Document:

Exhibit 4.2

 

EXECUTION COPY

 

AMENDED AND RESTATED MORTGAGES TRUST DEED

 

 

DATED 12th
March, 2004 

 

 

HALIFAX PLC

 

and

 

PERMANENT
FUNDING (NO. 1) LIMITED

 

and

 

PERMANENT
MORTGAGES TRUSTEE LIMITED

 

and

 

SFM OFFSHORE
LIMITED

 

 

	
  

  
	
   

  
	
  LONDON

  

 

 

CONTENTS

 

	
  Clause

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and
  Construction

  	
   

  
	
  2.

  	
  Creation of Mortgages Trust

  	
   

  
	
  3.

  	
  Conditions Precedent

  	
   

  
	
  4.

  	
  Acquisition
  by Funding 1 of an Increased Interest in the Trust Property

  	
   

  
	
  5.

  	
  Initial
  Funding 1 Share and Initial Seller Share

  	
   

  
	
  6.

  	
  Acquisition
  by Seller of an Interest Relating to Capitalised Interest

  	
   

  
	
  7.

  	
  Payment
  by the Seller to Funding 1 of the Amount Outstanding under an Intercompany
  Loan

  	
   

  
	
  8.

  	
  Adjustment
  of Funding 1 Share Percentage and Seller Share Percentage on Calculation
  Dates

  	
   

  
	
  9.

  	
  Minimum Seller Share

  	
   

  
	
  10.

  	
  Allocation
  and Distribution of Revenue Receipts

  	
   

  
	
  11.

  	
  Allocation
  and Distribution of Principal Receipts

  	
   

  
	
  12.

  	
  Allocation of Losses

  	
   

  
	
  13.

  	
  Funding
  2 becomes a Beneficiary of the Mortgages Trust

  	
   

  
	
  14.

  	
  Ledgers

  	
   

  
	
  15.

  	
  Costs and
  Expenses of the Mortgages Trustee

  	
   

  
	
  16.

  	
  Directions from
  Beneficiaries

  	
   

  
	
  17.

  	
  Transfers

  	
   

  
	
  18.

  	
  Covenants of the
  Mortgages Trustee

  	
   

  
	
  19.

  	
  Power to Delegate

  	
   

  
	
  20.

  	
  Powers of Investment

  	
   

  
	
  21.

  	
  Other
  Provisions regarding the Mortgages Trustee

  	
   

  
	
  22.

  	
  No Retirement of
  Mortgages Trustee

  	
   

  
	
  23.

  	
  Termination

  	
   

  
	
  24.

  	
  Further Assurances

  	
   

  
	
  25.

  	
  Amendments

  	
   

  
	
  26.

  	
  Non Petition Covenant

  	
   

  
	
  27.

  	
  No Partnership or Agency

  	
   

  
	
  28.

  	
  Calculations

  	
   

  
	
  29.

  	
  No Waiver; Remedies

  	
   

  
	
  30.

  	
  Execution in
  Counterparts; Severability

  	
   

  
	
  31.

  	
  Tax

  	
   

  
	
  32.

  	
  Confidentiality

  	
   

  
	
  33.

  	
  Exclusion of Third
  Party Rights

  	
   

  
	
  34.

  	
  Addresses for Notices

  	
   

  
	
  35.

  	
  Governing
  Law and Submission to Jurisdiction

  	
   

  
	
  36.

  	
  Exclusion of Trustee Act
  2000

  	
   

  
	
   

  	
   

  	
   

  
	
  Signatories

  	
   

  

 

 

THIS AMENDED AND RESTATED MORTGAGES TRUST DEED is made on 12th March, 2004
between:

 

(1)                                  HALIFAX plc (registered number
2367076), a public limited company incorporated under the laws of England and
Wales whose registered office is at Trinity Road, Halifax, West Yorkshire HX1
2RG, in its capacities as Seller, Beneficiary and Cash Manager;

 

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

 

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

 

(4)                                  SFM
OFFSHORE LIMITED (registered number 76015) a private limited company
incorporated under the laws of Jersey whose registered office is at 47 Esplanade,
St Helier, Jersey JE1 0BD, Channel Islands, in its capacity as Share Trustee of
the Mortgages Trustee.

 

WHEREAS:

 

(A)                              The Mortgages Trust was constituted by the
Share Trustee of the Mortgages Trustee in favour of Funding 1 and the Seller on
the terms and subject to the conditions set out in the Mortgages Trust
Deed  (as amended and/or restated by
this Deed and from time to time, the Mortgages Trust Deed).

 

(B)                                The Mortgages Trustee holds the Trust
Property as bare trustee for the Beneficiaries upon, with and subject to the
trusts, powers and provisions of the Mortgages Trust Deed.

 

(C)                                The Seller carries on the business of,
inter alia, originating residential first mortgage loans to individual
Borrowers in the United Kingdom and of managing and administering such mortgage
loans.  The Seller assigned the Initial
Portfolio to the Mortgages Trustee on 14th June, 2002 and (from time to time)
has sold and may sell New Portfolios to the Mortgages Trustee, pursuant to the
terms of the Mortgage Sale Agreement. 
The Initial Portfolio is, and any New Portfolios are and shall be, held
by the Mortgages Trustee (in relation to Scottish Loans, in its capacity as
trustee under a Scottish Declaration of Trust) on trust for the Beneficiaries
upon, with and subject to the trusts, powers and provisions of the Mortgages
Trust Deed.

 

(D)                               The parties to the Mortgages Trust Deed
have agreed to amend and restate the terms of the Mortgages Trust Deed as set
out herein.

 

NOW THIS DEED WITNESSES:

 

1.                                      DEFINITIONS AND CONSTRUCTION

 

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

 

1

 

except where the context otherwise requires
and save where otherwise defined herein, have the same meanings in this Deed,
including the Recitals hereto and this Deed shall be construed in accordance
with the interpretation provisions set out in Clause 2 of the Master
Definitions and Construction Schedule.

 

1.2                                 This Deed amends and restates
the Mortgages Trust Deed made on 13th June, 2002 as amended and restated on 6th
March, 2003 and as further amended and restated on 25th November, 2003 (the Principal
Deed).  As of the date of
this Deed, any future rights or obligations (excluding such obligations accrued
to the date of this Deed) of a party under the Principal Deed shall be extinguished
and shall instead be governed by this Deed.

 

2.                                      CREATION OF MORTGAGES TRUST

 

2.1                               Initial Trust Property

 

On 13th
June, 2002 the Share Trustee of the Mortgages Trustee settled on trust the
Initial Trust Property to be held on trust absolutely as to both capital and
income by the Mortgages Trustee for the benefit, as tenants in common, of the
Seller as to the Initial Seller Share Percentage and Funding 1 as to the
Initial Funding 1 Share Percentage.

 

2.2                               Initial Closing Trust Property

 

Pursuant
to the provisions of the Mortgage Sale Agreement, the Seller assigned the
Initial Closing Trust Property to the Mortgages Trustee on the Initial Closing
Date.

 

2.3                               Future Trust Property

 

From
time to time and pursuant to the Mortgage Sale Agreement, the Seller has sold
and intends to sell the Future Trust Property to the Mortgages Trustee.

 

2.4                               Trust Property

 

Subject
to Clause
3, the Mortgages Trustee shall hold the Trust Property as to both
capital and income on trust absolutely for Funding 1 (as to the Funding 1
Share) and for the Seller (as to the Seller Share) as tenants in common upon,
with and subject to all the trusts, powers and provisions of this Deed.

 

3.                                      CONDITIONS PRECEDENT

 

3.1                                 The Initial Trust Property is
held by the Mortgages Trustee on the Mortgages Trust.

 

3.2                                 The Initial Closing Trust
Property shall be held by the Mortgages Trustee on the Mortgages Trust upon the
satisfaction of the following conditions precedent:

 

(a)                                  due execution and delivery of
the Mortgage Sale Agreement as amended and restated by all parties to it;

 

(b)                                 due execution and delivery of
this Deed by all parties to it; and

 

(c)                                  in respect of the Funding 1
Share of the Trust Property only, payment of the Purchase Price by Funding 1 to
the Seller.

 

3.3                                 The Initial Closing Trust
Property and any Future Trust Property shall be held by the Mortgages Trustee
on the Mortgages Trust subject to satisfaction of the conditions set out in

 

2

 

Clause 4.1 of the Mortgage Sale Agreement for the sale of New
Loans and their New Related Security to the Mortgages Trustee.

 

4.                                      ACQUISITION BY FUNDING 1 OF AN
INCREASED INTEREST IN THE TRUST PROPERTY

 

4.1                               Offer to pay

 

On not
more than 60 days’ written notice nor less than 20 days’ written notice, Funding
1 may offer to make a payment to the Seller so as to increase Funding 1’s share
of the Trust Property and to cause a corresponding decrease in the Seller’s
share of the Trust Property on the date specified in that notice.  Such offer may only be accepted if the
following conditions precedent are satisfied on such date:

 

(a)                                  no deficiency is recorded on
the Principal Deficiency Ledger as at the most recent Funding 1 Interest
Payment Date;

 

(b)                                 no Note Event of Default or
Intercompany Loan Event of Default shall have occurred which is continuing or
unwaived as at the relevant date;

 

(c)                                  the Security Trustee is not
aware that the increase in the Funding 1 Share of the Trust Property (or the
corresponding decrease in the  Seller
Share of the Trust Property) would adversely affect the then current credit
ratings by the Rating Agencies (or any of them) of the Notes;

 

(d)                                 the Notes have been issued by
the relevant Issuer, the subscription proceeds received on behalf of the
relevant Issuer and advanced by the relevant Issuer to Funding 1 pursuant to an
Intercompany Loan Agreement, the proceeds of which will be applied by Funding 1
to make the payment referred to in the notice on the relevant date;

 

(e)                                  Funding 1 has entered into, if
necessary, a New Start-up Loan and a New Funding 1 Swap and adjustments have
been made, if required, to the General Reserve Fund;

 

(f)                                    receipt of a solvency
certificate executed by an authorised signatory of the Seller in form and
content acceptable to the Mortgages Trustee, Funding 1 and the Security
Trustee;

 

(g)                                 as at the relevant date, the
aggregate Outstanding Principal Balance of Loans constituting the Trust
Property, in respect of which the aggregate amount in arrears is more than
three times the monthly payment then due, is less than 5 per cent. of the
aggregate Outstanding Principal Balance of all Loans constituting the Trust
Property;

 

(h)                                 the Seller has not received
written notice that the short term, unsecured, unguaranteed and unsubordinated
debt obligations of the Seller are not rated at least P-1 by Moody’s, A-1 by
Standard and Poor’s and F1 by Fitch at the time of, and immediately following,
the payment made by Funding 1 on the relevant date;

 

(i)                                     the product of the WAFF and
WALS for the Loans constituting the Trust Property calculated on the relevant
date in the same way as for the Initial Portfolio (or as agreed by the Servicer
and the Rating Agencies from time to time) does not exceed the product of the
WAFF and WALS for the Loans constituting the Trust Property calculated on the
most recent previous Closing Date, plus 0.25 per cent.;

 

3

 

(j)                                     the loan-to-value ratio of
Loans in the Trust Property, after application of the LTV Test on the relevant
date, does not exceed the loan-to-value ratio (based on the LTV Test) of Loans
in the Trust Property on the most recent previous Closing Date plus 0.25 per
cent.; and

 

(k)                                  the General Reserve Fund has
not been debited on or before the relevant date for the purposes of curing a
Principal Deficiency in respect of the Term Advances in circumstances where the
General Reserve Fund has not been replenished by a corresponding amount by the
relevant date.

 

Funding
1 may not make a payment to the Seller in consideration of an increased share of
the Trust Property if, as at the relevant date, the Step-up Date in respect of
any Note has been reached and the Issuer who issued that Note has not exercised
its option to redeem that Note as at the relevant date in accordance with the
Terms and Conditions of that Note.  For
the avoidance of doubt, this prohibition on Funding 1 making a payment to the
Seller in consideration of an increased share of the Trust Property shall
remain in effect only so long as any such Note remains outstanding and, upon,
its redemption, Funding 1 may again make a payment to the Seller in
consideration of an increased share of the Trust Property.

 

4.2                               Completion of assignment

 

If an
offer is made by Funding 1 in accordance with Clause 4.1 above and that
offer is accepted by the Seller, Funding 1 shall, subject to satisfaction of
the conditions precedent set out in Clause 4.1 above, pay to the Seller an
amount equal to the increase in the Funding 1 share of the Trust Property, the
Funding 1 Share of the Trust Property shall increase by a corresponding amount
and the Seller Share of the Trust Property shall decrease by the same amount.

 

4.3                               Audit of Loans constituting
the Trust Property

 

If the
short term, unsecured, unguaranteed and unsubordinated debt obligations of the
Seller fall below A-1 by Standard & Poor’s, P-1 by Moody’s and/or F1 by
Fitch, then the Beneficiaries shall appoint a firm of independent auditors
(approved by the Rating Agencies) to determine whether the Loans and their
Related Security (or any part of them) constituting the Trust Property complied
with the representations and warranties set out in Schedule 1 of the Mortgage
Sale Agreement as at the date such Loans were sold to the Mortgages
Trustee.  The costs of such independent
auditors shall be borne by the Beneficiaries pro rata according to their
respective current percentage shares in the Trust Property.

 

5.                                      INITIAL FUNDING 1 SHARE AND
INITIAL SELLER SHARE

 

5.1                               Initial Funding 1 Share

 

The
Initial Funding 1 Share of the Trust Property was £35.00 as at 13th June, 2002
and £3,500,000,035 as at the Initial Closing Date.  The Initial Funding 1 Share Percentage was the Initial Funding 1
Share expressed as a percentage of the Trust Property as at the Initial Closing
Date, such percentage being 35 per cent.

 

5.2                               Initial Seller Share

 

The
Initial Seller Share of the Trust Property was the total amount of the Trust
Property minus the Initial Funding 1 Share as at 13th June, 2002.  As at the Initial Closing Date, the Initial
Seller Share was £6,500,000,065 and the Initial Seller Share Percentage was
equal to

 

4

 

100 per
cent. minus the Initial Funding 1 Share Percentage, such percentage being 65
per cent.

 

6.                                      ACQUISITION BY SELLER OF AN
INTEREST RELATING TO CAPITALISED INTEREST

 

6.1                                 Any increase in the
Outstanding Principal Balance of a Loan due to Capitalised Interest will be
allocated to the Funding 1 Share of the Trust Property and to the Seller Share
of the Trust Property, based on respectively the Funding 1 Share Percentage and
the Seller Share Percentage in the Trust Property as calculated on the most
recent Calculation Date.

 

6.2                                 Prior to an Insolvency Event
occurring in respect of the Seller, on each Distribution Date the Seller shall
make a cash payment to Funding 1 in an amount equal to Funding 1’s share of the
Capitalised Interest in respect of those Loans that are subject to Payment
Holidays.  As a result of making such
payment the Seller Share of the Trust Property will increase by an amount equal
to the amount paid to Funding 1 for Funding 1’s Share of the Capitalised
Interest and Funding 1’s Share of the Trust Property will decrease by a
corresponding amount.  The cash payment
shall be made in accordance with Clause 6.4 below.

 

6.3                                 If an Insolvency Event occurs
in respect of the Seller, then the Seller may acquire from Funding 1 its share
of the Capitalised Interest in the same manner as is contemplated in Clause 6.2,
but it is not obliged to do so.

 

6.4                                 In respect of the cash payment
to be made by the Seller pursuant to Clause 6.2, the Seller hereby directs the
Mortgages Trustee to deduct from the Seller’s Share of the Mortgages Trust
Available Revenue Receipts (allocated to the Seller pursuant to Clause 10.2
of this Deed) an amount equal to such cash payment and to pay the same to
Funding 1 in satisfaction of the Seller’s obligations under Clause 6.2.  To the extent that the Seller’s Share of the
Mortgages Trust Available Revenue Receipts is less than the amount required to
be paid by it pursuant to Clause 6.2, then the Seller shall pay an
amount equal to the shortfall directly to Funding 1 from its own resources.

 

7.                                      PAYMENT BY THE SELLER TO FUNDING 1
OF THE AMOUNT OUTSTANDING UNDER AN INTERCOMPANY LOAN

 

7.1                               Conditions precedent to
acceptance of offer

 

On each
occasion that the Seller offers to make a payment to Funding 1 of the amount
outstanding under an Intercompany Loan (referred to in this Clause 7
as the relevant
Intercompany Loan), then Funding 1 may accept that offer but only
if:

 

(a)                                  the Security Trustee has
received written confirmation from each of the Rating Agencies that the then
current ratings of the Notes would not be adversely affected by Funding 1
accepting the offer;

 

(b)                                 Funding 1 would receive the
payment from the Seller on a Funding 1 Interest Payment Date; and

 

(c)                                  Funding 1 will apply the
proceeds of the payment to repay the relevant Intercompany Loan and the
relevant Issuer has confirmed to Funding 1 that on that Funding 1 Interest
Payment Date it will use the proceeds of the relevant payment to repay the
corresponding classes of Notes.

 

5

 

7.2                               Adjustment to shares if offer
accepted

 

If
Funding 1 accepts the offer as described in Clause 7.1 above, then the
Funding 1 Share of the Trust Property shall decrease by an amount corresponding
to the amount paid by the Seller and the Seller Share of the Trust Property
shall increase by the same amount.

 

8.                                      ADJUSTMENT OF FUNDING 1 SHARE
PERCENTAGE AND SELLER SHARE PERCENTAGE ON CALCULATION DATES

 

8.1                               Distribution

 

On each
Calculation Date, excluding, for the avoidance of doubt, the Initial Closing
Date, the Funding 1 Share Percentage and the Seller Share Percentage will be
recalculated by the Cash Manager (on behalf of the Mortgages Trustee and the
Beneficiaries) based on the aggregate Outstanding Principal Balance of the
Loans constituting the Trust Property (as adjusted from time to time) as at the
close of business on the London Business Day immediately preceding that
Calculation Date.  On each Distribution
Date, the Mortgages Trustee will distribute Principal Receipts and Revenue
Receipts in accordance with Clauses 10 and 11 hereof.

 

8.2                               Current Funding 1 Share
Percentage

 

On each
Calculation Date (the relevant Calculation Date) or on the date
that the Mortgages Trust terminates, the Current Funding 1 Share Percentage
will be recalculated and the recalculated amount will take effect from the next
Distribution Date.  The “Current Funding
1 Share Percentage” will be an amount, expressed as a percentage (calculated to
an accuracy of five decimal places (rounded upwards), equal to:

 

 

where,

 

A =                           the Current Funding 1 Share as calculated
on the immediately preceding Calculation Date (or, in the case of the first
Calculation Date, the Initial Funding 1 Share as at the Initial Closing Date);

 

B =                             the amount of any Principal Receipts to be
distributed to Funding 1 on the Distribution Date immediately following the
relevant Calculation Date in accordance with the provisions described in Clause 11
below;

 

C =                             the amount of any Losses sustained on the
Loans in the period from the last Calculation Date to the relevant Calculation
Date and the amount of any reductions occurring in respect of the Loans as
described in paragraphs (i) to (iv) of Clause 8.4(a), in each case allocated to
Funding 1 in the Calculation Period ending on the relevant Calculation Date;

 

D =                            an amount equal to any consideration to be
paid by Funding 1 to the Seller in relation to any New Loans to be sold to the
Mortgages Trustee on the relevant Calculation Date;

 

E =                              an amount equal to any consideration to be
paid by Funding 1 to the Seller in relation to any acquisition by Funding 1
from the Seller on the relevant Calculation Date of an interest in the Trust
Property;

 

6

 

F =                              an amount equal to any Capitalised Interest
accruing on a Loan due to Borrowers taking payment holidays or which has been
allocated to Funding 1 since the immediately preceding Calculation Date, less
the amount to be paid by the Seller on the relevant Distribution Date to
acquire an interest in the Trust Property in accordance with Clause 6 above;
and

 

G =                             the aggregate Outstanding Principal Balance
of all the Loans constituting the Trust Property as at the relevant Calculation
Date including after making the distributions, allocations and additions
referred to in (B), (C), (D), (E) and (F) above, and after taking account of
any distributions of Principal Receipts to Funding 1 and the Seller, the amount
of any Losses allocated to Funding 1 and the Seller, the amount of any increase
in the balances of the loans constituting the Trust Property due to
capitalisation of insurance premiums due by Borrowers or Borrowers taking
Payment Holidays under Loans, the adjustments referred to in paragraphs (i) to
(iv) (inclusive) of Clause 8.4(a) below and the amount of any
other additions or subtractions to the Trust Property.

 

8.3                               Current Funding 1 Share

 

The
“Current Funding 1 Share” will be an amount equal to:

 

A - B - C + D
+ E + F

 

where
“A”, “B”, “C”, “D”, “E” and “F” have the meanings specified in Clause 8.2
above.

 

8.4                               Adjustments to Trust Property

 

(a)                                  On each relevant Calculation
Date, the aggregate Outstanding Principal Balance of the Loans constituting the
Trust Property shall be reduced or, as the case may be, deemed to be reduced
for the purposes of the calculation set out in “G” above, if any of the
following events has occurred during the Calculation Period immediately
preceding the relevant Calculation Date:

 

(i)                                     any Borrower exercises a right
of set-off in relation to Loans constituting part of the  Trust Property so that the amount of
principal and/or interest owing under a loan is reduced but no corresponding
amount is received by the Mortgages Trustee in which event the total amount of
Trust Property shall be reduced by an amount equal to the amount set-off;
and/or

 

(ii)                                  a Loan or its Related Security
(i) is in breach of the Loan Warranties in the Mortgage Sale Agreement, (ii) is
the subject of a Further Advance or (iii) is the subject of a Product Switch in
the circumstances set out in Clause 8.4 of the Mortgage Sale  Agreement or other obligation of the Seller
to repurchase, and if the Seller fails to repurchase the Loan or Loans under
the relevant Mortgage Account and their Related Security as required by the
terms of the Mortgage Sale Agreement, then the Trust Property shall be deemed
to be reduced for the purposes of the calculation of “G” in Clause 8.2
above by an amount equal to the Outstanding Principal Balance of the relevant
Loan or Loans under the relevant Mortgage Account together with Arrears of
Interest and Accrued Interest; and/or

 

(iii)                               the Seller would be required
to repurchase a Loan and its Related Security in accordance with the terms of
the Mortgage Sale Agreement, but such Loan and its Related Security are not
capable of repurchase, in which case the Trust Property shall be deemed to be
reduced for the purposes of the calculation of “G” in Clause 8.2 above by an amount
equal to the Outstanding Principal Balance of the relevant Loan

 

7

 

or Loans under the relevant Mortgage
Account together with Arrears of Interest and Accrued Interest; and/or

 

(iv)                              the Seller materially breaches
any other material warranty under the Mortgage Sale Agreement and/or (for so
long as it is the Servicer) the Servicing Agreement, in which event the
aggregate Outstanding Principal Balance of Loans constituting the Trust
Property shall be deemed for the purposes of the calculation of “G” in Clause 8.2
above to be reduced by an amount equivalent to all losses, costs, liabilities,
claims, expenses and damages incurred by the Beneficiaries as a result of such
breach.

 

(b)                                 The reductions and deemed
reductions set out in paragraph (i) to (iv) (inclusive) of Clause 8.4(a) above shall be
made on the relevant Calculation Date first to the Seller’s Share (including
the Minimum Seller Share) of the Trust Property only, and thereafter shall be
made to the Funding 1 Share of the Trust Property.

 

(c)                                  If at any time after the
Initial Closing Date the Mortgages Trustee holds, or there is held to its
order, or it receives, or there is received to its order any property,
interest, right or benefit relating to any Loan and its Related Security which
is or has been subject to any reduction or deemed reduction pursuant to
paragraphs (i) to (iv) (inclusive) of Clause 8.4(a) above, then such property,
interest, right or benefit shall constitute a Revenue Receipt under the
relevant Loan.  Such Revenue Receipt
shall belong to Funding 1 (but only if and to the extent that the related
reductions were applied against the Funding 1 Share of the Trust Property) and
thereafter shall belong to the Seller.

 

8.5                               Current Seller Share
Percentage

 

On each
Calculation Date, the “Current Seller Share Percentage” will be an amount
calculated to the accuracy of five decimal places equal to:

 

100% - Current
Funding 1 Share Percentage.

 

8.6                               Current Seller Share

 

The
“Current Seller Share” will be an amount equal to:

 

Outstanding
Principal Balance of all the Loans in the Trust Property on the relevant

Calculation Date - Current Funding 1 Share.

 

8.7                               Funding 1 Share/Seller Share

 

Neither
the Funding 1 Share nor the Seller Share may be reduced below zero.  At all times the Funding 1 Share Percentage
and the Seller Share Percentage shall be equal to 100 per cent. of the Trust
Property.

 

9.                                      MINIMUM SELLER SHARE

 

9.1                               Initial Minimum Seller Share

 

The
Seller Share of the Trust Property includes an amount equal to the Minimum
Seller Share.  Unless and until the
Funding 1 Share of the Trust Property is in an amount equal to zero or an Asset
Trigger Event occurs, the Seller will not be entitled to receive Principal
Receipts which would reduce the Seller Share of the Trust Property to an amount
less than the Minimum Seller Share and the Seller consents and directs the
Mortgages Trustee accordingly.

 

8

 

9.2                               Fluctuation of Minimum Seller
Share on each Calculation Date

 

At the
Initial Closing Date, the Minimum Seller Share was £500,000,000.  The amount of the Minimum Seller Share will
be recalculated on each Calculation Date in accordance with the following
formula:

 

X + Y +
Z

 

where:

 

X =                             5% of the aggregate Outstanding Principal
Balance of all Loans comprised in the Trust Property;

 

Y =                              the product of: (p x q) x r where:

 

p =                               8%;

 

q =                               the Flexible Draw Capacity, being an amount
equal to the excess of (i) the maximum amount that Borrowers are entitled to
draw under Flexible Loans included in the Trust Property (whether or not drawn)
over (ii) the aggregate principal balance of actual Flexible Loan advances made
to Borrowers in the Trust Property on the relevant Calculation Date (but
excluding the Initial Advances made thereunder); and

 

r =                                  3; and

 

Z =                              the aggregate sum of reductions deemed made
(if any) in accordance with paragraphs (ii), (iii) and (iv) of Clause
8.4(a).

 

9.3                               Recalculation of Minimum
Seller Share following occurrence of exceptional events

 

Prior
to the occurrence of a Trigger Event:

 

(a)                                  the calculation of the Minimum
Seller Share in accordance with Clause 9.2 above will be recalculated or
increased (in consultation with the relevant Rating Agencies) if the Seller
merges or otherwise combines its business with another bank or other financial
institution so as to increase the risks associated with Borrowers holding
deposits in Halifax accounts and such merger or combination would adversely
affect the then current ratings of the Notes and such adverse effect on the
then current ratings of the Notes would be avoided if the Minimum Seller Share
was so recalculated or increased;

 

(b)                                 the calculation of the Minimum
Seller Share in accordance with Clause 9.2 above will be recalculated or
increased (in consultation with the relevant Rating Agencies) if notice has
been received from one or more of the Rating Agencies that the then current
ratings of the Notes would be downgraded and that such downgrade would be
avoided if the Minimum Seller Share was so recalculated or increased;

 

(c)                                  the amount of the Minimum
Seller Share as calculated in accordance with Clause 9.2 above will be
decreased  (and the calculation thereof
amended accordingly) from time to time at the request of the Seller or Funding
1 (acting reasonably) provided that the Security Trustee has received written
confirmation from each of the Rating Agencies that there would be no adverse
effect on the then current ratings of the Notes as a result thereof.

 

9

 

10.                               ALLOCATION AND DISTRIBUTION OF
REVENUE RECEIPTS

 

10.1                        Allocation and Distribution of
Third Party Amounts

 

Pursuant
to the Cash Management Agreement, the Cash Manager (at the direction of the
Mortgages Trustee on behalf of the Beneficiaries at their direction and with
their consent) will deduct, as and when identified, Third Party Amounts from
the Revenue Receipts standing to the credit of the Mortgages Trustee GIC
Account, and pay over the same to the proper recipients thereof.  The Mortgages Trustee and the Beneficiaries
hereby consent to such deductions.

 

10.2                        Allocation and Distribution of
Mortgages Trust Available Revenue Receipts

 

On each
Distribution Date the Cash Manager (at the direction of the Mortgages Trustee
and on behalf of the Beneficiaries at their direction and with their consent)
will allocate and distribute Mortgages Trust Available Revenue Receipts as
follows:

 

(a)                                  firstly, in or towards
satisfaction pari passu and pro rata according to the respective
amounts thereof of:

 

(i)                                     any costs, charges,
liabilities and expenses then due or to become due to the Mortgages Trustee
under the provisions of this Deed or any terms agreed by the Mortgages Trustee
with the Seller and Funding 1 in writing together with VAT thereon as provided
herein (if payable); and

 

(ii)                                  any amounts due and payable by
the Mortgages Trustee to third parties in respect of the Mortgages Trust and
incurred without breach by the Mortgages Trustee of the documents to which it
is a party and for which payment has not been provided for elsewhere),
(including amounts due to H.M Customs and Excise and/or to the Inland Revenue
or any other taxation authority which has jurisdiction over the Trust Property
or the Mortgages Trustee in respect of any stamp, issue, registration,
documentary and other fees, duties and taxes (including interest and penalties)
payable by the Mortgages Trustee in connection with (i) the execution and
delivery of this Deed; (ii) any action to be taken by or on behalf of the
Mortgages Trustee to enforce or to resolve any doubt concerning or, for any other
purpose in relation to, the Mortgages Trust Deed; and (iii) any such tax which
is primarily due from either or both of the Seller and Funding 1 in their
capacities as Beneficiaries (and, for the avoidance of doubt, only in such
capacities) in circumstances where the Mortgages Trustee has made a payment of
such tax (or part thereof) by reason of a failure by the Seller or Funding 1 to
discharge their primary liability in respect of such tax);

 

(b)                                 secondly, in or towards
satisfaction of any remuneration then due and payable or to become due and
payable during the following Calculation Period to the Servicer and any costs,
charges, liabilities and expenses then due or to become due to the Servicer
under the provisions of the Servicing Agreement, together with VAT thereon as
provided therein (if payable);

 

(c)                                  thirdly, to allocate and pay
to Funding 1 an amount equal to the lesser of:

 

(x)                                   an amount determined by multiplying the
total amount of the remaining Mortgages Trust Available Revenue Receipts by the
Funding 1 Share 

 

10

 

Percentage
of the Trust Property (as determined on the Relevant Share Calculation Date);
and

 

(y)                                 the aggregate of Funding 1’s obligations on
the immediately succeeding Funding 1 Interest Payment Date as set out under the
Funding 1 Pre-Enforcement Revenue Priority of Payments or, as the case may be,
the Funding 1 Post-Enforcement Priority of Payments (but excluding any
principal amount due under any Intercompany Loan and/or items (j) and (k) of
the Funding 1 Post-Enforcement Priority of Payments), less (in each case only
to the extent that such amounts of interest or income would not otherwise be
payable under the Intercompany Loan or, as applicable, the Notes, on the
succeeding Interest Payment Date) the sum of (i) the interest or other income
credited or to be credited to Funding 1’s Bank Accounts on the immediately
succeeding Funding 1 Interest Payment Date and (ii) all other income (not
derived from the distribution of Revenue Receipts under the Mortgages Trust)
which will constitute Funding 1 Available Revenue Receipts on the succeeding
Funding 1 Interest Payment Date;

 

(d)                                 fourthly, to allocate and
distribute to the Mortgages Trustee and/or Funding 1 (as applicable), an amount
equal to any Loss Amount suffered or incurred by it or them (as applicable);
and

 

(e)                                  fifthly, to allocate and
distribute to the Seller an amount equal to (if positive) the Mortgages Trust
Available Revenue Receipts less the amount of such Mortgages Trust Available
Revenue Receipts applied and/or allocated under paragraphs (a) to (d) above.

 

11.                               ALLOCATION AND DISTRIBUTION OF
PRINCIPAL RECEIPTS

 

11.1                        Allocation and Distribution of
Principal Receipts

 

(a)                                  On each Calculation Date (the relevant
Calculation Date), prior to distributing any Principal Receipts, the
Cash Manager shall ascertain:

 

(i)                                     the amount of Mortgages Trust
Available Principal Receipts;

 

(ii)                                  whether the Distribution Date
immediately succeeding the relevant Calculation Date is within a Cash Accumulation
Period relating to a Bullet Term Advance or a Scheduled Amortisation Instalment
(the Cash Accumulation Period being calculated separately for each Bullet Term
Advance and Scheduled Amortisation Instalment); and

 

(iii)                               Funding 1’s Cash Accumulation
Requirement and Repayment Requirement.

 

(b)                                 On each Distribution Date, the
Cash Manager (at the direction of the Mortgages Trustee acting on behalf of the
Beneficiaries at their direction and with their consent) shall then allocate
and distribute Principal Receipts as provided in this Clause 11.

 

11.2                        Allocation and Distribution of
Principal Receipts prior to the occurrence of a Trigger Event

 

On each
Distribution Date where no Trigger Event has occurred on or before the
immediately preceding Calculation Date, the Cash Manager shall allocate and
distribute Mortgages Trust Available Principal Receipts as follows:

 

11

 

(a)                                  firstly, where Funding 1 has
no Cash Accumulation Requirement and no Repayment Requirement on that
Distribution Date, to allocate the Mortgages Trust Available Principal Receipts
to the Seller until the Seller Share of the Trust Property (as calculated on
the Relevant Share Calculation Date) is equal to the Minimum Seller Share;

 

(b)                                 secondly, if Funding 1 has a
Cash Accumulation Requirement on that Distribution Date, to allocate the
Mortgages Trust Available Principal Receipts to Funding 1 in an amount up to
but not exceeding Funding 1’s Cash Accumulation Requirement on that
Distribution Date;

 

(c)                                  thirdly, if Funding 1 has a
Repayment Requirement on that Distribution Date, to allocate the Mortgages
Trust Available Principal Receipts to Funding 1 in an amount up to but not
exceeding Funding 1’s Repayment Requirement on that Distribution Date; and

 

(d)                                 fourthly, to allocate the
remainder of the Mortgages Trust Available Principal Receipts, if any, to the
Seller until the Seller Share of the Trust Property (as calculated on the
Relevant Share Calculation Date) is equal to the Minimum Seller Share.

 

11.3                        Allocation and Distribution of
Principal Receipts on or after the occurrence of a Non-Asset Trigger Event but
prior to the occurrence of an Asset Trigger Event

 

On each
Distribution Date where a Non-Asset Trigger Event has occurred on or before the
immediately preceding Calculation Date and an Asset Trigger Event has not
occurred on or before that Calculation Date, all Mortgages Trust Available
Principal Receipts shall be allocated and distributed to Funding 1 until the
Funding 1 Share of the Trust Property (as calculated on the relevant Share
Calculation Date) is zero and shall thereafter be allocated and paid to the
Seller.

 

11.4                        Allocation and Distribution of
Principal Receipts on or after the occurrence of an Asset Trigger Event

 

On each
Distribution Date where an Asset Trigger Event has occurred on or before the
immediately preceding Calculation Date, all Mortgages Trust Available Principal
Receipts shall be allocated and distributed pari passu and pro rata between Funding 1
and the Seller according to the Current Funding 1 Share Percentage of the Trust
Property (as calculated on the Relevant Share Calculation Date) and the Current
Seller Share Percentage of the Trust Property (as calculated on the Relevant
Share Calculation Date) respectively until, in the case of Funding 1, the
Funding 1 Share of the Trust Property is zero (and, for the avoidance of doubt,
such payments may reduce the Current Seller Share to an amount less than the
Minimum Seller Share).  When the Funding
1 Share of the Trust Property is zero, the remaining Mortgages Trust Available
Principal Receipts (if any) shall be allocated to the Seller.

 

12.                               ALLOCATION OF LOSSES

 

Subject
as provided in this Deed (and in particular, Clause 8), all Losses
sustained on the Loans during a Calculation Period shall be applied in reducing
pro rata
both the Funding 1 Share and the Seller Share of the Trust Property. Funding
1’s share and the Seller’s share of the Losses shall be determined by
multiplying the Losses in the relevant Calculation Period by the Current
Funding 1 Share Percentage, (as calculated on the Relevant Share Calculation
Date), the product of which shall be allocated to Funding 1, and the remainder
of such Losses

 

12

 

shall
be allocated to the Seller, on each Calculation Date, in each case prior to
calculating the allocation of Mortgages Trustee Available Principal Receipts on
that Calculation Date.

 

13.                               FUNDING 2 BECOMES A BENEFICIARY OF
THE MORTGAGES TRUST

 

On not
more than 60 days’ written notice nor less than 20 days’ written notice to the
Mortgages Trustee, Funding 1 and the Seller may direct the Mortgages Trustee to
add Funding 2 as a beneficiary to the Mortgages Trust.  The Mortgages Trustee shall include Funding
2 as a beneficiary of the Mortgages Trust if Funding 1 (or the Security
Trustee) notifies the Mortgages Trustee in writing that the following
conditions precedent are satisfied on the date of such inclusion:

 

(a)                                  that the Security Trustee has
received written confirmation from each of the Rating Agencies that the
inclusion of Funding 2 as a beneficiary of the Mortgages Trust would not have
an adverse effect on the then current ratings of the Notes;

 

(b)                                 no deficiency is recorded on
the Principal Deficiency Ledger as at the most recent Funding 1 Interest
Payment Date;

 

(c)                                  no Note Event of Default or
Intercompany Loan Event of Default shall have occurred which is continuing or
unwaived as at the relevant Distribution Date;

 

(d)                                 requisite amendments have been
made to the Transaction Documents to enable the inclusion of Funding 2 as a
beneficiary to the Mortgages Trust (including, without limitation, changes to
the way in which the Mortgages Trustee will allocate Mortgages Trust Revenue
Receipts and Mortgages Trust Principal Receipts under this Deed); and

 

(e)                                  the General Reserve Fund has
not been debited on or before the relevant Distribution Date for the purposes
of curing a Principal Deficiency in respect of the Term Advances in
circumstances where the General Reserve Fund has not been replenished by a
corresponding amount by the date.

 

14.                               LEDGERS

 

The
Mortgages Trustee shall maintain, or shall procure that there are maintained,
the following Mortgages Trustee Ledgers:

 

(a)                                  the Principal Ledger, which
shall record all receipts of Principal Receipts and distribution of the same to
Funding 1 and the Seller;

 

(b)                                 the Revenue Ledger, which
shall record all receipts of Revenue Receipts and distribution of the same to
Funding 1 and the Seller;

 

(c)                                  the Losses Ledger, which shall
record Losses in relation to the Loans; and

 

(d)                                 the Funding 1 Share/Seller
Share Ledger which shall record the Current Funding 1 Share, the Current Seller
Share of the Trust Property, the Current Funding 1 Share Percentage and the
Current Seller Share Percentage.

 

15.                               COSTS AND EXPENSES OF THE
MORTGAGES TRUSTEE

 

The
Mortgages Trustee shall be entitled to charge and be remunerated for the work
undertaken by it as trustee of the trusts created by this Deed.  The remuneration shall be on

 

13

 

such
terms (if any) as the Mortgages Trustee may from time to time agree with the
Seller and Funding 1 in writing. Funding 1 and the Seller shall indemnify the
Mortgages Trustee from time to time with such regularity as is reasonably
agreed between the parties, of the documentable costs and expenses directly and
properly incurred by the Mortgages Trustee in performing its obligations
hereunder together with any amounts in respect of Irrecoverable VAT incurred in
respect of such costs and expenses.  The
cost of such indemnity shall be paid in accordance with the priority of
payments set out in Clause 10.2 of this Deed.

 

16.                               DIRECTIONS FROM BENEFICIARIES

 

16.1                           On the Initial Closing Date,
the Mortgages Trustee entered into the Servicing Agreement, the Cash Management
Agreement, the Mortgage Sale Agreement, the Mortgages Trustee Guaranteed
Investment Contract and the Bank Account Agreement.

 

16.2                           Subject to Clause 16.4 below,
the Mortgages Trustee covenants with the Seller and Funding 1 that the
Mortgages Trustee shall take all necessary steps and do everything which both
Funding 1 and the Seller (acting together) may reasonably request or direct it
to do in order to give effect to the terms of this Deed or the other
Transaction Documents to which the Mortgages Trustee is a party.

 

16.3                           Funding 1 and the Seller
covenant with each other that neither shall direct or request the Mortgages
Trustee to do any act or thing which breaches the terms of, or is otherwise
expressly dealt with (such that the Mortgages Trustee has no discretion) by,
any of the Transaction Documents.

 

16.4                           The Mortgages Trustee will not
be bound and shall have no power to take any proceedings, actions or steps
under or in connection with any of this Deed or the other Transaction Documents
to which it is a party unless:

 

(a)                                  it shall have been directed to
do so by the Beneficiaries or it is required to do so under any express
provision of this Deed or the other Transaction Documents (but subject to Clause 16.2
in respect of conflict of directions); and

 

(b)                                 it shall have been indemnified
to its satisfaction against all liabilities, proceedings, claims and demands to
which it may be or become liable and all costs, charges and expenses which may
be incurred by it in connection therewith and the terms of such indemnity may
include the provision of a fighting fund, non-recourse loan or other similar
arrangement.

 

16.5                        Covenant of the Mortgages
Trustee

 

Subject
to Clause
16.2, the Mortgages Trustee covenants with each of the Seller and
Funding 1 to exercise all of its rights arising under the Trust Property
(including without limitation any rights of enforcement) for the benefit of and
on behalf of the Beneficiaries.

 

17.                               TRANSFERS

 

17.1                        Funding 1 shall not assign

 

Subject
to the terms of the Transaction Documents (including for the avoidance of
doubt, the Funding 1 Deed of Charge and the Second Supplemental Funding 1 Deed
of Charge) and the right of Funding 1 (or the Security Trustee or a Receiver on
its behalf) to sell the Funding 1 Share of the Trust Property following the
service of an Intercompany Loan Enforcement Notice (which right is hereby
conferred), Funding 1 covenants with the Seller that it shall not,

 

14

 

and
shall not purport to, sell, assign, transfer, convey, charge, declare a trust
over, create any beneficial interest in, or otherwise dispose of the Funding 1
Share in the Trust Property and/or its rights under this Deed, or any of
Funding 1’s rights, title and interest or benefit in the Trust Property and/or
this Deed to or in favour of a third party.

 

17.2                        Seller shall not assign

 

Subject
to the terms of the Transaction Documents, the Seller covenants with Funding 1
that it shall not, and shall not purport to, sell, assign, transfer, convey,
charge, declare a trust over, create any beneficial interest in, or otherwise
dispose of the Seller Share in the Trust Property and/or its rights under this
Deed or any of the Seller’s rights, title and interest or benefit in the Trust
Property and/or this Deed to or in favour of a third party, without the prior
consent of Funding 1 (such consent not to be unreasonably withheld).

 

17.3                        Transfers to Funding 2

 

Subject
to Clause
13, the parties hereby acknowledge that Funding 2 may become a
beneficiary to the Mortgages Trust after the Initial Closing Date and if it is
to become a such a beneficiary then the Seller and/or Funding 1 shall be
entitled to sell, assign, transfer, convey, charge, declare a trust over,
create a beneficial interest in, or otherwise dispose of their respective
shares in the Trust Property to Funding 2 or, as the case may be, Funding 1 or
the Seller.

 

18.                               COVENANTS OF THE MORTGAGES TRUSTEE

 

Save
with the prior written consent of the Beneficiaries or as provided in or
envisaged by this Deed and the other Transaction Documents to which the
Mortgages Trustee is a party, the Mortgages Trustee shall not, so long as it is
acting as Mortgages Trustee hereunder:

 

(a)                                  Negative Pledge

 

create
or permit to subsist any mortgage, standard security, pledge, lien, charge,
assignation in security or other security interest whatsoever (unless arising
by operation of law), upon the whole or any part of its assets (including any
uncalled capital) or its undertakings, present or future;

 

(b)                                  Disposal of Assets

 

transfer,
sell, lend, part with or otherwise dispose of, or deal with, or grant any
option or present or future right to acquire any of its assets or undertakings
or any interest, estate, right, title or benefit therein or thereto or agree or
attempt or purport to do so;

 

(c)                                  Equitable Interest

 

permit
any person other than the Beneficiaries to have any equitable or beneficial
interest in any of its assets or undertakings or any interest, estate, right,
title or benefit therein;

 

(d)                                  Bank Accounts

 

have an
interest in any bank account, other than as set out in the Transaction
Documents;

 

15

 

(e)                                  Restrictions on Activities

 

carry
on any business other than as described in this Deed and the Mortgage Sale
Agreement;

 

(f)                                    Borrowings

 

incur
any indebtedness in respect of borrowed money whatsoever or give any guarantee
or indemnity in respect of any such indebtedness;

 

(g)                                 Merger

 

consolidate
or merge with any other person or convey or transfer its properties or assets
substantially as an entirety to any other person;

 

(h)                                 Employees or premises

 

have
any employees or premises or subsidiaries;

 

(i)                                    Further shares

 

issue
any further shares;

 

(j)                                    Acquisitions

 

acquire
any assets other than pursuant to the terms of the Mortgage Sale Agreement and
this Mortgages Trust Deed (whereby any New Portfolio shall be held by the
Mortgages Trustee subject to the Mortgages Trust); or

 

(k)                                United States activities

 

engage
in any activities in the United States (directly or through agents) or derive
any income from United States sources as determined under United States income
tax principles or 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.

 

19.                               POWER TO DELEGATE

 

19.1                        Power to delegate

 

Subject
to Clause
19.2, the Mortgages Trustee may (notwithstanding any rule of law or
equity to the contrary) delegate (revocably or irrevocably and for a limited or
unlimited period of time) the performance of all or any of its obligations and
the exercise of all or any of its powers under this Deed or imposed or
conferred on it by law or otherwise to any person or body of persons
fluctuating in number selected by it and any such delegation may be by power of
attorney or in such other manner as the Mortgages Trustee may think fit and may
be made upon such terms and conditions (including the power to sub-delegate) as
the Mortgages Trustee may think fit.

 

19.2                        No further appointments

 

Notwithstanding
the provisions of Clause 19.1, the Mortgages Trustee shall
not appoint any agent, attorney or other delegate having power to act in
respect of the Trust Property unless it

 

16

 

is
directed in writing to do so by the Beneficiaries.  The appointment of any agent, attorney or other delegate shall
terminate immediately upon the occurrence of a Trigger Event.

 

20.                               POWERS OF INVESTMENT

 

Save as
expressly provided for in this Deed, the Mortgages Trustee Guaranteed
Investment Contract and the Bank Account Agreement, the Mortgages Trustee shall
have no further or other powers of investment with respect to the Trust
Property and neither the Trustee Act 2000 nor any other provision relating to
trustee powers of investment implied by statute or general law shall apply to
the Mortgages Trust and, for the avoidance of doubt, the statutory power to
accumulate income conferred on trustees by Section 31 of the Trustee Act 1925
is expressly excluded.

 

21.                               OTHER PROVISIONS REGARDING THE
MORTGAGES TRUSTEE

 

21.1                        No action to impair Trust
Property

 

Except
for actions expressly authorised by this Deed, the Mortgages Trustee shall take
no action reasonably likely to impair the interests of the Beneficiaries in any
Trust Property now existing or hereafter created or to impair the value of any
Loan or its Related Security subject to the Mortgages Trust.

 

21.2                        Litigation

 

The
Mortgages Trustee must not prosecute or defend any legal or other proceedings
anywhere in the world (at the cost of the Trust Property) unless it obtains
legal or other advice that it is in the interests of the Beneficiaries to do
so.

 

21.3                        No Implied Duties

 

The
duties and obligations of the Mortgages Trustee under the Mortgages Trust shall
be determined solely by the express provisions of this Deed (but without
prejudice to the duties and obligations of the Mortgages Trustee under any of
the other Transaction Documents).  The
Mortgages Trustee shall not be liable under this Deed except for the
performance of such duties and obligations as shall be specifically set forth
in this Deed.  No implied covenants or
obligations shall be read into this Deed against the Mortgages Trustee, and the
permissible right of the Mortgages Trustee to do things set out in this Deed
shall not be construed as a duty.

 

21.4                        No Liability

 

Neither
the Mortgages Trustee, Funding 1 (in its capacity as a Beneficiary hereunder)
nor the Seller (in its capacity as a Beneficiary hereunder) shall be liable to
each other, in the absence of wilful default, negligence or breach of the terms
of this Deed, in respect of any loss or damage which arises out of the exercise
or attempted or purported exercise or failure to exercise any of their
respective powers.

 

21.5                        Reliance on Certificates

 

The
Mortgages Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accordance with, any resolution, officer’s
certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal, bond
or other paper or document believed by it to be genuine and to have been signed
or presented to it pursuant to the Transaction Documents by the proper party or
parties.

 

17

 

21.6                        Reliance on Third Parties

 

The
Mortgages Trustee may, in relation to these presents, act on the opinion or
advice of or a certificate or any information obtained from any lawyer, banker,
valuer, broker, accountant, financial adviser, securities dealer, merchant
bank, computer consultant or other expert in the United Kingdom or elsewhere
and shall not, provided that it shall not have acted fraudulently or in breach
of any of the provisions of the Transaction Documents, be responsible for any
loss occasioned by so acting.  Any such
opinion, advice, certificate or information may be sent or obtained by letter,
telemessage, telex, cable or facsimile device and the Mortgages Trustee shall
not be liable for acting on any opinion, advice, certificate or information
purporting to be so conveyed although the same shall contain some error or
shall not be authentic, provided that such error or lack of authenticity shall
not be manifest.

 

22.                               NO RETIREMENT OF MORTGAGES TRUSTEE

 

22.1                        No Retirement

 

The
Mortgages Trustee shall not, and shall not purport to, retire as the trustee of
the Mortgages Trust or appoint any additional trustee of the Mortgages Trust
and shall have no power to retire or appoint any additional trustee under the
Trustee Act 1925 or otherwise.

 

22.2                        No Replacement

 

Neither
the Seller nor Funding 1 shall at any time remove or purport to remove and/or
replace the Mortgages Trustee as the trustee of the Mortgages Trust.

 

22.3                        No Termination

 

Prior
to the payment by Funding 1 of all amounts owing under the Intercompany Loan
Agreements and under the Transaction Documents, neither the Seller nor Funding
1 shall at any time, except in accordance with the provisions of Clauses 16
and 23,
terminate or purport to terminate the Mortgages Trust and, in particular, but
without prejudice to the generality of the foregoing, the Seller and Funding 1
shall not in reliance on their absolute beneficial interests in the Trust
Property call for the transfer to them or vesting in them of the legal estate
in all or any part of the Trust Property.

 

23.                               TERMINATION

 

The
Mortgages Trust shall terminate in respect of the Trust Property (if any then
remains) upon the later to occur of:

 

(a)                                  the date upon which the
Funding 1 Share of the Trust Property is zero; and

 

(b)                                 any other date agreed in
writing by Funding 1 and the Seller.

 

24.                               FURTHER ASSURANCES

 

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

 

18

 

25.                               AMENDMENTS

 

25.1                        Amendments and Waivers

 

Without
prejudice to Clause 25.8 of the Funding 1 Deed of Charge, no amendment or
waiver of any provision of this Deed 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 to this Deed.  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.

 

25.2                        Entire Agreement

 

This
Deed contains a final and complete integration of all prior expressions by the
parties with respect to the subject matter of this Deed and constitutes the
entire agreement among the parties with respect to the subject matter of this
Deed superseding all prior oral or written understandings other than the other
Transaction Documents.

 

26.                               NON PETITION COVENANT

 

The
Seller hereby agrees that it shall not institute against either Funding 1 or
the Mortgages Trustee any winding-up, administration, insolvency or similar
proceedings so long as any sum is outstanding under any Intercompany Loan
Agreement for the duration of one year plus one day since the last day on which
any such sum was outstanding.

 

27.                               NO PARTNERSHIP OR AGENCY

 

Nothing
in this Deed shall be taken to constitute or create a partnership between any
of the parties to this Deed or to make or appoint the Seller the agent of
Funding 1 (or vice versa).

 

28.                               CALCULATIONS

 

In the
absence of manifest error, any determination or calculation made by or on
behalf of the Mortgages Trustee in connection with the provisions of this Deed
shall be deemed to be conclusive.

 

29.                               NO WAIVER; REMEDIES

 

No
failure on the part of any party to this Deed 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 right or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy.  The remedies in this Deed are cumulative and
not exclusive of any remedies provided by law.

 

30.                               EXECUTION IN COUNTERPARTS;
SEVERABILITY

 

30.1                        Severability

 

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

 

19

 

31.                               TAX

 

31.1                           Any payment by Funding 1 to
the Seller to increase its share of the Trust Property shall be inclusive of
value added tax (if any).

 

31.2                           Any payment by the Seller to
Funding 1 which would increase its share of the Trust Property shall be
exclusive of VAT (if any).

 

31.3                           Any stamp duty or stamp duty
reserve tax in respect of any increase in Funding 1’s share of the Trust
Property shall be payable by the Seller.

 

32.                               CONFIDENTIALITY

 

32.1                        General Obligation of
Confidentiality

 

Unless
otherwise required by applicable law, and subject to Clause 32.2 below, each of
the parties agrees not to disclose to any person any information relating to
the business, finances or other matters of a confidential nature of or relating
to any other party to this Deed or any of the Transaction Documents which it
may have obtained as a result of having entered into this Deed or otherwise.

 

32.2                        Exceptions

 

The
provisions of Clause 32.1 above shall not apply:

 

(a)                                  to the disclosure of any
information to any person who is a party to any of the Transaction Documents as
expressly permitted by the Transaction Documents;

 

(b)                                 to the disclosure of any
information which is or becomes public knowledge otherwise than as a result of
the wrongful conduct of the recipient;

 

(c)                                  to the extent that the
recipient is required to disclose the same pursuant to any law or order of any
court or pursuant to any direction or requirement (whether or not having the
force of law) of any central bank or any governmental or other regulatory or
Taxation authority;

 

(d)                                 to the disclosure of any
information to professional advisers who receive the same under a duty of
confidentiality;

 

(e)                                  to the disclosure of any
information with the consent of the parties to this Deed;

 

(f)                                    to the disclosure to the
Rating Agencies or any of them of such information as may be requested by any
of them for the purposes of setting or reviewing the rating assigned to the
Notes (or any of them), provided that no information which would disclose the
identity of a Borrower shall be disclosed to the Rating Agencies or any of
them;

 

(g)                                 to the disclosure of any
information disclosed to a prospective assignee of Funding 1 (provided that it
is disclosed on the basis that the recipient will hold it confidential); or

 

(h)                                 to any disclosure for the
purposes of collecting in or enforcing the Trust Property or any of it.

 

20

 

33.                               EXCLUSION OF THIRD PARTY RIGHTS

 

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

 

34.                               ADDRESSES FOR NOTICES

 

Any
notices to be given pursuant to this Deed will be sufficiently served if sent
by prepaid first class post, by hand or facsimile transmission and will be
deemed to be given (in the case of facsimile transmission) when despatched
(where delivered by hand) on the day of delivery if delivered before 17.00
hours on a London Business Day or on the next London Business Day if delivered
thereafter or (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 Seller, to
Halifax plc, at Trinity Road, Halifax, West Yorkshire HX1 2RG (LP/3/3/SEC)
(facsimile number +44 (0)113 235 7511) for the attention of the Head of
Mortgage Securitisation with a copy to HBOS Treasury Services plc, 33 Old Broad
Street, London EC2N 1HZ (facsimile number +44 (020) 7574 8784) for the
attention of Head of Capital Markets and Securitisation;

 

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

 

(c)                                  in the case of Funding 1, to
Permanent Funding (No. 1) Limited, Blackwell House, Guildhall Yard, London,
EC2V 5AE (facsimile number +44 (0) 20 7556 0975) for the attention of the
Secretary with a copy to HBOS Treasury Services plc, 33 Old Broad Street,
London EC2N 1HZ (facsimile number +44 (020) 7574 8784) for the attention of
Head of Capital Markets and Securitisation;

 

(d)                                 in each case with a copy to
The Bank of New York, One Canada Square, London E14 5AL, (facsimile number +44
(020) 7964 6061 / 6399) for the attention of Global Structured Finance -
Corporate Trust ,

 

or to
such other address or facsimile number or for the attention of such other
person or entity as may from time to time be notified by any party to the
others by written notice in accordance with the provisions of this Clause 33.

 

35.                               GOVERNING LAW AND SUBMISSION TO
JURISDICTION

 

35.1                        Governing Law

 

This
Deed is governed by English law.

 

35.2                        Submission to Jurisdiction

 

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

 

21

 

forum
for the maintenance or hearing of such action or proceeding.  The Mortgages Trustee irrevocably appoints
Structured Finance Management Limited at Blackwell House, Guildhall Yard,
London EC2V 5AE as its agent for service of process.

 

36.                               EXCLUSION OF TRUSTEE ACT 2000

 

The
Trustee Act 2000 is hereby excluded to the maximum extent permissible, to the
intent that it shall not apply to the trusts constituted by this Deed and that
the parties shall be in the same position as they would be had that Act not
come into force.

 

IN WITNESS of which this Deed has been executed by the
parties hereto as a deed which has been delivered on the date first appearing
on page one.

 

22

 

SIGNATORIES

 

	
  EXECUTED as a DEED by

  	
  )

  	
   

  
	
  HALIFAX plc

  	
  )

  	
   

  
	
  as Seller, Cash Manager

  	
  )

  	
   

  
	
  and Beneficiary

  	
  )

  	
   

  
	
  acting by its attorney

  	
  )

  	
   

  
	
  in the presence of

  	
  )

  	
  (as attorney for HALIFAX PLC)

  
	
   

  	
   

  	
   

  
	
  Witness:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXECUTED as a DEED by

  	
  )

  	
   

  
	
  PERMANENT FUNDING (NO. 1)

  	
  )

  	
   

  
	
  LIMITED as Beneficiary

  	
  )

  	
   

  
	
  acting by

  	
  )

  	
   

  

 

 

	
   

  	
   

  	
   

  
	
  Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Director/Secretary

  	
   

  	
   

  

 

 

	
  EXECUTED as a DEED on behalf of

  	
  )

  
	
  PERMANENT MORTGAGES TRUSTEE

  	
  )

  
	
  LIMITED, a company incorporated in Jersey,

  	
  )

  
	
  Channel Islands, by

  	
  )

  
	
  being a person who, in

  	
  )

  
	
  accordance with the laws of that territory is acting

  	
  )

  
	
  under the authority of the company, in the presence

  	
  )

  
	
  of:

  	
  )

  

 

 

Witness:

 

Name:

 

Address:

 

23

 

	
  EXECUTED as a DEED by

  	
  )

  	
   

  
	
  SFM OFFSHORE

  	
  )

  	
   

  
	
  LIMITED as Share Trustee of the

  	
  )

  	
   

  
	
  Mortgages Trustee

  	
  )

  	
   

  
	
  acting by its attorney

  	
  )

  	
   

  
	
  in the presence of:

  	
  )

  	
  (as attorney for SFM OFFSHORE)

  
	
   

  	
   

  	
  LIMITED)

  

 

 

Witness:

 

Name:

 

Address:

 

24Exhibit 4.3

 

EXECUTION COPY

 

AMENDED AND RESTATED

MORTGAGE SALE AGREEMENT

 

 

DATED 12th March, 2004

 

 

HALIFAX plc

as Seller and one of the
Beneficiaries

 

 

and

 

 

PERMANENT FUNDING (NO. 1) LIMITED

as Funding 1 and one of the
Beneficiaries

 

 

and

 

 

PERMANENT MORTGAGES TRUSTEE LIMITED

as Mortgages Trustee

 

 

and

 

 

THE BANK OF NEW YORK

as Security Trustee

 

 

 

London

ICM 744611.7

 

 

CONTENTS

 

	
  Clause

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and
  Construction

  	
   

  
	
  2.

  	
  Sale and Purchase and
  Initial Portfolio

  	
   

  
	
  3.

  	
  Initial Closing Date

  	
   

  
	
  4.

  	
  Sale and Purchase
  of New Portfolios

  	
   

  
	
  5.

  	
  Trust of Monies

  	
   

  
	
  6.

  	
  Completion of the
  Transfer of Loans

  	
   

  
	
  7.

  	
  Undertakings

  	
   

  
	
  8.

  	
  Warranties and
  Repurchase by the Seller

  	
   

  
	
  9.

  	
  Other Warranties

  	
   

  
	
  10.

  	
  Further Assurance

  	
   

  
	
  11.

  	
  Consequences of Breach

  	
   

  
	
  12.

  	
  Subordination

  	
   

  
	
  13.

  	
  Non-Merger

  	
   

  
	
  14.

  	
  No Agency or Partnership

  	
   

  
	
  15.

  	
  Payments

  	
   

  
	
  16.

  	
  Waiver and Variation

  	
   

  
	
  17.

  	
  Notices

  	
   

  
	
  18.

  	
  Assignment

  	
   

  
	
  19.

  	
  Change of Security Trustee

  	
   

  
	
  20.

  	
  Not Used

  	
   

  
	
  21.

  	
  Third Party Rights

  	
   

  
	
  22.

  	
  Governing Law

  	
   

  

 

	
  Schedule

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Representations and
  warranties

  	
   

  
	
  2.

  	
  Registered
  Transfer

  	
   

  
	
  3.

  	
  Unregistered
  Transfer

  	
   

  
	
  4.

  	
  Lending
  Criteria

  	
   

  
	
  5.

  	
  Power of Attorney in
  favour of Funding 1, The Mortgages trustee and the Security Trustee

  	
   

  
	
  6.

  	
  Loan Repurchase Notice

  	
   

  
	
  7.

  	
  Assignment of Third
  Party Rights

  	
   

  
	
  8.

  	
  Assignment of Halifax Mortgage Re
  Limited MIG Policies

  	
   

  
	
  9.

  	
  Halifax
  Mortgage Re Limited MIG Policies Assignment notice

  	
   

  
	
  10.

  	
  Insurance Endorsement

  	
   

  
	
  11.

  	
  Insurance Acknowledgements

  	
   

  
	
  12.

  	
  New Portfolio Notice

  	
   

  
	
  13.

  	
  Forms of Scottish Transfer

  	
   

  
	
  14.

  	
  Forms
  of Scottish Transfer

  	
   

  
	
  15.

  	
  Form of Scottish
  Declaration of Trust

  	
   

  
	
  16.

  	
  Appendix

  	
   

  
	
   

  	
  Part 1 

  	
  Initial Portfolio

  	
   

  
	
   

  	
  Part 2

  	
  Standard Documentation

  	
   

  

 

 

THIS AMENDED AND RESTATED MORTGAGE SALE AGREEMENT is made on 12th March, 2004

 

BETWEEN:

 

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

 

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

 

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

 

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

 

WHEREAS:

 

(A)                              The Seller carries on the business of, inter alia,
originating mortgage loans to individual borrowers secured on residential
properties in England, Wales or Scotland.

 

(B)                                The Seller has sold to the Mortgages
Trustee certain of the above mentioned mortgage loans together with the benefit
of their related security on the terms and subject to the conditions set out in
the Mortgage Sale Agreement (as amended and/or restated by this Agreement and
from time to time, the Mortgage Sale Agreement).

 

(C)                                The Mortgages Trustee holds all of the
above mentioned mortgage loans as bare trustee for the Beneficiaries upon, with
and subject to the trusts, powers and provisions of the Mortgages Trust Deed
(as amended and/or restated from time to time, the Mortgages Trust Deed).

 

(D)                               The parties to the Mortgage Sale Agreement
have agreed to amend and restate the terms of the Mortgage Sale Agreement as
set out herein and the Seller may sell new portfolios of mortgage loans and
their related security to the Mortgages Trustee on such amended terms.

 

IT IS HEREBY AGREED as follows:

 

1.                                      DEFINITIONS AND CONSTRUCTION

 

1.1                                 The amended and restated
master definitions and construction schedule signed by, amongst others, the
parties to this Deed and dated 12th March, 2004 (as the same may be amended,
varied or supplemented from time to time with the consent of the parties to
this Agreement)

 

1

 

(the Master Definitions and Construction Schedule)
is expressly and specifically incorporated into this Agreement and,
accordingly, the expressions defined in the Master Definitions and Construction
Schedule (as so amended, varied or supplemented from time to time) shall,
except where the context otherwise requires and save where otherwise defined
herein, have the same meanings in this Agreement, including the Recitals hereto
and this Agreement shall be construed in accordance with the interpretation
provisions set out in Clause 2 of the Master Definitions and
Construction Schedule.

 

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

 

1.3                                 For the purposes of Section 2
of the Law of Property (Miscellaneous Provisions) Act 1989, the terms of the
Transaction Documents are, so far as applicable, incorporated herein.

 

1.4                                 The Initial Portfolio
contained as Part 1 of the Exhibit to this Agreement and any schedule of New
Loans attached to any New Portfolio Notice may be provided in a document stored
upon electronic media (including, but not limited to, a CD-ROM) in a form
acceptable to the Mortgages Trustee, the Security Trustee and Funding 1 (each
acting reasonably).

 

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

 

2.                                      SALE AND PURCHASE AND INITIAL PORTFOLIO

 

2.1                                 Subject to Clause 2.2,
in consideration of the Purchase Price (which shall be paid in accordance with Clause 3.3)
and the covenant of the Mortgages Trustee to hold the Trust Property upon
trust, with and subject to all the trusts, powers and provisions of the
Mortgages Trust Deed, the Seller hereby agrees to sell to the Mortgages Trustee
with full title guarantee, the Initial Portfolio on the Initial Closing Date.

 

2.2                                 The obligation of the Seller
under Clause
2.1 shall be subject to and conditional upon:

 

(a)                                  the issue by the First Issuer
of the Issuer Notes on the Initial Closing Date and the borrowing by Funding 1
of the Term Advances under the First Issuer Intercompany Loan Agreement;

 

(b)                                 the constitution of the
Mortgages Trust on or prior to the Initial Closing Date; and

 

(c)                                  the Transaction Documents
having been executed and delivered by the parties thereto on or before the
Initial Closing Date.

 

2.3                                 The sale of the Portfolio
shall not include any obligation to pay any Delayed Cashbacks, Home Cash
Reserve Drawings or Flexible Loan Drawings (if any), which obligation shall at
all times, and notwithstanding the sale of the Portfolio, remain an obligation
of the Seller.

 

2

 

3.                                      INITIAL CLOSING DATE

 

3.1         (a)                                        A meeting shall take place at
11 a.m. on the Initial Closing Date at the offices of Allen & Overy, One
New Change, London EC4M 9QQ or such other time or offices as the parties may
agree at which the Seller shall deliver to the Security Trustee or its
representative the following documents:

 

(i)                                     two originals of the power of
attorney dated as at the Initial Closing Date and substantially in the form set
out in Schedule 5 hereto, duly executed by the Seller;

 

(ii)                                  a certified copy of each of
the duly executed Insurance Acknowledgements;

 

(iii)                               a certified copy of each of
the duly executed Insurance Endorsements;

 

(iv)                              a duly executed assignment of
the Halifax Mortgage Re Limited MIG Policies to the extent that they relate to
the Mortgages comprised in the Initial Portfolio from the Seller to the
Mortgages Trustee and a certified copy of a notice (the original of which shall
be served by the Seller by courier or by special delivery) of such assignment
from the Seller to HBOS Insurance (PCC) Guernsey Limited dated as at the
Initial Closing Date and in the form (mutatis mutandis) set out in Schedule 8
and Schedule 9 hereto respectively and a certified copy of consent to
assignment of the Halifax Mortgage Re Limited MIG Policies (or acknowledgement
that the Mortgages Trustee will be an insured in respect of the Initial
Portfolio under the Halifax Mortgage Re Limited MIG Policies following such
assignment) from HBOS Insurance (PCC) Guernsey Limited in such form as HBOS
Insurance (PCC) Guernsey Limited reasonably requires;

 

(v)                                 a certificate of a duly
authorised officer of the Seller dated as at the Initial Closing Date attaching
a copy of the board minute of the Seller authorising its duly appointed
representatives to agree the sale of the Portfolio and authorising execution
and performance of this Agreement, the Servicing Agreement, the other Transaction
Documents to which the Seller is a party (in any capacity) and all of the
documentation to be entered into pursuant to this Agreement and confirming that
the resolutions referred to therein are in full force and effect and have not
been amended or rescinded as at the date of the certificate;

 

(vi)                              a duly executed assignment of
rights against third parties comprised in the Initial Portfolio dated as at the
Initial Closing Date and in the form of the Assignment of Third Party Rights;
and

 

(vii)                           a solvency certificate from an
authorised signatory of the Seller dated the Initial Closing Date in a form
acceptable to the Mortgages Trustee, Funding 1 and the Security Trustee (each
acting reasonably).

 

(b)                                 The parties hereto acknowledge
that completion on the Initial Closing Date of the sale to the Mortgages
Trustee of all of the Seller’s right, title, interest and benefit in and to the
Initial Portfolio subject to the terms and provisions of the Mortgages Trust
Deed shall occur as indicated in this Clause 3 Provided that the matters
described in

 

3

 

Clauses 6.2, 6.3, 6.4 and 6.5 shall not occur until the
relevant time indicated in Clause 6 or, as applicable, Clause 7.4.

 

3.2                                 The Seller undertakes that
from the Initial Closing Date until the perfection of the assignment or
assignation (as appropriate) in accordance with Clauses 6.2, 6.3, 6.4  and 6.5, the Seller shall hold the Title Deeds
and Customer Files relating to the Portfolio that are in its possession or under
its control or held to its order to the order of the Mortgages Trustee or as
the Mortgages Trustee shall otherwise direct.

 

3.3                                 Subject to fulfilment of the
conditions referred to in Clauses 2.2 and 3, the Seller shall be paid
the Purchase Price by telegraphic transfer by Funding 1 on the Initial Closing
Date.

 

3.4                                 The Seller shall provide all
reasonable co-operation to the Mortgages Trustee, Funding 1 and the Security
Trustee to enable them to carry out their respective duties and enforce their
rights under the Transaction Documents. 
Without prejudice to the generality of the foregoing, the Seller shall:

 

(a)                                  upon reasonable prior notice
and during normal office hours, permit the Mortgages Trustee, Funding 1, the
Security Trustee and their authorised employees and agents and other persons
nominated by the Security Trustee and approved by the Seller (such approval not
to be unreasonably withheld or delayed), to review the Customer Files and the
Title Deeds in relation to the Portfolio (subject to such person(s) agreeing to
keep the same confidential but provided that disclosure shall be permitted to
the professional advisors and auditors of the party to whom such disclosure is
made and/or to the extent that such disclosure is required by law or for the purpose
of any judicial or other proceedings); and/or

 

(b)                                 give promptly all such
information and explanations relating to the Loans and their Related Security
as the Mortgages Trustee, Funding 1 or the Security Trustee may reasonably
request (including a list of the Loans and their Related Security in the
Portfolio along with details of the location of the Title Deeds relating
thereto),

 

provided
that prior to completion in accordance with Clause 6, the Seller shall be
under no obligation to provide any information or documentation to any person
other than the Mortgages Trustee and/or the Security Trustee or their
respective employees and/or professional advisors or allow such person access
to the Customer Files or Title Deeds if to do so would result in a breach of
the applicable Mortgage Terms or the Data Protection Act 1998.

 

4.                                      SALE AND PURCHASE OF NEW
PORTFOLIOS

 

4.1                                 Subject to fulfilment of the
conditions set out in Clauses 2.2, 3.1, 4.2 (or as applicable, 4.3)
and 4.4
and the restriction set out in Clause 2.3, if the Seller shall, at any
time and from time to time serve a properly completed New Portfolio Notice on
the Mortgages Trustee and Funding 1 with a copy to the Security Trustee (such
service to be in the Seller’s sole discretion), the Seller agrees that on the
date for completion of the sale specified in such New Portfolio Notice the
Seller shall sell with full title guarantee (or in relation to rights and
assets situated in or governed by the law of Scotland with absolute warrandice)
to the Mortgages Trustee the relevant New Portfolio.

 

4.2                                 The conditions to be met as at
each Sale Date are:

 

4

 

(a)                                  no event of default under the
Transaction Documents shall have occurred which is continuing as at the relevant
Sale Date;

 

(b)                                 the Principal Deficiency
Ledger shall not have a debit balance as at the most recent Funding 1 Interest
Payment Date after applying all Funding 1 Available Revenue Receipts on that
Funding 1 Interest Payment Date;

 

(c)                                  the Mortgages Trustee is not
aware that the purchase of the New Portfolio on the relevant Sale Date will
adversely affect the then current rating by the Ratings Agencies (or any of
them) of the Notes;

 

(d)                                 as at the relevant Sale Date,
the Seller has not received any notice that the short term, unsecured,
unguaranteed and unsubordinated debt obligations of the Seller are not rated at
least P-1 by Moody’s, A-1 by S&P and F1 by Fitch at the time of, and
immediately following, the sale of the New Loans to the Mortgages Trustee;

 

(e)                                  as at the relevant Sale Date,
the aggregate Outstanding Principal Balances of the Loans in the Mortgages
Trust, in respect of which the aggregate amount in arrears is more than three
times the Monthly Payment then due, is less than 5 per cent. of the aggregate
Outstanding Principal Balances of the Loans in the Mortgages Trust;

 

(f)                                    except where Funding 1 pays
amounts to the Mortgages Trustee in consideration of New Loans to be sold to
it, the aggregate Outstanding Principal Balance (excluding Arrears of Interest)
of New Loans transferred in any one Interest Period must not exceed 15 per
cent. of the aggregate Outstanding Principal Balance of Loans (excluding
Arrears of Interest) in the Mortgages Trust as at the beginning of that
Interest Period;

 

(g)                                 the sale of the New Portfolio
on the relevant Sale Date does not result in the product of WAFF and WALS for
the Portfolio after such purchase calculated on the relevant Sale Date in the
same way as for the Initial Portfolio (or as agreed by the Servicer and the
Rating Agencies from time to time) exceeding the product of WAFF and WALS for
the Portfolio calculated on the most recent Closing Date plus 0.25 per cent.;

 

(h)                                 the yield (as calculated
below) of the Loans in the Mortgages Trust together with the yield of the New
Loans to be sold to the Mortgages Trustee on the relevant Sale Date (together
for the purposes of this paragraph, the Relevant Loans) is at least 0.50 per cent.
greater than Sterling-LIBOR for three-month sterling deposits as at the previous
Interest Payment Date, after taking into account the average yield on the Loans
which are Variable Rate Loans, Tracker Rate Loans and Fixed Rate Loans and the
margins on the Funding 1 Swap(s), in each case as at the relevant Sale Date.  The yield of the Relevant Loans is to be
calculated as follows:

 

 

where,

 

(A)         =                                            the Outstanding Principal
Balance, on the relevant Sale Date, of the Relevant Loans which are Fixed Rate
Loans;

 

5

 

(B)                                =                                         the interest rate receivable
by Funding 1 under the Funding 1 Fixed-Floating Rate Swap as at the relevant
Sale Date;

 

(C)                                =                                         the Outstanding Principal
Balance, on the relevant Sale Date, of the Relevant Loans which are Variable
Rate Loans;

 

(D)                               =                                         the weighted average Variable
Base Rate of the Relevant Loans which are Variable Rate Loans on the relevant
Sale Date;

 

(E)                                 =                                         the Variable Rate Swap SVR for
the Relevant Loans which are Variable Rate Loans on the relevant Sale Date;

 

(F)                                 =                                         the interest rate receivable
by Funding 1 under the Funding 1 Variable Rate Swap as at the relevant Sale
Date;

 

(G)                                =                                         the Outstanding Principal
Balance, on the relevant Sale Date, of the Relevant Loans which are Tracker
Rate Loans;

 

(H)                               =                                         the interest rate receivable
by Funding 1 under the Tracker Rate Swap as at the relevant Sale Date;

 

(I)                                    =                                         the weighted average margin of
the Relevant Loans which are Tracker Rate Loans over or under the Bank of
England Repo Rate on the relevant Sale Date;

 

(J)                                   =                                         the Outstanding Principal
Balance of the Relevant Loans on the relevant Sale Date;

 

(i)                                     the sale of the New Loans on
the relevant Sale Date does not result in the loan-to-value ratio of the Loans
and the New Loans after application of the LTV Test on the relevant Sale Date
exceeding the loan-to-value ratio (based on the LTV Test) of Loans in the
Portfolio on the most recent Closing Date plus 0.25 per cent.;

 

(j)                                     the sale of the New Loans on
the relevant Sale Date does not result in Loans (other than Fixed Rate Loans)
which after taking into account the Funding 1 Swap will yield less than
Sterling-LIBOR plus 0.50 per cent. as at the relevant Sale Date and that have
more than 2 years remaining on their incentive period accounting for more than
15 per cent. of the aggregate Outstanding Principal Balance of all Loans
comprising the Trust Property;

 

(k)                                  the sale of the New Loans on
the relevant Sale Date does not result in the Fixed Rate Loans which have more
than 1 year remaining on their incentive period accounting for more than 50 per
cent. of the aggregate Outstanding Principal Balance of Loans comprising the
Trust Property;

 

(l)                                     no sale of the New Loans may
occur, if, as at the relevant Sale Date, the Step-up Date in respect of any
Note issued after 1st January, 2003 and still outstanding has been reached and
such Note has not been redeemed in full. 
For the avoidance of doubt, this prohibition on the sale of New Loans to
the Mortgages Trustee shall remain in effect only for so long as any such Note
remains outstanding and, upon its

 

6

 

redemption, the sale of New Loans to the
Mortgages Trustee may be resumed in accordance with the terms of this
Agreement;

 

(m)                               as at the Sale Date, the
adjusted General Reserve Fund is equal to or greater than the General Reserve
Fund Threshold;

 

(n)                                 if the sale of New Loans
includes the sale of New Loan Types to the Mortgages Trustee, the Security
Trustee has received written confirmation from each of the Rating Agencies that
such New Loan Types may be sold and assigned to the Mortgages Trustee and that
such sale of New Loan Types would not have an adverse effect on the then
current ratings of the Notes;

 

(o)                                 the Funding 1 Swap Agreement
has been modified as required (or, if appropriate, Funding 1 has entered into a
new swap agreement) to hedge against the interest rates payable in respect of
such New Loans and the floating rate of interest payable on the Issuer
Intercompany Loan; and

 

(p)                                 no Trigger Event has occurred
on or before the relevant Sale Date.

 

In this
Clause
4.2 references to any Monthly Payment due at any date means the
Monthly Payment payable in respect of the month in which that date falls.

 

4.3                                 The obligations of the Seller
under Clause
4.1 shall be subject to and conditional upon no Insolvency Event
having occurred which is continuing as at the relevant Sale Date.

 

4.4                                 Subject to fulfilment of the
conditions referred to in Clauses 4.2, 4.3, 4.4 4.5 and 4.6,
the consideration to be provided to the Seller for the sale of the New
Portfolio to the Mortgages Trustee on a Sale Date shall be the aggregate of:

 

(a)                                  the payment by Funding 1 to
the Seller by telegraphic transfer on the relevant Sale Date of the proceeds of
any New Intercompany Loan advanced to Funding 1 by a New Issuer; and/or

 

(b)                                 the covenant of the Mortgages
Trustee to hold the Trust Property on trust pursuant to the terms of the
Mortgages Trust Deed.

 

4.5         (a)                                        On the date of the sale of the
relevant New Portfolio the Seller shall deliver to the Security Trustee or its
representative the following documents:

 

(i)                                     on the date of the first sale
of a relevant New Portfolio including Scottish Loans:

 

(A)                              two originals of the power of
attorney dated as at the Sale Date and substantially in the form set out in
Schedule 5 hereof duly executed by the Seller;

 

(B)                                a certified copy of each of
the duly executed Insurance Acknowledgements; and

 

(C)                                a certified copy of each of
the duly executed Insurance Endorsements;

 

7

 

(ii)                                  a duly executed assignment of
the Halifax Mortgage Re Limited MIG Policies to the extent that they relate to
the Mortgages comprised in the relevant New Portfolio from the Seller to the
Mortgages Trustee and a certified copy of a notice (the original of which shall
be served by the Seller by courier or by special delivery) of such assignment
from the Seller to HBOS Insurance (PCC) Guernsey Limited dated as of the
relevant Assignment Date and in the form (mutatis mutandis) set out in Schedule 8  and
Schedule 9 hereof respectively and a certified copy of consent to assignment of
the Halifax Mortgage Re Limited MIG policies (or acknowledgement that the
Mortgages Trustee will be an insured under the Halifax Mortgage Re Limited MIG
Policies following the assignment) from HBOS Insurance (PCC) Guernsey Limited
in such form as HBOS Insurance (PCC) Guernsey Limited reasonably requires;

 

(iii)                               a duly executed assignment of
rights against third parties comprised in the relevant New Portfolio dated as
at the relevant Sale Date and in the form of the Assignment of Third Party
Rights;

 

(iv)                              a certified copy of each of
the duly executed Insurance Acknowledgements;

 

(v)                                 on any Sale Date that Funding
1 provides consideration for New Loans to be sold to the Mortgages Trustee
pursuant to Clause 4.4(a) above only, a certificate of a duly authorised
officer of the Seller dated as at the relevant Sale Date attaching either (i) a
copy of the board minute referred to in Clause 3.1(a)(v) or (ii) any board minutes
or considerations, notes and resolutions of the Seller or its duly authorised
delegate (as applicable) authorising its duly appointed representatives to
agree the sale of a New Portfolio, and authorising the execution and
performance of the Transaction Documents to which the Seller is party, in each
case confirming that the resolutions referred to therein are in full force and
effect and have not been amended or rescinded as at the date of the
certificate;

 

(vi)                              on any Sale Date that Funding
1 provides consideration for New Loans to be sold to the Mortgages Trustee pursuant
to Clause
4.4(a) above only, a solvency certificate from an authorised
signatory of the Seller dated as at the relevant Sale Date; and

 

(vii)                           a Scottish Declaration of Trust in respect
of the Scottish Loans and their Related Security comprised in the relevant New
Portfolio, in the form (mutatis mutandis) set out in Schedule 15
and with the annexure thereto duly completed, duly executed by the Seller, the
Mortgages Trustee and Funding 1.

 

(b)                                 The parties hereto acknowledge
that completion on each relevant  Sale
Date of the sale to the Mortgages Trustee of all of the Seller’s right, title,
interest and benefit in and to the relevant New Portfolio subject to the terms
and provisions of the Mortgages Trust Deed shall occur as indicated in this Clause 4
PROVIDED
THAT the matters described in Clauses 6.6 and 6.5 shall not occur until the
relevant time indicated in Clause 6 or, as applicable, Clause 7.5.

 

4.6         (a)                                        The Seller undertakes that
from the relevant Sale Date until the perfection of the assignment or
assignation (as appropriate) in accordance with Clauses 6.2 and 6.5,

 

8

 

the Seller shall hold the Title Deeds and
Customer Files relating to the New Portfolio that are in its possession or
under its control or held to its order to the order of the Mortgages Trustee or
as the Mortgages Trustee shall direct.

 

(b)                                 The Seller undertakes that
within three (3) London Business Days of the Sale Date to provide the Mortgages
Trustee and the Security Trustee with an updated, complete and accurate list of
the Loans and their Related Security which comprise the New Portfolio which may
be provided in a document stored upon electronic media (including, but not
limited to a CD-Rom) in a form acceptable to the Mortgages Trustee and the
Security Trustee (each acting reasonably).

 

4.7                                 Prior to the earlier to occur
of:

 

(a)                                  a Trigger Event; and

 

(b)         (i)                                           if Funding 1 does not enter
into a New Intercompany Loan Agreement, the Interest Payment Date in June 2008;
or

 

(ii)                                  if Funding 1 does enter into
New Intercompany Loan Agreements, the latest Interest Payment Date specified by
Funding 1 by notice in writing to the Seller and the Mortgages Trustee as
applying in relation to this covenant,

 

the
Seller undertakes to use all reasonable endeavours to offer to sell, in
accordance with the provisions of this Clause 4, to the Mortgages Trustee and the
Mortgages Trustee undertakes to use all reasonable endeavours to acquire from
the Seller and to hold pursuant to the terms of the Mortgages Trust Deed until
the earlier of the Interest Payment Date falling in June 2008 (or such later
date as may be notified by Funding 1 to the Seller) and the occurrence of a
Trigger Event, sufficient New Loans and their Related Security so that the
aggregate Outstanding Principal Balance of Loans in the Portfolio (i) during
the period from and including the Fourth Issuer Closing Date up to and
excluding the Funding 1Interest Payment date in June 2006 is not less than
£21,500,000,000 and (ii) during the period from and including the interest
payment date in June 2006 to but excluding the Funding 1 Interest Payment Date
in June 2008 is not less than £15,750,000,000 before June 2008 (or such other
amount or amounts specified by Funding 1 in the notice referred to in Clause
4.7(b)(ii) above) provided that the Seller shall not be obliged to
sell to the Mortgages Trustee, and the Mortgages Trustee shall not be obliged
to acquire, New Loans and their Related Security if in the reasonable opinion
of the Seller the sale to the Mortgages Trustee of New Loans and their Related
Security would adversely affect the business of the Seller.

 

4.8                                 On each Sale Date that Funding
1 provides consideration for New Loans to be sold to the Mortgages Trustee
pursuant to Clause 4.4(a) above, the Beneficiaries shall appoint a firm of
independent auditors to undertake a due diligence exercise on a sample of the
Customer Files relating to the New Loans to be sold to the Mortgages Trustee on
the relevant Sale Date.  The costs of
such independent auditors shall be borne by the relevant New Issuer (which
shall be procured by Funding 1).

 

5.                                      TRUST OF MONIES

 

5.1                                 Notwithstanding the sales
effected by this Agreement, if at, or at any other time after, the Closing Date
(but prior to any repurchase in accordance with Clause 8.5) the Seller holds,
or there is held to its order, or it receives, or there is received to its
order any property, interests,

 

9

 

rights or benefits and/or the proceeds
thereof hereby agreed to be sold, the Seller undertakes to each of the
Mortgages Trustee, Funding 1 and the Security Trustee that, subject to Clause 6,
it will promptly remit, assign and/or transfer the same to the Mortgages
Trustee or, if appropriate, the Security Trustee and until it does so or to the
extent that the Seller is unable to effect such remittance, assignment,
assignation or transfer, it will hold such property, interests, rights or
benefits and/or the proceeds thereof upon trust for the Mortgages Trustee
subject at all times to the Mortgages Trust.

 

5.2                                 If at, or any time after, the
Initial Closing Date the Mortgages Trustee holds, or there is held to its
order, or it receives, or there is received to its order, any property,
interests, rights or benefits relating to:

 

(a)                                  any Loan or Loans under a
Mortgage Account and its Related Security repurchased by the Seller pursuant to
Clause
8.5; or

 

(b)                                 (without prejudice to Clause 11)
amounts owed by a Borrower to the Seller which the Seller has not agreed to
sell under Clause 2.1,

 

and/or
the proceeds thereof, the Mortgages Trustee undertakes to the Seller that it
will remit, assign, re-assign, retrocess or transfer the same to the Seller, as
the case may require, and until it does so or to the extent that the Mortgages
Trustee is unable to effect such remittance, assignation, assignment,
re-assignment, retrocession or transfer, the Mortgages Trustee undertakes to
hold such property, interests, rights or benefits and/or the proceeds thereof
upon trust for the Seller as the beneficial owner thereof or as the Seller may
direct provided that the Mortgages Trustee shall not be in breach of its
obligations under this Clause 5 if, having received any such
monies and paid them to third parties in error, it pays an amount equal to the
monies so paid in error to the Seller in accordance with the Servicing
Agreement.

 

6.                                      COMPLETION OF THE TRANSFER OF
LOANS

 

6.1                                 The assignments or
assignations (as appropriate) contemplated by this Agreement shall be perfected
on the twentieth London Business Day after the earliest to occur of:

 

(a)                                  the service of an Intercompany
Loan Acceleration Notice or a Note Acceleration Notice in relation to any Notes
of any Issuer; or

 

(b)                                 the Seller being required to
perfect legal title to the Mortgages, or procure any or all of the acts
referred to in this Clause 6 by an order of a court of
competent jurisdiction or by any regulatory authority of which the Seller is a
member or any organisation whose members comprise (but are not necessarily
limited to) mortgage lenders and with whose instructions it is customary for
the Seller to comply; or

 

(c)                                  it becoming necessary by law
to do any or all of the acts referred to in this Clause 6; or

 

(d)                                 the Security Trustee
certifying that, in its reasonable opinion, the property, assets and rights of
Funding 1 comprised in the security constituted by the Funding 1 Deed of Charge
or any material part thereof is/are in jeopardy and that the doing of any or
all of the acts referred to in Clauses 6.2 to 6.6 inclusive is necessary in
order materially to reduce such jeopardy; or

 

10

 

(e)                                  unless otherwise agreed in
writing by the Rating Agencies and the Security Trustee, the termination of the
Seller’s role as Servicer under the Servicing Agreement; or

 

(f)                                    the Seller calling for
perfection by serving notice in writing to that effect on the Mortgages
Trustee, Funding 1 and the Security Trustee; or

 

(g)                                 the date on which the Seller
ceases to be assigned a long term unsecured, unsubordinated debt obligation
rating from S&P of at least BBB- or from Moody’s of at least Baa3 or from
Fitch of at least BBB-; or

 

(h)                                 the occurrence of an
Insolvency Event in relation to the Seller; or

 

(i)                                     the latest of the last
repayment dates of the Intercompany Loans where any Intercompany Loan has not
been discharged in full.

 

6.2                                 Completion of the transfer of
the English Mortgages in the Portfolio shall be effected by:

 

(a)                                  a Registered Transfer, in the
case of English Mortgages over Registered Land (in the form set out in Schedule 2);
and

 

(b)                                 an Unregistered Transfer, in
the case of English Mortgages over Unregistered Land (in the form set out in Schedule 3).

 

6.3                                 Completion of the transfer of
the Scottish Mortgages in the Portfolio shall be effected by:

 

(a)                                  the completion and
registration in the Land Register of Scotland of an SLR Transfer, in the case
of Scottish Mortgages over Properties title to which is registered in the Land
Register of Scotland (in the form set out in Schedule 13); and

 

(b)                                 the completion and recording
in the General Register of Sasines of a Sasine Transfer (in the form set out in
Schedule
14), in the case of Scottish Mortgages over Properties title to
which is recorded in the General Register of Sasines.

 

6.4                                 Completion of the transfer of
any other matter comprised in the Portfolio shall be effected by a transfer in
such form as the Mortgages Trustee may reasonably require.

 

6.5                                 Subject to Clause 7.5,
prior to perfection pursuant to Clause 6.1, neither the Mortgages Trustee
nor Funding 1 nor the Security Trustee will:

 

(a)                                  submit or require the
submission of any notice, form, request or application to or pay any fee for
the registration of, or the noting of any interest at the Land Charges
Department of H.M. Land Registry or at H.M. Land Registry or Registers of
Scotland in relation to, the Mortgages Trustee’s and/or Funding 1’s interests
in the Portfolio;

 

(b)                                 give or require the giving of
any notice to any Borrower of the assignment or assignation of that Borrower’s
Loan and its Related Security to the Mortgages Trustee or the charge by Funding
1 of Funding 1’s interest in that Borrower’s Loan and its Related Security to
the Security Trustee pursuant to the Funding 1 Deed of Charge; or

 

(c)                                  send or require to be sent to
any solicitor who has acted on behalf of the Seller in respect of any Mortgage
with respect to which the Seller has not received a complete

 

11

 

set of the Title Deeds a letter or other
communication requiring such solicitor to hold such documents to the order of
the Mortgages Trustee or the Security Trustee (as the case may be).

 

6.6                                 Within 25 London Business Days
following perfection pursuant to Clause 6.1, the Seller will do such of the
acts or things referred to in Clauses 6.2 to 6.5 as the Security Trustee
or the Mortgages Trustee requires the Seller to do.

 

6.7                                 The Seller shall indemnify
each of the Mortgages Trustee, Funding 1 and the Security Trustee from and
against any and all costs, fees and expenses (including, without limitation,
legal fees and expenses and any applicable Value Added Tax thereon) which may
be incurred by the Mortgages Trustee and/or Funding 1 and/or the Security
Trustee by reason of the doing of any act, matter or thing referred to in this Clause 6
and Clause
7.5.

 

7.                                      UNDERTAKINGS

 

7.1                                 The Mortgages Trustee and
Funding 1 undertake to the Seller that they will at all times (or will direct
the Servicer at all times to) use reasonable endeavours to administer and
enforce (and exercise their powers and rights and perform their obligations
under) the Loans comprised in the Portfolio and their Related Security in
accordance with the Seller’s Policy (for so long as it exists and thereafter in
accordance with such policies as would be applied by a reasonable, prudent
mortgage lender in the conduct of its business), provided that if the Seller
fails to comply with its obligations to repurchase any Loan and its Related
Security pursuant to Clause 8.5 the Mortgages Trustee shall be
entitled to waive any Early Repayment Fee in respect of such Loan and its
Related Security if, in the Mortgages Trustee’s reasonable opinion, such waiver
is reasonably necessary in order to effect an interest rate change.

 

7.2                                 The Seller hereby undertakes
to the Mortgages Trustee and Funding 1 that, in the event that any Borrower
establishes that it has at any time prior to the Initial Closing Date or, as
the case may be, the relevant Sale Date, paid to the Seller any amounts in
excess of sums due to the Seller as at the date of payment under the Mortgage
Conditions applicable to that Loan, the Seller will reimburse the Borrower for
such overpayment together with any interest, cost or other expense associated
therewith.  The Seller further agrees to
hold the Mortgages Trustee and Funding 1 harmless against any such claims and
to indemnify the Mortgages Trustee and Funding 1 on an after Tax basis in
relation to any costs, expense, loss or other claim which may arise in
connection therewith.  Any payment made
by the Seller to the Mortgages Trustee and Funding 1 in discharge of the
foregoing indemnity shall be regarded as a rebate of part of the Purchase Price
of the relevant Loan.

 

7.3                                 Each of the Seller and the
Mortgages Trustee and Funding 1 undertakes to each other and to the Security
Trustee that if and to the extent that any determination shall be made by any
court or other competent authority or any ombudsman in respect of any Loan and
its Related Security that:

 

(a)                                  any term which relates to the
recovery of interest under the Standard Documentation applicable to that Loan
and its Related Security is unfair; or

 

(b)                                 the interest payable under any
Loan is to be set by reference to HVR 1 or HVR 2 (as applicable) (and not a
rate set by the Seller’s successors or assigns or those deriving title from
them); or

 

12

 

(c)                                  the variable margin above the
Bank of England repo rate under any Tracker Rate Loan must be set by the Seller
(rather than by its successors or assigns or those deriving title from them);
or

 

(d)                                 the interest payable under any
Loan is to be set by reference to an interest rate other than that set or
purported to be set by either the Servicer or the Mortgages Trustee as a result
of the Seller having more than one variable mortgage rate,

 

then,
at Funding 1’s direction (subject to the prior written consent of the Security
Trustee), the Mortgages Trustee will serve upon the Seller a notice in the form
of the Loan Repurchase Notice requiring the Seller to repurchase the relevant
Loan and all other Loans under the relevant Mortgage Account and its Related
Security in accordance with Clause 8.5 (but in the case of a
determination in respect of (b) above, only if at any time on or after such
determination, HVR 1 or HVR 2 (as applicable) shall be below or shall fall
below the standard variable rate of interest set by such successors or assigns
or those deriving title from them).

 

7.4                                 The Seller hereby undertakes
to the Mortgages Trustee, Funding 1 and the Security Trustee that:

 

(a)                                  if the long term unsecured,
unsubordinated and unguaranteed debt obligations of the Seller cease to be
assigned a rating of Baa2 or higher from Moody’s and BBB or higher from S&P
and BBB or higher from Fitch, the Seller shall deliver to the Mortgages
Trustee, Funding 1, the Security Trustee and the Rating Agencies a draft letter
of notice to each of the Borrowers of the sale and purchase effected by this
Agreement; and

 

(b)                                 if the long term unsecured,
unsubordinated and unguaranteed debt obligations of the Seller cease to be
assigned a rating of Baa3 or higher from Moody’s and BBB- or higher from
S&P and BBB- or higher from Fitch, then the Seller shall, within 20 London
Business Days of it becoming aware of such a rating being assigned, give notice
of the sale and purchase effected by this Agreement to each Borrower.

 

7.5                                 The Seller undertakes to the
Mortgages Trustee, Funding 1 and the Security Trustee that, pending perfection
under Clause
6, the Seller:

 

(a)                                  shall not do or omit to do any
act or thing which might, in the reasonable opinion of the Security Trustee,
prejudice the interests of the Mortgages Trustee, Funding 1 and/or the Security
Trustee in the Portfolio;

 

(b)                                 shall promptly notify the
Mortgages Trustee, Funding 1 and the Security Trustee in writing if it receives
written notice of any litigation or claim calling into question in any material
way the Seller’s or the Mortgages Trustee’s title to any Loan comprised in the
Portfolio or its Related Security or if it becomes aware of any material breach
of any of the Representations and Warranties or other obligations under this
Agreement;

 

(c)                                  shall, if reasonably required
so to do by the Mortgages Trustee or the Security Trustee, participate or join
in any legal proceedings to the extent necessary to protect preserve and
enforce the Seller’s or the Mortgages Trustee’s or Funding 1’s or the Security
Trustee’s title to or interest in any Loan or its Related Security;

 

13

 

(d)                                 shall use all reasonable
endeavours to obtain as soon as reasonably possible:

 

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

 

(ii)                                  the title number to each
Property in respect of which a Mortgage is registered in the Land Register of
Scotland to the extent that such title number does not appear in  the Exhibit to this Agreement (or, as the
case may be, the relevant New Portfolio Notice); and

 

(e)                                  shall make and enforce claims
under the Buildings Policies and the Halifax Insurance Policies and hold the
proceeds of such claims on trust for the Mortgages Trustee or as the Mortgages
Trustee may direct.

 

7.6                                 The Seller hereby further
undertakes to the Mortgages Trustee and Funding 1 that it is and at all times
shall remain solely responsible for funding any Delayed Cashbacks and any Home
Cash Reserve Drawings and Flexible Loan Drawings (if any) made by a Borrower
and for funding any request for any Further Advance made by a Borrower and, for
the avoidance of doubt, neither the Mortgages Trustee nor Funding 1 will be
required to advance moneys to the Seller or to a Borrower in order to fund such
a Delayed Cashback, Home Cash Reserve Drawing, Flexible Loan Drawing (if any),
or Further Advance in any circumstances whatsoever.

 

7.7                                 The Seller shall grant
security powers of attorney to the Mortgages Trustee, Funding 1 and the
Security Trustee in the form set out in Schedule 5 allowing any of the
Mortgages Trustee, Funding 1 and the Security Trustee and their delegates from
time to time (inter alia) to set the Seller’s Variable Base Rate in the
circumstances referred to in Clause 4 of the Servicing Agreement and/or
following perfection pursuant to Clause 6.1 PROVIDED  THAT nothing in this Clause 7.7
shall prevent the Seller (or any of its attorneys from time to time) from
setting a higher Seller’s Variable Base Rate than those set or to be set or
required or to be required by the Mortgages Trustee, Funding 1 or the Security
Trustee.

 

8.                                      WARRANTIES AND REPURCHASE BY THE
SELLER

 

8.1                                 (a)                                  The Seller hereby makes the
Representations and Warranties:

 

(i)                                     in respect of each Loan and
its Related Security in the Initial Portfolio as at the date hereof and on the
Initial Closing Date; and

 

(ii)                                  in relation to each New Loan
and its Related Security in a New Portfolio, on the date of the service of the
relevant New Portfolio Notice and on the relevant Sale Date.

 

(b)                                 Each statement comprised in
the Representations and Warranties shall be construed as a separate statement
and (save as expressly provided to the contrary) shall not be limited or
restricted by reference to or inference from the terms of any other such
statement.

 

14

 

(c)                                  The Seller acknowledges:

 

(i)                                     that the Representations and
Warranties are made with a view to inducing the Mortgages Trustee, Funding 1
and the Security Trustee (as the case may be) either to enter into this
Agreement and the other Transaction Documents to which is a party or to agree
to purchase the New Loans and their Related Security comprised in each New
Portfolio, and

 

(ii)                                  that each of the Mortgages
Trustee, Funding 1 and the Security Trustee has entered into this Agreement and
the other Transaction Documents to which it is a party in reliance upon the
Representations and Warranties notwithstanding any information in fact
possessed or discoverable by the Mortgages Trustee, Funding 1 and/or the
Security Trustee or otherwise disclosed to any of them, and

 

(iii)                               that prior to entering into
this Agreement and the other Transaction Documents to which each is a party
neither the Mortgages Trustee nor Funding 1 nor the Security Trustee has made
any enquiries of any matter.

 

8.2                                 The Mortgages Trustee’s,
Funding 1’s and the Security Trustee’s sole remedy in respect of a breach of
any of the Representations and Warranties shall be to take action under this Clause 8
or under Clause
6 of the Mortgages Trust Deed.

 

8.3                                 In the event of a material
breach of any of the Representations or Warranties in respect of any Loan
and/or its Related Security made under Clause 8.1 or if any of those
Representations or Warranties proves to be materially untrue as at the Initial
Closing Date or, as the case may be, the relevant Sale Date, and provided that:

 

(a)                                  the Mortgages Trustee has
given the Seller not less than 20 London Business Days’ notice in writing;

 

(b)                                 the Mortgages Trustee has obtained
the prior written consent of the Security Trustee; and

 

(c)                                  such breach or untruth, where
capable of remedy, is not remedied to the reasonable satisfaction of Funding 1
and the Security Trustee within the 20 London Business Days period referred to
in (a) (or such longer period as Funding 1 and the Security Trustee may direct
the Mortgages Trustee in writing),

 

then at
Funding 1’s direction (subject to the prior written consent of the Security
Trustee) the Mortgages Trustee shall serve upon the Seller a notice in the form
of the Loan Repurchase Notice requiring the Seller to repurchase the relevant
Loan and its Related Security (and any other Loan secured or intended to be
secured by that Related Security or any part of it) in accordance with Clause 8.5.

 

8.4         (a)                                        If the Seller accepts an
application from, or makes an offer (which is accepted) to, a Borrower for a
Further Advance then (save in the case of any Loan which is then in arrears),
at Funding 1’s direction (subject to the prior written consent of the Security
Trustee), the Mortgages Trustee will serve upon the Seller a notice in the form
of the Loan Repurchase Notice requiring the Seller to repurchase the relevant
Loan and its

 

15

 

Related Security (and any other Loan
secured or intended to be secured by that Related Security or any part of it)
in accordance with Clause 8.5.

 

(b)                                 If the Seller accepts an
application from, or makes an offer (which is accepted) to, a Borrower for a
Product Switch and (except as provided in paragraph (c) below) on the
immediately preceding Distribution Date, the Seller is in breach of the
conditions referred to in Clauses 4.2(a) to (p) inclusive as if
references therein to New Loans and New Portfolio were references
to the Loan which would result from the implementation of such Product Switch
and as if references to Sale Date were references to the date when
the Seller and relevant Borrower complete such Product Switch then (save in the
case of any Loan which is then in arrears) from and including the relevant
Distribution Date to but excluding the date when such conditions have been
satisfied, at Funding 1’s direction (subject to the prior written consent of
the Security Trustee), the Mortgages Trustee will serve upon the Seller a
notice in the form of the Loan Repurchase Notice requiring the Seller to
repurchase the relevant Loan and its Related Security (and any other Loan
secured or intended to be secured by that Related Security or any part of it)
in accordance with Clause 8.5.

 

(c)                                  If the Seller accepts an
application from, or makes an offer (which is accepted) to, a Borrower for a
Product Switch, the effect of which is to extend the final maturity date of the
relevant Loan beyond June 2040 then, at Funding 1’s direction (subject to the
prior written consent of the Security Trustee), the Mortgages Trustee will
serve upon the Seller a notice in the form of the Loan Repurchase Notice
requiring the Seller to repurchase the relevant Loan and its Related Security
in accordance with Clause 8.5 notwithstanding that the
conditions referred to in Clauses 4.2(a) to 4.2(p) have been satisfied.

 

(d)                                 For the avoidance of doubt,
the Seller shall not accept an application from nor make an offer (which is
accepted) to a Borrower for a Further Advance or a Product Switch if the
relevant Loan to which such Further Advance or Product Switch relates is then
in arrears subject only to such exceptions as made on a case by case basis as
would be acceptable to a reasonable, prudent mortgage lender.

 

8.5                                 Upon receipt of a Loan
Repurchase Notice duly signed on behalf of the Mortgages Trustee, the Seller
shall sign and return a duplicate copy and shall repurchase from the Mortgages
Trustee, and the Mortgages Trustee shall re-assign or re-transfer to the Seller
free from the Security Interests created by the Funding 1 Deed of Charge and
the Second Supplemental Funding 1 Deed of Charge, the relevant Loan (and any
other Loan secured or intended to be secured by that Related Security or any
part of it) and their Related Security. 
Completion of such repurchase shall take place on the Distribution Date
after receipt by the Seller of such Loan Repurchase Notice or such other date
as the Mortgages Trustee may direct in the Loan Repurchase Notice (provided
that the date so specified by the Mortgages Trustee shall not be later than 90
days after receipt by the Seller of such notice) when the Seller shall pay to
the Mortgages Trustee GIC Account (or as the Mortgages Trustee shall direct) an
amount equal to the aggregate Outstanding Principal Balance of such Loan or
Loans and any Related Security and all Arrears of Interest and Accrued Interest
relating thereto (save for the repurchase of any Loan and its Related Security
which is subject to a Further Advance or a Product Switch pursuant to Clause 8.4
in which case the Seller shall pay to the Mortgages Trustee GIC Account (or as
the Mortgages Trustee shall direct) an amount equal to the aggregate
Outstanding Principal Balance of such Loan and its Related Security and Accrued

 

16

 

Interest relating thereto only) as at the
date of such repurchase and the provisions of Clause 8.6 shall apply.

 

8.6                                 On the date of completion of
any repurchase of a Loan and its Related Security in accordance with Clause 8.5
above, the Security Trustee, the Mortgages Trustee and Funding 1 shall at the
cost of the Seller execute and deliver, or cause their respective duly
authorised attorneys to execute and deliver, to the Seller:

 

(a)                                  a memorandum of release of
such Loan and its Related Security from the security constituted by the Funding
1 Deed of Charge and the Second Supplemental Funding 1 Deed of Charge in a form
reasonably acceptable to the Seller;

 

(b)                                 in relation to the English Mortgages,
if perfection of the assignment to the Mortgages Trustee has occurred in
accordance with Clause 6:

 

(i)                                     if the relevant English
Mortgage is over Registered Land, a transfer of such Mortgage to the Seller in
the form of the Registered Transfer; or

 

(ii)                                  if the relevant English
Mortgage is over Unregistered Land, a transfer of such English Mortgage to the
Seller in the form of the Unregistered Transfer;

 

(c)                                  in relation to the Scottish
Mortgages, if perfection of the assignation to the Mortgages Trustee has
occurred in accordance with Clause 6:

 

(i)                                     if the relevant Scottish
Mortgage is over a Property title to which is registered in the Land Register
of Scotland, an SLR Transfer by the Mortgages Trustee in favour of the Seller;
and

 

(ii)                                  if the relevant Scottish
Mortgage is over a Property title to which is registered in the General
Register of Sasines, a Sasine Transfer by the Mortgages Trustee in favour of
the Seller.

 

(d)                                 a re-assignment or
retrocession (as appropriate) of the rights of the Mortgages Trustee in respect
of the relevant Related Security each in a form reasonably acceptable to the
Seller (which shall, in the case of the re-assignment of the MIG Policies, be
substantially in the form of the Assignment of MIG Policies); and

 

(e)                                  a notification to the Servicer
that all further sums due in respect of such repurchased Loan are for the
Seller’s account.

 

Upon
such completion the Seller shall cease to be under any further obligation to
hold any Title Deeds or other documents relating to such Loan or Loans and
its/their Related Security to the order of the Mortgages Trustee and if the
Mortgages Trustee holds the Title Deeds it will return them to the Seller.  Any repurchase by the Seller of or in
respect of a Loan or Loans and its or their Related Security shall constitute a
discharge and release of the Seller from any claims which the Mortgages Trustee
and/or Funding 1 or the Security Trustee may have against the Seller arising
from the relevant Representation or Warranty in relation to that Loan or Loans
and its or their Related Security only but shall not affect any rights arising
from a breach of any other express provision of this Agreement or any
Representation or Warranty in relation to any other Loan and other Related
Security.

 

17

 

8.7                                 After the Seller becomes aware
of any event and/or fact which may reasonably give rise to an obligation under
any clause of this Agreement to repurchase any Loan it shall notify the
Mortgages Trustee, Funding 1 and the Security Trustee in writing thereof as
soon as reasonably practicable.

 

8.8                                 The terms of this Clause 8
shall not prejudice the rights of the Mortgages Trustee or the Beneficiaries
under the Mortgages Trust Deed.

 

8.9                                 The parties to this Agreement
may, with the prior written consent of the Security Trustee, waive or amend the
Representations and Warranties.  In
determining whether to give its consent to the proposed waiver or amendments to
the Representations and Warranties, the Security Trustee shall exercise its
discretion in accordance with the terms of clause 25.8 of the Funding 1 Deed of
Charge.

 

9.                                      OTHER WARRANTIES

 

On the
date of this Agreement, the Closing Date, and each Sale Date, the Seller
represents and warrants to each of the Mortgages Trustee, Funding 1 and the
Security Trustee that:

 

(a)                                  the Seller has not acquired or
owned or possessed any rights in any Issuer, the Mortgages Trustee or Funding 1
such that it would control such Issuer within the meaning of
Section 416 ICTA 1988; and

 

(b)                                 there is not any connection
(within the meaning of Section 87 Finance Act 1996) between any Issuer and any
Borrower.

 

10.                               FURTHER ASSURANCE

 

The
parties hereto agree that they will co-operate fully to do all such further
acts and things and execute any further documents that may be necessary or
desirable to give full effect to the transactions contemplated by this
Agreement (but subject always to Clause 6).

 

11.                               CONSEQUENCES OF BREACH

 

Without
prejudice to Clauses 7 and 8, Funding 1, the Mortgages Trustee and the
Security Trustee severally acknowledge to and agree with the Seller, and the
Security Trustee acknowledges to and agrees with Funding 1 and the Mortgages
Trustee, that the Seller shall have no liability or responsibility (whether, in
either case, contractual or tortious, express or implied) for any loss or
damage for or in respect of any breach of, or any act or omission in respect
of, any of its obligations hereunder other than loss or damage directly (and
not indirectly or consequentially) suffered by the Mortgages Trustee and/or
Funding 1 or the assets comprised in the Funding 1 Security constituted by the
Funding 1 Deed of Charge by reason of such breach, act or omission.  For this purpose (and without limiting the
scope of the above exclusion in respect of indirect or consequential loss or
damage) any loss or damage suffered by the Mortgages Trustee and/or Funding 1
or such assets as a result of the breach, act or omission in question also
having been or given rise to an Event of Default or enforcement of the Funding
1 Security contributed by the Funding 1 Deed of Charge shall be treated as
indirect or consequential loss or damage PROVIDED THAT this sentence shall not apply
to any direct or non-consequential loss or damage arising from any such breach,
act or omission.

 

18

 

12.                               SUBORDINATION

 

The
Seller agrees with Funding 1, the Mortgages Trustee and the Security Trustee
that on the enforcement of any Mortgage any sums owed to the Seller by a Borrower
and which are secured under such Mortgage and the rights and remedies of the
Seller in respect of the sums owed to the Seller shall at all times be subject
and subordinated to any sums owed to the Mortgages Trustee by the Borrower and
which are secured under such Mortgage and to the rights and remedies of the
Mortgages Trustee in respect of such sums owed to the Mortgages Trustee by the
Borrower.

 

13.                               NON-MERGER

 

Any
term of this Agreement to which effect is not given on the Initial Closing Date
or on any Sale Date (including in particular, but without limitation, the
liability of the Seller under the Representations and Warranties and the
indemnity in Clause 6.7 and the provisions of Clause 4) shall not merge and
shall remain in full force and effect notwithstanding the sale and purchases
contemplated by this Agreement.

 

14.                               NO AGENCY OR PARTNERSHIP

 

It is
hereby acknowledged and agreed by the parties that nothing in this Agreement
shall be construed as giving rise to any relationship of agency, save as
expressly provided herein, or partnership between the parties and that in
fulfilling its obligations hereunder, each party shall be acting entirely for
its own account.

 

15.                               PAYMENTS

 

Except
as otherwise specifically provided, all payments to be made pursuant to this
Agreement shall be made in sterling in immediately available funds without
exercising or seeking to exercise any right of set-off as may otherwise exist
and shall be deemed to be made when they are received by the payee and shall be
accounted for accordingly unless failure to receive any payment is due to an
error by the payee’s bank.

 

16.                               WAIVER AND VARIATION

 

16.1                           Exercise or failure to
exercise any right under this Agreement shall not, unless otherwise herein
provided, constitute a waiver of that or any other right.

 

16.2                           Subject to Clause 25
of the Funding 1 Deed of Change any amendments to this Agreement will be made
only with the prior written consent of each party to this Agreement.

 

17.                               NOTICES

 

Any
notices to be given pursuant to this Agreement to any of the parties hereto
shall be in writing and 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 (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 Seller, to
Halifax plc, Trinity Road, Halifax, West Yorkshire HX1 2RG (LP/3/3/SEC)
(facsimile number +44 (0) 113 235 7511) for the attention of the

 

19

 

Head of Mortgage Securitisation with a copy
to HBOS Treasury Services PLC, 33 Old Broad Street, London EC2N 1HZ (facsimile
number +44 (020) 7574 8784) for the attention of Head of Capital Markets and
Securitisation,;

 

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

 

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

 

(d)                                 in the case of the Security
Trustee, to The Bank of New York, One Canada Square, London E14 5AL (facsimile
number + 44 (020) 7964 6061/6399) for the attention of Global Structural
Finance - Corporate Trust,

 

or to
such other address or facsimile number or for the attention of such other
person or entity as may from time to time be notified by any party to the
others by written notice in accordance with the provisions of this Clause 17.

 

18.                               ASSIGNMENT

 

18.1                           Subject always to the
provisions of Clause 19, no party hereto shall be entitled to assign all or
any part of its rights or obligations hereunder to any other party without the
prior written consent of each of the other parties hereto (which shall not, if
requested, be unreasonably withheld) save that Funding 1 shall be entitled to
assign whether by way of security or otherwise all or any of its rights under
this Agreement without such consent to the Security Trustee pursuant to the
Funding 1 Deed of Charge and the Security Trustee may at its sole discretion
assign all or any of its rights under or in respect of this Agreement without
such consent to any successor Security Trustee in exercise of its rights under
the Funding 1 Deed of Charge.

 

18.2                           The Seller acknowledges that
on the assignment pursuant to the Funding 1 Deed of Charge by Funding 1 to the
Security Trustee of Funding 1’s rights under this Agreement the Security
Trustee may enforce such rights in the Security Trustee’s own name without
joining Funding 1 in any such action (which right the Seller hereby waives) and
the Seller hereby waives as against the Security Trustee any rights or equities
in its favour arising from any course of dealing between the Seller and Funding
1.

 

19.                               CHANGE OF SECURITY TRUSTEE

 

19.1                           If there is any change in the
identity of the Security Trustee in accordance with the Funding 1 Deed of
Charge, the Seller, the Mortgages Trustee and Funding 1 shall execute such
documents and take such action as the successor Security Trustee and the
outgoing Security Trustee may reasonably require for the purpose of vesting in
the successor Security Trustee the rights and obligations of the outgoing
Security Trustee hereunder and releasing the

 

20

 

outgoing Security Trustee from its future
obligations under this Agreement and the Seller shall give notice thereof to
the Rating Agencies.

 

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

 

20.                               NOT USED

 

21.                               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.

 

22.                               GOVERNING LAW

 

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

 

22.2                           Each party to this Agreement
hereby irrevocably submits to the non-exclusive jurisdiction of the English
courts in any action or proceeding arising out of or relating to this
Agreement, and hereby irrevocably agrees that all claims in respect of such action
or proceeding may be heard and determined by such courts.  Each party to this Agreement hereby
irrevocably waives, to the fullest extent it may possibly do so, any defence or
claim that the English courts are an inconvenient forum for the maintenance or
hearing of such action or proceeding. 
The Mortgages Trustee irrevocably appoints Structured Finance Management
Limited of Blackwell House, Guildhall Yard, London EC2V 5AE as its agent for
service of process.

 

IN WITNESS WHEREOF the parties hereto have executed this
Agreement on the day and year first before written.

 

	
  SIGNED by

  	
  )

  
	
  as attorney
  for

  	
  )

  
	
  HALIFAX plc in the presence of

  	
  )

  
	
   

  	
   

  
	
  Witness’s Signature

  	
   

  	
   

  
	
   

  	
   

  
	
  Name: 

  	
   

  	
   

  
	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  
	
  SIGNED by

  	
  )

  
	
  for and on
  behalf of

  	
  )

  
	
  PERMANENT FUNDING (NO. 1) LIMITED

  	
  )

  
	
   

  	
   

  
	
  SIGNED by

  	
  )

  
	
  for and on
  behalf of

  	
  )

  
	
  PERMANENT MORTGAGES

  	
  )

  
	
  TRUSTEE LIMITED

  	
  )

  
					

 

21

 

	
  SIGNED by

  	
  )

  
	
  for and on
  behalf of

  	
  )

  
	
  THE BANK OF NEW YORK

  	
  )

  

 

22

 

SCHEDULE 1

 

REPRESENTATIONS AND WARRANTIES

 

1.                                      Loans

 

1.1                                 The particulars of the Loans set out in the
Exhibit (or, as the case may be, the relevant New Portfolio Notice and in each
Scottish Declaration of Trust) are true, complete and accurate in all material
respects.

 

1.2                                 Each Loan was originated by the Seller and
was originated and is denominated in pounds sterling (or was originated and is
denominated in euro if the euro has been adopted as the lawful currency for the
time being of the United Kingdom).

 

1.3                                 Each Loan in the Portfolio as at the Fourth
Issuer Closing Date was made not earlier than 1st February, 1996 and not later
than 2nd December, 2003.

 

1.4                                 Each Loan matures for repayment not later
than June 2040.

 

1.5                                 No Loan has an Outstanding Principal
Balance of more than £500,000.

 

1.6                                 The Lending Criteria are the lending
criteria applicable to the Loans and their Related Security.

 

1.7                                 Prior to the making of each Initial Advance
and Further Advance:

 

(a)                                  the Lending Criteria and all preconditions
to the making of any Loan were satisfied in all material respects subject only
to such exceptions as made on a case by case basis as would be acceptable to a
reasonable, prudent mortgage lender; and

 

(b)                                 the requirements of the relevant MIG Policy
were met, so far as applicable to that Loan.

 

1.8                                 (a)                                  Each Loan was made and its
Related Security taken or received substantially on the terms of the Standard
Documentation without any material variation thereto and nothing has been done
subsequently to add to, lessen, modify or otherwise vary the express provisions
of any of the same in any material respect.

 

(a)                                  The brochures, application forms, offers,
offer conditions and marketing material distributed by the Seller to the
Borrower when offering a Loan to a Borrower:

 

(i)                                     do not conflict in any material respect
with the terms applicable to the relevant Loan and its Related Security at the
time that the Loan was entered into;

 

(ii)                                  do not conflict with and would not prohibit
or otherwise limit the terms of, the Transaction Documents or the matters
contemplated thereby, including for the avoidance of doubt and without
limitation:

 

23

 

(A)                              the assignment or assignation (as
appropriate) of the Loans and their Related Security to the Mortgages Trustee
or the placing of the Loans and their Related Security into trust;

 

(B)                                the administration of the Loans and their
Related Security by the Servicer or a delegate of the Servicer or (for as long
as the Seller and the Servicer are the same legal entity) the appointment of a
new Servicer following the occurrence of an Insolvency Event in relation to the
Seller; and

 

(C)                                so far as the Seller is aware to the best
of its knowledge, information and belief, the ability of the Mortgages Trustee
or the Security Trustee to set the variable rate payable under any Variable
Rate Loan independently of (and without regard to the level of) the Seller’s
standard variable rate of interest or if the Seller has more than one standard
variable rate of interest, the relevant Seller’s standard variable rate of
interest, subject to any applicable cap on that variable rate which is not
itself linked to any rate set by the Seller and to set the variable margin
above the Bank of England repo rate under any Tracker Rate Loan independently
of (and without regard to the level of) any differential set by the Seller,
subject to any applicable cap on that variable margin above the Bank of England
repo rate which is not itself linked to any margin set by the Seller.

 

(b)                                 There is no restriction on the Seller’s
successors and assigns and assignees to the legal title of the Loans
(including, without limitation, the Mortgages Trustee if and when legal title
to the Loans is transferred to it) right:

 

(i)                                     to set the variable rate payable under any
Variable Rate Loan independently of (and without regard to the level of) the
Seller’s standard variable rate of interest or if the Seller has more than one
standard variable rate of interest, the relevant Seller’s standard variable
rate of interest, subject to any applicable cap on that variable rate which is
not itself linked to any rate set by the Seller (subject to complying with the
obligations under the Standard Documents as to changes in interest rates
generally and so that in particular the successors will not be able to change
the interest rate following a transfer of legal title unless the reasons for
changing the interest rate set out in the Standard Documents apply) and
provided that in relation to Loans which are subject to HVR 2, the differential
between that rate and the Loans which are subject to HVR 1 is maintained; and

 

(ii)                                  to set the variable margin above the Bank
of England repo rate under any Tracker Rate Loan independently of (and without
regard to the level of) any differential set by the Seller, subject to any
applicable cap on that variable margin above the Bank of England repo rate
which is not itself linked to any margin set by the Seller (subject to
complying with the obligations under the Standard Documents as to changes in
margins generally and so that in particular the successors will not be able to
change the margin following a transfer of legal title unless the reasons for
changing the margin set out in the Standard Documents apply).

 

24

 

1.9                                 The Seller is under no obligation to make
Further Advances (other than Flexible Loan Drawings (if any), Delayed Cashbacks
and Home Cash Reserve Drawings) or to release retentions or to pay fees or
other sums relating to any Loan or its Related Security to any Borrower.

 

1.10                           Each Borrower has made at least two Monthly
Payments in respect of each Loan.

 

1.11                           Other than with respect to monthly interest
payments or as provided in paragraph 1.12 below, no Borrower is or has, since
the date of the relevant Mortgage, been in material breach of any obligation
owed in respect of the relevant Loan or under the Related Security and
accordingly no steps have been taken by the Seller to enforce any Related
Security.

 

1.12                           The total amount of arrears of interest or
principal, together with any fees, commissions and premiums payable at the same
time as such interest payment or principal repayment, on any Loan is not on the
Initial Closing Date or the relevant Sale Date (as applicable), nor has been
during the 12 months immediately preceding the Initial Closing Date or the
relevant Sale Date (as applicable) more than the amount of the Monthly Payment
then due.

 

1.13                           No Loan is guaranteed by a third party save
where the guarantee constitutes legal, valid and binding obligations of the
guarantor enforceable in accordance with their terms.

 

1.14                           The Outstanding Principal Balance, all
Accrued Interest and all Arrears of Interest on each Loan and its Related
Security (other than any agreement for Flexible Loan Drawings (if any), Delayed
Cashbacks, Home Cash Reserve Drawings and any other Further Advances)
constitute a legal, valid, binding and enforceable debt due to the Seller from
the relevant Borrower and the terms of each Loan and its Related Security
constitute valid and binding obligations of the Borrower enforceable in
accordance with their terms (other than any agreement for Flexible Loan
Drawings (if any), Delayed Cashbacks, Home Cash Reserve Drawings and any other
Further Advance).

 

1.15                           Interest on each Loan is charged in
accordance with the Standard Documentation.

 

1.16                           Interest on each Loan is payable monthly in
arrear.

 

1.17                           No Loan or any part of it:

 

(a)                                  is or has ever been a
regulated agreement within Section 8 of the Consumer Credit Act 1974 (as
amended, extended or re-enacted from time to time);

 

(b)                                 is or has ever been a linked
transaction within Section 19 of the Consumer Credit Act 1974 (as amended,
extended or re-enacted from time to time);

 

(c)                                  is to be or has ever been
treated as a regulated agreement under Section 82(3) of the Consumer Credit Act
1974 (as amended, extended or re-enacted from time to time or otherwise); or

 

(d)                                 is or has ever been or may
become liable to be re-opened on the ground that the credit bargain is
extortionate under Sections 137 to 140 of the Consumer Credit Act 1974 (as
amended, extended or re-enacted from time to time).

 

25

 

1.18                           No Loan or any part of it is unenforceable
under the Consumer Protection (Contracts Concluded away from Business Premises)
Regulations 1987 (as amended, extended or re-enacted from time to time).

 

1.19                           All of the Borrowers are individuals and
were aged 18 years or older at the date he or she executed the relevant Mortgage.

 

1.20                           Not used.

 

1.21                           Each loan in the relevant Portfolio is
either:

 

(a)                                  a Variable Rate Loan, Tracker
Rate Loan or Fixed Rate Loan; or

 

(b)                                 a New Loan Type which each of
the Rating Agencies has confirmed in writing may be included in the relevant New
Portfolio.

 

2.                                      Mortgages

 

2.1                                 The whole of the Outstanding Principal
Balance on each Loan and any Arrears of Interest and all Accrued Interest is
secured by a Mortgage.

 

2.2                                 Each Mortgage is in the form of the pro
forma contained in the Standard Documentation which was applicable at the time
the Mortgage was executed.

 

2.3                                 Each Mortgage constitutes a valid and
subsisting first charge by way of legal mortgage or (in the case of Scottish
Mortgages) first ranking standard security over the relevant Property subject
only in certain appropriate cases to applications for registration or recording
at H.M. Land Registry or Registers of Scotland which where requisite have been
made and are pending and in relation to such cases the Seller is not aware of
any caution, notice, inhibition or any other matter that would prevent such
registration or recording.

 

2.4                                 Each Mortgage has first priority for the
whole of the Outstanding Principal Balance on the Loan and all Arrears of
Interest and Accrued Interest thereon and all future interest, fees, costs and
expenses payable under or in respect of such Mortgage.

 

2.5                                 Each Loan and its Related Security is, save
in relation to any Loan and Related Security which is not binding by virtue of
the Unfair Terms in Consumer Contracts Regulations 1994 or (as the case may be)
the Unfair Terms in Consumer Contracts Regulations 1999, valid and binding and
enforceable in accordance with its terms. 
To the best of the Seller’s knowledge, none of the Loans or their
Related Security is not binding by virtue of its being unfair pursuant to the
Unfair Terms in Consumer Contracts Regulations 1994 or (as the case may be) the
Unfair Terms in Consumer Contracts Regulations 1999.

 

3.                                      The Properties

 

3.1                                 All of the Properties are in England, Wales
or Scotland.

 

3.2                                 Each Property constitutes a separate
dwelling unit (subject to limited case by case exceptions) and is either
freehold, leasehold or (in Scotland) heritable or held under a long lease.

 

26

 

3.3                                 Save for children of Borrowers and children
of someone living with the Borrower, every person who, at the date upon which
any English Mortgage was granted, had attained the age of eighteen and was in
or about to be in actual occupation of the relevant Property, is either named
as a Borrower or has signed a Deed of Consent in the form of the pro forma
contained in the Standard Documentation which was applicable at the time the
Mortgage was executed.

 

3.4                                 At the date upon which any Scottish
Mortgage was granted all necessary MHA Documentation had been obtained so as to
ensure that neither that Scottish Mortgage nor the related Property is subject
to or affected by any statutory right of occupancy under the Matrimonial Homes
(Family Protection) (Scotland) Act 1981.

 

3.5                                 No Property has been let otherwise than by
way of:

 

(a)                                  an assured shorthold tenancy which meets
the requirements of Section 19A or Section 20 of the Housing Act 1988; or

 

(b)                                 a short assured tenancy which meets the
requirements of section 32 of the Housing (Scotland) Act 1988; or

 

(c)                                  an assured tenancy;

 

in each
case which meets the Seller’s Policy in connection with lettings to non-owners.

 

3.6                                 No Property is the subject of a shared
ownership lease arrangement or staircase purchasing arrangement.

 

4.                                      Valuers’ and Solicitors’
Reports

 

4.1                                 Not more than twelve months (or a longer
period as may be acceptable to a reasonable, prudent mortgage lender) prior to
the grant of each Mortgage (or such longer period as may be acceptable to a
reasonable, prudent mortgage lender) the Seller received a Valuation Report
from a Valuer on the relevant Property (or such other form of report concerning
the valuation of the relevant Property as would be acceptable to a reasonable,
prudent mortgage lender), the contents of which were such as would be
acceptable to a reasonable, prudent mortgage lender.

 

4.2                                 The principal amount of the Initial Advance
(including any retention(s) subsequently advanced to the Borrower but
disregarding Capitalised Expenses) is either:

 

(a)                                  not more than 75 per cent. of the lower of
the purchase price and the appraised value of the Property as stated in the
Valuation Report referred to above in paragraph 4.1 (the appraised value) (or, in case
of a remortgage, of the appraised value) of the Property; or

 

(b)                                 greater than 75 per cent. (but not more
than 97 per cent.) of the lower of the purchase price and the appraised value
(or, in the case of a remortgage, of the appraised value), in which case for
those Loans originated prior to 1st January, 2001 only that part of the Initial
Advance which exceeds 75 per cent. of the lower of the purchase price and the
appraised value (or, in the case of a remortgage, of the appraised value) is
covered under the terms of a MIG Policy.

 

27

 

4.3                                 Prior to the taking of each Mortgage (other
than a remortgage), the Seller:

 

(a)                                  instructed the Seller’s solicitor, licensed
conveyancer or (in Scotland) qualified conveyancer to carry out an
investigation of title to the relevant Property and to undertake such other
searches, investigation, enquiries and other actions on behalf of the Seller as
are set out in the instructions which the Seller issued to the relevant
solicitor as are set out in:

 

(i)                                     the CML’s Lenders’ Handbook for England and
Wales in relation to English Mortgages;

 

(ii)                                  the Seller’s Mortgage Practice Notes in
relation to Scottish Mortgages taken before the CML’s Lenders’ Handbook for
Scotland was adopted in 2000; or

 

(iii)                               the CML’s Lenders’ Handbook for Scotland in
relation to Scottish Mortgages taken after the CML’s Lenders’ Handbook for
Scotland was adopted in 2000,

 

(or
such comparable, predecessor or successor instructions and/or guidelines as may
for the time being be in place), subject only to such variations made on a case
by case basis as would have been acceptable to a reasonable, prudent mortgage
lender at the relevant time; or

 

(b)                                 received a Certificate of Title from the
solicitor or licensed conveyancer or (in Scotland) qualified conveyancer referred
to in paragraph (a) relating to such Property the contents of which were such
as would have been acceptable to a reasonable, prudent mortgage lender at that
time.

 

4.4                                 The benefit of all Valuation Reports any
other valuation report referred to in paragraph 4.1 and Certificates of Title
which were provided to the Seller not more than two years prior to the date of
this Agreement can be validly assigned to the Mortgages Trustee without
obtaining the consent of the relevant Valuer, solicitor or licensed conveyancer
or (in Scotland) qualified conveyancer.

 

5.                                      Buildings Insurance

 

5.1                                 Each Property is insured under:

 

(a)                                  a buildings insurance policy arranged by
the Borrower in accordance with the relevant Mortgage Conditions or in
accordance with the Alternative Insurance Recommendations; or

 

(b)                                 the Halifax Policies; or

 

(c)                                  a buildings insurance policy arranged by
the relevant landlord; or

 

(d)                                 the Properties in Possession Cover.

 

5.2                                 No act, event or circumstance has occurred
which would adversely affect the Properties in Possession Cover or entitle the
insurers to refuse to make payment thereunder or to reduce the amount payable
in respect of any claim thereunder.

 

28

 

5.3                                 All claims under the Properties in
Possession Cover have been paid in full within a reasonable time of the date of
submission of the claim and, save in respect of minor claims, there are no
claims outstanding.

 

6.                                      MIG Policies

 

6.1                                 Where applicable, the MIG Policies are in
full force and effect in relation to the Initial Portfolio or, as the case may
be, each New Portfolio and all premiums thereon have been paid.

 

6.2                                 The benefit of the Halifax Mortgage Re
Limited MIG Policies can be and will have been, with effect from the Initial
Closing Date or the relevant Sale Date, as applicable, validly assigned to the
Mortgages Trustee and charged to the Security Trustee, insofar as they relate
to the Initial Portfolio or, as the case may be, each New Portfolio in each
case in the manner and to the extent contemplated by the Transaction Documents.

 

6.3                                 To the best of the knowledge of the Seller
no act, event or circumstance has occurred which would adversely affect the MIG
Policies or entitle the insurers to refuse to make payment thereunder or to reduce
the amount payable in respect of any claim thereunder insofar as they relate to
the Initial Portfolio or, as the case may be, each New Portfolio.

 

6.4                                 All valid claims under the MIG Policies
have been paid in full within a reasonable time of the date of submission of
the claim.

 

7.                                      The Seller’s Title

 

7.1                                 The Seller has good title to, and is the
absolute unencumbered legal and beneficial owner of, all property, interests,
rights and benefits agreed to be sold and/or assigned by the Seller to the Mortgages
Trustee pursuant to this Agreement free and clear of all mortgages, charges,
liens, Encumbrances, claims and equities (including, without limitation, rights
of set-off or counterclaim and unregistered or overriding interests which fall
within any of the paragraphs of schedules 1 or 3 to the Land Registration Act
2002 (as such schedules have effect in accordance with section 90(5) and
Schedule 12 of the Land Registration Act 2002) or Section 28(1) of the Land
Registration (Scotland) Act 1979 and the Seller is not in breach of any
covenant implied by reason of its selling the Portfolio with full title
guarantee or absolute warrandice (or which would be implied if the Registered
Transfers, Unregistered Transfers or Scottish Transfers, as applicable, were completed).

 

7.2                                 All steps necessary to perfect the Seller’s
title to the Loans and the Related Security were duly taken at the appropriate
time or are in the process of being taken, in each case (where relevant) within
any applicable priority periods or time limits for registration with all due
diligence and without undue delay.

 

7.3                                 Save for Title Deeds held at H.M. Land
Registry or Registers of Scotland, the Title Deeds and the Customer Files
relating to each of the Loans and their Related Security are held by, or are
under the control of:

 

(a)                                  the Seller; or

 

(b)                                 the Seller’s solicitors or licensed
conveyancers or (in Scotland) qualified conveyancers to the order of the
Seller,

 

29

 

and the
Title Deeds held at H.M. Land Registry have been sent to it with a request that
any such Title Deeds will be returned to the Seller or its solicitors on its
behalf.

 

7.4                                 Neither the entry by the Seller into this
Agreement nor any transfer, assignment, assignation or creation of trust
contemplated by this Agreement affects or will adversely affect any of the
Loans and their Related Security (including, without limitation, the Insurance
Policies) and the Seller may freely assign and create a trust or trusts in
respect of all its rights, title, interests and benefits therein as
contemplated in this Agreement without breaching any term or condition applying
to any of them.

 

7.5                                 The Seller has not knowingly waived or
acquiesced in any breach of any of its rights in respect of a Loan or its
Related Security, other than waivers and acquiescence such as a reasonable,
prudent mortgage lender might make on a case by case basis.

 

8.                                      General

 

8.1                                 The Seller has, since the making of each
Loan, kept or procured the keeping of full and proper accounts, books and
records showing clearly all transactions, payments, receipts, proceedings and
notices relating to such Loan.

 

8.2                                 Neither the Seller nor as far as the Seller
is aware any of its agents has received written notice of any litigation,
claim, dispute or complaint (in each case, subsisting, threatened or pending)
in respect of any Borrower, Property, Loan, Related Security, Halifax Policy,
MIG Policy or Properties in Possession Cover which (if adversely determined)
might have a material adverse effect on the Trust Property or any part of it.

 

8.3                                 The Seller has received from each Borrower
a variable direct debit instruction in favour of the Seller signed by the
relevant Borrower and addressed to its bank, variable as to the amount payable
by such Borrower by unilateral notice given from time to time by the Seller to
such Borrower’s bank without further instruction or consent from such Borrower
or such other method of payment as may be acceptable to a reasonable, prudent
mortgage lender.

 

8.4                                 There are no authorisations, approvals,
licences or consents required as appropriate for the Seller to enter into or to
perform the obligations under this Agreement or to render this Agreement legal,
valid, binding, enforceable and admissible in evidence.

 

8.5                                 The Insurance Acknowledgements are valid,
binding and enforceable against the relevant insurer by the Mortgages Trustee
and the Security Trustee.

 

30

 

SCHEDULE 2

 

REGISTERED TRANSFER

 

In the form of HM Land Registry Form TR4 as shown
overleaf with such amendments as the Mortgages Trustee may reasonably require
to give effect to this Agreement or in such other form as the Mortgages Trustee
may reasonably require to take account of changes in law or practice.

 

31

 

SCHEDULE 3

 

UNREGISTERED TRANSFER

 

THIS DEED OF TRANSFER OF MORTGAGES is made
the             day
of

 

BY:

 

(1)                                  HALIFAX
plc
whose registered office is at Trinity Road, Halifax, West Yorkshire HX1 2RG
(hereinafter called the Transferor) of the one part; and

 

IN FAVOUR OF:

 

(2)                                  PERMANENT
MORTGAGES TRUSTEE LIMITED whose registered office is 47 Esplanade, St Helier,
Jersey JE1 0BD (hereinafter called the Transferee) of the other part.

 

WHEREAS:

 

(A)                              By the charges by way of legal mortgage
(the Mortgages)
brief particulars of which are set out in the Annexure hereto the properties
brief particulars of which are similarly set out became security for the
repayment of the monies therein mentioned.

 

(B)                                By a mortgage sale agreement (as amended
and/or restated from time to time) made between, inter alia, the Transferor
and the Transferee on 14th June, 2002 (as the same may be or have been amended,
varied or supplemented from time to time with the consent of the parties
hereto, the Mortgage Sale Agreement), the Transferor agreed to sell and
the Transferee agreed to buy all right, title, interest, benefit and obligation
(both present and future) of the Transferor in and under those Mortgages and
all other mortgages in favour of the Transferor over such properties which do
not relate to registered land for the consideration mentioned in the said
Mortgage Sale Agreement.

 

NOW THIS DEED WITNESSETH as follows:

 

1.                                       In consideration for the sums payable and
other consideration indicated under the Mortgage Sale Agreement (receipt of
which is hereby acknowledged), the Transferor hereby transfers unto the
Transferee with full title guarantee all rights, title, interests, benefits and
obligations (both present and future) of the mortgagee in and under the
Mortgages including for the avoidance of doubt:

 

(a)                                  the right to demand, sue for, recover,
receive and give receipts for all principal moneys payable or to become payable
under the relevant Mortgages or the unpaid part thereof and the interest due or
to become due thereon;

 

(b)                                 the benefit of all securities for such
principal moneys and interest, the benefit of all consents to mortgage signed
by occupiers of the mortgaged properties and the benefit of and the right to
sue on all covenants with, or vested in, the mortgagee in relation to each
Mortgage and the rights to exercise all powers of the mortgagee in relation to
each Mortgage;

 

32

 

(c)                                  all the estate and interest in the relevant
mortgaged properties vested in the mortgagee subject to redemption or cesser;
and

 

(d)                                 all causes of action of the mortgagee
against any person in connection with any report, valuation, opinion,
certificate, consent to mortgage or other statement of fact or opinion given in
connection with any Mortgage or affecting the decision to make the relevant
advance.

 

2.                                       This Deed shall be governed by and
construed in accordance with English law.

 

IN WITNESS WHEREOF this document has been executed and delivered
as a deed the day and year first before written.

 

	
  EXECUTED as a DEED by

  	
  )

  
	
  HALIFAX plc

  	
  )

  
	
  acting by
  its attorney in

  	
  )

  
	
  the presence
  of:

  	
  )

  

 

Witness:

 

Name:

 

Address:

 

33

 

ANNEX 1

 

	
  Account
  No.

  	
   

  	
  Property
  address

  	
   

  	
  Date
  of Mortgage

  	
   

  	
  Borrower

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

34

SCHEDULE 4

 

LENDING CRITERIA

 

Lending Criteria

 

The Loans in
the Initial Portfolio or, as the case may be, the relevant New Portfolio were
originated according to the Seller’s lending policy at the applicable time the
Loan was offered.  At the Fourth Issuer
Closing Date the Seller’s lending policy included the criteria set out
below.  However, the Seller retains the
right to revise its lending policy from time to time, and so the criteria
applicable to  New Loans may not be the
same as those set out below.

 

1.                                       Types of Property

 

Properties
may be either freehold, leasehold or (in Scotland) heritable or held under a
long lease.  In the case of leasehold
properties, the unexpired portion of the lease must in most cases not expire
earlier than 30 years after the term of the Loan.  The property must be used solely for residential purposes (with
extremely limited case by case exceptions) and must be in sound structural
condition and repair or be capable of being put into such state.  House boats, mobile homes and any property
on which buildings insurance cannot be arranged are not acceptable.  All persons who are to be legal owners of
the Property on completion of the relevant Mortgage must be Borrowers.

 

All
properties have been valued by a valuer approved by the Seller or, where
appropriate, according to a methodology which would meet the standards of a
reasonable, prudent mortgage lender and which has been approved by the Seller.

 

2.                                       Term of Loan

 

There
is no minimum term on home purchase Loans and the maximum term is 40 years for
all loans.  A repayment period for a new
Further Advance that would extend beyond the term of the original advance may
also be accepted at the Seller’s discretion, subject to the following:

 

(a)                                  the consent of any subsequent lender or guarantor
to the Further Advance;

 

(b)                                 the Seller may in its discretion extend the
period of the original advance, provided that, in all leasehold cases, not less
than 30 years of the lease must be left unexpired at the end of the term of the
Mortgage; and

 

(c)                                  the approval of the valuer where the valuer
has previously recommended a term which is shorter than the maximum Loan terms
referred to above.

 

If a
Borrower requests to increase the term of the existing Loan, the maximum term
for a repayment Loan is 25 years from the date from which the extended term is
granted.  However, the total term from
the start date of the account must not exceed 40 years.

 

35

 

3.                                       Age of Applicant

 

All
Borrowers must be aged 18 or over. 
There is no maximum age limit. 
However, if the term of the Mortgage extends into retirement, the Seller
will attempt to ascertain the Borrower’s anticipated income in retirement.  If the Seller determines the Borrower will
not be able to afford the Mortgage into retirement, the application will be
declined.  If the Borrower is already
retired, the Seller will consider the Borrower’s ability to support the Loan.

 

4.                                       Loan to Value (or LTV) Ratio

 

The
maximum original LTV ratio of Loans in the Initial Portfolio is 97 per
cent.  At the date of this Agreement,
for Properties of £150,000 or less, the Seller may lend up to 97 per cent. of
the improved valuation of the Property (the original valuation plus the increase
in value deriving from any improvements). 
For Properties in excess of £150,000, the permissible LTV ratio
decreases as the Loan amount increases. 
The Seller will not provide Loans in excess of 100 per cent. of the sum
of the purchase price and the increase in value deriving from any improvements.

 

In the
case of a Property that is being purchased, value is determined by the lower of
the valuation and the purchase price. 
In the case of a remortgage or Further Advance, value is determined on
the basis of a valuation only.

 

5.                                       Mortgage Indemnity Guarantee
Policies/High LTV Fees

 

Borrowers
are currently required to pay high LTV fees to the Seller for each Mortgage
account where the aggregate of the outstanding principal balance of the
relevant Loan(s) at origination (excluding any capitalised high LTV fees and/or
booking fees and/or valuation fees) exceeds certain specified percentages.

 

If the
LTV ratio exceeds 90 per cent., the Borrower pays high LTV fees based on the
difference between the actual LTV ratio and a 75 per cent. LTV ratio.

 

Prior
to 1st January, 2001, the Seller required cover under mortgage indemnity
guarantee, or MIG, policies for Mortgages where the LTV ratio exceeded 75 per
cent., though during 1999 and 2000 the Seller paid the premium for the MIG
cover if the LTV ratio was between 75 per cent. and 90 per cent.  Since 1st January, 2001, the Seller has not
required cover under MIG policies for any Loans.

 

6.                                       Status of Applicant(s)

 

The
maximum amount of the aggregate Loan(s) under a mortgage account is determined
by a number of factors, including the applicant’s income.  In determining income, the Seller includes
basic salary as primary income, along with performance or profit-related pay,
allowances, mortgage subsidies, pensions, annuities and state benefits.  Payments for overtime, bonus and commissions
will not be automatically included in income. 
The Seller will deduct the annual cost of existing commitments from the
applicant’s gross income, depending on the applicant’s credit score.  The Seller will also verify the applicant’s
employment.

 

36

 

In
cases where a single Borrower is attempting to have the Seller take a secondary
income into account, the Seller will consider the sustainability of the
Borrower’s work hours, the similarity of the jobs and/or skills, the commuting
time and distance between the jobs, the length of employment at both positions
and whether the salary is consistent with the type of employment.  The Seller will determine, after assessing
the above factors, if it is appropriate to use both incomes.  If so, both incomes will be used as part of
the normal income calculation.

 

When
there are two applicants, the Seller adds joint incomes together for the
purpose of deciding which income band to use. 
The Seller may, at its discretion, consider the income of additional
applicants as well but only a maximum rate of one times that income.

 

The
Seller may exercise discretion within its lending criteria in applying those
factors which are used to determine the maximum amount of the Loan(s).  Accordingly, these parameters may vary for
some Loans.  The Seller may take the
following into account when exercising discretion: credit score result,
existing customer relationship, percentage of LTV, stability of employment and career
progression, availability of living allowances and/or mortgage subsidy from the
employer, employer’s standing, regularity of overtime, bonus or commission (up
to a maximum of 60 per cent. of the income), credit commitments, quality of
security (such as type of property, repairs, location or saleability), and the
increase in income needed to support the Loan.

 

The
Seller may not exercise discretion where it is lending over 95 per cent. of
value or the Borrower’s credit score fails. 
There is an exception from this policy for existing Borrowers who are
moving home and the Seller’s overall position is improved.

 

7.                                       Credit History

 

(a)                                  Credit Search

 

With
the exception, in some circumstances, of Further Advances to existing
Borrowers, a credit search is carried out in respect of all applicants.  Applications may be declined where an
adverse credit history (for example, county court judgement (or the Scottish
equivalent), default, or bankruptcy notice) is revealed.

 

(b)                                 Existing Lender’s Reference

 

In some
cases, the Seller may also seek a reference from any existing and/or previous
lender.  Any reference must satisfy the
Seller that the account has been properly conducted and that no history of
material arrears exists.

 

(c)                                  First Time Buyers/Applicants in rented
accommodation

 

Where
applicants currently reside in rented accommodation, the Seller may seek a
landlord’s reference.  In addition, if
considered appropriate, a further reference may be taken in connection with any
other property rented by the applicant(s) within the preceding 18 months.

 

(d)                                 Bank Reference

 

A bank
reference may be sought or the applicants may be required to provide bank
statements in support of his or her application.

 

37

 

8.                                       Scorecard

 

The
Seller uses some of the above criteria and various other criteria to provide an
overall score for the application that reflects a statistical analysis of the
risk of advancing the Loan.  The lending
policies and processes are determined centrally to ensure consistency in the
management and monitoring of credit risk exposure.  Full use is made of software technology in credit scoring new
applications.  Credit scoring applies
statistical analysis to publicly available data and customer-provided data to assess
the likelihood of an account going into arrears.  Mortgage collection is conducted through a number of payment
collection departments.

 

The
Seller reserves the right to decline an application that has received a passing
score.  The Seller does have an appeals
process if an applicant believes his or her application to be unfairly
denied.  It is the Seller’s policy to
allow only authorised individuals to exercise discretion in granting variances
from the scorecard.

 

38

 

SCHEDULE 5

 

POWER OF ATTORNEY IN FAVOUR OF FUNDING 1,
THE MORTGAGES TRUSTEE

AND THE SECURITY TRUSTEE

 

THIS DEED OF POWER OF ATTORNEY is made on the [•], 2004 by:

 

(1)                                  HALIFAX
plc
whose registered office is at Trinity Road, Halifax, West Yorkshire HX1 2RG
(registered number 02367076) (the Seller);

 

IN FAVOUR OF each of:

 

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

 

(3)                                  PERMANENT
MORTGAGES TRUSTEE LIMITED whose registered office is at 47 Esplanade, St
Helier, Jersey JE1 0BD (registered number 83116) (the Mortgages Trustee);

 

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

 

WHEREAS:

 

(A)                              By virtue of a mortgage sale agreement (the
Mortgage
Sale Agreement) dated 14th June, 2002 and as subsequently amended
and restated on 6th March, 2003, 25th November, 2003 and on 12th March, 2004
and made between the Seller (1) Funding 1 (2) the Mortgages Trustee (3) and the
Security Trustee provision was made for the execution by the Seller of this
Power of Attorney.

 

(B)                                Words and phrases in this Power of Attorney
shall (save where expressed to the contrary) have the same meanings
respectively as the words and phrases in the Master Definitions and
Construction Schedule dated 12th March, 2004 as amended, varied or supplemented
from time to time and signed by amongst others, the parties to the Power of
Attorney.

 

NOW THIS DEED WITNESSETH as follows:

 

1.                                       The Seller irrevocably and by way of
security for the performance of the covenants, conditions and undertakings on
the part of the Seller contained in the Mortgage Sale Agreement and the
Servicing Agreement HEREBY APPOINTS each of Funding 1, the Mortgages Trustee
and the Security Trustee and any receiver and/or administrator appointed from
time to time in respect of Funding 1 and/or the Mortgages Trustee or their
assets (each an Attorney) severally to be its true and lawful attorney for the
Seller and in the Seller’s name or otherwise to do any act matter or thing
which any Attorney considers necessary or desirable for the protection,
preservation or enjoyment of that Attorney’s interest in the Loans and their
Related Security and/or which ought to be done under the covenants,
undertakings and provisions contained in the Mortgage Sale Agreement including
(without limitation) any or all of the following:

 

39

 

(a)                                  to execute, sign, seal and deliver (using
the company seal of the Seller where appropriate) any conveyance, assignation
or transfer (including, for the avoidance of doubt each Scottish Declaration of
Trust) of the Loans or any of them to the Mortgages Trustee and its successors
in title or to any other person or persons entitled to the benefit thereof;

 

(b)                                 to execute, sign, seal and deliver (using
the company seal of the Seller where appropriate) any conveyance, assignment,
assignation or transfer (including for the avoidance of doubt, each Scottish
Declaration of Trust) of the Related Security or any item comprised therein (to
the extent only that such item or items relate to the Loans) to the Mortgages
Trustee and its successors in title or to any other person or persons entitled
to the benefit thereof or entitled to be registered at H.M. Land Registry as
proprietor thereof or to be registered in the Land Register of Scotland or
recorded in the General Register of Sasines as heritable creditor thereof (as
the case may be);

 

(c)                                  to do every other act or thing which the
Seller is obliged to do under the Mortgage Sale Agreement or which that
Attorney may otherwise consider to be necessary proper or expedient for fully
and effectually vesting or transferring the interests sold thereunder in the
Loans and their Related Security or any or each of them and/or the Seller’s
estate right and title therein or thereto in or to the Mortgages Trustee and
its successors in title or to any other person or persons entitled to the
benefit thereof (as the case may be) in the same manner and as fully and
effectually in all respects as the Seller could have done including, without
limitation, any of the acts referred to in Clause 6.5(a) to (c) of the Mortgage Sale
Agreement;

 

(d)                                 to exercise its rights, powers and
discretions under the Loans including the right to fix the rate or rates of
interest payable under the Loans in accordance with the terms thereof
including, for the avoidance of doubt, whilst such Loans subsist and subject to
the consent of the Mortgages Trustee being given to the setting of such rates,
setting the Seller’s Variable Base Rate in the circumstances referred to in Clause 4
of the Servicing Agreement and/or following perfection pursuant to Clause 6.1
of the Mortgages Sale Agreement PROVIDED THAT nothing in the Clause shall
prevent the Seller (or any of its attorneys from time to time) from setting a
higher rate than those set or to be set or required or to be required by the
Mortgages Trustee or Funding 1 under this Power of Attorney;

 

(e)                                  to discharge the Mortgages or any of them
and to sign, seal, deliver and execute such receipts releases surrenders
instruments, discharges, retrocessions and deeds as may be requisite or
advisable in order to discharge the relevant Property or Properties from the
Mortgages or any of them; and

 

(f)                                    to exercise all the powers of the Seller in
relation to such Loans and their Related Security.

 

2.                                       Each Attorney shall have the power by
writing under its hand by an officer of the Attorney from time to time to
appoint a substitute who shall have power to act on behalf of the Seller as if
that substitute shall have been originally appointed Attorney by this Power of
Attorney (including, without limitation, the power of further substitution)
and/or to revoke any such appointment at any time without assigning any reason
therefor.

 

40

 

3.                                       The Seller hereby agrees at all times
hereafter to ratify and confirm whatsoever the said Attorney or its attorneys
shall lawfully do or cause to be done in and concerning the Loans or their
Related Security by virtue of this Power of Attorney.

 

4.                                       The laws of England shall apply to this
Power of Attorney and the interpretation thereof.

 

41

 

IN WITNESS WHEREOF the Seller has executed and delivered this
document as a deed the day and year first before written.

 

	
  THE COMMON SEAL of

  	
  )

  
	
  HALIFAX plc

  	
  )

  
	
  was hereunto
  affixed in

  	
  )

  
	
  the presence
  of:

  	
  )

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    Authorised
  Signatory

  
	
   

  	
   

  
	
   

  	
    Authorised
  Signatory

  
			

 

42

 

SCHEDULE 6

 

LOAN REPURCHASE NOTICE

 

Dated
[                             ]

 

1.                                       It is hereby agreed that for the purpose of
this notice the Principal Agreement shall mean the Mortgage Sale Agreement
dated 14th June, 2002 as amended and restated on 6th March, 2003, 25th
November, 2003 and as further amended and restated on 12th March, 2004 and from
time to time, made between (1) HALIFAX plc (the Seller) (2) PERMANENT
FUNDING (NO. 1) LIMITED (3) PERMANENT MORTGAGES TRUSTEE LIMITED (the Mortgages
Trustee) and (4) THE BANK OF NEW YORK (as the same may be or
have been amended, varied or supplemented from time to time with the consent of
those parties).

 

2.                                       Save where the context otherwise requires,
words and expressions in this notice shall have the same meanings respectively
as when used in the Principal Agreement.

 

3.                                       In accordance with Clause 8.5 of the Principal
Agreement, upon receipt of this Loan Repurchase Notice by the Seller there shall
exist between the Seller and the Mortgages Trustee an agreement (the Agreement
for Sale) for the sale by the Mortgages Trustee to the Seller of the
Loans and their Related Security more particularly described in the Schedule
hereto.  Completion of such sale shall
take place on 12th March, 2004.

 

4.                                       The Agreement for Sale shall incorporate, mutatis
mutandis, the relevant provisions of the Principal Agreement.

 

	
   

  	
   

  
	
   

  
	
  Signed for
  and on behalf of

  

 

PERMANENT MORTGAGES TRUSTEE LIMITED

 

[On duplicate

 

We hereby
acknowledge receipt of and confirm the contents of the Loan Repurchase Notice
dated
[            ].

 

	
   

  	
   

  
	
  Signed for
  and on behalf of

  
	
  HALIFAX plc]

  

 

Schedule

 

	
  5.

  	
   

  	
  6.

  	
   

  	
  7.

  	
   

  	
  8.

  	
   

  	
  9.

  
	
  Title
  No. (if

  registered)

  	
   

  	
  Borrower

  	
   

  	
  Account No.

  	
   

  	
  Property Postcode

  	
   

  	
  Date
  of Mortgage

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

43

 

SCHEDULE 7

 

ASSIGNMENT OF THIRD PARTY RIGHTS

 

THIS DEED OF ASSIGNMENT is made on [•]

 

BY:

 

(1)                                  HALIFAX
plc
(registered number 02367076), a public limited company incorporated under the
laws of England and Wales, whose registered office is at Trinity Road, Halifax,
West Yorkshire HX1 2RG (the Transferor);

 

IN FAVOUR OF:

 

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

 

WHEREAS:

 

(A)                              By the charges by way of legal mortgage or
standard security (the Mortgages) brief particulars of which are
set out in the Annexure hereto the properties brief particulars of which are
similarly set out became security for the repayment of the moneys therein
mentioned.

 

(B)                                By the Mortgage Sale Agreement, the
Transferor agreed to sell and the Transferee agreed to buy all right, title,
interest and benefit (both present and future) of the Transferor in and under
those Mortgages and all Related Security and all monies secured by those
Mortgages and Related Security.

 

NOW THIS DEED WITNESSETH as follows:

 

1.                                       Terms used (but not defined) in this Deed
(including the recitals) shall, except where the context otherwise requires and
save where otherwise defined in this Deed, have the meanings given to them in
the master definitions and construction schedule dated [12th March], 2004 as
amended and/or restated from time to time, signed by, amongst others, the
parties to this Deed (as the same may be amended, varied or supplemented from
time to time with the consent of the parties to this Deed) (the Master Definitions
and Construction Schedule) and this Deed shall be construed in
accordance with the interpretation provisions set out in Clause 2 thereof.

 

2.                                       The Transferor hereby assigns absolutely
unto the Transferee with full title guarantee or, in the case of any Related
Security or causes of action (as described in Clause 2(b) below) governed by
Scots law, with absolute warrandice:

 

(a)                                  the benefit of all Related Security
relating to the Mortgages (including without limitation all securities for the
principal moneys and interest secured by the Mortgages and the benefit of all
consents to mortgage signed by occupiers of the mortgaged properties and the
benefit of all guarantees, indemnities and surety contracts relating to the
Mortgages) other than any such Related Security which has

 

44

 

been
transferred to the Transferee by other means or which is not otherwise capable
of such transfer; and

 

(b)                                 all causes of action of the Transferor
against any person in connection with any report, valuation, opinion,
certificate, consent or other statement of fact or opinion given in connection
with any Related Security relating to the Mortgages or affecting the decision
to make any advance in connection with such Mortgages.

 

3.                                       The Transferor on behalf of the Transferee
agrees to intimate the assignation contained in Clause 2 hereof to all relevant
third parties where required to do so pursuant to Clause 6 of the Mortgage Sale
Agreement or as otherwise required by the Security Trustee.

 

4.                                       This Deed shall be governed by and
construed in accordance with English law.

 

IN WITNESS WHEREOF this document has been executed and
delivered as a deed the day and year first before written.

 

	
  EXECUTED as a DEED by

  	
  )

  
	
  HALIFAX plc

  	
  )

  
	
  acting by
  its attorney in

  	
  )

  
	
  the presence
  of:

  	
  )

  
	
   

  	
   

  
	
  Witness’s
  signature:

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Address:

  

 

45

 

ANNEXURE REFERRED TO IN THE FOREGOING ASSIGNMENT

 

	
  Account No.

  	
   

  	
  Property
  address

  	
   

  	
  Borrower

  	
   

  	
  Date of
  Mortgage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

46

 

SCHEDULE 8

 

ASSIGNMENT OF HALIFAX MORTGAGE
RE LIMITED MIG POLICIES

 

THIS DEED is
made on [•]

 

BY:

 

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

 

IN FAVOUR OF:

 

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

 

WHEREAS:

 

(A)                              By a Mortgage Sale Agreement dated 14th
June, 2002, as amended and restated on 6th March, 2003, 25th November, 2003, as
further amended and restated on [12th March], 2004 and from time to time made
between, amongst others, the parties hereto, the Seller agreed to transfer to
the Mortgages Trustee certain charges by way of legal mortgage or standard
security secured on residential property in England, Wales and Scotland
together with the benefit of any monies secured thereby from time to time.

 

(B)                                The Seller has the benefit of mortgage
indemnity insurance policies brief details of which are set out in the Schedule
to this Deed (the HMRL MIG Policies).

 

(C)                                The Seller has agreed with the Mortgages
Trustee to assign to the Mortgages Trustee the benefit of the HMRL MIG Policies
to the extent that they relate to the Loans in the Portfolio.

 

(D)                               The insurance businesses (including, for
the avoidance of doubt, the HMRL MIG Policies) of Halifax Mortgage Re Limited
were acquired by HBOS Insurance (PCC) Guernsey Limited on 21st December, 2001.

 

NOW THIS DEED WITNESSETH as follows:

 

1.                                       Terms used (but not defined) in this Deed
(including the recitals) shall, except where the context otherwise requires and
save where otherwise defined in this Deed, have the meanings given to them in
the master definitions and construction schedule dated 12th March, 2004 as amended
and/or restated from time to time, signed by amongst others, the parties to
this Deed, (as the same may be amended, varied or supplemented from time to
time with the consent of the parties to this Deed) (the Master Definitions Construction Schedule)
and this Deed shall be construed in accordance with the interpretation
provisions set out in Clause 2 thereof.

 

47

 

2.                                       The Seller with full title guarantee hereby
conveys, transfers and assigns to the Mortgages Trustee absolutely all its
right, title, interest and benefit in the HMRL MIG Policies to the extent that
they relate to the Mortgages which as at this date are comprised in the
Portfolio, and all moneys and proceeds to become payable under any of the same
and all covenants relating thereto and all powers and remedies for enforcing
the same.

 

3.                                       This Deed shall be governed by and
construed in accordance with English law.

 

IN WITNESS WHEREOF which this document has been executed and
delivered as a deed the day and year first before written.

 

	
  EXECUTED as a DEED by

  	
  )

  
	
  HALIFAX plc

  	
  )

  
	
  acting by
  its attorney in

  	
  )

  
	
  the presence
  of:

  	
  )

  
	
   

  	
   

  
	
  Witness:

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  
	
   

  	
   

  
	
  Address:

  	
   

  
	
   

  	
   

  
	
  Schedule

  

 

48

 

SCHEDULE 9

 

HALIFAX MORTGAGE RE LIMITED MIG POLICIES ASSIGNMENT
NOTICE

 

To:          HBOS Insurance (PCC) Guernsey Ltd

c/o AON
Insurance Managers (Guernsey) Limited

(as
Managers of HBOS Insurance (PCC) Ltd)

PO Box
33

Maison
Trinity

Trinity
Square

St
Peter Port

Guernsey
GY1 4AT

[•]

 

Dear Sirs,

 

Re:                             Assignment of mortgage indemnity
insurance policies numbered [•]
respectively (the MIG Policies)

 

We hereby give
you notice that, by an Assignment dated [•] and made between ourselves
and Permanent Mortgages Trustee Limited (the Mortgages Trustee) (a copy of
which is attached to this notice), we assigned all of our right, title, benefit
and interest in the MIG Policies to the Mortgages Trustee (to the extent that
they relate to the loans and the mortgages in a portfolio referred to in [the
Mortgage Sale Agreement dated [12th March], 2004 as amended and/or restated
from time to time between ourselves, Permanent Funding (No. 1) Limited, the
Mortgages Trustee and The Bank of New York/the New Portfolio Notice dated [•] between ourselves, Permanent
Funding (No.1) Limited and the Mortgages Trustee)](1).

 

Yours
faithfully,

 

	
   

  	
   

  
	
  For and on
  behalf of

  
	
  HALIFAX plc

  

 

Copy:     Permanent Mortgages Trustee Limited

Permanent
Funding (No. 1) Limited

The
Bank of New York

 

(1)           Delete as applicable.

 

49

 

SCHEDULE 10

 

INSURANCE ENDORSEMENT

 

ON THE HEADED NOTEPAPER OF [THE RELEVANT INSURER ]

 

ENDORSEMENT ý attaching to and forming part of policy
number [policy
number] (the Policy) issued by [name of Insurer] (the Insurer).

 

It is hereby
noted and agreed that with effect from the date of this Endorsement:

 

1.                                       The definition of Insured shall be deleted in
its entirety and replaced with the following wording:

 

(a)                                  “Halifax plc (Halifax) whose registered
office is at Trinity Road, Halifax, West Yorkshire, HX1 2RG;

 

(b)                                 any assignee or person to whom Halifax has
assigned (whether legally or equitably and whether by way of security or
otherwise) or has declared a trust in respect of any loans and/or mortgages
and/or standard securities and related collateral and/or assets to which this
Policy relates (an Assignee) (whether or not any such Assignee
holds the same on trust for another or others); and

 

(c)                                  any person benefiting from security granted
by Halifax or its Assignee over any loans and/or mortgages and/or standard
securities and related collateral and/or assets to which this Policy relates in
connection with the financing or re-financing of such loans and/or mortgages
and/or standard securities and related collateral and/or assets.”

 

2.                                       Each term of the Policy which is
inconsistent with the intent and/or effect of the amended definition of Insured
contemplated in paragraph 1 above (the New Definition) shall be subject to the New
Definition and shall not apply to the extent that such term of the Policy is
inconsistent with the New Definition.

 

3.                                       The Insurer acknowledges and agrees that
any Insured under the Policy may from time to time appoint Halifax or any other
person as agent of that Insured to deal with the Insurer on its behalf in the
administration of and making and payment of claims under the Policy.

 

All other
terms, clause and conditions of the Policy remain unchanged.

 

This
Endorsement is signed for and on behalf of the Insurer by a duly authorised
signatory:

 

 

	
   

  	
   

  
	
  [Name]

  
	
  [Position]

  
	
  [Insurer]

  
	
   

  
	
  Dated                                                          ,
  2003

  

 

50

 

SCHEDULE 11

 

INSURANCE ACKNOWLEDGEMENTS

 

PART 1

 

ON THE HEADED NOTEPAPER OF GE MORTGAGE INSURANCE LIMITED

 

	
  To:

  	
   

  	
  Halifax plc
  (the Seller)

  
	
   

  	
   

  	
  Trinity Road

  
	
   

  	
   

  	
  Halifax

  
	
   

  	
   

  	
  West
  Yorkshire

  
	
   

  	
   

  	
  HX1 2RG

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Permanent
  Mortgages Trustee Limited (the Mortgages Trustee)

  
	
   

  	
   

  	
  47 Esplanade

  
	
   

  	
   

  	
  St Helier

  
	
   

  	
   

  	
  Jersey

  
	
   

  	
   

  	
  JE1 08D

  
	
   

  	
   

  	
  Channel
  Islands

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  
	
   

  	
   

  	
  Blackwell
  House

  
	
   

  	
   

  	
  Guildhall
  Yard

  
	
   

  	
   

  	
  London

  
	
   

  	
   

  	
  EC2V 5AE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Bank of
  New York

  
	
   

  	
   

  	
  One Canada
  Square

  
	
   

  	
   

  	
  London E14
  5AL

  
	
   

  	
   

  	
   

  
	
  [date]

  

 

 

Dear Sirs,

 

Mortgage Indemnity Guaranty Policies numbers [•] and [•] (the MIG Policies)

 

We refer to
the transaction entered into or to be entered into between, inter alios,
each of the parties to whom this letter is addressed, pursuant to which:

 

(a)                                  the Seller may assign or agree to transfer
or declare a trust in respect of its interest in properties which are (or may
from time to time be) covered by the MIG Policies to the Mortgages Trustee;

 

(b)                                 the Mortgages Trustee may declare a trust
over its interest in such properties in favour of Funding 1 and the Seller; and

 

(c)                                  Funding 1 may charge its interest in such
properties to the Security Trustee.

 

51

 

In
consideration of the payment of £1 made by each of the Seller, the Mortgages
Trustee, Funding 1 and the Security Trustee (receipt whereof is hereby
acknowledged), we hereby confirm that the arrangements set out in paragraphs
(a) to (c) inclusive above will not cause the MIG
Policies to lapse or terminate and, notwithstanding any such arrangements, we
will continue to pay claims under the MIG Policies in the same way and in the
same amount as we would have paid them, had the said arrangements not been
entered into.

 

Yours
faithfully,

 

 

For and on behalf of GE Mortgage Insurance Limited

 

52

 

PART 2

 

ON THE HEADED NOTEPAPER OF HBOS INSURANCE (PCC)
GUERNSEY LTD

 

	
   

  	
   

  	
  Halifax plc
  (the Seller)

  
	
  To:

  	
   

  	
  Trinity Road

  
	
   

  	
   

  	
  Halifax

  
	
   

  	
   

  	
  West
  Yorkshire

  
	
   

  	
   

  	
  HX1 2RG

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Permanent
  Mortgages Trustee Limited (the Mortgages Trustee)

  
	
   

  	
   

  	
  47 Esplanade

  
	
   

  	
   

  	
  St Helier

  
	
   

  	
   

  	
  Jersey

  
	
   

  	
   

  	
  JE1 08D

  
	
   

  	
   

  	
  Channel
  Islands

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  
	
   

  	
   

  	
  Blackwell
  House

  
	
   

  	
   

  	
  Guildhall
  Yard

  
	
   

  	
   

  	
  London

  
	
   

  	
   

  	
  EC2V 5AE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Bank of New
  York (the Security Trustee)

  
	
   

  	
   

  	
  48th Floor

  
	
   

  	
   

  	
  One Canada
  Square

  
	
   

  	
   

  	
  London

  
	
   

  	
   

  	
  E14 5AL

  
	
  12th March 2004

  

 

Dear Sirs,

 

Mortgage Indemnity Guarantee Policy numbers 227001,
227001(A), 227002, 227003 and 227006 (the “MIG Policies”)

 

We refer to
the transaction entered into or to be entered into between, inter alios,
each of the parties to whom this letter is addressed, pursuant to which:

 

(a)                                  all of the Seller’s right,
title, benefit and interest in the MIG Policies (to the extent that the same
relate to the mortgage loans and their collateral security sold or to be sold
by the Seller to the Mortgages Trustee pursuant to a mortgage sale agreement to
be entered into between each of the parties to whom this letter is addressed)
shall be assigned by the Seller to the Mortgages Trustee;

 

(b)                                 the Seller may sell and assign
or agree to sell and assign or declare a trust in respect of its interest in
properties which are (or may from time to time be) covered by the MIG Policies
to or in favour of the Mortgages Trustee;

 

53

 

(c)                                  the Mortgages Trustee may
declare a trust over its interest in such properties in favour of
Funding 1 and the Seller; and

 

(d)                                 Funding 1 may charge its
beneficial interest in such properties to the Security Trustee.

 

In
consideration of the payment of £1 made by each of the Seller, the Mortgages Trustee,
Funding 1 and the Security Trustee (receipt whereof is hereby
acknowledged), we hereby confirm that the arrangements set out in paragraphs
(a) to (d) inclusive above will not cause the MIG
Policies to lapse or terminate and, notwithstanding any such arrangements, we
will continue to pay claims under the MIG Policies in the same way and in the
same amount as we would have paid them, had the said arrangements not been
entered into.

 

Yours
faithfully,

 

 

For and on behalf of HBOS Insurance (PCC) Guernsey
Limited

 

54

 

SCHEDULE 12

 

NEW PORTFOLIO NOTICE

 

Dated
[                   ]

 

1.                                       It is hereby agreed for the purpose of this
notice the Principal Agreement shall mean the Mortgage Sale Agreement
dated 14th June, 2002 as amended and restated on 6th March, 2003, 25th
November, 2003 and as further amended and restated on [•], 2004 made between (1) HALIFAX plc
(the Seller)
(2) PERMANENT
FUNDING (NO. 1) LIMITED (Funding 1) (3) PERMANENT MORTGAGES TRUSTEE LIMITED
(the Mortgages
Trustee) and (4) THE BANK OF NEW YORK (as the same may be or
have been amended, varied or supplemented from time to time with the consent of
those parties).

 

2.                                       Save where the context otherwise requires,
words and expressions in this notice shall have the same meanings respectively
as when used in the Principal Agreement.

 

3.                                       In accordance with and subject to Clause 4.1
of the Principal Agreement, upon receipt by the Seller of the duplicate of this
notice signed by Funding 1 and the Mortgages Trustee, there shall exist between
the Seller, Funding 1 and the Mortgages Trustee an agreement (the Agreement
for Sale) for the sale by the Seller to the Mortgages Trustee of the
New Loans and their Related Security more particularly described in the Schedule
hereto (other than any New Loans and their Related Security which have been
redeemed in full prior to the next following Sale Date).  Completion of such sale shall take place on
[                        ].

 

4.                                       The Agreement for Sale shall incorporate, mutatis
mutandis, the relevant provisions of the Principal Agreement.

 

	
   

  	
   

  
	
  Signed for
  and on behalf of

  
	
  HALIFAX plc

  

 

[On duplicate:

 

We hereby
acknowledge receipt of the New Portfolio Notice dated
[                 ],
and confirm that we are prepared to purchase New Loans as set out in that
notice.

 

	
   

  	
   

  
	
  Signed for
  and on behalf of

  
	
  PERMANENT FUNDING (NO. 1) LIMITED

  
	
   

  
	
   

  	
   

  
	
  Signed for
  and on behalf of

  
	
  [PERMANENT MORTGAGES TRUSTEE
  LIMITED]

  
			

 

Schedule

 

	
  1.

  	
   

  	
  2.

  	
   

  	
  3.

  	
   

  	
  4.

  	
   

  	
  5.

  
	
  Title
  No. (if

  registered)

  	
   

  	
  Borrower

  	
   

  	
  Property
  Postcode

  	
   

  	
  Account
  No.

  	
   

  	
  Date
  of Mortgage

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

55

 

SCHEDULE 13

 

FORMS OF SCOTTISH TRANSFER

 

LAND REGISTER

 

We, HALIFAX plc,
incorporated under the Companies Acts (registered number 02367076) and having
our Registered Office at Trinity Road, Halifax, West Yorkshire HX1 2RG  (the
Transferor)
CONSIDERING THAT in terms of a Mortgage Sale Agreement among us the Transferor,
PERMANENT
MORTGAGES TRUSTEE LIMITED, a private limited company incorporated
under the laws of Jersey, Channel Islands (registered number 83116) and having
its registered office at 47 Esplanade, St Helier, Jersey JE1 0BD (the Transferee)
and others dated 14 June 2002 as amended and restated on 6 March 2003 and 25
November 2003 and as further amended and restated on 12th March, 2004 (the Mortgage
Sale Agreement) we have sold our whole right, title and interest in
and to the Standard Securities and others hereinafter mentioned to the
Transferee NOW THEREFORE we, the Transferor, IN CONSIDERATION of the sums
payable in terms of and in implement of the Mortgage Sale Agreement HEREBY
ASSIGN to the Transferee as trustee under and in terms of the Mortgages Trust
Deed among us, the Transferor, the Transferee and others dated 13 June 2003 as
amended and restated on 6 March 2003 and 25 November 2003 and as further
amended and restated on 12th March, 2004 (the Mortgages Trust Deed) and its
successor or successors as trustee or trustees under and in terms of the
Mortgages Trust Deed:

 

(a)                                  the Standard Securities granted by the
respective parties whose names are specified in Column 3 of the Schedule
annexed and executed as relative hereto in favour of us the Transferor for all
sums due and to become due, to the extent of the sums specified in the relative
entry in Column 6 of the said Schedule being the amounts now due under the said
respective Standard Securities, registered said Standard Securities in the Land
Register under the Title Number specified in the relative entry in Column 4 of
the said Schedule on the date specified in the relative entry in Column 5 of
the said Schedule; and

 

(b)                                 the whole rights, title and interest of us
the Transferor in and under all and any personal bonds, credit agreements or
agreements for loan (however constituted) secured by the said Standard
Securities and granted by or entered into with the said respective parties
whose names are specified in Column 3 of the said Schedule, the dates of the
respective personal bonds, credit agreements or agreements for loan being
specified in the relative entry in Column 7 of the said Schedule;

 

With interest
from and also arrears and accumulations of interest due and unpaid as at
[                ];
And  we grant warrandice:  IN WITNESS WHEREOF these presents
typewritten on this [and the preceding] page are together with the Schedule
annexed hereto executed at
[                                ]
on the
[                      ]
day of [                      ]
as follows:

 

	
  SUBSCRIBED
  for and on behalf of HALIFAX plc by

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Authorised
  Signatory

  
	
   

  	
   

  
	
  (Print Full
  Name)

  	
   

  
	
   

  	
   

  
	
  before this
  witness

  	
   

  
				

 

56

 

	
   

  	
  Witness

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  (Print Full
  Name)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Address)

  	
   

  

 

57

 

This is the Schedule referred to in the foregoing
Assignation by Halifax plc in favour of Permanent Mortgages Trustee Limited

 

	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  
	
  Account

  No.

  	
   

  	
  Address

  	
   

  	
  Borrowers

  Full Names

  	
   

  	
  Title

  Number

  	
   

  	
  Registration

  Date

  	
   

  	
  Sum

  Due

  	
   

  	
  Date of

  Bond or Loan

  Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  	
  Authorised
  Signatory

  

 

58

 

SCHEDULE 14

 

FORMS OF SCOTTISH TRANSFER

 

SASINE REGISTER

 

We, HALIFAX plc,
incorporated under the Companies Acts (registered number 02367076) and having
our Registered Office at Trinity Road, Halifax, West Yorkshire HX1 2RG (the Transferor)
CONSIDERING THAT in terms of a Mortgage Sale Agreement among us the Transferor,
PERMANENT
MORTGAGES TRUSTEE LIMITED, a private limited company incorporated
under the laws of Jersey, Channel Islands (registered number 83116) and having
its registered office at 47 Esplanade, St Helier, Jersey JE1 0BD (the Transferee)
and others dated 14 June 2002 as amended and restated on 6 March 2003 and 25
November 2003 and as further amended and restated on [    ] 2004 (the Mortgage Sale Agreement) we
have sold our whole right, title and interest in and to the Standard Securities
and others hereinafter mentioned to the Transferee NOW THEREFORE we the
Transferor IN CONSIDERATION of the sums payable in terms of and in implement of
the Mortgage Sale Agreement HEREBY ASSIGN to the Transferee as trustee under
and in terms of the Mortgages Trust Deed among us, the Transferor, the Transferee
and others dated 13 June 2002 as amended and restated on 6 March 2003 and 25
November 2003 and as further amended and restated on [    ]
2004 (the Mortgages
Trust Deed) and its successor or successors as trustee or trustees
under and in terms of the Mortgages Trust Deed:

 

(a)                                  the Standard Securities granted by the
respective parties whose names are specified in Column 3 of the Schedule
annexed and executed as relative hereto in favour of us the Transferor for all
sums due and to become due, to the extent of the sums specified in the relative
entry in Column 6 of the said Schedule being the amounts now due under the said
respective Standard Securities, recorded said Standard Securities in the
Register for the County specified in the relative entry in Column 4 of the said
Schedule on the date specified in the relative entry in Column 5 of the said
Schedule; and

 

(b)                                 the whole rights, title and interest of us
the Transferor in and under all and any personal bonds, credit agreements or
agreements for loan (however constituted) secured by the said Standard
Securities and granted by or entered into with the said respective parties
whose names are specified in Column 3 of the said Schedule, the dates of the
respective personal bonds, credit agreements or agreements for loan being
specified in the relative entry in Column 7 of the said Schedule;

 

59

 

With interest
from and also arrears and accumulations of interest due and unpaid as at
[                 ];
And we grant warrandice:  IN WITNESS
WHEREOF these presents typewritten on this [and the preceding] page are
together with the Schedule annexed hereto executed at
[                  ]
on the
[                         ]
day of [                       ]
as follows:

 

	
  SUBSCRIBED
  for and on behalf of HALIFAX plc by

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Authorised
  Signatory

  
	
   

  	
   

  
	
  (Print Full
  Name)

  	
   

  
	
   

  	
   

  
	
  before this
  witness

  	
   

  
	
   

  	
  Witness

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  (Print Full
  Name)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Address)

  	
   

  

 

 

REGISTER on
behalf of the within named PERMANENT MORTGAGES TRUSTEE LIMITED as trustee
within mentioned in the REGISTERS of the COUNTIES of
[                          ]

 

60

 

This is the Schedule referred to in the foregoing
Assignation by Halifax plc in favour of Permanent Mortgages Trustee Limited

 

	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  
	
  Account

  No.

  	
   

  	
  Address

  	
   

  	
  Borrowers

  Full Names

  	
   

  	
  County

  	
   

  	
  Recording

  Date

  	
   

  	
  Sum Due

  	
   

  	
  Date of

  Bond or Loan

  Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
   

  	
   

  	
   

  	
  Authorised
  Signatory

  

 

61

 

SCHEDULE 15

 

FORM OF SCOTTISH DECLARATION OF TRUST

 

DECLARATION OF TRUST

 

among

 

HALIFAX plc, incorporated under the Companies Acts
(registered number 02367076) and having its Registered Office at Trinity Road,
Halifax, West Yorkshire HX1 2RG (the Seller)

 

and

 

PERMANENT MORTGAGES TRUSTEE LIMITED, a private limited company
incorporated under the laws of Jersey, Channel Islands (registered number
83116), and having its registered office at 47 Esplanade, St Helier, Jersey JE1
0BD, Channel Islands as trustee under and in terms of the mortgages trust deed
aftermentioned (the Mortgages Trustee)

 

and

 

PERMANENT FUNDING (NO. 1) LIMITED, incorporated under the
Companies Acts (registered number 4267660) and having its registered office at
Blackwell House, Guildhall Yard, London EC2V 5AE (Funding 1)

 

WHEREAS:

 

(A)                              Title to the Scottish Trust Property
aftermentioned is held by and vested in the Seller.

 

(B)                                In terms of a Mortgages Trust Deed entered
into among the Seller, Funding 1 and the Mortgages Trustee dated 13th June 2002
as amended and restated on 6th March 2003 and 25th November 2003 and as further
amended and restated on 12th March, 2004 and the Mortgages Trust constituted in
terms thereof, the Mortgages Trustee holds the Trust Property on trust for the
Beneficiaries therein specified.

 

(C)                                In terms of a Mortgage Sale Agreement
entered into among, inter alia, the Seller, Funding 1 and the
Mortgages Trustee dated 14th June 2002, as amended on 6th March 2003 and 25th
November 2003 and as amended and restated on 12th March, 2004 (the Mortgage
Sale Agreement) the Seller has agreed to sell inter alia the said
Scottish Trust Property to the Mortgages Trustee to be held thereafter by the
Mortgages Trustee under and in terms of the Mortgages Trust; and

 

(D)                               In implement of Clause 4.5(a)(vii) of the
Mortgage Sale Agreement and pending the taking of legal title to the said
Scottish Trust Property by the Mortgages Trustee, the Seller has undertaken to
grant this deed.

 

NOW THEREFORE the parties HEREBY AGREE and DECLARE as
follows:

 

1.                                      Interpretation

 

In this deed:

 

62

 

(a)                                  the amended and restated master definitions
and construction schedule signed by, amongst others, the parties to this deed
and 12th March, 2004 (as the same may be amended, varied or supplemented from
time to time with the consent of the parties to this deed) (the Master
Definitions and Construction Schedule) is expressly and specifically
incorporated into this deed and, accordingly, the expressions defined in the
Master Definitions and Construction Schedule (as so amended, varied or
supplemented from time to time) shall, except where the context otherwise
requires and save where otherwise defined herein, have the same meanings in
this deed, including the Recitals and this deed shall be construed in
accordance with the interpretation provisions set out in Clause 2 of the Master
Definitions and Construction Schedule; and

 

(b)                                 Scottish
Trust Property shall mean the Scottish Loans and their Related
Security brief particulars of which are detailed in the schedule annexed and
executed as relative hereto and any Further Advances made in respect of such
Scottish Loans (the Schedule), and all right, title, interest
and benefit of the Seller to:

 

(i)                                     all payments of principal and interest
(including, for the avoidance of doubt, all Accrued Interest, Arrears of
Interest, Capitalised Expenses and Capitalised Arrears) and other sums due or
to become due in respect of such Scottish Loans and their Related Security
including, without limitation, the right to demand, sue for, recover and give
receipts for all principal monies, interest and costs and the right to sue on
all covenants  and undertakings made or
expressed to be made in favour of the Seller under the applicable Mortgage
Terms;

 

(ii)                                  subject where applicable to the subsisting
rights of redemption of Borrowers, all MHA Documentation, Deeds of
Postponement, all third party guarantees and any other collateral security for
the repayment of the relevant Scottish Loans;

 

(iii)                               the right to exercise all the powers of the
Seller in relation thereto;

 

(iv)                              all proceeds resulting from the enforcement
of any of those Scottish Loans and their Related Security;

 

(v)                                 each Certificate of Title and Valuation
Report relevant to those Scottish Loans and any right of action of the Seller
against any solicitor, qualified conveyancer, valuer or other person in
connection with any report, valuation, opinion, certificate or other statement
of fact or opinion given in connection with any of those Scottish Loans and
their Related Security, or any part thereof or affecting the decision of the
Seller to make or offer to make any of those Scottish Loans or part thereof;

 

(vi)                              the proceeds of all claims made by or on
behalf of the Seller or to which the Seller is entitled in relation to the
Scottish Properties secured by the Scottish Mortgages detailed in the Schedule
under the Buildings Policies and the Properties in Possession Cover; and

 

(vii)                           the MIG Policies, so far as they relate to
the relevant Scottish Loans and their Related Security, including the right to
receive the proceeds of any claims.

 

63

 

2.                                      Declaration of Trust

 

The
Seller hereby DECLARES that from and after the date hereof the Seller holds
and, subject to Clause 8 below, shall henceforth hold the Scottish Trust
Property and its whole right, title and interest, present and future, therein
and thereto in trust absolutely for the Mortgages Trustee and its assignees
(whether absolutely or in security) whomsoever.

 

3.                                      Intimation

 

The
Seller hereby intimates to the Mortgages Trustee the coming into effect of the
trust hereby declared and created and the Mortgages Trustee by its execution of
this deed immediately subsequent to the execution hereof by the Seller
acknowledges such intimation.

 

4.                                      Dealings with Scottish Trust
Property and Negative Pledge

 

The
Seller warrants and undertakes that:

 

(a)                                  as at the date hereof it holds, subject to
any pending registration or recording in the Land Register of Scotland or the
General Register of Sasines, legal title to the Scottish Trust Property
unencumbered by any fixed or floating charge, diligence or other Security
Interest;

 

(b)                                 it shall not create or agree to create any
fixed or floating charge or other Security Interest over or which may attach to
or affect the whole or any part of the Scottish Trust Property or otherwise
dispose of the same at any time when such Scottish Trust Property or part
thereof remains subject to the trust hereby created; and

 

(c)                                  it shall deal with the Scottish Trust
Property (including without prejudice to said generality the calculation and
setting of any interest rate applicable thereto) in accordance with the
provisions of the Transaction Documents and the specific written instructions
(if any) of the Mortgages Trustee or its foresaids and shall take, subject to
Clause 8 below, any such action as may be necessary (including for the
avoidance of doubt the raising or defending of any proceedings in any court of
law whether in Scotland or elsewhere) to secure or protect the title to the
Scottish Trust Property but only in accordance with the specific written
instructions (if any) of the Mortgages Trustee or its foresaids.

 

5.                                      Transfer of Title

 

5.1                                 The Mortgages Trustee and its foresaids as
beneficiary hereunder shall have the right to call upon the Seller to execute
and deliver to the Mortgages Trustee, subject to the terms of Clause 6 of
the Mortgage Sale Agreement, valid assignations of the Scottish Trust Property
or any part thereof, and that notwithstanding the winding up of the Seller, the
making of any administration order or the filing of documents with the court
for the appointment of an administrator or the service of a notice of intention
to appoint an administrator in respect of the Seller or the appointment of a
receiver to all or any part of the Scottish Trust Property.

 

5.2                                 The Seller undertakes to the Mortgages
Trustee and binds and obliges itself that, upon the occurrence of any one of
the events specified in Clause 6.1 of the Mortgage Sale Agreement, it will
within five London Business Days of such occurrence provide such information as
is

 

64

 

necessary
to enable the Mortgages Trustee to complete Scottish Transfers (including all
schedules and annexures thereto) in relation to the whole of the Scottish Trust
Property.

 

5.3                                 For further assuring the said rights and
powers specified in this Clause 5, the Seller has granted a power of attorney
in favour of the Mortgages Trustee, Funding 1 and the Security Trustee
substantially in the form set out in Schedule 5 to the Mortgage Sale Agreement.

 

6.                                      Mortgages Trustee Declaration
of Trust

 

The
Mortgages Trustee by its said execution of this deed hereby DECLARES that its
whole right, title and beneficial interest in and to the Scottish Trust
Property in terms of this deed are and shall be held (to the extent not already
so held) by the Mortgages Trustee and its foresaids under and in terms of the
Mortgages Trust and all sums and amounts received or held by the Mortgages
Trustee relating thereto or deriving therefrom have been and shall be added (to
the extent aforesaid) to the Trust Property and held by the Mortgages Trustee
under the Mortgages Trust Deed.

 

7.                                      Mortgages Trust Intimation

 

The
Mortgages Trustee hereby intimates to Funding 1 and the Seller, as
Beneficiaries of the Mortgages Trust, the declaration of trust made in terms of
Clause 6 above and Funding 1 and the Seller by executing this deed acknowledge
such intimation.

 

8.                                      Termination of Trust

 

If:

 

(a)                                  legal title to any part or parts of the
Scottish Trust Property is taken by the Mortgages Trustee or its foresaids in
accordance with the provisions of Clause 5 above (which in the case of any
Scottish Mortgage shall be constituted by the registration or recording of the
title thereto in the Land Register of Scotland or the General Register of
Sasines (as appropriate); or

 

(b)                                 any part or parts of the Scottish Trust
Property forms the subject of a repurchase in accordance with the terms of
Clause 8.5 of the Mortgage Sale Agreement,

 

the
trust hereby declared and created pursuant to Clauses 2 and 3 above shall (but
only when any of the events or transactions before stated has been completed
irrevocably, validly and in full) ipso facto fall and cease to be of effect
in respect of such part or parts of the Scottish Trust Property but shall
continue in full force and effect in respect of the whole remainder (if any) of
the Scottish Trust Property.

 

9.                                      Change of Trustee

 

Except
with the prior consent of the Mortgages Trustee and (for so long as each
retains any right or interest in the Scottish Trust Property) Funding 1 and the
Security Trustee, the Seller shall not be entitled to resign office as a
trustee or assume a new trustee or trustees under this deed.

 

65

 

10.                               Variation

 

This
deed and the trusts hereby declared and created pursuant to Clauses 2 and 3 and
Clauses 6 and 7 above shall not be varied in any respect without the consent in
writing of the Mortgages Trustee and (for so long as each retains any right or
interest in the Scottish Trust Property) Funding 1 and the Security Trustee.

 

11.                               Governing Law

 

This
deed shall be governed by and construed in accordance with the law of Scotland
and each of the parties hereby prorogates the non-exclusive jurisdiction of the
Scottish courts so far as not already subject thereto and waives any right or
plea of forum non conveniens in respect of such jurisdiction.

 

12.                               Registration

 

The
parties hereto consent to the registration of these presents for preservation:

 

IN WITNESS
WHEREOF these presents typewritten on this and the preceding
[      ] pages together with the Schedule annexed
hereto are executed for and on behalf of the Seller, the Mortgages Trustee and
Funding 1 at
[                         ]
on [                          ]
as follows:

 

 

	
  SUBSCRIBED for and on behalf of

  	
   

  
	
  HALIFAX plc by [       ],
  its

  	
   

  
	
  Attorney, at London on
  [       ] 2004 before this

  	
   

  
	
  witness:

  	
   

  
	
   

  	
   

  
	
   

  	
  Witness

  	
   

  	
  Attorney

  
	
  (Signature)

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Print Full Name)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Address)

  	
   

  
							

 

	
  SUBSCRIBED for and on behalf of

  	
   

  
	
  PERMANENT MORTGAGES TRUSTEE LIMITED by [     ],

  	
   

  
	
  one of its Directors, at London on
  [     ] 2004

  	
   

  
	
  before this witness:

  	
   

  
	
   

  	
   

  
	
   

  	
  Witness

  	
   

  	
  Director

  
	
  (Signature)

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Print Full Name)

  	
   

  
						

 

66

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Address)

  	
   

  

 

	
  SUBSCRIBED for an on behalf of

  	
   

  
	
  PERMANENT FUNDING (NO. 1) LIMITED by
  [      ], one

  	
   

  
	
  of its Directors, at London on
  [     ] before

  	
   

  
	
  this witness:

  	
   

  
	
   

  	
   

  
	
   

  	
  Witness

  	
   

  	
  Director

  
	
  (Signature)

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Print Full Name)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Address)

  	
   

  
							

 

67

 

This is the Schedule referred to in the foregoing
Declaration of Trust among Halifax plc, Permanent Mortgages Trustee Limited and
Permanent Funding (No. 1) Limited

 

DETAILS OF SCOTTISH LOANS AND RELATED SECURITY

 

	
  1

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  7

  
	
  Account

  No.

  	
   

  	
  Address

  	
   

  	
  Borrowers’

  full names

  	
   

  	
  Title

  Number/

  County

  	
   

  	
  Registration/

  Recording

  Date

  	
   

  	
  Sum Due

  	
   

  	
  Date of Loan

  Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

68

 

APPENDIX 1

 

PART 1         INITIAL PORTFOLIO

 

PART 2         STANDARD DOCUMENTATION

 

69

 

APPENDIX 2

 

PART 1

 

INITIAL PORTFOLIO

 

This is Part 1
(on accompanying CD-ROM) of the Exhibit to a Mortgage Sale Agreement dated 14th
June, 2002 made between Halifax plc (1) Permanent Funding (No. 1) Limited (2)
Permanent Mortgages Trustee Limited (3) and State Street Bank and Trust Company
(4).

 

	
  Ian G
  Stewart

  
	
  HALIFAX plc

  
	
   

  
	
   

  
	
  David Balai

  
	
  PERMANENT FUNDING (NO. 1) LIMITED

  
	
   

  
	
   

  
	
  David Balai

  
	
  PERMANENT MORTGAGES TRUSTEE LIMITED

  
	
   

  
	
   

  
	
  David Duclos

  
	
  STATE STREET BANK AND TRUST COMPANY

  

 

70

 

PART 2

 

STANDARD DOCUMENTATION

 

This is Part 2
of the Exhibit to a Mortgage Sale Agreement dated 14th June, 2002 made between
Halifax plc (1) Permanent Funding (No. 1) Limited (2) Permanent Mortgages
Trustee Limited (3) and State Street Bank and Trust Company (4).

 

	
  Ian G
  Stewart

  
	
  HALIFAX plc

  
	
   

  
	
  David Balai

  
	
  PERMANENT FUNDING (NO. 1) LIMITED

  
	
   

  
	
  David Balai

  
	
  PERMANENT MORTGAGES TRUSTEE LIMITED

  
	
   

  
	
  David Duclos

  
	
  STATE STREET BANK AND TRUST COMPANY

  

 

71

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}]]