Exhibit 4.5
DRAFT 1: 07/10/03
SECOND DEED OF ACCESSION TO FUNDING 1
DEED OF CHARGE
DATED [o], 2003
PERMANENT FUNDING (NO. 1) LIMITED
and
PERMANENT FINANCING (NO. 1) PLC
and
PERMANENT FINANCING (NO. 2) PLC
and
PERMANENT FINANCING (NO. 3) PLC
and
THE BANK OF NEW YORK
and
HALIFAX plc
and
THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND
and
[JPMORGAN CHASE BANK]
and
STRUCTURED FINANCE MANAGEMENT LIMITED
ALLEN & OVERY
London
CONTENTS
Clause Page
1. Interpretation..............................................................2
2. Representations and Warranties..............................................2
3. Accession...................................................................3
4. Scope of the Funding 1 Deed of Charge.......................................3
5. Amendment to the Funding 1 Priority of Payments.............................4
6. Application.................................................................4
7. Notices and Demands.........................................................4
8. Choice of Law...............................................................5
Signatories....................................................................6
Appendix
1. Funding 1 Priority of Payments.............................................10
Part 1 Funding 1 Pre-Enforcement Revenue Priority of Payments............10
Part 2 Funding 1 Principal Priorities of Payments........................14
Part 3 Funding 1 Post-Enforcement Priority of Payments...................21
THIS SECOND DEED OF ACCESSION TO THE FUNDING 1 DEED OF CHARGE is made on [o],
2003
BETWEEN:
(1) PERMANENT FUNDING (NO. 1) LIMITED (registered number 4267660), a private
limited company incorporated under the laws of England and Wales, whose
registered office is at Blackwell House, Guildhall Yard, London EC2V 5AE
(Funding 1);
(2) PERMANENT FINANCING (NO. 1) PLC (registered number 4416192), a public
limited company incorporated under the laws of England and Wales, whose
registered office is at Blackwell House, Guildhall Yard, London EC2V 5AE
(the First Issuer);
(3) PERMANENT FINANCING (NO. 2) PLC (registered number 4623188), a public
limited company incorporated under the laws of England and Wales, whose
registered office is at Blackwell House, Guildhall Yard, London EC2V 5AE
(the Second Issuer);
(4) THE BANK OF NEW YORK, whose principal office is at One Canada Square,
London E14 5AL in its capacity as Security Trustee;
(5) 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, acting in its
capacities as Cash Manager, Seller, Funding 1 Swap Provider, First
Start-up Loan Provider (the First Start-up Loan Provider), Second Start-up
Loan Provider (the Second Start-up Loan Provider) and Third Start-up Loan
Provider (the Third Start-up Loan Provider);
(6) THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND, established by an Act of
the Parliament of Scotland in 1695, as amended, acting through its office
situated at 116 Wellington Street, Leeds LS1 4LT, acting in its capacities
as Account Bank and Funding 1 GIC Provider;
(7) [JPMORGAN CHASE BANK acting through its office at 125 London Wall, London
EC2Y 5AJ, acting in its capacity as Funding 1 Liquidity Facility Provider;
]
(8) STRUCTURED FINANCE MANAGEMENT LIMITED (registered number 3853947), 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 capacity as the Funding 1 Corporate Services Provider;
and
(9) PERMANENT FINANCING (No. 3) PLC (registered number 4907355), a public
limited company incorporated under the laws of England and Wales, whose
registered office is at Blackwell House, Guildhall Yard, London EC2V 5AE
(the Third Issuer).
WHEREAS:
(A) Pursuant to the terms of an intercompany loan agreement dated 6th March,
2003 made between Funding 1 and the Third Issuer (the Third Issuer
Intercompany Loan Agreement), the Third Issuer has agreed to make the
Third Issuer Term Advances available to Funding 1 and Funding 1 has agreed
to secure its obligations and other liabilities to the Third Issuer
thereunder pursuant to the Funding 1 Deed of Charge.
1
(B) Pursuant to the terms of a start-up loan agreement dated o, 2003 made
between Funding 1 and the Third Start-up Loan Provider (the Third Start-up
Loan Agreement), the Third Start-up Loan Provider has agreed to make a
subordinated loan to Funding 1 and Funding 1 has agreed to secure its
obligations and other liabilities to the Third Start-up Loan Provider
thereunder pursuant to the Funding 1 Deed of Charge.
(C) [On the Initial Closing Date, Funding 1 agreed to provide the Security
Trustee with the benefit of the security described in the Funding 1 Deed
of Charge to secure Funding 1's obligations to the Funding 1 Secured
Creditors. U.S. Bank National Trustee has since been appointed to act as a
co-trustee with State Street Bank and Trust Company pursuant to the terms
of the Funding 1 Deed of Charge and a Deed of Appointment dated on or
about the date hereof.]
(D) The terms of the Funding 1 Deed of Charge permit Funding 1 to secure its
obligations to a New Funding 1 Secured Creditor thereunder.
(E) The Third Issuer and the Third Start-up Loan Provider have agreed to enter
into this Deed to accede to the provisions of the Funding 1 Deed of
Charge.
(F) The Funding 1 Secured Creditors have agreed to enter into this Deed to,
among other things, acknowledge and agree to such accession and to permit
any consequential changes to the Funding 1 Priority of Payments set out in
Part 1, Part 2 and Part 3 of Schedule 3 of the Funding 1 Deed of Charge as
are required and any other amendment as may be required to give effect to
this Accession Undertaking.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION
The Amended and Restated Master Definitions and Construction Schedule
signed [for the purposes of identification by Allen & Overy and Sidley
Austin Brown & Wood on o, 2003] (as the same may be amended, varied or
supplemented from time to time with the consent of the parties hereto) are
expressly and specifically incorporated into this Deed and, accordingly,
the expressions defined in the Amended and Restated Master Definitions and
Construction Schedule (as so amended, varied or supplemented) shall,
except where the context otherwise requires and save where otherwise
defined herein, have the same meanings in this Deed, including the
Recitals hereto and this Deed shall be construed in accordance with the
interpretation provisions set out in Clause 2 of the Amended and Restated
Master Definitions and Construction Schedule.
2. REPRESENTATIONS AND WARRANTIES
2.1 The Third Issuer hereby represents and warrants to the Security Trustee
and each of the Funding 1 Secured Creditors in respect of itself that as
of the date of this Deed:
(a) pursuant to the terms of the Third Issuer Intercompany Loan
Agreement, Funding 1 has agreed to pay to the Third Issuer the
amounts set out in the Third Issuer Intercompany Loan Agreement; and
(b) the Third Issuer Intercompany Loan Agreement expressly provides that
all amounts due from Funding 1 thereunder are to be secured by the
Funding 1 Deed of Charge.
2.2 The Third Start-up Loan Provider hereby represents and warrants to the
Security Trustee and each of the Funding 1 Secured Creditors in respect of
itself that as of the date of this Deed:
2
(a) pursuant to the terms of the Third Start-up Loan Agreement, Funding
1 has agreed to pay to the Third Start-up Loan Provider the amounts
set out in the Third Start-up Loan Agreement; and
(b) the Third Start-up Loan Agreement expressly provides that all
amounts due from Funding 1 thereunder are to be secured by the
Funding 1 Deed of Charge.
2.3 Funding 1 hereby represents and warrants to the Security Trustee and each
of the Funding 1 Secured Creditors that as at the date of this Deed, the
conditions to incurring further secured Financial Indebtedness set out in
Clause 2.2 (New Intercompany Loan Agreements) of the Intercompany Loan
Terms and Conditions are satisfied.
3. ACCESSION
In consideration of the Third Issuer and the Third Start-up Loan Provider
being accepted as Funding 1 Secured Creditors for the purposes of the
Funding 1 Deed of Charge by the parties thereto as from the date of this
Deed, each of the Third Issuer and the Third Start-up Loan Provider:
(a) confirms that as from the date of this Deed, it intends to be a
party to the Funding 1 Deed of Charge as a Funding 1 Secured
Creditor;
(b) undertakes to comply with and be bound by all of the provisions of
the Amended and Restated Master Definitions and Construction
Schedule (as the same may be further amended, varied or restated
from time to time) and the Funding 1 Deed of Charge in its capacity
as a Funding 1 Secured Creditor, as if it had been an original party
thereto;
(c) undertakes to perform, comply with and be bound by all of the
provisions of the Funding 1 Deed of Charge in its capacity as a
Funding 1 Secured Creditor, as if it had been an original party
thereto as provided in Clause 31.8 (Funding 1 Secured Creditors)
(including without limitation Clauses 8.4 (Priorities of Payment -
After Service of an Intercompany Loan Acceleration Notice), 8.5
(Application of Monies Received After Intercompany Loan Acceleration
Notice) and 9.2 (No Enforcement by Funding 1 Secured Creditors); and
(d) agrees that the Security Trustee shall be the Security Trustee of
the Funding 1 Deed of Charge for all Funding 1 Secured Creditors
upon and subject to the terms set out in the Funding 1 Deed of
Charge.
4. SCOPE OF THE FUNDING 1 DEED OF CHARGE
Funding 1, the Third Issuer, the Third Start-up Loan Provider and the
Security Trustee hereby agree that for relevant purposes under the Funding
1 Deed of Charge and the Amended and Restated Master Definitions and
Construction Schedule:
(a) the Third Issuer Intercompany Agreement and the Third Start-up Loan
Agreement shall be treated as Funding 1 Agreements; and
(b) the Third Issuer and the Third Start-up Loan Provider shall be
treated as an Funding 1 Secured Creditors.
3
5. AMENDMENT TO THE FUNDING 1 PRIORITY OF PAYMENTS
The Funding 1 Secured Creditors agree to amend and restate the Funding 1
Priority of Payments set out in Part 1, Part 2 and Part 3 of Schedule 3 of
the Funding 1 Deed of Charge in accordance with Appendix 1 hereto.
6. APPLICATION
Prior to and following enforcement of the Funding 1 Security all amounts
at any time held by Funding 1, the Cash Manager or the Security Trustee in
respect of the security created under this Deed shall be held and/or
applied by such person subject to and in accordance with the relevant
provisions of the Funding 1 Deed of Charge.
7. NOTICES AND DEMANDS
Any notice or communication under or in connection with this Deed, the
Funding 1 Deed of Charge or the Amended and Restated Master Definitions
and Construction Schedule shall be given in the manner and at the times
set out in Clause 30 (Notices and Demands) of the Funding 1 Deed of Charge
to the addresses given in this Clause or at such other address as the
recipient may have notified to the other parties hereto and/or thereto in
writing.
The address referred to in this Clause 7 for the Third Issuer is:
Permanent Financing (No. 3) PLC
Blackwell House
Guildhall Yard
London
EC2V 5AE
Facsimile: +44 (0) 20 7556 0975
For the attention of: The Directors
with a copy to: HBOS Treasury Services plc
33 Old Broad Street
London
EC2N 1HZ
Facsimile: +44 (0) 20 7574 8784
For the attention of: Head of Capital Markets and Securitisation
The address referred to in this Clause 7 for the Third Start-up Loan
Provider is:
Halifax plc
Trinity Road
Halifax
West Yorkshire
HX1 2RG
Facsimile: +44 (0) 1422 391 777
For the attention of: the Mortgage Securitisation Managers
with a copy to: HBOS Treasury Services plc
33 Old Broad Street
London
EC2N 1HZ
4
Facsimile: +44 (0) 20 7574 8784
For the attention of: the Head of Capital Markets and Securitisation
The address referred to in this Clause 7 for the Security Trustee is:
The Bank of New York
One Canada Square
London E14 5AL
Facsimile: +[(44) 02 7964 6061/6399]
For the attention of: Global Structured Finance - Corporate Trust
or such other address and/or numbers as the Third Issuer, the Third
Start-up Loan Provider or the Security Trustee may notify to the parties
to the Funding 1 Deed of Charge in accordance with the provisions thereof.
8. CHOICE OF LAW
This Deed is governed by and shall be construed in accordance with English
law.
DULY EXECUTED AND DELIVERED AS A DEED by each of the parties hereto or on its
behalf on the date appearing on page 1.
5
SIGNATORIES
Funding 1
EXECUTED as a DEED by )
PERMANENT FUNDING (NO. 1) )
LIMITED acting by two )
directors/a director and the secretary )
Director
Director/Secretary
First Issuer
EXECUTED as a DEED by )
PERMANENT FINANCING (NO. 1) )
PLC acting by two )
directors/a director and the secretary )
Director
Director/Secretary
Second Issuer
EXECUTED as a DEED by )
PERMANENT FINANCING (NO. 2) )
PLC acting by two )
directors/a director and the secretary )
Director
Director/Secretary
6
Halifax
EXECUTED as a DEED by )
HALIFAX plc )
in its capacities as Seller, Cash Manager )
Funding 1 Swap Provider, First Start-up )
Loan Provider, Second Start-up Loan )
Provider and Third Start-up Loan Provider )
acting by its attorney )
in the presence of )
Witness:
Name:
Address:
The Governor and Company of the Bank of Scotland
EXECUTED as a DEED by )
THE GOVERNOR AND COMPANY OF )
THE BANK OF SCOTLAND )
in its capacities as Account Bank )
and Funding 1 GIC Provider )
acting by two directors/a director )
and the secretary )
Director
Director/Secretary
Funding 1 Corporate Services Provider
EXECUTED as a DEED by )
STRUCTURED FINANCE )
MANAGEMENT LIMITED )
acting by two Directors/a director )
and the secretary )
Director
Director/Secretary
7
Funding 1 Liquidity Facility Provider
EXECUTED as a DEED by )
[JPMORGAN CHASE BANK] )
acting by its attorney )
in the presence of )
Witness:
Name:
Address:
Security Trustee
EXECUTED as a DEED by )
THE BANK OF NEW YORK )
acting by its attorney in the presence of )
Witness:
Name:
Address:
Second Issuer
EXECUTED as a DEED by )
PERMANENT FINANCING (NO. 2) )
PLC acting by two )
directors/a director and the secretary )
Director
Director/Secretary
Third Issuer
EXECUTED as a DEED by )
PERMANENT FINANCING (NO. 3) )
PLC acting by two )
directors/a director and the secretary )
8
Director
Director/Secretary
9
APPENDIX 1
FUNDING 1 PRIORITY OF PAYMENTS
PART 1
FUNDING 1 PRE-ENFORCEMENT REVENUE PRIORITY OF PAYMENTS
1. Calculation of Funding 1 Available Revenue Receipts
1.1 On the day falling four London Business Days prior to each Funding 1
Interest Payment Date, the Cash Manager will calculate the amount of
Funding 1 Available Revenue Receipts that available to be applied on the
next Funding 1 Interest Payment Date in accordance with the Funding 1
Pre-Enforcement Revenue Priority of Payments.
1.2 Subject to paragraph 1.3 below, if there would be insufficient Funding 1
Available Revenue Receipts to meet Funding 1's obligations on the next
Funding 1 Interest Payment Date under the Funding 1 Pre-Enforcement
Revenue Priority of Payments, then Funding 1 (or the Cash Manager on its
behalf) shall pay or provide for that deficit by applying amounts then
standing to the credit of (a) the Funding 1 Principal Ledger, if any, and
(b) any amounts standing to the credit of the Cash Accumulation Ledger
after deducting the amounts standing to the credit of the Funding 1
Principal Ledger (if any) from such ledger, and the Cash Manager shall
make a corresponding entry in the relevant Principal Deficiency Ledger.
1.3 Funding 1 Principal Receipts may not be used to pay interest on any Term
Advance if and to the extent that would result in a deficiency being
recorded or an existing deficiency being increased on a Principal
Deficiency Sub-Ledger relating to a higher ranking Term Advance.
1.4 If, on a Funding 1 Interest Payment Date, there is a deficit of Funding 1
Available Revenue Receipts and there are no (or insufficient) amounts
standing to the credit of the Funding 1 Principal Ledger or the Cash
Accumulation Ledger to cure that deficit as described in paragraphs 1.2
and 1.3 above, then the Cash Manager will direct Funding 1 to request a
drawing pursuant to Clause 5.1 of the Funding 1 Liquidity Facility
Agreement to apply towards the deficit.
2. Distribution of Funding 1 Available Revenue Receipts prior to the service
of an Intercompany Loan Acceleration Notice on Funding 1
2.1 This section sets out the order of priority of payments of Funding 1
Available Revenue Receipts as at the Closing Date. If Funding 1 enters
into New Intercompany Loan Agreements, then this order of priority may
change pursuant to Clause 7.5 of the Funding 1 Deed of Charge.
2.2 Except for amounts due to third parties by an Issuer Funding 1 under
paragraph (a) below or amounts due to the Account Bank and/or an Issuer
Account Bank which shall be paid when due, on each Funding 1 Interest
Payment Date prior to the service of an Intercompany Loan Acceleration
Notice on Funding 1, the Cash Manager will apply the Funding 1 Available
Revenue Receipts in the following order of priority (being the Funding 1
Pre-Enforcement Revenue Priority of Payments):
10
(a) firstly, in or towards satisfaction of pro rata and pari passu, the
amounts due to:
(i) the Security Trustee (together with interest and any amount in
respect of VAT (or similar taxes) on those amounts) and to
provide for any amounts due or to become due in the
immediately following Interest Period to the Security Trustee
under the Funding 1 Deed of Charge;
(ii) pro rata and pari passu, to pay amounts due to the First
Issuer in respect of the First Issuer's obligations specified
in items (a) to (c) inclusive of the First Issuer
Pre-Enforcement Revenue Priority of Payments or, as the case
may be, items (a) and (b) of the First Issuer Post-Enforcement
Priority of Payments;
(iii) pro rata and pari passu, to pay amounts due to the Second
Issuer in respect of the Second Issuer's obligations specified
in items (a) to (c) inclusive of the Second Issuer
Pre-Enforcement Revenue Priority of Payments or, as the case
may be, items (a) and (b) of the Second Issuer
Post-Enforcement Priority of Payments;
(iv) pro rata and pari passu, to pay amounts due to the Third
Issuer in respect of the Third Issuer's obligations specified
in items (a) to (c) inclusive of the Third Issuer
Pre-Enforcement Revenue Priority of Payments or, as the case
may be, items (a) and (b) of the Third Issuer Post-Enforcement
Priority of Payments;
(v) any third party creditors of Funding 1 (other than those
referred to later in this order of priority of payments),
which amounts have been incurred without breach by Funding 1
of the Funding 1 Agreements (and for which payment has not
been provided for elsewhere) and to provide for any of these
amounts expected to become due and payable in the immediately
following Interest Period by Funding 1 and to pay or discharge
any liability of Funding 1 for corporation tax on any
chargeable income or gain of Funding 1;
(b) secondly, in or towards satisfaction of amounts due to the Funding 1
Liquidity Facility Provider under the Funding 1 Liquidity Facility
Agreement (except for amounts drawn thereunder to repay principal on
the Bullet Term Advances and any Funding 1 Liquidity Subordinated
Amounts);
(c) thirdly, in or towards satisfaction of amounts due and payable to
the Cash Manager under the Cash Management Agreement (together with
any amount in respect of VAT (or similar taxes) on those amounts);
(d) fourthly, in or towards satisfaction, pro rata and pari passu, of
amounts, if any, due and payable to the Account Bank under the terms
of the Bank Account Agreement and to the Funding 1 Corporate
Services Provider under the Funding 1 Corporate Services Agreement;
(e) fifthly, in or towards satisfaction of all amounts (if any) due and
payable to the Funding 1 Swap Provider under the Funding 1 Swap
Agreement (including termination payments but excluding any Funding
1 Swap Excluded Termination Amount);
(f) sixthly, in or towards satisfaction, pro rata and pari passu, of the
amounts of interest due and payable on the Term AAA Advances;
11
(g) seventhly, towards a credit to the AAA Principal Deficiency
Sub-Ledger in an amount sufficient to eliminate any debit on that
ledger;
(h) eighthly, in or towards satisfaction, pro rata and pari passu, of
the amounts of interest due and payable on the Term AA Advances;
(i) ninthly, towards a credit to the AA Principal Deficiency Sub-Ledger
in an amount sufficient to eliminate any debit on that ledger;
(j) tenthly, in or towards satisfaction, pro rata and pari passu, of
amounts of interest due and payable on the Term BBB Advances;
(k) eleventhly, towards a credit to the BBB Principal Deficiency
Sub-Ledger in an amount sufficient to eliminate any debit on that
ledger;
(l) twelfthly, in or towards satisfaction, pro rata and pari passu,
according to the respective amounts thereof:
(i) any amounts due to the First Issuer in respect of the First
Issuer's obligations (if any) to make a termination payment to
a First Issuer Swap Provider (but excluding any First Issuer
Swap Excluded Termination Amount);
(ii) any amounts due to the Second Issuer in respect of the Second
Issuer's obligations (if any) to make a termination payment to
a Second Issuer Swap Provider (but excluding any Second Issuer
Swap Excluded Termination Amount); and
(iii) any amounts due to the Third Issuer in respect of the Third
Issuer's obligations (if any) to make a termination payment to
a Third Issuer Swap Provider (but excluding any Third Issuer
Swap Excluded Termination Amount);
(m) thirteenthly, towards a credit to the Reserve Ledger in an amount up
to the Reserve Fund Required Amount taking into account any net
replenishment of the Reserve Fund on that Funding 1 Interest Payment
Date from Funding 1 Available Principal Receipts;
(n) fourteenthly, in or towards satisfaction, pro rata and pari passu,
of any amounts due (without double counting) to:
(i) the First Issuer in respect of the First Issuer's obligations
to make any termination payment to a First Issuer Swap
Provider as a result of a First Issuer Swap Provider Downgrade
Termination Event;
(ii) the Second Issuer in respect of the Second Issuer's
obligations to make any termination payment to a Second Issuer
Swap Provider as a result of a Second Issuer Swap Provider
Downgrade Termination Event;
(iii) the Third Issuer in respect of the Third Issuer's obligations
to make any termination payment to a Third Issuer Swap
Provider as a result of a Third Issuer Swap Provider Downgrade
Termination Event;
12
(iv) the First Issuer in respect of any other amounts due and
payable under the First Issuer Intercompany Loan Agreement and
not otherwise provided for in this order of priorities:
(v) the Second Issuer in respect of any other amounts due and
payable under the Second Issuer Intercompany Loan Agreement
and not otherwise provided for in this order of priorities:
(vi) the Third Issuer in respect of any other amounts due and
payable under the Third Issuer Intercompany Loan Agreement and
not otherwise provided for in this order of priorities:
(vii) after the occurrence of a Funding 1 Swap Provider Default or a
Funding 1 Swap Provider Downgrade Termination Event, towards
payment of any termination amount due and payable by Funding 1
under the Funding 1 Swap Agreement; and
(viii) the Funding 1 Liquidity Facility Provider to pay any Funding
1 Liquidity Subordinated Amounts due under the Funding 1
Liquidity Facility Agreement;
(o) fifteenthly, towards payment pro rata and pari passu amounts due to:
(i) the First Start-up Loan Provider under the First Start-up Loan
Agreement; and
(ii) the Second Start-up Loan Provider under the Second Start-up
Loan Agreement;
(iii) the Third Start-up Loan Provider under the Third Start-up Loan
Agreement;
(p) sixteenthly, towards payment of an amount equal to 0.01 per cent. of
the Funding 1 Available Revenue Receipts; and
(q) seventeenthly, towards payment to the shareholders of Funding 1 of
any dividend declared by Funding 1.
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PART 2
FUNDING 1 PRINCIPAL PRIORITIES OF PAYMENTS
1. Due and payable dates of Term Advances
1.1 Each First Issuer Term Advance shall become "due and payable" on the
earlier to occur of:
(a) each respective First Issuer Term Advances Due Date;
(b) the date upon which a Trigger Event occurs;
(c) the date upon which the Note Trustee serves a Note Acceleration
Notice on the First Issuer; and
(d) the date upon the Security Trustee serves an Intercompany Loan
Acceleration Notice on Funding 1.
1.2 Each Second Issuer Term Advance shall become "due and payable" on the
earlier to occur of:
(a) each respective Second Issuer Term Advances Due Date;
(b) the date upon which a Trigger Event occurs;
(c) the date upon which the Note Trustee serves a Note Acceleration
Notice on the Second Issuer;
(d) the date upon the Security Trustee serves an Intercompany Loan
Acceleration Notice on Funding 1; and
(e) the date upon which a step-up date occurs in relation to the
relevant Second Issuer Term Advance.
1.3 Each Third Issuer Term Advance shall become "due and payable" on the
earlier to occur of:
(a) each respective Third Issuer Term Advances Due Date;
(b) the date upon which a Trigger Event occurs;
(c) the date upon which the Note Trustee serves a Note Acceleration
Notice on the Third Issuer;
(d) the date upon the Security Trustee serves an Intercompany Loan
Acceleration Notice on Funding 1; and
(e) the date upon which a step-up date occurs in relation to the
relevant Third Issuer Term Advance.
1.4 If there are insufficient Funding 1 Available Principal Receipts available
to repay a Term Advance on a Funding 1 Interest Payment Date upon which
that Term Advance is due and payable (either in full or as a Scheduled
Amortisation Instalment), then the shortfall will be repaid on subsequent
Funding 1 Interest Payment Dates from Funding 1 Available Principal
Receipts until that Term Advance is fully repaid.
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2. Repayment of Term Advances of each Series prior to the occurrence of a
Trigger Event and prior to the service on Funding 1 of an Intercompany
Loan Acceleration Notice or the service on each Issuer of a Note
Acceleration Notice
2.1 On each Funding 1 Interest Payment Date (but prior to the date on which
(a) a Trigger Event occurs, (b) the Security Trustee serves an
Intercompany Loan Acceleration Notice on Funding 1 or (c) each Issuer has
been served with a Note Acceleration Notice by the [Security Trustee]),
the Cash Manager shall apply Funding 1 Available Principal Receipts in the
following order of priority:
(a) firstly, towards repayment of amounts due to the Funding 1 Liquidity
Facility Provider under the Funding 1 Liquidity Facility to the
extent only that amounts were drawn thereunder in order to make
Eligible Liquidity Facility Principal Repayments;
(b) secondly, towards replenishment of the Reserve Fund to the extent
only that monies have been drawn from the Reserve Fund to make
Eligible Reserve Fund Principal Repayments;
(c) thirdly, towards repayment of all Term AAA Advances that are then
due and payable in an order of priority based on their Final
Repayment Date, so that the earliest maturing Term AAA Advance is
paid first (and if any Term AAA Advances have the same Final
Repayment Date, then those Term Advances will be repaid pro rata and
pari passu), in each case subject to Rules (1), (2) and (3) set out
in paragraphs 2.2(a), (b) and (c) below;
(d) fourthly, pro rata and pari passu towards repayment of all Term AA
Advances that are then due and payable, in each case subject to
Rules (1), (2) and (3) set out in paragraphs 2.2(a), (b) and (c)
below;
(e) fifthly, pro rata and pari passu towards repayment of all Term BBB
Advances that are then due and payable, in each case subject to
Rules (1), (2) and (3) set out in paragraphs 2.2(a), (b) and (c)
below;
(f) sixthly, towards a credit to the Cash Accumulation Ledger until the
balance is equal to Funding 1's Cash Accumulation Liability (as
calculated after any payments are made at paragraph 2.1(c) above);
and
(g) seventhly, the remainder shall be credited to the Funding 1
Principal Ledger.
2.2 In the applicable circumstances, the following Rules apply in determining
the amounts to be paid under paragraphs 2.1(c), (d) and (e) above and,
where indicated, paragraphs 3.1(c), (d) and (e) and 4.1(c), (d) and (e)
below:
(a) Rule (1) - Deferral of repayment of Pass-Through Term Advances
and/or Scheduled Amortisation Instalments in certain circumstances.
(i) Deferral of Term AA Advances and/or Term BB Advances
(A) If on a Funding 1 Interest Payment Date:
I. there is a debit balance on the BBB Principal
Deficiency Sub-Ledger or the AA Principal
Deficiency Sub-Ledger, after application of the
Funding 1 Available Revenue Receipts on that
Funding 1 Interest Payment Date; or
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II. the Adjusted Reserve Fund Level is less than the
Reserve Fund Threshold; or
III. the aggregate Outstanding Principal Balance of
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 more than 5
per cent. of the aggregate Outstanding Principal
Balance of Loans in the Mortgages Trust,
then until the relevant circumstances as described in
subparagraphs 2.2(a)(i)(A)I, II or III above has been
cured or otherwise ceases to exist, if:
(aa) any Term AAA Advance (whether or not such Term AAA
Advance is then due and payable) remains
outstanding after making the payments under
paragraph 2.1(c) above the Term AA Advances
(including the Third Issuer Term AA Advances) will
not be entitled to Principal Repayments under
paragraph 2.1(d) above; and/or
(bb) any Term AAA Advance or any AA Term Advance
(whether or not such Term AAA Advance or Term AA
Advance is then due and payable) remains
outstanding after making the payments under
paragraphs 2.1(c) and/or (d) above then the Term
BBB Advances (including the Third Issuer Term BBB
Advances) will not be entitled to Principal
Repayments under paragraph 2.1(e) above.
(ii) Deferral of Scheduled Amortisation Term Advances when CPR is
below certain threshold(s) prior to Step-up Date:
If on a Funding 1 Interest Payment Date:
(A) one or more Bullet Term Advances are within a Cash
Accumulation Period at that time (irrespective of
whether any Scheduled Amortisation Instalments are then
in a Cash Accumulation Period); and
(B) either:
I. the quarterly CPR is less than [10] per cent.; or
II. both:
(aa) the quarterly CPR is equal to or greater
than [10] per cent., but less than [15] per
cent.; and
(bb) the annualised CPR is less than [10] per
cent.,
then on or before their Step-up Dates the
Scheduled Amortisation Term Advances will be
entitled to Principal Repayments under paragraph
2.1(c) above only the extent permitted under the
Scheduled Amortisation Repayment Restrictions.
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(iii) Deferral of original Pass-Through Term Advances when CPR is
below a certain threshold prior to Step-up Date:
If on a Funding 1 Interest Payment Date:
(A) one or more Bullet Term Advances and/or Scheduled
Amortisation Instalments are within a Cash Accumulation
Period at that time; and
(B) the quarterly CPR is less than [15] per cent.; and
(C) there is a Cash Accumulation Shortfall at that time,
then, on or before their Step-up Dates, the Original
Pass-Through Term Advances will be entitled to principal
repayments under paragraphs 2.1(c), (d) and (e) (as
applicable) above only to the extent permitted under the
Pass-Through Repayment Restrictions.
(b) Rule (2) - Repayment of Payable Pass-Through Term Advances after the
occurrence of a Step-up Date
Following the occurrence of the Step-up Date under an Intercompany
Loan Agreement (Intercompany Loan A) but prior to the time which
Rule (3) (as set out in paragraph 2.2(c) below) becomes applicable
and provided that the Funding 1 Share of the Trust Property is
greater than zero, the aggregate amount repaid on a Funding 1
Interest Payment Date in relation to Term Advances (other than
Bullet Term Advances or Scheduled Amortisation Instalments) under
that Intercompany Loan A under paragraphs 2.1(c), (d) and (e) above
shall be limited to an amount calculated as follows:
Outstanding Principal Balance of Intercompany
Loan A
Funding 1 Principal Funds x ----------------------------------------------
Aggregate Outstanding Principal Balance of all
Intercompany Loans
(c) Rule (3) - Repayment of Term Advances after service of a Note
Acceleration Notice on one or more (but not all) of the Issuers
If the [Note Trustee] serves a Note Acceleration Notice on one or
more (but not all) of the Issuers, then this Rule (3) will apply. In
these circumstances:
(i) service of a Note Acceleration Notice will not result in
automatic enforcement of the Funding 1 Security;
(ii) all of the Term Advances (including any outstanding Bullet
Term Advances and Scheduled Amortisation Instalments) under
the Intercompany Loan relating to the relevant Issuer who has
been served a Note Acceleration Notice (Intercompany Loan B)
will become immediately due and payable;
(iii) the Cash Manager shall apply the appropriate amount of Funding
1 Available Principal Receipts allocated to Intercompany Loan
B at the relevant level of the Funding 1 Principal Priorities
of Payments, towards repayment, pro rata and pari passu, of
any Term AAA Advances outstanding under that Intercompany Loan
B (that is, those Term AAA Advances will not be repaid in an
order of priority based on their Final Repayment Date); and
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(iv) the aggregate amount repaid on a Funding 1 Interest Payment
Date in respect of Intercompany Loan B under paragraphs
2.1(c), (d) and (e), 3.1(c), (d) and (e) or 4.1(c), (d) and
(e) (as applicable) of the relevant priority of payments shall
be limited to an amount calculated as follows:
Outstanding Principal Balance of Intercompany
Loan B
Funding 1 Principal Funds x ----------------------------------------------
Aggregate Outstanding Principal Balance of all
Intercompany Loans
Allocations involving Rule (2) or Rule (3)
Where Rule (2) or Rule (3) applies at a level of any priority of payments,
the funds available for making payments at that level shall first be
allocated without reference to Rule (2) or Rule (3) (as applicable).
However, if the amount so allocated to one or more Term Advances exceeds
the amount permitted under Rule (2) or Rule (3) (as applicable) to be paid
in respect of those Term Advances (the Capped Advances), the excess shall
then be reallocated among any other Term Advances at that level using the
method of allocation as applies at that level but without reference to the
Capped Advances in calculating such reallocation. If a further such excess
arises as a result of the reallocation process, the reallocation process
shall be repeated at that level in relation to each such further excess
that arises until no further funds can be allocated at that level
following which the remaining excess shall then be applied at the next
level of that priority of payments.
3. Repayment of Term Advances of each Series following the occurrence of a
Non-Asset Trigger Event but prior to the service on Funding 1 of an
Intercompany Loan Acceleration Notice or the service on each Issuer of a
Note Acceleration Notice
3.1 On each Funding 1 Interest Payment Date following the occurrence of a
Non-Asset Trigger Event (but prior to the date on which (i) an Asset
Trigger Event occurs, (ii) the Security Trustee serves an Intercompany
Loan Acceleration Notice on Funding 1 or (iii) each Issuer has been served
with a Note Acceleration Notice), the Bullet Term Advances and the
Scheduled Amortisation Term Advances under each Intercompany Loan will be
deemed to be Pass-Through Term Advances and, on each Funding 1 Interest
Payment Date, Funding 1 will be required to apply Funding 1 Available
Principal Receipts in the following order of priority:
(a) firstly, towards repayment of amounts due to the Funding 1 Liquidity
Facility Provider under the Funding 1 Liquidity Facility to the
extent only that amounts were drawn thereunder in order to make
Eligible Liquidity Facility Principal Repayments;
(b) secondly, towards replenishment of the Reserve Fund to the extent
only that monies have been drawn from the Reserve Fund to make
Eligible Reserve Fund Principal Repayments;
(c) thirdly, to repay the Term AAA Advance with the earliest Final
Repayment Date, then to repay the Term AAA Advance with the next
earliest Final Repayment Date, and so on until the Term AAA Advances
are fully repaid;
(d) fourthly, pro rata and pari passu, to repay the Term AA Advances,
until those Term AA Advances are fully repaid; and
(e) fifthly, pro rata and pari passu, to repay the Term BBB Advances,
until each of those Term BBB Advances are fully repaid.
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4. Repayment of Term Advances of each Series following the occurrence of an
Asset Trigger Event but prior to the service on Funding 1 of an
Intercompany Loan Acceleration Notice or the service on each Issuer of a
Note Acceleration Notice
4.1 Following the occurrence of an Asset Trigger Event (whether or not a
Non-Asset Trigger Event occurs or has occurred) (but prior to (i) service
by the Security Trustee of an Intercompany Loan Acceleration Notice on
Funding 1 or (ii) each issuer has been served with a Note Acceleration
Notice), the Bullet Term Advances and the Scheduled Amortisation Term
Advances in respect of all Intercompany Loans will be deemed to be
Pass-Through Term Advances, and on each Funding 1 Interest Payment Date
Funding 1 will be required to apply Funding 1 Available Principal Receipts
in the following order of priority:
(a) firstly, towards repayment of amounts due to the Funding 1 Liquidity
Facility Provider under the Funding 1 Liquidity Facility to the
extent only that those amounts were drawn in order to make Eligible
Liquidity Facility Principal Repayments;
(b) secondly, towards replenishment of the Reserve Fund to the extent
only that monies have been drawn from the Reserve Fund to make
Eligible Reserve Fund Principal Repayments;
(c) thirdly, pro rata and pari passu, towards repayment of the Term AAA
Advances, until each of those Term AAA Advances is fully repaid;
(d) fourthly, pro rata and pari passu, towards repayment of the Term AA
Advances until each of those Term AA Advances is fully repaid; and
(e) fifthly, pro rata and pari passu, towards repayment of the Term BBB
Advances, until each of those Term BBB Advances is fully repaid.
5. Repayment of Term Advances of each Series following the service on each
Issuer of a Note Acceleration Notice but prior to the service on Funding 1
of an Intercompany Loan Acceleration Notice
5.1 If each Issuer has been served with a Note Acceleration Notice, then that
will not result in automatic enforcement of the Funding 1 Security under
the Funding 1 Deed of Charge. In those circumstances, however, the Bullet
Term Advances and any Scheduled Amortisation Term Advances under each
Issuer's respective Intercompany Loan will be deemed to be Pass-Through
Term Advances and Funding 1 will be required to apply Funding 1 Available
Principal Receipts on each Funding 1 Interest Payment Date in the
following order of priority:
(a) firstly, towards repayment to the Funding 1 Liquidity Facility
Provider of amounts drawn under the Funding 1 Liquidity Facility on
the prior Funding 1 Interest Payment Date in order to make Eligible
Liquidity Facility Principal Repayments;
(b) secondly, towards replenishment of the Reserve Fund to the extent
only that monies have been drawn from the Reserve Fund to make
Eligible Reserve Fund Principal Repayments;
(c) thirdly, pro rata and pari passu, towards repayment of the Term AAA
Advances, until each of those Term AAA Advances is fully repaid.
(d) fourthly, pro rata and pari passu, towards repayment of the Term AA
Advances, until each of those Term AA Advances is fully repaid; and
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(e) fifthly, pro rata and pari passu, towards repayment of the Term BBB
Advances, until each of those Term BBB Advances is fully repaid
6. Repayment of Term Advances when Funding 1 receives the amount outstanding
under an Intercompany Loan
If Funding 1 receives a payment from the Seller in the circumstances set
out in Clause 7 of the Mortgages Trust Deed or the proceeds of a New
Intercompany Loan which are to be used to refinance another Intercompany
Loan (such payment by the Seller or such proceeds being a Full Repayment
Amount), then Funding 1 will not apply the Full Repayment Amount as
described in paragraphs 2 to 5 above. Instead, Funding 1 will apply the
Full Repayment Amount to repay the relevant Intercompany Loan. If at any
time only one Intercompany Loan is outstanding, then Funding 1 will apply
the Full Repayment Amount first to repay amounts due to the Funding 1
Liquidity Facility Provider under the Funding 1 Liquidity Facility to the
extent only that amounts were drawn thereunder in order to repay the
principal amounts of any Bullet Term Advances made under any of the
Intercompany Loans and the remainder shall be applied to repay the
relevant Intercompany Loan.
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PART 3
FUNDING 1 POST-ENFORCEMENT PRIORITY OF PAYMENTS
All monies received or recovered by the Security Trustee or the Receiver in
respect of the Funding 1 Security subsequent to the Security Trustee serving an
Intercompany Loan Acceleration Notice on Funding 1, will be applied (save to the
extent required by law) by the Security Trustee or the Receiver on each Funding
1 Interest Payment Date in accordance with the following order of priority (in
each case only and to the extent that payments or provision of a higher priority
have been made in full):
(a) firstly, in or towards satisfaction of, pro rata and pari passu, amounts
due to:
(i) the Security Trustee and any Receiver appointed by the Security
Trustee, together with interest and any amount in respect of VAT (or
similar taxes) on those amounts, and to provide for any amounts due
or to become due to the Security Trustee and the Receiver in the
following Interest Period under the Funding 1 Deed of Charge;
(ii) the First Issuer in respect of the First Issuer's obligations
specified in items (a) and (b) of the First Issuer Post-Enforcement
Priority of Payments;
(iii) the Second Issuer in respect of the Second Issuer's obligations
specified in items (a) and (b) of the Second Issuer Post-Enforcement
Priority of Payments; and
(iv) the Third Issuer in respect of the Third Issuer's obligations
specified in items (a) and (b) of the Third Issuer Post-Enforcement
Priority of Payments;
(b) secondly, in or towards satisfaction of amounts due and payable to the
Cash Manager and any costs, charges, liabilities and expenses then due or
to become due and payable to the Cash Manager under the Cash Management
Agreement, together with VAT (or similar taxes) on those amounts;
(c) thirdly, in or towards satisfaction of, pro rata and pari passu, amounts
(if any) due to the Account Bank under the terms of the Bank Account
Agreement and to the Funding 1 Corporate Services Provider under the
Funding 1 Corporate Services Agreements;
(d) fourthly, in or towards satisfaction of amounts (if any) due to the
Funding 1 Liquidity Facility Provider under the Funding 1 Liquidity
Facility Agreement (except for any Funding 1 Liquidity Facility
Subordinated Amounts);
(e) fifthly, in or towards satisfaction of amounts (if any) due to the Funding
1 Swap Provider under the Funding 1 Swap Agreement (including any
termination payment but excluding any Funding 1 Swap Excluded Termination
Amount;
(f) sixthly, in or towards satisfaction of, pro rata and pari passu, amounts
of interest and principal due and payable on the Term AAA Advances;
(g) seventhly, in or towards satisfaction of, pro rata and pari passu, amounts
of interest and principal due and payable on the Term AA Advances;
(h) eighthly, in or towards satisfaction of, pro rata and pari passu, amounts
of interest and principal due and payable on the Term BBB Advances;
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(i) ninthly, in or towards satisfaction of any amounts due to:
(i) the First Issuer in respect of the First Issuer's obligation's (if
any) to make a termination payment to a First Issuer Swap Provider
(but excluding any First Issuer Swap Excluded Termination Amount);
(ii) the Second Issuer in respect of the Second Issuer's obligations (if
any) to make a termination payment to a Second Issuer Swap Provider
(but excluding any Second Issuer Swap Excluded Termination Amount);
and
(iii) the Third Issuer in respect of the Third Issuer's obligations (if
any) to make a termination payment to a Third Issuer Swap Provider
(but excluding any Third Issuer Swap Excluded Termination Amount);
(j) tenthly, in or towards satisfaction of, pro rata and pari passu (without
double counting):
(i) amounts due to the First Issuer in respect of the First Issuer's
obligations to pay any termination payment to a First Issuer Swap
Provider as a result of a First Issuer Swap Provider Default or a
First Issuer Swap Provider Downgrade Termination Event (as
appropriate);
(ii) amounts due to the Second Issuer in respect of the Second Issuer's
obligations to pay any termination payment to a Second Issuer Swap
Provider as a result of a Current Swap Provider Default or an Swap
Provider Downgrade Termination Event (as appropriate);
(iii) amounts due to the Third Issuer in respect of the Third Issuer's
obligations to pay any termination payment to a Third Issuer Swap
Provider as a result of a Current Swap Provider Default or an Swap
Provider Downgrade Termination Event (as appropriate);
(iv) any other amounts due to the First Issuer under the First Issuer
Intercompany Loan Agreement and not otherwise provided for earlier
in this order of priorities;
(v) any other amounts due to the Third Issuer under the Third Issuer
Intercompany Loan Agreement and not otherwise provided for earlier
in this order of priorities;
(vi) any Funding 1 Liquidity Subordinated Amounts due to the Funding 1
Liquidity Facility Provider; and
(vii) amounts due to the Funding 1 Swap Provider in respect of any
termination payment due to the Funding 1 Swap Provider as a result
of a Funding 1 Swap Provider Default or a Funding 1 Swap Provider
Downgrade Termination Event; and
(k) eleventhly, towards payment, pro rata and pari passu, of amounts due to:
(i) the First Start-up Loan Provider under the First Start-up Loan
Agreement;
(ii) the Second Start-up Loan Provider under the Second Start-up Loan
Agreement; and
(iii) the Third Start-up Loan Provider under the Third Start-up Loan
Agreement.
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