DRAFT: 26.02.04
FUNDING 1 SWAP
SCHEDULE
TO THE
MASTER AGREEMENT
dated as of 14th June, 2002
between
(1) HALIFAX PLC ("PARTY A");
(2) PERMANENT FUNDING (No.1) LIMITED ("PARTY B"); and
(3) THE BANK OF NEW YORK (the "SECURITY TRUSTEE", which expression will
include its successors and assigns and which has agreed to become a party
to this Agreement solely for the purpose of taking the benefit of Parts
5(b) and 5(k) of this Schedule and assuming the obligations under the
final paragraph of Part 5(f) of this Schedule).
This Agreement amends and restates the 1992 ISDA Master Agreement (Funding 1
Swap) dated as of 14th June, 2002 between Party A, Party B and the Security
Trustee, as amended and supplemented from time to time.
Part 1. TERMINATION PROVISIONS
(a) "SPECIFIED ENTITY" means in relation to Party A for the purpose of:-
Section 5(a)(v), none
Section 5(a)(vi), none
Section 5(a)(vii), none
Section 5(b)(iv), none
and in relation to Party B for the purpose of:-
Section 5(a)(v), none
Section 5(a)(vi), none
Section 5(a)(vii), none
Section 5(b)(iv), none
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14 of
this Agreement.
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi), will not apply to
Party A and will not apply to Party B.
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(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will not
apply to Party A and will not apply to Party B.
(e) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will not apply
to Party A and will not apply to Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purposes of Section 6(e) of this
Agreement:
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) "TERMINATION CURRENCY" means Sterling.
(h) "ADDITIONAL TERMINATION EVENT" will apply. In addition to the Additional
Termination Events set forth in Part 5(f)(vi) of this Schedule, the
following will constitute an Additional Termination Event:
The Additional Tax Representation (as defined in Part 2(b) of this
Schedule), proves to have been incorrect or misleading in any material
respect with respect to one or more Transactions (each an "AFFECTED
TRANSACTION" for the purpose of this Additional Termination Event) when
made or repeated or deemed to have been made or repeated.
For the purpose of the foregoing Termination Event, the Affected Party
will be Party A only.
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Part 2. TAX REPRESENTATIONS
(a) PAYER REPRESENTATIONS. For the purpose of Section 3(e) of this Agreement,
Party A and Party B each make the following representation:
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant Jurisdiction
to make any deduction or withholding for or on account of any Tax from any
payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this
Agreement) to be made by it to the other party under this Agreement. In
making this representation, it may rely on (i) the accuracy of any
representations made by the other party pursuant to Section 3(f) of this
Agreement, (ii) the satisfaction of the agreement contained in Section
4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness
of any document provided by the other party pursuant to Section 4(a)(i) or
4(a)(iii) of this Agreement and (iii) the satisfaction of the agreement of
the other party contained in Section 4(d) of this Agreement, except that
it will not be a breach of this representation where reliance is placed on
clause (ii) and the other party does not deliver a form or document under
Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.
(b) PAYEE REPRESENTATIONS. For the purpose of Section 3(f) of the Agreement,
Party A makes the following representation (the "ADDITIONAL TAX
REPRESENTATION"):
(i) it is a party to each Transaction solely for the purposes of a trade
(or part of a trade) carried on by it in the United Kingdom through a
branch or agency; or
(ii) it is resident in the United Kingdom or in a jurisdiction with which
the United Kingdom has a double tax treaty which makes provision,
whether for relief or otherwise, in relation to interest.
For the purpose of Section 3(f) of the Agreement, Party B does not make
any representation.
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Part 3. AGREEMENT TO DELIVER DOCUMENTS
For the purpose of Sections 4(a)(i) and 4(a)(ii) of this Agreement, each party
agrees to deliver the following documents, as applicable:
(a) Tax forms, documents or certificates to be delivered are: none
(b) Other documents to be delivered are:
PARTY REQUIRED COVERED BY
TO DELIVER FORM/DOCUMENT/ DATE BY WHICH SECTION 3(D)
DOCUMENT CERTIFICATE TO BE DELIVERED REPRESENTATION
Party A and Appropriate evidence of On signing of Yes
Party B its signatory's authority this Agreement
Party B Certified copy of On signing of Yes
board resolution this Agreement
Party A Legal opinion in form On signing of No
and substance satisfactory this Agreement
to Party B
Party B Legal opinion On signing of No
from Allen & this Agreement
Overy
22
Part 4. MISCELLANEOUS
(a) ADDRESSES FOR NOTICES. For the purpose of Section 12(a) of this Agreement:
Address for notices or communications to Party A:
Address: Trinity Road
Halifax
West Yorkshire
HX1 2RG
Attention: Mortgage Securitisation Manager
Facsimile No.: 01422 391777
With a copy to: HBOS Treasury Services plc
33 Old Broad Street
London
EC2N 1HZ
Attention: Head of Capital Markets and Securitisation
Facsimile No.: 020 7574 8784
Address for notices or communications to Party B:
Address: Blackwell House
Guildhall Yard
London
EC2V 5AE
Attention: The Secretary
Facsimile No.: 020 7566 0975
With a copy to: (i) HBOS Treasury Services plc:
Address: 33 Old Broad Street
London
EC2N 1HZ
Attention: Head of Capital Markets and Securitisation
Facsimile No.: 020 7574 8784
(ii) the Security Trustee:
Address: The Bank of New York
One Canada Square
London
E14 5AL
Attention: Global Structured Finance - Corporate Trust
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Facsimile No.: 020 7964 6061/6399
(b) PROCESS AGENT. For the purpose of Section 13(c) of this Agreement:
Party A appoints as its Process Agent: None.
Party B appoints as its Process Agent: None.
(c) OFFICES. The provisions of Section 10(a) will apply to this Agreement.
(d) MULTIBRANCH PARTY. For the purpose of Section 10(c) of this Agreement:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document:
In respect of Party A: None.
In respect of Party B: None.
(g) CREDIT SUPPORT PROVIDER. Credit Support Provider means in relation to
Party A, none.
Credit Support Provider means in relation to Party B, none.
(h) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with English law.
(i) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) of this Agreement
will apply to Transactions entered into under this Agreement unless
otherwise specified in a Confirmation.
(j) "AFFILIATE" will have the meaning specified in Section 14 of this
Agreement.
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Part 5. OTHER PROVISIONS
(a) NO SET-OFF
(i) All payments under this Agreement will be made without set-off or
counterclaim, except as expressly provided for in Section 6.
(ii) Section 6(e) will be amended by the deletion of the following sentence:
"The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off."
(b) SECURITY INTEREST
Notwithstanding Section 7, Party A hereby agrees and consents to the assignment
by way of security by Party B of its interests under this Agreement (without
prejudice to, and after giving effect to, any contractual netting provision
contained in this Agreement) to the Security Trustee (or any successor thereto)
pursuant to and in accordance with the Funding 1 Deed of Charge and acknowledges
notice of such assignment. Each of the parties hereby confirms and agrees that
the Security Trustee will not be liable for any of the obligations of Party B
hereunder.
(c) DISAPPLICATION OF CERTAIN EVENTS OF DEFAULT
Section 5(a)(ii), Section 5(a)(iii), Section 5(a)(iv), Section 5(a)(v), Section
5(a)(vii)(2), (5), (6), (7) and (9) and Section 5(a)(viii) will not apply in
respect of Party B.
Section 5(a)(vii)(8) will not apply in respect of Party B to the extent that it
applies to Section 5(a)(vii) (2), (5), (6), (7) and (9).
(d) DISAPPLICATION OF CERTAIN TERMINATION EVENTS
The "Tax Event" and "Tax Event Upon Merger" provisions of Section 5(b)(ii) and
5(b)(iii) will not apply to Party A or to Party B.
(e) ADDITIONAL EVENT OF DEFAULT
The following will constitute an additional Event of Default with respect to
Party B:
An Intercompany Loan Acceleration Notice is served on Party B (which will be the
Defaulting Party).
"INTERCOMPANY LOAN ACCELERATION NOTICE" will have the meaning ascribed to that
term in the relevant Intercompany Loan Agreement.
(f) RATINGS EVENT
(i) In the event that the short-term, unsecured and unsubordinated debt
obligations of Party A (or its successor) or any Credit Support Provider
from time to time in respect of Party A cease to be rated at least as high
as ["A-1+"] by Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc. ("S&P") and, as a result of such cessation,
the then current rating of the Issuer Notes is downgraded or placed under
review for possible downgrade by S&P (an "INITIAL S&P RATING EVENT"), then
Party A will, within 30 days of the occurrence of such Initial S&P Rating
Event, at its own cost either:
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(A) put in place an appropriate mark-to-market collateral agreement
(which may be based on the credit support documentation published by
ISDA, or otherwise, and relates to collateral in the form of cash or
securities or both) in support of its obligations under this
Agreement provided that (x) Party A will be deemed to have satisfied
the requirements of S&P if the amount of collateral agreed to be
provided in the form of cash and/or securities (the "COLLATERAL
AMOUNT") is determined on a basis which satisfies (but is no more
onerous than) the criteria of S&P published on 17th December, 2003,
which enables entities rated lower than a specified level to
participate in structured finance transactions which, through
collateralisation, are rated at a higher level (the "S&P CRITERIA"),
(y) the Collateral Amount will not be required to exceed such amount
as would be required (in accordance with the S&P Criteria) to
maintain or restore the rating of the Issuer Notes at or to the level
they would have been at immediately prior to such Initial S&P Rating
Event [and (z) the enforceability of such collateral arrangement must
be supported by legal opinions with respect to each relevant
jurisdiction provided in a form reasonably acceptable to S&P within
30 days of the occurrence of such Initial S&P Rating Event];
(B) transfer all of its rights and obligations with respect to this
Agreement to a replacement third party satisfactory to the Security
Trustee (whose consent will be given if S&P confirms that such
transfer would maintain the ratings of the Issuer Notes by S&P at, or
restore the rating of the Issuer Notes by S&P to, the level it would
have been at immediately prior to such Initial S&P Rating Event);
(C) obtain a guarantee of its rights and obligations with respect to this
Agreement from a third party satisfactory to the Security Trustee
(whose consent will be given if S&P confirms that such guarantee
would maintain the rating of the Issuer Notes at, or restore the
rating of the Issuer Notes to, the level it would have been at
immediately prior to such Initial S&P Rating Event); or
(D) take such other action as Party A may agree with S&P as will result
in the rating of the Issuer Notes following the taking of such action
being maintained at, or restored to, the level it would have been at
immediately prior to such Initial S&P Rating Event.
If any of paragraphs (i)(B), (i)(C) or (i)(D) above are satisfied at any
time, all collateral (or the equivalent thereof, as appropriate)
transferred by Party A pursuant to paragraph (i)(A) will be transferred to
Party A and Party A will not be required to transfer any additional
collateral.
(ii) In the event that the short-term, unsecured and unsubordinated debt
obligations of Party A (or its successor) or any Credit Support Provider
from time to time in respect of Party A cease to be rated at least as high
as ["A-3"] by S&P and, as a result of such downgrade, the then current
rating of the Issuer Notes may in the reasonable opinion of S&P be
downgraded or placed under review for possible downgrade (such event, a
"SUBSEQUENT S&P RATING EVENT"), then Party A will, within 30 days of the
occurrence of such Subsequent S&P Rating Event, at its own cost either:
(A) transfer all of its rights and obligations with respect to this
Agreement to a replacement third party satisfactory to the Security
Trustee (whose consent will be given if S&P confirms that such
transfer would maintain the rating of the Issuer Notes by S&P at, or
restore the rating of the Issuer Notes by S&P to, the level it would
have been at immediately prior to such Subsequent S&P Rating Event);
26
(B) take such other action as Party A may agree with S&P as will result
in the rating of the Issuer Notes following the taking of such action
being maintained at, or restored to, the level it would have been at
immediately prior to such Subsequent S&P Rating Event[; or
(C) obtain a guarantee of its rights and obligations with respect to this
Agreement from a third party satisfactory to the Security Trustee
(whose consent will be given if S&P confirms that such guarantee
would maintain the rating of the Issuer Notes at, or restore the
rating of the Issuer Notes to, the level it would have been at
immediately prior to such Subsequent S&P Rating Event)],
and, if, at the time a Subsequent S&P Rating Event occurs, Party A has
provided collateral pursuant to a mark-to-market collateral arrangement
put in place pursuant to paragraph (i)(A) above following an Initial S&P
Rating Event, it will continue to post collateral notwithstanding the
occurrence of a Subsequent S&P Rating Event until such time as any of
paragraphs (ii)(A), (ii)(B) [or (ii)(C)] above have been satisfied.
If any of paragraphs (ii)(A), (ii)(B) or (ii)(C) above are satisfied at
any time, all collateral (or the equivalent thereof, as appropriate)
transferred by Party A pursuant to paragraph (i)(A) above will be
transferred to Party A and Party A will not be required to transfer any
additional collateral.
(iii) In the event that:
(A) the long-term, unsecured and unsubordinated debt obligations of Party
A (or its successor) or any Credit Support Provider in respect of
Party A cease to be rated at least as high as "A1" (or its
equivalent) by Moody's; or
(B) the short-term, unsecured and unsubordinated debt obligations of
Party A (or its successor) or any Credit Support Provider in respect
of Party A cease to be rated at least as high as "Prime-1" (or its
equivalent) by Moody's,
(such cessation being an "INITIAL MOODY'S RATING EVENT"), then Party A
will, within 30 days of the occurrence of such Initial Moody's Rating
Event, at its own cost either:
(1) transfer all of its rights and obligations with respect to this
Agreement to either (x) a replacement third party with the Required
Ratings (as defined below) domiciled in the same legal jurisdiction
as Party A or Party B, or (y) a replacement third party as agreed
with Moody's;
(2) procure another person to become co-obligor in respect of the
obligations of Party A under this Agreement, which co-obligor may be
either (x) a person with the Required Ratings (as defined below)
domiciled in the same legal jurisdiction as Party A or Party B, or
(y) such other person as agreed with Moody's;
(3) take such other action as agreed with Moody's; or
(4) put in place a mark-to-market collateral agreement in a form and
substance acceptable to Moody's (which may be based on the credit
support documentation published by ISDA, or otherwise, and relates to
collateral in the form of cash or securities or both) in support of
its obligations under this Agreement which complies with the Moody's
Criteria (as defined below) or such other requirements as may be
agreed with Moody's.
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If any of paragraphs (iii)(1), (iii)(2) or (iii)(3) above are satisfied at
any time, all collateral (or the equivalent thereof, as appropriate)
transferred by Party A pursuant to paragraph (iii)(4) will be transferred
to Party A and Party A will not be required to transfer any additional
collateral.
(iv) In the event that:
(A) the long-term, unsecured and unsubordinated debt obligations of Party
A (or its successor) or any Credit Support Provider in respect of
Party A cease to be rated as high as "Baa2" (or its equivalent) by
Moody's; or
(B) the short-term, unsecured and unsubordinated debt obligations of
Party A (or its successor) or any Credit Support Provider in respect
of Party A cease to be rated as high as "Prime-2" (or its equivalent)
by Moody's,
(such cessation being a "SUBSEQUENT MOODY'S RATING EVENT"), then Party A
will:
(1) on a best efforts basis within 30 days of the occurrence of such
Subsequent Moody's Rating Event, at its own cost, attempt either to:
(aa) transfer all of its rights and obligations with respect to this
Agreement to either (x) a replacement third party with the
Required Ratings (as defined below) domiciled in the same legal
jurisdiction as Party A or Party B, or (y) a replacement third
party as agreed with Moody's;
(bb) procure another person to become co-obligor in respect of the
obligations of Party A under this Agreement, which co-obligor
may be either (x) a person with the Required Ratings (as
defined below) domiciled in the same legal jurisdiction as
Party A or Party B, or (y) such other person as agreed with
Moody's; or
(cc) take such other action agreed with Moody's; and
(2) within 10 days of the occurrence of such Subsequent Moody's Rating
Event, put in place, at its own cost, pending compliance with
paragraph (iv)(1)(aa), (iv)(1)(bb) or (iv)(1)(cc) above, a
mark-to-market collateral agreement in a form and substance
acceptable to Moody's (which may be based on the credit support
documentation published by ISDA, or otherwise, and relates to
collateral in the form of cash or securities or both) in support of
its obligations under this Agreement which complies with the Moody's
Criteria (as defined below) or such other requirements as may be
agreed with Moody's, provided that, if, at the time a Subsequent
Moody's Rating Event occurs, Party A is required to post collateral
following an Initial Moody's Rating Event, it will continue to post
collateral notwithstanding the occurrence of a Subsequent Moody's
Rating Event.
If any of paragraphs (iv)(1)(aa), (bb) or (cc) are satisfied at any time,
all collateral (or the equivalent thereof, as appropriate) transferred by
Party A pursuant to paragraph (iv)(2) will be transferred to Party A and
Party A will not be required to transfer any additional collateral.
For the purposes of paragraphs (iii) and (iv) of this Part 5(f), "REQUIRED
RATINGS" means, in respect of the relevant entity, its short-term, unsecured and
unsubordinated debt obligations are rated at least as
28
high as "Prime-1" and its long-term, unsecured and unsubordinated debt
obligations are rated at least as high as "A1", or such other ratings as may be
agreed with Moody's from time to time.
"MOODY'S CRITERIA" means that the Collateral Amount will equal:
(a) 102 per cent. of the mark-to-market value of the outstanding Transactions
as determined by Party A in good faith on a weekly basis if the long-term,
unsecured and unsubordinated debt obligations of Party A (or its
successor) or any Credit Support Provider in respect of Party A are
downgraded below "A1";
(b) if the long-term, unsecured and unsubordinated debt obligations or
short-term, unsecured and unsubordinated debt obligations of Party A (or
its successor) or any Credit Support Provider in respect of Party A are
downgraded below "A2" or "Prime-1" by Moody's, the sum of:
(i) 102 per cent. of the mark-to-market value of the outstanding
Transactions determined by Party A in good faith on a weekly basis;
and
(ii) the sum of:
(A) the aggregate of the amounts, determined in respect of each
class and series of Issuer Notes, equal to the Outstanding
Principal Balance of that class and series of Issuer Notes at
the time of determination multiplied by the weighted average
life of that class and series of Issuer Notes, as at the date
of determination (expressed in days) divided by 365 (such
aggregate, the "BUFFER NOTIONAL") multiplied by the product of
0.2 per cent. and the Fixed Rate Ratio; and
(B) the Buffer Notional multiplied by the product of 0.1 per cent.
and the sum of:
(aa) the Variable Rate Ratio; and
(bb) the Tracker Ratio; and
(c) if the long-term, unsecured and unsubordinated debt obligations or
short-term, unsecured and unsubordinated debt obligations of Party A (or
its successor) or any Credit Support Provider in respect of Party A are
downgraded below "Baa2" or "Prime-2" by Moody's, the sum of:
(i) 102 per cent. of the mark-to-market value of the outstanding
Transactions determined by Party A in good faith on a weekly basis;
and
(ii) the sum of:
(A) the Buffer Notional multiplied by the product of 0.4 per cent.
and the Fixed Rate Ratio; and
(B) the Buffer Notional multiplied by the product of 0.2 per cent.
and the sum of:
(aa) the Variable Rate Ratio; and
(bb) the Tracker Ratio.
For the purposes of determining the Buffer Notional Amount, Party A will
calculate the weighted average life of each series and class of Issuer Notes
using (1) such assumptions as will reflect the then
29
current expectations of Party A and/or be based upon such circumstances as Party
A may, in good faith, determine applicable; and, notwithstanding for the
avoidance of doubt (1) above; assuming (2) that the constant payment rate of the
Loans comprised within the Portfolio will be equal to the Annualised CPR in
respect of the Calculation Date immediately preceding the Funding 1 Interest
Payment Date immediately preceding the date of determination; (3) that the
relevant Issuer will not exercise its call option to redeem such Issuer Notes in
full on the Step-up Date, if any, in respect of such Issuer Notes; and (4) that
sufficient Loans will be assigned to the Mortgages Trustee so that the aggregate
Outstanding Principal Balance of Loans in the Portfolio is not less than that
required to be maintained by the Seller pursuant to Clause 4.7 of the Mortgage
Sale Agreement (as amended and /or restated from time to time).
In relation to paragraphs (ii)(4) and (iii)(2) above, Party A will, upon receipt
of reasonable notice from Moody's demonstrate to Moody's the calculation by
Party A of the mark-to-market value of the outstanding Transactions. In relation
to paragraph (iii)(2) above, Party A will, at its own cost, on receipt of
reasonable notice from Moody's (which, for the avoidance of doubt, will be no
less than 30 days) arrange an audit of the methodology used by Party A in the
calculation of the mark-to-market value of the outstanding Transactions.
(v) In the event that the short-term, unsecured and unsubordinated debt
obligations of Party A (or its successor) or any Credit Support Provider
from time to time in respect of Party A cease to be rated at least as high
as "F1" (or its equivalent) by Fitch Ratings Ltd ("FITCH") and, as a
result of such cessation, the then current rating of the Issuer Notes is
downgraded or placed under review for possible downgrade by Fitch (an
"INITIAL FITCH RATING EVENT") then Party A will, on a reasonable efforts
basis within 30 days of the occurrence of such Initial Fitch Rating Event,
at its own cost, either:
(A) put in place an appropriate mark-to-market collateral agreement in a
form and substance acceptable to Fitch (which may be based on the
credit support documentation published by ISDA, or otherwise, and
relates to collateral in the form of cash or securities or both to be
posted on a weekly basis) in support of its obligations under this
Agreement provided that (x) Party A will be deemed to have satisfied
the requirements of Fitch if the Collateral Amount is determined on a
basis which is no more onerous than the Fitch Criteria (as defined
below), and (y) the Collateral Amount will not be required to exceed
such amount as would be required (in accordance with the Fitch
Criteria) to maintain or restore the rating of the Issuer Notes at or
to the level it would have been at immediately prior to such Initial
Fitch Rating Event;
(B) transfer all of its rights and obligations with respect to this
Agreement to a replacement third party satisfactory to the Security
Trustee (whose consent will be given if Fitch confirms that such
transfer would maintain the rating of the Issuer Notes by Fitch at,
or restore the rating of the Issuer Notes by Fitch to, the level it
would have been at immediately prior to such Initial Fitch Rating
Event);
(C) obtain a guarantee of its rights and obligations with respect to this
Agreement from a third party satisfactory to the Security Trustee
(whose consent will be given if Fitch confirms that such guarantee
would maintain the rating of the Issuer Notes at, or restore the
rating of the Issuer Notes to, the level it would have been at
immediately prior to such Initial Fitch Rating Event); or
(D) take such other action as Party A may agree with Fitch as will result
in the rating of the Issuer Notes following the taking of such action
being maintained at, or restored
30
to, the level it would have been at immediately prior to such Initial
Fitch Rating Event.
If any of paragraphs (v)(B), (v)(C) or (v)(D) above are satisfied at any
time, all collateral (or the equivalent thereof, as appropriate)
transferred by Party A pursuant to paragraph (v)(A) above will be
transferred to Party A and Party A will not be required to transfer any
additional collateral.
(vi) In the event that the short-term, unsecured and unsubordinated debt
obligations of Party A (or its successor) or any Credit Support Provider
from time to time in respect of Party A cease to be rated at least as high
as "F2" (or its equivalent) by Fitch and, as a result of such cessation,
the then current rating of the Issuer Notes is downgraded or placed under
review for possible downgrade by Fitch (a "SUBSEQUENT FITCH RATING EVENT")
then Party A will:
(A) on a reasonable efforts basis within 30 days of the occurrence of
such Subsequent Fitch Rating Event, at its own cost, attempt either
to:
(1) transfer all of its rights and obligations with respect to this
Agreement to a replacement third party satisfactory to the
Security Trustee (whose consent will be given if Fitch confirms
that such transfer would maintain the rating of the Issuer
Notes by Fitch at, or restore the rating of the Issuer Notes by
Fitch to, the level it would have been at immediately prior to
such Subsequent Fitch Rating Event);
(2) obtain a guarantee of its rights and obligations with respect
to this Agreement from a third party satisfactory to the
Security Trustee (whose consent will be given if Fitch confirms
that such guarantee would maintain the rating of the Issuer
Notes at, or restore the rating of the Issuer Notes to, the
level it would have been at immediately prior to such
Subsequent Fitch Rating Event); or
(3) take such other action as Party A may agree with Fitch as will
result in the rating of the Issuer Notes following the taking
of such action being maintained at, or restored to, the level
it would have been at immediately prior to such Subsequent
Fitch Rating Event; and
(B) within 10 days of the occurrence of such Subsequent Fitch Rating
Event, put in place, at its own cost, pending compliance with
paragraph (vi)(A)(1), (vi)(A)(2) or (vi)(A)(3) above, an appropriate
mark-to-market collateral agreement in a form and substance
acceptable to Fitch (which may be based on the credit support
documentation published by ISDA, or otherwise, and relates to
collateral in the form of cash or securities or both to be posted on
a weekly basis) in support of its obligations under this Agreement
provided that (x) Party A will be deemed to have satisfied the
requirements of Fitch if the Collateral Amount is determined on a
basis which is no more onerous than the Fitch Criteria (as defined
below), and (y) the Collateral Amount will not be required to exceed
such amount as would be required (in accordance with the Fitch
Criteria) to maintain or restore the rating of the Issuer Notes at or
to the level it would have been at immediately prior to such
Subsequent Fitch Rating Event, and provided that, if, at the time a
Subsequent Fitch Rating Event occurs, Party A is required to post
collateral following an Initial Fitch Rating Event, it will continue
to post collateral notwithstanding the occurrence of a Subsequent
Fitch Rating Event.
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If any of paragraphs (vi)(A)(1), (2) or (3) above are satisfied at any
time, all collateral (or the equivalent thereof, as appropriate)
transferred by Party A pursuant to paragraph (vi)(B) above will be
transferred to Party A and Party A will not be required to transfer any
additional collateral.
"FITCH CRITERIA" means that the Collateral Amount will equal the sum of:
(a) 100 per cent. of the mark-to-market value of the outstanding Transactions
as determined by Party A in good faith on a weekly basis; and
(b) the product of:
(i) the aggregate of the amounts, determined in respect of each class and
series of Issuer Notes, equal to the Outstanding Principal Balance of
such class and series of Issuer Notes as at the date of determination
multiplied by the number of days remaining from the date of the
determination to the Expected Repayment Date (as defined below) in
respect of such class and series of Issuer Notes divided by 365, and
(ii) 0.1 per cent. multiplied by the Fixed Rate Ratio.
"EXPECTED REPAYMENT DATE" means in respect of each class and series of Issuer
Notes the earlier of the Step Up Date of such class and series of Issuer Notes
and the Final Maturity Date of such class and series of Issuer Notes.
(vii) (A) If Party A does not take any of the measures described in paragraph
(i) above, such failure will not be or give rise to an Event of
Default but will constitute an Additional Termination Event with
respect to Party A which will be deemed to have occurred on the
thirtieth day following the S&P Rating Event with Party A as the sole
Affected Party and all Transactions as Affected Transactions.
[(B) If, at the time a Subsequent S&P Rating Event occurs, Party A has
provided collateral and fails to continue to post collateral pending
compliance with any of paragraphs (ii)(A), (ii)(B) [or (ii)(C)]
above, such failure will not be or give rise to an Event of Default
but will constitute an Additional Termination Event with respect to
Party A and will be deemed to have occurred on the [tenth] day
following such Subsequent S&P Rating Event with Party A as the sole
Affected Party and all Transactions as Affected Transactions.
Further, it will constitute an Additional Termination Event with
respect to Party A if, even if it is posting collateral as required
by paragraph (ii) above and notwithstanding Section 5(a)(ii), Party A
does not take any of the measures described in paragraphs (ii)(A),
(ii)(B) [or (ii)(C)] above. Such Additional Termination Event will be
deemed to have occurred on the thirtieth day following the Subsequent
S&P Rating Event with Party A as the sole Affected Party and all
Transactions as Affected Transactions.]
(C) If Party A does not take any of the measures described in paragraph
(iii)(1), (2), (3) or (4) above, such failure will not be or give
rise to an Event of Default but will constitute an Additional
Termination Event with respect to Party A and will be deemed to have
occurred on the thirtieth day following the occurrence of such
Initial Moody's Rating Event with Party A as the sole Affected Party
and all Transactions as Affected Transactions.
(D) If Party A does not take the measures described in paragraph (iv)(2)
above, such failure will give rise to an Event of Default with
respect to Party A and will be
32
deemed to have occurred on the tenth day following such Subsequent
Moody's Rating Event with Party A as the Defaulting Party. Further,
it will constitute an Additional Termination Event with respect to
Party A if, even after satisfying the requirements of paragraph
(iv)(2) above, Party A has failed, within 30 days following such
Subsequent Moody's Rating Event, to either transfer as described in
paragraph (iv)(1)(aa), find a co-obligor as described in paragraph
(iv)(1)(bb) or take such other action as described in paragraph
(iv)(1)(cc). Such Additional Termination Event will be deemed to have
occurred on the thirtieth day following such Subsequent Moody's
Rating Event with Party A as the sole Affected Party and all
Transactions as Affected Transactions.
(E) If Party A does not take the measures described in paragraph (v)
above, such failure will not be or give rise to an Event of Default
but will constitute an Additional Termination Event with respect to
Party A which will be deemed to have occurred on the thirtieth day
following the Initial Fitch Rating Event with Party A as the sole
Affected Party and all Transactions as Affected Transactions.
(F) If Party A does not take the measures described in paragraph (vi)(B)
above, such failure will give rise to an Event of Default with
respect to Party A and will be deemed to have occurred on the tenth
day following such Subsequent Fitch Rating Event with Party A as the
Defaulting Party. Further, it will constitute an Additional
Termination Event with respect to Party A if, even after satisfying
the requirements of paragraph (vi)(B) above, Party A has failed,
within 30 days following such Subsequent Fitch Rating Event, to
either transfer as described in paragraph (vi)(A)(1), find a
co-obligor as described in paragraph (vi)(A)(2) or take such other
action as described in paragraph (vi)(A)(3). Such Additional
Termination Event will be deemed to have occurred on the thirtieth
day following such Subsequent Fitch Rating Event with Party A as the
sole Affected Party and all Transactions as Affected Transactions.
(G) In the event that Party B were to designate an Early Termination Date
and there would be a payment due to Party A, Party B may only
designate such an Early Termination Date in respect of an Additional
Termination Event under this Part 5(f) if Party B has found a
replacement counterparty willing to enter into a new transaction on
terms that reflect as closely as reasonably possible, as determined
by Party B in its sole and absolute discretion, the economic, legal
and credit terms of the Terminated Transactions with Party A, and
Party B has obtained the prior written consent of the Security
Trustee.
Each of Party B and the Security Trustee will use their reasonable endeavours to
co-operate with Party A in putting in place such credit support documentation,
including agreeing to such arrangements in such documentation as may satisfy
S&P, Moody's and/or Fitch, as applicable, with respect to the operation and
management of the collateral and entering into such documents as may reasonably
be requested by Party A in connection with the provision of such collateral.
33
(g) ADDITIONAL REPRESENTATION
Section 3 is amended by the addition at the end thereof of the following
additional representations (provided that the representation in Section 3(h)
will be made by Party A only):
"(g) NO AGENCY. It is entering into this Agreement, including each
Transaction, as principal and not as agent of any person or entity.
(h) PARI PASSU. Its obligations under this Agreement rank pari passu with
all of its other unsecured, unsubordinated obligations except those
obligations preferred by operation of law."
(h) RECORDING OF CONVERSATIONS
Each party to this Agreement acknowledges and agrees to the tape recording of
conversations between the parties to this Agreement whether by one or other or
both of the parties.
(i) RELATIONSHIP BETWEEN THE PARTIES
The Agreement is amended by the insertion after Section 14 of an additional
Section 15, reading in its entirety as follows:
"15. RELATIONSHIP BETWEEN THE PARTIES
Each party will be deemed to represent to the other party on the date on which
it enters into a Transaction that (absent a written agreement between the
parties that expressly imposes affirmative obligations to the contrary for that
Transaction):
(a) NON RELIANCE. It is acting for its own account, and it has made its own
independent decisions to enter into that Transaction and as to whether
that Transaction is appropriate or proper for it based upon advice from
such advisers as it has deemed necessary. It is not relying on any
communication (written or oral) of the other party as investment advice or
as a recommendation to enter into that Transaction, it being understood
that information and explanations related to the terms and conditions of a
Transaction will not be considered investment advice or a recommendation
to enter into that Transaction. No communication (written or oral)
received from the other party will be deemed to be an assurance or
guarantee as to the expected results of that Transaction.
(b) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the merits of and
understanding (on its own behalf or through independent professional
advice), and understands and accepts, the terms, conditions and risks of
that Transaction. It is also capable of assuming, and assumes, the
financial and other risks of that Transaction.
(c) STATUS OF PARTIES. The other party is not acting as a fiduciary for or an
adviser for it in respect of that Transaction."
(j) TAX
The Agreement is amended by deleting Section 2(d) in its entirety and replacing
it with the following:
"(d) Deduction or Withholding for Tax
(i) Requirement to Withhold
34
All payments under this Agreement will be made without any deduction or
withholding for or on account of any Tax unless such deduction or
withholding is required (including, for the avoidance of doubt, if such
deduction or withholding is required in order for the payer to obtain
relief from Tax) by any applicable law, as modified by the practice of any
relevant governmental revenue authority, then in effect. If a party ("X")
is so required to deduct or withhold, then that party (the "DEDUCTING
PARTY"):
(1) will promptly notify the other party ("Y") of such requirement;
(2) will pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be
deducted or withheld from any Gross Up Amount (as defined below) paid
by the Deducting Party to Y under this Section 2(d)) promptly upon
the earlier of determining that such deduction or withholding is
required or receiving notice that such amount has been assessed
against Y;
(3) will promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if X is Party A, X will promptly pay in addition to the payment to
which Party B is otherwise entitled under this Agreement, such
additional amount (the "GROSS UP AMOUNT") as is necessary to ensure
that the net amount actually received by Party B will equal the full
amount which Party B would have received had no such deduction or
withholding been required.
(ii) Liability
If:
(1) X is required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, to make any deduction or
withholding for or on account of any Tax; and
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against X,
then, except to the extent that Y has satisfied or then satisfies the
liability resulting from such Tax, (A) where X is Party B, Party A will
promptly pay to Party B the amount of such liability (the "LIABILITY
AMOUNT") (including any related liability for interest and together with
an amount equal to the Tax payable by Party B on receipt of such amount
but including any related liability for penalties only if Party A has
failed to comply with or perform any agreement contained in Section
4(a)(i), 4(a)(iii) or 4(d)) and Party B will promptly pay to the relevant
government revenue authority the amount of such liability (including any
related liability for interest and penalties) and (B) where X is Party A
and Party A would have been required to pay a Gross Up Amount to Party B,
Party A will promptly pay to the relevant government revenue authority the
amount of such liability (including any related liability for interest and
penalties).
(iii) Tax Credit etc.
Where Party A pays an amount in accordance with Section 2(d)(i)(4) above,
Party B undertakes as follows:
35
(1) to the extent that Party B obtains any Tax credit, allowance, set-off
or repayment from the tax authorities of any jurisdiction relating to
any deduction or withholding giving rise to such payment, it will pay
to Party A as soon as practical after receipt of the same so much of
the cash benefit (as calculated below) relating thereto which it has
received as will leave Party B in substantially the same (but in any
event no worse) position as Party B would have been in if no such
deduction or withholding had been required;
(2) the "cash benefit" will, in the case of credit, allowance or set-off,
be the additional amount of Tax which would have been payable by
Party B in the jurisdiction referred to in (1) above but for the
obtaining by it of the said Tax credit, allowance or set-off and, in
the case of a repayment, will be the amount of the repayment
together, in either case, with any related interest or similar
payment obtained by Party B; and
(3) it will use all reasonable endeavours to obtain any Tax credit,
allowance, set-off or repayment as soon as is reasonably practicable
and it will, upon request by Party A, supply Party A with a
reasonably detailed explanation of its calculation of the amount of
any such Tax credit, allowance, set-off or repayment and of the date
on which the same is received."
(k) SECURITY, ENFORCEMENT AND LIMITED RECOURSE
Party A agrees with Party B and the Security Trustee to be bound by the terms of
the Funding 1 Deed of Charge and, in particular, confirms that: (A) no sum will
be payable by or on behalf of Party B to it except in accordance with the
provisions of the Funding 1 Deed of Charge; and (B) it will not take any steps
for the winding up, dissolution or reorganisation or for the appointment of a
receiver, administrator, administrative receiver, trustee, liquidator,
sequestrator or similar officer of Party B or of any or all of its revenues and
assets nor participate in any ex parte proceedings nor seek to enforce any
judgment against Party B, subject to the provisions of the Funding 1 Deed of
Charge.
In relation to all sums due and payable by Party B to Party A, Party A agrees
that it will have recourse only to Funding 1 Revenue Receipts and Funding 1
Principal Receipts, but always subject to the order of priority of payments set
out in the Third Issuer Cash Management Agreement and the Third Issuer Deed of
Charge.
(l) CONDITION PRECEDENT
Section 2(a)(iii) will be amended by the deletion of the words "a Potential
Event of Default" in respect of obligations of Party A only.
(m) REPRESENTATIONS
Section 3(b) will be amended by the deletion of the words "or Potential Event of
Default" in respect of the representation given by Party B only.
(n) ADDITIONAL DEFINITIONS
Words and expressions defined in the Amended and Restated Master Definitions and
Construction Schedule (the "MASTER SCHEDULE") signed on or about {circle}, 2004
and any other Master Definitions and Construction Schedule, each as amended,
varied or supplemented from time to time (together the "MASTER DEFINITIONS
SCHEDULE") will, except so far as the context otherwise requires, have the same
meaning in this Agreement. The rules of interpretation set out in the Master
Definitions Schedule will apply to this Agreement.
36
(o) MODIFICATIONS TO CLOSE-OUT PROVISIONS
Upon the occurrence of an Event of Default with respect to Party A or an
Additional Termination Event which entitles Party B to terminate any Affected
Transaction pursuant to Section 6(b) of the Agreement, Party B will be entitled
(but not obliged in the event that it does not designate an Early Termination
Date) to proceed in accordance with Section 6 of this Agreement, subject to the
following:
(i) For the purposes of Section 6(d)(i), Party B's obligation with respect to
the extent of information to be provided with its calculations is limited
to information Party B has already received in writing and provided Party
B is able to release this information without breaching the provisions of
any law applicable to, or any contractual restriction binding upon, Party
B.
(ii) The following amendments will be deemed to be made to the definition of
"Market Quotation":
(A) the word "firm" will be added before the word "quotations" in the
second line; and
(B) the words ", provided that such documentation would either be the
same as this Agreement and the existing confirmations hereto (and the
long-term, unsecured and unsubordinated debt obligations of the
Reference Market-maker are rated not less than ["BBB-"] by S&P and
"A1" by Moody's and the short-term, unsecured and unsubordinated debt
obligations of the Reference Market-maker are rated not less than
"Prime-1" by Moody's and "F1" by Fitch (or, if such Reference
Market-maker is not rated by a Rating Agency, at such equivalent
rating that is acceptable to such Rating Agency)) or the Rating
Agencies have confirmed in writing that such proposed documentation
will not adversely impact the ratings of the Notes" will be added
after "agree" in the sixteenth line; and
(C) the last sentence will be deleted and replaced with the following:
"If, on the last date set for delivery of quotations, exactly two
quotations are provided, the Market Quotation will be either (a) the
lower of the two quotations where there would be a sum payable by
Party A to Party B, or (b) the higher of the two quotations where
there would be a sum payable by Party B to Party A. If only one
quotation is provided on such date, Party B may, in its discretion,
accept such quotation as the Market Quotation and, if Party B does
not accept such quotation (or if no quotation has been provided), it
will be deemed that the Market Quotation in respect of the Terminated
Transaction cannot be determined. If no quotation has been provided,
it will be deemed that the Market Quotation in respect of the
Terminated Transaction cannot be determined."
(iii) For the purpose of the definition of "Market Quotation", and without
limitation of the general rights of Party B under the Agreement:
(A) Party B will undertake to use its reasonable efforts to obtain at
least three firm quotations as soon as reasonably practicable after
the Early Termination Date and in any event within the time period
specified pursuant to Part 5(o)(iii)(C) below;
(B) Party A will, for the purposes of Section 6(e), be permitted to
obtain on behalf of Party B quotations from Reference Market-makers;
37
(C) If no quotations have been obtained within 6 Local Business Days
after the occurrence of the Early Termination Date or such longer
period as Party B may specify in writing to Party A, then it will be
deemed that the Market Quotation in respect of the Terminated
Transaction cannot be determined;
(D) Party B will be deemed to have discharged its obligations under Part
5(o)(iii)(A) above if it promptly requests, in writing, Party A (such
request to be made within two Local Business Days after the
occurrence of the Early Termination Date) to obtain on behalf of
Party B quotations from Reference Market-makers. Party A agrees to
act in accordance with such request; and
(E) Party B will not be obliged to consult with Party A as to the day and
time of obtaining any quotations.
(p) TRANSFER POLICY
Subject to the constraints otherwise provided by Section 7 of this Agreement,
but without prejudice to Section 6(b)(ii) as amended in this Schedule, Party A
may transfer all (but not part only) of its interests and obligations in and
under this Agreement to another entity (a "TRANSFEREE") with the prior written
consent of the Note Trustee, provided that:
(i) the Transferee's short-term, unsecured and unsubordinated debt obligations
are then rated not less than "A-1+" by S&P, "Prime-1" by Moody's and "F1"
by Fitch and its long-term, unsecured and unsubordinated debt obligations
are then rated not less than ["BBB-"] by S&P, "A1" by Moody's and "A+" by
Fitch (or its equivalent by any substitute rating agency) or such
Transferee's obligations under this Agreement are guaranteed by an entity
whose short-term, unsecured and unsubordinated debt obligations are then
rated not less than "A-1+" by S&P, "Prime-1" by Moody's and "F1" by Fitch
and whose long-term, unsecured and unsubordinated debt obligations are
then rated not less "AA-" by S&P, "A1" by Moody's and "A+" by Fitch (or
its equivalent by any substitute rating agency);
(ii) the Ratings Agencies have confirmed that the transfer will not result in
the then current rating of the Issuer Notes being downgraded;
(iii) the Transferee will not, as a result of such transfer, be required on the
next succeeding Scheduled Payment Date to withhold or deduct on account of
any Tax (except in respect of default interest) amounts in excess of that
which Party A would, on the next succeeding Scheduled Payment Date have
been required to so withhold or deduct unless the Transferee would be
required to make additional payments pursuant to Section 2(d)(i)(4)
corresponding to such excess;
(iv) a Termination Event or Event of Default does not occur as a result of such
transfer;
(v) no additional amount will be payable by Party B to Party A or the
Transferee on the next succeeding Scheduled Payment Date as a result of
such transfer; and
(vi) the Transferee confirms in writing that it will accept all of the
interests and obligations in and under this Agreement which are to be
transferred to it in accordance with the terms of this provision.
With respect to paragraph (iii) above, each party agrees to make such Payee Tax
Representations and Payer Tax Representations as may reasonably be requested by
the other party in order to reasonably
38
satisfy such other party that such withholding or deduction will not occur.
Following the transfer, all references to Party A will be deemed to be
references to the Transferee.
39
DRAFT (1): 26.02.04
FUNDING 1 SWAP CONFIRMATION
From: Halifax plc
Trinity Road
Halifax
West Yorkshire
HX1 2RG
To: Permanent Funding (No. 1) Limited
Blackwell House
Guildhall Yard
London
EC2V 5AE
Attention: The Secretary
To: The Bank of New York
One Canada Square
London
E14 5AL
Attention: Global Structured Finance - Corporate Trust
{circle}, 2004
Dear Sirs,
CONFIRMATION - FUNDING 1 SWAP
This confirmation hereby amends and replaces the confirmation entered into
between us, you and the Security Trustee on 14th June, 2002, as amended and
restated on 6th March, 2003 and 25th November, 2003 (the PREVIOUS
CONFIRMATION).
This confirmation constitutes a "Confirmation" as referred to in the 1992 ISDA
Master Agreement (Multicurrency-Cross Border) dated as of 14th June, 2002 as
amended and restated by us, you and the Security Trustee on 6th March, 2003,
25th November, 2003 and the date hereof and as amended and supplemented from
time to time (the AGREEMENT). As of the date hereof, all rights and
obligations of the parties to the Previous Confirmation shall cease to exist
and shall be replaced in their entirety by the rights and obligations arising
pursuant to this Confirmation.
The purpose of this letter (the CONFIRMATION) is to confirm the terms and
conditions of the Swap Transaction entered into between us on the Trade Date
specified below.
The definitions and provisions contained in the 2000 ISDA Definitions as
published by the International Swaps and Derivatives Association, Inc. (the
DEFINITIONS) are incorporated into this Confirmation.
In the event of any inconsistency between any of the following, the first
listed shall govern: (i) this Confirmation; (ii) the Master Definitions
Schedule; and (iii) the Definitions.
The following expressions shall, for the purpose of this Confirmation, have the
following meanings:
AVERAGE FIXED RATE LOAN BALANCE means, in respect of a Calculation Period, the
average daily aggregate Outstanding Principal Balance of the Fixed Rate Loans
during the relevant Calculation Period as notified by the Cash Manager in
accordance with the Cash Management Agreement.
AVERAGE LOAN BALANCE means, in respect of a Calculation Period, the sum of the
Average Fixed Rate Loan Balance, the Average Variable Rate Loan Balance and the
Average Tracker Rate Loan Balance.
AVERAGE TRACKER RATE LOAN BALANCE means, in respect of a Calculation Period,
the average daily aggregate Outstanding Principal Balance of the Tracker Rate
Loans during the relevant Calculation Period as notified by the Cash Manager in
accordance with the provisions of the Cash Management Agreement.
AVERAGE VARIABLE RATE LOAN BALANCE means, in respect of a Calculation Period,
the average daily aggregate Outstanding Principal Balance of the Variable Rate
Loans during the relevant Calculation Period as notified by the Cash Manager in
accordance with the provisions of the Cash Management Agreement.
BLENDED RATE means, in respect of a Calculation Period, a rate of interest
equal to the sum of (i) the Weighted Average Fixed Rate for such Calculation
Period multiplied by the Fixed Rate Ratio for such Calculation Period; (ii) the
Variable Rate Swap SVR for such Calculation Period multiplied by the Variable
Rate Ratio for such Calculation Period and (iii) the Tracker Swap Rate for such
Calculation Period multiplied by the Tracker Ratio for such Calculation Period.
BLENDED SPREAD means, in respect of a Calculation Period, a percentage equal to
the sum of (i) the Fixed Rate Spread multiplied by the Fixed Rate Ratio for
such Calculation Period; (ii) the Variable Rate Spread multiplied by the
Variable Rate Ratio for such Calculation Period and (iii) the Tracker Spread
multiplied by the Tracker Ratio for such Calculation Period.
CALCULATION DATE means the first day (or if not a London Business Day, the next
succeeding London Business Day) of each month and any other day on which
Funding 1 acquires a further interest in the Trust Property from and including
the Calculation Date immediately preceding the Effective Date.
CALCULATION PERIOD means, each period from and including the Closing Date to
but excluding the first Calculation Date and thereafter the period from and
including one Calculation Date to but excluding the next following Calculation
Date.
CALCULATION PERIOD FUNDING 1 AMOUNT means, in respect of a Calculation Period,
an amount in Sterling equal to the amount produced by applying the Blended Rate
for such Calculation Period to the Notional Amount, such amount to be
calculated by the Calculation Agent on the basis of the actual number of days
in such Calculation Period, divided by 365.
CALCULATION PERIOD SWAP PROVIDER AMOUNT means, in respect of a Calculation
Period, an amount in Sterling which is equal to the amount produced by applying
a rate equal to the Three Month LIBOR prevailing on the first day of such
Calculation Period plus the Blended Spread to the Notional Amount for such
Calculation Period, such amount to be calculated by the Calculation Agent on
the basis of the actual number of days in such Calculation Period, divided by
365.
FIRST ISSUER means Permanent Financing (No. 1) PLC.
FIXED RATE RATIO means, in respect of a Calculation Period, the Average Fixed
Rate Loan Balance divided by the Average Loan Balance.
2
FIXED RATE SPREAD means {circle} per cent. per annum.
FUNDING 1 AMOUNT means, in respect of an Interest Period, an amount equal to
the sum of each of the Calculation Period Funding 1 Amounts calculated in
respect of the Calculation Periods which end on a date falling within such
Interest Period.
INTERCOMPANY LOANS means, the First Issuer Intercompany Loan entered into
between Funding 1, the First Issuer and the Security Trustee, the Second Issuer
Intercompany Loan entered into between Funding 1, the Second Issuer, and the
Security Trustee and any New Intercompany Loan.
INTEREST PAYMENT DATE means each Funding 1 Interest Payment Date.
INTEREST PERIOD means the period from (and including) the Second Issuer Closing
Date to (but excluding) the Interest Payment Date falling in June 2003 and
thereafter from (and including) one Interest Payment Date to (but excluding)
the next succeeding Interest Payment Date.
NOTIONAL AMOUNT means in respect of a Calculation Period, an amount in Sterling
equal to:
(a) the Outstanding Principal Balance of the Intercompany Loans on the first
day of the relevant Calculation Period, less
(b) the balance of the Principal Deficiency Ledger attributable to the
Intercompany Loans on the first day of the relevant Calculation Period,
less
(c) the amount of the Principal Receipts in the Funding 1 GIC Account
attributable to the Intercompany Loans on the first day of the relevant
Calculation Period.
The Notional Amount shall be determined on the first day of the relevant
Calculation Period after any changes made on such date to the Outstanding
Principal Balance of the Intercompany Loans, the balance of the Principal
Deficiency Ledger attributable to the Intercompany Loans and the amount of
Principal Receipts in the Funding 1 GIC Account have become effective.
REFERENCE LENDERS means Abbey National plc, HSBC Bank plc, Lloyds TSB plc,
Nationwide Building Society, National Westminster Bank Plc, Northern Rock plc
and Woolwich plc (or their respective successors) and such additional or
replacement residential mortgage lenders as shall be determined by the
Calculation Agent and REFERENCE LENDER means any one of them.
SECOND ISSUER means Permanent Financing (No. 2) PLC.
SWAP PROVIDER AMOUNT means, in respect of an Interest Period, an amount equal
to the sum of each of the Calculation Period Swap Provider Amounts calculated
in respect of the Calculation Periods which end on a date falling within such
Interest Period.
THREE MONTH LIBOR means the weighted average of the rates of interest
(excluding spreads) applicable to any outstanding Intercompany Loan.
TRACKER RATIO means, in respect of a Calculation Period, the Average Tracker
Rate Loan Balance divided by the Average Loan Balance.
TRACKER SPREAD means {circle} per cent. per annum.
3
TRACKER SWAP RATE means, in respect of a Calculation Period, a rate of
interest, linked to the Bank of England repo rate, as determined by the Cash
Manager in accordance with the provisions of the Cash Management Agreement.
VARIABLE RATE RATIO means, in respect of a Calculation Period, the Average
Variable Rate Loan Balance divided by the Average Loan Balance.
VARIABLE RATE SPREAD means {circle} per cent. per annum.
VARIABLE RATE SWAP SVR means, in respect of a Calculation Period, the rate of
interest equal to the average of the standard variable rate or its equivalent
charged to existing borrowers on residential mortgage loans as published from
time to time after excluding the highest and lowest rate, of the Reference
Lenders, as determined by the Cash Manager in good faith and notified to the
Calculation Agent from time to time in accordance with the Cash Management
Agreement.
WEIGHTED AVERAGE FIXED RATE means, in respect of a Calculation Period, the
weighted average (by Outstanding Principal Balance) of the fixed rates of
interest charged to borrowers of Fixed Rate Loans during the relevant
Calculation Period as notified by the Cash Manager in accordance with the
provisions of the Cash Management Agreement.
1. This Confirmation supplements, forms part of, and is subject to, the
Agreement. All provisions contained in the Agreement govern this
Confirmation except as expressly modified below.
2. The terms of the Transaction to which this Confirmation relates are as
follows:
PARTY A: Halifax plc
PARTY B: Permanent Funding (No. 1) Limited
TRADE DATE: 14th June, 2002
TERMINATION DATE: The date on which the amount outstanding under the
Intercompany Loans is reduced to zero.
EFFECTIVE DATE: 14th June, 2002
BUSINESS DAY CENTRES
FOR ALL PAYMENTS: London
CALCULATION OF
AMOUNTS: On each Interest Payment Date, the Calculation Agent
shall calculate the Swap Provider Amount and the
Funding 1 Amount for the then current Interest Period,
and forthwith notify Party A, Party B and the Cash
Manager of the amounts so determined and of the net
amount determined as set out below.
PAYMENTS: If in relation to any Interest Payment Date:
(i) the Swap Provider Amount for the relevant
Interest Period exceeds the Funding 1 Amount
for the relevant Interest Period, Party A shall
pay the amount of such excess to Party B on
such Interest Payment Date;
4
(ii) the Funding 1 Amount for the relevant Interest
Period exceeds the Swap Provider Amount for the
relevant Interest Period, Party B shall pay the
amount of such excess to Party A on such
Interest Payment Date;
(iii) the Swap Provider Amount for the relevant
Interest Period is equal to the Funding 1
Amount for the relevant Interest Period, no
amount shall be due and payable by either party
hereunder in relation to such Interest Payment
Date.
CALCULATION AGENT: Halifax plc acting in its capacity of Servicer
pursuant to the Servicing Agreement or of Cash
Manager pursuant to the Cash Management
Agreement, as the case may be.
3. MISCELLANEOUS:
Subject to Clause 25 of the Funding 1 Deed of Charge (Supplemental
Provisions Regarding the Security Trustee), any amendments to this
Confirmation or the Agreement will be made only with the prior written
consent of each party to the Agreement.
4. ACCOUNT DETAILS:
Payments to Party A: Bank: Halifax plc
Domestic Banking
Trinity Road
Halifax
Sort Code: 11-99-06
Account Number: 00000000
Account Name: Halifax CHAPS Funding
Beneficiary Name: Securitisation E/04101-06
Payments to Party B: Bank: The Governor and Company of the
Bank of Scotland
Account Number: 00998318
Sort Code: 12-24-55
Account Name: Permanent Funding (No. 1) Ltd
- Transaction Account
5. NOTICE DETAILS:
Party A: Halifax plc
Address: Trinity House
Halifax
West Yorkshire HX1 2RG
5
Facsimile Number: +44 (0) 1422 391777
Attention: Head of Mortgage Securitisation
with a copy to:- HBOS Treasury Services plc,
Address: 33 Old Broad Street
London
EC2N 1HZ
Facsimile Number: 020 7574 8784
Attention: Head of Capital Markets and Securitisation
Party B: Permanent Funding (No. 1) Limited
Address: Blackwell House
Guildhall Yard
London
EC2V 5AE
Facsimile Number: 020 7566 0975
Attention: The Secretary
With a copy to:- (i) HBOS Treasury Services plc
Address: 33 Old Broad Street
London
EC2N 1HZ
Facsimile Number: 020 7574 8784
Attention: Head of Capital Markets and Securitisation
(ii) the Security Trustee:
Name: The Bank of New York
Address: One Canada Square
London
E14 5AL
Facsimile Number: 020 7964 6061/6399
Attention: Global Structured Finance - Corporate Trust
6
Yours faithfully,
HALIFAX PLC
By:
Name:
Title:
Confirmed as of the date first written:
PERMANENT FUNDING (NO. 1) LIMITED
By:
Name:
Title:
THE BANK OF NEW YORK
By:
Name:
Title:
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