DRAFT: (2) 25.02.04
LOAN CONFIRMATION FOURTH ISSUER
INTERCOMPANY LOAN AGREEMENT
DATED [12TH MARCH], 2004
PERMANENT FUNDING (NO. 1) LIMITED
AS FUNDING 1
PERMANENT FINANCING (NO. 4) PLC
AS FOURTH ISSUER
AND
THE BANK OF NEW YORK
AS SECURITY TRUSTEE
CITIBANK, N.A., LONDON BRANCH
AS AGENT BANK
ALLEN & OVERY
London
CONTENTS
CLAUSE PAGE
1. Interpretation...........................................................1
2. Intercompany Loan Terms and Conditions...................................2
3. The Fourth Issuer Term Advances..........................................2
4. Interest.................................................................5
5. Repayment................................................................7
6. Prepayment .............................................................11
7. Certain Fees, etc.......................................................12
8. Application of Certain Provisions.......................................14
9. Addresses...............................................................14
SCHEDULE
1. Conditions Precedent in Respect of Drawdown.............................16
2. Signatories.............................................................19
THIS LOAN CONFIRMATION TO THE FOURTH ISSUER INTERCOMPANY LOAN AGREEMENT is
dated [12th March], 2004
BETWEEN:
(1) PERMANENT FUNDING (NO. 1) LIMITED (registered in England and Wales No.
4267660) whose registered office is at Blackwell House, Guildhall Yard,
London EC2V 5AE (FUNDING 1);
(2) PERMANENT FINANCING (NO. 4) PLC (registered in England and Wales No.
4988201) whose registered office is at Blackwell House, Guildhall Yard,
London EC2V 5AE (the FOURTH ISSUER);
(3) THE BANK OF NEW YORK, acting through its offices at 48th Floor, One
Canada Square, London E14 5AL in its capacity as Security Trustee; and
(4) CITIBANK, N.A., LONDON BRANCH, whose offices are at 5 Carmelite Street,
London EC4Y 0PA, acting in its capacity as Agent Bank.
IT IS AGREED as follows:
1. INTERPRETATION
1.1 The amended and restated master definitions and construction schedule
signed by, amongst others, the parties to this Agreement and dated [12th
March], 2004 (as the same may be amended, varied or supplemented from time
to time with the consent of the parties to this Agreement) (the MASTER
DEFINITIONS AND CONSTRUCTION SCHEDULE) and the fourth issuer master
definitions and construction schedule signed for the purposes of
identification by Allen & Overy and Sidley Austin Brown & Wood on [12th
March], 2004 (the FOURTH ISSUER MASTER DEFINITIONS AND CONSTRUCTION
SCHEDULE) are expressly and specifically incorporated into this Agreement
and, accordingly, the expressions defined in the Master Definitions and
Construction Schedule and/or the Fourth Issuer Master Definitions and
Construction Schedule (as so amended, varied or supplemented from time to
time) shall, except where the context otherwise requires and save where
otherwise defined herein, have the same meanings in this Agreement,
including the Recitals hereto and this Agreement shall be construed in
accordance with the interpretation provisions set out in CLAUSE 2
(Interpretation and Construction) of the Master Definitions and
Construction Schedule and the Fourth Issuer Master Definitions and
Construction Schedule.
1.2 Unless the context otherwise requires, references in the Intercompany
Loan Terms and Conditions to:
CLOSING DATE means [12th March], 2004;
INTERCOMPANY LOAN means the Fourth Issuer Intercompany Loan;
INTERCOMPANY LOAN AGREEMENT means the Fourth Issuer Intercompany Loan
Agreement;
INTERCOMPANY LOAN CONFIRMATION means the Fourth Issuer Intercompany Loan
Confirmation;
ISSUER means the Fourth Issuer;
1
ISSUER TRANSACTION ACCOUNT means the Fourth Issuer Sterling Account;
NEW BASEL CAPITAL ACCORD means the new or revised capital accord as
described in the consultative document "The New Basel Capital Accord"
published by the Basel Committee on Banking Supervision in January 2001;
NOTES means the Fourth Issuer Notes; and
FOURTH ISSUER TERM ADVANCES has the meaning given in the Fourth Issuer
Master Definitions and Construction Schedule.
2. INTERCOMPANY LOAN TERMS AND CONDITIONS
Each of the parties to this Agreement agrees that the Intercompany Loan
Terms and Conditions signed by Funding 1, the Security Trustee and the
Agent Bank for the purposes of identification on 14th June, 2002, as
amended and restated on 25th November, 2003 and from time to time and the
provisions set out therein shall form part of this Agreement and shall be
binding on the parties to this Agreement as if they had expressly been
set out herein. References in this Agreement to "this Agreement" shall be
construed accordingly.
3. THE FOURTH ISSUER TERM ADVANCES
3.1 FOURTH ISSUER TERM AAA ADVANCES
On and subject to the terms of this Agreement, the Fourth Issuer grants
to Funding 1 a term loan which consists of the following sub-loans:
(a) the series 1 term AAA advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 1 TERM
AAA ADVANCE) and which corresponds to the sterling equivalent of
the principal amount upon issue of the Series 1 Class A Fourth
Issuer Notes;
(b) the series 2 term AAA advance in the maximum aggregate principal
amount of {pound-sterling}{circle}(the FOURTH ISSUER SERIES 2 TERM
AAA ADVANCE) and which corresponds to the sterling equivalent of
the principal amount upon issue of the Series 2 Class A Fourth
Issuer Notes;
(c) the series 3 term AAA advance in the maximum aggregate principal
amount of {pound-sterling}{circle}(the FOURTH ISSUER SERIES 3 TERM
AAA ADVANCE) and which corresponds to the sterling equivalent of
the principal amount upon issue of the Series 3 Class A Fourth
Issuer Notes;
(d) the series 4 term AAA advance in the maximum aggregate principal
amount of {pound-sterling}{circle}(the FOURTH ISSUER SERIES 4
TERM AAA ADVANCE) and which corresponds to the principal amount
upon issue of the Series 4 Class A Fourth Issuer Notes;
(e) the series 5A1 term AAA advance in the maximum aggregate principal
amount of {pound-sterling}{circle}(the FOURTH ISSUER SERIES 5A1
TERM AAA ADVANCE) and which corresponds to the sterling equivalent
of the principal amount upon issue of the Series 5 Class A1 Fourth
Issuer Notes;
(f) the series 5A2 term AAA advance in the maximum aggregate principal
amount of {pound-sterling}{circle}(the FOURTH ISSUER SERIES 5A2
TERM AAA ADVANCE) and which corresponds to
2
the sterling equivalent of the principal amount upon issue of the
Series 5 Class A2 Fourth Issuer Notes; and
and together the Fourth Issuer Series 1 Term AAA Advance, the Fourth
Issuer Series 2 Term AAA Advance, the Fourth Issuer Series 3 Term AAA
Advance, the Fourth Issuer Series 4 Term AAA Advance, the Fourth Issuer
Series 5A1 Term AAA Advance and the Fourth Issuer Series A2 Term AAA
Advance are referred to herein as the FOURTH ISSUER TERM AAA ADVANCES.
3.2 FOURTH ISSUER TERM AA ADVANCES
On and subject to the terms of this Agreement, the Fourth Issuer grants
to Funding 1 a term loan which consists of the following sub-loans:
(a) the series 1 term AA advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 1
TERM AA ADVANCE) and which corresponds to the sterling equivalent
of the principal amount upon issue of the Series 1 Class B Fourth
Issuer Notes;
(b) the series 2 term AA advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 2
TERM AA ADVANCE) and which corresponds to the sterling equivalent
of the principal amount upon issue of the Series 2 Class B Fourth
Issuer Notes;
(c) the series 3 term AA advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 3
TERM AA ADVANCE) and which corresponds to the sterling equivalent
of the principal amount upon issue of the Series 3 Class B Fourth
Issuer Notes;
(d) the series 4 term AA advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 4
TERM AA ADVANCE) and which corresponds to the sterling equivalent
of the principal amount upon issue of the Series 4 Class B Fourth
Issuer Notes; and
(e) the series 5 term AA advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 5
TERM AA ADVANCE) and which corresponds to the principal amount
upon issue of the Series 5 Class B Fourth Issuer Notes,
and together the Fourth Issuer Series 1 Term AA Advance, the Fourth
Issuer Series 2 Term AA Advance, the Fourth Issuer Series 3 Term AA
Advance, the Fourth Issuer Series 4 Term AA Advance and the Fourth Issuer
Series 5 Term AA Advance are referred to herein as the FOURTH ISSUER TERM
AA ADVANCES.
3.3 FOURTH ISSUER TERM A ADVANCES
On and subject to the terms of this Agreement, the Fourth Issuer grants
to Funding 1 a term loan which consists of the following sub-loans:
(a) the series 2 term A advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 2
TERM A ADVANCE) and which corresponds to the sterling equivalent
of the principal amount upon issue of the Series 2 Class M Fourth
Issuer Notes;
3
(b) the series 3 term A advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 3
TERM A ADVANCE) and which corresponds to the sterling equivalent
of the principal amount upon issue of the Series 3 Class M Fourth
Issuer Notes; and
(c) the series 5 term A advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 5
TERM A ADVANCE) and which corresponds to the principal amount upon
issue of the Series 5 Class M Fourth Issuer Notes,
and together the Fourth Issuer Series 1 Term A Advance, the Fourth Issuer
Series 2 Term A Advance, the Fourth Issuer Series 3 Term A Advance, the
Fourth Issuer Series 4 Term A Advance and the Fourth Issuer Series 5 Term
A Advance are referred to herein as the FOURTH ISSUER TERM A ADVANCES.
3.4 FOURTH ISSUER TERM BBB ADVANCES
On and subject to the terms of this Agreement, the Fourth Issuer grants
to Funding 1 a term loan which consists of the following sub-loans:
(a) the series 2 term BBB advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 2
TERM BBB ADVANCE) and which corresponds to the sterling equivalent
of the principal amount upon issue of the Series 2 Class C Fourth
Issuer Notes;
(b) the series 3 term BBB advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 3
TERM BBB ADVANCE) and which corresponds to the sterling equivalent
of the principal amount upon issue of the Series 3 Class C Fourth
Issuer Notes; and
(c) the series 5 term BBB advance in the maximum aggregate principal
amount of {pound-sterling}{circle} (the FOURTH ISSUER SERIES 5
TERM BBB ADVANCE) and which corresponds to the principal amount
upon issue of the Series 5 Class C Fourth Issuer Notes,
and together the Fourth Issuer Series 1 Term BBB Advance, the Fourth
Issuer Series 2 Term BBB Advance, the Fourth Issuer Series 3 Term BBB
Advance and the Fourth Issuer Series 4 Term BBB Advance and the Fourth
Issuer Series 5 Term BBB Advance are referred to herein as the FOURTH
ISSUER TERM BBB ADVANCES.
3.5 TERM ADVANCE RATING
The Term Advance Rating in respect of the Fourth Issuer Term AAA Advances
shall be AAA/Aaa/AAA, the Term Advance Rating in respect of the Fourth
Issuer Term AA Advances shall be AA/Aa3/AA, the Term Advance Rating in
respect of the Fourth Issuer Term A Advances shall be A/A2/A and the Term
Advance Rating in respect of the Fourth Issuer Term BBB Advances shall be
BBB/Baa2/BBB.
3.6 CONDITIONS PRECEDENT
Save as the Fourth Issuer and the Security Trustee may otherwise agree,
the Fourth Issuer Term Advances will not be available for utilisation
unless the Security Trustee has confirmed to Funding 1 that it or its
advisers have received all the information and documents listed in
hereof in form and substance satisfactory to the Security Trustee.
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4. INTEREST
4.1 RATE OF INTEREST TO FIRST FUNDING 1 INTEREST PAYMENT DATE
On the Closing Date the Agent Bank will determine the Initial Relevant
Screen Rate (as defined below) in respect of each Fourth Issuer Term
Advance as at or about 11.00 a.m. (London time) on that date. If the
Initial Relevant Screen Rate is unavailable, the Agent Bank will request
the principal London office of each of the Reference Banks to provide the
Agent Bank with its offered quotations to leading banks for three-month
and four-month sterling deposits of {pound-sterling}10,000,000, in the
London inter-bank market as at or about 11.00 a.m. (London time) on such
Closing Date. The Term Advance Rates of Interest for the first Interest
Period shall be the aggregate of (a) the Relevant Margin and (b) the
Initial Relevant Screen Rate or, if the Initial Relevant Screen Rate is
unavailable, the linear interpolation of the arithmetic mean of such
offered quotations for [two]-month sterling deposits and the arithmetic
mean of such offered quotations for [three]-month sterling deposits
(rounded upwards, if necessary, to five decimal places).
INITIAL RELEVANT SCREEN RATE means the linear interpolation of the
arithmetic mean of the offered quotations to leading banks for [two]-
month sterling deposits and the arithmetic mean of the offered quotations
to leading banks for [three]-month sterling deposits (rounded upwards if
necessary to five decimal places) displayed on the Moneyline Telerate
monitor at Moneyline Telerate page number 3750 (or such replacement page
on that service which displays the information) or, if that service
ceases to display the information, such other service as may be
determined by the Fourth Issuer with the approval of the Security
Trustee.
4.2 TERM ADVANCE RATES OF INTEREST
The Term Advance Rate of Interest payable on each Term Advance shall be
LIBOR for three-month sterling deposits as determined in accordance with
Clause 6 of the Intercompany Loan Terms and Conditions plus a RELEVANT
MARGIN which shall be:
(a) in respect of the Fourth Issuer Series 1 Term AAA Advance, a
margin of -{circle} per cent. per annum;
(b) in respect of the Fourth Issuer Series 2 Term AAA Advance, a
margin of {circle} per cent. per annum;
(c) in respect of the Fourth Issuer Series 3 Term AAA Advance, a
margin of {circle} per cent. per annum up to and including the
Interest Period ending in [March 2011] and thereafter
{circle} per cent. per annum;
(d) in respect of the Fourth Issuer Series 4 Term AAA Advance, a margin
of {circle} per cent. per annum up to and including the Interest
Period ending in [March 2011] and thereafter {circle} per cent. per
annum;
(e) in respect of the Fourth Issuer Series 5A1 Term AAA Advance, a
margin of {circle} per cent. per annum up to and including the
Interest Period ending in [March 2011] and thereafter {circle} per
cent. per annum;
(f) in respect of the Fourth Issuer Series 5A2 Term AAA Advance, a
margin of {circle} per cent. per annum up to and including the
Interest Period ending in [March 2011] and thereafter {circle} per
cent. per annum;
5
(g) in respect of the Fourth Issuer Series 1 Term AA Advance, a margin
of {circle} per cent. per annum up to and including the Interest
Period ending in [March 2011] and thereafter {circle}
per cent. per annum;
(h) in respect of the Fourth Issuer Series 2 Term AA Advance, a margin
of {circle} per cent. per annum up to and including the Interest
Period ending in [March 2011] and thereafter
{circle} per cent. per annum;
(i) in respect of the Fourth Issuer Series 3 Term AA Advance, a margin
of {circle} per cent. per annum up to and including the Interest
Period ending in [March 2011] and thereafter
{circle} per cent. per annum;
(j) in respect of the Fourth Issuer Series 4 Term AA Advance, a margin
of {circle} per cent. per annum up to and including the Interest
Period ending in [March 2011] and thereafter
{circle} per cent. per annum;
(k) in respect of the Fourth Issuer Series 5 Term AA Advance, a margin
of {circle} per cent. per annum up to and including the Interest
Period ending in [March 2011] and thereafter
{circle} per cent. per annum;
(l) in respect of the Fourth Issuer Series 1 Term A Advance, a margin
of {circle} per cent. per annum up to and including the Interest
Period ending in [March 2011] and thereafter
{circle} per cent. per annum;
(m) in respect of the Fourth Issuer Series 2 Term A Advance, a margin
of {circle} per cent. per annum up to and including the Interest
Period ending in [March 2011] and thereafter
{circle} per cent. per annum;
(n) in respect of the Fourth Issuer Series 3 Term A Advance, a margin
of {circle} per cent. per annum up to and including the Interest
Period ending in [March 2011] and thereafter
{circle} per cent. per annum;
(o) in respect of the Fourth Issuer Series 4 Term A Advance, a margin
of {circle} per cent. per annum up to and including the Interest
Period ending in [March 2011] and thereafter
{circle} per cent. per annum;
(p) in respect of the Fourth Issuer Series 5 Term A Advance, a margin
of {circle} per cent. per annum up to (and including) the Interest
Period ending in [March 2011] and thereafter
{circle} per cent. per annum;
(q) in respect of the Fourth Issuer Series 2 Term BBB Advance, a
margin of {circle} per cent. per annum up to and including the
Interest Period ending in [March 2011] and
thereafter {circle} per cent. per annum;
(r) in respect of the Fourth Issuer Series 3 Term BBB Advance, a
margin of {circle} per cent. per annum up to and including the
Interest Period ending in [March 2011] and
thereafter {circle} per cent. per annum; and
(s) in respect of the Fourth Issuer Series 5 Term BBB Advance, a
margin of {circle} per cent. per annum up to (and including) the
Interest Period ending in [March 2011] and
thereafter {circle} per cent. per annum.
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4.3 INTEREST PERIODS
The first Interest Period shall commence on (and include) the Closing
Date and end on (but exclude) the Funding 1 Interest Payment Date falling
in [June], 2004. Each subsequent Interest Period shall commence on (and
include) a Funding 1 Interest Payment Date and end on (but exclude) the
following Funding 1 Interest Payment Date.
5. REPAYMENT
5.1 REPAYMENT SUBJECT TO TERMS OF THE FUNDING 1 DEED OF CHARGE
The terms and provisions of this Clause are to be read subject to the
provisions of Part II of Schedule 3 to the Funding 1 Deed of Charge and
as the same may be further amended or varied from time to time in
accordance with the terms of the Funding 1 Deed of Charge. Without
limiting the generality of the foregoing, the Fourth Issuer Term Advances
shall become due and payable as described in paragraph 1.4 of Part II of
Schedule 3 of the Funding 1 Deed of Charge.
5.2 REPAYMENT OF FOURTH ISSUER TERM AAA ADVANCES 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
Subject to the provisions of Clauses 1 and 2 of Part II of Schedule 3 of
the Funding 1 Deed of Charge, 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, Funding 1 shall repay to the Fourth Issuer:
(a) the Fourth Issuer Series 1 Term AAA Advance on the Funding 1
Interest Payment Date falling in [March 2005];
(b) the Fourth Issuer Series 2 Term AAA Advance on the Funding 1
Interest Payment Date falling in [March 2007] but if there are
insufficient funds available to repay the Fourth Issuer Series 2
Term AAA Advance on such Funding 1 Interest Payment Date, then the
shortfall shall be repaid on subsequent Funding 1 Interest Payment
Dates from Funding 1 Available Principal Receipts until the Fourth
Issuer Series 2 Term AAA Advance is fully repaid;
(c) the Fourth Issuer Series 3 Term AAA Advance in two equal
instalments (each a SCHEDULED AMORTISATION INSTALMENT) on the
Funding 1 Interest Payment Date falling in [December 2008] and
[March 2009] but if there are insufficient funds available to
repay the Scheduled Amortisation Instalments on such Funding 1
Interest Payment Dates, then the shortfall shall be repaid on
subsequent Funding 1 Interest Payment Dates from Funding 1
Available Principal Receipts until the Fourth Issuer Series 3 Term
AAA Advance is fully repaid;
(d) the Fourth Issuer Series 4 Term AAA Advance in two equal
instalments (each a SCHEDULED AMORTISATION INSTALMENT) on the
Funding 1 Interest Payment Date falling in [June 2009] and
[September 2009] but if there are insufficient funds available to
repay the Scheduled Amortisation Instalments on such Funding 1
Interest Payment Dates, then the shortfall shall be repaid on
subsequent Funding 1 Interest Payment Dates from Funding 1
Available Principal Receipts until the Fourth Issuer Series
4 Term AAA Advance is fully repaid;
7
(e) the Fourth Issuer Series 5 Term AAA Advance on each Funding 1
Interest Payment Date commencing on the Funding 1 Interest Payment
Date falling in [March, 2001] to the extent of Funding 1 Available
Principal Receipts until the Fourth Issuer Series 5A1 Term AAA
Advance is fully repaid; and
(f) the Fourth Issuer Series 5A2 Term AAA Advance on each Funding 1
Interest Payment Date commencing on the Funding 1 Interest Payment
Date falling in [March 2011] to the extent of Funding 1 Available
Principal Receipts until the Fourth Issuer Series 5 Term AAA
Advance is fully repaid.
5.3 REPAYMENT OF FOURTH ISSUER TERM AA ADVANCES 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
Subject to the provisions of Clauses 1 and 2 of Part II of Schedule 3 of
the Funding 1 Deed of Charge, 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, Funding 1 shall repay to the Fourth Issuer:
(a) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
1 Term AAA Advance is fully repaid, the Fourth Issuer Series 1
Term AA Advance to the extent of Funding 1 Available Principal
Receipts until the Fourth Issuer Series 1 Term AA Advance is fully
repaid;
(b) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
2 Term AAA Advance is fully repaid, the Fourth Issuer Series 2
Term AA Advance to the extent of Funding 1 Available Principal
Receipts until the Fourth Issuer Series 2 Term AA Advance is fully
repaid;
(c) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
3 Term AAA Advance is fully repaid, the Fourth Issuer Series 3
Term AA Advance to the extent of Funding 1 Available Principal
Receipts until the Fourth Issuer Series 3 Term AA Advance is fully
repaid;
(d) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
4 Term AAA Advance is fully repaid, the Fourth Issuer Series 4
Term AA Advance to the extent of Funding 1 Available Principal
Receipts until the Fourth Issuer Series 4 Term AA Advance is fully
repaid; and
(e) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
5 Term AAA Advance is fully repaid, the Fourth Issuer Series 5
Term AA Advance to the extent of Funding 1 Available Principal
Receipts therefor until the Fourth Issuer Series 5 Term AA Advance
is fully repaid.
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5.4 REPAYMENT OF FOURTH ISSUER TERM A ADVANCES 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
Subject to the provisions of Clauses 1 and 2 of Part II of Schedule 3 of
the Funding 1 Deed of Charge, 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, Funding 1 shall repay to the Fourth Issuer:
(a) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
1 Term AA Advance is fully repaid, the Fourth Issuer Series 1 Term
A Advance to the extent of Funding 1 Available Principal Receipts
until the Fourth Issuer Series 1 Term A Advance is fully repaid;
(b) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
2 Term AA Advance is fully repaid, the Fourth Issuer Series 2 Term
A Advance to the extent of Funding 1 Available Principal Receipts
until the Fourth Issuer Series 2 Term A Advance is fully repaid;
(c) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
3 Term AA Advance is fully repaid, the Fourth Issuer Series 3 Term
A Advance to the extent of Funding 1 Available Principal Receipts
until the Fourth Issuer Series 3 Term A Advance is fully repaid;
(d) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
4 Term AA Advance is fully repaid, the Fourth Issuer Series 4 Term
A Advance to the extent of Funding 1 Available Principal Receipts
until the Fourth Issuer Series 4 Term A Advance is fully repaid;
and
(e) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
5 Term AA Advance is fully repaid, the Fourth Issuer Series 5 Term
A Advance to the extent of Funding 1 Available Principal Receipts
therefor until the Fourth Issuer Series 5 Term A Advance is fully
repaid.
5.5 REPAYMENT OF FOURTH ISSUER TERM BBB ADVANCES 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
Subject to the provisions of Clauses 1 and 2 of Part II of Schedule 3 of
the Funding 1 Deed of Charge, 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, Funding 1 shall repay to the Fourth Issuer:
(a) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
2 Term A Advance is fully repaid, the Fourth Issuer Series 2 Term
BBB Advance to the extent of Funding 1 Available Principal
Receipts until the Fourth Issuer Series 2 Term BBB Advance is
fully repaid;
(b) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
3 Term A Advance is fully repaid, the Fourth Issuer Series 3 Term
BBB Advance to the extent of Funding 1 Available
9
Principal Receipts until the Fourth Issuer Series 3 Term BBB
Advance is fully repaid; and
(c) on each Funding 1 Interest Payment Date falling on or after the
Funding 1 Interest Payment Date on which the Fourth Issuer Series
5 Term A Advance is fully repaid, the Fourth Issuer Series 5 Term
BBB Advance to the extent of Funding 1 Available Principal
Receipts therefor until the Fourth Issuer Series 5 Term BBB
Advance is fully repaid.
5.6 REPAYMENT OF FOURTH ISSUER TERM ADVANCES 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
On and from the Funding 1 Interest Payment Date 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, Funding 1 shall repay the Fourth Issuer Term
Advances on each Funding 1 Interest Payment Date from Funding 1 Available
Principal Receipts in the manner set out in Clause 3 of Part II of
Schedule 3 to the Funding 1 Deed of Charge.
5.7 REPAYMENT OF FOURTH ISSUER TERM ADVANCES 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
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, Funding 1 shall
repay the Fourth Issuer Term Advances on each Funding 1 Interest Payment
Date from Funding 1 Available Principal Receipts in the manner set out in
Clause 4 of Part II of Schedule 3 to the Funding 1 Deed of Charge.
5.8 REPAYMENT OF FOURTH ISSUER TERM ADVANCES 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
Following the service on each Issuer (including the Fourth Issuer) of a
Note Acceleration Notice pursuant to the terms of the Fourth Issuer Deed
of Charge but prior to the service on Funding 1 of an Intercompany Loan
Acceleration Notice, Funding 1 shall apply Funding 1 Available Principal
Receipts in the manner set out in Clause 5 of Part II of Schedule 3 to the
Funding 1 Deed of Charge.
5.9 REPAYMENT FOLLOWING THE SERVICE ON FUNDING 1 OF AN INTERCOMPANY LOAN
ACCELERATION NOTICE
Following the service on Funding 1 of an Intercompany Loan Acceleration
Notice pursuant to the terms of the Funding 1 Deed of Charge, the Fourth
Issuer Intercompany Loan shall be repaid in the manner set out in Part
III of Schedule 3 to the Funding 1 Deed of Charge (as the same shall be
amended from time to time).
5.10 ACKNOWLEDGEMENT OF PREVIOUS INTERCOMPANY LOANS
The Fourth Issuer hereby acknowledges and agrees that Funding 1 has
entered into an intercompany loan agreement with Permanent Financing (No.
1) PLC (the FIRST ISSUER) dated 14th June, 2002 (the FIRST ISSUER
INTERCOMPANY LOAN AGREEMENT), an intercompany loan agreement with
Permanent Financing (No. 2) PLC (the SECOND ISSUER) dated 6th March,
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2003 (the SECOND ISSUER INTERCOMPANY LOAN AGREEMENT) and an intercompany
loan agreement with Permanent Financing (No. 3) PLC (the THIRD ISSUER)
dated 25th November, 2003 (the THIRD INTERCOMPANY LOAN AGREEMENT) and
accordingly, the obligation of Funding 1 to repay this Fourth Issuer
Intercompany Loan, the Third Issuer Intercompany Loan, the Second Issuer
Intercompany Loan and the First Issuer Intercompany Loan will depend on
the Term Advance Ratings of the various Term Advances made to Funding 1
under this Fourth Issuer Intercompany Loan Agreement, the Third Issuer
Intercompany Loan Agreement, the Second Issuer Intercompany Loan Agreement
and the First Issuer Intercompany Loan Agreement and the provisions of
Schedule 3 to the Funding 1 Deed of Charge.
5.11 ACKNOWLEDGEMENT OF NEW INTERCOMPANY LOANS
The Fourth Issuer hereby acknowledges and agrees that from time to time
Funding 1 may enter into New Intercompany Loans with New Issuers and that
the obligation of Funding 1 to repay this Fourth Issuer Intercompany Loan
and any New Intercompany Loan will depend on the Term Advance Rating of
the individual Term Advances made to Funding 1 under any of the First
Issuer Intercompany Loan, the Second Issuer Intercompany Loan Agreement,
the Third Issuer Intercompany Loan Agreement, this Fourth Issuer
Intercompany Loan any New Intercompany Loans and the provisions of
Schedule 3 to the Funding 1 Deed of Charge. Subject to Clause 25 of the
Funding 1 Deed of Charge (Supplemental Provisions Regarding the Security
Trustee), any amendments to this Agreement will be made only with the
prior written consent of each party to this Agreement.
6. PREPAYMENT
6.1 PREPAYMENT OF FOURTH ISSUER TERM ADVANCES
(a) If:
(i) the New Basel Capital Accord has been implemented in the
United Kingdom, whether by rule of law, recommendation, or
best practice or by any other regulation;
(ii) a Fourth Issuer Note Acceleration Notice has not been served
on the relevant Interest Payment Date for the exercise of
the Redemption Option;
(iii) Funding 1 has given not more than 60 days and not less than
30 days' (or such shorter period as may be required by any
relevant law or agreed with the Fourth Issuer and the
Security Trustee) prior written notice to the Fourth Issuer
and the Security Trustee of the prepayment of the relevant
Term Advances;
(iv) each Rating Agency has confirmed to Funding 1 in writing
that its then current ratings of the Notes would not be
adversely affected by the prepayment of the relevant Term
Advances on such a date; and
(v) prior to giving any such notice, Funding 1 has provided to
the Security Trustee a certificate signed by two directors
of Funding 1 to the effect that Funding 1 will have
sufficient funds to prepay the relevant Term Advances and to
pay any amounts under the Funding 1 Pre-Enforcement Revenue
Priority of Payments required to be paid in priority to or
pari passu with payments on the relevant Term Advances on
the relevant Interest Payment Date,
then Funding 1 has the right to prepay all but not some only of one
or more Term Advance of a particular ranking on any Interest
Payment Date falling on or after the Interest Payment
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Date in March 2008 at their Principal Amount Outstanding without
penalty or premium, but subject to Clause 15 (Default Interest and
Indemnity) of the Intercompany Loan Terms and Conditions; and
(b) each of the Security Trustee, Funding 1, the Fourth Issuer and the
Agent Bank shall concur in, execute and do all such deeds,
instruments, acts and things, and shall consent to any amendment,
modification or waiver of the provisions of the Fourth Issuer
Transaction Documents to which it is a party, which may be
necessary or desirable to permit and give effect to the
prepayment, including any waiver of covenants of the Funding 1.
7. CERTAIN FEES, ETC.
7.1 APPLICATION OF MONIES
The Fourth Issuer hereby agrees to apply any amounts received by way of
prepayment pursuant to Clause 6.1 (Prepayment of Fourth Issuer Term
Advances) in making repayments under the relevant Fourth Issuer Notes
pursuant to its Redemption Option.
7.2 FEE FOR PROVISION OF FOURTH ISSUER TERM ADVANCES
Funding 1 shall (except in the case of payments due under paragraphs (c),
(e), (f) and (i) below, which shall be paid when due) on each Funding 1
Interest Payment Date pay to the Fourth Issuer for same day value to the
Fourth Issuer Transaction Account a fee for the provision of the Fourth
Issuer Term Advances. Such fee shall be an amount or amounts in the
aggregate equal to the following:
(a) the fees, costs, charges, liabilities and expenses and any other
amounts due and payable to the Security Trustee pursuant to the
Fourth Issuer Deed of Charge together with interest thereon as
provided therein;
(b) the fees, costs, charges, liabilities and expenses and any other
amounts due and payable to the Note Trustee pursuant to the Fourth
Issuer Trust Deed together with interest thereon as provided
therein;
(c) the reasonable fees and expenses of any legal advisers,
accountants and auditors appointed by the Fourth Issuer and
properly incurred in their performance of their functions under
the Transaction Documents which have fallen due;
(d) the fees, costs and expenses due and payable to the Paying Agents,
the Registrar, the Transfer Agent and the Agent Bank pursuant to
the Fourth Issuer Paying Agent and Agent Bank Agreement;
(e) any amounts due and payable by the Fourth Issuer to the Inland
Revenue in respect of the Fourth Issuer's liability to United
Kingdom corporation tax (insofar as payment is not satisfied by
the surrender of group relief or out of the profits, income or
gains of the Fourth Issuer and subject to the terms of the Fourth
Issuer Deed of Charge) or any other Taxes payable by the Fourth
Issuer;
(f) the fees, costs, charges, liabilities and expenses due and payable
to the Fourth Issuer Account Bank, pursuant to the Fourth Issuer
Bank Account Agreement (if any);
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(g) the fees, costs, charges, liabilities and expenses due and payable
to the Fourth Issuer Cash Manager, pursuant to the Fourth Issuer
Cash Management Agreement;
(h) any termination payment due and payable by the Fourth Issuer to
any Fourth Issuer Swap Provider, pursuant to any Fourth Issuer
Swap Agreement;
(i) the fees, costs, charges and liabilities and expenses due and
payable to the Corporate Services Provider pursuant to the Fourth
Issuer Corporate Services Agreement;
an amount equal to "G" where G is calculated as follows:
G = (A - D - H) or, if such calculation is less than zero, then G
shall be zero
where,
A = 0.01 per cent of the interest amounts paid by Funding 1 to
the Fourth Issuer on the Fourth Issuer Term Advances on the
immediately preceding Funding 1 Interest Payment Date;
D = E - F
where,
E = the interest amounts (which excludes those fee amounts
in this Clause 6.1) paid by Funding 1 to the Fourth Issuer on
the Fourth Issuer Term Advances on the immediately preceding
Funding 1 Interest Payment Date; and
F = amounts paid by the Fourth Issuer under paragraphs (d) to
(g) of the Fourth Issuer Pre-Enforcement Revenue Priority of
Payments on the immediately preceding Funding 1 Interest
Payment Date;
and
H = the cumulative aggregate of (D - A) as calculated on
each previous Funding 1 Interest Payment Date. If such
cumulative aggregate of (D - A) is less than zero, then H
shall be zero;
(k) any other amounts due or overdue by the Fourth Issuer to third
parties including the Rating Agencies and the amounts paid by the
Fourth Issuer under the Subscription Agreement and the
Underwriting Agreement (excluding, for these purposes, the
Noteholders) other than amounts specified in paragraphs (a) to (j)
above; and
(l) if on any Funding 1 Interest Payment Date there are Fourth Issuer
Principal Receipts remaining in the Fourth Issuer Bank Accounts,
an amount equal to the difference between (i) the interest that
would be earned by the Fourth Issuer on such Fourth Issuer
Principal Receipts remaining in the Fourth Issuer Bank Accounts
during the next succeeding Interest Period and (ii) the interest
that would be payable by the Fourth Issuer applying the weighted
average rate of interest payable on the Series 5 Fourth Issuer
Notes or the relevant Fourth Issuer Currency Swap Agreements due
for repayment at the end of that Interest Period to such Fourth
Issuer Principal Receipts remaining in the Fourth Issuer Bank
Accounts,
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together with, (i) in respect of taxable supplies made to the Fourth
Issuer, an amount in respect of any value added tax or similar tax
payable in respect thereof against production of a valid tax invoice; and
(ii) in respect of taxable supplies made to a person other than the
Fourth Issuer, any amount in respect of any Irrecoverable VAT or similar
tax payable in respect thereof (against production of a copy of the
relevant tax invoice), and to be applied subject to and in accordance
with the provisions of the Fourth Issuer Pre-Enforcement Revenue Priority
of Payments in the Fourth Issuer Cash Management Agreement.
7.3 SET-OFF
Funding 1 and each of the other parties to the Fourth Issuer Intercompany
Loan Agreement agree that the Fourth Issuer shall be entitled to set-off
those amounts due and payable by Funding 1 pursuant to this CLAUSE 6 on
the Closing Date against the amount to be advanced by the Fourth Issuer
to Funding 1 by way of the Fourth Issuer Term Advances on the Closing
Date.
8. APPLICATION OF CERTAIN PROVISIONS
The provisions set out in CLAUSE 4.2 (Limited Recourse) of the
Intercompany Loan Terms and Conditions shall apply to:
(a) the Fourth Issuer Term AA Advances;
(b) the Fourth Issuer Term A Advances; and
(c) the Fourth Issuer Term BBB Advances.
9. ADDRESSES
The addresses referred to in CLAUSE 18.4 (Notices) of the Intercompany
Loan Terms and Conditions are as follows:
THE SECURITY TRUSTEE:
THE BANK OF NEW YORK
For the attention of: Global Structured Finance - Corporate Trust
Address: The Bank of New York
One Canada Square
London
E14 5AL
Facsimile: + 44 20 7964 60 1/6399
THE FOURTH ISSUER:
For the attention of: The Secretary
Address: Permanent Financing (No. 4) PLC
Facsimile: +44 (0) 20 7556 0975
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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
FUNDING 1:
For the attention of: The Secretary
Address: Permanent Funding (No. 1) Limited
Facsimile: +44 (0) 20 7556 0975
Copy to: HBOS Treasury Services plc
33 Old Broad Street
London EC2N 1HZ
Facsimile number: +44 (0) 20 7574 8784
For the attention of: Head of Capital Markets and Securitisation
RATING AGENCIES:
MOODY'S:
Address: 2 Minster Court, Mincing Lane, London EC3R 7XB
For the attention of: Nicholas Lindstrom
Telephone: +44 (0) 20 7772 5332
Facsimile: +44 (0) 20 7772 5400
S&P:
Address: Garden House, 18 Finsbury Circus, London EC2M 7NJ
For the attention of: Andre Vollmann
Telephone: +44 (0) 20 7826 3855
Facsimile: +44 (0) 20 7826 3598
FITCH:
Address: 101 Finsbury Pavement, London EC2A 1RS
For the attention of: FS Surveillance
Telephone: +44 (0) 20 7417 4355
Facsimile: +44 (0) 20 7417 6262
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SCHEDULE 1
CONDITIONS PRECEDENT IN RESPECT OF DRAWDOWN
1. AUTHORISATIONS
(a) A copy of the memorandum and articles of association, certificate
of incorporation and certificate of incorporation on change of
name of Funding 1.
(b) A copy of a resolution of the board of directors of Funding 1
authorising the entry into, execution and performance of each of
the Transaction Documents to which Funding 1 is a party and
authorising specified persons to execute those on its behalf.
(c) A certificate of a director of Funding 1 certifying:
(i) that each document delivered under this paragraph of is
correct, complete and in full force and effect as at a date
no later than the date of execution of the Fourth Issuer
Intercompany Loan Agreement and undertaking to notify the
Security Trustee if that position should change prior to the
first Drawdown Date; and
(ii) as to the identity and specimen signatures of the directors
and signatories of Funding 1.
2. SECURITY
(a) The Funding 1 Deed of Charge (and the Third Deed of Accession)
duly executed by the parties thereto.
(b) The Second Supplemental Funding 1 Deed of Charge duly executed by
the parties thereto.
(c) Duly completed bank account mandates in respect of the Funding 1
GIC Account and the Funding 1 Transaction Account.
(d) Security Power of Attorney for Funding 1.
3. LEGAL OPINION
Legal opinions of:
(a) Allen & Overy, English and U.S. legal advisers to the Seller, the
Fourth Issuer and the Servicer, addressed to, inter
alios, the Security Trustee; and
(b) Sidley Austin Brown & Wood, English and U.S. legal advisers to the
Arrangers, addressed to, inter alios, the Security Trustee.
4. TRANSACTION DOCUMENTS
Duly executed copies of:
(a) the Servicing Agreement;
(b) the Mortgages Trust Deed;
(c) the Halifax Deed and Power of Attorney;
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(d) the Funding 1 Deed of Charge;
(e) the Funding 1 Swap Agreement;
(f) the Corporate Services Agreements;
(g) the Funding 1 Liquidity Facility Agreement;
(h) the Scottish Declaration of Trust;
(i) the First Issuer Intercompany Loan Agreement, the Second Issuer
Intercompany Loan Agreement and the Third Issuer Intercompany Loan
Agreement and the Fourth Issuer Intercompany Loan Agreement;
(j) the Cash Management Agreement;
(k) the Bank Account Agreement;
(l) the Funding 1 Guaranteed Investment Contract;
(m) the First Start-up Loan Agreement, the Second Issuer Start-up Loan
Agreement, the Third Start-up Loan Agreement and the Fourth Start-
up Loan Agreement;
(n) the Mortgage Sale Agreement;
(o) the Seller Power of Attorney;
(p) the Fourth Issuer Deed of Charge;
(q) the Fourth Issuer Cash Management Agreement;
(r) the Fourth Issuer Swap Agreements;
(s) the Fourth Issuer Bank Account Agreement;
(t) the Fourth Issuer Post-Enforcement Call Option Agreement;
(u) the Fourth Issuer Trust Deed;
(v) the Fourth Issuer Global Notes;
(w) the Fourth Issuer Paying Agent and Agent Bank Agreement;
(x) the Underwriting Agreement;
(y) the Subscription Agreement;
(z) the Mortgages Trustee Guaranteed Investment Contract; and
(aa) the Master Definitions and Construction Schedule, the First Issuer
Master Definitions and Construction Schedule, the Second Issuer
Master Definitions and Construction Schedule, the Third Issuer
Master Definitions and Construction Schedule and the Fourth Issuer
Master Definitions and Construction Schedule.
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5. BOND DOCUMENTATION
(a) Confirmation that the Fourth Issuer Notes have been issued and the
subscription proceeds received by the Fourth Issuer; and
(b) Copies of the Offering Circular.
6. MISCELLANEOUS
Solvency certificates from Funding 1 signed by two directors of Funding 1
in or substantially in the form set out in Schedule 2 to the Intercompany
Loan Terms and Conditions.
SIGNATORIES
IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed
on the day and year appearing on page 1.
FUNDING 1
SIGNED by )
for and on behalf of )
PERMANENT FUNDING (NO. 1) LIMITED )
FOURTH ISSUER
SIGNED by )
for and on behalf of )
PERMANENT FINANCING (NO. 4) PLC )
SECURITY TRUSTEE
SIGNED by )
for and on behalf of )
THE BANK OF NEW YORK )
AGENT BANK
SIGNED by )
for and on behalf of )
CITIBANK, N.A., )
LONDON BRANCH )
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