EX-4 15 ex4-12.txt Exhibit 4.12 EXECUTION COPY AMENDED AND RESTATED BANK ACCOUNT AGREEMENT 17 OCTOBER 2006 PERMANENT FUNDING (NO. 1) LIMITED as Funding 1 and PERMANENT FUNDING (NO. 2) LIMITED as Funding 2 and PERMANENT MORTGAGES TRUSTEE LIMITED as Mortgages Trustee and HALIFAX PLC as Cash Manager and Seller and THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND as Account Bank and THE BANK OF NEW YORK as Funding 1 Security Trustee and Funding 2 Security Trustee ALLEN & OVERY ALLEN & OVERY LLP CONTENTS CLAUSE PAGE 1. Definitions and Interpretation.........................................3 2. The Funding 1 Transaction Account, the Funding 1 GIC Account, the Funding 2 Transaction Account, the Funding 2 GIC Account and the Mortgages Trustee GIC Account..........................................4 3. Payment................................................................5 4. Mandates...............................................................5 5. Acknowledgement by the Account Bank....................................6 6. Certification, Indemnity and Acceleration Notice.......................7 7. Change of Funding 1 Security Trustee and Funding 2 Security Trustee or Account Bank........................................................9 8. Termination............................................................9 9. Further Assurance.....................................................12 10. Confidentiality.......................................................12 11. Costs.................................................................13 12. Notices...............................................................13 13. Interest..............................................................14 14. Withholding...........................................................14 15. Tax Status............................................................15 16. Entire Agreement......................................................15 17. Assignment............................................................15 18. The Funding 1 Security Trustee and Funding 2 Security Trustee.........15 19. Amendments, Waivers and Consents......................................16 20. Exclusion of Third Party Rights.......................................16 21. Counterparts and Severability.........................................16 22. Governing Law.........................................................16 23. Submission to Jurisdiction............................................16 SCHEDULE 1. Forms of Mandate......................................................17 2. Forms of Notice of Charge and Acknowledgement.........................18 Part 1 Notice of Charge - Funding 1 Transaction Account/ Funding 1 GIC Account........................................18 Part 2 Acknowledgement - Funding 1 Transaction Account/ Funding 1 GIC Account........................................20 Part 3 Notice of Charge - Funding 2 Transaction Account/ Funding 2 GIC Account........................................21 Part 4 Acknowledgement - Funding 2 Transaction Account/ Funding 2 GIC Account...................... .................23 Signatories..................................................................24 THIS AMENDED AND RESTATED BANK AGREEMENT (this AGREEMENT) is made on 17 October 2006 BETWEEN: (1) PERMANENT FUNDING (NO. 1) LIMITED (registered number 4267660), a private limited company incorporated under the laws of England and Wales, whose registered office is at 35 Great St. Helen's, London EC3A 6AP (FUNDING 1); (2) PERMANENT FUNDING (NO. 2) LIMITED (registered number 4441772), a private limited company incorporated under the laws of England and Wales whose registered office is at 35 Great St. Helen's, London EC3A 6AP (FUNDING 2); (3) PERMANENT MORTGAGES TRUSTEE LIMITED (registered number 83116), a private limited company incorporated under the laws of Jersey, Channel Islands, whose registered office is at 47 Esplanade, St. Helier, Jersey JE1 0BD (the MORTGAGES TRUSTEE); (4) HALIFAX PLC (registered number 2367076), a public limited company incorporated under the laws of England and Wales whose registered office is at Trinity Road, Halifax, West Yorkshire HX1 2RG, in its capacity as CASH MANAGER to Funding 1, Funding 2 and the Mortgages Trustee pursuant to the Cash Management Agreement; (5) THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND, a company established by an Act of Parliament of Scotland in 1695 and having its head office at The Mound, Edinburgh EH1 1YZ, acting in its capacity as ACCOUNT BANK from the branch located at (in the case of the Mortgages Trustee GIC Account, the Funding 1 Transaction Account, the Funding 1 GIC Account, the Funding 2 Transaction Account and the Funding 2 GIC Account) 116 Wellington Street, Leeds LS1 4LT; (6) THE BANK OF NEW YORK, a New York Banking Corporation acting through its offices at 48th Floor, One Canada Square, London E14 5AL, in its capacity as FUNDING 1 SECURITY TRUSTEE; and (7) THE BANK OF NEW YORK, a New York Banking Corporation acting through its offices at 48th Floor, One Canada Square, London E14 5AL, in its capacity as FUNDING 2 SECURITY TRUSTEE. IT IS HEREBY AGREED AS FOLLOWS: 1. DEFINITIONS AND INTERPRETATION 1.1 The amended and restated master definitions and construction schedule signed by, amongst others, the parties to this Agreement and dated 17 October 2006 (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) is expressly and specifically incorporated into this Agreement and, accordingly, the expressions defined in the Master Definitions and Construction Schedule (as so amended, varied or supplemented from time to time) shall, except where the context otherwise requires and save where otherwise defined herein, have the same meanings in this Agreement, including the Recitals hereto and this Agreement shall be construed in accordance with the interpretation provisions set out in clause 2 of the Master Definitions and Construction Schedule. 1.2 This Agreement amends and restates the Account Bank Agreement made on 14th June, 2002 as amended and restated on 22 March 2006 (the PRINCIPAL AGREEMENT). As of the date of this Agreement, any future rights or obligations (excluding such obligations accrued to the date of this 3 Agreement) of a party under the Principal Agreement shall be extinguished and shall instead be governed by this Agreement. 1.3 Any reference in this Agreement to any discretion, power, right, duty or obligation on the part of the Mortgages Trustee shall be as exercised by the Mortgages Trustee only as directed by the Beneficiaries but subject in each case to the provisions of Clause 16 of the Mortgages Trust Deed. 2. THE FUNDING 1 TRANSACTION ACCOUNT, THE FUNDING 1 GIC ACCOUNT, THE FUNDING 2 TRANSACTION ACCOUNT, THE FUNDING 2 GIC ACCOUNT AND THE MORTGAGES TRUSTEE GIC ACCOUNT 2.1 INSTRUCTIONS FROM THE CASH MANAGER Subject to Clause 6.5, the Account Bank shall comply with any direction of the Cash Manager to effect a payment by debiting any one of the Funding 1 Transaction Account, the Funding 1 GIC Account, the Funding 2 Transaction Account, the Funding 2 GIC Account or the Mortgages Trustee GIC Account (and/or any additional or replacement bank accounts opened in the name of either the Mortgages Trustee and/or Funding 1 and/or Funding 2 from time to time with the prior written consent of the Funding 1 Security Trustee and/or Funding 2 Security Trustee and the Rating Agencies, together, the BANK ACCOUNTS) if such direction (i) is in writing or is given by the internet banking service provided by the Account Bank and (ii) complies with the Funding 1 Transaction Account Mandate, the Funding 1 GIC Account Mandate, the Funding 2 Transaction Account Mandate, the Funding 2 GIC Account Mandate or the Mortgages Trustee GIC Account Mandate as appropriate. 2.2 TIMING OF PAYMENT The Account Bank agrees that if directed pursuant to Clause 2.1 to make any payment then, subject to Clauses 2.4 and 6.5 below, it will do so prior to close of business on the London Business Day on which such direction is received and for value that day provided that, if any direction is received later than 2.30 p.m. (London time) on any London Business Day or, in the case of a payment to another account with the Account Bank at the same branch 4.00 p.m. (London time) on any London Business Day, the Account Bank shall make such payment at the commencement of business on the following London Business Day for value that day. 2.3 ACCOUNT BANK CHARGES (a) The charges of the Account Bank for the operation of the each of the Bank Accounts payable by the Mortgages Trustee shall be debited to the Mortgages Trustee GIC Account only on each Distribution Date in accordance with the Mortgages Trust Revenue Priority of Payments and the terms of the Mortgages Trust Deed and the Mortgages Trustee by its execution hereof irrevocably agrees that this shall be done. The charges shall be payable at the same rates as are generally applicable to the business customers of the Account Bank provided that, subject to Clause 8.6, if there are insufficient funds standing to the credit of the Mortgages Trustee GIC Account to pay such charges the Account Bank shall not be relieved of its obligations in respect of any of the Bank Accounts. (b) The charges of the Account Bank for the operation of the each of the Bank Accounts payable by the Funding 1 shall be debited to the Funding 1 Transaction Account only on each date payable in accordance with the Funding 1 Pre-Enforcement Revenue Priority of Payments and the terms of the Funding 1 Deed of Charge and Funding 1 by its execution hereof irrevocably agrees that this shall be done. The charges shall be payable at the same rates as are generally applicable to the business customers of the Account Bank provided that, subject to Clause 8.6, if there are insufficient funds standing to the credit of the Funding 1 Transaction Account to pay such charges the Account Bank shall not be relieved of its obligations in respect of any of the Bank Accounts. 4 (c) The charges of the Account Bank for the operation of the each of the Bank Accounts payable by the Funding 2 shall be debited to the Funding 2 Transaction Account only on each date payable in accordance with the Funding 2 Pre-Enforcement Revenue Priority of Payments and the terms of the Funding 2 Deed of Charge and Funding 2 by its execution hereof irrevocably agrees that this shall be done. The charges shall be payable at the same rates as are generally applicable to the business customers of the Account Bank provided that, subject to Clause 8.6, if there are insufficient funds standing to the credit of the Funding 2 Transaction Account to pay such charges the Account Bank shall not be relieved of its obligations in respect of any of the Bank Accounts. 2.4 NO NEGATIVE BALANCE Notwithstanding the provisions of Clause 2.1, amounts shall only be withdrawn from any Bank Account to the extent that such withdrawal does not cause the relevant Bank Accounts to have a negative balance. 3. PAYMENT 3.1 INSTRUCTIONS FROM THE CASH MANAGER (a) The Cash Manager shall, before the date upon which any payment is due to be made from any Bank Account (including the payments due to be made on each Funding 1 Interest Payment Date and/or Funding 2 Interest Payment Date and/or Distribution Date), submit to the Account Bank irrevocable written instructions or instructions by way of the internet banking service provided by the Account Bank as to the payments to be made out of such Bank Account or Bank Accounts (as the case may be) on such date. (b) The Account Bank shall comply with the instructions described in paragraph 3(a) and shall effect the payments specified in such instructions not later than the time specified for payment therein (provided that the Account Bank shall not have any liability to any person if it fails to effect timely payment by reason of strike, computer failure, power cut or other matters beyond its control) on the relevant date if the instructions comply with the relevant Mandate. 4. MANDATES 4.1 SIGNING AND DELIVERY OF MANDATES Funding 1 and the Mortgages Trustee have delivered to the Account Bank prior to the Initial Closing Date and Funding 2 has delivered to the Account Bank on or prior to the Funding 2 Programme Date the duly executed relevant Mandates in or substantially in the forms set out in Schedule 1 hereto and relating to the Bank Accounts (together, the MANDATES), and the Account Bank hereby confirms to the Funding 1 Security Trustee and the Funding 2 Security Trustee that the Mandates have been provided to it, that the Bank Accounts are open and that the respective Mandates are operative. The Account Bank acknowledges that the Mandates and any other mandates delivered from time to time pursuant to the terms hereof shall be subject to the terms of the Funding 1 Deed of Charge, the Funding 2 Deed of Charge, the Mortgages Trust Deed and this Agreement as appropriate. 4.2 AMENDMENT OR REVOCATION The Account Bank agrees that it shall notify the Funding 1 Security Trustee and/or the Funding 2 Security Trustee (as applicable) as soon as is reasonably practicable and in accordance with Clause 12 if it receives any amendment to or revocation of any Mandate relating to the Bank Accounts (other than a change of Authorised Signatory) and shall require the prior written consent of the Funding 1 Security Trustee and/or the Funding 2 Security Trustee (as applicable) to any such 5 amendment or revocation (other than a change of Authorised Signatory) but, unless such Mandate is revoked, the Account Bank may continue to comply with such Mandate (as it may from time to time be amended in accordance with the provisions of this Clause 4.2) unless it receives notice in writing from the Funding 1 Security Trustee and/or the Funding 2 Security Trustee (as applicable) to the effect that an Intercompany Loan Acceleration Notice or a Master Intercompany Loan Acceleration Notice has been served or that the appointment of Halifax plc as Cash Manager under the Cash Management Agreement has been terminated and shall, thereafter, act solely on the instructions of the Funding 1 Security Trustee and/or the Funding 2 Security Trustee (as applicable) and in accordance with the terms thereof as provided in Clause 6.5 of this Agreement. 5. ACKNOWLEDGEMENT BY THE ACCOUNT BANK 5.1 RESTRICTION ON ACCOUNT BANK'S RIGHTS Notwithstanding anything to the contrary in the Mandates, the Account Bank hereby: (a) waives any right it has or may hereafter acquire to combine, consolidate or merge any of the Bank Accounts with any other account of the Cash Manager, the Mortgages Trustee, Funding 1, Funding 2, the Seller, the Funding 1 Security Trustee, the Funding 2 Security Trustee or any other person or any liabilities of the Cash Manager, the Mortgages Trustee, Funding 1, Funding 2, the Seller, the Funding 1 Security Trustee, the Funding 2 Security Trustee or any other person to it; (b) agrees that it may not exercise any lien or, to the extent permitted by law, any set-off or transfer any sum standing to the credit of or to be credited to any of the Bank Accounts in or towards satisfaction of any liabilities to it of the Cash Manager, the Mortgages Trustee, Funding 1, Funding 2, the Seller, the Funding 1 Security Trustee, the Funding 2 Security Trustee or any other person owing to it; (c) in addition to and without prejudice to its rights and obligations as Funding 1 Secured Creditor and/or Funding 2 Secured Creditor, agrees that it will not take, and shall not take, any steps whatsoever to recover any amount due or owing to it pursuant to this Agreement or any other debts whatsoever owing to it by the Mortgages Trustee, Funding 1 or Funding 2, or procure the winding-up or liquidation of the Mortgages Trustee, Funding 1 or Funding 2, or the making of an administration order in relation to the Mortgages Trustee, Funding 1 or Funding 2, or in respect of any of the liabilities of the Mortgages Trustee, Funding 1 or Funding 2 whatsoever; (d) agrees that it shall have recourse only to sums paid to or received by (or on behalf of) the Mortgages Trustee, Funding 1 or Funding 2 pursuant to this Agreement, the Mortgage Sale Agreement, the Mortgages Trust Deed, the Intercompany Loan Agreements, the Master Intercompany Loan Agreement, the Funding 1 Swap Agreement, the Funding 2 Swap Agreement or any other document entered into by the Mortgages Trustee, Funding 1 and Funding 2 in relation to the Intercompany Loans, the Master Intercompany Loans or the Loans; (e) agrees that it will notify in accordance with Clause 12 the Cash Manager, Funding 1, Funding 2, the Mortgages Trustee, the Funding 1 Security Trustee and the Funding 2 Security Trustee if compliance with any instruction would cause the relevant Bank Account(s) to which such instruction relates to have a negative balance such notification to be given on the same London Business Day that it determines that compliance with such instruction would cause any such account to have a negative balance; 6 (f) acknowledges that Funding 1 has, pursuant to the Funding 1 Deed of Charge, inter alia, assigned by way of security all its rights, title, interest and benefit, present and future, in and to, all sums from time to time standing to the credit of the Bank Accounts and all of its rights under this Agreement to the Funding 1 Security Trustee; and (g) acknowledges that Funding 2 has, pursuant to the Funding 2 Deed of Charge, inter alia, assigned by way of security all its rights, title, interest and benefit, present and future, in and to, all sums from time to time standing to the credit of the Bank Accounts and all of its rights under this Agreement to the Funding 2 Security Trustee. 5.2 NOTICE OF ASSIGNMENT AND ACKNOWLEDGEMENT (a) The Account Bank agrees that promptly upon receipt of a notice of assignment signed by Funding 1, in (or substantially in) the form of notice set out in Part 1 of Schedule 2, hereto, the Account Bank shall sign and duly return to Funding 1, with a copy to the Funding 1 Security Trustee and the Funding 2 Security Trustee, an acknowledgement in (or substantially in) the form of acknowledgement set out in Part 2 of Schedule 2 hereto. (b) The Account Bank agrees that promptly upon receipt of a notice of assignment signed by Funding 2, in (or substantially in) the form of notice set out in Part 3 of Schedule 2 hereto, the Account Bank shall sign and duly return to Funding 2 with a copy to the Funding 1 Security Trustee and the Funding 2 Security Trustee, an acknowledgement in (or substantially in) the form of acknowledgement set out in Part 4 of Schedule 2 hereto. 5.3 MONTHLY STATEMENT Unless and until directed otherwise by the Funding 1 Security Trustee and the Funding 2 Security Trustee in accordance with Clause 12, the Account Bank shall provide the Cash Manager with a written statement in respect of each Bank Account on a monthly basis and also as soon as reasonably practicable after receipt of a request for a statement. The Account Bank is hereby authorised by Funding 1, Funding 2 and the Mortgages Trustee to provide statements in respect of each Bank Account to the Cash Manager, the Funding 1 Security Trustee and the Funding 2 Security Trustee. 6. CERTIFICATION, INDEMNITY AND ACCELERATION NOTICE 6.1 ACCOUNT BANK TO COMPLY WITH CASH MANAGER'S INSTRUCTIONS Unless otherwise directed in writing by the Funding 1 Security Trustee and the Funding 2 Security Trustee pursuant to Clause 6.5, in making any transfer or payment from any Bank Account in accordance with this Agreement, the Account Bank shall be entitled to act as directed by the Cash Manager pursuant to Clauses 2.1 and 3 and to rely as to the amount of any such transfer or payment on the Cash Manager's instructions in accordance with the relevant Mandate, and the Account Bank shall have no liability to the Cash Manager, the Mortgages Trustee, Funding 1, Funding 2, the Seller, the Funding 1 Security Trustee or the Funding 2 Security Trustee for having acted on such instructions except in the case of its wilful default, fraud or negligence. 6.2 FUNDING 1'S INDEMNITY Funding 1 shall indemnify the Account Bank or, pursuant to Clause 6.5, the Funding 1 Security Trustee, as the case may be, to the extent of funds then standing to the credit of the Funding 1 Transaction Account and/or the Funding 1 GIC Account against any loss, cost, damage, charge or expense incurred by the Account Bank or the Funding 1 Security Trustee, as the case may be, in complying with any instruction delivered by Funding 1 pursuant to and in accordance with this Agreement, save that this indemnity shall not extend to: 7 (a) the charges of the Account Bank (if any) for the operation of the Funding 1 Transaction Account and/or the Funding 1 GIC Account other than as provided in this Agreement; and (b) any loss, cost, damage, charge or expense arising from any breach by the Account Bank of its obligations under this Agreement. 6.3 FUNDING 2'S INDEMNITY Funding 2 shall indemnify the Account Bank or, pursuant to Clause 6.5, the Funding 2 Security Trustee, as the case may be, to the extent of funds then standing to the credit of the Funding 2 Transaction Account and/or the Funding 2 GIC Account against any loss, cost, damage, charge or expense incurred by the Account Bank or the Funding 2 Security Trustee, as the case may be, in complying with any instruction delivered by Funding 2 pursuant to and in accordance with this Agreement, save that this indemnity shall not extend to: (a) the charges of the Account Bank (if any) for the operation of the Funding 2 Transaction Account and/or the Funding 2 GIC Account other than as provided in this Agreement; and (b) any loss, cost, damage, charge or expense arising from any breach by the Account Bank of its obligations under this Agreement. 6.4 MORTGAGES TRUSTEE INDEMNITY Subject to the Mortgages Trust Revenue Priority of Payments, the Mortgages Trustee shall indemnify the Account Bank to the extent of funds then standing to the credit of the Mortgages Trustee GIC Account against any loss, cost, damage, charge or expense incurred by the Account Bank in complying with any instruction delivered pursuant to and in accordance with this Agreement, save that this indemnity shall not extend to: (a) the charges of the Account Bank (if any) for the operation of the Mortgages Trustee GIC Account other than as provided in this Agreement; and (b) any loss, cost, damage, charge or expense arising from any breach by the Account Bank of its obligations under this Agreement. 6.5 CONSEQUENCES OF AN INTERCOMPANY LOAN ACCELERATION NOTICE OR A MASTER INTERCOMPANY LOAN ACCELERATION NOTICE The Account Bank acknowledges that, if it receives notice in writing from the Funding 1 Security Trustee and the Funding 2 Security Trustee to the effect that (a) the Funding 1 Security Trustee has served an Intercompany Loan Acceleration Notice or the Funding 2 Security Trustee has served a Master Intercompany Loan Acceleration Notice or (b) that the appointment of Halifax plc as Cash Manager under the Cash Management Agreement has been terminated (but without prejudice to Clause 6.1 above) all right, authority and power of the Cash Manager in respect of each of the Bank Accounts shall be terminated and be of no further effect and the Account Bank agrees that it shall, upon receipt of such notice from the Funding 1 Security Trustee and the Funding 2 Security Trustee, comply with the directions of the Funding 1 Security Trustee and the Funding 2 Security Trustee or any successor cash manager appointed by the Funding 1 Security Trustee and the Funding 2 Security Trustee (subject to such successor cash manager having entered into an agreement with the Account Bank on substantially the same terms as this Agreement) in relation to the operation of each of the Bank Accounts. 8 7. CHANGE OF FUNDING 1 SECURITY TRUSTEE AND FUNDING 2 SECURITY TRUSTEE OR ACCOUNT BANK 7.1 CHANGE OF FUNDING 1 SECURITY TRUSTEE AND FUNDING 2 SECURITY TRUSTEE In the event that there is any change in the identity of the Funding 1 Security Trustee and/or the Funding 2 Security Trustee or an additional Funding 1 Security Trustee and/or an additional Funding 2 Security Trustee are appointed in accordance with the provisions of the Funding 1 Deed of Charge and/or the Funding 2 Deed of Charge, the existing Funding 1 Security Trustee and the existing Funding 2 Security Trustee, the new Funding 1 Security Trustee and the new Funding 2 Security Trustee or the retiring Funding 1 Security Trustee and the retiring Funding 2 Security Trustee, as the case may be, the Cash Manager, the Seller, the Mortgages Trustee, Funding 1, Funding 2 and the Account Bank shall execute such documents and take such actions as such of the new Funding 1 Security Trustee and the new Funding 2 Security Trustee and the retiring Funding 1 Security Trustee and the retiring Funding 2 Security Trustee or, as the case may be, the existing Funding 1 Security Trustee and the existing Funding 2 Security Trustee shall agree are reasonably necessary for the purpose of vesting in such new Funding 1 Security Trustee and/or the new Funding 2 Security Trustee the rights, benefits and obligations of the Funding 1 Security Trustee and/or the Funding 2 Security Trustee under this Agreement and releasing the retiring Funding 1 Security Trustee and/or the retiring Funding 2 Security Trustee from its future obligations hereunder. 7.2 CHANGE OF ACCOUNT BANK If there is any change in the identity of the Account Bank, the Cash Manager, the Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2 Security Trustee shall execute such documents and take such actions as the new Account Bank and the outgoing Account Bank, the Funding 1 Security Trustee and the Funding 2 Security Trustee may require for the purpose of vesting in the new Account Bank the rights and obligations of the outgoing Account Bank and releasing the outgoing Account Bank from its future obligations under this Agreement. 8. TERMINATION 8.1 TERMINATION EVENTS The Cash Manager or Funding 1, in the case of the Funding 1 Transaction Account or the Funding 1 GIC Account, or Funding 2, in the case of the Funding 2 Transaction Account or the Funding 2 GIC Account or the Cash Manager, Funding 1, Funding 2 or the Mortgages Trustee (as trustee for the Beneficiaries) in the case of the Mortgages Trustee GIC Account or any other Bank Account opened in the name of the Mortgages Trustee: (i) may (with the prior written consent of the Funding 1 Security Trustee and the Funding 2 Security Trustee) terminate this Agreement in the event that the matters specified in paragraphs (a) or (f) below occur; and (ii) shall (with the prior written consent of the Funding 1 Security Trustee and the Funding 2 Security Trustee) terminate this Agreement in the event that any of the matters specified in paragraphs (b) to (e) (inclusive) below occur, in each case by serving a written notice of termination on the Account Bank in any of the following circumstances: (a) if a deduction or withholding for or on account of any Tax is imposed, or it appears likely that such a deduction or withholding will be imposed, in respect of the interest payable on any Bank Account; or 9 (b) if the short-term unsecured, unsubordinated and unguaranteed debt obligations of the Account Bank falls below A-1+ by S&P and P-1 by Moody's and F1+ by Fitch Ratings respectively; or (c) if the Account Bank, otherwise than for the purposes of such amalgamation or reconstruction as is referred to in paragraph (d) below, ceases or, through an authorised action of the board of directors of the Account Bank, threatens to cease to carry on all or substantially all of its business or the Account Bank is deemed unable to pay its debts as and when they fall due within the meaning of Section 123(1) (a) of the Insolvency Act 1986 (on the basis that the reference in such section to [POUND]750 was read as a reference to [POUND]10 million), Section 123(1)(b), (d) and (e), 123(1)(c) (on the basis that the words "for a sum exceeding [POUND]10 million" were inserted after the words "extract registered bond" and "extract registered protest" and 123(2) of the Insolvency Act 1986 (as that Section may be amended) or ceases to be an appropriately authorised institution under the Financial Services and Markets Act 2000; or (d) if an order is made or an effective resolution is passed for the winding-up of the Account Bank except a winding-up for the purposes of or pursuant to a solvent amalgamation or reconstruction the terms of which have previously been approved in writing by the Mortgages Trustee (as trustee for the Beneficiaries), the Funding 1 Security Trustee and the Funding 2 Security Trustee (such approval not to be unreasonably withheld or delayed); or (e) if proceedings are initiated against the Account Bank under any applicable liquidation, insolvency, bankruptcy, composition, reorganisation (other than a reorganisation where the Account Bank is solvent) or other similar laws (including, but not limited to, presentation of a petition for an administration order) and (except in the case of presentation of petition for an administration order) such proceedings are not, in the reasonable opinion of the Mortgages Trustee (as trustee for the Beneficiaries), Funding 1 and Funding 2, being disputed in good faith with a reasonable prospect of success or an administration order is granted or an administrator, administrative receiver or other receiver, liquidator, trustee in sequestration or other similar official is appointed in relation to the Account Bank or in relation to the whole or any substantial part of the undertaking or assets of the Account Bank, or an encumbrancer takes possession of the whole or any substantial part of the undertaking or assets of the Account Bank, or a distress, execution or diligence or other process is levied or enforced upon or sued out against the whole or any substantial part of the undertaking or assets of the Account Bank and such possession or process (as the case may be) is not discharged or otherwise ceases to apply within 30 days of its commencement, or the Account Bank initiates or consents to judicial proceedings relating to itself under applicable liquidation, insolvency, bankruptcy, composition, reorganisation or other similar laws or makes a conveyance or assignment or assignation for the benefit of its creditors generally; or (f) if the Account Bank fails to perform any of its obligations under this Agreement and such failure remains unremedied for three Business Days after the Cash Manager or the Funding 1 Security Trustee and the Funding 2 Security Trustee have given notice of such failure. 8.2 TERMINATION OPTION With the prior written consent of Funding 1 Security Trustee and the Funding 2 Security Trustee, the Mortgages Trustee (as trustee for the Beneficiaries) may, upon a breach by the Account Bank of its obligations under this Agreement, the Mortgages Trustee Guaranteed Investment Contract, the Cash Management Agreement, the Funding 1 Deed of Charge or the Funding 2 Deed of Charge, and/or Funding 1 may, upon a breach by the Account Bank of its obligations under this Agreement, any Funding 1 Bank Account Agreement, the Funding 1 Guaranteed Investment Contract, the Funding 1 10 Liquidity Facility Agreement, the Cash Management Agreement, any Funding 1 Issuer Cash Management Agreement or the Funding 1 Deed of Charge and/or Funding 2 may, upon a breach by the Account Bank of its obligations under this Agreement, the Master Issuer Bank Account Agreement, the Funding 2 Guaranteed Investment Contract, the Cash Management Agreement, the Master Issuer Cash Management Agreement or the Funding 2 Deed of Charge, terminate the appointment of the Account Bank by serving a written notice of termination to the Account Bank and the Cash Manager, the Mortgages Trustee, Funding 1 and Funding 2 shall, subject to the terms of Clause 8.5, use reasonable endeavours to find a replacement financial institution or institutions within 60 days of the date of the notice. 8.3 NOTIFICATION OF TERMINATION EVENT Each of the Mortgages Trustee, Funding 1, Funding 2, the Cash Manager and the Account Bank undertakes and agrees to notify the Funding 1 Security Trustee and the Funding 2 Security Trustee in accordance with Clause 12 promptly upon becoming aware thereof of any event which would or could entitle the Funding 1 Security Trustee and the Funding 2 Security Trustee to serve a notice of termination pursuant to Clause 8.4. 8.4 TERMINATION BY FUNDING 1 SECURITY TRUSTEE AND FUNDING 2 SECURITY TRUSTEE In addition, prior to the service of an Intercompany Loan Acceleration Notice and/or a Master Intercompany Loan Acceleration Notice, the Funding 1 Security Trustee and the Funding 2 Security Trustee may terminate this Agreement and close any of the Bank Accounts by serving a notice of termination if any of the events specified in Clause 8.1(a) to (f) (inclusive) of this Agreement occurs in relation to the Account Bank. Following the service of an Intercompany Loan Acceleration Notice and/or a Master Intercompany Loan Acceleration Notice the Funding 1 Security Trustee and the Funding 2 Security Trustee may serve a notice of termination at any time. 8.5 REPLACEMENT ACCOUNT BANK The termination of the Account Bank under Clauses 8.1, 8.2 and 8.4 of this Agreement shall not be effective: (a) until a replacement financial institution or institutions (in each case, (i) with a short-term unsecured, unsubordinated and unguaranteed debt obligation rating of at least P-1 (in the case of Moody's) and A-1+ (in the case of S&P) and F1+ (in the case of Fitch Ratings) and (ii) being an authorised institution under the Financial Services and Markets Act 2000) shall have entered into an agreement in form and substance similar to this Agreement; and (b) unless such termination would not adversely affect the then current ratings of the Notes. In the event of such termination the Account Bank shall assist the other parties hereto to effect an orderly transition of the banking arrangements documented hereby and the Mortgages Trustee, Funding 1 and Funding 2 (as applicable) shall reimburse the Account Bank for its reasonable costs and any amounts in respect of Irrecoverable VAT thereon (including reasonable costs and expenses) incurred during the period of, and until completion of, such transition. 8.6 AUTOMATIC TERMINATION This Agreement shall automatically terminate (if not terminated earlier pursuant to this Clause 8) on the date falling 90 days after the termination of the Mortgages Trust Deed. 11 8.7 TERMINATION BY ACCOUNT BANK The Account Bank may terminate this Agreement and cease to operate the Bank Accounts at any time: (a) on giving not less than six months' prior written notice thereof ending on any London Business Day which does not fall on either a Distribution Date, a Funding 1 Interest Payment Date or a Funding 2 Interest Payment Date or less than 10 London Business Days before any such date to each of the other parties hereto without assigning any reason therefor; and (b) on giving not less than three months' prior written notice thereof ending on any London Business Day which does not fall on either a Distribution Date, a Funding 1 Interest Payment Date or a Funding 2 Interest Payment Date or less than 10 London Business Days before any such date to each of the other parties hereto, if the Account Bank shall have demanded payment of its due charges or any interest and the same shall have remained unpaid for a period of one month, provided that if the relevant amounts have been paid on or before the date six weeks after the date of delivery of such notice then the notice shall have no effect, Provided that such termination shall not take effect: (i) until a replacement financial institution or institutions (in each case, (x) with a short-term unsecured, unsubordinated and unguaranteed debt obligation rating of A-1+ (in the case of S&P), P-1 (in the case of Moody's) and F1+ (in the case of Fitch Ratings) and (y) being an authorised institution under the Financial Services and Markets Act 2000) shall have entered into an agreement in form and substance similar to this Agreement; and (ii) if the then current ratings of the Notes would be adversely affected thereby. In either case the Account Bank shall not be responsible for any costs or expenses occasioned by such termination and cessation. In the event of such termination and cessation the Account Bank shall assist the other parties hereto to effect an orderly transition of the banking arrangements documented hereby. 9. FURTHER ASSURANCE The parties hereto agree that they will co-operate fully to do all such further acts and things and execute any further documents as may be necessary or reasonably desirable to give full effect to the arrangements contemplated by this Agreement. 10. CONFIDENTIALITY None of the parties hereto shall during the term of this Agreement or after its termination disclose to any person whatsoever (except as provided herein or in any of the Transaction Documents to which it is a party or with the authority of the other parties hereto or so far as may be necessary for the proper performance of its obligations hereunder or unless required by law or any applicable stock exchange requirement or any governmental or regulatory authority or ordered to do so by a court of competent jurisdiction or by the Inland Revenue or the Commissioners of Customs and Excise or the Bank of England or the Financial Services Authority) any information relating to the business, finances or other matters of a confidential nature of any other party hereto of which it may in the course of its duties hereunder have become possessed and each of the parties hereto shall use all reasonable endeavours to prevent any such disclosure. 12 11. COSTS The Mortgages Trustee agrees to pay the reasonable costs and any amounts in respect of Irrecoverable VAT thereon (including reasonable legal costs and expenses) of the Account Bank in connection with the negotiation of this Agreement and the establishment of the Bank Accounts and the negotiation and execution of any further documents and the taking of any further action to be executed or taken pursuant to Clauses 7, 8 (other than Clauses 8.1(b), 8.1(c), 8.1(d), 8.1(e), 8.1(f), 8.6 and 8.7(a)) and 9. 12. NOTICES 12.1 Any notices to be given pursuant to this Agreement to any of the parties hereto shall be sufficiently served if sent by prepaid first class post, by hand or facsimile transmission and shall be deemed to be given (in the case of facsimile transmission) when despatched, (where delivered by hand) on the day of delivery if delivered before 17.00 hours on a Business Day or on the next Business Day if delivered thereafter or on a day which is not a Business Day or (in the case of first class post) when it would be received in the ordinary course of the post and shall be sent: (a) in the case of the Cash Manager: to Halifax plc at Trinity Road (LP/3/3/SEC), Halifax, West Yorkshire HX1 2RG (facsimile number +44 (0) 113 235 7511) for the attention of Head of Mortgage Securitisation with a copy to HBOS Treasury Services plc, 33 Old Broad Street, London EC2N 1HZ (facsimile number +44 (020) 7574 8303) for the attention of Head of Mortgage Securitisation and Covered Bonds; (b) in the case of the Mortgages Trustee: to Permanent Mortgages Trustee Limited, 47 Esplanade, St. Helier, Jersey JE1 OBD (facsimile number +44 (0) 1534 726391) for the attention of the Secretary with a copy to HBOS Treasury Services plc, 33 Old Broad Street, London EC2N 1HZ (facsimile number +44 (020) 7574 8303) for the attention of Head of Mortgage Securitisation and Covered Bonds; (c) in the case of the Seller: to Halifax plc at Trinity Road (LP/3/3/SEC), Halifax, West Yorkshire HX1 2RG (facsimile number +44 (0) 113 235 7511) for the attention of the Head of Mortgage Securitisation with a copy to HBOS Treasury Services plc, 33 Old Broad Street, London EC2N 1HZ (facsimile number +44 (020) 7574 8303) for the attention of Head of Mortgage Securitisation and Covered Bonds; (d) in the case of Funding 1: to Permanent Funding (No. 1) Limited, 35 Great St. Helen's, London EC3A 6AP (facsimile number +44 (020) 7398 6325) to the attention of the Secretary with a copy to HBOS Treasury Services plc, 33 Old Broad Street, London EC2N 1HZ (facsimile number +44 (020) 7574 8303) for the attention of Head of Mortgage Securitisation and Covered Bonds; (e) in the case of Funding 2: to Permanent Funding (No. 2) Limited, 35 Great St. Helen's, London EC3A 6AP (facsimile number +44 (020) 7398 6325) to the attention of the Secretary with a copy to HBOS Treasury Services plc, 33 Old Broad Street, London EC2N 1HZ (facsimile number +44 (020) 7574 8303) for the attention of Head of Mortgage Securitisation and Covered Bonds; (f) in the case of the Funding 1 Security Trustee and the Funding 2 Security Trustee: to The Bank of New York, 48th Floor, at 1 Canada Square, Canary Wharf, London E14 5AL (facsimile number +44 (020) 7964 6339) for the attention of Corporate Trust; and (g) in the case of the Account Bank: to the Bank of Scotland plc, Leeds Business Centre, 116 Wellington Street, Leeds, LS1 4LT (facsimile number +44 (0) 113 215 5899) for the 13 attention of the Corporate Banking Channel Support with copies to: Halifax plc, Trinity Road (LP/3/3/SEC), Halifax, West Yorkshire HX1 2RG (facsimile number +44 (0) 113 235 7511) for the attention of Head of Mortgage Securitisation; and HBOS Treasury Services plc, 33 Old Broad Street, London EC2N 1HZ (facsimile number +44 (020) 7574 8303) for the attention of Head of Mortgage Securitisation and Covered Bonds, or to such other address or facsimile number or for the attention of such other person or entity as may from time to time be notified by any party to the others by written notice in accordance with the provisions of this Clause 12. 13. INTEREST 13.1 The Account Bank shall pay, on the last Business day of each month in respect of the current month, interest on any cleared credit balances on the Funding 1 Transaction Account at a rate of Sterling LIBOR for three-month sterling deposits in respect of such period less 0.25 per cent. per annum. 13.2 The Account Bank shall pay, on the last Business day of each month in respect of the current month, interest on any cleared credit balances on the Funding 2 Transaction Account at a rate of Sterling LIBOR for one-month sterling deposits in respect of such period less 0.25 per cent. per annum. 13.3 Interest shall be paid on the Mortgages Trustee GIC Account, the Funding 1 GIC Account and the Funding 2 GIC Account in accordance with the terms of the Mortgages Trustee Guaranteed Investment Contract, the Funding 1 Guaranteed Investment Contract and the Funding 2 Guaranteed Investment Contract respectively. 13.4 Any other accounts opened by the Mortgages Trustee, Funding 1 or Funding 2 with the Account Bank shall bear interest at a rate as agreed between the Account Bank and the Mortgages Trustee, Funding 1 or Funding 2 respectively. 14. WITHHOLDING All payments by the Account Bank under this Agreement shall be made in full without any deduction or withholding (whether in respect of set-off, counterclaim, duties, Taxes, charges or otherwise whatsoever) unless the deduction or withholding is required by law, in which event the Account Bank shall: (a) ensure that the deduction or withholding does not exceed the minimum amount legally required; (b) pay to the relevant taxation or other authorities within the period for payment permitted by applicable law the full amount of the deduction or withholding; (c) furnish to the Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security Trustee or the Funding 2 Security Trustee (as the case may be) within the period for payment permitted by the relevant law, either: (i) an official receipt of the relevant taxation authorities involved in respect of all amounts so deducted or withheld; or (ii) if such receipts are not issued by the taxation authorities concerned on payment to them of amounts so deducted or withheld, a certificate of deduction or equivalent evidence of the relevant deduction or withholding; and 14 (d) account to Funding 1 in full by credit to the Funding 1 Transaction Account or the Funding 1 GIC Account (as the case may be), to Funding 2 in full by credit to the Funding 2 Transaction Account or the Funding 2 GIC Account (as the case may be) and to the Mortgages Trustee in full by credit to the Mortgages Trustee GIC Account of an amount equal to the amount of any rebate, repayment or reimbursement of any deduction or withholding which the Account Bank has made pursuant to this Clause 14 (as appropriate) and which is subsequently received by the Account Bank. 15. TAX STATUS 15.1 The Account Bank hereby represents and warrants that it is a bank for the purposes of section 349 of the Income and Corporation Taxes Act 1988, is entering into this Agreement in the ordinary course of its business, will pay interest pursuant hereto in the ordinary course of such business, will bring into account payments (other than deposits) made under this Agreement in computing its income for United Kingdom Tax purposes and undertakes that it will not cease to be so or to do so otherwise than as a result of the introduction of, change in, or change in the interpretation, administration or application of, any law or regulation or any practice or concession of HM Revenue and Customs occurring after the date of this Agreement. 15.2 The Account Bank will procure that any of its successors or assigns will provide the same representation as to its tax status as is provided by the Account Bank in Clause 15.1 above. 16. ENTIRE AGREEMENT This Agreement and the schedules together constitute the entire agreement and understanding between the parties in relation to the subject matter hereof and cancel and replace any other agreement or understanding in relation thereto. 17. ASSIGNMENT Subject as provided in or contemplated by Clauses 5.1(f), 5.1(g) and 7.2: (a) the Account Bank may not assign or transfer any of its rights or obligations hereunder without the prior written consent of the Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2 Security Trustee; (b) the Mortgages Trustee, Funding 1 and Funding 2 may not assign or transfer any of their rights or obligations hereunder without the prior written consent of the Account Bank, the Funding 1 Security Trustee and the Funding 2 Security Trustee; and (c) the Account Bank may not act through any other branch other than the branch specified on page 1 of this Agreement without the prior written consent of the Mortgages Trustee, Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2 Security Trustee (such consent not to be unreasonably withheld). 18. THE FUNDING 1 SECURITY TRUSTEE AND FUNDING 2 SECURITY TRUSTEE The Funding 1 Security Trustee and the Funding 2 Security Trustee have agreed to become parties to this Agreement for the better preservation and enforcement of their rights under this Agreement but shall have no responsibility for any of the obligations of, nor assume any liabilities to, the Cash Manager, the Account Bank, the Mortgages Trustee, Funding 1 or Funding 2 hereunder. Furthermore, any liberty or power may, subject to Clause 19, be exercised or made in the Funding 1 Security Trustee's and the Funding 2 Security Trustee's absolute discretion without any obligation to give reasons therefor. 15 19. AMENDMENTS, WAIVERS AND CONSENTS 19.1 Subject to Clauses 2, 3 and 4 of the Controlling Beneficiary Deed (as applicable) and (in the case of Funding 1) Clause 25.8 of the Funding 1 Deed of Charge and (in the case of Funding 2) Clause 12 of the Funding 2 Deed of Charge, no amendment or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by (or by some person duly authorised by) each of the parties to this Agreement. In the case of a waiver, such waiver shall be effective only in the specific instance and as against the party or parties giving it for the specific purpose for which it is given. No single or partial exercise of, or failure or delay in exercising, any right under this Agreement shall constitute a waiver or preclude any other or further exercise of that or any other right. 19.2 Funding 1, Funding 2, the Funding 1 Security Trustee and the Funding 2 Security Trustee will each exercise all rights, powers, benefits and/or discretions conferred on it under this Agreement (including, without limitation, in giving its consent, approval or authorisation to any event, matter or thing requested hereunder) in accordance with Clauses 2, 3 and 4 of the Controlling Beneficiary Deed (as applicable) and (in the case of Funding 1) Clause 25 of the Funding 1 Deed of Charge and (in the case of Funding 2) Clause 12 of the Funding 2 Deed of Charge. 20. EXCLUSION OF THIRD PARTY RIGHTS A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement, but this does not affect any right or remedy of a third party which exists or is available apart from that Act. 21. COUNTERPARTS AND SEVERABILITY 21.1 This Agreement may be signed (manually or by facsimile) and delivered in one or more counterparty, all of which, taken together, shall constitute one and the same document. 21.2 Where any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations under this Agreement, or of such provision or obligation in any other jurisdiction, shall not be affected or impaired thereby. 22. GOVERNING LAW This Agreement shall be governed by, and construed in accordance with, the laws of England. 23. SUBMISSION TO JURISDICTION Each party to this Agreement hereby irrevocably submits to the exclusive jurisdiction of the English courts in any action or proceeding arising out of or relating to this Agreement, and hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined by such courts. Each party to this Agreement hereby irrevocably waives, to the fullest extent it may possibly do so, any defence or claim that the English courts are an inconvenient forum for the maintenance or hearing of such action or proceeding. The Mortgages Trustee irrevocably appoints Structured Finance Management Limited, located at 35 Great St. Helen's, London EC3A 6AP, as its agent for service of process. IN WITNESS WHEREOF the parties hereto have executed this Agreement the day and year first before written. 16 SCHEDULE 1 FORMS OF MANDATE IN THE FORMS ATTACHED 17 SCHEDULE 2 FORMS OF NOTICE OF CHARGE AND ACKNOWLEDGEMENT PART 1 NOTICE OF CHARGE - FUNDING 1 TRANSACTION ACCOUNT/FUNDING 1 GIC ACCOUNT To: The Governor and Company of the Bank of Scotland 116 Wellington Street Leeds England LS1 4LT For the attention of: Company Secretary and to: The Bank of New York 1 Canada Square Canary Wharf London E14 5AF For the attention of: Corporate Trust 14th June, 2002 Dear Sirs, RE: PERMANENT FUNDING (NO. 1) LIMITED: * FUNDING 1 TRANSACTION ACCOUNT NUMBER 00856456 (SORT CODE 12-08-83) (THE "FUNDING 1 TRANSACTION ACCOUNT") * FUNDING 1 GIC ACCOUNT NUMBER 00856368 (SORT CODE 12-08-83) (THE "FUNDING 1 GIC ACCOUNT") We hereby give you notice that, by a deed of charge dated of even date herewith and made between, inter alios, ourselves, Halifax plc and State Street Bank and Trust Company (the "SECURITY TRUSTEE"), a copy of which is enclosed (the "FUNDING 1 DEED OF CHARGE"), we: (a) charged by way of first fixed charge all of our right, title, benefit and interest present and future in, to and under the Funding 1 Transaction Account and the Funding 1 GIC Account and all sums of money standing to the credit thereof and all interest accruing thereon from time to time; and (b) assigned all of our right, title, benefit and interest present and future in, to and under the bank account agreement of even date herewith between ourselves, yourselves, the Security Trustee and Halifax plc in its capacity as Seller and Cash Manager. Accordingly, amounts may and shall be withdrawn from time to time from the Funding 1 Transaction Account or the Funding 1 GIC Account in accordance with the provisions of the Funding 1 Deed of Charge only until such time as you receive notice in writing from the Security Trustee in which case you shall thereafter comply with all directions of the Security Trustee. 18 Please note that the foregoing authorisations and instructions may not be revoked or varied by ourselves without the prior written consent of the Security Trustee. Please acknowledge receipt of this notice and your acceptance of the instructions herein contained by signing two copies of the attached form of acknowledgement, returning one copy to ourselves and sending the other copy direct to the Security Trustee at 1 Canada Square, Canary Wharf, London E14 5AF for the attention of Corporate Trust. This notice of charge and assignment is governed by, and construed in accordance with, the laws of England. Words defined in the Master Definitions and Construction Schedule referred to in clause 1 of the Funding 1 Deed of Charge shall have the same meaning in this notice. Yours faithfully ............................. for and on behalf of PERMANENT FUNDING (NO. 1) LIMITED 19 PART 2 ACKNOWLEDGEMENT - FUNDING 1 TRANSACTION ACCOUNT/FUNDING 1 GIC ACCOUNT To: Permanent Funding (No. 1) Limited Blackwell House Guildhall Yard London EC2V 5AE and to: 1 Canada Square Canary Wharf London E14 5AF For the attention of Corporate Trust 14th June, 2002 Dear Sirs, RE: PERMANENT FUNDING (NO. 1) LIMITED: * FUNDING 1 TRANSACTION ACCOUNT NUMBER 00856456 (SORT CODE 12-08-83) (THE "FUNDING 1 TRANSACTION ACCOUNT") * FUNDING 1 GIC ACCOUNT NUMBER 00856368 (SORT CODE 12-08-83) (THE "FUNDING 1 GIC ACCOUNT") We acknowledge receipt of your letter dated 14th June, 2002, a copy of which is attached. Words and expressions defined in that letter have the same meanings herein. In consideration of your agreeing to maintain the Funding 1 Transaction Account and the Funding 1 GIC Account with us, we now agree and confirm to the Security Trustee that we accept and will comply with the authorisations and instructions contained in that letter and will not accept or act upon any instructions contrary thereto unless the same shall be in writing signed by the Security Trustee. This acknowledgement is governed by, and construed in accordance with, the laws of England. Yours faithfully, ............................. for and on behalf of THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND 20 PART 3 NOTICE OF CHARGE - FUNDING 2 TRANSACTION ACCOUNT/FUNDING 2 GIC ACCOUNT To: The Governor and Company of the Bank of Scotland 116 Wellington Street Leeds England LS1 4LT For the attention of: Corporate Banking Channel Support and to: The Bank of New York 48th Floor One Canada Square London E14 5AL For the attention of: Corporate Trust 17 October 2006 Dear Sirs, RE: PERMANENT FUNDING (NO. 2) LIMITED: * FUNDING 2 TRANSACTION ACCOUNT NUMBER 06052778 (SORT CODE 12-08-83) (THE FUNDING 2 TRANSACTION ACCOUNT) * FUNDING 2 GIC ACCOUNT NUMBER 06052751 (SORT CODE 12-08-83) (THE FUNDING 2 GIC ACCOUNT) We hereby give you notice that, by a deed of charge dated of even date herewith and made between, inter alios, ourselves, Halifax plc and The Bank of New York (the FUNDING 2 SECURITY TRUSTEE), a copy of which is enclosed (the FUNDING 2 DEED OF CHARGE), we: (a) charged by way of first fixed charge all of our right, title, benefit and interest present and future in, to and under the Funding 2 Transaction Account and the Funding 2 GIC Account and all sums of money standing to the credit thereof and all interest accruing thereon from time to time; and (b) assigned all of our right, title, benefit and interest present and future in, to and under the bank account agreement of even date herewith between ourselves, yourselves, the Funding 2 Security Trustee and Halifax plc in its capacity as Cash Manager. Accordingly, amounts may and shall be withdrawn from time to time from the Funding 2 Transaction Account and the Funding 2 GIC Account in accordance with the provisions of the Bank Account Agreement and the Funding 2 Deed of Charge only until such time as you receive notice in writing from the Funding 2 Security Trustee in which case you shall thereafter comply with all directions of the Funding 2 Security Trustee. Please note that the foregoing authorisations and instructions may not be revoked or varied by ourselves without the prior written consent of the Funding 2 Security Trustee. 21 Please acknowledge receipt of this notice and your acceptance of the instructions herein contained by signing two copies of the attached form of acknowledgement, returning one copy to ourselves and sending the other copy direct to the Funding 2 Security Trustee at 48th Floor, One Canada Square, London E14 5AL for the attention of Corporate Trust. This notice of charge and assignment is governed by, and construed in accordance with, the laws of England. Words defined in the Master Definitions and Construction Schedule referred to in clause 1 of the Funding 2 Deed of Charge shall have the same meaning in this notice. Yours faithfully ............................. for and on behalf of PERMANENT FUNDING (NO. 2) LIMITED 22 PART 4 ACKNOWLEDGEMENT - FUNDING 2 TRANSACTION ACCOUNT/FUNDING 2 GIC ACCOUNT To: Permanent Funding (No. 2) Limited 35 Great St. Helen's London EC3A 6AP and to: The Bank of New York 48th Floor One Canada Square London E14 5AL For the attention of Corporate Trust 17 October 2006 Dear Sirs, RE: PERMANENT FUNDING (NO. 2) LIMITED: * FUNDING 2 TRANSACTION ACCOUNT NUMBER 06052778 (SORT CODE 12-08-83) (THE FUNDING 2 TRANSACTION ACCOUNT) * FUNDING 2 GIC ACCOUNT NUMBER 06052751 (SORT CODE 12-08-83) (THE FUNDING 2 GIC ACCOUNT) We acknowledge receipt of your letter dated 17 October 2006, a copy of which is attached. Words and expressions defined in that letter have the same meanings herein. In consideration of your agreeing to maintain the Funding 2 Transaction Account and the Funding 2 GIC Account with us, we now agree and confirm to the Funding 2 Security Trustee that we accept and will comply with the authorisations and instructions contained in that letter and will not accept or act upon any instructions contrary thereto unless the same shall be in writing signed by the Funding 2 Security Trustee. This acknowledgement is governed by, and construed in accordance with, the laws of England. Yours faithfully, ............................. for and on behalf of THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND 23 SIGNATORIES Signed by ) for and on behalf of ) PERMANENT FUNDING (NO. 1) ) LIMITED ) /s/ Claudia Wallace as Funding 1 ) ............................ Signed by ) for and on behalf of ) PERMANENT FUNDING (NO. 2) ) LIMITED ) /s/ Claudia Wallace as Funding 2 ) ............................ Signed by ) for and on behalf of ) PERMANENT MORTGAGES TRUSTEE ) LIMITED ) /s/ Claudia Wallace as Mortgages Trustee ) ............................ Signed by ) for and on behalf of ) /s/ Ian Stewart HALIFAX PLC ) /s/ Amarpal Takk as Cash Manager and Seller ) ............................ Signed by ) for and on behalf of ) THE GOVERNOR AND ) COMPANY OF THE BANK OF ) /s/ Ian Stewart SCOTLAND ) /s/ Amarpal Takk as Account Bank ) ............................ Signed by ) for and on behalf of ) THE BANK OF NEW YORK ) ) /s/ Kate Russell as Funding 1 Security Trustee and ) ............................ Funding 2 Security Trustee 24