Class Initial Principal Amount (EUR) BOADILLA PROJECT FINANCE CLO (2008-1) LIMITED (Incorporated in Ireland with limited liability under Registered Number 461152) EUR 250,000 Class A Asset-Backed Credit Linked Notes due 2037 EUR 18,250,000 Class B Asset-Backed Credit Linked Notes due 2037 EUR 13,750,000 Class C Asset-Backed Credit Linked Notes due 2037 EUR 14,500,000 Class D Asset-Backed Credit Linked Notes due 2037 EUR 11,500,000 Class E Asset-Backed Credit Linked Notes due 2037 EUR 16,000,000 Class F1 Asset-Backed Credit Linked Notes due 2037 EUR 4,000,000 Class F2 Asset-Backed Credit Linked Notes due 2037 Reference Interest Rate Margin (% per annum) Issue Price (%) Expected Ratings (S&P) Scheduled Redemption Date Final Redemption Date (not later than) A 250,000 EURIBOR 0.2 100 AAA 31 December 2034 31 December 2037 B 18,250,000 EURIBOR 1.5 100 AA 31 December 2034 31 December 2037 C 13,750,000 EURIBOR 3 100 A 31 December 2034 31 December 2037 D 14,500,000 EURIBOR 4 100 BBB 31 December 2034 31 December 2037 E 11,500,000 EURIBOR 5 100 BB 31 December 2034 31 December 2037 F1 16,000,000 Variable Interest Not applicable 100 UNRATED 31 December 2034 31 December 2037 Amount F2 4,000,000 Variable Interest Amount Not applicable 100 UNRATED 31 December 2034 31 December 2037 The Notes On 11 December 2008 (or such other date as Boadilla Project Finance CLO (2008-1) Limited (the Issuer ) and the Arranger agree) (the Closing Date ), the Issuer will issue the EUR 250,000 Class A Asset-Backed Credit Linked Notes due 2037 (the Class A Notes ), the EUR 18,250,000 Class B Asset-Backed Credit Linked Notes due 2037 (the Class B Notes ), the EUR 13,750,000 Class C Asset-Backed Credit Linked Notes due 2037 (the Class C Notes ), the EUR 14,500,000 Class D Asset-Backed Credit Linked Notes due 2037 (the Class D Notes ), the EUR 11,500,000 Class E Asset-Backed Credit Linked Notes due 2037 (the Class E Notes )) and the EUR 16,000,000 Class F1 Asset-Backed Credit Linked Notes due 2037 (the Class F1 Notes ) and the EUR 4,000,000 Class F2 Asset-Backed Credit Linked Notes due 2037 (the Class F2 Notes ), (together the Notes ). Each of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F1 Notes and the Class F2 Notes are referred to as a Class or a Class of Notes. The Class F1 Notes and the Class F2 Notes will rank pari passu without preference or priority amongst themselves. The Notes will be issued by the Issuer on a limited recourse basis. Application to the Irish Financial Services Regulatory Authority and the Irish Stock Exchange This Prospectus constitutes a prospectus for the purposes of the Prospectus (Directive 2003/71/EC) Regulations (the Prospectus Regulations ) (which implement the Prospectus Directive in Ireland). Application has been made to the Irish Stock Exchange Limited (the Irish Stock Exchange ) for the Notes to be admitted to the official list (the Official List ) and trading on its regulated market. References in this Prospectus to Notes being listed (and all related references) shall mean that such Notes have been admitted to trading on the regulated market of the Irish Stock Exchange and have been admitted to the Official List. The regulated market of the Irish Stock Exchange is a regulated market for the purposes of the Directive on Markets in Financial Instruments (Directive 2004/39/EC). Approval Statement This Prospectus has been approved by the Irish Financial Services Regulatory Authority (the Irish Financial Services Regulatory Authority or the Financial Regulator ), as competent authority under the Prospectus Directive 2003/71/EC. The Financial Regulator only approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to Prospectus Directive 2003/71/EC. Obligations of Issuer Only The Notes will be obligations of the Issuer only and will not be obligations or responsibilities of, or guaranteed by, any of the other parties to the transactions described in this Prospectus and any suggestion otherwise, express or implied, is expressly excluded. Ratings A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by any one or more of the Rating Agency. Each credit rating should be evaluated independently of any other credit rating. Form of Notes The Notes of each Class will each initially be represented on issue by a temporary global note in bearer form (each, a Temporary Global Note ) without interest coupons attached, which is expected to be deposited on or about the Closing Date with a common depositary for Clearstream Banking, société anonyme ( Clearstream, Luxembourg ) and Euroclear Bank S.A./N.V. ( Euroclear ). Each Temporary Global Note will be exchangeable for interests in a permanent global note in bearer form (each, a Permanent Global Note ) representing the same Class of Notes, without interest coupons attached, not earlier than 40 days after the Closing Date (provided that certificates as to non-u.s. beneficial ownership have been received). Ownership interests in the Temporary Global Notes and the Permanent Global Notes will be shown on, and transfers thereof will only be effected through, records maintained by Clearstream, Luxembourg and Euroclear and their respective participants. Interests in the Permanent Global Notes will be exchangeable for Definitive Notes in bearer form only in certain limited circumstances as set forth therein. The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the Securities Act ), and include Notes in bearer form that are subject to U.S. tax law requirements. The Notes may not be offered, sold or delivered, directly or indirectly, in the United States or to any U.S. persons except under an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes are being offered for sale outside the United States in accordance with Regulation S ( Regulation S ) under the Securities Act. See Note Purchase and Purchase and Transfer Restrictions. Risk Factors Each person contemplating making an investment in the Notes must make its own investigation and analysis of the creditworthiness of the Issuer and the Reference Portfolio and its own determination of the suitability of any such investment, with particular reference to its own investment objectives and experience and any other factors which may be relevant to it in connection with such investment. A prospective investor who is in any doubt whatsoever as to the risks involved in investing in the Notes should consult its own independent professional advisors. A discussion of certain factors, which should be considered by prospective Noteholders in connection with an investment in the Notes, is set out in the section entitled Risk Factors. Boadilla Project Finance CLO (2008-1) Limited is not authorised by the Financial Regulator by virtue of the issue of the Notes or otherwise. Any investment in the Notes does not have the status of a bank deposit and is not subject to the deposit protection scheme operated by the Financial Regulator. Arranger Banco Santander S.A. The date of this Prospectus is 10 December 2008
c99719pu010 Proof 1: 9.12.08 B/L Revision: Responsibility Statements Except for the Santander Information as described below, the Issuer accepts responsibility for the information contained in this Prospectus. To the best of the knowledge and belief of the Issuer (which has taken all reasonable care to ensure that such is the case) the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. Banco Santander S.A. accepts responsibility for the information in the sections headed Description of The Reference Portfolio, Santander Information and Credit and Collection Policies (together, the Santander Information ). To the best of the knowledge and belief of Banco Santander S.A., the Santander Information is in accordance with the facts and does not omit anything likely to affect the import of such information, Banco Santander S.A. accepts no responsibility with regard to the contents of this Prospectus other than the Santander Information. Representations about the Notes No person is or has been authorised in connection with the issue and sale of the Notes to make any representation or provide any information other than as contained in this Prospectus and, if given or made, such representation or information should not be relied upon as having been authorised by or on behalf of the Issuer, the Arranger, the Trustee, the Paying Agents, the Agent Bank, the Swap Counterparty, the Cash Collateral Bank, the Issuer Account Bank, the Cash Administrator, the Calculation Agent or the Corporate Services Provider (the Transaction Parties and each a Transaction Party ) (as described in this Prospectus) or any person affiliated with them. None of the Transaction Parties (except the Issuer and, in respect of the sections disclosed above, Banco Santander S.A.) or any person affiliated with them have separately verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by such Transaction Parties or any person affiliated with them as to the accuracy or completeness of the information contained in this Prospectus or any other information supplied in connection with the Notes, their distribution or the future performance and adequacy of the Notes. Each person receiving this Prospectus acknowledges that such person has not relied on the Transaction Parties or any other person affiliated with them in connection with any investigation of the accuracy of the information on its investment decision. Financial condition of the Issuer Neither the delivery of this Prospectus nor the offer, sale, allocation, solicitation or delivery of any Note shall, in any circumstances, create any implication or constitute a representation that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer or in any other information contained herein since the date of this Prospectus or that the information contained herein is correct as at any time subsequent to the date of this Prospectus. Selling Restrictions Other than the approval of the Irish Financial Services Regulatory Authority of this Prospectus as a prospectus in accordance with the Prospectus Directive, no action has been or will be taken to permit a public offering of the Notes or the distribution of this Prospectus in any jurisdiction. The distribution of this Prospectus and the offering of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus (or any part thereof) comes are required by the Issuer and the Arranger to inform themselves about and to observe any such restrictions. Neither this Prospectus nor any part hereof constitutes an offer of, or an invitation by, or on behalf of, the Issuer or the Arranger to subscribe for or purchase any of the Notes. Neither this Prospectus, nor any part hereof, may be used for or in connection with an offer to, or solicitation by, any person in any jurisdiction or in any circumstance in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this Prospectus nor any part hereof nor any other prospectus, form of application, advertisement, other offering material or other information may be issued, distributed or published in any country or jurisdiction except in circumstances that will result in compliance with all applicable laws, orders, rules and regulations. ii
c99719pu010 Proof 1: 9.12.08 B/L Revision: None of the Issuer, the Arranger or any of their representatives is making any representation to any offeree or purchaser of the Notes offered by this Prospectus regarding the legality of an investment by such an offeree or purchaser under appropriate legal, investment or similar laws. Prospective purchasers should consult with their advisers as to the legal, tax, business, financial and related aspects of a purchase of the Notes. For a further description of certain restrictions on offers and sales of the Notes and distribution of this Prospectus, see section Note Purchase and Purchase and Transfer Restrictions below. Any individual intending to invest in any instrument described in this Prospectus should consult his or her professional adviser and ensure that he or she fully understands all the risks associated with making such an investment and has sufficient financial resources to sustain any loss that may arise from it. Withholding Tax Payments of interest, principal and premium (if any) in respect of the Notes will be made subject to any applicable withholding taxes and none of the Issuer, the Paying Agents nor any other person will be obliged to pay additional amounts as a consequence thereof. See section Taxation in Ireland below. Interpretation References to EUR, e or Euro are to the single currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty establishing the European Communities, as amended by the Treaty on European Union. Certain figures included in this Prospectus have been subject to rounding adjustments. Accordingly, figures shown for the same category in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them. Capitalised terms used in this Prospectus, unless otherwise indicated, have the meaning set out in this Prospectus. An index of defined terms appears at the end of this Prospectus. Any website mentioned herein does not form part of this Prospectus. The language of the prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. Stabilisation In connection with the issue of the Notes, Banco Santander S.A. (sociedad anónima) (in such capacity the Stabilising Manager ) (or any person acting on behalf of the Stabilising Manager) may over-allot Notes (provided that the aggregate principal amount of the Notes allotted does not exceed 105 per cent. of the aggregate principal amount of the relevant Class) or effect the transaction with the intention to support the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) will undertake stabilisation actions. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made, and, if begun, may end at any time, but it must end no later than the earlier of 30 days after the issue of the Notes and 60 days after the date of the allotment of the Notes. iii
c99719pu020 Proof 2: 9.12.08 B/L Revision: CONTENTS Clause Page TRANSACTION DIAGRAM... 2 SUMMARY OF TERMS... 3 TRANSACTION PARTIES... 4 PRINCIPAL FEATURES OF THE NOTES... 6 SUMMARY OF THE MAIN PROVISIONS OF THE CREDIT DEFAULT SWAP... 18 RISK FACTORS... 32 REFERENCE OBLIGATION ELIGIBILITY CRITERIA... 45 REFERENCE PORTFOLIO ELIGIBILITY CRITERIA... 47 DESCRIPTION OF THE REFERENCE PORTFOLIO... 53 CREDIT AND COLLECTION POLICIES... 61 THE ISSUER... 66 THE CREDIT DEFAULT SWAP... 69 THE COLLATERAL AND CASH ADMINISTRATION ARRANGEMENTS... 88 THE COLLATERAL SWITCH AGREEMENT... 90 SANTANDER INFORMATION... 95 USE OF PROCEEDS... 96 SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM... 97 TERMS AND CONDITIONS OF THE NOTES... 99 TAXATION IN IRELAND... 134 NOTE PURCHASE... 136 PURCHASE AND TRANSFER RESTRICTIONS... 141 GENERAL INFORMATION... 143 INDEX OF DEFINED TERMS... 145 1
c99719pu020 Proof 2: 9.12.08 B/L Revision: TRANSACTION DIAGRAM This summary of terms and transaction overview is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. In the event of any inconsistency between this summary of terms and transaction overview and the information provided elsewhere in this Prospectus, the information provided elsewhere in this Prospectus shall prevail. Banco Santander S.A. "Originator", "Servicer" & "Swap Counterparty" Cash Principal Proceeds Super Senior risk assumed by Banco Santander S.A. Reference Portfolio of European project finance loans Issuer Cash Collateral Income / Repo Premium Premium Credit protection payment Boadilla Project Finance CLO (2008-1) "Issuer" Note Proceeds Interest and Principal Note Proceeds Class A Class B Class C Class D Class E Class F1 & F2 2
c99719pu020 Proof 2: 9.12.08 B/L Revision: SUMMARY OF TERMS Overview of the Transaction The Issuer will, concurrently with the issuance of the Notes, enter into a Credit Default Swap with the Swap Counterparty in respect of the Reference Portfolio of eligible Reference Obligations. In certain circumstances certain Reference Obligations may be removed from the Reference Register and Replenishments may be made subject to satisfying certain conditions. On the Closing Date, the Issuer will utilise the proceeds of the issue of the Notes to transfer the Cash Collateral to the Cash Collateral Bank. Pursuant to the terms of the Credit Default Swap, the Swap Counterparty is required to pay to the Issuer on each Note Payment Date the Swap Counterparty Payment calculated pursuant to the terms of the Credit Default Swap and referable in part to the amount of interest payable by the Issuer on such Note Payment Date in relation to the Notes. In return for payment of the Swap Counterparty Payments, the Issuer has agreed under the terms of the Credit Default Swap that if a Credit Event occurs and the Conditions to Settlement are satisfied in respect of a Reference Obligation, the Issuer will pay to the Swap Counterparty on each Note Payment Date an amount equal to the Aggregate Issuer Payment determined in respect of the Calculation Period ending prior to such Note Payment Date. The satisfaction of the Conditions to Settlement may result in the Adjusted Principal Balance of the Notes being reduced. On any date on which the Notes fall due for redemption, the funds standing to the credit of the Cash Collateral Account will be liquidated and used to redeem the Notes. 3
c99719pu020 Proof 2: 9.12.08 B/L Revision: TRANSACTION PARTIES Issuer Swap Counterparty Cash Collateral Bank Cash Administrator Trustee Corporate Services Provider Agent Bank Principal Paying Agent Rating Agency Calculation Agent Boadilla Project Finance CLO (2008-1) Limited a private company with limited liability, incorporated under the laws of Ireland and having its registered office at 5 Harbourmaster Place, IFSC, Dublin 1, Ireland. The Issuer has been established for the purpose of entering into the Credit Default Swap, issuing the Notes and entering into the other Transaction Documents. The entire issued share capital of the Issuer is held beneficially by Deutsche International Finance (Ireland) Limited as share trustee for the benefit of charitable purposes under the terms of a share declaration of trust. Banco Santander S.A. will act as Swap Counterparty under the credit default swap (the Credit Default Swap ) dated the Closing Date between the Issuer and the Swap Counterparty. Banco Santander S.A., Frankfurt Branch, having its registered office at Eschersheimer Landstr. 27, 60322, Frankfurt am Main, Germany, with whom the cash collateral, meaning all rights and interests in the cash collateral held with the Cash Collateral Bank which is subject to the terms of the Cash Collateral and Account Pledge Agreement (the Cash Collateral ) equal to the proceeds of the Notes, shall be deposited on the Closing Date. Cash Collateral will only be able to be kept at the Cash Collateral Bank pursuant to the provisions of the Collateral Switch Agreement. Deutsche Bank AG, London Branch (in such capacity, the Cash Administrator ) will act as cash administrator in accordance with the terms of the cash administration agreement (the Cash Administration Agreement ) dated on or about the Closing Date between the Issuer, the Swap Counterparty, the Principal Paying Agent, the Trustee, the Issuer Account Bank, the the Cash Collateral Bank, the Agent Bank and the Cash Administrator. Deutsche Trustee Company Limited will act as trustee (the Trustee ) for the Noteholders and the other Secured Creditors pursuant to the Trust Deed, and as holder of the security for the Secured Creditors (including itself) pursuant to the Deed of Charge. Deutsche International Corporate Services (Ireland) Limited will act as corporate services provider (in such capacity, the Corporate Services Provider ) to the Issuer pursuant to a corporate services agreement (the Corporate Services Agreement ) dated on or about the Closing Date between the Issuer and the Corporate Services Provider. Deutsche Bank AG, London Branch will act as agent bank (in such capacity, the Agent Bank ) in accordance with the terms of an agency agreement (the Agency Agreement ) dated on or about the Closing Date between, inter alios, the Issuer and the Agent Bank and the Principal Paying Agent. Deutsche Bank AG, London Branch will act as principal paying agent (in such capacity, the Principal Paying Agent ) in respect of the Notes in accordance with the terms of the Agency Agreement. Standard & Poor s is the rating agency in respect of the Notes (the Rating Agency. Abbey National Treasury Services plc will act as calculation agent (in such capacity, the Calculation Agent ) under the Credit Default Swap. 4
c99719pu020 Proof 2: 9.12.08 B/L Revision: Issuer Account Bank Deutsche Bank AG, London Branch will act as issuer account bank (in such capacity, the Issuer Account Bank ), in respect of the Issuer Transaction Accounts (into which payments by the Swap Counterparty under the Credit Default Swap and all income of the Issuer shall be credited), in accordance with the terms of the Cash Administration Agreement and the Cash Collateral and Account Pledge Agreement (the Issuer Transaction Accounts Bank Agreement ) dated on or about the Closing Date between, inter alios, the Issuer and the Issuer Account Bank. The Issuer Account Bank is required to meet the Issuer Account Bank Required Rating (as defined in Condition 1 (Definitions)) (or if the Issuer Account Bank does not have the Issuer Account Bank Required Rating, the Issuer Account Bank must procure a guarantee of its obligations as Issuer Account Bank from a guarantor which has the Issuer Account Bank Required Rating) failing which the Issuer Account Bank will be replaced within 30 calendar days of it failing to have such Issuer Account Bank Required Rating. Secured Creditors The Trustee, the Noteholders, the Swap Counterparty, the Issuer Account Bank, the Cash Collateral Bank, the Cash Administrator, the Principal Paying Agent, the Agent Bank, the Calculation Agent, the Corporate Services Provider, the Verification Agent and any Receiver appointed pursuant to the Deed of Charge will constitute the Secured Creditors. Issuer s Auditors Deloitte & Touche, Chartered Accountants and Registered Auditors, Deloitte & Touche House, Earlsfort Terrace, Dublin 2, Ireland (in such capacity, the Issuer s Auditors ). Verification Agent Deutsche Bank AG, London Branch, will be appointed as verification agent pursuant to an agreement (the Verification Agency Agreement ) entered into between the Swap Counterparty, the Verification Agent, the Issuer, the Trustee and the Calculation Agent. Independent Accountant Deloitte, S.L. Listing Agent A&L Listing Limited Common Depository Deutsche Bank AG, London Branch, will act as Common Depository with respect to the Notes. 5
c99719pu020 Proof 2: 9.12.08 B/L Revision: PRINCIPAL FEATURES OF THE NOTES GENERAL Note Classes On the Closing Date, the Issuer will, pursuant to a trust deed (the Trust Deed ) entered into between the Issuer and the Trustee, issue the following classes of Notes: Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F1 Notes and Class F2 Notes. The Notes will have an aggregate initial principal balance of EUR 78,250,000 consisting of the following classes (each, a Class ) and each Class of Notes will have the initial principal balance (the Initial Principal Balance ) indicated in the table below: Ratings Initial Principal Class Balance (EUR) Class A Notes 250,000 Class B Notes 18,250,000 Class C Notes 13,750,000 Class D Notes 14,500,000 Class E Notes 11,500,000 Class F1 Notes 16,000,000 Class F2 Notes 4,000,000 Total 78,250,000 It is a condition to the issuance of the Notes of each Class that they are to be assigned the ratings as indicated in the following table by Standard & Poor s: Class Standard Poor s A AAA B AA C A D BBB E BB F1 Unrated F2 Unrated A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by any one or all of the Rating Agency. The rating attributed to the Notes that are to be assigned ratings by the Rating Agency addresses the ability of the Issuer to pay accrued interest and to repay principal in each case in full and in a timely manner in accordance with the Conditions of the Notes. Note Interest, Note Interest Periods and Note Payment Dates Interest on the Notes is payable by reference to successive note interest periods, each a Note Interest Period. A Note Interest Period means the period from (and including) the Closing Date to (but excluding) the Note Payment Date falling in April 2009 and, thereafter, each successive Note Interest Period will commence on (and include) a Note Payment Date and end on (but exclude) the next succeeding Note Payment Date. Interest on the Notes is payable quarterly in arrear on the 15th day of April, July, October and January in each year (or, if such date is not a Note Business Day, the next succeeding Note Business Day unless such succeeding Note Business Day falls in the next succeeding calendar month, in which case, the immediately preceding Note Business Day) beginning on April 2009, any 6
c99719pu020 Proof 2: 9.12.08 B/L Revision: Early Redemption Date and the Note Business Day at the end of any Extension Period (each, a Note Payment Date ) in respect of the Note Interest Period ending immediately prior thereto. Interest Rate means for each Class of Notes, EURIBOR plus the relevant margin set out in the table below. Day Count Fraction Note Business Day Calculation of Interest Maturity Class Interest Basis Margin from Closing Date to Final Redemption Date A EURIBOR 0.2 % p.a. B EURIBOR 1.5 % p.a. C EURIBOR 3 % p.a. D EURIBOR 4 % p.a. E EURIBOR 5 % p.a. Variable Interest F1 F2 Actual/360. Amount Variable Interest Amount Not applicable Not applicable Note Business Day means any TARGET Settlement Day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits), other than a Saturday or Sunday, in Madrid, Dublin and London. Each Class (other than the Class F1 Notes and the Class F2 Notes) will bear interest on its outstanding Adjusted Principal Balance at the relevant Interest Rate described above. Interest on each Class of Notes (other than the Class F1 Notes and the Class F2 Notes) will be paid in arrear on each Note Payment Date in an amount determined by the Agent Bank to be the product of: (a) the Adjusted Principal Balance of such Class of Notes (prior to any adjustments made on such Note Payment Date); (b) the Interest Rate applicable to such Class of Notes; and (c) the actual number of days in the Note Interest Period ending on the Note Payment Date, divided by 360. The Variable Interest Amount will be payable in respect of the Class F1 Notes and the Class F2 Notes on each Note Payment Date. Interest payments shall be made on Note Payment Dates only to the extent the Issuer has funds available for the purpose and in accordance with the Pre-Enforcement Available Income Funds Priority of Payments. Actual Principal Balance of any Class means, at any time and from time to time, the Initial Principal Balance of such Class less any amounts paid to the Noteholders in redemption of that Class. Please refer to Condition 6 (Interest) for further information on the calculation of interest. The Notes are expected to mature on the Note Payment Date scheduled to fall on 31 December 2034 (the Scheduled Redemption Date ). In the event that the Notes are not redeemed at their then Adjusted Principal Balance on the Scheduled Redemption Date, the Issuer shall give notice thereof to the Trustee and the Noteholders and the Notes shall remain outstanding until the date (the Final Redemption Date ) which is the earliest of: 7
c99719pu020 Proof 2: 9.12.08 B/L Revision: (a) (b) (c) the Note Payment Date upon which the Notes have been redeemed at their then Adjusted Principal Balance; the latest of (i) the Note Payment Date upon which the Adjusted Principal Balance of all the Classes of Notes has been reduced to EUR 1 and all Defaulted Reference Obligations have become Worked Out Obligations or Final Estimated Recoveries Date Reference Obligations, (ii) the Note Payment Date falling on or immediately after the date on which the Independent Accountants have verified the Issuer Payment relating to the last Defaulted Reference Obligation and (iii) the date on which the final Issuer Payment Adjustment Amount has been dealt with in accordance with the Conditions; and the Note Payment Date scheduled to fall on 31 December 2037. Principal payments shall (subject as provided in Maturity Extension below) be made on the Scheduled Redemption Date or (as the case may be) the Final Redemption Date only to the extent the Issuer has funds available for the purpose and in accordance with the Pre- Enforcement Available Redemption Funds Priority of Payments or (as the case may be) the Post-Enforcement Priority of Payments. The Notes will be limited recourse obligations of the Issuer, with recourse limited to the proceeds of enforcement of the Security. Any claims of Noteholders remaining after application of the proceeds of enforcement of the Security shall be extinguished. Maturity Extension/Early Redemption Note Extension If, on the Scheduled Redemption Date or, as the case may be, on the Early Redemption Date (resulting from the giving of a Note Enforcement Notice), the Conditions to Settlement have been satisfied in respect of a Defaulted Reference Obligation but the relevant Defaulted Reference Obligation (each, a Work Out Pending Reference Obligation ) has not become a Worked Out Obligation, a portion of the most junior Class (or Classes, as applicable) of Notes equal to the Note Extension Amount shall remain outstanding until the earlier of the Note Payment Date following such Defaulted Reference Obligation becoming a Worked Out Obligation and the end of the Extension Period. Extension Period means the period from and including the Scheduled Redemption Date to but excluding the Final Redemption Date or, in the case of an Early Redemption Date resulting from the giving of a Note Enforcement Notice, the period from and including such Early Redemption Date to but excluding the day falling 55 Note Business Days immediately following such Early Redemption Date. The Note Extension Amount shall be calculated in accordance with Condition 7(g) (Redemption, Reduction, Reinstatement and Cancellation Mandatory Redemption of the Notes in Whole during the Extension Period). To the extent that the Note Extension Amount when re-calculated during the Extension Period, is reduced from one Note Payment Date to the next following Note Payment Date, the Issuer shall redeem, in accordance with the Order of Seniority, (but only to the extent of an amount equal to such reduction less the Issuer Payment payable in respect of the Worked Out Obligations), each Class of Notes at its then Adjusted Principal Balance together with all interest accrued thereon (including for the avoidance of doubt but without limitation, any Make-up Interest Amount) on the next Note Payment Date. 8
c99719pu020 Proof 2: 9.12.08 B/L Revision: Ranking of the Notes prior to delivery of a Note Enforcement Notice Ranking of the Notes following delivery of a Note Enforcement Notice The Notes of each Class rank pari passu without any preference or priority amongst Notes of the same Class. Prior to delivery of a Note Enforcement Notice, all payments due on the Notes will rank in the Order of Seniority and will be paid in accordance with the Pre-Enforcement Available Income Funds Priority of Payments and the Pre-Enforcement Available Redemption Funds Priority of Payments. Following the delivery of a Note Enforcement Notice, all payments due on the Notes of each Class will rank in the Order of Seniority and will be paid in accordance with the Post-Enforcement Priority of Payments. Order of Seniority means, with respect to any payment of interest or principal or other amount on the Notes or any reinstatement of the Adjusted Principal Balance of any Class of Notes, the following order of seniority: first the Class A Notes, second the Class B Notes, third the Class C Notes, fourth the Class D Notes, fifth the Class E Notes and sixth both the Class F1 Notes and Class F2 Notes, which rank pari passu without preference or priority amongst themselves. Clearing of the Notes The Notes will be cleared through the common depositary on behalf of Euroclear and Clearstream, Luxembourg (the Common Depositary ). Denomination EUR 50,000 DEPOSIT Cash Collateral The Issuer will utilise the proceeds of the issue of the Notes to transfer the Cash Collateral in an amount of EUR 78,250,000 (the Cash Collateral Amount ) into an account in the name of the Issuer (the Cash Collateral Account ) with the Cash Collateral Bank pursuant to the Cash Collateral and Account Pledge Agreement. The Cash Collateral and Account Pledge Agreement provides for periodic income payments to be made to the Issuer on each Note Payment Date (the Issuer Cash Collateral Income ). The Issuer Cash Collateral Income will be determined on each Calculation Date by reference to the balance of the Cash Collateral and EURIBOR less a margin (the Cash Collateral Margin ) (and calculated on the basis of the Day Count Fraction (the Cash Collateral Rate )). The Cash Collateral Bank shall undertake, following receipt of a Note Enforcement Notice, to apply the Available Cash Collateral Amount (as defined below) in accordance with instructions given to it by the Trustee. Following the transfer of all or part of the Available Cash Collateral Amount to the Trustee, the Trustee (or the Cash Administrator on behalf of the Trustee) shall apply such proceeds in accordance with the Post-Enforcement Priority of Payments. For further information, including a description of the circumstances under which the Cash Collateral Bank may be replaced, please refer to the section headed The Collateral and Cash Administration Arrangements The Cash Collateral Arrangements. Liquidation of Cash Collateral to satisfy Issuer Payment The Cash Collateral will be held in the currency and amount corresponding to the Adjusted Principal Balance of the Notes. In the event that the Cash Collateral is liquidated to satisfy an Issuer Payment (if any), the amount of Cash Collateral to be liquidated will be equal to the Issuer Payment. 9
c99719pu020 Proof 2: 9.12.08 B/L Revision: The Adjusted Principal Balance of the Notes will be written down (in Reverse Order of Seniority) by an amount equal to the Issuer Payment. Reverse Order of Seniority means with respect to any reduction of the Adjusted Principal Balance of the Notes, the following order of priority: first the both the Class F1 Notes and Class F2 Notes, which rank pari passu without preference or priority amongst themselves, second the Class E Notes, third the Class D Notes, fourth the Class C Notes, fifth the Class B Notes and sixth the Class A Notes, in each case until the Adjusted Principal Balance of such Class has been reduced to EUR 1 (or on the Final Redemption Date to zero). SECURITY Security Deed of Charge Means all of the assets and property which are expressed to be subject to the security created under or pursuant to the Deed of Charge. Pursuant to the terms of an English law deed of charge (the Deed of Charge ) to be dated on or about the Closing Date between, inter alios, the Issuer and the Trustee, the Issuer will grant in favour of the Trustee for the benefit of the Secured Creditors as Security for the Secured Obligations: (a) (b) (c) an assignment by way of Security over all of its rights, claims, title, benefit and interest, present and future, actual and contingent (and interests arising in respect thereof) in and to the Transaction Documents (including the Cash Collateral and Account Pledge Agreement and the Credit Default Swap) to which it is a party other than: (1) the Trust Deed and (2) the Deed of Charge); a first fixed charge over all of its rights, claims, title, benefit and interest, present and future, actual and contingent (and interests arising in respect thereof) in the Issuer Transaction Accounts and all monies standing to the credit thereof; a first fixed charge over all of its rights, claims, title, benefit and interest, present and future, actual and contingent (and interests arising in respect thereof) in any bank or other accounts in which the Issuer may at any time have or acquire interest; and (d) a first floating charge over the whole of the Issuer s undertaking and all its property, assets and rights whatsoever and wheresoever, present and future not secured by the security interests set out in paragraphs (a) to (c), which will rank in point of priority behind all fixed security granted in favour of the Trustee pursuant to the terms of the Security Documents (other than the Issuer Irish Account and amounts representing the Issuer Profit Amount and the share capital of the Issuer). On an enforcement of the security created pursuant to the Deed of Charge, the proceeds of any realisation will be applied by the Trustee (or the Cash Administrator on behalf of the Trustee) in accordance with the Post-Enforcement Priority of Payments. Cash Collateral and Account Pledge Agreement The Cash Collateral will be held with the Cash Collateral Bank and the Cash Collateral and Account Pledge Agreement will govern any Cash Collateral. 10
c99719pu020 Proof 2: 9.12.08 B/L Revision: Secured Obligations PRIORITY OF PAYMENTS Available Income Funds Pre-Enforcement Available Income Funds Priority of Payments For further information please refer to the section headed The Collateral and Cash Administration Arrangements The Cash Collateral Arrangements. The aggregate of all monies and Liabilities which from time to time are or may become due, owing or payable by the Issuer to each, some or any of the Secured Creditor under or in respect of the Transaction Documents. On each Note Payment Date, the Issuer will receive and/or will have available the following income funds: (a) the Swap Counterparty Payment from the Swap Counterparty in respect of such Note Payment Date and, where the Swap Counterparty does not have the Swap Counterparty Required Rating, those funds representing advance payment of the Swap Counterparty Payment; and (b) income (if any) on the Cash Collateral and income in respect of any Issuer Transaction Accounts which has accrued in the immediately preceding Calculation Period (collectively, the Issuer Income ), (a) and (b) being collectively, the Available Income Funds. Prior to the delivery of a Note Enforcement Notice, Available Income Funds will be applied by or on behalf of the Issuer on each Note Payment Date in making the following payments in the following order of priority in their relevant currency (the Pre- Enforcement Available Income Funds Priority of Payments ) and only to the extent that any prior ranking item is satisfied in full: (a) First, to pay the Issuer Profit Amount and to pay any Operating Expenses due and payable on such Note Payment Date to the Trustee and/or any appointee of the Trustee (or in the event that the Swap Counterparty does not have on such date the Swap Counterparty Required Rating (or, as the case may be, the Second Trigger Swap Counterparty Required Rating), to pay amounts due on such date and to accrue and reserve for the Operating Expenses that will be or are likely to be due and payable to the Trustee and/or any appointee of the Trustee on the next Note Payment Date), such Operating Expenses due and payable to the Trustee and/or any appointee of the Trustee being subject to a maximum of EUR300,000 in any one calendar year; (b) Second, to pay, on a pari passu and pro rata basis, any Operating Expenses due and payable on such Note Payment Date to the Operating Creditors other than the Trustee and any appointee of the Trustee (or in the event that the Swap Counterparty does not have on such date the Swap Counterparty Required Rating (or, as the case may be, the Second Trigger Swap Counterparty Required Rating), to pay amounts due on such date and to accrue and reserve for the Operating Expenses that will be due and payable on the next Note Payment Date to the Operating Creditors other than the Trustee), subject to a maximum of EUR100,000 in any one calendar year, provided that, in the event that the Operating Expenses due and payable to the Trustee and/or any appointee of the Trustee in respect of a calendar year exceeds the maximum amount of EUR300,000 as provided for in the foregoing sub-paragraph (a) (such excess amount, the Excess Trustee Operating Expenses ), and to the extent 11
c99719pu020 Proof 2: 9.12.08 B/L Revision: (c) (d) (e) (f) (g) (h) that the Operating Expenses due and payable to the Operating Creditors other than the Trustee and any appointee of the Trustee in respect of the same calendar year is less than the maximum amount of EUR100,000 as provided for in this sub-paragraph (b), any such balance shall be used to fund the Excess Trustee Operating Expenses, to the fullest extent possible, in respect of the same calendar year; Third, pari passu and pro rata: (a) to pay any accrued and unpaid interest then due and payable on the Class A Notes, and (b) in the event that the Swap Counterparty does not have on such date the Swap Counterparty Required Rating (or, as the case may be, the Second Trigger Swap Counterparty Required Rating), to pay amounts due on such date and to accrue and reserve for the interest that will be due and payable on the Class A Notes on the next Note Payment Date; Fourth, pari passu and pro rata: (a) to pay any accrued and unpaid interest then due and payable on the Class B Notes, and (b) in the event that the Swap Counterparty does not have on such date the Swap Counterparty Required Rating (or, as the case may be, the Second Trigger Swap Counterparty Required Rating), to pay amounts due on such date and to accrue and reserve for the interest that will be due and payable on the Class B Notes on the next Note Payment Date; Fifth, pari passu and pro rata: (a) to pay any accrued and unpaid interest then due and payable on the Class C Notes, and (b) in the event that the Swap Counterparty does not have on such date the Swap Counterparty Required Rating (or, as the case may be, the Second Trigger Swap Counterparty Required Rating), to pay amounts due on such date and to accrue and reserve for the interest that will be due and payable on the Class C Notes on the next Note Payment Date; Sixth, pari passu and pro rata: (a) to pay any accrued and unpaid interest then due and payable on the Class D Notes, and (b) in the event that the Swap Counterparty does not have on such date the Swap Counterparty Required Rating (or, as the case may be, the Second Trigger Swap Counterparty Required Rating), to pay amounts due on such date and to accrue and reserve for the interest that will be due and payable on the Class D Notes on the next Note Payment Date; Seventh, pari passu and pro rata: (a) to pay any accrued and unpaid interest then due and payable on the Class E Notes, and (b) in the event that the Swap Counterparty does not have on such date the Swap Counterparty Required Rating (or, as the case may be, the Second Trigger Swap Counterparty Required Rating), to pay amounts due on such date and to accrue and reserve for the interest that will be due and payable on the Class E Notes on the next Note Payment Date; Eighth, pari passu and pro rata: (a) to pay any accrued and unpaid interest then due and payable on the Class F1 Notes and Class F2 Notes, which rank pari passu without preference or priority amongst themselves, and (b) in the event that the Swap Counterparty does not have on such date the Swap 12
c99719pu020 Proof 2: 9.12.08 B/L Revision: (i) (j) (k) (l) Counterparty Required Rating (or, as the case may be, the Second Trigger Swap Counterparty Required Rating), to pay amounts due on such date and to accrue and reserve for the interest that will be due and payable on the Class F1 Notes and Class F2 Notes on the next Note Payment Date; Ninth, to pay any amounts then due and payable to the Swap Counterparty pursuant to the Credit Default Swap other than any Issuer Payment but including any refund amount in respect of overpayment of the Swap Counterparty Payment when paid in advance; Tenth, to pay any Operating Expenses due and payable on such Note Payment Date to the Trustee and/or any appointee of the Trustee (or in the event that the Swap Counterparty does not have on such date the Swap Counterparty Required Rating (or, as the case may be, the Second Trigger Swap Counterparty Required Rating), to pay amounts due on such date and to accrue and reserve for the Operating Expenses that will be or are likely to be due and payable to the Trustee and/or any appointee of the Trustee on the next Note Payment Date), to the extent not funded pursuant to subparagraph (a) and sub-paragraph (b) above; Eleventh, to pay, on a pari passu and pro rata basis, any Operating Expenses due and payable on such Note Payment Date to the Operating Creditors other than the Trustee and any appointee of the Trustee (or in the event that the Swap Counterparty does not have on such date the Swap Counterparty Required Rating (or, as the case may be, the Second Trigger Swap Counterparty Required Rating), to pay amounts due on such date and to accrue and reserve for the Operating Expenses that will be due and payable on the next Note Payment Date to the Operating Creditors other than the Trustee), to the extent not funded pursuant to sub-paragraph (b) above; and Twelfth, to the Issuer, any excess. PRINCIPAL Available Redemption Funds Pre-Enforcement Available Redemption Funds Priority of Payments The Issuer will receive or have available the following principal funds (the Available Redemption Funds ): (a) principal amounts received from the Cash Collateral upon withdrawal of any part of the Cash Collateral (and other than in respect of a Collateral Transfer); and (b) the amounts received from the Repo Counterparty on any unwind of the Repurchase Agreement, pursuant to which the Repo Counterparty will repurchase Repo Collateral from the Issuer in accordance with the terms of the Repo Agreement (and other than in respect of a Collateral Transfer); and (c) upon enforcement of the Security, amounts realised upon any sale by the Trustee (or any Receiver appointed pursuant to the Deed of Charge) of any of the Repo Collateral (including accrued and unpaid interest in respect thereof). Prior to the delivery of a Note Enforcement Notice, on each Note Payment Date, Available Redemption Funds shall be used by the Issuer in making the following payments in the following order of priority (the Pre-Enforcement Available Redemption Funds Priority of Payments ): 13
c99719pu020 Proof 2: 9.12.08 B/L Revision: Post-Enforcement Priority of Payments (a) First, to pay to the Swap Counterparty, the Aggregate Issuer Payments, if any, due and unpaid; (b) Second, to repay any amounts of principal then due and payable on each Class of Notes in the Order of Seniority (as defined in the Conditions); and (c) Third, to pay to the Swap Counterparty any other amounts then due and payable pursuant to the terms of the Credit Default Swap. Available Income Funds and Available Redemption Funds (collectively, Available Funds ) will be applied by or on behalf of the Issuer following the date on which a Note Enforcement Notice is served in making the following payments in the following order of priority (the Post-Enforcement Priority of Payments ): (a) First, to pay any Operating Expenses due and unpaid to the Trustee and/or any appointee of the Trustee (including any Receiver appointed pursuant to the Deed of Charge); (b) Second, to pay, on a pari passu and pro rata basis, any Operating Expenses due and payable to the Operating Creditors (other than the Trustee or any Receiver); (c) Third, to pay to the Swap Counterparty, the Aggregate Issuer Payments, if any, due and unpaid; (d) Fourth, to pay on a pari passu and pro rata basis according to the amount then payable all principal (calculated at the Adjusted Principal Balance thereof) and interest then due and unpaid on the Class A Notes, applying the payment first to interest and then to due but unpaid principal; (e) Fifth, to pay on a pari passu and pro rata basis according to the amount then payable all principal (calculated at the Adjusted Principal Balance thereof) and interest then due and unpaid on the Class B Notes, applying the payment first to interest and then to due but unpaid principal; (f) Sixth, to pay on a pari passu and pro rata basis according to the amount then payable all principal (calculated at the Adjusted Principal Balance thereof) and interest then due and unpaid on the Class C Notes, applying the payment first to interest and then to due but unpaid principal; (g) Seventh, to pay on a pari passu and pro rata basis according to the amount then payable all principal (calculated at the Adjusted Principal Balance thereof) and interest then due and unpaid on the Class D Notes, applying the payment first to interest and then to due but unpaid principal; (h) Eighth, to pay on a pari passu and pro rata basis according to the amount then payable all principal (calculated at the Adjusted Principal Balance thereof) and interest then due and unpaid on the Class E Notes, applying the payment first to interest and then to due but unpaid principal; (i) Ninth, to pay on a pari passu and pro rata basis according to the amount then payable all principal (calculated at the Adjusted Principal Balance thereof) and interest then due and unpaid on the Class F1 Notes and Class F2 Notes, applying the payment first to interest and then to due but unpaid principal; (j) Tenth, to pay on a pari passu and pro rata basis to the Cash Collateral Bank any break costs pursuant to the Cash Collateral and Account Pledge Agreement; 14