1. Orrick PowerPoint Template January 17, 2001 Name of Presenter Kellogg School of Management Securitization 2003 Spring Colloquium Cam Cowan May 12, 2003 Legal Issues in Securitization: What You Don’t Know Could Hurt You

2. Agenda Hypothetical Transaction Structuring the Transaction Selling the Transaction -

3. Mortgages Credit Card Receivables Auto Loan Receivables Student Loans Corporate Loans Tobacco Settlement Payments Record Sales And maybe... Source of Payment

4. Cubs Ticket Sales

5. Ticket Sale Securitization There must be a reasonable predictability of a consistent payment stream Nature of Obligors Nature of Originator Nature of Receivables Confirming predictability of cash flow Attendance statistics, season ticket holders, ticket prices, continuity

6. Do the Chicago Cubs ticket sales meet the requirements? Average annual tickets sold (past 20 years): 2.5 million Current average ticket price: $30 Current average annual ticket revenues: $75 million Last time won World Series: 1908 Ticket Sale Securitization

7. Bankruptcy Law Commercial Law Tax Law Securities Law [Bank Regulatory] Chicago Cubs Ticket Sales Structuring the Transaction

8. Chicago National League Ball Club, Inc. “Owner and Servicer” Chicago Cubs LLC “Transferor” Chicago Cubs Master Ticket Trust Investors Structure Summary Receivables $ $ Class A, Class B and Class C Notes $

9. Chicago Cubs Ticket Sales Structuring the Transaction The Parties: “Obligors” – The fans Originator/Obligor – The Chicago Cubs Servicer – The Chicago Cubs Trustee – A financial institution Credit Enhancer – Subordinated class of securities Rating Agencies – S&P, Moody’s, Fitch Underwriter – Investment bank Investors – Pension fund, insurance company, financial institution Counsel – Mayer Brown Rowe & Maw

10. Bankruptcy Law -- Make the SPV “Bankruptcy-Remote” Protecting the SPV from voluntary and involuntary bankruptcy Protecting the SPV from substantive consolidation Creating a “true sale” of receivables Chicago Cubs Ticket Sales Structuring the Transaction

11. Commercial Law – Perfect the Transfer Creating the security interest Perfecting the security interest Giving the security interest priority Chicago Cubs Ticket Sales Structuring the Transaction

12. Tax Law –- Avoid Additional Taxation Taxation of the Originator Taxation of the SPV Taxation of the Investors Chicago Cubs Ticket Sales Structuring the Transaction

13. Applies to Investment Companies – entities that are principally engaged in owning or holding “securities” “Security” is broadly defined Compliance is costly and burdensome Find an exemption: Sections 3(c)(1), 3(c)(5), 3(c)(7); Rule 3a-7 Investment Company Act of 1940 -– Avoid It Chicago Cubs Ticket Sales Structuring the Transaction

14. Securities Act of 1933 Securities Exchange Act of 1934 ERISA Offering the Securities The Closing Chicago Cubs Ticket Sales Selling the Transaction

15. The Securities Act of 1933 –- Comply with It Requires offers and sales of securities to be registered, unless exemption available Restricts offering communications -- Pre-filing period -- Waiting period -- Post-effective period Exemptions from Registration -- Regulation D, Rule 144A, Regulation S Chicago Cubs Ticket Sales Selling the Transaction

16. The Securities Act of 1933 –- Comply with It “Prospectus” disclosure requirements Liability for false registration statement -- Section 11 liability -- Due diligence defense [And “Blue Sky” Laws] Chicago Cubs Ticket Sales Selling the Transaction

17. The Securities Exchange Act of 1934 -- Don’t Forget It Anti-fraud provisions – Rule 10(b)(5) Periodic reporting requirements Sarbanes-Oxley requirements Chicago Cubs Ticket Sales Selling the Transaction

18. ERISA -- Get Help Pension Plan investors Prohibited Transactions -- Between Plan and party in interest -- Between Issuer and party in interest Exemptions Debt securities Chicago Cubs Ticket Sales Selling the Transaction

19. Communications –- Be Careful Prospectus defined in Section 2(a)(10) of the ‘33 Act : Provides investors with material information : -- Description of the notes -- How, when, and how much principal and interest will be paid -- Information about the Chicago Cubs -- Risk factors: Baseball strike Loss of Sammy Sosa Poor team performance Prolonged bad weather Beer prohibition Damage to Wrigley Field Chicago Cubs Ticket Sales Selling the Securities

21. Communications –- Be Careful Regulation FD (Fair Disclosure) Addresses selective disclosure of material, non- public information by issuers Requires issuer to make concurrent, public disclosure of material, non-public information Chicago Cubs Ticket Sales Selling the Securities

22. Communications –- Be Careful Electronic Roadshows -- Roadshows are allowed to be performed over the Internet -- Transmission cannot be a “prospectus” -- Registered offerings -- Rule 144A offerings -- Regulation S offerings Chicago Cubs Ticket Sales Selling the Securities

23. The Closing -- Bring the Champagne Documents Reviewed and Executed Opinions Delivered -- authority, enforceability, no conflicts, etc. -- commercial law opinions -- true sale/non-consolidation opinions -- tax opinions -- securities law opinions -- 10(b)(5) opinion Money Wired and Bonds Released -- The Chicago Cubs receive the proceeds of the sale and the investors receive their securities Chicago Cubs Ticket Sales Selling the Securities

24. The Chicago Cubs will now have money to pay its players, causing them to express their gratitude.... Chicago Cubs Ticket Sales Everybody is Happy

26. Orrick PowerPoint Template January 17, 2001 Name of Presenter Kellogg School of Management Securitization 2003 Spring Colloquium Cam Cowan May 12, 2003 Legal Issues in Securitization: What You Don’t Know Could Hurt You