Orrick PowerPoint Template

1. Orrick PowerPoint Template 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 January 17, 2001 Name of Presenter

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

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

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. Ticket Sale Securitization • 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

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

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

9. Chicago Cubs Ticket SalesStructuring 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. Chicago Cubs Ticket SalesStructuring the Transaction • 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

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

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

13. Chicago Cubs Ticket SalesStructuring the Transaction Investment Company Act of 1940 -– Avoid It • 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

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

15. Chicago Cubs Ticket SalesSelling the Transaction • TheSecuritiesAct 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

16. Chicago Cubs Ticket SalesSelling the Transaction • 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]

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

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

19. Chicago Cubs Ticket SalesSelling the Securities • 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

21. Chicago Cubs Ticket SalesSelling the Securities • 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

22. Chicago Cubs Ticket SalesSelling the Securities • 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

23. Chicago Cubs Ticket SalesSelling the Securities • 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

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

25. Chicago Cubs Ticket SalesEverybody is Happy

26. Orrick PowerPoint Template 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 January 17, 2001 Name of Presenter