SWWI Simon Worldwide Inc (GM)

Three Lions LLC Agreement

On March 18, 2013, (the “Effective Date”), Simon Worldwide, Inc. (“the Company”), together with Richard Beckman, Joel Katz and OA3, LLC, a California limited liability company (“OA3”), entered into the Limited Liability Company Agreement (the “LLC Agreement”) of Three Lions Entertainment, LLC (“Three Lions”). A copy of the LLC Agreement (including all of the exhibits thereto) is attached hereto as Exhibit 2.1, and is incorporated by reference herein.

Pursuant to the LLC Agreement, we made an initial capital contribution of $3,150,000 to acquire 600,000 investor membership units, or investor units, representing 60% of the voting power of Three Lions, subject to certain major decisions that require the unanimous approval of either the members of Three Lions or its Executive Board as described in more detail below. The other two initial members of Three Lions, Richard Beckman and Joel Katz, were granted a total of 35,294 investor units in respect of their combined initial capital contributions of $185,294, and a total of 364,706 common units in respect of their establishment of and contributions of property to Three Lions, which investor units and common units represent 40% of the voting power of Three Lions, subject to such unanimous approval provisions.

The 600,000 investor units we acquired in respect of our initial capital contribution currently represent a 60% interest in the economic returns of Three Lions, including the right to receive along with the other holders of investor units, in preference over holders of common units, certain priority distributions of 100% of available proceeds of any sale or liquidation transactions and not less than 75% of available cash from operations, in each case as determined by the Executive Board, until such time as the respective capital contributions made by us and the other members holding investor units have been recouped in full, at which time the holders of common units would be entitled to receive certain catch-up distributions thereafter until aggregate distributions made match the respective pro rata 63.5%/36.5% percentage interest split between the investor units and the common units. An employee incentive equity pool of non-voting units representing approximately 10% of the fully diluted economic interests of Three Lions has also been established in the LLC Agreement, however none of these non-voting units are currently outstanding. Any issuance of such incentive units or other economic participation rights to Three Lions employees could result in a proportionate dilutive reduction in our 60% interest in the economic returns of Three Lions of up to 6% in the aggregate, after the return of our aggregate capital contributions to Three Lions.

Pursuant to the LLC Agreement, we made a second capital contribution to Three Lions in the amount of $1,850,000, and Messrs. Beckman and Katz made additional capital contributions to Three Lions totaling $108,824, in April 2013. We have the option, but are not required, to make a third and final capital contribution to Three Lions of $3,500,000, and Messrs. Beckman and Katz are required to make final capital contributions to Three Lions totaling $205,882. We intend to make this $3,500,000 capital contribution to Three Lions following the closing of the rights offering described in the Registration Statement on Form S-1 filed by the Company with the Securities and Exchange Commission on May 31, 2013, as it may be amended from time to time, provided that it successfully closes. If we do not make this third capital contribution, OA3, an affiliate of our controlling shareholder Overseas Toys, L.P., a Delaware limited partnership (“Overseas Toys”) is obligated to make a capital contribution of $3,500,000 to Three Lions. OA3 is also obligated under the LLC Agreement to make available to Three Lions, upon the request of its chief executive officer, a revolving loan facility in a principal amount not to exceed $6,000,000 on the terms set forth in the LLC Agreement.

If OA3 makes such contribution, it will acquire a proportionate interest in Three Lions of approximately 247,000 investor units and our interest in Three Lions will be reduced by an equivalent number of investor units as are issued to OA3. Notwithstanding any such reduction in investor units held by us, the LLC Agreement provides that for so long as we and OA3 collectively hold at least 51% of the voting membership units in Three Lions (or 510,000 investor units), we alone will control at least 51% of the voting power of the members of Three Lions, subject to certain major decisions that require the unanimous approval of either the members of Three Lions or its Executive Board. Additionally, the LLC Agreement provides that we have the right to appoint three of the five members of the Executive Board of Three Lions. For so long as we and OA3 collectively hold not less than 75% of the membership units collectively held by us and OA3 following the third capital contribution described above, and we hold not less than 75% of the membership units we held following such third capital contribution, we alone shall continue to be entitled to appoint and remove three of the five members of the Executive Board of Three Lions.

The LLC Agreement provides that the management of Three Lions is vested in an Executive Board (the “Executive Board”), which has the power and authority to manage and direct the business and affairs of Three Lions and full, exclusive and complete control and responsibility for its business activities. The Executive Board acts pursuant to a majority vote of its members, except with respect to certain specified decisions in the LLC Agreement requiring special approval by either all members of the Executive Board or by all members of Three Lions holding investor units or common units. The matters requiring such special approval are:

The day-to-day management of Three Lions is vested in such executive officers as are designated by the Executive Board from time to time, in each case and at all times under the supervision of the Executive Board. The executive officers have the general powers and duties of management usually vested in the office chief executive officer and chief operating officer of a corporation, and will report to the Executive Board and have such other powers and duties as may be prescribed by the Executive Board or the LLC Agreement. No executive officer may be removed without the prior written consent of the Executive Board. Mr. Beckman serves as the chief executive officer of Three Lions with primary responsibility for day-to-day operations, is the primary liaison to the Executive Board and is responsible for keeping the Executive Board informed as to Three Lions’ status and endeavors including in particular its financial condition and results.

The foregoing description of the LLC Agreement is a summary and is qualified in its entirety by the terms of the LLC Agreement.

In connection with the foregoing, Three Lions entered into an Employment Agreement with Richard Beckman, who will serve as the Chief Executive Officer of Three Lions. Mr. Beckman is guaranteed a salary of $800,000 per year for five years, plus certain bonuses and merit raises, subject to certain termination provisions.

Prior to the negotiation of the Company’s acquisition of an equity interest in Three Lions, none of the Company, Overseas Toys, OA3 or Ronald Burkle had any pre-existing material relationship with Three Lions, Mr. Beckman or Mr. Katz. On April 12, 2013, following the execution of the LLC Agreement, the Company issued a letter of credit in the amount of $0.2 million and with an expiration date of April 15, 2014, to guarantee payments on an office lease obtained by Three Lions. To our knowledge, the only pre-existing material relationship between Messrs. Beckman and Katz prior to their formation of Three Lions is that Mr. Beckman is a long-standing client of Mr. Katz, who is an entertainment law attorney.

Overseas Toys is the direct beneficial owner of 41,763,668 shares of the Company’s common stock, $0.01 par value per share, representing approximately 82.5% of the Company’s outstanding common stock. Multi-Accounts, LLC, a California limited liability company (“Multi-Accounts”) is the general partner of Overseas Toys. OA3 is the managing member of Multi-Accounts. Ronald W. Burkle, an individual, controls OA3.

Three Lions’ Business

Three Lions intends to originate, produce and monetize annual television programming for broadcast on network television, exhibition on basic cable and premium subscription services and associated multi-media events, with a particular emphasis on branded entertainment and special events. Branded entertainment is an entertainment-based vehicle that is funded by advertisers and is complementary to a brands marketing strategy.

Three Lions’ strategy is to not rely solely on TV license fees that typically drive the TV production business. Three Lions expects to derive revenue from sponsorships and marketing partnerships related to its programming that are executed across multiple platforms including television, online, events and print. Sponsorship revenues will be paid in accordance with negotiated contracts, with the identities of partners and the terms of sponsorship changing from time to time.

Three Lions initially intends to produce or co-produce revivals of the Fashion Rocks and Movies Rock events which were produced from 2004 to 2008, and Three Lions has secured subsequent to formation of Three Lions certain intellectual property licenses for the “Fashion Rocks” and “Movies Rock” marks to enable it to produce such events. Three Lions productions will generally be standalone events, and a network may license a specified number of rebroadcasts on the network in the U.S. during a license period. Three Lions is currently in negotiations with a network to enter into a broadcast agreement for its first two television productions using the Fashion Rocks and Movies Rock brands, and with an executive producer to enter into a production agreement for such productions, which Three Lions plans to produce in 2014. Remaining distribution rights, including international and/or off-network syndication rights, are generally anticipated to be retained by Three Lions or, in the case of co-productions, shared with the co-producer for U.S. or international markets.

The network license fee for a special event, when applicable, is normally lower than the costs of producing the event; however, Three Lions’ objective is to recoup its costs and earn a profit through sponsorship revenue and international and domestic syndication. Three Lions is currently in the process of negotiating potential sponsorship agreements with several major companies. Three Lions may also distribute syndicated and other programming internationally or enter into agreements for digital streaming of its programming in the U.S. and certain other countries. Three Lions has not yet entered into any of the aforementioned broadcast, production, distribution, sponsorship or digital streaming agreements, or into any of the venue, print partnership or host city agreements that are also under consideration by Three Lions with respect to its planned productions, and there can be no assurance that Three Lions will succeed in its efforts to enter into such agreements.

As of July 12, 2013, Three Lions has thirteen employees, all of whom are full-time employees. In May 2013, Three Lions entered into a lease agreement for approximately 4,000 square feet of office space located at 150 East 52nd Street, Suite 32002, New York, NY 10022. The lease has a term of 5 years and 4 months and a total lease payment obligation of $1.3 million over the course of such term.

At present, Three Lions’ material assets consist of its licenses to the Fashion Rocks and Movies Rock marks and the approximately $3.15 million in cash held by it as of June 30, 2013. Three Lions’ cash on hand is comprised of the approximately $5.29 million in capital contributions made by its members to date, less transaction costs, operating expenses and trademark license royalty advances. Three Lions’ material liabilities consist of the trademark license royalty payments, lease payment obligations and employee overhead costs. Three Lions is currently in the process of negotiating a revolving credit facility of approximately $6 million with a third party lender, but there can be no assurance that Three Lions will be able to secure such a facility.