SWWI Simon Worldwide Inc (GM)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) May 7, 2014

 

 

Simon Worldwide, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

(State or Other Jurisdiction of Incorporation)

 

0-21878				04-3081657
(Commission File Number)				(IRS Employer Identification No.)
18952 MacArthur Boulevard, Irvine, California				92612
(Address of Principal Executive Offices)				(Zip Code)

Registrant’s Telephone Number, Including Area Code: (949) 251-4660

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 1.01.

Entry into a Material Definitive Agreement.

First Amendment to Three Lions LLC Agreement

On May 7, 2014, Simon Worldwide, Inc. (“the Company”) entered into a First Amendment (the “First Amendment”) to the Limited Liability Company Agreement (the “LLC Agreement”) of Three Lions Entertainment, LLC (“Three Lions”), dated March 18, 2013, by and among the Company, Richard Beckman, Joel Katz and OA3, LLC, a California limited liability company (“OA3”). The Company’s entry into the LLC Agreement was previously reported in the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on March 22, 2013, as amended by Amendment No. 1 thereto filed by the Company on July 15, 2013, Amendment No. 2 thereto filed by the Company on August 7, 2013, and Amendment No. 3 thereto filed by the Company on August 23, 2013. A copy of the First Amendment is attached hereto as Exhibit 2.1, and is incorporated by reference herein.

Pursuant to the First Amendment, the terms of Section 1.1 and Article 9 of the LLC Agreement were amended to permit each member of Three Lions, including the Company, to (i) pledge up to 100% of its membership interests, economic interests and/or units in Three Lions as security for Three Lions’ obligations under that certain Revolving Credit, Security, Guaranty and Pledge Agreement, dated as of May 7, 2014 (the “Credit Agreement”), by and among Three Lions, the guarantors named therein, SunTrust Bank, as lender, and SunTrust Bank, as administrative agent for the lender (“SunTrust”), and (ii) enter into a pledge agreement in favor of SunTrust pursuant to which such member agrees to pledge 100% of its membership interests, economic interests, and/or units in Three Lions as security for Three Lions’ obligations under the Credit Agreement. The Company is not a party to the Credit Agreement or named as a guarantor therein.

The First Amendment also provides that any interests and/or units in Three Lions transferred pursuant to any such pledge agreement shall not be subject to any rights of first refusal, co-sale rights or drag along rights of the other members set forth in the LLC Agreement, and that in the event SunTrust forecloses on any such interests or units, it will be admitted to Three Lions as a member and entitled to all voting and other rights as a member of Three Lions.

The First Amendment also amended Section 4.4.3 of the LLC Agreement, pursuant to which OA3 is obligated 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 (the “OA3 Loan Facility”). Pursuant to the First Amendment, Section 4.4.3 was amended to provide that Three Lions is only permitted to draw on the OA3 Loan Facility for the sole purpose of providing funding necessary for Three Lions to cure any defaults under the Credit Agreement, and that the OA3 Loan Facility shall be subordinate and junior in right of payment of the obligations under the Credit Agreement. OA3 is the managing member of Multi-Accounts, a California limited liability company, which is the general partner of Overseas Toys, L.P., a Delaware limited partnership that is the direct beneficial owner of 65,287,045 shares of the Company’s common stock, $0.01 par value per share, representing approximately 87.6% of the Company’s outstanding common stock. Ronald W. Burkle, an individual, controls OA3.

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

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Pledge Agreement

On May 7, 2014, the Company also entered into a Pledge Agreement (the “Pledge Agreement”), by and between the Company and SunTrust. A copy of the Pledge Agreement is attached hereto as Exhibit 10.1, and is incorporated by reference herein.

Pursuant to the Pledge Agreement, the Company pledged all of its equity interests in Three Lions (constituting 94.445% of the Investor Units (as defined in the LLC Agreement) of Three Lions) and any and all proceeds therefrom (the “Pledged Securities”), to SunTrust as security for Three Lions’ obligations under the Credit Agreement. Unless and until an event of default shall have occurred and be continuing under the Credit Agreement, the Company shall retain all voting rights, and rights to receive any cash dividends or distributions paid while no event of default is continuing, with respect to the Pledged Securities so long as such rights are exercised in a manner not inconsistent with the terms of the Pledge Agreement and the Credit Agreement. The Company’s pledge of the Pledged Securities under the Pledge Agreement shall terminate only upon the payment in full and termination of Three Lions’ obligations under the Credit Agreement. The Pledge Agreement expressly provides that SunTrust shall not have any claim, remedy or right to proceed against the Company for any deficiency in payment or performance of the obligations under the Credit Agreement, from any source other than the Pledged Securities pledged by the Pledge Agreement.

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

 

Item 2.01.

Completion of Acquisition or Disposition of Assets.

The information set forth in Item 1.01 above is hereby incorporated by reference into this Item 2.01.

Forward Looking Statements

This Current Report on Form 8-K contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically preceded by words such as “believes,” “expects,” “anticipates,” “intends,” “will,” “may,” “should,” or similar expressions, although some forward-looking statements are expressed differently. Forward-looking statements represent the Company’s management’s judgment regarding future events. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, the Company can give no assurance that such expectations will prove to be correct. All statement other than statements of historical fact included in the Current Report on Form 8-K are forward-looking statements. The Company cannot guarantee the accuracy of the forward-looking statements, and you should be aware that the Company’s actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including the statements under “Risk Factors” contained in the Company’s reports filed with the Securities and Exchange Commission.

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Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit 2.1		First Amendment to Limited Liability Company Agreement of Three Lions Entertainment, LLC, dated May 7, 2014, by and among the Company, Richard Beckman, Joel Katz and OA3, LLC.
Exhibit 10.1		Pledge Agreement, dated May 7, 2014, between the Company and SunTrust Bank, as Administrative Agent for the lenders referred to therein.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				SIMON WORLDWIDE, INC.
May 13, 2014				/s/ Anthony Espiritu
				Name:		Anthony Espiritu
				Title:		Chief Financial Officer

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EXHIBIT INDEX

 

Exhibit No.		Description
Exhibit 2.1		First Amendment to Limited Liability Company Agreement of Three Lions Entertainment, LLC, dated May 7, 2014, by and among the Company, Richard Beckman, Joel Katz and OA3, LLC.
Exhibit 10.1		Pledge Agreement, dated May 7, 2014, between the Company and SunTrust Bank, as Administrative Agent for the lenders referred to therein.

Exhibit 2.1

 

 

FIRST AMENDMENT TO

LIMITED LIABILITY COMPANY AGREEMENT

OF

THREE LIONS ENTERTAINMENT, LLC,

a Delaware limited liability company

May 7, 2014

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FIRST AMENDMENT TO

LIMITED LIABILITY COMPANY AGREEMENT

OF THREE LIONS ENTERTAINMENT, LLC,

a Delaware limited liability company

This First Amendment (this “Amendment’) to the Limited Liability Company Agreement of Three Lions Entertainment, LLC, a Delaware limited liability company (the “Company”), effective as of May 7, 2014, is entered into by Richard Beckman (“Beckman”), Joel A. Katz (“Katz”), Simon Worldwide Inc., a Delaware corporation (“Simon”; together with Beckman and Katz, collectively, the “Members” and each individually, a “Member”).

Reference is hereby made to the Limited Liability Company Agreement of the Company, dated as of March 15, 2013 (the “Agreement”). All capitalized terms used but not defined herein have the meanings set forth in the Agreement.

WHEREAS, the Company is entering into that certain Revolving Credit, Security, Guaranty and Pledge Agreement (the “Credit Agreement”) dated on or about the date hereof, by and among the Company, the guarantors named therein, SunTrust Bank, as the lender (the “Lender”) and SunTrust Bank, as administrative agent for the Lender (the “Administrative Agent”).

WHEREAS, in order to induce the Lender to lend funds to the Company pursuant to the Credit Agreement, the Credit Agreement requires that each Member pledge 100% of its Membership Interest and/or Units in the Company to the Administrative Agent (for the benefit of Lenders) as security for the due and punctual payment of the Company’s Obligations (as defined in the Credit Agreement).

WHEREAS, each Member desires to enter into a Pledge Agreement (each, a “Pledge Agreement”) in favor of the Administrative Agent, pursuant to which each Member shall pledge 100% of its Membership Interest and/or Units in the Company to the Administrative Agent (for the benefit of Lenders) as security for the due and punctual payment of the Company’s Obligations.

WHEREAS, the Members desire to amend the Agreement to permit each Member to execute and deliver a Pledge Agreement and enter into the transactions contemplated thereby.

WHEREAS, in order to induce the Lender to lend funds to the Company pursuant to the Credit Agreement, the Credit Agreement requires that the Yucaipa Loan be made available for the sole purpose of providing funding necessary for the Company to cure any defaults under the Credit Agreement and be subordinate and junior in right of payment to the Credit Agreement.

WHEREAS, the Members desire to amend the Agreement to revise the terms, conditions and other obligations under the Yucaipa Loan as provided herein.

WHEREAS, the Agreement may be amended by the unanimous written approval of the Members holding all Investor Units and Common Units, and collectively, the Members hold all Investor Units and Common Units and desire to amend the Agreement as provided herein.

 

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NOW, THEREFORE, for good and valuable consideration, the Members hereby agree to amend the Agreement as follows:

 

1.

Section 1.1 of the Agreement is hereby amended to add the following definitions in the appropriate alphabetical order:

 

a.

“Credit Agreement” means that certain Revolving Credit, Security, Guaranty and Pledge Agreement, dated as of May 7, 2014, by and among the Company, the guarantors named therein and SunTrust, as the lender and as the administrative agent.

 

b.

“Pledge Agreement” has the meaning set forth in Section 9.8.

 

c.

“SunTrust” means SunTrust Bank

 

d.

“Subordination and Intercreditor Agreement” means that certain Subordination and Intercreditor Agreement, dated as May 7, 2014, by and among the Company, SunTrust and Yucaipa.

 

e.

“Yucaipa Backstop Agreement” means that certain Backstop Commitment Letter, dated as May 7, 2014, by and among the Company, SunTrust and Yucaipa.

 

2.

Section 4.4.3 of the Agreement is hereby amended and restated in its entirety and shall read as follows:

4.4.3 Yucaipa Loan. Pursuant to the terms of the Yucaipa Backstop Agreement, Yucaipa shall make available to the Company, for the benefit of SunTrust, loans (the “Yucaipa Loans”) in an aggregate principal amount up to Six Million Dollars ($6,000,000). The Yucaipa Loans shall be secured by a lien against the Company’s assets, subordinate only to the rights of SunTrust, as set forth in the Subordination and Intercreditor Agreement and shall be evidenced by such security agreements and other loan documentation all as shall be mutually and reasonably agreed (and as shall be consistent with terms and conditions set forth herein and as is customary for arm’s length lending industry practice) between the Company’s Executive Board (with those Executive Board Members appointed by the Y-S Investors having no vote on such matter) and Yucaipa, subject to the terms of the Subordination and Intercreditor Agreement. The Yucaipa Loan shall be available for the sole purpose of providing funding necessary for the Company to cure any defaults under the Credit Agreement and shall be subordinate and junior in right of payment of the obligations under Credit Agreement. The Company shall make drawings and borrowings under the Yucaipa Backstop Agreement only to the extent allowed in the Credit Agreement and the Subordination and Intercreditor Agreement.

 

3.

The beginning of the first sentence of Section 9.1.1 of the Agreement is hereby amended by replacing the phrase “No” with “Subject to Sections 9.7 and 9.8, no”.

 

4.

The beginning of the first sentence of Section 9.7 of the Agreement is hereby amended by replacing the phrase “Subject to Section 9.1” with “Subject to Section 9.8”.

 

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5.

The Agreement is hereby amended by adding thereto the following Section 9.8:

“9.8 SunTrust Pledge. Notwithstanding anything to contrary in this Agreement, each Member or Holder is hereby permitted to (i) pledge up to one hundred percent (100%) of its Membership Interest, Economic Interest and/or Units as security for the Company’s obligations under the Credit Agreement and (ii) enter into a pledge agreement (each, a “Pledge Agreement”) in favor of SunTrust pursuant to which such Member or Holder agrees to pledge up to one hundred percent (100%) of its Membership Interest, Economic Interest and/or Units as security for the Company’s obligations under the Credit Agreement. No Member or Holder shall have any Right of First Refusal pursuant to Section 9.2.1, any Co-Sale Rights pursuant to Section 9.2.2 nor any Drag-Along Rights pursuant to Section 9.2.3 with respect to the transfer of any Membership Interests, Economic Interest and/or Units made in connection with a Pledge Agreement. In the event SunTrust forecloses on any Membership Interest, Economic Interest and/or Units pledged in connection with a Pledge Agreement, SunTrust will be admitted into the Company as a Member and shall be entitled to exercise voting rights and all other rights of a Member.

 

6.

The Agreement as hereby amended remains in full force and effect. The terms and provisions of this Amendment shall be governed by and construed in accordance with the laws of the State of Delaware.

[Signature page follows]

 

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IN WITNESS WHEREOF, the Members have hereby executed this Amendment as of the date first set forth above.

 

 

ACCEPTED AND AGREED TO WITH RESPECT TO THE AMENDMENTS TO SECTION 4.4.3:

/s/ Robert P. Bermingham

OA3, LLC

[Signature Page to LLC Agreement Amendment]

Exhibit 10.1

Execution Copy - Simon

PLEDGE AGREEMENT

PLEDGE AGREEMENT dated as of May 7, 2014 (as amended, supplemented or otherwise modified, renewed or replaced from time to time, the “Agreement”) between Simon Worldwide, Inc., a Delaware corporation (the “Pledgor”) and SUNTRUST BANK, as agent for the Lenders under the Credit Agreement defined below (the “Administrative Agent”).

WHEREAS, pursuant to that certain Revolving Credit, Security, Guaranty and Pledge Agreement dated as of the date hereof, among (i) Three Lions Entertainment, LLC (the “Company”), as borrower, the Guarantors named therein (the “Guarantors”), (ii) the Lenders named therein (the “Lenders”), and (iii) the Administrative Agent (as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time in accordance with its terms, the “Credit Agreement” capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement or, if not defined in the Credit Agreement, in the Company Agreement (as defined below), as appropriate), the Lenders have agreed to make loans to the Company (the “Loans”) to be used for the purpose set forth therein.

WHEREAS, as of March 15, 2013, the Pledgor and the other members of the Company entered into the Limited Liability Company Agreement (as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time in accordance with its terms, the “Company Agreement”).

WHEREAS, the Pledgor owns beneficially and of record 94.445% of all of the issued and outstanding Investor Units of the Company as set forth on Schedule 1 hereto.

WHEREAS, in order to induce the Lenders and the Administrative Agent to enter into the Credit Agreement and the Lenders to make the Loans to the Company as contemplated thereby and to secure payment in full of the Obligations thereunder, the Pledgor hereby pledges to the Administrative Agent (for the benefit of the Secured Parties) the Equity Interests set forth on Schedule 1 hereto, all as more fully set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Pledge. Pledgor, as security for the due and punctual payment of the Obligations (including interest accruing on and after the filing of any petition in bankruptcy or of reorganization of the Company whether or not post filing interest is allowed in such proceeding), hereby grants, pledges, hypothecates, assigns, transfers, sets over, conveys and delivers unto the Administrative Agent (for the benefit of the Secured Parties) a first priority security interest in (i) all of its Equity Interests in the Company, and (ii) all proceeds of such shares and all other securities or other property at any time and from time to time receivable or otherwise distributed in respect of or in exchange for any or all of such shares or additional securities. All items referred to in clauses (i) and (ii) of this Section 1 are hereinafter referred to collectively as the “Pledged Securities”. On or prior to the Closing Date, the Pledgor shall deliver to the Administrative Agent the definitive instruments (if any) representing all Pledged Securities, accompanied by undated stock powers (or any comparable documents for non-corporate entities to the extent certificated), duly endorsed or executed in blank by the Pledgor, and such other instruments or documents relating thereto as the Administrative Agent or its counsel shall reasonably request.

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2. Covenants.

(a) Pledgor agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from the Pledgor, and Pledgor agrees that it will remain bound upon this pledge notwithstanding any extension or renewal of any Obligation.

(b) Pledgor, to the extent permitted by Applicable Law, waives presentment to, demand for payment from and protest to the Company, and also waives notice of protest for nonpayment, notice of acceleration and notice of intent to accelerate. The obligations of the Pledgor hereunder shall not be affected by: (i) the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any right or remedy against the Company under the provisions of the Credit Agreement, this Agreement or any other agreement or otherwise; (ii) any extension or renewal of any provision hereof or thereof; (iii) any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of the Credit Agreement, the Notes or any other agreement; (iv) the release, exchange, waiver or foreclosure of any collateral securing the Obligations; or (v) the failure of the Administrative Agent or any Secured Party to exercise any right or remedy against the Guarantors or any other guarantor of the Obligations.

(c) Pledgor agrees that this pledge is a continuing security interest in the Pledged Securities and constitutes security for performance and payment when due and not just of collection, and waives, to the extent permitted by Applicable Law, any right to require that any resort be had by the Administrative Agent or the Lenders to any other security held for payment of the Obligations or to any balance of any deposit, account or credit on the books of the Administrative Agent or any Secured Party in favor of the Company or to any other person.

(d) Pledgor acknowledges that none of the Administrative Agent or any Lender shall have any responsibility to inform the Pledgor of the financial condition of the Company or any circumstances affecting the Pledged Securities or the ability of the Company to perform its obligations under the Credit Agreement.

(e) This pledge shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations, or any instrument evidencing any of the Obligations, or by the existence, validity, enforceability, perfection or extent of the Pledged Securities or by any other circumstance relating to the Obligations which might otherwise constitute a defense to the pledge under this Agreement (other than the indefeasible payment in full of the Obligations). None of the Administrative Agent or any Secured Party makes any representation or warranty in respect of any such circumstances or has any duty or responsibility whatsoever to the Pledgor in respect to the management and maintenance of the Obligations or the Pledged Securities.

(f) The obligations of the Pledgor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim or waiver, release, surrender, alteration or compromise (other than payment of the Obligations), and shall not be subject to any defense (other than payment of the Obligations) or set-off,

 

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counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Pledgor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy hereunder or under the Credit Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure, or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing, or omission or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of the Pledgor or would otherwise operate as a discharge of the Pledgor as a matter of Applicable Law, unless and until the Obligations are paid in full.

3. Registration in Nominee Name; Denominations. The Administrative Agent shall have the right (in its sole and absolute discretion) to hold the certificates, if any, representing any Pledged Securities (a) in its own name (on behalf of the Secured Parties) or the name of its nominee, or (b) in the name of Pledgor, endorsed or assigned in blank or in favor of the Administrative Agent. The Administrative Agent shall have the right to exchange the certificates, if any, representing any of the Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

4. Representations, Warranties and Covenants. Pledgor hereby represents, warrants, covenants and agrees with the Administrative Agent as follows:

(a) the Investor Units set forth on Schedule 1 hereto constitute 94.445% of the issued and outstanding Investor Units of the Company;

(b) the Pledged Securities are duly authorized, validly issued and fully paid;

(c) there are no restrictions on the transfer of the Pledged Securities other than as a result of the Credit Agreement, this Agreement, the Company’s certificate of formation, the Company Agreement or applicable Securities Laws or the regulations promulgated thereunder;

(d) the Pledgor has good title to the Pledged Securities;

(e) the Pledged Securities are not subject to any prior liens, encumbrances or security interests, and the Pledgor will keep the Pledged Securities free and clear of all security interests, Liens and encumbrances other than the Lien granted hereunder, and will not sell, assign, transfer, exchange or otherwise dispose of the Pledged Securities or any portion thereof except to the Administrative Agent (on behalf of the Secured Parties);

(f) the Pledgor has the right to pledge the Pledged Securities hereunder free and clear of any Liens, encumbrances or security interests and without the consent of any other Person or any government agency whatsoever;

(g) the Pledgor has the capacity to execute, deliver and perform this Agreement and to pledge the Pledged Securities hereunder;

(h) the Pledgor will not take any action to allow any equity interests of the Company to be issued, or grant any options or warrants, unless such securities are pledged to the Administrative Agent (for the benefit of the Secured Parties), on terms satisfactory to the Administrative Agent, as security for the Obligations;

 

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(i) the execution, delivery and performance of this Agreement will not violate any provision of Applicable Law, any order of any court or other agency of government having jurisdiction over the Pledgor, the Company or the Pledged Securities, any provision of any indenture, agreement or other instrument to which Pledgor is a party, or be in conflict with, result in a material breach of or constitute (with due notice and/or lapse of time) a material default under any such indenture, agreement or other instrument;

(j) there are no pending legal or governmental proceedings to which Pledgor is a party or to which any of the Pledgor’s properties is subject which will materially affect the ability of the Pledgor to perform its obligations hereunder;

(k) on the date hereof, the Pledged Securities consist of the interests listed on Schedule 1 hereto;

(l) the Pledgor will realize a direct economic benefit as a result of the Loans being made to the Company which are secured hereby; and

(m) the Pledgor will promptly notify the Administrative Agent of any change in its location as determined under Section 9-307 of the Uniform Commercial Code as in effect in the State of New York on the date of execution of this Agreement.

5. Voting Rights: Dividends; etc. Unless and until an Event of Default shall have occurred and be continuing;

(a) The Pledgor shall be entitled to exercise any and all voting and/or consensual rights and powers accruing to the owner of the Pledged Securities or any part thereof for any purpose not inconsistent with the terms hereof, of the Credit Agreement and of the other Fundamental Documents.

(b) All dividends or distributions of any kind whatsoever (other than cash dividends or cash distributions paid while no Event of Default is continuing) received by the Pledgor with respect to the Pledged Securities, whether resulting from a subdivision, combination, or reclassification of the outstanding capital stock or Equity Interests of the issuer or received in exchange for Pledged Securities or any part thereof or as a result of any merger, consolidation, acquisition, or other exchange of assets to which the issuer may be a party, or otherwise, shall be and become part of the Pledged Securities pledged hereunder and shall immediately be delivered to the Administrative Agent to be held subject to the terms hereof. All dividends and distributions with respect to any Pledged Securities which are received by a Pledgor contrary to the provisions of this Section 5(b) shall be received in trust for the benefit of the Secured Parties, segregated from the Pledgor’s own assets, and shall be delivered to the Administrative Agent.

(c) Upon the occurrence and during the continuance of an Event of Default and notice from the Administrative Agent of the transfer of such rights to the Administrative Agent, all rights of the Pledgor (i) to exercise the voting and/or consensual rights and powers which it is

 

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entitled to exercise pursuant to this Section 5, and (ii) to receive and retain cash dividends and cash distributions with respect to the Pledged Securities shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall have the sole and exclusive right and authority to exercise such voting and/or consensual rights with respect to any Pledged Securities and receive such cash dividends and cash distributions with respect to any Pledged Securities until such time as such Event of Default has been cured or waived.

6. Remedies Upon Default. If an Event of Default shall have occurred and be continuing, the Administrative Agent (on behalf of the Secured Parties), may sell the Pledged Securities, or any part thereof, at public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Administrative Agent shall deem appropriate subject to the terms hereof or as otherwise provided in the UCC or otherwise to the extent provided by Applicable Law. The Administrative Agent shall be authorized at any such sale (if the Administrative Agent deems it advisable to do so) to restrict to the full extent permitted by Applicable Law the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Pledged Securities for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale, the Administrative Agent shall have the right to assign, transfer, and deliver to the purchaser or purchasers thereof the Pledged Securities so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of the Pledgor. The Administrative Agent shall give the Pledgor ten (10) days’ prior written notice of any such public or private sale, or sale at any broker’s board or on any such securities exchange, or of any other disposition of the Pledged Securities. Such notice, in the case of public sale, shall state the time and place for such sale and, in the case of sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Pledged Securities, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Administrative Agent may fix and shall state in the notice of such sale. At any such sale, the Pledged Securities, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Administrative Agent may (in its sole and absolute discretion) determine. The Administrative Agent shall not be obligated to make any sale of the Pledged Securities if it shall determine not to do so, regardless of the fact that notice of sale of the Pledged Securities may have been given. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case the sale of all or any part of the Pledged Securities is made on credit or for future delivery, the Pledged Securities so sold shall be retained by the Administrative Agent until the sale price is paid by the purchaser or purchasers thereof, but the Administrative Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Pledged Securities so sold and, in case of any such failure, such Pledged Securities may be sold again upon like notice. At any sale or sales made pursuant to this Section 6, the Administrative Agent (on behalf of the Secured Parties) may bid for or purchase, free from any claim or right of whatever kind, including any equity of redemption, of the Pledgor, any such demand, notice, claim, right or equity being hereby expressly waived and released to the extent permitted by the UCC, any or all of the Pledged Securities offered for sale, and may make any payment on the account thereof by using any claim for moneys then due and payable to the Administrative Agent

 

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or any other consenting Secured Party by any Credit Party as a credit against the purchase price; and the Administrative Agent, upon compliance with the terms of sale, may hold, retain and dispose of the Pledged Securities without further accountability therefor to the Pledgor or any third party (other than the Secured Parties). The Administrative Agent shall in any such sale make no representations or warranties with respect to the Pledged Securities or any part thereof, and shall not be chargeable with any of the obligations or liabilities of the Pledgor with respect thereto. Pledgor hereby agrees that (i) it will indemnify and hold the Secured Parties harmless from and against any and all claims with respect to the Pledged Securities asserted before the taking of actual possession or control of the Pledged Securities by the Administrative Agent pursuant to this Agreement, or arising out of any act of, or omission to act on the part of, any Person prior to such taking of actual possession or control by the Administrative Agent (whether asserted before or after such taking of possession or control), or arising out of any act on the part of any Pledgor, its agents or Affiliates before or after the commencement of such actual possession or control by the Administrative Agent, but excluding therefrom all claims with respect to the Pledged Securities resulting from the gross negligence or willful misconduct of any of the Administrative Agent or any Secured Party, as finally determined by a court of competent jurisdiction in a non-appealable decision or an appealable decision that has not been appealed within the time period required, and (ii) the Secured Parties shall have no liability or obligation arising out of any such claim except for acts of willful misconduct or gross negligence of such Person, as finally determined by a court of competent jurisdiction in a non-appealable decision or an appealable decision that has not been appealed within the time period required. As an alternative to exercising the power of sale herein conferred upon it, the Administrative Agent may proceed by a suit or suits at law or in equity to foreclose upon the Pledged Securities under this Agreement and to sell the Pledged Securities, or any portion thereof, pursuant to a judgment or decree of a court or courts having competent jurisdiction.

7. Application of Proceeds of Sale and Cash. The proceeds of any sale of the Pledged Securities sold pursuant to Section 6 hereof shall be applied by the Administrative Agent, first, to the payment of costs incurred by the Administrative Agent while enforcing its rights pursuant to this Agreement, and then, in accordance with Section 10.6 of the Credit Agreement.

8. Administrative Agent Appointed Attorney-in-Fact. Upon the occurrence and during the continuance of an Event of Default which has not been waived, the Pledgor hereby appoints the Administrative Agent as its attorney-in-fact for the purpose of carrying out the provisions of this Agreement and the pledge of the Pledged Securities hereunder and taking any action and executing any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Administrative Agent shall have the right and power to receive, endorse, and collect all checks and other orders for the payment of money made payable to the Pledgor representing any dividend or other distribution payable in respect of the Pledged Securities or any part thereof and to give full discharge for the same.

9. Securities Laws, etc. In view of the position of the Pledgor in relation to the Pledged Securities pledged by it, or because of other present or future circumstances, a question may arise under the U.S. Securities Act of 1933, as amended, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose (the statute referenced in this Section 9

 

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and any applicable securities laws of other provinces, states, territories and other foreign jurisdictions, the regulations promulgated thereunder, and the policies and instruments adopted by the applicable Governmental Authorities in respect thereof being referred to herein as the “Securities Laws”), with respect to any disposition of the Pledged Securities permitted hereunder. Each of the Pledgor and the Administrative Agent understands that compliance with the Securities Laws may very strictly limit the course of conduct of the Administrative Agent if the Administrative Agent were to attempt to dispose of all or any part of the Pledged Securities, and may also limit the extent to which or the manner in which any subsequent transferee of any Pledged Securities may dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Administrative Agent in any attempt to dispose of all or any part of the Pledged Securities under applicable Blue Sky or other state Securities Laws, or similar laws analogous in purpose or effect. Under Applicable Law, in the absence of an agreement to the contrary, the Administrative Agent may perhaps be held to have certain general duties and obligations to the Pledgor to make some effort towards obtaining a fair price even though the Obligations may be discharged or reduced by the proceeds of a sale at a lesser price. Pledgor waives to the fullest extent permitted by Applicable Law any such general duty or obligation to it, and the Pledgor will not attempt to hold the Administrative Agent responsible for selling all or any part of the Pledged Securities at an inadequate price. Without limiting the generality of the foregoing, the provisions of this Section 9 would apply if, for example, the Administrative Agent were to place all or any part of the Pledged Securities for private placement by an investment banking firm, or if such investment banking firm purchased all or any part of the Pledged Securities for its own account, or if the Administrative Agent placed all or any part of the Pledged Securities privately with a purchaser or purchasers.

10. Continuation and Reinstatement Pledgor agrees that its pledge hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Secured Party upon the bankruptcy or reorganization of Pledgor or otherwise. If, for any reason, any portion of such payments to the Secured Parties is set aside or restored, whether voluntarily or involuntarily, after the making thereof, then the obligation intended to be satisfied thereby shall be revived and continued in full force and effect as if said payment or payments had not been made, and the Obligations secured by the Liens granted hereunder shall include the full amount any of the Secured Parties is required to repay plus any and all costs and expenses (including attorneys’ fees and expenses and attorneys’ fees and expenses incurred pursuant to proceedings arising under the Bankruptcy Code and/or other Applicable Laws) paid by any of the Secured Parties in connection therewith.

11. Termination. The pledge referenced herein shall terminate when all of the Obligations shall have been fully and indefeasibly paid in cash and performed and the Commitments shall have terminated (other than contingent indemnification obligations under any of the Fundamental Documents that are expressly stated to survive such payment or termination and for which no claim has been asserted by any indemnified party), at which time the Administrative Agent (at the sole expense of the Pledgor) shall promptly assign and deliver to the Pledgor, or to such Person or Persons as Pledgor shall designate, against receipt, such of the Pledged Securities (if any) as shall not have been sold or otherwise applied by the Administrative Agent pursuant to the terms hereof and shall still be held by it hereunder, together with appropriate instruments of reassignment and release, and shall file termination statements

 

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with respect to any financing statements covering the Pledged Securities. Any such reassignment shall be free and clear of all Liens, arising by, under or through the Administrative Agent but shall otherwise be without recourse upon or warranty by the Administrative Agent and at the expense of the Pledgor.

12. Further Assurances. Pledgor, at its own expense, will execute and deliver, from time to time, any and all further or other instruments, and perform such acts, as the Administrative Agent may reasonably request to effect the purposes of this Agreement and to secure to the Administrative Agent (for the benefit of the Secured Parties), the benefits of all rights, authorities, and remedies conferred upon the Administrative Agent (for the benefit of the Secured parties) by the terms of this Agreement.

13. Notice. All notices, requests, demands or other communications to the parties hereto shall be in writing and shall be delivered by hand, by internationally recognized overnight courier (e.g., FedEx or DHL), by facsimile or by transmission by electronic photocopy (i.e., “PDF” or “TIFF”) format sent by electronic mail, and shall be deemed to have been received by the party to which sent (a) on the day of delivery (if delivered by hand), or on the Business Day of confirmed transmission by facsimile or electronic mail (with confirmation of successful transmission issued from the sender’s facsimile machine or email server, as applicable) (provided such transmission was made prior to 6:00 p.m. New York time on a Business Day and. if not, then on the Business Day after such transmission was confirmed), or one (1) Business Day after being sent by nationally recognized overnight courier, or (b) on such later date if the recipient gives verifiable proof of receipt on such later date, and shall be addressed to the parties hereto, as the ease may be, at their respective addresses. The address for notices to the parties (until notice of a change thereof is served as provided in this Section 13) shall be as follows:

 

To the Administrative Agent:		With a courtesy copy to:
SunTrust Bank		Akin Gump Strauss Hauer & Feld LLP
303 Peachtree St., 32nd Floor		2029 Century Park East, Suite 2400
Atlanta, GA, 30308		Los Angeles, California 90067
Attention: Brett Ross, Vice President, Sports &		Attention: P. John Burke, Esq.
Entertainment Specialty Group		Fax No.: (310)229-1001
Fax No.: (404) 813-5260		Email: Jburke@akingump.com
Email: Brett.Ross@SunTrust.com
To Pledgor:		With a courtesy copy to:
Simon Worldwide, Inc.		The Yucaipa Companies
18952 MacArthur Boulevard		9130 West Sunset Boulevard
Irvine, California 92612		Los Angeles, California 90069
Attention: Terrance Wollack		Attention: Henry Orren
Fax No.: (949)-251-4670		Fax No.: (310) 789-1791
Email: terry_wollack@smi-la.com		Email: henry.orren@yucaipaco.com
		Greenberg Traurig, LLP
		3333 Piedmont Road NE, Suite 2500
		Atlanta, GA 30305
		Attention: James Altenbach, Esq.
		Fax No.: (678)553-2445
		Email : AltenbachJ@gtlaw.com1

 

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14. Non-Waiver of Rights and Remedies. No delay or failure on the part of the Administrative Agent in the exercise of any right or remedy shall operate as a waiver thereof, no single or partial exercise by the Administrative Agent of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy and no course of dealing between the parties shall operate as a waiver of any right or remedy of the Administrative Agent.

15. No Recourse to Pledgor. It is expressly understood and agreed that the Administrative Agent shall not have any claim, remedy, or right to proceed (at law or in equity) against Pledgor for the payment of any deficiency or any other sum or performance of any of the Obligations under the Credit Agreement or in connection therewith, from any source other than the Equity Interests pledged by this Agreement.

16. CHOICE OF LAW. THIS AGREEMENT AND ANY INSTRUMENT OR AGREEMENT REQUIRED HEREUNDER SHALL BE DEEMED TO BE MADE UNDER, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

17. Miscellaneous. This Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement shall be prohibited by or invalidated under Applicable Law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement and the parties hereto agree to negotiate in good faith a provision to replace the ineffective provision, such provision to be as similar in effect and intent as the ineffective provision as permissible. This Agreement may not be amended except by a writing signed by each of the parties hereto. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, administrators, representatives, successors and assigns. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall constitute an original for all purposes, but all such counterparts taken together shall constitute the same instrument.

[signature pages to follow]

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

 

 

 

 

[Signature page to Pledge Agreement]

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SCHEDULE I

PLEDGED SECURITIES

 

Company		Ownership Interest / Shares Owned		Owner/Pledgor
Three Lions Entertainment, LLC		100% of the Investor Units held by Owner (94.445% of all Investor Units of the Company, representing 94.445% of all Voting Power in the Company)		Simon Worldwide, Inc.