DRAFT

Licensing and Merchandising Plan

October 5, 2011

DRAFT

page 2

Executive Summary

• Our responsibility for securing Smurfs merchandise licensees and retail space is limited to North American based companies and global “primary category” deals, for which we are compensated at 30% - 51% agency commissions

• Our go forward plan is to maximize the opportunity in these categories with additional headcount

– 5 additional FTEs at SPCP

– Double Smurfs merch revenue

– With a $600K annual investment in incremental headcount, increase SPE’s Smurf merch revenue from $6.3MM (Smurfs 1) to $12.8MM (Smurfs 2) on an ultimate basis

Domestic (which we drive) from $4.0MM to $8.2MM International (which is a passive interest) from $2.3MM to $4.6MM

• We will attempt to restructure deal terms with Lafig that could ultimately drive upside for both parties and we have a reasonable chance of gaining their support

– Release of frozen non-theatrical content rights (e.g., DTV, TV animation)

– Establishment of CMF funded/co-funded by Lafig

– Control of international retail management to SPE

• We will also request full control of international, with related commissions topped up to domestic levels, but Lafig is unlikely to accept unless it takes place between Smurfs 2 and Smurfs 3

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page 3

Smurfs Relationship Overview

• SPE is the agent for North America (U.S. and Canada) only

• Lafig controls international

• SPE has no licensor participation and can be legally dismissed as the agent for North America, which would leave SPE with zero overall participation

RolesRoles

• 51% for licenses solicited by SPE covering North America only

• 30% of licenses (“global licenses”) with U.S. companies solicited by SPE

• 15% of licenses solicited by Lafig covering international territories only

General SPE Commission

Rates

General SPE Commission

Rates

DRAFT

$347

$208

$25 $6 $0

$100

$200

$300

$400

Retailer(e.g., Wal-Mart)

Licensee(e.g., Hasbro)

Licensors(Lafig + SPE)

SPE

$208

$125

$15 $2 $0

$50

$100

$150

$200

$250

Retailer(e.g., Wal-Mart)

Licensee(e.g., Hasbro)

Licensors(Lafig + SPE)

SPE

$139

$83

$10 $4 $0

$25

$50

$75

$100

$125

$150

Retailer(e.g., Wal-Mart)

Licensee(e.g., Hasbro)

Licensors(Lafig + SPE)

SPE

page 4

Smurfs 1 – Domestic Value Chain Smurfs 1 – International Value Chain

Smurfs 1 – Global Value Chain

We are projecting Smurfs 1 SPE worldwide share of $6MM, which implies a $347MM global retail spend with 40% domestic vs. 60% international split

60%

12%

40%

60%

12%

15%

60%

12%

25%

($ in millions) ($ in millions)

($ in millions)

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64%

131%

50%

81%

58% 76%

48% 36%

65%

30% 26% 33% 18%

0%

25%

50%

75%

100%

125%

150%

Smurfs 1 Smurfs 2 Ice Age 3 Madagascar Ice Age 2 Alvin and the

Chipmunks 2

Madagascar 2

Shrek 4 Ice Age 1 Kung Fu Panda 2

How to Train Your Dragon

Monsters vs. Aliens

Despicable Me

$347

$712

$445 $429 $380

$335 $292 $270 $250

$180 $130 $125 $100

$0

$200

$400

$600

$800

Smurfs 1 Smurfs 2 Ice Age 3 Madagascar Ice Age 2 Alvin and the

Chipmunks 2

Madagascar 2

Shrek 4 Ice Age 1 Kung Fu Panda 2

How to Train Your

Dragon

Monsters vs. Aliens

Despicable Me

page 5

Smurfs 2 Retail Estimate vs. Select Film Properties

Retail Sales: Life-to-Date

Retail as % of WWBO

Average: $267

Average: 47%

Hello Kitty:Toy Story 3:Cars 2:Spider-Man:Peanuts:

$8.2B$5.6B$5.0B$4.0B$4.0B

Toy Story 3:Cars 2:Spider-Man:

527%908%495%

(1) Hello Kitty, Toy Story 3, Cars 2, Spider-Man and Peanuts converted to retail ultimate by multiplying by 2 years.

(1)

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page 6

Smurfs 1 vs. 2 Merch Performance (000s)

Smurfs 1 Smurfs 2

Retail

Domestic $138,889 $284,722

International 208,333 427,083

Total Worldwide $347,222 $711,806

Licensor

Domestic $10,000 $20,500

International 15,000 30,750

Total Worldwide $25,000 $51,250

% of Total % of TotalSPE Lic. Share Lic. Share

Domestic $4,000 40% $8,200 40%

International 2,250 15% 4,613 15%

Total Worldwide $6,250 25% $12,813 25%

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page 7

Smurfs Licensing Revenue Analysis

Note: Box indicates categories covered by new headcount.

Smurfs 2 domestic business plan assures revenues double and category shares % of total are consistent with industry averages

Smurfs 1 Smurfs 2

% of Licensing % of Licensing % Growth

Product Category Total Revenue Total Revenue vs. S1

Toys/games: dolls, action figures, pre-school 30% 3,000 25% 5,200 73%

Software/videogames: handheld, accessories 12% 1,200 15% 3,000 150%

Sub-Total Primary 42% 4,200 40% 8,200 95%

Accessories: head wear, jewelry, watches 4% $400 6% $1,200 200%

Apparel: adult, kids 20% 2,000 10% 2,000 0%

Food/beverage: candy, cereal, water 3% 300 8% 1,600 433%

Footwear: adult, kids 8% 800 4% 800 0%

Home décor: furniture, furnishings, lamps 3% 300 4% 800 167%

Gifts/novelties: collectibles, gifts 2% 200 7% 1,400 600%

Health/beauty: cosmetics, health 1% 100 1% 200 100%

Housewares: kitchenware 3% 300 2% 400 33%

Music/video - - 3% 600 -

Infant products - - 1% 200 -

Paper products: art, greeting cards 4% 400 3% 700 75%

Publishing 4% 400 4% 800 100%

Sporting goods 5% 500 2% 500 0%

School supplies 1% 100 1% 300 200%

Other: theme park, costume character - - 4% 800 -

Sub-Total Secondary 58% 5,800 60% 12,300 112%

Total NA Gross License Revenue 100% $10,000 100% $20,500 105%

Pri

mar

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eco

nd

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page 8

SPCP will need 5 additional heads to support Smurfs 2 merch target

Global SVP

Domestic VP Adm Asst

DirectorPaper Products, BTS, Publishing

Exec DirRetail

DirectorToys, Games,

Sporting Goods

CoordinatorRetail

DirectorHardlines,

Food/Bev, HBA

DirectorInteractive, Video,

Mob Apps

Manager

DirectorApparel, Access,

Footwear

DirectorHome Décor, Housewares, Gift/Novelty, Collectibles

CoordinatorNew Position

Current

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page 9

Smurfs 2 vs. Smurfs 1 Incremental Contribution (000s)

(1) Incremental headcount cost assumes 4 Director-level hires and 1 Coordinator with 60% of time spent on Smurfs over 3.5 year time period.

Property LaFig SPE

SPE-Controlled Domestic Ultimate Share Share

Smurfs 2 - Domestic Revenue $20,500 $12,300 $8,200

Smurfs 1 - Domestic Revenue 10,000 6,000 4,000

Incremental Smurfs 2 - Domestic Revenue $10,500 $6,300 $4,200

Incremental SPE Headcount Costs(1) $0 $0 ($1,185)

Incremental Smurfs 2 Domestic Contribution $10,500 $6,300 $3,015

Property LaFig SPE

Lafig-Controlled International Ultimate Share Share

Smurfs 2 - International Revenue $30,750 $26,138 $4,613

Smurfs 1 - International Revenue 15,000 12,750 2,250

Incremental Smurfs 2 - International Revenue $15,750 $13,388 $2,363

Incremental Smurfs 2 WW Contribution $26,250 $19,688 $5,377

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page 10

Cross-SPE Opportunities for Retail

Contribution

SPCPSPCP

SPASPA

SPHESPHE

SPTSPT

Resulting Campaign

• Secure in-store promotion

• Secure licensee to provide Christmas plush

• Produce additional content, e.g., “Smurfs: A Christmas Carol”

• Promote “Smurfs: A Christmas Carol” on DVDs & Blu-ray with sticker on front of package

• Sell “Smurfs: A Christmas Carol” into TV

• Holiday Campaign

• DVD/Blu-ray with short and plush featured at retail on end caps

• TV special increases awareness and drives purchase

201

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201

1 P

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201

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page 11

Target Deal Terms to Pursue Restructuring

• Release of frozen non-theatrical content rights (e.g., DTV, TV animation) to SPE

TermTerm Resulting Upside(s) for SPEResulting Upside(s) for SPE

• Stand-alone profitable brand extensions

• Support for merch between films and with expanded demo

Modest asks with reasonable chance for Lafig support

• Lafig funding / co-funding of CMF

• Increased retail support for merch

• Int’l retail management to SPE (distinct from ownership of int’l licensee relationships)

• Retail management fee to SPE

• Increased SPE control of int’l film promotion

• Incremental $1.5MM ultimate contribution(1) to SPE

• Full control of int’l to SPE

• SPE int’l commissions increased to domestic levels

• Incremental $7.7MM ultimate contribution(2) to SPE Aggressive ask

Lafig is unlikely to support

(1) Assumes additional 5% fee to SPE (i.e., 15% + 5% = 20% total SPE commission). Would require the conversion of one consultant into FTE plus one full-time coordinator hire.(2) Assumes 25% increase in int’l merch commission (i.e., 15% + 25% = 40% commission in-line with domestic wtd. Avg. commission).