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4Kids Completes Sale of Yu-Gi-Oh! for $15 Million

Friday, 13 July 2012 09:43
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4Kids Entertainment, Inc., and its subsidiaries, completed the sale of certain of its assets pursuant to the Asset Purchase
Agreement, entered into on June 24, 2012, among the Company, Kidsco Media Ventures LLC, an affiliate of Saban Capital Group,
and 4K Acquisition Corp., an affiliate of Konami Corporation.  In connection with the consummation of those transactions, the Konami Purchaser paid the Seller an aggregate amount equal to $14,996,950, representing a base purchase price of $15,000,000,
less a $3,050 downward adjustment contemplated by the Asset Purchase Agreement.  In addition, in connection with the
consummation of the transactions contemplated by the Asset Purchase Agreement, the following payments were made by or on
behalf of the Company:
(a) $1,000,000 was delivered to the escrow agent under the
escrow agreements provided for in the Asset Purchase
Agreement, to be used to satisfy any indemnification
obligations that the Seller may have to either of the
Purchasers pursuant to the provisions of the Asset
Purchase Agreement;
(b) $2,500 was paid to the escrow agent as the Seller's
portion of fees payable to it for its performance of
services as escrow agent under the escrow agreements;
(c) $3,051,094 was paid to The CW Network LLC as a cure cost
under the term sheet originally entered into with the CW
as of Oct. 1, 2007, and amended as of Oct. 2, 2008, and
June 23, 2010;
(d) $429,000 was paid to Toei Animation as a cure cost;
(e) $28,319 was paid to Twenty Three R.P. Associates as a
cure cost;
(f) approximately $21,241 was paid to satisfy cure costs
under other agreements; and
(g) $504,069 was paid to the Saban Purchaser in accordance
with the terms of the Asset Purchase Agreement, with
$475,920 representing an adjustment to the purchase price
for the Saban Purchased Assets and $28,149 representing
the Seller's share of national advertising proceeds from
the broadcast of commercials during the second calendar
quarter of 2012 on the five hour Saturday morning block
of programs telecast on The CW Network.
The assets sold by the Company to the Konami Purchaser included, inter alia, all of Seller's right, title and interest in and to the business of Seller relating to and commercial use of Yu-Gi-Oh!, the Japanese manga (also known as cartoon or comic) created by Kazuki Takahashi and the related brand and franchise, as well as other assets relating to the Konami Purchased Business.  4Kids was party to an agreement with Konami Corporation, dated as of Aug. 1, 2001, as amended by the First Amendment, dated Sept. 12, 2007, which agreement related to, inter alia, sales of Yu-Gi-Oh! trading cards and videogames.  The Konami Agreement was included as part of the Konami Purchased Assets transferred to the Konami Purchaser in connection with the closing of the transactions contemplated by the Asset Purchase Agreement on July 2, 2012.
Other than in respect of the consummation of the transactions contemplated by the Asset Purchase Agreement, the Konami Agreement and certain merchandise license agreements affecting the Yu-Gi-Oh! Property which were transferred to the Konami Purchaser pursuant to the Asset Purchase Agreement, there are no material relationships between the Konami Purchaser, on the one hand, and 4Kids or any of its affiliates, directors or officers, or any associates of any such directors, on the other.
The assets sold by the Company to the Saban Purchaser included, inter alia, all of Seller's right, title and interest in and to the television business of the Seller including the CW Agreement and the television episodes and rights related thereto, as well as other assets relating to the Saban Purchased Business.
New York-based 4Kids is an entertainment and media company specializing in the youth oriented market, with operations in these business segments: (i) licensing, (ii) advertising and media broadcast, and (iii) television and film production/distribution.  The parent entity, 4Kids Entertainment, was organized as a New York corporation in 1970.
4Kids filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code to protect its most valuable asset -- its rights under an exclusive license relating to the popular Yu-Gi-Oh! series of animated television programs -- from efforts by the licensor, a consortium of Japanese companies, to terminate the license and force 4Kids out of business.
4Kids and affiliates filed Chapter 11 petitions (Bankr. S.D.N.Y. Lead Case No. 11-11607) on April 6, 2011.  Kaye Scholer LLP is the Debtors' restructuring counsel.  Epiq Bankruptcy Solutions, LLC, is the Debtors' claims and notice agent.  BDO Capital Advisors, LLC, is the financial advisor and investment banker.  EisnerAmper LLP fka Eisner LLP serves as auditor and tax advisor.  4Kids Entertainment disclosed $78,397,971 in assets and $86,515,395 in liabilities as of the Chapter 11 filing.
Hahn & Hessen LLP serves as counsel to the Official Committee of Unsecured Creditors.  Epiq Bankruptcy Solutions LLC serves as its information agent for the Committee.
The Consortium consists of TV Tokyo Corporation, which owns and operates a television station in Japan; ASATSU-DK Inc., a Japanese advertising company; and Nihon Ad Systems, ADK's wholly owned subsidiary.  The Consortium is represented by Kyle C. Bisceglie, Esq., Michael S. Fox, Esq., Ellen V. Holloman, Esq., and Mason Barney, Esq., at Olshan Grundman Frome Rosenzweig & Wolosky LLP, in New York.
In January 2012, the bankruptcy judge ruled in favor of 4Kids, deciding that the Yu-Gi-Oh! property license agreement between the Debtor and the licensor was not effectively terminated prior to the bankruptcy filing.  Following the ruling, 4Kids entered into a settlement where it would receive $8 million to end the dispute over its valuable Yu-Gi-Oh! Property.
4Kids Entertainment, Inc., and its subsidiaries completed the sale of certain of its assets pursuant to the Asset Purchase Agreement, entered into on June 24, 2012, among the Company, Kidsco Media Ventures LLC, an affiliate of Saban Capital Group, and 4K Acquisition Corp., an affiliate of Konami Corporation.  In connection with the consummation of those transactions, the Konami Purchaser paid $14,996,950, representing a base purchase price of $15,000,000, less a $3,050 downward adjustment contemplated by the agreement.

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