SETTLEMENT AGREEMENT AND
RELEASE
This settlement
agreement and release (the “Settlement Agreement and
Release”) dated as of July 15, 2009, is made by and
between ION Media Networks, Inc. (“ION”) and RHI
Entertainment Distribution, LLC (“RHI”).
WHEREAS, ION and RHI are parties to that certain license
agreement, dated December 1, 2007 (the
“Agreement”), pursuant to which RHI licensed to ION
certain programs for broadcast on ION’s television network,
and ION provided to RHI the exclusive right to air such programming
during certain time periods on ION’s television network, on
the terms and conditions set forth therein;
WHEREAS, on May 19, 2009, ION and certain of its
affiliates (collectively, the “Debtors”) each filed a
petition under chapter 11 of title 11 of the United States Code
(the “Bankruptcy Code”) in the United States Bankruptcy
Court for the Southern District of New York (the “Bankruptcy
Court”);
WHEREAS, on June 8, 2009, ION commenced an adversary
proceeding against RHI in the Bankruptcy Court (Adv. Pro.
No. 09-01268 (JMP) (referred to herein as the
“Lawsuit”), alleging that RHI breached the Agreement in
a number of respects;
WHEREAS , RHI denies the allegations in the Complaint
and intends to assert certain affirmative defenses and
counterclaims against ION;
WHEREAS, following the commencement of the Lawsuit, ION
and RHI engaged in settlement communications concerning the alleged
breach of the Agreement by RHI as well as certain claims that RHI
allegedly believes it has against ION; and
WHEREAS , the signatories to this Settlement Agreement
and Release desire to resolve fully and finally all of the disputes
and claims they have or may have that arise out of or relate in any
way to the Agreement, the Lawsuit, and each party’s claims
against the other, without any admission of liability or
wrongdoing;
NOW,
THEREFORE, in
consideration of the promises herein made and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is hereby mutually agreed as
follows:
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1.
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This Settlement Agreement and
Release will become effective on the date (the “Effective
Date”) that is two (2) business days following the date
on which the Bankruptcy Court enters an order approving this
Settlement Agreement and Release, provided RHI has made the
Settlement Payment provided for in paragraph 2 below. If the
Bankruptcy Court declines to approve this Settlement Agreement and
Release, then the entire Settlement Agreement and Release shall be
null and void.
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2.
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In
consideration of the rights and releases herein granted, RHI shall
pay Two Million Five Hundred Thousand Dollars ($2,500,000) to ION
(the “Settlement Payment”) no later than the Effective
Date by wire transfer to an account designated in writing by ION.
The Settlement Payment is made in compromise of all amounts
allegedly owed by each party to the other pursuant to the
Agreement, including all Annual Minimum Guarantee payments (as
defined in the Agreement), accounts receivable for cumulative
advertising sales, and certain minimum advertising, marketing and
promotion expenditures in connection with RHI
Programming.
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ION
will be solely responsible for any and all tax liabilities
associated with the Settlement Payment, and RHI makes no
representation or warranty of any kind regarding same.
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3.
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RHI
and ION will retain for their own accounts all monies they have
collected from advertising sales under the Agreement through and
including June 30, 2009. Any monies collected by RHI from
advertising sales under the Agreement after June 30, 2009 but
prior to the Effective Date, will be paid by RHI to ION on the
Effective Date. All such monies collected by RHI during any
calendar month after the Effective Date (including any checks dated
prior to, but received after, June 30, 2009) will be paid to
ION no later than the 15 th day of the month following the
calendar month in which the money was collected. ION shall continue
to retain for its own account any monies it collects from
advertising sales under the Agreement after June 30,
2009.
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4.
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RHI
and ION hereby acknowledge and agree that, as of the Effective
Date, and following payment of the Settlement Payment, the
Agreement shall be terminated and of no further force or effect and
neither shall have any further obligation to the other in
connection therewith. For the avoidance of doubt, as of the
Effective Date, RHI, subject to the payment of the Settlement
Payment, shall have no further obligation whatsoever under the
Agreement, including to: (i) provide any RHI Programming (as
defined in the Agreement) to ION; (ii) pay any Annual Minimum
Guarantee or other payment to ION (except as provided in paragraph
3 above); (iii) spend any amount for “off network”
marketing, advertising or promotion in connection with RHI
Programming; (iv) spend or cause a third party to spend any
amount for “on network” advertising, marketing or
promotion in connection with RHI Programming; or (v) with
respect to any remaining advertising sales “liability”
resulting from audience delivery shortfalls, provide Audience
Deficiency Units (“ADU’s”) or other methods such
as “cash back” payments to advertisers who purchased
RHI Programming Time Period advertising inventory.
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5.
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For
the avoidance of doubt, as of the Effective Date, ION shall have no
further obligation or right to telecast or otherwise exploit RHI
Programming. On or before the Effective Date, ION, at its sole cost
and expense, shall return to
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RHI
all masters, sub-masters and other such materials in its possession
or control related to RHI Programming.
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6.
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(a) Except for claims to
enforce the terms of, or for any breaches of the warranties and
representations set forth in, this Settlement Agreement and
Release, and in consideration of the Settlement Payment, the
sufficiency of which is hereby acknowledged by ION, and of the
covenants set forth herein, ION, and each of the Debtors, on behalf
of themselves and their respective past, present or future general
partners, limited partners, predecessors-in-interest,
successors-in-interest, administrators, parents, owners, officers,
shareholders, directors, employees, representatives, licensees,
subsidiaries (whether wholly, partially or indirectly owned),
affiliates, divisions, entities, related entities, agents,
attorneys and assigns and each of their respective successors and
assigns (hereinafter collectively the “ION Parties”)
hereby release and discharge RHI, and its past, present or future
general partners, limited partners, predecessors-in-interest,
successors-in-interest, administrators, parents, owners, officers,
shareholders, directors, employees, representatives, licensees,
subsidiaries (whether wholly, partially or indirectly owned),
affiliates, divisions, entities, related entities, agents,
attorneys and assigns and each of their respective successors and
assigns (hereinafter collectively the “RHI Parties”)
from any and all liabilities, actions, claims, causes of action,
lawsuits (including, without limitation, the Lawsuit), debts, dues,
sums of money, accounts, reckonings, bills, covenants, contracts,
controversies, agreements, obligations, promises, judgments and
demands, whatsoever, whether known or u
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