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UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF TENNESSEE

IN RE: *
*
INTERNATIONAL STORYTELLING CENTER, * CASE NO. 2:10-bk-53299
* Chapter 11
Debtor *

MOTION TO REJECT EXECUTORY CONTRACTS

NOTICE OF OPPORTUNITY TO OBJECT AND FOR HEARING

Pursuant to Local Rule 9013-1(h), the Court may consider this matter without further notice or hearing unless
a party in interest files an objection. If you object to the relief requested in this paper, you must file with the
clerk of the Court at James H. Quillen United States Courthouse, 220 West Depot Street, Greeneville,
Tennessee 37743 within twenty-one (21) days from the date this paper was filed and serve a copy on Mark S.
Dessauer, Esq., Attorney for Movant; and Patricia Foster, Attorney for United States Trustee. If you file and
serve an objection within the time permitted, the Court will schedule a hearing and you will be notified. If
you do not file an objection within the time permitted, the Court will consider that you do not oppose the
relief requested in this paper and may grant the relief requested without further notice or hearing.

The Debtor, International Storytelling Center (the "Debtor" or "ISC"), pursuant to

11 U.S.C. § 365(a) and Fed. R. Bankr. P. 6006(a), seeks the Court's approval to reject certain

executory contracts between ISC and the National Storytelling Network ("NSN"). Specifically,

the Debtor seeks to reject Restructuring Agreement dated November 6, 1998 between ISC and

NSN (the "Restructuring Agreement"), a copy of which is attached hereto as Exhibit No. 1;

Festival Agreement dated November 1, 1998 (the "Festival Agreement"), a copy of which is

attached hereto as Exhibit No. 2; and Settlement Agreement dated October 3, 2004 (the

"Settlement Agreement"), a copy of which is attached hereto as Exhibit No. 3. In support of

this Motion, the Debtor states as follows.

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1. ISC filed a voluntary Chapter 11 petition in bankruptcy on December 31, 2010.

It continues to own and operate its properties as a debtor-in-possession pursuant to 11 U.S.C.

§§ 1107 and 1108.

2. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 157(a).

Venue is proper in this Court pursuant to 28 U.S.C. § 1409(a). This is a core proceeding

pursuant to 11 U.S.C. § 157(b)(2)(O).

FACTUAL BACKGROUND

3. In 1973, Jonesborough resident Jimmy Neil Smith founded and staged the first

National Storytelling Festival under the sponsorship of the Jonesborough Civic Trust. This

event generated a storytelling revival in America. In 1975, Smith founded and formed the

National Association for the Preservation and Perpetuation of Storytelling, Inc. ("NAPPS"), a

not-for-profit entity organized for the purpose of continuing and perpetuating the revival of the

art of storytelling.

4. NAPPS later received tax exempt status from the Internal Revenue Service and

thereafter operated as an entity exempt from federal income taxes pursuant to Section 501(c)(3)

of the Internal Revenue Code.

5. On approximately November 17, 1994, NAPPS' name was changed to the

National Storytelling Association ("NSA").

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6. From its inception, through approximately 1998, NAPPS and NSA created a

national and international following that served a growing membership who were engaged in

advancing the tradition and art of storytelling.

7. In 1997, a division of opinion developed among the members of the board of

directors of NSA regarding the future growth and vision of storytelling and the role of NSA in that

process. A contingent of the board desired to develop a substantial Jonesborough presence

including the building of the storytelling center in order to enhance Jonesborough's recognition

on a national and international basis, while another contingent on the board felt that NSA should

focus solely on serving membership.

8. As a result, two separate entities emerged from the NSA, ISC and NSN.

9. NSA continued to operate as an entity exempt from federal income taxes under

the original NAPPS Charter. NSA elected a new board of directors. NSN was formed as a

separate entity by certain of the former board of directors of NSA. NSA's name was changed to

Storytelling Foundation Center and, on June 5, 2003, NSA again changed its name to the

"National Storytelling Center," the name under which it operates today. NSA also, in 2005,

obtained authority to operate under the assumed names of "National Association for the

Preservation and Perpetuation of Storytelling" and "National Storytelling Foundation." ISC

rarely operates under or uses such assumed names but continues to place value on the names

and the ability to use them in the future.

10. As part of the separation of NSA into ISC and NSN, NSA (ISC) and the National

Storytelling Membership Association (NSN) entered into two agreements, the Restructuring

Agreement and the Festival Agreement.

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11. The purpose of the Restructuring Agreement was to define the roles of the two

entities and to set forth the continuing obligations of ISC to NSN and of NSN to ISC. These

continuing obligations included, without limitation, the development of plans and programs; the

obligation of ISC to not solicit or encourage any person to become a member of ISC; the

obligation of NSN to not build or construct a storytelling center similar to that built and

contemplated to be built by ISC; the granting of a license by ISC to NSN of the copyright and

production rights then owned by NSA and in potential copyrights and production rights to

archived materials; the right of both ISC and NSN to approve either party's transfer or granting

of a license to a third party of the copyright and production rights then shared by ISC and NSN;

ISC's right to access the database of NSN; the obligation of each party to share the name,

address and telephone number of any independent data basis developed by either party; the

exclusive right granted to ISC to operate the retail sales shop at the National Storytelling Center

located in Jonesborough; the requirement of ISC to provide twenty (20) hours of accounting

services to NSN for $500.00 per month; and ISC's right to the grant awarded annually by the

Tennessee Arts Commission.

12. ISC contends that the Restructuring Agreement is an executory contract which

ISC is entitled to reject pursuant to § 365(a) of the Bankruptcy Code.

13. The purpose of the Festival Agreement was to set forth the respective obligations

and responsibilities of ISC and NSN with respect to the annual Festival and a mechanism to

generate funds for NSN so that it could continue as an independent entity and share in the

history and tradition of storytelling. The Festival Agreement likewise created numerous

continuing obligations of ISC and NSN including, without limitation, the creation and continued

participation by ISC and NSN in the Production Advisory Committee, and the division of income

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from the annual Festival whereby NSN was to receive a "guaranteed eighteen percent (18%) of

the gross income from the Festival each year."

14. ISC contends that the Festival Agreement is an executory contract which ISC is

entitled to reject under § 365(a) of the Bankruptcy Code.

15. Subsequent to the execution of the Restructuring Agreement and Festival

Agreement, disputes arose between ISC and NSN regarding the interpretation and

responsibilities of each party under the Restructuring Agreement and the Festival Agreement.

ISC and NSN then engaged in a mediation through a third party mediator that resulted in the

parties entering into the Settlement Agreement.

16. The purpose of the Settlement Agreement was to resolve the parties' differences

by further defining their respective obligations and, similar to the Restructuring Agreement and

the Festival Agreement, the Settlement Agreement created numerous continuing obligations of

ISC and NSN. These continuing obligations include, without limitation, the creation and

continued participation by ISC and NSN in a Sponsorship Committee and related activities; the

right of NSN to conduct an audit of the annual Festival; the continuation of the Festival Advisory

Committee in a revised format; an annual joint meeting of the Executive Committee of ISC and

NSN; ISC's granting to NSN the use of ISC's facilities and staff at various times and for various

purposes during the annual Festival; and NSN's obligation to include one (1) full page

advertisement for the Festival in four (4) issues of NSN's bi-monthly magazine and one (1) full

page advertisement in NSN's conference programs.

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17. Paragraph 10 of the Settlement Agreement states in pertinent part:

Effect of Settlement Agreement. This Settlement Agreement

constitutes a modification of the Restructuring Agreement and
Festival Agreement according to the terms set forth herein . . .

ISC, therefore, contends that the Restructuring Agreement, Festival Agreement and Settlement

Agreement each remain separate and independent agreements, except to the extent the

Restructuring Agreement and Festival Agreement are modified by the Settlement Agreement.

18. ISC contends that the Settlement Agreement is an executory contract which ISC

is entitled to reject under § 365(a) of the Bankruptcy Code.

RIGHT TO REJECT RESTRUCTURING AGREEMENT,

FESTIVAL AGREEMENT AND SETTLEMENT AGREEMENT

19. Section 365(a) of the Bankruptcy Code states in pertinent part that:

. . . the trustee,1 subject to the court's approval may assume or

reject any executory contract or unexpired lease of the debtor.

20. "The Bankruptcy Code does not explicitly define the term 'executory contract.'

The legislative history, however, indicated that Congress intended the terms to be defined as a

contract 'on which performance remains due to some extent on both sides'." In re Pro Page

Partners, LLC, 270 B.R. 221, 226, 227 (Bankr. E.D. Tenn. 2001) (quoting Terrell v. Albaugh (In

re Terrell), 892 F. 2d 469, 471 (6th Cir. 1989) (quoting S. Rep. No. 95-989, a 58 (1978),

reprinted in 1978 U.S.C.C.A.N. 5787, 5844)).

1
ISC, as a debtor-in-possession, has all the rights of a trustee under the Bankruptcy Code.
See 11 U.S.C. § 1107(a).

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21. In Terrell, the Sixth Circuit also stated that:

Congress apparently had in mind the definition of executory

contracts set forth in Countryman, Executory Contracts in
Bankruptcy: Part 1, 57, Minn. L. Rev. 439, 460 (1973). Professor
Countryman defined an executory contract for the purposes of the
Bankruptcy Code as 'a contract under which the obligation of both
the bankrupt and the other party are so far unperformed that the
failure of either to complete performance would constitute a
material breach excusing the performance of the other.'

Pro Page Partners, at 227, citing In re Terrell, 892 F.2d at 471, n. 2.

22. ISC contends that the Restructuring Agreement, the Festival Agreement and the

Settlement Agreement are executory contracts under Terrell and/or under the Countryman

definition in that each agreement contains numerous provisions that, if remain unperformed or if

either party fails to complete performance, would constitute a material breach. These provisions

include, without limitation, those referenced in Paragraphs 11, 13 and 16 hereof.

23. The decision as to whether to reject an executory contract is left to the sound

business judgment of the debtor. Lubigol Enterprises, Inc. v. Richmond Metal Finishers, Inc.,

756 F.2d 1043, 1046-47 (4th Cir. 1985); Phar-Mor, Inc. v. Strauss Building Associates, 204 B.R.

948, 954 (Bankr. N.D. Ohio, 1977); In re Level Propane Gases, Inc., 2007 WL 1821723 (N.D.

Ohio, June 22, 2007).

24. Under the business judgment rule, the Court should "presume that the debtor

acted prudently, on an informed basis, in good faith, and in the honest belief that the action

taken was in the best interests of the bankruptcy estate." In re Pomona Valley Med. Group, 476

F.3d 665, 670 (9th Cir. 2007) (citations omitted). The Court should thus approve the requested

rejection unless the decision is so manifestly unreasonable that it could not be based on sound

business judgment, but only on bad faith, or whim or caprice. Id. (citations omitted).

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25. Here, the requested rejections are in the business judgment of the Debtor and in

the best interests of its bankruptcy estate. Under the Festival Agreement, the Debtor is required

to pay NSN eighteen percent (18%) of the gross revenue of the Festival without NSN having

any accompanying obligations and without NSN being responsible for the expenses of the

organization or production of the Festival. The continuing obligation to make this payment was

a major contributing factor in the Debtor seeking Chapter 11 relief. This continuing financial

obligation to NSN also creates a substantial hardship on ISC's ability to profitably produce the

Festival. In addition, this financial obligation is inequitable to ISC and its bankruptcy estate and

creates a material barrier to ISC's ability to reorganize. It is, therefore, in the best interests of

ISC to reject the Festival Agreement.

26. The continued association or relationship of ISC to NSN through the

Reorganization Agreement, Festival Agreement and Settlement Agreement are no longer of

benefit to ISC and, in fact, harm and hinder ISC's growth and influence in the storytelling

community. From the date of the signing of these agreements, NSN has steadily declined in

size, scope, stature and influence. NSN's membership has declined from approximately 5,500

in 1998 to approximately 1,500 in 2011 while, at the same time, ISC is precluded from soliciting

members which hinders ISC's growth and fundraising abilities. NSN chose to only service its

members, but has apparently failed in its mission as membership has declined by some

seventy-five percent (75%) since NSN's inception. NSN no longer supplies all the talent for the

Festival as ISC has independent relationships with the storytellers and storytelling community.

This membership decline has occurred despite the growth of interest in the art and application

of storytelling across America and internationally and the generous funding from ISC. In other

words, NSN continues to share in the revenues of the annual Festival, but has failed in its

mission to enhance ISC through its membership and related services. It is, therefore, also in

the best interests of ISC to reject the Reorganization Agreement and Settlement Agreement.

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27. ISC has and plans to continue to plan, produce and conduct and produce the

Festival, but desires to remove the burdensome and unproductive relationship with NSN in the

form of the Restructuring Agreement, Festival Agreement and Settlement Agreement.

WHEREFORE, ISC requests that the Court grant this motion and authorize and approve

ISC's rejection of the Reorganization Agreement, the Festival Agreement and the Settlement

Agreement.

HUNTER, SMITH & DAVIS, LLP

By: _/s/Mark S. Dessauer_______________

Mark S. Dessauer, Esq. (TN BPR NO. 010421)
Attorney for Debtor
Post Office Box 3740
Kingsport, Tennessee 37664
(423) 378-8840; Fax: (423) 378-8801
dessauer@hsdlaw.com

CERTIFICATE OF SERVICE

The undersigned hereby certifies that on February 11, 2011, the (1) Motion to Reject
Executory Contracts, and (2) Proposed Order were filed electronically. All parties on the
attached Service List will receive copies of this filing. Notice of this filing will be sent by
operation of the Court's electronic filing system to all parties indicated on the electronic filing
receipt. All other parties, if any, have been served by hand delivery, overnight delivery,
facsimile transmission, or by mailing a copy of same by United States Mail, postage prepaid.

HUNTER, SMITH & DAVIS, LLP

/s/ Mark S. Dessauer

Mark S. Dessauer

DESSAUER: I-J
INTERNATIONAL STORYTELLING CENTER
NSA.86822

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SERVICE LIST

RE: International Storytelling Center; Case No. 2:10-bk-53299

Bank of America, N.A. Capital Bank and Trust

c/o M. Craig Smith, Esq. American Funds Service Company
Miller & Martin PLLC P.O. Box 6164
Suite 1000, Volunteer Bldg. Indianapolis, Indiana 46206
832 Georgia Avenue
Chattanooga, TN 37402-2289
Blackburn, Childers & Steagall Capital One
P. O. Box 3745 P. O. Box 71083
Johnson City, Tennessee 37602-3745 Charlotte, North Carolina 28272-1083
Mark Carrier Chattanooga Tent
231 Madison Walk P. O. Box 3098
Piney Flats, Tennessee 37686 Chattanooga, Tennessee 37404
Hillhouse Graphic Design, LLC First Tennessee Bank
c/o Edward T. Brading, Esq. c/o Walter N. Winchester, Esq.
P.O. Box 1160 P.O. Box 2428
Johnson City, TN 37605-1160 Knoxville, TN 37901-2428
City of Johnson City Jonesborough Insurance
P.O. Box 2150 806 East Jackson Blvd., Suite 3
Johnson City, TN 37605 Jonesborough, Tennessee 37659
Main Street Cafe Richard McClain
117 West Main Street 1029 Whittling Wood Drive
Jonesborough, Tennessee 37659 Johnson City, Tennessee 37601
New Peoples Bank NSN
c/o Dave B. Jordan, Esq. P.O. Box 795
P.O. Box 5215 Jonesborough, Tennessee 37659
Kingsport, Tennessee 37663
Paramore Redd Pulp Printing
124 12th Avenue, S., Suite 510 1706 W. State Street
Nashville, Tennessee 37203 Bristol, Tennessee 37620
Rural Development Jimmy Neil Smith
214 N. College Street, No. 300 107 Spring Street
Greeneville, Tennessee 37744 Jonesborough, Tennessee 37659
Spears Services Horton Sports d/b/a American Screen Design Co.
3300 Browns Mill Road 3007 Industrial Drive
Johnson City, Tennessee 37604 Johnson City, TN 37604
Patricia Foster, Esq. Tennessee Department of Revenue
Attorney for the U. S. Trustee Andrew Jackson State Office Building
800 Market St., Suite 114 500 Deaderick Street
Howard Baker U. S. Courthouse Nashville, Tennessee 37242-0700
Knoxville, Tennessee 37902
AmericInn of Jonesborough FIA Card Services
376 East Jackson Blvd. P.O. Box 15710
Jonesborough, TN 37659 Wilmington, DE 19886-5710
Brentwood Professional Center, Inc. Central Heating and Air Co., LLC
104 East Park Drive, Suite 300 1619 1/2 W. Market Street
Brentwood, TN 37027 Johnson City, TN 37604
Central Paper and Supply Co. Terry Countermine
P.O. Box 1158 101 East College Street
Johnson City, TN 37604 Jonesborough, TN 37659

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Dell Business Credit Digital Fridge

Payment Processing Center Kyle Long
P.O. Box 5275 115 Mountain Laurel
Carol Stream, IL 60197-5275 Unicoi, TN 37692
East Tennessee Rent-Alls Eureka Hotel
P.O. Box 3856 127 West Main Street
Johnson City, TN 37602 Jonesborough, TN 37659
Everything Gifts, LLC Fresh Air Photographics
P.O. Box 5291 2114 East Fairview Avenue
Deltona, FL 32728 Johnson City, TN 37601
Gryphon House, Inc. Independent Publishers Group
P.O. Box 10 814 North Franklin Street
Lewisville, NC 27023 Chicago, IL 60610
Historic Jonesborough Visitors Center Jonesborough City Tax Collector
117 Boone Street 123 Boone Street
Jonesborough, TN 37659 Jonesborough, TN 37659
Mail Works, Inc. Tami Moore
320 Wesley Street 201 West Main Street
Johnson City, TN 37601 Jonesborough, TN 37659
HSBC Peachtree Publishers, Ltd.
P.O. Box 5239 1700 Chattahoochee Avenue
Carol Stream, IL 60197-5239 Atlanta, GA 30318-2112
Penguin Putnam, Inc. Pitney Bowes Purchase Power
4920 Collection Center Drive P.O. Box 371874
Chicago, IL 60693 Pittsburg, PA 15250-7874
Rae Dunn River City Publishing, LLC
1332 Powell 1719 Mulberry Street
Emeryville, CA 94608 Montgomery, AL 36106
Ramesh Singh, Financial Controller Smithsonian Institution
Recovery Management Systems Corp. AR Clearing Acct.
Agent for Sam's Club (GE Money Bank) 24133 Network Place
25 SE 2nd Ave., Suite 1120 Chicago, IL 60673-1241
Miami, FL 33131-1605
SimplexGrinnel United Elevator Services
Dept. CH 10320 P.O. Box 1301
Palatine, IL 60055-0320 Knoxville, TN 37901
Washington County Trustee VAR Resources
P.O. Box 215 P.O. Box 6434
Jonesborough, TN 37659 Carol Stream, IL 60197-6434
Saratoga Lynda Wexler
101 Med Tech Parkway, Suite 307 1030 Hunters Lake Drive
Johnson City, TN 37604 Johnson City, TN 37604
William Kennedy Rab Summers
400 West Main Street 119 Chestnut Ridge Drive
Jonesborough, TN 37659 Jonesborough, TN 37659
James Powell
250 Urbana Rd.
Limestone, TN 37681

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