11. Commitments and Contingencies

On August 13, 2014, Cinedigm Corp. and Cinedigm Entertainment Holdings, LLC (together, “Cinedigm”) initiated an arbitration proceeding under the Membership Interest Purchase Agreement, dated October 17, 2013, by and among Cinedigm and Gaiam, Inc. and one of its subsidiaries (the “MIPA”). The aggregate relief requested by Cinedigm exceeded $30.0 million and included unspecified compensatory damages, attorneys’ fees, costs and interest, and other relief. Contractual provisions in the MIPA and related agreements provided that the working capital adjustment dispute would be resolved pursuant to arbitration before a nationally recognized accounting firm (the “WC Arbitration”), and the other disputes would be resolved pursuant to arbitration before the American Arbitration Association (the “AAA Arbitration”).
Following the conclusion of the WC Arbitration, the parties entered into a Confidential Settlement Agreement and Release on September 30, 2015 (the “Settlement”). The Settlement resolves all of the parties’ claims in connection with both the WC Arbitration and the AAA Arbitration (including the claims for working capital adjustment, breach of representations and warranties, breach of contract, fraud and other tortious acts)-with the sole exception of a single claim by Cinedigm (which was preserved) related to the reconciliation of cash collected by the Company during the transition period following the closing of the transaction (the “Cash Reconciliation Claim”). The Settlement provides that the Company will deliver a payment of $2.3 million to Cinedigm. The Settlement further provides that the Cash Reconciliation Claim will be resolved through one final arbitration (which has not yet been scheduled). The Settlement limits the Company’s potential exposure in connection with the Cash Reconciliation Claim. The company believes it has adequately accrued for the pending arbitration and does not expect any material additional settlements beyond the current estimate.
 
The Settlement does not constitute an admission by either party of any liability or wrongdoing whatsoever. The Company entered into the Settlement in order to (i) eliminate the uncertainty and risk inherent in any litigation, (ii) significantly reduce the professional fees and costs that the litigation would require, and (iii) significantly reduce the distraction imposed by the process on management.
During the three months ended September 30, 2015, the Company recorded charges of $10.7 million which include a non-cash charge of $7.3 million for the working capital receivable due from Cinedigm. The expenses associated with the Settlement and arbitration have all been included in Loss from discontinued operations in the accompanying condensed consolidated statements of operations.
From time to time, we are involved in legal proceedings that we consider to be in the normal course of business. Claimed amounts against us may be substantial but may not bear any reasonable relationship to the merits of the claim or the extent of any real risk of court or arbitral awards. We record accruals for losses related to those matters against us that we consider to be probable and that can be reasonably estimated. Although it is not feasible to predict the outcome of these matters with certainty, it is reasonably possible that some legal proceedings may be disposed of or decided unfavorably to us and in excess of the amounts currently accrued. Based on available information, in the opinion of management, settlements, arbitration awards and final judgments, if any, which are considered probable of being rendered against us in litigation or arbitration in existence at September 30, 2015 and can be reasonably estimated are reserved against or would not have a material adverse effect on our financial condition, results of operations or cash flows.