Leno will return to 'Tonight' on March 1

In the year 2010… Conan O’Brien will no longer be hosting “The Tonight Show.”

The Peacock confirmed early Thursday morning that it had reached a $45 million exit deal for O’Brien. Now, Jay Leno will resume his “Tonight Show” hosting duties, while O’Brien is leaving the network.

“NBC and Conan O’Brien have reached a resolution of the issues surrounding O’Brien’s contract to host ‘The Tonight Show with Conan O’Brien,’ ” NBC and O’Brien said in a joint statement.

“Under terms of an agreement that was signed earlier today, NBC and O’Brien will settle their contractual obligations and the network will release O’Brien from his contract, freeing him to pursue other opportunities after September 1, 2010.

“O’Brien will make his final appearance as host of ‘The Tonight Show’ on January 22.”

In a separate statement, Jeff Gaspin, chairman, NBC Universal Television Entertainment, announced Leno’s return.

“We’re pleased that Jay is returning to host the franchise that he helmed brilliantly and successfully for many years,” said Gaspin. “He is an enormous talent, a consummate professional and one of the hardest-working performers on television.”

After days of negotiating, deal was finally signed around midnight as Wednesday turned into Thursday.

As part of the exit arrangement, O’Brien will get more than $33 million, NBC said. The rest will go to his staff in severance.

“In the end, Conan was appreciative of the steps NBC made to take care of his staff and crew and decided to supplement the severance they were getting out of his own pocket,” O’Brien’s manager, Gavin Polone, told several reporters, including Variety. “Now he just wants to get back on the air as quickly as possible.”

O’Brien is set to host two more editions of the “Tonight Show,” concluding his run this Friday, with a show that will feature Tom Hanks, Will Ferrell and Neil Young.

After that, “Tonight” was already set to go on hiatus next week. As now planned, NBC will run repeat episodes until Feb. 11, when it’s pre-empted for the Olympics.

Meanwhile, Leno will host his final episode of the doomed primetime strip “The Jay Leno Show” on Friday. Feb. 11. After a break for NBC’s coverage of the Winter Olympics, Leno returns to the 11:35 slot — and “The Tonight Show with Jay Leno” makes its return — on Monday, March 1.

Announcement of O’Brien’s departure was expected for several days, but was delayed as lawyers for both NBC and the host hammered out small deal points.

O’Brien will also now have the opportunity to launch a new late-night program by September, when a short non-compete window expires. (A new show would take at least that long to launch, insiders note.)

Included in the exit package are severance and contract buy-out packages for the entire “Tonight Show” staff.

That’s a hefty payout, as O’Brien’s executive producer, Jeff Ross, also has a large contract, while the show’s other talent – from Andy Richter and members of “Max Weinberg and the Tonight Show Band” — are negotiating their exits as well. Everyone, from the show’s writers and all the way down to the janitorial team – will receive a severance package described as more generous than the company’s standard exit agreements.

Both sides are also agreed to a disparagement clause in the agreement — in other words, how much fun can O’Brien poke at NBC and Leno (both on “The Tonight Show” and as a guest on other shows) until he returns to hosting a new talk show.

On recent editions of “The Tonight Show,” O’Brien has made light of what he can or can’t say about NBC going forward.

Insiders had earlier said most of the exit agreement’s larger points had been settled days ago — although the two sides are giving two very different answers on whether O’Brien’s settlement would be offset by money he might make on that hypothetical new show.

O’Brien’s reps have said all along that the host’s exit agreement — believed to be as much as $40 million — included a “no offset” clause. NBC insiders, however, disagree, and say there is an offset built in the deal should he wind up at a new home like Fox.

Now that the fate of NBC’s late night has been settled, however, the real questions begin.

It’s unclear how much Leno and “The Tonight Show” brand have been damaged by the events of the past 15 days — and how much damage control will need to be employed.

Peacock will also have to figure out a delicate way to promote the return of Leno to “Tonight” without turning off viewers unhappy over the turn of events.

NBC execs are likely hoping that the Winter Olympics buffer might prove to be a cool down period, and that Leno fans that had started going to bed before 11:30 will now be willing to once again stay up a tad later.

Simultaneously, NBC now faces a big primetime challenge as well: Getting viewers back to the 10 p.m. timeslot to view the return of scripted fare there.

Peacock has already been heavily promoting two of those new 10 p.m. series, “Parenthood” and “The Marriage Ref,” and just picked up additional episodes of several established series in order to fill the void.

On O’Brien’s side, the attention now turns to what the host plans to do next.

O’Brien’s reps haven’t yet started talking with other networks, but Fox remains the most ideal landing spot for the star.

Whether or not clearing a late night slot will ultimately make sense for Fox remains to be seen. An O’Brien show looks to be a tough sell to Fox’s owned and affiliated stations, given the lucrative off-net syndie fare those stations now run in those slots.

O’Brien will likely want to make a swift decision and strike while the interest is hot — and the “I’m With CoCo”/ “Team Conan” movement awaits further instructions.

Thursday’s official announcement capped a surreal two weeks in the late night world, after NBC first decided to scrap “The Jay Leno Show” in prime, move it to 11:35 p.m. and bump “The Tonight Show with Conan O’Brien” to 12:05.

It was clear at that point that NBC had opted to place their bets on Leno — whose mega contract with the Peacock would have required a massive payout (some say even bigger than what NBC is paying O’Brien) had the host been bumped from 10 p.m. — where he had time slot guarantees — and not given a more desirable home.

Once word leaked of the plan, O’Brien made his unhappiness known — first via reps, and then by a blockbuster statement.

“For 60 years the ‘Tonight Show’ has aired immediately following the late local news,” O’Brien wrote in the statement addressed tongue-in-cheek to “people of Earth.” “I sincerely believe that delaying the ‘Tonight Show’ into the next day to accommodate another comedy program will seriously damage what I consider to be the greatest franchise in the history of broadcasting. The ‘Tonight Show’ at 12:05 simply isn’t the ‘Tonight Show.’”

That assertion would up at the center of the early talks with O’Brien.

While execs may argue that NBC hasn’t breached O’Brien’s contract — he is, in their mind, still the host of the “Tonight Show,” just at a different time — O’Brien noted that with former “Tonight Show” host Jay Leno back at 11:35, it’s a hollow title.

NBC said O’Brien’s contract didn’t include an 11:35 time slot guarantee — something that O’Brien’s camp disagreed with.

Late night hosts, particularly David Letterman (who gleefully knocked his former employer, NBC) and Jimmy Kimmel (who spent one episode disguised as Leno, and went on “Jay Leno” to tweak the host), mined the battle for plenty of material.

Through it all, O’Brien saw his “Tonight Show” ratings increase dramatically. On Tuesday night, O’Brien averaged a 1.9 rating and 8 share among adults 18-49 in the 25 local people meter markets — more than doubling CBS’ “Late Show with David Letterman” (0.7/3).

“Over the past week, ratings for the “Tonight Show” are up by 50%,” O’Brien quipped Wednesday. “When NBC executives heard this they told me, ‘See, you really don’t fit in around here.’ “

Follow @Variety on Twitter for breaking news, reviews and more