SUNNYVALE, Calif.—FriendFinder Networks Inc. (FFN) announced Thursday morning that it has reached an agreement to settle litigation with Broadstream Capital Partners, Inc. regarding the 2007 acquisition by Penthouse of FNN.
The announcement contained details of the settlement. "The agreement governing the settlement provides that FFN is obligated to pay Broadstream a total of $15.0 million, in three installments of $8.0 million, $5.0 million and $2.0 million, which are due on July 13, 2011, September 29, 2011 and January 2, 2012, respectively," it stated.
The issues at play in the case extend back to before the purchase by Penthouse of Various, Inc., the company that owned and operated FriendFinder Networks and its galaxy of social networking sites. Penthouse originally acquired Various in Dec. 2006, and went public with news of deal a year later, in Dec. 2007.
Broadstream, a merchant bank that also invests in and provides advisory services to companies, claimed that the Various deal was supposed to be a joint venture between Penthouse and itself, and alleged breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty and constructive fraud. The suit, which was filed in Los Angeles Superior Court, was subsequently moved to U.S. District Court.
As a result of the settlement, however, FFN said it is finally able to put the Broadstream matter to rest and "eliminate the potential impact of this litigation on its business and more fully focus on business growth now that this matter is resolved."
Marc Bell, Chief Executive Officer of FFN, added, “We are pleased to have settled this matter at the low end of our potential exposure. Now that we have removed the uncertain impact of this litigation we look forward to continuing with our plans for acquisitions and organic growth."