Nevada |
7370 |
13-3750988 |
||||||||
(State or
other jurisdiction of |
(Primary standard industrial |
(I.R.S. Employer |
||||||||
incorporation or organization) |
classification code number) |
Identification No.) |
Bradley
D. Houser Akerman Senterfitt One SE Third Avenue Miami, Florida 33131 Phone: (305) 374-5600 Facsimile: (305) 374-5095 |
Charles I. Weissman Adam M. Fox Dechert LLP 1095 Avenue of the Americas New York, New York 10036 Phone: (212) 698-3500 Facsimile: (212) 698-3599 |
Large Accelerated
filer |
[ ] |
Accelerated filer |
[ ] |
||||||||||||
Non-accelerated filer |
[X] |
Smaller Reporting Company |
[ ] |
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(Do
not check if smaller reporting company) |
Per Share |
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Initial
public offering price |
$ | $ | ||||||||
Underwriting
discounts and commissions(1) |
$ | $ | ||||||||
Proceeds to
us |
$ | $ |
(1) |
In addition, we have agreed to reimburse the underwriters for certain expenses in connection with this offering. See the section entitled Underwriting. |
Imperial Capital |
Ladenburg Thalmann & Co. Inc. |
Page |
||||||
---|---|---|---|---|---|---|
Prospectus
Summary |
1 | |||||
Risk Factors
|
13 | |||||
Forward-Looking Statements |
37 | |||||
Market and
Industry Data |
39 | |||||
Use of
Proceeds |
40 | |||||
Dividend
Policy |
41 | |||||
Capitalization |
42 | |||||
Dilution
|
44 | |||||
Selected
Consolidated Financial Data |
45 | |||||
Managements Discussion and Analysis of Financial Condition and Results of Operations |
48 | |||||
Our Industry
|
86 | |||||
Business
|
89 | |||||
Management
|
106 | |||||
Principal
Stockholders |
130 | |||||
Certain
Relationships and Related Party Transactions |
134 | |||||
Description
of Capital Stock |
144 | |||||
Description
of Indebtedness |
150 | |||||
Shares
Eligible for Future Sale |
162 | |||||
Certain
Material U.S. Tax Considerations |
164 | |||||
Underwriting
|
166 | |||||
Legal Matters
|
172 | |||||
Independent
Registered Public Accounting Firm |
172 | |||||
Where You Can
Find More Information |
172 | |||||
Index to
Consolidated Financial Statements |
F-1 |
|
Social Networking. Approximately 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. The content on our social networking sites is generated by our users for our users. Our social networking technology platform is extremely scalable and requires limited incremental cost to add additional users or to create new websites catering to additional unique audiences. As a result, we have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. |
|
Live Interactive Video. Approximately 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. Users are charged on a per-minute basis to interact with models. We pay a percentage of the revenues we generate to the studios that employ the models. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. As a result, many studios and their models prefer our platform given our audience size and international reach, and our users prefer our platform as a result of the quality and variety of our models, the reliability of our network and the diversity of interactive features our platform provides. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. |
|
Visitors. Visitors are users who visit our websites but do not necessarily register. Visitors come to our websites through a number of channels, including by being directed from affiliate websites, keyword searches through standard search engines and by word of mouth. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, according to comScore. |
|
Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. |
|
Members. Members are registrants who log into one of our websites and make use of our free products and services. Members are able to complete their personal profile and access our searchable database of members but do not have the same full-access rights as subscribers. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. |
|
Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the year ended December 31, 2010, we had a monthly average of approximately 1.0 million paying subscribers. |
|
Paid Users . Paid users are members who purchase products or services on a pay-by-usage basis. For the year ended December 31, 2010, we averaged approximately 1.6 million purchased minutes by paid users each month. |
|
Average Revenue per Subscriber . We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. For more information regarding our revenue, see the sections entitled Financial Results and Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Year Ended December 31, 2010 as Compared to Year Ended December 31, 2009. |
|
Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate of loss of subscribers, decreased from approximately 16.3% per month for the year ended December 31, 2009 to approximately 16.1% per month for the year ended December 31, 2010. |
|
Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA |
increased from $46.89 for the year ended December 31, 2009 to $47.25 for the year ended December 31, 2010. |
|
Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber increased from $79.34 for the year ended December 31, 2009 to $80.17 for the year ended December 31, 2010. While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. |
|
Proprietary and Scalable Technology Platform. Our robust, proprietary and highly scalable technology platform supports our social networking, live interactive video and premium content websites. We are able to use our customized back-end interface to quickly and affordably generate new websites, launch new features and target new audiences at a relatively low incremental cost. Our technology platform enables us to rapidly redeploy the architecture underlying our websites with new appearances and themes in order to create additional websites for our users. We believe that our ability to create new websites and provide new features is crucial to cost-effectively maintaining our relationships with existing users and attracting new users. Furthermore, our technology platform has also enabled us to create and continue to expand our affiliate network and to measure and optimize the efficiency of our marketing spend, allowing us to expand the number of visitors to our site in an economical manner. |
|
Paid Subscriber-Based Model. We operate social networking websites that allow our members to make connections with other members with whom they share common interests. Our members are able to post their profiles and other content of interest for free and our subscribers are then able to access this content for a fee. Our paid subscriber-based model of social networking websites is distinctly different from the business models of other free social networking websites whose users access the websites to remain connected to their pre-existing friends and interest groups. |
|
Large and Diverse User Base. We operate some of the most heavily visited social networking websites in the world, currently adding on average more than 6.4 million new registrants and more than 3.9 million new members each month. Since our inception, more than 445 million registrants and more than 298 million members have registered on our websites, with a majority of our members outside of the United States. Our websites are designed to appeal to individuals with a diversity of interests and backgrounds. We believe potential members are attracted to the opportunity to interact with other individuals by having access to our large, diverse user base. We believe that our broad and diverse international user base also represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups and represents a substantial barrier to entry for potential competitors. |
|
Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. Our marketing affiliates are companies that market our services on their websites, allowing us to market our brand beyond our established user base. These affiliates direct visitor traffic to our websites by using our technology to place banners or links on their websites to one or more of our websites for a fee. As of December 31, 2010, we had more than 250,000 participants in our marketing affiliate program from which we derive a substantial portion of our new members and approximately 45% of our net revenues. For the year ended December 31, 2010, we made payments to marketing affiliates of approximately $71.2 million, a large portion of which was on a revenue share basis with the Company, as opposed to a pay-per-order basis. In addition, we spent $32.3 million on ad buy expenses during the same time period. We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend of approximately $103.5 million for the year ended December 31, 2010, presents a significant barrier to entry for potential competitors. |
|
Convert Visitors, Registrants and Members into Subscribers or Paid Users. We continually seek to convert visitors, registrants and members into subscribers or paid users. We do this by constantly evaluating, adding and enhancing features on our websites to improve our users experience. We also dynamically adjust offers and pricing to users based on a variety of factors such as geography, currency, payment system, country of origin, time of day or calendar date in order to encourage users to become subscribers or paid users. |
|
Create Additional Websites and Diversify Offerings. We are constantly seeking to identify groups of sufficient size who share a common interest in order to create a website intended to appeal to their interests. Our technology provides us with a scalable, low-cost capacity to quickly create and launch additional websites, such as new social networking websites, content-driven websites that serve as portals for user-generated and professional content and complementary FriendFinder branded websites, without substantial additional capital investment. Our extensive user database serves as an existing source of potential members and subscribers for new websites we create. |
|
Expand into and Monetize Current Foreign Markets. In 2010, nearly 71% of our members were outside the United States, but non-U.S. users accounted for less than half of our total net revenues. We seek to expand in selected geographic markets, including Southeast Europe, South America and Asia. Our geographic expansion, in conjunction with growth in alternative payment mechanisms including credit card and non-credit card payments, such as pre-authorized debiting and mobile phone payments in our targeted geographic areas should allow us to significantly increase our revenue and EBITDA. |
|
Pursue Targeted Acquisitions. We intend to expand our business by acquiring and integrating additional social networking websites, technology platforms, owners, creators and distributors of content and payment processing and advertising businesses. Our management team possesses significant mergers and acquisitions and integration expertise and regularly screens the marketplace for strategic acquisition opportunities. |
|
Generate Online Advertising Revenue. To date, online advertising revenue has represented less than 0.1% of our net revenue, averaging approximately $9,000 per month in the year ended December 31, 2010. We believe that our broad and diverse user base represents a valuable asset that will provide opportunities for us to offer targeted online advertising to specific demographic groups. We believe we will be able to offer advertisers an opportunity to achieve superior results with advertisements that are well-targeted to their preferred demographic and interest groups. We intend to focus our advertising efforts on our general audience social networking websites and maintain our subscription-based model for our adult social networking websites. |
Common stock
offered by us |
shares |
|||||
Common stock
outstanding before this offering (as of March 15, 2011) |
6,517,746 shares |
|||||
Common stock to
be outstanding after this offering |
shares |
|||||
Dividend policy
|
We do
not anticipate paying cash dividends for the foreseeable future. |
|||||
Over-allotment
option |
We
have granted the underwriters an option to purchase up to additional shares of our common stock at the public
offering price less the underwriting discount to cover any over-allotment. |
|||||
Use of proceeds
|
We
estimate that our net proceeds from this offering will be approximately $ million, assuming an initial
offering price of $ per share of common stock, the midpoint of the range set forth on the cover page of this
prospectus, after deducting underwriting discounts and estimated offering expenses payable by us. We intend to use all of the net proceeds to repay a
portion of our New First Lien Notes and our Cash Pay Second Lien Notes on the terms as further described under the section entitled Use of
Proceeds. After this offering, we will still have outstanding debt. |
|||||
Risk factors
|
You should read the section entitled Risk Factors beginning on page 13 for a discussion of factors you should consider
carefully before deciding whether to purchase shares of our common stock. |
|||||
Nasdaq Global
Market |
FFN |
|
8,444,853 shares of common stock issuable upon the conversion of all of the 8,444,853 outstanding shares of our Series B Convertible Preferred Stock (the holders of which have notified us in writing that they intend to exercise their option to convert effective upon the consummation of this offering); |
|
1,839,825 shares of common stock issuable upon the exchange of all of the 1,839,825 outstanding shares of our Series B common stock (the holders of which have notified us in writing that they intend to exercise their option to exchange); and |
|
shares of common stock underlying 4,003,89 8 outstanding warrants with an exercise price of $0.0002 per share, which if not exercised will expire upon the closing of this offering; |
|
2,000,452 shares of common stock issuable upon conversion of all of the 1,766,703 outstanding shares of our Series A Convertible Preferred Stock; |
|
shares of common stock underlying 1,373,859 outstanding warrants with an exercise price of $0.0002 per share (assuming such warrants are exercised for cash) which, to the extent not exercised, will not expire upon the closing of this offering; |
|
shares of common stock underlying all of the 476,57 3 outstanding warrants with an exercise price of $6.20 per share (assuming such warrants are exercised for cash); |
|
25,090 shares of common stock underlying all of the 25,090 outstanding warrants with an exercise price of $10.25 per share (assuming such warrants ar e e xercise d for cash); |
|
shares of common stock issuable upon the holders election to convert their Non-Cash Pay Second Lien Notes (assuming an initial offering price of $ per share of common stock, the midpoint of the range |
set forth on the cover of this prospectus) and subject to further restriction on conversion as set forth in the Non-Cash Pay Second Lien Notes; |
|
shares of common stock issuable upon the exercise of options available for future issuance under our FriendFinder Networks Inc. 2008 Stock Option Plan, or our 2008 Stock Option Plan; |
|
a number of shares equal to up to one percent of our fully diluted equity following this offering of common stock (estimated to be shares based on the assumptions set forth herein) reserved for future issuance under our FriendFinder Networks Inc. 2009 Restricted Stock Plan, or our 2009 Restricted Stock Plan; and |
|
shares of common stock the underwriters may purchase upon the exercise of the underwriters over-allotment option. |
|
the amendment and restatement of the certificate of designation of our Series A Convertible Preferred Stock; |
|
the 1-for-20 reverse split of our authorized Series A Convertible Preferred Stock, including a corresponding and proportionate decrease in the number of outstanding shares of Series A Convertible Preferred Stock; |
|
the amendment and restatement of the certificate of designation of the Series B Convertible Preferred Stock; |
|
the 1-for-20 reverse split of our authorized Series B Convertible Preferred Stock, including a corresponding and proportionate decrease in the number of outstanding shares of Series B Convertible Preferred Stock; and |
|
the 1-for-20 reverse split of each series of our authorized common stock, including a corresponding and proportionate decrease in the number of outstanding shares of such series. |
Consolidated Data |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, |
|||||||||||||||
2010 |
2009 |
2008 (1) |
|||||||||||||
(in thousands, except per share
amounts) |
|||||||||||||||
Statements of Operations and Per Share Data: |
|||||||||||||||
Net revenue
|
$ | 345,997 | $ | 327,692 | $ | 331,017 | |||||||||
Cost of
revenue |
110,490 | 91,697 | 96,514 | ||||||||||||
Gross profit
|
235,507 | 235,995 | 234,503 | ||||||||||||
Operating
expenses : |
|||||||||||||||
Product
development |
12,834 | 13,500 | 14,553 | ||||||||||||
Selling and
marketing |
37,258 | 42,902 | 59,281 | ||||||||||||
General and
administrative |
79,855 | 76,863 | 88,280 | ||||||||||||
Amortization
of acquired intangibles and software |
24,461 | 35,454 | 36,347 | ||||||||||||
Depreciation
and other amortization |
4,704 | 4,881 | 4,502 | ||||||||||||
Impairment of
goodwill |
| | 9,571 | ||||||||||||
Impairment of
other intangible assets |
4,660 | 4,000 | 14,860 | ||||||||||||
Total
operating expenses |
163,772 | 177,600 | 227,394 | ||||||||||||
Income from
operations |
71,735 | 58,395 | 7,109 | ||||||||||||
Interest and
other non-operating expense, net (2) |
115,374 | 104,943 | 71,251 | ||||||||||||
Loss before
income tax ( benefit ) |
(43,639 | ) | (46,548 | ) | (64,142 | ) | |||||||||
Income tax
(benefit) |
(486 | ) | (5,332 | ) | (18,176 | ) | |||||||||
Net loss
|
(43,153 | ) | (41,216 | ) | (45,966 | ) | |||||||||
Net loss
per common share basic and diluted(3) |
$ | (3.14 | ) | $ | (3.00 | ) | $ | (3.35 | ) | ||||||
Weighted
average common shares outstanding basic and diluted (3) |
13,735 | 13,735 | 13,735 |
Consolidated Data |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
As of December 31, |
|||||||||||
2010 |
2009 |
||||||||||
(in thousands) |
|||||||||||
Consolidated Balance Sheet Data (at period end): |
|||||||||||
Cash and
restricted cash |
$ | 41,970 | $ | 28,895 | |||||||
Total
assets |
532,817 | 551,881 | |||||||||
Long-term
debt, net |
510,551 | 432,028 | |||||||||
Deferred
revenue |
48,302 | 46,046 | |||||||||
Total
liabilities |
682,597 | 657,523 | |||||||||
Redeemable
preferred stock |
| 26,000 | |||||||||
Accumulated
deficit |
(230,621 | ) | (187,468 | ) | |||||||
Total
stockholders deficiency |
(149,780 | ) | (131,642 | ) |
Year Ended December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
(in thousands) | |||||||||||
Consolidated Statement s of Cash Flows Data: |
|||||||||||
Net cash
provided by operating activities |
$ | 42,640 | $ | 39,679 | |||||||
Net cash
(used in) provided by investing activities |
(1,250 | ) | 4,204 | ||||||||
Net cash
used in financing activities |
(29,405 | ) | (44,987 | ) |
(1) |
Net revenue for the year ended December 31, 2008 does not reflect $19.2 million due to a non-recurring purchase accounting adjustment that required the deferred revenue at the date of the acquisition of Various , Inc., or Various, to be recorded at fair value. Management believes that it is appropriate to add back the deferred revenue adjustment because the average renewal rate of the subscriptions that were the basis for the deferred revenue was approximately 63%. The renewal rate on subscriptions that had already been renewed at least one time since the acquisition was 78%. Therefore, management believes that historical results of Various are reflective of our future results, including those revenues that were added back to the adjusted net revenue. |
(2) |
Includes interest expense, net of interest income, other finance expenses, interest and penalties related to value added tax, or VAT, net loss on extinguishment and modification of debt, foreign exchange gain, principally related to VAT not charged to customers, gain on settlement of VAT liability not charged to customers, gain on liability related to warrants and other non-operating (expense) income, net. |
(3) |
Basic and diluted loss per share is based on the weighted average number of shares of common stock and Series B common stock outstanding and includes shares underlying common stock purchase warrants which are exercisable at the nominal price of $0.0002 per share. For information regarding the computation of per share amounts, refer to Note C(25), Summary of Significant Accounting Policies Per share data of our consolidated financial statements included elsewhere in this prospectus. |
Consolidated Data |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, |
|||||||||||||||
2010 |
2009 |
2008 |
|||||||||||||
(in thousands) |
|||||||||||||||
GAAP net loss
|
$ | (43,153 | ) | $ | (41,216 | ) | $ | (45,966 | ) | ||||||
Add: Interest
expense, net |
88,508 | 92,139 | 80,510 | ||||||||||||
Subtract: Income tax benefit |
(486 | ) | (5,332 | ) | (18,176 | ) | |||||||||
Add:
Amortization of acquired intangible assets and software |
24,461 | 35,454 | 36,347 | ||||||||||||
Add:
Depreciation and other amortization |
4,704 | 4,881 | 4,502 | ||||||||||||
EBITDA |
$ | 74,034 | $ | 85,926 | $ | 57,217 | |||||||||
Add: Deferred
revenue purchase accounting adjustment ( 1) |
| | 19,200 | ||||||||||||
Add:
Impairment of goodwill |
| | 9,571 | ||||||||||||
Add:
Impairment of other intangible assets |
4,660 | 4,000 | 14,860 | ||||||||||||
Add:
Broadstream arbitration provision |
13,000 | | | ||||||||||||
Add
(subtract): Loss (gain) related to VAT liability not charged to customers |
1,683 | 7,942 | (9,456 | ) | |||||||||||
Add: Net
Loss on extinguishment and modification of debt |
7,457 | 7,240 | | ||||||||||||
Add: Other
finance expenses |
4,562 | | | ||||||||||||
Subtract:
Non-recurring refund by former owner of litigation costs for legacy patent case |
| (2,685 | ) | | |||||||||||
Adjusted
EBITDA( 2) |
$ | 105,396 | $ | 102,423 | $ | 91,392 |
(1) |
Net revenue for the year ended December 31, 2008 does not reflect $19.2 million due to a non-recurring purchase accounting adjustment that required the deferred revenue at the date of the acquisition of Various to be recorded at fair value. Management believes that it is appropriate to add back the deferred revenue adjustment because the average renewal rate of the subscriptions that were the basis for the deferred revenue was approximately 63%. The renewal rate on subscriptions that had already been renewed at least one time since the acquisition was 78%. Therefore, management believes that historical results of Various are reflective of our future results, including those revenues that were added back to adjusted EBITDA. |
( 2) |
For the year ended December 31, 2008 and for the quarters ended March 31, 2008, June 30, 2008, September 30, 2008, March 31, 2009 and June 30, 2009, we failed to satisfy our EBITDA covenants with respect to our 2006 Notes and 2005 Notes because of operating performance. For the quarters ended March 31, 2008, June 30, 2008 and September 30, 2008 we failed to satisfy our EBITDA covenants with respect to the First Lien Senior Secured Notes and the Second Lien Subordinated Secured Notes due to the liability related to VAT not charged to customers and the purchase accounting adjustment due to the required reduction of the deferred revenue liability to fair value. On October 8, 2009, these events of default were cured. For the quarter ended September 30, 2009, we met our EBITDA covenants with respect to our 2006 Notes and 2005 Notes, each as amended. For the year ended December 31, 2009 and the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010, we met our EBITDA covenants with respect to the First Lien Senior Secured Notes and the Second Lien Subordinated Secured Notes. For more information regarding this and other events of default under our note agreements, see the section entitled Description of Indebtedness. The above mentioned debt was paid off with the proceeds of the New Financing. Our new note agreements contain material debt covenants based on our maintaining specified levels of EBITDA (as it is defined in the particular agreement as noted below). Specifically, we are required to maintain the following EBITDA levels for our outstanding debt: |
|
For each of the fiscal quarters ending through September 30,
2011, September 30, 2012 and September 30, 2013, our EBITDA (as defined) on a consolidated basis for the four consecutive fiscal quarters ending on
such date needs to be greater than $85 million, $90 million and $95 million, respectively. Our EBITDA for the four quarters ended December 31,
2010, as defined in the relevant documents, was $105.4 million. We met our EBITDA covenant requirements for the quarter and year ended December 31, 2010. |
Non-Financial Operating Data |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, |
|||||||||||||||
2010 |
2009 |
2008 |
|||||||||||||
Historical
Operating Data: |
|||||||||||||||
Adult
Social Networking Websites |
|||||||||||||||
Subscribers
(as of the end of the period) |
928,314 | 916,005 | 896,211 | ||||||||||||
Churn (1) |
16. 0 | % | 16.3 | % | 17.8 | % | |||||||||
ARPU (2) |
$ | 20.47 | $ | 20.7 3 | $ | 22.28 | |||||||||
CPGA (3) |
$ | 48.43 | $ | 47.24 | $ | 51.26 | |||||||||
Average
Lifetime Net Revenue Per Subscriber (4) |
$ | 79.45 | $ | 79.64 | $ | 74.22 | |||||||||
General
Audience Social Networking Websites |
|||||||||||||||
Subscribers
(as of the end of the period) |
53,198 | 57,431 | 68,647 | ||||||||||||
Churn (1) |
17.3 | % | 15.5 | % | 18.6 | % | |||||||||
ARPU (2) |
$ | 20.72 | $ | 18.05 | $ | 19.21 | |||||||||
CPGA (3) |
$ | 29.04 | $ | 41.61 | $ | 36.68 | |||||||||
Average
Lifetime Net Revenue Per Subscriber (4) |
$ | 91.02 | $ | 74.71 | $ | 66.70 | |||||||||
Live
Interactive Video Websites |
|||||||||||||||
Average
Revenue Per Minute |
$ | 3.90 | $ | 3.49 | $ | 2.87 | |||||||||
Cams
Minutes (5) |
19,566,551 |
17,293,702 |
19,101,202 |
(1) |
Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period and by the number of months in the period. |
(2) |
ARPU is calculated by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. To provide meaningful comparisons between the years, net revenue for the year ended December 31, 2008 includes the add back of $19.2 million due to a non-recurring purchase accounting adjustment that required the deferred revenue at the date of the acquisition of Various to be recorded at fair value. For more information regarding our revenue adjusted for purchase price accounting, see the section entitled Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Year Ended December 31, 2009 as Compared to the Year Ended December 31, 2008. |
(3) |
CPGA is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. |
(4) |
Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. |
(5) |
Users purchase minutes in advance of their use and draw down on the available funds as the minutes are used. |
|
if we experience excessive chargebacks and/or credits; |
|
if we experience excessive fraud ratios; |
|
if there is an adverse change in policy of the acquiring banks and/or card associations with respect to the processing of credit card charges for adult-related content; |
|
if there is an increase in the number of European and U.S. banks that will not accept accounts selling adult-related content; |
|
if there is a breach of our security resulting in the theft of credit card data; |
|
if there is continued tightening of credit card association chargeback regulations in international commerce; |
|
if there are association requirements for new technologies that consumers are less likely to use; and |
|
if negative global economic conditions result in credit card companies denying more transactions. |
|
cause our customers to lose confidence in our services; |
|
deter consumers from using our services; |
|
harm our reputation; |
|
require that we expend significant additional resources related to our information security systems and result in a disruption of our operations; |
|
expose us to liability; |
|
subject us to unfavorable regulatory restrictions and requirements imposed by the Federal Trade Commission or similar authority; |
|
cause us to incur expenses related to remediation costs; and |
|
decrease market acceptance of the use of e-commerce transactions. |
|
Internet . Several U.S. governmental agencies are considering a number of legislative and regulatory proposals that may lead to laws or regulations concerning different aspects of the internet, including social networking, online content, intellectual property rights, e-mail, user privacy, taxation, access charges, liability for third-party activities and personal jurisdiction. New Jersey enacted the Internet Dating Safety Act in 2008 , which requires online dating services to disclose whether they perform criminal background screening practices and to offer safer dating tips on their websites. Other states have enacted or considered enacting similar legislation. While online dating and social networking websites are not currently required to verify the age or identity of their members or to run criminal background checks on them, any such requirements could increase our cost of operations or discourage use of our services . The Childrens Online Privacy Protection Act (COPPA) restricts the ability of online services to collect information from minors. The Protection of Children from Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances. |
In the area of data protection, many states have passed laws requiring notification to users when there is a security breach for personal data, such as Californias Information Practices Act. Congress, the FTC and at least thirty-seven states have promulgated laws and regulations regarding email advertising and the application of such laws and the extent of federal preemptions is still evolving. Under U.S. law, the Digital Millennium Copyright Act has provisions which limit, but do not eliminate, our liability to list or link to third-party websites that include materials that infringe copyrights, so long as we comply with the statutory requirements of this act. Furthermore, the Communications Decency Act (CDA), under certain circumstances, immunizes computer service providers from liability for certain non-intellectual property |
claims for content created by third parties. The interpretation of the extent of CDA immunity is evolving and we run the risk that in certain instances we may not qualify for such immunity. We face similar risks in international markets where our products and services are offered and may be subject to additional regulations and balkanized laws . The interpretation and application of data protection laws in the United States, Europe and elsewhere are still uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines and other monetary remedies , this could result in an order requiring that we change our data practices. In 2008, Nevada enacted a law prohibiting businesses from transferring a customers personal information through an electronic transmission, unless that information is encrypted. In practice, the law requires businesses operating in Nevada to purchase and implement data encryption software in order to send any electronic transmission (including e-mail) that contains a customers personal information. |
More recently, Massachusetts has adopted regulations, which, like the Nevada law, require businesses to encrypt data sent over the internet. However, these Massachusetts regulations also require encryption of data on laptops and flash drives or other portable devices, and apply to anyone who owns, licenses, stores, or maintains personal information about the states residents. Any failure on our part to comply with these regulations may subject us to additional liabilities. |
Regulation of the internet could materially adversely affect our business, financial condition and results of operations by reducing the overall use of the internet, reducing the demand for our services or increasing our cost of doing business. Proposed legislation concerning data protection is currently pending at the U.S. federal and state level as well as in certain foreign jurisdictions. Complying with these laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business. |
|
Commercial advertising. We receive a significant portion of our print publications advertising revenue from companies that sell tobacco products. Significant limitations on the ability of those companies to advertise in our publications or on our websites because of legislative, regulatory or court action could materially adversely affect our business, financial condition and results of operations. |
|
Adult content . Regulation, investigations and prosecutions of adult content could prevent us from making such content available in certain jurisdictions or otherwise have a material adverse effect on our business, financial condition and results of operations. Government officials may also place additional restrictions on adult content affecting the way people interact on the internet. The governments of some countries, such as China and India, have sought to limit the influence of other cultures by restricting the distribution of products deemed to represent foreign or immoral influences. Regulation aimed at limiting minors access to adult content both in the United States and abroad could also increase our cost of operations and introduce technological challenges by requiring development and implementation of age verification systems. U.S. government officials could amend or construe and seek to enforce more broadly or aggressively the adult content recordkeeping and labeling requirements set forth in 18 U.S.C. Section 2257 and its implementing regulations in a manner that is unfavorable to our business. Court rulings may place additional restrictions on adult content affecting how people interact on the internet, such as mandatory web labeling. |
|
unforeseen operating difficulties and expenditures arising from the process of integrating any acquired business, product or technology, including related personnel, and maintaining uniform standards, controls, procedures and policies; |
|
diversion of a significant amount of managements attention from the ongoing development of our business; |
|
dilution of existing stockholders ownership interests; |
|
incurrence of additional debt; |
|
exposure to additional operational risks and liabilities, including risks and liabilities arising from the operating history of any acquired businesses; |
|
negative effects on reported results of operations from acquisition-related charges and amortization of acquired intangibles; |
|
entry into markets and geographic areas where we have limited or no experience; |
|
the potential inability to retain and motivate key employees of acquired businesses; |
|
adverse effects on our relationships with suppliers and customers; and |
|
adverse effects on the existing relationships of any acquired companies, including suppliers and customers. |
|
competition from pre-existing competitors with significantly stronger brand recognition in the markets we enter; |
|
our erroneous evaluations of the potential of such markets; |
|
diversion of capital and other valuable resources away from our core business; |
|
foregoing opportunities that are potentially more profitable; and |
|
weakening our current brands by over expansion into too many new markets. |
|
challenges caused by distance, language and cultural differences; |
|
local competitors with substantially greater brand recognition, more users and more traffic than we have; |
|
challenges associated with creating and increasing our brand recognition, improving our marketing efforts internationally and building strong relationships with local affiliates; |
|
longer payment cycles in some countries; |
|
credit risk and higher levels of payment fraud in some countries; |
|
different legal and regulatory restrictions among jurisdictions; |
|
political, social and economic instability; |
|
potentially adverse tax consequences; and |
|
higher costs associated with doing business internationally. |
|
we may be unable to obtain additional financing for working capital, capital expenditures, acquisitions, repayment of debt at maturity and other general corporate purposes; |
|
a significant portion of our cash flow from operations must be dedicated to debt service, which reduces the amount of cash we have available for other purposes; |
|
we may be disadvantaged as compared to our competitors, such as in our ability to adjust to changing market conditions, as a result of the amount of debt we owe; |
|
we may be restricted in our ability to make strategic acquisitions and to exploit business opportunities; and |
|
additional dilution of stockholders may be required to service our debt. |
|
incur or guarantee additional indebtedness; |
|
repurchase capital stock; |
|
make loans and investments; |
|
enter into agreements restricting our subsidiaries abilities to pay dividends; |
|
grant liens on assets; |
|
sell or otherwise dispose of assets; |
|
enter new lines of business; |
|
merge or consolidate with other entities; and |
|
engage in transactions with affiliates. |
|
Quarterly variations in our results of operations or those of our competitors. |
|
Announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or capital commitments. |
|
Disruption to our operations or those of our marketing affiliates. |
|
The emergence of new sales channels in which we are unable to compete effectively. |
|
Our ability to develop and market new and enhanced products on a timely basis. |
|
Commencement of, or our involvement in, litigation. |
|
Any major change in our board or management. |
|
Changes in governmental regulations or in the status of our regulatory approvals. |
|
Changes in earnings estimates or recommendations by securities analysts. |
|
General economic conditions and slow or negative growth of related markets. |
|
establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; |
|
authorize our board of directors to issue blank check preferred stock to increase the number of outstanding shares and thwart a takeover attempt; |
|
require the written request of at least 75% of the voting power of our capital stock in order to compel management to call a special meeting of the stockholders; and |
|
prohibit stockholder action by written consent and require that all stockholder actions be taken at a meeting of our stockholders, unless otherwise specifically required by our articles of incorporation or the Nevada Revised Statutes. |
|
our history of significant operating losses and the risk of incurring additional net losses in the future; |
|
our reliance on subscribers to our websites for most of our revenue; |
|
competition from other social networking, internet personals and adult-oriented websites; |
|
our reliance on our affiliate network to drive traffic to our websites; |
|
increased subscriber churn or subscriber upgrade and retention costs impact on our financial performance; |
|
our ability to generate significant revenue from internet advertising; |
|
our ability to maintain and enhance our brands; |
|
unfavorable economic and market conditions; |
|
our reliance on credit cards as a form of payment; |
|
our ability to keep up with new technologies and remain competitive; |
|
we may be held secondarily liable for the actions of our affiliates; |
|
our history of breaching certain covenants in our note agreements and the risk of future breaches; |
|
our reliance on member-generated content to our websites; |
|
security breaches may cause harm to our subscribers or our systems; |
|
we may be subject to liability arising from our media content; |
|
our ability to safeguard the privacy of the users of our websites; |
|
our ability to enforce and protect our intellectual property rights; |
|
we may be subject to claims that we have violated the intellectual property rights of others; |
|
our ability to obtain or maintain key website addresses; |
|
our ability to scale and adapt our network infrastructure; |
|
the loss of our main data center or backup data center or other parts of our infrastructure; |
|
systems failures and interruptions in our ability to provide access to our websites and content; |
|
companies providing products and services on which we rely may refuse to do business with us; |
|
changes in government laws affecting our business; |
|
we may be liable if one of our members or subscribers harms another or misuses our websites; |
|
risks associated with additional taxes being imposed by any states or countries; |
|
we may have unforeseen liabilities from our acquisition of Various and our recourse may be limited ; |
|
we may not be successful in integrating any future acquisitions we make; |
|
risks of international expansion; |
|
any debt outstanding after the consummation of this offering could restrict the way we do business; |
|
failure to maintain financial ratios; |
|
our reliance on key personnel; |
|
our ability to attract internet traffic to our websites; |
|
risks associated with currency fluctuations; and |
|
risks associated with our litigation and legal proceedings. |
|
on an actual, historical basis; |
|
on a pro forma basis reflecting (i) the issuance of 8,444,853 shares of common stock upon the conversion of all of the outstanding shares of our Series B Convertible Preferred Stock (the holders of which have notified us in writing that they intend to exercise their option to convert effective upon the consummation of this offering), (ii) the issuance of 1,839,825 shares of common stock upon the exchange of all of the outstanding shares of our Series B common stock (the holders of which have notified us in writing that they intend to exercise their option to exchange), and (iii) the issuance of 4,003,898 shares of common stock underlying outstanding warrants with an exercise price of $0.0002 per share, which if not exercised will expire upon the closing of this offering (collectively, the Conversions) ; and |
|
on a pro forma as adjusted basis reflecting (i) all of the foregoing pro forma adjustments, (ii) the sale of shares of our common stock in this offering at the assumed initial offering price of $ per share, the midpoint of the range set forth on the front cover of this prospectus, after deducting underwriting discounts and commissions of $ million and related estimated offering expenses of $ million (including $ million incurred and paid at December 31, 2010) and giving effect to the receipt of the estimated proceeds of $ million, and (iii) the repayment of certain indebtedness under our New First Lien Notes and Cash Pay Second Lien Notes as further described in the section entitled Use of Proceeds and the resultant $ loss on extinguishment of debt, net of related deferred tax effect (the IPO). |
As of December 31, 2010 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual |
Pro Forma |
Pro Forma as Adjusted |
|||||||||||||
(unaudited) (dollars in thousands except share data) |
|||||||||||||||
Cash and
restricted cash |
$ | 41,970 | $ | 41,971 | $ | ||||||||||
New First
Lien Notes, net of unamortized discount of $10,974 |
294,026 | 294,026 | |||||||||||||
Cash Pay
Second Lien Notes, net of unamortized discount of $262 |
13,516 | 13,516 | |||||||||||||
Non-Cash
Pay Second Lien Notes, net of unamortized discount of $20,986 |
216,225 | 216,225 | 216,225 | ||||||||||||
Other, net
of unamortized discount of $457 |
1,793 | 1,793 | 1,793 | ||||||||||||
Total
Indebtedness |
525,560 | 525,560 | |||||||||||||
Stockholders Deficiency |
|||||||||||||||
Preferred
stock, $0.001 par value authorized 22,500,000 shares; issued and outstanding 10,211,556 |
|||||||||||||||
Series A
Convertible Preferred Stock, $0.001 per share authorized 2,500,000 shares; issued and outstanding 1,7 66,703 (liquidation preference
$21,000) |
2 | 2 | 2 | ||||||||||||
Series B
Convertible Preferred Stock, $0.001 per share authorized 10,000,000 shares; issued and outstanding 8,444,853 (liquidation preference
$5,000), none pro forma and none pro forma as adjusted |
8 | | | ||||||||||||
Common
stock, $0.001 par value authorized 125,000,000 shares |
As of December 31, 2010 |
||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual |
Pro Forma |
Pro Forma as Adjusted | ||||||||||||||||||||||||
(unaudited) (dollars in thousands except share data) |
||||||||||||||||||||||||||
Common
stock voting authorized 112,500,000 shares, issued and outstanding 6,517,746, pro forma 20,806,322 shares and pro
forma as adjusted |
6 | 21 | ||||||||||||||||||||||||
Series B
common stock non-voting authorized 12,500,000 shares; issued and outstanding 1,839,825 shares, none pro forma and none pro forma as adjusted
|
2 | | | |||||||||||||||||||||||
Capital in
excess of par value |
80,823 | 80,82 1 | ||||||||||||||||||||||||
Accumulated deficit |
(230,621 | ) | (230,621 | ) | ||||||||||||||||||||||
Total
stockholders deficiency |
(149,780 | ) | (149,77 9 | ) | ||||||||||||||||||||||
Total
Capitalization |
$ | 375,780 | $ | 375,78 1 | $ |
Assumed
initial public offering price per share |
$ | |||||||||
Net tangible
book value deficiency per share as of December 31, 2010 |
$ | |||||||||
Decrease in
net tangible book value deficiency attributable to new investors |
$ | |||||||||
Adjusted net
tangible book value deficiency per share after this offering |
$ | |||||||||
Dilution per share to new investors |
$ |
Shares Purchased |
Total Consideration |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amount |
Percent |
Amount |
Percent |
Average price per share |
||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||
Existing
stockholders |
% | $ | % | $ | ||||||||||||||||||
Investors in
this offering |
% | % | $ | |||||||||||||||||||
Total
|
% | $ | % |
Consolidated Data |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, |
|||||||||||||||||||||||
2010 |
2009 |
2008(1) |
2007(1) |
2006 |
|||||||||||||||||||
(in thousands, except per share data) |
|||||||||||||||||||||||
Statements of Operations and Per Share Data: |
|||||||||||||||||||||||
Net
revenue |
$ | 345,997 | $ | 327,692 | $ | 331,017 | $ | 48,073 | $ | 29,965 | |||||||||||||
Cost of
revenue |
110,490 | 91,697 | 96,514 | 23,330 | 15,927 | ||||||||||||||||||
Gross profit
|
235,507 | 235,995 | 234,503 | 24,743 | 14,038 | ||||||||||||||||||
Operating
expenses |
|||||||||||||||||||||||
Product
development |
12,834 | 13,500 | 14,553 | 1,002 | | ||||||||||||||||||
Selling and marketing |
37,258 | 42,902 | 59,281 | 7,595 | 1,430 | ||||||||||||||||||
General and
administrative |
79,855 | 76,863 | 88,280 | 24,466 | 24,354 | ||||||||||||||||||
Amortization
of acquired intangibles and software |
24,461 | 35,454 | 36,347 | 2,262 | | ||||||||||||||||||
Depreciation
and other amortization |
4,704 | 4,881 | 4,502 | 2,829 | 3,322 | ||||||||||||||||||
Impairment
of goodwill |
| | 9,571 | 925 | 22,824 | ||||||||||||||||||
Impairment of
other intangible assets |
4,660 | 4,000 | 14,860 | 5,131 | | ||||||||||||||||||
Total
operating expenses |
163,772 | 177,600 | 227,394 | 44,210 | 51,930 | ||||||||||||||||||
Income
(loss) from operations. |
71,735 | 58,395 | 7,109 | (19,467 | ) | (37,892 | ) | ||||||||||||||||
Interest
expense, net of interest income |
(88,508 | ) | (92,139 | ) | (80,510 | ) | (15,953 | ) | (7,918 | ) | |||||||||||||
Other
finance expenses |
(4,562 | ) | | | | | |||||||||||||||||
Interest
and penalties related to VAT liability not charged to customers |
(2,293 | ) | (4,205 | ) | (8,429 | ) | (1,592 | ) | | ||||||||||||||
Net
loss on extinguishment and modification of debt |
(7,457 | ) | (7,240 | ) | | | (3,799 | ) | |||||||||||||||
Foreign
exchange gain (loss) principally related to VAT liability not charged to customers |
610 | (5,530 | ) | 15,195 | 546 | | |||||||||||||||||
Gain on
elimination of liability for United Kingdom VAT not charged to customers |
| 1,561 | | | | ||||||||||||||||||
Gain on
settlement of VAT liability not charged to customers |
| 232 | 2,690 | | | ||||||||||||||||||
Gain on
liability related to warrants |
38 | 2,744 | | | | ||||||||||||||||||
Other
non-operating (expense) income, net |
(13,202 | ) | (366 | ) | (197 | ) | 119 | (332 | ) | ||||||||||||||
Loss
before income tax benefit |
(43,639 | ) | (46,548 | ) | (64,142 | ) | (36,347 | ) | (49,941 | ) | |||||||||||||
Income tax
benefit |
486 | 5,332 | 18,176 | 6,430 | | ||||||||||||||||||
Net loss
|
(43,153 | ) | (41,216 | ) | (45,966 | ) | (29,917 | ) | (49,941 | ) |
Consolidated Data |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, |
|||||||||||||||||||||||
2010 |
2009 |
2008(1) |
2007(1) |
2006 | |||||||||||||||||||
(in thousands, except per share data) |
|||||||||||||||||||||||
Non-cash
dividends on convertible preferred stock |
| | | (4,396 | ) | | |||||||||||||||||
Net loss
attributable to common stock |
$ | (43,153 | ) | $ | (41,216 | ) | $ | (45,966 | ) | $ | (34,313 | ) | $ | (49,941 | ) | ||||||||
Net loss
per common share basic and diluted(2) |
$ | (3.14 | ) | $ | (3.00 | ) | $ | (3.35 | ) | $ | (5.19 | ) | $ | (8.99 | ) | ||||||||
Weighted
average common shares outstanding basic and diluted(2) |
13,735 | 13,735 | 13,735 | 6,610 | 5,554 | ||||||||||||||||||
Pro-forma
net loss per common share-basic and diluted (3) |
$ | $ | |||||||||||||||||||||
Pro-forma
weighted average common shares outstanding basic and diluted( 3) |
$ | $ |
Consolidated Data(1) |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
As of December 31, |
|||||||||||||||||||||||
2010 |
2009 |
2008(2) |
2007(2) |
2006 |
|||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Consolidated Balance Sheet Data (at period end): |
|||||||||||||||||||||||
Cash and
restricted cash |
$ | 41,970 | $ | 28,895 | $ | 31,565 | $ | 23,722 | $ | 2,998 | |||||||||||||
Total
assets |
532,817 | 551,881 | 599,913 | 649,868 | 70,770 | ||||||||||||||||||
Long-term
debt classified as current due to events of default, net of unamortized discount(4)
|
| | 415,606 | 417,310 | | ||||||||||||||||||
Long-term
debt, net of una mortized discount |
510,551 | 432,028 | 38,768 | 35,379 | 63,166 | ||||||||||||||||||
Deferred
revenue |
48,302 | 46,046 | 42,814 | 27,214 | 6,974 | ||||||||||||||||||
Total
liabilities |
682,597 | 657,523 | 657,998 | 661,987 | 91,516 | ||||||||||||||||||
Redeemable
preferred stock |
| 26,000 | 26,000 | 26,000 | 21,000 | ||||||||||||||||||
Accumulated deficit |
(230,621 | ) | (187,468 | ) | (144,667 | ) | (98,701 | ) | (68,784 | ) | |||||||||||||
Total
stockholders deficiency |
(149,780 | ) | (131,642 | ) | (84,085 | ) | (38,119 | ) | (41,746 | ) |
Consolidated Data |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, |
|||||||||||||||||||||||
2010 |
2009 |
2008(1) |
2007(1) |
2006 |
|||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Other
Data |
|||||||||||||||||||||||
Net cash
provided by (used in) operating activities |
$ | 42,640 | $ | 39,679 | $ | 50,948 | $ | 4,744 | $ | (16,600 | ) | ||||||||||||
Net cash
provided by (used in) investing activities |
(1,250 | ) | 4,204 | (9,289 | ) | (149,322 | ) | (3,414 | ) | ||||||||||||||
Net cash
provided by (used in) financing activities |
(29,405 | ) | (44,987 | ) | (25,336 | ) | 148,961 | 10,569 |
(1) |
Net revenue for the years ended December 31, 2008 and 2007 does not reflect $19.2 million and $8.5 million, respectively, due to a non-recurring purchase accounting adjustment that required the deferred revenue at the date of the acquisition of Various to be recorded at fair value. Management believes that it is appropriate to add back the deferred revenue adjustment because the average renewal rate of the subscriptions that were the basis for the deferred revenue was approximately 63%. The renewal rate on subscriptions that had already been renewed at least one time since the acquisition was 78%. Therefore, management believes that historical results of Various are reflective, including those revenues that were added back to the adjusted net revenue, of our future results. |
(2) |
Basic and diluted loss per share is based on the weighted average number of shares of common stock outstanding, including Series B common stock, Series B Convertible Preferred Stock and shares underlying common stock purchase warrants which are exercisable at |
the nominal price of $0.0002 per share and which if not exercised will expire upon closing of this offering. For information regarding the computation of per share amounts, refer to Note C(25), Summary of Significant Accounting Policies Per share data of our consolidated financial statements included elsewhere in this prospectus. |
(3) |
Following is a calculation of pro forma results assuming that, as of the beginning of the respective periods, (a) shares of our common stock were sold in this offering and a portion of the outstanding New First Lien Notes and Cash Pay Second Lien Notes were extinguished with the proceeds of the offering and (b) all of the outstanding shares of our Series B Convertible Preferred Stock were converted into common stock: |
Year Ended December 31, 2010 |
Year Ended December 31, 2009 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Net
loss, as reported (in thousands): |
$ | (43,153 | ) | $ | (41,216 | ) | ||||
Pro
forma adjustments: |
||||||||||
1) A
reduction in interest expense resulting from the repayment of a portion of the New First Lien Notes and Cash Pay Second Lien Notes from the proceeds of
this offering. |
| | ||||||||
2)
Reduction in tax benefit related to reduction in interest expense |
| | ||||||||
Pro
forma net loss |
$ | | (a) | $ | | (a) | ||||
Weighted
average common shares outstanding basic and diluted (in thousands) |
13,735 | 13,735 | ||||||||
Pro
forma adjustments: |
||||||||||
1)
Issuance of common stock upon the conversion of all of the outstanding shares of our Series B Convertible Preferred stock (the holders of which have
notified us in writing that they intend to exercise their option to convert effective upon the consummation of this offering) |
| | ||||||||
2) An
increase in the shares of common stock underlying certain of our warrants resulting from the anti-dilution provisions of such warrants |
| | ||||||||
3) The
sale of common stock in this offering |
| | ||||||||
Pro
forma weighted average common shares outstanding |
| | ||||||||
Net loss
per common share basic and diluted |
$ | () | $ | () |
(a) |
The pro forma net loss per common share excludes any loss on extinguishment of a portion of our First Lien Senior Secured Notes and Cash Pay Second Lien Notes ($ and $ for the year ended December 31, 2010 and the year ended December 31, 2009, respectively) representing a non-recurring charge directly attributable to the use of proceeds from this offering. |
(4) |
Excludes $1.4 million at December 31, 2008 of principal amortization of First Lien Senior Secured Notes required to be paid on February 15, 2009, which is classified as a current portion of long-term debt. |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Percentage of
revenue contributed by affiliates |
45 | % | 44 | % | 43 | % | |||||||||
Compensation
to affiliates (in millions) |
$ | 71.2 | $ | 56.7 | $ | 62.3 |
|
valuation of goodwill, identified intangibles and other long-lived assets, including business combinations; and |
|
legal contingencies. |
|
a significant decline in actual or projected revenue; |
|
a significant decline in performance of certain acquired companies relative to our original projections; |
|
an excess of our net book value over our market value; |
|
a significant decline in our operating results relative to our operating forecasts; |
|
a significant change in the manner of our use of acquired assets or the strategy for our overall business; |
|
a significant decrease in the market value of an asset; |
|
a shift in technology demands and development; and |
|
a significant turnover in key management or other personnel. |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
(in thousands) | |||||||||||||||
Net
revenue |
|||||||||||||||
Internet |
$ | 321,605 | $ | 306,213 | $ | 306,129 | |||||||||
Entertainment |
24,392 | 21,479 | 24,888 | ||||||||||||
Total |
345,997 | 327,692 | 331,017 | ||||||||||||
Cost of
revenue |
|||||||||||||||
Internet |
97,959 | 78,627 | 81,815 | ||||||||||||
Entertainment |
12,531 | 13,070 | 14,699 | ||||||||||||
Total |
110,490 | 91,697 | 96,514 | ||||||||||||
Gross
profit |
|||||||||||||||
Internet |
223,646 | 227,586 | 224,314 | ||||||||||||
Entertainment |
11,861 | 8,409 | 10,189 | ||||||||||||
Total |
235,507 | 235,995 | 234,503 | ||||||||||||
Income (loss)
from operations |
|||||||||||||||
Internet |
76,142 | 64,962 | 34,345 | ||||||||||||
Entertainment |
1,140 | (439 | ) | (17,748 | ) | ||||||||||
Unallocated
corporate |
(5,547 | ) | (6,128 | ) | (9,488 | ) | |||||||||
Total |
$ | 71,735 | $ | 58,395 | $ | 7,109 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Adult Social Networking Websites |
|||||||||||||||
New
members |
38,216,689 | 22,461,322 | 20,738,807 | ||||||||||||
Beginning
subscribers |
916,005 | 896,211 | 919,146 | ||||||||||||
New
subscribers (1) |
1,771,837 | 1,776,916 | 1,935,533 | ||||||||||||
Terminations |
1,759,528 | 1,757,122 | 1,958,468 | ||||||||||||
Ending
subscribers |
928,314 | 916,005 | 896,211 | ||||||||||||
Conversion of
members to subscribers |
4.6 | % | 7.9 | % | 9.3 | % | |||||||||
Churn |
16.0 | % | 16.3 | % | 17.8 | % | |||||||||
ARPU |
$ | 20.47 | $ | 20.73 | $ | 22.28 | |||||||||
CPGA |
$ | 48.43 | $ | 47.24 | $ | 51.26 | |||||||||
Average
lifetime net revenue per subscriber |
$ | 79.45 | $ | 79.64 | $ | 74.22 | |||||||||
Net
revenue(2) (in millions) |
$ | 226.6 | $ | 225.4 | $ | 242.7 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 | |||||||||||||
General
Audience Social Networking Websites |
|||||||||||||||
New members
|
8,985,965 | 8,994,757 | 11,221,993 | ||||||||||||
Beginning
subscribers |
57,431 | 68,647 | 85,893 | ||||||||||||
New
subscribers (1) |
114,709 | 116,608 | 174,290 | ||||||||||||
Terminations
|
118,942 | 127,824 | 191,536 | ||||||||||||
Ending
subscribers |
53,198 | 57,431 | 68,647 | ||||||||||||
Conversion of
members to subscribers |
1.3 | % | 1.3 | % | 1.6 | % | |||||||||
Churn
|
17.3 | % | 15.5 | % | 18.6 | % | |||||||||
ARPU
|
$ | 20.72 | $ | 18.05 | $ | 19.21 | |||||||||
CPGA
|
$ | 29.04 | $ | 41.61 | $ | 36.68 | |||||||||
Average
lifetime net revenue per subscriber |
$ | 91.02 | $ | 74.71 | $ | 66.70 | |||||||||
Net
revenue(2) (in millions) |
$ | 13.8 | $ | 13.7 | $ | 17.8 | |||||||||
Live
Interactive Video Websites |
|||||||||||||||
Total minutes
|
19,566,551 | 17,293,702 | 19,101,202 | ||||||||||||
Average
revenue per minute |
$ | 3.90 | $ | 3.49 | $ | 2.87 | |||||||||
Net
revenue(2) (in millions) |
$ | 76.3 | $ | 60.4 | $ | 54.9 |
(1) |
New subscribers are subscribers who have paid subscription fees to one of our websites during the period indicated in the table but who were not subscribers in the immediately prior period. Members who previously were subscribers, but discontinued their subscriptions either by notifying us of their decisions to discontinue or allowing their subscriptions to lapse by failing to pay their subscription fees, are considered new subscribers when they become subscribers again at any point after their previous subscriptions ended. If a current subscriber to one of our websites becomes a subscriber to another one of our websites, such new subscription would also be counted as a new subscriber since such subscriber would be paying the full subscription fee for each subscription. |
(2) |
Net revenue for the year ended December 31, 2008 includes the adding back of $19.2 million due to a non-recurring purchase accounting adjustment that required deferred revenue at the date of acquisition of Various to be recorded at fair value. To provide meaningful comparisons between the years shown, management believes that the historical results of Various are reflective of our future results. |
|
our consolidated results of operations for the year ended December 31, 2010 compared to the year ended December 31, 2009; |
|
our consolidated results of operations for the year ended December 31, 2009 compared to the year ended December 31, 2008. |
|
an analysis of internet segment operating data which are key to an understanding of our operating results and strategies for the year ended December 31, 2010 as compared to the year ended December 31, 2009, and for the year ended December 31, 2009 as compared to the year ended December 31, 2008. |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Net revenue
|
100.0 | % | 100.0 | % | 100.0 | % | |||||||||
Cost of
revenue |
31.9 | 28.0 | 29.2 | ||||||||||||
Gross
profit |
68.1 | 72.0 | 70.8 | ||||||||||||
Operating expenses: |
|||||||||||||||
Product
development |
3.7 | 4.1 | 4.4 | ||||||||||||
Selling and
marketing |
10.8 | 13.1 | 17.9 | ||||||||||||
General and
administrative |
23.1 | 23.5 | 26.7 | ||||||||||||
Amortization
of acquired intangibles and software |
7.1 | 10.8 | 11.0 | ||||||||||||
Depreciation
and other amortization |
1.3 | 1.5 | 1.3 | ||||||||||||
Impairment of
goodwill |
| | 2.9 | ||||||||||||
Impairment of
other intangible assets |
1.4 | 1.2 | 4.5 | ||||||||||||
Total
operating expenses |
47.4 | 54.2 | 68.7 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 | |||||||||||||
Income from
operations |
20.7 | 17.8 | 2.1 | ||||||||||||
Interest
expense, net of interest income |
(25.6 | ) | (28.1 | ) | (24.3 | ) | |||||||||
Other
finance expenses |
(1.3 | ) | | | |||||||||||
Interest and
penalty related to VAT liability not charged to customers |
(0.7 | ) | (1.3 | ) | (2.5 | ) | |||||||||
Net
loss on extinguishment and modification of debt |
(2.1 | ) | (2.2 | ) | | ||||||||||
Foreign
exchange (gain) loss principally related to VAT liability not charged to customers |
0.2 | (1.7 | ) | 4.6 | |||||||||||
Gain on
elimination of liability for United Kingdom VAT not charged to customers |
| 0.5 | | ||||||||||||
Gain on
settlement of liability related to VAT not charged to customers |
| 0.1 | 0.8 | ||||||||||||
Gain
on liability related to warrants |
0.0 | 0.8 | | ||||||||||||
Other
non-operating expense net |
(3.8 | ) | (0.1 | ) | (0.1 | ) | |||||||||
Loss
before income tax benefit |
(12.6 | ) | (14.2 | ) | (19.4 | ) | |||||||||
Income tax
benefit |
0.1 | 1.6 | 5.5 | ||||||||||||
Net loss
|
(12.5 | )% | (12.6 | )% | (13.9 | )% |
Year Ended December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
( $ in millions) |
2009 |
2008 |
|||||||||
Net revenue
|
$ | 327.7 | $ | 331.0 | |||||||
Purchase accounting adjustment |
| 19.2 | |||||||||
Adjusted
revenue |
$ | 327.7 | $ | 350.2 | |||||||
Internet
revenue |
$ | 306.2 | $ | 306.1 | |||||||
Purchase
accounting adjustment |
| 19.2 | |||||||||
Adjusted
net internet revenue |
306.2 | 325.3 | |||||||||
Entertainment revenue |
21.5 | 24.9 | |||||||||
Total
adjusted revenue |
$ | 327.7 | $ | 350.2 |
|
For the last four quarters for any period ended through September 30, 2011, September 30, 2012 and September 30, 2013, our EBITDA on a consolidated basis for the year ended on such date needs to be greater than $85.0 million, $90.0 million and $95.0 million, respectively. Our EBITDA for the four quarters ended December 31, 2010, as defined in the relevant documents, was $105.4 million. |
$276,000 or 2%, are identical to the terms of the New First Lien Notes except as to matters regarding collateral, subordination, enforcement and voting. The Cash Pay Second Lien Notes are secured by a fully subordinated second lien on substantially all of our assets, parri passu with the Non-Cash Pay Second Lien Notes, and will be included with the New First Lien Notes on a dollar for dollar basis for purposes of determining required consents or waivers on all matters except for matters relating to collateral, liens and enforcement of rights and remedies. As to such matters, the Cash-Pay Second Lien Notes will be included with the Non-Cash Pay Second Lien Notes for purposes of determining required consents or waivers.
Payments due by period |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total |
Less Than 1 Year |
1-3 Years |
3-5 Years |
More Than 5 Years |
|||||||||||||||||||
( $ in thousands) |
|||||||||||||||||||||||
Long-term Notes Payable, including current portion: |
|||||||||||||||||||||||
New First
Lien Notes(1) |
$ | 305,000 | $ | 14,115 | $ | 290,885 | $ | | $ | | |||||||||||||
Cash Pay
Second Lien Notes(1) |
13,778 | 638 | 13,140 | | |||||||||||||||||||
Non-Cash
Pay Second Lien Notes |
237,210 | | | 237,210 | | ||||||||||||||||||
Consulting
Agreements(2) |
2,250 | 1,000 | 1,250 | | |
Payments due by period |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total |
Less Than 1 Year |
1-3 Years |
3-5 Years |
More Than 5 Years | |||||||||||||||||||
($in thousands) |
|||||||||||||||||||||||
Capital Lease
Obligations and |
|||||||||||||||||||||||
Miscellaneous
Notes (2) |
$ | 13 | $ | 13 | $ | | $ | | $ | | |||||||||||||
Operating
Leases (3) |
12,413 | 2,076 | 6,320 | 4,017 | |||||||||||||||||||
Other (4) |
6,069 | 5,271 | 798 | | | ||||||||||||||||||
Total
|
$ | 576,733 | $ | 23,113 | $ | 312,393 | $ | 241,227 | $ | |
(1) |
We are required to use the net cash proceeds from an initial public offering of our common stock to repay a portion of the New First Lien Notes and Cash Pay Second Lien Notes pro rata at a redemption price of 110%, plus accrued and unpaid interest. |
(2) |
Represents our contractual commitments for lease payments on computer hardware equipment. |
(3) |
Represents our minimum rental commitments for non-cancellable operating leases of office space. |
(4) |
Other commitments and obligations are comprised of contracts with software licensing, communications, computer hosting, and marketing service providers. These amounts totaled $5.3 million for less than one year and $0.8 million between one and three years. Contracts with other service providers are for 30 day terms or less. |
|
the principals granted the sellers an option to purchase from time to time from the principals, shares of our common stock and Series B Convertible Preferred Stock at the exercise price of $0.20 per share, at any time until the consummation of an initial public offering. The option was subject to a vesting schedule pursuant to which the option vested in part immediately, and in part after each of six, nine and twelve months; |
|
in the event (i) there is a default under the letter agreement; (ii) the outstanding balance of the First Lien Senior Secured Notes held by the sellers is greater than or equal to $50.0 million, and there is an interest or principal payment default under the 2007 Securities Purchase Agreement, which is not cured at least two days prior to the applicable time frame within which cure is permitted under the 2007 Securities Purchase Agreement; (iii) the outstanding balance of the notes is less than $50.0 million, and there is an interest or principal payment default under the 2007 Securities Purchase Agreement that has been called for immediate payment by the Required Holders (as defined in the 2007 Securities Purchase Agreement) pursuant to the terms of the 2007 Securities Purchase Agreement; or (iv) the First Lien Senior Secured Notes are not paid in full within 3.5 years after issuance, the sellers shall have the right to require the principals to purchase their outstanding First Lien Senior Secured Notes, in whole or in part, together with the related warrants to purchase shares of our common stock that are then still outstanding, and the principals will purchase such First Lien Senior Secured Notes and related outstanding warrants, at a purchase price equal to the then outstanding principal amount of the First Lien Senior Secured Notes required to be purchased, plus accrued and unpaid interest on such First Lien Senior Secured Notes through the date of purchase; |
|
the principals granted the sellers a security interest in all our equity securities owned by the principals to secure the performance of the principals obligations referenced in the foregoing item; |
|
in the event that, at any time and from time to time, after the issuance of the First Lien Senior Secured Notes to sellers, any seller receives a bid price equal to or greater than 97% of par plus accrued and unpaid interest to purchase such sellers First Lien Senior Secured Notes and related outstanding warrants, in whole or in part, such seller shall sell its First Lien Senior Secured Notes and the related outstanding warrants pursuant to such bid; and (ii) each seller shall, at all times for so long as it owns any First Lien Senior Secured Notes, maintain with Imperial Capital, LLC and/or such other broker as the principals shall designate an offer price not greater than par plus accrued and unpaid interest to sell its First Lien Senior Secured Notes and related outstanding warrants; and |
|
for so long as any First Lien Senior Secured Notes owned by any seller remain outstanding, the principals are restricted from selling, transferring or otherwise disposing of their First Lien Senior Secured Notes except subject to certain exceptions. |
|
the principals no longer have an obligation to purchase the sellers First Lien Senior Secured Notes or to grant a security interest in any equity securities owned by the principals; |
|
the sellers no longer have an obligation to sell their First Lien Senior Secured Notes at a certain bid price; |
|
the principals granted the sellers an immediately exercisable option to purchase from time to time from the principals, an aggregate of approximately 1,000,000 shares of our common stock at the exercise price of $0.20 per share, at any time until the consummation of an initial public offering; |
|
the principals are no longer restricted from selling their First Lien Senior Secured Notes. Instead, until the consummation of an initial public offering, no principal may sell, transfer or otherwise dispose of any of our securities subject to the purchase option or permit them to become subject to any liens; and |
|
the letter agreement terminates upon the consummation of this offering and the completion of transfer of any equity securities required by the amendment to be transferred. |
Exchange for New First Lien Notes by Marc Bell, Staton Family Investments, Ltd. and the Andrew C. Conru Trust and of Cash Pay Second Lien Notes by Marc Bell and Staton Family Investments, Ltd. |
Exchange for Non-Cash Pay Second Lien Notes by Marc Bell, Staton Family Investments, Ltd., each of the Sellers, PET Capital Partners I LLC and Florescue Family Corporation |
Sale of Non-Cash Pay Second Lien Notes by Marc Bell, Staton Family Investments, Ltd. and PET Capital Partners II LLC |
Entity |
First Lien Notes |
Cash Pay Second Lien Notes |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Marc H.
Bell |
$3.6 million |
$6.6 million |
||||||||||||
Staton
Family Investments Ltd. |
$3.6 million |
$6.6 million |
|
internet penetration, particularly broadband penetration, continues to grow, expanding our potential client base and permitting us to offer more services and a better user experience to our customers; |
|
online social networking continues to expand rapidly, as social networking interactions become increasingly mobile, media-rich and content-driven, and social networking by adult users remains relatively underpenetrated; |
|
the usage of credit cards and other online payment mechanisms in emerging markets continues to increase, facilitating online user transactions; and |
|
worldwide internet advertising spending is expected to increase given the internets interactive nature, reach and ability to target niche audiences. |
Global Broadband Penetration (as a
percentage of population) |
||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2014a |
2013a |
2012a |
2011a |
2010a |
2009b |
|||||||||||||||||||||||
Broadband
subscriptions (m) |
668.7 | 636.3 | 600.8 | 556.9 | 506.6 | 453.1 | ||||||||||||||||||||||
Broadband subscriptions (per 100 people) |
12.4 | 11.9 | 11.4 | 10.6 | 9.8 | 8.8 |
United States Online Social Networking
by Adult Users |
||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2014 |
2013 |
2012 |
2011 |
2010 |
2009 |
|||||||||||||||||||||||
Number of
adult social networking users (in millions) |
139.6 | 133.5 | 126.7 | 117.7 | 105.8 | 89.6 | ||||||||||||||||||||||
Percentage of adult internet users |
69.3 | % | 67.9 | % | 66.3 | % | 63.6 | % | 59.2 | % | 52.4 | % |
Emerging Market Credit Card Circulation
Growth (in millions) |
||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 |
2008 |
2007 |
2006 |
|||||||||||||||||
China
|
185.3 | 142.1 | 90.3 | 49.6 | ||||||||||||||||
Growth
% |
30.3 | % | 57.5 | % | 82.1 | % | 22.6 | % | ||||||||||||
Brazil
|
175.0 | 164.6 | 138.0 | 109.2 | ||||||||||||||||
Growth
% |
6.3 | % | 19.2 | % | 26.4 | % | 17.8 | % | ||||||||||||
Mexico
|
23.9 | 26.5 | 24.2 | 19.6 | ||||||||||||||||
Growth
% |
(9.9 | %) | 9.5 | % | 23.4 | % | 41.9 | % | ||||||||||||
India
|
20.7 | 26.1 | 26.2 | 21.6 | ||||||||||||||||
Growth
% |
(20.4 | %) | (0.6 | %) | 21.5 | % | 24.5 | % | ||||||||||||
United
States |
632.5 | 695.8 | 739.1 | 701.2 | ||||||||||||||||
Growth % |
(9.1 | %) | (5.9 | %) | 5.4 | % | 5.5 | % |
Worldwide Advertising Spending
(Growth in millions of dollars) |
|
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
2010 |
2009 |
||||||||||||||||||||
Print
|
134,208 | 134,672 | 135,663 | 137,383 | 141,081 | |||||||||||||||||||
Growth
% |
(0.3 | %) | (0.7 | %) | (1.3 | %) | (2.6 | %) | ||||||||||||||||
Television
|
213,878 | 202,380 | 191,198 | 180,280 | 165,260 | |||||||||||||||||||
Growth
% |
5.7 | % | 5.8 | % | 6.1 | % | 9.1 | % | ||||||||||||||||
Radio
|
35,054 | 33,815 | 32,580 | 31,979 | 31,855 | |||||||||||||||||||
Growth
% |
3.7 | % | 3.8 | % | 1.9 | % | 0.4 | % | ||||||||||||||||
Cinema
|
2,681 | 2,538 | 2,393 | 2,258 | 2,104 | |||||||||||||||||||
Growth
% |
5.6 | % | 6.1 | % | 6.0 | % | 7.3 | % | ||||||||||||||||
Outdoor
|
34,554 | 32,821 | 30,945 | 29,319 | 28,120 | |||||||||||||||||||
Growth
% |
5.3 | % | 6.1 | % | 5.5 | % | 4.3 | % | ||||||||||||||||
Internet
|
91,516 | 80,672 | 70,518 | 61,884 | 54,209 | |||||||||||||||||||
Growth % |
13.4 | % | 14.4 | % | 14.0 | % | 14.2 | % | ||||||||||||||||
Total
|
511,891 | 486,898 | 463,297 | 443,102 | 422,629 | |||||||||||||||||||
Growth % |
5.1 | % | 5.1 | % | 4.6 | % | 4.8 | % |
Worldwide Online Advertising
Spending |
||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
2010 |
2009 |
||||||||||||||||||||
Print
|
26.2 | % | 27.7 | % | 29.3 | % | 31.0 | % | 33.4 | % | ||||||||||||||
Television
|
41.8 | % | 41.6 | % | 41.3 | % | 40.7 | % | 39.1 | % | ||||||||||||||
Radio
|
6.8 | % | 6.9 | % | 7.0 | % | 7.2 | % | 7.5 | % | ||||||||||||||
Cinema
|
0.5 | % | 0.5 | % | 0.5 | % | 0.5 | % | 0.5 | % | ||||||||||||||
Outdoor
|
6.8 | % | 6.7 | % | 6.7 | % | 6.6 | % | 6.7 | % | ||||||||||||||
Internet |
17.9 | % | 16.6 | % | 15.2 | % | 14.0 | % | 12.8 | % |
|
Social Networking. Approximately 70% of our total net revenues for the year ended December 31, 2010 were generated through our targeted social networking technology platform. Our social networking technology platform provides users who register or purchase subscriptions to one or more of our websites with the ability to communicate and to establish new connections with other users via our personal chat rooms, instant messaging and e-mail applications and to create, post and view content of interest. The content on our social networking sites is generated by our users for our users. Our social networking technology platform is extremely scalable and requires limited incremental cost to add additional users or to create new websites catering to additional unique audiences. As a result, we have been able to rapidly create and seamlessly maintain multiple websites tailored to specific categories or genres and designed to cater to targeted audiences with mutual interests. We believe that our ability to create and operate a diverse network of specific interest websites with unique, user-generated content in a cost-effective manner is a significant competitive differentiator that allows us to implement a subscription-fee based revenue model while many other popular social networking websites rely primarily upon free-access, advertising-based revenue models. |
|
Live Interactive Video. Approximately 22% of our total net revenues for the year ended December 31, 2010 were generated through our live interactive video technology platform. Our live interactive video technology platform is a live video broadcast platform that enables models to broadcast from independent studios throughout the world and interact with our users via instant messaging and video. Users are charged on a per-minute basis to interact with models. We pay a percentage of the revenues we generate to the studios that employ the models. We believe our live interactive video platform provides a unique offering including bi-directional and omni-directional video and interactive features that allow models to communicate with and attract users through a variety of mediums including blogs, newsletters and video. As a result, many studios and their models prefer our platform given our audience size and international reach, and our users prefer our platform as a result of the quality and variety of our models, the reliability of our network and the diversity of interactive features our platform provides. In addition, we believe the reliability of our live interactive video technology platform, which had approximately 99.1% uptime during 2010, is a key factor allowing us to maintain a large base of users. |
|
Visitors. Visitors are users who visit our websites but do not necessarily register. Visitors come to our websites through a number of channels, including by being directed from affiliate websites, keyword searches through standard search engines and by word of mouth. We believe we achieve large numbers of unique visitors because of our focus on continuously enhancing the user experience and expanding the breadth of our services. We had more than 196 million unique worldwide visitors in the month of December 2010, according to comScore. |
|
Registrants. Registrants are visitors who complete a free registration form on one of our websites by giving basic identification information and submitting their e-mail address. For the year ended December 31, 2010, we averaged more than 6.4 million new registrations on our websites each month. Some of our registrants are also members, as described below. |
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Members. Members are registrants who log into one of our websites and make use of our free products and services. Members are able to complete their personal profile and access our searchable database of members but do not have the same full - access rights as subscribers. For the year ended December 31, 2010, we averaged more than 3.9 million new members on our websites each month. |
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Subscribers. Subscribers are members who purchase daily, three-day, weekly, monthly, quarterly, annual or lifetime subscriptions for one or more of our websites. Subscribers have full access to our websites and may access special features. For the year ended December 31, 2010, we had a monthly average of approximately 1.0 million paying subscribers. |
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Paid Users. Paid users are members who purchase products or services on a pay-by-usage basis. For the year ended December 31, 2010, we averaged approximately 1.6 million purchased minutes by paid users each month. |
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Average Revenue per Subscriber . We calculate average revenue per subscriber, or ARPU, by dividing net revenue for the period by the average number of subscribers in the period and by the number of months in the period. As such, our ARPU is a monthly calculation. For the year ended December 31, 2010, our average monthly revenue per subscriber was $20.49. For more information regarding our revenue, see the sections entitled Financial Results and Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Year Ended December 31, 2010 as Compared to Year Ended December 31, 2009. |
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Churn. Churn is calculated by dividing terminations of subscriptions during the period by the total number of subscribers at the beginning of that period. Our average monthly churn rate, which measures the rate of loss of subscribers, decreased from approximately 16.3% per month for the year ended December 31, 2009 to approximately 16.1% per month for the year ended December 31, 2010. |
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Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by adding affiliate commission expense plus ad buy expenses and dividing by new subscribers during the measurement period. Our CPGA increased from $46.89 for the year ended December 31, 2009 to $47.25 for the year ended December 31, 2010. |
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Average Lifetime Net Revenue Per Subscriber. Average Lifetime Net Revenue Per Subscriber is calculated by multiplying the average lifetime (in months) of a subscriber by ARPU for the measurement period and then subtracting the CPGA for the measurement period. Our Average Lifetime Net Revenue Per Subscriber increased from $79.34 for the year ended December 31, 2009 to $80.17 for the year ended December 31, 2010. |
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While we monitor many statistics in the overall management of our business, we believe that Average Lifetime Net Revenue Per Subscriber and the number of subscribers are particularly helpful metrics for gaining a meaningful understanding of our business as they provide an indication of total revenue and profit generated from our base of subscribers inclusive of affiliate commissions and advertising costs required to generate new subscriptions. |
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Proprietary and Scalable Technology Platform. |
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Paid Subscriber-Based Model. |
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Large and Diverse User Base. |
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Large and Difficult to Replicate Affiliate Network and Significant Marketing Spend. |
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Convert Visitors, Registrants and Members into Subscribers or Paid Users. |
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Create Additional Websites and Diversify Offerings. |
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Expand into and Monetize Current Foreign Markets. |
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Pursue Targeted Acquisitions. |
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Generate Online Advertising Revenue. |
English |
German |
Portuguese |
||||||||
Chinese |
Italian |
Spanish |
||||||||
Dutch |
Japanese |
Swedish |
||||||||
French |
Korean |
Tagalog |
|
Blogs Blogs are a simple way to create a regularly updated home page where members can express themselves, learn about others, get more noticed and attract new friends. There are numerous blogs, grouped by subject. |
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Chatrooms Chatrooms are areas where members can discuss a specific topic or join rooms established by region. A private chatroom lets a member host a chat party by invitation only. |
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Contests Contests are a means of engaging our members by offering rewards for member-generated content. Examples include Best Holiday Greeting Card, Silly Photos with Clever Captions and many more. Prizes include upgraded memberships, free points, DVDs, T-shirts and mugs. |
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Cupid Reports Once a member has described an ideal match, the member is automatically notified by e-mail when a person matching that description becomes a member. |
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Friends Network A member can invite specified members into a personal group, keep track of them, share private photos and send personalized bulletins. |
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Get Local Websites list local events that are geographically targeted according to a members location. |
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Groups Groups are the place to find people who share interests and to develop new friendships. Members search for groups by topics, names or keywords and correspond, exchanging ideas. All groups have their own discussion boards and chatrooms, which facilitate communication and relationship building. Popular groups include Single again? Lets get together!, Dancing and Adventures, Romantic Getaways. |
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Instant Messaging Two different types of our instant messaging system are available: a standard service and a faster Flash system, which offers extra options such as live video and sound. |
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Loyalty Program Our point based loyalty program is designed to increase participation in our websites membership activities, such as participating in blogs and online magazines and creating video introductions as members are awarded points for participating in these activities. Points can be redeemed for other membership services such as upgraded memberships or more prominence of member profiles in online searches. |
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Newsletters Our most popular websites periodically send newsletters to members, including photos and brief descriptions of other members, advice on enhancing ones profile to attract more responses from other members and practical tips on dating and relationships. |
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Online Magazine At magazine pages, members can participate in many ways: read articles with expert advice on dating and relationships, enjoy fiction serials, submit their own articles, vote and comment on their reading, post original polls they have created, give advice and exchange opinions on various subjects, and view archives of articles. |
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Photo, Video and Voice Sharing Members can post their photographs and create webcam video introductions and voice introductions of themselves, which generates member-to-member contact. |
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Posting Profiles Members include personal details, such as city of residence and birthday, physical information, such as height and hair color, personal information, such as education, and occupation as well as other information. They describe themselves, specifying hobbies, the type of person they are seeking for a friend or for dating and can present up to 20 photographs. Members are encouraged to make their profiles as unique as possible by including personal details. |
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Search Members can conduct searches for compatible members according to a substantial list of criteria, including gender, geographical proximity, availability of photos and interests. Search criteria can be saved for repeated use. |
Website |
Description |
Registrants Since Inception |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
AdultFriendFinder.com |
Our
most popular adult social networking and dating website. |
223,841,919 | ||||||||
Amigos.com
|
Spanish version of FriendFinder.com, translated into Spanish, Portuguese and English. |
53,441,861 | ||||||||
AsiaFriendFinder.com |
Chinese version of FriendFinder.com, features traditional and simplified Chinese character sets as well as an English
interface. |
44,578,026 |
Website |
Description |
Registrants Since Inception | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Cams.com
|
Adult
content live interactive video website where members pay per minute to chat with models who broadcast on the website via their
webcams. |
43,418,308 | ||||||||
FriendFinder.com
|
Website targeted toward singles looking for love, romance and marriage. Also includes many social networking aspects. |
16,943,386 | ||||||||
ALT.com
|
Alternative lifestyle personals website, catering to users with fetish, role-playing and other alternative sexuality
interests. |
15,313,082 | ||||||||
GetItOn.com
|
Adult social networking and personals website where members from around the world log on to chat and view each other via their
webcams. |
11,547,167 | ||||||||
OutPersonals.com
|
Adult-oriented dating website for gay men. |
7,614,319 | ||||||||
Penthouse.com
|
Premium content-based website with varying levels of access to Penthouse pictorials, articles, videos and live webcams shows with Penthouse
Pets. |
3,731,220 | ||||||||
GradFinder.com
|
Alumni directory where members can contact friends from elementary school through college. |
3,448,476 | ||||||||
IndianFriendFinder.com |
Indian version of FriendFinder.com, where users can narrow their searches by specific criteria, including language, religion, diet, and
caste. |
3,147,442 | ||||||||
BigChurch.com
|
Christian dating website with searchable bible passages and daily bible chapter e-mails. |
2,440,245 | ||||||||
SeniorFriendFinder.com |
Website targeted toward people over 40 years of age. |
2,283,198 | ||||||||
FrenchFriendFinder.com |
French version of FriendFinder.com, translated into French and English. |
2,000,401 | ||||||||
FilipinoFriendFinder.com |
Filipino version of FriendFinder.com, translated into Tagalog and English. |
1,980,696 | ||||||||
GermanFriendFinder.com |
German version of FriendFinder.com, translated into German and English. |
1,458,489 | ||||||||
FastCupid.com
|
Social networking and personals website for dating, romance and friendship. |
1,267,947 | ||||||||
Bondage.com
|
Worlds largest BDSM community |
1,246,649 | ||||||||
GayFriendFinder.com |
Dating website for gay men. |
1,165,758 | ||||||||
ItalianFriendFinder.com |
Italian version of FriendFinder.com, translated into Italian and English. |
1,134,947 | ||||||||
KoreanFriendFinder.com |
Korean version of FriendFinder.com, translated into Korean and English. |
1,031,095 | ||||||||
Millionairemate.com |
Dating website targeted toward like-minded people who understand that intelligence, success and drive are key elements to
attraction. |
872,132 | ||||||||
JewishFriendFinder.com |
Jewish dating website. |
620,897 | ||||||||
AllPersonals.com |
Allows users to join multiple top personal sites at one time |
300,704 | ||||||||
Slim.com
|
Health and wellness website. |
145,686 | ||||||||
icams.com
|
Cams site dedicated to amateur videos |
140,585 |
Website |
Description |
Registrants Since Inception | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
HotBox.com
|
Premium content-based website that allows members to search a database of adult movies by favorite actor or by category of
movie. |
115,572 | ||||||||
stripshow.com
|
Low cost cams site which offers group viewing |
100,608 |
|
Notice. Users are provided meaningful notice about the information collected and used for internet related advertising. Users visiting our websites are provided notice via links to our privacy policies usually located on every one of our web pages and other methods of the types of individual information collected for advertising purposes, the technologies employed to collect such information, and how such information is used, including if applicable that other companies operate on the website and may collect such information. |
|
Choice. Users are provided with a choice on how certain information is used. We provide for an opt-out mechanism for e-mail advertising and members of our social networking websites have access to a control panel that allows them to make choices on the type of data that is stored on our servers or made available to the public or other members using our websites. |
|
Security. We strive to provide reasonable security for consumer data. Our security methods are based on the sensitivity of the data, the nature of the services provided, the types of risks related to such data and the reasonable protections available to us for practical implementation. We require our business service providers, such as credit card processors, to contractually maintain appropriate information security procedures based upon the sensitivity of the data and industry practices. We also ask registrants and members to provide their age and we review all member-generated content prior to its appearing on our websites. |
|
Responsiveness. Users have a readily accessible means to contact us to express concerns and complaints regarding privacy matters and we have a team associated with handling such concerns and complaints. Most of our web pages have a link directly to a web based form for providing complaints to us for processing. |
number of users |
number of registrants completing registration |
|||||
number of paid subscriptions |
number of messages sent |
|||||
number of images uploaded |
number of customer service requests |
|||||
number of blogs created |
number of videos uploaded and viewed |
referring link/domain |
referring affiliate/ad buy/traffic source |
|||||
country |
language |
|||||
gender |
email domain |
number of requests served |
time spent per request |
|||||
central processing unit utilization |
memory utilization |
|||||
disc utilization |
|
a percentage of revenue generated and collected; |
|
per registrant or member; and |
|
per subscriber. |
|
Social Networking Websites Unlike most other social networking websites which are free, we have a paid subscription-based business model, which we believe is a significant competitive advantage. Our adult-themed community websites from which the majority of our revenue and earnings are derived, including AdultFriendFinder.com, do not directly compete with other general interest social networking websites because of the adult nature of the content. Our general audience websites, which contribute substantially less of our revenue and earnings, compete with other companies offering social networking websites such as MySpace, Inc., Facebook, Inc. and Friendster, Inc. Our general audience websites provide a wide range of social networking tools including blogs, chatrooms and messaging similar to our competitors. We also believe that a significant advantage to our websites is the ease with which members meet other members who were not known to them prior to joining our network. |
|
Internet Personals Websites We compete with certain elements of the internet personals business provided by companies including Match.com, L.L.C., Yahoo!Personals, a website owned and operated by Yahoo! Inc., Windows Live Profile, run by Microsoft Corporation, eHarmony, Inc., Lavalife Corp., Plentyoffish Media Inc. and Spark Networks Limited websites, including jdate.com, americansingles.com and relationships.com, as well as companies offering adult-oriented internet personals websites such as Cytek Ltd., the operator of SexSearch.com, and Fling Incorporated. |
|
Adult Audience Websites We compete with many adult-oriented and live interactive video websites, such as RedTube.com, Pornhub.com, YouPorn.com, Playboy.com and LiveJasmin.com. These websites are largely distinguished by the quality of the video and the quantity and caliber of the video content. We continue to seek to be at the forefront of video technology by seeking to offer our users the best available experience. As adult content receives wider mainstream acceptance, we expect our websites to benefit from an increased volume of member-generated content that will enhance our large library of adult content which is frequently updated and refreshed. |
|
Adult Entertainment Providers We compete with other publishers of branded mens lifestyle magazines, such as Maxim and Playboy, and we compete with other producers of adult pictorial and video content, such as Playboy Enterprises Inc., tmc Content Group AG and Total Media Agency. |
Location/Principal Use |
Square Feet |
Lease Expiration Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sunnyvale,
California internet |
50,112 | October 31, 2015 |
||||||||
Los Angeles,
California entertainment |
35,400 | April
30, 2014 |
||||||||
New York, New
York entertainment |
16,431 | May
6, 2018 |
||||||||
Boca Raton,
Florida corporate administrative offices |
8,533 | December 31, 2015 |
||||||||
Las Vegas,
Nevada internet |
6,976 | December
31, 2012 |
Name |
Age |
Position |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Marc H. Bell
|
43 | Chief
Executive Officer, President and Director |
||||||||
Daniel C. Staton
|
58 | Chairman of the Board and Treasurer |
||||||||
Ezra Shashoua
|
56 | Chief
Financial Officer |
||||||||
Anthony Previte
|
45 | Chief
Operating Officer |
||||||||
Robert Brackett
|
33 | President, internet group |
||||||||
Robert B. Bell
|
71 | Director |
||||||||
Barry W.
Florescue |
67 | Director |
||||||||
James
Jim LaChance |
46 | Director |
||||||||
Toby E. Lazarus
|
43 | Director |
||||||||
Jason Smith
|
38 | Director |
|
appointing, replacing and overseeing the work of the registered independent public accounting firm, including compensation and any fees paid to such accounting firm in relation to its services; |
|
appointing an internal audit officer to handle the internal audit function of the Company, and reviewing such appointment as necessary; |
|
reviewing and discussing with management , the internal audit officer and the registered independent accounting firm our quarterly and annual financial statements and discussing with management our earnings releases; |
|
pre-approving all auditing services and permissible non-audit services provided by our registered independent public accounting firm; |
|
engaging in a dialogue with the registered independent public accounting firm regarding relationships that may adversely affect the independence of the registered independent public accounting firm and, based on such review, assessing the independence of the registered independent public accounting firm; |
|
taking appropriate steps to confirm the independence of the independent public accounting firm, including recommending to the board of directors to take appropriate action to oversee the independence of the independent public accounting firm; |
|
providing the audit committee report to be filed with the SEC in our annual proxy statement; |
|
establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including the confidential anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; |
|
reviewing and discussing with our Chief Executive Officer, Chief Financial Officer, management, internal audit officer and registered independent accounting firm, managements annual assessment of the effectiveness of the internal controls; |
|
reviewing and discussing with our Chief Executive Officer, Chief Financial Officer, management, internal audit officer and registered independent accounting firm the adequacy and effectiveness of our internal controls over our financial reporting including any significant deficiencies in the design or operation of our internal controls or material weaknesses and the adequacy and effectiveness of our disclosure controls and procedures; |
|
reviewing and approving related party transactions in accordance with our related party transaction policy; |
|
reporting on its activities in our annual proxy statement; and |
|
reviewing and assessing annually the adequacy of the audit committee charter. |
|
reviewing and determining the compensation of our executive officers; |
|
recommending to the Board the cash compensation of the Companys directors; |
|
granting equity and other incentive awards to executive officers, directors and other eligible individuals under our equity plans and determining the terms and conditions of such awards; |
|
making recommendations to the board of directors with respect to amendments to our equity plans and changes in the number of shares reserved for issuance thereunder; |
|
duplicative of issuing a report on executive compensation in accordance with applicable rules and regulations of the SEC for inclusion in our annual proxy statement; |
|
evaluating the performance of our Chairman of the Board and Chief Executive Officer (and such other executive officers as it deems appropriate) in light of the our current business environment and our strategic objectives; |
|
evaluating the need for, and provisions of, employment agreements or severance arrangements for the executive officers or, if so directed, our board of directors or other officers; |
|
reviewing trends in executive compensation, overseeing the development of new compensation plans, and, when necessary, approving the revision of existing executive compensation plans; and |
|
reviewing and assessing annually the compensation committees performance. |
|
leading the search for and recommending qualified candidates or nominees for the board of directors to be proposed for election by the shareholders and individuals to be considered by the board of directors to fill vacancies; |
|
reviewing periodically the criteria for the selection of new directors and recommending any proposed changes to our board of directors; |
|
developing and recommending to our board of directors a set of corporate governance principles applicable to us; |
|
monitoring and overseeing matters of corporate governance, including the evaluation of board performance and processes and the independence of directors; and |
|
reviewing and assessing annually the performance of the nominating and corporate governance committee. |
|
Marc H. Bell, Chief Executive Officer and President |
|
Daniel C. Staton, Chairman of the Board and Treasurer |
|
Ezra Shashoua, Chief Financial Officer |
|
Anthony Previte, Chief Operating Officer |
|
Robert Brackett, President, internet group |
|
base salary; |
|
bonuses; |
|
long-term equity incentive compensation in the form of stock options under our 2008 Stock Option Plan and, subject to the approval of our compensation committee, restricted stock following the consummation of this offering; and |
|
retirement benefits. |
|
the executive officers total compensation package, both individually and relative to other executive officers; and |
|
the individual performance of the executive officer. |
Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
All Other Compensation ($) |
Total ($) |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Marc H. Bell,
|
2010 | 291,666 | (1) | | 22,582 | (2) | 314,248 | |||||||||||||||
Chief
Executive Officer and President |
2009 | 250,000 | (1) | | 15,634 | (2) | 265,634 | |||||||||||||||
2008 | 250,000 | (1) | | 5,404 | (2) | 255,404 | ||||||||||||||||
Daniel C.
Staton, |
2010 | 291,666 | (3) | | 69,414 | (4) | 361,080 | |||||||||||||||
Chairman of
the Board and Treasurer |
2009 | 250,000 | (3) | | 72,296 | (4) | 322,296 | |||||||||||||||
2008 | 250,000 | (3) | | 16,316 | (4) | 266,316 | ||||||||||||||||
Ezra
Shashoua, |
2010 | 460,000 | 150,000 | | 610,000 | |||||||||||||||||
Chief
Financial Officer |
2009 | 400,000 | | | 400,000 | |||||||||||||||||
2008 | 300,000 | | | 300,000 | ||||||||||||||||||
Anthony
Previte, |
2010 | 574,999 | 150,000 | | 724,999 | |||||||||||||||||
Chief
Operating Officer |
2009 | 500,000 | | | 500,000 |
Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
All Other Compensation ($) |
Total ($) | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2008 | 475,000 | (5) | | 39,149 | (6) | 514,149 | ||||||||||||||||
Robert
Brackett, |
2010 | 365,000 | 111,200 | | 477,200 | |||||||||||||||||
President,
internet group |
2009 | 337,917 | 288,667 | (7) | 626,584 | |||||||||||||||||
2008 | 328,326 | 413,167 | (8) | | 741,493 |
(1) |
This amount reflects the portion of the payment to Bell & Staton, Inc., pursuant to the management agreement, that is attributable to Mr. Bell. |
(2) |
This amount represents certain subsidies we provide Mr. Bell for the cost of healthcare coverage. |
(3) |
This amount reflects the portion of the payment to Bell & Staton, Inc., pursuant to the management agreement, that is attributable to Mr. Staton. |
(4) |
This amount represents reimbursement for car lease expenses and the amount of certain subsidies we provide Mr. Staton for the cost of healthcare coverage. |
(5) |
This amount reflects $50,000 in consulting fees paid under a consulting agreement pursuant to which Mr. Previte served as head of our entertainment group prior to becoming our Chief Operating Officer on February 26, 2008 as well as $425,000 in salary related to his service as our Chief Operating Officer. |
(6) |
This amount represents relocation expenses for Mr. Previte from Los Angeles, California to Sunnyvale, California. |
(7) |
This amount reflects $241,667 which is the second installment of Mr. Bracketts retention bonus and bonus payments with respect to the first, second and fourth fiscal quarters of 2009 as follows: $14,000 for the first quarter, $23,000 for the second quarter, $10,000 for the fourth quarter. |
(8) |
This amount reflects bonus payments with respect to each fiscal quarter of 2008 as follows: $43,750 for the first quarter, $48,125 for the second quarter, $48,125 for the third quarter and $31,500 for the fourth quarter, plus a $241,667 retention bonus. |
Termination |
Severance |
|||||
---|---|---|---|---|---|---|
Without
Cause/For Good Reason |
$ | 480,000 |
Termination |
Severance |
|||||
---|---|---|---|---|---|---|
Without
Cause |
$ | 1,800,000 |
Termination |
Severance |
|||||
---|---|---|---|---|---|---|
Without
Cause |
$ | 1,188,000 |
Option Awards |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number of Securities Underlying Unexercised Options |
|||||||||||||||||||||||
Name |
Exercisable |
Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options |
Option Exercise Price(1) |
Option Expiration Date |
||||||||||||||||||
Marc H.
Bell |
50,000 | | | $ | 07/07/18 | ||||||||||||||||||
Daniel C.
Staton |
50,000 | | | $ | 07/07/18 | ||||||||||||||||||
Ezra
Shashoua |
50,000 | | | $ | 07/07/18 | ||||||||||||||||||
Anthony
Previte |
37,500 | | | $ | 07/07/18 | ||||||||||||||||||
Rob
Bracket |
25,000 | | | $ | 07/07/18 |
(1) |
Assumes an initial public offer ing price of $ per share of common stock, the midpoint of the range set forth on the cover page of this prospectus. |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(a) | (b) | (c) | ||||||||||||
Equity
compensation plans approved by security holders |
| | | |||||||||||
Equity
compensation plans not approved by security holders |
659,750 | (1) | (2) | 684,247 | (1) | |||||||||
Total |
659,750 | (1) | (2) | 684,247 | (1) |
(1) |
The information set forth above pertains to our 2008 Stock Option Plan and our 2009 Restricted Stock Plan as of December 31, 2010. For a discussion of our 2008 Stock Option Plan please refer to the section entitled Executive Compensation Executive Compensation Components Long Term Equity Incentive Compensation or refer to Note L, Stock Options of our consolidated financial statements included elsewhere in this prospectus. The number of shares of restricted stock available for issuance under our 2009 Restricted Stock Plan will be equal to one percent (1%) of the fully-diluted equity of our company on the date that we consummate the offering and, therefore, is not included in column (c) above, because it cannot be determined at this time. |
(2) |
Each option will have an exercise price equal to the price per share of our common stock offered to the public at the time of our initial public offering. |
Name |
Fees Earned or Paid in Cash ($) |
Total ($) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Robert Bell
|
30,000 | 30,000 | ||||||||
Barry
Florescue |
30,000 | 30,000 | ||||||||
James
LaChance |
30,000 | 30,000 | ||||||||
Toby Lazarus
|
30,000 | 30,000 | ||||||||
Jason Smith
|
30,000 | 30,000 |
|
each person or entity who is known to beneficially own 5% or more of common stock and Series A Convertible Preferred Stock; |
|
each named executive officer; |
|
each director; and |
|
all of our named executive officers and directors as a group. |
Shares Beneficially Owned Prior to Offering |
Shares Beneficially Owned After Offering |
||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Common Stock |
Common Stock Issuable Upon Conversion of Series A Convertible Preferred Stock |
% Total Voting Power(1) |
Common Stock |
Common Stock Issuable Upon Conversion of Series A Convertible Preferred Stock |
% Total Voting Power(1) |
||||||||||||||||||||||||||||||||||||||
Name and Title of Beneficial Holder |
Shares |
% |
Shares |
% |
Shares |
% |
Shares |
% |
|||||||||||||||||||||||||||||||||||
Named
executive officers and directors: |
|||||||||||||||||||||||||||||||||||||||||||
Daniel C.
Staton, Chairman of the Board and Treasurer(2) |
6,548,651 | 56.33 | % | 565,536 | 28.27 | % | 58.36 | % | | | | | | ||||||||||||||||||||||||||||||
Marc H. Bell,
Chief Executive Officer, President and Director(3) |
5,090,296 | 49.18 | % | 565,536 | 28.27 | % | 51.81 | % | | | | | | ||||||||||||||||||||||||||||||
Robert
Brackett, President, Internet Group |
| | | | | | | | | | |||||||||||||||||||||||||||||||||
Anthony
Previte, Chief Operating Officer |
| | | | | | | | | |
Shares Beneficially Owned Prior to Offering |
Shares Beneficially Owned After Offering |
||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Common Stock |
Common Stock Issuable Upon Conversion of Series A Convertible Preferred Stock |
% Total Voting Power(1) |
Common Stock |
Common Stock Issuable Upon Conversion of Series A Convertible Preferred Stock |
% Total Voting Power(1) |
||||||||||||||||||||||||||||||||||||||
Name and Title of Beneficial Holder |
Shares |
% |
Shares |
% |
Shares |
% |
Shares |
% |
|||||||||||||||||||||||||||||||||||
Ezra Shashoua,
Chief Financial Officer |
| | | | | | | | | | |||||||||||||||||||||||||||||||||
Robert B.
Bell, Director |
| | | | | | | | | | |||||||||||||||||||||||||||||||||
Barry
Florescue, Director(4) |
669,109 | 9.31 | % | 440,712 | 22.03 | % | 14.55 | % | | | | | | ||||||||||||||||||||||||||||||
Jim LaChance,
Director |
| | | | | | | | | | |||||||||||||||||||||||||||||||||
Toby E.
Lazarus, Director |
| | | | | | | | | | |||||||||||||||||||||||||||||||||
Jason H. Smith,
Director |
| | | | | | | | | | |||||||||||||||||||||||||||||||||
All named
executive officers and directors as a group (11 persons) |
12,308,056 | 76.32 | % | 1,571,784 | 78.57 | % | 78.42 | % | | | | | | ||||||||||||||||||||||||||||||
Five
percent stockholders: |
|||||||||||||||||||||||||||||||||||||||||||
Absolute Income
Fund, L.P.(5) |
1,563,035 | 20.32 | % | 428,668 | 21.43 | % | 24.52 | % | | | | | | ||||||||||||||||||||||||||||||
Andrew B.
Conru Trust Agreement(6) |
3,380,879 | 51.87 | % | | | 51.87 | % | | | | | | |||||||||||||||||||||||||||||||
CMI II LLC(7) |
428,555 | 6.17 | % | | | 6.17 | % | | | | | | |||||||||||||||||||||||||||||||
Del Mar
Master Fund, Ltd.(8) |
563,444 | 7.96 | % | | | 7.96 | % | | | | | | |||||||||||||||||||||||||||||||
Epic Distressed
Debt Opportunity Master Fund Ltd.(9) |
359,970 | 5.23 | % | | | 5.23 | % | | | | | | |||||||||||||||||||||||||||||||
Florescue
Family Corporation(10) |
669,109 | 9.31 | % | 159,922 | 7.94 | % | 11.22 | % | | | | | | ||||||||||||||||||||||||||||||
Mapstead Trust,
created on April 16, 2002(11) |
512,992 | 7.87 | % | | | 7.87 | % | | | | | | |||||||||||||||||||||||||||||||
PET Capital
Partners II LLC(12) |
| | 904,970 | 45.24 | % | 12.19 | % | | | | | | |||||||||||||||||||||||||||||||
RockView
Trading, Ltd.(13) |
552,228 | 7.81 | % | | | 7.81 | % | | | | | | |||||||||||||||||||||||||||||||
Stonehill
Master Fund Ltd.(14) |
806,952 | 11.02 | % | | | 11.02 | % | ||||||||||||||||||||||||||||||||||||
Staton Family
Investments, Ltd.(15) |
4,709,686 | 47.65 | % | 565,536 | 28.27 | % | 50.48 | % | | | | | | ||||||||||||||||||||||||||||||
Staton Family
Perpetual Trust(16) |
1,688,970 | 20.58 | % | | | 20.58 | % | | | | | | |||||||||||||||||||||||||||||||
Strategic Media
I LLC(17) |
1,274,165 | 16.35 | % | | | 16.35 | % | | | | | |
(1) |
Percentage of total voting power represents voting power with respect to all shares of our common stock (including options and warrants currently exercisable or exercisable within 60 days of March 7, 2011, our Series B Convertible Preferred Stock and our Series B common stock) and Series A Convertible Preferred Stock, which vote together as a single class on all matters to be voted upon by our stockholders. Each share of Series A Convertible Preferred Stock is voted on an as-converted basis. As of March 7, 2011, each share of Series A Convertible Preferred Stock may be converted into 1.13 shares of common stock. |
(2) |
Shares of common stock beneficially owned include: 1,343,309 shares of common stock, 1,646,182 shares of common stock issuable upon conversion of Series B Convertible Preferred Stock and 446,030 shares of common stock issuable upon exercise of warrants, owned by Staton Family Investments, Ltd.; 1,274,165 shares of common stock issuable upon the exchange of Series B common stock purchased from IBD over which Staton Family Investments, Ltd. holds sole dispositive and voting power; 97,925 shares of common stock and 52,070 shares of common stock issuable upon the exchange of Series B common stock owned by Staton Media LLC; and 1,688,970 shares of common stock issuable upon conversion of Series B Convertible Preferred Stock, owned by Staton Family Perpetual Trust. Shares of common stock issuable upon conversion of Series A Convertible Preferred Stock beneficially owned include 255,94 6 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock owned by Staton Family Investments, Ltd. and 309,59 0 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock owned by PET II of which Staton Family Investments, Ltd. is the beneficial owner. Mr. Staton is a member of Staton Family Investments, Ltd. and has voting and investment power over its shares. Mr. Staton is a member and the manager of Staton Media LLC and has voting and investment power over its shares. Mr. Staton is a member of PET II and has voting and investment power over his percentage interest in its shares. Mr. Staton disclaims beneficial |
ownership over the shares held by PET II for which he does not have voting and investment power. Mr. Staton is also the trustee of Staton Family Perpetual Trust and has voting and investment power over its shares, which are held in trust for the benefit of his minor children. Shares of common stock beneficially owned do not include shares of common stock issuable upon the conversion of its new Non-Cash Pay Second Lien Notes (notes issued in exchange for the Subordinated Convertible Notes in the New Financing). Shares of common stock beneficially owned do not include 764,298 shares of common stock to be sold to Andrew C. Conru Trust Agreement, effective upon the consummation of this offering, pursuant to Andrew C. Conru Trust Agreements exercise of such right to purchase in December 2009. |
(3) |
Shares of common stock beneficially owned include: 1,257,044 shares of common stock, 52,070 shares of common stock issuable upon conversion of Series B common stock, 3,335,152 shares of common stock issuable upon conversion of Series B Convertible Preferred Stock and 446,030 shares of common stock issuable upon exercise of warrants. Shares of common stock issuable upon conversion of Series A Convertible Preferred Stock beneficially owned include 255,946 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock owned by Marc H. Bell and 309,589 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock owned by PET II. Mr. Bell is a member of PET II and has voting and investment power over his percentage interest in its shares. Mr. Bell disclaims beneficial ownership over the shares held by PET II for which he does not have voting and investment power. Shares of common stock beneficially owned do not include 184,190 shares of common stock held by the Bell Family 2003 Charitable Lead Annuity Trust for which Mr. Bell does not hold voting or dispositive power. Mr. Bell disclaims beneficial ownership over the shares held by the Bell Family 2003 Charitable Lead Annuity Trust. Shares of common stock beneficially owned do not include shares of common stock issuable upon the conversion of its new Non-Cash Pay Second Lien Notes (notes issued in exchange for the Subordinated Convertible Notes in the New Financing). Shares of common stock beneficially owned do not include 2,616,581 shares of common stock to be sold to Andrew C. Conru Trust Agreement, effective upon the consummation of this offering, pursuant to Andrew C. Conru Trust Agreements exercise of such right to purchase in December 2009. |
(4) |
Shares of common stock beneficially owned include 465,325 shares of common stock issuable upon conversion of Series B Convertible Preferred Stock and 203,784 shares of common stock issuable upon exercise of warrants owned by Florescue Family Corporation. Shares of common stock issuable upon conversion of Series A Convertible Preferred Stock beneficially owned include 154,921 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock owned by Florescue Family Corporation. and 285,790 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock owned by PET II of which Florescue Family Corporation is the beneficial owner and Florescue Family Corporation is a member of PET II and has voting and investment power over its percentage interest in PET IIs shares. Mr. Florescue is President of Florescue Family Corporation and has voting and investment power over its shares. Mr. Florescue disclaims beneficial ownership over the shares held by PET II for which he does not have voting and investment power. |
(5) |
Shares of common stock beneficially owned include 387,760 shares of common stock and 1,175,275 shares of common stock issuable upon conversion of Series B Convertible Preferred Stock. Income Fund GP Limited (IFGPL) is the general partner of Absolute Income Fund, L.P. and has shared voting and dispositive power over the shares held by Absolute Income Fund, L.P. Ben Christian Rispoli is the sole director of IFGPL. Greymoor International Limited is the sole shareholder of IFGPL and is a wholly-owned subsidiary of Neville Holdings Group Limited. Olivier Claude Michel Bassou and Olivier Pierre Adam are the directors of Greymoor International Limited and Neville Holdings Group Limited. Mr. Rispoli, Mr. Bassou and Mr. Adam share voting and dispositive power over the shares held by Absolute Income Fund, L.P., but disclaim beneficial ownership of such shares for all other purposes. The address of Absolute Income Fund, L.P. is Suite 4-213-4 Governors Square, PO Box 31298, Grand Cayman, KY1-1206, Cayman Islands. |
(6) |
Shares of common stock beneficially owned include 2,616,581 shares of common stock and 764,298 shares of common stock issuable upon exercise of its right to purchase shares from Marc H. Bell, Daniel C. Staton, and related entities. In December 2009, such stockholders exercised its right to purchase shares from Messrs. Bell and Staton and related entities such exercise to be effective immediately upon consummation of the offering. Shares of common stock beneficially owned do not include shares of common stock issuable upon the conversion of its new Non-Cash Pay Second Lien Notes (notes issued in exchange for the Subordinated Convertible Notes in the New Financing). To the best of our knowledge, Andrew Conru holds investment and voting power over the securities held by the Andrew B. Conru Trust Agreement. The address of the Andrew B. Conru Trust Agreement is 2125 1st Avenue #2904, Seattle, Washington 98121. |
(7) |
Shares of common stock beneficially owned consist of 428,555 shares of common stock issuable upon conversion of Series B common stock. CMI II, LLC is a wholly-owned subsidiary of Castlerigg Master Investments Ltd. Sandell Asset Management Corp. is the investment manager of Castlerigg Investments Ltd. Thomas Sandell is the controlling person of Sandell Asset Management Corp. and shares beneficial ownership of the shares beneficially owned by Castlerigg Master Investments Ltd. Castlerigg International Ltd. is the controlling shareholder of Castlerigg International Holdings Limited and Castlerigg GS Holdings, Ltd., who are together the beneficial owners of Castlerigg Offshore Holdings, Ltd. Castlerigg Offshore Holdings, Ltd. is the controlling shareholder of Castlerigg Master Investments Ltd. Each of Castlerigg International Holdings Limited, Castlerigg GS Holdings, Ltd., Castlerigg Offshore Holdings, Ltd. and Castlerigg International Ltd. shares beneficial ownership over the shares beneficially owned by Castlerigg Master Investments Ltd. Each of Sandell Asset Management Corp., Mr. Sandell, Castlerigg International Holdings Limited, Castlerigg GS Holdings, Ltd., Castlerigg Offshore Holdings, Ltd. and Castlerigg International Ltd. disclaims beneficial ownership of the securities with respect to which indirect beneficial ownership is described. The address of CMI II LLC is c/o Sandell Asset Management Corp., 40 West 57th Street, 26th Floor, New York, New York 10019. |
(8) |
Shares of common stock beneficially owned consist of 563,444 shares of common stock issuable upon exercise of warrants. Del Mar Asset Management, LP is the advisor to Del Mar Master Fund, Ltd. The general partner of Del Mar Asset Management, LP is Del Mar Management, LLC. David Freelove is the president, chief executive officer and a managing member of Del Mar Management, LLC and has sole voting and dispositive power over the securities managed by Del Mar Asset Management, LP. Mr. Freelove disclaims beneficial ownership over the shares held by Del Mar Master Fund, Ltd. The address of Del Mar Master Fund, Ltd. is c/o Del Mar Asset Management, LP, 711 Fifth Avenue, 5th Floor, New York, New York 10022. |
(9) |
Shares of common stock beneficially owned consist of 359,970 shares of common stock issuable upon exercise of warrants. Epic Special Purpose Vehicle and CAI Distressed Debt Opportunity Master Fund, Ltd. are the beneficial owners of the shares held by Epic Distressed Debt Opportunity Master Fund, Ltd. through a participation agreement. Citigroup Alternative Investments LLC is the registered investment advisor to the above-listed funds and is the entity that directs voting and dispositive power over the shares held by Epic Distressed Debt Opportunity Master Fund, Ltd. The address of Epic Distressed Debt Opportunity Master Fund, Ltd. is c/o Citi Alternative Investments, 399 Park Avenue, 7th Floor, New York, New York 10022. |
(10) |
Shares of common stock beneficially owned include: 465,325 shares of common stock issuable upon conversion of Series B Convertible Preferred Stock and 203,784 shares of common stock issuable upon exercise of warrants. Mr. Florescue is President of Florescue Family Corporation and has voting and investment power over its shares. The address of Florescue Family Corporation is 50 E. Sample Rd, Suite 400, Pompano Beach, Florida 30064. |
(11) |
Shares of common stock beneficially owned include 258,226 shares of common stock and 254,766 shares of common stock issuable upon exercise of its right to purchase shares from Marc H. Bell, Daniel C. Staton, or related entities. Shares of common stock beneficially owned do not include shares of common stock issuable upon the conversion of its new Non-Cash Pay Second Lien Notes (notes issued in exchange for the Subordinated Convertible Note s in the New Financing) . In December 2009, such stockholder exercised its right to purchase shares from Marc H. Bell, Daniel C. Staton and related entities, such exercise to be effective immediately prior to the consummation of this offering. Lars Mapstead and Marin Mapstead are trustees of the Mapstead Trust, created on April 16, 2002 and hold voting and investment power over its shares. The address of Mapstead Trust, created on April 16, 2002 is c/o Lars Mapstead, 180 Horizon Way, Aptos, California 95003. |
(12) |
Messrs. Bell, Staton and Florescue each disclaim beneficial ownership of these shares except with respect to their or their affiliated entities percentage ownership of PET II. |
(13) |
Shares of common stock beneficially owned consist of 552,228 shares of common stock issuable upon exercise of warrants. Kevin Schweitzer is the managing member of Zabak Capital, LLC and holds sole voting and dispositive power over the shares held by RockView Trading, Ltd. Zabak Capital, LLC is the managing member of RockView Management LLC, which is the investment manager to RockView Trading, Ltd. Mr. Schweitzer disclaims beneficial ownership over the shares held by RockView Trading, Ltd. The address of RockView Trading, Ltd. is Metro Center, One Station Place, Stamford, Connecticut 06902. |
(14) |
Shares of common stock beneficially owned consist of 806,952 shares of common stock issuable upon exercise of warrants. Wayne Teetsel is the managing member of Stonehill Capital Management LLC and has sole voting and dispositive power over the shares held by Stonehill Master Fund Ltd. Stonehill Capital Management LLC is the advisor of Stonehill Master Fund Ltd. Stonehill Master Fund Ltd. is located at 885 Third Avenue, New York, NY 10022. |
(15) |
Shares of common stock beneficially owned include 1,343,309 shares of common stock and 1,646,182 shares of common stock issuable upon conversion of Series B Convertible Preferred Stock and 446,030 shares of common stock issuable upon exercise of warrants; and 1,274,165 shares of common stock issuable upon the exchange of Series B common stock purchased by IBD over which Staton Family Investments, Ltd. holds sole dispositive and voting power. Shares of Series A Convertible Preferred Stock beneficially owned include 255,946 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock owned by Staton Family Investments Ltd. and 309,590 shares of common stock issuable upon conversion of Series A Convertible Preferred Stock owned by PET II of which Staton Family Investments, Ltd. is the beneficial owner. Mr. Staton is a member of Staton Family Investments, Ltd. and has voting and investment power over its shares. |
(16) |
Shares of common stock beneficially owned consist of 1,688,970 shares of common stock issuable upon conversion of Series B Convertible Preferred Stock. Mr. Staton is the trustee of Staton Family Perpetual Trust and has voting and investment power over its shares, which are held in trust for the benefit of his minor children. |
(17) |
Shares of common stock beneficially owned consist of 1,274,165 shares of common stock issuable upon the exchange of Series B common stock. Staton Family Investments, Ltd. holds sole dispositive and voting power over the shares held by Strategic Media I LLC. Mr. Staton is a member of Staton Family Investments, Ltd. and has voting and investment power over its shares. |
|
the principals granted the sellers an option to purchase from time to time from the principals, shares of our common stock and Series B Convertible Preferred Stock at the exercise price of $0.20 per share, at any time until the consummation of an initial public offering. The option was subject to a vesting schedule pursuant to which the option vested in part immediately, and in part after each of six, nine and twelve months; |
|
in the event (i) there is a default under the letter agreement; (ii) the outstanding balance of the First Lien Senior Secured Notes held by the sellers is greater than or equal to $50.0 million, and there is an interest or principal payment default under the 2007 Securities Purchase Agreement, which is not cured at least two days prior to the applicable time frame within which cure is permitted under the 2007 Securities Purchase Agreement; (iii) the outstanding balance of the notes is less than $50.0 million, and there is an interest or principal payment default under the 2007 Securities Purchase Agreement that has been called for immediate payment by the Required Holders (as defined in the 2007 Securities Purchase Agreement) pursuant to the terms of the 2007 Securities Purchase Agreement; or (iv) the First Lien Senior Secured Notes are not paid in full within 3.5 years after issuance, the sellers shall have the right to require the principals to purchase their outstanding First Lien Senior Secured Notes, in whole or in part, together with the related warrants to purchase shares of our common stock that are then still outstanding, and the principals will purchase such First Lien Senior Secured Notes and related outstanding warrants, at a purchase price equal to the then outstanding principal amount of the First Lien Senior Secured Notes required to be purchased, plus accrued and unpaid interest on such First Lien Senior Secured Notes through the date of purchase; |
|
the principals granted the sellers a security interest in all our equity securities owned by the principals to secure the performance of the principals obligations referenced in the foregoing item; |
|
in the event that, at any time and from time to time, after the issuance of the First Lien Senior Secured Notes to sellers, any seller receives a bid price equal to or greater than 97% of par plus accrued and unpaid interest to purchase such sellers First Lien Senior Secured Notes and related outstanding warrants, in whole or in part, such seller shall sell its First Lien Senior Secured Notes and the related outstanding warrants pursuant to such bid; and (ii) each seller shall, at all times for so long as it owns any First Lien Senior Secured Notes, maintain with Imperial Capital, LLC and/or such other broker as the principals shall designate an offer price not greater than par plus accrued and unpaid interest to sell its First Lien Senior Secured Notes and related outstanding warrants; and |
|
for so long as any First Lien Senior Secured Notes owned by any seller remain outstanding, the principals are restricted from selling, transferring or otherwise disposing of their First Lien Senior Secured Notes except subject to certain exceptions. |
|
the principals no longer have an obligation to purchase the sellers First Lien Senior Secured Notes or to grant a security interest in any equity securities owned by the principals; |
|
the sellers no longer have an obligation to sell their First Lien Senior Secured Notes at a certain bid price; |
|
the principals granted the sellers an immediately exercisable option to purchase from time to time from the principals, an aggregate of approximately 1,000,000 shares of our common stock at the exercise price of $0.20 per share, at any time until the consummation of an initial public offering; |
|
the principals are no longer restricted from selling their First Lien Senior Secured Notes. Instead, until the consummation of an initial public offering, no principal may sell, transfer or otherwise dispose of any of our securities subject to the purchase option or permit them to become subject to any liens; and |
|
the letter agreement terminates upon the consummation of this offering and the completion of transfer of any equity securities required by the amendment to be transferred. |
Entity |
First Lien Notes |
Cash Pay Second Lien Notes |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Marc H. Bell
|
$3.6 million |
$6.6
million |
||||||||
Staton Family
Investments Ltd. |
$3.6 million |
$6.6
million |
|
our consummation of a sale of all or substantially all of our assets or capital stock to any unaffiliated third party or, with certain exceptions, our merger, consolidation or combination with any third party, or |
|
our consummation of an underwritten initial public offering of securities or our reverse merger with or into a publicly traded company. |
|
restricting dividends on the common stock; |
|
diluting the voting power of the common stock; |
|
impairing the liquidation rights of the common stock; or |
|
delaying or preventing a change in control of us without further action by the stockholders. |
|
acquisition of us by means of a tender offer; |
|
acquisition of us by means of a proxy contest or otherwise; or |
|
removal of our incumbent officers and directors. |
|
they were subordinated to the 2006 Notes, the 2005 Notes, the First Lien Senior Secured Notes and the Second Lien Subordinated Secured Notes; |
|
we could not redeem the Subordinated Term Loan Notes while the 2006 Notes, the 2005 Notes, the First Lien Senior Secured Notes and the Second Lien Subordinated Secured Notes remain ed outstanding; |
|
we were restricted from paying cash interest on the Subordinated Term Loan Notes until we had maintained consolidated EBITDA of at least $25.0 million for the prior four consecutive fiscal quarters and attain an interest coverage ratio of at least 3:1; and |
|
upon the occurrence of a change of control, the holders of the Subordinated Term Loan Notes would have the right to require us to concurrently purchase their notes at 100.0% of the face value thereof, plus accrued |
and unpaid interest, if any, provided, however, that such right could only be exercisable if the holders of the 2006 Notes and the 2005 Notes have exercised their repurchase right. |
|
102.0%, if redeemed on or before December 6, 2010; and |
|
100.0%, if redeemed after December 6, 2010. |
|
December 31, 2009, an installment amount of approximately $38.6 million; |
|
December 31, 2010, an installment amount of approximately $51.5 million; and |
|
June 30, 2011, an installment amount of approximately $141.5 million. |
Days After the Date of this Prospectus |
Additional Shares Eligible for Public Sale |
|||||
---|---|---|---|---|---|---|
On the date
of this prospectus |
||||||
At various
times beginning more than 180 days after the date of this prospectus |
|
1.0% of the total number of shares of our common stock outstanding; or |
|
the average weekly reported trading volume of our common stock for the four calendar weeks prior to the sale. |
Underwriters |
Number of Shares |
|||||
---|---|---|---|---|---|---|
Imperial
Capital, LLC |
||||||
Ladenburg
Thalmann & Co. Inc. |
||||||
Total
|
Fee Per Share (1) |
Total Without Exercise of Over- Allotment |
Total With Exercise of Over- Allotment |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Public
offering price |
$ | $ | $ | |||||||||||
Discount
|
$ | $ | $ | |||||||||||
Proceeds
before expenses |
$ | $ | $ |
(1) |
The fees do not include the over-allotment option granted to the underwriters. |
|
the history and prospects of companies in our industry; |
|
prior offerings of those companies; |
|
our history and prospects, including our past and present financial performance and our prospects for future earnings; |
|
our capital structure; |
|
an assessment of our management and their experience; |
|
general conditions of the securities markets at the time of the offering; and |
|
other factors as were deemed relevant. |
|
Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by either exercising their over-allotment option and/or purchasing shares in the open market. |
|
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. |
|
Syndicate covering transactions involve purchases of securities in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of securities to close out the short position, the underwriters will consider, among other things, the price of securities available for purchase in the open market as compared to the price at which they may purchase securities through the over-allotment option. If the underwriters sell more securities than could be covered by the over-allotment option, creating a naked short position, the position can only be closed out by buying securities in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the securities in the open market after pricing that could adversely affect investors who purchase in the offering. |
|
Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the security originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
|
to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; |
|
to any legal entity that has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than EUR43,000,000 and (3) an annual net turnover of more than EUR50,000,000, as shown in its last annual or consolidated accounts; |
|
to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives; or |
|
in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive, |
|
the purchaser is entitled under applicable provincial securities laws to purchase our securities without the benefit of a prospectus qualified under those securities laws; |
|
where required by law, that the purchaser is purchasing as principal and not as agent; |
|
the purchaser has reviewed the text above under Resale Restrictions; and |
|
the purchaser acknowledges and consents to the provision of specified information concerning its purchase of our securities to the regulatory authority that by law is entitled to collect the information. |
FriendFinder
Networks Inc. and Subsidiaries |
||||||
Audited
Financial Statements as of December 31, 2010 and 2009 and the years ended December 31, 2010, 2009 and
2008 |
||||||
Report of
Independent Registered Public Accounting Firm |
F-2 | |||||
Consolidated
Balance Sheets as of December 31, 2010 and 2009 |
F- 3 | |||||
Consolidated
Statements of Operations for the years ended December 31, 2010, 2009 and 2008 |
F- 4 | |||||
Consolidated
Statements of Changes in Redeemable Preferred Stock and Stockholders (Deficiency) for the years ended December 31, 2010, 2009 and 2008
|
F- 5 | |||||
Consolidated
Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008 |
F- 6 | |||||
Notes to
Consolidated Financial Statements |
F- 8 |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
ASSETS |
|||||||||||
Current
assets: |
|||||||||||
Cash
|
$ | 34,585 | $ | 22,600 | |||||||
Restricted
cash |
7,385 | 6,295 | |||||||||
Accounts
receivable, less allowance for doubtful accounts of $2,236 and $2,152, respectively |
9,886 | 12,142 | |||||||||
Inventories
|
1,028 | 1,339 | |||||||||
Prepaid
expenses |
4,534 | 7,980 | |||||||||
Deferred tax
asset |
5,522 | 11,366 | |||||||||
Total current
assets |
62,940 | 61,722 | |||||||||
Film costs,
net |
4,312 | 4,526 | |||||||||
Property and
equipment, net |
6,666 | 13,812 | |||||||||
Goodwill
|
326,540 | 326,540 | |||||||||
Domain names
|
55,890 | 55,491 | |||||||||
Trademarks
|
9,213 | 13,873 | |||||||||
Other
intangible assets, net |
29,134 | 48,183 | |||||||||
Deferred
debt costs, net |
22,336 | 12,318 | |||||||||
Deferred
offering costs |
13,267 | 9,050 | |||||||||
Receivable
from escrow fund |
| 2,679 | |||||||||
Other assets
|
2,519 | 3,687 | |||||||||
$ | 532,817 | $ | 551,881 | ||||||||
LIABILITIES |
|||||||||||
Current
liabilities: |
|||||||||||
Current
installment of long-term debt, net of unamortized discount of $744 and $1,931, respectively |
15,009 | 56,116 | |||||||||
Accounts
payable |
9,481 | 12,612 | |||||||||
Accrued
expenses and other liabilities |
65,420 | 69,727 | |||||||||
Deferred
revenue |
48,302 | 46,046 | |||||||||
Total current
liabilities |
138,212 | 184,501 | |||||||||
Deferred tax
liability |
30,275 | 37,397 | |||||||||
Long-term
debt, net of unamortized discount of $31,935 and $44,118, respectively |
510,551 | 432,028 | |||||||||
Liability
related to warrants |
3,559 | 3,597 | |||||||||
Total
liabilities |
682,597 | 657,523 | |||||||||
Commitments
and contingencies (Notes P and Q) |
|||||||||||
REDEEMABLE PREFERRED STOCK |
|||||||||||
Series A
Convertible Preferred Stock, $0.001 per share authorized 2,500,000 shares; issued and outstanding 1,766,703 shares in 2009 (at liquidation preference) |
| 21,000 | |||||||||
Series B
Convertible Preferred Stock, $0.001 per share authorized 10,000,000 shares; issued and outstanding 8,444,853 shares in 2009 (at liquidation preference) |
| 5,000 | |||||||||
STOCKHOLDERS DEFICIENCY |
|||||||||||
Preferred
stock, $0.001 par value authorized 22,500,000 shares; issued and outstanding 10,211,556 shares in 2010 and redeemable shares in 2009, shown above; Series A Convertible Preferred Stock $0.001 per share authorized 2,500,000 shares; issued and outstanding 1,766,703 shares in 2010 (liquidation preference $21,000) |
2 | | |||||||||
Series B
Convertible Preferred Stock $0.001 per share authorized 10,000,000 shares; issued and outstanding 8,444,853 shares in 2010 (liquidation preference $5,000) |
8 | | |||||||||
Common
stock, $0.001 par value authorized 125,000,000 shares in 2010 and 2009 |
|||||||||||
Common stock
voting authorized 112,500,000 shares, issued and outstanding 6,517,746 in 2010 and 2009. |
6 | 6 | |||||||||
Series B
common stock non-voting authorized 12,500,000 shares; issued and outstanding 1,839,825 shares in 2010 and 2009 |
2 | 2 | |||||||||
Capital in
excess of par value |
80,823 | 55,818 | |||||||||
Accumulated
deficit |
(230,621 | ) | (187,468 | ) | |||||||
Total
stockholders deficiency |
(149,780 | ) | (131,642 | ) | |||||||
$ | 532,817 | $ | 551,881 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Net
revenue |
|||||||||||||||
Service
|
$ | 324,211 | $ | 309,033 | $ | 309,388 | |||||||||
Product
|
21,786 | 18,659 | 21,629 | ||||||||||||
Total
|
345,997 | 327,692 | 331,017 | ||||||||||||
Cost of
revenue |
|||||||||||||||
Service
|
97,959 | 78,627 | 81,815 | ||||||||||||
Product
|
12,531 | 13,070 | 14,699 | ||||||||||||
Total
|
110,490 | 91,697 | 96,514 | ||||||||||||
Gross
profit |
235,507 | 235,995 | 234,503 | ||||||||||||
Operating
expenses: |
|||||||||||||||
Product
development |
12,834 | 13,500 | 14,553 | ||||||||||||
Selling and
marketing |
37,258 | 42,902 | 59,281 | ||||||||||||
General and
administrative |
79,855 | 76,863 | 88,280 | ||||||||||||
Amortization
of acquired intangibles and software |
24,461 | 35,454 | 36,347 | ||||||||||||
Depreciation
and other amortization |
4,704 | 4,881 | 4,502 | ||||||||||||
Impairment of
goodwill |
| | 9,571 | ||||||||||||
Impairment of
other intangible assets |
4,660 | 4,000 | 14,860 | ||||||||||||
Total
operating expenses |
163,772 | 177,600 | 227,394 | ||||||||||||
Income
from operations |
71,735 | 58,395 | 7,109 | ||||||||||||
Interest
expense, net of interest income |
(88,508 | ) | (92,139 | ) | (80,510 | ) | |||||||||
Other
finance expenses |
(4,562 | ) | | | |||||||||||
Interest
and penalties related to VAT liability not charged to customers |
(2,293 | ) | (4,205 | ) | (8,429 | ) | |||||||||
Net loss
on extinguishment and modification of debt |
(7,457 | ) | (7,240 | ) | | ||||||||||
Foreign
exchange gain (loss), principally related to VAT liability not charged to customers |
610 | (5,530 | ) | 15,195 | |||||||||||
Gain on
settlement of VAT liability not charged to customers |
| 232 | 2,690 | ||||||||||||
Gain on
elimination of liability for United Kingdom VAT not charged to customers |
| 1,561 | | ||||||||||||
Gain on
liability related to warrants |
38 | 2,744 | | ||||||||||||
Other
non-operating expenses, net |
(13,202 | ) | (366 | ) | (197 | ) | |||||||||
Loss
before income tax benefit |
(43,639 | ) | (46,548 | ) | (64,142 | ) | |||||||||
Income tax
benefit |
(486 | ) | (5,332 | ) | (18,176 | ) | |||||||||
Net
loss |
$ | (43,153 | ) | $ | (41,216 | ) | $ | (45,966 | ) | ||||||
Net loss
per common share basic and diluted |
$ | (3.14 | ) | $ | (3.00 | ) | $ | (3.35 | ) | ||||||
Weighted
average shares outstanding basic and diluted |
13,735 | 13,735 | 13,735 |
Redeemable Preferred Stock |
Stockholders Deficiency |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Series A Convertible |
Series B Convertible |
Preferred Stock |
Common Stock |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Voting |
Series B Non-Voting |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital in Excess of Par Value |
Accumulated Deficit |
Total |
|||||||||||||||||||||||||||||||||||||||||||
Balance
at January 1, 2008 |
1,766,703 | $ | 21,000 | 8,444,853 | $ | 5,000 | 0 | $ | 0 | 3,561,127 | $ | 4 | 1,839,825 | $ | 2 | $ | 60,576 | $ | (98,701 | ) | $ | (38,119 | ) | ||||||||||||||||||||||||||||||||
Exercise
of warrants |
1,686,700 | 1 | (1 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss
|
(45,966 | ) | (45,966 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at
December 31, 2008 |
1,766,703 | 21,000 | 8,444,853 | 5,000 | 0 | 0 | 5,247,827 | 5 | 1,839,825 | 2 | 60,575 | (144,667 | ) | (84,085 | ) | ||||||||||||||||||||||||||||||||||||||||
Classification of warrants as a liability |
(4,756 | ) | (1,585 | ) | (6,341 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Exercise
of warrants |
1,269,919 | 1 | (1 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss
|
(41,216 | ) | (41,216 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance
at December 31, 2009 |
1,766,703 | 21,000 | 8,444,853 | 5,000 | 0 | 0 | 6,517,746 | 6 | 1,839,825 | 2 | 55,818 | (187,468 | ) | (131,642 | ) | ||||||||||||||||||||||||||||||||||||||||
Transfer
of preferred stock from temporary equity to stockholders deficiency |
(1,766,703 | ) | (21,000 | ) | (8,444,853 | ) | (5,000 | ) | 10,211,556 | 10 | 25,990 | 26,000 | |||||||||||||||||||||||||||||||||||||||||||
Other
|
(985 | ) | (985 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss
|
(43,153 | ) | (43,153 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance
at December 31, 2010 |
0 | $ | 0 | 0 | $ | 0 | 10,211,556 | $ | 10 | 6,517,746 | $ | 6 | 1,839,825 | $ | 2 | $ | 80,823 | $ | (230,621 | ) | $ | (149,780 | ) |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Cash flows
from operating activities: |
|||||||||||||||
Net loss
|
$ | (43,153 | ) | $ | (41,216 | ) | $ | (45,966 | ) | ||||||
Adjustments
to reconcile net loss to net cash provided by operating activities: |
|||||||||||||||
Deferred
income tax benefit |
(1,278 | ) | (5,332 | ) | (18,550 | ) | |||||||||
Impairment of
intangibles |
4,660 | 4,000 | 24,431 | ||||||||||||
Net loss
on extinguishment and modification of debt |
7,457 | 7,240 | | ||||||||||||
Amortization
of acquired intangibles and software |
24,461 | 35,454 | 36,347 | ||||||||||||
Depreciation
and other amortization |
4,702 | 4,881 | 4,502 | ||||||||||||
Amortization
of film costs |
3,763 | 4,001 | 3,899 | ||||||||||||
Non-cash
interest, including amortization of discount |
45,148 | 47,139 | 30,725 | ||||||||||||
Provision for
doubtful accounts |
839 | 249 | 1,505 | ||||||||||||
Gain on
elimination of liability for United Kingdom VAT not charged to customers |
| (1,561 | ) | | |||||||||||
Gain on
settlement of VAT liability not charged to customers |
| (232 | ) | (2,690 | ) | ||||||||||
Gain on
warrant liability |
(38 | ) | (2,744 | ) | | ||||||||||
Other
|
504 | 209 | 32 | ||||||||||||
Changes in
operating assets and liabilities: |
|||||||||||||||
Restricted
cash |
(1,090 | ) | 1,566 | 8,480 | |||||||||||
Accounts
receivable |
1,417 | (3,050 | ) | 5,101 | |||||||||||
Inventories
|
311 | 288 | 88 | ||||||||||||
Prepaid
expenses |
3,446 | (1,652 | ) | (2,820 | ) | ||||||||||
Film costs
|
(3,549 | ) | (3,705 | ) | (4,461 | ) | |||||||||
Deferred
debt costs |
(4,265 | ) | (5,594 | ) | | ||||||||||
Deferred
offering costs |
(4,217 | ) | (6,974 | ) | (2,076 | ) | |||||||||
Other assets
|
1,169 | (1,133 | ) | (864 | ) | ||||||||||
Accounts
payable |
(3,132 | ) | 3,579 | (2,775 | ) | ||||||||||
Accrued
expenses and other liabilities |
3,230 | 1,034 | 440 | ||||||||||||
Deferred
revenue |
2,255 | 3,232 | 15,600 | ||||||||||||
Net cash
provided by operating activities |
42,640 | 39,679 | 50,948 | ||||||||||||
Cash flows
from investing activities: |
|||||||||||||||
Cash
received from escrow in connection with acquisition |
2,679 | 7,321 | | ||||||||||||
Purchases of
property and equipment |
(3,530 | ) | (3,542 | ) | (9,161 | ) | |||||||||
Reduction
of goodwill attributable to reimbursement from prior owners of Various |
| 915 | | ||||||||||||
Other
|
(399 | ) | (490 | ) | (128 | ) | |||||||||
Net cash
(used in) provided by investing activities |
(1,250 | ) | 4,204 | (9,289 | ) | ||||||||||
Cash flows
from financing activities: |
|||||||||||||||
Debt
issuance costs |
(5,834 | ) | | | |||||||||||
Repayment of
long-term debt |
(25,921 | ) | (44,987 | ) | (25,336 | ) | |||||||||
Redemption
of long-term debt |
(86,237 | ) | | | |||||||||||
Issuance
of New First and Second Lien Notes |
89,572 | | | ||||||||||||
Other
|
(985 | ) | | | |||||||||||
Net cash
(used in) financing activities |
(29,405 | ) | (44,987 | ) | (25,336 | ) | |||||||||
Net
increase (decrease) in cash |
11,985 | (1,104 | ) | 16,323 | |||||||||||
Cash at
beginning of period |
22,600 | 23,704 | 7,381 | ||||||||||||
Cash at
end of period |
$ | 34,585 | $ | 22,600 | $ | 23,704 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Supplemental disclosures of cash flow information: |
|||||||||||||||
Interest paid
|
$ | 43,541 | $ | 45,531 | $ | 53,592 | |||||||||
Non-cash
investing and financing activities: |
|||||||||||||||
Reduction of
Subordinated Convertible Notes and goodwill for bonus indemnification from former stockholders of Various |
| $ | 1,202 | $ | 1,074 | ||||||||||
Accrual
and issuance of notes for debt modification costs |
| $ | 6,041 | | |||||||||||
Effect of
elimination of United Kingdom VAT liability: |
|||||||||||||||
Reduction
in accrued expenses and other liabilities |
| $ | 39,520 | | |||||||||||
Increase
in Subordinated Convertible Notes payable |
| $ | 28,989 | | |||||||||||
Reduction
of goodwill |
| $ | 5,381 | | |||||||||||
Increase
in deferred tax liability |
| $ | 3,587 | | |||||||||||
Exchange
of New First Lien Notes for outstanding First ($126,124) and Second ($48,275) Lien Notes |
$ | 174,399 | | | |||||||||||
Issuance
of New First Lien Notes for commitment fees |
$ | 13,146 | | | |||||||||||
Exchange
of New First Lien Notes and Cash Pay Second Lien Notes for Senior Secured Notes |
$ | 28,053 | | | |||||||||||
Exchange
of Non-Cash Pay Second Lien Notes for outstanding Subordinated Convertible Notes ($161,560) plus $3,514 of accrued interest |
$ | 165,074 | | | |||||||||||
Exchange
of Non-Cash Pay Second Lien Notes for $42,811 of Subordinated Term Notes plus $5,949 of accrued interest |
$ | 45,726 | | |
1. |
Principles of consolidation: |
2. |
Stock split s : |
3. |
Use of estimates: |
4. |
Cash and cash equivalents: |
5. |
Restricted cash: |
6. |
Accounts receivable: |
7. |
Inventories: |
8. |
Property and equipment: |
9. |
Software costs: |
10. |
Film costs: |
11. |
Goodwill, trademarks and other intangibles: |
11. |
Goodwill, trademarks and other intangibles: (Continued) |
12. |
Deferred debt costs: |
13. |
Deferred offering costs: |
14. |
Revenue recognition: |
a) |
Internet: |
14. |
Revenue recognition: (Continued) |
b) |
Entertainment: |
15. |
Cost of revenue: |
16. |
Product development: |
17. |
Advertising: |
18. |
Loyalty program: |
19. |
Stock-based compensation: |
20. |
Income taxes: |
21. |
Value added taxes: |
22. |
Foreign c urrency t ransactions: |
23. |
Concentration of credit risk: |
24. |
Fair value of financial instruments: |
24. |
Fair value of financial instruments: (Continued) |
25. |
Per share data: |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Common stock
|
6,518 | 6,518 | 5,248 | ||||||||||||
Series B
common stock |
1,840 | 1,840 | 1,840 | ||||||||||||
Common stock
purchase warrants |
5,377 | 5,377 | 6,647 | ||||||||||||
13,735 | 13,735 | 13,735 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Series A
Convertible Preferred Stock |
2,000 | 2,000 | 2,000 | ||||||||||||
Series B
Convertible Preferred Stock |
8,445 | 8,445 | 8,445 | ||||||||||||
Warrants
|
502 | 502 | 502 | ||||||||||||
Total
common shares issuable |
10,947 | 10,947 | 10,947 |
27. |
Reclassifications |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
Paper and
printing costs |
$ | 693 | $ | 804 | |||||||
Editorials
and pictorials |
335 | 535 | |||||||||
$ | 1,028 | $ | 1,339 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Opening
balance |
$ | 4,526 | $ | 4,822 | $ | 4,260 | |||||||||
Content
produced |
3,549 | 3,705 | 4,461 | ||||||||||||
Amortization
|
(3,763 | ) | (4,001 | ) | (3,899 | ) | |||||||||
Ending
balance |
$ | 4,312 | $ | 4,526 | $ | 4,822 |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
Property and
equipment: |
|||||||||||
Leasehold
improvements |
$ | 1,004 | $ | 757 | |||||||
Computer
hardware and software |
39,318 | 36,035 | |||||||||
40,322 | 36,792 | ||||||||||
Less
accumulated depreciation and amortization |
33,656 | 22,980 | |||||||||
$ | 6,666 | $ | 13,812 |
Internet |
Entertainment |
Total |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance as of
December 31, 2008 |
$ | 334,037 | $ | | $ | 334,037 | ||||||||
Reduction
for elimination of VAT liability (see Note J(f)) |
(5,380 | ) | (5,380 | ) | ||||||||||
Reduction
for reimbursement from sellers of Various |
(915 | ) | | (915 | ) | |||||||||
Reduction
for indemnification from sellers of Various (see Note J(f)) |
(1,202 | ) | | (1,202 | ) | |||||||||
Balance as
of December 31, 2009 and 2010 |
$ | 326,540 | $ | | $ | 326,540 |
December 31, |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
|||||||||||||||||||||
Gross Amount |
Accumulated Amortization |
Gross Amount |
Accumulated Amortization |
Estimated Useful Lives (Years) |
||||||||||||||||||
Amortizable
intangible assets: |
||||||||||||||||||||||
Non-compete
agreements |
$ | 10,600 | $ | 10,600 | $ | 10,600 | $ | 7,305 | 3 | |||||||||||||
Customer
lists |
23,626 | 23,280 | 28,666 | 27,988 | 24 | |||||||||||||||||
Service
contracts |
72,800 | 44,782 | 72,800 | 30,185 | 35 | |||||||||||||||||
Studio
contracts |
3,300 | 2,530 | 3,300 | 1,705 | 4 | |||||||||||||||||
Other
|
2,840 | 2,840 | 2,840 | 2,840 | 3 | |||||||||||||||||
$ | 113,166 | $ | 84,032 | $ | 118,206 | $ | 70,023 |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
Accrued
liability related to VAT |
$ | 42,235 | $ | 45,719 | |||||||
Chargeback
reserve |
1,137 | 860 | |||||||||
Compensation
and benefits |
1,273 | 1,193 |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 | ||||||||||
Accrued
marketing |
1,148 | 1,328 | |||||||||
Legal and
related expenses |
510 | 1,055 | |||||||||
Accrued
interest |
| 7,538 | |||||||||
Accrued
commissions to third party websites |
3,147 | 2,774 | |||||||||
Accrued
waiver fees |
| 2,613 | |||||||||
Accrued
loss related to claim in arbitration (see Note Q (a)) |
10,000 | | |||||||||
Other
|
5,970 | 6,647 | |||||||||
$ | 65,420 | $ | 69,727 |
December 31, |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||||||||||
Principal |
Unamortized Discount |
Principal |
Unamortized Discount |
||||||||||||||||
Debt
issued by FriendFinder and INI on October 27, 2010 (a): |
|||||||||||||||||||
First Lien
Notes due 20112013, including principal of $107,460 ($103,594 net of discount) issued to Companys stockholders (b)(e)
|
$ | 305,000 | $ | 10,974 | | | |||||||||||||
Cash Pay
Second Lien Notes due 2013 issued to entities controlled by stockholders who are officers and directors (c)(e) |
13,778 | 262 | | | |||||||||||||||
Non-Cash
Pay Second Lien Notes, due 2014, including principal of $233,191 ($212,560 net of discount) issued to Company stockholders, including $45,310 ($41,302
net of discount) to entities controlled by certain officers and directors(d)(e) |
237,211 | 20,986 | | | |||||||||||||||
Debt
issued by INI in connection with the acquisition of Various: |
|||||||||||||||||||
First Lien
Senior Secured Notes due 20092011, including principal of $75,722 ($70,715 net of discount) issued to selling stockholders (f)
|
| | $ | 189,014 | $ | 12,497 | |||||||||||||
Second
Lien Subordinated Secured Notes due 2011 issued to selling stockholders (f) |
| | 80,000 | 3,300 | |||||||||||||||
Subordinated Convertible Notes due 2011 issued to selling stockholders (g) |
| | 169,807 | 28,265 | |||||||||||||||
Other (h)
|
2,250 | 457 | 6,250 | 1,142 | |||||||||||||||
Senior
Secured Notes of FriendFinder due 2010 (i) |
| | 46,311 | 845 | |||||||||||||||
Subordinated Term Notes of FriendFinder due 2011 (j) |
| | 42,811 | | |||||||||||||||
$ | 558,239 | $ | 32,679 | $ | 534,193 | $ | 46,049 | ||||||||||||
Less
unamortized discount |
(32,679 | ) | (46,049 | ) | |||||||||||||||
Less current
installment of long-term debt, net of unamortized discount of $744 and $1,931, respectively |
(15,009 | ) | (56,116 | ) | |||||||||||||||
$ | 510,551 | $ | 432,028 |
(a) |
On October 27, 2010, $305,000,000 principal amount of 14% Senior Secured Notes due 2013 were co-issued by FriendFinder and its wholly-owned subsidiary Interactive Network, Inc (INI), the parent of Various (the New First Lien Notes) , of which (a) $200,185,000 was exchanged for $130,485,000 outstanding principal amount of First Lien Notes, $49,361,000 outstanding principal amount of Second Lien Notes and $14,551,000 outstanding principal amount of Senior Secured Notes, (b) $91,400,000 was issued for cash proceeds of $89,572,000 before payment of related fees and expenses of $5,834,000 and (c) $13,415,000 was issued to pay commitment fees to the holders of First Lien Notes and Second Lien Notes. Cash of $86,237,000 was used to redeem $36,608,000 outstanding principal amount of First Lien Notes at 102% of principal, $30,639,000 outstanding principal amount of Second Lien Notes (representing the remaining outstanding principal amounts of First Lien Notes and Second Lien Notes) and $18,258,000 outstanding principal amount |
of Senior Secured Notes. Cash was also used to pay $4,132,000 of accrued interest on the exchanged and redeemed notes, an $825,000 redemption premium on certain exchanged First Lien Notes and $435,000 in commitment fees to certain noteholders. |
(b) |
The New First Lien Notes, of which approximately $107,460,000 principal amount were issued to the Companys stockholders, including $7,460,000 to entities controlled by certain officers and directors, were issued with an original issue discount of $6,100,000, or 2.0%. The notes mature on September 30, 2013 and accrue interest at a rate per annum equal to 14.0%. Interest on the notes is payable quarterly on March 31, June 30, September 30 and December 31 of each year. Principal on the New First Lien Notes is payable quarterly to the extent of 75% of Excess Cash Flow, as defined, at 102% of principal, subject to pro-rata sharing with the Cash Pay Second Lien Notes. The New First Lien Notes are guaranteed by domestic subsidiaries of |
FriendFinder and INI and are collateralized by a first-priority lien on all of the Companys assets as well as a pledge of stock of subsidiaries. The New First Lien Notes are redeemable prior to maturity at the option of the Company, in whole but not in part, at 110% of principal, plus accrued and unpaid interest. In the event of an IPO, the net proceeds must be used to redeem the New First Lien Notes and Cash Pay Second Lien Notes pro-rata at 110% of principal plus accrued and unpaid interest. In addition, noteholders have the option of requiring the Company to repay the New First Lien Notes and Cash Pay Second Lien Notes in full upon a Change of Control, as defined, at 110% of principal. The Company shall also repay the New First Lien Notes and, in certain circumstances, the Cash Pay Second Lien Notes, with proceeds received from any debt or equity financing (including a secondary offering) and asset sales of more than $25 million at 110% of principal, and with proceeds from other asset sales, insurance claims, condemnation and other extraordinary cash receipts at principal, subject to certain exceptions. |
(c) |
The Cash Pay Second Lien Notes, all of which were issued to entities controlled by stockholders who are also officers and directors, were issued with an original issue discount of $276,000, or 2%, mature on September 30, 2013 and have identical terms to those of the New First Lien Notes, except as to matters regarding collateral, subordination, enforcement and voting. The Cash Pay Second Lien Notes are collateralized by a fully subordinated second lien on substantially all of the assets of the Company, pari passu with the Non-Cash Pay Second Lien Notes, and will vote with the New First Lien Notes on a dollar for dollar basis on all matters except for matters relating to collateral, liens and enforcement of rights and remedies. As to such matters, the Cash Pay Second Lien Notes will vote with the Non-Cash Pay Second Lien Notes. |
(d) |
The Non-Cash Pay Second Lien Notes, of which approximately $228,519,000 principal amount were issued to the Companys stockholders, including $44,402,000 to entities controlled by certain officers and directors, mature on April 30, 2014 and bear interest at 11.5%, payable semi-annually on June 30 and December 31, which may be paid in additional notes at the Companys option. While the New First Lien Notes are in place, interest must be paid with additional notes. During 2010, interest amounting to $4,752,000 was paid through the issuance of additional Non-Cash Pay Second Lien Notes. The Non-Cash Pay Second Lien Notes are guaranteed by the domestic subsidiaries of FriendFinder and INI and collateralized by a second priority lien on all of the Companys assets and a pledge of the stock of subsidiaries; however, such security interest is subordinate to the prior payment of the New First Lien Notes. The Non-Cash Pay Second Lien Notes are redeemable, at the option of the Company, in whole but not in part, at 100% of principal plus accrued and unpaid interest. Upon the payment in full of the New First Lien Notes, principal on the Non-Cash Pay Second Lien Notes is payable quarterly to the extent of 75% of Excess Cash Flow, as defined, at 102% of principal subject to pro-rata sharing with the Cash Pay Second Lien Notes. Upon an IPO, if the New First Lien Notes are paid in full, the net proceeds must be used to redeem the Non-Cash Pay Second Lien Notes and Cash Pay Second Lien Notes on a pro-rata basis at 110% of principal plus accrued and unpaid interest. In addition, noteholders have the option of requiring the Company to repay the Non-Cash Pay Second Lien Notes in full upon a Change of Control, as defined, at 110% of principal plus accrued and unpaid interest. If the New First Lien Notes are paid in full, the Company shall repay the Non-Cash Pay Second Lien Notes and Cash Pay Second Lien Notes on a pro-rata basis with proceeds received from any debt or equity financing (including a secondary offering), and asset sales of more than $25 million at 110% of principal plus accrued and unpaid interest and with proceeds of other asset sales, insurance claims, condemnation and other extraordinary cash receipts at principal, subject to certain exceptions. The Non-Cash Pay Second Lien Notes will be convertible into shares of the Companys common stock upon or after an IPO. The conversion price of the notes will be at the per share offering price for the Companys common stock upon consummation of the IPO provided that such conversion option shall be limited to approximately 21.1% of the Companys fully diluted equity. |
(e) |
The New First Lien Notes, the Cash Pay Second Lien Notes and Non-Cash Pay Second Lien Notes (1) require the Company to maintain minimum specified levels of EBITDA and liquidity and financial ratios, including debt and coverage ratios, all as defined, (2) provides for certain limitations including limits on indebtedness, lease obligations, VAT payments and investments and (3) prohibits dividends and other payments with respect to the Companys equity securities. |
(f) |
The First Lien Senior Secured Notes (First Lien Notes), of which approximately $110,000,000 principal amount were issued to the Companys stockholders including $10,000,000 to entities controlled by certain officers and directors, were issued with an original issue discount of $7,720,000, or approximately 3.0%, were to mature on June 30, 2011, and accrue d interest at a rate per annum equal to the sum of the greater of three month LIBOR (0.25% at December 31, 2009) or 4.5%, plus 8.0%. Interest on the notes was payable quarterly on March 31, June 30, September 30 and December 31 of each year. Principal on the First Lien Notes was payable quarterly to the extent of 90% of Excess Cash Flow, as defined, subject to minimum amounts. |
(g) |
The Subordinated Convertible Notes (Convertible Notes) were to mature on December 6, 2011 and bore interest at 6% which was paid in additional Convertible Notes at INIs option. The notes had been recorded at estimated fair value at the date of issuance, resulting in an effective interest rate of approximately 13% and discount of $24,977,000, which was being amortized as interest expense (by use of the interest method) over the term of the notes. During 2008, interest amounting to $6,892,000 was paid through issuance of additional Convertible Notes. The notes were the unsecured obligation of INI and were guaranteed by FriendFinder. The |
notes were subordinate in right of payment to the First Lien Notes and Second Lien Notes. The guarantee was subordinate to the prior payment of FriendFinders Senior Notes and the guarantee of the First Lien Notes and Second Lien Notes and pari passu in right of payment with FriendFinders Subordinated Term Notes. The notes which had an original principal amount of $170,000,000 were subject to reduction to the extent certain post-closing bonuses of up to $3.5 million were paid by Various over a three-year period and for a post-closing working capital adjustment. During 2009 and 2008, respectively, as a result of payment of $1.3 and $1.4 million in bonuses which were charged to expense, the principal amount of the notes was reduced and the carrying value of the notes was reduced by $1.1 and $1.1 million , respectively, with a corresponding reduction in goodwill. The post-closing working capital adjustment determined by the Company resulted in an indemnity claim which has been reflected as a reduction of $64,279,357 in the principal amount of the notes and a $10,000,000 receivable from an escrow fund set up in connection with the acquisition. |
(h) |
In connection with the acquisition of Various, INI issued a non-interest bearing obligation with a principal balance of $5.0 million to a former owner. In each of 2009 and 2008, $1.0 million of the notes were paid and 3.0 million was paid in 2010. The obligation was recorded at a present value of $3.6 million using a discount rate of 15%. |
(i) |
The Senior Secured Notes were scheduled to mature on July 31, 2010 and bore interest at 15% payable quarterly in cash. The notes were collateralized by a first-priority security interest in all of the Companys assets, other than those of INI and its subsidiaries for which a third-priority secured interest had been granted. |
(j) |
The Subordinated Term Notes, which were held by entities controlled by certain principal stockholders of the Company who are also officers and directors, were to mature on October 1, 2011 and bore interest at 13% |
payable annually principally through the issuance of additional subordinated notes. The Subordinated Term Notes were collateralized by a second priority security interest in all assets of the Company other than those held by INI and its subsidiaries and were subordinate to the notes issued by INI as well as the Senior Secured Notes issued by FriendFinder. |
Year |
Amount |
|||||
---|---|---|---|---|---|---|
2011
|
$ | 15,753 | ||||
2012
|
1,000 | |||||
2013
|
304,275 | |||||
2014
|
237,211 | |||||
$ | 558,239 |
Expiration Date(1) |
Exercise Price |
Number of Shares(2) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
August 2015
|
$ | 6.20 | (4) | 476,57 3 | (4) | |||||
August 2015
|
$ | 10.25 | (4) | 25,090 | ||||||
August 2015
|
$ | 0.0002 | 243,287 | |||||||
August 2016
|
$ | 0.0002 | 441,47 4 | |||||||
December 2017
|
$ | 0.0002 | 4,692,996 | (3) | ||||||
5,879,4 20 |
(1) |
Except for warrants to purchase 1,373,859 shares of common stock at $0.0002 per share which were amended on October 8, 2009, warrants terminate if not exercised concurrently with the consummation of an IPO, if earlier than their stated expiration date. |
(2) |
The number of shares of common stock for which each warrant is exercisable will be decreased immediately prior to the closing of an IPO in the event that the Company has issued prior to such IPO fewer than 1,343,997 |
shares or options pursuant to an equity incentive or benefit plan except for the warrants exercisable at $10.25. The adjustment provision for such warrants is triggered if the Company has issued fewer than 588,890 shares or options pursuant to an equity incentive or benefit plan prior to the closing of an IPO. |
(3) |
In order to maintain the warrant holders percentage of fully diluted equity, the number of shares of common stock for which each warrant is exercisable shall be increased immediately prior to the closing of an IPO based on the number of shares of common stock into which the Non-Cash Pay Second Lien Notes which were exchanged for Convertible Notes issued to selling stockholders in the acquisition of Various , will be convertible based on the IPO price. |
(4) |
Adjusted for subsequent dilutive issuances of equity securities. |
2010 |
2009 |
2008 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current: |
||||||||||||||
Federal
|
$ | 162 | $ | | $ | 374 | ||||||||
State
|
630 | | | |||||||||||
792 | | 374 | ||||||||||||
Deferred: |
||||||||||||||
Federal
|
(1,118 | ) | (4,688 | ) | (13,615 | ) | ||||||||
State
|
(160 | ) | (644 | ) | (4,935 | ) | ||||||||
(1,278 | ) | (5,332 | ) | (18,550 | ) | |||||||||
Total tax
benefit |
$ | (486 | ) | $ | (5,332 | ) | $ | (18,176 | ) |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Tax benefit
at federal statutory rate (35%) |
$ | 15,274 | $ | 16,292 | $ | 22,450 | |||||||||
State taxes,
net of federal effect |
1,552 | 435 | 3,208 | ||||||||||||
Impairment of
goodwill |
| | (3,350 | ) | |||||||||||
Net operating
loss for which no tax benefit is recognized |
(16,679 | ) | (4,881 | ) | (4,842 | ) | |||||||||
Non-deductible penalties including related foreign exchange gain |
| 97 | 1,119 | ||||||||||||
Write off
of deferred tax asset related to United Kingdom VAT liability which was eliminated (see Note I) |
| (7,785 | ) | | |||||||||||
Gain on
warrant liability |
14 | 960 | | ||||||||||||
Other
|
326 | 214 | (409 | ) | |||||||||||
Tax benefit
|
$ | 486 | $ | 5,332 | $ | 18,176 |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
Deferred tax
assets: |
|||||||||||
Net operating
loss carryforwards |
$ | 27,424 | $ | 30,430 | |||||||
Allowance for
doubtful accounts |
894 | 861 | |||||||||
Accrued
liability related to VAT |
12,264 | 13,733 | |||||||||
Accrued
loss related to claim in arbitration |
5,200 | | |||||||||
Other
|
590 | 427 | |||||||||
Gross
deferred tax assets |
46,372 | 45,451 | |||||||||
Less
valuation allowance |
(28,627 | ) | (11,948 | ) | |||||||
Net deferred
tax assets |
17,745 | 33,503 | |||||||||
Deferred tax
liabilities: |
|||||||||||
Trademarks
and domain names not subject to amortization |
(23,794 | ) | (25,644 | ) | |||||||
Intangible
assets subject to amortization |
(11,654 | ) | (19,273 | ) | |||||||
Long-term
debt |
(5,875 | ) | (10,634 | ) | |||||||
Property
and equipment, including software |
(217 | ) | (3,222 | ) | |||||||
Other
|
(958 | ) | (761 | ) | |||||||
(42,498 | ) | (59,534 | ) | ||||||||
Net deferred
tax liabilities |
$ | (24,753 | ) | $ | (26,031 | ) |
December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
||||||||||
Deferred tax
asset current |
$ | 5,522 | $ | 11,366 | |||||||
Deferred tax
liability non-current |
(30,275 | ) | (37,397 | ) | |||||||
Net deferred
tax liability |
$ | (24,753 | ) | $ | (26,031 | ) |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Assets: |
|||||||||||||||
Internet
|
$ | 506,297 | $ | 522,179 | $ | 568,999 | |||||||||
Entertainment
|
22,399 | 23,520 | 26,724 | ||||||||||||
Unallocated
corporate |
4,121 | 6,182 | 4,190 | ||||||||||||
Total
|
$ | 532,817 | $ | 551,881 | $ | 599,913 | |||||||||
Net
revenue from external customers: |
|||||||||||||||
Internet
|
$ | 321,605 | $ | 306,213 | $ | 306,129 | |||||||||
Entertainment
|
24,392 | 21,479 | 24,888 | ||||||||||||
Total
|
$ | 345,997 | $ | 327,692 | $ | 331,017 | |||||||||
Income from
operations: |
|||||||||||||||
Internet
|
$ | 76,142 | $ | 64,962 | $ | 34,345 | |||||||||
Entertainment
|
1,140 | (439 | ) | (17,748 | ) | ||||||||||
Total segment
income from operations |
77,282 | 64,523 | 16,597 | ||||||||||||
Unallocated
corporate |
(5,547 | ) | (6,128 | ) | (9,488 | ) | |||||||||
Total
|
$ | 71,735 | $ | 58,395 | $ | 7,109 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 | |||||||||||||
Amortization
of acquired intangibles and software (included in income from operations): |
|||||||||||||||
Internet
|
$ | 24,461 | $ | 35,454 | $ | 36,347 | |||||||||
Entertainment
|
| | | ||||||||||||
Unallocated
corporate |
| | | ||||||||||||
Total
|
$ | 24,461 | $ | 35,454 | $ | 36,347 | |||||||||
Depreciation
and other amortization (included in income from operations): |
|||||||||||||||
Internet
|
$ | 4,527 | $ | 4,587 | $ | 4,052 | |||||||||
Entertainment
|
177 | 294 | 450 | ||||||||||||
Unallocated
corporate |
| | | ||||||||||||
Total
|
$ | 4,704 | $ | 4,881 | $ | 4,502 | |||||||||
Impairment
of goodwill and other assets (included in income from operations): |
|||||||||||||||
Internet
|
$ | | $ | | $ | 6,829 | |||||||||
Entertainment
|
4,660 | 4,000 | 17,602 | ||||||||||||
Total
|
$ | 4,660 | $ | 4,000 | $ | 24,431 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Internet: |
|||||||||||||||
Subscription
based service |
$ | 245,174 | $ | 245,015 | $ | 246,978 | |||||||||
Pay by usage
service |
76,321 | 60,434 | 56,729 | ||||||||||||
Advertising
|
110 | 764 | 2,422 | ||||||||||||
321,605 | 306,213 | 306,129 | |||||||||||||
Entertainment: |
|||||||||||||||
Magazine
|
10,894 | 12,218 | 15,581 | ||||||||||||
Video
entertainment |
10,892 | 6,441 | 6,048 | ||||||||||||
Licensing
|
2,606 | 2,820 | 3,259 | ||||||||||||
24,392 | 21,479 | 24,888 | |||||||||||||
Total
revenues |
$ | 345,997 | $ | 327,692 | $ | 331,017 |
Year Ended December 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 |
2009 |
2008 |
|||||||||||||
Net
revenue: |
|||||||||||||||
United
States |
$ | 178,873 | $ | 177,753 | $ | 192,102 | |||||||||
Europe
|
103,224 | 97,317 | 86,797 | ||||||||||||
Canada
|
17,200 | 15,364 | 16,381 | ||||||||||||
Other
|
46,700 | 37,258 | 35,737 | ||||||||||||
Total
|
$ | 345,997 | $ | 327,692 | $ | 331,017 |
Year |
Operating Leases |
|||||
---|---|---|---|---|---|---|
2011
|
$ | 2,076 | ||||
2012
|
2,125 | |||||
2013
|
2,125 | |||||
2014
|
2,070 | |||||
2015
|
1,800 | |||||
Thereafter
|
2,217 | |||||
Total
|
$ | 12,413 |
(a) |
On December 28, 2007, Broadstream Capital Partners, Inc. (Broadstream) filed a lawsuit against the Company in the State Superior Court of California, County of Los Angeles, Central District, and the Company subsequently removed the case to the Federal District Court for the Central District of California. The complaint alleged breach of contract, breach of covenant of good faith and fair dealing, breach of fiduciary duty and constructive fraud arising out of a document titled Non-Disclosure Agreement. The complaint alleged, among other things, that Broadstream entered into a Non-Disclosure Agreement with the Company that required Broadstreams prior written consent for the Company to knowingly acquire Various or any of its subsidiaries and that such consent was not obtained. On April 7, 2008, Broadstream filed its First Amended Complaint, which added a new cause of action for intentional interference with prospective economic advantage. On February 20, 2009, Broadstream filed its Third Amended Complaint, which dismisses the allegations of breach of fiduciary duty and constructive fraud. The complaint seeks damages which plaintiff alleges to be in excess of $20 million, plus interest, costs and punitive damages. Broadstream later asserted up to $557 million in damages plus punitive damages. On July 20, 2009, the Company entered into an agreement with Broadstream under which, without admitting liability, the Company agreed to pay Broadstream $3.0 million in $1.0 million installments due no later than July 2009, January 2010 and July 2010. Such payments were timely made. The agreement provides that upon the earlier of twelve months after the Company |
has securities registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, or eighteen months after the effective date of the agreement, but not later than twelve months following such earlier date, Broadstream must choose either to (i) refile its complaint in Federal District Court provided that it first repay the Company the $3.0 million or (ii) demand arbitration. If Broadstream elects arbitration, the parties have agreed that there will be an arbitration award to Broadstream of at least $10.0 million but not more than $47.0 million. Giving consideration of the limitation of the arbitration award in relation to damages sought in litigation, management had not concluded that it was probable that Broadstream would demand arbitration. Accordingly, no loss had been provided for as a result of entering into the agreement. In the event that Broadstream elected arbitration, at such time the Company would recognize a loss in connection with the matter of $13.0 million to $50.0 million. |
(b) |
On December 23, 2005, Robert Guccione, our former president, filed an action against the Company and some of its officers, among other defendants, in New York State Court for breach of contract, fraud, unjust enrichment, promissory estoppel, failure to pay severance and conspiracy to defraud. The amount of damages requested in the complaint against the Company is approximately $9 .0 million and against the officers is in excess of $10 .0 million. Some of the counts in the complaint also demand an unspecified amount of damages. Guccione filed an amended complaint on June 5, 2007 to include additional claims relating to ownership of certain United Kingdom, Jersey and Guernsey trademarks and add ed as a party Penthouse Publications Limited, an entity with no current affiliation with the Company, as party plaintiff. Guccione agreed to dismiss the count for conspiracy to defraud only. Guccione filed a Second Amended Complaint on December 14, 2007 adding General Media International, Inc. (an entity with no current affiliation with the Company) as party plaintiff and a new claim for inducement to breach of contract. The Company filed its motion to dismiss the Second Amended Complaint on January 31, 2008, which was granted in part and denied in part. The court dismissed the claims for unjust enrichment and promissory estoppel. The Company filed its Answer and Affirmative Defenses to the Second Amended Complaint on June 25, 2009. On August 14, 2008, Guccione filed a voluntary petition for Chapter 7 Bankruptcy. Guccione filed a dismissal of the bankruptcy proceedings on November 4, 2009. The Court dismissed the bankruptcy action on November 9, 2009. The settlement agreement between Guccione and his judgment creditors assigns all rights to the New York state court action to his judgment creditors. On January 8, 2010, the Company filed an Amended Answer with counterclaims against Guccione and Penthouse Publications Limited for conversion, breach of fiduciary duty, declaratory relief and indemnification. No specific amount of damages has been requested in the counterclaims. On January 27, 2010, Plaintiffs filed a Reply to the Companys counterclaims. In January and February 2010, certain defendants filed Answers to Plaintiffs Second Amended Complaint with cross-claims against the Company for contribution and indemnification. No specific amount of damages has been requested. In February and March 2010, the Company filed its Answer and Affirmative Defenses to the cross-claims. On October 20, 2010, Guccione passed away. As such, the case is stayed pending substitution of his estate as a party. The Company believes it has meritorious defenses to all claims and intends to vigorously defend the lawsuit. |
(c) |
On November 28, 2006, Antor Media Corporation (Antor) filed a complaint against the Company, its subsidiary, General Media Communications, Inc. (GMCI), and several non-affiliate media/entertainment |
defendants in the U.S. District Court for the Eastern District of Texas, Texarkana Division, for infringement of a P atent titled Method and Apparatus for Transmitting Information Recorded on Information Storage Means from a Central Server to Subscribers via a High Data Rate Digital Telecommunications Network. No specific amount of damages has been requested. Injunctive relief is also sought. The Company and its subsidiary filed an Answer, Affirmative Defenses and Counterclaims. The United States Patent and Trademark Office (USPTO) issued a non-final office action rejecting Antors patent claims. Antor filed a response to the office action which added 83 new claims to the original 29 rejected claims. In August 2008, the USPTO issued its final office action sustaining its rejection of the original 29 claims and rejecting the 83 new claims. Antor filed its Petition to Vacate Finality of Office Action on the grounds it introduced new grounds for the rejection. Based on the final office action, the Company, GMCI and all other defendants filed an expedited motion to stay the case. In December 2008, pursuant to an order granting a re - examination proceeding, the USPTO issued a non-final office action again rejecting the original 29 claims and the new 83 claims. In February 2009, Antor filed a response in which it agreed to cancel the 83 new claims previously proposed. On May 11, 2009, the Court entered an Order granting Defendants Motion to Stay as modified. On May 22, 2009, the defendants accepted the terms of the Courts proposed Stipulation regarding the use of prior art at trial and filed their Stipulation. On June 5, 2009, the USPTO issued a Final Office Action rejecting all of the Plaintiffs claims. Plaintiff filed an appeal on July 7, 2009 and an appellate brief on October 8, 2009. On February 18, 2010, the USPTO filed an answer brief. On October 21, 2010, the USPTO Board of Patent Appeals entered an order affirming the rejection of Antors claims. On December 21, 2010, Antor filed a request for rehearing. The case will remain stayed pending the appeal. |
(d) |
On or about November 27, 2006, a claimant filed a consumer class action arbitration at Judicial Arbitration and Mediation Services, Inc. or JAMS in San Jose, California, alleging a nationwide class action against Various under a variety of legal theories related to, among other things, representations regarding the number of active users on its internet dating websites, causing the appearance of erroneous member profiles, and a failure to adequately remove or account for alleged erroneous member profiles. The claimant is seeking unspecified damages. Various disputes the claims and intends to defend the arbitration vigorously. |
(e) |
In or about March 2009, a complaint was filed against the Companys subsidiary FriendFinder California, Inc. and other defendants in the State Superior Court of California, County of Los Angeles in connection with their advertising on a free adult content website run by a third party known as Bright Imperial Limited. In April 2009, Various and the Company were added as defendants. The complaint alleges that the defendants aided and abetted Bright Imperial Limited in engaging in below cost competition and unlawful use of loss leaders in violation of California law by providing free, apparently professionally produced adult content. The plaintiff is seeking $10.0 million in damages, trebled to at least $30.0 million, plus injunctive relief and attorneys fees. On May 8, 2009, the Court denied the plaintiffs request for an Order to Show Cause concerning its request for preliminary injunction, citing insufficient evidence among other factors. On May 26, 2009, the Company filed an Anti-SLAPP Motion to Strike the Complaint along with a Motion to Dismiss the claims in the Complaint. On or about July 24, 2009, after the Court granted the Anti-SLAPP motion the plaintiff then stipulated to the form of an Order on the Anti-SLAPP motion that finds in favor of the Company, effectively terminating the case. On August 10, 2009, plaintiff filed his Notice of Appeal to the California Court of Appeal. On January 26, 2011, the California Appellate Court affirmed the trial courts ruling in the Companys favor. |
(f) |
On November 4, 2008, Balthaser Online, Inc. filed a lawsuit for patent infringement against the Company among other defendants, in the U.S. District Court for the Eastern District of Texas, Texarkana Division, seeking unspecified monetary damages as well as injunctive relief. The complaint alleged infringement of Patent titled Methods, Systems, and Processes for the Design and Creation of Rich-Media Applications via the Internet. The plaintiff filed a first amended complaint naming Various, Inc., FriendFinder California Inc. and Global Alphabet, Inc. as defendants on January 15, 2009. On or about August 28, 2009, pursuant to local rule, the Company served its invalidity contentions. On September 15, 2009, the Court granted the Companys |
motion to transfer the case to the U.S. District Court for the Northern District of California. The lawsuit was settled on November 30, 2010 for an immaterial amount and the action was dismissed with prejudice. |
(g) |
In or about December 2007, Spark Network Services, Inc. served Various with a complaint for patent infringement seeking unspecified monetary damages as well as injunctive relief. The complaint alleges infringement of a U.S. Patent titled System for Data Collection and Matching Compatible Profiles. Various moved for a stay of the federal case due to the USPTOs re-examination of the patent at issue and the Federal Court granted the stay. The USPTO issued a final rejection of the patent at issue on September 18, 2009, and the plaintiff filed a notice of appeal on December 17, 2009. In March 2010, the parties entered into a settlement agreement resolving the case and the Federal action was dismissed with prejudice. The settlement did not have a material effect on the Companys financial statements. |
(h) |
On November 5, 2009, Joao Control and Monitoring Systems of Texas, LLC filed a patent infringement lawsuit in the United States District Court for the Eastern District of Texas against the Company and its indirect wholly-owned subsidiary Streamray Inc., and a number of other unrelated adult entertainment companies, alleging infringement of a patent titled Monitoring Apparatus and Method and seeking unspecified monetary damages as well as injunctive relief. The lawsuit was served on the Company and Streamray Inc. on November 12, 2009. In or about June 2010 the Company filed a motion related to the propriety of the forum and Streamray Inc. answered the complaint. On or around July 2010, the parties entered into a settlement agreement resolving the case and the action was dismissed with prejudice. The settlement did not have a material effect on the Companys financial statements. |
(i) |
Effective July 1, 2008, Various registered in the European Union and on July 29, 2008, began separately charging VAT to its customers. For periods prior thereto, Various recorded a liability for VAT and related interest and penalties in connection with revenue from internet services derived from its customers in the various European Union countries. Various reduced its VAT liability for periods prior to July 1, 2008 in the countries where the liability was either paid in full or payments were made pursuant to settlement and payment plans or where determinations were made that payments were not due. Various continues to negotiate settlements of the liabilities or challenge the liability related to VAT for periods prior to July 1, 2008 (see Note I). |
(j) |
On May 19, 2009 representatives for Summit Trading Limited (Summit) sent a letter to the Companys outside legal counsel, alleging that the Company, Interactive Brand Development, Inc., (an owner of the Companys Series B Common Stock) and entities affiliated with two of the Companys principal stockholders defrauded Summit of financial compensation for services provided to the Companys predecessor entity, General Media, Inc. Among the claims, Summit asserted bad faith , breach of contract and fraud by the Companys management and the Company, and claimed that it is owed an equity interest in the Company, as well as compensatory, punitive and exemplary damages in excess of $500 million. Management believes that the allegations stated in the letter are vague and lack factual basis and merit. Summit has not taken any legal action against the Company. Should Summit take legal action, the Company would vigorously defend the lawsuit. |
(k) |
On November 16, 2010, Patent Harbor, LLC filed a Complaint for patent infringement against, among others, Penthouse Digital Media Productions Inc. (PDMP), in the United States District Court for the Eastern District of Texas. The Complaint alleges an infringement of a U.S. Patent titled Apparatus and Method for Assembling Content Addressable Video. No specific amount of damages has been requested. However, on November 16, 2010, the Company received a settlement demand from plaintiff in the amount of $800,000. Plaintiff later lowered its demand to $500,000. On January 28, 2011, the Company filed an Answer, Affirmative Defenses and Counterclaims. On February 25, 2011, plaintiff filed its Answer to the Counterclaims. The Company has no insurance coverage for patent infringement claims. The Company disputes the allegations and believes it has meritorious defenses, and plans to vigorously defend the allegations. |
The Company currently is a party to other legal proceedings and claims. While management presently believes that the ultimate outcome of these proceedings, including the ones discussed above, individually and in the |
aggregate, will not have a material adverse effect on the Companys financial position, cash flows, or overall trends in results of operations, litigation and arbitration is subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include monetary damages or, in cases for which injunctive relief is sought, an injunction prohibiting the Company from selling one or more products or services. Were an unfavorable ruling to occur there exists the possibility of a material adverse impact on the business or results of operations for the period in which the ruling occurs or future periods. Other than as disclosed above, the Company is unable to estimate the possible loss or range of loss which may result from pending legal proceedings or claims. |
Imperial
Capital |
Ladenburg Thalmann & Co. Inc. |
Securities
and Exchange Commission registration fee |
$ | 18,078 | ||||
Financial
Industry Regulatory Authority filing fee |
46,500 | |||||
Nasdaq
Global Market listing fee |
70,000 | |||||
Printing
expenses |
900,000 | |||||
Legal fees
and expenses |
7,000,000 | |||||
Accounting
fees and expenses |
3,600,000 | |||||
Transfer
agent fees |
3,500 | (1) | ||||
Blue sky fees
and expenses |
3,500 | |||||
Miscellaneous |
1,900,000 | |||||
Total |
$ | 13,541,578 |
(1) |
In addition to the $3,500 closing fee that is charged by American Stock Transfer & Trust Company, the registrant will be required to pay to American Stock Transfer & Trust Company a $1,000 monthly fee for acting as transfer agent of the registrants common stock. |
(a) |
Exhibits. |
(b) |
Financial Statement Schedules. |
Description of Financial Statement Schedules |
Page Number |
|||||
---|---|---|---|---|---|---|
Report of
Independent Registered Public Accounting Firm |
II-5 | |||||
Schedule II
Valuation and Qualifying Accounts |
II-5 |
Balance at Beginning of Period |
Additions Charged to Costs and Expenses |
Deductions Charged to Other Accounts |
Deductions |
Balance at End of Period |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Description |
|||||||||||||||||||||||
Year Ended
December 31, 2008: |
|||||||||||||||||||||||
Allowance for
doubtful accounts |
$ | 1,368 | $ | 1505 | $ | | $ | 363 | (a) | $ | 2,510 | ||||||||||||
Deferred tax
asset valuation allowance |
4,782 | 4,84 2 | | | 9,624 | ||||||||||||||||||
Year Ended
December 31, 2009: |
|||||||||||||||||||||||
Allowance for
doubtful accounts |
2,510 | 249 | 607 | (a) | 2,152 | ||||||||||||||||||
Deferred tax
asset valuation allowance |
9,624 | 4,881 | 2,557 | (b) | | 11,948 | |||||||||||||||||
Year Ended
December 31, 2010: |
|||||||||||||||||||||||
Allowance for
doubtful accounts |
2,152 | 839 | | 755 | (a) | 2,236 | |||||||||||||||||
Deferred tax
asset valuation allowance |
11,948 | 16,679 | | | 28,627 |
(a) |
Accounts receivable amounts considered uncollectible and removed from accounts receivable by reducing the allowance for doubtful accounts. |
(b) |
Reduction of the valuation allowance and corresponding increase in deferred tax liability due to elimination of United Kingdom VAT liability . |
By: |
/s/ Marc H. Bell Marc H. Bell Chief Executive Officer and President |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Marc H.
Bell Marc H. Bell |
Chief Executive
Officer, President and Director (Principal Executive Officer) |
March
17, 2011 |
||||||||
/s/ Ezra
Shashoua Ezra Shashoua |
Chief Financial
Officer (Principal Financial Officer and Principal Accounting Officer) |
March
17, 2011 |
||||||||
* Daniel C. Staton |
Chairman of the
Board and Treasurer |
March
17, 2011 |
||||||||
* Robert B. Bell |
Director |
March
17, 2011 |
||||||||
* Barry Florescue |
Director |
March
17, 2011 |
||||||||
* James LaChance |
Director |
March
17, 2011 |
||||||||
* Toby E. Lazarus |
Director |
March
17, 2011 |
||||||||
* Jason H. Smith |
Director |
March
17, 2011 |
||||||||
* By: /s/
Ezra Shashoua Ezra Shashoua Attorney-in-fact |
March
17, 2011 |
|
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; |
|
were qualified at the time of entry into the applicable agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
|
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |
|
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
Exhibit Number |
Description |
|||||
---|---|---|---|---|---|---|
2.1** |
Stock Purchase Agreement dated September 21, 2007, by and among Various, Inc., The Andrew B. Conru Trust, established November 6, 2001, The
Lars Mapstead Trust, established April 18, 2002, Andrew B. Conru, Lars Mapstead and Penthouse Media Group Inc. |
|||||
2.2** |
Amendment to Stock Purchase Agreement dated December 6, 2007, by and among Various, Inc., Andrew B. Conru Trust Agreement, Mapstead Trust,
created on April 16, 2002, Andrew B. Conru, Lars Mapstead and Penthouse Media Group Inc. |
|||||
3.1** |
Articles of Incorporation of FriendFinder Networks Inc. |
|||||
3.2** |
Certificates of Amendment to Articles of Incorporation of FriendFinder Networks Inc. dated March 30, 2006, November 13, 2007 and July 1,
2008 |
|||||
3.3** |
Bylaws of Penthouse Media Group Inc. |
|||||
3.4** |
Amended and Restated Articles of Incorporation of FriendFinder Networks Inc. which became effective on January 25, 2010 |
|||||
3.5** |
Form
of Amended and Restated Bylaws of FriendFinder Networks Inc. to be effective upon the closing of this offering |
|||||
4.1** |
Specimen of Common Stock Certificate |
|||||
4.3** |
Specimen of Series A Convertible Preferred Stock Certificate |
|||||
4.5** |
Certificate of Designation of Series A Convertible Preferred Stock |
|||||
4.6** |
Amended and Restated Certificate of Designation of Series A Convertible Preferred Stock which became effective on January 25, 2010 prior to
the effectiveness of the reverse split of the Companys Series A Convertible Preferred Stock |
|||||
4.7** |
Certificate of Designation of Series B Convertible Preferred Stock |
|||||
4.8** |
Amended and Restated Certificate of Designation of Series B Convertible Preferred Stock which became effective on January 25, 2010 prior to
the effectiveness of the reverse split of the Companys Series B Convertible Preferred Stock |
|||||
4.9** |
Form
of 2007 Detachable Warrant for the Purchase of Securities of Penthouse Media Group Inc. |
Exhibit Number |
Description | |||||
---|---|---|---|---|---|---|
4.10** |
Form
of Amended and Restated 2005 and 2006 Detachable Warrant for the Purchase of Securities of Penthouse Media Group Inc. |
|||||
4.11** |
Form
of 2005 Warrant to Purchase Securities of Penthouse Media Group Inc. issued to a placement agent |
|||||
4.12** |
Form
of 2007 Warrant to Purchase Securities of Penthouse Media Group Inc. issued to a placement agent |
|||||
4.13** |
Registration Rights Agreement dated December 6, 2007 (Warrants) |
|||||
4.14** |
Amendment to Registration Rights Agreement (Warrants) dated October 8, 2009 |
|||||
4.15** |
Registration Rights Agreement dated December 6, 2007 (6% Subordinated Convertible Notes) |
|||||
4.16** |
Amendment to Registration Rights Agreement dated May 14, 2008 (6% Subordinated Convertible Notes) |
|||||
4.17** |
Intercreditor and Subordination Agreement dated December 6, 2007 (Interactive Network, Inc. First Lien/Second Lien Notes) |
|||||
4.18** |
Intercreditor and Subordination Agreement dated December 6, 2007 (Penthouse Media Group Inc. Senior Lien Notes/Subordinated Guaranty by
Penthouse Media Group Inc. of Interactive Network, Inc. Notes/Marc Bell Notes/Various Seller Notes Guaranties) |
|||||
4.19** |
Intercreditor and Subordination Agreement dated December 6, 2007 (Subordinated Secured Guaranty of Penthouse Media Group Inc. Notes from
Interactive Network, Inc.) |
|||||
4.20* |
Intercreditor and Subordination Agreement, dated October 27, 2010 |
|||||
4.21* |
Second Lien Intercreditor Agreement, dated October 27, 2010 |
|||||
4.22** |
Seller Note Subordination Agreement dated December 6, 2007 |
|||||
4.23** |
Intercreditor Agreement dated December 6, 2007 (PET Notes/Seller Notes Guaranty) |
|||||
4.24** |
Security Holders Agreement dated August 17, 2005, by and among Penthouse Media Group Inc. and Holders of Equity Securities of Penthouse Media
Group Inc. |
|||||
4.25** |
Security Holders Agreement dated December 6, 2007, by and among Penthouse Media Group Inc. and Holders of Equity Securities of Penthouse Media
Group Inc. |
|||||
4.26** |
Shareholders Agreement dated September 21, 2004, by and among PET Capital Partners LLC, Marc H. Bell, Daniel C. Staton, certain other
investors and Penthouse Media Group Inc. |
|||||
4.27** |
Form of 13% Subordinated Term Loan Note due 2011 |
|||||
4.28** |
Form
of 15% Senior Secured Note Due 2010 |
|||||
4.29** |
Form
of Senior Secured Class A Note Due 2011 |
|||||
4.30** |
Form
of Sellers Subordinated Secured Note Due 2011 |
|||||
4.31** |
Form
of Senior Secured Class B Note Due 2011 |
|||||
4.32** |
Form of Amended and Restated 6% Subordinated Convertible Note Due 2011 |
|||||
4.33** |
Form of 6% Subordinated Convertible Note Due 2011 |
|||||
4.34** |
Guaranty of 6% Subordinated Convertible Note due 2011 |
|||||
4.35* |
Form of 14% Senior Secured Note Series A due 2013 |
|||||
4.36* |
Form of 14% Senior Secured Note Series B due 2013 |
|||||
4.37* |
Form of Cash Pay Secured Note Series A due 2013 |
|||||
4.3 8* |
Form of Cash Pay Secured Note Series B due 2013 |
|||||
4.3 9** |
Agreement re: Limitation on Ability to Acquire Common Stock by and between FriendFinder Networks Inc. and Beach Point Capital Management LP
dated October 8, 2009 |
|||||
4. 40** |
Form of Amendment to Warrants executed in connection with Agreement re: Limitation on Ability to Acquire Common Stock |
Exhibit Number |
Description | |||||
---|---|---|---|---|---|---|
4.4 1** |
Securities Purchase Agreement dated August 17, 2005, by and among Penthouse Media Group Inc., each Subsidiary of Penthouse Media Group Inc.
acting as a Guarantor, the Security Holders named therein and U.S. Bank National Association |
|||||
4.4 2** |
First Amendment and Limited Waiver to Securities Purchase Agreement dated August 28, 2006, by and among Penthouse Media Group Inc., each
Subsidiary of Penthouse Media Group Inc. acting as a Guarantor, the Security Holders named therein and U.S. Bank National Association |
|||||
4.4 3** |
Second Amendment and Limited Waiver to Securities Purchase Agreements for Acquisition and Related Transactions dated December 6, 2007, by and
among Penthouse Media Group Inc., each Subsidiary of Penthouse Media Group Inc. acting as a Guarantor, the Security Holders named therein and U.S. Bank
National Association |
|||||
4.4 4** |
Issuer Security and Pledge Agreement dated August 17, 2005, by and between Penthouse Media Group Inc. and U.S. Bank National Association, as
collateral agent for the Security Holders party to the Securities Purchase Agreement dated August 17, 2005 |
|||||
4.4 5** |
First Amendment to Issuer Security and Pledge Agreement dated August 28, 2006, by and between Penthouse Media Group Inc. and U.S. Bank
National Association, as collateral agent for the Security Holders party to the Securities Purchase Agreement dated August 17, 2005 |
|||||
4.4 6** |
Form
of Guarantor Security and Pledge Agreement dated August 17, 2005, by and between each Guarantor and U.S. Bank National Association, as collateral agent
for the Security Holders party to the Securities Purchase Agreement dated August 17, 2005 |
|||||
4.4 7** |
Form
of First Amendment to Guarantor Security and Pledge Agreement dated August 28, 2006, by and between each Guarantor and U.S. Bank National Association,
as collateral agent for the Security Holders party to the Securities Purchase Agreement dated August 17, 2005 |
|||||
4.4 8** |
Securities Purchase Agreement dated August 28, 2006, by and among Penthouse Media Group Inc., each Subsidiary of Penthouse Media Group Inc.
acting as a Guarantor, the Security Holders named therein and U.S. Bank National Association |
|||||
4.4 9** |
Limited Waiver for Series B Convertible Preferred Stock Sale, dated as of December 6, 2007, by and between Penthouse Media Group Inc., the
Guarantors named therein and the Holders named therein |
|||||
4. 50** |
Securities Purchase Agreement dated December 6, 2007, by and among Interactive Network, Inc., each Subsidiary of Penthouse Media Group Inc.
acting as a Guarantor, the Security Holders named therein and U.S. Bank National Association |
|||||
4.5 1** |
Amendment No. 1 to Securities Purchase Agreement effective January 14, 2008, by and among Interactive Network, Inc., each Subsidiary of
Penthouse Media Group Inc. acting as a Guarantor, the Security Holders named therein and U.S. Bank National Association |
|||||
4.5 2** |
Issuer Security and Pledge Agreement dated December 6, 2007, by and between Interactive Network, Inc. and U.S. Bank National Association, as
collateral agent for the Security Holders party to the Securities Purchase Agreement dated December 6, 2007 |
|||||
4.5 3** |
Parent Security and Pledge Agreement dated December 6, 2007, by and between Penthouse Media Group Inc. and U.S. Bank National Association, as
collateral agent for the Security Holders party to the Securities Purchase Agreement dated December 6, 2007 |
|||||
4.5 4** |
Sellers Securities Agreement dated December 6, 2007, by and among Interactive Network, Inc., each Subsidiary of Penthouse Media Group
Inc. acting as a Guarantor, the Security Holders named therein and U.S. Bank National Association |
|||||
4.5 5** |
Amendment to Sellers Securities Agreement dated as of December 6, 2008, by and among Interactive Network, Inc., each Subsidiary of
Penthouse Media Group Inc. acting as a Guarantor, the Security Holders named therein and U.S. Bank National Association |
Exhibit Number |
Description | |||||
---|---|---|---|---|---|---|
4.5 6** |
Issuer Security and Pledge Agreement dated December 6, 2007, by and between Interactive Network, Inc. and U.S. Bank National Association, as
collateral agent for the Security Holders party to the Sellers Securities Agreement dated December 6, 2007 |
|||||
4.5 7** |
Parent Security and Pledge Agreement dated December 6, 2007, by and between Penthouse Media Group Inc. and U.S. Bank National Association, as
collateral agent for the Security Holders party to the Sellers Securities Agreement dated December 6, 2007 |
|||||
4.5 8** |
Limited Waiver dated December 6, 2007, by and between Penthouse Media Group Inc., and PET Capital Partners LLC, as agent for the Holders of
the 13% Subordinated Term Loan Notes due 2011 |
|||||
4.5 9** |
Limited Waiver dated December 19, 2008, by and between FriendFinder Networks Inc. and PET Capital Partners LLC, as agent for the Holders of
the 13% Subordinated Term Loan Notes due 2011 |
|||||
4. 60** |
Limited Waiver dated March 20, 2009, by and between FriendFinder Networks Inc. and PET Capital Partners LLC, as agent for the Holders of the
13% Subordinated Term Loan Notes due 2011 |
|||||
4.6 1** |
Limited Waiver dated October 8, 2009, by and between FriendFinder Networks Inc. and PET Capital Partners LLC, as agent for the Holders of the
13% Subordinated Term Loan Notes due 2011 |
|||||
4.6 2** |
Third Amendment and Limited Waiver to Securities Purchase Agreement dated October 8, 2009, by and among FriendFinder Networks Inc., the
Guarantor parties signatory thereto and the Holders named therein |
|||||
4.6 3** |
Amendment No. 2 and Waiver to Securities Purchase Agreement relating to Interactive Network, Inc., dated October 8, 2009 |
|||||
4.6 4** |
Amendment No. 2 and Waiver to Sellers Securities Agreement relating to the Subordinated Secured Notes due 2011 of Interactive Network,
Inc. dated October 8, 2009 |
|||||
4.6 5** |
Binding Term Sheet by and among FriendFinder Networks Inc., Interactive Network, Inc., Andrew B. Conru Trust Agreement, Mapstead Trust,
created on April 16, 2002, Andrew B Conru, Lars Mapstead, Daniel Staton and Marc H. Bell, dated October 8, 2009 |
|||||
4.6 6* |
Indenture 14% Senior Secured Notes due 2013, dated October 27, 2010 |
|||||
4.6 7* |
Indenture Non-Cash Pay Secured Notes due 2014, dated October 27, 2010 |
|||||
4.6 8* |
Indenture Cash Pay Secured Notes due 2013, dated October 27, 2010 |
|||||
4.6 9* |
Security and Pledge Agreement |
|||||
4. 70* |
Second Lien Cash Pay Security and Pledge Agreement |
|||||
5.1** |
Opinion of Brownstein Hyatt Farber Schreck, LLP |
|||||
9.1** |
Voting Agreement dated July 6, 2005, by and among Barry Florescue, Marc H. Bell and Daniel C. Staton |
|||||
10.1** |
Form
of Indemnification Agreement between FriendFinder Networks Inc. and its Directors and Officers |
|||||
10.2* |
Amended and Restated Management Agreement , dated as of November 1, 2010, by and between the Company and
Bell & Staton, Inc. |
|||||
10.3* |
Form of Employment Agreement, dated March , 2011, by and between FriendFinder Networks Inc. and Daniel C. Staton to be effective
upon closing of this offering |
|||||
10.4* |
Form of Employment Agreement, dated March , 2011, by and between FriendFinder Networks Inc. and Marc H. Bell to be effective
upon closing of this offering |
|||||
10.5** |
Securities Purchase Agreement dated July 6, 2005, by and among Penthouse Media Group Inc., PET Capital Partners II LLC and Absolute Return
Europe Fund |
Exhibit Number |
Description | |||||
---|---|---|---|---|---|---|
10.6** |
Note Exchange Agreement dated August 17, 2005, by and among Penthouse Media Group Inc., PET Capital Partners LLC and Absolute Return Europe
Fund |
|||||
10.7** |
Securities Purchase Agreement dated August 10, 2006, by and between Penthouse Media Group Inc. and PET Capital Partners II
LLC |
|||||
10.8** |
Securities Purchase Agreement dated July 23, 2007, by and among Penthouse Media Group Inc. and the Investors named
therein |
|||||
10.9** |
Escrow Agreement dated July 23, 2007, by and among Penthouse Media Group Inc., the Investors named therein and Moses & Singer LLP as
the Escrow Agent |
|||||
10.10** |
Letter to Absolute Return Europe Fund re: Penthouse Media Group Inc. Series B Offering |
|||||
10.11** |
Letter to Florescue Family Corporation re: Penthouse Media Group Inc. Series B Offering |
|||||
10.12** |
Letter to Mr. Russell H. Frye re: Penthouse Media Group Inc. Series B Offering |
|||||
10.13** |
Assignment Agreement dated December 6, 2007, concerning Stock Purchase Agreement dated September 21, 2007 |
|||||
10.14** |
Independent Contractor Agreement dated September 21, 2007, by and between Hinok Media Inc. and Various, Inc. |
|||||
10.15** |
Amendment to Independent Contractor Agreement dated May 12, 2008, by and between Hinok Media Inc. and Various, Inc. |
|||||
10.16** |
Amendment No. 2 to Independent Contractor Agreement, Assignment and Limited Waiver dated October 8, 2009, by and between Hinok Media Inc.,
YouMu, Inc. and Various, Inc. |
|||||
10.17* |
Amendment to Letter Agreement, dated October 8, 2009 by and among the Company, Andrew B. Conru Trust Agreement, Mapstead Trust and Messrs.
Conru, Mapstead, Bell and Staton |
|||||
10.18* |
Letter Agreement relating to confirmation of certain consent and exchange fees, by and between the Company and Andrew B. Conru Trust
Agreement dated October 27, 2010 |
|||||
10.19* |
Letter Agreement relating to confirmation of certain consent and exchange fees, by and between the Company and Mapstead Trust dated
October 27, 2010 |
|||||
10.20* |
Subscription Agreement for Non-Cash Pay Secured Notes due 2014, dated as of October 27, 2010 |
|||||
10.2 1 ** |
Employee Proprietary Information Agreement dated September 21, 2007, by and between Andrew B. Conru and Various, Inc. |
|||||
10.2 2 ** |
Independent Contractor Agreement dated September 21, 2007, by and between Legendary Technology Inc. and Various, Inc. |
|||||
10.2 3 ** |
Amendment No. 1 to Independent Contractor Agreement dated October 8, 2009, by and between Legendary Technology Inc. and Various,
Inc. |
|||||
10.2 4 ** |
Employee Proprietary Information Agreement dated September 21, 2007, by and between Lars Mapstead and Various, Inc. |
|||||
10.2 5 ** |
Employment Agreement dated September 6, 2007, by and between Penthouse Media Group Inc. and Ezra Shashoua |
|||||
10.2 6 ** |
Consulting Agreement dated September 11, 2007, by and between Penthouse Media Group Inc. and Ezra Shashoua |
|||||
10.2 7 ** |
Amended and Restated Employment Agreement, dated July 8, 2008, by and between Penthouse Media Group Inc. and Ezra
Shashoua |
|||||
10.28* |
Second Amended and Restated Employment Offer, dated as of April 1, 2010, by and between the Company and Ezra
Shasho ua |
|||||
10.29* |
Form of Employment Agreement, effective as of March , 2011, by and between the Company and Anthony Previte |
|||||
10. 30* |
Employment Agreement, effective as of January 1, 2011, by and between the Company and Robert Brackett |
Exhibit Number |
Description | |||||
---|---|---|---|---|---|---|
10. 31** |
Bonus Award Agreement dated November 13, 2007 by and between Various, Inc. and Robert Brackett |
|||||
10. 32** |
Amendment to Bonus Award Agreement dated December 5, 2007, by and between Various, Inc. and Robert Brackett |
|||||
10. 33** |
Employee Proprietary Information Agreement dated November 9, 2007, by and between Various, Inc. and Robert Brackett |
|||||
10. 34** |
Consulting Agreement dated December 11, 2006, by and between Penthouse Media Group Inc. and Starsmith LLC |
|||||
10. 35* |
Fourth Amendment to Lease, dated November 1, 2010, by and between 6800 Broken Sound LLC and FriendFinder Networks
Inc. |
|||||
10. 36** |
Lease dated May 6, 2008 by and between 20 Broad Company LLC and Penthouse Media Group Inc. |
|||||
10. 37** |
Lease dated April 24, 2009 by and between NBP Partners I, LLC and Streamray Studios, Inc. |
|||||
10. 38 ** |
Lease dated April 21, 2005 by and between KNK Properties, LLC and Streamray Inc. |
|||||
10. 39 ** |
Modification of Lease , dated September 1, 2005, by and between KNK Properties, LLC and Streamray
Inc. |
|||||
10. 40 ** |
Modification of Lease , dated April 1, 2007, by and between KNK Properties, LLC and Streamray
Inc. |
|||||
10. 41 ** |
Modification of Lease, dated May 1, 2009, by and between KNK Properties, LLC and Streamray Inc. |
|||||
10. 42 ** |
Modification of Lease, dated October 14, 2009, by and between KNK Properties, LLC and Streamray , Inc. |
|||||
10. 43 ** |
Lease dated May 9, 2008, between Batton Associates, LLC, Lessor and Various, Inc., Lessee |
|||||
10. 44 ** |
Commercial Lease Agreement dated December 14, 2009 by and between Escondido Partners II, LLC and Steamray Inc. |
|||||
10. 45 ** |
Amended and Restated FriendFinder Networks Inc. 2008 Stock Option Plan |
|||||
10. 46 ** |
Form of FriendFinder Networks Inc. Stock Option Agreement for Employees |
|||||
10. 47** |
Form of FriendFinder Networks Inc. Stock Option Agreement Non-ISO |
|||||
10. 48 ** |
Form
of FriendFinder Networks Inc. Stock Option Agreement for Directors |
|||||
10. 49 ** |
Form
of FriendFinder Networks Inc. Stock Option Agreement for Consultants |
|||||
10. 50 ** |
Form
of FriendFinder Networks Inc. Stock Option Agreement for Board Consultants |
|||||
10. 51 ** |
FriendFinder Networks Inc. 2009 Restricted Stock Plan |
|||||
10. 52 ** |
Form
of FriendFinder Networks Inc. 2009 Restricted Stock Plan Restricted Stock Grant Agreement |
|||||
10. 53 ** |
Agreement, dated as of December 17, 2009, by and between Daniel C. Staton and FriendFinder Networks Inc. |
|||||
10. 54 ** |
Agreement, dated as of December 17, 2009, by and between Marc H. Bell and FriendFinder Networks Inc. |
|||||
10. 55 ** |
Agreement, dated as of December 17, 2009, by and between Andrew B. Conru Trust Agreement and FriendFinder Networks
Inc. |
|||||
10. 56 ** |
Agreement, dated as of December 17, 2009, by and between Mapstead Trust, created on April 16, 2002 and FriendFinder Networks
Inc. |
|||||
21.1* |
List of Subsidiaries |
|||||
23.1* * |
Consent of Brownstein Hyatt Farber Schreck, LLP (included in Exhibit 5.1) |
|||||
23.2 * |
Consent of Eisner Amper LLP |
|||||
24.1** |
Power of Attorney (included in signature page) |
* |
Filed herewith. |
** |
Previously filed. |
(A) |
Schedules and exhibits to this Exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K under the Securities Act of 193, as amended. The Company hereby agrees to furnish a copy of any such omitted schedule or exhibit to the SEC upon request. |
No. [ ] | Principal Amount $[ ] |
CUSIP NO. |
INTERACTIVE NETWORK, INC. | |||
|
By:
|
||
Name: Paul Asher | |||
Title: Secretary |
FRIENDFINDER NETWORKS INC. | |||
|
By:
|
||
Name: Paul Asher | |||
Title: Secretary |
Dated: October ___, 2010 | |||||
U.S. BANK NATIONAL ASSOCIATION | |||||
as Trustee | |||||
By:
|
|||||
Trust Officer |
Date: | Your Signature: | ||||
Signature | |||||
Guarantee: |
|
(1)
|
o |
acquired for the undersigned’s own account, without transfer; or
|
|
(2)
|
o |
transferred to an Issuer; or
|
|
(3)
|
o |
transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); or
|
|
(4)
|
o |
transferred pursuant to an effective registration statement under the Securities Act; or
|
|
(5)
|
o |
transferred pursuant to and in compliance with Regulation S under the Securities Act; or
|
|
(6)
|
o |
transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Section 2.8 of the Indenture); or
|
|
(7)
|
o |
transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended.
|
Signature | ||||
Signature Guarantee: | ||||
(Signature must be guaranteed)
|
Signature
|
|
|||
Dated: | |||
Date of Exchange
|
Amount of decrease in
Principal Amount
of this Global
Security
|
Amount of increase
in Principal
Amount of this
Global Security
|
Principal Amount
of this Global
Security following
such decrease or
increase
|
Signature of
authorized signatory of
Trustee or
Securities Custodian
|
||||
o | o | o | ||
[2.18(b)] | [2.18(c)] | [2.18(d)] |
Date: | Your | |||
Signature: | ||||
(Sign exactly as your name appears on the other side of this Security) | ||||
Signature | ||||
Guarantee: | ||||
(Signature must be guaranteed) |
|
Trust Officer
|
Date: ____________, 2010
|
Date:
|
Your
|
|||||
Signature:
|
||||||
Signature
Guarantee:
|
||||||
(Signature must be guaranteed)
|
||||||
Sign exactly as your name appears on the other side of this Security.
|
Date of
Exchange
|
Amount of decrease in
Principal
Amount of this Global
Security
|
Amount of increase in
Principal
Amount of this Global
Security
|
Principal Amount of this
Global
Security following such
decrease or increase
|
Signature of
authorized
signatory of Trustee
or
Securities Custodian
|
||||
Date:
|
Your
|
||||||
Signature:
|
|||||||
(Sign exactly as your name appears on the other side of this Security)
|
|||||||
Signature
Guarantee:
|
|||||||
(Signature must be guaranteed)
|
No. [ ] | Principal Amount $[ ] |
CUSIP NO.
|
INTERACTIVE NETWORK, INC.
|
|||
|
By:
|
/s/ | |
Name: Paul Asher
|
|||
Title: Secretary
|
|||
FRIENDFINDER NETWORKS INC.
|
|||
|
By:
|
/s/ | |
Name: Paul Asher
|
|||
Title: Secretary
|
|||
(Print or type assignee’s name, address and zip code)
|
(Insert assignee’s social security or tax I.D. No.)
|
Date: | Your Signature: |
Signature
Guarantee:
|
|||||
(Signature must be guaranteed)
|
|||||
|
|||||
Sign exactly as your name appears on the other side of this Security.
|
|
(1)
|
o |
acquired for the undersigned’s own account, without transfer; or
|
|
(2)
|
o |
transferred to an Issuer; or
|
|
(3)
|
o |
transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); or
|
|
(4)
|
o |
transferred pursuant to an effective registration statement under the Securities Act; or
|
|
(5)
|
o |
transferred pursuant to and in compliance with Regulation S under the Securities Act; or
|
|
(6)
|
o |
transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Section 2.8 of the Indenture); or
|
|
(7)
|
o |
transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended.
|
|
||
Signature | ||
Signature Guarantee: | ||
|
||
(Signature must be guaranteed) | Signature |
Date of Exchange |
|
Amount of
decrease in
Principal Amount
of this Global
Security
|
|
Amount of increase
in Principal
Amount of this
Global Security
|
|
Principal Amount
of this Global
Security following
such decrease or
increase
|
|
Signature of
authorized
signatory of
Trustee or
Securities
Custodian
|
o | o | o |
[2.18(b)] | [2.18(c)] | [2.18(d)] |
Date: | Your
Signature:
|
|
|
||
(Sign exactly as your name appears on the other side of this Security) | ||
Signature
Guarantee:
|
|
|
(Signature must be guaranteed) |
No. [ ] | Principal Amount $[ ] |
CUSIP NO. |
|
Trust Officer
|
Date: ____________, 2010
|
Date:
|
Your
|
|||||
Signature:
|
||||||
Signature
Guarantee:
|
||||||
(Signature must be guaranteed)
|
||||||
Sign exactly as your name appears on the other side of this Security.
|
Date of
Exchange
|
Amount of decrease in
Principal
Amount of this Global
Security
|
Amount of increase in
Principal
Amount of this Global
Security
|
Principal Amount of
this
Global
Security following such
decrease or increase
|
Signature of
authorized
signatory of Trustee
or
Securities Custodian
|
||||
Date:
|
Your
|
||||||
Signature:
|
|||||||
(Sign exactly as your name appears on the other side of this Security)
|
|||||||
Signature
Guarantee:
|
|||||||
(Signature must be guaranteed)
|
ARTICLE I
|
||||
DEFINITIONS AND INCORPORATION BY REFERENCE
|
||||
SECTION 1.1.
|
Definitions
|
1
|
||
SECTION 1.2.
|
Incorporation by Reference of Trust Indenture Act
|
31
|
||
SECTION 1.3.
|
Terms Generally
|
32
|
||
SECTION 1.4.
|
Accounting and Other Terms
|
32
|
||
SECTION 1.5.
|
Time References
|
32
|
||
ARTICLE II
|
||||
THE SECURITIES
|
||||
SECTION 2.1.
|
Form, Dating and Terms
|
33
|
||
SECTION 2.2.
|
Execution and Authentication
|
40
|
||
SECTION 2.3.
|
Registrar and Paying Agent
|
41
|
||
SECTION 2.4.
|
Paying Agent to Hold Money in Trust
|
42
|
||
SECTION 2.5.
|
Holder Lists
|
42
|
||
SECTION 2.6.
|
Transfer and Exchange
|
43
|
||
SECTION 2.7.
|
Form of Certificate to be Delivered upon Termination of Restricted Period
|
47
|
||
SECTION 2.8.
|
Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors
|
48
|
||
SECTION 2.9.
|
Form of Certificate to be Delivered in Connection with Transfers of Beneficial Interests in a Rule 144A Security Pursuant to Regulation S
|
50
|
||
SECTION 2.10.
|
Mutilated, Destroyed, Lost or Stolen Securities
|
51
|
||
SECTION 2.11.
|
Outstanding Securities
|
52
|
||
SECTION 2.12.
|
Temporary Securities
|
53
|
||
SECTION 2.13.
|
Cancellation
|
53
|
||
SECTION 2.14.
|
Payment of Interest
|
54
|
||
SECTION 2.15.
|
Apportionment of Payments
|
54
|
||
SECTION 2.16.
|
Computation of Interest
|
54
|
||
SECTION 2.17.
|
Optional Redemption of Securities
|
54
|
||
SECTION 2.18.
|
Mandatory Prepayment of Securities; Offers to Purchase Securities
|
56
|
||
SECTION 2.19.
|
Additional Amounts
|
64
|
||
SECTION 2.20.
|
CUSIP, Common Code and ISIN Numbers
|
66
|
ARTICLE III
|
||||
REGISTRATION
|
||||
SECTION 3.1.
|
Registration Under the Securities Act
|
66
|
||
SECTION 3.2.
|
Registration Procedures
|
69
|
||
SECTION 3.3.
|
Participation of Broker-Dealers in Exchange Offer
|
74
|
||
SECTION 3.4.
|
Indemnification and Contribution
|
75
|
||
ARTICLE IV
|
||||
COVENANTS
|
||||
SECTION 4.1.
|
Affirmative Covenants
|
78
|
||
SECTION 4.2.
|
Negative Covenants
|
88
|
||
SECTION 4.3.
|
Financial Covenants
|
93
|
||
ARTICLE V
|
||||
REPRESENTATIONS AND WARRANTIES
|
||||
SECTION 5.1.
|
Representations and Warranties of the Obligors
|
93
|
||
ARTICLE VI
|
||||
DEFAULTS AND REMEDIES
|
||||
SECTION 6.1.
|
Events of Default
|
108
|
||
SECTION 6.2.
|
Acceleration
|
111
|
||
SECTION 6.3.
|
Other Remedies
|
113
|
||
SECTION 6.4.
|
No Waivers or Election of Remedies, Expenses, Etc
|
113
|
||
SECTION 6.5.
|
Waiver of Past Defaults
|
114
|
||
SECTION 6.6.
|
Control by Majority
|
114
|
||
SECTION 6.7.
|
Limitation on Suits
|
114
|
||
SECTION 6.8.
|
Rights of Holders to Receive Payment
|
115
|
||
SECTION 6.9.
|
Collection Suit by Trustee
|
115
|
||
SECTION 6.10.
|
Trustee May File Proofs of Claim
|
115
|
||
SECTION 6.11.
|
Priorities
|
116
|
||
SECTION 6.12.
|
Undertaking for Costs
|
116
|
||
ARTICLE VII
|
||||
TRUSTEE
|
||||
SECTION 7.1.
|
Duties of Trustee
|
116
|
||
SECTION 7.2.
|
Rights of Trustee
|
118
|
SECTION 7.3.
|
Individual Rights of Trustee
|
119
|
||
SECTION 7.4.
|
Trustee’s Disclaimer
|
119
|
||
SECTION 7.5.
|
Notice of Defaults
|
120
|
||
SECTION 7.6.
|
Reports by Trustee to Holders
|
120
|
||
SECTION 7.7.
|
Compensation and Indemnity
|
120
|
||
SECTION 7.8.
|
Replacement of Trustee
|
121
|
||
SECTION 7.9.
|
Successor Trustee by Merger
|
122
|
||
SECTION 7.10.
|
Eligibility; Disqualification
|
122
|
||
SECTION 7.11.
|
Preferential Collection of Claims Against the Issuers
|
122
|
||
SECTION 7.12.
|
Trustee’s Application for Instruction from the Issuers
|
122
|
||
ARTICLE VIII
|
||||
DISCHARGE OF INDENTURE; DEFEASANCE
|
||||
SECTION 8.1.
|
Discharge of Liability on Securities; Defeasance
|
123
|
||
SECTION 8.2.
|
Conditions to Defeasance
|
124
|
||
SECTION 8.3.
|
Application of Trust Money
|
126
|
||
SECTION 8.4.
|
Repayment to the Issuers
|
126
|
||
SECTION 8.5.
|
Indemnity for U.S. Government Obligations
|
126
|
||
SECTION 8.6.
|
Reinstatement
|
126
|
||
ARTICLE IX
|
||||
AMENDMENTS
|
||||
SECTION 9.1.
|
Without Consent of Holders
|
127
|
||
SECTION 9.2.
|
With Consent of Holders
|
128
|
||
SECTION 9.3.
|
Compliance with Trust Indenture Act
|
129
|
||
SECTION 9.4.
|
Revocation and Effect of Consents and Waivers
|
129
|
||
SECTION 9.5.
|
Notation on or Exchange of Securities
|
130
|
||
SECTION 9.6.
|
Trustee to Sign Amendments
|
130
|
||
ARTICLE X
|
||||
GUARANTY
|
||||
SECTION 10.1.
|
Guaranty
|
130
|
||
SECTION 10.2.
|
Limitation on Liability; Termination, Release and Discharge
|
132
|
||
SECTION 10.3.
|
Right of Contribution
|
133
|
||
SECTION 10.4.
|
No Subrogation
|
133
|
||
SECTION 10.5.
|
Waiver
|
133
|
||
SECTION 10.6.
|
Continuing Guaranty; Assignments
|
134
|
||
SECTION 10.7.
|
Liens on Real Property; Other Waivers
|
134
|
||
SECTION 10.8.
|
Condition of Issuers and their Subsidiaries
|
135
|
ARTICLE XI
|
||||
COLLATERAL AND SECURITY
|
||||
SECTION 11.1.
|
The Collateral
|
135
|
||
SECTION 11.2.
|
Change in Collateral; Collateral Records; Collateral Locations
|
136
|
||
SECTION 11.3.
|
Further Assurances
|
136
|
||
SECTION 11.4.
|
Impairment of Security Interest
|
137
|
||
SECTION 11.5.
|
Real Estate Mortgages and Filings
|
138
|
||
SECTION 11.6.
|
Additional Guaranties and Security Documents
|
139
|
||
SECTION 11.7.
|
Release of Liens on the Collateral
|
139
|
||
SECTION 11.8.
|
Authorization of Actions to be Taken by the Trustee or the Senior Lien Collateral Agent Under the Security Documents
|
140
|
||
ARTICLE XII
|
||||
MISCELLANEOUS
|
||||
SECTION 12.1.
|
Trust Indenture Act Controls
|
142
|
||
SECTION 12.2.
|
Notices
|
142
|
||
SECTION 12.3.
|
Communication by Holders with other Holders
|
143
|
||
SECTION 12.4.
|
Certificate and Opinion as to Conditions Precedent
|
143
|
||
SECTION 12.5.
|
Statements Required in Certificate or Opinion
|
144
|
||
SECTION 12.6.
|
When Securities Disregarded
|
144
|
||
SECTION 12.7.
|
Rules by Trustee, Paying Agent and Registrar
|
145
|
||
SECTION 12.8.
|
Legal Holidays
|
145
|
||
SECTION 12.9.
|
GOVERNING LAW
|
145
|
||
SECTION 12.10.
|
CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE
|
145
|
||
SECTION 12.11.
|
No Recourse Against Others
|
146
|
||
SECTION 12.12.
|
Successors
|
146
|
||
SECTION 12.13.
|
Counterparts
|
146
|
||
SECTION 12.14.
|
Qualification of Indenture
|
146
|
||
SECTION 12.15.
|
Table of Contents; Headings
|
146
|
||
SECTION 12.16.
|
WAIVERS OF JURY TRIAL
|
146
|
||
SECTION 12.17.
|
Force Majeure
|
147
|
||
SECTION 12.18.
|
Expenses; Attorneys’ Fees
|
147
|
||
SECTION 12.19.
|
[Reserved]
|
147
|
||
SECTION 12.20.
|
Severability
|
147
|
||
SECTION 12.21.
|
Consent by the Trustee and Holders
|
147
|
||
SECTION 12.22.
|
No Party Deemed Drafter
|
148
|
||
SECTION 12.23.
|
Reinstatement; Certain Payments
|
148
|
||
SECTION 12.24.
|
Indemnification
|
148
|
||
SECTION 12.25.
|
Binding Effect
|
149
|
||
SECTION 12.26.
|
Interest
|
149
|
EXHIBIT A
|
Form of Series A Note
|
|||
EXHIBIT B
|
Form of Series B Note
|
|||
EXHIBIT C
|
Form of Confidentiality Agreement
|
|||
EXHIBIT D
|
Form of Management Report
|
|||
EXHIBIT E
|
Form of Joinder Agreement
|
|||
SCHEDULE 1.1 – Existing Indebtedness Subject to Recapitalization
|
||||
SCHEDULE 4.2(a) – Permitted Liens
|
||||
SCHEDULE 4.2(e) – Loans, Advances, Investments, Etc.
|
||||
SCHEDULE 4.2(h) – Permitted Restricted Payments
|
||||
SCHEDULE 4.2(n) – Required Minimum Subscribers
|
||||
SCHEDULE 4.3(a) – Consolidated EBITDA
|
||||
SCHEDULE 4.3(c) – Consolidated Coverage Ratio
|
||||
SCHEDULE 4.3(e) – Total Debt Ratio
|
||||
SCHEDULE 4.3(f) – First Lien Debt Ratio
|
||||
SCHEDULE 5.1(e)(2) – Record Holders of FFN Capital Stock
|
||||
SCHEDULE 5.1(g) – Subsidiaries
|
||||
SCHEDULE 5.1(k) – Financial Statements
|
||||
SCHEDULE 5.1(l) – Certain Changes or Events
|
||||
SCHEDULE 5.1(m) – Taxes, Etc.
|
||||
SCHEDULE 5.1(q) – Real Property
|
||||
SCHEDULE 5.1(r) – Material Contracts
|
||||
SCHEDULE 5.1(t) – Insurance
|
||||
SCHEDULE 5.1(v) – Location of Bank Accounts
|
||||
SCHEDULE 5.1(w)(1) – Exceptions to Intellectual Property Ownership
|
||||
SCHEDULE 5.1(w)(2) – Registered Intellectual Property
|
||||
SCHEDULE 5.1(w)(3) – Employees who have not executed Issuers’ Confidentiality, Non-Solicitation, and Invention Assignment Agreements
|
||||
SCHEDULE 5.1(y) – Name; Jurisdiction of Organization; Organization ID Number; Chief Place of Business; Chief Executive Office; FEIN
|
||||
SCHEDULE 5.1(z) – Location of Collateral
|
||||
SCHEDULE 5.1(aa) – Existing Indebtedness
|
||||
SCHEDULE 5.1(gg) – Potential Conflict of Interest
|
||||
SCHEDULE 5.1(hh) – Brokers
|
|
(1)
|
reasonable out-of-pocket expenses and fees relating to such Event of Loss (including, without limitation, legal, accounting and appraisal and insurance adjuster fees);
|
|
(2)
|
all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP as a consequence of such Event of Loss;
|
|
(3)
|
repayment of Indebtedness (other than Indebtedness evidenced by the Securities, the Cash Pay Second Lien Securities and the Non-Cash Pay Second Lien Securities) that is secured by a higher priority Lien than the Indebtedness evidenced by these Securities by the property or assets that are the subject of such Event of Loss; and
|
|
(4)
|
appropriate amounts to be provided by the Issuers as a reserve, in accordance with GAAP, against any liabilities associated with such Event of Loss and retained by the Issuers after such Event of Loss, including, without limitation, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Event of Loss.
|
[Date] |
Very truly yours, | |||
[Name of Transferor] | |||
|
By
|
||
Authorized Signature |
cc:
|
Interactive Network, Inc. and
|
FriendFinderNetworks Inc.
|
[Date] |
TRANSFEREE: | |||
BY: |
cc:
|
Interactive Network, Inc. and
|
FriendFinderNetworks Inc.
|
[Date] |
Very truly yours, | |||
[Name of Transferor] | |||
|
By
|
||
Authorized Signature |
cc:
|
Interactive Network, Inc. and
|
FriendFinderNetworks Inc.
|
|
(1)
|
the Redemption Date,
|
|
(2)
|
the amount of accrued interest to the Redemption Date payable as provided below, if any,
|
|
(3)
|
that on the Redemption Date the redemption price (and accrued interest, if any, to the Redemption Date payable as provided below) will become due and payable upon each such Security to be redeemed, and, unless the Issuers default in making the redemption payment, that interest on Securities called for redemption will cease to accrue on and after said date,
|
|
(4)
|
the place or places where such Securities are to be surrendered for payment of the redemption price and accrued interest, if any,
|
|
(5)
|
the name and address of the Paying Agent,
|
|
(6)
|
that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price, and
|
|
(7)
|
the CUSIP, Common Code and ISIN numbers, if applicable, and that no representation is made as to the accuracy or correctness of the CUSIP, Common Code and ISIN numbers, if applicable, if any, listed in such notice or printed on the Securities.
|
ISSUERS:
|
|||
INTERACTIVE NETWORK, INC. | |||
|
By:
|
/s/ Paul Asher | |
Name: Paul Asher | |||
Title: Secretary |
FRIENDFINDER NETWORKS INC. | |||
|
By:
|
/s/ Paul Asher | |
Name: Paul Asher | |||
Title: Secretary |
GUARANTORS:
|
|||
GENERAL MEDIA ART HOLDING, INC. | |||
GENERAL MEDIA COMMUNICATIONS, INC. | |||
GENERAL MEDIA ENTERTAINMENT, INC. | |||
GMCI INTERNET OPERATIONS, INC. | |||
GMI ON-LINE VENTURES, LTD. | |||
PENTHOUSE IMAGES ACQUISITIONS, LTD. | |||
WEST COAST FACILITIES INC. | |||
PMGI HOLDINGS INC. | |||
PURE ENTERTAINMENT | |||
TELECOMMUNICATIONS, INC. |
PENTHOUSE DIGITAL MEDIA PRODUCTIONS | |||
INC. | |||
VIDEO BLISS, INC. | |||
DANNI ASHE, INC. |
SNAPSHOT PRODUCTIONS, LLC |
GLOBAL ALPHABET, INC.
|
|||
SHARKFISH, INC. | |||
TRAFFIC CAT, INC. | |||
BIG ISLAND TECHNOLOGY GROUP, INC. | |||
FASTCUPID, INC. | |||
MEDLEY.COM INCORPORATED | |||
PPM TECHNOLOGY GROUP, INC. | |||
FRIENDFINDER CALIFORNIA INC. |
VARIOUS, INC. |
TAN DOOR MEDIA INC. |
STREAMRAY INC. | |||
CONFIRM ID, INC. | |||
FRNK TECHNOLOGY GROUP | |||
TRANSBLOOM, INC. | |||
STREAMRAY STUDIOS INC. |
BIG EGO GAMES INC. | |||
|
By:
|
/s/ Paul Asher | |
Name: Paul Asher | |||
Title: Vice President |
TRUSTEE: | |||
U.S. BANK NATIONAL ASSOCIATION | |||
|
By:
|
/s/ Kathy L. Mitchell | |
Name: Kathy L. Mitchell | |||
Title: Vice President |
No. [ ] | Principal Amount $[ ] |
CUSIP NO. |
INTERACTIVE NETWORK, INC. | |||
|
By:
|
||
Name: Paul Asher | |||
Title: Secretary | |||
FRIENDFINDER NETWORKS INC. | |||
|
By:
|
||
Name: Paul Asher | |||
Title: Secretary | |||
By:
|
||
Trust Officer |
Date: | Your Signature: | ||||
Signature | |||||
Guarantee: | |||||
(Signature must be guaranteed) |
|
(1)
|
o |
acquired for the undersigned’s own account, without transfer; or
|
|
(2)
|
o |
transferred to an Issuer; or
|
|
(3)
|
o |
transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); or
|
|
(4)
|
o |
transferred pursuant to an effective registration statement under the Securities Act; or
|
|
(5)
|
o |
transferred pursuant to and in compliance with Regulation S under the Securities Act; or
|
|
(6)
|
o |
transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Section 2.8 of the Indenture); or
|
|
(7)
|
o |
transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended.
|
|
|
|||
Signature
|
||||
|
|
|||
Signature Guarantee: | ||||
(Signature must be guaranteed) |
Signature
|
Dated:
|
Date of Exchange
|
Amount of decrease in
Principal Amount
of this Global Security
|
Amount of increase in
Principal Amount
of this Global Security
|
Principal Amount of this
Global Security following
such decrease or increase
|
Signature of authorized
signatory of Trustee
or Securities Custodian
|
|||||
o | o | o | ||
[2.18(b)] | [2.18(c)] | [2.18(d)] |
Date: | Your | |||
Signature: | ||||
(Sign exactly as your name appears on the other side of this Security) | ||||
Signature | ||||
Guarantee: | ||||
(Signature must be guaranteed) |
No. [ ] | Principal Amount $[ ] |
CUSIP NO. |
INTERACTIVE NETWORK, INC. | |||
|
By:
|
||
Name: | |||
Title: | |||
FRIENDFINDER NETWORKS INC. | |||
|
By:
|
||
Name: | |||
Title: | |||
By:
|
||||
Trust Officer | Date: | , 2010 |
Date: | Your | ||||
Signature: | |||||
Signature | |||||
Guarantee: | |||||
(Signature must be guaranteed) |
Date of Exchange
|
Amount of decrease in
Principal Amount of
this Global Security
|
Amount of increase in
Principal Amount of
this Global Security
|
Principal Amount of this
Global Security following s
uch decrease or increase
|
Signature of authorized
signatory of Trustee
or Securities Custodian
|
|||||
o | o | o | ||
[2.18(b)] | [2.18(c)] | [2.18(d)] |
Date: | Your | ||||
Signature: | |||||
(Sign exactly as your name appears on the other side of this Security) | |||||
Signature | |||||
Guarantee: | |||||
(Signature must be guaranteed) |
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
($ in thousands) | 2007(1) | 2008 | 2009 | 2009 | 2010 | |||||||||||||||
Net revenue
|
||||||||||||||||||||
Internet
|
$ | 20,961 | $ | 306,129 | $ | 306,213 | $ | 153,935 | $ | 160,030 | ||||||||||
Entertainment
|
27,112 | 24,888 | 21,479 | 10,990 | 10,798 | |||||||||||||||
Total
|
$ | 48,073 | $ | 331,017 | $ | 327,692 | $ | 164,925 | $ | 170,828 | ||||||||||
Cost of revenue
|
||||||||||||||||||||
Internet
|
$ | 8,479 | $ | 81,815 | $ | 78,627 | $ | 41,548 | $ | 51,648 | ||||||||||
Entertainment
|
14,851 | 14,699 | 13,070 | 5,931 | 6,210 | |||||||||||||||
Total
|
$ | 23,330 | $ | 96,514 | $ | 91,697 | $ | 47,479 | $ | 57,858 | ||||||||||
Gross profit
|
||||||||||||||||||||
Internet
|
$ | 12,482 | $ | 224,314 | $ | 227,586 | $ | 112,387 | $ | 108,382 | ||||||||||
Entertainment
|
12,261 | 10,189 | 8,409 | 5,059 | 4,588 | |||||||||||||||
Total
|
$ | 24,743 | $ | 234,503 | $ | 235,995 | $ | 117,446 | $ | 112,970 | ||||||||||
Income (loss) from operations
|
||||||||||||||||||||
Internet
|
$ | (964 | ) | $ | 34,345 | $ | 64,962 | $ | 31,277 | $ | 30,297 | |||||||||
Entertainment
|
(7,811 | ) | (17,748 | ) | (439 | ) | 1,840 | 1,180 | ||||||||||||
Unallocated corporate
|
(10,692 | ) | (9,488 | ) | (6,128 | ) | (3,519 | ) | (2,888 | ) | ||||||||||
Total
|
$ | (19,467 | ) | $ | 7,109 | $ | 58,395 | $ | 29,598 | $ | 28,589 |
[NEW OBLIGOR] | |||
|
By:
|
||
Title: | |||
Period
|
Minimum Consolidated EBITDA
|
Four Fiscal Quarters Ending:
|
|
December 31, 2010
|
$85,000,000
|
March 31, 2011
|
$85,000,000
|
June 30, 2011
|
$85,000,000
|
September 30, 2011
|
$85,000,000
|
December 31, 2011
|
$90,000,000
|
March 31, 2012
|
$90,000,000
|
June 30, 2012
|
$90,000,000
|
September 30, 2012
|
$90,000,000
|
December 31, 2012
|
$95,000,000
|
March 31, 2013
|
$95,000,000
|
June 30, 2013
|
$95,000,000
|
September 30, 2013
|
$95,000,000
|
Period
|
Consolidated Coverage Ratio
|
Four Fiscal Quarters Ending:
|
|
December 31, 2011
|
1.9:1.0
|
March 31, 2011
|
1.9:1.0
|
June 30, 2011
|
2.0:1.0
|
September 30, 2011
|
2.0:1.0
|
December 31, 2011
|
2.2:1.0
|
March 31, 2012
|
2.2:1.0
|
June 30, 2012
|
2.3:1.0
|
September 30, 2012
|
2.3:1.0
|
December 31, 2012
|
2.7:1.0
|
March 31, 2013
|
2.7:1.0
|
June 30, 2013
|
2.9:1.0
|
September 30, 2013
|
2.9:1.0
|
Four Fiscal Quarters Ending:
|
Total Debt Ratio
|
December 31, 2010
|
6.5:1.0
|
March 31, 2011
|
6.5:1.0
|
June 30, 2011
|
6.5:1.0
|
September 30, 2011
|
6.5:1.0
|
December 31, 2011
|
6.1:1.0
|
March 31, 2012
|
6.1:1.0
|
June 30, 2012
|
6.1:1.0
|
September 30, 2012
|
6.1:1.0
|
December 31, 2012
|
5.7:1.0
|
March 31, 2013
|
5.7:1.0
|
June 30, 2013
|
5.7:1.0
|
September 30, 2013
|
5.7:1.0
|
Four Fiscal Quarters Ending:
|
First Lien Debt Ratio
|
December 31, 2010
|
3.5:1.0
|
March 31, 2011
|
3.5:1.0
|
June 30, 2011
|
3.3:1.0
|
September 30, 2011
|
3.3:1.0
|
December 31, 2011
|
3.0:1.0
|
March 31, 2012
|
3.0:1.0
|
June 30, 2012
|
2.8:1.0
|
September 30, 2012
|
2.8:1.0
|
December 31, 2012
|
2.5:1.0
|
March 31, 2013
|
2.5:1.0
|
June 30, 2013
|
2.2:1.0
|
September 30, 2013
|
2.2:1.0
|
Schedule No.
|
|
1.1
|
Existing Indebtedness Subject to Recapitalization
|
4.2(a)
|
Permitted Liens
|
4.2(e)
|
Loans, Advances, Investments, Etc.
|
4.2(h)
|
Permitted Restricted Payments
|
4.2(n)
|
Required Minimum Subscribers
|
4.3(a)
|
Consolidated EBITDA
|
4.3(c)
|
Consolidated Coverage Ratios
|
4.3(e)
|
Total Debt Ratio
|
4.3(f)
|
First Lien Debt Ratio
|
5.1(e)(2)
|
Record Holders of FFN Capital Stock
|
5.1(g)
|
Subsidiaries
|
5.1(k)
|
Financial Statements
|
5.1(l)
|
Absence of Certain Changes or Events
|
5.1(m)
|
Taxes, Etc.
|
5.1(q)
|
Real Property
|
5.1(r)
|
Material Contracts
|
5.1(t)
|
Insurance
|
5.1(v)
|
Location of Bank Accounts
|
5.1(w)(1)
|
Exceptions to Intellectual Property Ownership
|
5.1(w)(2)
|
Registered Intellectual Property
|
5.1(w)(3)
|
Employees who have not executed Issuers’ Confidentiality, Non-Solicitation, and Invention Assignment Agreements
|
5.1(y)
|
Name; Jurisdiction of Organization; Organizational ID Number; Chief Place of Business; Chief Executive Office; FEIN
|
5.1(z)
|
Location of Collateral
|
5.1(aa)
|
Existing Indebtedness
|
5.1(gg)
|
Potential Conflicts of Interest
|
5.1(hh)
|
Brokers
|
1.
|
Interactive Network, Inc. – First Lien Senior Secured Notes due 2011
|
$167,093,787
|
2.
|
Interactive Network, Inc. – Second Lien Subordinated Secured Notes due 2011
|
$ 80,000,000
|
3.
|
Interactive Network, Inc. – 6% Subordinated Convertible Notes due 2011
|
$183,517,466
|
4.
|
FriendFinder Networks Inc. (f/k/a) Penthouse Media Group Inc. – August 2005 and August 2006 15% Senior Secured Notes due 2010, as extended
|
$ 46,311,497
|
5.
|
FriendFinder Networks Inc. (f/k/a) Penthouse Media Group Inc. – Subordinated term loan notes.
|
$ 48,654,650
|
$525,577,400
|
Debtor
|
State
|
File No.
|
Filing Type
|
File Date
|
Secured Party
|
Collateral
|
Penthouse Media Group Inc (n/k/a FriendFinder Networks Inc.)
|
DE
|
52740232
54051034
60727636
60937391
|
UCC-1
UCC-1
UCC-1
UCC-1
|
12/23/2005
12/29/2005
03/02/2006
03/20/2006
|
Dell Financial Services, L.P.
|
All computer equipment and peripherals (collectively Equipment) wherever located heretofore or hereafter leased to Lessee by Lessor pursuant to that certain Equipment Lease #007491505-002 dated December 21, 2005, and/or any other Equipment leased pursuant to Leases that are in substantially the same form attached, including without limitation all substitutions, additions, accessions and replacements thereto, and thereof, now or hereafter installed in, affixed to, or used in, conjunction with the Equipment and proceeds thereof together with all rental or installment payments, insurance proceeds, other proceeds and payments due and to become due and arising from or relating to said Equipment.
Equipment Lease #007595601-004 dated December 27, 2005.
Equipment Lease #007491505-003; #007595601-005, each dated January 16, 2006.
Equipment Lease #007595601-006 dated March 14, 2006.
|
Penthouse Media Group Inc (n/k/a FriendFinder Networks Inc.)
|
DE
|
61041532
|
UCC-1
|
03/20/2006
|
NEC Financial Services, Inc.
|
Equipment Lease
|
FriendFinder Networks Inc.
|
NV
|
2009016131-5
|
UCC-1
|
06/29/2009
|
US Bancorp
|
1 KM-5050 PPK8913523BW; 1 KM-5050 PPK8913530BW
|
Various, Inc.
|
CA
|
087146029168
|
UCC-1
|
02/04/2008
|
Dell Financial Services L.P.
|
All computer equipment and peripherals (collectively “Equipment”) wherever located, financed under and described in the Master Lease Agreement (“MLA”) entered into between Lessee and Lessor and all of Lessee’s rights, title and interest in and to use any software and services (collectively “Software”) financed under and described in the MLA, along with any modifications or supplements to the MLA which are incorporated or evidenced in writing and all substitutions, additions, accessions and replacements to the Equipment or Software now or hereafter installed in, affixed to, or used in conjunction with the Equipment or Software and the proceeds thereof together with all payments, insurance proceeds, credits or refunds obtained by Lessee from a manufacturer, licensor or service provider, or other proceeds and payments due and to become due and arising from or relating to such Equipment, Software or the MLA.
|
1)
|
Fulfill obligations to indemnify Marc H. Bell for liability incurred as “custodian” under the Credit Card Processing Services Agreement with Paymentech L.P., dated January 19, 1995, relating to Mr. Bell’s personal responsibility for the payment of credit card charges made by FFN’s customers.
|
2)
|
Open market purchase of equity securities of New Frontier Media (NOOF) (2,066 shares at 1.86 per share for a total value of $ 3,842.76)
|
3)
|
Equity securities of Interactive Publishing SHS (2,475,000 shares valued at 0.0 per share) received as settlement of a receivable from a licensee.
|
4)
|
Additional investment in a money market account, General MNY MKT Fund CL B, in the amount of $9,936.01.
|
|
1.
|
Pay the amounts due and expense reimbursement in the ordinary course of business under the terms of the Management Agreement, as amended pursuant to its Amendment No. 1 dated as of August 17, 2005, its Amendment No. 2 dated as of August 23, 2006 and its Amendment No. 3 dated as of October 8, 2009, until the consummation of a Qualified Initial Public Offering, following which no further such payments shall be made. Fees thereunder may be increased to $1,000,000 annually in the aggregate.
|
|
2.
|
Pay the amounts due under the terms of the Employment Agreement to become effective upon the consummation of a Qualified Initial Public Offering, between FFN and Marc H. Bell and the Employment Agreement, to become effective upon the consummation of a Qualified Initial Public Offering, between FFN and Daniel C. Staton.
|
|
3.
|
Pay the amounts due under the terms of the Agreements dated December 17, 2009, to become effective upon the consummation of a Qualified Initial Public Offering, between FFN and each of (i) Marc H. Bell, (ii) Daniel C. Staton, (iii) Andrew B. Conru Trust Agreement and (iv) Mapstead Trust, created on April 16, 2002.
|
|
4.
|
Fulfill all obligations under lease of office space at 6800 Broken Sound Parkway, Boca Raton, FL 33487 as currently in effect and any extension thereof with the rent or other amounts payable by FFN and its Subsidiaries thereunder not to exceed $150,000 per year.
|
|
5.
|
Pay customary and reasonable salaries and bonuses to personnel (other than Marc H. Bell and Daniel C. Staton) who are on FFN’s payroll and who may also be on the payroll of PET Capital Partners LLC, PET Capital Partners II LLC, Absolute Return Europe Fund, NAFT Ventures I, LLC and their respective managers, principals and affiliates, for services actually performed by such personnel of Obligors in an amount not to exceed $750,000 in the aggregate annually.
|
|
6.
|
Fulfill obligations to indemnify Marc H. Bell for liability incurred as “custodian” under the Credit Card Processing Services Agreement with Paymentech L.P., dated January 19, 1995, relating to Mr. Bell’s personal responsibility for the payment of credit card charges made by FFN’s customers.
|
|
7.
|
Pay amounts due under the terms of that certain Independent Contractor Agreement by and between Various, Inc., and Hinok Media Inc., dated as of September 21, 2007, as amended, and as further amended pursuant to that certain Amendment No. 2 to Independent Contractor Agreement, Assignment and Limited Waiver dated as of October 8, 2009, and that certain Independent Contractor Agreement by and between Various, Inc., and Legendary Technology Inc., dated as of September 21, 2007, as amended pursuant to that certain Amendment No. 1 to Independent Contractor Agreement dated as of October 8, 2009.
|
|
8.
|
All payments to Management Persons and employees of Various, Inc. and Subsidiaries made pursuant to the Transaction Bonus Obligations, as defined in the Stock Purchase Agreement dated September 21, 2007, by and among Various, Inc., The Andrew B. Conru Trust, established November 6, 2001, The Lars Mapstead Trust, established April 18, 2002, Andrew B. Conru, Lars Mapstead and Penthouse Media Group Inc.
|
Adult FriendFinder | = | 819,653 |
Alt.com/Bondage.com | = | 66,590 |
GetItOn | = | 65,009 |
OutPersonals | = | 18,290 |
969,542
|
Big Ego Games Inc.
|
|
State and Date of Incorporation
|
California, September 23, 2010
|
Employer Federal Identification Number
|
TBA
|
California Secretary of State ID Number
|
N/A
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized
Shares Issued
Owner of Shares
|
1,000
100
Various, Inc.
|
Big Island Technology Group, Inc.
|
|
State and Date of Incorporation
|
California, October 30, 2006
|
Employer Federal Identification Number
|
20-8009795
|
California Secretary of State ID Number
|
C2793439
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized
Shares Issued
Owner of Shares
|
100,000
50,000
Various, Inc.
|
Confirm ID, Inc.
|
|
State and Date of Incorporation
|
California, April 8, 2002
|
Employer Federal Identification Number
|
74-3037020
|
California Secretary of State ID Number
|
C2277213
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized
Shares Issued
Owner of Shares
|
20,000,000
100,000
Various, Inc.
|
Danni Ashe, Inc.
|
|
State and Date of Incorporation
|
California, December 18, 1997
|
Employer Federal Identification Number
|
95-4665271
|
California Secretary of State ID Number
|
C2063487
|
Principal Address
|
6800 Broken Sound Parkway NW
Suite 100
Boca Raton, Florida 33487
|
Place(s) of Business
|
California, Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
1,000
100
GMI On-line Ventures, Ltd.
|
Fastcupid, Inc.
|
|
State and Date of Incorporation
|
California, June 14, 2005
|
Employer Federal Identification Number
|
20-2997869
|
California Secretary of State ID Number
|
C2633477
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California and New York
|
Shares Authorized
Shares Issued
Owner of Shares
|
2,000,000
1,000,000
Various, Inc.
|
FriendFinder California Inc.
|
|
State and Date of Incorporation
|
California, September 3, 1999
|
Employer Federal Identification Number
|
77-0522750
|
California Secretary of State ID Number
|
C0276567
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized:
Shares Issued:
Owner of Shares:
|
20,000,000
10,000,000
Various, Inc.
|
FriendFinder GmbH
(Pending Dissolution)
|
|
State and Date of Incorporation
|
Germany, November 7, 2006
|
ID #
|
635/2006
|
Principal Address
|
AM Houllier Platz 4
61381 Friedrichsdorf/Ts
|
Place(s) of Business
|
Germany
|
Shares Authorized
Shares Issued
Owner of Shares
|
25,000
25,000
Various, Inc.
|
FriendFinder Networks Inc.
|
|
State and Date of Incorporation
|
Nevada [Originally filed on January 17, 2006 and amended on March 30, 2006 to reflect the merger of Penthouse Media Group Inc. (DE) into Penthouse Media Group Inc. (NV)]
(Predecessor: Delaware, November 9, 1993)
|
Employer Federal Identification Number
|
13-3750988
|
Nevada Organizational ID Number
|
Entity # E0022932006-7
(Predecessor: Delaware Organizational ID Number 2358813)
|
Principal Address
|
6800 Broken Sound Parkway NW
Boca Raton, Florida 33487
|
Place(s) of Business
|
Nevada, California, Florida and New York
|
FriendFinder Processing Ltd.
(St. Christopher and Nevis)
|
|
State and Date of Incorporation
|
St. Christopher and Nevis, February 1, 2002
|
ID#
|
003373
|
Principal Address
|
Amory Building Victoria Road, Box 1058 Basseterre, St. Christopher & Nevis
|
Place(s) of Business
|
St. Christopher and Nevis
|
Shares Authorized
Shares Issued
Owner of Shares
|
1,000
1,000
Various, Inc
|
FriendFinder United Kingdom Ltd.
(England and Wales)
|
|
State and Date of Incorporation
|
England and Wales, May 24, 2004
|
ID#
|
5135811
|
Principal Address
|
Brinken Merchant Incorporation Limited
Suite 5F, West Wing, Prospect Business Park
Leadgate, Consett, County Durham, DH8 7PW
|
Place(s) of Business
|
United Kingdom
|
Shares Authorized
Shares Issued
Owner of Shares
|
1,000
100
Various, Inc.
|
FRNK Technology Group
|
|
State and Date of Incorporation
|
California, July 22, 1997
|
Employer Federal Identification Number
|
94-3277102
|
California Secretary of State ID Number
|
C2031258
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized
Shares Issued
Owner of Shares
|
100,000
75,000
Big Island Technology Group, Inc.
|
General Media Art Holding, Inc.
|
|
State and Date of Incorporation
|
Delaware, May 8, 1998
|
Employer Federal Identification Number
|
13-4042637
|
Delaware Organizational Identification Number
|
2894325
|
Principal Address
|
20 Broad Street, 14th Fl.
New York, New York 10005
|
Place(s) of Business
|
Delaware
|
Shares Authorized
Shares Issued
Owner of Shares
|
100
100
FriendFinder Networks Inc.
|
General Media Communications, Inc.
|
|
State and Date of Incorporation
|
New York, June 9, 1988
|
Employer Federal Identification Number
|
13-3502237
|
Organizational Identification Number
|
N/A
|
Principal Address
|
20 Broad Street, 14th Fl.
New York, New York 10005
|
Place(s) of Business
|
New York, California and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
1,000 - No Par Value
100
FriendFinder Networks Inc.
|
General Media Entertainment, Inc.
|
|
State and Date of Incorporation
|
New York, June 15, 1990
|
Employer Federal Identification Number
|
13-3592960
|
Organizational Identification Number
|
N/A
|
Principal Address
|
20 Broad Street, 14th Fl.
New York, New York 10005
|
Place(s) of Business
|
New York, California and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
200 - no par value
100
General Media Communications, Inc.
|
Global Alphabet, Inc.
|
|
State and Date of Incorporation
|
California, November 12, 1999
|
Employer Federal Identification Number
|
77-0527649
|
California Secretary of State ID Number
|
C2077311
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized
Shares Issued
Owner of Shares
|
20,000,000
1,000
Interactive Network, Inc.
|
GMCI Internet Operations, Inc.
|
|
State and Date of Incorporation
|
New York, January 11, 2000
|
Employer Federal Identification Number
|
13-4097655
|
Organizational Identification Number
|
N/A
|
Principal Address
|
20 Broad Street, 14th Fl.
New York, New York 10005
|
Place(s) of Business
|
New York and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
100 - $0.001 Par Value
100
General Media Communications, Inc.
|
GMI On-line Ventures, Ltd.
|
|
State and Date of Incorporation
|
Delaware, January 13, 2000
|
Employer Federal Identification Number
|
13-4097656
|
Delaware Organizational Identification Number
|
3159007
|
Principal Address
|
20 Broad Street, 14th Fl.
New York, New York 10005
|
Place(s) of Business
|
Delaware, Florida and New York
|
Shares Authorized
Shares Issued
Owner of Shares
|
100 - $0.01 Par Value
100
FriendFinder Networks Inc.
|
Interactive Network, Inc.
|
|
State and Date of Incorporation
|
Nevada, November 13, 2007
|
Employer Federal Identification Number
|
42-1745941
|
Organizational Identification Number
|
E0781922007-5
|
Principal Address
|
6800 Broken Sound Parkway
Suite 100
Boca Raton, Florida 33487
|
Place(s) of Business
|
Nevada and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
200
1
FriendFinder Networks Inc.
|
Medley.com Incorporated
|
|
State and Date of Incorporation
|
California, July 15, 2002
|
Employer Federal Identification Number
|
03-0543594
|
California Secretary of State ID Number
|
C2278746
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized
Shares Issued
Owner of Shares
|
20,000,000
10,000,000
Various, Inc.
|
NAFT Media, S.L.
|
|
State and Date of Incorporation
|
Madrid, Spain, October 15, 2010
|
Employer Federal Identification Number
|
N/A
|
California Secretary of State ID Number
|
B86038833
|
Principal Address
|
Calle de Zurbano, Numero 76, 4 Derecha
Madrid, Spain 28010
|
Place(s) of Business
|
Madrid, Spain
|
Shares Authorized
Shares Issued
Owner of Shares
|
3,020
3,020
Penthouse Digital Media Productions Inc.
|
Penthouse Clubs International Establishment, Vaduz
|
|
State and Date of Incorporation
|
Liechtenstein, February 22, 1971
|
Employer Federal Identification Number
|
98-0091522
|
Organizational Identification Number
|
H. 254/39
|
Principal Address
|
Allgemeines Treuunternehmen
c/o Dr. Guido Meier
Aeulestrasse 5
P.O. Box 83
FL-9400 Vaduz
Liechtenstein
|
Place(s) of Business
|
Liechtenstein
|
Shares Authorized
Shares Issued
Owner of Shares
|
200
200
General Media Communications, Inc.
|
Penthouse Digital Media Productions Inc.
|
|
State and Date of Incorporation
|
New York, May 9, 2005
|
Employer Federal Identification Number
|
65-1251056
|
Organizational Identification Number
|
N/A
|
Principal Address
|
20 Broad Street, 14th Fl.
New York, New York 10005
|
Place(s) of Business
|
New York and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
200 – no par value
100
General Media Communications, Inc.
|
Penthouse Financial Services N.V.
|
|
State and Date of Incorporation
|
Curacao, Netherlands Antilles
August 18, 1992
|
ID#
|
N/A
|
Principal Address
|
c/o CITCO
De Ruyterkade 62
Curaçao
Netherlands Antilles
|
Place(s) of Business
|
Curacao, Netherlands Antilles
|
Shares Authorized
Shares Issued
Owner of Shares
|
100 - $60 par value
100
General Media Communications, Inc.
|
State and Date of Incorporation
|
Curacao, Netherlands Antilles
August 18, 1992
|
Penthouse Images Acquisitions, Ltd.
|
|
State and Date of Incorporation
|
New York, January 4, 1991
|
Employer Federal Identification Number
|
13-3599228
|
Organizational Identification Number
|
N/A
|
Principal Address
|
20 Broad Street, 14th Fl.
New York, New York 10005
|
Place(s) of Business
|
New York and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
200 - no par value
100
General Media Communications, Inc.
|
PMGI Holdings Inc.
|
|
State and Date of Incorporation
|
Delaware, October 25, 2004
|
Employer Federal Identification Number
|
20-1942663
|
Delaware Organizational Identification Number
|
3872062
|
Principal Address
|
20 Broad Street, 14th Fl.
New York, New York 10005
|
Place(s) of Business
|
Delaware and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
200 - $0.01 Par Value
100
FriendFinder Networks Inc.
|
PPM Technology Group, Inc.
|
|
State and Date of Incorporation
|
California, December 5, 2006
|
Employer Federal Identification Number
|
20-8009876
|
California Secretary of State ID Number
|
C2794043
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized
Shares Issued
Owner of Shares
|
100,000
50,000
Various, Inc.
|
Pure Entertainment Telecommunications, Inc.
|
|
State and Date of Incorporation
|
New York, May 11, 1983
|
Employer Federal Identification Number
|
90-0209626
|
Organizational Identification Number
|
N/A
|
Principal Address
|
20 Broad Street, 14th Fl.
New York, New York 10005
|
Place(s) of Business
|
New York and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
200 - No Par Value
100
General Media Communications, Inc.
|
Sharkfish, Inc.
|
|
State and Date of Incorporation
|
California, July 16, 2004
|
Employer Federal Identification Number
|
56-2471221
|
California Secretary of State ID Number
|
C2627023
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized:
Shares Issued:
Owner of Shares:
|
2,000
1,000
Interactive Network, Inc.
|
Snapshot Productions, LLC
|
|
State and Date of Incorporation
|
Texas, April 4, 2002
|
Employer Federal Identification Number
|
46-0477091
|
Organizational Identification Number
|
800071303
|
Principal Address
|
6800 Broken Sound Parkway
Suite 100
Boca Raton, Florida 33487
|
Place(s) of Business
|
Florida
|
Units Authorized
Units Issued
Owner of Shares
|
N/A
100
Video Bliss, Inc.
|
Streamray, Inc.
(St. Christopher and Nevis)
|
|
State and Date
of Incorporation
|
St. Christopher and Nevis, September 27, 2002
|
ID#
|
003458
|
Principal Address
|
Amory Building Victoria Road, Box 1058 Basseterre, St. Christopher & Nevis
|
Place(s) of Business
|
St. Christopher and Nevis
|
Shares Authorized
Shares Issued
Owner of Shares
|
1,000
1,000
Streamray Inc. (Nevada)
|
Streamray Inc.
|
|
State and Date of Incorporation
|
Nevada, April 9, 1999
|
Employer Federal Identification Number
|
88-0422716
|
Nevada Organizational ID Number
|
C8727-1999
|
Principal Address
|
5258 Eastern Ave
Suite 100
Las Vegas, NV 89119
|
Place(s) of Business
|
Nevada and California
|
Shares Authorized
Shares Issued
Owner of Shares
|
25,000 - Par Value of $1/share
950
Various, Inc.
|
Streamray Processing Limited
(England and Wales)
|
|
State and Date of Incorporation
|
England and Wales, February 27, 2007
|
ID#
|
6129271
|
Principal Address
|
Brinken Merchant Incorporation Limited
Suite 5F, West Wing, Prospect Business Park
Leadgate, Consett, County Durham, DH8 7PW
|
Place(s) of Business
|
England and Wales
|
Shares Authorized
Shares Issued
Owner of Shares
|
1,000
100
Various, Inc.
|
State and Date of Incorporation
|
England and Wales, February 27, 2007
|
Streamray Studios Inc.
|
|
State and Date of Incorporation
|
California, February 13, 2009
|
Employer Federal Identification Number
|
26-4311009
|
California Secretary of State ID Number
|
C3187967
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 95833
|
Place(s) of Business
|
California
|
Shares Authorized
Shares Issued
Owner of Shares
|
1,000
1
Streamray Inc. (NV)
|
Tan Door Media Inc.
|
|
State and Date of Incorporation
|
California, February 13, 2009
|
Employer Federal Identification Number
|
26-4311100
|
California Secretary of State ID Number
|
C3187966
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
1,000
1
GMI On-line Ventures, Ltd.
|
Traffic Cat, Inc.
|
|
State and Date of Incorporation
|
California, July 16, 2004
|
Employer Federal Identification Number
|
56-2471223
|
California Secretary of State ID Number
|
C2627035
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized
Shares Issued
Owner of Shares
|
2,000
1,000
Interactive Network, Inc.
|
Transbloom, Inc.
|
|
State and Date of Incorporation
|
California, November 9, 2001
|
Employer Federal Identification Number
|
74-3021168
|
California Secretary of State ID Number
|
C2275090
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California
|
Shares Authorized
Shares Issued
Owner of Shares
|
20,000,000
10,000,000
Various, Inc.
|
Various, Inc.
|
|
State and Date of Incorporation
|
California, February 10, 1998
|
Employer Federal Identification Number
|
77-0477762
|
California Secretary of State ID Number
|
C2069612
|
Principal Address
|
220 Humboldt Court
Sunnyvale, California 94089
|
Place(s) of Business
|
California, Florida, New York and Nevada
|
Shares Authorized:
Shares Issued:
Owner of Shares:
|
20,000,000 – Par Value of $.001/share
10,931,948
Interactive Network, Inc.
|
Ventnor Enterprise Limited
(England and Wales)
|
|
State and Date of Incorporation
|
England and Wales, February 13, 2009
|
ID#
|
06819033
|
Principal Address
|
Mazars Company Secretaries Limited
Tower Bridge House
St. Katherine’s Way
London E1W1DD, United Kingdom
|
Place(s) of Business
|
England and Wales
|
Shares Authorized
Shares Issued
Owner of Shares
|
100
100
Various, Inc.
|
Video Bliss, Inc.
|
|
State and Date of Incorporation
|
California, February 13, 1996
|
Employer Federal Identification Number
|
95-4566760
|
Organizational Identification Number
|
C1778404
|
Principal Address
|
6800 Broken Sound Parkway NW
Suite 100
Boca Raton, Florida 33487
|
Place(s) of Business
|
California and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
1,000
1,000
GMI On-line Ventures, Ltd.
|
West Coast Facilities Inc.
|
|
State and Date of Incorporation
|
California, June 16, 2005
|
Employer Federal Identification Number
|
59-3814751
|
California Secretary of State ID Number
|
C2753092
|
Principal Address
|
6800 Broken Sound Parkway NW
Suite 100
Boca Raton, Florida 33487
|
Place(s) of Business
|
California and Florida
|
Shares Authorized
Shares Issued
Owner of Shares
|
200 - No Par Value
100
FriendFinder Networks Inc.
|
Wight Enterprise Limited
(England and Wales)
|
|
State and Date of Incorporation
|
England and Wales, February 13, 2009
|
ID #
|
06819092
|
Principal Address
|
Mazars Company Secretaries Limited
Tower Bridge House
St. Katherine’s Way
London E1W1DD, United Kingdom
|
Place(s) of Business
|
England and Wales
|
Shares Authorized
Shares Issued
Owner of Shares
|
100
100
Streamray Inc.
|
(i)
|
Reference is made to the financial statements for the year ended December 31, 2009 as contained in the Confidential Information Memorandum dated September 2010.
|
(ii)
|
Unaudited consolidated financial statements of FFN
|
|
(a)
|
March 2010 (see attached)
|
|
(b)
|
June 2010 (see Confidential Information Memorandum dated September 2010)
|
|
(c)
|
September 2010 (see attached)
|
(iii)
|
Unaudited consolidated income statement flash reports for January, February, March, April, May, June, July, August and September (see attached)
|
ENTITIES
|
BANK NAME
|
A/C NUMBER
|
Type of ACCOUNT
|
BANK ADDRESS
|
|
Penthouse Media Group Inc.
|
|||||
General Media Communications
|
Bank of America
|
005502710149
|
Checking
|
Bank of America, Ft Lauderdale, FL 33301
|
|
Penthouse Media Group Inc
|
Bank of America
|
005505860928
|
Checking
|
Bank of America, Ft Lauderdale, FL 33301
|
|
General Media Communications Depository
|
Suntrust Bank
|
1000031077505
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Penthouse Digital Media Productions
|
Suntrust Bank
|
1000039518005
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
General Media Art Holding
|
Suntrust Bank
|
1000039518013
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
West Coast Facilities
|
Suntrust Bank
|
1000039518021
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
General Media Communications Refunds
|
Suntrust Bank
|
1000039518039
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Pure Entertainment Telecommunications
|
Suntrust Bank
|
1000042340744
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
GMCI Internet Operations
|
Suntrust Bank
|
1000042340751
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
General Media Entertainment
|
Suntrust Bank
|
1000042340769
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
PMGI Holdings
|
Suntrust Bank
|
1000042340835
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Penthouse Images Acquisitions
|
Suntrust Bank
|
1000042340850
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
GMI On Line Ventures
|
Suntrust Bank
|
1000042340876
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
General Media Communications Payroll
|
Suntrust Bank
|
1000042340884
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Penthouse Media Group Inc
|
Suntrust Bank
|
1000046278247
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Video Bliss
|
Suntrust Bank
|
1000049008104
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Video Bliss Depository Acct.
|
Suntrust Bank
|
1000049008310
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
General Media Communications Inc.
|
Suntrust Bank
|
1000042340785
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Penthouse Media Group Inc MMA
|
Suntrust Bank
|
1000031222168
|
Money Market
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Penthouse Media group FSA
|
Suntrust Bank
|
1000031221459
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Tan Door Media Inc.
|
Suntrust Bank
|
1000093748514
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
FriendFinder Networks Inc. - Euros
|
Suntrust Bank
|
3148527
|
Euro Holding Account
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Penthouse Digital Media Productions - Euros
|
Suntrust Bank
|
3148927
|
Euro Holding Account
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
PMGI Holdings Inc. - Euros
|
Suntrust Bank
|
3149027
|
Euro Holding Account
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
GMCI - Euros
|
Suntrust Bank
|
3149127
|
Euro Holding Account
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
General Media Communications, Inc.
|
Wells Fargo Advisors
|
3845-2987
|
Checking
|
53 Wooster Heights Rd, Danbury, CT 06810
|
|
Interactive Network, Inc.
|
|||||
Interactive Network Inc MMA
|
Suntrust Bank
|
1000031221582
|
Money Market
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
Interactive Network Inc
|
Suntrust Bank
|
1000031221442
|
Checking
|
501 S Flagler Dr, West Palm Beach, FL 33401
|
|
FRIENDFINDER INC/VARIOUS
|
|||||
VARIOUS INC - NEW
|
Wells Fargo Bank
|
40000-46953
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
VARIOUS INC
|
Wells Fargo Bank
|
41210-67557
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
VARIOUS INC
|
Wells Fargo Bank
|
40000-47001
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
VARIOUS INC
|
Wells Fargo Bank
|
40000-46979
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
VARIOUS INC
|
Wells Fargo Bank
|
40200-08504
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
FRIENDFINDER INC EUR
|
Wells Fargo Bank
|
7770006497
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
FRIENDFINDER INC GBP
|
Wells Fargo Bank
|
7776003829
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
VARIOUS INC EUR
|
ING Belgium SA
|
ES7701680001810001780349
|
Checking
|
Avenue Marnixlaan 24 B-1000 Brussels, Belgium
|
|
PAYPAL
|
Paypal
|
paypal@ffn.com
|
Merchant
|
2211 North First Street, San Jose, California 95131
|
|
FRIENDFINDER CA INC
|
|||||
FRIENDFINDER CALIFORNIA - NEW
|
Wells Fargo Bank
|
40000-47019
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
Wells Fargo Bank
|
49450-40277
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
||
FASTCUPID
|
|||||
FASTCUPID INC
|
Wells Fargo Bank
|
412-1174718
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
MEDLEY.COM INC.
|
|||||
MEDLEY.COM INC
|
Wells Fargo Bank
|
41210-31553
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
MEDLEY.COM INC
|
Wells Fargo Bank
|
41219-80585
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
MEDLEY.COM INC
|
ITI Bank
|
203-1-028530
|
Merchant
|
409 Silverside Road, Suite 105 Wilmington, DE 19809
|
|
EPASSPORTE
|
Epassporte
|
Vcard 4689048005523427
|
Merchant
|
Landhuis Joonchi Kaya Richard J. Beaujon z/n Curacao, AN 0
|
|
FRNK TECHNOLOGY
|
|||||
Wells Fargo Bank
|
412169-5357
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
||
STREAMRAY, INC.
|
|||||
STREAMRAY - NEW
|
Wells Fargo Bank
|
562-768-7204
|
Checking
|
490 California Ave, Reno, NV 89509
|
|
STREAMRAY - OLD
|
Wells Fargo Bank
|
040-437-8622
|
Checking
|
490 California Ave, Reno, NV 89509
|
|
STREAMRAY - Wire Account
|
Wells Fargo Bank
|
625-221-2029
|
Checking
|
490 California Ave, Reno, NV 89509
|
|
EPASSPORTE
|
Epassporte
|
Vcard 4689043000774281
|
Merchant
|
Landhuis Joonchi Kaya Richard J. Beaujon z/n Curacao, AN 0
|
|
STREAMRAY MERCHANT BANKS - LOCAL AND FOREIGN
|
|||||
Jettis
|
Wells Fargo Bank
|
040-396-6104
|
Checking
|
490 California Ave, Reno, NV 89509
|
|
Redwoods
|
Wells Fargo Bank
|
285-782-6818
|
Checking
|
490 California Ave, Reno, NV 89509
|
|
Humboldt
|
Wells Fargo Bank
|
562-7687196
|
Checking
|
490 California Ave, Reno, NV 89509
|
|
St. Kitts
|
Wells Fargo Bank
|
285-857-6883
|
Checking
|
490 California Ave, Reno, NV 89509
|
|
STREAMRAY INC
|
St.Kitts National Bank
|
42034
|
Merchant
|
P O box 343- Basseterre, St Kitts W.I.
|
|
STREAMRAY STUDIOS, INC
|
|||||
STREAMRAY STUDIOS, INC
|
Wells Fargo Bank
|
412189-5239
|
Checking
|
490 California Ave, Reno, NV 89509
|
|
OTHER SMALL ENTITIES
|
GLOBAL ALPHABET
|
Wells Fargo Bank
|
40000-47027
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
CONFIRM ID
|
Wells Fargo Bank
|
49450-40285
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
PPM TECHNOLOGY
|
Wells Fargo Bank
|
41214-64390
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
|
BIG ISLAND TECHNOLOGY
|
Wells Fargo Bank
|
41214-68359
|
Checking
|
420 Montgomery Street, San Francisco, CA 94104
|
Debtor/Grantor
|
Trade/Assumed Name
|
Various, Inc.
Medley.com, Inc.
|
Friendfinder
Streamray
Adultfriendfinder
AFF
|
General Media Communications, Inc.
|
Penthouse Magazine
Penthouse
|
Lessee/Notice
|
Lessor/Notice
|
Property Address
|
Use of Space
|
Lease/Office Locations
|
|||
Penthouse Media Group Inc.
n/k/a FriendFinder Networks Inc.
|
6800 Broken Sound LLC
|
6800 Broken Sound Parkway NW
Boca Raton, FL 33487
|
FFN Boca Raton Office
|
Streamray Studios Inc.
|
NBP Partners I, LLC
c/o WATT Management Company
Attn: Allison Lynch
|
19749 Dearborn Street
Chatsworth, CA 91311
|
Video Bliss and Streamray Inc. California Office
|
Streamray Inc.
|
Escondido Partners II, LLC
Attn: David Bloom, General Counsel
|
6845 South Escondido Street
Suites 105 and 106
Las Vegas, NV 89119
|
Streamray Inc. Las Vegas Office
|
Penthouse Media Group Inc.
n/k/a FriendFinder Networks Inc.
|
20 Broad Company L.L.C.
c/o Vornado Office Management LLC
Attn: Ronald T. Lo Russo
|
20 Broad Street
New York, NY 10005
|
FFN New York Office
|
Various, Inc.
|
Batton Associates, LLC
c/o W.F. Batton Management Company
Attn: Harold Balzer
|
220 Humboldt Court
Sunnyvale, CA 94089
|
Various, Inc. California Office
|
Storage Locations
|
|||
Penthouse Media Group Inc.
n/k/a FriendFinder Networks Inc.
|
GAM Inventory Management Services
Attn: Elizabeth Van Dyk
|
25 Colony Road
Jersey City, NJ 07305
|
Storage
|
General Media Communications, Inc.
|
Iron Mountain (NJ)
Attn: Patti Sulli
|
235 Main Street
Little Falls, NJ 07424
|
Storage
|
Penthouse Digital Media Productions Inc.
|
Iron Mountain (CA)
Attn: Guy Abrahams
|
1025 North Highland Avenue
Hollywood, CA 90038
|
Storage
|
Video Bliss, Inc.
|
Hollywood Vaults Inc.
Attn: John Scarff
|
742 Seward Street
Hollywood, CA 90038
|
Storage
|
Penthouse Digital Media Productions Inc.
|
Kiss Universal
|
4444 Vineland Avenue
Toluca Lake, CA 91602
|
Storage
|
Penthouse Media Group Inc.
n/k/a FriendFinder Networks Inc.
|
GRM Information Management Services
Attn: Elizabeth Van Dyk
|
215 Coles Street
New Jersey, NJ 07310
|
Storage
|
General Media Communications, Inc.
|
Total Records Information Management, LLC
Attn: Denise Miller
|
29 Reyerson Street
Brooklyn, NY 11205
|
Storage
|
General Media Communications, Inc.
|
Iron Mountain Limited (UK)
Attn: Ivana Romito
|
Unit B
Prologis Park
Twelvetrees Crescent
London E3 3JH
|
Storage
|
Penthouse Media Group Inc.
n/k/a FriendFinder Networks Inc.
|
South Congress Mini Storage
|
1200 Holland Drive
Boca Raton, FL 33487
|
Storage
|
Penthouse Digital Media Productions Inc.
|
Public Storage
|
8512 National Blvd
Culver City, CA 90232
|
Storage
|
Collocation Facilities
|
|||
Penthouse Media Group Inc.
n/k/a FriendFinder Networks Inc.
|
Equinix (Formerly Switch & Data)
|
444 Toyama Drive
Sunnyvale, CA 94089
|
Offsite Disaster Recovery/Collocation Facility
|
Penthouse Media Group Inc.
n/k/a FriendFinder Networks Inc.
|
SAVVIS
|
2401 Walsh Ave
Santa Clara, CA 95051
|
Offsite Disaster Recovery/Collocation Facility
|
Video Bliss, Inc. & Streamray Inc.
|
AT&T
|
19749 Dearborn Street
Chatsworth, CA 91311
|
Collocation Facility
|
Issuers’ Debt Summary
|
|
10/27/2010
|
|
14% Senior Secured Notes Due 2013
|
$ 305,000,000
|
Cash Pay Secured Notes Due 2013
|
13,777,790
|
Non-Cash Pay Secured Notes due 2014
|
232,457,118
|
Total Debt Outstanding
|
$ 551,234,908
|
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE | 1 | |||
SECTION 1.1.
|
Definitions
|
1
|
||
SECTION 1.2.
|
Incorporation by Reference of Trust Indenture Act
|
31
|
||
SECTION 1.3.
|
Terms Generally
|
32
|
||
SECTION 1.4.
|
Accounting and Other Terms
|
32
|
||
SECTION 1.5.
|
Time References
|
33
|
||
ARTICLE II THE SECURITIES
|
33 | |||
SECTION 2.1.
|
Form, Dating and Terms
|
33
|
||
SECTION 2.2.
|
Execution and Authentication
|
40
|
||
SECTION 2.3.
|
Registrar and Paying Agent; Conversion Agent
|
41
|
||
SECTION 2.4.
|
Paying Agent to Hold Money in Trust
|
41
|
||
SECTION 2.5.
|
Holder Lists
|
42
|
||
SECTION 2.6.
|
Transfer and Exchange
|
42
|
||
SECTION 2.7.
|
Form of Certificate to be Delivered upon Termination of Restricted Period
|
46
|
||
SECTION 2.8.
|
Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors
|
47
|
||
SECTION 2.9.
|
Form of Certificate to be Delivered in Connection with Transfers of Beneficial Interests in a Rule 144A Security Pursuant to Regulation S
|
49
|
||
SECTION 2.10.
|
Mutilated, Destroyed, Lost or Stolen Securities
|
51
|
||
SECTION 2.11.
|
Outstanding Securities
|
52
|
||
SECTION 2.12.
|
Temporary Securities
|
52
|
||
SECTION 2.13.
|
Cancellation
|
52
|
||
SECTION 2.14.
|
Payment of Interest
|
53
|
||
SECTION 2.15.
|
Apportionment of Payments
|
55
|
||
SECTION 2.16.
|
Computation of Interest
|
55
|
||
SECTION 2.17.
|
Optional Redemption of Securities
|
56
|
||
SECTION 2.18.
|
Mandatory Prepayment of Securities; Offers to Purchase Securities
|
57
|
||
SECTION 2.19.
|
Additional Amounts
|
65
|
||
SECTION 2.20.
|
CUSIP, Common Code and ISIN Numbers
|
68
|
||
SECTION 2.21.
|
Additional Securities
|
68
|
||
ARTICLE III REGISTRATION
|
68
|
|||
SECTION 3.1.
|
Registration Under the Securities Act
|
68
|
||
SECTION 3.2.
|
Registration Procedures
|
71
|
||
SECTION 3.3.
|
Participation of Broker-Dealers in Exchange Offer
|
76
|
||
SECTION 3.4.
|
Indemnification and Contribution
|
77
|
||
ARTICLE IV COVENANTS
|
80
|
|||
SECTION 4.1.
|
Affirmative Covenants
|
80
|
||
SECTION 4.2.
|
Negative Covenants
|
89
|
||
SECTION 4.3.
|
Financial Covenants
|
94
|
||
ARTICLE V REPRESENTATIONS AND WARRANTIES
|
95 | |||
SECTION 5.1.
|
Representations and Warranties of the Obligors
|
95
|
||
ARTICLE VI DEFAULTS AND REMEDIES
|
109 | |||
SECTION 6.1.
|
Events of Default
|
109
|
||
SECTION 6.2.
|
Acceleration
|
113
|
||
SECTION 6.3.
|
Other Remedies
|
114
|
||
SECTION 6.4.
|
No Waivers or Election of Remedies, Expenses, Etc
|
114
|
||
SECTION 6.5.
|
Waiver of Past Defaults
|
114
|
||
SECTION 6.6.
|
Control by Majority
|
115
|
||
SECTION 6.7.
|
Limitation on Suits
|
115
|
||
SECTION 6.8.
|
Rights of Holders to Receive Payment
|
116
|
||
SECTION 6.9.
|
Collection Suit by Trustee
|
116
|
||
SECTION 6.10.
|
Trustee May File Proofs of Claim
|
116
|
||
SECTION 6.11.
|
Priorities
|
116
|
||
SECTION 6.12.
|
Undertaking for Costs
|
117
|
||
ARTICLE VII TRUSTEE
|
117 | |||
SECTION 7.1.
|
Duties of Trustee
|
117
|
||
SECTION 7.2.
|
Rights of Trustee
|
119
|
||
SECTION 7.3.
|
Individual Rights of Trustee
|
120
|
||
SECTION 7.4.
|
Trustee’s Disclaimer
|
120
|
||
SECTION 7.5.
|
Notice of Defaults
|
121
|
||
SECTION 7.6.
|
Reports by Trustee to Holders
|
121
|
||
SECTION 7.7.
|
Compensation and Indemnity
|
121
|
||
SECTION 7.8.
|
Replacement of Trustee
|
122
|
||
SECTION 7.9.
|
Successor Trustee by Merger
|
123
|
||
SECTION 7.10.
|
Eligibility; Disqualification
|
123
|
||
SECTION 7.11.
|
Preferential Collection of Claims Against the Issuers
|
124
|
||
SECTION 7.12.
|
Trustee’s Application for Instruction from the Issuers
|
124
|
||
ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE
|
124 | |||
SECTION 8.1.
|
Discharge of Liability on Securities; Defeasance
|
124
|
||
SECTION 8.2.
|
Conditions to Defeasance
|
126
|
||
SECTION 8.3.
|
Application of Trust Money
|
127
|
||
SECTION 8.4.
|
Repayment to the Issuers
|
127
|
||
SECTION 8.5.
|
Indemnity for U.S. Government Obligations
|
127
|
||
SECTION 8.6.
|
Reinstatement
|
128
|
||
ARTICLE IX AMENDMENTS
|
128 | |||
SECTION 9.1.
|
Without Consent of Holders
|
128
|
||
SECTION 9.2.
|
With Consent of Holders
|
129
|
||
SECTION 9.3.
|
Compliance with Trust Indenture Act
|
131
|
||
SECTION 9.4.
|
Revocation and Effect of Consents and Waivers
|
131
|
||
SECTION 9.5.
|
Notation on or Exchange of Securities
|
131
|
||
SECTION 9.6.
|
Trustee to Sign Amendments
|
131
|
||
ARTICLE X GUARANTY
|
132 | |||
SECTION 10.1.
|
Guaranty
|
132
|
||
SECTION 10.2.
|
Limitation on Liability; Termination, Release and Discharge
|
133
|
||
SECTION 10.3.
|
Right of Contribution
|
134
|
||
SECTION 10.4.
|
No Subrogation.
|
134
|
||
SECTION 10.5.
|
Waiver
|
135
|
||
SECTION 10.6.
|
Continuing Guaranty; Assignments
|
135
|
||
SECTION 10.7.
|
Liens on Real Property; Other Waivers
|
135
|
||
SECTION 10.8.
|
Condition of Issuers and their Subsidiaries
|
136
|
||
SECTION 10.9.
|
Subordination of Subsidiary Guarantee
|
137
|
||
ARTICLE XI COLLATERAL AND SECURITY
|
137 | |||
SECTION 11.1.
|
The Collateral
|
137
|
||
SECTION 11.2.
|
Change in Collateral; Collateral Records; Collateral Locations
|
138
|
||
SECTION 11.3.
|
Further Assurances
|
138
|
||
SECTION 11.4.
|
Impairment of Security Interest
|
139
|
||
SECTION 11.5.
|
Real Estate Mortgages and Filings
|
140
|
||
SECTION 11.6.
|
Additional Guaranties and Security Documents
|
140
|
||
SECTION 11.7.
|
Release of Liens on the Collateral
|
141
|
||
SECTION 11.8.
|
Authorization of Actions to be Taken by the Trustee or the Collateral Agent Under the Security Documents
|
142
|
||
ARTICLE XII MISCELLANEOUS
|
144 | |||
SECTION 12.1.
|
Trust Indenture Act Controls
|
144
|
||
SECTION 12.2.
|
Notices
|
144
|
||
SECTION 12.3.
|
Communication by Holders with other Holders
|
145
|
||
SECTION 12.4.
|
Certificate and Opinion as to Conditions Precedent
|
145
|
||
SECTION 12.5.
|
Statements Required in Certificate or Opinion
|
146
|
||
SECTION 12.6.
|
When Securities Disregarded
|
146
|
||
SECTION 12.7.
|
Rules by Trustee, Paying Agent and Registrar
|
147
|
||
SECTION 12.8.
|
Legal Holidays
|
147
|
||
SECTION 12.9.
|
GOVERNING LAW
|
147
|
||
SECTION 12.10.
|
CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE
|
147
|
||
SECTION 12.11.
|
No Recourse Against Others
|
148
|
||
SECTION 12.12.
|
Successors
|
148
|
||
SECTION 12.13.
|
Counterparts
|
148
|
||
SECTION 12.14.
|
Qualification of Indenture
|
148
|
||
SECTION 12.15.
|
Table of Contents; Headings
|
149
|
||
SECTION 12.16.
|
WAIVERS OF JURY TRIAL
|
149
|
||
SECTION 12.17.
|
Force Majeure
|
149
|
||
SECTION 12.18.
|
Expenses; Attorneys’ Fees
|
149
|
||
SECTION 12.19.
|
[Reserved]
|
150
|
||
SECTION 12.20.
|
Severability
|
150
|
||
SECTION 12.21.
|
Consent by the Trustee and Holders
|
150
|
||
SECTION 12.22.
|
No Party Deemed Drafter
|
150
|
||
SECTION 12.23.
|
Reinstatement; Certain Payments
|
150
|
||
SECTION 12.24.
|
Indemnification
|
151
|
SECTION 12.25.
|
Binding Effect
|
151
|
||
SECTION 12.26.
|
Interest
|
152
|
||
ARTICLE XIII SUBORDINATION
|
153 | |||
SECTION 13.1.
|
Agreement to Subordinate
|
153
|
||
SECTION 13.2.
|
Liquidation; Dissolution; Bankruptcy
|
153
|
||
SECTION 13.3.
|
Acceleration of Securities
|
154
|
||
SECTION 13.4.
|
When Distribution Must Be Paid Over
|
154
|
||
SECTION 13.5.
|
Notice by the Issuers
|
154
|
||
SECTION 13.6.
|
Subrogation
|
154
|
||
SECTION 13.7.
|
Relative Rights
|
154
|
||
SECTION 13.8.
|
Subordination may not be Impaired by the Issuers
|
155
|
||
SECTION 13.9.
|
Distribution or Notice to Representative
|
155
|
||
SECTION 13.10.
|
Rights of Trustee and Paying Agent
|
155
|
||
SECTION 13.11.
|
Authorization to Effect Subordination
|
155
|
||
SECTION 13.12.
|
Amendments
|
155
|
||
ARTICLE XIV CONVERSION
|
156 | |||
SECTION 14.1.
|
Conversion Privilege and Conversion Price
|
156
|
||
SECTION 14.2.
|
Exercise of Conversion Privilege
|
156
|
||
SECTION 14.3.
|
Fractional Shares
|
158
|
||
SECTION 14.4.
|
Adjustment of Conversion Price
|
158
|
||
SECTION 14.5.
|
Notice of Adjustments of Conversion Price and Conversion Limit
|
159
|
||
SECTION 14.6.
|
Reservation and Authorization of FFN Voting Common Stock
|
160
|
||
SECTION 14.7.
|
Taxes on Conversion
|
161
|
||
SECTION 14.8.
|
Cancellation of Converted Securities
|
161
|
||
SECTION 14.9.
|
Changes in Common Stock
|
161
|
||
SECTION 14.10.
|
No Voting or Dividend Rights
|
162
|
||
EXHIBIT A | Form of Series A Note | |||
EXHIBIT B | Form of Series B Note | |||
EXHIBIT C | Form of Confidentiality Agreement | |||
EXHIBIT D | Form of Management Report | |||
EXHIBIT E | Form of Joinder Agreement |
|
(1)
|
reasonable out-of-pocket expenses and fees relating to such Event of Loss (including, without limitation, legal, accounting and appraisal and insurance adjuster fees);
|
|
(2)
|
all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP as a consequence of such Event of Loss;
|
|
(3)
|
repayment of Indebtedness (other than Indebtedness evidenced by the Securities, the Cash Pay Second Lien Securities and the Senior Lien Securities) that is secured by a higher priority Lien than the Indebtedness evidenced by these Securities by the property or assets that are the subject of such Event of Loss; and
|
|
(4)
|
appropriate amounts to be provided by the Issuers as a reserve, in accordance with GAAP, against any liabilities associated with such Event of Loss and retained by the Issuers after such Event of Loss, including, without limitation, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Event of Loss.
|
By
|
_____________________________________
|
|
_____________________________________
|
|
Authorized Signature
|
By
|
_____________________________________
|
|
_____________________________________
|
|
Authorized Signature
|
|
(1)
|
the Redemption Date,
|
|
(2)
|
the amount of accrued interest to the Redemption Date payable as provided below, if any,
|
|
(3)
|
that on the Redemption Date the redemption price (and accrued interest, if any, to the Redemption Date payable as provided below) will become due and payable upon each such Security to be redeemed, and, unless the Issuers default in making the redemption payment, that interest on Securities called for redemption will cease to accrue on and after said date,
|
|
(4)
|
the place or places where such Securities are to be surrendered for payment of the redemption price and accrued interest, if any,
|
|
(5)
|
the name and address of the Paying Agent,
|
|
(6)
|
that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price,
|
|
(7)
|
the CUSIP, Common Code and ISIN numbers, if applicable, and that no representation is made as to the accuracy or correctness of the CUSIP, Common Code and ISIN numbers, if applicable, if any, listed in such notice or printed on the Securities, and
|
|
(8)
|
if the Redemption Date is after the consummation of a Qualified Initial Public Offering, information indicating the reasonably satisfactory existence of the Issuers’ financial capability to satisfy such redemption obligations.
|
By:
|
/s/ Paul Asher
|
|
Name: Paul Asher
|
|
Title: Secretary
|
By:
|
/s/ Paul Asher
|
|
Name: Paul Asher
|
|
Title: Secretary
|
By:
|
/s/ Paul Asher
|
|
Name: Paul Asher
|
|
Title: Vice President
|
By:
|
/s/ Kathy L. Mitchell
|
|
Name: Kathy L. Mitchell
|
|
Title: Vice President
|
No. [ ] | Principal Amount $[ ] | ||
CUSIP NO.
|
By:
|
___________________________________
|
|
Name:
|
|
Title:
|
By:
|
___________________________________
|
|
Name:
|
|
Title:
|
(1)
|
o |
acquired for the undersigned’s own account, without transfer; or
|
(2)
|
o |
transferred to an Issuer; or
|
(3)
|
o |
transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); or
|
(4)
|
o |
transferred pursuant to an effective registration statement under the Securities Act; or
|
(5)
|
o |
transferred pursuant to and in compliance with Regulation S under the Securities Act; or
|
(6)
|
o |
transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Section 2.8 of the Indenture); or
|
(7)
|
o |
transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended.
|
___________________________________
Signature
|
|
Signature Guarantee:
|
|
_______________________________
(Signature must be guaranteed)
|
___________________________________
Signature
|
Date of Exchange
|
Amount of decrease in
Principal Amount of
this Global Security
|
Amount of increase in
Principal Amount of
this Global Security
|
Principal Amount of
this Global Security following
such decrease or increase
|
Signature of authorized
signatory of Trustee
or Securities Custodian
|
||||
o | o | o | ||
[2.18(b)] | [2.18(c)] | [2.18(d)] |
Date:
_______
|
Your
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Security)
|
Signature
Guarantee:
|
____________________________________________________________
(Signature must be guaranteed)
|
No. [ ] | Principal Amount $[ ] | ||
CUSIP NO.
|
|
INTERACTIVE NETWORK INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
FRIENDFINDER NETWORKS INC.
|
|
By:
|
|
Name:
|
|
Title:
|
By:
|
|
|
|
Trust Officer
|
Date: ____________, 2010
|
Date:
|
Your
|
|||||
Signature:
|
||||||
Signature
Guarantee:
|
||||||
(Signature must be guaranteed) |
Sign exactly as your name appears on the other side of this Security.
|
Date of
Exchange
|
Amount of decrease in
Principal
Amount of this Global
Security
|
Amount of increase in
Principal
Amount of this Global
Security
|
Principal Amount of this
Global
Security following such
decrease or increase
|
Signature of
authorized
signatory of Trustee
or
Securities Custodian
|
||||
o | o | o | ||
[2.18(b)] | [2.18(c)] | [2.18(d)] |
Date:
|
Your
|
|||||
Signature:
|
||||||
(Sign exactly as your name appears on the other side of this Security)
|
||||||
Signature
Guarantee:
|
||||||
(Signature must be guaranteed) |
Year Ended December 31,
|
Six Months
Ended June 30, |
|||||||||||||||||||
($ in thousands)
|
2007(1)
|
2008
|
2009
|
2009
|
2010
|
|||||||||||||||
Net revenue
|
||||||||||||||||||||
Internet
|
$ | 20,961 | $ | 306,129 | $ | 306,213 | $ | 153,935 | $ | 160,030 | ||||||||||
Entertainment
|
27,112 | 24,888 | 21,479 | 10,990 | 10,798 | |||||||||||||||
Total
|
$ | 48,073 | $ | 331,017 | $ | 327,692 | $ | 164,925 | $ | 170,828 | ||||||||||
Cost of revenue
|
||||||||||||||||||||
Internet
|
$ | 8,479 | $ | 81,815 | $ | 78,627 | $ | 41,548 | $ | 51,648 | ||||||||||
Entertainment
|
14,851 | 14,699 | 13,070 | 5,931 | 6,210 | |||||||||||||||
Total
|
$ | 23,330 | $ | 96,514 | $ | 91,697 | $ | 47,479 | $ | 57,858 | ||||||||||
Gross profit
|
||||||||||||||||||||
Internet
|
$ | 12,482 | $ | 224,314 | $ | 227,586 | $ | 112,387 | $ | 108,382 | ||||||||||
Entertainment
|
12,261 | 10,189 | 8,409 | 5,059 | 4,588 | |||||||||||||||
Total
|
$ | 24,743 | $ | 234,503 | $ | 235,995 | $ | 117,446 | $ | 112,970 | ||||||||||
Income (loss) from operations
|
||||||||||||||||||||
Internet
|
$ | (964 | ) | $ | 34,345 | $ | 64,962 | $ | 31,277 | $ | 30,297 | |||||||||
Entertainment
|
(7,811 | ) | (17,748 | ) | (439 | ) | 1,840 | 1,180 | ||||||||||||
Unallocated corporate
|
(10,692 | ) | (9,488 | ) | (6,128 | ) | (3,519 | ) | (2,888 | ) | ||||||||||
Total
|
$ | (19,467 | ) | $ | 7,109 | $ | 58,395 | $ | 29,598 | $ | 28,589 |
Period
|
Minimum
Consolidated
EBITDA
|
|
Four Fiscal Quarters Ending:
|
||
December 31, 2010
|
$85,000,000
|
|
March 31, 2011
|
$85,000,000
|
|
June 30, 2011
|
$85,000,000
|
|
September 30, 2011
|
$85,000,000
|
|
December 31, 2011
|
$90,000,000
|
|
March 31, 2012
|
$90,000,000
|
|
June 30, 2012
|
$90,000,000
|
|
September 30, 2012
|
$90,000,000
|
|
December 31, 2012
|
$95,000,000
|
|
March 31, 2013
|
$95,000,000
|
|
June 30, 2013
|
$95,000,000
|
|
September 30, 2013
|
$95,000,000
|
Period
|
Consolidated
Coverage Ratio
|
|
Four Fiscal Quarters Ending:
|
||
December 31, 2011
|
1.9:1.0
|
|
March 31, 2011
|
1.9:1.0
|
|
June 30, 2011
|
2.0:1.0
|
|
September 30, 2011
|
2.0:1.0
|
|
December 31, 2011
|
2.2:1.0
|
|
March 31, 2012
|
2.2:1.0
|
|
June 30, 2012
|
2.3:1.0
|
|
September 30, 2012
|
2.3:1.0
|
|
December 31, 2012
|
2.7:1.0
|
|
March 31, 2013
|
2.7:1.0
|
|
June 30, 2013
|
2.9:1.0
|
|
September 30, 2013
|
2.9:1.0
|
Four Fiscal Quarters Ending:
|
Total Debt Ratio
|
|
December 31, 2010
|
6.5:1.0
|
|
March 31, 2011
|
6.5:1.0
|
|
June 30, 2011
|
6.5:1.0
|
|
September 30, 2011
|
6.5:1.0
|
|
December 31, 2011
|
6.1:1.0
|
|
March 31, 2012
|
6.1:1.0
|
|
June 30, 2012
|
6.1:1.0
|
|
September 30, 2012
|
6.1:1.0
|
|
December 31, 2012
|
5.7:1.0
|
|
March 31, 2013
|
5.7:1.0
|
|
June 30, 2013
|
5.7:1.0
|
|
September 30, 2013
|
5.7:1.0
|
Four Fiscal Quarters Ending:
|
First Lien Debt Ratio
|
|
December 31, 2010
|
3.5:1.0
|
|
March 31, 2011
|
3.5:1.0
|
|
June 30, 2011
|
3.3:1.0
|
|
September 30, 2011
|
3.3:1.0
|
|
December 31, 2011
|
3.0:1.0
|
|
March 31, 2012
|
3.0:1.0
|
|
June 30, 2012
|
2.8:1.0
|
|
September 30, 2012
|
2.8:1.0
|
|
December 31, 2012
|
2.5:1.0
|
|
March 31, 2013
|
2.5:1.0
|
|
June 30, 2013
|
2.2:1.0
|
|
September 30, 2013
|
2.2:1.0
|
ARTICLE I
|
||||
DEFINITIONS AND INCORPORATION BY REFERENCE
|
||||
SECTION 1.1.
|
Definitions
|
1
|
||
SECTION 1.2.
|
Incorporation by Reference of Trust Indenture Act
|
31
|
||
SECTION 1.3.
|
Terms Generally
|
31
|
||
SECTION 1.4.
|
Accounting and Other Terms
|
32
|
||
SECTION 1.5.
|
Time References
|
32
|
||
ARTICLE II
|
||||
THE SECURITIES
|
||||
SECTION 2.1.
|
Form, Dating and Terms
|
32
|
||
SECTION 2.2.
|
Execution and Authentication
|
40
|
||
SECTION 2.3.
|
Registrar and Paying Agent
|
41
|
||
SECTION 2.4.
|
Paying Agent to Hold Money in Trust
|
41
|
||
SECTION 2.5.
|
Holder Lists
|
42
|
||
SECTION 2.6.
|
Transfer and Exchange
|
42
|
||
SECTION 2.7.
|
Form of Certificate to be Delivered upon Termination of Restricted Period
|
46
|
||
SECTION 2.8.
|
Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors
|
47
|
||
SECTION 2.9.
|
Form of Certificate to be Delivered in Connection with Transfers of Beneficial Interests in a Rule 144A Security Pursuant to Regulation S
|
49
|
||
SECTION 2.10.
|
Mutilated, Destroyed, Lost or Stolen Securities
|
50
|
||
SECTION 2.11.
|
Outstanding Securities
|
51
|
||
SECTION 2.12.
|
Temporary Securities
|
52
|
||
SECTION 2.13.
|
Cancellation
|
52
|
||
SECTION 2.14.
|
Payment of Interest
|
53
|
||
SECTION 2.15.
|
Apportionment of Payments
|
53
|
||
SECTION 2.16.
|
Computation of Interest
|
54
|
||
SECTION 2.17.
|
Optional Redemption of Securities
|
54
|
||
SECTION 2.18.
|
Mandatory Prepayment of Securities; Offers to Purchase Securities
|
56
|
||
SECTION 2.19.
|
Additional Amounts
|
64
|
||
SECTION 2.20.
|
CUSIP, Common Code and ISIN Numbers
|
67
|
||
ARTICLE III
|
||||
registration
|
||||
SECTION 3.1.
|
Registration Under the Securities Act
|
67
|
||
SECTION 3.2.
|
Registration Procedures
|
70
|
||
SECTION 3.3.
|
Participation of Broker-Dealers in Exchange Offer
|
75
|
||
SECTION 3.4.
|
Indemnification and Contribution
|
76
|
||
ARTICLE IV
|
||||
COVENANTS
|
||||
SECTION 4.1.
|
Affirmative Covenants
|
79
|
||
SECTION 4.2.
|
Negative Covenants
|
88
|
||
SECTION 4.3.
|
Financial Covenants
|
93
|
||
ARTICLE V
|
||||
REPRESENTATIONS AND WARRANTIES
|
||||
SECTION 5.1.
|
Representations and Warranties of the Obligors
|
93
|
||
ARTICLE VI
|
||||
DEFAULTS AND REMEDIES
|
||||
SECTION 6.1.
|
Events of Default
|
108
|
||
SECTION 6.2.
|
Acceleration
|
111
|
||
SECTION 6.3.
|
Other Remedies
|
113
|
||
SECTION 6.4.
|
No Waivers or Election of Remedies, Expenses, Etc
|
113
|
||
SECTION 6.5.
|
Waiver of Past Defaults
|
114
|
||
SECTION 6.6.
|
Control by Majority
|
114
|
||
SECTION 6.7.
|
Limitation on Suits
|
114
|
||
SECTION 6.8.
|
Rights of Holders to Receive Payment
|
115
|
||
SECTION 6.9.
|
Collection Suit by Trustee
|
115
|
||
SECTION 6.10.
|
Trustee May File Proofs of Claim
|
115
|
||
SECTION 6.11.
|
Priorities
|
116
|
||
SECTION 6.12.
|
Undertaking for Costs
|
116
|
||
ARTICLE VII
|
||||
TRUSTEE
|
||||
SECTION 7.1.
|
Duties of Trustee
|
117
|
||
SECTION 7.2.
|
Rights of Trustee
|
118
|
SECTION 7.3.
|
Individual Rights of Trustee
|
119
|
||
SECTION 7.4.
|
Trustee’s Disclaimer
|
120
|
||
SECTION 7.5.
|
Notice of Defaults
|
120
|
||
SECTION 7.6.
|
Reports by Trustee to Holders
|
120
|
||
SECTION 7.7.
|
Compensation and Indemnity
|
120
|
||
SECTION 7.8.
|
Replacement of Trustee
|
121
|
||
SECTION 7.9.
|
Successor Trustee by Merger
|
122
|
||
SECTION 7.10.
|
Eligibility; Disqualification
|
123
|
||
SECTION 7.11.
|
Preferential Collection of Claims Against the Issuers
|
123
|
||
SECTION 7.12.
|
Trustee’s Application for Instruction from the Issuers
|
123
|
||
ARTICLE VIII
|
||||
DISCHARGE OF INDENTURE; DEFEASANCE
|
||||
SECTION 8.1.
|
Discharge of Liability on Securities; Defeasance
|
123
|
||
SECTION 8.2.
|
Conditions to Defeasance
|
125
|
||
SECTION 8.3.
|
Application of Trust Money
|
126
|
||
SECTION 8.4.
|
Repayment to the Issuers
|
127
|
||
SECTION 8.5.
|
Indemnity for U.S. Government Obligations
|
127
|
||
SECTION 8.6.
|
Reinstatement
|
127
|
||
ARTICLE IX
|
||||
AMENDMENTS
|
||||
SECTION 9.1.
|
Without Consent of Holders
|
128
|
||
SECTION 9.2.
|
With Consent of Holders
|
129
|
||
SECTION 9.3.
|
Compliance with Trust Indenture Act
|
130
|
||
SECTION 9.4.
|
Revocation and Effect of Consents and Waivers
|
130
|
||
SECTION 9.5.
|
Notation on or Exchange of Securities
|
131
|
||
SECTION 9.6.
|
Trustee to Sign Amendments
|
131
|
||
ARTICLE X
|
||||
GUARANTY
|
||||
SECTION 10.1.
|
Guaranty
|
131
|
||
SECTION 10.2.
|
Limitation on Liability; Termination, Release and Discharge
|
133
|
||
SECTION 10.3.
|
Right of Contribution
|
134
|
||
SECTION 10.4.
|
No Subrogation
|
134
|
||
SECTION 10.5.
|
Waiver
|
134
|
||
SECTION 10.6.
|
Continuing Guaranty; Assignments
|
135
|
||
SECTION 10.7.
|
Liens on Real Property; Other Waivers
|
135
|
||
SECTION 10.8.
|
Condition of Issuers and their Subsidiaries
|
136
|
||
ARTICLE XI
|
||||
COLLATERAL AND SECURITY
|
||||
SECTION 11.1.
|
The Collateral
|
136
|
||
SECTION 11.2.
|
Change in Collateral; Collateral Records; Collateral Locations
|
137
|
||
SECTION 11.3.
|
Further Assurances
|
138
|
||
SECTION 11.4.
|
Impairment of Security Interest
|
139
|
||
SECTION 11.5.
|
Real Estate Mortgages and Filings
|
139
|
||
SECTION 11.6.
|
Additional Guaranties and Security Documents
|
140
|
||
SECTION 11.7.
|
Release of Liens on the Collateral
|
140
|
||
SECTION 11.8.
|
Authorization of Actions to be Taken by the Trustee or the Collateral Agent Under the Security Documents
|
142
|
||
ARTICLE XII
|
||||
MISCELLANEOUS
|
||||
SECTION 12.1.
|
Trust Indenture Act Controls
|
143
|
||
SECTION 12.2.
|
Notices
|
144
|
||
SECTION 12.3.
|
Communication by Holders with other Holders
|
144
|
||
SECTION 12.4.
|
Certificate and Opinion as to Conditions Precedent
|
145
|
||
SECTION 12.5.
|
Statements Required in Certificate or Opinion
|
145
|
||
SECTION 12.6.
|
When Securities Disregarded
|
146
|
||
SECTION 12.7.
|
Rules by Trustee, Paying Agent and Registrar
|
146
|
||
SECTION 12.8.
|
Legal Holidays
|
146
|
||
SECTION 12.9.
|
GOVERNING LAW
|
146
|
||
SECTION 12.10.
|
CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE
|
146
|
||
SECTION 12.11.
|
No Recourse Against Others
|
147
|
||
SECTION 12.12.
|
Successors
|
147
|
||
SECTION 12.13.
|
Counterparts
|
147
|
||
SECTION 12.14.
|
Qualification of Indenture
|
148
|
||
SECTION 12.15.
|
Table of Contents; Headings
|
148
|
||
SECTION 12.16.
|
WAIVERS OF JURY TRIAL
|
148
|
||
SECTION 12.17.
|
Force Majeure
|
149
|
||
SECTION 12.18.
|
Expenses; Attorneys’ Fees
|
149
|
||
SECTION 12.19.
|
[Reserved]
|
149
|
||
SECTION 12.20.
|
Severability
|
149
|
||
SECTION 12.21.
|
Consent by the Trustee and Holders
|
149
|
||
SECTION 12.22.
|
No Party Deemed Drafter
|
149
|
||
SECTION 12.23.
|
Reinstatement; Certain Payments
|
150
|
||
SECTION 12.24.
|
Indemnification
|
150
|
||
SECTION 12.25.
|
Binding Effect
|
151
|
||
SECTION 12.26.
|
Interest
|
151
|
EXHIBIT A | Form of Series A Note | |||
EXHIBIT B | Form of Series B Note | |||
EXHIBIT C | Form of Confidentiality Agreement | |||
EXHIBIT D | Form of Management Report | |||
EXHIBIT E | Form of Joinder Agreement |
SCHEDULE 1.1 – Existing Indebtedness Subject to Recapitalization
|
|
SCHEDULE 1.2 – Subscription Agreements
|
|
SCHEDULE 4.2(a) – Permitted Liens
|
|
SCHEDULE 4.2(e) – Loans, Advances, Investments, Etc.
|
|
SCHEDULE 4.2(h) – Permitted Restricted Payments
|
|
SCHEDULE 4.2(n) – Required Minimum Subscribers
|
|
SCHEDULE 4.3(a) – Consolidated EBITDA
|
|
SCHEDULE 4.3(c) – Consolidated Coverage Ratio
|
|
SCHEDULE 4.3(e) – Total Debt Ratio
|
|
SCHEDULE 4.3(f) – First Lien Debt Ratio
|
|
SCHEDULE 5.1(e)(2) – Record Holders of FFN Capital Stock
|
|
SCHEDULE 5.1(g) – Subsidiaries
|
|
SCHEDULE 5.1(k) – Financial Statements
|
|
SCHEDULE 5.1(l) – Certain Changes or Events
|
|
SCHEDULE 5.1(m) – Taxes
|
|
SCHEDULE 5.1(q) – Real Property
|
|
SCHEDULE 5.1(r) – Material Contracts
|
|
SCHEDULE 5.1(t) – Insurance
|
|
SCHEDULE 5.1(v) – Location of Bank Accounts
|
|
SCHEDULE 5.1(w)(1) – Exceptions to Intellectual Property Ownership
|
|
SCHEDULE 5.1(w)(2) – Registered Intellectual Property
|
|
SCHEDULE 5.1(w)(3) – Employees who have not executed Issuers’ Confidentiality, Non-Solicitation, and Invention Assignment Agreements
|
|
SCHEDULE 5.1(y) – Name; Jurisdiction of Organization; Organization ID Number; Chief Place of Business; Chief Executive Office; FEIN
|
|
SCHEDULE 5.1(z) – Location of Collateral
|
|
SCHEDULE 5.1(aa) – Existing Indebtedness
|
|
SCHEDULE 5.1(gg) – Potential Conflict of Interest
|
|
SCHEDULE 5.1(hh) – Brokers
|
|
By _____________________________________
|
|
_____________________________________
|
|
Authorized Signature
|
cc:
|
Interactive Network, Inc. and
|
|
FriendFinder Networks Inc.
|
cc:
|
Interactive Network, Inc. and
|
|
FriendFinder Networks Inc.
|
|
By _____________________________________
|
|
_____________________________________
|
|
Authorized Signature
|
cc:
|
Interactive Network, Inc. and
|
|
FriendFinder Networks Inc.
|
|
(1)
|
the Redemption Date,
|
|
(2)
|
the amount of accrued interest to the Redemption Date payable as provided below, if any,
|
|
(3)
|
that on the Redemption Date the redemption price (and accrued interest, if any, to the Redemption Date payable as provided below) will become due and payable upon each such Security to be redeemed, and, unless the Issuers default in making the redemption payment, that interest on Securities called for redemption will cease to accrue on and after said date,
|
|
(4)
|
the place or places where such Securities are to be surrendered for payment of the redemption price and accrued interest, if any,
|
|
(5)
|
the name and address of the Paying Agent,
|
|
(6)
|
that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price, and
|
|
(7)
|
the CUSIP, Common Code and ISIN numbers, if applicable, and that no representation is made as to the accuracy or correctness of the CUSIP, Common Code and ISIN numbers, if applicable, if any, listed in such notice or printed on the Securities.
|
|
By: /s/Paul Asher
Name: Paul Asher
Title: Secretary
|
|
By: /s/Paul Asher
Name: Paul Asher
Title: Secretary
|
|
By: /s/Paul Asher
Name: Paul Asher
Title: Vice President
|
|
By: /s/Kathy L. Mitchell
Name: Kathy L. Mitchell
Title: Vice President
|
No. [ ] | Principal Amount $[ ] |
CUSIP NO. |
INTERACTIVE NETWORK, INC. | |||
|
By:
|
/s/ Paul Asher | |
Name: Paul Asher | |||
Title: Secretary | |||
FRIENDFINDER NETWORKS INC.
|
|||
|
By:
|
/s/ Paul Asher | |
Name: Paul Asher | |||
Title : Secretary | |||
Date: | Your Signature: |
Signature
Guarantee:
|
|
(1)
|
o |
acquired for the undersigned’s own account, without transfer; or
|
|
(2)
|
o |
transferred to an Issuer; or
|
|
(3)
|
o |
transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); or
|
|
(4)
|
o |
transferred pursuant to an effective registration statement under the Securities Act; or
|
|
(5)
|
o |
transferred pursuant to an effective registration statement under the Securities Act; or
|
|
(6)
|
o |
transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Section 2.8 of the Indenture); or
|
|
(7)
|
o |
transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended.
|
___________________________________
Signature
|
|
Signature Guarantee:
|
|
_______________________________
(Signature must be guaranteed)
|
___________________________________
Signature
|
Date of Exchange
|
Amount of decrease in Principal Amount of this Global Security
|
Amount of increase in Principal Amount of this Global Security
|
Principal Amount of this Global Security following such decrease or increase
|
Signature of authorized signatory of Trustee or Securities Custodian
|
||||
o | o | o |
[2.18(b)] | [2.18(c)] | [2.18(d)] |
Date:
______________
|
Your
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Security)
|
Signature
Guarantee:
|
____________________________________________________________
(Signature must be guaranteed)
|
No. [ ] | Principal Amount $[ ] |
CUSIP NO. |
INTERACTIVE NETWORK, INC. | |||
|
By:
|
/s/ | |
Name: | |||
Title: | |||
FRIENDFINDER NETWORKS INC.
|
|||
|
By:
|
/s/ | |
Name: | |||
Title : | |||
By: | |||
Trust Officer |
Date: ____________, 2010
|
||
Date: | Your Signature: |
Signature
Guarantee:
|
Date of
Exchange
|
Amount of decrease in
Principal
Amount of this Global
Security
|
Amount of increase in
Principal
Amount of this Global
Security
|
Principal Amount of this
Global
Security following such
decrease or increase
|
Signature of
authorized
signatory of Trustee
or
Securities Custodian
|
||||
o | o | o |
[2.18(b)] | [2.18(c)] | [2.18(d)] |
Date: | Your Signature: |
Signature
Guarantee:
|
Six Months
|
||||||||||||||||||||
Year Ended December 31,
|
Ended June 30,
|
|||||||||||||||||||
($ in thousands)
|
2007(1)
|
2008
|
2009
|
2009
|
2010
|
|||||||||||||||
Net revenue
|
||||||||||||||||||||
Internet
|
$ | 20,961 | $ | 306,129 | $ | 306,213 | $ | 153,935 | $ | 160,030 | ||||||||||
Entertainment
|
27,112 | 24,888 | 21,479 | 10,990 | 10,798 | |||||||||||||||
Total
|
$ | 48,073 | $ | 331,017 | $ | 327,692 | $ | 164,925 | $ | 170,828 | ||||||||||
Cost of revenue
|
||||||||||||||||||||
Internet
|
$ | 8,479 | $ | 81,815 | $ | 78,627 | $ | 41,548 | $ | 51,648 | ||||||||||
Entertainment
|
14,851 | 14,699 | 13,070 | 5,931 | 6,210 | |||||||||||||||
Total
|
$ | 23,330 | $ | 96,514 | $ | 91,697 | $ | 47,479 | $ | 57,858 | ||||||||||
Gross profit
|
||||||||||||||||||||
Internet
|
$ | 12,482 | $ | 224,314 | $ | 227,586 | $ | 112,387 | $ | 108,382 | ||||||||||
Entertainment
|
12,261 | 10,189 | 8,409 | 5,059 | 4,588 | |||||||||||||||
Total
|
$ | 24,743 | $ | 234,503 | $ | 235,995 | $ | 117,446 | $ | 112,970 | ||||||||||
Income (loss) from operations
|
||||||||||||||||||||
Internet
|
$ | (964 | ) | $ | 34,345 | $ | 64,962 | $ | 31,277 | $ | 30,297 | |||||||||
Entertainment
|
(7,811 | ) | (17,748 | ) | (439 | ) | 1,840 | 1,180 | ||||||||||||
Unallocated corporate
|
(10,692 | ) | (9,488 | ) | (6,128 | ) | (3,519 | ) | (2,888 | ) | ||||||||||
Total
|
$ | (19,467 | ) | $ | 7,109 | $ | 58,395 | $ | 29,598 | $ | 28,589 |
[NEW OBLIGOR]
|
|||
|
By:
|
||
Title: | |||
Period
|
Minimum Consolidated EBITDA
|
|
Four Fiscal Quarters Ending:
|
||
December 31, 2010
|
$85,000,000
|
|
March 31, 2011
|
$85,000,000
|
|
June 30, 2011
|
$85,000,000
|
|
September 30, 2011
|
$85,000,000
|
|
December 31, 2011
|
$90,000,000
|
|
March 31, 2012
|
$90,000,000
|
|
June 30, 2012
|
$90,000,000
|
|
September 30, 2012
|
$90,000,000
|
|
December 31, 2012
|
$95,000,000
|
|
March 31, 2013
|
$95,000,000
|
|
June 30, 2013
|
$95,000,000
|
|
September 30, 2013
|
$95,000,000
|
Period
|
Consolidated
Coverage Ratio
|
|
Four Fiscal Quarters Ending:
|
||
December 31, 2011
|
1.9:1.0
|
|
March 31, 2011
|
1.9:1.0
|
|
June 30, 2011
|
2.0:1.0
|
|
September 30, 2011
|
2.0:1.0
|
|
December 31, 2011
|
2.2:1.0
|
|
March 31, 2012
|
2.2:1.0
|
|
June 30, 2012
|
2.3:1.0
|
|
September 30, 2012
|
2.3:1.0
|
|
December 31, 2012
|
2.7:1.0
|
|
March 31, 2013
|
2.7:1.0
|
|
June 30, 2013
|
2.9:1.0
|
|
September 30, 2013
|
2.9:1.0
|
Four Fiscal Quarters Ending:
|
Total Debt Ratio
|
|
December 31, 2010
|
6.5:1.0
|
|
March 31, 2011
|
6.5:1.0
|
|
June 30, 2011
|
6.5:1.0
|
|
September 30, 2011
|
6.5:1.0
|
|
December 31, 2011
|
6.1:1.0
|
|
March 31, 2012
|
6.1:1.0
|
|
June 30, 2012
|
6.1:1.0
|
|
September 30, 2012
|
6.1:1.0
|
|
December 31, 2012
|
5.7:1.0
|
|
March 31, 2013
|
5.7:1.0
|
|
June 30, 2013
|
5.7:1.0
|
|
September 30, 2013
|
5.7:1.0
|
Four Fiscal Quarters Ending:
|
First Lien Debt Ratio
|
|
December 31, 2010
|
3.5:1.0
|
|
March 31, 2011
|
3.5:1.0
|
|
June 30, 2011
|
3.3:1.0
|
|
September 30, 2011
|
3.3:1.0
|
|
December 31, 2011
|
3.0:1.0
|
|
March 31, 2012
|
3.0:1.0
|
|
June 30, 2012
|
2.8:1.0
|
|
September 30, 2012
|
2.8:1.0
|
|
December 31, 2012
|
2.5:1.0
|
|
March 31, 2013
|
2.5:1.0
|
|
June 30, 2013
|
2.2:1.0
|
|
September 30, 2013
|
2.2:1.0
|
Issuer
|
Record Owner
|
Class of
Shares
|
Number of
Outstanding
Shares
Owned by the
Grantor
|
Number of
Shares
Pledged
Hereunder
|
Par or
Liquidation
Value
|
Big Ego Games Inc.
|
Various, Inc.
|
Common
|
100
|
100
|
No par value
|
Big Island Technology Group, Inc.
|
Various, Inc.
|
Common
|
50,000
|
50,000
|
No par value
|
Confirm ID, Inc.
|
Various, Inc.
|
Common
|
100,000
|
100,000
|
No par value
|
Danni Ashe, Inc.
|
GMI On-line Ventures, Ltd.
|
Common
|
100
|
100
|
No par value
|
Fastcupid, Inc.
|
Various, Inc.
|
Common
|
1,000,000
|
1,000,000
|
No par value
|
FriendFinder California Inc.
|
Various, Inc.
|
Common
|
10,000,000
|
10,000,000
|
No par value
|
FRNK Technology Group
|
Big Island Technology Group, Inc.
|
Common
|
75,000
|
75,000
|
No par value
|
General Media Art Holding, Inc.
|
FriendFinder Networks Inc.
|
Common
|
100
|
100
|
No par value
|
General Media Communications, Inc.
|
FriendFinder Networks Inc.
|
Common
|
100
|
100
|
No par value
|
General Media Entertainment, Inc.
|
General Media Communications, Inc.
|
Common
|
100
|
100
|
No par value
|
Global Alphabet, Inc.
|
Interactive Network, Inc.
|
Common
|
1,000
|
1,000
|
No par value
|
GMCI Internet Operations, Inc.
|
General Media Communications, Inc.
|
Common
|
100
|
100
|
$0.001 par value
|
GMI On-line Ventures, Ltd.
|
FriendFinder Networks Inc.
|
Common
|
100
|
100
|
$0.01 par value
|
Interactive Network,Inc.
|
FriendFinder Networks Inc.
|
Common
|
1
|
1
|
No par value
|
Medley.com Incorporated
|
Various, Inc.
|
Common
|
10,000,000
|
10,000,000
|
No par value
|
Penthouse Digital Media Productions Inc.
|
General Media Communications, Inc.
|
Common
|
100
|
100
|
No par value
|
Penthouse Images Acquisitions, Ltd.
|
General Media Communications, Inc.
|
Common
|
100
|
100
|
No par value
|
PMGI Holdings Inc.
|
FriendFinder Networks Inc.
|
Common
|
100
|
100
|
$0.01 par value
|
PPM Technology Group, Inc.
|
Various, Inc.
|
Common
|
50,000
|
50,000
|
No par value
|
Pure Entertainment Telecommunications, Inc.
|
General Media Communications, Inc.
|
Common
|
100
|
100
|
No par value
|
Sharkfish, Inc.
|
Interactive Network, Inc.
|
Common
|
1,000
|
1,000
|
No par value
|
Snapshot Productions, LLC
|
Video Bliss, Inc.
|
Common
|
100
|
100
|
No par value
|
Streamray Inc.
|
Various, Inc.
|
Common
|
950
|
950
|
$1 par value
|
Streamray Studios Inc.
|
Streamray Inc.
|
Common
|
1
|
1
|
No par value
|
Tan Door Media Inc.
|
GMI On-line Ventures, Ltd.
|
Common
|
1
|
1
|
No par value
|
Traffic Cat, Inc.
|
Interactive Network, Inc.
|
Common
|
1,000
|
1,000
|
No par value
|
Transbloom, Inc.
|
Various, Inc.
|
Common
|
10,000,000
|
10,000,000
|
No par value
|
Various, Inc.
|
Interactive Network, Inc.
|
Common
|
10,931,948
|
10,931,948
|
$0.001 par value
|
Video Bliss, Inc.
|
GMI On-line Ventures, Ltd.
|
Common
|
1,000
|
1,000
|
No par value
|
West Coast Facilities Inc.
|
FriendFinder Networks Inc.
|
Common
|
100
|
100
|
No par value
|
NAFT News Corporation*
|
FriendFinder Networks Inc.
|
Common
|
100
|
100
|
No par value
|
Playtime Gaming Inc.*
|
FriendFinder Networks Inc.
|
Common
|
100
|
100
|
No par value
|
FriendFinder Ventures Inc.**
|
FriendFinder Networks Inc.
|
Common
|
100
|
100
|
No par value
|
FriendFinder GmbH (pending dissolution)
|
Various, Inc.
|
N/A
|
25,000 Euros
|
16,250 Euros
|
N/A
|
FriendFinder Processing Ltd.
|
Various, Inc.
|
Common
|
1,000
|
650
|
N/A
|
FriendFinder United Kingdom Ltd. (England and Wales)
|
Various, Inc.
|
Common
|
100
|
65
|
N/A
|
NAFT Media, S.L.
|
Penthouse Digital Media Productions Inc.
|
Common
|
3,020
|
1,963
|
N/A
|
Penthouse Clubs International Establishment, Vaduz
|
General Media Communications, Inc.
|
Founders’ Rights
|
200
|
130
|
N/A
|
Penthouse Financial Services N.V.
|
General Media Communications, Inc.
|
Common
|
100
|
65
|
$60 par value
|
Streamray, Inc.
|
Streamray Inc. (NV)
|
Common
|
1,000
|
650
|
N/A
|
Streamray Processing Limited
|
Various, Inc.
|
Common
|
100
|
65
|
N/A
|
Ventnor Enterprise Limited
|
Various, Inc.
|
Common
|
100
|
65
|
N/A
|
Wight Enterprise Limited
|
Streamray Inc. (NV)
|
Common
|
100
|
65
|
N/A
|
*Entities were formed post-closing and executed joinder agreements on November 12, 2010.
|
|||||
**Entity was formed post-closing and executed a joinder agreement on January 4, 2011.
|
Number of
|
|||||||||||
Outstanding
|
Number of
|
||||||||||
Shares
|
Shares
|
Par or
|
|||||||||
Class of
|
Owned by the
|
Pledged
|
Liquidation
|
||||||||
Issuer
|
Record Owner
|
Shares
|
Grantor
|
Hereunder
|
Value
|
||||||
Big Ego Games Inc.
|
Various, Inc.
|
Common
|
100 | 100 |
No par value
|
||||||
Big Island Technology Group, Inc.
|
Various, Inc.
|
Common
|
50,000 | 50,000 |
No par value
|
||||||
Confirm ID, Inc.
|
Various, Inc.
|
Common
|
100,000 | 100,000 |
No par value
|
||||||
Danni Ashe, Inc.
|
GMI On-line Ventures, Ltd.
|
Common
|
100 | 100 |
No par value
|
||||||
Fastcupid, Inc.
|
Various, Inc.
|
Common
|
1,000,000 | 1,000,000 |
No par value
|
||||||
FriendFinder California Inc.
|
Various, Inc.
|
Common
|
10,000,000 | 10,000,000 |
No par value
|
||||||
FRNK Technology Group
|
Big Island Technology Group,
|
Common
|
75,000 | 75,000 |
No par value
|
||||||
Inc.
|
|||||||||||
General Media Art Holding, Inc.
|
FriendFinder Networks Inc.
|
Common
|
100 | 100 |
No par value
|
||||||
General Media Communications, Inc.
|
FriendFinder Networks Inc.
|
Common
|
100 | 100 |
No par value
|
||||||
General Media Entertainment, Inc.
|
General Media
|
Common
|
100 | 100 |
No par value
|
||||||
Communications, Inc.
|
|||||||||||
Global Alphabet, Inc.
|
Interactive Network, Inc.
|
Common
|
1,000 | 1,000 |
No par value
|
||||||
GMCI Internet Operations, Inc.
|
General Media
|
Common
|
100 | 100 |
$0.001 par
|
||||||
Communications, Inc.
|
value
|
||||||||||
GMI On-line Ventures, Ltd.
|
FriendFinder Networks Inc.
|
Common
|
100 | 100 |
$0.01 par
|
||||||
value
|
|||||||||||
Interactive Network,Inc.
|
FriendFinder Networks Inc.
|
Common
|
1 | 1 |
No par value
|
||||||
Medley.com Incorporated
|
Various, Inc.
|
Common
|
10,000,000 | 10,000,000 |
No par value
|
||||||
Penthouse Digital Media Productions Inc.
|
General Media
|
Common
|
100 | 100 |
No par value
|
||||||
Communications, Inc.
|
|||||||||||
Penthouse Images Acquisitions, Ltd.
|
General Media
|
Common
|
100 | 100 |
No par value
|
||||||
Communications, Inc.
|
|||||||||||
PMGI Holdings Inc.
|
FriendFinder Networks Inc.
|
Common
|
100 | 100 |
$0.01 par
|
||||||
value
|
|||||||||||
PPM Technology Group, Inc.
|
Various, Inc.
|
Common
|
50,000 | 50,000 |
No par value
|
||||||
Pure Entertainment Telecommunications,
|
General Media
|
Common
|
100 | 100 |
No par value
|
||||||
Inc.
|
Communications, Inc.
|
||||||||||
Sharkfish, Inc.
|
Interactive Network, Inc.
|
Common
|
1,000 | 1,000 |
No par value
|
||||||
Snapshot Productions, LLC
|
Video Bliss, Inc.
|
Common
|
100 | 100 |
No par value
|
||||||
Streamray Inc.
|
Various, Inc.
|
Common
|
950 | 950 |
$1 par value
|
||||||
Streamray Studios Inc.
|
Streamray Inc.
|
Common
|
1 | 1 |
No par value
|
||||||
Tan Door Media Inc.
|
GMI On-line Ventures, Ltd.
|
Common
|
1 | 1 |
No par value
|
||||||
Traffic Cat, Inc.
|
Interactive Network, Inc.
|
Common
|
1,000 | 1,000 |
No par value
|
||||||
Transbloom, Inc.
|
Various, Inc.
|
Common
|
10,000,000 | 10,000,000 |
No par value
|
||||||
Various, Inc.
|
Interactive Network, Inc.
|
Common
|
10,931,948 | 10,931,948 |
$0.001 par
|
||||||
value
|
|||||||||||
Video Bliss, Inc.
|
GMI On-line Ventures, Ltd.
|
Common
|
1,000 | 1,000 |
No par value
|
||||||
West Coast Facilities Inc.
|
FriendFinder Networks Inc.
|
Common
|
100 | 100 |
No par value
|
||||||
FriendFinder GmbH (pending dissolution)
|
Various, Inc.
|
N/A
|
25,000 Euros
|
16,250 |
N/A
|
||||||
Euros
|
|||||||||||
FriendFinder Processing Ltd.
|
Various, Inc.
|
Common
|
1,000 | 650 |
N/A
|
||||||
FriendFinder United Kingdom Ltd.
|
Various, Inc.
|
Common
|
100 | 65 |
N/A
|
||||||
(England and Wales)
|
|||||||||||
NAFT Media, S.L.
|
Penthouse Digital Media
|
Common
|
3,020 | 1,963 |
N/A
|
||||||
Productions Inc.
|
Penthouse Financial Services N.V.
|
General Media
|
Common
|
100 | 65 |
$60 par
|
||||||
Communications, Inc.
|
value
|
||||||||||
Streamray, Inc.
|
Streamray Inc. (NV)
|
Common
|
1,000 | 650 | N/A | ||||||
Streamray Processing Limited
|
Various, Inc.
|
Common
|
100 | 65 | N/A | ||||||
Ventnor Enterprise Limited
|
Various, Inc.
|
Common
|
100 | 65 | N/A | ||||||
Wight Enterprise Limited
|
Streamray Inc. (NV)
|
Common
|
100 | 65 | N/A |
Issuer
|
Record Owner
|
Principal Amount
|
Title
|
Issuer
|
Record Owner
|
Class of Shares
|
Number of
Outstanding Shares Owned
by the Grantor
|
Number of
Shares Pledged
Hereunder
|
Par or
Liquidation
Value
|
|||||
Issuer
|
Record Owner
|
Principal Amount
|
Title
|
|||||
By: | |||||
Name: | |||||
Title: |
|
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
By: | |||||
Name: | |||||
Title: |
Exhibit 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (Agreement) made as of the ____ day of March, 2011 between FRIENDFINDER NETWORKS INC., a Nevada corporation (the Company) having an office at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and DANIEL C. STATON (the Executive).
WHEREAS, the Company desires to employ the Executive and the Executive desires to accept such employment by the Company on the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows:
1.
Employment. The Company hereby employs the Executive, and the Executive hereby accepts such employment by the Company, upon the terms and conditions set forth below.
2.
Term. Subject to the provisions for termination herein provided, the employment of the Executive shall commence as of the date the Company consummates its initial public offering (the Effective Date) and shall continue for a term of five (5) years (the Term).
3.
Duties and Responsibilities.
3.1
During the Term, the Executive shall have the position of Chairman of the Board of the Company and in connection therewith, the Executive shall perform such executive duties and responsibilities commonly incident to such office as may be assigned to him from time to time by or under the authority of the Board of Directors of the Company (the Board), and, in the absence of such assignment, such duties customary to such offices as are necessary to the operations of the Company.
3.2
The Executives employment by the Company shall be full-time, and during the Term, the Executive agrees that he will devote his business time and attention, his best efforts, and all of his skill and ability to promote the interests of the Company. Notwithstanding the foregoing, the Executive shall be permitted to devote up to twenty percent (20%) of his business time to such other business activities that the Executive desires, engage in charitable and civic activities and manage his personal passive investments; provided, however, that such activities (individually or collectively) (a) do not interfere with the performance of his duties or responsibilities under this Agreement and (b) do not injure the reputation, business or business relationships of the Company or any of its affiliates as determined by the Company in good faith.
3.3
The Executives services shall be substantially performed at the Companys offices in Boca Raton, Florida, subject to necessary travel requirements of his position and duties hereunder.
3.4
Nothing contained herein shall require the Executive to follow any directive or to perform any act which would violate any laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority. The Executive shall act in accordance with all laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority.
4.
Compensation.
4.1
Base Salary. Subject to Section 9 hereof, during the Term, the Company shall pay the Executive $1,000,000 per annum (the Base Salary) in accordance with the Companys customary payroll practices as in effect from time to time. The Base Salary may be increased in each fiscal year of the Company following the first anniversary of the date hereof (the First Anniversary) at the rate of ten percent (10%) of the then current Base Salary.
4.2
Bonus. In addition to the Base Salary, the Executive will be eligible to receive a performance bonus during each year of employment with the Company during the Term of up to one hundred percent (100%) of the Base Salary. The award of each years performance bonus, if any, shall be based upon the following performance criteria: (a) seventy-five percent (75%) based on the compensation committees objective evaluation of revenue growth, successful integration of acquisitions, EBITDA growth and margin improvement and (b) twenty-five percent (25%) based on the compensation committees subjective evaluation of the Executives performance. Such determination shall be made after consultation with the Executive within sixty (60) days following the end of each Fiscal Year during the Term commencing with the Fiscal Year ended December 31, 2011. For the Fiscal Year 2011, the criteria set forth above shall be evaluated commencing on the Effective Date. The Executive must be employed by the Company through December 31 of the applicable Fiscal Year in order to receive a bonus with respect to such Fiscal Year. Subject to Section 9 hereof, the Company shall pay any performance bonus payable hereunder within seventy-four (74) days following the end of the applicable Fiscal Year; provided, however, to the extent any portion of the bonus (the "Excess Bonus"), is not deductible by the Company pursuant to Section 162(m) of the Code, then such Excess Bonus shall not be paid to the Executive until the first day of the month
1
following the date of Executive's termination of employment with the Company. The full performance bonus that may be awarded pursuant to this Section 4.2, as it may be increased from time to time in the discretion of the Board, shall be referred to herein as the Bonus.
4.3
Stock Options. The Company shall grant on the Effective Date an option to purchase 4,167 shares of common stock of the Company and on each anniversary of the Effective Date of this Agreement during the Term (each such grant, an Option); provided, that, the Executive is employed by the Company on each such date. The respective exercise price per share of each Option shall be no less than the fair market value of the underlying shares on the date the Option is granted. If the Option is granted on or prior to the date of the Companys initial public offering of its common stock pursuant to an effective registration statement filed with the Securities Exchange Commission (the IPO), the fair market value of the Companys common stock shall be determined in good faith by the Board in compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the Code). If the Option is granted after the IPO, the fair market value of the Companys common stock shall be determined based on the closing price on the trading day immediately before the grant date. Subject to accelerated vesting provisions set forth in Section 6 herein, each Option shall vest as to twenty percent (20%) of the shares subject to such Option on the first anniversary of the grant of such Option and as to twenty percent (20%) of the shares subject to such Option on each anniversary thereafter, subject to the Executives continued employment with the Company on the relevant vesting dates. In all other respects, each Option shall be subject to the terms, definitions and provisions of the Companys 2008 Stock Option Plan, as amended from time to time, and the stock option agreement by and between the Executive and the Company (the Option Agreement).
4.4
Restricted Stock. On the First Anniversary and on each anniversary thereafter during the Term, the Company shall issue to the Executive 2,500 shares of restricted stock (the Restricted Stock); provided, that, the Executive is employed by the Company on each such date, which stock the Executive shall not sell, transfer, assign or otherwise convey prior to the third anniversary of the date such Restricted Stock is issued. In the event that the Executive ceases to be employed by the Company, except for termination of the Executives employment under Certain Circumstances or due to the Executives death, disability (as defined under the Companys Restricted Stock Plan) or termination of the Executives employment upon the expiration of the Term, the Company shall have the right to repurchase any Restricted Stock issued less than three years prior to the date of such termination at a price equal to the lesser of (a) fair market value as of the date of such repurchase and (b) $2.00 per share. The Company shall provide written notice to the Executive of its intention to exercise such repurchase right no later than five (5) days after the date of termination of employment and the repurchase of the Restricted Stock shall be consummated within ten (10) days of such notice.
For purposes of this Agreement, Certain Circumstances shall mean the termination of the Executives employment (i) by the Company Without Cause (as defined in Section 5.1); or (ii) by the Executive for Good Reason (as defined in Section 5.2); or (iii) as a result of a Change in Control (as defined in Section 6).
4.5
Share Adjustment. All share amounts contemplated in Sections 4.3 and 4.4 are subject to appropriate adjustment in the event of a stock split, reverse stock split, merger, recapitalization and similar transactions which may take place after the date hereof.
4.6
Expenses. The Company shall pay or reimburse the Executive for all reasonable out-of-pocket expenses incurred by the Executive, accompanied by vouchers therefore in accordance with the Companys policies, in the course of providing management services to the Company.
4.7
Vacation. The Executive shall be entitled to four (4) weeks of paid vacation during each calendar year, to be taken during such calendar year at times selected by the Executive, as well as paid holidays and personal days according to the Company policy in effect from time to time.
4.8
Benefits. During the Term of this Agreement, the Executive shall be eligible to participate in each of the Companys existing or future benefit plans, policies or arrangements maintained by the Company and made available to employees generally, as well as all such existing or future benefit plans, policies or arrangements maintained by the Company for the benefit of executives. Except as specifically provided for herein, no additional compensation under any such plan, policy or arrangement shall be deemed to modify or otherwise effect the terms of this Agreement.
5.
Termination.
5.1
Termination by the Company for Cause. The Company may terminate the Executives employment and this Agreement at any time during the Term for Cause, effective immediately upon written notice to the Executive of such termination. For purposes of this Section 5.1, Cause shall mean: a willful failure or refusal on Executives part to perform Executives duties under this Agreement, willful failure or refusal to carry out the lawful directions of the Board; willful gross misconduct, willful dishonesty or fraud on Executives part in connection with Executives employment, regardless of whether it results in economic harm to the Company or its subsidiaries or affiliates; conviction of or plea of nolo contendere to a crime other than a minor traffic
2
infraction, following an opportunity by the Executive to appear and be heard by the Board; or material breach of any provision of this Agreement.
5.2
Termination by the Company Without Cause. The Company may terminate the Executives employment and this Agreement without Cause upon thirty (30) days prior written notice to the Executive.
5.3
Termination by the Executive for Good Reason. The Executive may terminate his employment and this Agreement for Good Reason. A resignation for Good Reason shall mean a resignation by the Executive of the Executives employment within sixty (60) days following the occurrence of any of the following events:
(a)
Without the Executives written consent, a material reduction of his duties, position or responsibilities;
(b)
Without the Executives written consent, a significant reduction by the Company in the Base Salary or Bonus as in effect immediately prior to such reduction; or
(c)
Without the Executives written consent, a requirement by the Company that the Executive relocate his office to a location more than fifty (50) miles from its then-current location.
5.4
Voluntary Termination by the Executive Without Good Reason. The Executive may voluntarily terminate his employment hereunder without Good Reason, upon not less than 180 days prior written notice to the Company.
5.5
Death. The Executives employment and this Agreement shall automatically terminate upon the Executives death.
6.
Severance.
6.1
In the event of a termination of the Executives employment by the Company for Cause, by the Executive without Good Reason, due to the expiration of the Term or as a result of the Executives death, the Executive shall be entitled to (i) his Base Salary earned but unpaid through and including the date of the termination of his employment, (ii) any unpaid bonus that is earned and accrued for any completed Fiscal Year, and (iii) any benefits or payments to which the Executive is entitled under any Company plan, program, agreement, or policy (collectively, Accrued Amounts).
6.2
In the event the Executives employment is terminated as a result of a Change in Control (as defined below) as determined by the Board in its sole discretion, by the Company without Cause (which does not include termination due to expiration of the Term) or by the Executive for Good Reason during the Term, the Executive shall be entitled to the Accrued Amounts and, subject to the Executives signing, returning to the Company and not revoking a release of claims for the benefit of the Company, in the form provided by the Company (the Release), the Executive shall be entitled to receive, and the Company shall be obligated to provide, the following severance benefits; provided, that, if the Executive should fail to execute such Release within 45 days following the later of (i) the Executives date of termination or (ii) the date the Executive actually receives an execution copy of such Release (which shall be delivered to the Executive within five (5) calendar days following the Executives termination date), the Company shall not have any obligations to provide the severance payments contemplated under this Section 6.2:
(a)
Payment to the Executive of an amount equal to the lesser of (i) 2.99 times the Base Salary in the year of such termination or (ii) the amount of Base Salary owed to the Executive for the remainder of the Term, in twenty-four (24) monthly payments, beginning within sixty (60) days following the termination date;
(b)
Payment to the Executive of an amount equal to one hundred percent (100%) of the Bonus opportunity actually earned for the year prior to the year of termination, if any; this amount shall be paid in twenty-four (24) monthly payments, beginning within sixty (60) days following the termination date;
(c)
The same level of health (i.e. medical, vision and dental) coverage and benefits as in effect for the Executive on the day immediately preceding the day of termination of employment; provided, however that (i) the Executive constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of the Code; and (ii) the Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), within the time period prescribed pursuant to COBRA. The Company shall continue to provide the Executive with such health coverage until the earlier of (A) the date the Executive is no longer eligible to receive continuation coverage pursuant to COBRA, or (B) twelve (12) months from the termination date; and
(d)
The vesting of the Option will accelerate on the date of termination as to that number of shares that would have become vested if the Executive had remained employed by the Company until the date twelve (12) months following the termination date.
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For avoidance of doubt, the Executive shall not be entitled to any severance benefits pursuant to this Section 6.2 if his employment is terminated by the Company for Cause, by the Executive without Good Reason or due to the Executives death or the expiration of the Term; provided that, in the event that the Executives employment is terminated by the Company for Cause or is terminated by the Executive without Good Reason (a Discretionary Severance Event), the Board (without the Executives participation), in its sole and absolute discretion, may choose to pay the Executive an amount equal to the sum of the payments referred to in subsections 6.2(a) and (b) above, payable in twenty-four (24) monthly payments, beginning within sixty (60) days following the termination date. Notwithstanding anything in this Section 6.2 to the contrary, in the event the 60 day post-termination period, during which the payments referred to in subsections 6.2(a) and (b) above are required to be made, begins in one taxable year of the Executive and ends in a second taxable year of the Executive, the payments referred to in subsections 6.2(a) and (b) above shall be made in the second taxable year (and within such 60 day period).
For purposes of this Agreement, a Change in Control shall mean: (i) the direct or indirect acquisition, whether in one or a series of transactions by any person (as such term is used in Section 13(d) and Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act)), or related persons (such person or persons, an Acquirer) constituting a group (as such term is used in Rule 13d-5 under the Exchange Act), of (A) beneficial ownership (as defined in the Exchange Act) of issued and outstanding shares of stock of the Company, the result of which acquisition is that such person or such group possesses in excess of 50% of the combined voting power of all then-issued and outstanding capital stock of the Company, or (B) the power to elect, appoint, or cause the election or appointment of at least a majority of the members of the Board (or such other governing body in the event the Company or any successor entity is not a corporation); (ii) a merger or consolidation of the Company with a person or a direct or indirect subsidiary of such person, provided that the result of such merger or consolidation, whether in one or a series of related transactions, is that the holders of the outstanding voting stock of the Company immediately prior to the consummation of such transaction do not possess, whether directly or indirectly, immediately after the consummation of such merger or consolidation, in excess of 50% of the combined voting power of all then-issued and outstanding capital stock of the merged or consolidated person, its direct or indirect parent, or the surviving person of such merger or consolidation; or (iii) a sale or disposition, whether in one or a series of transactions, of all or substantially all of the Companys assets.
Notwithstanding any other provision contained herein, if the Board (or its delegate) determines in its discretion that severance payments due under this Section 6.2 are nonqualified deferred compensation subject to Section 409A of the Code and that the Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code and the regulations and other guidance issued thereunder, then such severance payments shall be paid on the first payroll date of the seventh month following the month in which the Executives termination occurs. For purposes of this Agreement, whether the Executive is a specified employee will be determined in accordance with written procedures adopted by the Board.
7.
Non-Competition. Executive acknowledges that Executives employment with the Company will enable Executive to obtain, among other things, knowledge associated with the Companys business and will also enable Executive to form certain relationships with individuals and entities with which the Company furnishes its products and/or services. Executive further acknowledges that the substantial relationships with prospective and existing customers, goodwill and other valuable proprietary interests of the Company will cause the Company to suffer irreparable and continuing damage in the event Executive competes or assists others in competing with the Company during Executives employment and within two (2) years subsequent to the Executives notice of voluntary termination (other than for Good Reason) or a Discretionary Severance Event (if the Board chooses to make the payments described in Section 6.2 above). Therefore, Executive agrees that during Executives employment and for a period of two (2) years from the date of notice in the event of voluntary termination (other than for Good Reason) or a Discretionary Severance Event (if the Board chooses to make the payments described in Section 6.2 above) (Restrictive Period), Executive will not, without the prior written consent of the Company, which consent may be withheld by the Company in its sole and absolute discretion, be employed directly or indirectly by a competitor of the Company, or otherwise engage directly or indirectly in any conduct, activity, or business that substantially competes with the business of the Companys internet segment, as described in the Companys registration statement on Form S-1 for its initial public offering, as of the date of effectiveness of such registration statement. The phrase directly or indirectly shall include either as an individual or as a partner, joint venturer, employee, agent, executive, independent contractor, consultant, officer, director, stockholder, investor or otherwise. Executive further acknowledges that Executives continued employment with the Company constitutes fair and adequate consideration for Executives agreement not to engage in such conduct during the Restrictive Period in the event of Executives voluntary termination (other than for Good Reason) or a Discretionary Severance Event (if the Board chooses to make the payments described in Section 6.2 above). The geographic scope of the non-competition obligations of this paragraph includes anywhere in the world where the Company engage(s) in business or otherwise markets or sells its/their products or services (Restricted Area) in the provision of any services which are the same as, substantially similar to or competitive with the business and services which the Company was designing, developing, selling or providing, within the twelve (12) month period prior to the Employees termination of employment. Notwithstanding the foregoing, in the event the Company shall fail to pay Executive any severance payments to Executive pursuant to Section 6 of this Agreement when due, Executive shall have no further obligations under this Section 7.
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8.
Non-Solicitation. Executive acknowledges that, because of Executives responsibilities at the Company, Executive has developed and will help to develop, and has been exposed to, the Companys business strategies, information on customers and clients, and other valuable Proprietary Information, and that use or disclosure of such Proprietary Information in breach of this Agreement would be extremely difficult to detect or prove. For purposes of this Agreement, Proprietary Information shall mean any and all trade secrets, confidential knowledge, data or any other proprietary information pertaining to any business of the Company or any of its clients, customers or consultants, licensees or affiliates. By way of illustration but not limitation, Proprietary Information includes (a) inventions, ideas, improvements, discoveries, trade secrets, processes, data, programs, source code, web site designs, web site processes, knowledge, know-how, designs, techniques, formulas, test data, computer code, complaints, complaint processes and analysis, security procedures and processes, passwords, user ids, customer information, affiliate information, customer lists, affiliate lists, other works of authorship and designs whether or not patentable, copyrightable, or otherwise protected by law, and whether or not conceived or prepared by me, either alone or jointly with others (hereinafter collectively referred to as Inventions); (b) information regarding research, development, new products and services, marketing plans and strategies, merchandising and selling, business plans, strategies, forecasts, projections, profits, investments, operations, financings, records, budgets and financial statements, licenses, prices and costs, suppliers and customers; and (c) identity, requirements, preferences, practices and methods of doing business of specific parties with whom the Company transacts business, and information regarding the skills and compensation of other employees of the Company and independent contractors performing services for the Company. Executive also acknowledges that the Companys relationships with its employees, customers, clients, vendors, and other persons are valuable business assets. Therefore, Executive agrees as follows:
(a)
Executive shall not, for a period of one (1) year following Executives date of notice of voluntary termination (other than for Good Reason) or a Discretionary Severance Event (if the Board chooses to make the payments described in Section 6.2 above), directly or indirectly solicit, induce, recruit, or encourage any officer, director, or employee of the Company to leave the Company or terminate his or her employment with the Company.
(b)
Executive shall not, for a period of one (1) year following the Executives date of notice of voluntary termination (other than for Good Reason) or a Discretionary Severance Event (if the Board chooses to make the payments described in Section 6.2 above), for the purpose of selling products or services competitive with the Companys, solicit any actual or prospective customer or client of the Company by using the Companys Proprietary Information or trade secrets, or otherwise solicit such customers or clients by using means that amount to unfair compensation.
Notwithstanding the foregoing, in the event the Company shall fail to pay Executive any severance payments to Executive pursuant to Section 6 of this Agreement when due, Executive shall have no further obligations under Section 8(a) and Section 8(b) hereto.
9.
Administration/Other Agreements. Notwithstanding anything contained in this Agreement to the contrary, the Executive acknowledges and agrees that the Board, in its sole and absolute discretion, shall administer this Agreement in a manner that complies Section 409A of the Code.
10.
Section 280G. Notwithstanding any other provisions of this Agreement to the contrary, in the event that the Company determines in good faith that any payment or benefit received or to be received by the Executive pursuant to this Agreement, or otherwise (all such payments and benefits, including, without limitation, salary and bonus payments, being hereinafter called the Total Payments) would be subject to the excise tax imposed by Section 4999 of the Code, by reason of being considered contingent on a change in ownership or control of the Company within the meaning of Section 280G of the Code, then such Total Payments shall be reduced to the extent necessary so that the Total Payments will be less than three times Executives base amount (as defined in Section 280G(b)(3) of the Code). The reduction of the Total Payments shall apply as follows, unless otherwise agreed and such agreement is in compliance with Section 409A of the Code: (i) first, any cash severance payments due under the Agreement shall be reduced, with the last such payment due first forfeited and reduced, and sequentially thereafter working from the next last payment, and (ii) second, any acceleration of vesting of any equity shall be deferred with the tranche that would vest last (without any such acceleration) first deferred.
11.
Miscellaneous.
11.1
Notices. All notices under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivery against receipt or if mailed by first class registered or certified mail, return receipt requested, addressed to Company and to the Executive at their respective addresses set forth in the first paragraph of this Agreement, or to such other person or address as may be designated by like notice hereunder. Any such notice shall be deemed to be given on the day delivered, if personally delivered, or on the third day after the mailing if mailed.
5
11.2
Parties in Interest. No party shall assign this Agreement without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successor and permitted assigns, but no other person shall acquire or have any rights under or by virtue of this Agreement.
11.3
Further Assurances. From and after the date of this Agreement, each of the parties hereto shall from time to time, at the request of the other party and without further consideration, do, execute and deliver, or cause to be done, executed and delivered, all such further acts, things and instruments as may be reasonably requested or required more effectively to evidence and give effect to the transactions provided for in this Agreement.
11.4
Governing Law. This Agreement shall be governed by and construed in accordance with the laws and decisions of the State of Florida applicable to contracts made and to be performed therein without giving effect to the principles of conflict of laws.
11.5
Counterparts; Facsimile Signatures. This Agreement may be executed in counterparts and by facsimile, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Facsimile signatures shall be considered originals for all purposes.
11.6
Severability. The provisions of this Agreement are severable, and if any one or more provisions are determined to be judicially unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
11.7
Entire Agreement; Modification; Waiver. Except as otherwise specifically contemplated herein, this Agreement contains the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior negotiations and oral understandings, if any. Neither this Agreement nor any of its provisions may be modified, amended, waived, discharged or terminated, in whole or in part, except in writing signed by the party to be charged. No waiver of any such provision or any breach of or default under this Agreement shall be deemed or shall constitute a waiver of any other provision, breach or default.
12.
Section 409A Compliance.
It is intended that all benefits and compensation payable pursuant to this Agreement are exempt from or, alternatively, comply with Code Section 409A (and any legally binding guidance promulgated under Code Section 409A, including, without limitation, the Final Treasury Regulations), and this Agreement will be interpreted, administered and operated accordingly. In the event that any provision of this Agreement is inconsistent with Code Section 409A or such guidance, then the applicable provisions of Code Section 409A shall supersede such inconsistent provision. In accordance with the foregoing, the Executive shall not have a legally binding right to any distribution made to Executive in error. Notwithstanding the foregoing, in no event will any of the Company, its parent, its or their respective subsidiaries, affiliates, or officers, directors, employees, or agents have any liability for failure of this Agreement to be exempt from or comply with Code Section 409A and none of the foregoing guarantees that the Agreement is exempt from or complies with Code Section 409A. For all purposes under Code Section 409A, the Executives right to receive any payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company. A termination of employment under this Agreement shall mean a separation from service under Code Section 409A and Final Treasury Regulation 1.409A-1(h) and the default presumptions thereof.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.
FRIENDFINDER NETWORKS INC.
By:
Name:
Title:
EXECUTIVE:
/s/DANIEL C. STATON
DANIEL C. STATON
[Signature Page to Daniel C. Staton Employment Agreement]
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Exhibit 10.4
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (Agreement) made as of the ____ day of March, 2011 between FRIENDFINDER NETWORKS INC., a Nevada corporation (the Company) having an office at 6800 Broken Sound Parkway, Suite 200, Boca Raton, Florida 33487 and MARC H. BELL (the Executive).
WHEREAS, the Company desires to employ the Executive and the Executive desires to accept such employment by the Company on the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows:
1.
Employment. The Company hereby employs the Executive, and the Executive hereby accepts such employment by the Company, upon the terms and conditions set forth below.
2.
Term. Subject to the provisions for termination herein provided, the employment of the Executive shall commence as of the date the Company consummates its initial public offering (the Effective Date) and shall continue for a term of five (5) years (the Term).
3.
Duties and Responsibilities.
3.1
During the Term, the Executive shall have the position of Chief Executive Officer and President of the Company and in connection therewith, the Executive shall perform such executive duties and responsibilities commonly incident to such office as may be assigned to him from time to time by or under the authority of the Board of Directors of the Company (the Board), and, in the absence of such assignment, such duties customary to such offices as are necessary to the operations of the Company.
3.2
The Executives employment by the Company shall be full-time, and during the Term, the Executive agrees that he will devote his business time and attention, his best efforts, and all of his skill and ability to promote the interests of the Company. Notwithstanding the foregoing, the Executive shall be permitted to devote up to twenty percent (20%) of his business time to such other business activities that the Executive desires, engage in charitable and civic activities and manage his personal passive investments; provided, however, that such activities (individually or collectively) (a) do not interfere with the performance of his duties or responsibilities under this Agreement and (b) do not injure the reputation, business or business relationships of the Company or any of its affiliates as determined by the Company in good faith.
3.3
The Executives services shall be substantially performed at the Companys offices in Boca Raton, Florida, subject to necessary travel requirements of his position and duties hereunder.
3.4
Nothing contained herein shall require the Executive to follow any directive or to perform any act which would violate any laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority. The Executive shall act in accordance with all laws, ordinances, regulations or rules of any governmental, regulatory or administrative body, agent or authority, any court or judicial authority, or any public, private or industry regulatory authority.
4.
Compensation.
4.1
Base Salary. Subject to Section 9 hereof, during the Term, the Company shall pay the Executive $1,000,000 per annum (the Base Salary) in accordance with the Companys customary payroll practices as in effect from time to time. The Base Salary may be increased in each fiscal year of the Company following the first anniversary of the date hereof (the First Anniversary) at the rate of ten percent (10%) of the then current Base Salary.
4.2
Bonus. In addition to the Base Salary, the Executive will be eligible to receive a performance bonus during each year of employment with the Company during the Term of up to one hundred percent (100%) of the Base Salary. The award of each years performance bonus, if any, shall be based upon the following performance criteria: (a) seventy-five percent (75%) based on the compensation committee's objective evaluation of revenue growth, successful integration of acquisitions, EBITDA growth and margin improvement and (b) twenty-five percent (25%) based on the compensation committee's subjective evaluation of the Executives performance. Such determination shall be made after consultation with the Executive within sixty (60) days following the end of each Fiscal Year during the Term commencing with the Fiscal Year ended December 31, 2011. For the Fiscal Year 2011, the criteria set forth above shall be evaluated commencing on the Effective Date. The Executive must be employed by the Company through December 31 of the applicable Fiscal Year in order to receive a bonus with respect to such Fiscal Year. Subject to Section 9 hereof, the Company shall pay any performance bonus payable hereunder within seventy-four (74) days following the end of the applicable Fiscal Year; provided, however, to the extent any portion of the bonus (the "Excess Bonus"), is not deductible by the Company pursuant to Section 162(m) of the Code, then such Excess Bonus shall not be paid to the Executive until the first day of the month
1
following the date of Executive's termination of employment with the Company. The full performance bonus that may be awarded pursuant to this Section 4.2, as it may be increased from time to time in the discretion of the Board, shall be referred to herein as the Bonus.
4.3
Stock Options. The Company shall grant on the Effective Date an option to purchase 4,167 shares of common stock of the Company and on each anniversary of the Effective Date of this Agreement during the Term (each such grant, an Option); provided, that, the Executive is employed by the Company on each such date. The respective exercise price per share of each Option shall be no less than the fair market value of the underlying shares on the date the Option is granted. If the Option is granted on or prior to the date of the Companys initial public offering of its common stock pursuant to an effective registration statement filed with the Securities Exchange Commission (the IPO), the fair market value of the Companys common stock shall be determined in good faith by the Board in compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the Code). If the Option is granted after the IPO, the fair market value of the Companys common stock shall be determined based on the closing price on the trading day immediately before the grant date. Subject to accelerated vesting provisions set forth in Section 6 herein, each Option shall vest as to twenty percent (20%) of the shares subject to such Option on the first anniversary of the grant of such Option and as to twenty percent (20%) of the shares subject to such Option on each anniversary thereafter, subject to the Executives continued employment with the Company on the relevant vesting dates. In all other respects, each Option shall be subject to the terms, definitions and provisions of the Companys 2008 Stock Option Plan, as amended from time to time, and the stock option agreement by and between the Executive and the Company (the Option Agreement).
4.4
Restricted Stock. On the First Anniversary and on each anniversary thereafter during the Term, the Company shall issue to the Executive 2,500 shares of restricted stock (the Restricted Stock); provided, that, the Executive is employed by the Company on each such date, which stock the Executive shall not sell, transfer, assign or otherwise convey prior to the third anniversary of the date such Restricted Stock is issued. In the event that the Executive ceases to be employed by the Company, except for termination of the Executives employment under Certain Circumstances or due to the Executives death, disability (as defined under the Companys Restricted Stock Plan) or termination of the Executives employment upon the expiration of the Term, the Company shall have the right to repurchase any Restricted Stock issued less than three years prior to the date of such termination at a price equal to the lesser of (a) fair market value as of the date of such repurchase and (b) $2.00 per share. The Company shall provide written notice to the Executive of its intention to exercise such repurchase right no later than five (5) days after the date of termination of employment and the repurchase of the Restricted Stock shall be consummated within ten (10) days of such notice.
For purposes of this Agreement, Certain Circumstances shall mean the termination of the Executives employment (i) by the Company Without Cause (as defined in Section 5.1); or (ii) by the Executive for Good Reason (as defined in Section 5.2); or (iii) as a result of a Change in Control (as defined in Section 6).
4.5
Share Adjustment. All share amounts contemplated in Sections 4.3 and 4.4 are subject to appropriate adjustment in the event of a stock split, reverse stock split, merger, recapitalization and similar transactions which may take place after the date hereof.
4.6
Expenses. The Company shall pay or reimburse the Executive for all reasonable out-of-pocket expenses incurred by the Executive, accompanied by vouchers therefore in accordance with the Companys policies, in the course of providing management services to the Company.
4.7
Vacation. The Executive shall be entitled to four (4) weeks of paid vacation during each calendar year, to be taken during such calendar year at times selected by the Executive, as well as paid holidays and personal days according to the Company policy in effect from time to time.
4.8
Benefits. During the Term of this Agreement, the Executive shall be eligible to participate in each of the Companys existing or future benefit plans, policies or arrangements maintained by the Company and made available to employees generally, as well as all such existing or future benefit plans, policies or arrangements maintained by the Company for the benefit of executives. Except as specifically provided for herein, no additional compensation under any such plan, policy or arrangement shall be deemed to modify or otherwise effect the terms of this Agreement.
5.
Termination.
5.1
Termination by the Company for Cause. The Company may terminate the Executives employment and this Agreement at any time during the Term for Cause, effective immediately upon written notice to the Executive of such termination. For purposes of this Section 5.1, Cause shall mean: a willful failure or refusal on Executives part to perform Executives duties under this Agreement, willful failure or refusal to carry out the lawful directions of the Board; willful gross misconduct, willful dishonesty or fraud on Executives part in connection with Executives employment, regardless of whether it results in economic harm to the Company or its subsidiaries or affiliates; conviction of or plea of nolo contendere to a crime other than a minor traffic
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infraction, following an opportunity by the Executive to appear and be heard by the Board; or material breach of any provision of this Agreement.
5.2
Termination by the Company Without Cause. The Company may terminate the Executives employment and this Agreement without Cause upon thirty (30) days prior written notice to the Executive.
5.3
Termination by the Executive for Good Reason. The Executive may terminate his employment and this Agreement for Good Reason. A resignation for Good Reason shall mean a resignation by the Executive of the Executives employment within sixty (60) days following the occurrence of any of the following events:
(a)
Without the Executives written consent, a material reduction of his duties, position or responsibilities;
(b)
Without the Executives written consent, a significant reduction by the Company in the Base Salary or Bonus as in effect immediately prior to such reduction; or
(c)
Without the Executives written consent, a requirement by the Company that the Executive relocate his office to a location more than fifty (50) miles from its then-current location.
5.4
Voluntary Termination by the Executive Without Good Reason. The Executive may voluntarily terminate his employment hereunder without Good Reason, upon not less than 180 days prior written notice to the Company.
5.5
Death. The Executives employment and this Agreement shall automatically terminate upon the Executives death.
6.
Severance.
6.1
In the event of a termination of the Executives employment by the Company for Cause, by the Executive without Good Reason, due to the expiration of the Term or as a result of the Executives death, the Executive shall be entitled to (i) his Base Salary earned but unpaid through and including the date of the termination of his employment, (ii) any unpaid bonus that is earned and accrued for any completed Fiscal Year, and (iii) any benefits or payments to which the Executive is entitled under any Company plan, program, agreement, or policy (collectively, Accrued Amounts).
6.2
In the event the Executives employment is terminated as a result of a Change in Control (as defined below) as determined by the Board in its sole discretion, by the Company without Cause (which does not include termination due to expiration of the Term) or by the Executive for Good Reason during the Term, the Executive shall be entitled to the Accrued Amounts and, subject to the Executives signing, returning to the Company and not revoking a release of claims for the benefit of the Company, in the form provided by the Company (the Release), the Executive shall be entitled to receive, and the Company shall be obligated to provide, the following severance benefits; provided, that, if the Executive should fail to execute such Release within 45 days following the later of (i) the Executives date of termination or (ii) the date the Executive actually receives an execution copy of such Release (which shall be delivered to the Executive within five (5) calendar days following the Executives termination date), the Company shall not have any obligations to provide the severance payments contemplated under this Section 6.2:
(a)
Payment to the Executive of an amount equal to the lesser of (i) 2.99 times the Base Salary in the year of such termination or (ii) the amount of Base Salary owed to the Executive for the remainder of the Term, in twenty-four (24) monthly payments, beginning within sixty (60) days following the termination date;
(b)
Payment to the Executive of an amount equal to one hundred percent (100%) of the Bonus opportunity actually earned for the year prior to the year of termination, if any; this amount shall be paid in twenty-four (24) monthly payments, beginning within sixty (60) days following the termination date;
(c)
The same level of health (i.e. medical, vision and dental) coverage and benefits as in effect for the Executive on the day immediately preceding the day of termination of employment; provided, however that (i) the Executive constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of the Code; and (ii) the Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), within the time period prescribed pursuant to COBRA. The Company shall continue to provide the Executive with such health coverage until the earlier of (A) the date the Executive is no longer eligible to receive continuation coverage pursuant to COBRA, or (B) twelve (12) months from the termination date; and
(d)
The vesting of the Option will accelerate on the date of termination as to that number of shares that would have become vested if the Executive had remained employed by the Company until the date twelve (12) months following the termination date.
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For avoidance of doubt, the Executive shall not be entitled to any severance benefits pursuant to this Section 6.2 if his employment is terminated by the Company for Cause, by the Executive without Good Reason or due to the Executives death or the expiration of the Term; provided that, in the event that the Executives employment is terminated by the Company for Cause or is terminated by the Executive without Good Reason (a Discretionary Severance Event), the Board (without the Executives participation), in its sole and absolute discretion, may choose to pay the Executive an amount equal to the sum of the payments referred to in subsections 6.2(a) and (b) above, payable in twenty-four (24) monthly payments, beginning within sixty (60) days following the termination date. Notwithstanding anything in this Section 6.2 to the contrary, in the event the 60 day post-termination period, during which the payments referred to in subsections 6.2(a) and (b) above are required to be made, begins in one taxable year of the Executive and ends in a second taxable year of the Executive, the payments referred to in subsections 6.2(a) and (b) above shall be made in the second taxable year (and within such 60 day period).
For purposes of this Agreement, a Change in Control shall mean: (i) the direct or indirect acquisition, whether in one or a series of transactions by any person (as such term is used in Section 13(d) and Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act)), or related persons (such person or persons, an Acquirer) constituting a group (as such term is used in Rule 13d-5 under the Exchange Act), of (A) beneficial ownership (as defined in the Exchange Act) of issued and outstanding shares of stock of the Company, the result of which acquisition is that such person or such group possesses in excess of 50% of the combined voting power of all then-issued and outstanding capital stock of the Company, or (B) the power to elect, appoint, or cause the election or appointment of at least a majority of the members of the Board (or such other governing body in the event the Company or any successor entity is not a corporation); (ii) a merger or consolidation of the Company with a person or a direct or indirect subsidiary of such person, provided that the result of such merger or consolidation, whether in one or a series of related transactions, is that the holders of the outstanding voting stock of the Company immediately prior to the consummation of such transaction do not possess, whether directly or indirectly, immediately after the consummation of such merger or consolidation, in excess of 50% of the combined voting power of all then-issued and outstanding capital stock of the merged or consolidated person, its direct or indirect parent, or the surviving person of such merger or consolidation; or (iii) a sale or disposition, whether in one or a series of transactions, of all or substantially all of the Companys assets.
Notwithstanding any other provision contained herein, if the Board (or its delegate) determines in its discretion that severance payments due under this Section 6.2 are nonqualified deferred compensation subject to Section 409A of the Code and that the Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code and the regulations and other guidance issued thereunder, then such severance payments shall be paid on the first payroll date of the seventh month following the month in which the Executives termination occurs. For purposes of this Agreement, whether the Executive is a specified employee will be determined in accordance with written procedures adopted by the Board.
7.
Non-Competition. Executive acknowledges that Executives employment with the Company will enable Executive to obtain, among other things, knowledge associated with the Companys business and will also enable Executive to form certain relationships with individuals and entities with which the Company furnishes its products and/or services. Executive further acknowledges that the substantial relationships with prospective and existing customers, goodwill and other valuable proprietary interests of the Company will cause the Company to suffer irreparable and continuing damage in the event Executive competes or assists others in competing with the Company during Executives employment and within two (2) years subsequent to the Executives notice of voluntary termination (other than for Good Reason) or a Discretionary Severance Event (if the Board chooses to make the payments described in Section 6.2 above). Therefore, Executive agrees that during Executives employment and for a period of two (2) years from the date of notice in the event of voluntary termination (other than for Good Reason) or a Discretionary Severance Event (if the Board chooses to make the payments described in Section 6.2 above) (Restrictive Period), Executive will not, without the prior written consent of the Company, which consent may be withheld by the Company in its sole and absolute discretion, be employed directly or indirectly by a competitor of the Company, or otherwise engage directly or indirectly in any conduct, activity, or business that substantially competes with the business of the Companys internet segment, as described in the Companys registration statement on Form S-1 for its initial public offering, as of the date of effectiveness of such registration statement. The phrase directly or indirectly shall include either as an individual or as a partner, joint venturer, employee, agent, executive, independent contractor, consultant, officer, director, stockholder, investor or otherwise. Executive further acknowledges that Executives continued employment with the Company constitutes fair and adequate consideration for Executives agreement not to engage in such conduct during the Restrictive Period in the event of Executives voluntary termination (other than for Good Reason) or a Discretionary Severance Event (if the Board chooses to make the payments described in Section 6.2 above). The geographic scope of the non-competition obligations of this paragraph includes anywhere in the world where the Company engage(s) in business or otherwise markets or sells its/their products or services (Restricted Area) in the provision of any services which are the same as, substantially similar to or competitive with the business and services which the Company was designing, developing, selling or providing, within the twelve (12) month period prior to the Employees termination of employment. Notwithstanding the foregoing, in the event the Company shall fail to pay Executive any severance payments to Executive pursuant to Section 6 of this Agreement when due, Executive shall have no further obligations under this Section 7.
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8.
Non-Solicitation. Executive acknowledges that, because of Executives responsibilities at the Company, Executive has developed and will help to develop, and has been exposed to, the Companys business strategies, information on customers and clients, and other valuable Proprietary Information, and that use or disclosure of such Proprietary Information in breach of this Agreement would be extremely difficult to detect or prove. For purposes of this Agreement, Proprietary Information shall mean any and all trade secrets, confidential knowledge, data or any other proprietary information pertaining to any business of the Company or any of its clients, customers or consultants, licensees or affiliates. By way of illustration but not limitation, Proprietary Information includes (a) inventions, ideas, improvements, discoveries, trade secrets, processes, data, programs, source code, web site designs, web site processes, knowledge, know-how, designs, techniques, formulas, test data, computer code, complaints, complaint processes and analysis, security procedures and processes, passwords, user ids, customer information, affiliate information, customer lists, affiliate lists, other works of authorship and designs whether or not patentable, copyrightable, or otherwise protected by law, and whether or not conceived or prepared by me, either alone or jointly with others (hereinafter collectively referred to as Inventions); (b) information regarding research, development, new products and services, marketing plans and strategies, merchandising and selling, business plans, strategies, forecasts, projections, profits, investments, operations, financings, records, budgets and financial statements, licenses, prices and costs, suppliers and customers; and (c) identity, requirements, preferences, practices and methods of doing business of specific parties with whom the Company transacts business, and information regarding the skills and compensation of other employees of the Company and independent contractors performing services for the Company. Executive also acknowledges that the Companys relationships with its employees, customers, clients, vendors, and other persons are valuable business assets. Therefore, Executive agrees as follows:
(a)
Executive shall not, for a period of one (1) year following Executives date of notice of voluntary termination (other than for Good Reason) or a Discretionary Severance Event (if the Board chooses to make the payments described in Section 6.2 above), directly or indirectly solicit, induce, recruit, or encourage any officer, director, or employee of the Company to leave the Company or terminate his or her employment with the Company.
(b)
Executive shall not, for a period of one (1) year following the Executives date of notice of voluntary termination (other than for Good Reason) or a Discretionary Severance Event (if the Board chooses to make the payments described in Section 6.2 above), for the purpose of selling products or services competitive with the Companys, solicit any actual or prospective customer or client of the Company by using the Companys Proprietary Information or trade secrets, or otherwise solicit such customers or clients by using means that amount to unfair compensation.
Notwithstanding the foregoing, in the event the Company shall fail to pay Executive any severance payments to Executive pursuant to Section 6 of this Agreement when due, Executive shall have no further obligations under Section 8(a) and Section 8(b) hereto.
9.
Administration/Other Agreements. Notwithstanding anything contained in this Agreement to the contrary, the Executive acknowledges and agrees that the Board, in its sole and absolute discretion, shall administer this Agreement in a manner that complies Section 409A of the Code.
10.
Section 280G. Notwithstanding any other provisions of this Agreement to the contrary, in the event that the Company determines in good faith that any payment or benefit received or to be received by the Executive pursuant to this Agreement, or otherwise (all such payments and benefits, including, without limitation, salary and bonus payments, being hereinafter called the Total Payments) would be subject to the excise tax imposed by Section 4999 of the Code, by reason of being considered contingent on a change in ownership or control of the Company within the meaning of Section 280G of the Code, then such Total Payments shall be reduced to the extent necessary so that the Total Payments will be less than three times Executives base amount (as defined in Section 280G(b)(3) of the Code). The reduction of the Total Payments shall apply as follows, unless otherwise agreed and such agreement is in compliance with Section 409A of the Code: (i) first, any cash severance payments due under the Agreement shall be reduced, with the last such payment due first forfeited and reduced, and sequentially thereafter working from the next last payment, and (ii) second, any acceleration of vesting of any equity shall be deferred with the tranche that would vest last (without any such acceleration) first deferred.
11.
Miscellaneous.
11.1
Notices. All notices under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivery against receipt or if mailed by first class registered or certified mail, return receipt requested, addressed to Company and to the Executive at their respective addresses set forth in the first paragraph of this Agreement, or to such other person or address as may be designated by like notice hereunder. Any such notice shall be deemed to be given on the day delivered, if personally delivered, or on the third day after the mailing if mailed.
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11.2
Parties in Interest. No party shall assign this Agreement without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successor and permitted assigns, but no other person shall acquire or have any rights under or by virtue of this Agreement.
11.3
Further Assurances. From and after the date of this Agreement, each of the parties hereto shall from time to time, at the request of the other party and without further consideration, do, execute and deliver, or cause to be done, executed and delivered, all such further acts, things and instruments as may be reasonably requested or required more effectively to evidence and give effect to the transactions provided for in this Agreement.
11.4
Governing Law. This Agreement shall be governed by and construed in accordance with the laws and decisions of the State of Florida applicable to contracts made and to be performed therein without giving effect to the principles of conflict of laws.
11.5
Counterparts; Facsimile Signatures. This Agreement may be executed in counterparts and by facsimile, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Facsimile signatures shall be considered originals for all purposes.
11.6
Severability. The provisions of this Agreement are severable, and if any one or more provisions are determined to be judicially unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
11.7
Entire Agreement; Modification; Waiver. Except as otherwise specifically contemplated herein, this Agreement contains the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior negotiations and oral understandings, if any. Neither this Agreement nor any of its provisions may be modified, amended, waived, discharged or terminated, in whole or in part, except in writing signed by the party to be charged. No waiver of any such provision or any breach of or default under this Agreement shall be deemed or shall constitute a waiver of any other provision, breach or default.
12.
Section 409A Compliance.
It is intended that all benefits and compensation payable pursuant to this Agreement are exempt from or, alternatively, comply with Code Section 409A (and any legally binding guidance promulgated under Code Section 409A, including, without limitation, the Final Treasury Regulations), and this Agreement will be interpreted, administered and operated accordingly. In the event that any provision of this Agreement is inconsistent with Code Section 409A or such guidance, then the applicable provisions of Code Section 409A shall supersede such inconsistent provision. In accordance with the foregoing, the Executive shall not have a legally binding right to any distribution made to Executive in error. Notwithstanding the foregoing, in no event will any of the Company, its parent, its or their respective subsidiaries, affiliates, or officers, directors, employees, or agents have any liability for failure of this Agreement to be exempt from or comply with Code Section 409A and none of the foregoing guarantees that the Agreement is exempt from or complies with Code Section 409A. For all purposes under Code Section 409A, the Executives right to receive any payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company. A termination of employment under this Agreement shall mean a separation from service under Code Section 409A and Final Treasury Regulation 1.409A-1(h) and the default presumptions thereof.
[ signature page follows ]
6
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.
FRIENDFINDER NETWORKS INC.
By:
Name:
Title:
EXECUTIVE:
/s/ MARC H. BELL
MARC H. BELL
[Signature Page to Marc H. Bell Employment Agreement]
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Due Date
|
Amount Payable
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December 15, 2010
|
$3,000,000
|
December 31, 2010
|
$910,000
|
December 31, 2011
|
$910,000
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December 31, 2012
|
$910,000
|
March 31, 2013
|
$227,500
|
|
Re:
|
Confirmation of Certain Consent and Exchange Fees
|
Due Date |
Amount Payable
|
|
December 31, 2010 | $90,000 | |
December 31, 2011 | $90,000 | |
December 31, 2012 | $90,000 | |
March 31, 2013 | $22,500 |
1.1
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Exchange of New Securities.
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1.2
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Closing Procedure.
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2.1
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Representations and Warranties of the Issuers. The Issuers, jointly and severally, represent and warrant to, and agree with, each Investor that each of the representations and warranties of the Obligors set forth in the Indenture will be true as of the Closing Date, and further represent and warrant to, and agree with, each Investor as follows:
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2.2
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Representations and Warranties of the Investors. The Investors, jointly and severally, represent and warrant to, and agree with the Issuers as follows:
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(1)
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Each Investor is an “accredited investor” within the meaning of Rule 501 under the Securities Act (as such definition is modified by Section 413 of the Dodd Frank Wall Street Reform and Consumer Protection Act); and the Investor is receiving the New Securities for its own account for the purpose of investment and not with a view to the distribution thereof or dividing all or any part of its interest therein with any other person or entity. Each Investor acknowledges that in connection with the Exchange, the New Securities have not been registered under the Securities Act or under any applicable federal securities laws or state securities or “blue sky” laws and that the New Securities can not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under, pursuant to an exemption from or in a transaction not subject to any applicable federal securities laws or state securities or “blue sky” laws.
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(2)
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The Investor agrees that until such time as the applicable restriction is terminated pursuant to Section 2.2(E)(3) hereof, each instrument representing the New Securities issued pursuant to the Indenture shall bear a legend reading substantially as follows and such other legends required by the Indenture:
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(3)
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The restrictions referred to in the endorsement required pursuant to Section 2.2(E)(2) shall cease and terminate as to the New Securities when any Issuer determines that such restriction is no longer required in order to assure compliance with the Securities Act.
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(4)
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Each Investor acknowledges that it is not receiving the New Securities as a result of any general solicitation or general advertising, as such terms are used in Regulation D under the Securities Act, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act.
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3.1
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Conditions to Each Party’s Obligations. The respective obligations of each Party to consummate the transactions contemplated herein are subject to the satisfaction at or prior to the Closing of the following conditions:
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3.2
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Conditions to Obligations of the Issuers. The obligations of the Issuers to consummate the transactions contemplated hereby are further subject to the satisfaction (or waiver by the Issuers) at or prior to the Closing of the following conditions:
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3.3
|
Conditions to Obligations of the Investor. The obligations of the Investors to consummate the transactions contemplated hereby are further subject to the satisfaction (or waiver by the Investors) at or prior to the Closing of the following conditions:
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4.1
|
If the Closing has not occurred by October 28, 2010, this Agreement shall automatically terminate. Upon such termination pursuant to Section 4.1, the Parties hereto shall be relieved of any further obligation hereunder; provided, however, that no Party shall be relieved of any liability for breach of this Agreement, the Escrow and Settlement Agreement or any of the other Transaction Documents to which it is a party. Immediately upon such termination, the Issuers shall cause the Exchange Agent to return to each of the Investors the Existing Notes.
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5.1
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The Parties hereby acknowledge and agree that in connection with the consummation of the Exchange and the retirement of the Existing Notes, all Obligations (as defined on Schedule 1) of the Issuers to each of the Investors shall be forever discharged and satisfied in full and the Investors shall have no further claims with respect to such Obligations, whether direct or indirect, accrued or non-accrued, against any of the assets of any Issuer, all in accordance with the terms and conditions of this Section 5.1. The Issuers or their designee shall cause all Liens (as defined on Schedule 1) evidencing the Obligations of the Issuers pursuant to the terms and conditions of each of the Existing Notes, to be released as of the Closing Date.
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5.2
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Without limiting the generality of Section 5.1, subject to the satisfaction (or waiver) of the conditions set forth in Sections 3.1, 3.2 and 3.3, each Investor hereby authorizes U.S. Bank National Association in its capacity as collateral agent under the financing agreement governing the Existing Note to execute (1) a payoff letter in favor of the Issuers, (2) releases of any and all security interests securing the obligations under such financing agreement and (3) termination or satisfaction of any and all financing and collateral documents entered into in connection with such financing agreement, in form satisfactory to the collateral agent.
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6.1
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The Investor agrees that it will not issue any press release or otherwise make any public statement, filing or other communication regarding the issuance of the New Securities or the business, operations or financial condition of the Issuers, the Guarantors or any of their Subsidiaries without the prior consent of the Issuers, except to the extent required by law or legal process, in which case the Investor shall use its commercially reasonable efforts to provide the Issuers with prior notice of such disclosure. The Issuers agree that they will not, and shall not permit any of their respective subsidiaries to, publicly disclose the name of any of the Investors or include the name of the Investors, without the prior written consent of the respective Investor, in any press release or other public statement, filing or other communication, except (a) in any registration statement in which the Investors are identified as selling securityholders, or (b) to the extent required by law or legal process, in which case the Issuers shall use commercially reasonable efforts to provide the Investors with prior notice of such disclosure.
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7.1
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Entire Agreement. This Agreement and all schedules, exhibits, annexes or other attachments hereto or thereto, and the certificates, documents, instruments and writings that are delivered pursuant hereto or thereto, constitutes the entire agreement and understanding of the Parties in respect of the subject matter hereof and supersedes all prior understandings, agreements or representations by or among the Parties, written or oral, to the extent they relate in any way to the subject matter hereof.
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7.2
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Further Assurances. The Issuers agree to provide such further information, take such further actions and execute and deliver such further documents and instruments which may be reasonably necessary to carry out the intent of this Agreement.
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7.3
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No Third Party Beneficiary. Nothing in this Agreement is intended to confer any rights or remedies under or by reason of this Agreement on any person other than the Investor and the Issuers.
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7.4
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Assignment; Binding Effect. No Party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other Parties, and any such assignment by a Party without prior written approval of the other Parties will be deemed invalid and not binding on such other Parties, provided that any of the Investor may assign their rights, interests or obligations hereunder to one or more of its affiliates or Related Funds without the prior written approval of the other Parties so long as the respective Investor remains liable under this Agreement for all of its obligations and so long as the transferee meets the requirements of Section 2.2(E) hereof. All of the terms, agreements, covenants, representations, warranties and conditions of this Agreement are binding upon, inure to the benefit of and are enforceable by, the Parties and their respective successors and permitted assigns. “Related Fund” means, with respect to any Investor, any fund or entity that is advised or managed by the respective Investor, the same investment advisor as the Investor or by an affiliate of the Investor or such investment advisor.
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7.5
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Notices. Any notice or communication shall be in writing and delivered in person, sent by facsimile, delivered by commercial courier service or mailed by first-class mail, postage prepaid, addressed as follows:
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7.6
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Headings. The headings of the Articles and Sections of this Agreement have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.
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7.7
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Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the state of New York, without giving effect to any choice of law principles.
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7.8
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Consent to Jurisdiction; Service of Process. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF THE STATE OF NEW YORK AS ITS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE ISSUERS (FOR ITSELF AND THE GUARANTORS) AT ITS ADDRESS FOR NOTICES AS SET FORTH IN SECTION 7.5 AND THE SIGNATURE PAGES HERETO AND TO THE SECRETARY OF STATE OF THE STATE OF NEW YORK, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY OF THE INVESTOR TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN ANY OTHER JURISDICTION. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT.
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7.9
|
Waivers of Jury Trial. EACH PARTY HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OF THE INVESTORS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE INVESTORS WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH PARTY HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
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7.10
|
Amendment; Extensions; Waivers. No amendment, modification, waiver, replacement, termination or cancellation of any provision of this Agreement will be valid, unless the same is in writing and signed by the Parties. Each waiver of a right hereunder does not extend beyond the specific event or circumstance giving rise to the right. No waiver by any Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence. Neither the failure nor any delay on the part of any Party to exercise any right or remedy under this Agreement will operate as a waiver thereof, nor does any single or partial exercise of any right or remedy preclude any other or further exercise of the same or of any other right or remedy.
|
7.11
|
Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided, however, that if any provision of this Agreement, as applied to any Party or to any circumstance, is judicially determined not to be enforceable in accordance with its terms, the Parties agree that the court judicially making such determination may modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its modified form, such provision will then be enforceable and will be enforced.
|
7.12
|
Counterparts; Effectiveness. This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. This Agreement will become effective when one or more counterparts have been signed by each Party and delivered to the other Parties.
|
7.13
|
Construction. This Agreement has been freely and fairly negotiated among the Parties. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party because of the authorship of any provision of this Agreement. The words “include,” “includes,” and “including” will be deemed to be followed by “without limitation.” The word “person” includes individuals, entities and Governmental Authorities. Pronouns in masculine, feminine and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The Parties intend that each representation, warranty and covenant contained herein will have independent significance. If any Party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached will not detract from or mitigate the fact that the Party is in breach of the first representation, warranty or covenant.
|
ISSUERS: | |||
INTERACTIVE NETWORK, INC. | |||
|
By:
|
/s/ Paul Asher | |
Name: Paul Asher | |||
Title: Secretary | |||
FRIENDFINDER NETWORKS INC. | |||
|
By:
|
/s/ Paul Asher | |
Name: Paul Asher | |||
Title: Secretary | |||
INVESTORS: | |||
ANDREW B. CONRU TRUST AGREEMENT | |||
|
By:
|
/s/ Andrew B. Conru | |
Name: Andrew B. Conru | |||
Title: Trustee | |||
Address for purposes of Section 7.5: | |||
MAPSTEAD TRUST, created on April 16, 2002 | |||
|
By:
|
/s/ Lars Mapstead | |
Name: Lars Mapstead | |||
Title: Trustee |
|
By:
|
/s/ Marin A. Mapstead | |
Name: Marin A. Mapstead | |||
Title: Trustee | |||
Address for purposes of Section 7.5: | |||
180 Horizon Way | |||
Aptos, CA 95003-2718 | |||
Name of Holder |
2005 FFN SPA & 2006 FFN SPA: | $ |
Pay Off Date
|
Principal Amount of New
Securities
|
Cash (if any)
|
Monday, October 25, 2010
|
||
Tuesday, October 26, 2010
|
||
Wednesday, October 27, 2010
|
||
Thursday, October 28, 2010
|
||
Exhibit 10.28
FRIENDFINDER NETWORKS INC.
6800 BROKEN SOUND PARKWAY
SUITE 200
BOCA RATON FL 33487
April 1, 2010
Ezra Shashoua
3990 NW 52nd Place
Boca Raton, FL 33496
Re:
Second Restated Employment Offer For Position Of Chief Financial Officer
Dear Ezra:
On behalf of Friendfinder Networks Inc. and its subsidiaries (the Company), I am pleased to restate to you the conditions of your employment in the position of Chief Financial Officer, reporting directly to Marc Bell and Daniel C. Staton. This letter agreement supercedes the letter agreements dated September 6, 2007 and July 8, 2008, which are of no further force. This position is based in the Companys Boca Raton, Florida offices (currently located at 6800 Broken Sound Parkway, Suite 100, Boca Raton, Florida 33487).
1.
Base salary: Effective as of April 1, 2010, your base annual salary is payable semi-monthly in accordance with the Companys standard payroll practices at the rate of $20,000 per pay period ($480,000 annually).
2.
Other Compensation: Contingent upon your continued employment through and at the end of the IPO (Initial Public Offering) process, and based on the achievement of specific goals and objectives set forth and agreed to with and by Senior Management, you will be eligible for an annual performance based bonus of up to fifty percent (50%) of your then current annual salary with PMGI. In addition, you will receive in 2010 a guaranteed bonus of $233,333, to be paid on a date chosen by you upon at least 5 days prior notice to the Company.
3.
Intentionally omitted.
4.
Start date: Your start date of employment was January 1, 2008.
5.
Equity compensation (Friendfinder): It is contemplated that the Company will be issuing options imminently and restricted stock upon the consummation of an IPO. You will receive options from time to time in an amount and other terms equal to those received by the top tier of senior executives pursuant to the Companys Stock Option Plan. The amount of options to be issued to you initially is currently planned to be 1,000,000 In addition, upon the consummation of an IPO, restricted stock will be issued to you from time to time in an amount and other terms equal to those received by the then top tier of senior executives of the Company receiving such stock.
6.
Intentionally omitted.
7.
Benefits and vacation time: Beginning the first day of the month following your full-time employment start date, you will be eligible for the standard Company health insurance, dental insurance, disability insurance, life insurance, and other benefit plans, consistent with the terms of such plans and as set forth in the summary plan documents, a copy of which the Company will provide to you. Beginning the first day of the month following ninety days after your full-time employment start date, you will be eligible for the standard 401(K) savings plan. Vacation shall be as agreed to between the parties but in no event less than 4 weeks.
8.
Responsibilities: You will be responsible for the Chief Financial Officer function. You will also be responsible for functions and such other duties as may be reasonably assigned by the Company from time to time and consistent with or complementary to your duties as described herein. You will devote all of your professional time, attention, energy and skill to the business and affairs of the Company. You will serve the Company faithfully and diligently to the best of your ability. We acknowledge your prior commitment and understand that you may need to devote some time to completing that project.(to Incubrands Spirits Group llc.)
1
9.
At-will employment: The Company is an at will employer and you are an at will employee. As such, your employment is not for any definite period of time, and either you or the Company may terminate such employment for any reason, at any time, with or without cause, and with or without notice. Similarly, as an employee of the Company, you will be subject to such employment policies and terms and conditions as the Company may adopt or modify from time to time, and nothing in this offer letter, or told or given to you during your employment should be interpreted as a guarantee or contract for continued employment.
10.
Termination without Cause: If you are terminated without Cause, as the Company may elect to do,, or in the event an IPO does not take place within one year of the Friend Finder acquisition, or if a change of control takes place within one year of the Friend Finder acquisition, or should the base of the Chief Financial Officer relocate from Boca Raton, Florida, you will have the option of exercising your right to resign your position and the Company shall pay you the lump sum of $480,000 within 30 days of such resignation, as well as any unpaid bonus previously awarded or guaranteed (the Severance Payment). Cause shall be a willful failure or refusal on your part to perform your duties under this Agreement; willful failure or refusal to carry out the lawful directions of your superiors provided that you shall not be liable for willfully failing or refusing to perform your duties under this agreement for any actions undertaken or not undertaken as the result of following the lawful directions of your superiors; willful gross misconduct on your part, including but not limited to theft, violent work-related behavior, violation of the Companys sexual or other unlawful workplace harassment policies or repeated acts of gross insubordination; willful dishonesty or fraud in connection with your employment, regardless of whether it results in economic harm to the Company or its subsidiaries or affiliates; indictment or conviction of a crime other than a minor traffic infraction; or material breach of one or more provisions of this Agreement If you are terminated with Cause, you shall receive only unpaid salary through the date your employment is terminated and shall forfeit all entitlement to [as yet unvested] stock options and unpaid bonus.
11.
D&O insurance coverage: The Company shall cover you in its standard D&O insurance policy, under the current limits and evidence in place. To the fullest extent permitted by law, the Company shall indemnify, defend, protect and hold you harmless from and against all claims, demands, causes of action, actions, suits, costs, damages, penalties, fines, liabilities, losses and expenses, whether civil or criminal, including without limitation reasonable and reasonably documented attorneys fees and consultants fees and expenses arising out of or resulting from the performance of your duties within the scope of your employment, provided that (i) all such obligations shall first be satisfied on behalf of the Company via its insurance coverages consistent with the terms of such coverages; (ii) you provide immediate notice to Marc Bell, Daniel C. Staton and the Companys General Counsel of any matters that you believe could trigger the Companys obligations pursuant to this Section; and (iii) as between you and the Company, the Company shall have sole control over the defense, strategy and resolution of such matters, and you will cooperate as requested by the Company and its representatives in connection with the defense and resolution of all such matters, provided that as to this provision (iii) you have the right to decline representation provided by the Company and engage, on your own behalf and at your own (i.e., non-indemnified) expense, independent counsel chosen by you and approved by the Company should any civil or criminal proceedings be asserted against you personally.
12.
Intellectual property and confidentiality.
a.
Intellectual property. All inventions, trade secrets, works of authorship and other intellectual property created by you in part or in whole during your employment with Company using Company resources, or otherwise related to the actual or prospective businesses or interests of the Company, shall be owned exclusively by the Company and shall be deemed work made for hire to the extent permissible under applicable law. You agree to execute and deliver promptly, at the Companys expense, all assignments and other documents requested by the Company to confirm the Companys ownership of such in such intellectual property. You hereby waive any and all moral rights you might have in such intellectual property. You agree that any inventions, products, processes, apparatus, designs, improvements, or business related suggestions and information, conceived, discovered, made or developed by you, solely or jointly with others, after your termination of employment with the Company that are based on the Company's trade secrets or confidential information shall belong to the Company and you hereby assign any and all rights in such items to the Company.
You agree you will fully and promptly disclose, in writing, to the Company all inventions, products, processes, apparatus, designs, improvements, or business related suggestions and information which you may, solely or jointly with others, conceive, discover, make or develop while employed with the Company.
2
13.
Confidentiality.
As a result of your employment with the Company, you agree you will have access to confidential information about the Company and its business, subsidiaries, and affiliates. You agree that you will not at any time utilize for personal benefit, or directly or indirectly divulge or communicate to any person, firm, corporation or entity, any confidential information concerning the Company and its business, subsidiaries and affiliates, which was disclosed to or acquired by you at any time during the Term of this Agreement, except upon direct written authority of Marc Bell, Daniel C. Staton or the Chief Executive Officer. You specifically agree that all confidential information or knowledge concerning matters affecting or relating to the Companys business obtained by you during your employment is deemed to be included within the terms of this paragraph and to constitute important, material and confidential trade secrets that affect the successful conduct of the Companys business and its goodwill.
Confidential information, as used herein, means information which includes, but is not limited to, the names, buying habits or practices of any of the Companys customers; operational, marketing and fundraising strategies; marketing methods and related data; the names of any vendors or suppliers; costs of materials; the prices the Company obtains or has obtained or at which it sells or has sold its products or services; manufacturing and sales costs; lists or other written records used in the Companys business; compensation paid to employees and other terms of employment; merchandising or sales techniques; contracts and licenses; business systems; computer software and programs (including object code and source code), network architecture, protocols, and any other confidential information of, about, or concerning the business of the Company and its parents, subsidiaries and affiliates, their manners of operation, or other confidential data of any kind.
Enclosed you will find two copies of our Offer of Employment. Please contact me as soon as you have reached a decision concerning our offer of employment. Indicate your acceptance of this offer by signing and dating below and returning this signed offer letter to Carmela Monti, Vice President, Human Resources via fax 212-702-6283. You may keep one copy for your records.
We are very excited about the contributions you can make to the Friendfinder Team! Should you have any questions concerning the enclosed information or need additional information, please contact me at (561) 988-1724.
/s/ Daniel C. Staton |
|
|
Daniel C. Staton |
| Date |
Chairman |
|
|
ACKNOWLEDGED AND AGREED
/s/ Ezra Shashoua |
| 4/9/10 |
Ezra Shashoua |
| Date |
3
Exhibit 10.29
Effective March 14, 2011
Anthony L. Previte
2932 Richland Avenue
San Jose, CA 95125
Re: Employment Offer Letter
Dear Anthony:
On behalf of FriendFinder Networks Inc., and its subsidiary, Various, Inc. (collectively, the Company), the Company is pleased to offer you the position of Chief Operating Officer reporting directly to Marc Bell and Daniel C. Staton. This position is based in the Companys Northern California offices (currently located at 220 Humboldt Court, Sunnyvale, CA 94089).
1.
Base salary: Your base salary per year of employment will be payable bi-monthly in accordance with the Companys standard payroll practices at the rate of $25,000.00 ($600,000.00 annually).
2.
Other Compensation: You will be eligible to receive a discretionary annual bonus contingent upon your achievement of specific goals and objectives set forth and agreed to with and by Senior Management.
3.
Equity compensation: You have been granted equity compensation in the past, and will be provided further grants under the Companys equity compensation plans from time to time commensurate with your status as a senior executive of the Company.
4.
Benefits and vacation time: You are currently eligible for the standard Company health insurance, dental insurance, disability insurance, life insurance, and other benefit plans, consistent with the terms of such plans and as set forth in the summary plan documents, a copy of which the Company will provide to you. You shall be eligible to participate in any executive medical plan the Company may introduce in the future. You are currently and will continue to be eligible for the Companys standard 401(K) savings plan. The Paid Time Off (PTO) system, which provides eligible employees with a bank of paid hours, to be used as you deem appropriate, will continue. You will continue to accrue paid time off hours at a rate of 10 hours per pay period.
5.
Start date: The State Date hereunder shall be March 14, 2011. Your current tenure with Various will be grandfathered.
6.
Responsibilities: You will be responsible for the Chief Operating Officer function. You will also be responsible for functions and such other duties as may be reasonably assigned by the Company from time to time and consistent with or complementary to your duties as described herein. You will devote all of your professional time, attention, energy and skill to the business and affairs of the Company. You will serve the Company faithfully and diligently to the best of your ability.
7.
Term: Your term of employment shall commence on the Start Date and continue for three (3) years; provided that the Company may terminate you for Cause without incurring further liability to you in connection with your employment. Cause means a willful failure or refusal on your part to perform your duties under this Agreement, or otherwise imparted by the Companys employee manual; willful failure or refusal to carry out the lawful directions of your superiors; willful gross misconduct on your part, including but not limited to theft, violent work-related behavior, violation of the Companys anti-discrimination and anti-harassment policies or repeated acts of gross insubordination; willful dishonesty or fraud in connection with your employment, regardless of whether it results in economic harm to the Company or its subsidiaries or affiliates; conviction of a crime other than a minor traffic infraction; or material breach of any provision of this Agreement. If you are terminated with Cause, you shall receive only unpaid salary through the date your employment is terminated.
Anthony L. Previte
2932 Richland Avenue
San Jose, CA 95125
March 14, 2011
Page 2 of 4
8.
Payments Following Certain Events of Termination: In the event your employment is terminated by the Company without Cause, the Company shall continue to make salary continuation payments (but not Bonus payments) for the remainder of the Term. In the event your employment is terminated by you (other than in connection with a termination by the Company for Cause), the Company shall make salary continuation payments to you at your then-current rate (but no Bonus payments) for a period of one year following the date of termination. Payments of amounts under this Paragraph 8 are subject to compliance by you with Paragraphs 9, 10, 11 and 12 hereof.
9.
Intellectual Property:
a.
All inventions, trade secrets, works of authorship and other intellectual property created by you in part or in whole during your employment with the Company using Company resources, or otherwise related to the actual or prospective businesses or interests of the Company, shall be owned exclusively by the Company and shall be deemed work made for hire to the extent permissible under applicable law. You agree to execute and deliver promptly, at the Companys expense, all assignments and other documents requested by the Company to confirm the Companys ownership of such in such intellectual property. You hereby waive any and all moral rights you might have in such intellectual property. You agree that any inventions, products, processes, apparatus, designs, improvements, or business related suggestions and information, conceived, discovered, made or developed by you, solely or jointly with others, after your termination of employment with the Company that are based on the Company's Confidential Information shall belong to the Company and you hereby assign any and all rights in such items to the Company.
b.
You agree you will fully and promptly disclose, in writing, to the Company all inventions, products, processes, apparatus, designs, improvements, or business related suggestions and information which you may, solely or jointly with others, conceive, discover, make or develop while employed with the Company.
10.
Confidentiality: As a result of your employment with the Company, you agree you will have access to Confidential Information about the Company and its business, subsidiaries, and affiliates. You agree that you will not at any time utilize for personal benefit, or directly or indirectly divulge or communicate to any person, firm, corporation or entity, any Confidential Information concerning the Company and its business, subsidiaries and affiliates, which was disclosed to or acquired by you at any time during the Term of this Agreement, except upon direct written authority of Marc Bell, Dan Staton or the Chief Executive Officer. You specifically agree that all confidential information or knowledge concerning matters affecting or relating to the Companys business obtained by you during your employment is deemed to be included within the terms of this paragraph and to constitute important, material and confidential trade secrets that affect the successful conduct of the Companys business and its goodwill.
Confidential Information, as used herein, means information which includes, but is not limited to, the names, buying habits or practices of any of the Companys customers; operational, marketing and fundraising strategies; marketing methods and related data; the names of any vendors or suppliers; costs of materials; the prices the Company obtains or has obtained or at which it sells or has sold its products or services; manufacturing and sales costs; lists or other written records used in the Companys business; compensation paid to employees and other terms of employment; merchandising or sales techniques; contracts and licenses; business systems; computer software and programs (including object code and source code), network architecture, protocols, trade secrets and any other confidential information of, about, or concerning the business of the Company and its parents, subsidiaries and affiliates, their manners of operation, or other confidential data of any kind.
11.
Interference with Business: You acknowledge that, because of your responsibilities at the Company you have developed and will help to develop, and have been and will be exposed to, the Companys business strategies, information on customers and clients, and other valuable Confidential Information and that use of disclosure of such Confidential Information in breach of this Agreement would be extremely difficult to detect or prove. You also acknowledge that the Companys relationships with its employees, customers, clients, vendors, and other persons are valuable business assets. Therefore, you agree as follows:
2
Anthony L. Previte
2932 Richland Avenue
San Jose, CA 95125
March 14, 2011
Page 3 of 4
a.
You shall not, for a period of one (1) year following termination of your employment with the Company for any reason, directly or indirectly solicit, induce, recruit, or encourage any officer, director or employee of the Company to leave the Company or terminate his or her employment with the Company.
b.
You shall not, for a period of one (1) year following the termination of your employment with the Company for any reason, for the purpose of selling products or services competitive with the Companys, solicit any actual or prospective customer or client of the Company by using the Companys Confidential Information, or otherwise solicit such customers or clients by using means that amount to unfair competition.
12.
Additional Arrangements Following Termination of Employment: In the event that your employment with the Company is terminated by the Company with or without Cause, or by you for any reason, you hereby acknowledge and agree and confirm that any obligation by the Company to make continuing payments to you (other than amounts accrued through the date of termination), including as required by Paragraphs 7 and 8 hereof shall be conditioned upon (i) your continuing compliance with Paragraph 9, 10 and 11 hereof and (ii) for the applicable period of ongoing posttermination payments set forth herein, you not accepting employment with or providing consulting service to any web-based provider of adult-oriented social networking, chat or cams services worldwide.
13.
Indemnification Agreement: It is hereby agreed between you and the Company that your Indemnification Agreement entered into as of April 21, 2009 shall remain in full force and effect in accordance with its terms.
3
Anthony L. Previte
2932 Richland Avenue
San Jose, CA 95125
March 14, 2011
Page 4 of 4
Please indicate your acceptance of this offer of employment by signing and dating below and returning this signed offer letter to me via fax at (561) 912 1754. You may keep one copy for your records.
Should you have any questions concerning the enclosed information or need additional information, please let me know.
Sincerely,
FRIENDFINDER NETWORKS INC.
/s/ Ezra Shashoua |
|
|
Ezra Shashoua |
| Date |
Chief Financial Officer |
|
|
ACKNOWLEDGED AND AGREED
/s/ Anthony L. Previte |
|
|
Anthony L. Previte |
| Date |
4
|
1.
|
Base salary: Your base salary per year of employment will be payable bi-monthly in accordance with the Company's standard payroll practices at the rate of $16,500. ($396,000 annually).
|
|
2.
|
Bonus: Your bonus will be payable as outlined in Exhibit A, less applicable tax withholding.
|
|
3.
|
Equity compensation: You have been granted equity compensation in the past, and will be provided further grants under the Company's equity compensation plans from time to time commensurate with your status as a senior executive of the Company.
|
|
4.
|
Benefits and vacation time: You are currently eligible for the standard Company health insurance, dental insurance, disability insurance, life insurance, and other benefit plans, consistent with the terms of such plans and as set forth in the summary plan documents, a copy of which the Company will provide to you. You shall be eligible to participate in any executive medical plan the Company may introduce in the future, You are currently and will continue to be eligible for the Company's standard 401 (K) savings plan. The Paid Time Off (PTO) system, which provides eligible employees with a "bank" of paid hours, to be used as you deem appropriate, will continue. You will continue to accrue paid time off hours at a rate of 10 hours per pay period.
|
|
5.
|
Start date: The Start Date hereunder shall be January 1, 2011. Your current tenure with Various will be grandfathered.
|
|
6.
|
Responsibilities: You will be responsible for the function of president of Various, Inc. and the Company's social networking websites. . You will also be responsible for functions and such other duties as may be reasonably assigned by the Company from time to time and consistent with or complementary to your duties as described herein. You will devote all of your professional time, attention, energy and skill to the business and affairs of the Company. You will serve the Company faithfully and diligently to the best of your ability.
|
7.
|
Term. Your term of employment shall commence on the Start Date and continue for three (3) years; provided that the Company may terminate you for Cause without incurring further liability to you in connection with your employment. "Cause" means a willful failure or refusal on your part to perform your duties under this Agreement, the Employee Proprietary Information Agreement, or otherwise imparted by the Company's employee manual ; willful failure or refusal to carry out the lawful directions of your superiors; willful gross misconduct on your part, including but not limited to theft, violent work-related behavior, violation of the Company's antidiscrimination and anti-harassment policies or repeated acts of gross insubordination; willful dishonesty or fraud in connection with your employment, regardless of whether it results in economic harm to the Company or its subsidiaries or affiliates; indictment or conviction of a crime other than a minor traffic infraction; or material breach of any provision of this Agreement or the Employee Proprietary Information Agreement. If you are terminated with Cause, you shall receive only unpaid salary through the date your employment is terminated.
|
8.
|
Payments Following Certain Events of Termination. In the event your employment is terminated by the Company without Cause, the Company shall continue to make salary continuation payments (but not Bonus payments) for the remainder of the Term. In the event your employment is terminated by you (other than in connection with a termination by the Company for Cause), the Company shall make salary continuation payments to you at your then-current rate (but no Bonus payments) for a period of one year following the date of termination. Payments of amounts under this Paragraph 8 are subject to compliance by you with Paragraphs 9 and 10 hereof.
|
9.
|
Interference with Business. You acknowledge that, because of your responsibilities at the Company, you have developed and will help to develop, and have been and will be exposed to, the Company's business strategies, information on customers and clients, and other valuable Proprietary Information (as defined in the Employee Proprietary Information Agreement) and trade secrets, and that use or disclosure of such Proprietary Information and trade secrets in breach of this Agreement would be extremely difficult to detect or prove. You also acknowledge that the Company's relationships with its employees, customers, clients, vendors, and other persons are valuable business assets. Therefore, you agree as follows:
|
|
a.
|
You shall not, for a period of the longer of (x) one (1) year following termination of your employment with the Company for any reason and (y) the continuation of payments under Paragraph 8 hereof, directly or indirectly solicit, induce, recruit, or encourage any officer, director, or employee of the Company to leave the Company or terminate his or her employment with the Company.
|
|
b.
|
You shall not, for a period of the longer of (x) one (1) year following the termination of your employment with the Company for any reason and (y) the continuation of payments under Paragraph 8 hereof, for the purpose of selling products or services competitive with the Company's, solicit any actual or prospective customer or client of the Company by using the Company's Proprietary Information or trade secrets, or otherwise solicit such customers or clients by using means that amount to unfair competition.
|
c.
|
You shall not, following the termination of your employment with theCompany for any reason, use the Company's Proprietary Information or trade secrets to interfere with any business relationship or contract between the Company and any of its customers, clients, vendors, business partners, or suppliers.
|
10.
|
Additional Arrangements Following Termination of Employment. In the event that your employment with the Company is terminated by the Company with or without Cause, or by you for for any reason, you hereby acknowledge and agree and confirm that any obligation by the company to make continuing payments to you (other than amounts accrued through the date of termination), including as required by Paragraphs 7 and 8 hereof shall be conditioned upon (i) your continuing compliance with Paragraph 9 hereof and (ii) for the applicable period of ongoing post-termination payments set forth herein, you not accepting employment with or provide consulting services to any web- based provider of adult-oriented social networking, chat or cams services worldwide.
|
FRIENDFINDER NETWORKS INC.
|
||||
/s/ Ezra Shashoua
|
12/13/10 | |||
Ezra Shashoua | Date | |||
Chief Financial Officer
|
ACKNOWLEDGED AND AGREED
|
||||
/s/ Robert Brackett
|
12/13/10 | |||
Robert Brackett | Date | |||
|
|
a.
|
"B. Premises: A portion of the First Floor and Second Floor in the Building as outlined on the floor plan attached hereto as Exhibit A."
|
|
b.
|
"G. Expiration Date: December 31, 2015 or such earlier date in which the Term of this Lease shall expire or be terminated pursuant to the terms and conditions of this Lease or pursuant to law."
|
|
c.
|
"H. Rentable Area: The rentable area of the Premises shall be deemed to be 8,533 square feet, and the rentable area of the Building shall be deemed to be 50,809 square feet, for the purposes of this lease, subject to Article 34."
|
|
d.
|
"I. Tenant's Share of Taxes: 17% subject to Articles 4 and 34."
|
|
e.
|
"J. Tenant's Share of Expenses: 17% subject to Articles 4 and 34."
|
Period
|
Base Rent per SF |
Annual Base
Rent (1)
|
Monthly Base
Rent (1) |
|||||||||
November 1, 2010 — December 31, 2010
|
$ | 17.39 | $ | 148,388.87 | $ | 12,365.74 | ||||||
January 1, 2011 — December 31, 2011
|
17.92 | 152,911.36 | 12,742.62 | |||||||||
January 1, 2012 — December 31, 2012
|
18.46 | 157,519.18 | 13,126.60 | |||||||||
January 1, 2013 — December 31, 2013
|
19.02 | 162,297.66 | 13,524.81 | |||||||||
January 1, 2014 — December 31, 2014
|
19.59 | 167,161.47 | 13,930.13 | |||||||||
January 1, 2015 — December 31, 2015
|
20.18 | 172,195.94 | 14,349.67 |
LANDLORD: | ||||
6800 BROKEN SOUND LLC, a Florida limited liability company | ||||
By: |
/s/ Marc H. Bell
|
|||
Name: |
Marc H. Bell
|
|||
|
Title: |
Managing Member
|
TENANT:
|
||||
FRIENDFINDER NETWORKS INC., a Nevada corporation
|
||||
By: |
/s/ Ezra Shashoua
|
|||
Name: |
Ezra Shashoua
|
|||
|
Title: | Chief Financial Officer |
Name
|
Jurisdiction of Incorporation
|
Big Ego Games Inc.
|
California
|
BIG HAT ENTERPRISES, INC.
|
Panama
|
Big Island Technology Group, Inc.
|
California
|
Confirm ID, Inc.
|
California
|
Danni Ashe, Inc.
|
California
|
Fastcupid, Inc.
|
California
|
FriendFinder California Inc.
|
California
|
FriendFinder GmbH
|
Germany
|
FriendFinder Processing, Ltd.
|
St. Kitts
|
FriendFinder Networks Inc.
|
Nevada
|
FriendFinder United Kingdom Ltd.
|
England and Wales
|
FRIENDFINDER VENTURES INC.
|
Nevada
|
FRNK Technology Group
|
California
|
General Media Art Holding, Inc.
|
Delaware
|
General Media Communications, Inc.
|
New York
|
General Media Entertainment, Inc.
|
New York
|
Global Alphabet, Inc.
|
California
|
GMCI Internet Operations, Inc.
|
New York
|
GMI On-Line Ventures, Ltd.
|
Delaware
|
Interactive Network, Inc.
|
Nevada
|
JG Enterprises Limited Liability Company Podgorica
|
Montenegro
|
Medley.com Incorporated
|
California
|
NAFT MEDIA, S.L.
|
Spain
|
NAFT News Corporation
|
California
|
Penthouse Clubs International Establishment
|
Liechtenstein
|
Penthouse Digital Media Productions Inc.
|
New York
|
Penthouse Financial Services N.V.
|
Curacao Netherlands Antilles
|
Penthouse Images Acquisitions, Ltd.
|
New York
|
PLAYTIME GAMING INC.
|
California
|
PMGI Holdings Inc.
|
Delaware
|
PPM Technology Group, Inc.
|
California
|
Pure Entertainment Telecommunications, Inc.
|
New York
|
Sharkfish, Inc.
|
California
|
Snapshot Productions, LLC
|
Texas
|
Streamray Inc.
|
St. Christopher and Nevis
|
Streamray, Inc.
|
Nevada
|
Streamray Processing Ltd.
|
England and Wales
|
Streamray Studios Inc.
|
California
|
Tan Door Media Inc.
|
California
|
Traffic Cat, Inc.
|
California
|
Transbloom, Inc.
|
California
|
Various, Inc.
|
California
|
Ventnor Enterprise Limited
|
England and Wales
|
Video Bliss, Inc.
|
California
|
West Coast Facilities Inc.
|
California
|
Wight Enterprise Limited
|
England and Wales
|
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm under the captions Selected Consolidated Financial Data and Independent Registered Public Accounting Firm and to the use of our reports dated March 15, 2011 in Amendment No. 12 to the Registration Statement on Form S-1 and the related Prospectus of FriendFinder Networks Inc. dated March 17, 2011.
/s/ EisnerAmper LLP
New York, New York
March 15, 2011
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