We lost some valuable intellectual property in the process, as well as about half a million dollars in earnout to be paid over time, not counting performance based royalties on future revenues. The IP was a group communication platform that was accessible by voice, text and IM, and significantly improved on conference calling platforms available at the time. So even if we had put the company on ice, the IP would have still been ours. In retrospect, it would have been quite valuable. Plus, there was the psychic cost of dealing with such unpleasant people, and then their attorneys, in the aftermath.
The main point of the piece though is to trust your gut and not to let friendships cloud business decisions. Had I done so, I would have avoided this outcome.