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Log In / Register | Feb 9, 2012

NexCen Statement from Legal Department

Posted Thu, 2008/05/22 - 20:07 by Janet Sparks

Writer's Note: As part of a letter sent to franchisees today, president Chris Dull attached a statement from NexCen's legal department regarding the company's recent announcements. The statement is as follows:

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Key Messages

  • The company announced on Monday that it will delay the filing of its 10-Q for the first quarter of 2008 and that it expects to amend the company’s 10-K for 2007.

  • Nexcen concluded that disclosures regarding a change in the priority of cash distributions from “lockbox accounts” and the accelerated-redemption feature of our bank credit facility were not contained in the company’s 2007 10-K or the January 29, 2008 8-K filed in connection with the acquisition of Great American Cookies.

  • NexCen’s bank credit facility was amended in January 2008 at the time of the acquisition of Great American Cookies. The amendments allowed NexCen to borrow an additional $70 million to finance a portion of the acquisition purchase price and included:

  • An accelerated-redemption feature applicable to $35 million of the $70 million. Specifically, the amendments require that the $35 million be reduced to $5 million by October 17, 2008.

  • A “lockbox” feature that provided that after payment of some amount to cover the ordinary course operating expenses of the company’s franchise and brand management businesses, all remaining collected cash from the company’s franchise businesses and the cookie dough factory would be applied to reduce the outstanding principal amount of new debt until the note is repaid in full.

  • Based on information now known, the company currently believes that there is substantial doubt about its ability to continue as a going concern and that, pending review by independent counsel, this substantial doubt also may have existed at the time the company filed its 2007 10-K.

  • The company is continuing to review all of the relevant facts and circumstances. To assist in evaluating and resolving these matters, NexCen has retained independent counsel to conduct an independent review of the situation.

  • · The company also announced on 5/19 that management is conducting a review of strategic alternatives for the company, including potential capital market transactions, a possible sale of one or more of their businesses, and discussions with the Company’s lender.

  • The executive team and Board of Directors are carefully considering the future direction of the business. The company has a number of options under consideration and will be moving expeditiously in their review.

  • As part of the evaluation of strategic alternatives, NexCen is also taking immediate steps to reduce operating expenses and are undertaking a comprehensive review of all expenses throughout the business.

  • NexCen is in the preliminary stages of the evaluation of strategic alternatives and is still in the midst of the review of the 2007 10-K. Until that review is complete, NexCen cannot comment any further than what was said in the 5/19 press release. As soon as NexCen has an update on either of these matters they will communicate that information.