EFTA01037132.pdf

From: "Jeffrey E." <jeevacation@grnail.com> To: Richard Kahn Subject: Re: Next Date: Fri, 25 Aug 2017 10:45:11 +0000 pretty funny Neale. even ,the silly open gate proposal was in essence stepping into your shoes for only 6 million cash. BACK THEN !! then proposing to distribute what they estimated to be almost the full total -ie 14 of the 15 million of cash on the balance sheet ( I point out that that is .more than it totals today , -for chris ). and then having Joel ,them and faith leverage themselves up by borrowing at 7!! percent against the entire co in order to make a further distribution of an additional 15 rrt/ . on paper creating a highly inflated enterprise value . he only proposed 6 million cash infusion. around the same amount that you are currently being offered. they valued faiths and joel ongoing equity(, that they proposd they) " keep in" , silly, at 8 m. roughly the same as we suggested. Financial engineering done well is like lipstick.. however not done well. is also like lipstick.. :) This is a personal service business. no more no less. suggesting that they leverage themselves up so you that they can pay themselves a higher salary . fails the HBS first year class that im aware youve taken. re the 18 million , we have distributions from Next directly to the former shareholders of the claxon offshore entity of approx 3. re receivables . you can ask millie . sorry PS Faith and joel will have to borrow the money to buy you out at 5.. can be done, but not so easy. they have never taken out real money from the co. - in any form. salary etc. hence little net worth ,and current lenders are not that comfortable with the potential liabilites. . On Fri, Aug 25, 2017 at 5:27 AM, Richard Kahn > wrote: Please advise. Thank you. Richard Kahn HBRK Associates Inc. 575 Lexington Avenue, 4th Floor New York, NY 10022 Tel Fax Cell Begin forwarded message: From: Neale Attenborough Date: August 24, 2017 at 4:50:55 PM EDT To: Richard Kahn < Cc: Chris Lawler <I Subject: RE: Next I look forward to our conversation. For the record, we did actually pay $18MM for 42% of this business in 2008. At the time that represented an -8x multiple of EBITDA. That is not a fictitious number. In addition we did receive a bid for about the same amount from EFTA01037132 Open Gate Capital, a reputable private equity firm. I do not understand why you say that ii is "hardly legitimate". While I did say we didn't expect to receive what we paid, I did not say it was immaterial. I don't follow most of what you say below and look forward to hearing your clarification. However, can you please clarify one statement specifically? What do you mean when you say the current receivables have not be reviewed in years? Thanks, Neale From: Richard Kahn rmailto Sent: Thursday, August 24, 2017 3:45 PM To: Neale Attenborough Cc: Chris Lawler Subject: Next confirmed thank you We have reviewed your statements that you sent to us along with the K-1's and some financials. Frankly, some of the numbers are inaccurate as a result of millie. Your annual financial statements were reviewed but not audited - shame on all of you... Your calculation of Ebitda includes things like adding back foreign exchange costs? board fees etc. That is not the way we look at what is unfortunately for all merely a personal service business. Faith and Joel make up the business, nothing more. We calculate the Ebidta, which we think is an odd way of measuring value of a personal service biz with lots of competition and small growth opportuinties if any. Giving you the benefit of the doubt, and ignoring how much you paid or if some of that money was repaid directly to the former owners of Claxon and not truly understanding what you described as a fixed tax payment per quarter (ie based on what I think looking back over the past three years) ebitda looks like 4-5 million. We have bought many small biz and usually pay mom and pops for 1- 3 times ebita or more usually 4 times net income. We are finding it difficult to get to more than a 15 million total value for Next ( not including liabilities). The 18 million dollar bid that you mentioned Faith said was hardly legitimate. I think further review of the accounting tax etc. is probably a waste of all our time. As you rightly said, what you initially paid is somewhat if not totatly immaterial to todays value. You have not factored in the liabilities, both reputationally and fiscal yet. I think the 5 million cash offer or 6m over time is fair. I look forward to our conversation on tuesday. As another note, the current receivables have not been reviewed for years... EFTA01037133  Rich On Aug 24, 2017, at 3:28 PM, Neale Attenborough < > wrote: Disclaimer: This message contains information that may be confidential and/or privileged and is intended only for the person(s) named. Any use, distribution, copying or disclosure to any other person is strictly prohibited. If you received this transmission in error, please notify the sender by reply e-mail and then destroy the message. Opinions, conclusions, and other information in this message that do not relate to the official business of Golden Gate Capital shall be understood to be neither given nor endorsed by the company. 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