On July 12, 2017 a
No Value
was filed
involving a dispute between
Adam Csernay,
Andrew Weimer,
Barbara Mcbride,
Barbara Nuss,
Bart Boniol,
Bill Hoggatt,
Bob Edwards,
Brady Nelson,
Dan Van Wart,
David Reese,
David Vanwyk,
Deborah Parlette,
Don Baldwin,
Don Tuttle,
Fred Dahlke,
Gary Paone,
Glen Berry,
Glen Kiefer,
Greg Nichols,
James Devita,
James Woodward,
Janice Waite,
Jeff Lerner,
Jim Reed,
Jo Alloway,
Joanne Bengiveno,
Joseph Dziemianzuk,
Kathy Segers,
Keith Kittidumrongkool,
Kelly Shannon,
Ken Snyder,
Kevin Sass,
Kristina Kittidumrongkool,
Larry Bernstein,
Lynn Duffy,
Margie Renstrom,
Mark Hatcher,
Mark Meinhofer,
Mark Peters,
Mary Chase,
Michael Clark,
Michael Hoerner,
Michael Horsely,
Michael Serignano,
Miguel Martinez,
Pamela Klosiewski,
Peter Maccracken,
Peter Ortega,
Randy Bustillos,
Renee West,
Richard Van Gilder,
Rich Valentine,
Rick Bea,
Robert Winkler,
Roy Freer,
Sabra Shafer,
Sami Rice,
Sarah Evans,
Shona Choudhury,
Stefan Cox,
Steve Boggio,
Steven Sylvester,
Suzanne Frazier,
Teresa Chapman,
Tony Cains,
Tyrone Julian,
and
Aai Pentwater Fund Public Limited,
Ae 2015 Grantor Clat,
Alzette European Clo Sa,
Amf Bowling Centers Inc,
Bowlmor Amf Corp.,
Bowlmor, Va,
Brett Parker,
Cerberus California Llc,
Cerberus Capital Lp,
Cerberus Capital Management L.P.,
Cerberus Institutional Associates, Llc,
Cerberus Institutional Partners Lp,
Cerberus Operations And Advisory Company, Llc,
Cerberus Series Four Holdings Llc,
Chase Lincoln First Commercial Corp,
Cobalt Recreation Llc,
Erik Wright,
Ethan Klemperer,
Gerry Madigan,
Jerry Comstock,
John Young,
Kingpin Intermediate Holdings, Llc,
Map 98 Segregated Portfolio Of Lma Spc,
Michael Elkins,
Oceana Master Fund Ltd,
Pentwater Equity Opportunities Master Fund Ltd,
Pentwater Event Driven,
Pwcm Master Fund Ltd,
Robert Davenport,
Selous Capital Ii Llc,
Tanner Partners Credit Fund Lp,
Tom Shannon,
Wells Fargo Bank,
for Commercial - Other (BCL/fraud.conv.)
in the District Court of Oneida County.
Preview
FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328
NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF ONEIDA
Jane Does #1-14 and John Does #15-64,
Index No. EFCA2017-001328
Plaintiffs,
AFFIDAVIT OF BRETT
- against - PARKER IN OPPOSITION
TO PLAINTIFFS’ ORDER TO
Bowlmor AMF Corp., Cerberus Capital Management, L.P., SHOW CAUSE
Tom Shannon, Brett Parker, Ethan Klemperer, Erik
Wright, Robert Davenport, Jerry Comstack, John Young, Assigned to
Gerry Madigan, and Michael Elkins, Justice MacRae
Defendants.
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
BRETT PARKER, being duly sworn, deposes and says:
1. I am a defendant in the above-captioned action. I am employed by AMF Bowling
Centers, Inc. and serve as the Chief Financial Officer and Executive Vice President of the
Bowlmor family of companies (the “Bowlmor Companies”), including defendant Bowlmor AMF
Corp. (“Bowlmor AMF”). I am also Vice Chairman of the Bowlmor AMF Board of Directors
(the “Board”). I am personally familiar with the facts set forth herein. I submit this Affidavit in
opposition to Plaintiffs’ Order to Show Cause.
2. I obtained a Bachelor’s degree in Economics from Cornell University in 2000 and
started working for the Bowlmor Companies in 2001. I have spent my entire professional career
with the Bowlmor Companies.
3. As CFO, I oversee the financial operations of the Bowlmor Companies. My
responsibilities include, among many other things, preparing budgets and financial forecasts,
financial reporting, making sure bills are paid on time, negotiating credit agreements with
1
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lenders, and negotiating with vendors. In this capacity I am intimately familiar with the financial
condition of the Bowlmor Companies, including Bowlmor AMF.
I. The Bowlmor Companies
4. When I started working for the Bowlmor Companies, we operated one bowling
center. Today, we operate over 300 centers.
5. Over the span of approximately four years, we acquired two competitors - the
“AMF” branded bowling centers run by AMF Bowling Centers and the “Brunswick” branded
bowling centers run by Brunswick Corporation. We also invested hundreds of millions of
dollars in upgrading and modernizing our centers. With these acquisitions and improvements,
we are considered among the fastest-growing private companies in the U.S. since 2014.
6. For example, our revenues grew from over $37 million during our 2012 fiscal
year, before the Bowlmor Companies acquired AMF in July 2013, to more than $582 million
during our 2016 fiscal year. During our 2017 fiscal year, which ended in early July, our
revenues grew to more than $595 million. In addition to growth in revenue, our earnings before
interest, taxes, depreciation, and amortization (“EBITDA”) grew from around $5.5 million for
the fiscal year 2012 to $124.4 million for the fiscal year 2017.
II. The Atairos Sale
7. On July 3, 2017, Bowlmor AMF closed a transaction with the private equity firm
Atairos Group, Inc. (“Atairos”) whereby Atairos purchased a majority of the shares of Bowlmor
AMF (the “Atairos Sale”), at a price that valued the Bowlmor Companies at substantially more
than $1 billion. Atairos paid for a substantial portion (several hundred million dollars) of that
purchase with cash. In the months preceding the Atairos Sale, Bowlmor AMF had multiple
additional offers to complete similar transactions at valuations of more than $1 billion.
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8. Bowlmor AMF chose to enter into the transaction with Atairos for a number of
reasons including because it is a well-funded private equity firm with more than $4 billion in
committed capital that is run by individuals with extensive management backgrounds. (Exs. A,
B.) Indeed, Atairos was formed in 2016 by former executives of Comcast Corp. and a majority
of its capital is funded by Comcast. It is my understanding that, as of today, the market
capitalization of Comcast is over $186 billion.
9. In connection with the Atairos Sale, Bowlmor AMF retained Duff & Phelps,
LLC, a well-respected independent financial advisor, to prepare a fairness opinion (the “Fairness
Opinion”) for the Board. Specifically, Duff & Phelps was asked to provide “an opinion . . . as to
the fairness, from a financial point of view, to the Unaffiliated Stockholders, of the consideration
to be received by them” in connection with the Atairos Sale. Duff & Phelps concluded that “the
consideration to be received by the Unaffiliated Stockholders [in connection with the Atairos
Sale] is fair, from a financial point of view.” As a private company, Bowlmor AMF was not
legally required to obtain a Fairness Opinion in connection with a transaction of this nature;
however, it did so as a matter of good governance. Exhibit C is copy of a presentation given by
Duff & Phelps on June 6, 2017 to the Board in connection with the Fairness Opinion (the “Board
Presentation”).
10. In preparing the Fairness Opinion, Duff & Phelps considered the specific financial
statements cited in Mr. Dowe’s Affirmation in support of Plaintiffs’ Order to Show Cause in
addition to having access to extensive financial data and qualitative information on the company.
(Id. at 7; see Dowe Aff. Exs. B, L.)
11. As demonstrated in the Board Presentation, as of June 6, 2017, Duff & Phelps had
determined, based on its independent analysis of Bowlmor AMF’s financial condition—
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including the very financial statements relied on by Plaintiffs in their motion—that the enterprise
value of Bowlmor AMF, based on a discounted cash flow (“DCF”) and comparable company
analysis, was (Ex. C at 7.)
12. Moreover, Duff & Phelps determined that, as of June 6, 2017, Bowlmor AMF’s
equity value1 was (Id.)
13. In connection with the Atairos Sale, each share of Bowlmor AMF’s stock was
valued at (Id.)
III. Bowlmor’s Financial Condition
14. I am advised that Plaintiffs contend that Bowlmor AMF was made insolvent by
Bowlmor AMF’s share repurchase in September 2016 and remains so to this day. Plaintiffs’
assertions are false.
15. I am aware that there are three general tests courts use to determine whether a
company is insolvent, namely, the “balance sheet test,” the “cash flow test,” and the “adequate
capitalization test.” Bowlmor AMF is not insolvent under any of these tests.
A. Bowlmor AMF’s Assets and Liabilities
16. I am aware that, under the “balance sheet test,” a company is considered solvent if
the value of its assets is greater than the value of its liabilities.
17. Bowlmor AMF has not prepared a balance sheet since the close of the Atairos
Sale that reflects the current value of Bowlmor AMF’s assets. It is customary and allowable
under GAAP for a balance sheet to not be issued for approximately one year following a
transaction of this type. However, as CFO, I am confident that the value of Bowlmor AMF’s
assets exceeds its liabilities.
1
Bowlmor’s equity value equals its enterprise value minus its debts and liabilities incurred in connection with the
Atairos Sale or otherwise existing or expected to exist on a pro-forma basis.
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18. The most direct evidence that the value of Bowlmor AMF’s assets exceed its
liabilities is the fact that Atairos, a sophisticated investor, was willing to pay over $1 billion (a
substantial amount in excess of Bowlmor AMF’s liabilities) to acquire a majority stake in
Bowlmor AMF.
19. Moreover, as I discussed in more detail above, Duff & Phelps also estimated
Bowlmor AMF’s value to be
(Ex. C at 7.)
20. Contrary to Plaintiffs’ assertion, the September 2016 “Share Repurchase” did not
make Bowlmor AMF insolvent. In September 2016, Bowlmor AMF decided to effectuate a
repurchase of some of its shares of stock (the “Share Repurchase”) to, among other things,
reduce outstanding shares. At the same time, Bowlmor AMF also decided to refinance its term
loan with Credit Suisse AG, a nationally recognized institutional lender, and other syndicated
lenders due to favorable interest rates. The refinanced loan proceeds were used, among other
things, to finance $175 million of the Share Repurchase, pay general operating expenses, and pay
other general corporate expenses. The refinanced credit facility expressly permitted the use of
the refinanced loan proceeds for the Share Repurchase and such purpose was fully disclosed to
all lenders participating under the refinanced credit facility. (Ex. E at 50, 53, at 116 (excerpts of
First Lien Credit Agreement dated September 19, 2016).)
21. Bowlmor AMF received an overwhelmingly positive response from highly
sophisticated financial institutions including those that, to my understanding, conducted
extensive diligence and multiple levels of internal review on the financial condition of Bowlmor
AMF before agreeing to make loans to Bowlmor AMF as part of the refinanced credit facility.
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22. Ultimately, a group of 39 sophisticated institutional lenders, with Credit Suisse
AG acting as the administrative agent, refinanced Bowlmor AMF’s credit facility in September
2016. If Bowlmor AMF would have been rendered balance sheet insolvent by the Share
Repurchase, the lenders would not have advanced funds. Indeed, the company was required to
certify its solvency in connection with the transaction. (Ex. I.) Bowlmor AMF ultimately
obtained up to $630 million in loans ($600 million loaned at closing) in connection with the
September 2016 refinancing. (Id. at 21.)
23. In addition, Bowlmor AMF’s auditor, KPMG LLP, issued an unqualified audit
opinion on October 20, 2016 with full knowledge that Bowlmor AMF was going to use $175
million to repurchase up to 3,684,210 shares of Bowlmor AMF’s common stock. (Ex. D at 30.)
It is my understanding as the CFO that if the Share Repurchase threatened Bowlmor AMF as a
going concern, KPMG would not have provided an unqualified audit opinion pursuant to its
professional responsibilities.
24. Similar to the 2016 Share Repurchase, the Atairos Sale did not make Bowlmor
AMF insolvent.
25. A portion of the purchase price in the Atairos Sale was financed through a new
2017 loan with JPMorgan Chase Bank, Credit Suisse, and Goldman Sachs Bank, and other
syndicated lenders. The new 2017 loan expressly permitted the use of the loan proceeds to,
among other things, pay off the September 2016 credit facility and finance the Atairos Sale, and
such purposes were fully disclosed to all lenders participating under the new 2017 loan.
26. Like the 2016 refinanced credit facility, Bowlmor AMF received an
overwhelmingly positive response to the new 2017 loan from highly sophisticated financial
institutions including those that, to my understanding, conducted extensive diligence and
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multiple levels of internal review on the financial condition of Bowlmor AMF before agreeing to
make loans to Bowlmor AMF. In fact, the new 2017 loan was oversubscribed by a factor of 2—
meaning Bowlmor AMF had to turn away lenders who were ready and willing to loan Bowlmor
AMF more money because of our healthy financial condition. This was true even after Bowlmor
AMF amended the terms to be more borrower friendly after the initial offering. This included
moving borrowings from the second lien into the first (and thus reducing interest expense going
forward) and reducing the Original Issue Discount (and thus increasing liquidity at closing). As
of today, those loans are trading over par, which means that buyers are willing to accept a lower
yield that results from paying more than face value for the loans. This indicates that the market
continues to value the loans as being a lower risk than the reward reflected in the interest rate
(and, in fact, views the costs to Bowlmor AMF as being greater than market).
27. Ultimately, with JPMorgan Chase Bank, Credit Suisse, and Goldman Sachs Bank
taking the lead, 81 sophisticated institutional lenders made loans to Bowlmor AMF under the
new 2017 loan. As in September 2016, to obtain financing in July 2017, Bowlmor AMF had to
certify its solvency. (Ex. J.) Bowlmor AMF ultimately obtained up to $695 million in loans in
connection with the new 2017 loan.
B. Bowlmor AMF’s Cash Flow
28. I am aware that, under the “cash flow test,” a company is considered insolvent if
it is unable to pay its debts as they become due.
29. Bowlmor AMF pays all of its debts as they become due. It is not in arrears, and
no creditor is pursuing Bowlmor AMF for nonpayment of bills.
30. Indeed, Moody’s Investor Service gave Bowlmor AMF a 3B credit rating (Ex. F)
and Standard & Poor’s (“S&P”) gave Bowlmor AMF a B credit rating (Ex. G) post-Atairos Sale.
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These ratings reflect the views of seasoned professionals with deep experience in assessing the
viability of firms of this type in this industry. These analysts have deep and continuing access to
Bowlmor AMF’s historical and projected financial data and access to management.
C. Bowlmor AMF Is Adequately Capitalized
31. I am aware that under the “adequate capitalization test,” a company is considered
insolvent if it does not have adequate capital to maintain its business going forward.
32. Bowlmor AMF has adequate liquidity to maintain its business going forward,
which is supported, in part, by a $50 million revolving credit facility with JPMorgan Chase
Bank, Credit Suisse, and Goldman Sachs Bank.
33. Indeed, the ratings agencies publicly agree that Bowlmor AMF is well capitalized.
Moody’s reported that it “anticipates that Bowlmor AMF will have good liquidity over the next
12 months, supported by a substantial cash balance pro-forma for the [Atairos] [T]ransaction and
an undrawn $50 million revolver.” (Ex. F at 3.) S&P reported that it believes Bowlmor AMF
would still have adequate liquidity even if its EBITDA underperformed S&P’s forecast by 15%.
(Ex. G at 4.)
IV. Bowlmor AMF Would Suffer Irreparable Harm If the Relief Plaintiffs Seek Is
Awarded
34. As CFO, I believe that Bowlmor AMF would be significantly harmed if the relief
sought by Plaintiffs is awarded. First, the Atairos Sale has already closed, and undoing it now
would severely upset Bowlmor AMF’s business as the company would have to figure out how to
unwind a $1 billion acquisition of the corporation. This is probably not even possible and would
require cooperation of non-party Atairos as well as Bowlmor AMF’s other shareholders from the
pre-Atairos period.
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35. Bowlmor AMF would also incur substantial harm if it were required to pay $100
million into escrow during the pendency of Plaintiffs’ EEOC claims.
36. I am aware that, according to the EEOC website, the average time it takes to
investigate and resolve one charge is about 10 months. (Ex. H.) I am also aware that Plaintiffs’
claims involve 64 separate charges.
37. If Bowlmor AMF were required to place $100 million in escrow for that (or any)
period of time, it would be required either to take out a loan in that amount, or to use a
combination of cash on hand or its revolving loan that would incur interest.
38. The cost for Bowlmor AMF to obtain capital is approximately 12 percent,
meaning it would cost approximately $12 million to obtain a $100 million loan for one year.
39. At its current rate of growth, Bowlmor AMF achieves an approximately 40
percent annual return on investment for capital expenditures and other investment activities. If
Bowlmor AMF were to put $100 million in escrow rather than investing that money into its
business for one year, the company would incur $40 million in damages.
40. Bowlmor AMF’s investments in its businesses benefit more than just the
company. When Bowlmor makes capital expenditures on itsbowling centers, itcontributes to
local economies by creating construction jobs, adding to the permanent employment level at the
locations, and generating tax revenues.
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41. One example of this is the AMF Pin-O-Rama bowling alley located at 1724
Genesee Street in Utica, New York. In 2016, Bowlmor invested over $200,000 in renovating
and refurbishing the bowling alley. Those dollars were spent with local contractors, tradesmen
and suppliers in the local economy, and the investment made to the bowling alley provided more
attractive offerings for children and families in the community.
Dated: New York, New York
September 10, 2017
BRETT PARKER
Sworn to before me this
10th day of September 2017
Notary Public
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Preview
FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328 NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF ONEIDA Jane Does #1-14 and John Does #15-64, Index No. EFCA2017-001328 Plaintiffs, AFFIDAVIT OF BRETT - against - PARKER IN OPPOSITION TO PLAINTIFFS’ ORDER TO Bowlmor AMF Corp., Cerberus Capital Management, L.P., SHOW CAUSE Tom Shannon, Brett Parker, Ethan Klemperer, Erik Wright, Robert Davenport, Jerry Comstack, John Young, Assigned to Gerry Madigan, and Michael Elkins, Justice MacRae Defendants. STATE OF NEW YORK ) ss.: COUNTY OF NEW YORK ) BRETT PARKER, being duly sworn, deposes and says: 1. I am a defendant in the above-captioned action. I am employed by AMF Bowling Centers, Inc. and serve as the Chief Financial Officer and Executive Vice President of the Bowlmor family of companies (the “Bowlmor Companies”), including defendant Bowlmor AMF Corp. (“Bowlmor AMF”). I am also Vice Chairman of the Bowlmor AMF Board of Directors (the “Board”). I am personally familiar with the facts set forth herein. I submit this Affidavit in opposition to Plaintiffs’ Order to Show Cause. 2. I obtained a Bachelor’s degree in Economics from Cornell University in 2000 and started working for the Bowlmor Companies in 2001. I have spent my entire professional career with the Bowlmor Companies. 3. As CFO, I oversee the financial operations of the Bowlmor Companies. My responsibilities include, among many other things, preparing budgets and financial forecasts, financial reporting, making sure bills are paid on time, negotiating credit agreements with 1 1 of 10 FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328 NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017 lenders, and negotiating with vendors. In this capacity I am intimately familiar with the financial condition of the Bowlmor Companies, including Bowlmor AMF. I. The Bowlmor Companies 4. When I started working for the Bowlmor Companies, we operated one bowling center. Today, we operate over 300 centers. 5. Over the span of approximately four years, we acquired two competitors - the “AMF” branded bowling centers run by AMF Bowling Centers and the “Brunswick” branded bowling centers run by Brunswick Corporation. We also invested hundreds of millions of dollars in upgrading and modernizing our centers. With these acquisitions and improvements, we are considered among the fastest-growing private companies in the U.S. since 2014. 6. For example, our revenues grew from over $37 million during our 2012 fiscal year, before the Bowlmor Companies acquired AMF in July 2013, to more than $582 million during our 2016 fiscal year. During our 2017 fiscal year, which ended in early July, our revenues grew to more than $595 million. In addition to growth in revenue, our earnings before interest, taxes, depreciation, and amortization (“EBITDA”) grew from around $5.5 million for the fiscal year 2012 to $124.4 million for the fiscal year 2017. II. The Atairos Sale 7. On July 3, 2017, Bowlmor AMF closed a transaction with the private equity firm Atairos Group, Inc. (“Atairos”) whereby Atairos purchased a majority of the shares of Bowlmor AMF (the “Atairos Sale”), at a price that valued the Bowlmor Companies at substantially more than $1 billion. Atairos paid for a substantial portion (several hundred million dollars) of that purchase with cash. In the months preceding the Atairos Sale, Bowlmor AMF had multiple additional offers to complete similar transactions at valuations of more than $1 billion. 2 of 10 FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328 NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017 8. Bowlmor AMF chose to enter into the transaction with Atairos for a number of reasons including because it is a well-funded private equity firm with more than $4 billion in committed capital that is run by individuals with extensive management backgrounds. (Exs. A, B.) Indeed, Atairos was formed in 2016 by former executives of Comcast Corp. and a majority of its capital is funded by Comcast. It is my understanding that, as of today, the market capitalization of Comcast is over $186 billion. 9. In connection with the Atairos Sale, Bowlmor AMF retained Duff & Phelps, LLC, a well-respected independent financial advisor, to prepare a fairness opinion (the “Fairness Opinion”) for the Board. Specifically, Duff & Phelps was asked to provide “an opinion . . . as to the fairness, from a financial point of view, to the Unaffiliated Stockholders, of the consideration to be received by them” in connection with the Atairos Sale. Duff & Phelps concluded that “the consideration to be received by the Unaffiliated Stockholders [in connection with the Atairos Sale] is fair, from a financial point of view.” As a private company, Bowlmor AMF was not legally required to obtain a Fairness Opinion in connection with a transaction of this nature; however, it did so as a matter of good governance. Exhibit C is copy of a presentation given by Duff & Phelps on June 6, 2017 to the Board in connection with the Fairness Opinion (the “Board Presentation”). 10. In preparing the Fairness Opinion, Duff & Phelps considered the specific financial statements cited in Mr. Dowe’s Affirmation in support of Plaintiffs’ Order to Show Cause in addition to having access to extensive financial data and qualitative information on the company. (Id. at 7; see Dowe Aff. Exs. B, L.) 11. As demonstrated in the Board Presentation, as of June 6, 2017, Duff & Phelps had determined, based on its independent analysis of Bowlmor AMF’s financial condition— 3 of 10 FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328 NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017 including the very financial statements relied on by Plaintiffs in their motion—that the enterprise value of Bowlmor AMF, based on a discounted cash flow (“DCF”) and comparable company analysis, was (Ex. C at 7.) 12. Moreover, Duff & Phelps determined that, as of June 6, 2017, Bowlmor AMF’s equity value1 was (Id.) 13. In connection with the Atairos Sale, each share of Bowlmor AMF’s stock was valued at (Id.) III. Bowlmor’s Financial Condition 14. I am advised that Plaintiffs contend that Bowlmor AMF was made insolvent by Bowlmor AMF’s share repurchase in September 2016 and remains so to this day. Plaintiffs’ assertions are false. 15. I am aware that there are three general tests courts use to determine whether a company is insolvent, namely, the “balance sheet test,” the “cash flow test,” and the “adequate capitalization test.” Bowlmor AMF is not insolvent under any of these tests. A. Bowlmor AMF’s Assets and Liabilities 16. I am aware that, under the “balance sheet test,” a company is considered solvent if the value of its assets is greater than the value of its liabilities. 17. Bowlmor AMF has not prepared a balance sheet since the close of the Atairos Sale that reflects the current value of Bowlmor AMF’s assets. It is customary and allowable under GAAP for a balance sheet to not be issued for approximately one year following a transaction of this type. However, as CFO, I am confident that the value of Bowlmor AMF’s assets exceeds its liabilities. 1 Bowlmor’s equity value equals its enterprise value minus its debts and liabilities incurred in connection with the Atairos Sale or otherwise existing or expected to exist on a pro-forma basis. 4 of 10 FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328 NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017 18. The most direct evidence that the value of Bowlmor AMF’s assets exceed its liabilities is the fact that Atairos, a sophisticated investor, was willing to pay over $1 billion (a substantial amount in excess of Bowlmor AMF’s liabilities) to acquire a majority stake in Bowlmor AMF. 19. Moreover, as I discussed in more detail above, Duff & Phelps also estimated Bowlmor AMF’s value to be (Ex. C at 7.) 20. Contrary to Plaintiffs’ assertion, the September 2016 “Share Repurchase” did not make Bowlmor AMF insolvent. In September 2016, Bowlmor AMF decided to effectuate a repurchase of some of its shares of stock (the “Share Repurchase”) to, among other things, reduce outstanding shares. At the same time, Bowlmor AMF also decided to refinance its term loan with Credit Suisse AG, a nationally recognized institutional lender, and other syndicated lenders due to favorable interest rates. The refinanced loan proceeds were used, among other things, to finance $175 million of the Share Repurchase, pay general operating expenses, and pay other general corporate expenses. The refinanced credit facility expressly permitted the use of the refinanced loan proceeds for the Share Repurchase and such purpose was fully disclosed to all lenders participating under the refinanced credit facility. (Ex. E at 50, 53, at 116 (excerpts of First Lien Credit Agreement dated September 19, 2016).) 21. Bowlmor AMF received an overwhelmingly positive response from highly sophisticated financial institutions including those that, to my understanding, conducted extensive diligence and multiple levels of internal review on the financial condition of Bowlmor AMF before agreeing to make loans to Bowlmor AMF as part of the refinanced credit facility. 5 of 10 FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328 NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017 22. Ultimately, a group of 39 sophisticated institutional lenders, with Credit Suisse AG acting as the administrative agent, refinanced Bowlmor AMF’s credit facility in September 2016. If Bowlmor AMF would have been rendered balance sheet insolvent by the Share Repurchase, the lenders would not have advanced funds. Indeed, the company was required to certify its solvency in connection with the transaction. (Ex. I.) Bowlmor AMF ultimately obtained up to $630 million in loans ($600 million loaned at closing) in connection with the September 2016 refinancing. (Id. at 21.) 23. In addition, Bowlmor AMF’s auditor, KPMG LLP, issued an unqualified audit opinion on October 20, 2016 with full knowledge that Bowlmor AMF was going to use $175 million to repurchase up to 3,684,210 shares of Bowlmor AMF’s common stock. (Ex. D at 30.) It is my understanding as the CFO that if the Share Repurchase threatened Bowlmor AMF as a going concern, KPMG would not have provided an unqualified audit opinion pursuant to its professional responsibilities. 24. Similar to the 2016 Share Repurchase, the Atairos Sale did not make Bowlmor AMF insolvent. 25. A portion of the purchase price in the Atairos Sale was financed through a new 2017 loan with JPMorgan Chase Bank, Credit Suisse, and Goldman Sachs Bank, and other syndicated lenders. The new 2017 loan expressly permitted the use of the loan proceeds to, among other things, pay off the September 2016 credit facility and finance the Atairos Sale, and such purposes were fully disclosed to all lenders participating under the new 2017 loan. 26. Like the 2016 refinanced credit facility, Bowlmor AMF received an overwhelmingly positive response to the new 2017 loan from highly sophisticated financial institutions including those that, to my understanding, conducted extensive diligence and 6 of 10 FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328 NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017 multiple levels of internal review on the financial condition of Bowlmor AMF before agreeing to make loans to Bowlmor AMF. In fact, the new 2017 loan was oversubscribed by a factor of 2— meaning Bowlmor AMF had to turn away lenders who were ready and willing to loan Bowlmor AMF more money because of our healthy financial condition. This was true even after Bowlmor AMF amended the terms to be more borrower friendly after the initial offering. This included moving borrowings from the second lien into the first (and thus reducing interest expense going forward) and reducing the Original Issue Discount (and thus increasing liquidity at closing). As of today, those loans are trading over par, which means that buyers are willing to accept a lower yield that results from paying more than face value for the loans. This indicates that the market continues to value the loans as being a lower risk than the reward reflected in the interest rate (and, in fact, views the costs to Bowlmor AMF as being greater than market). 27. Ultimately, with JPMorgan Chase Bank, Credit Suisse, and Goldman Sachs Bank taking the lead, 81 sophisticated institutional lenders made loans to Bowlmor AMF under the new 2017 loan. As in September 2016, to obtain financing in July 2017, Bowlmor AMF had to certify its solvency. (Ex. J.) Bowlmor AMF ultimately obtained up to $695 million in loans in connection with the new 2017 loan. B. Bowlmor AMF’s Cash Flow 28. I am aware that, under the “cash flow test,” a company is considered insolvent if it is unable to pay its debts as they become due. 29. Bowlmor AMF pays all of its debts as they become due. It is not in arrears, and no creditor is pursuing Bowlmor AMF for nonpayment of bills. 30. Indeed, Moody’s Investor Service gave Bowlmor AMF a 3B credit rating (Ex. F) and Standard & Poor’s (“S&P”) gave Bowlmor AMF a B credit rating (Ex. G) post-Atairos Sale. 7 of 10 FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328 NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017 These ratings reflect the views of seasoned professionals with deep experience in assessing the viability of firms of this type in this industry. These analysts have deep and continuing access to Bowlmor AMF’s historical and projected financial data and access to management. C. Bowlmor AMF Is Adequately Capitalized 31. I am aware that under the “adequate capitalization test,” a company is considered insolvent if it does not have adequate capital to maintain its business going forward. 32. Bowlmor AMF has adequate liquidity to maintain its business going forward, which is supported, in part, by a $50 million revolving credit facility with JPMorgan Chase Bank, Credit Suisse, and Goldman Sachs Bank. 33. Indeed, the ratings agencies publicly agree that Bowlmor AMF is well capitalized. Moody’s reported that it “anticipates that Bowlmor AMF will have good liquidity over the next 12 months, supported by a substantial cash balance pro-forma for the [Atairos] [T]ransaction and an undrawn $50 million revolver.” (Ex. F at 3.) S&P reported that it believes Bowlmor AMF would still have adequate liquidity even if its EBITDA underperformed S&P’s forecast by 15%. (Ex. G at 4.) IV. Bowlmor AMF Would Suffer Irreparable Harm If the Relief Plaintiffs Seek Is Awarded 34. As CFO, I believe that Bowlmor AMF would be significantly harmed if the relief sought by Plaintiffs is awarded. First, the Atairos Sale has already closed, and undoing it now would severely upset Bowlmor AMF’s business as the company would have to figure out how to unwind a $1 billion acquisition of the corporation. This is probably not even possible and would require cooperation of non-party Atairos as well as Bowlmor AMF’s other shareholders from the pre-Atairos period. 8 of 10 FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328 NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017 35. Bowlmor AMF would also incur substantial harm if it were required to pay $100 million into escrow during the pendency of Plaintiffs’ EEOC claims. 36. I am aware that, according to the EEOC website, the average time it takes to investigate and resolve one charge is about 10 months. (Ex. H.) I am also aware that Plaintiffs’ claims involve 64 separate charges. 37. If Bowlmor AMF were required to place $100 million in escrow for that (or any) period of time, it would be required either to take out a loan in that amount, or to use a combination of cash on hand or its revolving loan that would incur interest. 38. The cost for Bowlmor AMF to obtain capital is approximately 12 percent, meaning it would cost approximately $12 million to obtain a $100 million loan for one year. 39. At its current rate of growth, Bowlmor AMF achieves an approximately 40 percent annual return on investment for capital expenditures and other investment activities. If Bowlmor AMF were to put $100 million in escrow rather than investing that money into its business for one year, the company would incur $40 million in damages. 40. Bowlmor AMF’s investments in its businesses benefit more than just the company. When Bowlmor makes capital expenditures on itsbowling centers, itcontributes to local economies by creating construction jobs, adding to the permanent employment level at the locations, and generating tax revenues. 9 of 10 FILED: ONEIDA COUNTY CLERK 09/11/2017 01:06 PM INDEX NO. EFCA2017-001328 NYSCEF DOC. NO. 99 RECEIVED NYSCEF: 09/11/2017 41. One example of this is the AMF Pin-O-Rama bowling alley located at 1724 Genesee Street in Utica, New York. In 2016, Bowlmor invested over $200,000 in renovating and refurbishing the bowling alley. Those dollars were spent with local contractors, tradesmen and suppliers in the local economy, and the investment made to the bowling alley provided more attractive offerings for children and families in the community. Dated: New York, New York September 10, 2017 BRETT PARKER Sworn to before me this 10th day of September 2017 Notary Public 10 of 10