SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AMF BOWLING, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[AMF LOGO]
AMF BOWLING, INC.
8100 AMF Drive
Richmond, Virginia 23111
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 1999
----------------------------------------
The 1999 annual meeting of shareholders (the "Meeting") of AMF Bowling,
Inc. (the "Company") will be held at the offices of McGuire, Woods, Battle &
Boothe LLP, One James Center, 901 East Cary Street, Richmond, Virginia on
Tuesday, May 4, 1999 at 9:30 a.m., Eastern Standard Time.
The purposes of the Meeting are:
(1) To elect the Company's Board of Directors;
(2) To consider and vote upon an amendment to the Company's 1998
Stock Incentive Plan (the "1998 Plan"), which increases the
number of shares of Company Common Stock authorized for
issuance under the 1998 Plan;
(3) To ratify the appointment of Arthur Andersen LLP as independent
public accountants for the Company for the year ending December
31, 1999; and
(4) To transact such other business as may properly come before the
Meeting or any adjournments thereof.
Shareholders of record at the close of business on March 8, 1999 (the
"Record Date") will receive notice of and be entitled to vote at the Meeting.
Copies of the annual report of the Company and the Company's Annual Report on
Form 10-K as filed with the Securities and Exchange Commission for the year
ended December 31, 1998 are being mailed along with the Proxy Statement to each
shareholder of record as of the Record Date.
SHAREHOLDERS ARE URGED TO EXECUTE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT THEY EXPECT TO ATTEND THE
MEETING. ANY SHAREHOLDER ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF HE OR
SHE HAS RETURNED A PROXY.
By order of the Board of Directors,
/s/ Suzanne B. Roski
SUZANNE B. ROSKI
SECRETARY
April 2, 1999
<PAGE>
AMF BOWLING, INC.
8100 AMF Drive
Richmond, Virginia 23111
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 4, 1999
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement, along with the annual report of AMF Bowling, Inc.
(the "Company") and the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission for the year ended December 31, 1998, are
first being mailed to shareholders on or about April 2, 1999. The enclosed
proxy is being solicited by the Board of Directors (the "Board") for use at the
1999 annual meeting of shareholders on Tuesday, May 4, 1999 at 9:30 a.m.,
Eastern Standard Time (the "Meeting"). In addition to the solicitation by mail,
proxies may be solicited in person or by telephone, telegraph or electronic
means. Solicitation on behalf of the Company may be made by directors, officers
and regular employees of the Company without compensation other than regular
compensation.
Any proxy given pursuant to this solicitation may be revoked by written
notice or delivery of another proxy to the Company's Secretary at any time
before it is voted. Notice of revocation should be provided in writing signed
by the shareholder in the same manner as the proxy being revoked. A proxy, if
executed and not revoked, will be voted FOR the election of the nominees for
director named herein, FOR the proposed amendment to the Company's 1998 Stock
Incentive Plan described herein and FOR the ratification of the appointment of
Arthur Andersen LLP as the Company's independent public accountants for 1999,
unless it contains specific instructions to the contrary, in which event it
will be voted in accordance with such instructions.
COMPANY BACKGROUND
On May 1, 1996, investors led by affiliates of Goldman, Sachs & Co. (the
"Investors") acquired the stock and certain related businesses of predecessor
companies of the Company (the "Acquisition"). The Company currently owns all of
the outstanding capital stock of AMF Group Holdings Inc. ("Group Holdings"),
which in turn owns all of the outstanding capital stock of AMF Bowling
Worldwide, Inc. ("Bowling Worldwide"). The Company and Group Holdings are
holding companies, whose principal assets are comprised of investments in
subsidiaries. The operations of the Company, which are comprised principally of
the ownership and operation of bowling centers and the manufacture and
distribution of bowling equipment, are conducted through Bowling Worldwide and
its subsidiaries and affiliates.
When used in this Proxy Statement, except where the context clearly
requires otherwise, the "Company" means AMF Bowling, Inc. and its subsidiaries
and their combined operations.
In connection with the Acquisition, the Investors entered into a
Stockholders Agreement (the "Stockholders Agreement") described below under
"Certain Relationships and Related Transactions -- Stockholders Agreement."
Since the Acquisition, other shareholders of the Company, including certain
members of management of the Company, participants in the Company's 1996 Stock
Incentive Plan and transferees of the Company's Common Stock, $.01 par value
per share (the "Common Stock"), have also executed the Stockholders Agreement.
The Stockholders Agreement contains a number of provisions governing the
relationships between the parties to the Stockholders Agreement and the
Company, including provisions giving certain of the Investors the right to
nominate certain members of the Board and requiring parties to the Stockholders
Agreement to vote their shares of Common Stock in favor of the persons
nominated by Investors to be directors and otherwise vote such shares on other
matters in a manner not inconsistent with the terms of the Stockholders
Agreement.
On November 7, 1997, the Company's Common Stock became publicly traded as
a result of a public offering (the "Initial Public Offering") and was listed on
the New York Stock Exchange. As a result of the Initial Public Offering and
listing, the Board undertook a number of new corporate governance initiatives,
including the creation of an Audit Committee and a Compensation Committee.
VOTING RIGHTS
On March 8, 1999 (the "Record Date"), 59,597,550 shares of Common Stock
were outstanding and entitled to vote. Each share of Common Stock entitles the
holder to one vote.
1
<PAGE>
Votes will be tabulated by one or more inspectors of election. The
election for each nominee for director requires the affirmative vote of the
holders of a plurality of the shares of Common Stock cast in the election of
directors. The affirmative vote of the holders of a majority of the votes cast
will be required to act on all other matters to come before the Meeting,
including the approval of the proposed amendment to the Company's 1998 Stock
Incentive Plan and the ratification of the appointment of Arthur Andersen LLP
as the independent public accountants for the Company for 1999.
The required quorum for the transaction of business at the Meeting will be
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Abstentions and broker non-votes will be included in determining the
presence of a quorum. Abstentions will be considered present and entitled to
vote with respect to determining the total number of shares entitled to vote on
a matter. Broker non-votes will not be considered for purposes of determining
the number of shares entitled to vote with respect to the particular proposal
on which the broker has expressly not voted. Neither abstentions nor broker
non-votes will have any effect on the voting on the election of directors, the
approval of the proposed amendment to the Company's 1998 Stock Incentive Plan
or the ratification of the appointment of the Company's independent accountants
since they will not represent votes cast at the Meeting for the purpose of
voting on such matters.
Parties to the Stockholders Agreement, owning an aggregate of 43,855,200
shares, or 73.6% of the outstanding Common Stock as of February 1, 1999, have
agreed to vote their shares in favor of the election of the nominees for
director named herein.
ITEM 1 -- ELECTION OF DIRECTORS
GENERAL
The Board is constituted to include nine members, each of whom is elected
to serve a one-year term or until his successor is duly elected and qualified
or until his earlier death, resignation or removal. Effective January 1, 1999,
Douglas J. Stanard resigned from the Board and from all his positions with the
Company and its subsidiaries. He has not been replaced and a successor for his
seat on the Board has not been nominated. The Company is presently conducting a
search for a new president and chief executive officer. It is anticipated that,
pursuant to the bylaws, the Board will elect the new president and chief
executive officer, once hired, to the seat formerly occupied by Mr. Stanard.
Each present director has served on the Board since 1996. Set forth below is
information about each nominee for election as a director of the Board,
including his business experience for the past five years. Each of the persons
nominated to serve as a director of the Company is also a director of Group
Holdings and Bowling Worldwide.
The Stockholders Agreement governs the nomination of persons to serve as
directors. The nominees named below have been nominated in accordance with the
terms of the Stockholders Agreement. Each nominee has agreed to serve a
one-year term or until his successor is duly elected and qualified. If a
nominee should become unable or unwilling prior to the Meeting to serve as a
director, the Investor nominating such person to serve as a director may,
subject to the Stockholders Agreement, designate a substitute nominee. In that
case, the persons named as proxies will vote for the substitute nominee so
designated. See "Certain Relationships and Related Transactions -- Stockholders
Agreement."
NOMINEES FOR ELECTION AS DIRECTORS
RICHARD A. FRIEDMAN, 41, is a Managing Director of Goldman, Sachs & Co.
("Goldman Sachs") and is co-head of the Merchant Banking Division. He joined
Goldman Sachs in 1981. Mr. Friedman serves on the Boards of Directors of
Carmike Cinemas, Inc., Diamond Cable Communications PLC and Polo Ralph Lauren
Corporation.
STEPHEN E. HARE, 45, was named Acting President and Chief Executive
Officer of the Company on November 2, 1998 following the resignation of Douglas
J. Stanard until a successor is named. He is also the Executive Vice President
and Chief Financial Officer of the Company and has served in that capacity for
the Company's subsidiaries since he joined AMF in May 1996. Prior to joining
AMF, Mr. Hare was Senior Vice President and Chief Financial Officer of James
River Corporation of Virginia, beginning in 1992.
TERENCE M. O'TOOLE, 40, is a Managing Director of Goldman Sachs in the
Principal Investment Area. He joined Goldman Sachs in 1983. Mr. O'Toole serves
on the Boards of Directors of Western Wireless Corporation and Amscan Holdings,
Inc.
PETER M. SACERDOTE, 61, is a limited partner in The Goldman Sachs Group,
L.P. ("The Goldman Sachs Group"). He joined Goldman Sachs in 1964 and served as
a general partner from 1973 to 1990. Mr. Sacerdote serves on the Boards of
Directors of Franklin Resources, Inc. and QUALCOMM, Inc.
2
<PAGE>
CHARLES M. DIKER, 64, has been a non-managing principal of Weiss, Peck &
Greer, an investment management firm, since 1975. He has been Chairman of the
Board of Cantel Industries, Inc. since 1986. Mr. Diker also serves on the
Boards of Directors of BeautiControl Cosmetics, International Specialty
Products, Data Broadcasting and Chyron Corporation.
PAUL B. EDGERLEY, 43, has been Managing Director of Bain Capital, Inc., an
investment firm, since 1993. From 1990 to 1993 he was a General Partner of Bain
Venture Capital, and from 1988 to 1990 he was a principal of Bain Capital
Partners. He serves on the Boards of Directors of Steel Dynamics, Inc., GS
Industries, Inc. and Sealy Mattress Company.
HOWARD A. LIPSON, 35, is Senior Managing Director of The Blackstone Group
L.P., and has been involved in that firm's principal activities since 1988. He
serves on the Boards of Directors of Allied Waste Industries, Inc., Rose Hills
Holdings Corp., Prime Succession, Inc., VSI Acquisition II Corporation and
Ritvik Toys, Inc.
THOMAS R. WALL IV, 40, joined Kelso & Company, L.P. in 1983 and has served
as a Managing Director since 1990. Mr. Wall serves on the Boards of Directors
of Consolidated Vision Group, Inc., Cygnus Publishing, Inc., iXL Enterprises,
Inc., Mitchell Supreme Fuel Company, Mosler Inc., Peebles, Inc., TransDigm Inc.
and 21st Century Newspapers, Inc.
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES FOR
DIRECTOR LISTED ABOVE.
MEETINGS AND COMMITTEES OF THE BOARD
COMMITTEES OF THE BOARD
The Board has three standing committees: an Audit Committee, a
Compensation Committee and an Executive Committee. The Executive Committee is
required by, and its membership is determined pursuant to, the Stockholders
Agreement. See "Certain Relationships and Related Transactions -- Stockholders
Agreement." The Audit and Compensation Committees were created in December 1997
following the consummation of the Initial Public Offering.
AUDIT COMMITTEE. The members of the Audit Committee are Howard A. Lipson
(Chairman) and Paul B. Edgerley. The Audit Committee, which is composed
entirely of independent directors, recommends to the Board the engagement of
the independent auditors of the Company and reviews with the independent
auditors the scope and results of the Company's audits, the Company's internal
accounting controls and the professional services furnished by the independent
auditors to the Company.
COMPENSATION COMMITTEE. The members of the Compensation Committee are
Richard A. Friedman (Chairman), Charles M. Diker and Thomas R. Wall, IV. The
Compensation Committee is responsible for reviewing and approving the amount
and type of consideration to be paid to senior management. A subcommittee of
the Compensation Committee composed of independent directors is authorized to
grant awards under and to administer the Company's 1996 Stock Incentive Plan
(the "1996 Plan") and the 1998 Stock Incentive Plan (the "1998 Plan").
EXECUTIVE COMMITTEE. The members of the Executive Committee are Richard A.
Friedman (Chairman), Terence M. O'Toole and Stephen E. Hare. Subject to the
Stockholders Agreement, the Executive Committee may exercise all the powers and
authority of the Board (subject further to any restrictions under Delaware law)
except with respect to those actions requiring a Special Vote (as hereinafter
defined) and, in the case of matters requiring a prior meeting of the Board,
only after such meeting has occurred. See "Certain Relationships and Related
Transactions -- Stockholders Agreement."
ATTENDANCE AT MEETINGS
During 1998, the Board held seven meetings. The Executive Committee did
not meet during 1998. The Audit Committee held two meetings in 1998. The
Compensation Committee met once in 1998. All directors of the Company attended
at least 75% of the aggregate of all meetings of the Board and the committees
on which they served.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of the Company or affiliated with
Goldman Sachs receive no compensation for service as members of the Board or
committees thereof. Directors who are not officers or employees of the Company
or affiliated with Goldman Sachs receive a $2,000 fee for attending each Board
meeting and a $1,000 fee for attending each committee meeting. All directors'
reasonable expenses for attending Board and committee meetings and related
duties are reimbursed by the Company.
3
<PAGE>
Pursuant to an option agreement (the "Diker Option Agreement"), dated May
1, 1996, Mr. Diker, a director of the Company, was granted nonqualified stock
options to purchase 100,000 shares of Common Stock at an exercise price of
$10.00 per share pursuant to the 1996 Plan. One-third of such stock options
vested on May 1, 1996, one-third vested on May 1, 1997 and the remaining stock
options vested on May 1, 1998. If any successor to the Company acquires all or
substantially all of the business and/or assets of the Company, the Company may
purchase all of the stock options then held by Mr. Diker for the fair market
value of the underlying Common Stock minus the exercise price of the stock
options. Mr. Diker is a party to the Stockholders Agreement and any shares of
Common Stock held by Mr. Diker are subject to the terms of the Stockholders
Agreement, as well as the terms of the Diker Option Agreement. See "Certain
Relationships and Related Transactions -- Stockholders Agreement."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of: Richard A. Friedman (Chairman),
Charles M. Diker and Thomas R. Wall, IV. Mr. Friedman was President and Chief
Executive Officer of the Company until July 31, 1997, which period was prior to
the Initial Public Offering. Mr. Friedman did not receive any compensation for
such services. None of the members of the Compensation Committee was an officer
or an employee of the Company or its subsidiaries during the last completed
fiscal year. No interlocking relationship currently exists between any member
of the Compensation Committee and any member of any other company's board of
directors or compensation committee, nor did any such interlocking relationship
exist during 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in the Common Stock by officers and
directors of the Company and any persons owning more than 10% of the Common
Stock are required to be reported to the Securities and Exchange Commission
pursuant to Section 16 of the Securities Exchange Act of 1934. Based solely
upon its review of the copies of the Forms 3, 4 and 5 received by it, and
written representations from certain reporting persons that no Forms 5 were
required to be filed by those persons, the Company believes that all officers,
directors and 10% shareholders complied with such filing requirements.
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows for each of the three years ended December 31,
1996, 1997, and 1998, compensation paid or accrued by the Company and its
predecessor to the Company's Chief Executive Officer and each of the Company's
three other most highly compensated executive officers (the "Named Executive
Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
AWARDS PAYOUTS
----------- ---------
SECURITIES
ANNUAL UNDERLYING
COMPENSATION(a) STOCK LTIP ALL OTHER
----------------------------- OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION (b) YEAR SALARY ($) BONUS ($) (#) (c) ($) ($)(d)
- --------------------------------------------------- ------ ------------ ---------------- ----------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stephen E. Hare (e) 1998 330,000 -- -- -- --
Acting President and Chief Executive Officer, 1997 302,500 340,000(f) 15,000 -- 8,000
Executive Vice President, Chief Financial Officer 1996 178,333 266,667(g) 105,000 -- --
and Treasurer
John P. Watkins (h) 1998 101,743 49,038 100,000 -- --
Executive Vice President/President of
U.S. Bowling Centers
Michael P. Bardaro 1998 139,167 23,173 15,000 -- --
Senior Vice President, Corporate Controller 1997 133,316 105,101 10,000 -- 8,000
and Assistant Secretary 1996 120,958 40,076 25,000 -- 168,338(i)
Douglas J. Stanard (j) 1998 333,333 -- -- -- 1,250,000
President and Chief Executive Officer 1997 379,167 489,584(k) 25,000 -- 8,000
1996 308,333 229,167 130,000 -- 7,500
</TABLE>
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(a) None of the Named Executive Officers received perquisites or other personal
benefits in excess of the lesser of $50,000 or 10% of the total of their
salary and bonus or other amounts properly reportable as other annual
compensation.
(b) Richard A. Friedman, Chairman of the Board of the Company, received no
compensation from the Company in 1996, 1997 and 1998, and ceased to hold
the positions of Chief Executive Officer and President of the Company on
July 31, 1997, at which time Mr. Stanard, who had been Chief Executive
Officer of the Company's principal subsidiaries, assumed the additional
titles of President and Chief Executive Officer of the Company until his
resignation effective as of January 1, 1999.
(c) Options to purchase shares of Common Stock. The Company has not
granted any stock appreciation rights or restricted stock.
(d) Unless otherwise indicated, All Other Compensation represents matching and
profit-sharing contributions made by the Company under its 401(k) plan.
(e) Mr. Hare's employment with the Company began on May 28, 1996. Mr.
Hare is serving as the Acting President and Chief Executive Officer
of the Company until a successor to Mr. Stanard is selected. See
"--Employment Agreements."
(f) Includes a special one-time bonus of $175,000 approved by the
Compensation Committee for services in connection with the Initial Public
Offering.
(g) Mr. Hare received two bonuses with respect to 1996, one for $166,667 and
one for $100,000. See "Employment Agreements."
(h) Mr. Watkins joined the Company in September of 1998 and receives annual
compensation of $300,000. See " -- Employment Agreements."
(i) Includes a special one-time bonus in the amount of $161,338 paid in 1996 by
the Company's predecessor in connection with the Acquisition.
(j) Mr. Stanard resigned, effective as of January 1, 1999, from his positions
as President, Chief Executive Officer and a director of the Company, and
from all other positions with the Company and its subsidiaries. In
connection with his resignation, Mr. Stanard was paid $1,250,000 by the
Company, representing $400,000 with respect to severance and $850,000 with
respect to his compliance with certain obligations under the Settlement
Agreement described below. These amounts are included in the table as
other compensation. See " -- Settlement Agreement".
(k) Includes a special one-time bonus of $250,000 approved by the Compensation
Committee for services in connection with the Initial Public Offering.
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STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding the granting of stock
options to the Named Executive Officers in 1998 pursuant to the 1998 Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF ANNUAL RATES OF
SECURITIES TOTAL STOCK STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
STOCK OPTIONS GRANTED TO EXERCISE OPTION TERM (4)(5)
GRANTED (#) EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
NAME (1)(2) 1998(3) SHARE($/SH) DATE 5%($) 10%($)
- -------------------------------- --------------- -------------- ------------- ------------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Stephen E . Hare ............... -- -- -- -- -- --
John P. Watkins ................ 100,000 10.5% $ 4.06 October 28, 2008 $ 661,330 $ 1,053,060
Michael P. Bardaro ............. 15,000 1.6% $ 16.19 August 11, 2008 $ 395,577 $ 629,891
Douglas J. Stanard (6) ......... -- -- -- -- -- --
</TABLE>
- ---------
(1) All stock options listed in this table were granted under the 1998 Plan.
The Company did not grant any stock appreciation rights in 1998.
(2) The stock options listed in this table that remain outstanding will become
20% vested on each anniversary of the date on which the options were
granted until all have vested. Mr. Watkins' options were granted on
October 28, 1998 and Mr. Bardaro's options were granted on August 11,
1998. Upon an optionee's termination of employment, the portion of an
option that has not yet vested will be forfeited. All options were granted
at 100% of the fair market value of the Common Stock on the date of grant.
(3) In 1998, 950,400 stock options were granted under the 1998 Plan, 115,000 of
which were granted to the Named Executive Officers. In 1998, no stock
options were granted under the 1996 Plan to the Named Executive Officers.
(4) Potential realizable value is calculated from the exercise price per share
on the date of grant for the securities underlying the stock options.
(5) The dollar amounts under these columns use the 5% and 10% rates of
appreciation prescribed by the Securities and Exchange Commission. The 5%
and 10% rates of appreciation would result in per share prices of $6.6133
and $10.5306 for Mr. Watkins and $26.3718 and $41.9927 for Mr. Bardaro.
The Company expresses no opinion regarding whether this level of
appreciation will be realized and expressly disclaims any representation
to that effect.
(6) Pursuant to the terms of the Settlement Agreement, discussed below, all of
Mr. Stanard's stock options were cancelled and forfeited as of November 2,
1998.
AGGREGATED STOCK OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE
The following table provides information regarding the number and value of
unexercised stock options at December 31, 1998 for the Named Executive
Officers. No Named Executive Officer exercised any stock options in fiscal year
1998.
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE
UNEXERCISED STOCK OPTIONS AT MONEY STOCK OPTIONS AT
DECEMBER 31, 1998 (#) DECEMBER 31, 1998($)(1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Stephen E. Hare (2) ............. 45,000 75,000 $ 0 $ 0
John P. Watkins (3) ............. 0 100,000 $ 0 $131,500
Michael P . Bardaro (4) ......... 12,000 38,000 $ 0 $ 0
Douglas J. Stanard (5) .......... 0 0 -- --
</TABLE>
- ---------
(1) Based on the excess of the last sales price of the Common Stock on the New
York Stock Exchange as of December 31, 1998 of $5.375 per share over the
exercise price of the stock options.
(2) The exercise price of $10.00 per share with respect to all of Mr. Hare's
exercisable and unexercisable stock options exceeded the last sales price
of the Common Stock on the New York Stock Exchange as of December 31, 1998
of $5.375 per share.
(3) At December 31, 1998, the exercise price of all of Mr. Watkins'
unexercisable stock options was $4.06 per share.
6
<PAGE>
(4) The exercise price of $10.00 per share with respect to all of Mr. Bardaro's
exercisable stock options, the exercise price of $10.00 per share with
respect to 23,000 unexercisable stock options and the exercise price of
$16.19 per share with respect to 15,000 unexercisable stock options,
exceeded the last sales price of the Common Stock on the New York Stock
Exchange as of December 31, 1998 of $5.375 per share.
(5) Pursuant to the terms of the Settlement Agreement, discussed below, all of
Mr. Stanard's stock options were cancelled and forfeited as of November 2,
1998.
EMPLOYMENT AGREEMENTS
Mr. Hare has an employment agreement (the "Executive Employment
Agreement") with the Company and Bowling Worldwide for an employment period
ending on May 28, 1999. Under his Executive Employment Agreement, Mr. Hare
holds the positions of Chief Financial Officer of Bowling Worldwide and
Executive Vice President, Chief Financial Officer and Treasurer of the Company
and is serving as Acting President and Chief Executive Officer of the Company
until a successor to Mr. Stanard is selected. Mr. Hare's annual base salary
under his Executive Employment Agreement is $300,000. On December 1, 1997 the
Board raised his salary to $330,000. The Executive Employment Agreement
provides for the payment of an annual bonus if certain operational and
financial targets, determined by the Board of Directors of Bowling Worldwide
(the "Targets"), are attained, and Mr. Hare may earn a smaller annual bonus if
less than 100% but more than 90% of the Targets are attained.
The Executive Employment Agreement provides for payment of accrued
compensation, continuation of certain benefits and payment of a portion of Mr.
Hare's bonus (if the applicable Targets are later met) following termination of
employment by Bowling Worldwide under certain circumstances. The Executive
Employment Agreement further provides for a severance payment equal to Mr.
Hare's annual base salary if termination by Bowling Worldwide is not due to
death or disability. Mr. Hare's employment will be deemed to have been
terminated by Bowling Worldwide if all or substantially all of the stock or
assets of Bowling Worldwide are sold or disposed of to an unaffiliated third
party and the executive is not thereafter employed by the Company or one of its
continuing affiliates; however, neither the Company nor Bowling Worldwide will
have any obligations with respect to accrued salary, continuation of benefits,
allocated portion of bonus and, if applicable, severance payments to Mr. Hare
upon termination of his employment if he is hired by the purchaser of Bowling
Worldwide's stock or assets, or if his employment is continued by Bowling
Worldwide.
Mr. Hare purchased 150,000 shares of Common Stock (the "Purchased Stock")
for $500,000 in cash plus a non-recourse promissory note for $1,000,000,
payable to the Company and secured by the Purchased Stock which has been
pledged pursuant to a stock pledge agreement between Mr. Hare and the Company.
In addition, Mr. Hare was granted stock options to purchase 105,000 shares of
Common Stock. Unless sooner exercised or forfeited as provided, Mr. Hare's
stock options expire on May 28, 2006. To the extent not inconsistent with the
Executive Employment Agreement, such stock options are governed by the 1996
Plan. Twenty percent of Mr. Hare's stock options vested on May 28, 1997, twenty
percent vested on May 28, 1998 and another twenty percent will vest on each May
28 thereafter through the year 2001. If any successor to the Company or Bowling
Worldwide acquires all or substantially all of the business and/or assets of
the Company or Bowling Worldwide, the Company may purchase all of the Purchased
Stock held by Mr. Hare for its fair market value, and any stock options then
held by him for the fair market value of the underlying Common Stock less the
exercise price of the stock options.
John P. Watkins, Executive Vice President of the Company and President,
U.S. Bowling Centers, has an employment agreement with the Company and receives
compensation consisting of salary and an incentive bonus if certain financial
targets, determined by the Board, are met. Mr. Watkins' annual base salary
under his employment agreement is $300,000. Mr. Watkins' employment agreement
provides for the payment of a bonus from September 8 through December 31, 1998
on a pro rata basis equal to 50% of his annual base salary. Mr. Watkins was
granted stock options to purchase 100,000 shares of Common Stock on the same
vesting schedule as other employees. The employment agreement further provides
for a severance payment if the Company terminates Mr. Watkins' employment for
any reason other than cause equal to (i) two years of salary if terminated up
to December 31, 1998, (ii) his salary through December 31, 2000 if terminated
during 1999, and (iii) one year of salary if terminated from and after January
1, 2000.
See " -- Settlement Agreement" below for a discussion of Mr. Stanard's
resignation from the Company and the termination of his executive employment
agreement.
7
<PAGE>
SETTLEMENT AGREEMENT
Mr. Stanard resigned from his positions as Chief Operating Officer of
Bowling Worldwide, President and Chief Executive Officer of the Company and
from all other positions with the Company and its subsidiaries effective as of
January 1, 1999 (the "Resignation"). Prior to the Resignation, Mr. Stanard had
an executive employment agreement with the Company and Bowling Worldwide for an
employment period ending on May 1, 1999. Under the terms of the employment
agreement, Mr. Stanard received an annual base salary of $350,000, which was
raised to $400,000 on June 1, 1997, and was eligible to receive an annual bonus
if certain operational and financial targets were attained. Mr. Stanard
received no such bonus for 1998. Mr. Stanard's employment agreement also
provided for payment of accrued compensation and continuation of certain
benefits following termination of his employment by Bowling Worldwide under
certain circumstances and a severance payment equal to his annual base salary
if termination was not due to death or disability. Pursuant to his employment
agreement, Mr. Stanard purchased 150,000 shares of Common Stock for $500,000 in
cash plus a non-recourse promissory note for $1,000,000 payable to the Company
and secured by such Common Stock which was pledged pursuant to a stock pledge
agreement between Mr. Stanard and the Company. In addition, Mr. Stanard was
granted stock options to purchase 130,000 shares of Common Stock.
Pursuant to the terms of a settlement agreement (the "Settlement
Agreement") executed in connection with the Resignation, dated as of November
2, 1998, by and among Mr. Stanard, the Company and Bowling Worldwide, the
Company paid Mr. Stanard (i) $400,000 as severance under his executive
employment agreement and (ii) $850,000 in consideration of his compliance with
certain obligations under the Settlement Agreement, including non-competition
and non-solicitation provisions, and obligations to cooperate with information
requests from the Company and to reasonably assist the Company with respect to
pending and future dispute resolutions. In addition, Mr. Stanard transferred
all of his Common Stock to the Company in exchange for the cancellation of his
non-recourse promissory note. Pursuant to the Settlement Agreement, all stock
options previously granted to Mr. Stanard were cancelled and forfeited as of
November 2, 1998, and Mr. Stanard will be subject to non-competition and
non-solicitation provisions for two years following his date of termination.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") reviews, and subject to Board
ratification, approves actions regarding the Company's executive compensation
program. The program is designed to attract, motivate and retain the executive
management necessary to enhance the profitability of the Company and increase
shareholder value. The program provides executives with:
1. A competitive base salary;
2. Variable pay opportunities that subject a significant portion of
the executive's total compensation to attainment of specific
performance criteria;
3. Total compensation that appropriately rewards attainment of both
short and long-term goals; and
4. Stock options which link management incentives to increases in
shareholder value.
The objective of the program is to pay total compensation commensurate
with the Company's performance as compared to a peer group of companies. The
program has three elements: base salary, annual bonus and stock incentive
award. The Committee supports executive stock ownership as a means to link
management and shareholder interests.
BASE SALARY. Base salaries for 1998 were set at levels consistent with the
average base salaries for executives with comparable positions in a group of
peer companies. The peer group consisted of location-based entertainment
companies. The Committee reviews the base salary of senior officers every 12
months.
ANNUAL BONUS. The annual bonus for 1998 was based on yearly performance
objectives. Program participants included executives and key management
employees. The Chief Executive Officer approved the amount of the potential
bonuses and the targeted performance goals for participants. For each
performance objective, a performance range and potential payout from a
threshold to a maximum was determined. The Committee reviewed and approved
objectives, performance targets and potential payouts for the Chief Executive
Officer and Chief Financial Officer. The Executive Committee of the Board
ratified the objectives and targets for the potential bonus for the Chief
Executive Officer. The 1998 annual performance objectives for the Chief
Executive Officer and other participants included performance against a
projected budget target and individual performance measures. The 1998 annual
bonus for business unit participants included the same types of objectives at
the business unit level. In 1998, each participant's award contained minimum
operating cash flow and revenue levels that had to be achieved before any bonus
was paid. During 1998, bonus opportunities generally represented between 10%
and
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<PAGE>
75% of a participant's total compensation. Bonus payments in 1998 were
substantially reduced because the Company did not achieve budgeted performance
targets for 1998.
STOCK INCENTIVE AWARDS. The Committee will continue to include
equity-based compensation for participants in the Company's compensation
structure. The Committee believes that stock compensation will provide
additional incentive to participants to focus on enhancements to shareholder
value.
CHIEF EXECUTIVE OFFICER. Prior to his Resignation, Mr. Stanard
participated in each of the compensation programs available to executives but
did not participate in any decisions regarding the setting of his own
compensation. Other aspects of Mr. Stanard's compensation are described under
the caption "Settlement Agreement." Mr. Standard's base salary was based on the
same market criteria used for other senior officers and was ratified by the
Executive Committee. Mr. Stanard's base salary for 1998 was slightly below
average, based on national survey data that included data for companies in the
peer group described above. Mr. Stanard received none of the total potential
bonus under the 1998 annual bonus program. Mr. Stanard resigned from his
positions with the Company and its subsidiaries effective as of January 1,
1999. In connection with such Resignation, Mr. Stanard received certain
payments from the Company as described in " -- Settlement Agreement" above.
Mr. Hare became Acting President and Chief Executive Officer of the
Company effective November 2, 1998 with compensation continuing at the same
levels as before such date. Mr. Hare received none of the potential bonus under
the 1998 annual bonus program. The Board has directed the Executive Committee
to search for a new president and chief executive officer to replace Mr.
Stanard. The Company anticipates the compensation for the new president and
chief executive officer will include a base salary, bonus and stock incentive
award and will be at levels consistent with comparable positions in a group of
peer companies.
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE. The Company's
compensation philosophy is to have a large percentage of potential total
compensation based on Company performance. Section 162(m) of the Internal
Revenue Code (the "Code") provides generally that compensation paid to each of
the Company's Chief Executive Officer and the other four most highly
compensated officers of the Company in excess of $1 million is not deductible.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met, including shareholder approval. In the future,
the Committee will take actions to maximize the effectiveness of the Company's
compensation programs and preserve tax deductibility to the extent consistent
with the best interests of the Company and its shareholders.
The Compensation Committee submits this Report.
Richard A. Friedman, Chairman
Charles M. Diker
Thomas R. Wall, IV
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<PAGE>
SECURITIES OWNED BY MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The table below reflects the number of shares of Common Stock beneficially
owned as of February 1, 1999 by (i) each director of the Company, (ii) each
Named Executive Officer, (iii) the directors and executive officers as a group
and (iv) each person who is known by the Company to own beneficially more than
5% of the Company's outstanding equity securities. Unless otherwise noted, each
individual has sole voting power and sole investment power with respect to
securities beneficially owned. Unless otherwise noted, the address of the
beneficial owner is c/o the Company, 8100 AMF Drive, Richmond, Virginia 23111.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY
OWNED AS OF
FEBRUARY 1, PERCENT OF
NAME OF BENEFICIAL OWNER 1999 (1)(3) CLASS (2)
- -------------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
DIRECTORS:
Richard A. Friedman (3) .................................................. -- *
Terence M. O'Toole (4) ................................................... -- *
Peter M. Sacerdote (5) ................................................... -- *
Charles M. Diker (6) ..................................................... 248,680 *
Paul B. Edgerley (7) ..................................................... -- *
Howard A. Lipson (8) ..................................................... -- *
Thomas R. Wall, IV (9) ................................................... -- *
Stephen E. Hare** (10) ................................................... 195,000 *
NAMED EXECUTIVE OFFICERS:
John P. Watkins .......................................................... -- *
Michael P. Bardaro (11) .................................................. 12,200 *
Douglas J. Stanard (12) .................................................. -- *
All directors and executive officers as a group (11 persons) (13) ........ 455,880 0.8%
BENEFICIAL OWNERS OF MORE THAN 5%:
The Goldman Sachs Group (14) ............................................. 30,836,593 51.0%
Blackstone Group (as hereinafter defined) (15) ........................... 5,762,805 9.7%
Kelso (as hereinafter defined) (16) ...................................... 5,762,805 9.7%
Baron Capital Group, Inc. and certain affiliates (17) .................... 11,936,700 20.0%
</TABLE>
- ---------
* Less than 1%
** Mr. Hare is also a Named Executive Officer
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options and warrants held by
that person that are currently exercisable or are exercisable within 60
days are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of any
other person. The table above does not include the Company's zero coupon
convertible debentures (the "Debentures") which are convertible, at the
option of the holder at any time prior to maturity (unless previously
redeemed or otherwise purchased by the Company), into Common Stock at the
rate of 8.6734 shares per $1,000 principal amount at maturity of the
Debentures.
(2) Based on 59,597,550 shares of Common Stock outstanding and warrants (with
respect to Goldman Sachs) to purchase 870,000 shares of Common Stock
outstanding as of February 1, 1999.
(3) Mr. Friedman, who is a Managing Director of Goldman Sachs, disclaims
beneficial ownership of the shares owned by The Goldman Sachs Group and
its affiliates, except to the extent of his pecuniary interest therein.
(4) Mr. O'Toole, who is a Managing Director of Goldman Sachs, disclaims
beneficial ownership of the shares owned by The Goldman Sachs Group and
its affiliates, except to the extent of his pecuniary interest therein.
(5) Mr. Sacerdote, who is a limited partner of The Goldman Sachs Group,
disclaims beneficial ownership of the shares owned by The Goldman Sachs
Group and its affiliates, except to the extent of his pecuniary interest
therein.
(6) Includes 100,000 shares which may be acquired upon the exercise of stock
options within 60 days and 85,880 shares held by his spouse and trusts for
his children, as to which he disclaims beneficial ownership.
10
<PAGE>
(7) Mr. Edgerley, who is (i) a Managing Director of the general partner of
the general partner of Bain Capital Fund V, L.P. and Bain Capital Fund
V-B, L.P. and (ii) a general partner of BCIP Associates and BCIP Trust
Associates, L.P., disclaims beneficial ownership of the shares owned by
those entities (collectively, "Bain"). Bain Capital Fund V, L.P. owns
402,002 shares, Bain Capital Fund V-B, L.P. owns 1,055,469 shares, BCIP
Associates owns 193,031 shares and BCIP Trust Associates, L.P. owns 78,340
shares.
(8) Mr. Lipson, who is a member of the limited liability company
which acts as the general partner of Blackstone Capital Partners II
Merchant Banking Fund L.P., Blackstone Offshore Capital Partners II L.P.
and Blackstone Family Investment Partnership II L.P. (collectively,
"Blackstone Group"), disclaims beneficial ownership of the shares owned by
Blackstone Group.
(9) Mr. Wall, who is (i) a general partner of Kelso Partners V, L.P., the
general partner of Kelso Investment Associates V, L.P. ("KIA V") and
(ii) a general partner of Kelso Equity Partners V, L.P.("KEP V," and
together with KIA V, "Kelso"), disclaims beneficial ownership of the
shares owned by KIA V and KEP V.
(10) Includes 45,000 shares which may be acquired upon the exercise of stock
options within 60 days.
(11) Includes 12,000 shares which may be acquired upon the exercise of stock
options within 60 days.
(12) Mr. Stanard transferred all of his Common Stock to the Company, as of
January 4, 1999, in exchange for the cancellation of a non-recourse
promissory note referred to under "Executive Compensation -- Settlement
Agreement". In addition, all stock options previously granted to Mr.
Stanard were cancelled and forfeited as of November 2, 1998.
See " -- Settlement Agreement".
(13) Includes an aggregate of 157,000 shares which may be acquired upon the
exercise of stock options within 60 days.
(14) Of the total number of shares which may be deemed to be beneficially owned
by The Goldman Sachs Group, 19,317,476 are owned by GS Capital Partners
II, L.P., 7,679,488 shares are owned by GS Capital Partners II Offshore,
L.P., 712,530 shares are owned by Goldman Sachs & Co. Verwaltungs GmbH,
as nominee for GS Capital Partners II (Germany) C.L.P., 451,922 shares are
owned by Stone Street Fund 1995, L.P., 772,645 shares are owned by Stone
Street Fund 1996, L.P., 508,546 shares are owned by Bridge Street Fund
1995, L.P. and 523,986 shares are owned by Bridge Street Fund 1996, L.P.
(collectively, "GSCP"). The Goldman Sachs Group owns an aggregate
principal amount at maturity of $343,074,000 of the Debentures, which are
convertible into 2,975,618 shares of Common Stock. In addition, The
Goldman Sachs Group beneficially owns warrants to purchase 870,000 shares
of Common Stock, which were issued upon the closing of the Acquisition. GS
Capital Partners II, L.P., GS Capital Partners II Offshore, L.P., GS
Capital Partners II (Germany), C.L.P., Stone Street Fund 1995, L.P., Stone
Street Fund 1996, L.P., Bridge Street Fund 1995, L.P. and Bridge Street
Fund 1996, L.P., are investment partnerships. Affiliates of The Goldman
Sachs Group are the general, managing general or managing partners of all
such partnerships and have full voting and investment power with respect
to the holding of such partnerships. Excludes certain shares of Common
Stock in client accounts managed by Goldman Sachs (the "Managed
Accounts"). Each of Goldman Sachs and The Goldman Sachs Group disclaims
beneficial ownership of the Common Stock in the Managed Accounts. The
address of The Goldman Sachs Group is 85 Broad Street, New York, New York
10004.
(15) Of the total number of shares beneficially owned by Blackstone Group,
4,141,761 shares are owned by Blackstone Capital Partners II Merchant
Banking Fund L.P., 1,210,342 shares are owned by Blackstone Offshore
Capital Partners II L.P. and 410,702 shares are owned by Blackstone Family
Investment Partnership II L.P. The address of Blackstone Group is 345 Park
Avenue, New York, New York 10154.
(16) Of the total number of shares beneficially owned by Kelso, 5,409,974
shares are owned by KIA V and 352,831 are owned by KEP V. Kelso owns an
aggregate principal amount at maturity of $79,993,000 of the Debentures,
which are convertible into 693,811 shares of Common Stock. The address of
each such shareholder is c/o Kelso & Company, Inc., 320 Park Avenue, 24th
Floor, New York, New York 10022. Due to their common control, KIA V and
KEP V could be deemed to beneficially own each other's shares, but each
disclaims such beneficial ownership. Joseph S. Schuchert, Frank T.
Nickell, Thomas R. Wall, IV, George E. Matelich, Michael B. Goldberg,
David I. Wahrhaftig, Frank K. Bynum, Jr. and Philip E. Berney may be
deemed to share beneficial ownership of shares beneficially owned of
record by KIA V and KEP V, by virtue of their status as general partners
of the general partner of KIA V and as general partners of KEP V. Messrs.
Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig, Bynum and Berney
share investment and voting power with respect to securities owned by KIA
V and KEP V, but disclaim beneficial ownership of such securities.
(17) Based solely on information provided to the Company by Baron Capital
Group, Inc. ("BCG"), BAMCO, Inc. ("BAMCO"), Baron Capital Management, Inc.
("BCM"), Baron Asset Fund ("BAF") and Ronald Baron as of February 1, 1999.
BAMCO and BCM are subsidiaries of BCG. BAF is an investment advisory
client of BAMCO. Ronald Baron owns a controlling interest in BCG. Of the
total number of shares beneficially owned by Baron, 286,000 shares are
owned by BCG, 286,000 shares are owned by BCM and 286,000 shares are owned
by Ronald Baron. BCG and Ronald Baron disclaim beneficial
11
<PAGE>
ownership of shares held by their controlled entities (or the investment
advisory clients thereof) to the extent such shares are held by persons
other than BCG and Ronald Baron. BAMCO and BCM disclaim beneficial
ownership of shares held by their investment advisory clients to the
extent such shares are held by persons other than BAMCO, BCM and their
affiliates. The address of Baron Capital Group, Inc. is 767 Fifth Avenue,
24th floor, New York, New York 10153.
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
On April 30, 1996, the Company, GSCP, Blackstone Group, Kelso, Bain (Bain,
together with Blackstone Group and Kelso, the "Governance Investors"), Citicorp
North America, Inc. ("Citicorp"), Mr. Diker (Mr. Diker, together with
Blackstone Group, Kelso, Bain and Citicorp, the "Investors"), certain current
and former members of management (the "Management Investors," and, with GSCP
and the Investors, the "Stockholders") entered into a Stockholders Agreement,
which regulates the relationship among the Company and the Stockholders.
Subsequently, Mr. Hare and other members of management who received stock
option awards under the 1996 Plan and certain other members of management have
become parties to the Stockholders Agreement as additional Management Investors
and Stockholders. The following discussion summarizes the terms of the
Stockholders Agreement that the Company believes are material to holders of
Common Stock. This summary is qualified in its entirety by reference to the
full text of the Stockholders Agreement, which was filed with the Securities
and Exchange Commission on November 3, 1997 as an exhibit to the Company's
Registration Statement on Form S-1 (Registration No. 333-34099).
The Stockholders Agreement confers on GSCP the right to increase or
decrease the Board from its initial size of nine members. GSCP has the right to
nominate five directors and to nominate a majority (not limited to a simple
majority) of the members of the Board, so long as GSCP and its Permitted
Transferees (as hereinafter defined), as they currently do, hold a majority of
the outstanding shares of Common Stock. Each Governance Investor has the right
to nominate, subject to GSCP consent, one member of the Board, so long as the
number of shares of Common Stock held by it and certain of its permitted
transferees under the Stockholders Agreement, as it currently is, is equal to
at least one-half of the sum of (i) the number of shares initially purchased by
it and its Permitted Transferees plus (ii) the number of additional shares that
the Governance Investor was required to purchase pursuant to the "overcall"
provisions of the Stockholders Agreement (in each case, subject to appropriate
adjustments). If a Governance Investor is no longer entitled to nominate a
director, the director is required to resign or be subject to removal by the
shareholders. Each of GSCP and each Governance Investor has the right to
recommend removal, with or without cause, of any director nominated by it, in
which case such director is required to resign immediately or be subject to
removal by the shareholders. In the event of death, removal or resignation of a
director nominated by a Governance Investor, so long as the Governance Investor
continues to have the right to nominate a director for such position, the
Governance Investor has the right to nominate (subject to GSCP consent) a
director to fill the vacancy created. A quorum may be constituted by a majority
of the number of directors then in office, but not less than one-third of the
whole Board, including at least one GSCP director.
The Stockholders Agreement provides for the continual existence of an
Executive Committee, consisting of two GSCP-nominated directors and the
President and Chief Executive Officer. Mr. Hare is serving on the Executive
Committee as Acting President and Chief Executive Officer until the Company
hires a new president and chief executive officer. The Executive Committee may
exercise all the powers and authority of the Board (subject to any restrictions
under Delaware law) except with respect to those actions requiring a Special
Vote (as defined below) and, in the case of matters which under the
Stockholders Agreement require a prior meeting of the Board, only after such
meeting has occurred. A "Special Vote" is required for (i) the issuance of
capital stock below fair market value, (ii) the grant or issuance of options or
warrants exercisable or exchangeable for more than 2,877,151 shares, (iii)
entering into certain transactions with affiliates of GSCP and (iv) amendments
to the Stockholders Agreement, the Certificate of Incorporation or By-Laws,
which would adversely affect the rights and obligations of Blackstone Group or
Kelso; provided, that any amendment affecting a Stockholder differently from
any other Stockholder requires such Stockholder's approval. Matters requiring a
Special Vote must be approved by a majority of the GSCP directors who are
partners or employees of Goldman Sachs and who are not employees of the Company
and its subsidiaries, and at least one director nominated by Blackstone Group
or Kelso (if there is one serving at such time.)
Pursuant to the Stockholders Agreement, each of the Stockholders has
agreed (i) to appear in person or by proxy at any shareholder meeting for the
purpose of obtaining a quorum, (ii) to vote its shares of Common Stock, at any
shareholder meeting called for the purpose of voting on the election or removal
of directors, in favor of the election or removal of directors, as applicable,
in accordance with the provisions described in the second preceding paragraph,
(iii) otherwise to vote its shares of Common Stock at shareholder meetings in a
manner consistent with the Stockholders Agreement, (iv) not to grant any proxy
or enter into any voting trust with respect to the Common Stock it holds or
enter into any shareholder agreement or arrangement inconsistent with the
provisions of the Stockholders Agreement and (v) not to act as a member of a
group or in concert with others in connection with the acquisition, disposition
or voting of shares of Common Stock in any manner inconsistent with the
Stockholders Agreement.
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<PAGE>
The Stockholders Agreement provides that in the event a Stockholder
determines to sell its shares of Common Stock (subject to certain exceptions,
including sales of shares made through a broker under Securities and Exchange
Commission Rule 144), such Stockholder must give the other Stockholders notice
thereof and such other Stockholders must have the opportunity to sell a pro
rata share of their Common Stock in such a sale. Moreover, in the event
Stockholders owning 51% or more of the outstanding Common Stock propose to sell
all of the Common Stock held by such Stockholders pursuant to a stock sale,
merger, business combination, recapitalization, consolidation, reorganization,
restructuring or similar transaction, such Stockholders will have the right,
under certain circumstances, to require the other Stockholders to sell the
equity securities of the Company held by such other Stockholders in such sale
on the same terms and conditions and at the same price as the Stockholders
proposing to sell.
The foregoing rights and obligations will terminate upon the first to
occur of: (i) GSCP, the Investors and their permitted transferees under the
Stockholders Agreement (the "Permitted Transferees") holding in the aggregate
less than 50% of the sum of (a) the number of shares of Common Stock
outstanding, on a fully diluted basis, immediately after giving effect to the
transactions contemplated by the subscription agreement (the "Subscription
Agreement") entered into on the same date and by the same parties as the
Stockholders Agreement, except for the Management Investors, and (b) the number
of additional shares of Common Stock, if any, issued pursuant to the "overcall"
provisions of the Stockholders Agreement and (ii) GSCP, the Investors and their
Permitted Transferees holding in the aggregate less than 40% of the fully
diluted shares of Common Stock then outstanding. Notwithstanding these
provisions, in the event of any merger, recapitalization, consolidation,
reorganization or other restructuring of the Company as a result of which the
Stockholders and their Permitted Transferees own less than a majority of the
outstanding voting power of the entity surviving such transaction, the
Stockholders Agreement will terminate.
REGISTRATION RIGHTS AGREEMENT
The Company and the Stockholders entered into a Registration Rights
Agreement on April 30, 1996 (the "Registration Rights Agreement"). Pursuant to
the Registration Rights Agreement, (i) each of Blackstone Group (as a group),
Kelso (as a group) and Bain (as a group) may make one demand (subject to
certain exceptions) of the Company to register shares of Common Stock held by
such group and (ii) GSCP may make up to five demands (subject to certain
exceptions) of the Company to register shares of Common Stock held by it, in
each case, so long as (a) the aggregate offering price for the shares to be
sold is at least $50 million and (b) shares representing at least 5% of the sum
of (1) the number of shares of Common Stock purchased by GSCP prior to
execution of the Subscription Agreement, (2) the number of shares of Common
Stock issued pursuant to the Subscription Agreement and (3) the number of
shares (subject to adjustment) of Common Stock purchased by the Stockholders
pursuant to the "overcall" provisions of the Stockholders Agreement are being
registered. Upon a demand for registration by any of GSCP, Blackstone Group,
Kelso or Bain, each of the other Stockholders is to be given the opportunity to
participate on a pro rata basis in the registration demanded. The Registration
Rights Agreement also provides the Stockholders with piggyback registration
rights which allow each of them to include all or a portion of their shares of
Common Stock under a registration statement filed by the Company, subject to
certain exceptions and limitations.
TRANSACTIONS WITH MANAGEMENT AND OTHERS; CERTAIN BUSINESS RELATIONSHIPS
Messrs. Friedman and O'Toole, each of whom is a Managing Director of
Goldman Sachs, and Mr. Sacerdote, who is a limited partner of The Goldman Sachs
Group, are directors of the Company, Group Holdings and Bowling Worldwide. Mr.
Friedman is also Chairman of the Company. Goldman Sachs and its affiliates
together currently beneficially own a majority of the outstanding shares of
Common Stock. See "Securities Owned by Management and Certain Beneficial
Owners." Goldman Sachs and its affiliates were the initial purchasers of the
debt issued by Bowling Worldwide in connection with financing the Acquisition.
Goldman Sachs also served as financial advisor to the owners of the Company's
predecessor in connection with the Acquisition.
Goldman Sachs acted as the Company's lead initial purchaser of the 1998
offering of the Debentures and received underwriting fees of $5.4 million.
Under a credit agreement, amended and restated as of November 7, 1997
among Bowling Worldwide, Goldman Sachs Credit Partners, L.P., an affiliate of
Goldman Sachs, Citibank, N.A. and its affiliates Citicorp Securities, Inc. and
Citicorp USA, Inc. and certain other banks, financial institutions and
institutional lenders, executed in connection with the Initial Public Offering,
as since amended (the "Credit Agreement"), Goldman Sachs Credit Partners, L.P.
acted as Syndication Agent, Goldman Sachs Credit Partners, L.P. and Citicorp
Securities, Inc. acted as Arrangers, and Citibank, N.A. is acting as
Administrative Agent and Citicorp USA, Inc., is acting as Collateral Agent with
respect to a revolving credit and term loan facility extended to Bowling
Worldwide in an amount up to $810.3 million. In 1998, total fees paid to
Goldman Sachs Credit
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<PAGE>
Partners, L.P. for services under the Credit Agreement were approximately
$300,000. Such entity was also reimbursed for expenses incurred in connection
with its services.
Bowling Worldwide and Goldman Sachs are parties to an engagement letter
pursuant to which Goldman Sachs was retained as Bowling Worldwide's financial
advisor to provide investment banking and financial advisory services,
including in connection with any acquisitions, dispositions or financings.
Pursuant to the engagement, Bowling Worldwide has agreed to reimburse Goldman
Sachs for its out-of-pocket expenses and indemnify Goldman Sachs in connection
with its services arising under the engagement.
The Company also entered into two interest rate cap agreements with
Goldman Sachs Capital Markets, L.P. ("GSCM"), an affiliate of Goldman Sachs,
both of which were executed to hedge the Company's exposure to fluctuations in
the interest rates applicable to borrowings under the Credit Agreement. The
Company paid a fee of $50,000 to GSCM in connection with the first of these
transactions executed on March 31, 1998, which capped 3-month LIBOR on $200
million principal amount of debt at 7.0% until March 31, 1999. The Company paid
a fee of $15,000 to GSCM in respect of the second transaction executed on
October 30, 1998, which capped 3-month LIBOR on $150 million in debt at 6.5%
until December 31, 1999.
See "Executive Compensation -- Employment Agreements" and " -- Settlement
Agreement" for a discussion of arrangements under which the Company loaned
money to Messrs. Stanard and Hare on a non-recourse basis to enable them to
purchase shares of Common Stock and "Executive Compensation -- Settlement
Agreement" for a discussion of the arrangement under which Mr. Stanard's loan
was cancelled in connection with his resignation.
15
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative annual total shareholder return on
the Common Stock with the cumulative annual total shareholder return of the
published Standard and Poor's 500 Stock Index and an index of a group of peer
companies selected by the Company for the period commencing November 4, 1997,
the date of the Initial Public Offering, and ending December 31, 1998. The
graph assumes an investment of $100 in the Company's Common Stock and each of
the indices at the market close on November 4, 1997 and the reinvestment of all
dividends. The companies included in the peer group are AMC Entertainment Inc.,
Carmike Cinemas, Inc., Dave & Buster's Inc., Family Golf Centers, Inc., GC
Companies, Inc., IMAX Corporation, The Mills Corporation, Premier Parks Inc.
and Vail Resorts, Inc. The Company is not included in the peer group index. In
calculating the annual cumulative total shareholder return of the peer group
index, the shareholder returns of the peer group companies are weighted
according to the stock market capitalizations of the companies. Historic stock
price performance is not indicative of future stock price performance.
COMPARISON OF 14 MONTH CUMULATIVE TOTAL RETURN*
AMONG AMF BOWLING, INC., THE S&P 500 INDEX
AND A PEER GROUP
[GRAPH]
*ASSUMES $100 INVESTED ON 11/4/97 IN STOCK OR INDEX--
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEARS ENDING DECEMBER 31.
<TABLE>
<CAPTION>
11/4/97 12/31/97 12/31/98
------------ ---------- ---------
<S> <C> <C> <C>
AMF Bowling, Inc ............. $ 100.00 114.94 23.56
S&P 500 Stock Index .......... $ 100.00 103.30 132.82
Peer Group Index ............. $ 100.00 95.48 103.69
</TABLE>
16
<PAGE>
ITEM 2 -- APPROVAL OF
AMENDMENT TO THE 1998 STOCK INCENTIVE PLAN TO
INCREASE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
SUMMARY OF THE AMENDMENT
The Board of Directors has adopted an amendment to the 1998 Stock
Incentive Plan (the "1998 Plan") which increases the number of shares of
Company common stock ("Common Stock") authorized for issuance under the 1998
Plan. The 1998 Plan currently permits two million shares of Common Stock to be
issued. In addition to the two million shares reserved under the 1998 Plan, any
shares that are not issued under the AMF Bowling, Inc. 1996 Stock Incentive
Plan (the "1996 Plan"), or that are subject to 1996 Plan awards that expire or
terminate, may be issued under the 1998 Plan. As of March 8, 1999, there were a
total of 1,378,301 shares of Common Stock available for issuance under the 1998
Plan.
The amendment authorizes an additional two million shares to be issued
under the 1998 Plan. This will increase the number of shares that may be issued
under the 1998 Plan to four million (excluding those shares that may be
available under the 1996 Plan). The Board of Directors believes that this
increase will help the Company to retain and attract the high caliber of
employees that are essential to the Company's success and will permit the
Company to grant stock options and other types of awards to a broader base of
employees than was contemplated at the time the 1998 Plan was first adopted.
The amendment is attached to this Proxy Statement as Exhibit A.
SUMMARY OF THE PLAN
The 1998 Plan is administered by a subcommittee of the Compensation
Committee called the Stock Option Plan Subcommittee (the "Committee"). The
Committee is composed of independent directors. Employees who have directly
affected or are expected to directly affect the management, growth and
profitability of the Company are eligible to receive awards under the 1998
Plan. The Committee has the power and complete discretion to select eligible
employees to receive awards, and to determine the type, terms and conditions of
the awards. The Committee may delegate to the Chief Executive Officer the power
to select which employees will receive awards, the type of awards, the time
when awards are granted, the number of shares of Common Stock allocated to
awards and the terms of awards, except to the extent that such a delegation
would prevent compliance with Rule 16b-3 of the Securities and Exchange
Commission ("Rule 16b-3"), the Internal Revenue Code (the "Code"), or other
applicable laws or regulations. Actions taken by the Chief Executive Officer
pursuant to such a delegation must be ratified by the Committee. The Company
has approximately 800 employees who would currently be eligible to receive
awards under the 1998 Plan.
As noted above, the Board of Directors proposes to increase the total
number of shares of Common Stock available for issuance under the 1998 Plan by
from two million shares to four million shares. The 1998 Plan will continue to
permit shares that are not issued under the 1996 Plan, or that are subject to
awards under the 1996 Plan that expire or terminate, to be issued under the
1998 Plan. Shares allocated to awards under the 1998 Plan which are later
forfeited, expire or otherwise terminate (including shares subject to stock
appreciation rights that are exercised for cash) may again be used for awards
under the 1998 Plan. No more than two hundred thousand shares of Common Stock
may be allocated under the 1998 Plan to awards granted to a participant in any
year. The Board or the Committee may adjust the number or kind of shares which
may be issued under the 1998 Plan in the event of a merger, reorganization,
consolidation, recapitalization, spinoff, stock dividend, stock split, reverse
stock split, extraordinary distribution with respect to the Common Stock or
other change in corporate structure affecting the Common Stock. The Common
Stock is traded on the New York Stock Exchange. On March 8, 1999 the closing
price for the Common Stock was $4 5/16.
The 1998 Plan permits the Committee to grant stock options to eligible
employees. Stock options may be either incentive stock options (which are
subject to favorable tax treatment under the Code) or nonqualified stock
options (which are not subject to such treatment). Stock appreciation rights
may be granted with respect to all or any part of a stock option, and also are
subject to terms and conditions set by the Committee. Stock appreciation rights
may only be granted in connection with a stock option.
The exercise price of a nonqualified stock option must be at least 90% of
the fair market value of the Common Stock on the date that the stock option is
granted. The exercise price of an incentive stock option must be at least 100%
of the fair market value of the Common Stock on the date that the stock option
is granted (or 110% of fair market value in the case of a grant to an employee
who is a 10% shareholder of the Company). The value of incentive stock options
that can be exercised by a participant for the first time in any calendar year
under the 1998 Plan, or under any similar plan maintained by the Company
(including the 1996 Plan), is limited to $100,000. The Committee may set the
term of a stock option, which
17
<PAGE>
may not be longer than ten years (or five years in the case of a 10%
shareholder). If the Committee does not set the term of a stock option, the
term will be ten years.
The Committee may grant a stock appreciation right in connection with all
or any part of a stock option. A stock appreciation right entitles the
participant to receive an amount equal to the excess of (i) the fair market
value of the Common Stock covered by the stock appreciation right over (ii) the
price of the Common Stock on the date the stock appreciation right was granted.
The stock appreciation right can be paid in stock or cash, or both. The
Committee may also grant shares of Common Stock that are subject to certain
terms and conditions ("Restricted Stock"). Employees who receive Restricted
Stock may not sell or transfer the Restricted Stock until the restrictions have
been met, and if the restrictions are not met, the Restricted Stock will be
forfeited. Unless otherwise provided in the Restricted Stock agreement, the
Stockholders Agreement or any other agreement, a holder of Restricted Stock
will have all the rights of a Company shareholder holding the same class or
series of Common Stock, including the right to vote the shares and the right to
receive cash dividends and distributions. At the time an award is granted under
the 1998 Plan or at any time thereafter, the Committee may also grant to the
participant the right to receive a cash payment for the purpose of assisting
the participant to pay applicable payroll taxes on the award, subject to such
terms and conditions as the Committee may impose.
The following stock option grants have been made under the 1998 Plan:
Stephen E. Hare (acting President and Chief Executive Officer, Executive Vice
President, Chief Financial Officer and Treasurer), no option grants; John P.
Watkins (Executive Vice President/President of U.S. Bowling Centers), options
to acquire 100,000 shares; Michael P. Bardaro (Senior Vice President, Corporate
Controller and Assistant Secretary), options to acquire 15,000 shares; Douglas
J. Stanard (former President and Chief Executive Officer), no option grants;
all executive officers as a group, options to acquire 115,000 shares; all
employees as a group (including all current officers who are not executive
officers), options to acquire 1,025,400 shares. No stock options have been
granted under the 1998 Plan to any director, any nominee for election as a
director, or to any associates of directors, executive officers or nominees for
election as a director. No other person has received 5% or more of the total
options that have been awarded under the 1998 Plan. As of March 8, 1999, 88,250
stock options have been forfeited under the 1998 Plan.
Stock options are not transferable other than (i) by will or by the laws
of descent or distribution, or (ii) in the case of a nonqualified stock option,
pursuant to a qualified domestic relations order (as defined in the Employee
Retirement Income Security Act of 1974) or under such other circumstances as
may be determined by the Committee in its discretion. Incentive stock options
may only be transferred by will or by the laws of descent and distribution.
Participants cannot sell, transfer or pledge shares of Restricted Stock until
the shares become unrestricted, as provided in the Restricted Stock agreement.
Upon a change of control, and unless otherwise provided in a participant's
award agreement or the Stockholders Agreement, all stock options and stock
appreciation rights outstanding immediately prior to the change of control will
become fully vested and exercisable (to the full extent of the original grant).
Also, upon a change of control, the restrictions applicable to Restricted Stock
will lapse and such Restricted Stock will become fully vested, free of
restrictions and transferable to the full extent of the portion of the grant
that had not previously been forfeited.
The 1998 Plan was approved by the Board and by a Special Vote (as required
by the Stockholders Agreement) on March 6, 1998 and was approved by
shareholders on May 19, 1998. The amendment to the 1998 Plan was approved by
the Board and by a Special Vote (as required by the Stockholders Agreement) on
February 25, 1999. The 1998 Plan will terminate ten years after the date on
which the Board approved it, unless the 1998 Plan is sooner terminated. The
Board may amend or terminate the 1998 Plan as it deems advisable. However, if
and to the extent required by the Code, shareholders must approve amendments
that would (i) increase the number of shares of Common Stock that are reserved
and available for issuance under the 1998 Plan, (ii) materially change the
requirements for eligibility to participate in the 1998 Plan, or (iii)
materially increase the benefits that eligible employees may receive under the
1998 Plan. The Board may amend the 1998 Plan as necessary and without
shareholder approval to ensure that the 1998 Plan continues to comply with Rule
16b-3 or to cause incentive stock options to meet the requirements of the Code
and applicable regulations. The Board may unilaterally amend any award as
necessary to ensure that it continues to comply with Rule 16b-3, or to cause
incentive stock options to meet the requirements of the Code and regulations
promulgated thereunder.
FEDERAL INCOME TAX CONSEQUENCES
A participant generally will not incur federal income tax when he or she
is granted a nonqualified stock option, an incentive stock option or a stock
appreciation right. Upon exercise of a nonqualified stock option or a stock
appreciation right, the participant will be treated, in most circumstances, as
having received ordinary income equal to the difference
18
<PAGE>
between the fair market value of the Common Stock on the date of the exercise
and the exercise price. This income is subject to income tax withholding by the
Company. When a participant exercises an incentive stock option, he or she
generally will not recognize taxable income, unless the participant is subject
to the alternative minimum tax, subject to satisfying applicable holding period
requirements.
A participant will generally not incur federal income tax when he or she
is granted Restricted Stock. When the restrictions imposed on the Restricted
Stock lapse, the participant will be treated as having received ordinary income
equal to the fair market value of the Restricted Stock on the date the
restrictions lapsed. A participant may make a special election under the Code
to be taxed on the fair market value of the Restricted Stock at the time the
Restricted Stock is granted. If such an election is made, the participant
generally will not be taxed when the restrictions on the Restricted Stock later
lapse. Income recognized by a participant in connection with Restricted Stock
is subject to income tax withholding by the Company.
The Company usually will be entitled to a business expense deduction at
the time and in the amount that the recipient of an award recognizes ordinary
income. As stated above, this usually occurs upon exercise of nonqualified
stock options and stock appreciation rights, and upon the lapse of restrictions
on Restricted Stock. No deduction is allowed in connection with an incentive
stock option unless the employee disposes of the Common Stock received upon
exercise in violation of certain holding period requirements. There also may be
circumstances when a deduction is not allowed for certain transfers of Common
Stock or payments to participants upon the exercise of an award that has been
accelerated as a result of a change of control.
Section 162(m) of the Code imposes a $1 million limit on the amount of the
annual compensation deduction allowable to a publicly-held company with respect
to the compensation paid to its chief executive officer and each of its other
four most highly compensated officers. An exception to this limit is provided
for performance-based compensation if certain requirements are met. The 1998
Plan permits the Committee to grant nonqualified stock options and stock
appreciation rights that will qualify for this exception from the deduction
limit, and to qualify incentive stock options under the exception to the extent
ordinary income is recognized under such options.
This summary of federal income tax consequences of stock options, stock
appreciation rights and Restricted Stock is not complete. State, local and
foreign income taxes may also be applicable to awards and to transactions
involving awards.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT
TO THE AMF BOWLING, INC. 1998 STOCK INCENTIVE PLAN.
ITEM 3 -- RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
Acting upon the recommendation of the Audit Committee, the Board has
appointed Arthur Andersen LLP as the Company's independent public accountants
to audit the consolidated financial statements of the Company for the year
ending December 31, 1999. Arthur Andersen LLP has served as the Company's
independent public accountants since the Acquisition in 1996. Although action
by the shareholders in this matter is not required, the Board believes that it
is appropriate to seek shareholder ratification of this appointment in light of
the critical role played by independent public accountants in maintaining the
integrity of Company financial controls and reporting. A representative of
Arthur Andersen LLP is expected to be present at the Meeting, will have an
opportunity to make a statement and will be available to respond to appropriate
questions that may be asked by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS TO AUDIT THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY FOR
THE FISCAL YEAR 1999.
19
<PAGE>
ITEM 4 -- OTHER BUSINESS
At this time, the Company knows of no other matters to be brought before
the Meeting, but if other matters properly come before the Meeting, your proxy
may be voted by the persons named in it in such manner as they deem to be in
the best interest of the Company and its shareholders.
SHAREHOLDER PROPOSALS FOR PRESENTATION AT THE 2000 ANNUAL MEETING
Proposals that any shareholder desires to have included in the proxy
statement for the 2000 Annual Meeting of Shareholders must be received by the
Secretary of the Company at its principal executive offices no later than
December 3, 1999. Any such proposal must meet the applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, IT IS IMPORTANT THAT YOUR
STOCK BE REPRESENTED AT THE MEETING. IF YOU ARE UNABLE TO ATTEND THE MEETING,
YOU ARE URGED TO DATE AND SIGN YOUR PROXY AND RETURN IT WITHOUT DELAY IN THE
ENCLOSED ADDRESSED ENVELOPE. THE SHARES REPRESENTED BY EACH PROXY SO SIGNED AND
RETURNED WILL BE VOTED IN ACCORDANCE WITH THE SHAREHOLDERS' DIRECTIONS.
By Order of the Board
/s/ Suzanne B. Roski
SUZANNE B. ROSKI
SECRETARY
April 2, 1999
20
<PAGE>
EXHIBIT A
AMENDMENT
TO THE
AMF BOWLING, INC.
1998 STOCK INCENTIVE PLAN
THIS AMENDMENT to the AMF Bowling, Inc. 1998 Stock Incentive Plan (the
"Plan") is made pursuant to the authority under Section 10 of the Plan for the
Board of Directors to amend the Plan. The Plan is hereby amended by deleting
the first sentence of Section 3(a) of the Plan and replacing it with the
following new sentence:
The total number of shares of Common Stock reserved and available for grant
under the Plan shall be four million shares (4,000,000).
21
<PAGE>
REVOCABLE PROXY [AMF BOWLING INC. LOGO]
AMF BOWLING, INC.
Annual Meeting of Shareholders--May 4, 1999, 9:30 a.m.
One James Center
901 East Cary Street
Richmond, Virginia 23219
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael P. Bardaro, Daniel McCormack and Suzanne
B. Roski and each of them, proxies of the undersigned, with full power of
substitution, to vote all the shares of Common Stock of AMF Bowling, Inc. (the
"Company") which the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held May 4, 1999 at 9:30 a.m., and at any adjournment or
postponement thereof.
Items 1, 2, and 3 are more particularly described in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on May 4, 1999. The
undersigned hereby acknowledges receipt of the Proxy Statement, the Annual
Report to Shareholders and the Company's Annual Report on Form 10-K.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all that
said proxies, their substitutes or any of them may lawfully do by virtue hereof.
(Continued and to be dated and signed on reverse side)
- --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED Please mark
AS SPECIFIED BY THE UNDERSIGNED SHAREHOLDER. IF NO your votes as [x]
CHOICE IS SPECIFIED BY THE SHAREHOLDER, THIS PROXY indicated in
WILL BE VOTED "FOR" ITEMS (1), (2) AND (3) AND, IN this example
THE PROXIES' DISCRETION, ON ANY OTHER MATTERS
COMING BEFORE THE MEETING.
<TABLE>
<CAPTION>
<S> <C> <C>
(1) Election of Directors NOMINEES: Richard A. Friedman, Stephen E. Hare, Terence M. O'Toole, Peter M. Sacerdote,
Charles M. Diker, Paul B. Edgerley, Howard A. Lipson and Thomas R. Wall, IV
FOR all nominees WITHHOLD
listed to the right AUTHORITY INSTRUCTION: To withhold authority to vote for any individual nominee, write that
(except as marked to vote for all nominee's name in the space provided below.
to the contrary) listed to the right
[ ] [ ] ---------------------------------------------------------------------------------
(2) Approval of an amendment to (3) Ratification of the appointment of Arthur (4) In their discretion, the proxies
the Company's 1998 Stock Incentive Andersen LLP as independent public are authorized to vote upon
Plan, which increases the number of accountants for the Company for 1999. such other matters as may properly
shares of Company Common Stock come before the meeting or any
authorized for issuance under the adjournment or postponement thereof.
1998 Stock Incentive Plan.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
Please date this Proxy Card and sign your name
exactly as it appears hereon. Where there is
more than one owner, each should sign. When
signing as an attorney, administrator, executor,
guardian or trustee, please add your title as
such. If executed by a corporation, this Proxy
card should be signed by a duly authorized
officer. If executed by a partnership, please
sign in partnership name by authorized persons.
Dated_______________________________,1999
_________________________________________
_________________________________________
(Continued from other side) Please promptly mark, sign, and mail this Proxy
Card in the enclosed envelope. No postage is
required.
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^FOLD AND DETACH HERE^
</TABLE>
