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Case JTD Doc 222 Filed 02/02/21 Page 1 of 8 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE. Debtors.

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re:

PBS BRAND CO., LLC, et al., Debtors.1 Chapter 11 Case No. 20-13157-JTD (Jointly Administered) Ref. No. 181

DECLARATION OF EDWARD T. GAVIN, CTP IN SUPPORT OF THE MOTION OF THE DEBTORS FOR FINAL ORDER PURSUANT TO 11 U.S.C. §§ 105, 361,

362, 363, 364, 503, AND 507 (I) AUTHORIZING THE DEBTORS TO OBTAIN POSTPETITION FINANCING; (II) GRANTING LIENS AND SUPERPRIORITY

ADMINISTRATIVE EXPENSE CLAIMS; (III) AUTHORIZING USE OF CASH COLLATERAL AND GRANTING ADEQUATE PROTECTION; (IV)

MODIFYING THE AUTOMATIC STAY; AND (V) GRANTING RELATED RELIEF

I, Edward T. Gavin, CTP2 hereby declare, pursuant to 28 U.S.C. §1746, under penalty

of perjury:

1. I am a Managing Director of the firm Gavin/Solmonese LLC (“Gavin/Solmonese”), with offices at 919 N. Market Street, Suite 600; Wilmington, DE 19801 and other locations, and I am duly authorized to make this statement. This Declaration

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor's federal tax identification

number are (1) PBS Brand Co., LLC, a Delaware limited liability company (7897), (2) Punch Bowl Social, Inc., a Delaware corporation (9826), (3) Punch Bowl Arlington, LLC, a Delaware limited liability company (7250), (4) Punch Bowl Atlanta Battery, LLC, a Delaware limited liability company (8973), (5) Punch Bowl Austin, LLC, a Delaware limited liability company (0366), (6) Punch Bowl Chicago West Loop, LLC, a Del-aware limited liability company (4024), (7) Punch Bowl Cleveland, LLC, a DelDel-aware limited liability company (8583), (8) Punch Bowl Dallas Deep Ellum, LLC, a Delaware limited liability company (8239), (9) Punch Bowl, LLC, a Colorado limited liability company (2287), (10) Punch Bowl Indianapolis, LLC, a Delaware limited liability company (0144), (11) Punch Bowl Minneapolis, LLC, a Delaware limited liability company (9815), (12) Punch Bowl Sacramento, LLC, a Delaware limited liability company (8092), (13) Punch Bowl SanDiego, LLC, a Delaware limited liability company (6440), (14) Punch Bowl Austin Congress, LLC a Del-aware limited liability company (0964), and (15) Punch Bowl Ranchocucamonga, LLC, a DelDel-aware limited liability company (6646).

2 The suffix “CTP” refers to “Certified Turnaround Professional”, a credential awarded by the Association of

Certified Turnaround Professionals based upon, inter alia, at least five years’ experience as a turnaround pro-fessional, passage of a rigorous examination, an extensive background check, and maintenance of continuing professional education.

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is given in support of the Motion Of The Debtors For Final Order Pursuant To 11 U.S.C. §§ 105. 361, 362, 363, 364, 503, and 507 (I) Authorizing The Debtors To Obtain Postpetition Financing; (II) Granting Liens And Superpriority Administrative Expense Claims; (III) Authorizing Use Of Cash Collateral And Granting Adequate Protection; (IV) Modifying The Automatic Stay; and (V) Granting Related Relief (the “Final DIP Motion”).

2. Except as otherwise indicated, all statements in the Declaration are based upon my personal knowledge, my discussions with other members of the Debtors’ management team and the Debtors’ advisors, my review of relevant documents and information concerning the Debtors’ operations, financial affairs, restructuring initiatives, or my opinions based upon my experience and knowledge. I am over the age of eighteen and am authorized to submit this Declaration on behalf of the Debtors.

GAVIN/SOLMONESE’S QUALIFICATIONS

3. I have over 20 years of experience working with distressed companies and their stakeholders in the restructuring business, and have acted as a financial advisor and been appointed as a CRO in many bankruptcy cases before this and other Courts.

4. GavinSolmonese was initially contacted about the Debtors’ bankruptcy cases and was retained on the morning of December 21, 2021 (the “Petition Date”). Since the inception of these cases, I and others from Gavin/Solmonese have been involved in reviewing, advising, and consulting with the Debtors with regard to their operations, the ongoing and anticipated finances of the Debtors and have been involved in discussing and negotiating various financing proposals made by CrowdOut Capital LLC (“CrowdOut”) and Sortis Holdings, Inc. (“Sortis”) to provide post-petition funding in these Chapter 11 cases.

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5. On January 22, 2021, I attended a hearing before the Court in which the Court granted the Debtors’ request for entry of an interim order approving the proposed financing, but expressly directed that the parties work over the weekend and file a final order approving post-petition financing no later than Monday, January 25.

6. Pursuant to authority provided by management and corporate resolutions dated January 23, 2021, I was initially appointed the Debtors’ Chief Restructuring Officer (“CRO”) having the sole discretion, on behalf of each of the Debtors, and subject to order of the Bankruptcy Court, to determine:

a) Marketing procedures for the sale or restructuring of the Debtors’ assets; b) The highest and best bid, through either a plan of reorganization or

liquidation, or standalone sale of the Debtors’ assets;

c) The terms of any plan of reorganization or liquidation to be filed by the Debtors in the Bankruptcy Cases; and

d) All other aspects and issues in the Bankruptcy Cases as may be considered necessary and appropriate by the CRO in his business judgment necessary to maximize the value of the Debtors’ estates. 7. Following my appointment as the Debtors’ CRO, I engaged immediately with the Debtor’s managers and their advisors, and the Companies’ advisors in order to determine the best path forward for the debtors to obtain the financing needed for these cases.

8. Starting on Friday, January 22, 2021, the Debtors, the Committee, and CrowdOut began negotiating terms for final postpetition financing. The negotiations undertaken in connection with the proposed parties were extensive, and were undertaken at all times in good faith, at arms-length with the primary goal of maximizing the value of the estates’ assets, including minimizing expenses and giving the Debtors the greatest flexibility that would allow to emerge from bankruptcy after an orderly process and maximize distributions to unsecured creditors.

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9. Among other things, the parties ultimately reached a resolution for a budget of more than $11.2 million that included, among other things, payment of all costs for the Debtors’ continued operations and the costs for estate professionals, including an investment banker who would market the assets to ensure that the estate determines the highest and best value for those assets, either through a plan or standalone sale transaction. Importantly, the terms of the proposed financing does not seek to prime any other secured parties, and would provide the proposed lender with no fees. The proposed final financing carries interest of only 0.14%. Significantly, the terms of the proposed financing included entry into a restructuring support agreement (the “RSA”) that includes milestones for a five-week marketing process for the Debtors’ assets that will culminate in the sale of the assets through either a standalone sale under section 363 of the Bankruptcy Code or a plan of reorganization. The RSA also set a floor by and through which unsecured creditors are guaranteed a recovery on account of their claims; however, the RSA does not require that CrowdOut be the stalking horse for the Debtors assets, thereby enabling the Debtors to maximize the flexibility of a marketing process.

10. On Sunday, January 23, 2021 at 3:20 p.m., more than two days after the conclusion of the January 22 hearing and the re-commencement of negotiations between the Debtors, the Committee, and CrowdOut, I received a copy of a plan term sheet (the “Sortis Term Sheet”) from counsel for PBS DIP Lender LLC, an affiliate of Sortis. As set forth in the email to which the Sortis Term Sheet was attached, the proposal was for a chapter 11 plan expressly conditioned upon “Sortis providing a replacement DIP on substantially the same terms agreed by CrowdOut.” Significantly, the Sortis Term Sheet did not specifically include terms for proposed final financing. Further, the Sortis Term Sheet required the filing

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of a plan that would require the reorganization of the Company and3 the issuance of new equity in the Debtors’ Parent to the Plan Sponsor and the Bridge Lender in consideration of the DIP Lender’s and the Plan Sponsor’s commitments under the proposed plan. Further, the Sortis Term Sheet required that through the marketing process, Sortis would serve as the “stalking horse”, subject to a break-up fee and expense reimbursement in Sortis’ favor.

EFFORTS TO FIND ALTERNATIVE FINANCING

11. Since the inception of these cases, I and others from Gavin/Solmonese, in concert with the Debtors and their professionals, have been attempting to identify funding sources for post-petition financing on the best terms available from interested lenders.

12. Gavin/Solmonese contacted over 30 additional potential funding sources including funds, traditional and non-traditional lenders, and bankers experienced in lending to bankrupt or distressed debtors, presented information to those who requested it and discussed the Debtor’s business with those who expressed interest.

13. In the end, however, many potential sources were either not interested because they were no longer willing to fund restaurants and similar industries in the Covid-19 environment, or were only interested if the Debtors owned real property that could be used as collateral for any loans. Others were not interested due to the potential size of any proposed lending facility. In short, the general reaction of the market was that the opportunity was “too small” and “too risky”.

14. Ultimately, only Sortis or CrowdOut were determined to be possible sources of post-petition funding for debtor-in-possession financing and the Debtors continued to

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negotiate with both Sortis and CrowdOut for most of these Chapter 11 cases as of December 21, 2020.

COMPARISON OF THE CROWDOUT AND SORTIS PROPOSALS

15. After receipt of the Sortis Term Sheet, the Debtors and the Committee con-ferred with respect to the respective proposals of CrowdOut and Sortis. After consideration of the respective terms of the proposal by Sortis, which relied upon Sortis’ prior offers to provide postpetition financing, and the proposal of CrowdOut, and pursuant to the authority provided to me as CRO, I determined in my business judgment that the proposed financing reflected in the Final DIP Motion constituted the best proposal available to the Debtor under the circumstances of these cases.

16. Among other things, the most significant factors in determining that the CrowdOut proposal was more favorable were (i) the Sortis proposal does not expressly in-clude any statement about interest and fees, but Sortis’ prior proposals inin-cluded interest and fees that were materially higher than those set forth in CrowdOut’s proposal; (ii) the Sortis proposal sought to prime the Debtors’ other secured creditors, which would be opposed by CrowdOut, and by contrast, CrowdOut’s proposed terms of financing does not seek to prime any other parties; (iii) the CrowdOut proposal allowed the Debtors flexibility toward a sale or plan process as CrowdOut did not require that the marketing culminate in a plan of reor-ganization, but could result in either a plan or a standalone sale; and (iv) the Sortis Term Sheet required that, through the marketing process, Sortis would serve as the “stalking horse” proposal, subject to a break-up fee and expense reimbursement in Sortis’ favor, as opposed to CrowdOut’s proposal which did not mandate that it serve as a stalking horse. Finally, while it was certainly not the most important reason, when considering the two proposals,

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the Debtors were also cognizant that the Committee had already negotiated a resolution with CrowdOut that guaranteed a recovery for unsecured creditors, whereas Sortis had not achieved any such resolution with the Committee. Given the Court’s requirement that the Debtors file a motion to approve final financing by Monday, the receipt of Sortis’ proposal on Sunday afternoon would not leave sufficient time for the Committee and the Debtors to negotiate a plan term sheet and proposed order.

17. All of these factors, coupled with the Court’s directive that the Debtors submit a Final DIP Order that could be approved, led the Debtors and their professionals and me, in consultation with the Committee’s advisors, to determine, in the exercise of our business judgment, that the economic differences between the two proposals and the certain of impact on unsecured creditors made the CrowdOut proposal reflected in the Final DIP Motion the superior and, importantly, the more likely achievable, proposal.

THE PROPOSED FINAL DIP FINANCING WITH CROWDOUT PROVIDES ADEQUATE PROTECTION TO SORTIS

18. Review of the Final DIP Motion shows that Sortis is adequately protected during the cases. Sortis is not being primed. Moreover, Sortis is being granted superiority claims, valid, binding, enforceable and perfected security interests and replacement liens to the extent and in the same priority as existed prepetition, in each case to secure Sortis and CrowdOut (in its capacity as Bridge Lender), without duplication, against the aggregate diminution, if any subsequent to the Petition Date, in the value of the Sortis liens or the Bridge Lender liens, subject to, among other things, depreciation, the DIP Obligations, and the Carve Out.

19. Accordingly, the Debtor has provided adequate protection for the Sortis’ prepetition debt and liens.

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20. In consultation with the Debtors and their advisors, I concluded that, given the circumstances, the proposed financing from CrowdOut is (a) appropriate and (b) provides the most cost-effective and beneficial financing to the Debtors.

21. Based on my experience, the proposed DIP financing is reasonable given current market conditions, the Debtors’ circumstances and the terms of the prepetition security interests provided to the Debtors. I believe that the economic terms of the proposed DIP financing are within the range of, or superior to, other similarly sized DIP facilities provided to debtors-in-possession in recent years.

22. As such, in my opinion, it is prudent for the Debtors to enter into the DIP financing and their decision to do so is a reasonable exercise of theirs and my business judgment.

Dated: February 2, 2021 By:______________________________________ Edward T. Gavin, CTP

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