Exhibit 10.1
SUBSCRIPTION AND BACKSTOP PURCHASE AGREEMENT
     SUBSCRIPTION AND BACKSTOP PURCHASE AGREEMENT, dated June 27, 2007 (this
“Agreement”), among Bally Total Fitness Holding Corporation, a Delaware
corporation (the “Company”), the subsidiary guarantors listed on Schedule 1
hereto and such additional subsidiary guarantors as may become parties to this
Agreement subsequent to the date hereof pursuant to a joinder hereto (the
“Subsidiary Guarantors” and, together with the Company, “Bally”), and the
parties set forth on Schedule 2 hereto (the “Backstop Providers”). Unless
otherwise specified herein, all capitalized terms used and not defined herein
shall have the meanings ascribed to them in the pre-packaged Chapter 11 plan of
reorganization of the Debtors, dated as of June 27, 2007, a copy of which has
been provided to the Backstop Providers and is attached hereto as Exhibit A, as
such plan may be amended, supplemented or modified from time to time after the
date hereof with the consent of the Required Backstop Parties (the “Plan”).
     WHEREAS, the Company and certain of its direct and indirect subsidiaries
(as more particularly defined in the Plan (as defined below), the “Debtors”)
intend to file chapter 11 petitions under Chapter 11 of Title 11 of the United
States Code, 11 U.S.C. §§101-1330 (as amended, the “Bankruptcy Code”) in the
United States Bankruptcy Court for the Southern District of New York (the
“Bankruptcy Court”) (such chapter 11 cases, the “Chapter 11 Cases”) in order to
effectuate a financial and corporate restructuring of the Debtors through the
Plan;
     WHEREAS, prior to the execution and delivery of this Agreement, Bally and
the Backstop Providers, as holders of more than 80% of the aggregate principal
amount of the Company’s Prepetition Senior Subordinated Notes have, along with
certain holders of a majority of the Company’s Senior Notes (the “Consenting
Senior Noteholders” and, together with the Backstop Providers, the “Plan Support
Parties”) entered into a Restructuring Support Agreement, dated June 15, 2007
(the “Restructuring Support Agreement”), pursuant to which the Debtors agreed,
among other things, to file and use their best efforts to confirm and consummate
the Plan, and the Plan Support Parties agreed, among other things, to vote to
accept the Plan, subject to the terms and conditions of the Restructuring
Support Agreement;
     WHEREAS, the Plan provides for a Rights Offering in connection with which
(i) holders of Allowed Claims in Class 6-A (of which the Backstop Providers are
members) as of the Rights Offering Recipients Record Date (the “Class 6-A Rights
Offering Recipients”), which consists of all Allowed Claims in respect of the
Prepetition Senior Subordinated Notes, will have the right to purchase Rights
Offering Senior Subordinated Notes of the reorganized Company in an aggregate
principal amount equal to approximately 27.9% of their Allowed Claims in
Class 6-A, the aggregate principal amount of which is $90.0 million and (ii) the
holders of Allowed Claims in Class 6-B-1 as of the Rights Offering Recipients
Record Date, which consists of Allowed Unsecured Claims against the Company that
are not guaranteed by, or secured by assets of, any of the Company’s
subsidiaries (the “Class 6-B-1 Holders” and, together with the Class 6-A Rights
Offering Recipients, the “Rights Offering Recipients”), will have the right to
purchase additional Rights Offering Senior Subordinated Notes of the reorganized
Company in the principal amount of approximately 27.9% of their respective
Allowed Claims in Class 6-B-1;
     WHEREAS, each Backstop Provider has reviewed the Plan and the Solicitation
Materials; and

 

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     WHEREAS, subject to the terms and conditions hereof, each of the Backstop
Providers has agreed, severally, but not jointly, to subscribe for, and
purchase, its (i) Subscription Purchase and (ii) Backstop Purchase and
(iii) Supplemental Backstop Purchase (each as defined below);
     WHEREAS, the Subsidiary Guarantors agree to be bound by the provisions
hereof, including the payment obligation of the Company in respect of the
Backstop Commitment Fee, and have agreed to guaranty the payment obligations of
the Company hereunder in respect of the Backstop Commitment Fee and the
indemnification obligations in Section 5.8 hereof, as provided for in the
Limited Subsidiary Guarantee, dated as of the date hereof, a form of which is
attached hereto as Exhibit B.
     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereby agree as follows:
SECTION 1.
DEFINITIONS
     The following terms will have the meaning set forth below:
     “Affiliate” of any Person means any Person that directly or indirectly
controls, or is under common control with, or is controlled by, such Person. As
used in this definition, “control” (including with its correlative meanings,
“controlled by” and “under common control with”) shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
     “Agreement” has the meaning assigned to it in the Preamble.
     “Approvals” means the consents, authorizations and approvals listed on
Schedule 3 hereto.
     “Backstop Commitment” has the meaning assigned to it in the Recitals
hereto.
     “Backstop Commitment Fee”, with respect to each Backstop Provider, means
4.0% of such Backstop Provider’s Backstop Share of $90,000,000, subject to
reduction pursuant to Section 2.3(d) hereof.
     “Backstop Payment Date” has the meaning assigned to it in Section 2.3
hereof.
     “Backstop Providers” has the meaning assigned to it in the Preamble.
     “Backstop Purchase” has the meaning assigned to it in Section 2.2 hereof.
     “Backstop Purchase Amount” means the result of (i) a Backstop Provider’s
Backstop Share multiplied by (ii) (x) $90,000,000 less (y) the aggregate
principal amount of all Rights Offering Senior Subordinated Notes subscribed for
and purchased in the Rights Offering by the Class 6-A Rights Offering Recipients
(after giving effect to the exercise of oversubscription rights by all such
Class 6-A Rights Offering Recipients).

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     “Backstop Purchase Notice” has the meaning assigned to it in Section 2.2
hereof.
     “Backstop Share” means, with respect to any Backstop Provider, the
percentage resulting from the ratio of (i) the principal amount of Prepetition
Senior Subordinated Notes held by such Backstop Provider as of the Voting Record
Date and (ii) the aggregate amount of Allowed Claims in respect of Prepetition
Senior Subordinated Notes held by all Backstop Providers as of the Voting Record
Date.
     “Backstop Termination Date” has the meaning assigned to it in Section 2.3
hereof.
     “Bankruptcy Code” has the meaning assigned to it in the Recitals hereto.
     “Bankruptcy Court” has the meaning assigned to it in the Recitals hereto.
     “Business Day” means a day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
     “Class 6-A Rights Offering Recipients” has the meaning assigned to it in
the Recitals hereto.
     “Company” has the meaning assigned to it in the Preamble.
     “Consenting Senior Noteholders” has the meaning assigned to it in the
Recitals hereto.
     “Exchange Act” means the Securities Exchange Act of 1934, as amended.
     “Final Order” means an order of the Bankruptcy Court as to which the time
to appeal, petition for certiorari, or move for reargument or rehearing has
expired and as to which no appeal, petition for certiorari, or other proceedings
for reargument or rehearing shall then be pending or as to which any right to
appeal, petition for certiorari, reargument, or rehearing shall have been waived
in writing in form and substance satisfactory to the Backstop Providers, or, in
the event that an appeal, writ of certiorari or reargument, or rehearing thereof
has been sought, such order of the Bankruptcy Court shall have been determined
by the highest court to which such order was appealed, or certiorari, reargument
or rehearing shall have been denied and the time to take any further appeal,
petition for certiorari, or move for reargument or rehearing shall have expired;
provided, however, that the possibility that a motion under Rule 60 of the
Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy
Rules, may be filed with respect to such order shall not preclude such order
from being a Final Order.
     “First Quarter 2007 Balance Sheet” has the meaning assigned to it in
Section 3.7 hereof.
     “Initial Subscription Purchase” has the meaning assigned to it in
Section 2.1 hereof.
     “Material Adverse Effect” means, a change, effect, event, occurrence,
development, circumstance or state of facts that, either alone or in
combination, has had or would reasonably be expected to have a materially
adverse effect on the business, properties, operations, financial condition,
prospects or results of operations of the Company and its subsidiaries
(including foreign subsidiaries and their respective businesses) taken as a
whole, or which would or would

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reasonably be expected to materially impair its ability to perform its
obligations under this Agreement or have a materially adverse effect on or
prevent or materially delay the consummation of the transactions contemplated by
the Plan; provided, that in no event shall (i) any effect directly resulting
from the public announcement of this Agreement or the commencement of the
Chapter 11 Cases or (ii) any changes in financial condition reflected in the
updated financial information of the Company dated May 3, 2007 or June 13, 2007
and presented to a representative of the Backstop Providers be taken into
account in determining whether there has been, or would reasonably likely be, a
Material Adverse Effect for purposes of this Agreement.
     “Payment Date” has the meaning assigned to it in Section 2.3 hereof.
     “Person” includes all natural persons, corporations, business trusts,
limited liability companies, associations, companies, partnerships, joint
ventures and other entities, as well as governments and their respective
agencies and political subdivisions.
     “Petition Date” has the meaning assigned to it in the Plan.
     “Plan” has the meaning assigned to it in the Preamble.
     “Plan Support Parties” has the meaning assigned to it in the Recitals
hereto.
     “Purchase Price” has the meaning assigned to it in Section 2.3 hereof.
     “Registration Rights Agreement” has the meaning set forth in the Plan.
     “Required Backstop Providers” has the meaning assigned to it in Section 8.5
hereof.
     “Restructuring Support Agreement” has the meaning assigned to it in the
Recitals hereto.
     “Securities Act” means the Securities Act of 1933, as amended.
     “Significant Subsidiary” has the meaning assigned to it under Rule 1-02 of
Regulation S-X promulgated under the Exchange Act.
     “Solicitation Materials” means the documents filed by the Company on the
Petition Date as complying with Section 1126(b) of the Bankruptcy Code for the
Company’s prepetition solicitation of votes on the Plan.
     “Subscription Amount” means the amount for each Backstop Provider listed on
Schedule 2 hereto.
     “Subscription Purchase” has the meaning assigned to it in Section 2.1
hereof.
     “Subscription Purchase Notice” has the meaning assigned to it in
Section 2.1 hereof.
     “Supplemental Backstop Purchase” has the meaning assigned to it in Section
2.2(b) hereof.

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     “Supplemental Backstop Purchase Notice” has the meaning assigned to it in
Section 2.2(b) hereof.
SECTION 2.
THE RIGHTS OFFERING AND BACKSTOP COMMITMENT
     2.1 The Rights Offering.
     (a) The Company will commence, administer and consummate the Rights
Offering in accordance with the Plan.
     (b) Subject to the Company’s compliance with the terms hereof, each of the
Backstop Providers hereby agrees, severally, but not jointly, to subscribe for
its Subscription Amount of Rights Offering Senior Subordinated Notes (the
“Initial Subscription Purchase” and, together with oversubscriptions by the
Backstop Providers, if any, the “Subscription Purchase”). The Backstop Providers
will have the opportunity, to the same extent as the other Class 6-A Rights
Offering Recipients and as provided in the Plan, to oversubscribe in the Rights
Offering.
     (c) On or before the fifth Business Day after the Subscription Expiration
Date applicable to Class 6-A Rights Offering Recipients, the Company shall
notify each Backstop Provider in writing (the “Subscription Purchase Notice”) as
to the amount of its Subscription Purchase. Each Backstop Provider hereby
agrees, severally, but not jointly, to take all action and execute and deliver
all documents (including the Subscription Form) required to exercise its Rights
in respect of the Subscription Purchase pursuant to the Rights Offering through
the later of the Payment Date (as defined below) or the Effective Date of the
Plan.
     2.2 Backstop Commitment.
     (a) On or before the fifth Business Day after the Subscription Expiration
Date applicable to Class 6-A Rights Offering Recipients, the Company shall
notify each Backstop Provider in writing (the “Backstop Purchase Notice”) as to
(i) the aggregate principal amount of Rights Offering Senior Subordinated Notes
that have not been subscribed for (including any oversubscriptions) and
purchased by the Class 6-A Rights Offering Recipients in the Rights Offering,
and (ii) the amount of each Backstop Provider’s Backstop Purchase Amount with
respect to the Rights Offering Senior Subordinated Notes referred to in clause
(i). Each Backstop Provider (independent of the obligation of any other Backstop
Provider) shall subscribe for and purchase its Backstop Purchase Amount with
respect to the Rights Offering Senior Subordinated Notes referred to in clause
(i) in the immediately preceding sentence (the “Backstop Purchase”) on the
applicable Payment Date (as defined below).
     (b) On or before the fifth Business Day after the Subscription Payment Date
applicable to Class 6-A Rights Offering Recipients, the Company shall notify
each Backstop Provider in writing (the “Supplemental Backstop Purchase Notice”)
as to (i) the aggregate principal amount of Rights Offering Senior Subordinated
Notes, if any, that (x) any and all Class 6-A Rights Offering Recipients other
than any Backstop Provider had subscribed to purchase, or was believed by the
Company to have subscribed to purchase, but had failed to consummate such
purchase for any reason by the applicable Subscription Payment Date, and (y) was
not taken into account in determining the Backstop Purchase of each Backstop
Provider pursuant to Section

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2.2(a) hereof, and (ii) the amount of each Backstop Provider’s Backstop Purchase
Amount with respect to such the Rights Offering Senior Subordinated Notes
referenced in clause (i). Each Backstop Provider (independent of the obligation
of any other Backstop Provider) shall subscribe for and purchase its Backstop
Purchase Amount with respect to the Rights Offering Senior Subordinated Notes
referenced in clause (i) in the immediately preceding sentence (the
“Supplemental Backstop Purchase”) on or before the applicable Payment Date.
     (c) Notwithstanding anything to the contrary in this Section 2.2, no
Backstop Provider shall be obligated to purchase any Rights Offering Senior
Subordinated Notes in connection with its Backstop Purchase or Supplemental
Backstop Purchase if such Backstop Provider’s Backstop Purchase Amount is less
than $1,000 aggregate principal amount of Rights Offering Senior Subordinated
Notes.
     2.3 Payment; Closing.
     (a) Each Backstop Provider hereby agrees, severally, but not jointly, to
pay the applicable Subscription Price in respect of its Subscription Purchase,
Backstop Purchase and Supplemental Backstop Purchase by wire transfer of
immediately available funds to an account designated by the Company (i) in the
case of the Subscription Purchase and the Backstop Purchase, on the date on
which all conditions to the occurrence of the Effective Date (other than the
condition of receipt of payment from the Backstop Providers of the Subscription
Price in respect of their Subscription Purchase and Backstop Purchase) have been
satisfied or waived or on such other date as may be mutually agreed by the
Company and the Backstop Providers or (ii) in the case of the Supplemental
Backstop Purchase, the fifth Business Day after the Company’s delivery of the
Supplemental Backstop Notice (as applicable, the “Payment Date”).
     (b) On the Effective Date (in the case of the Subscription Purchase and the
Backstop Purchase) or promptly after the applicable Payment Date (in the case of
the Supplemental Backstop Purchase), the Company shall deliver to the nominee of
The Depository Trust Company, for the account of each Backstop Provider, one or
more global notes representing the aggregate of its Subscription Purchase,
Backstop Purchase and Supplemental Backstop Purchase in connection with which
the Company shall have received payment of the purchase price therefor (the
“Purchase Price”).
     (c) Subject to Section 2.3(d), and in addition to the Limited Subsidiary
Guarantee, the Company and the Subsidiary Guarantors hereby agree to pay each
Backstop Provider its Backstop Commitment Fee, which shall be deemed earned as
of the execution and delivery of this Agreement, on the earlier of the Effective
Date, the termination of this Agreement or the rejection of this Agreement
pursuant to Section 365 of the Bankruptcy Code in consideration for each
Backstop Provider’s agreement to effect a Backstop Purchase or Supplemental
Backstop Purchase herein; provided, however, that neither the Company nor any
Subsidiary Guarantor will be obligated to pay a Backstop Commitment Fee to any
Backstop Provider (i) that is in material default under any of its obligations
under this Agreement as of the Payment Date or (ii) in the event that the
Effective Date does not occur as a result of any Backstop Provider’s breach of
any of its obligations under this Agreement or the Restructuring Support
Agreement and such breach is not cured by any Backstop Provider on or before the
fifth Business Day following the Company’s delivery of a notice of such breach
to the Backstop Providers. In the case of a breach

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as described in clause (ii) of the immediately preceding sentence, the Company
hereby assigns to each curing Backstop Provider any right of the Company to
pursue any claim, whether at law or in equity, against any breaching Backstop
Provider. Each of the Company and the Subsidiary Guarantors agree to pay the
Backstop Commitment Fee in respect of any defaulting Backstop Provider to any
curing Backstop Provider pro rata based on the aggregate principal amount of
Rights Offering Senior Subordinated Notes not purchased by a defaulting Backstop
Provider but purchased by a curing Backstop Provider (and each Backstop Provider
hereby consents to such payment).
     (d) Notwithstanding the terms of Section 2.3(c), upon the occurrence of the
Effective Date of the Plan (or any other plan that the Backstop Providers
consent to as the Plan for purposes of this Agreement), each Backstop Provider’s
Backstop Commitment Fee will be automatically reduced by an amount equal to 4.0%
of its Subscription Amount. Subject to Section 2.3(c), if the Effective Date has
not occurred by the 60th day following the Petition Date (the “Backstop
Termination Date”), this Agreement shall terminate and the Backstop Commitment
Fee shall automatically become due and payable to each Backstop Provider that is
not in material default under this Agreement or the Restructuring Support
Agreement; provided, however, that the Required Backstop Providers may extend
the Backstop Termination Date, in their sole discretion, and, in the case of
such extension, the Backstop Commitment Fee shall not become due and payable
until the earlier of the Effective Date, the termination or the rejection of
this Agreement or the Backstop Termination Date, as extended. If the Backstop
Commitment Fee becomes payable, but the Plan is not consummated, the Company
shall pay the Backstop Commitment Fee to each Backstop Provider in cash as an
administrative expense under Section 503 of the Bankruptcy Code.
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
     The Company represents and warrants to the Backstop Providers, in their
capacities as Backstop Providers and as Rights Offering Recipients under the
Rights Offering, as of the date hereof, as follows:
     3.1 Organization. Each of the Company and its Significant Subsidiaries:
     (a) is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization;
     (b) is duly qualified or licensed to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction where the nature of
the property owned or leased by it or the nature of the business conducted by it
makes such qualification or license necessary, except where any such failure to
be so qualified or licensed, individually in the aggregate, would not result in
a Material Adverse Effect; and
     (c) has all corporate power and authority to own and operate its
properties, to lease the property it operates under lease and to conduct its
business, except where any such failure to own and/or operate, individually in
the aggregate, would not result in a Material Adverse Effect.

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     3.2 Due Authorization, Execution and Delivery; Enforceability. The Company
has the requisite corporate power and authority to enter into, execute and
deliver this Agreement and, subject to the Approvals, to perform its obligations
hereunder, including the issuance of the Rights Offering Senior Subordinated
Notes, and has taken all necessary corporate action required for the due
authorization, execution, delivery and performance by it of this Agreement.
Subject to the Approvals, this Agreement constitutes the legally valid and
binding obligation of the Company, enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors’ rights
generally or by equitable principles relating to enforceability (collectively,
the “Enforceability Exceptions”).
     3.3 The Rights Offering Senior Subordinated Notes. The Rights Offering
Senior Subordinated Notes have been duly authorized by the Company, subject to
the receipt of the Approvals and the occurrence of the Effective Date, and when
duly executed, authenticated, issued and delivered and paid for as provided
herein, will be duly and validly issued and outstanding and will constitute
legally valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, subject to the Enforceability
Exceptions.
     3.4 Consents. Subject to the Approvals, none of the execution, delivery or
performance of this Agreement by the Company, including the issuance of Rights
Offering Senior Subordinated Notes by it, will require any consent of,
authorization by, exemption from, filing with, or notice to any governmental
entity or any other Person.
     3.5 No Conflicts. Except for the Approvals, and subject to the occurrence
of the Effective Date, the execution, delivery and performance of this Agreement
by the Company, including the issuance of shares of Rights Offering Senior
Subordinated Notes and the consummation of the transactions contemplated
hereunder and thereunder, will not (a) conflict with or result in any breach of
any provision of its certificate of incorporation or by-laws as in effect on the
Effective Date, (b) conflict with or result in the breach of the terms,
conditions or provisions of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, acceleration or cancellation under, any material
agreement, lease, mortgage, license, indenture, instrument or other contract to
which it or any of its subsidiaries is a party or by which any of its or any of
its subsidiaries’ properties or assets are bound as in effect on the Effective
Date, or (c) result in a violation of any law, rule, regulation, order, judgment
or decree (including, without limitation, federal and state securities laws and
regulations) applicable to it or any of its subsidiaries or by which any of its
or its subsidiaries’ properties or assets are bound or affected as in effect on
the Effective Date, except in the case of clauses (b) and (c), as would not,
individually or in the aggregate, result in a Material Adverse Effect.
     3.6 No Registration. Assuming the accuracy of the representations and
warranties of the Backstop Providers set forth in this Agreement, no
registration of the Rights Offering Senior Subordinated Notes under the
Securities Act is required for the purchase of the Rights Offering Senior
Subordinated Notes by the Backstop Providers in the manner contemplated by this
Agreement.

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     3.7 Financial Statements. The Company has heretofore delivered to the
Backstop Providers an unaudited consolidated balance sheet as of March 31, 2007
(the “First Quarter 2007 Balance Sheet”). The First Quarter 2007 Balance Sheet
was prepared in conformity with GAAP (except as provided below in this
Section 3.7), is complete and correct in all material respects and fairly
presents in all material respects the assets and liabilities of the Company and
its Subsidiaries as of March 31, 2007, subject to the completion of the audit
for the year ended December 31, 2006 that may result in changes to the First
Quarter 2007 Balance Sheet; provided, however, that the Backstop Providers
acknowledge that (i) the Company’s method of recognition of deferred revenue is
uncertain as of the date hereof and may not have been conducted in accordance
with GAAP and (ii) the Company’s reserves in respect of worker’s compensation,
general liability and health insurance as reflected on the First Quarter 2007
Balance Sheet do not include the Company’s estimates of potential recoveries for
such liabilities. Except as described in this Section 3.7, neither the Company
nor any of its subsidiaries has any contingent obligation, contingent liability,
or liability for taxes, long term lease or unusual forward of long term
commitment or other material liability, liquidated or unliquidated, that could
reasonably be expected to have a Material Adverse Effect and is not reflected on
the First Quarter 2007 Balance Sheet.
     3.8 Restructuring Support Agreement. The Company shall comply with its
obligations under the Restructuring Support Agreement.
     3.9 No Fiduciary Representation. Notwithstanding anything herein to the
contrary, Bally acknowledges and agrees that (a) the transactions contemplated
hereby are arm’s length commercial transactions between Bally, on the one hand,
and the Backstop Providers, on the other, (b) in connection therewith and with
the processes leading to such transactions, each Backstop Provider is acting
solely as a principal and not the agent or fiduciary of Bally or its debtor
estate, (c) no Backstop Provider has assumed an advisory or fiduciary
responsibility in favor of Bally or its debtor estate with respect to any legal,
tax, investment, accounting, regulatory or other matters involving the
transactions contemplated herein or the processes leading thereto (irrespective
of whether such Backstop Provider has advised or is currently advising Bally on
other matters), and (d) Bally has consulted its own legal and financial advisors
to the extent it deemed appropriate. Bally agrees that it will not claim that
any Backstop Provider has rendered advisory services of any nature or respect,
or owes a fiduciary or similar duty to Bally or its shareholders or estate, in
connection with the transactions contemplated herein or the processes leading
thereto.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF EACH BACKSTOP PROVIDER
     Each Backstop Provider represents and warrants to the Company, for itself
and no other Backstop Provider, as of the date hereof as follows:
     4.1 Organization. The Backstop Provider is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization.
     4.2 Due Authorization. The Backstop Provider has the requisite power and
authority to enter into, execute and deliver this Agreement and to perform its
obligations hereunder and

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has taken all necessary action required for the due authorization, execution,
delivery and performance by it of this Agreement.
     4.3 Due Execution; Enforceability. This Agreement has been duly and validly
executed and delivered by the Backstop Provider and constitutes its legally
valid and binding obligation, enforceable against it in accordance with its
terms, subject to the Enforceability Exceptions.
     4.4 No Registration Under the Securities Act; Selling Restrictions. Each
Backstop Provider acknowledges that the Rights Offering Senior Subordinated
Notes to be purchased by it pursuant to the terms of this Agreement have not
been registered under the Securities Act and that the Company shall not be
required to effect any registration under the Securities Act, or any state
securities law, of the Rights Offering Senior Subordinated Notes, except
pursuant to the Registration Rights Agreement. Each Backstop Provider
understands and agrees on its own behalf that it will not offer, resell, pledge
or otherwise transfer the Rights Offering Senior Subordinated Notes unless the
Rights Offering Senior Subordinated Notes are offered, resold, pledged or
otherwise transferred in accordance with the limitations on transfers set forth
in the indenture governing such Rights Offering Senior Subordinated Notes and
any applicable securities laws of any state of the United States and:
     (a) the Rights Offering Senior Subordinated Notes are sold in compliance
with Rule 144A under the Securities Act; or
     (b) the Rights Offering Senior Subordinated Notes are sold in compliance
with Rule 904 of Regulation S under the Securities Act; or
     (c) the Rights Offering Senior Subordinated Notes are sold pursuant to an
effective registration statement under the Securities Act; or
     (d) the Rights Offering Senior Subordinated Notes are sold to the Company;
or
     (e) the Rights Offering Senior Subordinated Notes are disposed of in any
other transaction that does not require registration under the Securities Act.
     4.5 Acquisition for Investment. The Rights Offering Senior Subordinated
Notes are being acquired under this Agreement by the Backstop Provider in good
faith solely for its own account, for investment and not with a view toward
distribution within the meaning of the Securities Act; provided, however, that
the disposition of the Rights Offering Senior Subordinated Notes shall at all
times be within such Backstop Provider’s control, subject to compliance with
applicable law.
     4.6 Accredited Investor Representations. Each Backstop Provider represents,
warrants and acknowledges as set forth in Schedule 4 hereof. Each Backstop
Provider further acknowledges that it has, independently and without reliance
upon Jefferies & Company, Inc., Houlihan Lokey Howard & Zukin Capital, Inc., any
of their Affiliates or any other Person, and based upon the Solicitation
Materials, made its own analysis and decision to enter into this Agreement.

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SECTION 5.
ADDITIONAL COVENANTS
     The Company and the Backstop Providers hereby agree and covenant as
follows:
     5.1 No Listing. The Company will not take any steps to list the Rights
Offering Senior Subordinated Notes on any securities exchange.
     5.2 Legends. The Backstop Providers agree with the Company that the
certificates evidencing the Rights Offering Senior Subordinated Notes to be
purchased hereunder will bear the following legend:
     “THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ACQUIRED IN A
TRANSACTION THAT WAS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT (1) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE REQUIREMENTS
OF ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR (2) UNDER
ANY APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.”
     5.3 Further Assurances. From time to time after the date of this Agreement,
the parties hereto shall execute, acknowledge and deliver to the other parties
such other instruments, documents, and certificates and will take such other
actions as the other parties may reasonably request in order to consummate the
transactions contemplated by this Agreement.
     5.4 Access to Information. For so long as any of the Rights Offering Senior
Subordinated Notes are outstanding and are “restricted securities” within the
meaning of Rule 144(a)(3) under the Securities Act (unless such securities can
be sold pursuant to Rule 144(k) under the Securities Act or otherwise can be
sold under section 4(1) of the Securities Act without restriction), the Company,
during any period in which it is not subject to and in compliance with
Section 13 or 15(d) of the Exchange Act, will provide to each holder of Rights
Offering Senior Subordinated Notes and to each prospective purchaser of such
Rights Offering Senior Subordinated Notes (as designated by such holder), upon
the request of such holder or prospective purchaser, any information required to
be provided by Rule 144A(d)(4) under the Securities Act.
     5.5 Access to Books and Records. Subject to applicable law and
confidentiality agreements, Bally shall provide to the Backstop Providers and
their advisors and representatives reasonable access during normal business
hours to all books, records, documents, properties, personnel, advisors and
representatives of Bally. In addition, Bally shall promptly provide written
notification to the Backstop Providers of any claim or litigation, arbitration
or administrative proceeding that is overtly threatened in writing or filed
against the company from the date hereof until the earlier of the (i) Effective
Date and (ii) termination of this Agreement. Bally shall promptly provide
written notice to the Backstop Providers of any change in any of the

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information contained in the representations or warranties made by Bally herein
and shall promptly furnish any information that a Backstop Provider may
reasonably request in relation to such changes
     5.6 Commercially Reasonable Efforts. The Company shall use commercially
reasonable efforts to cause the conditions set forth in Section 6 to be
satisfied and to consummate the transactions contemplated herein.
     5.7 Company to Assume Agreement. Each of the Company and the Subsidiary
Guarantors covenants and agrees to file a motion on the Petition Date seeking
authorization to assume this Agreement pursuant to Section 365 of the Bankruptcy
Code and to use commercially reasonable efforts to assume this Agreement as soon
as practicable.
     5.8 Indemnity and Reimbursement. Each of the Company and the Subsidiary
Guarantors shall indemnify each Backstop Provider and respective affiliates, and
each of their respective directors, officers, partners, members, employees,
agents, counsel, advisors and assignees for any liability or expenses arising
from any act or omission in connection with, relating to, or arising out of the
Chapter 11 Cases, this Agreement, the Plan, the Restructuring Support Agreement,
Disclosure Statement, the Rights Offering, the prepetition or postpetition
solicitation of acceptances of the Plan, the prepetition or postpetition
solicitation of subscriptions with respect to the Rights Offering, and the acts
taken hereunder, the pursuit of confirmation of the Plan, the confirmation of
the Plan, the consummation of this Agreement or the Plan, or any claim,
litigation, investigation or proceeding relating thereto; provided, that the
foregoing indemnity will not, as to any Backstop Provider, apply to any
liability or related expenses to the extent they are found in a final,
non-appealable judgment of a court of competent jurisdiction to have resulted
from the willful misconduct or gross negligence of such Backstop Provider or any
of its Affiliates. Each of the Company and the Subsidiary Guarantors shall also
reimburse the Backstop Providers, upon presentation of a sufficiently detailed
invoice and without application to the Bankruptcy Court, for all reasonable and
documented out-of-pocket costs and expenses, including reasonable and documented
fees of one counsel, incurred by the Backstop Providers in connection with the
negotiation and performance of their obligations under this Agreement, the
Restructuring Support Agreement, the Plan or related documents. Neither the
Company nor the Subsidiary Guarantors shall be liable for any settlement of any
such proceeding effected without its written consent, but if settled with such
consent, the Company shall indemnify the Backstop Providers from and against any
loss, liability or expenses by reason of such settlement, subject to the rights
of the Company and the Subsidiary Guarantors in this paragraph to claim
exemption from its indemnity obligations. The obligations of the Company and the
Subsidiary Guarantors under this Section 5.8 shall survive any termination or
rejection of this Agreement.
     5.9 Operations in Ordinary Course of Business. Following execution of this
Agreement, the Company and its subsidiaries shall, absent consent of the
Required Backstop Providers, continue to operate in the ordinary course of
business.
     5.10 Maintenance of Chief Operating Officer. The Company shall (i) maintain
the employment of the current Chief Operating Officer or (ii) in the event such
employment is terminated, hire a replacement Chief Operating Officer approved in
advance by the Required Backstop Providers.

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     5.11 Notice of Alternative Proposals. At all times prior to, on, or after
the date of the commencement of the Chapter 11 Cases, Bally shall be obligated
to promptly deliver to the Backstop Providers all written communications
delivered to or received by Bally or its advisors making or materially modifying
any alternative offers, including, without limitation, copies of all expressions
of interest, term sheets, letters of interest, offers, proposed agreements or
otherwise, and shall regularly update (not less than once every five Business
Days) the Backstop Providers concerning such matters.
SECTION 6.
CONDITIONS TO BACKSTOP PROVIDERS’ BACKSTOP OBLIGATIONS
     The obligation of the Backstop Providers to consummate the Subscription
Purchase, Backstop Purchase and Supplemental Backstop Purchase, shall be
subject, in each case, to the satisfaction of each of the following conditions
on the Payment Date:
     (a) Restructuring Support Agreement. The Restructuring Support Agreement
shall not have terminated, and no material default thereunder by Bally shall
have occurred and be continuing, unless waived in writing by the Requisite
Subordinated Noteholders (as defined in the Restructuring Support Agreement) or
cured within the time period specified in, and otherwise in accordance with, the
Restructuring Support Agreement;
     (b) Required Consents. All of the Approvals shall have been obtained;
     (c) Backstop Commitment Fee. The Debtors shall have paid to the Backstop
Providers the Backstop Commitment Fee as set forth in Section 2.3(c), subject to
reduction pursuant to Section 2.3(d) of this Agreement;
     (d) Rights Offering. All conditions to the consummation of the Rights
Offering, except for the receipt by the Company of the Purchase Price in respect
of the aggregate principal amount of Rights Offering Senior Subordinated Notes
subscribed for by all Rights Offering Recipients in the Rights Offering, shall
have been fulfilled;
     (e) Plan Effectiveness. All conditions to the occurrence of the Effective
Date shall have occurred (other than the consummation of the Subscription
Purchase, Backstop Purchase and Supplemental Backstop Purchase) and the Plan
shall not have been amended or modified in any material respect without the
consent of the Required Backstop Providers;
     (f) Material Adverse Effect. No Material Adverse Effect shall have occurred
since March 31, 2007.
     (g) Assumption of Agreement. The Debtors shall have assumed this Agreement
pursuant to Section 365 of the Bankruptcy Code;
     (h) Other Conditions. (i) The Debtors shall have performed in all material
respects their obligations hereunder (or cured any default thereof within the
period specified in Section 8.10 hereof) required to be performed by them at or
prior to the Payment Date, and (ii) the representations and warranties of the
Debtors contained in this Agreement shall be true and correct in all material
respects, in each case, at and as of the Payment Date.

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SECTION 7.
CONDITIONS TO COMPANY’S BACKSTOP OBLIGATIONS
     The obligations of the Company to issue Rights Offering Senior Subordinated
Notes to the Backstop Providers in respect of the Subscription Purchase,
Backstop Purchase and Supplemental Backstop Purchase pursuant to Section 2
hereof (but not the obligations of the Company in respect of the Backstop
Commitment Fee pursuant to Section 2.3 or its indemnification obligations
pursuant to Section 5.8) are subject to the satisfaction (or the waiver by the
Company) of the following conditions as of the Payment Date:
     (a) Restructuring Support Agreement. The Restructuring Support Agreement
shall not have terminated;
     (b) Required Consents. All of the Approvals shall have been obtained;
     (c) Rights Offering. The Rights Offering in respect of Class 6-A Rights
Offering Recipients shall have been consummated pursuant to the Plan;
     (d) Plan Effectiveness. All conditions to the occurrence of the Effective
Date shall have occurred; and
     (e) Other Conditions. (i) Each Backstop Provider shall have performed in
all material respects its obligations hereunder (or cured any default thereof
within the period specified in Section 8.10 hereof) required to be performed by
it at or prior to the Payment Date, and (ii) the representations and warranties
of each Backstop Provider contained in this Agreement shall be true and correct
in all material respects at and as of the Payment Date.
SECTION 8.
MISCELLANEOUS
     8.1 Notices. Any notice or other communication required or which may be
given pursuant to this Agreement will be in writing and either delivered
personally to the addressee, telecopied to the addressee, sent via electronic
mail or mailed, certified or registered mail, postage prepaid, and will be
deemed given when so delivered personally, telecopied, or sent via electronic
mail, or, if mailed, five (5) days after the date of mailing, as follows:
     (i) if to a Backstop Provider, to the address, facsimile number or email
address set forth in Schedule 1 hereto:
     with a copy to:
Akin Gump Strauss Hauer & Feld LLP
590 Madison Avenue
New York, NY 10022
Attn: Daniel Golden, Esq.
Russell Parks, Jr., Esq.
Facsimile: (212) 872-1002

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and
Houlihan Lokey Howard & Zukin Capital, Inc.
255 South Sixth Street, Suite 4950
Minneapolis, MN 55402-4304
Attn: Brad Geer
Facsimile: (612) 338-2938
     (ii) if to the Company, to:
Bally Total Fitness Holding Corporation
8700 West Bryn Mawr Avenue
Chicago, IL 60631
Attn: Marc D. Bassewitz
E-Mail: mbassewitz@ballyfitness.com
Facsimile: (773) 399-0126
     with a copy to:
Latham & Watkins LLP
Sears Tower, Suite 5800
233 South Wacker Drive
Chicago, IL 60606
Attn: Mark D. Gerstein
David S. Heller
E-Mail: mark.gerstein@lw.com
david.heller@lw.com
Facsimile: (312) 993-9767
     8.2 Survival of Representations and Warranties, etc. All representations
and warranties made in this Agreement and the Schedules attached hereto will
survive the execution and delivery of this Agreement and consummation of the
Rights Offering until expiration of the applicable statute of limitations.
     8.3 Assignment. Except as described in this Section 8.3, this Agreement
will be binding upon and inure to the benefit of each and all of the parties to
this Agreement, and neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties to this Agreement
without the prior written consent of the other parties. Notwithstanding the
foregoing, any Backstop Provider may (i) assign its rights and obligations
hereunder to any wholly owned affiliate thereof or (ii) freely assign its rights
under Sections 5.4 and 5.8 hereunder, provided that any such assignment pursuant
to clauses (i) or (ii) of this sentence shall not release such Backstop Provider
from any of its obligations under this Agreement.
     8.4 Entire Agreement. This Agreement, including the terms of the agreements
contemplated hereby and referred to herein contain the entire agreement by and
between the Company and the Backstop Providers with respect to the transactions
contemplated by this Agreement and supersedes all prior agreements and
representations, written or oral, with respect

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thereto. To the extent there is an inconsistency between the provisions in this
Agreement and the agreements contemplated hereby and referred to herein, the
provisions in this Agreement shall control. To the extent there is an
inconsistency between the provisions in this Agreement and the Plan, this
Agreement shall control.
     8.5 Waivers and Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions of this
Agreement may be waived, only by a written instrument signed by the Company and
the Backstop Providers who are holders of 50% of the aggregate principal amount
of Prepetition Senior Subordinated Notes held by all Backstop Providers (the
“Required Backstop Providers”) or, in the case of a waiver, by (i) the Required
Backstop Providers, in the case of a waiver by any Backstop Provider or (ii) the
Company, in the case of a waiver by the Company or any Debtor. No delay on the
part of any party in exercising any right, power or privilege pursuant to this
Agreement will operate as a waiver thereof, nor will any waiver on the part of
any party of any right, power or privilege pursuant to this Agreement, nor will
any single or partial exercise of any right, power or privilege pursuant to this
Agreement, preclude any other or further exercise thereof or the exercise of any
other right, power or privilege pursuant to this Agreement. The rights and
remedies provided pursuant to this Agreement are cumulative and are not
exclusive of any rights or remedies which any party otherwise may have at law or
in equity. Notwithstanding anything to the contrary in this Agreement, no
amendment that reduces the Backstop Commitment Fee or increases a Backstop
Provider’s Backstop Purchase Amount shall be effective against any Backstop
Provider without such Backstop Provider’s consent.
     8.6 Governing Law; Jurisdiction; Venue; Process. This Agreement will be
governed by and construed in accordance with the laws of the State of New York
without regard to any choice of law or conflict of law provision or rule that
would cause the application of the laws of any other jurisdiction. Each party
hereby irrevocably submits, for itself and its property, to the exclusive
jurisdiction of the United States Bankruptcy Court for the Southern District of
New York, for purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Each party irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
     8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument. All such counterparts will be
deemed an original, will be construed together and will constitute one and the
same instrument.
     8.8 Headings. The headings in this Agreement are for reference purposes
only and will not in any way affect the meaning or interpretation of this
Agreement.
     8.9 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein will not be in any way impaired

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thereby, it being intended that all of the rights and privileges of the parties
hereto will be enforceable to the fullest extent permitted by law.
     8.10 Termination. This Agreement shall terminate:
     (a) in the event of a material breach of this Agreement by any of the
Backstop Providers that has prevented the satisfaction of any condition to the
effectiveness of the Plan, or the Company’s performance of any of its
obligations hereunder or under the Restructuring Support Agreement or the Plan,
and such violation or breach has not been waived by the Company or cured in all
material respects by the applicable Backstop Provider within five Business Days
after written notice thereof from the Company (provided, however, that the
Company may not seek to terminate this Agreement based upon a material breach
arising out of its own actions or omissions in breach hereof);
     (b) in the event of a material breach of this Agreement by the Company
which has prevented the satisfaction of any condition to the effectiveness of
the Plan, or the Company’s performance of any of its obligations hereunder or
under the Restructuring Support Agreement or the Plan, and such violation or
breach has not been waived by the Required Backstop Providers or cured in all
material respects by the Company within five Business Days after written notice
thereof from the Required Backstop Providers (provided, however, that the
Required Backstop Providers may not seek to terminate this Agreement based upon
a material breach arising out of the actions or omissions of any Backstop
Provider in breach hereof);
     (c) if the Company or any of the other Debtors, without the written consent
of the Required Backstop Providers, after the date hereof (i) amend or otherwise
modify in any material respect their existing executive compensation programs
(including the Prepetition Management Incentive Plan, or adopt any new executive
compensation programs other than the Prepetition Management Incentive Plan,
(ii) amend or otherwise modify the Prepetition Credit Documents, the Senior
Notes Indenture or any Senior Notes (each as defined in the Plan) in any
material respect that conflicts or is inconsistent with the Plan, (iii) enter
into any new consulting agreements or executive employment agreements (including
with any chief executive officer appointed after the date hereof) that
individually exceeds $35,000 per month, or (iv) enter into any new contracts
with a term of one year or longer that are not terminable without penalty on
less than 90 days notice or with payments by the Company that individually
exceed $1,000,000 over the term of such contract or agreement, or that exceed in
the aggregate $5,000,000 over the terms of all such contracts and agreements
that individually exceed $500,000 over their respective terms, in the case of
each of clauses (iii) and (iv) other than renewals, extensions or other
modifications of any existing contracts or operating agreements entered into in
the ordinary course of business (but excluding material increases in the amounts
payable thereunder), provided, however, that this Agreement may not be
terminated upon the occurrence of any of the foregoing actions or occurrences
described in any of clauses (c)(i) through (c)(iv) unless the Company and/or the
other Debtors fails to rescind or otherwise undo, nullify or render ineffective
such actions or occurrences within five Business Days after delivery of a notice
by the Required Backstop Providers as to their intention to terminate this
Agreement based on any such clause, or if the Chapter 11 Cases are then pending,
within five Business Days after the filing of a motion by Required Backstop
Providers for relief from the automatic stay to permit the delivery of such
notice (in which case this Agreement shall automatically terminate on the

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fifth Business Day after the filing of such motion unless the actions or other
occurrences described in the applicable clause of this Section 8.10(c) have been
rescinded or otherwise undone, nullified or rendered ineffective by such time);
     (d) if any of the Company or the Debtors breaches the Restructuring Support
Agreement in any material respect and such breach is not cured on or before the
fifth Business Day after delivery by the Required Subordinated Noteholders (as
defined in the Restructuring Support Agreement) of notice of such breach or if
the Chapter 11 Cases are then pending, on or before the fifth Business Day after
the filing by Required Subordinated Noteholders (as defined in the Restructuring
Support Agreement) of a motion for relief from the automatic stay to permit the
delivery of such notice (in which case this Agreement shall automatically
terminate on the fifth Business Day after the filing of such motion unless such
breach has been cured by such time);
     (e) if the Company and the Required Backstop Providers agree to terminate
this Agreement; or
     (f) if this Agreement is terminated pursuant to Section 2.3(d) hereof.
     Regardless of the termination of this Agreement pursuant to this
Section 8.10, (i) the parties to this Agreement shall remain liable for breaches
of this Agreement prior to its termination, (ii) the Company and the Subsidiary
Guarantors shall remain liable for the Backstop Commitment Fee to each
non-breaching Backstop Provider to the extent provided in this Agreement,
including Section 2.3(c) hereof and (iii) the Company and the Subsidiary
Guarantors shall remain liable for the indemnity and reimbursement obligations
set forth in Section 5.8 hereof.
     8.11 Several, Not Joint, Obligations. The agreements, representations, and
obligations of the Backstop Providers under this Agreement are, in all respects,
several and not joint.

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     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.

            BALLY TOTAL FITNESS HOLDING CORPORATION
      By:   /s/ Marc D. Bassewitz         Name:   Marc D. Bassewitz       
Title:   Senior Vice President     

            THE GUARANTORS, named on Schedule 1 hereto
      By:   /s/ Marc D. Bassewitz         Name:   Marc D. Bassewitz       
Title:   Senior Vice President     

 

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            ANSCHUTZ INVESTMENT COMPANY
      By:   /s/ Scott Carpenter         Name:   Scott Carpenter        Title:  
President     

 

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            GOLDMAN, SACHS & CO.
      By:   /s/ Donald Mullen         Name:   Donald Mullen        Title:  
Managing Director     

 

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            SPECIAL VALUE OPPORTUNITIES FUND, LLC

By: Tennenbaum Capital Partners, LLC
Its: Investment Manager
      By:   /s/ Howard M. Levkowitz         Name:   Howard M. Levkowitz       
Title:   Managing Partner     

 

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            SPECIAL VALUE EXPANSION FUND, LLC

By: Tennenbaum Capital Partners, LLC
Its: Investment Manager
      By:   /s/ Howard M. Levkowitz         Name:   Howard M. Levkowitz       
Title:   Managing Partner     

 

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            SPECIAL VALUE CONTINUATION PARTIES, LP

By: Tennenbaum Capital Partners, LLC
Its: Investment Manager
      By:   /s/ Howard M. Levkowitz         Name:   Howard M. Levkowitz       
Title:   Managing Partner     

 

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            TENNENBAUM OPPORTUNITIES PARTNERS V, LP

By: Tennenbaum Capital Partners, LLC
Its: Investment Manager
      By:   /s/ Howard M. Levkowitz         Name:   Howard M. Levkowitz       
Title:   Managing Partner     

 

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SCHEDULE 1
SUBSIDIARY GUARANTORS
BALLY FITNESS FRANCHISING, INC.
BALLY FRANCHISE RSC, INC.
BALLY FRANCHISING HOLDINGS, INC.
BALLY TOTAL FITNESS CORPORATION
BALLY TOTAL FITNESS HOLDING CORPORATION
BALLY TOTAL FITNESS INTERNATIONAL, INC.
BALLY TOTAL FITNESS OF MISSOURI, INC.
BALLY TOTAL FITNESS OF TOLEDO, INC.
BALLY REFS WEST HARTFORD, LLC
BALLY TOTAL FITNESS OF CONNECTICUT COAST, INC.
BALLY TOTAL FITNESS OF CONNECTICUT VALLEY, INC.
GREATER PHILLY NO. 1 HOLDING COMPANY
GREATER PHILLY NO. 2 HOLDING COMPANY
HEALTH & TENNIS CORPORATION OF NEW YORK
HOLIDAY HEALTH CLUBS OF THE EAST COAST, INC.
BALLY TOTAL FITNESS OF UPSTATE NEW YORK, INC.
BALLY TOTAL FITNESS OF COLORADO, INC.
BALLY TOTAL FITNESS OF THE SOUTHEAST, INC.
HOLIDAY/ SOUTHEAST HOLDING CORP.
BALLY TOTAL FITNESS OF CALIFORNIA, INC.
BALLY TOTAL FITNESS OF THE MID-ATLANTIC, INC.
BTF/CFI, INC.
BALLY TOTAL FITNESS OF GREATER NEW YORK, INC.
JACK LA LANNE HOLDING CORP.
BALLY SPORTS CLUBS, INC.
NEW FITNESS HOLDING CO., INC.
NYCON HOLDING CO., INC.
BALLY TOTAL FITNESS OF PHILADELPHIA, INC.
BALLY TOTAL FITNESS OF RHODE ISLAND, INC.
RHODE ISLAND HOLDING COMPANY
BALLY TOTAL FITNESS OF THE MIDWEST, INC.
BALLY TOTAL FITNESS OF MINNESOTA, INC.
TIDELANDS HOLIDAY HEALTH CLUBS, INC.
U.S. HEALTH, INC.
BALLY TOTAL FITNESS FRANCHISING, INC.

 

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SCHEDULE 2
BACKSTOP PROVIDERS

                  Subscription Backstop Provider   Address   Amount
Anschutz Investment Company
       
 
       
Goldman, Sachs & Co.
       
 
       
Special Value Opportunities Fund, LLC
       
 
       
Special Value Expansion Fund, LLC
       
 
       
Special Value Continuation Partners, LP
       
 
       
Tennenbaum Opportunities Partners V, LP
       

 

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SCHEDULE 3
APPROVALS

1.   The entry of the Final Order of the United States Bankruptcy Court for the
Southern District of New York confirming the Plan.

 

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SCHEDULE 4
ACCREDITED INVESTOR REPRESENTATIONS AND WARRANTIES

1.   It has received and reviewed the Plan Term Sheet and this Agreement;   2.  
It acknowledges that (a) the Company has not filed recent periodic reports with
the Securities and Exchange Commission (the “SEC”), (b) the information that the
Company intends to include in future SEC filings is not available at this time
and, were it available, could be material to the Backstop Provider’s decision
whether to enter into this Agreement and (c) the Company cannot predict when
this information will be available;   3.   It is an “Accredited Investor” as
that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act;   4.   It acknowledges that any information that it has
requested concerning the Company and the Rights Offering Senior Subordinated
Notes or any other matter relevant to its decision to elect to receive the
Rights Offering Senior Subordinated Notes is or has been made available to it;  
5.   It (a) is able to act on its own behalf in the transactions related to this
Agreement, (b) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its prospective
investment in the Rights Offering Senior Subordinated Notes and (c) has the
ability to bear the economic risks of its prospective investment in the Rights
Offering Senior Subordinated Notes and can afford the complete loss of such
investment; and   6.   It understands that the Company and others will rely upon
the truth and accuracy of the foregoing acknowledgments, representations,
warranties and agreements and agrees that if any of the acknowledgments,
representations, warranties and agreements made in this Agreement are, at any
time, no longer accurate, it shall promptly notify the Company.

 

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EXHIBIT A
PLAN OF REORGANIZATION

 

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EXHIBIT B
LIMITED SUBSIDIARY GUARANTY
     LIMITED SUBSIDIARY GUARANTY, dated as of June 27, 2007 (this “Guaranty”),
is made by the subsidiary guarantors listed on Schedule 1 hereto and such
additional subsidiary guarantors as may become parties to this Guaranty
subsequent to the date hereof pursuant to a joinder hereto (each a “Subsidiary
Guarantor,” and collectively, the “Subsidiary Guarantors”), in favor of the
Backstop Providers (the “Backstop Providers”) under and as defined in the
Subscription and Backstop Purchase Agreement (as defined below).
     WHEREAS, Bally Total Fitness Holding Corporation, a Delaware corporation
(the “Company”), the Subsidiary Guarantors and the Backstop Providers are
parties to the Subscription and Backstop Purchase Agreement, dated June 27, 2007
(the “Subscription and Backstop Purchase Agreement”);
     WHEREAS, the Subscription and Backstop Purchase Agreement provides, in
part, that the Company and the Subsidiary Guarantors shall (i) pay each Backstop
Provider its Backstop Commitment Fee pursuant to Section 2.3(c) of the
Subscription and Backstop Purchase Agreement (the “Backstop Commitment Fee
Obligations”) and (ii) indemnify the Backstop Providers pursuant to Section 5.8
of the Subscription and Backstop Purchase Agreement (the “Indemnification
Obligations” and, collectively with the Backstop Commitment Fee Obligations, the
“Obligations”), each in consideration for the obligations of the Backstop
Providers thereunder;
     WHEREAS, the Subsidiary Guarantors have agreed to guaranty the payment
obligations of the Company in respect of the Obligations.
     NOW, THEREFORE, in consideration of the premises and in order to induce the
Backstop Providers to perform their obligations under the Subscription and
Backstop Purchase Agreement, the Subsidiary Guarantors hereby agree with the
Backstop Providers, for the benefit of the Backstop Providers:
     1.1. Defined Terms.
     Capitalized terms used and not defined herein shall have the meanings
ascribed to them in the Subscription and Backstop Purchase Agreement.
     2.1. Guaranty of Payment.
     (a) Each Subsidiary Guarantor hereby unconditionally guaranties, jointly
and severally, the full and prompt payment to the Backstop Providers when due,
upon demand, of any and all of the Obligations.
     (b) Each Subsidiary Guarantor acknowledges that valuable consideration
supports this Guaranty, including, without limitation, the consideration set
forth in the recitals above.

 

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     (c) Each Subsidiary Guarantor agrees that all payments under this Guaranty
shall be made in United States currency in the same manner as provided for the
Obligations.
     3.1. Nature of Guaranty: Continuing, Absolute and Unconditional.
     (a) This Guaranty is and is intended to be a continuing guaranty of payment
of the Obligations, independent of and in addition to any other guaranty,
endorsement, collateral or other agreement held by the Backstop Providers
therefor or with respect thereto, whether or not furnished by any Subsidiary
Guarantor. Each Subsidiary Guarantor shall have no right of subrogation with
respect to the Obligations or any payments made by the Subsidiary Guarantor
hereunder and hereby waives any right to enforce any remedy which the Backstop
Providers now have or may hereafter have against the Company or any endorser or
any other Subsidiary Guarantor of all or any part of the Obligations. Each
Subsidiary Guarantor agrees that it will not take any action to enforce any
obligations of Company to any Subsidiary Guarantor prior to the Obligations
being paid in full in cash; provided, that in the event of the bankruptcy or
insolvency of the Company, the Backstop Providers shall be entitled to file in
the name of any Subsidiary Guarantor or in its own name a claim for any and all
indebtedness owing to such Subsidiary Guarantor by the Company (exclusive of
this Guaranty), to vote such claim and to apply the proceeds of any such claim
to the Obligations.
     (b) This Guaranty is absolute and unconditional and shall not be changed or
affected by any representation, oral agreement, act or thing whatsoever, except
as herein provided. This Guaranty is intended by the Subsidiary Guarantors to be
the final, complete and exclusive expression of the guaranty agreement between
the Subsidiary Guarantors and the Backstop Providers. No modification or
amendment of any provision of this Guaranty shall be effective unless in writing
and signed by a duly authorized officer of the Backstop Providers and by the
Subsidiary Guarantors affected thereby.
     (c) Until final payment and performance in full of the Obligations, each
Subsidiary Guarantor hereby releases the Company from all, and agrees not to
assert or enforce (whether by or in a legal or equitable proceeding or
otherwise) any, “claims” (as defined in Section 101 of the United States
Bankruptcy Code, as amended (the “Bankruptcy Code”)), whether arising under any
law, ordinance, rule, regulation, order, policy or other requirement of any
domestic or foreign government, or any instrumentality or agency thereof, having
jurisdiction over the conduct of its business or assets or otherwise, to which
such Subsidiary Guarantor is or would at any time be entitled by virtue of its
obligations hereunder or any payment made pursuant hereto, including any such
claims to which such Subsidiary Guarantor may be entitled as a result of any
right of subrogation, exoneration or reimbursement.
     4.1. Certain Rights and Obligations.
     (a) If any default shall be made in the payment of any of the Obligations
and any grace period has expired with respect thereto as provided in the
Subscription and Backstop Purchase Agreement, each Subsidiary Guarantor hereby
agrees to pay the same in full to the extent hereinafter provided:

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     (i) without deduction by reason of any setoff, defense (other than payment)
or counterclaim of the Company;
     (ii) without requiring presentment, protest or notice of nonpayment or
notice of default to any Subsidiary Guarantor, to the Company or to any other
Person;
     (iii) without demand for payment or proof of such demand or filing of
claims with a court in the event of receivership, bankruptcy or reorganization
of the Company;
     (iv) without requiring the Backstop Providers to resort first to the
Company (this being a guaranty of payment and not of collection) or to any other
guaranty or any collateral which the Backstop Providers may hold;
     (v) without requiring notice of acceptance hereof or assent hereto by the
Backstop Providers; and
     (vi) without requiring notice that any of the Obligations have been
incurred, extended or continued or of the reliance by the Backstop Providers
upon this Guaranty;
all of the foregoing which each Subsidiary Guarantor hereby waives.
     (b) To the extent permitted by applicable law, the obligations of each
Subsidiary Guarantor hereunder shall not be affected by any of the following,
all of which each Subsidiary Guarantor hereby waives:
     (i) any defense arising by reason of the cessation from any cause
whatsoever of liability of the Company including, without limitation, any
failure, negligence or omission by the Backstop Providers in enforcing its
claims against the Company;
     (ii) any release, settlement or compromise of any obligation of the
Company;
     (iii) the invalidity or unenforceability of any of the Obligations;
     (iv) any change of ownership of the Company or the insolvency, bankruptcy
or any other change in the legal status of the Company;
     (v) any change in, or the imposition of, any law, decree, regulation or
other governmental act which does or might impair, delay or in any way affect
the validity, enforceability or the payment when due of the Obligations;
     (vi) the existence of any claim, setoff or other right which any Subsidiary
Guarantor may have at any time against the Backstop Providers or the Company in
connection herewith or any other transaction, related or unrelated; or
     (vii) any other fact or circumstance which might otherwise constitute
grounds at law or equity for the discharge or release of any Subsidiary
Guarantor from its obligations hereunder (other than termination of this
Guaranty in accordance with Section 5.1 hereof), all whether or not any
Subsidiary Guarantor shall have had notice or

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knowledge of any act or omission referred to in the foregoing clauses
(i) through (vi) of this Section 4.1(b).
     5.1. Termination.
     This Guaranty shall remain in full force and effect until the date on which
all of the Obligations have been finally and irrevocably paid in full in cash
and the commitments of the Backstop Providers under the Subscription and
Backstop Purchase Agreement shall have been terminated. Thereafter, but subject
to the following, the Backstop Providers shall take such action and execute such
documents as the Subsidiary Guarantors may request (and at the Subsidiary
Guarantors’ joint and several cost and expense) in order to evidence the
termination of this Guaranty. Payment of all of the Obligations from time to
time shall not operate as a discontinuance of this Guaranty. Each Subsidiary
Guarantor further agrees that, to the extent that any Backstop Provider is
required by any court or otherwise to return to the Company, any Subsidiary
Guarantor, or any custodian, trustee, liquidator, or other similar official
acting in relation to the Company or any Subsidiary Guarantor, any amount paid
by the Company or any Subsidiary Guarantor to such Backstop Provider, this
Guaranty, to the extent theretofore discharged, reduced, or satisfied, shall be
reinstated and continued in full force and effect as of the date when such
initial payment, reduction or satisfaction occurred, and this Guaranty shall
continue in full force notwithstanding any contrary action which may have been
taken by the Backstop Providers in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to the Backstop Providers’
rights under this Guaranty and shall be deemed to have been conditioned upon
such payment having become final and irrevocable.
     6.1. Miscellaneous.
     (a) The terms “Company” and “Subsidiary Guarantor” as used in this Guaranty
shall include: (i) any successor individual or individuals, association,
partnership or corporation to which all or substantially all of the business or
assets of the Company or any Subsidiary Guarantor, respectively, shall have been
transferred; and (ii) any other corporation or other entity into or with which
the Company or any Subsidiary Guarantor, as appropriate, shall have been merged,
consolidated, reorganized or absorbed.
     (b) No course of dealing between the Company or any Subsidiary Guarantor
and the Backstop Providers and no act, delay or omission by the Backstop
Providers in exercising any right or remedy hereunder or with respect to any of
the Obligations shall operate as a waiver thereof or of any other right or
remedy, and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right or remedy. The
Backstop Providers may remedy any default by the Company under any agreement
with the Company or with respect to any of the Obligations in any reasonable
manner without waiving the default remedied and without waiving any other prior
or subsequent default by the Company. All rights and remedies of the Backstop
Providers hereunder are cumulative.
     (c) This Agreement shall inure to the benefit of the Backstop Providers and
its successors and assigns under the Subscription and Backstop Purchase
Agreement.

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     (d) If any provision of this Guaranty is unenforceable in whole or in part
for any reason, the remaining provisions shall continue to be effective.
     (e) This Guaranty will be governed by and construed in accordance with the
laws of the State of New York without regard to any choice of law or conflict of
law provision or rule that would cause the application of the laws of any other
jurisdiction. Each Subsidiary Guarantor hereby irrevocably submits, for itself
and its property, to the exclusive jurisdiction of the United States Bankruptcy
Court for the Southern District of New York, for purposes of all legal
proceedings arising out of or relating to this Guaranty or the transactions
contemplated hereby. Each party irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.

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          IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be
duly executed and delivered by its duly authorized officer on the date first
above written.

            THE GUARANTORS, named on Schedule 1 hereto
      By:   /s/ Marc D. Bassewitz         Name:   Marc D. Bassewitz       
Title:   Senior Vice President     

ACKNOWLEDGED, this 27th day of June, 2007, by the Backstop Providers.
[SIGNATURE PAGES FOLLOW]

 

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            ANSCHUTZ INVESTMENT COMPANY
      By:   /s/ Scott Carpenter         Name:   Scott Carpenter        Title:  
President   

 

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            GOLDMAN, SACHS & CO.
      By:   /s/ Donald Mullen         Name:   Donald Mullen        Title:  
Managing Director   

 

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            SPECIAL VALUE OPPORTUNITIES FUND, LLC

By: Tennenbaum Capital Partners, LLC
Its: Investment Manager
      By:   /s/ Howard M. Levkowitz         Name:   Howard M. Levkowitz       
Title:   Managing Partner   

 

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            SPECIAL VALUE EXPANSION FUND, LLC

By: Tennenbaum Capital Partners, LLC
Its: Investment Manager
      By:   /s/ Howard M. Levkowitz         Name:   Howard M. Levkowitz       
Title:   Managing Partner     

 

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            SPECIAL VALUE CONTINUATION PARTIES, LP

By: Tennenbaum Capital Partners, LLC
Its: Investment Manager
      By:   /s/ Howard M. Levkowitz         Name:   Howard M. Levkowitz       
Title:   Managing Partner     

 

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            TENNENBAUM OPPORTUNITIES PARTNERS V, LP

By: Tennenbaum Capital Partners, LLC
Its: Investment Manager
      By:   /s/ Howard M. Levkowitz         Name:   Howard M. Levkowitz       
Title:   Managing Partner     

 

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SCHEDULE 1
SUBSIDIARY GUARANTORS
BALLY FITNESS FRANCHISING, INC.
BALLY FRANCHISE RSC, INC.
BALLY FRANCHISING HOLDINGS, INC.
BALLY TOTAL FITNESS CORPORATION
BALLY TOTAL FITNESS HOLDING CORPORATION
BALLY TOTAL FITNESS INTERNATIONAL, INC.
BALLY TOTAL FITNESS OF MISSOURI, INC.
BALLY TOTAL FITNESS OF TOLEDO, INC.
BALLY REFS WEST HARTFORD, LLC
BALLY TOTAL FITNESS OF CONNECTICUT COAST, INC.
BALLY TOTAL FITNESS OF CONNECTICUT VALLEY, INC.
GREATER PHILLY NO. 1 HOLDING COMPANY
GREATER PHILLY NO. 2 HOLDING COMPANY
HEALTH & TENNIS CORPORATION OF NEW YORK
HOLIDAY HEALTH CLUBS OF THE EAST COAST, INC.
BALLY TOTAL FITNESS OF UPSTATE NEW YORK, INC.
BALLY TOTAL FITNESS OF COLORADO, INC.
BALLY TOTAL FITNESS OF THE SOUTHEAST, INC.
HOLIDAY/ SOUTHEAST HOLDING CORP.
BALLY TOTAL FITNESS OF CALIFORNIA, INC.
BALLY TOTAL FITNESS OF THE MID-ATLANTIC, INC.
BTF/CFI, INC.
BALLY TOTAL FITNESS OF GREATER NEW YORK, INC.
JACK LA LANNE HOLDING CORP.
BALLY SPORTS CLUBS, INC.
NEW FITNESS HOLDING CO., INC.
NYCON HOLDING CO., INC.
BALLY TOTAL FITNESS OF PHILADELPHIA, INC.
BALLY TOTAL FITNESS OF RHODE ISLAND, INC.
RHODE ISLAND HOLDING COMPANY
BALLY TOTAL FITNESS OF THE MIDWEST, INC.
BALLY TOTAL FITNESS OF MINNESOTA, INC.
TIDELANDS HOLIDAY HEALTH CLUBS, INC.
U.S. HEALTH, INC.
BALLY TOTAL FITNESS FRANCHISING, INC.