Document:

exv10w1

 

Exhibit 10.1

EXECUTION COPY

THIRD AMENDMENT AND WAIVER

          THIRD AMENDMENT AND WAIVER, dated as of March 24, 2006 (this “Amendment”), under the
CREDIT AGREEMENT, dated as of November 18, 1997, as amended and restated as of October 14, 2004 (as
in effect on the date immediately prior to the date hereof, the “Credit Agreement”), among
BALLY TOTAL FITNESS HOLDING CORPORATION, a Delaware corporation (the “Borrower”), the
lenders parties thereto (the “Lenders”), JPMORGAN CHASE BANK, N.A., as agent for the
Lenders (the “Agent”), DEUTSCHE BANK SECURITIES, INC., as Syndication Agent, and LASALLE
BANK NATIONAL ASSOCIATION, as Documentation Agent. Terms used herein, but not defined, shall have
the respective meanings set forth in the Credit Agreement.

W I T N E S S E T H:

          WHEREAS, the Borrower has requested, and the undersigned Lenders wish to consent to, certain
amendments to and waivers of the Credit Agreement;

          NOW, THEREFORE, the parties hereto hereby agree as follows:

          1. Amendments to Credit Agreement. (a) Section 1.01 of the 2006 Credit Agreement is
amended by adding the following new definitions in proper alphabetical order:

     “Third Amendment” means the Third Amendment and Waiver dated as of
March 24, 2006 to this Agreement.

     “2006 Bond Waivers” means the waivers with respect to the
Senior Unsecured Notes Indenture and the Subordinated Notes Indenture
described in the Third Amendment.

               (b) Section 1.01 of the Credit Agreement is amended by deleting the text “less, for purposes
of Section 6.12 only...” to the end of the definition of “Consolidated Interest Expense”
and replacing it with the following text:

, less, for purposes of Section 6.12 only and without duplication,
to the extent added in determining such aggregate amount of interest for
such period, any amortization of consent fees and expenses paid by the
Borrower (x) in connection with the Bond Waivers including, but not limited
to, fees paid to the Agent and the Lenders in connection with the Bond
Waivers and the extension of the Credit Agreement Default Date and (y) in
connection with the 2006 Bond Waivers, including, but not limited to, fees
paid to the Agent and the Lenders.

 

 

2

               (c) Section 7.08(d) of the Credit Agreement is hereby amended by inserting in clause (1)
thereof following the phrase “the value of such dispositions does not exceed $10,000,000 in any
fiscal year, including the 2004 fiscal year” the following parenthetical:

(it being understood that as of the effectiveness date of the Third Amendment, the
Borrower and its Subsidiaries have no more capacity to exclude Reinvestment Proceeds
from the calculation of any Net Cash Proceeds received in the Borrower’s 2006 fiscal
year; and provided, further, that in the 2006 fiscal year, the value
of the assets subject to such dispositions shall not exceed $15,000,000)

               (d) Section 9.01 of the Credit Agreement is hereby amended by adding the following paragraph
at the end thereof:

If the time period provided for delivery of documents or notices required under any
provision of the Credit Documents would end on a day which is not a Banking Day,
such time period shall be extended to the next Banking Day.

          2. Waivers; Acknowledgements.

          (a) Notwithstanding the provisions of Section 7.04 of the Credit Agreement, the Lenders
consent to the amendments and waivers of the Senior Unsecured Notes Indenture and the Subordinated
Notes Indenture and the payments related thereto on the terms and conditions set forth in Exhibit A
to this Amendment.

          (b) The Lenders waive any Default or Event of Default that has resulted or might result from
the occurrence of any of the following:

     (i) failure by the Borrower to deliver (A) audited financial statements of the Borrower
and its Subsidiaries for the Borrower’s 2005 fiscal year, together with the related
accountants’ certification, as required pursuant to Section 6.03(b)(ii) of the Credit
Agreement, (B) the officer’s certificate required to be delivered in connection with the
financial statements referred to in clause (A) pursuant to Section 6.03(e) of the Credit
Agreement and (C) copies of the combined balance sheet, statements of income and retained
earnings of the Unrestricted Subsidiaries required to be delivered in connection with the
financial statements referred to in clause (A) pursuant to Section 6.03(j) of the Credit
Agreement, in each case, on the date required by such provisions, provided, that (x)
unaudited consolidated financial statements of the Borrower and its Subsidiaries of the
types described in Sections 6.03(b)(ii) and 6.03(j) for the Borrower’s 2005 fiscal year,
together with the officer’s certificate referred to in clause (B) above, are delivered no
later than April 14, 2006, and (y) audited financial statements of the Borrower and its
Subsidiaries for the Borrower’s 2005 fiscal year, together with the related accountants’
certification, as required by Section 6.03(b)(ii) of the Credit Agreement, and the related
officer’s certificate, as required by Section 6.03(e) of the Credit Agreement, are delivered
as required by the Credit Agreement no later than July 10, 2006;

     (ii) failure by the Borrower to deliver (A) unaudited financial statements of the
Borrower for the first quarter of the Borrower’s 2006 fiscal year as required pursuant to
Section 6.03(a) of the Credit Agreement, together with the related officer’s certificate,

 

 

3

as required pursuant to Section 6.03(e) of the Credit Agreement, and (B) copies of the
combined balance sheet, statements of income and retained earnings of the Unrestricted
Subsidiaries required to be delivered in connection with the financial statements referred
to in clause (A) pursuant to Section 6.03(j) of the Credit Agreement, in each case, on the
date required by such provisions, provided, that such financial statements and
certificate are delivered as required by the Credit Agreement no later than July 10, 2006;

     (iii) failure by the Borrower to deliver (A) unaudited financial statements of the
Borrower for the second quarter of the Borrower’s 2006 fiscal year as required pursuant to
Section 6.03(a) of the Credit Agreement, together with the related officer’s certificate, as
required pursuant to Section 6.03(e) of the Credit Agreement, and (B) copies of the combined
balance sheet, statements of income and retained earnings of the Unrestricted Subsidiaries
required to be delivered in connection with the financial statements referred to in clause
(A) pursuant to Section 6.03(j) of the Credit Agreement, in each case, on the date required
by such provisions, provided, that such financial statements and certificate are
delivered as required by the Credit Agreement no later than September 11, 2006, or in the
event that the Borrower elects its option to extend under the 2006 Bond Waivers, October 11,
2006; and

     (iv) with respect to Section 8.07 of the Credit Agreement, any breach of Section 10.17
of the Senior Unsecured Notes Indenture or Section 10.17 of the Subordinated Notes Indenture
as a result of the failure of the Borrower to timely file financial statements with the SEC
for the Borrower’s 2005 fiscal year; provided, that notwithstanding the foregoing
such Default or Event of Default shall arise relating to the financial statements for the
Borrower’s 2005 fiscal year, on the later of (x) April 14, 2006 and (y) 10 days after a
notice of default of the type described in Section 5.1(c) of the Senior Unsecured Note
Indenture or Section 5.1(c) of the Subordinated Note Indenture shall have been delivered,
unless such default shall have been cured or waived, or such notice of default shall have
been withdrawn.

          3. Conditions to Effectiveness of this Amendment. This Amendment shall become
effective as of the date first set forth above (the “Effective Date”) at such time as:

          (i) the Agent shall have received counterparts of this Amendment duly executed and delivered
by a duly authorized officer of each of the Borrower, each Guarantor and the Majority Lenders; and

          (ii) the Agent shall have received payment of all fees and expenses of the Agent and the
Lenders that are due and payable on or prior to the Effective Date in connection with this
Amendment.

          4. Consent Fee. The Borrower agrees to pay to the Agent for the account of each
Lender which executes and delivers this Amendment by 5:00 p.m. EST on March 30, 2006, an amendment
fee equal to 0.75% of the sum of such Lender’s Term Advances and Revolving Credit Commitments on
the Effective Date, earned, due and payable on the Effective Date;
provided, that in the event the Borrower elects its option to extend the 2006 Bond
Waivers in respect of its unaudited financial statements for the second quarter of the Borrower’s
2006 fiscal

 

 

4

year until October 11, 2006, each Lender under the Credit Agreement shall be entitled
to an additional amendment fee equal to 0.125% of the sum of such Lender’s Term Advances and
Revolving Credit Commitments on the date the Borrower makes such election (which may be no later
than September 11, 2006), earned, due and payable on such date.

          5. Representations and Warranties. The Borrower represents and warrants to each
Lender that as of the Effective Date after giving effect to this Amendment: (a) the
representations and warranties made by the Credit Parties in the Credit Documents are true and
correct in all material respects on and as of the date hereof (except to the extent that such
representations and warranties are expressly stated to relate to an earlier date, in which case
such representations and warranties shall have been true and correct in all material respects on
and as of such earlier date) and (b) no Default or Event of Default shall have occurred and be
continuing as of the date hereof after giving effect to this Amendment.

          6. Counterparts. This Amendment may be executed by one or more of the parties to this
Amendment on any number of separate counterparts (including by facsimile transmission), and all of
said counterparts taken together shall be deemed to constitute one and the same instrument. The
execution and delivery of this Amendment by any Lender shall be binding upon each of its successors
and assigns and binding in respect of all of its Commitments and Advances, including any acquired
subsequent to its execution and delivery hereof and prior to the effectiveness hereof.

          7. Continuing Effect; No Other Amendments. This Amendment is to be narrowly
constructed. Except to the extent the Credit Agreement is expressly amended hereby, all of the
terms and provisions of the Credit Agreement and the other Credit Documents are and shall remain in
full force and effect. This Amendment shall constitute a Credit Document.

          8. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

[Rest of page intentionally left blank]

 

 

     
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.

		
	 	
    BALLY TOTAL FITNESS HOLDING
	 	
    CORPORATION

			
	 	By:	
    

		
	 	
    

	 	
    Name: Carl J. Landeck
	 	
    Title:     Senior V.P., CFO
	 
	 	
    JPMORGAN CHASE BANK, N.A., individually
	 	
    and as Agent

			
	 	By:	

		
	 	
    

	 	
    Name:
	 	
    Title:

 

     
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.

		
	 	
    BALLY TOTAL FITNESS HOLDING
	 	
    CORPORATION

			
	 	By:	

		
	 	
    

	 	
    Name:
	 	
    Title:
	 
	 	
    JPMORGAN CHASE BANK, N.A., individually
	 	
    and as Agent

			
	 	By:	
    

		
	 	
    

	 	
    Name: Barry Bergman
	 	
    Title:     Managing Director

 

		
	 	
     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.
	 	
    59TH STREET GYM LLC
	 	
    708 GYM LLC
	 	
    ACE, LLC
	 	
    BTF/CFI, INC.
	 	
    CRUNCH L.A. LLC
	 	
    CRUNCH WORLD LLC
	 	
    FLAMBE LLC
	 	
    MISSION IMPOSSIBLE, LLC
	 	
    SOHO HO LLC
	 	
    WEST VILLAGE GYM AT THE ARCHIVES LLC

			
	 	By:	
    

		
	 	
    

	 	
    Name: Carl J. Landeck
	 	
    Title:     Senior V.P., CFO
	 	
                 for
    each of the Guarantors listed above

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    WELLS FARGO FOOTHILL, LLC

			
	 	By:	
    

		
	 	
    

	 	
    Name: Juan Barrera
	 	
    Title:     Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    The Foothill Group, Inc.

			
	 	By:	
    

		
	 	
    

	 	
    Name: Michael R. Bohannon
	 	
    Title:     SVP

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    
	 	
    

	 	
              Citigroup
    Financial Products Inc.

			
	 	By:	
    

		
	 	
    Name: GREGORY W. FRENZEL
	 	
    Title:     Managing Director

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    GENERAL ELECTRIC CAPITAL
	 	
    CORPORATION, as Administrator for,
	 	
    MERRITT CLO HOLDING LLC

			
	 	By: 	
    

		
	 	
    

	 	
    Name: Brian P. Schwinn
	 	
    Title:   Duly Authorized Signatory

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    Boldwater CBNA Loan Funding LLC,
	 	
    for itself or an agent for
	 	
    Boldwater CFPI Loan Funding LLC

			
	 	By: 	
    

		
	 	
    

	 	
    Name: MIKUS N. KINS
	 	
    Title:   Attorney-in-fact

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 
	 
	 	
    

	 	
    ADAR Investment Fund LTD
	 	
    by ADAR Investment Management LLC,
	 	
    Its Investment Manager

			
	 	By: 	
    

		
	 	
    

	 	
    Name: Aaron Morse
	 	
    Title:   Chief Operating Officer

 

		
	 	
    Bally Total Fitness Holding Corporation Third
	 	
    Amendment and Waiver dated as of March 24, 2006
	 	
    to the Amended and Restated Credit Agreement
	 
	 	
    CELERITY CLO LIMITED
	 	
    By: TCW Advisors, Inc.,
	 	
    as Agent

			
	 	By: 	

		
	 	
    
	 
	 	
    

	 	
    Name:        Jonathan R.
    Insull

			
	 	Title:	
    Managing Director

			
	 	By: 	

		
	 	
    
	 
	 	
    

	 	
    Name:        Vikas
    Mavinkurve

			
	 	Title:	
    Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third
	 	
    Amendment and Waiver dated as of March 24, 2006
	 	
    to the Amended and Restated Credit Agreement

			
	 	DAR	
    IEN LOAN FUNDING COMPANY

		
	 	
    By: TCW Advisors as its Interim
	 	
    Interim Collateral Manager

			
	 	By: 	

		
	 	
    
	 
	 	
    

	 	
    Name:        Jonathan R.
    Insull

			
	 	Title:	
    Managing Director

			
	 	By: 	

		
	 	
    
	 
	 	
    

	 	
    Name:        Vikas
    Mavinkurve

			
	 	Title:	
    Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third
	 	
    Amendment and Waiver dated as of March 24, 2006
	 	
    to the Amended and Restated Credit Agreement

			
	 	F	
    IRST 2004-I CLO, LTD.

		
	 	
    By: TCW Advisors as its Interim
	 	
    Interim Collateral Manager

			
	 	By: 	

		
	 	
    
	 
	 	
    

	 	
    Name:        Jonathan R.
    Insull

			
	 	Title:	
    Managing Director

			
	 	By: 	

		
	 	
    
	 
	 	
    

	 	
    Name:        Vikas
    Mavinkurve

			
	 	Title:	
    Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third 

     Amendment and Waiver dated as of March 24, 

     2006 to the Amended and Restated Credit 

     Agreement

			
	 	F	
    IRST 2004-II CLO, LTD.

		
	 	
    By: TCW Advisors, Inc.
	 	
    Its Collateral Manager

			
	 	By:	
    

		
	 	
    

	 	
    Jonathan R. Insull

			
	 	Title:	
    Managing Director

		

			
	 	By:	
    

		
	 	
    

	 	
    Vikas Mavinkurve

			
	 	Title:	
    Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third 

     Amendment and Waiver dated as of March 24, 

     2006 to the Amended and Restated Credit 

     Agreement
	 
	 	
    LOAN FUNDING I LLC, 

     a wholly owned subsidiary of Citibank, N.A. 

     By: TCW Advisors, Inc., 

     as Portfolio Manager of Loan Funding I LLC

			
	 	By:	
    

		
	 	
    

	 	
    Jonathan R. Insull

			
	 	Title:	
    Managing Director

			
	 	By:	
    

		
	 	
    

	 	
    Vikas Mavinkurve

			
	 	Title:	
    Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third 

     Amendment and Waiver dated as of March 24, 

     2006 to the Amended and Restated Credit 

     Agreement
	 
	 	
    TCW SELECT LOAN FUND, LIMITED 

     By: TCW Advisors, Inc. as its 

     Collateral Manager

			
	 	By:	
    

		
	 	
    

	 	
    Jonathan R. Insull

			
	 	Title:	
    Managing Director

			
	 	By:	
    

		
	 	
    

	 	
    Vikas Mavinkurve

			
	 	Title:	
    Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third 

     Amendment and Waiver dated as of March 24, 

     2006 to the Amended and Restated Credit 

     Agreement
	 
	 	
    TCW Senior Secured Loan Fund, LP 

     By: TCW Advisors, Inc., as its Investment Advisor

			
	 	By:	
    

		
	 	
    

	 	
    Jonathan R. Insull

			
	 	Title:	
    Managing Director

			
	 	By:	
    

		
	 	
    

	 	
    Vikas Mavinkurve

			
	 	Title:	
    Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third 

     Amendment and Waiver dated as of March 24, 

     2006 to the Amended and Restated Credit 

     Agreement
	 
	 	
    VELOCITY CLO, LTD

     TCW Advisors, Inc., its Collateral Manager

			
	 	By:	
    

		
	 	
    

	 	
    Jonathan R. Insull

			
	 	Title:	
    Managing Director

			
	 	By:	
    

		
	 	
    

	 	
    Vikas Mavinkurve

			
	 	Title:	
    Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third 

     Amendment and Waiver dated as of March 24, 

     2006 to the Amended and Restated Credit 

     Agreement
	 
	 	
    Q FUNDING III, L.P. [LENDER] 

     By: Prufrock Onshore, L.P., its General Partner
	 	
    By: J. Alfred Onshore, LLC, its General Partner

			
	 	By:	
    

		
	 	
    

	 	
    Name: Robert McCormick

			
	 	Title:	
    Vice President

 

		
	 	
    Black Diamond Offshore, Ltd.
	 	
    By: Carlson Capital L.P., its investment advisor
	 	
    By: Asgard Investment Corp., its general partner

			
	 	By: 	
    

		
	 	
    

	 	
    Name: Clint D. Carlson
	 	
    Title:   President

 

 

		
	 	
    Double Black Diamond Offshore LDC
	 	
    By: Carlson Capital, L.P., its investment advisor
	 	
    By: Asgard Investment Corp., its general partner

			
	 	By: 	
    

		
	 	
    

	 	
    Name: Clint D. Carlson
	 	
    Title:      President

 

		
	 	
    Bally Total Fitness Holding Corporation Third
	 	
    Amendment and Waiver dated as of March 24,
	 	
    2006 to the Amended and Restated Credit
	 	
    Agreement
	 
	 	
    HARBOUR TOWN FUNDING LLC

			
	 	By: 	
    

		
	 	
    

	 	
    Name: M. Cristina Higgins
	 	
    Title:  Assistant Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third
	 	
    Amendment and Waiver dated as of March 24,
	 	
    2006 to the Amended and Restated Credit
	 	
    Agreement
	 
	 	
    LONG LANE MASTER TRUST IV

			
	 	By: 	
    

		
	 	
    

	 	
    Name: M. Cristina Higgins
	 	
    Title:  Authorized Agent

 

		
	 	
    Bally Total Fitness Holding Corporation Third
	 	
    Amendment and Waiver dated as of March 24,
	 	
    2006 to the Amended and Restated Credit
	 	
    Agreement
	 
	 	
    RED FOX FUNDING LLC

			
	 	By: 	
    

		
	 	
    

	 	
    Name: M. Cristina Higgins
	 	
    Title:  Assistant Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third
	 	
    Amendment and Waiver dated as of March 24,
	 	
    2006 to the Amended and Restated Credit
	 	
    Agreement
	 
	 	
    SEMINOLE FUNDING LLC

			
	 	By: 	
    

		
	 	
    

	 	
    Name: M. Cristina Higgins
	 	
    Title:  Assistant Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    WB Loan Funding 2, LLC

			
	 	By: 	

		
	 	
    
	 	
    

	 	
    Name:        Diana M.
    Himes

			
	 	Title:	
    Associate

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 
	 
	 
	 	
    

	 	
    Deutsche Bank Trust Company Americas

			
	 	By: 	

		
	 	
    
	 	
    

	 	
    Name:        Brenda Casey

			
	 	Title:	
    Director

			
	 	By: 	

		
	 	
    
	 	
    

	 	
    Name:        
Steven P. Lapham

			
	 	Title:	
    Managing Director

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    Credit Genesis CLO 2005-1
	 	
    

	 	
    [LENDER]

			
	 	By: 	

		
	 	
    
	 	
    

	 	
    Name:        TK DECCAN

			
	 	Title:	
    Managing Principal

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 in the Amended and
    Restated Credit Agreement
	 
	 	
    
	 
	 	
    

	 	
    TRS LEDA LLC

			
	 	By: 	

		
	 	
     
	 	
    

	 	 

	 	
    Name: Alice L. Wagner

			
	 	Title:	Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    GENERAL ELECTRIC CAPITAL CORPORATION

			
	 	By: 	

		
	 	
    
	 	
    

	 	
    Name:        Dwayne L.
    Coker

			
	 	Title:	
    Duly Authorized signatory

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    Sankaty Advisors, LLC as Collateral Manager for AVERY POINT CLO,
LTD., as Term Lender

			
	 	By: 	

		
	 	
    
	 	
    

	 	
    Name:        Michelle L.
    Rocha

			
	 	Title:	
    Authorized Signatory

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    Sankaty Advisors, LLC as Collateral Manager for Race Point II
    CLO, Limited, as Term Lender

			
	 	By: 	
    

		
	 	
    

	 	
    Name:
	 	
    Title:

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    Sankaty Advisors, LLC as Collateral Manager for Castle Hill I -
    INGOTS, Ltd., as Term Lender

			
	 	By: 	

		
	 	
    

	 	
    Name:
	 	
    Title:

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    Sankaty Advisors, LLC as Collateral Manager for Loan Funding XI
    LLC, as Term Lender

			
	 	By: 	
    

		
	 	
    

	 	
    Name:
	 	
    Title:

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    Sankaty Advisors, Inc., as Collateral Manager for Brant Point
    CBO 1999-1 LTD., as Term Lender

			
	 	By: 	
    

		
	 	
    

	 	
    Name:
	 	
    Title:

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    Sankaty Advisors, LLC as Collateral Manager for Race Point CLO,
    Limited, as Term Lender

			
	 	By: 	
    

		
	 	
    

	 	
    Name:
	 	
    Title:

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    Sankaty High Yield Partners, III, L.P.

			
	 	By: 	
    

		
	 	
    

	 	
    Name:
	 	
    Title:

 

		
	 	
    Bally Total Fitness Holding Corporation Third 

     Amendment and Waiver dated as of March 24, 2006 

     to the Amended and Restated Credit Agreement
	 
	 	
    Sankaty Advisors, LLC as Collateral Manager for Castle
Hill II — INGOTS, Ltd., as Term Lender

			
	 	By: 	
     

     _____________________________________ 

     Name: 

     Title:

 

		
	 	
    Bally Total Fitness Holding Corporation Third 

     Amendment and Waiver dated as of March 24, 2006 

     to the Amended and Restated Credit Agreement

		
		
    Sankaty Advisors, LLC as Collateral Manager 

     for Prospect Funding I, LLC as Term Lender

			
	 	By: 	
     

     _____________________________________ 

     Name: 

     Title:

 

		
	 	
    Bally Total Fitness Holding Corporation Third 

     Amendment and Waiver dated as of March 24, 2006 

     to the Amended and Restated Credit Agreement

		
		
    Sankaty Advisors, LLC as Collateral Manager 

     for Brant Point II CBO 2000-1 Ltd., as Term Lender

			
	 	By: 	
     

     _____________________________________ 

     Name: 

     Title:

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    Sankaty Advisors, LLC as Collateral Manager for Race Point III,
    CLO Ltd. as Term Lender

			
	 	By:	
    

		
	 	
    

	 	
    Name:
	 	
    Title:

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    Canyon Capital CDO 2002-1 Ltd.
	 	
    [LENDER]

			
	 	By: 	
    

		
	 	
    

	 	
    Name:      Mitchell R. Julis
	 	
    Title:      Managing Director

			
	 	By: 	
    Canyon Capital Advisors LLC,

		
	 	
          a Delaware limited liability company,
	 	
          its Collateral Manager

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement
	 
	 	
    FIELD POINT I, LTD.

			
	 	By: 	
    

		
	 	
    

	 	
    Name:      Richard Petrill
	 	
    Title:      Authorized Signatory

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    FIELD POINT II, LTD.

			
	 	By: 	
    

		
	 	
    Name: Richard Petrill
	 	
    Title:  Authorized Signatory

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    

	 	
    LaSalle Bank N.A.

			
	 	By: 	
    

		
	 	
    Name: David Shapiro
	 	
    Title:  Senior Vice President

 

		
	 	
     Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    

	 	
    ANCHORAGE CROSSOVER CREDIT
	 	
    OFFSHORE MASTER FUND, LTD.

			
	 	By: 	
    ANCHORAGE ADVISORS, LLC.,

		
	 	
    Its Advisor

			
	 	By: 	
    

		
	 	
    

	 	
    Name: Michael Aglialoro
	 	
    Title:  Executive Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    SBZ PARTNERS, L.P.
	 	
    

	 	
    [LENDER]

			
	 	By:	
    

		
	 	
    

	 	
    Name: Martin Bious

			
	 	Title:	
    Co-manager, SBZ copy illegible, GP, LLC, Its General Partner

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    Sunrise Partners Limited Partnership
	 	
    

	 	
    [LENDER]

			
	 	By:	
    

		
	 	
    

	 	
    Name: Michael J. Berner
	 	
    Title:     Vice President

 

		
	 	
    Bally Total Fitness Holding Corporation Third Amendment and
    Waiver dated as of March 24, 2006 to the Amended and
    Restated Credit Agreement.
	 
	 	
    The Alphagen Credit Fund LP
	 	
    

	 	
    [LENDER]

			
	 	By:	
    

		
	 	
    

	 	
    Name: Varkks Chacko

			
	 	Title:	
    Signing in his capacity 

     as Fund Manager, 

     [Illegible] Global Investments

 

EXHIBIT A

Amendments and Waivers to Senior

Unsecured Notes Indenture and

Subordinated Notes Indenture

Senior Unsecured Notes Indenture:

WAIVERS

Waiver of any Default or Event of Default (as such terms are defined in the Senior Unsecured
Notes Indenture) (A) arising from a failure to comply with the covenants set forth in
Section 7.4 and 10.17 of the Senior Unsecured Notes Indenture (the “Reporting
Covenants”), which require the Borrower to file with the SEC and to furnish to the
Trustee and holders under the Senior Unsecured Notes Indenture, the reports required to
be filed pursuant to the Securities Exchange Act of 1934 and (B) arising from the
Borrower’s failure to provide notice to the Trustee under the Senior Unsecured Notes
Indenture of any Reporting Covenant Default under Section 10.19(b) of the Senior
Unsecured Notes Indenture.

Waiver extends through July 10, 2006 with respect to the Borrower’s 2005 10-K Report and
first quarter 2006 10-Q Report and through September 11, 2006 with respect to the
Borrower’s second quarter 2006 10-Q Report, with an option to extend to October 11,
2006.

CONSIDERATION

A
fee, at the election of the holder under the Senior Unsecured Notes Indenture
of (i) $10.00 or (ii) 4.4444 shares of the Borrower’s common stock, par value $0.01 per
share (“Common Stock”), in each case per $1,000 in principal amount of Senior Unsecured
Notes.

In addition, if the Borrower elects the option to extend the delivery of its
second quarter 2006 10-Q Report by 30 additional days to October 11, 2006, a fee of (i)
$3.33 or (ii) 1.4815 shares of Common Stock per $1,000 in principal amount of Senior
Unsecured Notes.

Subordinated Notes Indenture:

WAIVERS

Waiver of any Default or Event of Default (as such terms are defined in the Subordinated
Notes Indenture) (A) arising from a failure to comply with the covenants set forth in
Section 7.4 and 10.17 of the Subordinated Notes Indenture (the “Reporting Covenants”),
which require the Borrower to file with the SEC and to furnish to the Trustee and
holders under the Subordinated Notes Indenture, the reports required to be filed
pursuant to the Securities Exchange Act of 1934 and (B) arising from the Borrower’s
failure to provide notice to the Trustee under the Subordinated Notes

 

 

Indenture of any Reporting Covenant Default under Section 10.18(b) of the Subordinated
Notes Indenture.

Waiver extends through July 10, 2006 with respect to the Borrower’s 2005 10-K Report and
first quarter 2006 10-Q Report and through September 11, 2006 with respect to the
Borrower’s second quarter 2006 10-Q Report, with an option to extend to October 11,
2006.

CONSIDERATION

A fee, at the election of the holder under the Subordinated Notes Indenture of
(i) $10.00 or (ii) 4.4444 shares of the Borrower’s common stock, par value $0.01 per
share (“Common Stock”), in each case per $1,000 in principal amount of Subordinated
Notes.

In addition, if the Borrower elects the option to extend the delivery of its
second quarter 2006 10-Q Report by 30 additional days to October 11, 2006, a fee of (i)
$3.33 or (ii) 1.4815 shares of Common Stock per $1,000 in principal amount of
Subordinated Notes.exv10w1

 

Exhibit 10.1

AMENDMENT NUMBER ONE

to the

AMENDED AND RESTATED SALE AND SERVICING AGREEMENT,

dated as of November 12, 2004,

among

OPTION ONE OWNER TRUST 2003-5,

OPTION ONE LOAN WAREHOUSE CORPORATION,

OPTION ONE MORTGAGE CORPORATION

and

WELLS FARGO BANK, N.A.

          This AMENDMENT NUMBER ONE (this “Amendment”) is made and is effective as of this 11th day of
November, 2005, among Option One Owner Trust 2003-5 (the “Issuer”), Option One Loan Warehouse
Corporation (the “Depositor”), Option One Mortgage Corporation (the “Loan Originator” and the
“Servicer”) and Wells Fargo Bank, N.A., (formerly known as Wells Fargo Bank Minnesota, National
Association) as Indenture Trustee (the “Indenture Trustee”), to the Amended and Restated Sale and
Servicing Agreement, dated as of November 12, 2004 (the “Sale and Servicing Agreement”), among the
Issuer, the Depositor, the Loan Originator, the Servicer and the Indenture Trustee.

RECITALS

          WHEREAS, the parties hereto desire to amend the Sale and Servicing Agreement subject to the
terms and conditions of this Amendment.

          NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and of the mutual covenants herein contained, the parties hereto hereby agree
as follows:

          SECTION 1. Defined Terms. Any terms capitalized but not otherwise defined herein
shall have the respective meanings set forth in the Sale and Servicing Agreement.

          SECTION 2. Amendments. (A) Section 1.01 of the Sale and Servicing Agreement
is hereby amended by adding the following definition:

          Interest-Only Loan: A loan which, by its terms, requires the related Borrower
to make monthly payments of only accrued interest for the certain period of time
following origination. After such interest-only period, the loan terms provide that
the Borrower’s monthly payment will be recalculated to cover both interest and
principal so that such loan will amortize fully on or prior to its final payment
date. Each Interest-Only Loan shall be identified as such on the Loan Schedule, and
shall have an interest-only period of five years or as otherwise designated in the
Loan Schedule.

 

 

          (B) Section 1.01 of the Sale and Servicing Agreement is hereby amended by amending the
definition of the term “Revolving Period” in its entirety to read as follows:

          Revolving Period: With respect to the Notes, the period commencing on November
11, 2005 and ending on the earlier of (i) 364 days after such date, and (ii) the
date on which the Revolving Period is terminated pursuant to Section 2.07.

          (C) Section 2.03(b) of the Sale and Servicing Agreement is amended in its entirety to
read as follows:

     (b) It is the intention of the parties hereto that, other than for
federal, state and local income or franchise tax purposes (as to which no treatment
is herein contemplated), the transfers and assignments of the Trust Estate on the
initial Closing Date, on each Transfer Date and as otherwise contemplated by the
Basic Documents and the Assignments shall constitute a sale of the Trust Estate
including, without limitation, the Loans and all other property comprising the
Trust Estate specified in Section 2.01(a) hereof, from the Depositor to the Issuer
and such property shall not be property of the Depositor. The parties hereto shall
treat the Notes as indebtedness for federal, state and local income and franchise
tax purposes.

          (D) Section 3.01(e) of the Sale and Servicing Agreement is amended in its entirety to
read as follows:

     (e) There are no actions or proceedings against, or investigations of,
the Depositor currently pending with regard to which the Depositor has received
service of process and no action or proceeding against, or investigation of, the
Depositor is, to the knowledge of the Depositor, threatened or otherwise pending
before any court, administrative agency or other tribunal that (A) if determined
adversely to the Depositor, has a reasonable possibility of prohibiting or
preventing its entering into any of the Basic Documents to which it is a party or
render the Securities invalid, (B) seek to prevent the issuance of the Securities
or the consummation of any of the transactions contemplated by any of the Basic
Documents to which it is a party or (C) if determined adversely to the Depositor,
would prohibit or materially and adversely affect the performance by the Depositor
of its obligations under, or the validity or enforceability of, any of the Basic
Documents to which it is a party or the Securities, provided, however, that,
insofar as this representation relates to the Loan Originator’s satisfaction of its
financial covenants, there is also a reasonable possibility of an adverse
determination of such action, proceeding or investigation having such effect;

2

 

          (E) Section 3.02(e) of the Sale and Servicing Agreement is amended in its entirety to
read as follows:

     (e) There are no actions or proceedings against, or investigations of,
the Loan Originator currently pending with regard to which the Loan Originator has
received service of process and no action or proceeding against, or investigation
of, the Loan Originator is, to the knowledge of the Loan Originator, threatened or
otherwise pending before any court, administrative agency or other tribunal that
(A) if determined adversely to the Loan Originator, would prohibit its entering
into any Basic Document to which it is a party or render the Securities invalid,
(B) seek to prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by any Basic Document to which it is a party or (C)
if determined adversely to the Loan Originator, would have a reasonable possibility
of prohibiting or preventing or materially and adversely affecting the sale of the
Loans to the Depositor, the performance by the Loan Originator of its obligations
under, or the validity or enforceability of, any Basic Document to which it is a
party or the Securities, provided, however, that, insofar as this representation
relates to
the Loan Originator’s satisfaction of its financial covenants, there is also a
reasonable possibility of an adverse determination of such action, proceeding or
investigation having such effect;

          (F) Section 3.03(e) of the Sale and Servicing Agreement is amended in its entirety to
read as follows:

     (e) There are no actions or proceedings against, or investigations of,
the Servicer currently pending with regard to which the Servicer has received
service of process and no action or proceeding against, or investigation of, the
Servicer is, to the knowledge of the Servicer, threatened or otherwise pending
before any court, administrative agency or other tribunal that (A) if determined
adversely to the Servicer, would prohibit its entering into any Basic Document to
which it is a party, (B) seek to prevent the consummation of any of the
transactions contemplated by any Basic Document to which it is a party, (C) if
determined adversely to the Servicer, would have a reasonable possibility of
prohibiting or materially and adversely affecting the performance by the Servicer
of its obligations under, or the validity or enforceability of, any Basic Document
to which it is a party or the Securities, provided, however, that, insofar as this
representation relates to the Loan Originator’s satisfaction of its financial
covenants, there is also a reasonable possibility of an adverse determination of
such action, proceeding or investigation having such effect, or (D) allege that the
Servicer has engaged in practices, with respect to any of the Loans, that are
predatory, abusive, deceptive or otherwise wrongful under any applicable statute,
regulation or ordinance or that are otherwise actionable and that have a reasonable
possibility of adverse determination;

3

 

          (G) Section 7.02 of the Sale and Servicing Agreement is amended in its entirety to
read as follows:

     Section 7.02 Financial Covenants.

     (a) Each of the Loan Originator and the Servicer shall maintain a
minimum Tangible Net Worth of $425 million as of any day.

     (b) Each of the Loan Originator and the Servicer shall maintain a
ratio of 1.0 or greater at any time pursuant to the Capital Adequacy Test, attached
as Exhibit G hereto.

     (c) Neither the Loan Originator nor the Servicer may exceed a maximum
non-warehouse leverage ratio (the ratio of (i) the sum of (A) all funded debt
(excluding debt from H&R Block, Inc. or any of its Affiliates and all non-recourse
debt) less (B) 91% of its mortgage loan inventory held for sale less (C) 90% of
servicing advance receivables (determined and valued in accordance with GAAP) to
(ii) Tangible Net Worth) of 0.50x at any time.

     (d) Each of the Loan Originator and the Servicer shall maintain a
minimum liquidity facility (defined as a committed, unsecured, non-amortizing
liquidity facility from H&R Block, Inc. not to mature (scheduled or accelerated)
prior to the Maturity Date) in an amount no less than $150 million. Such facility
from H&R Block,
Inc. cannot contain covenants or termination events more restrictive than the
covenants or termination events contained in the Basic Documents.

     (e) Each of the Loan Originator and the Servicer shall maintain a
minimum “Net Income” (defined and determined in accordance with GAAP) of at least
$1 based on the total of the current quarter combined with the previous three
quarters.

     (f) Each of the Loan Originator and the Servicer, on a quarterly
basis, shall provide the Noteholder Agent with an Officer’s Certificate stating
that the Loan Originator or the Servicer, as the case may be, is in compliance with
the financial covenants set forth in this Section 7.02 and the details of such
compliance.

          (H) Clause (10) of Section 9.01(a) of the Sale and Servicing Agreement is amended in
its entirety to read as follows:

     (10) so long as the Servicer or the Loan Originator is an Affiliate of
the Issuer, the occurrence of an Event of Default under the Indenture as a result
of the action or inaction of the Issuer.

          (I) Exhibit E to the Sale and Servicing Agreement is hereby amended by amending (xx)
the following representations and warranties:

4

 

          (xx) Except for Interest-Only Loans, Principal payments on the Loan
commenced no more than two months after the proceeds of the Loan were disbursed.
The Loan bears interest at the Loan Interest Rate. With respect to each Loan unless
otherwise stated on the Loan Schedule, the Promissory Note is payable on the first
day of each month in Monthly Payments which, except for Balloon Loans, are
sufficient to fully amortize the original principal balance over the original term
thereof and to pay interest at the related Loan Interest Rate, and, in the case of
each ARM, are changed on each Adjustment Date. The Promissory Note does not permit
negative amortization. No Loan is a Convertible Mortgage Loan;

     (J) A new Exhibit G is added to the Sale and Servicing Agreement, in the form appended
to this Amendment.

     SECTION 3. Representations. In order to induce the parties hereto to execute and
deliver this Amendment, each of the Issuer and the Depositor hereby jointly and severally
represents to the other parties hereto and the Noteholders that as of the date hereof, after giving
effect to this Amendment, (a) all of its respective representations and warranties in the Note
Purchase Agreement and the other Basic Documents are true and correct, and (b) it is otherwise in
full compliance with all of the terms and conditions of the Sale and Servicing Agreement.

     SECTION 4. Guaranty. Reference is hereby made to that certain Guaranty, dated as of
November 1, 2003 (the “Guaranty”), made by H&R Block, Inc. in favor of Wells Fargo Bank Minnesota,
National Association, as indenture trustee. H&R Block, Inc., as guarantor pursuant to the Guaranty,
hereby consents to this Amendment and acknowledges and agrees that the Guaranty shall remain in
full force and effect and shall apply to all of the Guaranteed Obligations (as defined in the
Guaranty), as such term is amended or affected by this Amendment.

     SECTION 5. Limited Effect. Except as expressly amended and modified by this Amendment,
the Sale and Servicing Agreement shall continue in full force and effect in accordance with its
terms. Reference to this Amendment need not be made in the Sale and Servicing Agreement or any
other instrument or document executed in connection therewith or herewith, or in any certificate,
letter or communication issued or made pursuant to, or with respect to, the Sale and Servicing
Agreement, any reference in any of such items to the Sale and Servicing Agreement being sufficient
to refer to the Sale and Servicing Agreement as amended hereby.

     SECTION 6. Fees and Expenses. The Issuer and the Depositor jointly and severally
covenant to pay as and when billed by the Initial Noteholder all of the reasonable out-of-pocket
costs and expenses incurred in connection with the transactions contemplated hereby and in the
other Basic Documents including, without limitation, (i) all reasonable fees, disbursements and
expenses of counsel to the Initial Noteholder, (ii) all reasonable fees and expenses of the
Indenture Trustee and Owner Trustee and their counsel and (iii) all reasonable fees and expenses of
the Custodian and its counsel.

5

 

     SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS DOCTRINE APPLIED IN SUCH STATE.

     SECTION 8. Counterparts. This Amendment may be executed by each of the parties hereto
on any number of separate counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same instrument.

     SECTION 9. Limitation on Liability. It is expressly understood and agreed by the
parties hereto that (a) this Amendment is executed and delivered by Wilmington Trust Company, not
individually or personally, but solely as Owner Trustee of Option One Owner Trust 2003-5 in the
exercise of the powers and authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and intended not as
personal representations, undertakings and agreements by Wilmington Trust Company but is made and
intended for the purpose for binding only the Issuer, (c) nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company, individually or personally, to
perform any covenant either expressed or implied contained herein, all such liability, if any,
being expressly waived by the parties hereto and by any Person claiming by, through or under the
parties hereto and (d) under no circumstances shall Wilmington Trust Company be personally liable
for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer
under this Amendment or any other related documents.

6

 

          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered
by their duly authorized officers as of the day and year first above written.

	 	 	 	 	 
	 	 	OPTION ONE OWNER TRUST 2003-5
	 
	 	 	 	 
	 	 	By: Wilmington Trust Company, not in its
	 	 	individual capacity but solely as owner trustee
	 
	 	 	 	 
	 

	 	By:
	 	      /s/ Joann A. Rozell
	 

	 	 	 	 
	 	 	Name: Joann A. Rozell
	 	 	Title: Financial Services Officer
	 
	 	 	 	 
	 	 	OPTION ONE LOAN WAREHOUSE CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	     /s/ Bob Fulton
	 

	 	 	 	 
	 	 	Name: Bob Fulton
	 	 	Title: Vice President
	 
	 	 	 	 
	 	 	OPTION ONE MORTGAGE CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	      /s/ Bob Fulton
	 

	 	 	 	 
	 	 	Name: Bob Fulton
	 	 	Title: Vice President
	 
	 	 	 	 
	 	 	WELLS FARGO BANK, N.A., as Indenture Trustee
	 
	 	 	 	 
	 

	 	By:
	 	      /s/ Amy Doyle
	 

	 	 	 	 
	 	 	Name: Amy Doyle
	 	 	Title: Vice President

Acknowledged and Agreed as

of the date first above written:

H&R BLOCK, INC.

	 	 	 	 	 
	By:

	 	      /s/ Becky S. Shulman	 	 
	Name: Becky S. Shulman	 	 
	Title: Vice President and Treasurer	 	 

 

 

EXHIBIT G

Capital Adequacy Test

*For each field multiply the HRB% by the Balance Sheet Amount for Required Capital

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	HRB TEST	 	Balance Sheet	 	Required Capital
	Unrestricted Cash and Equivalents
	 	 	0	%	 	 	 	 	 	 	 	 
	Restricted Cash
	 	 	0	%	 	 	 	 	 	 	 	 
	Loans Held for Sale
	 	 	9	%	 	 	 	 	 	 	 	 
	Servicing Advances
	 	 	10	%	 	 	 	 	 	 	 	 
	Beneficial Interests in trusts
	 	 	10	%	 	 	 	 	 	 	 	 
	Subprime Mortgage NIM Residual Interest
	 	 	60	%	 	 	 	 	 	 	 	 
	Real Estate Held for Sale
	 	 	10	%	 	 	 	 	 	 	 	 
	Furniture and Equipment
	 	 	0	%	 	 	 	 	 	 	 	 
	Mortgage Servicing Rights
	 	 	25	%	 	 	 	 	 	 	 	 
	Prepaid Expenses and Other Assets
	 	 	10	%	 	 	 	 	 	 	 	 
	Accrued interest receivable
	 	 	10	%	 	 	 	 	 	 	 	 
	Receivable from H&R Block
	 	 	0	%	 	 	 	 	 	 	 	 
	Intangibles and goodwill
	 	 	100	%	 	 	 	 	 	 	 	 
	Deferred Tax Assets
	 	 	10	%	 	 	 	 	 	 	 	 
	Derivative Assets
	 	 	10	%	 	 	 	 	 	 	 	 
	Total Required Capital
	 	 	 	 	 	 	 	 	 	 	 	 

Total Owners Equity on Balance Sheet Date

Less: Receivables from H&R Block / Adjusted Net Worth

Adjusted Net Worth divided by Required Capital = Ratio for Capital Adequacy Test

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