Document:

THIRD
AMENDMENT LETTER

				
	To:			Allied
Healthcare Holdings Limited
 Allied Healthcare Group Holdings
Limited (formerly Allied Healthcare Group Limited)
Stone Business
Park
Brooms Road
StoneStaffordshire ST15 0TL
	 			Fax No: 01785
819031
	Attention:			David
Moffatt
	

17 October
2006

Dear Sirs

Project Air: Third Amendment
Letter

We refer to the £50,000,000 facility
agreement dated 19 July  2004 between Allied Healthcare Group
Limited (the ‘‘Company’’), Allied
Healthcare Holdings Limited (the
‘‘Borrower’’), Allied Healthcare
International Inc, the Guarantors listed therein, Barclays Capital and
Lloyds TSB Bank PLC as Arrangers and Ancillary Lenders, the Original
Lenders listed therein and Barclays Bank PLC as Agent and Security
Agent (the ‘‘Original Facility
Agreement’’) as amended by an amendment letter dated
28 July  2006 (the ‘‘First Amendment
Letter’’) and an amendment letter dated 11
September  2006 (the ‘‘Second Amendment
Letter’’ and, together with the Original Facility
Agreement and the First Amendment Letter, the
‘‘Amended
Agreement’’).

		
	1 	DEFINITIONS

Unless
otherwise stated, terms defined in the Amended Agreement have the same
meaning in this Letter.

‘‘Third
Effective Date’’ means the date on which the Agent
notifies the Company that it has
received:

			
		(i) 	for the Parent and each
of the Obligors, either a copy of their respective constitutional
documents or a certificate of an authorised signatory of each of them
certifying that the constitutional documents previously delivered to
the Agent on or before 19 July  2004 for the purposes of the
Original Facility Agreement have not been amended and remain in full
force and effect;

			
		(ii) 	a copy of a
resolution of the board of directors of the Parent and each
Obligor:

			
		(a) 	approving the terms of,
and the transactions contemplated by, this Letter and resolving that it
execute this Letter;
and

			
		(b) 	authorising a specified person
or persons to execute this Letter on its
behalf;

			
		(iii) 	a specimen of the
signature of each person authorised by the resolution referred to in
paragraph (ii) above;

			
		(iv) 	a
certificate of the Company (signed by a director) confirming that
borrowing or guaranteeing, as appropriate, the Facility A Commitment
and the Facility B Commitment under the Amended Agreement would not
cause any borrowing, guaranteeing or similar limit binding on the
Parent or any Obligor to be exceeded;
and

			
		(v) 	a certificate of an authorised
signatory of the Parent and the relevant Obligor certifying that each
copy document listed at (i) to (iv) above is correct, complete and in
full force and effect as at a date no earlier than the date of this
Letter.

		
	2 	OVERDRAFT

		
	2.1 	The
Bank agrees, subject to the terms and conditions of this Letter, to
continue to make the Overdraft Facility available to the Borrower from
the Third Effective Date. The Overdraft Facility shall also continue to
be made available on an uncommitted basis and may be cancelled by the
Bank at any time by notice to the Borrower.

		
	2.2 	The Overdraft Facility will be
available for utilisation by way of overdraft on the current account of
the Borrower held with the
Bank.

		
	2.3 	The total utilisations
in respect of the Overdraft Facility at any time shall not exceed
£3,000,000. The Bank may refuse any utilisation request that
would result in this limit being
exceeded.

		
	2.4 	The Overdraft
Facility shall be repayable by the Borrower on an ‘‘on
demand basis’’, that is to say that the Bank may at any
time and without giving any reason therefore demand immediate repayment
of all or any part the Overdraft Facility or may by notice immediately
cancel any part of the Overdraft Facility, whereupon it shall be
immediately due and payable to the
Bank.

		
	2.5 	The Borrower shall
apply all amounts borrowed under the Overdraft Facility for its general
corporate purposes.

		
	2.6 	To the
extent that no demand is made in respect of the Overdraft Facility on
or prior to 10 November  2006, the Borrower shall ensure that all
amounts outstanding in respect of the Overdraft Facility are reduced to
zero, and the Overdraft Facility shall be automatically cancelled, on
10 November
2006.

		
	2.7 	Interest on the
Overdraft Facility shall be charged at the same rate as is applicable
to Facility B under the Amended Agreement and shall be computed on a
365 day basis and shall be payable on demand, or if no such demand is
made on or prior to 10 November  2006, on 10 November
2006.

		
	2.8 	The provisions of
Clause 13 of the Amended Agreement shall be incorporated into this
Letter as if set out in full and shall apply in respect of the
Overdraft Facility.

		
	2.9 	If the
Bank does allow any utilisation resulting in the facility limit being
exceeded in respect of the Overdraft Facility, it will not mean that
such limit has changed or that the Bank will agree to any other
utilisation which would have the effect of exceeding the limit and the
right of the Bank to charge an unauthorised excess margin and / or
unauthorised excess fee pursuant to Clause 2.10 below does not
constitute an agreement by the Bank to permit borrowings in excess of
any limit applicable to the Overdraft
Facility.

		
	2.10 	To the extent
that at any time the aggregate total utilisations under the Overdraft
Facility exceed £3,000,000 without the prior written consent of
the Bank (each such instance an
‘‘Excess’’), the Bank shall be
entitled to charge the Borrower:

			
		2.10.1 	a fee in the amount of
£10,000 for each instance of such an Excess arising;
and

			
		2.10.2 	interest on the
entire amount outstanding under the Overdraft Facility at the time of
Excess calculated at a rate of 15% per annum above the
Bank’s base rate from time to time, such default rate of
interest to remain applicable until any relevant Excess has been repaid
and the total utilisation under the Overdraft Facility have been
reduced to below £3,000,000. Any interest payable pursuant to
this Clause 2.10.2 shall be computed on a 365 day basis and shall be
payable on demand, or if no such demand is made on or prior to 10
November  2006, on 10 November
2006.

		
	2.11 	The Obligors hereby
confirm that the Security granted in favour of the Security Agent
pursuant to the Security Documents is granted as continuing security
for present and future moneys, debts and liabilities due, owing or
incurred by the Borrower under or in connection with any Finance
Document, including by virtue of the designation of this Letter as a
Finance Document, any present and future moneys, debts and liabilities
due, owing or incurred by the Borrower under or in connection with the
Overdraft Facility.

2

		
	3 	COVENANTS

		
	3.1 	Resetting
of Financial Covenants

The Lenders and the Company
hereby undertake to use all reasonable endeavours to agree, on or prior
to 10 November  2006, a revised Clause 21 of the Amended
Agreement, such revised Clause 21 to be in form and substance
satisfactory to the Lenders.

		
	3.2 	Acquisition
Covenant

Notwithstanding the provisions of Clause 22.11
of the Amended Agreement, the Parent and each Obligor undertakes that
it will not (and the Company undertakes that it will ensure that no
other member of the Group will), on or prior to 10 November
2006:

			
		3.2.1 	invest in or
acquire any share in, or any security issued by, any person, or any
interest therein or in the capital of any person, or make any capital
contribution to any person (or agree to do any of the foregoing);
or

			
		3.2.2 	invest in or acquire
any business or going concern, or the whole or substantially the whole
of the assets or business of any person, or any assets that constitute
a division or operating unit of the business of any person (or agree to
do any of the foregoing);
or

			
		3.2.3 	enter into any joint
venture agreement with any person;
or

			
		3.2.4 	acquire or agree to
acquire any other assets other than in the ordinary course of
trading,

without the prior written consent of the
Lenders.

		
	4 	AMENDMENTS

		
	4.1 	Amendment to the Amended
Agreement

The parties to this Letter agree that, with
effect from the Third Effective Date, the Amended Agreement shall be
amended as follows:

			
		(a) 	In Clause 20.8
the words ‘‘16 October’’ shall be
deleted and replaced by the words ‘‘10
November’’.

			
		(b) 	In
Clause 20.9 the words ‘‘16 October’’
shall be deleted and replaced by the words ‘‘10
November’’.

		
	4.2 	Continuing
obligations

The provisions of the Amended Agreement and
the other Finance Documents shall, save as amended by this Letter,
continue in full force and effect. Where there is any inconsistency
between the terms of this Letter and the Amended Agreement, the terms
of this Letter will apply.

		
	5 	GROUP
ADVICE

The Group or the Parent shall, as soon as
reasonably practicable following the Third Effective Date, provide the
Agent (in sufficient quantities for all the Lenders) and the Reporting
Accountants with copies of:

			
		(i) 	the
written legal advice the Group and/or the Parent has received (or in
the case of such advice being given orally, a written summary of such
advice); and

			
		(ii) 	the Group’s
own cost/benefit analysis,

with respect to the US
listing of the Parent.

		
	6 	COSTS AND
EXPENSES

		
	6.1 	Transaction
costs

The Company shall within three Business Days of
demand reimburse the Agent for the amount of all costs and expenses
(including legal fees) reasonably incurred by the Agent in connection
with the negotiation, preparation, printing and execution of this
Letter and any other documents referred to in this
Letter.

3

		
	6.2 	Ongoing incidental
costs

Without prejudice to the generic costs and
expenses provisions in Clause 17 of the Amended Agreement and elsewhere
in the Finance Documents the Company shall, for the period from the
Third Effective Date to 10 November  2006, within seven Business
Days of demand reimburse the Secured Party for the amount of all travel
costs and incidental expenses reasonably incurred by that Secured Party
at any time after the Third Effective Date in connection with any
meetings required with the Company, the Parent or other Group members
to discuss the protection or preservation of rights under this Letter
and any other document referred to in this Letter and in connection
with the consideration and/or discussion of the independent business
review with the Company, the Parent and/or other Group members and/or
with the Reporting Accountants.

		
	6.3 	Payment
of Fees, Costs and Expenses

The Company hereby
irrevocably authorises the Lender to cause the Company to satisfy any
payment obligations arising pursuant to this Clause 6 by debiting any
bank account of the Company held with the
Lender.

		
	7 	LOSS
SHARE

		
	7.1 	In consideration of
the Bank providing the Overdraft Facility, each of the Lenders agrees
that, to the extent that the Bank does not recover within 30 days of
making demand all amounts owing to it in connection with the Overdraft
Facility, they shall pay to the Bank within 5 Business Days of demand,
the proportion of such shortfall as is equal to each Lenders’
percentage participation in the Total Facility Commitments (any such
payment a ‘‘Loss Share
Payment’’).

		
	7.2 	For
the avoidance of doubt, no Lender shall be required to make any Loss
Share Payment(s) pursuant to Clause 7.1 above in an aggregate amount in
excess of £1,500,000.

		
	7.3 	To the extent that any Loss
Share Payment is made pursuant to Clause 7.1 above, such Lender shall
be subrogated to the extent possible to that part of the Bank’s
claim under the Overdraft Facility against the Borrower which
corresponds to the relevant Loss Share Payment. However, for the
avoidance of doubt, no such Lender shall receive any payment from or
exercise any rights against the Borrower as a result of such
subrogation until after the Bank has received the relevant Loss Share
Payment from it.

		
	8 	AMENDMENT AND
RESTATEMENT

The Lenders hereby confirm that it is their
current intention to enter into negotiations with the Company with a
view to agreeing, on terms acceptable to all parties, an amendment and
restatement to the Amended Agreement on or prior to 10 November
2006. For the avoidance of doubt, this Clause 8 does not constitute a
legally binding commitment to enter into any such amendment and
restatement
agreement.

		
	9 	MISCELLANEOUS

		
	9.1 	Guarantors

Each
of the Guarantors and the Parent agree to each of the provisions of
this Letter, including without limitation, the provision of the
Overdraft Facility and the amendments to the Amended Agreement
contemplated by this Letter and each agrees that (i) nothing in this
Letter effects its obligations as a Guarantor or in the case of the
Parent as the Parent and (ii) its obligations as a Guarantor or in the
case of the Parent as the Parent, extend to the Overdraft
Facility.

		
	9.2 	Reservation of
Rights

This Letter is provided by the Finance Parties
strictly on the basis that the Finance Parties reserve all rights and
remedies of the Agent, the Security Agent and the Finance Parties under
the Original Facility Agreement, the First Amendment Letter, the Second
Amendment Letter and the Amended 

4

Agreement. Other than as set out in this
Letter, nothing in this Letter or done pursuant to this Letter, will
constitute an amendment to or is intended to operate as a release or
waiver of any breach or potential breach of, or any obligations under
any Finance Document.

		
	9.3 	Third Party
Rights

A person who is not a party to this Letter has no
right under the Contracts (Rights of Third Parties) Act 1999 to enforce
any of the provisions of this
Letter.

		
	9.4 	Counterparts

This
Letter may be signed in a number of counterparts, and this has the same
effect as if the signatures on the counterparts were on a single copy
of this Letter.

		
	9.5 	Joint and Several
Obligations

The obligations of the Finance Parties under
this Letter are several. The obligations of the Obligors under this
Letter are joint and several.

		
	9.6 	Finance
Documents

In accordance with the Amended Agreement,
each of the Company and the Agent designate this Letter as a Finance
Document.

		
	10 	GOVERNING
LAW

This Letter will be governed and construed in
accordance with English law.

5

We hereby agree to the terms of
this Letter:

The Original Lenders

Barclays
Bank PLC

By: /s/ Alan Douglas

Lloyds
TSB Bank plc

By: /s/ Kiron Nath

Ancillary
Lenders

Barclays Bank PLC

By: /s/ Alan
Douglas

Lloyds TSB Bank plc

By: /s/
Kiron Nath

The Bank

Barclays Bank
PLC

By: /s/ Alan Douglas

The
Agent

Barclays Bank PLC

By: /s/ Colin
Gilmore

The Security Agent

Barclays Bank
PLC

By: /s/ Colin Gilmore

6

Agreed and accepted by:

The
Company

Allied Healthcare Group Holdings Limited
(formerly Allied Healthcare Group Limited)

By: /s/
Tim Aitken

The Parent

Allied Healthcare
International Inc.

By: /s/ Tim Aitken

The
Original Borrower

Allied Healthcare Holdings
Limited

By: /s/ Tim Aitken

The Original
Guarantors

Allied Healthcare Group Holdings Limited
(formerly Allied Healthcare Group Limited)

By: /s/
Paul Weston

Allied Healthcare Holdings
Limited

By: /s/ Paul
Weston

Allied Healthcare Group Limited
(formerly Allied Healthcare (UK) Limited)

By: /s/ Paul
Weston

Allied Respiratory Limited (formerly
Allied Oxycare Limited)

By: /s/ Paul
Weston

Balfor Medical Limited

By:
/s/ Paul Weston

Crystalglen
Limited

By: /s/ Paul
Weston

Medigas Limited

By:
/s/ Paul Weston

Nightingale Nursing Bureau
Limited

By: /s/ Paul
Weston

Omnicare Limited

By:
/s/ Paul Weston

Allied Staffing
Professionals Limited (formerly Staffing Enterprise
Limited)

By: /s/ Paul
Weston

7exv10w1

 

Exhibit 10.1

EXECUTION COPY

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

among

BALLY TOTAL FITNESS HOLDING CORPORATION,

as Borrower

The Several Banks and other Financial Institutions

Parties Hereto

JPMORGAN CHASE BANK, N.A.,

as Agent

and

MORGAN STANLEY SENIOR FUNDING, INC.,

as Syndication Agent

Dated as of October 16, 2006

 

 

J.P. MORGAN SECURITIES INC.,

as Sole Lead Arranger and Sole Bookrunner

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I. DEFINITIONS AND ACCOUNTING TERMINOLOGY
	 	 	2	 
	 
	 	 	 	 
	1.01 Certain Definitions
	 	 	2	 
	 
	 	 	 	 
	1.02 Financial Standards
	 	 	30	 
	 
	 	 	 	 
	1.03 Interpretation
	 	 	30	 
	 
	 	 	 	 
	ARTICLE II. THE CREDIT
	 	 	30	 
	 
	 	 	 	 
	2.01 The Revolving Credit
	 	 	30	 
	 
	 	 	 	 
	2.02 Requests for Revolving Advances
	 	 	31	 
	 
	 	 	 	 
	2.03 Term Loan Facility
	 	 	32	 
	 
	 	 	 	 
	2.04 Requests for Term Advances
	 	 	33	 
	 
	 	 	 	 
	2.05 Repayment of Term Advances
	 	 	34	 
	 
	 	 	 	 
	2.06 Lending Branch and Evidence of Credit
	 	 	35	 
	 
	 	 	 	 
	2.07 Conversion and Continuation Options
	 	 	36	 
	 
	 	 	 	 
	2.08 Computation of and Payment of Interest
	 	 	36	 
	 
	 	 	 	 
	2.09 Payment of Advances
	 	 	38	 
	 
	 	 	 	 
	2.10 Payments
	 	 	38	 
	 
	 	 	 	 
	2.11 Optional Termination or Reduction of Commitment Amounts
	 	 	39	 
	 
	 	 	 	 
	2.12 Optional Prepayments
	 	 	39	 
	 
	 	 	 	 
	2.13 Mandatory Prepayments
	 	 	40	 
	 
	 	 	 	 
	2.14 Fees
	 	 	41	 
	 
	 	 	 	 
	2.15 Agency Fees
	 	 	42	 
	 
	 	 	 	 
	2.16 Taxes
	 	 	42	 
	 
	 	 	 	 
	2.17 Increased Costs; Illegality; Indemnity
	 	 	44	 
	 
	 	 	 	 
	2.18 Capital Adequacy
	 	 	45	 

-i-

 

	 	 	 	 	 
	 	 	Page	 
	2.19 Letters of Credit
	 	 	46	 
	 
	 	 	 	 
	ARTICLE III. SECURITY
	 	 	53	 
	 
	 	 	 	 
	3.01 Security
	 	 	53	 
	 
	 	 	 	 
	3.02 Collateral Documents
	 	 	54	 
	 
	 	 	 	 
	3.03 Priority of Security Interest
	 	 	54	 
	 
	 	 	 	 
	3.04 New Guarantors
	 	 	54	 
	 
	 	 	 	 
	3.05 Real Property Matters
	 	 	55	 
	 
	 	 	 	 
	3.06 Exceptions
	 	 	56	 
	 
	 	 	 	 
	3.07 Pledge of Capital Stock
	 	 	56	 
	 
	 	 	 	 
	3.08 Collateral Agency Agreement
	 	 	56	 
	 
	 	 	 	 
	3.09 Amendments of Collateral Documents
	 	 	56	 
	 
	 	 	 	 
	ARTICLE IV. CONDITIONS PRECEDENT
	 	 	57	 
	 
	 	 	 	 
	4.01 Conditions Precedent to Closing Date
	 	 	57	 
	 
	 	 	 	 
	4.02 Conditions Precedent to Each Advance and Letter of Credit
	 	 	60	 
	 
	 	 	 	 
	ARTICLE V. REPRESENTATIONS AND WARRANTIES
	 	 	61	 
	 
	 	 	 	 
	5.01 Borrower’s Existence
	 	 	61	 
	 
	 	 	 	 
	5.02 Subsidiaries’ Existence
	 	 	61	 
	 
	 	 	 	 
	5.03 Borrower’s and Subsidiaries’ Powers
	 	 	61	 
	 
	 	 	 	 
	5.04 Power of Officers
	 	 	62	 
	 
	 	 	 	 
	5.05 Government Approvals
	 	 	62	 
	 
	 	 	 	 
	5.06 Compliance With Laws
	 	 	62	 
	 
	 	 	 	 
	5.07 Enforceability of Agreement
	 	 	62	 
	 
	 	 	 	 
	5.08 Title to Property
	 	 	62	 
	 
	 	 	 	 
	5.09 Litigation
	 	 	62	 
	 
	 	 	 	 
	5.10 Events of Default
	 	 	62	 

-ii-

 

	 	 	 	 	 
	 	 	Page	 
	5.11 Compliance with Margin Requirements
	 	 	63	 
	 
	 	 	 	 
	5.12 Subsidiaries
	 	 	63	 
	 
	 	 	 	 
	5.13 Financial Information
	 	 	63	 
	 
	 	 	 	 
	5.14 ERISA
	 	 	63	 
	 
	 	 	 	 
	5.15 Investment Company Act of 1940
	 	 	63	 
	 
	 	 	 	 
	5.16 No Restrictions on Subsidiaries
	 	 	64	 
	 
	 	 	 	 
	5.17 Senior Indebtedness
	 	 	64	 
	 
	 	 	 	 
	5.18 Environmental Matters
	 	 	64	 
	 
	 	 	 	 
	5.19 Collateral Documents
	 	 	65	 
	 
	 	 	 	 
	5.20 Copyrights, Patents, Trademarks and Licenses, etc.
	 	 	65	 
	 
	 	 	 	 
	5.21 Accuracy of Information, etc.
	 	 	66	 
	 
	 	 	 	 
	5.22 Permitted Indebtedness
	 	 	66	 
	 
	 	 	 	 
	ARTICLE VI. AFFIRMATIVE COVENANTS
	 	 	66	 
	 
	 	 	 	 
	6.01 Use of Proceeds and Letters of Credit
	 	 	66	 
	 
	 	 	 	 
	6.02 Notices
	 	 	67	 
	 
	 	 	 	 
	6.03 Financial Statements, Reports, Etc.
	 	 	68	 
	 
	 	 	 	 
	6.04 Further Assurances
	 	 	71	 
	 
	 	 	 	 
	6.05 Existence, Etc.
	 	 	71	 
	 
	 	 	 	 
	6.06 Ownership of Stock of Subsidiaries
	 	 	71	 
	 
	 	 	 	 
	6.07 Payment of Obligations
	 	 	71	 
	 
	 	 	 	 
	6.08 Compliance with Laws
	 	 	71	 
	 
	 	 	 	 
	6.09 Insurance and Condemnation
	 	 	71	 
	 
	 	 	 	 
	6.10 Adequate Books
	 	 	74	 
	 
	 	 	 	 
	6.11 ERISA
	 	 	74	 
	 
	 	 	 	 
	6.12 Minimum Liquidity
	 	 	75	 

-iii-

 

	 	 	 	 	 
	 	 	Page	 
	6.13 Hazardous Materials
	 	 	75	 
	 
	 	 	 	 
	6.14 Minimum Consolidated Cash EBITDA
	 	 	76	 
	 
	 	 	 	 
	6.15 Real Estate Taxes
	 	 	77	 
	 
	 	 	 	 
	6.16 Real Estate Collateral
	 	 	77	 
	 
	 	 	 	 
	6.17 Control Agreements
	 	 	78	 
	 
	 	 	 	 
	6.18 Asset Sales
	 	 	78	 
	 
	 	 	 	 
	ARTICLE VII. NEGATIVE COVENANTS
	 	 	78	 
	 
	 	 	 	 
	7.01 Investments and Restricted Payments
	 	 	78	 
	 
	 	 	 	 
	7.02 Other Obligations
	 	 	80	 
	 
	 	 	 	 
	7.03 Other Security
	 	 	82	 
	 
	 	 	 	 
	7.04 Subordinated Debt; Senior Unsecured Notes
	 	 	83	 
	 
	 	 	 	 
	7.05 Liquidation; Merger
	 	 	84	 
	 
	 	 	 	 
	7.06 [Reserved.]
	 	 	85	 
	 
	 	 	 	 
	7.07 Change in Business
	 	 	85	 
	 
	 	 	 	 
	7.08 Disposal of Assets
	 	 	85	 
	 
	 	 	 	 
	7.09 Limitation on Optional Payments and Modifications of Debt Instruments
	 	 	87	 
	 
	 	 	 	 
	7.10 Limitation on Transactions with Affiliates
	 	 	88	 
	 
	 	 	 	 
	7.11 Limitation on Sales and Leasebacks
	 	 	88	 
	 
	 	 	 	 
	7.12 Limitation on Changes in Fiscal Year
	 	 	88	 
	 
	 	 	 	 
	7.13 Unrestricted Subsidiaries
	 	 	88	 
	 
	 	 	 	 
	7.14 Tax Allocation and Indemnity Agreement
	 	 	88	 
	 
	 	 	 	 
	7.15 Negative Pledge Clauses
	 	 	88	 
	 
	 	 	 	 
	ARTICLE VIII. EVENTS OF DEFAULT
	 	 	89	 
	 
	 	 	 	 
	8.01 Nonpayment
	 	 	89	 
	 
	 	 	 	 
	8.02 Representation or Warranty
	 	 	89	 

-iv-

 

	 	 	 	 	 
	 	 	Page	 
	8.03 Judgments
	 	 	89	 
	 
	 	 	 	 
	8.04 Voluntary Bankruptcy
	 	 	90	 
	 
	 	 	 	 
	8.05 Involuntary Bankruptcy
	 	 	90	 
	 
	 	 	 	 
	8.06 Change of Control Event
	 	 	90	 
	 
	 	 	 	 
	8.07 Cross Default
	 	 	90	 
	 
	 	 	 	 
	8.08 ERISA
	 	 	90	 
	 
	 	 	 	 
	8.09 Specific Defaults
	 	 	91	 
	 
	 	 	 	 
	8.10 Guarantee and Collateral Agreement; Impairment of Collateral Documents
	 	 	91	 
	 
	 	 	 	 
	8.11 Condemnation
	 	 	91	 
	 
	 	 	 	 
	8.12 Public Filings
	 	 	92	 
	 
	 	 	 	 
	8.13 Actual or Asserted Invalidity
	 	 	92	 
	 
	 	 	 	 
	8.14 Failure to Constitute Senior Indebtedness
	 	 	92	 
	 
	 	 	 	 
	8.15 Other Defaults
	 	 	92	 
	 
	 	 	 	 
	ARTICLE IX. MISCELLANEOUS
	 	 	93	 
	 
	 	 	 	 
	9.01 Notices
	 	 	93	 
	 
	 	 	 	 
	9.02 Successors and Assigns
	 	 	94	 
	 
	 	 	 	 
	9.03 Lenders’ Obligations Several
	 	 	94	 
	 
	 	 	 	 
	9.04 Assignments; Participations
	 	 	94	 
	 
	 	 	 	 
	9.05 Delays and Waivers
	 	 	97	 
	 
	 	 	 	 
	9.06 Costs and Expenses
	 	 	97	 
	 
	 	 	 	 
	9.07 Telephone Indemnity
	 	 	98	 
	 
	 	 	 	 
	9.08 Other Indemnity
	 	 	98	 
	 
	 	 	 	 
	9.09 Choice of Law
	 	 	99	 
	 
	 	 	 	 
	9.10 Personal Jurisdiction; Waiver
	 	 	99	 
	 
	 	 	 	 
	9.11 Service of Process
	 	 	100	 

-v-

 

	 	 	 	 	 
	 	 	Page	 
	9.12 Waiver of Jury Trial
	 	 	100	 
	 
	 	 	 	 
	9.13 Section Headings
	 	 	100	 
	 
	 	 	 	 
	9.14 Severability
	 	 	100	 
	 
	 	 	 	 
	9.15 Counterparts
	 	 	100	 
	 
	 	 	 	 
	9.16 No Reliance by Lenders
	 	 	100	 
	 
	 	 	 	 
	9.17 Entire Agreement
	 	 	101	 
	 
	 	 	 	 
	9.18 Confidentiality
	 	 	101	 
	 
	 	 	 	 
	9.19 Existing Credit Agreement to Remain in Full Force and Effect
	 	 	101	 
	 
	 	 	 	 
	9.20 Replacement of Lenders
	 	 	101	 
	 
	 	 	 	 
	ARTICLE X. RELATION OF LENDERS
	 	 	102	 
	 
	 	 	 	 
	10.01 Agent and Collateral Agent; Enforcement of Guaranties
	 	 	102	 
	 
	 	 	 	 
	10.02 Pro Rata Sharing
	 	 	103	 
	 
	 	 	 	 
	10.03 Set-off
	 	 	103	 
	 
	 	 	 	 
	10.04 Liability of Agent
	 	 	104	 
	 
	 	 	 	 
	10.05 Reliance by Agent
	 	 	105	 
	 
	 	 	 	 
	10.06 Approvals; Amendments
	 	 	105	 
	 
	 	 	 	 
	10.07 Notice of Default
	 	 	106	 
	 
	 	 	 	 
	10.08 Credit Decision
	 	 	106	 
	 
	 	 	 	 
	10.09 Lenders’ Indemnity
	 	 	107	 
	 
	 	 	 	 
	10.10 Agent as Lender
	 	 	107	 
	 
	 	 	 	 
	10.11 Notice of Transfer
	 	 	108	 
	 
	 	 	 	 
	10.12 Resignation of Agent
	 	 	108	 
	 
	 	 	 	 
	10.13 Collateral Matters
	 	 	108	 
	 
	 	 	 	 
	10.14 Collateral Agent
	 	 	112	 
	 
	 	 	 	 
	10.15 Documentation Agent and Syndication Agent
	 	 	112	 

-vi-

 

SCHEDULES

	 	 	 
	Schedule 1.01
	 	Existing Liens
	Schedule 1.01(a)
	 	Unrestricted Subsidiaries
	Schedule 1.01(b)
	 	GAAP EBITDA Adjustments
	Schedule 2.19(b)
	 	Letters of Credit
	Schedule 3.05
	 	Existing Mortgage Collateral Properties
	Schedule 5.09
	 	Litigation
	Schedule 5.14
	 	ERISA Matters
	Schedule 5.16
	 	Restrictions on Subsidiaries
	Schedule 5.18
	 	Environmental Matters
	Schedule 5.20
	 	Trademark Disputes
	Schedule 6.02(a)
	 	Additional Disclosed Litigation
	Schedule 7.01(j)
	 	Intercompany Loans
	Schedule 7.01(k)
	 	Investments
	Schedule 7.02(b)
	 	Existing Debt
	Schedule 7.09(a)
	 	Prepayable Debt
	Schedule 9.01
	 	Addresses for Notices

EXHIBITS

	 	 	 
	Exhibit A.
	 	Form of Guarantee and Collateral Agreement
	Exhibit B.
	 	Form of Collateral Agency Agreement
	Exhibit C.
	 	List of Commitment Percentages
	Exhibit D.
	 	List of Subsidiaries
	Exhibit E.
	 	Form of Operating Bank Guaranty
	Exhibit F.
	 	Form of Revolving Note
	Exhibit G.
	 	Form of Tranche B Term Note
	Exhibit H.
	 	Form of Delayed-Draw Term Note
	Exhibit I.
	 	Form of Opinions of Borrower’s Special Counsel
	Exhibit J.
	 	Form of Opinion of General Counsel
	Exhibit K.
	 	Form of Assignment and Acceptance
	Exhibit L.
	 	Form of Subordination Agreement

-vii-

 

CREDIT AGREEMENT

          This Amended and Restated Credit Agreement, dated as of October 16, 2006 (the “Credit
Agreement”), among BALLY TOTAL FITNESS HOLDING CORPORATION, a Delaware corporation
(“Borrower”), the banks and other financial institutions named on the signature pages of
this Agreement (collectively, “Lenders” and individually, a “Lender”), JPMORGAN
CHASE BANK, N.A., as agent for Lenders (in such capacity, “Agent”), and MORGAN STANLEY
SENIOR FUNDING, INC., as syndication agent (in such capacity, the “Syndication Agent”) is
entered into with respect to the following:

          1. The Borrower, certain of the Lenders, certain other lenders and the Agent are parties to
the Credit Agreement dated as of November 18, 1997, as amended and restated as of November 10,
1999, as further amended and restated as of December 21, 2001, as further amended and restated as
of July 2, 2003, and as further amended and restated as of October 14, 2004, as amended (as further
amended, modified or supplemented from time to time prior to the date hereof, the “Existing
Credit Agreement”).

          2. The Borrower has requested that the Existing Credit Agreement be amended and restated (a)
to provide for (i) a four-year senior secured revolving credit facility under this Agreement in an
aggregate principal amount of $44,000,000 (the “Revolving Credit Facility”), (ii) a
four-year senior secured “tranche B” term loan facility under this Agreement in an aggregate
principal amount of $205,900,000 (the “Tranche B Term Loan Facility”) and (iii) a four-year
senior secured delayed-draw term loan facility under this Agreement in an aggregate principal
amount of $34,100,000 (the “Delayed-Draw Term Loan Facility” and, together with the Tranche
B Term Loan Facility, the “Term Loan Facility”), in order, first, with respect to
the Tranche B Term Loan Facility, to repay certain indebtedness under the Existing Credit
Agreement, second, with respect to the Delayed-Draw Term Loan Facility, to finance or
refinance the purchase price or cost of construction or improvement of certain capital
expenditures, including the acquisition, improvement or development of real or personal, movable or
immovable property, and third, with respect to the Tranche B Term Loan Facility and the
Revolving Credit Facility, for general corporate and working capital purposes, (b) to amend certain
covenants and (c) otherwise to amend the Existing Credit Agreement and restate it in its entirety
as more fully set forth herein.

          3. Certain of the Lenders party to the Existing Credit Agreement and the Credit Parties (as
herein defined) desire to continue in full force and effect all of the indebtedness, guarantees,
liens and security interests created under the Existing Credit Agreement and all guarantee and
collateral documents delivered in connection therewith under this Agreement and the other Credit
Documents.

          4. The Lenders and the Agent are willing to so amend and restate the Existing Credit
Agreement, and the Lenders not now parties to the Existing Credit Agreement are willing to become
parties hereto, on the terms and subject to the conditions set forth herein.

          In consideration of the premises and other valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree that on the

 

 

Closing Date (as hereinafter defined) the Existing Credit Agreement shall be amended and
restated in its entirety as follows:

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMINOLOGY

          1.01
Certain Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):

     “Advance” means a Revolving Advance or a Term Advance.

     “Advance Maturity Date” means the later of (a) October 1, 2007 and (b) the date
that is 14 days prior to the earliest date on which any Subordinated Notes are scheduled to
mature, if the final maturity date of any Subordinated Notes (after giving effect to any
payments made in accordance with the terms of Sections 7.04 and 7.09) has been extended
(including successive extensions) pursuant to an amendment, extension, modification or
refinancing of the 1997 Indenture, the 1998 Indenture and the Subordinated Notes in
accordance with the terms of Sections 7.04 and 7.09.

     “Affiliate” of any Person means any other Person directly or indirectly
Controlling or Controlled by or under direct or indirect common Control with such Person.

     “Agreement” shall mean the Existing Credit Agreement, as amended and restated
by this Agreement, as the same may be amended, supplemented or otherwise modified from time
to time.

     “Applicable Margin” means, at any time, (a) with respect to Eurodollar Rate
Advances and Letter of Credit fees, 4.25% and (b) with respect to Reference Rate Advances
and any other payment obligations hereunder bearing interest based on the Reference Rate,
3.25%.

     “Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions of credit
in the ordinary course and that is administered or managed by (a) a Lender, (b) an Affiliate
of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.

     “Arranger” means J.P. Morgan Securities Inc.

     “Banking Day” means a day other than Saturday or Sunday on which (i) banks are
open for business in New York City and (ii) for any calculation, determination or other
matter with respect to Eurodollar Rate Advances, dealings in foreign currencies and
exchange between banks may be carried on in London, England.

2

 

     “Borrowing Date” means, with respect to each Advance, the date such Advance is
made.

     “Capitalized Lease” means any lease which is or should be, in accordance with
GAAP, capitalized on the balance sheet of the lessee.

     “Capital Stock” of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person’s capital stock or
other equity interests whether now outstanding or issued after the Closing Date.

     “Cash Equivalents” means (i) securities issued or directly and fully guaranteed
or insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is pledged
in support thereof) having maturities of not more than 12 months from the date of
acquisition, (ii) Dollar denominated time deposits, certificates of deposit and bankers
acceptances of any Lender or any bank whose short-term commercial paper rating from Standard
& Poor’s Ratings Group, a division of McGraw-Hill (“S&P”), is at least A-1 or the
equivalent thereof or from Moody’s Investors Service, Inc. (“Moody’s”) is at least
P-1 or the equivalent thereof (any such Lender, an “Approved Lender”), with
maturities of not more than 12 months from the date of acquisition, (iii) repurchase
obligations with a term of not more than seven days for underlying securities of the type
described in clause (i) entered into with an Approved Lender, (iv) commercial paper issued
by, or guaranteed by, any Approved Lender or by the parent company of any Approved Lender or
commercial paper issued by, or guaranteed by, any industrial or financial company with a
short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at
least P-1 or the equivalent thereof by Moody’s, or issued by, or guaranteed by, any
industrial company with a long term unsecured debt rating of at least A or A2, or the
equivalent of each thereof, from S&P or Moody’s, respectively, and in each case maturing
within 12 months after the date of acquisition and (v) any fund or funds making
substantially all of their investments in investments of the type described in clauses (i)
through (iv) above.

     “Casualty Event” means the damage, destruction or condemnation, as the case may
be, of property of any Person or any of its Subsidiaries.

     “Change of Control Event” means, without limitation, (a) the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person or group
(excluding any Person or group who as of the Closing Date held five percent (5%) or more of
the Capital Stock of the Borrower) (within the meaning of the Securities Exchange Act of
1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the
date hereof), of shares representing more than 30% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of the Borrower; (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the Borrower by
Persons who were not directors as of the Closing
Date and who were neither (i) nominated by the board of directors of the Borrower nor
(ii) appointed by directors so nominated; or (c) a “change of control” (however

3

 

denominated)
shall occur with respect to any Subordinated Debt or the Senior Unsecured Notes.

     “Closing Date” means the date on which all of the conditions in Section 4.01
are satisfied.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time,
or any successor statute.

     “Collateral” means all real, personal and mixed property and interests in
property and proceeds thereof now owned or hereafter acquired by Borrower or any Guarantor
and their respective Subsidiaries in or upon which a security interest, pledge, lien or
mortgage is granted to the Lenders or the Collateral Agent pursuant to the Collateral
Documents for the benefit of the Secured Creditors whether under this Agreement or under any
other documents, instruments or writings executed by any such Persons in connection with
Advances or other credit extensions made hereunder and delivered to the Collateral Agent or
the Lenders.

     “Collateral Agency Agreement” means the Collateral Agency Agreement between the
Collateral Agent and the Agent in the form of Exhibit B hereto, as amended, supplemented or
otherwise modified.

     “Collateral Agent” means JPMorgan Chase Bank, N.A., or any successor agent
thereto acting as Collateral Agent for the Secured Creditors pursuant to the Collateral
Agency Agreement.

     “Collateral Documents” means, collectively, (i) the Guarantee and Collateral
Agreement, the Collateral Agency Agreement, the Mortgages, the Mortgage Amendments, the
Operating Bank Guaranty, the Control Agreements and all other security agreements,
mortgages, deeds of trust, patent and trademark assignments, certificates of title, lease
assignments, guarantees and other agreements between Borrower or any Guarantor and their
respective Subsidiaries and any of the Lenders or the Collateral Agent for the benefit of
the Lenders or the Secured Creditors, now or hereafter delivered to any of the Secured
Creditors or the Collateral Agent pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable documents) now or hereafter
filed in accordance with the Uniform Commercial Code (or comparable law) against Borrower or
any Guarantor or any Subsidiaries in favor of any of the Lenders or the Collateral Agent for
the benefit of the Lenders or the Secured Creditors and (ii) any amendments, supplements,
modifications, renewals, replacements, consolidations, substitutions and extensions of any
of the foregoing.

     “Commitment” means, as to any Lender, such Lender’s Revolving Credit
Commitment, L/C Commitment, Tranche B Term Loan Commitment and Delayed-Draw Term Loan
Commitment; collectively, as to all the Lenders, the “Commitments”.

4

 

     “Commitment Percentage” means, as to each Lender, its Revolving Credit
Commitment Percentage, its Tranche B Term Loan Commitment Percentage, or its Delayed-Draw
Term Loan Commitment Percentage, as applicable.

     “Commitment Reductions” shall mean the amount of the permanent reductions of
the Revolving Credit Commitment Amount and/or the Delayed-Draw Term Loan Commitment Amount
resulting from the application of Section 2.11, 2.13 or any other provision contained
herein.

     “Conduit Lender” means any special purpose corporation organized and
administered by any Lender for the purpose of making Advances otherwise required to be made
by such Lender and designated by such Lender in a written instrument; provided, that
the designation by any Lender of a Conduit Lender shall not relieve the designating Lender
of any of its obligations to make an Advance under this Agreement if, for any reason, its
Conduit Lender fails to make such Advance, and the designating Lender (and not the Conduit
Lender) shall have the sole right and responsibility to deliver all consents and waivers
required or requested under this Agreement with respect to its Conduit Lender and itself,
and provided, further, that no Conduit Lender shall (a) be entitled to
receive any greater amount pursuant to Section 2.16, 2.17, 2.18 or 9.06 than the designating
Lender would have been entitled to receive in respect of the extensions of credit made by
such Conduit Lender or (b) be deemed to have any Commitment.

     “Consolidated” or “consolidated” means (i) when used herein with
reference to financial statements, ratios, assets, liabilities, operating accounts or
operations of Borrower and its Subsidiaries, that any calculations have been made by
combining the assets and liabilities of Borrower and its Subsidiaries after eliminating all
intercompany items; and (ii) when used herein with reference to a Subsidiary, a Subsidiary
the financial statements of which have been presented together with those of Borrower.

     “Consolidated Adjusted EBITDA” means, for any period, GAAP EBITDA of the
Borrower and its Subsidiaries for such period, calculated in accordance with GAAP as in
effect from time to time. If the Borrower or any Subsidiary has acquired or disposed of any
Person, line of business or health and fitness club within any applicable trailing 12-month
period, Consolidated Adjusted EBITDA for such period shall be calculated on a pro
forma basis (and adjusted for cost savings realizable within twelve months of such
acquisitions or dispositions, as the case may be, provided that any such adjustments for
cost saving shall be reasonably satisfactory to the Agent) as if such acquisition or
disposition, as the case may be, occurred on the first day of such period, as set forth in a
certificate of a duly authorized financial officer of the Borrower.

     “Consolidated Cash EBITDA” means, for any period, Consolidated Adjusted EBITDA
of the Borrower and its Subsidiaries, for such period, plus, to the extent deducted
in calculating Consolidated Net Income and not already added back in calculating
Consolidated Adjusted EBITDA for such period, all non-cash charges incurred during such
period, plus or minus changes in deferred revenue for such period and
minus any cash payments made during such period in respect of non-cash items
previously added back in calculating Consolidated Adjusted EBITDA.

5

 

     “Consolidated Net Income” of the Borrower means, for any period, the
consolidated net income (or loss) of the Borrower and its Subsidiaries for such period as
determined in accordance with GAAP, adjusted, to the extent included in calculating such net
income (or loss), minus (i) all extraordinary gains or losses (less all fees, costs,
and expenses relating thereto), (ii) the portion of net income (or loss) of the Borrower and
its Subsidiaries allocable to minority interests in unconsolidated Persons to the extent
that cash dividends or distributions have not actually been received by the Borrower or one
of its Subsidiaries, (iii) net income (or loss) of any Person combined with the Borrower or
any of its subsidiaries on a “pooling of interests” basis attributable to any period prior
to the date of combination, (iv) any gain or loss, net of taxes, realized upon the
termination of any Plan, (v) any gains or losses (less all fees, costs, and expenses
relating thereto) in respect of dispositions of assets other than in the ordinary course of
business, and (vi) the net income of any Subsidiary to the extent that the declaration of
the dividends or similar distributions by that Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental regulations
applicable to that Subsidiary or its stockholders.

     “Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether through the
ability to exercise voting power or by contract or otherwise. “Controlling” and
“Controlled” have meanings correlative thereto.

     “Control Agreement” has the meaning assigned in Section 6.17.

     “Converted Existing Revolving Loan” has the meaning set forth in Section
2.01(a).

     “Converted Existing Term Loan” has the meaning set forth in Section 2.03(a).

     “Credit” means the credit available to Borrower under Article II hereof.

     “Credit Agreement” has the meaning assigned in the recitals hereto.

     “Credit Documents” means, collectively, this Agreement, the Notes and the
Collateral Documents.

     “Credit Parties” means the Borrower and each of its Subsidiaries which is a
party to a Credit Document.

     “Debt” means for any Person (i) all indebtedness of such Person for borrowed
money (including, without limitation, reimbursement and all other obligations with respect
to letters of credit, whether or not matured), (ii) all obligations of such Person
representing the deferred purchase price of real or personal property or of services (other
than trade liabilities incurred in the ordinary course of business and payable in accordance
with customary practices), (iii) the amount of all obligations of such Person under
Capitalized Leases determined in accordance with GAAP, (iv) the Termination Value of any
Interest Expense Hedging Arrangement, and (v) without duplication of any

6

 

amount of Debt included in clause (i), (ii), (iii) or (iv) of this definition, all
Guaranties made by such Person.

     “Default” shall mean an event which with the giving of notice, passage of time
or both would constitute an Event of Default.

     “Delayed-Draw Term Advance” means a borrowing under the Delayed-Draw Term Loan
Facility pursuant to Section 2.03(b) hereof; collectively, the “Delayed-Draw Term
Advances”.

     “Delayed-Draw Term Loan Commitment” has the meaning ascribed to it in Section
2.03(b) hereof.

     “Delayed-Draw Term Loan Commitment Amount” means $34,100,000, less any
Delayed-Draw Term Loan Commitment Reductions.

     “Delayed-Draw Term Loan Commitment Percentage” means, as to each Lender, the
percentage set forth opposite such Lender’s name under the column entitled “Delayed-Draw
Term Loan Commitment Percentage” on Exhibit C hereto or, if such Lender shall have acquired
or disposed of any interest in the Delayed-Draw Term Loan Facility pursuant to Section
9.04(a), on the applicable instrument of assignment, which is the percentage equivalent of a
fraction, the numerator of which is the amount of such Lender’s Delayed-Draw Term Loan
Commitment after giving effect to such assignment and the denominator of which is the amount
of the Delayed-Draw Term Commitments (or if the Delayed-Draw Term Loan Commitments have
terminated, the sum of its outstanding Delayed-Draw Term Advances as a percentage of the
aggregate amount of Delayed-Draw Term Advances).

     “Delayed-Draw Term Loan Commitment Period” means the period from and including
the Closing Date to and including date which is the earlier of (a) 18 months after the
Closing Date, or if such date is not a Business Day, the Business Day next succeeding such
date and (b) the Term Loan Termination Date.

     “Delayed-Draw Term Loan Commitment Reductions” means the amount of the
permanent reductions of the Delayed-Draw Term Loan Commitment Amount resulting from the
application of Section 2.11, 2.13 or any other provision contained herein.

     “Delayed-Draw Term Loan Facility” means the credit described in Section
2.03(b).

     “Delayed-Draw Term Lender” means each Lender which has, or has acquired
pursuant to an assignment made in accordance with Section 9.04, a Delayed-Draw Term Loan
Commitment or which has made, or acquired pursuant to an assignment made in accordance with
Section 9.04, a Delayed-Draw Term Advance.

     “Delayed-Draw Term Note” means the master promissory note of the Borrower
payable to the order of a Lender in substantially the form of Exhibit H hereto; and
“Delayed-Draw Term Notes” means all of such Delayed-Draw Term Notes.

7

 

     “Demand Deposit Accounts” means (i) the demand deposit accounts listed on Annex
1 to the Operating Bank Guaranty maintained by Borrower and/or any of its Subsidiaries with
the respective Revolving Lenders identified on such Annex, and (ii) other demand deposit
accounts established by Borrower or any of its Subsidiaries on or after the date hereof
which shall be promptly identified by the Borrower in writing to Agent including by delivery
of an updated Annex 1.

     “Designated Senior Indebtedness” means Designated Senior Indebtedness of
Borrower as defined in each of the 1997 Indenture and the 1998 Indenture.

     “Determination Period” has the meaning assigned in Section 6.14.

     “DOJ Investigation” shall mean investigations, requests for information and
related matters initiated by the Justice Department in connection with the previously
announced restatements of the Borrower’s financial statements and related matters.

     “Dollars” and “$” mean United States dollars.

     “Domestic Subsidiary” means any Subsidiary of the Borrower organized under the
laws of any jurisdiction within the United States.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any regulations promulgated thereunder.

     “ERISA Affiliate” means any corporation, trade or business that is, along with
Borrower, a member of a controlled group of corporations or a controlled group of trades or
businesses, as described in Section 414 of the Code or Section 4001 of ERISA.

     “Eurocurrency Reserve Requirements” means, for any day as applied to a
Eurodollar Rate Advance, the aggregate (without duplication) of the rates (expressed as a
decimal) of reserve requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves under any regulations of the Board of
Governors of the Federal Reserve System or other governmental authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board)
maintained by a member bank of such System.

     “Eurodollar Base Rate”: with respect to each day during each Interest Period
pertaining to a Eurodollar Rate Advance, the rate per annum determined on the basis of the
rate for deposits in Dollars for a period equal to such Interest Period commencing on the
first day of such Interest Period appearing on Page 3750 of the Dow Jones Markets screen as
of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest
Period. In the event that such rate does not appear on Page 3750 of the Dow Jones Markets
screen (or otherwise on such screen), the “Eurodollar Base Rate” shall be determined
by reference to such other comparable publicly available service for displaying eurodollar
rates as may be selected by the Agent or, in the absence of such availability, by reference
to the rate at which the Agent is offered Dollar deposits at or about 11:00 A.M., New York
City time, two Banking Days prior to the beginning of such

8

 

Interest Period in the interbank eurodollar market where its eurodollar and foreign
currency and exchange operations are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.

     “Eurodollar Rate” means, with respect to each day during each Interest Period
pertaining to a Eurodollar Rate Advance, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

	 	 	 	 	 
	 
	 	Eurodollar Base Rate
	 	 
	 
	 	1.00 - Eurocurrency Reserve Requirements
	 	 

     “Eurodollar Rate Advances” means Advances the rate of interest applicable to
which is based upon the Eurodollar Rate.

     “Event of Default” means any event listed in Article VIII.

     “Excess Cash Flow” means, for any fiscal year of the Borrower, without
duplication:

(a) “Cash provided by operating activities” as reported on the Borrower’s
Consolidated Statement of Cash Flows (adjusted to remove Unrestricted Subsidiaries)
for such fiscal year as provided by the Borrower to the Lenders,

     Plus:

(b) to the extent not included in “Cash provided by operating activities”, net cash
proceeds received by the Borrower or any of its Subsidiaries from the sale, lease,
assignment or other disposition of any asset (excluding proceeds from the sale of
Capital Stock of the Borrower) in such fiscal year;

     Less:

(c) net proceeds from asset sales to the extent (without duplication):

	 	(i)	 	constituting Net Cash Proceeds or Net Casualty
Proceeds or Reinvestment Proceeds,
	 
	 	(ii)	 	derived from any disposition permitted by
Section 7.08(a), (d), (f), (p) or (q),

(d) dividends, distributions, and repayments on Investments to the extent included
in “Cash provided by operating activities”,

(e) the aggregate amount of capital expenditures actually paid by the Borrower and
its Subsidiaries in cash during such fiscal year (excluding the principal amount of
Debt (other than Debt incurred under this Agreement) incurred in connection with
such expenditures),

9

 

(f) Investments to the extent not deducted in calculating “Cash provided by
operating activities” and not included in the amount reported on the line titled
“Cash used in Investing Activities” on such Consolidated Statement of Cash Flows
(adjusted to remove Unrestricted Subsidiaries),

(g) debt issuance costs incurred in such fiscal year, and

(h) the aggregate amount of all regularly scheduled principal payments of the
Borrower and its Subsidiaries in such fiscal year.

     “Excess Cash Flow Application Date” has the meaning set forth in Section
2.13(b).

     “Existing Credit Agreement” has the meaning set forth in the recitals hereto.

     “Existing Mortgage Collateral Properties” has the meaning set forth in Section
3.05.

     “Existing Revolving Loan” has the meaning set forth in Section 2.01(a).

     “Existing Term Loan” has the meaning set forth in Section 2.03(a).

     “Facility” means the collective reference to the Tranche B Term Loan Facility,
the Delayed-Draw Term Loan Facility and the Revolving Credit Facility.

     “Fair Market Value” means, with respect to any asset or property, the sale
value that would be obtained in an arm’s-length transaction between a seller under no
compulsion to sell and a willing buyer under no compulsion to buy.

     “Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such day is not a Banking Day, for
the next preceding Banking Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Banking Day, the average of the quotations for such
day on such transactions received by the Agent from three (3) Federal funds brokers of
recognized standing selected by it.

     “Foreign Subsidiaries” means (x) Bally Matrix Fitness Centre Ltd., a
corporation organized under the laws of Ontario, Canada, and (y) any other Subsidiary of the
Borrower organized under the laws of any jurisdiction outside the United States of America.

     “Franchise Program” means a program under which the Borrower or its
Subsidiaries grant franchises to third parties which require franchisees, among other
things, to pay fees to the Borrower and/or its Subsidiaries, make use of certain collection
and administrative services of the Borrower and its Subsidiaries and contribute to a
national advertising program and which entitle the franchisees, among other things, to

10

 

receive training from the Borrower and its Subsidiaries, to have nonexclusive licenses
to use on a limited basis certain service marks, trademarks and trade names and other
intellectual property of or licensed to the Borrower and its Subsidiaries, and to sell
memberships to use facilities of the franchisee and the Borrower and its Subsidiaries. A
Franchise Program may include the conversion of certain facilities owned by the Borrower or
its Subsidiaries to franchised facilities, so long as such conversions are consummated on
terms and conditions permitted under this Agreement.

     “GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time.

     “GAAP EBITDA” means with respect to the Borrower and its Subsidiaries on a
consolidated basis, without duplication, for any period of determination, (i) Consolidated
Net Income (loss), plus, to the extent deducted in determining Consolidated Net
Income (loss), (ii) provision for taxes, (iii) consolidated interest expense, determined in
accordance with GAAP, (iv) depreciation, amortization and impairment charges, all calculated
in accordance with GAAP, (v) any non-cash compensation charges, including any such charges
related to stock-based compensation, including, without limitation, stock options,
restricted stock grants or other equity-incentive programs and similar arrangements
(including any repricing, amendment, modification, substitution or change of any such stock,
stock option, stock appreciation rights or similar arrangements); provided, that, to
the extent any non-cash expense under this clause (v) subsequently requires any cash
disbursement, such disbursement expense will be subtracted from GAAP EBITDA in the
applicable period, (vi) the cumulative non-cash charge resulting from a change in accounting
principles (including, but not limited to, changes in lease accounting), (vii) GAAP rent
expense reflected on the consolidated income statement for the period of determination in
excess of cash rental expense, (viii) with respect to any discontinued operation, any
non-cash loss resulting therefrom, (ix) expenses incurred by the Borrower or any Subsidiary
to the extent reimbursed in cash by a third party, (x) any financial advisory fees,
accounting fees, legal fees and other similar fees and related costs, charges and expenses
in respect of the financing under this Agreement and certain severance payments made to
members of the Borrower’s senior management in August 2006, (xi) any financial advisory
fees, accounting fees, legal fees and other similar fees and related costs, charges and
expenses in respect of any restructuring transaction, including, but not limited to, the
early retirement of Debt, the extension, refinancing, restructuring, redemption or exchange
of the Subordinated Debt or the Senior Unsecured Notes, Investments, dispositions permitted
hereunder (including, without limitation, Permitted Asset Sales and Permitted
Sale/Leasebacks) and the issuance of Capital Stock or Debt permitted hereunder to the extent
not deferred and amortized, (xii) certain professional fees and expenses and other charges
consistent with the Borrower’s presentation of cash contribution filed on Form 8-K on August
11, 2006, (xiii) all cash fees and expenses associated with the Securities Exchange
Commission and Department of Justice investigations and related shareholder litigation;
provided, that the aggregate amount added back to Consolidated Net Income (loss)
pursuant to the foregoing clauses (xi) and (xii) and up to the first $1,000,000 added back
under clause (xiii) shall not exceed the amounts for the relevant determination periods as
set forth on Schedule

11

 

1.01(b); and, minus, cash rental expense in excess of GAAP rent expense
reflected on the consolidated income statement, in each case, for the period of
determination.

     “Guarantee and Collateral Agreement” means the Guarantee and Collateral
Agreement in the form of Exhibit A hereto, as amended, supplemented or otherwise modified
from time to time.

     “Guarantors” means collectively, the Subsidiaries listed on Exhibit D hereto
(other than Unrestricted Subsidiaries, Bally ARA Corporation, Foreign Subsidiaries and
Lincoln Indemnity Company) and any other Subsidiary which hereafter becomes a Guarantor
pursuant to Section 3.04 (each individually a “Guarantor”).

     “Guaranty” means, as applied to any Debt, (i) a guaranty (other than by
endorsement of negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner, of any part or all of such obligation and (ii) an
agreement, direct or indirect, contingent or otherwise, the practical effect of which is to
assure in any way the payment or performance (or payment of damages in the event of
non-performance) of any part or all of such obligation, including, without limiting the
foregoing, the payment of amounts drawn under letters of credit. The amount of any Guaranty
of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of which such Guaranty is
made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to
the terms of the instrument embodying such Guaranty.

     “Hazardous Materials” means any (i) “hazardous substance” or “toxic
substances,” as those terms are defined by the Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et seq. and the
Hazardous Materials Transportation Act, 49 U.S.C. § 1802, all as amended or hereafter
amended; (ii) “hazardous waste”, as defined by the Resource Conservation and Recovery Act
(“RCRA”), 42 U.S.C. § 6901 et seq., as amended or hereafter amended; (iii)
pollutant or contaminant or hazardous, dangerous or toxic chemical, material, or substance
within the meaning of any other applicable federal, state or local law, regulation,
ordinance, or requirement (including consent decrees and administrative orders) relating to
protection of health, safety or the environment, as amended or hereafter amended; (iv) crude
oil or any fraction thereof which is liquid at standard conditions of temperature and
pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute); (v) any
radioactive material, including any source, special nuclear or by-product material as
defined at 42 U.S.C. § 2011 et seq., as amended or hereafter amended; (vi)
asbestos or asbestos containing material (“ACM”) in any form or condition and (vii)
polychlorinated biphenyls (“PCBs”) or substances or compounds containing PCBs.

     “Hazardous Materials Claims” has the meaning ascribed to it in Section 6.02(f).

     “Hazardous Materials Laws” means any federal, state or local statute,
regulation, ordinance or other legal requirement (including consent decrees and
administrative orders) relating to protection of health, safety or environment, including
but not limited to the Comprehensive Environmental Response, Compensation and Liability Act

12

 

(“CERCLA”), 42 U.S.C. § 9601 et seq.; the Resource Conservation and
Recovery Act (“RCRA”), 42 U.S.C. § 6901 et seq.; the Clean Air Act, 42
U.S.C. § 7401 et seq.; the Clean Water Act, 33 U.S.C. § 1251 et
seq.; the Occupational Safety and Health Act (“OSHA”), 29 U.S.C. § 651 et
seq.; the Toxic Substances Control Act (“TSCA”), 15 U.S.C. § 2601 et
seq.; any similar state or local laws; any regulations promulgated pursuant to any
of the foregoing; and all of the foregoing as amended or hereafter amended.

     “Hedging Arrangement” means (a) any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement involving, or
settled by reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures of
economic, financial or pricing risk or value or any similar transaction or any combination
of these transactions and (b) any agreement with respect to any transactions (together with
any related confirmations) which are subject to the terms and conditions of, or are governed
by, any master agreement published by the International Swaps and Derivatives Association,
Inc., any International Foreign Exchange Master Agreement or any other similar master
agreement.

     “Intangible Asset” means any asset which is treated as an intangible asset in
conformity with GAAP, including, without limitation, leasehold rights, franchise rights,
non-compete agreements, goodwill, unamortized debt discounts, patents, patent applications,
trademarks, trade names, copyrights and licenses.

     “Intellectual Property” has the meaning assigned to such term in the Guarantee
and Collateral Agreement.

     “Interest Expense Hedging Arrangement” means an interest rate swap, cap or
collar agreement or similar arrangement entered into with the intent of protecting the
Borrower or a Guarantor against fluctuations in interest rates or the exchange of notional
interest obligations, either generally or under specific contingencies.

     “Interest Payment Date” means (a) as to any Reference Rate Advance, the last
Banking Day of each January, April, July and October, (b) as to any Eurodollar Rate Advance
having an Interest Period of three months or less, the last day of such Interest Period, (c)
as to any Eurodollar Rate Advance having an Interest Period longer than three months, (i)
each day which is three months, or a whole multiple thereof, after the first day of such
Interest Period and (ii) the last day of such Interest Period, (d) as to any Revolving
Advance, the Revolving Credit Termination Date, (e) as to any Term Advance, the Term Loan
Termination Date and (f) as to any Advance, in addition to any applicable dates under
clauses (a), (b), (c), (d) and (e) above, the date of any repayment or prepayment (except
for any prepayment pursuant to Section 2.12 of any Revolving Advance that is a Reference
Rate Advance) made in respect thereof.

     “Interest Period” means with respect to any Eurodollar Rate Advance:

13

 

     (a) initially, the period commencing on the borrowing or conversion date, as
the case may be, with respect to such Eurodollar Rate Advance and ending one, two,
three or six months thereafter, as selected by the Borrower in its notice of
borrowing or notice of conversion, as the case may be, given with respect thereto;
and

     (b) thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Rate Advance and ending one, two,
three or six months thereafter, as selected by the Borrower by irrevocable notice to
the Agent not less than three Banking Days prior to the last day of the then current
Interest Period with respect thereto;

provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:

     (1) if any Interest Period pertaining to a Eurodollar Rate Advance would
otherwise end on a day that is not a Banking Day, such Interest Period shall be
extended to the next succeeding Banking Day unless the result of such extension
would be to carry such Interest Period into another calendar month in which event
such Interest Period shall end on the immediately preceding Banking Day;

     (2) any Interest Period for any Revolving Advance that would otherwise extend
beyond the Revolving Credit Termination Date shall end on the Revolving Credit
Termination Date;

     (3) any Interest Period for any Term Advance that would otherwise extend
beyond the Term Loan Termination Date shall end on the Term Loan Termination Date;

     (4) any Interest Period pertaining to a Eurodollar Rate Advance that begins on
the last Banking Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Banking Day of a calendar month; and

     (5) the Borrower shall select Interest Periods in such a way so that no
Eurodollar Rate Advances will be required to be repaid prior to the last day of an
Interest Period therefor.

     “Investment” means any direct or indirect loans, advances, capital
contributions or transfers of assets, and any direct or indirect purchases and other
acquisitions of, or a beneficial interest in, any capital stock or other securities;
provided, however, that the allocation of corporate overhead to Foreign
Subsidiaries shall not constitute an “Investment”. The amount of any Investment not
consisting of cash shall equal the Fair Market Value of such Investment at the time it is
made.

     “Issuing Lender” means JPMorgan Chase Bank, N.A., and other Lenders having
Revolving Credit Commitments acceptable to the Agent and the Borrower.

14

 

     “JPMorgan Chase Bank” means JPMorgan Chase Bank, N.A., a New York banking
corporation.

     “Lenders” shall have the meaning set forth in the recitals hereto;
provided, that unless the context otherwise requires, each reference herein to the
Lenders shall be deemed to include any Conduit Lender.

     “Lending Branch” means with respect to each Lender the branches or offices
specified on the signature pages hereto or such other of its branches or offices as such
Lender may from time to time designate in writing to Agent and Borrower.

     “Letter of Credit” means any letter of credit issued by an Issuing Lender
pursuant to Section 2.19.

     “L/C Commitments” means the commitments of Lenders to issue or participate in
Letters of Credit and to make L/C Advances pursuant to Section 2.19 in the aggregate maximum
amount specified in Section 2.19(a)(i), as such amount may be reduced or terminated from
time to time hereunder.

     “L/C Commitment Amount” means, at any time, an amount equal to the Revolving
Credit Commitment Amount at such time.

     “Lien” means a mortgage, security interest, pledge, deed of trust, encumbrance,
lien, option, tax lien, mechanics’ lien, materialmen’s lien or charge or encumbrance of any
kind (including any conditional sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, and any financing
statement under the Uniform Commercial Code (other than precautionary financing
statements)).

     “Liquidity” means, as of any date of determination, an amount equal to the sum
of (a) cash and Cash Equivalents held by the Borrower and its Subsidiaries in (i) the
concentration account held with JPMorgan Chase Bank, N.A., (ii) any account held with any
Lender, or until the date which is three months after the Closing Date, any account held
with LaSalle Bank National Association, or (iii) any account subject to a Control Agreement,
plus, (b) the unutilized amount of Revolving Credit Commitments available to be
drawn on such date by the Borrower (with satisfaction of the applicable conditions precedent
to such extension of credit to be tested as of such date); provided that amounts held in
payroll, tax, trust and similar accounts or amounts pledged to Persons on a first priority
basis other than the Secured Parties shall be excluded in calculating Liquidity.

     “Majority Lenders” means at any time Lenders holding more than 51% of the sum
of (i) the aggregate unpaid principal amount of Tranche B Term Advances then outstanding,
(ii) the Delayed-Draw Term Loan Commitments then in effect or, if the Delayed-Draw Term Loan
Commitments have been terminated, the Delayed-Draw Term Advances then outstanding, and (iii)
the Revolving Credit Commitments then in effect or, if the Revolving Credit Commitments have
been terminated, the Revolving Advances and participating interests in Letters of Credit and
unreimbursed drawings in respect of Letters of Credit then outstanding.

15

 

     “Margin Regulations” means Regulations T, U and X of the Board of Governors of
the Federal Reserve System, as amended from time to time.

     “Material Adverse Effect” means a material adverse effect on (a) the business,
operations, property, or financial condition of the Borrower and its Subsidiaries taken as
whole, (b) the validity or enforceability of (i) this Agreement, any of the Notes or any of
the other Credit Documents or (ii) the rights or remedies of the Agent and the Lenders
hereunder or thereunder or (c) the ability of the Borrower and its Subsidiaries taken as a
whole to perform when due their respective obligations under the Credit Documents. The
Lenders acknowledge that the events, developments and circumstances expressly described in
the Public Filings and, with respect to the legal proceedings and related matters described
therein, the consequences thereof as reasonably foreseeable by the Agent and the Syndication
Agent, do not constitute a Material Adverse Effect.

     “Membership Receivables” means all right, title and interest of the Borrower
and its Domestic Subsidiaries in payment obligations (however characterized), including
accounts and receivables, owed to or owned by the Borrower and its Domestic Subsidiaries in
connection with membership in and the right to use the facilities at, and obtain products
and services from, one or more fitness centers and health clubs owned or operated by the
Borrower and its Subsidiaries, including, without limitation, (a) the right to payment of
amounts in respect of the membership fee (including any sales tax thereon) and finance
charges relating thereto under an agreement made by the Borrower or any Domestic Subsidiary
of the Borrower, in the form of a written retail installment sale contract, for membership
in and the right to use facilities at, and obtain products and services from, the Borrower
and its Domestic Subsidiaries or one or more health clubs owned or operated by the Borrower
or any Domestic Subsidiary of the Borrower, (b) all amounts paid from time to time in
connection with the foregoing, including pursuant to such written retail installment sale
contract in respect of monthly dues, nsf fees, late payment fees, cancellation fees for
relocation cancellations, transfer fees to transfer a membership, lost membership card
replacement fees, or other payments and proceeds thereof.

     “Mortgage Amendment” means each of the Amendments to Mortgages in the form
reasonably requested by the Agent, to be executed by the Borrower or the various Guarantors
in order to continue for the benefit of the Collateral Agent, on behalf of the Secured
Creditors, the Liens created by the Mortgages delivered under the Existing Credit Agreement.

     “Mortgages” means all fee mortgages, leasehold mortgages, assignments of
leases, mortgage deeds, deeds of trust, deeds to secure debt, security agreements, and other
similar instruments, executed or to be executed by the Borrower or the various Guarantors
(i) which provide the Collateral Agent, for the benefit of the Secured Creditors, a Lien on
or other interest in Existing Mortgage Collateral Properties and (ii) pursuant to Section
3.05(b) or (c), as amended, restated, modified, extended or supplemented from time to time.

     “Multiemployer Plan” has the meaning ascribed to it in Section 3(37) of ERISA.

16

 

     “Net Cash Proceeds” means (a) in connection with any issuance or incurrence of
Prepayment Debt, the cash proceeds received from such issuance or incurrence, net of
attorneys’ fees, investment banking fees, accountants’ fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in connection therewith
and (b) in connection with the sale, lease, assignment or other disposition of any asset
(other than sales by the Borrower or a Subsidiary of the Borrower of Capital Stock of the
Borrower) or any Casualty Event, cash proceeds (including any cash received by way of
deferred payments, purchase price adjustments or otherwise, but only as and when so
received) received by the Borrower or any of its Subsidiaries from the sale, lease,
assignment or other disposition (but excluding any such disposition permitted by Sections
7.08(a), (e), (h), (i), (j) and (k)) of any asset or property of such Person or any
insurance proceeds or condemnation awards net of (i) the reasonable and customary costs
directly incurred in connection with such transaction, (ii) taxes actually paid or in good
faith estimated to be payable as a result thereof, (iii) amounts applied to the repayment of
other Debt secured by a Permitted Lien on the asset disposed of or subject to such Casualty
Event and (iv) reasonable expenses directly incurred in connection with the collection of
such insurance proceeds or condemnation awards; provided, that “Net Cash
Proceeds” shall exclude (A) cash proceeds from the sale of written-off receivables to a
collection agency or similar organization pursuant to Section 7.08(g); (B) cash received by
the Borrower or its Subsidiaries related to membership contracts receivables originated for
the account of franchisees or other third parties (and not constituting assets of the
Borrower or its Subsidiaries); (C) at the Borrower’s
option, to be exercised by no later than December 31, 2006
(provided, that the Borrower shall be deemed to have elected
option (y) below in the event it shall not have made such
election by such date or it and/or any of its Subsidiaries shall on
or prior to such date have received in excess of $25,000,000 in the
aggregate of any such proceeds from Permitted Sale/Leasebacks or in
excess of $25,000,000 in the aggregate of any such proceeds from Permitted
Asset Sales), either (x) up to $25,000,000 of any such
proceeds from Permitted Sale/Leasebacks and up to $25,000,0000 of any such proceeds from
Permitted Asset Sales and, thereafter, 50% of any such incremental proceeds from Permitted
Sale/Leasebacks and Permitted Asset Sales up to an aggregate amount of such incremental
proceeds from Permitted Sale/Leasebacks and/or Permitted Asset Sales of $25,000,000 or (y)
up to $50,000,000 of such proceeds from Permitted Sale/Leasebacks and/or Permitted Asset
Sales and (D) Reinvestment Proceeds. If in determining “Net Cash Proceeds”, amounts are
deducted for estimated taxes payable, and such amounts are not actually paid when due by the
Borrower in cash in accordance with all applicable laws, then such deducted amounts shall
constitute “Net Cash Proceeds”.

     “New Ventures” means the collective reference to each Person (other than
Subsidiaries and Unrestricted Subsidiaries) in which the Borrower or any Subsidiary makes
its initial Investment after the date hereof.

     “1998 Indenture” means that certain Indenture dated as of December 16, 1998
between Borrower and U.S. Bank National Association, as trustee (and any successor trustee
thereto) relating to the 1998 Subordinated Notes.

     “1998 Subordinated Notes” has the meaning ascribed to it in the definition of
Subordinated Debt.

17

 

     “1997 Indenture” means that certain Indenture, dated as of October 7, 1997,
between Borrower and First Trust National Association, as trustee (and any successor trustee
thereto) relating to the 1997 Subordinated Notes.

     “1997 Subordinated Notes” has the meaning ascribed to it in the definition of
Subordinated Debt.

     “Notes” means the collective reference to the Revolving Notes and the Term
Notes.

     “Obligations” means all loans, advances, debts, liabilities, obligations,
covenants and duties owing to Agent, the Collateral Agent, any Lender (or in the case of any
Interest Expense Hedging Arrangement referred to below, any Person that is a Lender (or any
Affiliate thereof) at the time such Interest Rate Hedging Arrangement was entered into), any
Issuing Lender or any of them or any of their respective successors and assigns, of any kind
or nature, present or future, arising under this Agreement or under the Notes or under any
Collateral Document or under any Interest Expense Hedging Agreement with any Person that is
a Lender (or any Affiliate thereof) at the time such Interest Rate Hedging Arrangement was
entered into, whether or not for the payment of money, whether arising by reason of an
extension of credit, opening or amendment of a letter of credit (or payment of any draft
drawn thereunder), loan, guaranty, indemnification, or in any other manner, whether direct
or indirect (including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term includes,
without limitation, all interest (whether or not such interest would be an allowed claim in
a bankruptcy or similar proceeding against the Borrower or any Guarantor), charges,
expenses, fees, reasonable attorneys’ fees and disbursements and paralegals’ fees, and any
other sums chargeable to Borrower or any Guarantor under this Agreement or any other
Collateral Document.

     “Operating Bank Guaranty” means the Guaranty Agreement in the form of Exhibit E
hereto, as amended, supplemented or otherwise modified, pursuant to which each of the
Guarantors shall guaranty the payment of the Operating Bank Obligations to the extent set
forth therein.

     “Operating Bank Obligations” means, collectively at any time, up to Ten Million
Dollars ($10,000,000) in the aggregate (including, without limitation, principal, interest,
fees, costs and expenses) of the obligations of Borrower and/or any of its Subsidiaries to
one or more of the Operating Banks (including, without limitation, JPMorgan Chase Bank,
N.A., in its individual capacity) at such time under or by reason of any customary banking
deposit or disbursement transaction or service performed for Borrower or any of its
Subsidiaries in connection with the Demand Deposit Accounts.

     “Operating Banks” means the Lenders (and their Affiliates or financing
institutions that were Lenders) listed on Annex 1 to the Operating Bank Guaranty and other
Lenders (and their Affiliates or financing institutions that were Lenders) at which Borrower
or any of its Subsidiaries may from time to time establish Demand Deposit Accounts.

18

 

     “PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

     “Permitted Asset Sales” means assets sales permitted by Section 7.08(o).

     “Permitted Leasehold Liens” means liens on leasehold interests and leasehold
improvements of the types permitted by clauses (i), (ii), (iii), (iv) (to the extent such
lien permitted by clause (iv) is on property acquired after the Closing Date), (vi) or (vii)
of the definition of “Permitted Liens”.

     “Permitted Liens” means any one or more of the following:

     (i) Liens for taxes, assessments, governmental charges or levies either not yet
delinquent (or, if delinquent, in an aggregate amount not in excess of $500,000) or
the validity of which is being contested in good faith in an appropriate manner
diligently pursued and as to which adequate reserves for the unpaid amount shall have
been set aside in conformity with GAAP;

     (ii) Deposits or pledges to secure the payment of, or to secure the Borrower’s
obligations with respect to letters of credit that secure the payment of, workers’
compensation, unemployment insurance or social security or other retirement benefits
or obligations (exclusive of liens arising under ERISA), or to secure the performance
of bids, trade contracts, leases, public or statutory obligations, surety or appeal
bonds and other obligations of a like nature incurred in the ordinary course of
business;

     (iii) Materialmen’s, mechanics’, landlords’, workmen’s, repairmen’s,
employees’, suppliers’ (including sellers of goods pursuant to customary reservations
or retentions of title) or other like liens arising in the ordinary course of
business to secure obligations not yet delinquent or being contested in good faith
and as to which adequate reserves for the unpaid amount shall have been set aside in
conformity with GAAP or as to which adequate bonds shall have been obtained;

     (iv) Purchase money liens, purchase money security interests, mortgages or
title retention arrangements upon or in any property (real or personal) acquired by
Borrower or its Subsidiaries in the ordinary course of business to secure Debt
(including, without limitation, Capitalized Leases) permitted hereunder
(provided that the security agreement or conditional sales or other title
retention contract pursuant to which the Lien on such property is created shall be
entered into within 180 days (except as otherwise permitted by Section 7.03(b)) after
the purchase or substantial completion of the construction of such property) and
incurred solely for the purpose of financing the acquisition of such property or
improvements upon such property, or renewals, extensions or refinancing thereof;
provided, that such Liens do not extend to any property of Borrower or any
Subsidiary other than the property acquired with the original purchase money Debt;

19

 

     (v) Other Liens, so long as the aggregate amount of all such other Liens does
not exceed at any time an aggregate amount of Two Million Dollars ($2,000,000);

     (vi) Other non-monetary Liens which do not have a material adverse effect on
the value or use of the property subject to such Liens (including licenses,
sublicenses, leases and subleases in the ordinary course of business consistent with
past practices);

     (vii) Precautionary UCC filings (or similar filings), in the ordinary course of
business, on equipment, leasehold improvements and furnishings;

     (viii) Liens under the Collateral Documents;

     (ix) Liens related to (A) credit card processing agreements or (B) agreements
with any Lender or Affiliate of a Lender relating to the issuance of corporate credit
cards to employees of the Borrower and its Subsidiaries, so long as the aggregate
amount secured by the Liens described in clauses (A) and (B) above does not exceed at
any time an aggregate amount of Five Million Dollars ($5,000,000);

     (x) Other existing Liens listed on Schedule 1.01 (as updated pursuant to
Section 6.16) and refinancings, refundings, renewals or extensions of such Liens;
provided, (A) that no such Lien is spread to cover any additional property
after the Closing Date and that the amount secured thereby is not increased and (B)
the refinancing, refunding, renewal or extension of the obligations secured by such
Liens is permitted by this Agreement;

     (xi) Liens created after the Closing Date securing Debt of the Borrower or any
Subsidiary of the type described in clause (iii) of the definition of “Debt”, which
Debt is incurred in the ordinary course of business of the Borrower or such
Subsidiary in connection with the acquisition of property (real or personal) by the
Borrower or its Subsidiaries, and any renewals, extensions or refinancings of such
Debt permitted hereunder, provided that such Liens shall not extend to or
encumber any property other than the property acquired by such Debt;

     (xii) Liens that are contractual rights of set-off (i) relating to the
establishment of depository relations with banks not given in connection with the
issuance or incurrence of Indebtedness, (ii) relating to pooled deposit or sweep
accounts of any Borrower or any Subsidiary to permit satisfaction of overdraft or
similar obligations incurred in the ordinary course of business of the Borrower and
its Subsidiaries or (iii) relating to purchase orders and other agreements entered
into with customers or suppliers of any Borrower or any Subsidiary in the ordinary
course of business;

     (xiii) easements, leases, subleases, ground leases, zoning restrictions,
building codes, rights-of-way, minor defects, survey defects, or irregularities in
title and similar encumbrances on real property imposed by law or arising in the

20

 

ordinary course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or interfere with the
ordinary conduct of business of the Borrower or any Subsidiary;

     (xiv) Liens arising by operation of law under Article 2 of the Uniform
Commercial Code in favor of a reclaiming seller of goods or buyer of goods;

     (xv) Liens on (i) incurred premiums, dividends and rebates which may become
payable under insurance policies and loss payments which reduce the incurred premiums
on such insurance policies and (ii) rights which may arise under State insurance
guarantee funds relating to any such insurance policy, in each case to secure
Indebtedness permitted under Section 7.02(e);

     (xvi) security given to a public or private utility or any Governmental
Authority as required in the ordinary course of business;

     (xvii) Liens (i) of a collection bank arising under Section 4-210 of the
Uniform Commercial Code on items in the course of collection, or (ii) in favor of a
banking institution arising as a matter of law encumbering deposits (including the
right of set-off) and which are within the general parameters customary in the
banking industry;

     (xviii) Liens securing judgments, decrees or attachments not constituting an
Event of Default;

     (xix) Liens on assets of Foreign Subsidiaries securing Debt of such Foreign
Subsidiaries permitted hereunder; and

     (xx) Deposits or pledges of cash or Cash Equivalents to secure the payment of,
or to secure the Borrower’s or any of its Subsidiaries’ obligations with respect to
letters of credit issued for the credit of the Borrower or one of its Subsidiaries,
so long as the obligations so secured are permitted hereunder and the aggregate
amount of such cash or Cash Equivalents does not exceed $4,200,000; provided,
that the Borrower and its Subsidiaries shall, following the Closing Date, have
received Net Cash Proceeds (determined without giving effect to the proviso of the
definition thereof) from Permitted Sale/Leasebacks and/or Permitted Asset Sales in an
aggregate amount equal to at least the face amount of such letter(s) of credit.

     “Permitted Sale/Leaseback” means Sale/Leasebacks in respect of the assets
comprising one or more fitness centers (excluding, for the avoidance of doubt, any
Intellectual Property material to the business of the Borrower or any of its Subsidiaries)
on terms reasonably satisfactory to the Agent; provided, that such assets are sold
at no less than Fair Market Value, and provided, further, that upon request
by the Agent, the Borrower shall have provided the Agent with documentation (including legal
opinions) reasonably satisfactory to the Agent that such Sale/Leaseback is permitted under
the terms of the Subordinated Notes Indenture and the Senior Unsecured Notes Indenture.

21

 

     “Permitted Subordinated Indenture Amendment” means any amendment, modification
or other change of the terms of the 1997 Indenture, the 1998 Indenture, any Subordinated
Notes or other documents governing Subordinated Debt, which amendment, modification, or
other change (a) permits the issuance by the Borrower of its Capital Stock to holders of
Subordinated Debt as consideration for such amendments, modifications, or extensions, (b)
permits an increase in the interest rates applicable to Subordinated Notes which increases
are payable in kind at the Borrower’s option, (c) does not require cash payments and which
is not materially adverse to the Lenders, or (d) permits the reimbursement of out-of-pocket
expenses of the holders of the Subordinated Debt.

     “Permitted Subordinated Notes Refinancing” means the repayment in full of the
Subordinated Notes from the proceeds of common equity of the Borrower or of other
Subordinated Debt of the Borrower requiring no principal payments on or prior to October 31,
2011, which, in each case, is issued contemporaneously with the repayment of the
Subordinated Notes and, in the case of an issuance of Subordinated Debt, (i) the terms of
such Subordinated Debt are at least as favorable to the Credit Parties and the Secured
Parties as in the 1998 Indenture or (ii) such Subordinated Debt contains terms reasonably
satisfactory to the Agent.

     “Person” means an individual, a corporation, a partnership, limited liability
company, a joint venture, an association, a trust or any other entity or organization,
including a governmental or political subdivision or an agent or instrumentality thereof.

     “Plan” means, at any date, any employee pension benefit plan (as defined in
Section 3(2) of ERISA) which is subject to Title IV of ERISA (other than a Multiemployer
Plan) and to which Borrower or any ERISA Affiliate may have any liability, including any
liability by reason of having been a substantial employer within the meaning of Section 4063
of ERISA at any time during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.

     “Prepayment Debt” means any Debt incurred after the Closing Date other than as
expressly permitted under this Agreement in accordance with Section 7.02 or as consented to
by the Lenders.

     “Properties” means all real properties owned in fee by Borrower or its
Subsidiaries and all real properties in which Borrower or its Subsidiaries hold a leasehold
interest.

     “Public Filings” means the Borrower’s reports filed with the SEC on Form 10-K
for its fiscal year ended December 31, 2005, on Form 10-Q filed for its fiscal quarters
ended March 31, 2006 and June 30, 2006 and on Form 8-K in the calendar year 2006 prior to
the date hereof.

     “Real Estate Financing Subsidiary” means each of Bally Real Estate I, LLC,
Bally Real Estate II, LLC, Bally Real Estate III, LLC and Bally Real Estate IV, LLC.

22

 

     “Reference Rate” means, for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: “Prime
Rate” shall mean the rate of interest per annum publicly announced from time to time by
JPMorgan Chase Bank, N.A. as its prime rate (the Prime Rate not being intended to be the
lowest rate of interest charged by the JPMorgan Chase Bank, N.A. in connection with
extensions of credit to debtors) in effect at its principal office in New York City (each
change in the Prime Rate to be effective on the date such change is publicly announced);
“Base CD Rate” shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of
which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate;
“Three-Month Secondary CD Rate” shall mean, for any day, the secondary market rate
for three-month certificates of deposit reported as being in effect on such day (or, if such
day shall not be a Business Day, the next preceding Business Day) by the Board of Governors
of the Federal Reserve System (the “Board”) through the public information telephone
line of the Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for three-month
certificates of deposit of major money center banks in New York City received at
approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the Agent from three New York City
negotiable certificate of deposit dealers of recognized standing selected by it; “C/D
Assessment Rate”: for any day as applied to any Reference Rate Advance, the annual
assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund
maintained by the Federal Deposit Insurance Corporation (the “FDIC”) classified as
well-capitalized and within supervisory subgroup “B” (or a comparable successor assessment
risk classification) within the meaning of 12 C.F.R. § 327.4 (or any successor provision) to
the FDIC (or any successor) for the FDIC’s (or such successor’s) insuring time deposits at
offices of such institution in the United States; “C/D Reserve Percentage”: for any
day as applied to any Reference Rate Advance, that percentage (expressed as a decimal) which
is in effect on such day, as prescribed by the Board, for determining the maximum reserve
requirement for a Depositary Institution (as defined in Regulation D of the Board as in
effect from time to time) in respect of new non-personal time deposits in Dollars having a
maturity of 30 days or more; and “Federal Funds Effective Rate” shall mean, for any
day, the weighted average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for the day of
such transactions received by the Agent from three federal funds brokers of recognized
standing selected by it. If for any reason the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to ascertain the
Base CD Rate or the Federal Funds Effective Rate, or both, for any reason, including the
inability or failure of the Agent to obtain sufficient quotations in accordance with the
terms thereof, the Reference Rate

23

 

shall be determined without regard to clause (b) or (c), or both, of the first sentence
of this definition, as appropriate, until the circumstances giving rise to such inability no
longer exist. Any change in the Reference Rate due to a change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the
effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.

     “Reference Rate Advance” means an Advance the rate of interest applicable to
which is based upon the Reference Rate.

     “Register” has the meaning ascribed to it in Section 9.04(e).

     “Reinvestment Proceeds” means, at any time, all net proceeds of dispositions of
assets permitted by Sections 7.08(d), (f), (g), (l), (m) and (n) or of any insurance
proceeds or condemnation awards received in connection with any Casualty Event, to the
extent, without duplication, that (i) such net proceeds have not yet been applied to the
acquisition of properties and other assets that replace the properties and assets that were
the subject of such disposition or Casualty Event or properties and assets that will be used
in the businesses of the Borrower or its Subsidiaries existing on the Closing Date (or in
businesses reasonably related or complementary thereto), and with respect to which less than
360 days has elapsed since the disposition or Casualty Event giving rise to such proceeds,
or (ii) an amount equal to or greater than such net proceeds has been applied to the
acquisition of properties and other assets that (as determined by the Borrower) replace the
properties and assets that were the subject of such disposition or Casualty Event or
properties and assets that will be used in the businesses of the Borrower or its
Subsidiaries existing on the Closing Date (or in businesses reasonably related or
complementary thereto) within 180 days prior to the disposition or Casualty Event giving
rise to such proceeds, provided that, to the extent that the Borrower and its
Subsidiaries receive in excess of $10,000,000 of Net Cash Proceeds from dispositions but not
Casualty Events (determined without giving effect to clause (C) of the proviso to the
definition of Net Cash Proceeds and excluding any such dispositions permitted by Sections
7.08(l)) in any fiscal year of the Borrower, such excess shall not be Reinvestment Proceeds.

     “Replaced Lender” has the meaning ascribed to it in Section 9.20 hereof.

     “Replacement Lender” has the meaning ascribed to it in Section 9.20 hereof.

     “Reportable Event” shall be as defined in Section 4043 of ERISA.

     “Restricted Payment” means with respect to any Person (a) any dividend or other
distribution of assets, properties, cash, rights, obligations or securities, direct or
indirect, on account of any shares of any class of the capital stock or other equity
interests of such Person; or (b) any amount paid in redemption, retirement, repurchase,
direct or indirect, of (x) any shares of any class of capital stock or other equity
interests or (y) any warrants, options or other rights to acquire any shares of any class of
capital stock or other equity interests of such Person.

24

 

     “Revolving Advance” means a borrowing under the Revolving Credit pursuant to
Section 2.01 or 2.19(e)(ii) hereof; collectively, the “Revolving Advances”.

     “Revolving Credit” means the credit described in Section 2.01.

     “Revolving Credit Commitment” has the meaning ascribed to it in Section 2.01(a)
hereof.

     “Revolving Credit Commitment Amount” means $44,000,000, less any
Revolving Credit Commitment Reductions.

     “Revolving Credit Commitment Percentage” means, as to each Lender, the
percentage set forth opposite such Lender’s name under the column entitled “Commitment
Percentage” on Exhibit C hereto or, if such Lender shall have acquired or disposed of any
interest in the Revolving Credit pursuant to Section 9.04(a), on the applicable instrument
of assignment, which is the percentage equivalent of a fraction, the numerator of which is
the amount of such Lender’s Revolving Credit Commitment and the denominator of which is the
Revolving Credit Commitment Amount (or, if the Revolving Credit Commitments have been
terminated, the sum of its outstanding Revolving Advances, participating interests in
Letters of Credit and unreimbursed drawings in respect of Letters of Credit as a percentage
of the aggregate amount of outstanding Revolving Advances, participating interests in
Letters of Credit and unreimbursed drawings in respect of Letters of Credit).

     “Revolving Credit Commitment Period” means the period from and including the
date of this Agreement to but excluding the Revolving Credit Termination Date.

     “Revolving Credit Commitment Reductions” means the amount of the permanent
reductions of the Revolving Credit Commitment Amount resulting from the application of
Sections 2.11, 2.13 or any other provision contained herein.

     “Revolving Credit Lender” means each Lender which has, or has acquired pursuant
to an assignment made in accordance with Section 9.04, a Revolving Credit Commitment or
which has made, or acquired pursuant to an assignment made in accordance with Section 9.04,
a Revolving Advance or a participation in a Letter of Credit.

     “Revolving Credit Termination Date” means the earliest to occur of:

     (a) the date the Revolving Credit Commitment Amount is terminated by the
Borrower pursuant to Section 2.11 or is otherwise terminated or reduced to zero
pursuant to the terms of this Agreement, provided that all amounts payable
under this Agreement in respect of the Revolving Credit and the Revolving Notes are
fully repaid on or prior to such date,

     (b) the date the Revolving Credit hereunder is terminated or accelerated
pursuant to Article VIII,

25

 

     (c) October 1, 2010, and

     (d) the Advance Maturity Date.

     “Revolving Note” means the master promissory note of Borrower payable to the
order of a Lender in substantially the form of Exhibit F hereto; and “Revolving
Notes” means all of such Notes.

     “Sale/Leaseback” means any transaction or series of related transactions
pursuant to which the Borrower or any of its Subsidiaries sells or transfer any property or
asset in connection with the leasing or the resale against installment payments of such
property or asset to the seller or transferor.

     “SEC” means the Securities and Exchange Commission, as from time constituted,
created under the Securities Exchange Act of 1934, as amended from time to time, or any
successor thereto.

     “Secured Creditors” means, collectively, JPMorgan Chase Bank, N.A. and the
Operating Banks in their separate financial arrangements with the Borrower, and the Agent,
the Collateral Agent, the Lenders and the Issuing Lenders (and any Person that is a Lender
(or any Affiliate thereof) at the time an Interest Expense Hedging Arrangement was entered
into), each in connection with the Secured Obligations.

     “Secured Obligations” means, collectively, the Obligations and the Operating
Bank Obligations.

     “Senior Indebtedness” means Senior Indebtedness of the Borrower as defined in
each of the 1997 Indenture and the 1998 Indenture.

     “Senior Unsecured Notes” means the Borrower’s 10.5% Senior Notes due 2011,
issued under and pursuant to the Senior Unsecured Notes Indenture

     “Senior Unsecured Notes Indenture” means that certain Indenture dated as of
July 2, 2003 among the Borrower, the Subsidiaries party thereto and U.S. Bank National
Association, as trustee (and any successor trustee thereto) relating to the Senior Unsecured
Notes.

     “Subordinated Debt” means (a) Borrower’s 9-7/8% Senior Subordinated Notes due
2007, issued under and pursuant to the 1997 Indenture (“1997 Subordinated Notes”),
(b) Borrower’s 9-7/8% Senior Subordinated Notes due 2007, issued under and pursuant to the
1998 Indenture (together with any of Borrower’s 9-7/8% Senior Subordinated Notes due 2007
issued under the 1998 Indenture in exchange therefor, the “1998 Subordinated Notes”
and together with the 1997 Subordinated Notes, the “Subordinated Notes”), and (c)
any other Debt of Borrower which is subordinated to the Secured Obligations (i) in a manner
and containing terms and provisions satisfactory to Majority Lenders or (ii) on terms at
least as favorable to the Secured Creditors as the subordination provisions in the
Subordinated Notes Indenture and which does not require any principal payments on or prior
to October 31, 2010.

26

 

     “Subordinated Notes” has the meaning ascribed to it in the definition of
Subordinated Debt.

     “Subordinated Notes Indenture” means the collective reference to the 1997
Indenture and the 1998 Indenture.

     “Subsidiary” means any corporation, association or other business entity of
which a Person owns, directly or indirectly, more than fifty percent (50%) of the voting
securities thereof or which such Person otherwise controls; provided that, other
than for purposes of Sections 5.12, 6.08 and 7.14, the definition of “Subsidiary” shall not
include any Unrestricted Subsidiary; provided however, that for purposes of
the definitions of “Consolidated Adjusted EBITDA”, “Consolidated Cash EBITDA”, “Consolidated
Net Income” and “GAAP EBITDA”, the definition of “Subsidiary” shall include BTF Canada
Corporation. Unless the reference is specifically otherwise, “Subsidiary” shall refer to a
Subsidiary of Borrower.

     “Substantial Subsidiary” means any Subsidiary of Borrower with respect to which
(a) the aggregate book value of its assets, determined in accordance with GAAP at such time,
is greater than 1% of the aggregate book value of the assets of Borrower and its
Subsidiaries taken as a whole or (b) the aggregate gross revenues of such Subsidiary,
determined in accordance with GAAP for the immediately preceding fiscal quarter, is greater
than 1% of the aggregate gross revenues of Borrower and its Subsidiaries taken as a whole,
for such period.

     “Tax Allocation and Indemnity Agreement” means the Tax Allocation and Indemnity
Agreement, dated as of January 9, 1996, among Bally Entertainment Corporation, a Delaware
corporation, the Borrower and their respective direct and indirect subsidiaries.

     “Term Advance” means a Tranche B Term Advance or a Delayed-Draw Term Advance;
collectively, the “Term Advances”.

     “Term Loan Commitment” has the meaning ascribed to it in Section 2.03(b)
hereof.

     “Term Loan Facility” means the Tranche B Term Loan Facility and the
Delayed-Draw Term Loan Facility.

     “Term Loan Termination Date” means the earliest to occur of (a) the date the
Tranche B Term Advances and Delayed-Draw Term Advances are accelerated pursuant to Article
VIII, (b) October 1, 2010 and (c) the Advance Maturity Date.

     “Term Notes” means collectively, the Tranche B Term Notes and the Delayed-Draw
Term Notes.

     “Termination Date” means the Revolving Credit Termination Date or the Term Loan
Termination Date, as applicable.

27

 

     “Termination Event” means (i) the institution of steps by Borrower, an ERISA
Affiliate, PBGC or any other Person under Section 4041 or 4042, as applicable, of ERISA to
terminate a Plan, (ii) the occurrence of a Reportable Event which is a basis under Section
4042 of ERISA for PBGC to institute steps to terminate a Plan, (iii) the occurrence of a
contribution failure with respect to a Plan sufficient to give rise to a lien under Section
302(f) of ERISA, (iv) the withdrawal by Borrower or any ERISA Affiliate from a Plan as to
which it is a substantial employer under Sections 4062(e) and 4063 of ERISA or (v) the
withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan under Section 4203
or 4205 of ERISA.

     “Termination Value” means on any date in respect of any Hedging Arrangement,
after taking into account the effect of any legally enforceable netting agreement relating
to such Hedging Arrangement, (a) if such Hedging Arrangement has been terminated as of such
date, an amount equal to the termination value determined in accordance with such Hedging
Arrangement and (b) if such Hedging Arrangement has not been terminated as of such date, an
amount equal to the mark-to-market value for such Hedging Arrangement, which mark-to-market
value shall be determined by reference to one or more mid-market or other readily available
quotations provided by any recognized dealer (including any Lender or an Affiliate of any
Lender) of such Hedging Arrangement.

     “Tranche B Term Advance” means a borrowing under the Tranche B Term Loan
Facility pursuant to Section 2.03(a) hereof; collectively, the “Tranche B Term
Advances”.

     “Tranche B Term Lender” means each Lender which has a Tranche B Term Loan
Commitment or which has made, or acquired pursuant to an assignment made in accordance with
Section 9.04, a Tranche B Term Advance.

     “Tranche B Term Loan Commitment” has the meaning ascribed to it in Section
2.03(a) hereof.

     “Tranche B Term Loan Commitment Amount” means $205,900,000.

     “Tranche B Term Loan Commitment Percentage” means, as to each Lender, the
percentage set forth opposite such Lender’s name under the column entitled “Tranche B Term
Loan Commitment Percentage” on Exhibit C hereto or, if such Lender shall have acquired or
disposed of any amount of Tranche B Term Advances pursuant to Section 9.04(a), on the
applicable instrument of assignment, which is the percentage equivalent of a fraction, the
numerator of which is the amount of such Lender’s Tranche B Term Advances and the
denominator of which is the amount of the aggregate Tranche B Term Advances then
outstanding.

     “Tranche B Term Loan Facility” means the credit described in Section 2.03(a).

     “Tranche B Term Note” means the master promissory note of the Borrower payable
to the order of a Lender in substantially the form of Exhibit G hereto; and “Tranche B
Term Notes” means all of such Tranche B Term Notes.

28

 

     “Transferee” has the meaning ascribed to it in Section 9.04(c).

     “Type” means, as to any Advance, its nature as a Reference Rate Advance or a
Eurodollar Rate Advance.

     “Unrestricted Subsidiary” means (i) any Subsidiary of the Borrower that exists
on the Closing Date and is so designated as an Unrestricted Subsidiary on Schedule 1.01(b),
(ii) any subsidiary of the Borrower that at the time of determination shall be an
Unrestricted Subsidiary (as designated by the Board of Directors of the Borrower, as
provided below), and (iii) any subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any subsidiary of the Borrower (including any newly acquired or
newly formed subsidiary) to be an Unrestricted Subsidiary if all of the following conditions
apply: (a) neither the Borrower nor any of its Subsidiaries provides guarantees or other
credit support for Debt or other obligations of such Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Debt or obligations), (b) such
Unrestricted Subsidiary is not liable, directly or indirectly, with respect to any Debt
other than Unrestricted Subsidiary Indebtedness, (c) any Investment by the Borrower in such
Unrestricted Subsidiary made as a result of designating such subsidiary an Unrestricted
Subsidiary shall not violate the provisions described under Section 7.01 and such
Unrestricted Subsidiary is not party to any agreement, contract, arrangement or
understanding at such time with the Borrower or any other Subsidiary of the Borrower unless
the terms of any such agreement, contract, arrangement or understanding are no less
favorable to the Borrower or such other Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Borrower or, in the event such condition is
not satisfied, the value of such agreement, contract, arrangement or understanding to such
Unrestricted Subsidiary shall be deemed an Investment, and (d) such Unrestricted Subsidiary
does not own any Capital Stock in any Subsidiary of the Borrower which is not simultaneously
being designated an Unrestricted Subsidiary. Any such designation by the Board of Directors
shall be evidenced to the Agent by filing with the Agent a resolution of the Board of
Directors of the Borrower giving effect to such designation and an officer’s certificate
certifying that such designation complies with the foregoing conditions and any Investment
by the Borrower in such Unrestricted Subsidiary shall be deemed the making of an Investment
on the date of designation in an amount equal to the greater of (1) the net book value of
such Investment or (2) the Fair Market Value of such Investment as determined in good faith
by the Board of Directors. The Board of Directors may designate any Unrestricted Subsidiary
as a Subsidiary; provided (i) that, if such Unrestricted Subsidiary has any Debt,
immediately after giving effect to such designation, no Default or Event of Default would
result, and (ii) that all Debt of such Subsidiary shall be deemed to be incurred on the date
such Unrestricted Subsidiary becomes a Subsidiary.

     “Unrestricted Subsidiary Indebtedness” of any Unrestricted Subsidiary means
Debt of such Unrestricted Subsidiary (a) as to which neither the Borrower nor any Subsidiary
is directly or indirectly liable (by virtue of the Borrower or any such Subsidiary being the
primary obligor on, guarantor of, or otherwise liable in any respect to, such Debt), and (b)
which, upon the occurrence of a default with respect thereto, does not result in, or permit
any holder of any Debt of the Borrower or any Subsidiary to

29

 

declare, a default on such Debt of the Borrower or any Subsidiary or cause the payment
thereof to be accelerated or payable prior to its stated maturity.

          1.02 Financial Standards. All accounting terms not expressly defined herein shall be
construed, except where the context otherwise requires or if it has otherwise been indicated
herein, in accordance with GAAP. If any changes in accounting principles are hereafter occasioned
by promulgation of rules, regulations, pronouncements or opinions by or are otherwise required by
the Securities and Exchange Commission, the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies with similar
functions), and any of such changes result in a change in the method of calculation, or affect the
results of such calculation, of any of the financial covenants and the definitions relating to such
financial covenants, then the parties hereto agree to enter into and diligently pursue negotiations
in order to amend such financial covenants or terms in accordance with Section 10.06 hereof so as
to equitably reflect such changes, with the desired result that the criteria for evaluating
Borrower’s financial condition and results of operations shall be the same after such changes as if
such changes had not been made. Notwithstanding anything to the contrary in the foregoing, the
definitions set forth in the Credit Documents and any financial calculations required by the Credit
Documents shall be computed to exclude (a) the application of FAS 150 with respect to the
accounting treatment of any preferred stock issued by the Borrower and (b) any mark-to-market
adjustments to any derivatives (including embedded derivatives contained in other debt or equity
instruments under FAS 133).

          1.03 Interpretation. References to Exhibits and Schedules are to those to this Agreement,
unless otherwise indicated. References to agreements and other contractual instruments shall be
deemed to include all exhibits and appendices attached thereto and all amendments, supplements and
other modifications to such instruments, but only to the extent such amendments, supplements and
other modifications are not prohibited by the terms of this Agreement; and references to Persons
include their respective permitted successors and assigns and, in the case of governmental
authorities, Persons succeeding to their respective functions and capacities.

ARTICLE II.

THE CREDIT

          2.01 The Revolving Credit. (a) From time to time during the Revolving Credit Commitment
Period and subject to the terms and conditions of this Agreement, each Lender severally agrees to
lend to Borrower sums at any one time outstanding not in excess of an aggregate amount equal to
such Lender’s Revolving Credit Commitment Percentage of the Revolving Credit Commitment Amount (as
to each Lender; its “Revolving Credit Commitment”) (or, pursuant to the immediately
succeeding sentence, agrees to convert all or a portion of such Lender’s revolving credit loans
held under the Existing Credit Agreement (each an “Existing Revolving Loan”) into
a Revolving Advance hereunder) provided, that no Lender shall make any Advance if,
after giving effect to such Revolving Advance, the aggregate outstanding principal amount of all
Revolving Advances plus the aggregate undrawn amount of all Letters of Credit then outstanding plus
the aggregate amount of all unreimbursed drawings under Letters of Credit

30

 

would exceed the
Revolving Credit Commitment Amount. In connection with the making of Revolving Advances on the
Closing Date pursuant to the immediately preceding sentence, any Lender that is a Lender under the
Existing Credit Agreement shall make all or any portion of such Lender’s Revolving Advance by
converting a portion of the outstanding principal amount of the Existing Revolving Loan held by
such Lender into a Revolving Advance (each such Existing Revolving Loan, a “Converted Existing
Revolving Loan”) in a principal amount equal to such Lender’s pro rata share of the Revolving
Advances made on the Closing Date, such amount to be determined based on such Lender’s Revolving
Credit Commitment Percentage and, in the case of an Existing Revolving Loan bearing interest based
on the Eurodollar Rate, such Converted Existing Revolving Loan bearing interest based on the
Eurodollar Rate, consisting of a Eurodollar Rate Advance with an Interest Period ending on the same
date as which the interest period applicable to such Existing Term Loan is scheduled to end. On
the Closing Date, the amount of Converted Existing Revolving Loans equal to the amount of Revolving
Advances to be made on the Closing Date shall be converted for all purposes of this Agreement into
Revolving Advances, and the Agent shall record in the Register the aggregate amounts of Converted
Existing Revolving Loans into Revolving Advances. Each Lender’s maximum obligation under the
Revolving Credit at any time is the amount derived by multiplying its Revolving Credit Commitment
Percentage by the Revolving Credit Commitment Amount. Revolving Advances made under the Existing
Credit Agreement and outstanding and not repaid on the Closing Date shall continue outstanding
under this Agreement and be deemed to be Advances made by the Lenders pursuant to this Agreement.

          (b) The Revolving Credit is a revolving credit and Borrower may, prior to the Revolving
Credit Termination Date, borrow, repay and reborrow amounts repaid up to the maximum amount
available under Section 2.01(a), subject to the reductions required by Section 2.13 hereof and the
reductions permitted by Section 2.11 hereof.

          (c) The Revolving Credit may from time to time consist of (i) Eurodollar Rate Advances, (ii)
Reference Rate Advances or (iii) a combination thereof, as determined by the Borrower and notified
to the Agent in accordance with Section 2.02, provided that no Advance shall be made as a
Eurodollar Rate Advance after the day that is one month prior to the Revolving Credit Termination
Date.

          2.02 Requests for Revolving Advances. (a) Each Revolving Advance shall be made upon the
irrevocable request of the Borrower received by Agent by 12:00 p.m. noon, New York time, on the
Borrowing Date therefor in the case of Reference Rate Advances and three (3) Banking Days prior to
the Borrowing Date therefor in the case of Eurodollar Rate Advances, specifying: (i) the Borrowing
Date for such Revolving Advance, which shall be a Banking Day; (ii) the amount of such Revolving
Advance; (iii) whether the Revolving Advance is to be of Reference Rate Advances, Eurodollar Rate
Advances or a combination thereof; (iv) if the Revolving Advance is to consist entirely or partly
of Eurodollar Rate Advances, the amount of such Eurodollar Rate Advances
and the length of the initial Interest Period therefor; and (v) the account of Borrower with
Agent for the deposit of the proceeds of such Revolving Advance. Notwithstanding the foregoing, all
Revolving Advances to be made on the Closing Date shall be Reference Rate Advances.

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          (b) Each request for a Revolving Advance may be made in writing or by telephone,
provided, however, that any such telephonic request shall be confirmed immediately
by telecopier and also in writing delivered to Agent by Borrower not more than three (3) Banking
Days after the date such telephonic request is made, provided, however, that
telephonic requests shall be subject to the indemnity provisions set forth in Section 9.07 hereof.

          (c) Upon receipt of such borrowing request, Agent shall promptly notify Lenders thereof.

          (d) Each Reference Rate Advance hereunder shall be in the minimum aggregate amount of One
Million Dollars ($1,000,000) or in integral multiples of Five Hundred Thousand Dollars ($500,000)
in excess thereof (or, if the excess of the Revolving Credit Commitments then in effect over the
aggregate principal amount of all Revolving Advances then outstanding is less than $1,000,000, such
lesser amount). Each Eurodollar Rate Advance shall be in the minimum aggregate amount of Five
Million Dollars ($5,000,000) or in integral multiples of One Million Dollars ($1,000,000) in excess
thereof.

          (e) Each Revolving Advance shall be made on a pro rata basis by all Lenders having Revolving
Credit Commitments, and each Lender’s portion of each Revolving Advance shall be equal to its
Commitment Percentage of such Revolving Advance.

          2.03 Term Loan Facility 

          (a) Tranche B Term Loan Facility:

     (i) Subject to the terms and conditions of this Agreement, each Lender
severally agrees to make a term loan (a “Tranche B Term Advance”) to the
Borrower (or pursuant to the immediately succeeding sentence, agrees to convert all
or a portion of such Lender’s term loans held under the Existing Credit Agreement (an
“Existing Term Loan”) into a Tranche B Term Advance hereunder) on the Closing
Date in an amount equal to such Lender’s Tranche B Term Loan Commitment Percentage of
the Tranche B Term Loan Commitment Amount (as to each Lender, its “Tranche B Term
Loan Commitment”). In connection with the making of Tranche B Term Advances on
the Closing Date pursuant to the immediately preceding sentence, upon the Agent’s
request, any Lender that is a Lender under the Existing Credit Agreement shall make
all or any portion of such Lender’s Tranche B Term Advance by converting all of the
outstanding principal amount of each Existing Term Loan held by such Lender into a
Tranche B Term Advance in a principal amount equal to the aggregate principal amount
of such Existing Term Loan and, in the case of an Existing Term Loan bearing interest
based on the Eurodollar Rate, consisting of a Eurodollar Rate Advance with an
Interest Period ending on the same date as which the interest period applicable to
such Existing Term Loan is scheduled to end, (each such Existing Term Loan, a
“Converted Existing Term Loan”). On the Closing Date, the Converted Existing
Term Loans shall be converted for all purposes of this Agreement into Tranche B Term
Advances, and the Agent shall record in the Register the aggregate amounts

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of Converted Existing Term Loans into Tranche B Term Advances. Amounts of Tranche B Term
Advances repaid or prepaid may not be reborrowed.

     (ii) The Tranche B Term Advances may from time to time consist of (a)
Eurodollar Rate Advances, (b) Reference Rate Advances or (iii) a combination thereof,
as determined by the Borrower and notified to the Agent in accordance with Sections
2.04 and 2.06 (and subject to clause (i) above with respect to Converted Existing
Term Loans.)

          (b) Delayed-Draw Term Loan Facility:

     (i) From time to time during the Delayed-Draw Term Loan Commitment Period and
subject to the terms and conditions of this Agreement, each Lender severally agrees
to lend to Borrower sums at any one time outstanding not in excess of an aggregate
amount equal to such Lender’s Delayed-Draw Term Loan Commitment Percentage of the
Delayed-Draw Term Loan Commitment Amount (as to each Lender, its “Delayed-Draw
Term Loan Commitment” and, together with its Tranche B Term Loan Commitment, its
“Term Loan Commitment”) provided, that no Lender shall make any
Delayed-Draw Term Advance if, after giving effect to such Delayed-Draw Term Advance,
the aggregate outstanding principal amount of all Delayed-Draw Term Advances would
exceed the Delayed-Draw Term Loan Commitment Amount. Amounts of Delayed-Draw Term
Advances repaid or prepaid may not be reborrowed.

     (ii) The Delayed-Draw Term Advances may from time to time consist of (a)
Eurodollar Rate Advances, (b) Reference Rate Advances or (iii) a combination thereof,
as determined by the Borrower and notified to the Agent in accordance with Sections
2.04 and 2.06.

     (iii) Borrowings of Delayed-Draw Term Advances pursuant to the Delayed-Draw
Term Loan Commitments (x) shall be made no more frequently than one time each
calendar month, (y) shall be in an aggregate principal amount of a whole multiple of
$1,000,000, and (z) shall be available only during the Delayed-Draw Term Loan
Commitment Period.

          2.04 Requests for Term Advances. (a) (i) Except as specified in Section 2.03(a)(i) with
respect to Converted Existing Term Loans, each Tranche B Term Advance shall be made upon the
irrevocable request of the Borrower received by the Agent by 12:00 p.m. noon, New York time, one
(1) Banking Day prior to the Closing Date in the case of Reference Rate Advances and three (3)
Banking Days prior to the Closing Date in the case of Eurodollar Rate Advances, specifying (i) the
amount of such Tranche B Term Advances; (ii) whether the Tranche B Term Advances are to be
Reference Rate Advances, Eurodollar Rate Advances or a combination thereof; (iii) if the
Tranche B Term Advances are to consist entirely or partly of Eurodollar Rate Advances, the amount
of such Eurodollar Rate Advances and the length of the initial Interest Period therefor; and (iv)
the account of the Borrower with Agent for the deposit of the proceeds of such Tranche B Term
Advances. Notwithstanding the foregoing, and subject to

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Section 2.03(a)(i), any Term Advances to
be made on the Closing Date shall be Reference Rate Advances, unless otherwise agreed by the Agent.

          (ii) Each Delayed-Draw Term Advance shall be made upon the irrevocable request of the Borrower
received by Agent by 12:00 p.m. noon, New York time, one Banking Day prior to the Borrowing Date
therefor in the case of Reference Rate Advances and three (3) Banking Days prior to the Borrowing
Date therefor in the case of Eurodollar Rate Advances, specifying: (i) the Borrowing Date for such
Delayed-Draw Term Advance, which shall be a Banking Day; (ii) the amount of such Delayed-Draw Term
Advance; (iii) whether the Delayed-Draw Term Advance is to be of Reference Rate Advances,
Eurodollar Rate Advances or a combination thereof; (iv) if the Delayed-Draw Term Advance is to
consist entirely or partly of Eurodollar Rate Advances, the amount of such Eurodollar Rate Advances
and the length of the initial Interest Period therefor; and (v) the account of Borrower with Agent
for the deposit of the proceeds of such Delayed-Draw Term Advance. Notwithstanding the foregoing,
all Delayed-Draw Term Advances to be made on the Closing Date shall be Reference Rate Advances
unless otherwise agreed by the Agent.

          (b) Each request for Term Advances may be made in writing or by telephone, provided,
however, that any such telephonic request shall be confirmed immediately by telecopier and
also in writing delivered to Agent by Borrower not more than three (3) Banking Days after the date
such telephonic request is made, provided, however, that telephonic requests shall
be subject to the indemnity provisions set forth in Section 9.07 hereof.

          (c) Upon receipt of such borrowing request, the Agent shall promptly notify the applicable
Lenders thereof.

          (d) Except as otherwise provided in Section 2.3(b)(iii) with respect to Delayed-Draw Term
Advances, each Reference Rate Advance hereunder shall be in the minimum aggregate amount of One
Million Dollars ($1,000,000) or in integral multiples of One Hundred Thousand Dollars ($100,000) in
excess thereof. Each Eurodollar Rate Advance shall be in the minimum aggregate amount of Five
Million Dollars ($5,000,000) or in integral multiples of One Million Dollars ($1,000,000) in excess
thereof.

          (e) Each Tranche B Term Advance shall be made on a pro rata basis by all Tranche B Term
Lenders having Tranche B Term Loan Commitments, and each Tranche B Term Lender’s portion of the
Tranche B Term Advances shall be equal to its Tranche B Term Loan Commitment Percentage of such
Tranche B Term Advances.

          (f) Each Delayed-Draw Term Advance shall be made on a pro rata basis by all Delayed-Draw Term
Lenders having Delayed-Draw Term Loan Commitments, and each Delayed-Draw Term Lender’s portion of
the Delayed-Draw Term Advances shall be equal to its Delayed-Draw Term Loan Commitment Percentage
of such Delayed-Draw Term Advances.

          2.05 Repayment of Term Advances . (a) The Tranche B Term Advances of each Tranche B Term
Lender shall mature in 13 consecutive installments on each of January 31, April 28, July 31, and
October 31, commencing on October 31, 2007, each of which shall equal such Tranche B Term Lender’s
Tranche B Term Loan Commitment Percentage multiplied by

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$514,750, except for the final
installment which shall be payable on October 1, 2010 and shall equal such Tranche B Term Lender’s
Tranche B Term Loan Commitment Percentage multiplied by $199,723,000. In any event, all Tranche B
Term Advances will mature on or before the Term Loan Termination Date.

          (b)   The Delayed-Draw Term Advances of each Delayed-Draw Term Lender shall mature in full in
a single installment on the Term Loan Termination Date.

          2.06   Lending Branch and Evidence of Credit. (a) The Borrower hereby
unconditionally promises to pay to the Agent for the account of each Lender (i) the then unpaid
principal amount of each Revolving Advance made by such Lender on the Revolving Credit Termination
Date (or such earlier date on which the Advances become due and payable pursuant to Article VIII)
and (ii) the then unpaid principal amount of each Term Advance made by such Lender in accordance
with Section 2.05 or, if earlier, on the Term Loan Termination Date. The Borrower hereby further
agrees to pay interest on the unpaid principal amount of the Advances made to it from time to time
outstanding from the Closing Date until payment in full thereof at the rates per annum, and on the
dates, set forth in Section 2.08.

          (b)   Each Lender shall maintain in accordance with its usual practice an account or accounts
evidencing indebtedness of the Borrower to such Lender resulting from each Advance made by such
Lender from time to time, including the amounts of principal and interest payable and paid to such
Lender from time to time under this Agreement.

          (c)   The Agent shall maintain the Register pursuant to Section 9.04(e), and a subaccount
therein for each Lender in which shall be recorded (i) the amount of each Revolving Advance and
Term Advance made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the
amount of any principal or interest due and payable or to become due and payable from the Borrower
to each Lender hereunder and (iii) both the amount of any sum received by the Agent hereunder from
the Borrower and each Lender’s share thereof.

          (d)   The entries made in the Register and the accounts of each Lender maintained pursuant to
Section 2.06(c) shall, to the extent permitted by applicable law, be prima facie evidence of the
existence and amounts of the obligations of the Borrower therein recorded; provided,
however, that the failure of any Lender or the Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the obligation of any Borrower to
repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with
the terms of this Agreement.

          (e)   The Borrower agrees that, upon the request to the Agent by any Lender, the Borrower will
execute and deliver to such Lender (i) a Revolving Note with appropriate
insertions as to date and principal amount, and/or (ii) a Term Note for each Term Loan
Facility with appropriate insertions as to date and principal amount.

          (f)   Each Lender’s proportionate interest in each Advance and each payment to such Lender
under this Agreement and the Notes shall be made for the account of such Lender’s Lending Branch.

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          2.07   Conversion and Continuation Options. (a) The Borrower may elect from time to
time to convert Eurodollar Rate Advances to Reference Rate Advances by giving the Agent at least
two Banking Days’ prior irrevocable notice of such election, provided that any such
conversion of Eurodollar Rate Advances may only be made on the last day of an Interest Period with
respect thereto. The Borrower may elect from time to time to convert Reference Rate Advances to
Eurodollar Rate Advances by giving the Agent at least three Banking Days’ prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Rate Advances shall specify the
length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such
notice the Agent shall promptly notify each Lender thereof. All or any part of outstanding
Eurodollar Rate Advances or Reference Rate Advances may be converted as provided herein,
provided that (i) no Advance may be converted into a Eurodollar Rate Advance when any
Default or Event of Default has occurred and is continuing and the Agent or the Majority Lenders
have determined that such a conversion is not appropriate, and (ii) no Advance may be converted
into a Eurodollar Rate Advance after the date that is one month prior to the relevant Termination
Date.

          (b)   Any Eurodollar Rate Advances may be continued as such upon the expiration of the then
current Interest Period with respect thereto by the Borrower’s giving notice to the Agent, in
accordance with the applicable provisions of the term “Interest Period” set forth in Section 1.01,
of the length of the next Interest Period to be applicable to such Advance, provided that
no Eurodollar Rate Advance may be continued as such (i) when any Default or Event of Default has
occurred and is continuing and the Agent or the Majority Lenders have determined that such a
continuation of a Eurodollar Rate Advance is not appropriate, or (ii) after the date that is one
month prior to the relevant Termination Date and provided, further, that if the
Borrower shall fail to give any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Advances shall be
automatically converted to Reference Rate Advances on the last day of such then expiring Interest
Period.

          2.08   Computation of and Payment of Interest. (a) From and including the relevant
Borrowing Date to the payment in full of all Obligations, the outstanding principal balance of each
Advance hereunder, subject to Section 2.08(d) hereof, shall bear interest until paid in full at a
rate per annum equal to:

     (i)   with respect to Reference Rate Advances, at the Reference Rate for each
day plus the Applicable Margin; and

     (ii)   with respect to Eurodollar Rate Advances, for each day during an Interest
Period therefor, at the Eurodollar Rate for such day plus the Applicable Margin.

          (b)   Interest on each Advance shall be paid in arrears on each Interest Payment Date.
Interest shall also be payable on the date of any prepayment of Advances pursuant to Section 2.12
or 2.13 (except for any prepayment pursuant to Section 2.12 of any Advance that is a Reference Rate
Advance) for the portion of the Advances so prepaid and upon payment (including prepayment, except
for any prepayment pursuant to Section 2.12 of any Advance that is a Reference Rate Advance) in
full thereof and, after the occurrence and during the continuance of any Event of Default, interest
shall be payable on demand.

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          (c)   Interest on Reference Rate Advances calculated on the basis of the Prime Rate shall be
computed on the basis of a year of three hundred sixty-five (365) or three hundred sixty-six (366)
days, as the case may be; otherwise, interest and fees payable hereunder shall be computed on the
basis of a year of three hundred sixty (360) days, in each case for actual days elapsed, including
the first day and excluding the last day.

          (d)   During the period (i) from and including the stated due date for payment of any amount
under this Agreement or the date of acceleration of any amount pursuant to Article VIII which
Borrower fails to pay on such due date or date of acceleration and (ii) to but excluding the date
on which such amount is paid in full, Borrower shall, on demand and to the extent permitted by
applicable law, pay interest on such unpaid amount at a rate per annum equal to (A) in the case of
overdue principal of any Advance, the sum of the rate of interest otherwise applicable to such
unpaid amount plus two percent (2%) or (B) in the case of any other overdue amount, the Reference
Rate plus the Applicable Margin plus 2%; provided, however, that upon the
occurrence and during the continuation of an Event of Default under Section 8.01(a), the entire
principal amount of the Advances outstanding hereunder and under the Notes shall bear interest as
provided in this Section 2.08(d). Interest under this Section 2.08(d) shall be computed on the
basis of a three hundred sixty (360) day year and actual days elapsed.

          (e)   Each determination of an interest rate by the Agent pursuant to any provision of this
Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Agent shall, at the request of the Borrower, deliver to the Borrower a
statement showing the quotations used by the Agent in determining any interest rate pursuant to
Section 2.08(a).

          (f)   If prior to the first day of any Interest Period:

     (i)   the Agent shall have determined (which determination shall be conclusive
and binding upon the Borrower) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, or

     (ii)   the Agent shall have received notice from the Majority Lenders that the
Eurodollar Rate determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to such Lenders (as conclusively certified by
such Lenders) of making or maintaining their affected Advances during such Interest
Period,

then the Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as
soon as practicable thereafter. If such notice is given (x) any Eurodollar Rate Advances requested
to be made on the first day of such Interest Period shall be made as Reference Rate Advances, (y)
any Advances that were to have been converted on the first day of such Interest Period to
Eurodollar Rate Advances shall be converted to or continued as Reference Rate Advances and (z) any
outstanding Eurodollar Rate Advances shall be converted, on the first day of such requested
Interest Period, to Reference Rate Advances. Until such notice has been withdrawn by the Agent, no
further Eurodollar Rate Advances shall be made or continued as such, nor shall the Borrower have
the right to convert Advances to Eurodollar Rate Advances.

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The Agent shall give telecopy or
telephonic notice of such withdrawal to the Borrower and the Lenders as soon as practicable
thereafter.

          2.09   Payment of Advances. Borrower shall repay the outstanding amount of (a) all
Revolving Advances on the Revolving Credit Termination Date and (b) all Term Advances on the dates
set forth in Section 2.05, or if earlier, on the Term Loan Termination Date.

          2.10   Payments. (a) Each payment to Borrower hereunder, and each payment of
principal, interest and other sums due from Borrower under this Agreement shall be made in
immediately available funds at Agent’s address for payments indicated on the signature page of this
Agreement.

          (b)   Each Lender agrees that upon receipt of notice from Agent, it will make the funds which
it is to advance hereunder available to Agent at Agent’s address for payments indicated on the
signature page of this Agreement not later than 1:00 p.m., New York time, on the date of
disbursement, and Agent will thereupon advance to Borrower the amount so received from Lenders.

          (c)   Payment of all sums under this Agreement shall be made by Borrower to Agent for the
account of Lenders, and the Agent shall promptly distribute to each Lender its share of such
payments by wire transfer of immediately available funds. Each payment by Borrower shall be made
without setoff, deduction or counterclaim not later than 1:00 p.m., New York time, on the day such
payment is due. All sums received after such time shall be deemed received on the next Banking Day
and such extension of time shall be included in the computation of payment of interest, fees or
other sums, as the case may be.

          (d)   Unless Agent shall have been notified by telephone (confirmed in writing), by any Lender
prior to a Borrowing Date, that such Lender will not make available to Agent the amount which would
constitute its applicable Commitment Percentage of the Advances to be made on such date, Agent may
assume that such Lender has made such amount available to Agent and, in reliance thereon, may (but
shall not be required to) make available to Borrower a corresponding amount. If such Lender makes
its applicable Commitment Percentage of an Advance available to Agent after a borrowing date, such
Lender shall pay to Agent on demand an amount equal to the product of (i) the daily average Federal
Funds Rate from and including
the borrowing date to but excluding the date the applicable Commitment Percentage of such
Advance was made available to Agent (the “Out of Funds Period”) multiplied by (ii) an
amount equal to its applicable Commitment Percentage of such Advance multiplied by (iii) the
quotient of the number of days in the Out of Funds Period divided by 365 or 366, as the case may
be. A certificate from Agent submitted to any Lender with respect to any amounts owing under this
paragraph (d) shall be conclusive in the absence of manifest error. If any Lender’s applicable
Commitment Percentage of an Advance is not in fact made available to Agent by such Lender within
one (1) Banking Day after a Borrowing Date, Agent shall be entitled to recover such amount, with
interest thereon at the rate per annum then applicable to the Advances hereunder, on demand from
Borrower, without prejudice to Agent’s and Borrower’s rights against such defaulting Lender.

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          (e)   Unless Agent shall have been notified by telephone (confirmed in writing), by Borrower,
prior to any date on which a payment is due hereunder, that Borrower will not make the required
payment on such date, Agent may assume that Borrower will make such payment to Agent and, in
reliance upon such assumption, may (but shall not be required to) make available to each Lender the
amount due to it on such date. If such amount is not in fact paid to Agent by Borrower within one
(1) Banking Day after such payment is due, Agent shall be entitled to recover from each Lender the
amount paid to it by Agent, together with interest thereon in the amount equal to the product of
(i) the daily average Federal Funds Rate from and including the payment date to but excluding the
date the payment was made available to Agent (the “Out of Funds Interval”) multiplied by
(ii) an amount equal to the amount received by such Lender multiplied by (iii) the quotient of the
number of days in the Out of Funds Interval divided by 365 or 366, as the case may be. A
certificate from Agent submitted to any Lender with respect to any amounts owing under this
paragraph (e) shall be conclusive in the absence of manifest error.

          2.11   Optional Termination or Reduction of Commitment Amounts.

          (a)   The Borrower shall have the right, upon not less than five Banking Days’ notice to the
Agent, to terminate the Revolving Credit Commitments and the L/C Commitments or, from time to time,
to reduce the Revolving Credit Commitment Amount. Any such reduction shall be in an amount equal
to $2,000,000 or a whole multiple thereof and shall reduce permanently the Revolving Credit
Commitment Amount then in effect; provided, however, that the Revolving Credit
Commitment Amount may not at any time be reduced (after giving effect to any prepayments made on
the date of such reduction pursuant to Section 2.13(c)) below the sum of (i) the principal amount
of the outstanding Revolving Advances, (ii) the undrawn amount of all outstanding Letters of Credit
and (iii) the aggregate amount of all unreimbursed drawings under Letters of Credit on the date of
reduction or termination. Any Revolving Credit Commitment Reduction pursuant to this Section 2.11
shall be permanent.

          (b)   The Borrower shall have the right, upon not less than five Banking Days’ notice to the
Agent, to terminate the Delayed-Draw Term Loan Commitments or, from time to time, to reduce the
unutilized amount of Delayed-Draw Term Loan Commitments. Any such reduction shall be in an amount
equal to $2,000,000 or a whole multiple thereof and shall reduce permanently the Term Loan
Commitment Amount then in effect; provided, however, that the
Term Loan Commitment Amount may not at any time be reduced below the principal amount of the
outstanding Term Advances. Any Term Loan Commitment Reduction pursuant to this Section 2.11 shall
be permanent.

          2.12   Optional Prepayments. (a) Upon written notice (or telephone notice confirmed
promptly in writing) received by Agent not later than 12:00 noon, New York City time, on the date
thereof, Borrower may at any time prepay any Reference Rate Advance in full or in part, without
premium or penalty (except as provided in paragraph (b) below), in the amount of One Million
Dollars ($1,000,000) or an integral multiple of Five Hundred Thousand Dollars ($500,000) in excess
thereof (or, if the outstanding principal amount of all Reference Rate Advances is less than
$1,000,000, such lesser amount). Upon written notice (or telephone notice confirmed promptly in
writing) received by Agent not later than 12:00 noon, New York time, received at least three (3)
Banking Days prior to the date of prepayment, which notice shall specify the date and amount of
prepayment and the amount of Eurodollar Rate Advances being

39

 

prepaid, Borrower may on the last day
of any Interest Period with respect thereto prepay any Eurodollar Rate Advance in full or in part,
without premium or penalty (other than costs required to be paid pursuant to Section 2.17(d)), in
the amount of Five Million Dollars ($5,000,000) or an integral multiple of One Million Dollars
($1,000,000) in excess thereof. Each such prepayment of Revolving Advances made pursuant to this
Section 2.12 may be reborrowed subject to the terms and conditions of this Agreement. Prepayments
of Term Advances may not be reborrowed. Any prepayments of Revolving Advances or Term Advances, as
the case may be, made pursuant to this Section 2.12 shall be applied first to Reference Rate
Advances then outstanding and then to Eurodollar Rate Advances then outstanding, subject to Section
2.17(d). Any prepayments of Term Advances made pursuant to this Section 2.12 shall be applied to
Delayed-Draw Term Loans and Tranche B Term Loans ratably and to the remaining installments of each
thereof in direct order of maturity.

          (b)   Any optional prepayments of the Term Advances pursuant to Section 2.12(a) and any
mandatory prepayment of the Term Advances pursuant to Section 2.13(a) (and any permanent reduction
of Delayed-Draw Term Loan Commitments pursuant to Section 2.12(a) or 2.13(a)) (in each case other
than in respect of up to $25,000,000 of Net Cash Proceeds from Permitted Asset Sales and/or
Permitted Sale/Leasebacks to the extent the Borrower has elected its ability to retain proceeds
under option (x) set forth in clause (C) of the proviso to the definition of “Net Cash Proceeds”)
by the Borrower or any of its Subsidiaries made on or prior to the first anniversary of the Closing
Date shall be accompanied by a prepayment premium of 1% on the amount of Term Advances so prepaid
(and on the amount by which the Delayed-Draw Term Loan Commitments are so reduced).

          2.13   Mandatory Prepayments. (a) (i) Within ten (10) days of the date of receipt
by Borrower or any of its Subsidiaries of any Net Cash Proceeds, Borrower shall apply an amount
equal to 100% of such Net Cash Proceeds, without premium or penalty (other than costs required to
be paid pursuant to Section 2.17(d) and except as provided in Section 2.12(b) above),
first, to make a mandatory prepayment of the Term Advances, second, after payment
in full of the Term Advances, to
permanently reduce the Delayed-Draw Term Loan Commitment Amount, and third, after
reduction of the Delayed-Draw Term Loan Commitment Amount to zero, to make a mandatory prepayment
of the outstanding Revolving Advances or, to the extent that at such time no Revolving Advances are
outstanding, to cash collateralize any outstanding Letter of Credit, in an amount equal to 100% of
such Net Cash Proceeds.

          (b)   If, for any fiscal year of the Borrower commencing with the fiscal year ending December
31, 2006, there shall be Excess Cash Flow in excess of $5,000,000, the Borrower shall, on the
relevant Excess Cash Flow Application Date, apply 50% of such Excess Cash Flow minus (without
duplication) any permanent prepayments of Debt (including any prepayments under Section 2.12 of the
Term Advances and Revolving Advances to the extent accompanying permanent reductions in the
Revolving Credit Commitment Amount), without premium or penalty (other than costs required to be
paid pursuant to Section 2.17(d), first, to make a mandatory prepayment of the Term
Advances, second, after payment in full of the Term Advances, to permanently reduce the
Delayed-Draw Term Loan Commitment Amount, and third, after reduction of the Delayed-Draw
Term Loan Commitment Amount to zero, to make a mandatory prepayment of the outstanding Revolving
Advances or, to the extent that at such time no Revolving Advances are outstanding, to cash
collateralize any outstanding Letter of Credit

40

 

(without any reduction of the Revolving Credit
Commitment Amount). Each such prepayment shall be made on a date (an “Excess Cash Flow
Application Date”) no later than five days after the earlier of (i) the date on which the
financial statements of the Borrower referred to in Section 6.03(b), for the fiscal year with
respect to which such prepayment is made, are required to be delivered to the Agent and (ii) the
date such financial statements are actually delivered.

          (c)   If at any time (A) the sum of the aggregate principal amount of the outstanding
Revolving Advances plus the aggregate undrawn amount of all outstanding Letters of Credit plus the
aggregate amount of all unreimbursed drawings under Letters of Credit shall exceed (B) the
Revolving Credit Commitment Amount, Borrower shall, without demand or notice, prepay Revolving
Advances or cash collateralize or replace Letters of Credit in such amount as may be necessary to
eliminate such excess, and Borrower shall take such action on the Banking Day on which Borrower
learns or is notified of the excess, if Borrower so learns or is so notified prior to 1:00 p.m.
(New York City time) on such day, and otherwise on the immediately succeeding Banking Day.
Notwithstanding any contrary provision contained herein, the prepayment of any Advance or cash
collateralization or replacement of any Letter of Credit hereunder (except for any prepayment
pursuant to Section 2.12 of any Advance that is a Reference Rate Advance) shall be accompanied by
the payment of accrued interest on the amount prepaid to the date of payment.

          (d)   Any prepayments made pursuant to this Section 2.13 shall be applied first to Reference
Rate Advances to the extent then outstanding and then to Eurodollar Rate Advances to the extent
then outstanding, subject to Section 2.17(d). Any prepayments of Term Advances pursuant to this
Section 2.13 shall be applied to the Delayed-Draw Term Loans and the Tranche B Term Loans ratably
and to the installments of each thereof in direct order of maturity and may not be reborrowed.

          2.14   Fees. Borrower shall pay to Agent for the ratable benefit of each relevant Lender (except as
otherwise provided):

     (a)   (i) in respect of each Letter of Credit, a commission on the maximum face amount
available for drawing under such Letter of Credit, calculated at the rate per annum equal to
the rate applicable to Letter of Credit fees (as set forth under the definition of
Applicable Margin in Section 1.01), computed for the period from the date such Letter of
Credit is issued to the date upon which the next payment is due under this subsection (and,
thereafter, from the date of payment under this subsection to the date upon which the next
payment is due under this subsection), and payable quarterly in arrears (calculated on the
basis of a three hundred sixty (360) day year for the actual days elapsed) on the last
Banking Day of each January, April, July and October after the issuance of such Letter of
Credit and on the Revolving Credit Termination Date;

     (ii)   a fronting fee in an amount equal to one-quarter percent (1/4%) of the face
amount of such Letter of Credit, computed for the period from the date such Letter of Credit
is issued to the date upon which the next payment is due under this subsection (and,
thereafter, from the date of payment under this subsection to the date upon which the next
payment is due under this subsection), and payable quarterly in arrears (calculated on the
basis of a three hundred sixty (360) day year for the actual days

41

 

elapsed) on the last
Banking Day of each January, April, July and October after the issuance of such Letter of
Credit and on the Revolving Credit Termination Date; provided that such fee shall be
for the Issuing Lender’s sole account; and

     (iii)   all customary and normal costs and expenses as are incurred or charged by the
Issuing Lender in negotiating, issuing, effecting payment under, amending or otherwise
administering any Letter of Credit, provided that payment of such costs and expenses
shall be for the Issuing Lender’s sole account;

          (b)   a commitment fee, at the rate per annum equal to 0.50%, on the difference between (i)
the average daily Revolving Credit Commitment Amount, and (ii) the average daily principal amount
of the outstanding Revolving Advances, participating interests in Letters of Credit and
unreimbursed drawings in respect of Letters of Credit. The commitment fees under this Section
2.14(b) shall be payable quarterly in arrears (calculated on the basis of a three hundred sixty
(360) day year for the actual days elapsed) payable on the last Banking Day of each January, April,
July and October and on the Revolving Credit Termination Date; and

          (c)   a commitment fee, at the rate per annum equal to 1.00%, on the difference between (i)
the average daily Delayed-Draw Term Loan Commitment Amount, and (ii) the average daily principal
amount of the outstanding Delayed-Draw Term Advances. The commitment fees under this Section
2.14(c) shall be payable quarterly in arrears (calculated on the basis of a three hundred sixty
(360) day year for the actual days elapsed) payable on the last Banking Day of each January, April,
July and October and on the Term Loan Termination Date.

          2.15   Agency Fees. The Borrower agrees to pay to the Agent the fees in the amounts and on the dates as set
forth in any fee agreements with the Agent and to perform any other obligations contained therein.

          2.16   Taxes.

          (a)   All payments or reimbursements under this Agreement and any instrument or agreement
required hereunder shall be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding,

     (i)   in the case of each Lender and Agent, taxes imposed on its net income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Lender or Agent (as the case may be) is organized or any political subdivision
thereof,

     (ii)   in the case of each Lender, taxes imposed on its net income, and
franchise taxes imposed on it, by the jurisdiction of such Lender’s Lending Branch or
any political subdivision thereof, and

     (iii)   in the case of each Lender that is not a U.S. person as defined in
Section 7701(a)(30) of the Code (“Non-U.S. Lender”), United States federal
withholding taxes that are (x) attributable to such Bank’s failure to comply with the
requirements of Section 2.16(d), (y) imposed on amounts payable to such Lender at

42

 

the
time the Lender becomes a party to this Agreement, or (z) imposed other than as a
result of a change in treaty, law or regulation or the application or interpretation
thereof, except in the case of (x) or (y), to the extent that such Bank’s assignor
(if any) was entitled, at the time of assignment, to receive additional amounts from
the Borrower with respect to such taxes.

(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities
being hereinafter referred to as “Taxes”). If Borrower or Agent shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder to any Lender or Agent,

     (i) the sum payable by Borrower shall be increased as may be necessary so that after
Borrower or Agent has made all required deductions (including deductions applicable to
additional sums payable under this Section 2.16) such Lender or Agent (as the case may be)
receives an amount equal to the sum it would have received had no such deductions been made,

     (ii) Borrower or Agent shall make such deductions and

     (iii) Borrower or Agent shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.

          (b)   In addition, Borrower agrees to pay any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies which arise from any payment made by
Borrower or by Agent hereunder or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement (hereinafter referred to as “Other Taxes”).

          (c)   Borrower will indemnify each Lender and Agent for the full amount of Taxes or Other
Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.16) paid by such Lender or Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification
shall be made within 30 days from the date such Lender or Agent (as the case may be) makes written
demand therefor. Any such demand shall show in reasonable detail the amount payable and the
calculations used to determine such amount and shall provide reasonably acceptable evidence of
payment of such Tax or Other Tax.

          (d)   Each Non-U.S. Lender shall deliver to the Borrower and the Agent two copies of either
U.S. Internal Revenue Service Form W-8 BEN or Form W-8ECI, or any subsequent versions thereof or
successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete
exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower
under this Agreement. Such forms shall be delivered by each Non-U.S. Lender on or before the date
it becomes a party to this Agreement. In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it
is no longer in a position to provide any previously delivered certificate to the Borrower (or any
other form of certification adopted by the

43

 

U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this Section 2.16(d), a Non-U.S. Lender shall not be
required to deliver any form pursuant to this Section 2.16(d) that such Non-U.S. Lender is not
legally able to deliver.

          (e)   Any Lender claiming any additional amounts payable pursuant to this Section 2.16 shall
use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions)
to change the jurisdiction of its Lending Branch if the making of such a change would avoid the
need for, or reduce the amount of, any such additional amounts which may thereafter accrue and
would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender.

          (f)   Without prejudice to the survival of any other agreement of Borrower hereunder, the
agreements and obligations of the Borrower contained in this Section 2.16 shall survive the payment
in full of principal and interest under this Agreement and the Notes and all other Obligations
under this Agreement.

          2.17   Increased Costs; Illegality; Indemnity. (a) Borrower shall reimburse or
compensate each Lender, upon demand by such Lender, for all costs incurred, losses suffered
(including lost profit) or payments made by
such Lender which are applied or allocated by such Lender to the Credit (all as determined by
such Lender in its sole and absolute discretion) by reason of:

           (i)   any Lender’s being subject to any tax of any kind whatsoever with respect
to this Agreement, any Note or any Advance made by it, or change in the basis of
taxation of payments to such Lender in respect thereof (except for taxes covered by
Section 2.16 and changes in the rate of tax on the overall net income of such
Lender);

           (ii)   the imposition, modification or holding applicable of any reserve,
special deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of such
Lender which is not otherwise included in the determination of the Eurodollar Rate;
or

           (iii)   compliance by such Lender with any direction, requirement or request
from any regulatory authority, whether or not having the force of law.

          (b)   Any Lender seeking (i) reimbursement from Borrower for the costs incurred, losses
suffered or payments made as described in subsection (a) of this Section 2.17, or (ii) payment from
Borrower under Section 2.18 hereof, may recover such sums from Borrower by delivering to Borrower a
statement setting forth the amount owed to such Lender and showing how such calculation was made,
signed by a duly authorized officer of such Lender, which statement shall be conclusive evidence of
the amount owed absent manifest error; provided, however, that (A) reimbursement or
payment under this subsection (b) shall not be demanded by any Lender for the period prior to the
Closing Date (other than Lenders party to the Existing
Credit Agreement; provided that no
claim shall be made by any Lender pursuant to the Existing

44

 

Credit Agreement that arose during the
period prior to the closing date for the Existing Credit Agreement), and (B) each Lender shall
notify Borrower as promptly as practicable of any event occurring after the date of this Agreement
that would entitle such Lender to reimbursement or payment under this subsection (b).

          (c)   Notwithstanding any other provision herein, if the adoption of or any change in any
requirement of law or in the interpretation or application thereof shall make it unlawful for any
Lender to make or maintain Eurodollar Rate Advances as contemplated by this Agreement, (A) the
commitment of such Lender hereunder to make Eurodollar Rate Advances, continue Eurodollar Rate
Advances as such and convert Reference Rate Advances to Eurodollar Rate Advances shall forthwith be
cancelled and (B) such Lender’s Advances then outstanding as Eurodollar Rate Advances, if any,
shall if required by law, be converted automatically to Reference Rate Advances on the respective
last days of the then current Interest Periods with respect to such Advances or within such earlier
period as required by law. If any such conversion of a Eurodollar Rate Advance occurs on a day
which is not the last day of the then current Interest Period with respect thereto, the Borrower
shall pay to such Lender such amounts, if any, as may be required pursuant to paragraph (d) below.

          (d)   The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any
loss or expense which such Lender may sustain or incur as a consequence of (A) default by the
Borrower in payment when due of the principal amount of or interest on any Eurodollar Rate Advance,
(B) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar
Rate Advances after the Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (C) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this Agreement or (D) the
making of a prepayment of Eurodollar Rate Advances on a day which is not the last day of an
Interest Period with respect thereto, including, without limitation, in each case, any such loss or
expense arising from the reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained. A certificate as to any amounts payable pursuant to
this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest
error. The covenants contained in Subsections (b) and (d) of this Section 2.17 shall survive the
termination of this Agreement and the payment of the Notes and all other amounts payable hereunder.

          2.18   Capital Adequacy. If any Lender shall have determined that, after the date
hereof, the adoption of any applicable law, rule, regulation or guideline regarding capital
adequacy, or any change therein, or any change in the interpretation or administration thereof by
any governmental authority, central Lender or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Lending Branch or any corporation
controlling such Lender) with any direction, requirement or request regarding capital adequacy
(whether or not having the force of law) of any such authority, central Lender or comparable
agency, affects or would affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and such Lender (taking into consideration such
Lender’s policies with respect to capital adequacy and such Lender’s targeted return on capital)
determines that the amount of such capital is increased or required to be increased as a
consequence of such Lender’s obligations under this Agreement, then, upon demand by such Lender,
Borrower shall immediately pay to such Lender, from time to time as

45

 

specified by such Lender,
additional amounts sufficient to compensate such Lender for such increase.

          2.19   Letters of Credit. (a) The Letters of Credit. (i) From time to time
during the Revolving Credit Commitment Period, each Issuing Lender agrees on the terms and
conditions set forth herein to issue Letters of Credit for the account of the Borrower;
provided, that no Issuing Lender shall issue any Letter of Credit if after giving effect to
such issuance, the aggregate undrawn amount of all Letters of Credit then outstanding plus the
aggregate amount of all unreimbursed drawings under Letters of Credit would exceed the L/C
Commitment Amount; provided, further, that no Issuing Lender shall issue any
Letters of Credit if, after giving effect to such issuance, the sum of the aggregate undrawn amount
of all Letters of Credit then outstanding plus the aggregate outstanding principal amount of all
Revolving Advances plus the aggregate amount of unreimbursed drawings under Letters of Credit would
exceed the Revolving Credit Commitment Amount; provided, further, that no Issuing
Lender shall issue any Letters of Credit subsequent to the date which is 30 days prior to the
Revolving Credit Termination Date.

          (ii)   No Issuing Lender shall be under any obligation to issue any Letter of
Credit if:

     (A)   any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing
Lender from issuing such Letter of Credit or any legal requirement
applicable to such Issuing Lender or any request or directive (whether or
not having the force of law) from any governmental authority with
jurisdiction over such Issuing Lender shall prohibit, or request that such
Issuing Lender refrain from the issuance of letters of credit generally or
such Letter of Credit in particular or shall impose upon such Issuing Lender
with respect to such Letter of Credit any restriction or reserve or capital
requirement (for which such Issuing Lender is not otherwise compensated) not
in effect on the Closing Date, or any unreimbursed loss, cost or expense
which was not applicable, in effect or known to such Issuing Lender on the
Closing Date and which such Issuing Lender in good faith deems material to
it; or

     (B)   such Issuing Lender has received notice from Agent, or from Agent
at the request of any Lender, on or prior to the Banking Day immediately
prior to the requested date of issuance of such Letter of Credit that one or
more of the conditions contained in Section 4.02 is not then satisfied; or

     (C)   such requested Letter of Credit has an expiration date which is
after the earlier of (x) five Banking Days prior to the Revolving Credit
Termination Date (without taking into account any Advance Maturity Date) and
(y) one year after the date of issuance (subject to automatic renewals on
terms satisfactory to the Issuing Lenders).

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          (iii)   Subject to Section 2.19(g), Letters of Credit with a one-year tenor may
be by their terms automatically renewable (such automatically renewable Letters of
Credit hereby referred to as “Renewable Letters of Credit”) for additional
one-year periods (which shall in no event extend beyond the date referred to in
clause (x) of the preceding paragraph (a)(ii)(C), as such date is determined at the
time of such renewal or extension). The Issuing Lender shall notify all
beneficiaries of Renewable Letters of Credit that such Letters of Credit shall not be
renewed or extended unless the Agent and the Issuing Lender shall have received the
request from the Borrower required under Section 2.19(g) and all conditions precedent
to the issuance of Letters of Credit set forth in Section 4.02 are satisfied at the
time of such renewal or extension (which time, for purposes of this Section and
Section 4.02, shall be deemed to be the time of such renewal or extension and not the
expiry date of such Letters of Credit).

          (b)   Issuance of Letters of Credit.

          (i)   Each Letter of Credit shall be issued upon the irrevocable written request
of Borrower, received by Agent and the Issuing Lender at least seven (7) days (or
such shorter time as Agent may agree in a particular instance) prior to the proposed
date of issuance. Each Letter of Credit outstanding under the Existing Credit
Agreement which survives the Closing Date shall be deemed to be reissued under this
Agreement on the Closing Date as set forth on Schedule 2.19(b).

          (ii)   Each request for issuance of a Letter of Credit shall be by telecopy,
confirmed immediately in writing, on the form specified by the Issuing Lender as
being its then customary form for letter of credit applications and shall specify:
(A) the proposed date of issuance (which shall be a Banking Day); (B) the face amount
of the Letter of Credit; (C) the date of expiration of the Letter of Credit; (D) the
purpose of such Letter of Credit, (E) the name and address of the beneficiary
thereof; (F) the documents to be presented by the beneficiary of the Letter of Credit
in case of any drawing thereunder; and (G) the full text of any certificate to be
presented by the beneficiary in case of any drawing thereunder; provided that
in the event that the form specified by the Issuing Lender conflicts with any
provisions of this Agreement, the provisions in this Agreement shall govern.

          (iii)   No Letter of Credit shall be issued (or renewed or extended) if such
Letter of Credit would thereupon have an expiration date which is after the date
which is five Banking Days prior to the Revolving Credit Termination Date (without
taking into account any Advance Maturity Date).

          (iv)   Unless an Issuing Lender has received notice on or before the Banking Day
immediately preceding the date such Issuing Lender is to issue a requested Letter of
Credit (A) from the Agent directing such Issuing Lender not to issue such Letter of
Credit because the amount specified in Section 2.19(a)(i) would be exceeded and/or
(B) from any Lender that one or more conditions specified in Section 4.02 are not
then satisfied, then subject to the terms and conditions of this

47

 

Section 2.19 and
provided that the applicable conditions set forth in Section 4.02 hereof have
been satisfied, such Issuing Lender shall, subject to paragraph (a)(ii), on the
requested date, issue a Letter of Credit for the account of Borrower in accordance
with the Issuing Lender’s usual and customary business practices. Prior to issuing
any Letter of Credit, the Issuing Lender of such Letter of Credit will consult with
the Agent to confirm that the amount specified in Section 2.19(a)(i) would not be
exceeded, and that the conditions specified in Section 4.02 have been satisfied.

          (v)   Promptly after issuance of each Letter of Credit, the Issuing Lender shall
deliver to Borrower and Agent a copy of such Letter of Credit. Agent shall promptly
deliver a copy thereof to each other Lender. Each Letter of Credit shall provide
that, except as otherwise determined in the sole discretion of the Issuing
Lender, payment thereunder shall not be made earlier than two (2) business days
after receipt of any requisite documents demanding such payment.

          (vi)   All Letters of Credit shall be issued only in Dollars.

          (c)   Participations, Drawings and Reimbursements.

          (i)   Immediately upon the issuance of each Letter of Credit, each Lender (other
than the Issuing Lender) shall be deemed to, and hereby agrees to, have irrevocably
purchased from the Issuing Lender a participation in such Letter of Credit and each
drawing thereunder in a percentage equal to the Revolving Credit Commitment
Percentage of such Lender. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT,
EACH SUCH LENDER ACKNOWLEDGES AND AGREES THAT LETTERS OF CREDIT MAY BE ISSUED WITH
EXPIRATION DATES AFTER OCTOBER 1, 2007, OR ANY OTHER ADVANCE MATURITY DATE. EACH SUCH
LENDER ACKNOWLEDGES AND IRREVOCABLY AGREES THAT ITS PARTICIPATING INTEREST APPLIES TO
SUCH LETTERS OF CREDIT BOTH BEFORE AND AFTER THE ADVANCE MATURITY DATE INCLUDING,
WITHOUT LIMITATION, DURING THE PERIOD FOLLOWING THE ADVANCE MATURITY DATE.

          (ii)   The Borrower shall reimburse the Agent for the full amount of any drawing
under the Letter of Credit on the Banking Day immediately succeeding the date such
drawing is honored by the Issuing Lender. The Borrower shall pay interest to the
Issuing Lender from the date such drawing is honored by the Issuing Lender to the
Banking Day immediately succeeding such date at a rate equal to the Reference Rate
plus the Applicable Margin. In the event Borrower shall fail to reimburse Agent for
the full amount of any drawing on the Banking Day immediately succeeding the date
such drawing is honored by the Issuing Lender under any Letter of Credit, the Issuing
Lender shall promptly notify Agent and Agent shall as promptly as possible notify
each Lender with a Revolving Credit Commitment thereof and Borrower shall be deemed
to have requested that a Reference Rate Advance be made by the Lenders with a
Revolving Credit

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Commitment to be disbursed on the date of payment by the Issuing
Lender under such Letter of Credit, subject to the amount of the unutilized portion
of the Revolving Credit Commitment Amount on such date and subject to the conditions
set forth in Section 4.02. Any notice given by the Issuing Lender or Agent pursuant
hereto may be oral if immediately confirmed in writing (including telecopy or telex);
provided that the lack of such an immediate confirmation shall not affect the
conclusiveness and binding effect of such notice. The proceeds of such Revolving
Advances shall be paid to the Agent which will, in turn, disburse such proceeds to
the Issuing Lender as reimbursement for such drawings. Notwithstanding the
foregoing, if at any time an Event of Default described in Section 8.05 or 8.06 has
occurred and is continuing, such drawings shall be reimbursed by the Lenders’
purchasing pro rata participation interests in such
Letter of Credit in amounts equal to each Lender’s Revolving Credit Commitment
Percentage of the relevant amounts drawn.

          (iii)   Any unreimbursed Letter of Credit drawing which shall not be converted
into a Revolving Advance pursuant to Section 2.19(c)(ii) in whole or in part because
such conversion would have caused the Revolving Credit Commitment Amount to be
exceeded or because of Borrower’s failure to satisfy the conditions set forth in
Section 4.02, shall become due and payable on the Banking Day immediately succeeding
the date such drawing is paid by the Issuing Lender. Agent shall promptly notify
Borrower and Lenders with a Revolving Credit Commitment of the occurrence of any
unreimbursed drawing under a Letter of Credit. Any such unreimbursed drawing shall
bear interest at a rate per annum equal to the Reference Rate plus the sum of the
Applicable Margin and 2%.

          (iv)   Each Lender will, promptly upon receipt of notice of an unreimbursed
drawing under a Letter of Credit pursuant to Section 2.19(c)(iii), make available to
Agent for the account of the Issuing Lender an amount in immediately available funds
equal to its Revolving Credit Commitment Percentage of the amount of the such
unreimbursed drawing. If any Lender so notified shall fail to make available to
Agent for the account of the Issuing Lender the amount of its Revolving Credit
Commitment Percentage of any such unreimbursed drawing on the date the relevant
Letter of Credit drawing was honored by the Issuing Lender (the “Participation
Date”), then interest shall accrue on such Lender’s obligation to make such
payment, (i) from the Participation Date to but not including the second Banking Day
after the Participation Date at a rate per annum equal to the Federal Funds Rate, and
(ii) from the second Banking Day after the Participation Date at the same rate
specified in Section 2.08(a) for Reference Rate Advances. Agent will as promptly as
practicable (but in no event later than two (2) Banking Days after the occurrence
thereof) give notice of the occurrence of the Participation Date, but failure of
Agent to give any such notice on the Participation Date or in sufficient time to
enable any Lender to effect such payment on such date shall not relieve such Lender
from its obligations under this Section 2.19(c)(iv).

          (v)   The obligation of each Lender to provide Agent with such Lender’s
Revolving Credit Commitment Percentage of the amount of any payment or

49

 

disbursement
made by any Issuing Lender under any outstanding Letter of Credit shall be absolute
and unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which such Lender may have or have had against
such Issuing Lender (or any other Lender), including, without limitation, that the
Revolving Credit Termination Date has occurred after, on or prior to the date of such
payment or disbursement, any defense based on the failure of the demand for payment
under such Letter of Credit to conform to the terms of such Letter of Credit or the
legality, validity, regularity or enforceability of such Letter of Credit or any
defense based on the identity of the transferee of such Letter of Credit or the
sufficiency of the transfer if such Letter of Credit is transferable;
provided, however, that Lenders shall not be obligated to reimburse
such Issuing Lender for any wrongful payment or disbursement made
under any Letter of Credit as a result of acts or omissions constituting gross
negligence or willful misconduct on the part of such Issuing Lender or any of its
officers, employees or agents. Further, each Lender agrees to perform its
obligations under Section 2.19(c)(iv) despite the occurrence of the Revolving Credit
Termination Date, a Default or an Event of Default or any inability of Borrower to
require such Lender to fulfill its other obligations hereunder including, without
limitation, any inability resulting from the operation of Bankruptcy Code § 365(c)(2)
(11 U.S.C. § 365(c)(2)) or otherwise.

          (d)   Repayment of Participations.

          (i)   Upon and only upon receipt by Agent for the account of the Issuing Lender
of funds from Borrower,

          (A)   in reimbursement of any payment made under a Letter of Credit
with respect to which any Lender has theretofore paid Agent for the account
of the Issuing Lender for such Lender’s participation in the Letter of
Credit pursuant to Section 2.19(c)(iv); or

          (B)   in payment of interest thereon;

Agent will pay to each Lender which has funded its participating interest therein, in the
same funds as those received by Agent for the account of the Issuing Lender, such Lender’s
Revolving Credit Commitment Percentage of such funds.

          (ii)   If Agent or the Issuing Lender is required at any time to return to
Borrower or to a trustee, receiver, liquidator, custodian or other similar official
any portion of the payments made by Borrower to Agent for the account of the Issuing
Lender pursuant to paragraph (i) in reimbursement of payment made under the Letter of
Credit or interest thereon, each Lender shall, on demand of Agent, forthwith return
to Agent or the Issuing Lender its Revolving Credit Commitment Percentage of any
amounts so returned by Agent or the Issuing Lender plus interest thereon from the
date such demand is made to but not including the date such amounts are returned by
such Lender to Agent or the Issuing Lender, at a rate per annum equal to the Federal
Funds Rate.

50

 

          (e) Role of Issuing Lender. (i) Each Issuing Lender will exercise and give the same
care and attention to any Letter of Credit as it gives to its other letters of credit and similar
obligations.

     (ii) Each Lender participating in a Letter of Credit agrees that, in paying any
drawing under any Letter of Credit, the Issuing Lender shall not have any
responsibility to obtain any document (other than the sight draft and certificates
required by the Letter of Credit) or to ascertain or inquire as to the validity or
accuracy of any such document or the authority of the Person delivering any such
document. Neither the Issuing Lender nor any of its representatives, officers,
employees or agents shall be liable to any Lender for:

     (A) any action taken or omitted in connection herewith at the request
or with the approval of the Majority Lenders;

     (B) any action taken or omitted in the absence of gross negligence or
willful misconduct; or

     (C) the execution, effectiveness, genuineness, validity or
enforceability of any Letter of Credit or any other document contemplated
hereby or thereby.

          (f) Obligations Absolute. The obligations of Borrower under this Agreement and any
other agreements or instrument relating to any Letter of Credit to reimburse each Issuing Lender
shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of
this Agreement and such other agreement or instrument under all circumstances, including, without
limitation, the following circumstances:

     (A) any lack of validity or enforceability of this Agreement, any
Letter of Credit, or any other agreement or instrument relating thereto
(collectively, the “L/C Related Documents”);

     (B) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of Borrower in respect of any
Letter of Credit or any other amendment or waiver of or any consent to
departure from all or any of the L/C Related Documents;

     (C) the existence of any claim, set-off, defense or other right that
Borrower may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any Person for whom any such beneficiary or any
such transferee may be acting), the Issuing Lender or any other Person,
whether in connection with this Agreement, the transactions contemplated
hereby or by the L/C Related Documents or any unrelated transaction;

     (D) any statement and other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;

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     (E) any payment by the Issuing Lender under any Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of any Letter of Credit;

     (F) any exchange, release or non-perfection of any Collateral, or any
release or amendment or waiver of or consent to departure from any
Collateral Document, for all or any of the obligations of Borrower in
respect of any Letter of Credit;

     (G) the occurrence of the Revolving Credit Termination Date at any
time prior to, on, or after the date the payment or disbursement by the
Issuing Lender giving rise to such reimbursement obligation was made;

     (H) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, Borrower or any Guarantor but excluding any action
constituting the Issuing Lender’s gross negligence or willful misconduct; or

     (I) the occurrence of a Default or an Event of Default.

          (g) Requests Regarding Renewals and Extensions of Renewable Letters of Credit. The
Borrower shall deliver to the Agent and the applicable Issuing Lender, not earlier than thirty (30)
days, and not later than fourteen (14) days, before notice of non-renewal or non-extension is
required under the Renewable Letters of Credit issued by such Issuing Lender, a written request for
renewal or extension of each Renewable Letter of Credit which the Borrower desires to renew or
extend. Such request shall specify the required date for notice by the Issuing Lender of
non-renewal or non-extension under the Renewable Letters of Credit and include a certification by
the Borrower that as of the date of such request, no Default or Event of Default shall have
occurred and be continuing and all of the representations and warranties contained in this
Agreement and the Collateral Documents are true and correct in all material respects, except as to
representations and warranties contained in Section 5.09 and which expressly relate to an earlier
date and for changes which are contemplated or permitted by this Agreement. No such request shall
be made by the Borrower which would cause the expiry date of such Renewable Letter of Credit to
extend beyond five Banking Days prior to the Revolving Credit Termination Date. For purposes of
this Section 2.19(g), valid delivery by the Borrower of the required request shall be deemed to
have occurred only upon actual receipt of such notice by the Agent and the Issuing Lender. If the
Borrower fails to deliver such a notice within such period with respect to such Renewable Letter of
Credit, the Issuing Lender of such Renewable Letter of Credit shall deliver appropriate notices of
non-extension or non-renewal with respect to such Renewable Letter of Credit.

          (h) Increased Costs. If any change in any requirement of law shall either (i)
impose, modify or deem or make applicable any reserve, special deposit, assessment or similar
requirement against Letters of Credit issued by any Issuing Lender or against a Lender’s
participation in such Letter of Credit or (ii) impose on any Issuing Lender or any Lender

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participating in such Letter of Credit (a “Participating Lender”) any other condition
regarding this Agreement or any Letter of Credit, and the result of any event referred to in clause
(i) or (ii) above shall be to increase the cost to such Issuing Lender of issuing or maintaining
any Letter of Credit, or to such Participating Lender of purchasing or maintaining such
participating interest in any Letter of Credit (which increase in cost shall be the result of such
Issuing Lender’s, or Participating Lender’s, as the case may be, reasonable allocation of the
aggregate of such cost increases resulting from such events), then from time to time following
notice by such Issuing Lender (or such Participating Lender, as the case may be) to the Borrower,
the Borrower shall pay to such Person, as specified by such Person, additional amounts which shall
be sufficient to
compensate such Person for such increased cost, together with interest on each such amount
from the date demanded until payment in full thereof at a rate per annum equal to the Reference
Rate plus the Applicable Margin plus 2% per annum. A certificate submitted by such Issuing Lender
or Participating Lender to the Borrower concurrently with any such demand by such Person, shall be
conclusive, absent manifest error, as to the amount thereof.

          (i) Cash Collateralization. If any Letter of Credit shall remain outstanding on the
date that is five Banking Days prior to the Revolving Credit Termination Date (for the avoidance of
doubt, taking into account any Advance Maturity Date), the Borrower shall deposit in an account
with the Agent, in the name of the Agent and for the benefit of the Lenders, an amount in cash
equal to 105% of the aggregate undrawn amount under all such Letters of Credit as of such date.
The obligation to deposit such cash collateral shall become effective immediately, and such deposit
shall become immediately due and payable, without demand or other notice of any kind. Such deposit
shall be held by the Agent as collateral for the payment and performance of the obligations of the
Borrower hereunder. The Agent shall have exclusive dominion and control, including the exclusive
right of withdrawal, over such account. Other than any interest earned on the investment of such
deposits, which types of investments shall be made at the option and sole discretion of the Agent
and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys in such account
shall be applied by the Agent to reimburse the Issuing Lender for the amount of any drawing under
any such Letter of Credit for which it has not been reimbursed and, to the extent not so applied,
shall be held for the satisfaction of the reimbursement obligations of the Borrower in respect of
drawings under such Letters of Credit at such time.

ARTICLE III.

SECURITY

          3.01 Security.

          (a) As security for the prompt payment and performance of all Secured Obligations of
Borrower, Borrower has heretofore granted and assigned or shall grant and assign, in accordance
with the provisions of the Collateral Documents applicable to Borrower, to the Collateral Agent for
the benefit of the Secured Creditors all of its right, title and interest in and to all of the
Collateral. Additionally, all Secured Obligations shall be guaranteed by each Guarantor under the
Guarantee and Collateral Agreement and all Operating Bank Obligations

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shall be guaranteed by each
Guarantor under the Operating Bank Guaranty, to the extent provided therein, and the obligations of
the Guarantors under the Guarantee and Collateral Agreement and the Operating Bank Guaranty shall
be secured pursuant to the terms of the Collateral Documents required to be executed and delivered
by them hereunder. Upon the effective date of the sale of all of the stock owned by Borrower or
any Subsidiary of any Guarantor, upon the dissolution, liquidation or merger out of existence of
any Guarantor in connection with which dissolution, liquidation, or merger, the separate existence
of the
Guarantor terminates, or the effective date of the sale of all of the assets of any Guarantor,
in each case to the extent permitted hereunder, such Guarantor shall be released from all
obligations under the Guarantee and Collateral Agreement.

          (b) Upon the acquisition of any new property or assets by the Borrower or any Subsidiary, the
Borrower or such Subsidiary at its reasonable expense shall immediately cause such acquired
property or assets to become subject to Liens and security interests in favor of the Collateral
Agent to secure the Secured Obligations except (i) to the extent that this Agreement and the
Collateral Documents do not require such property or assets to become subject to such Liens and
security interests and (ii) in the case of property consisting of Capital Stock of a Joint Venture
or New Venture, if the pledge of such Capital Stock is prohibited by customary contractual
obligations imposed by other parties to such Joint Venture or New Venture which have not been
waived or made inapplicable with respect to receipt by the Borrower and its Subsidiaries of such
property (with Borrower hereby agreeing to use reasonable efforts to cause any such restriction to
be waived or made inapplicable). Upon any such acquisition, such acquired property or assets shall
be deemed to constitute Collateral for all purposes of this Agreement and the Collateral Documents,
any collateral documents executed and delivered by the Borrower or any of its Subsidiaries to grant
the liens and security interests required by this Section shall be deemed to be Collateral
Documents for all purposes of this Agreement and the other Credit Documents, and any such
acquisition of such property or assets shall be deemed a representation and warranty that, as of
the date of such acquisition, all representations and warranties contained in this Agreement and
the Collateral Documents applicable to such Collateral are true and correct in all material
respects.

          3.02 Collateral Documents. The Borrower and the Guarantors have heretofore executed and
delivered or will execute and deliver to the Collateral Agent certain Collateral Documents, and the
Borrower shall execute and deliver to the Collateral Agent for the benefit of the Secured Creditors
(and shall cause each Guarantor to so execute and deliver) all such further Collateral Documents
and such other collateral documents as may be reasonably requested by the Collateral Agent in order
to perfect and protect Collateral Agent’s security interest in the Collateral granted pursuant to
the Collateral Documents, all in form and substance reasonably acceptable to the Collateral Agent.

          3.03 Priority of Security Interest. The lien and security interest of the Collateral Agent
in the Collateral shall, to the extent permissible by applicable law, at all times, be and continue
to be a first lien in all jurisdictions, whether state, federal or foreign, subject to no other
Lien of any kind (except Permitted Liens).

          3.04 New Guarantors. Borrower shall cause each Domestic Subsidiary which is hereafter
created or acquired (but in any event excluding (i) Unrestricted Subsidiaries, (ii)

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Lincoln Indemnity Company, and (iii) any Subsidiary acquired after the Closing Date to the extent such
Subsidiary is not required to provide a security interest in its assets or cause its capital stock
to be pledged
pursuant to Section 7.01(e)) to promptly execute and deliver a supplement or addendum to each
of the Guarantee and Collateral Agreement and the Operating Bank Guaranty, in form and substance
reasonably satisfactory to the Collateral Agent, pursuant to which such Subsidiary shall become a
party to such agreements as a Grantor (as defined in the Guarantee and Collateral Agreement) and
guarantor, together with such Collateral Documents and other documents, instruments and opinions
reasonably requested by Agent or the Collateral Agent in order to perfect and protect the
Collateral Agent’s security interest in the Collateral granted pursuant to such Collateral
Documents, all in form and substance reasonably satisfactory to Agent and the Collateral Agent.

          3.05 Real Property Matters. (a) As security for the Secured Obligations, the Collateral
Agent shall have received, with respect to each parcel of real property listed on Schedule 3.05
(the “Existing Mortgage Collateral Properties”), (i) a Mortgage Amendment, executed and
delivered by a duly authorized officer of each party thereto; (ii) an endorsement to each of the
existing title insurance policies updating the effective date and amending the description of the
existing insured mortgage to include the Mortgage Amendment; and (iii) a no-lien affidavit executed
by the president or other officer of each respective mortgagor, in form satisfactory to the title
company.

          (b) As additional security for the Secured Obligations, Borrower agrees that in the event
Borrower or any Guarantor acquires any real property, then, from time to time, upon request of the
Agent, Borrower shall, or shall cause such Guarantor to, execute, deliver and record any new
mortgages, deeds of trust and similar instruments, or amendments to any existing mortgages, deeds
of trust and similar instruments (collectively, such existing and new instruments are called the
“Real Property Security Documents”) encumbering such owned property, which Real Property
Security Documents shall be substantially in the same form as the Real Property Security Documents
provided on and/or in effect as of the date hereof. In connection with such hereafter owned or
otherwise acquired real property, Borrower agrees to provide, or cause the applicable Guarantor to
provide, to the Collateral Agent (a) surveys of said real property in the form described in Section
4.01(o) of the Existing Credit Agreement (as in effect prior to its amendment and restatement as of
October 14, 2004) and (b) mortgagee title insurance policies in the form and amount described in
Section 4.01(p) of the Existing Credit Agreement (as in effect prior to its amendment and
restatement as of October 14, 2004) covering said real property.

          (c) As additional security for the Secured Obligations, Borrower agrees that if Borrower or
any Guarantor acquires any leasehold interest as lessee, it shall promptly following such
acquisition notify the Agent thereof and, from time to time, upon request of Agent, Borrower shall,
or shall cause such Guarantor to, execute, deliver and record any new mortgages, deeds of or trust
or similar instruments, or amendments to any existing mortgages, deeds of trust and similar
instruments encumbering such leasehold interest, which documents shall be substantially similar to
the Real Property Security Documents, in order to create a leasehold mortgage on such leasehold
interest. Notwithstanding the foregoing, the Borrower shall not be required to take any action
described in the preceding sentence to the extent taking such action (i) violates the applicable
lease, (ii) requires the consent of another party to such lease or (iii) if a

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recorded memorandum
with respect to such lease has not been filed in the relevant real property
recording offices. The actions required by this paragraph with respect to (i) any leasehold
interest existing on the Closing Date shall be completed no later than 60 days after the Closing
Date and (ii) any leasehold interest acquired after the Closing Date shall be completed no later
than 60 days of the request for such leasehold mortgage by the Agent in accordance with the
foregoing terms.

          3.06 Exceptions. Notwithstanding the foregoing, the Borrower and its Subsidiaries shall
not be required to (a) execute and deliver Real Property Security Documents with respect to real
property acquired after the Closing Date that is subject to liens permitted by clause (iv) of the
definition of “Permitted Liens”, or (b) cause any Subsidiary to provide a security interest in its
assets or cause its Capital Stock to be pledged to the extent not required pursuant to Section
7.01(e).

          3.07 Pledge of Capital Stock. Without limitation of the foregoing, the Borrower and its
Subsidiaries will pledge (a) the Capital Stock, limited liability interests, or partnership
interests, of any entity acquired after the Closing Date, subject to the provisions of Section 3.06
and (b) all Capital Stock of each Unrestricted Subsidiary which is owned by any Credit Party to be
pledged as Collateral pursuant to the Collateral Documents. Within seven (7) Business Days of the
Closing Date, or such later date as the Agent may agree in its reasonable discretion, the Borrower
shall provide the stock certificate or certificates and corresponding stock power or stock powers,
each endorsed in blank, for BTF Europe Corporation to the Collateral Agent; provided, that
the Collateral Agent shall have delivered to the Borrower a loss affidavit, consistent in form and
substance with past practice, in respect of any stock certificate for BTF Europe Corporation
previously delivered to it.

          3.08 Collateral Agency Agreement. Each Lender authorizes and instructs the Agent and the
Collateral Agent to execute and deliver the Collateral Agency Agreement on behalf of such Lender.
Each Lender agrees to be bound by and perform the obligations set forth for such Lender in the
Collateral Agency Agreement. Each Lender acknowledges and agrees that pursuant to the Collateral
Agency Agreement the Secured Obligations are secured by the Collateral under the Collateral
Documents an a pari passu basis. Each Lender acknowledges that the Collateral Agent is acting on
behalf of the Lenders (and their Affiliates), the Issuing Lenders, the Agent and the Operating
Banks.

          3.09 Amendments of Collateral Documents. The Lenders acknowledge that certain of the
Collateral Documents delivered under the Existing Credit Agreement are being amended, or amended
and restated, in order to secure all Delayed-Draw Term Advances and the other Secured Obligations
and to reflect the amendment and restatement of the Existing Credit Agreement by this Agreement.

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ARTICLE IV.

CONDITIONS PRECEDENT

          4.01 Conditions Precedent to Closing Date. This Agreement shall become effective as of the
Closing Date, subject to the conditions precedent that on or prior to the Closing Date (subject to
the additional time allotted in Section 6.16 for certain of such conditions to be satisfied):

          (a) Opinions of Counsel to Borrower, etc. There shall have been delivered to Agent,
in form and substance satisfactory to Agent and its counsel, an opinion, dated the Closing Date, of
(i) Kirkland & Ellis LLP, special counsel for the Borrower and the Guarantors, substantially in the
form of Exhibit I hereto and (ii) subject to Section 6.16, upon the Agent’s reasonable request,
counsel(s) to the Borrower and the Guarantors in certain jurisdictions in which Existing Mortgage
Collateral Properties are located;

          (b) Other Opinions. There shall have been delivered to Agent, in form and substance
satisfactory to Agent and its counsel, an opinion, dated the Closing Date, of Marc Bassewitz, Esq.,
or other acceptable in-house counsel, substantially in the form of Exhibit J hereto;

          (c) Borrower’s Incorporation Papers. There shall have been delivered to Agent, in
form and substance reasonably satisfactory to Agent and its counsel, a copy of Borrower’s
certificate of incorporation, certified by the Secretary of State of Delaware, as of a recent date,
and a copy of the Borrower’s by-laws, certified by the Secretary or an Assistant Secretary of
Borrower;

          (d) Borrower’s Corporate Resolution. There shall have been delivered to Agent, in
form and substance reasonably satisfactory to Agent and its counsel, a copy of a resolution or
resolutions passed by the Board of Directors of Borrower, certified by the Secretary or an
Assistant Secretary of Borrower as being in full force and effect on the Closing Date, authorizing
the borrowing provided for herein and the execution, delivery and performance of this Agreement,
the Notes, the Collateral Documents to which it is a party and any other instrument or agreement
required hereunder;

          (e) Borrower’s Incumbency Certificate. There shall have been delivered to Agent, in
form and substance reasonably satisfactory to Agent and its counsel, a certificate, signed by the
Secretary or an Assistant Secretary of Borrower and dated the Closing Date, as to the incumbency,
and containing the specimen signature or signatures (not photocopied), of the person or persons
authorized to execute and deliver this Agreement, the Notes, the Collateral Documents to which it
is a party and any other instrument or agreement required hereunder on behalf of Borrower;

          (f) Guarantors’ Incorporation Papers. There shall have been delivered to Agent, in
form and substance reasonably satisfactory to Agent and its counsel, with respect to each Guarantor
which has not previously delivered such documents to Agent, a copy of each such Guarantor’s
certificate of incorporation or articles of association and by-laws or partnership

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agreement, as the case may be, certified by the Secretary or an Assistant Secretary of such
Guarantor;

          (g) Guarantors’ Resolutions. There shall have been delivered to Agent, with respect
to each Guarantor which has not previously delivered such documents to Agent, in form and substance
reasonably satisfactory to Agent and its counsel, a copy of a resolution or resolutions passed by
the Board of Directors (or similar body) of each Guarantor (or, with respect to a Guarantor which
is a partnership, of such Guarantor’s general partner), certified by the Secretary or an Assistant
Secretary of such Guarantor (or general partner) as being in full force and effect on the Closing
Date, authorizing the execution, delivery and performance of the Collateral Documents to which it
is a party;

          (h) Guarantors’ Incumbency Certificates. There shall have been delivered to Agent,
with respect to each Guarantor which has not previously delivered such documents to Agent, in form
and substance reasonably satisfactory to Agent and its counsel, a certificate, signed by the
Secretary or an Assistant Secretary of each Guarantor (or, with respect to a Guarantor which is a
partnership, of such Guarantor’s general partner) and dated the Closing Date, as to the incumbency,
and containing the specimen signature or signatures (not photocopied), of the person or persons
authorized to execute and deliver the Collateral Documents to which it is a party on behalf of such
Guarantor (or on behalf of such general partner for such Guarantor);

          (i) Approvals and Consents. There shall have been delivered to Agent, in form and
substance reasonably satisfactory to Agent and its counsel, certified copies of all material
approvals, consents, exemptions and other actions by, and notices to and filings with, any
governmental authority or any other Person and any trustee or holder of any indebtedness or
obligation of Borrower or of any Guarantor which are required in connection with any transaction
contemplated hereby (other than landlords under leases and first mortgage holders constituting
Permitted Liens, but subject to Section 6.16), all of which shall be in full force and effect;

          (j) Agreement. There shall have been delivered to Agent, in form and substance
satisfactory to Agent and its counsel, sufficient counterparts of this Agreement, duly executed by
an authorized officer of Borrower;

          (k) Reallocations. The Lenders shall have made such payments as are directed by the
Agent so that, after giving effect thereto, the Advances are held by the Lenders based on their
respective applicable Commitment Percentages. To the extent invoiced to the Borrower, the Borrower
shall have paid all interest, fees and commissions accrued under the Existing Credit Agreement
through the Closing Date.

          (l) Collateral Documents. There shall have been delivered to Agent, in form and
substance reasonably satisfactory to Agent and its counsel, a reaffirmation of (i) the Guarantee
and Collateral Agreement, and (ii) the other Collateral Documents, executed by a duly authorized
officer of each of the Borrower and the Guarantors party to such Collateral Documents. In
addition, the Collateral Agent shall have received the documents described in Section 3.05 (subject
to the additional time allotted in Section 6.16);

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          (m) Pledge of Shares. The Collateral Agent shall have received (x) (i) subject to
the second sentence of Section 3.07, the certificates representing the certificated shares of each
of the Guarantors listed on Exhibit D hereto and each first-tier Subsidiary of such Guarantors, in
each case to the extent owned by a Credit Party, and (ii) the certificates representing 65% of the
certificated shares of the Foreign Subsidiaries owned directly by the Borrower or a Guarantor,
which certificates are to be pledged pursuant to the Guarantee and Collateral Agreement, together
with (y) an undated stock power for each such certificate executed in blank by a duly authorized
officer of the pledgor thereof;

          (n) No Litigation. No litigation, inquiry, injunction or restraining order shall be
pending, entered or threatened (including any proposed statute, rule or regulation) which, in the
reasonable opinion of the Majority Lenders, could have a Material Adverse Effect;

          (o) [Reserved];

          (p) Filings. Subject to Section 6.16, any filings and other actions required to
create, perfect and preserve the priority of the appropriate security interests in all Collateral
(including, without limitation, the filing of duly executed financing statements on Form UCC-1 in
the jurisdictions set forth in Schedule 3 to the Guarantee and Collateral Agreement and in any
other jurisdiction, in the opinion of the Agent, necessary to perfect the Liens on the Collateral)
shall have been authorized by the Borrower or the applicable Guarantor (or, in the case of UCC-1s,
delivered in proper form for filing), and all Collateral shall be free and clear of other liens
other than Permitted Liens;

          (q) Good Standing Certificates. There shall have been delivered to Agent, in form
and substance reasonably satisfactory to Agent, good standing certificates (or bring-down telexes
or other evidence of good standing) for Borrower and for each Guarantor from the Secretary of State
of the state of incorporation of each such Person and good standing certificates (or similar
authorization to conduct business as a foreign corporation) for Borrower and each Guarantor from
the Secretary of State of each state with respect to which Borrower makes the representations
contained in Sections 5.01 and 5.02 hereof;

          (r) Payment of Fees and Expenses. The Agent shall have received, for the account of
the Lenders and for its own account, payment by Borrower of all fees and expenses (including
reasonable legal fees and expenses) required to be paid hereunder, including without limitation,
under Section 9.06, to the extent invoices therefor have been presented to Borrower prior to the
Closing Date;

          (s) Officer’s Certificate. There shall have been delivered to Agent, in form and
substance satisfactory to Agent and its counsel, a certificate signed by a Senior Vice President of
Borrower, dated as of the Closing Date, certifying that:

     (i) the representations and warranties contained in Article V and in each
Collateral Document are true and correct in all material respects on and as of such
date, as though made on and as of such date;

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     (ii) no event has occurred and is continuing, or would result from the
transactions provided for herein, which has or would constitute an Event of Default;
and

     (iii) there has occurred since October 3, 2006, no development, event or
circumstance which has had or is reasonably likely to have a Material Adverse Effect;

          (t) Insurance Policies. There shall have been delivered to the Agent a certificate
evidencing the Borrower’s and its Subsidiaries’ insurance coverage in form and substance reasonably
satisfactory to the Agent;

          (u) Projections. The Borrower shall have delivered to the Lenders a financial
forecast, including income statements, balance sheets and cash flow statements through its fiscal
year ending December 31, 2010, in form and substance reasonably satisfactory to the Agent;

          (v) Senior Debt. The Chief Financial Officer of the Borrower shall have delivered to
the Agent a certificate demonstrating in reasonable detail that the Borrower and the other Credit
Parties have the ability (i) under the 1997 Indenture and the 1998 Indenture to incur the Secured
Obligations and that the Secured Obligations constitute Senior Indebtedness (as defined in the 1997
Indenture and the 1998 Indenture) and (ii) under the Senior Unsecured Notes Indenture to incur the
Secured Obligations and to create Liens on the Collateral therefor; and

          (w) Other Evidence Agent May Require. There shall have been delivered to Agent, in
form and substance satisfactory to Agent and its counsel, such other evidence or documents as Agent
may reasonably request consistent with the other terms of this Agreement to establish the
consummation of the transactions contemplated hereby, the taking of all proceedings in connection
herewith and compliance with the conditions set forth in this Agreement.

          4.02 Conditions Precedent to Each Advance and Letter of Credit. The obligation of each
Lender to make any Advance or to issue any Letter of Credit (or to renew or extend any Letter of
Credit) hereunder is subject to the following conditions precedent:

     (a) No Default or Event of Default has occurred and is continuing on the date of each
Advance or the date of issuance (or the date of renewal or extension, as the case may be) of
each Letter of Credit or would result from the incurring of obligations by Borrower under
this Agreement;

     (b) The representations and warranties contained herein, in the Collateral Documents
and in any guaranty hereafter executed and delivered by a new Guarantor pursuant to Section
3.04, shall be true and correct in all material respects on the date of each Advance or the
date of issuance (or the date of renewal or extension, as the case may be) of each Letter of
Credit, except as to representations and warranties which expressly relate to an earlier
date and except for changes which are expressly permitted by this Agreement;

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     (c) There has occurred since the Closing Date, no event, development or circumstance
which has had or is reasonably likely to have a Material Adverse Effect, and

     (d) with respect to any Delayed-Draw Term Advance, the proceeds of such Delayed-Draw
Term Advance will only be used for purposes described in clause (vii) of the definition of
“Permitted Indebtedness” under the “Subordinated Notes Indenture.”

Each borrowing by or credit extension to Borrower hereunder shall constitute a representation and
warranty by Borrower as of the date of each such borrowing or credit extension that the conditions
in Section 4.02 have been satisfied.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

          Borrower represents and warrants to each Lender that:

          5.01 Borrower’s Existence. Borrower is a corporation duly organized and validly existing
under the laws of the State of Delaware, and is in good standing and properly licensed to conduct
business in every jurisdiction in which the nature of the business conducted by it makes such
license and good standing necessary and where failure to so comply would have a Material Adverse
Effect.

          5.02 Subsidiaries’ Existence. Each Substantial Subsidiary is duly organized and validly
existing under the laws of the jurisdiction of its formation, and is in good standing and properly
licensed to conduct business in the State in which its principal operations are located and in
every jurisdiction in which the nature of the business conducted by it makes such compliance
necessary and where failure to comply would have a Material Adverse Effect. Each Guarantor which
is not a Substantial Subsidiary is duly organized and validly existing under the laws of the
jurisdiction of its formation and is in good standing and properly licensed to conduct business in
the State in which its principal operations are located and in every jurisdiction in which the
nature of the business conducted by it makes such compliance necessary except where failure to
comply with any of the foregoing could not reasonably be expected to have a Material Adverse
Effect.

          5.03 Borrower’s and Subsidiaries’ Powers. The execution, delivery and performance of this
Agreement, the Notes, the other Credit Documents and any other instrument or agreement required to
be executed and delivered by Borrower hereunder or any of its Subsidiaries are within Borrower’s or
such Subsidiary’s corporate or other appropriate powers, have been duly authorized, and are not in
conflict with the terms of any charter, by-law or other organization papers of Borrower or such
Subsidiary, or any material instrument or agreement to which Borrower or any Subsidiary is a
party or by which Borrower or any Subsidiary is bound or affected (including, but not limited
to, the 1997 Indenture, the 1998 Indenture and the Senior Unsecured Notes Indenture).

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          5.04 Power of Officers. The officers of Borrower and the other Credit Parties executing
this Agreement, the Notes, the other Credit Documents and any other certificate, instrument or
agreement required to be delivered hereunder are duly authorized to execute same.

          5.05 Government Approvals. No approval, consent, exemption or other action by, or notice
to or filing with, any governmental authority is necessary in connection with the execution,
delivery, performance or enforcement of this Agreement, the Notes, the other Credit Documents or
any other instrument or agreement required hereunder, except as may have been obtained and
certified copies of which have been delivered to Agent, and consents, authorizations, filings and
notices obtained or made in the ordinary course of business or except where the failure to so
comply would not reasonably be expected to have a Material Adverse Effect.

          5.06 Compliance With Laws. There is no law, rule or regulation, nor is there any judgment,
decree or order of any court or governmental authority binding on Borrower or any Subsidiary, which
would be contravened by the execution, delivery, performance or enforcement of this Agreement, the
Notes, the other Credit Documents or any instrument or agreement required hereunder, except where
the failure to so comply would not reasonably be expected to have a Material Adverse Effect.

          5.07 Enforceability of Agreement. Each of this Agreement, the Notes and each of the other
Credit Documents to which the Borrower or any of its Subsidiaries is a party are legal, valid and
binding agreements and obligations of Borrower, or such Subsidiary, as the case may be, enforceable
against Borrower or such Subsidiary, as the case may be, in accordance with their respective terms,
and any other instrument or agreement required hereunder, when executed and delivered, will be
similarly legal, valid, binding and enforceable, subject, in each case, to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally and general equitable principles (whether
considered in a proceeding in equity or at law).

          5.08 Title to Property. Borrower and its Subsidiaries have good title to their respective
personal properties and assets, and good and marketable title to their respective real properties,
free and clear of all Liens, except for Permitted Liens on such properties and assets. The
execution, delivery or performance of this Agreement, the Notes, the other Credit Documents or any
instrument or agreement required hereunder will not result in the creation of any Lien, other than
in favor of the Secured Creditors pursuant to the Collateral Documents.

          5.09 Litigation. Except as disclosed on Schedule 5.09, there are no suits, proceedings,
claims or disputes pending or, to the knowledge of Borrower, threatened against or affecting
Borrower or any Subsidiary or their respective property, which could reasonably be expected to have
a Material Adverse Effect.

          5.10 Events of Default. No event has occurred and is continuing or would result from the
incurring of obligations by Borrower or its Subsidiaries under this Agreement and the other Credit
Documents which is a Default or an Event of Default.

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          5.11 Compliance with Margin Requirements. Borrower is not in violation of any provision of
Section 7 of the Securities Exchange Act of 1934 or any Margin Regulation, nor will Borrower’s
activities cause it to violate such provision or any Margin Regulation.

          5.12 Subsidiaries. All of Borrower’s Subsidiaries are listed on Exhibit D hereto or on an
amendment thereto delivered pursuant to Section 6.03(d) hereof.

          5.13 Financial Information. The audited consolidated financial statements of Borrower and
its Subsidiaries for the fiscal year ending December 31, 2005 and the unaudited consolidated
financial statements of the Borrower and its subsidiaries for the fiscal quarter ending June 30,
2006 have been furnished by Borrower to Lenders. Such financial statements have been prepared in
accordance with GAAP and practices consistently applied and accurately and fairly present in all
material respects the consolidated financial condition and results of operations of the entities
referred to therein as of such dates. Since October 3, 2006, there has been no change in
Borrower’s consolidated financial condition or results of operations sufficient to impair
Borrower’s ability to repay the Obligations in accordance with the terms hereof. Neither Borrower
nor any Subsidiary has any contingent obligations, liabilities for taxes or other outstanding
financial obligations which are material in the aggregate, except those for which adequate reserves
are established or as disclosed in such statements or in the statements or reports delivered or to
be delivered for the period in which such obligations were incurred pursuant to Section 6.03.

          5.14 ERISA. Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and any other applicable federal or state law, and except as listed
on Schedule 5.14 no event or condition is occurring nor is there any present intent to cause any
such event or condition to occur with respect to any Plan or Multiemployer Plan with respect to
which Borrower would be under an obligation to furnish a report to Lenders in accordance with
Section 6.02(d) hereof and which, taking all such events or conditions arising within the last
twelve-month period, in the aggregate would result in liability to Borrower or an ERISA
Affiliate in excess of One Million Dollars ($1,000,000). For purposes of this representation and
warranty, Borrower, or any ERISA Affiliate if not the Plan administrator, shall be deemed to have
knowledge of all facts attributable to the Plan administrator designated pursuant to ERISA;
provided, however, that the foregoing representation with respect to Multiemployer
Plans is made with respect to matters of which Borrower or any ERISA Affiliate has actual
knowledge. The aggregate withdrawal liability under Section 4201 of ERISA which could be incurred
by Borrower and each ERISA Affiliate, collectively, upon a complete withdrawal, within the meaning
of Section 4203 of ERISA, from each and all Multiemployer Plans to which each is contributing or
has contributed within the past five calendar years, plus the aggregate of the excess of benefit
liabilities, within the meaning of Section 4001(a)(16) of ERISA, of each Plan upon termination of
such Plan over the assets of such Plan, does not exceed Five Million Dollars ($5,000,000).

          5.15 Investment Company Act of 1940. Neither Borrower nor any of its Subsidiaries is an
“investment company” or a company “controlled” by an “investment company”, within the meaning of
the Investment Company Act of 1940, as amended.

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          5.16 No Restrictions on Subsidiaries. No Subsidiary is prohibited by the terms of any
agreement to which it is a party or by which it is bound or affected from paying dividends to or
making loans or advances to Borrower or any Subsidiary directly controlling it, except (a) as
disclosed in Schedule 5.16; (b) restrictions imposed by this Agreement or any Collateral Agreement;
(c) customary non-assignment provisions restricting subletting or assignment of any lease or
assignment of any contract of any Subsidiary; customary net worth provisions contained in leases
and other agreements entered into by a Subsidiary in the ordinary course of business; and customary
provisions in instruments or agreements relating to a Lien created, incurred or assumed in
accordance with this Agreement prohibiting the transfer of the property subject to such Lien, in
each case in existence on the Closing Date; (d) restrictions on Debt secured by any Permitted Lien
limiting the right of such Subsidiaries to dispose of the assets securing such Debt to the extent
that the agreement governing such Debt prohibits the transfer of such assets as a Restricted
Payment; (e) customary restrictions with respect to a Subsidiary pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the capital stock or
assets of such Subsidiary; and (f) any restrictions pursuant to any agreement that extends,
refinances, renews or replaces any agreement containing any of the restrictions described in the
foregoing clauses (a) through (e), provided that the terms and conditions of any such
restrictions are not less favorable to the Lenders than those under or pursuant to the agreement
extended, refinanced, renewed or replaced.

          5.17 Senior Indebtedness. The Borrower agrees that at all times the Secured Obligations
will constitute Senior Indebtedness and Designated Senior Indebtedness under the Subordinated Notes
Indenture.

          5.18 Environmental Matters. As of the Closing Date:

          (a) except as disclosed on Schedule 5.18, the property, assets and operations of Borrower and
the Subsidiaries comply in all material respects with all applicable Hazardous Materials Laws and
all governmental permits required thereunder relating to the use and/or operation thereof (except
to the extent that failure to comply with such Hazardous Materials Laws or applicable permits would
not reasonably be expected to have a Material Adverse Effect;

          (b) to the knowledge of Borrower, (i) none of the real property owned in fee, or the assets
or operations of Borrower and the Subsidiaries related thereto is the subject of federal or state
investigation mandating any remedial action, involving expenditures, which is needed to respond to
a release of any Hazardous Materials into the environment where such expenditures would reasonably
be expected to have a Material Adverse Effect, (ii) there are no underground storage tanks present
on or under the Properties owned in fee the presence of which would reasonably be expected to have
a Material Adverse Effect, and (iii) there are no pending or threatened: (A) actions or proceedings
from any governmental agency or any other person or entity regarding the disposal of Hazardous
Materials, or regarding any Hazardous Materials Laws or evaluation, or (B) liens or governmental
actions, notices of violations, notices of noncompliance or other proceedings of any kind relating
to any of the Hazardous Materials Laws with respect to the Properties where such actions,
proceedings or liens would reasonably be expected to have a Material Adverse Effect; and

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          (c)   neither Borrower nor any Subsidiary has any material liability (material to the Borrower
and its Subsidiaries taken as a whole) in connection with any release of any Hazardous Materials
into the environment.

          5.19   Collateral Documents.
(a)  The provisions of each of the Collateral Documents
(other than the Mortgages, subject to (b) below, and the collateral assignments of tenant’s rights
in leases) are effective to create in favor of the Collateral Agent, for the benefit of the Secured
Creditors, a legal, valid and enforceable security interest in all right, title and interest of
Borrower and its Subsidiaries in the Collateral described therein; and financing statements have
been filed (or, in the case of UCC-1 financing statements delivered on the Closing Date, delivered
in the proper form for filing) in the offices in all of the jurisdictions listed in the schedules
to the Guarantee and Collateral Agreement.

          (b)   Each Mortgage when delivered will be effective to grant to the Collateral Agent for the
benefit of the Secured Creditors, a legal, valid and enforceable mortgage lien on all the right,
title and interest of the mortgagor under such Mortgage in the real property and fixtures described
therein. When each such Mortgage is duly recorded in the appropriate land records offices and the
mortgage recording fees and taxes in respect thereof are paid and compliance is otherwise had with
the formal requirements of state law applicable to the recording of real estate mortgages
generally, each such Mortgage shall constitute a perfected first priority mortgage lien on such
mortgaged property, subject to the encumbrances and exceptions to title set forth therein
and except as noted in the title policies and title endorsements thereto delivered to the
Collateral Agent, and such Mortgage also creates a legal, valid, enforceable and perfected first
lien on, and security interest in, all right, title and interest of Borrower or such Subsidiary
under such Mortgage in all fixtures which are covered by such Mortgage, subject to no other Liens,
except the encumbrances and exceptions to title set forth therein and except as noted in the title
policies and title endorsements thereto delivered to the Collateral Agent and Permitted Liens.

          (c)   The provisions of the Guarantee and Collateral Agreement, after giving effect to the
filing of UCC-1 financing statements in the offices set forth on the schedules to the Guarantee and
Collateral Agreement and completion of the filings and other actions described in Schedule 3 to the
Guarantee and Collateral Agreement, shall be effective to create, in favor of the Collateral Agent,
for the ratable benefit of the Secured Creditors, a fully perfected first Lien on, and security
interest in, all right, title and interest of Borrower and the Guarantors in the “Collateral”, as
defined in the Guarantee and Collateral Agreement (except for Permitted Liens).

          5.20   Copyrights, Patents, Trademarks and Licenses, etc. Except as disclosed in
Schedule 5.20, Borrower and its Subsidiaries own or are licensed or otherwise have the right to use
all of the Intellectual Property that is reasonably necessary for the operations of their
respective businesses as currently conducted, without material conflict with the rights of any
other Person with respect thereto, except where the failure to be in compliance with this sentence
would not have a Material Adverse Effect. To the best knowledge of Borrower, no slogan or other
advertising device, product, process, method, substance, part or other material now employed, or
now contemplated to be employed by Borrower or any of its Subsidiaries infringes upon any rights
obtained by any other Person, except where the failure to be in compliance with this sentence would
not have a Material Adverse Effect, and no claim or litigation regarding any of the foregoing is
pending or threatened.

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          5.21   Accuracy of Information, etc. No statement or information contained in this
Agreement, any other Credit Document, the “private” Confidential Information Memorandum dated
October 2006 or any other document. certificate or statement (other than Schedule 1.01 until such
time Schedule 1.01 shall have been updated pursuant to Section 6.16) furnished by or on behalf of
any Credit Party to the Agent or the Lenders, or any of them, for use in connection with the
transactions contemplated by this Agreement or the other Credit Documents, contained as of the date
such statement, information, document or certificate was so furnished (or, in the case of the
Confidential Information Memorandum, as of the date of this Agreement), any untrue statement of a
material fact or omitted to state a material fact necessary to make the statements contained herein
or therein (taken as a whole and as of the date furnished) not materially misleading in light of
the circumstances under which such statements are made. The projections and pro forma financial
information contained in the materials referenced above are based upon good faith estimates and
assumptions believed by management of the Borrower to be reasonable at the time made, it being
recognized by the Lenders that such financial information as it relates to future events is not to
be viewed as fact, no assurances are given that such projections will be attained
and that actual results during the period or periods covered by such financial information may
differ from the projected results set forth therein by a material amount.

          5.22   Permitted Indebtedness. All Indebtedness (as defined in the Senior Unsecured
Notes Indenture) outstanding in respect of the Secured Obligations is and will be permitted by
Sections 1.1 and 10.8 of the Senior Unsecured Notes Indenture. All Secured Obligations are and
will be permitted under the Senior Unsecured Notes Indenture. All Liens on the Collateral are and
will be permitted by Sections 1.1 and 10.11 of the Senior Unsecured Notes Indenture.

ARTICLE VI.

AFFIRMATIVE COVENANTS

          Borrower covenants and agrees that so long as the Credit shall remain available, and until the
full and final payment of all Obligations (other than contingent indemnification obligations for
which no claim has been asserted), it will, and with respect to Sections 6.01, 6.04, 6.05, 6.06,
6.07, 6.08, 6.09, 6.10, 6.11, 6.14, 6.15, 6.16 and 6.17, it will cause each Subsidiary to, unless
Majority Lenders waive compliance in writing:

          6.01   Use of Proceeds and Letters of Credit. Use (a) the proceeds of the Revolving
Advances solely (i) to refinance and continue indebtedness under the Existing Credit Agreement,
(ii) for general corporate purposes, including to finance expansions and investments permitted
hereunder and (iii) for working capital purposes in the ordinary course of business; (b) the
Letters of Credit (i) to provide security as required under applicable state consumer protection
statutes and for utility deposits, (ii) to provide credit support for insurance, construction
bonds, rent deposits and utility bonds, (iii) to secure the payment of workers’ compensation
benefits and obligations, (iv) for the purposes described in clause (ii) of the definition of
“Permitted Liens” and to provide credit support for the obligations described therein, and (v) for
the general corporate purposes of the Borrower and its Subsidiaries in the

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ordinary course of
business; (c) the proceeds of the Tranche B Term Advances in the following order of priority: (i)
first, subject to Section 2.03(a), to refinance all Term Advances outstanding under the Existing
Credit Agreement, (ii) second, to refinance all Revolving Advances outstanding under the Existing
Credit Agreement, (iii) third, to pay fees and expenses related to the foregoing, (iv) fourth, for
general corporate purposes, including to finance expansions and investments permitted hereunder and
(v) fifth, for working capital purposes in the ordinary course of business; and (d) the proceeds of
the Delayed-Draw Term Advances solely to finance or refinance the purchase price or cost of
construction or improvement of certain capital expenditures, including the acquisition, improvement
or development of real or personal, movable or immovable property of the Borrower or any of its
Restricted Subsidiaries after the Closing Date. For purposes of this Section 6.01, a “hostile
takeover” of another entity or a “tender offer” in furtherance of same is not a proper purpose.

          6.02   Notices. Promptly, but within five (5) Banking Days, unless otherwise provided below, give written
notice to Agent of:

     (a)   except for matters previously disclosed on Schedule 5.09, Schedule 6.02(a), and
the Public Filings (unless there is a significant development with respect to these
matters), any litigation affecting Borrower or any Subsidiary, the adverse determination of
which could materially and adversely affect the financial condition or business of Borrower
and its Subsidiaries taken as a whole, or where the amount Borrower or such Subsidiary
expects to pay the other parties to the litigation is more than Five Million Dollars
($5,000,000) except to the extent covered by written, legally enforceable third party
insurance or other indemnity;

     (b)   (i) any dispute which may exist between Borrower or any Subsidiary and any
governmental regulatory body or law enforcement authority which has not been previously
disclosed and could reasonably be expected to have a Material Adverse Effect, and (ii) any
lien for taxes (other than taxes unless such taxes are due), assessments, governmental
charges, or levies, in each case in excess of One Million Dollars ($1,000,000), immediately
upon the filing thereof or the attachment thereof to any property of Borrower or any of its
Subsidiaries;

     (c)   any labor controversy resulting in or reasonably likely to result in a strike
against Borrower or any Subsidiary which could reasonably be expected to have a Material
Adverse Effect;

     (d)   the occurrence of a Reportable Event with respect to any Plan which could result
in the incurrence by Borrower or any ERISA Affiliate of any liability, fine or penalty; the
institution of any steps to terminate any Plan (together with copies of any communication
between the PBGC and Borrower or any ERISA Affiliate related to such termination); the
institution of any steps to withdraw from any Plan, within the meaning of Section 4062(e) or
4063 of ERISA, or any Multiemployer Plan, within the meaning of Section 4203 or 4205 of
ERISA; the incurrence of any material increase in the contingent liability of Borrower or
any ERISA Affiliate with respect to any post-retirement welfare benefits; the failure of
Borrower or any other Person to make a required contribution to a Plan if such failure is
sufficient to give rise to a lien under Section 302(f) of ERISA; or

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the adoption of an
amendment to any Plan that pursuant to Section 401(a)(29) of the Code or Section 307 of
ERISA would require Borrower or an ERISA Affiliate to provide security to the Plan in
accordance with the provisions of such Sections;

     (e)   any Default or Event of Default, specifying the nature and the period of
existence thereof and what action Borrower has taken or proposes to take with respect
thereto;

     (f)   upon, but in no event later than thirty (30) days after, becoming aware of (i)
any and all enforcement, cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened against Borrower or any Subsidiary or any of their
properties pursuant to any applicable Hazardous Materials Laws which has the reasonable
likelihood of subjecting Borrower or any Subsidiary to environmental liability
of Five Million Dollars ($5,000,000) or more (to the extent not covered by written,
legally enforceable third party insurance or other indemnity), (ii) all claims made or
threatened by any third party against Borrower or any Subsidiary with respect to or because
of its or their property relating to damage, responsibility, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials which has the reasonable
likelihood of subjecting Borrower or any Subsidiary to environmental liability of Five
Million Dollars ($5,000,000) or more (to the extent not covered by written, legally
enforceable third party insurance or other indemnity) (the matters set forth in clauses (i)
and (ii) above are hereinafter referred to as “Hazardous Materials Claims”), and (iii) any
environmental or similar condition on any real property adjoining or in the vicinity of the
property of Borrower or any Subsidiary that could reasonably be anticipated to cause the
property owned by Borrower or any Subsidiary or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use of such property under any
Hazardous Materials Laws which has the reasonable likelihood of subjecting Borrower or any
Subsidiary to liability of Five Million Dollars ($5,000,000) or more (to the extent not
covered by written, legally enforceable third party insurance or other indemnity), together
with copies of all inquiries, reports or notices relating to the matters set forth in
clauses (i), (ii) and (iii);

     (g)   following receipt by Borrower of a material notice from any holder or
representative of Subordinated Debt or any Senior Unsecured Notes, a copy of such notice
and, concurrently with the sending of any notice by Borrower to the holder or representative
of any Subordinated Debt or any Senior Unsecured Notes, a copy of such notice; and

     (h)   any other matter which has resulted or is reasonably likely to result in a
Material Adverse Effect.

          6.03   Financial Statements, Reports, Etc. Deliver or cause to be delivered to the
Agent, with copies for each of the Lenders:

     (a)   As soon as available but no later than forty-five (45) days after the close of
each of the first three fiscal quarters of each of Borrower’s fiscal years, Borrower’s
unaudited consolidated statement of income and retained earnings as of the close of such

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quarter, its consolidated balance sheet and statement of income and retained earnings for
that portion of the fiscal year ending with such quarter, and its unaudited consolidated
statement of cash flows for that portion of the fiscal year ending with such quarter. Each
of such financial statements shall be certified by a responsible officer of Borrower as
being prepared in accordance with then applicable GAAP; provided, that the delivery
to each Lender of a Form 10-Q Quarterly Report of the Borrower within the time period set
forth above shall satisfy the Borrower’s obligations pursuant to this paragraph (a);

     (b)   As soon as available but no later than ninety (90) days after the close of each
of its fiscal years, a copy of the unqualified, audited financial statements of Borrower and
such other audited financial statements of Subsidiaries of Borrower that have been
prepared (if any). Such financial statements shall include at least the balance sheet
of Borrower as of the close of such year and statements of income and retained earnings and
of changes in financial position and cash flows for such year, prepared (in the case of
Borrower) on a consolidated basis, and such consolidated financial statements shall be
certified by KPMG LLC or by other independent public accountants of national reputation
selected by Borrower and reasonably satisfactory to Lenders. The delivery to each Lender of
a Form 10-K Annual Report within the time period set forth above shall satisfy the
Borrower’s obligations pursuant to the preceding portion of this Section 6.03(b);
provided that the consolidated financial statements included in such Form 10-K shall
be certified by KPMG LLC or by other independent public accountants of national reputation
selected by Borrower and reasonably satisfactory to Lenders. The accountants’ certification
shall not be qualified or limited because of restricted or limited examination by such
accountants of any material portion of the records of Borrower or any such Subsidiary for
which audited financial statements have been prepared; provided, however, it being
understood a “going concern” qualification or exception, or any exception or identified
weakness regarding compliance with the Sarbanes-Oxley Act of 2002 shall not in and of itself
constitute a Default or an Event of Default under the Credit Documents. Such accountants
for Borrower shall state in a letter to Lenders that in the course of their examination such
accountants, without undertaking any special procedures for the purpose of such certificate,
have obtained no knowledge of the occurrence of any condition, event or act which would
constitute a Default or an Event of Default with respect to financial covenants and certain
computations, or, if such accountants shall have obtained knowledge of any such violation,
condition, event or act, they shall specify in such letter all such violations, conditions,
events and acts and the nature and status thereof. If any of the materials required to be
delivered pursuant to paragraph (c) of this Section 6.03 are delivered in connection with
the delivery of the financial statements pursuant to this Section 6.03(b), the Borrower
shall not be required to deliver separately such statements pursuant to such paragraph (c).
Borrower shall promptly deliver to Agent a copy of any management letters from such
accountants to Borrower;

     (c)   promptly after filing with the Securities and Exchange Commission, a copy of each
Form 8-K Current Report, Form 10-K Annual Report, Form 10-Q Quarterly Report and Form 11-K
Annual Report, Annual Report to Shareholders, Proxy Statement and Registration Statement of
(i) Borrower and (ii) Borrower’s Subsidiaries;

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     (d)   not later than forty (40) days after the end of each fiscal month (other than the
last month in each fiscal quarter), Borrower’s unaudited consolidated statements of income
and cash flows for that portion of the fiscal year ending with such month and its unaudited
consolidated balance sheet as of the last day of such fiscal month, certified by a
responsible officer of Borrower as being complete and correct in all material respects and
fairly presenting in all material respects its results of operations and cash flows and
financial condition and including a comparison to the same period (or date, in the case of
balance sheets) for the prior fiscal year;

     (e)   (A) contemporaneous with the delivery of the financial statements set forth in
Section 6.03(d), a certificate executed by any of the chief financial officer, vice
president, treasurer or controller of Borrower, stating that such officer is familiar with
this
Agreement and the business and operations of Borrower and showing Borrower’s compliance
with Sections 6.12 and 6.14 and (B) contemporaneous with the delivery of the financial
statements set forth in Section 6.03(a) or (b), as applicable, a certificate executed by any
of the chief financial officer, vice president, treasurer or controller of Borrower, stating
that such officer is familiar with this Agreement and the business and operations of
Borrower and (i) showing Borrower’s compliance with Sections 6.18, 7.01, 7.02, 7.07 and
7.10, (ii) if Borrower or any Subsidiary is not in compliance therewith, showing such
failure to comply, the amount thereof and explaining the reason therefor, (iii) specifying
changes during such month in the list of Subsidiaries previously delivered by the Borrower
to the Lenders, other than changes previously reported to the Agent during such month, (iv)
stating that Borrower has performed all its obligations hereunder and under any judgment,
decree or order of any court or governmental authority binding on Borrower except as may be
contested in good faith upon advice of counsel and for the possible payment of which
adequate reserves are being maintained, (v) stating that no event has occurred which
constitutes a Default or an Event of Default, or, if such event has occurred, the nature and
status thereof and the steps that Borrower is taking or has taken to cure the same and (vi)
stating the name and jurisdiction of organization of each Subsidiary and Unrestricted
Subsidiary created during such month;

     (f)   commencing March 31, 2007, on such date and on the last day of each March
thereafter, updated projections through its fiscal year ending December 31, 2010 which are
similar in form and substance to the projections delivered pursuant to Section 4.01(u);

     (g)   such other statements, lists of property and accounts, budgets, forecasts or
reports as Agent or any Lender may reasonably request;

     (h)   at each time financial statements of the Borrower are required to be delivered
pursuant to paragraph (a), (b) or (d) above, copies of the combined balance sheet of the
Unrestricted Subsidiaries as of the close of the applicable fiscal month and combined
statements of income and retained earnings of the Unrestricted Subsidiaries for the portion
of the fiscal year ending with such month, all set forth in a format which reconciles such
financial statements of the Unrestricted Subsidiaries to the corresponding financial
statements delivered pursuant to paragraphs (d);

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     (i)   upon request of the Agent, a description of the business and activities of each
Unrestricted Subsidiary created after the Closing Date and the Borrower’s reason for
designation of such entity as an Unrestricted Subsidiary; and

     (j)   no later than the first Monday of each calendar month, a forecast of the sources
and uses of cash by the Borrower and its Subsidiaries (including Unrestricted Subsidiaries)
on a weekly basis for the succeeding thirteen (13) calendar weeks, together with a report
describing variances of sources and uses from previously delivered forecasts, all in form
and substance reasonably satisfactory to the Agent [and its financial advisor, if any].

Information required to be delivered pursuant to Section 6.03(a), (b) and (c) shall be deemed to
have been delivered to the Agent on the date on which the Borrower provides written notice to
the Agent that such information is available on the Internet via the EDGAR system of the SEC (to
the extent such information is so available on such date).

          6.04   Further Assurances. Borrower shall execute and deliver, or cause to be
executed and delivered, to Lenders, Agent or the Collateral Agent, such documents and agreements,
and shall take or cause to be taken such actions, as Agent, the Collateral Agent or the Majority
Lenders may from time to time reasonably request to carry out the terms and conditions of this
Agreement and all of the Collateral Documents.

          6.05   Existence, Etc. Subject to Section 7.05, maintain and preserve its existence
and all rights, privileges and franchises now enjoyed and necessary for use in its business, and
keep all its properties material to its operations consistent with industry practice in good
working order and condition.

          6.06   Ownership of Stock of Subsidiaries. Subject to Sections 7.01(g), 7.05 and
7.07, maintain at least the same ownership of the capital stock or other equity interests of each
of its Subsidiaries as in effect on the Closing Date or, if such Subsidiary is acquired after the
Closing Date, the same ownership of Capital Stock or other equity interests of such Subsidiary as
existed on the date of acquisition.

          6.07   Payment of Obligations. Pay all material obligations, including tax claims,
when due, except such as may be diligently contested in good faith and by appropriate proceedings
or as to which a bona fide dispute may exist and for which adequate reserves are being maintained.

          6.08   Compliance with Laws. At all times comply with all laws, rules, regulations,
orders and directions of any governmental authority applicable to or having jurisdiction over it or
its business, the violation of which could reasonably be expected to have a Material Adverse
Effect.

          6.09   Insurance and Condemnation. Maintain at all times substantially the same type
of insurance coverage in respect of its properties and assets as that maintained in respect thereof
immediately prior to the execution of this Agreement:

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     (a)   in amounts not less than the amount of the coverage immediately prior to the
execution of this Agreement for all insurance other than that described in clause (b) below
including, without limitation, fire and extended coverage insurance for the full and
insurable replacement value of all buildings and other improvements located on its
properties and business interruption and workmen’s compensation insurance. All such
insurance (other than workmen’s compensation insurance and directors’ and officers’
insurance) relating to assets of Borrower or its Subsidiaries shall name the Collateral
Agent as loss payee (and in the case of each item of real property on which the Collateral
Agent has a security interest, mortgage loss payee) and an additional insured for the
interests relating to the assets of Borrower and its Subsidiaries, for the benefit of the
Collateral Agent and each Secured Creditor, as their interests may appear, and shall not be
modified, reduced or cancelled in the absence of thirty (30) days prior written notice to
the Collateral Agent. Borrower shall promptly notify Agent of any loss, damage, or
destruction to the Collateral in excess of $2,000,000 for each such casualty, whether or not
covered by insurance. The Collateral Agent is hereby authorized to collect all insurance
proceeds directly. With respect to insurance proceeds arising from loss, damage or other
casualty to any of the Collateral or any part thereof, such proceeds shall be applied as
hereinafter provided. Destruction or damage to any real or personal property of Borrower or
any Subsidiary which gives rise to insurance proceeds shall be deemed to be a disposition of
such property for purposes of Section 7.08(d); provided, however, that if
the total amount of the proceeds from such casualty is reasonably expected to be less than
$5,000,000 and neither an Event of Default nor a Default shall have occurred and be
continuing, Borrower shall have the exclusive right to negotiate a settlement regarding such
proceeds with the applicable insurance company and the Collateral Agent shall promptly
forward such proceeds to Borrower and the Borrower shall use such proceeds to pay for the
repair or replacement (it being agreed that a destroyed or damaged fitness center may be
replaced at any site within five miles of the site of such fitness center) of the Collateral
subject to such casualty; provided, further, however, that if an Event of
Default or a Default shall have occurred and be continuing, or the proceeds of insurance
from such casualty are reasonably expected to be equal to or greater than $5,000,000,
Borrower shall not enter into any settlement agreement with the applicable insurance company
without the prior written consent of Agent, which consent shall not be unreasonably
withheld, and if a determination has been made by Borrower, with the prior written consent
of Agent, to utilize such proceeds to replace or rebuild the Collateral affected by such
casualty, the Collateral Agent shall release such proceeds to Borrower from time to time
during the course of said reconstruction, repair or restoration, but not more often than
once each thirty (30) day interval, in accordance with the Collateral Agent’s customary
practices for disbursements of construction loans, including, without limitation, customary
conditions precedent to disbursement, provided that:

     (i)   at the time of any requested release of funds, no Event of Default or
Default shall have occurred and be continuing (to the extent such Event of Default or
Default is cured or waived, Borrower may again request the release of such funds);

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     (ii)   if at the time of any such request by Borrower the cost of completing the
repair, replacement or reconstruction, lien-free and ready for use, is in excess of
insurance proceeds and other sums then in the Collateral Agent’s hand pursuant to
this Section 6.09, funds to cover such excess shall either (x) be promptly deposited
by Borrower with the Collateral Agent and shall be disbursed under this Section 6.09
in the same manner as insurance proceeds or (y) to the extent some or all of
such amount is available to be borrowed pursuant to Section 2.01(a) hereof,
Borrower may, in lieu of the deposit set forth in subsection (x) above, elect to
borrow such amounts as an Advance in accordance with the terms of Article II hereof
when and as needed to complete the repair;

     (iii)   costs of administering this disbursement procedure shall be paid by
Borrower out of funds on deposit with the Collateral Agent or otherwise;

     (iv)   when repair, replacement or reconstruction has been completed and paid
for, all insurance proceeds then remaining in the Collateral Agent’s hands shall be
applied, first, to the payment of the Term Advances in accordance with
Section 2.13(a) and, second, to the payment of the other Obligations in
accordance with Section 2.13(a);

     (v)   the Collateral Agent shall be satisfied that, upon release of such
proceeds, it shall have for the ratable benefit of the Secured Creditors, a first
priority perfected security interest on all property acquired (or to be acquired),
but subject to Permitted Liens, with such proceeds; and

     (vi)   each release of funds shall be conditioned upon receipt by Agent of such
documentation as Agent may reasonably require such as bills of sale, other evidences
of ownership by the Borrower (or a Subsidiary) of property acquired with such
proceeds, completion certificates, waivers of mechanic’s liens, etc.

The Collateral Agent shall, pending disbursement or application of funds in accordance with
the terms of this Section 6.09, hold any insurance proceeds (and other funds deposited with
it pursuant to clause (ii) above) deposited with it in an interest bearing account as to
which the Collateral Agent shall not be liable in any respect to Borrower for any investment
results. Interest thereon shall be held and disposed of in the same manner as other monies
held by the Collateral Agent under this Section 6.09. On each anniversary date of this
Agreement, Borrower shall provide Agent with a summary of each insurance policy satisfactory
to Agent reflecting the insurance coverage required under this Section 6.09 (together with
complete copies of any insurance policies which Agent may request promptly after such
request but not later than six months after such request). In the event of foreclosure of
any mortgage or deed of trust in favor of Collateral Agent encumbering the Properties or
transfer of title to the Properties in lieu of foreclosure, all right, title and interest of
Borrower in and to any insurance policies then in force with respect to the Properties
(other than liability policies of Borrower) shall pass to the purchaser, grantee or
assignee. In the event of any taking of any portion of any of the Properties by
condemnation, seizure or appropriation by any governmental authority which does not
constitute an Event of Default hereunder, all awards or proceeds on

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account of said taking
shall be collected and applied in the same manner and shall be subject to the same
conditions precedent to the disbursement thereof as applicable to insurance proceeds under
this Section 6.09. Notwithstanding the foregoing, the rights of the Agent and the Lenders
under this paragraph (a) with respect to property and casualty insurance proceeds relating
to loss, destruction or damage, or a taking of, real property (x) leased by the Borrower or
any of its Subsidiaries or (y) which is subject to a mortgage
lien which is prior to the lien of any Mortgage in favor of the Collateral Agent thereon,
and for which in either case the Collateral Agent is named as loss payee, shall be
subordinate to the rights, if any, of the owner of such real property or the holder of such
prior mortgage lien to the extent such owner or holder is also named as loss payee; and

     (b)   in an amount not less than Fifty Million Dollars ($50,000,000) for general
liability coverage, including both bodily injury and property damage, on a per occurrence
basis (the “Minimum Liability Coverage”), provided, however, that
the Minimum Liability Coverage may be reduced from time to time to a coverage limit of not
less than Twenty-Five Million Dollars ($25,000,000) on a per occurrence basis (the
“Lowered Coverage”) if, within thirty (30) days prior to the expiration of any
Minimum Liability Coverage policy, and thereafter within thirty (30) days after the end of
each fiscal year of Borrower until the Minimum Liability Coverage is reinstated, Borrower
delivers to Agent a certificate signed by the chief operating officer of Borrower stating
that Borrower has obtained a lesser amount of coverage, setting forth the amount thereof,
and that Borrower was unable to obtain Minimum Liability Coverage and was able to obtain
general liability coverage only in the amount set forth in the Borrower’s certificate;
provided, further, however, that the Lowered Coverage may be reduced
from time to time to a coverage limit of not less than Twenty-Five Million Dollars
($25,000,000) on a “claims made” basis if, within thirty (30) days prior to the expiration
of any Lowered Coverage policy and thereafter within thirty (30) days after the end of each
fiscal year of Borrower until the Minimum Liability Coverage is reinstated, Borrower
delivers to Agent a certificate signed by the chief operating officer of Borrower stating
that Borrower has obtained a lesser amount of coverage, setting forth the amount thereof,
and that Borrower was unable to obtain Minimum Liability Coverage or Lowered Coverage and
was able to obtain general liability coverage only in the amount set forth in the Borrower’s
certificate.

          6.10   Adequate Books. Maintain adequate books, accounts and records in accordance
with then applicable GAAP, and at any reasonable time upon reasonable notice, during normal
business hours, permit employees or agents of each Lender at any reasonable time to inspect its
properties and examine or audit its books, accounts and records and make copies and memoranda
thereof; provided, that, so long as no Event of Default has occurred and is continuing, the
Borrower shall only be required to reimburse the reasonable out-of-pocket costs and expenses of the
Agent incurred in connection with any such inspection; and provided, further, that
the Borrower shall also be required to reimburse such reasonable out-of-pocket costs and expenses
incurred by any Lender while an Event of Default shall have occurred and be continuing.

          6.11   ERISA. Make prompt payment contributions required to meet the minimum funding
standards of ERISA (including any funding waivers granted thereunder) or as

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required pursuant to a
collective bargaining agreement and to maintain, and cause each of its ERISA Affiliates to
maintain, each employee benefit plan (as defined in Section 3(3) of ERISA) as to which it may have
any liability in material compliance with all applicable requirements of law and regulations.

          6.12   Minimum Liquidity. On the last day of any fiscal month of the Borrower,
maintain Liquidity equal to or greater than the amount set forth below opposite the period during
which such day occurs:

	 	 	 	 	 
	Month Ending	 	Minimum Allowed	 
	November 30, 2006
	 	$	15,000,000	 
	December 1, 2006 through October 31, 2007
	 	$	25,000,000	 
	November 1, 2007 and thereafter
	 	$	30,000,000	 

          6.13   Hazardous Materials. (a)  Conduct, and cause each Subsidiary to conduct, its
operations and keep and maintain its property in compliance with all Hazardous Materials Laws
(except to the extent that failure to comply with such Hazardous Materials Laws would not have a
Material Adverse Effect.

     (b)   Conduct, and cause to be conducted, the ongoing operations of Borrower and its
Subsidiaries in a manner that will not give rise to the imposition of liability, or require
expenditures, under or in connection with any Hazardous Materials Law (except for any
liabilities or expenditure which, in the aggregate, would not have a material adverse effect
on the business, operations, properties, assets or financial condition of Borrower and its
Subsidiaries taken as a whole.

     (c)   Agent and its agents and representatives shall have the right at any reasonable
time to enter and visit the property (whether owned or leased) of Borrower or any of its
Subsidiaries for the purpose of observing such property. Agent is under no duty, however,
to visit or observe any such property, and any such acts by Agent shall be solely for the
purposes of protecting Lenders’ security and preserving Lenders’ rights under the Collateral
Documents. No site visit or observation by Agent shall result in a waiver of any default of
Borrower or any Subsidiary or impose any liability on Agent or Lenders. In no event shall
any site visit or observation by Agent be a representation that Hazardous Materials are or
are not present in, on, or under such property, or that there has been or shall be
compliance with any Hazardous Materials Laws. Neither the Borrower nor any other party is
entitled to rely on any site visit or observation by Agent. Agent owes no duty to inform
Borrower or any other party of any Hazardous Materials or any other adverse condition
affecting any such property. Agent shall not be obligated to disclose to Borrower or any
other party any report or findings made as a result of, or in connection with, any site
visit or observation by Agent. In each instance, Agent shall give Borrower reasonable
notice before entering any such property. Agent shall make reasonable efforts

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to avoid
interfering with the use of any such property in exercising any rights provided in this
Section 6.13.

     (d)   At the Collateral Agent’s reasonable request, which the Collateral Agent may make
at all reasonable times and from time to time, Borrower shall cause Phase I environmental
assessments of the Properties on which the Collateral Agent has Liens to be conducted by
technical consultants reasonably acceptable to the Collateral Agent and detailed written
reports thereof to be furnished to the Collateral Agent, for its benefit, all in a form
reasonably acceptable to the Collateral Agent, provided that no more than one such
audit may be required for any property unless at any time the Collateral Agent reasonably
determines that a breach of Section 5.18 has occurred. In the event said Phase I
environmental audits disclose any environmental condition of any of the Properties which
could cause a material violation of the Hazardous Materials Laws, Borrower shall cause an
assessment of the applicable Property to be conducted by said technical consultant
reasonably acceptable to the Collateral Agent and a detailed written report thereof to be
furnished to the Collateral Agent concerning the subject of such violation, including, where
appropriate, a Phase II environmental assessment. Where applicable, Borrower shall take all
reasonable remedial measures indicated in said Phase II environmental assessment or other
report necessary to be in compliance with law. If Borrower fails to obtain said
environmental assessments as aforesaid, the Collateral Agent may, but shall not be obligated
to, cause said Phase I or Phase II environmental audits to be conducted at Borrower’s sole
cost.

     (e)   Borrower hereby acknowledges that nothing in this Section is either intended to
or actually does give Collateral Agent or the Lenders control of Borrower’s or its
Subsidiaries’ Properties or business or any of its or their business decisions.

          6.14   Minimum Consolidated Cash EBITDA. On the last day of any fiscal month of the
Borrower, cause Consolidated Cash EBITDA for the period (the “Determination Period”) of 12
consecutive fiscal months ending on such day to be equal to or greater than the amount set forth
below opposite the period during which such day occurs; provided, that with respect to any
fiscal month ending prior to August 1, 2007, the Determination Period shall commerce on August 1,
2006 and end on the last day of such fiscal month:

	 	 	 	 	 
	Month Ending	 	Minimum Allowed	 
	November 30, 2006
	 	$	25,000,000	 
	December 31, 2006
	 	$	35,000,000	 
	January 31, 2007
	 	$	40,000,000	 
	February 28, 2007
	 	$	45,000,000	 
	March 31, 2007
	 	$	50,000,000	 
	April 30, 2007
	 	$	55,000,000	 
	May 31, 2007
	 	$	60,000,000	 
	June 30, 2007
	 	$	65,000,000	 
	July 31, 2007 through June 30, 2008
	 	$	70,000,000	 
	July 1, 2008 through December 31, 2008
	 	$	75,000,000	 
	January 1, 2009 through June 30, 2009
	 	$	80,000,000	 
	July 1, 2009 and thereafter
	 	$	90,000,000	 

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          6.15   Real Estate Taxes. Borrower shall pay and discharge, and shall cause its
Subsidiaries to pay and discharge, as and when due and payable, before any penalty attaches, all
charges, impositions, levies, assessments and taxes (whether general, special or otherwise), water
charges, sewer service charges and all other municipal or governmental charges, impositions,
levies, assessments and taxes of any kind or nature that may be at any time levied, assessed or
imposed upon or against any real property owned in fee by any Subsidiary or in which any Subsidiary
has a leasehold interest (but only to the extent Borrower or any Subsidiary is required to pay such
taxes in accordance with the terms of the lease), and shall promptly deliver to Collateral Agent
upon Collateral Agent’s request therefor, duplicate receipts evidencing payment thereof prior to
delinquency. Notwithstanding anything to the contrary in the foregoing, Borrower may contest any
tax imposed, assessed, levied or due with respect to or from said real property, by instituting and
diligently and in good faith prosecuting by appropriate judicial proceedings the validity or amount
of a tax, charge, imposition or assessment (said tax, charge, imposition or assessment being
hereinafter referred to in this Section as “impositions”) if (i) the contest or decision relating
thereto will not and cannot result in the forfeiture of said real property or the Subsidiary’s
leasehold interest therein prior to or pending resolution of such contest and the invalidity,
forfeiture, loss of priority or unenforceability of Collateral Agent’s mortgage lien on said real
property or the Subsidiary’s leasehold interest therein will not and cannot result from such
contest or failure to pay such impositions, (ii) no Event of Default shall exist hereunder, and
(iii) prior to commencement and during the duration of such proceeding, Borrower shall maintain
adequate reserves on account of the failure to pay such imposition and/or the contest of the amount
and/or validity thereof in accordance with GAAP. Upon resolution of such contest, Borrower shall
promptly pay the impositions then due. If, at any time during the continuance of the contest
described in the preceding sentence, said real property or the Subsidiary’s leasehold interest
therein is, in Collateral Agent’s reasonable determination, in imminent danger of being forfeited,
lost or rendered invalid or unenforceable, then, in any of said events, Borrower shall, at
Collateral Agent’s demand, use the aforesaid reserve to pay such impositions and if such reserve is
insufficient to pay in full the required payment, Borrower promptly shall pay the amount of such
insufficiency.

          6.16   Real Estate Collateral. Notwithstanding the provisions of Section 3.05,
Borrower and the Subsidiaries shall have met each of the requirements set forth in Section 3.05 in
connection with, and shall have delivered such opinions of counsel as the Agent shall reasonably
request with respect to, the real property set forth on Schedule 3.05 no later than 60 days
following the Closing Date, as such date may be extended from time to time in the sole reasonable
discretion of the Agent. Upon
Borrower’s receipt of endorsements to the existing title insurance policies, the Borrower
shall promptly and in any event no later than 60 days following the Closing Date deliver an updated
Schedule 1.01, which will only add valid Liens on

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the Existing Mortgage Collateral Properties noted
in such endorsements that were permitted under the Existing Credit Agreement prior to the Closing
Date and permitted hereunder following the Closing Date and secure obligations permitted under the
Existing Credit Agreement prior to the Closing Date and permitted hereunder following the Closing
Date.

          6.17   Control Agreements. The Borrower and its Subsidiaries will not open or create
a Demand Deposit Account or deposit account after the Closing Date unless such Account or account
is maintained with a Lender and is subject to written control agreements (each such agreement,
together with any agreement that constituted a “Control Agreement” under the Existing Credit
Agreement, a “Control Agreement”) with the applicable depository banks and the Collateral
Agent on terms reasonably satisfactory to the Agent in order to perfect a Lien on such Accounts and
accounts in favor of the Secured Parties (“Controlled Accounts”). Notwithstanding the
foregoing, the Borrower and its Subsidiaries shall not be required to enter into such control
arrangements with respect to any Demand Deposit Account or deposit account if the balance from time
to time is, or is expected to be, less than $250,000. The Borrower and its Subsidiaries (except
those Subsidiaries identified in clauses (i) through (iii) of the immediately following sentence)
shall hold at least 80% of all cash, cash equivalents and similar items in Controlled Accounts.
Notwithstanding anything in this Section 6.17 to the contrary, the requirements of this Section
6.17 shall not apply in respect of deposit accounts of (i) Lincoln Indemnity Company, (ii) any
Subsidiary acquired after the Closing Date to the extent such Subsidiary is not required to provide
a security interest in its assets or cause its capital stock to be pledged pursuant to Section
7.01(e) and (iii) Foreign Subsidiaries.

          6.18   Asset Sales. The Borrower and its Subsidiaries shall, during the period
following the Closing Date and ending on December 31, 2006, have received Net Cash Proceeds
(determined without giving effect to the proviso of the definition thereof describing exclusions)
from Permitted Sale/Leasebacks, Permitted Asset Sales, and/or proceeds of issuances of Capital
Stock of the Borrower in an aggregate amount equal to at least $20,000,000.

ARTICLE VII.

NEGATIVE COVENANTS

          Borrower covenants and agrees that so long as the Credit shall remain available, and until
full and final payment of all Obligations (other than contingent indemnification obligations for
which no claim has been asserted), it will not, and with respect to Sections 7.01, 7.02, 7.03,
7.04, 7.05, 7.07, 7.08, 7.09, 7.10, 7.12, 7.13 and 7.15, it will not permit any Subsidiary to,
unless Majority Lenders waive compliance in writing:

          7.01  
Investments and Restricted Payments. Except as otherwise permitted herein, make any Investments in any Person or any Restricted
Payments except:

     (a)   Borrower or any Subsidiary may make Investments in any Guarantor or in the
Borrower;

     (b)   Any Subsidiary may make Restricted Payments to Borrower or any Guarantor;

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     (c)   Borrower may make Investments in cash or Cash Equivalents;

     (d)   Investments may be made in the ordinary course of business related to employees,
such as payments in respect of relocation, entertainment, travel advances, and loans to
employees to exercise stock options, all of which Investments do not exceed in the aggregate
at any one time One Million Dollars ($1,000,000) or Investments made in the ordinary course
of business related to leases such as security deposits or similar items;

     (e)   Borrower or any Subsidiary may acquire on a friendly basis at least 51% of the
Capital Stock, membership interests or partnership interests, of any fitness center located
in the United States, provided that such fitness center shall immediately become a
Guarantor and shall comply with Section 3.04 hereof. As used in this Section 7.01(e),
“fitness center” means any corporation, limited liability company or partnership whose
business is comparable to any of the businesses currently operated by Borrower or any of its
Subsidiaries (other than a finance company);

     (f)   [Reserved];

     (g)   Investments by the Borrower and its Subsidiaries in New Ventures, Joint Ventures,
Foreign Subsidiaries, Lincoln Indemnity Company, and non-Consolidated Subsidiaries, and
Unrestricted Subsidiaries (i) existing on the Closing Date and (ii) made after the Closing
Date; provided that (A) the aggregate amount of such Investments made after the
Closing Date (valued at the time of the making thereof, and after taking into account any
return after the Closing Date from dividends, distributions and repayments in respect of
such Investments) does not exceed, at any one time outstanding, $15,000,000 (plus any
dividends, distributions and repayments in respect of Investments existing on the Closing
Date), (B) the aggregate amount of such investments made after the Closing Date (valued at
the time of the making thereof, and after taking into account any return after the Closing
Date from dividends, distributions and repayments in respect of such Investments) does not
exceed $5,000,000 in any fiscal year (except (i) that any portion of such permitted amount
not used in any fiscal year may be carried forward to subsequent fiscal years and (ii) for
any fiscal year, the amount that would otherwise be permitted to be so invested in such
fiscal year (including as a result of the carry-forward described in the preceding clause
(i)) may be increased by pulling forward to such fiscal year the amount that would be
permitted to be so invested in the immediately succeeding fiscal year; provided,
however, that the actual amount so pulled forward in respect of any fiscal year
shall reduce, on a dollar-for-dollar basis, the amount that would otherwise be permitted to
be so invested in the succeeding fiscal year; and provided, further, that
the aggregate amount permitted to be so invested may in no event exceed $10,000,000 in any
fiscal year) and (C) the cumulative outstanding Investment in any Subsidiary on the date
that such Subsidiary is converted to an Unrestricted Subsidiary in accordance with the terms
hereof shall be deemed an Investment made on such conversion date in an Unrestricted
Subsidiary for purposes of determining compliance with this Section 7.01(h);

     (h)   Investments to the extent funded by Capital Stock of the Borrower issued after
the Closing Date or the cash proceeds thereof received after the Closing Date (and

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Investments of such cash proceeds), provided that such proceeds from issuances of
Capital Stock may only be used for Investments if used within nine months of the issuance of
such stock;

     (i)   [Reserved];

     (j)   Investments resulting from (i) the write-off of intercompany loans in connection
with the liquidation or dissolution of any Subsidiary permitted hereunder and (ii) the
forgiveness of intercompany loans existing as of the Closing Date set forth on Schedule
7.01(j);

     (k)   Investments existing as of the Closing Date as set forth on Schedule 7.01(k) and
any modification, replacement, renewal or extension thereof provided that the original
amount of each such Investment is not increased except as otherwise permitted by this
Section 7.01;

     (l)   Investments resulting from entering into Hedging Arrangements;

     (m)   Investments received in connection with the bankruptcy or reorganization of any
Person or in settlement of obligations of, or disputes with, any Person arising in the
ordinary course of business and upon foreclosure with respect to any secured Investment or
other transfer of title with respect to any secured Investment; and

     (n)   Investments arising out of the receipt by the Borrower or any of its Subsidiaries
of promissory notes and non-cash consideration for Permitted Asset Sales, provided
that the non-cash consideration for any such asset sale shall not exceed 25% of the total
consideration therefore.

Notwithstanding the foregoing, Investments made pursuant to the preceding paragraph (g) shall be
subject to the following restrictions: (x) Collateral (other than cash and Cash Equivalents) having
an aggregate value in excess of $5,000,000 may not be transferred or invested in any one-year
period, (y) Investment in Joint Ventures and New Ventures shall be limited to assets consisting of
health and fitness clubs, cash and Cash Equivalents and (z) intellectual property may not be so
transferred or invested (other than non-exclusive immaterial Intellectual Property). In addition,
other than as permitted by Sections 7.04 and 7.09, the Borrower and its Subsidiaries shall not be
permitted to make Investments (including in Unrestricted Subsidiaries) which have the effect of
paying, purchasing, redeeming or defeasing the Senior Unsecured Notes or the Subordinated Notes or
paying dividends on or purchasing or redeeming Capital Stock of the Borrower. For the avoidance of
doubt, the Borrower and its Subsidiaries shall not provide
Guarantees or other credit support with respect to Unrestricted Subsidiaries after the Closing
Date.

          7.02   Other Obligations. Except as provided in this Agreement, create, incur, assume
or permit to exist any Debt, or create, incur or enter into any Guaranty of any Debt of any other
Person, other than:

     (a)   the Secured Obligations;

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     (b)   Any Debt existing on the Closing Date listed on Schedule 7.02(b) hereto, and any
renewal, extension or refinancing thereof that does not consist of any capitalization of
interest on the original Debt; provided, that the principal amount of such renewal,
extension or refinancing Debt (the “Refinancing Debt”) shall not exceed the
principal amount of the Debt on the Closing Date listed on such Schedule, the maturity date
of each installment or principal of such Refinancing Debt shall not be earlier than the
maturity date of the corresponding installment of the original Debt, the Liens securing the
Refinancing Debt constitute “Permitted Liens” and the only obligor(s) of the Refinancing
Debt shall be the obligor(s) of the Debt on the Closing Date listed on such Schedule;

     (c)   Standby letters of credit obtained in the ordinary course of business;

     (d)   Debt of the Borrower to any of its Subsidiaries and of any Guarantor to Borrower
or any other Guarantor;

     (e)   Debt of the Borrower or any of its Subsidiaries incurred to finance insurance
premiums in the ordinary course of business;

     (f)   additional Debt (including Guarantees of Debt permitted under paragraph (g) of
Section 7.02 to the extent such Guarantee would be in excess of the amount permitted by
paragraph (g) hereof) incurred or assumed by the Borrower and its Subsidiaries in an
aggregate principal amount not to exceed $10,000,000; provided that (i) such Debt is
not secured by any property constituting Collateral under the Collateral Documents (except
to the extent that such Debt may be secured by Liens described under clause (iv) of the
definition of “Permitted Liens”), (ii) any unsecured purchase money seller Debt is
subordinated to the Obligations on terms reasonably satisfactory to the Agent and (iii)
before and after giving effect to the incurrence of such Debt, no Default or Event of
Default shall have occurred and be continuing and provided, further, that
(to avoid double counting) Guarantees of such Debt shall not be considered Debt for the
purposes of this paragraph (f) of this Section 7.02;

     (g)   Guarantees of Debt permitted under paragraph (b) of this Section 7.02 in an
aggregate amount not to exceed $7,000,000;

     (h)   Debt incurred as an Investment permitted by Section 7.01;

     (i)   without duplication of Debt permitted by Section 7.02(b) above, Debt of the
Borrower consisting of the 1997 Subordinated Notes and the 1998 Subordinated Notes, or Debt
of the Borrower qualifying as a Permitted Subordinated Notes Refinancing;

     (j)   Debt of the Borrower consisting of the Senior Unsecured Notes and guarantees of
the Senior Unsecured Notes by Subsidiaries to the extent such Subsidiaries are Guarantors
and pledge their assets as grantors under the Collateral Documents;

     (k)   [Reserved]

     (l)   Debt of the Borrower consisting of (x) repurchase obligations with respect to
Capital Stock of the Borrower issued to directors, consultants, managers, officers and

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employees of the Borrower and its Subsidiaries arising upon the death, disability or
termination of employment of such director, consultant, manager, officer or employee to the
extent such repurchase is permitted hereunder and (y) promissory notes issued by the
Borrower to directors, consultants, managers, officers and employees (or their spouses or
estates) of the Borrower and its Subsidiaries to purchase or redeem Capital Stock of the
Borrower issued to such director, consultant, manager, officer or employee to the extent
such purchase or redemption is permitted hereunder;

     (m)   Debt arising out of the issuance of surety, stay, customs or appeal bonds,
performance bonds and performance bonds and performance and completion guarantees, in each
case incurred in the ordinary course of business;

     (n)   Indebtedness in respect of Hedging Arrangements entered into in the ordinary
course of business to hedge against actual exposure risk not for speculative purpose;

     (o)   Debt incurred in the ordinary course of business in connection with cash pooling,
netting and cash management arrangements consisting of overdrafts or similar arrangements;
provided that any such Debt does not consist of Debt for borrowed money and is owed to the
financial institutions providing such arrangements and such Debt is extinguished in
accordance with customary practices with respect thereto; and

     (p)   Debt of the Borrower or any of its Subsidiaries incurred in respect of letters of
credit issued for the account of the Borrower or any of its Subsidiaries in an aggregate
principal amount not to exceed $4,000,000 (plus any interest, fees and expenses related
thereto).

Notwithstanding the foregoing, (x) the Borrower will not permit any Subsidiary or Unrestricted
Subsidiary to Guaranty or provide credit support for any Subordinated Debt and (y) the Borrower
will not and will not permit any Subsidiary or Unrestricted Subsidiary to Guaranty or provide
credit support in respect of any Unrestricted Subsidiary.

          7.03   Other Security. (a) Other than as expressly permitted under Section 7.08,
create, assume or suffer to exist any Lien on any of its or its Subsidiaries’ property, real or
personal or mixed (including without limitation, any leasehold interests), whether now owned or hereafter
acquired, except Permitted Liens and licenses of intellectual property pursuant to a Franchise
Program.

          (b)   [RESERVED]

          (c)   Notwithstanding the foregoing, the Borrower and its Subsidiaries shall not be permitted
to create, assume or suffer to exist Liens (except pursuant to the Collateral Documents) on any
Membership Receivables (other than for Liens existing on the Closing Date of approximately $400,000
of Membership Receivables arising in connection with the acquisition of Planet Fitness fitness
centers and other Liens existing on the Closing Date securing approximately $1,700,000 of Debt),
Intellectual Property (other than as permitted by Section 7.08(e) and clause (vi) of the definition
of Permitted Liens)), leasehold interests (other than Permitted Leasehold Liens) or leasehold
improvements (other than Permitted Leasehold Liens).

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          7.04   Subordinated Debt; Senior Unsecured Notes. (a) Pay interest, principal, or
premium on any Subordinated Debt (other than the Subordinated Notes) if at the time of such payment
or proposed payment there has occurred and is continuing under this Agreement, or if as a result of
any such payment or proposed payment there would occur, a Default or an Event of Default;

     (b)   Pay interest, principal or premium on the 1997 Subordinated Notes in violation of
Article Thirteen of the 1997 Indenture, or make any payment thereunder or with respect to
any other Subordinated Debt to any holder or the trustee named therein prior to one (1)
Banking Day preceding the times set forth therein for the payment of same, or make any
payment, purchase or redemption of the 1997 Subordinated Notes pursuant to Article Four,
Five, Ten, Eleven, Twelve or Thirteen of the 1997 Indenture or deliver any notice to the
trustee under the Indenture or the holders of the 1997 Subordinated Notes of its intention
to make any such payment, purchase or redemption, or make any “Company Request” under
Section 12.1 of the 1997 Indenture;

     (c)   Except for Permitted Subordinated Indenture Amendments, amend or waive any
provision of the 1997 Indenture, the 1998 Indenture, the Subordinated Notes or any other
agreement relating to Subordinated Debt without first obtaining the consent of the Agent or
Majority Lenders;

     (d)   Prepay, redeem, defease, purchase or repurchase all or any part of any
Subordinated Debt including, but not limited to, the Subordinated Notes (other than as
permitted by Section 7.09(a) hereof), or take any action to effect the foregoing without
first obtaining the consent of Majority Lenders; provided that the foregoing shall
not restrict the Borrower or any Subsidiary’s ability to issue Capital Stock in accordance
with the other provisions of this Agreement, and provided further that the
Borrower shall be permitted to make cash payments up to an aggregate amount of $5,000,000 to
the holders of 1997 Subordinated Notes and 1998 Subordinated Notes to the extent necessary
(as determined by the Borrower in the reasonable exercise of its judgment) to obtain the
consent of such holders or to redeem the Subordinated Notes of such holders if, after giving
effect to such consent or redemption, the scheduled maturity date of the 1997
Subordinated Notes or the 1998 Subordinated Notes (as applicable) will be extended, or
the 1997 Subordinated Notes or the 1998 Subordinated Notes (as applicable) will be
refinanced, in a transaction otherwise permitted under this Agreement;

     (e)   Pay interest, principal or premium on the 1998 Subordinated Notes in violation of
Article Thirteen (or the comparable provisions of a successor indenture) of the 1998
Indenture, or make any payment thereunder to any holder or the trustee named therein prior
to one (1) Banking Day preceding the times set forth therein for the payment of same, or
make any payment, purchase or redemption of the 1998 Subordinated Notes pursuant to Article
Four, Five, Ten, Eleven, Twelve or Thirteen (or the comparable provisions of a successor
indenture) of the 1998 Indenture or deliver any notice to the trustee under the 1998
Indenture or the holders of the 1998 Subordinated Notes of its intention to make any such
payment, purchase or redemption, or make any “Company Request” under Section 12.1 (or the
comparable provisions of a successor indenture) of the 1998 Indenture;

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     (f)   Make any payment with respect to any Senior Unsecured Notes to any holder or the
trustee named therein prior to one (1) Banking Day preceding the times set forth therein for
the payment of same, or make any payment, purchase or redemption of the Senior Unsecured
Notes pursuant to Article Four, Five, Ten, Eleven, Twelve or Thirteen of the Senior
Unsecured Notes Indenture or deliver any notice to the trustee under the Senior Unsecured
Notes Indenture or the holders of the Senior Unsecured Notes of its intention to make any
such payment, purchase or redemption, or make any “Company Request” under Section 12.1 of
the Senior Unsecured Notes Indenture;

     (g)   Amend or waive any provision of the Senior Unsecured Notes Indenture, the Senior
Unsecured Notes or any other agreement relating thereto without first obtaining the consent
of the Agent or Majority Lenders; or

     (h)   Prepay, redeem, defease, purchase or repurchase all or any part of the Senior
Unsecured Notes (other than as permitted by Section 7.09(a) hereof), or take any action to
effect the foregoing without first obtaining the consent of Majority Lenders.

     (i)   Notwithstanding the provisions of Section 7.04 and Section 7.09, the Borrower may
purchase or redeem the 1997 Subordinated Notes at an aggregate price not in excess of
$350,000 or, upon the date the redemption prices provided in the 1997 Indenture are
applicable, such redemption prices plus accrued interest; provided that the terms on
which such purchase or redemption is made shall be reasonably satisfactory to the Agent and
immediately after giving effect thereto, no Default or Event of Default shall have resulted.

In addition to the payments expressly permitted under the preceding paragraphs of this Section
7.04, the only additional payments that the Borrower and its Subsidiaries (including Unrestricted
Subsidiaries) may make in respect of the Subordinated Debt and the Senior Unsecured Notes are (i)
scheduled payments of interest, (ii) payments permitted by clauses (i), (iii) and (iv) of the
second proviso of Section 7.09(a), (iii) the issuance of Capital Stock of the Borrower to holders
of Subordinated Notes as consideration for amendments, modifications or maturity extensions under
the 1997 Indenture, the 1998 Indenture, the Subordinated Notes and/or other Subordinated Debt which
amendments, modifications or maturity extensions are otherwise permitted under this Agreement and
(iv) reimbursement of out-of-pocket expenses of the holders of Subordinated Notes. Notwithstanding
the foregoing the Credit Parties may make payments of the type contemplated by clause (ii) of
Section 8.12 as long as no Event of Default exists under Section 8.12.

          7.05   Liquidation; Merger. Liquidate or dissolve, or enter into any consolidation,
merger, partnership, joint venture or other combination, or sell, lease or dispose of its business
or assets as a whole or in an amount which constitutes a substantial portion thereof;
provided, however, that (a) any Subsidiary may merge into, consolidate with or
transfer its business or assets to Borrower (if the purpose of such merger, consolidation or
combination is a legitimate tax planning purpose of the Borrower) or any other Subsidiary (so long
as such acquiring Subsidiary is a Guarantor) pro rata, to the extent owned by Borrower or such
Subsidiary, (b) Borrower may merge, consolidate or combine (including through liquidation or
dissolution into the Borrower) with any other corporation so long as Borrower is the surviving
corporation, no

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Default or Event of Default would exist under this Agreement after giving effect to
such merger, consolidation or combination and the reason for such merger, consolidation or
combination is either (i) legitimate tax planning purposes of the Borrower or (ii) to consummate an
acquisition permitted by Section 7.01(e), (c) any Subsidiary may liquidate or dissolve if upon such
liquidation or dissolution all or substantially all of the business or assets of such Subsidiary
are distributed to Borrower or any other Subsidiary (so long as such transferee Subsidiary is also
a Guarantor) pro rata, to the extent owned by Borrower or such Subsidiary, (d) in the event that a
Subsidiary has distributed its business or assets to Borrower or any Subsidiary pursuant to Section
7.05(c), neither Borrower nor any Subsidiary shall be required to preserve any right, license, or
franchise of such Subsidiary or the corporate existence of such Subsidiary if the Board of
Directors of Borrower or the Subsidiary to which the business or assets of such Subsidiary were
distributed shall determine that the preservation thereof is no longer desirable and that the loss
thereof is not adverse in any material respect to Lenders and (e) any Joint Venture, to the extent
required by, or made pursuant to buy/sell arrangements between the joint venture parties forth in,
joint venture arrangements and similar arrangements or otherwise required by the organizational
documents or joint venture documents, may dissolve, liquidate, sell, lease or dispose of its
business or assets, in whole or part.

          7.06    [Reserved.]

          7.07  
Change in Business. Engage in any business activities or operations substantially and materially different from
or unrelated to business activities existing on the Closing Date; provided,
however, that this Section 7.07 shall not prohibit the Borrower or its Subsidiaries from
managing non-owned fitness centers or providing payment, processing and collection services for
non-owned fitness centers, or from commencing and operating a Franchise Program, or from operating
a captive insurance company and, provided, further, the Borrower and its
Subsidiaries may elect to cease originating for their own account and/or servicing all or a portion
of membership contracts receivable and have third parties perform all or some of such functions.

          7.08   Disposal of Assets. Dispose of any accounts receivable, any fixed or capital
assets (including, without limitation, the entering into of any sale and leaseback agreement
covering any of its fixed or capital assets), any Capital Stock of Subsidiaries or any Intangible
Assets, or enter into any license, franchise or sublease arrangements; provided,
however, that:

     (a)   dispositions of assets among and between Borrower and the Guarantors shall not be
prohibited hereunder;

     (b)   [Reserved.]

     (c)   [Reserved];

     (d)   (i) Borrower or any Subsidiary may dispose of surplus, uneconomic, obsolete, no
longer used or useful equipment or fixtures in the ordinary course of business and (ii)
Borrower and its Subsidiaries may license certain rights with respect to

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its trade name or other Intellectual Property pursuant to franchising and other arrangements permitted by
Section 7.08(f);

     (e)   Borrower and its Subsidiaries may license certain rights with respect to its
trade name and other Intellectual Property (i) to franchisees and joint ventures for the
operation of health clubs pursuant to a Franchise Program or otherwise in respect of joint
ventures and (ii) for other purposes intended to generate proceeds to the Borrower in the
ordinary course of business consistent with past practice;

     (f)   Borrower and its Subsidiaries may sell assets (and related liabilities)
consisting of health and fitness clubs to Persons which simultaneously become franchisees
pursuant to a Franchise Program; provided that (i) such assets are sold at their net
fair market value (taking into account the amount of such liabilities) and (ii) the
aggregate net cash proceeds arising from such sales since the Closing Date do not exceed
$5,000,000;

     (g)   the Borrower and its Subsidiaries may sell written off receivables to a
collection or similar agency in lieu of in-house collection in the ordinary course of
business and other dispositions of accounts receivable in connection with compromise,
writedown or collection thereof;

     (h)   the Borrower and its Subsidiaries may enter into outsourcing arrangements with
respect to the processing of Membership Receivables as long as (i) such Membership
Receivables remain assets of the Borrower and its Subsidiaries and (ii) payment of such
Membership Receivables is made to Demand Deposit Accounts;

     (i)   the Borrower and its Subsidiaries may enter into leases, subleases, licenses or
sublicenses in the ordinary course of business consistent with past practices;

     (j)   dispositions of equipment to the extent that (i) such equipment is exchanged for
credit against the purchase price of similar replacement equipment or (ii) the proceeds of
such disposition are promptly applied to the purchase price of such replacement equipment;

     (k)   disposition of Cash Equivalents;

     (l)   transfer of property subject to a Casualty Event (i) upon receipt of Net Casualty
Proceeds of such Casualty Event or (ii) to a Governmental Authority as a result of
condemnation;

     (m)   dispositions of Investments in Joint Ventures, to the extent required by, or made
pursuant to buy/sell arrangements between the joint venture parties forth in, joint venture
arrangements and similar arrangements;

     (n)   disposition of assets not otherwise permitted under this Section 7.08 for Fair
Market Value and the consideration received consists entirely of cash and/or Cash
Equivalents and the total Fair Market Value of all assets sold pursuant to this clause does
not exceed (individually or in the aggregate) $2,000,000 per fiscal year;

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     (o)   the Borrower and its Subsidiaries may dispose of assets consisting of health and
fitness clubs (and related liabilities) for Fair Market Value (“Permitted Asset
Sales”); provided that the aggregate amount of all purchase price consideration
of dispositions under this clause (o) when combined with the aggregate amount of all
purchase price consideration of dispositions made under Section 7.08(p) shall not exceed
$100,000,000 after the Closing Date; and, provided, further, that such
assets shall not include any Intellectual Property material to the business of the Borrower
or any of its Subsidiaries; and

     (p)   the Borrower and its Subsidiaries may dispose of assets pursuant to Permitted
Sale/Leasebacks; provided that the aggregate amount of all purchase price
consideration of dispositions under this clause (p) when combined with the aggregate amount
of purchase price consideration of all dispositions made under Section 7.08(o), shall not
exceed $100,000,000 after the Closing Date.

For purposes of this Section 7.08, dispositions of assets shall not include sales by the Borrower
or any Subsidiary of the Borrower of Capital Stock (or Capital Stock equivalents) of the Borrower.

          7.09  
Limitation on Optional Payments and Modifications of Debt Instruments. Without limitation of any obligation under Section 7.04 or the last sentence of 7.01:

     (a)   make any optional payment or prepayment on or redemption or purchase or
defeasance of any Debt or make or set aside any sinking fund payments with respect to any
Debt (other than the Advances and reimbursement obligations in respect of any Letter of
Credit); provided, however, Borrower or its Subsidiaries may prepay or make
optional payments on any purchase money Debt or Capitalized Leases where the Agent, for the
benefit of the Lenders, is granted a Lien in the relevant asset of the Borrower or its
Subsidiary, as the case may be, in the amount of such prepayment or optional payment;
provided further, however, the Borrower shall be permitted to redeem
or prepay (i) the Subordinated Notes (x) in the manner allowed under Section 7.04 or (y)
from the proceeds of a public offering of the Borrower’s common stock after the Closing
Date, to the extent permitted by the “equity clawback” provision set forth in Section
11.1(b) of the 1997 Indenture and the 1998 Indenture, (ii) Debt existing on the Closing Date
and identified on Schedule 7.09(a), (iii) the Senior Unsecured Notes from the proceeds of a
public offering of the Borrower’s common stock after the Closing Date, to the extent
permitted by the “equity clawback” provision set forth in Section 11.1(b) of the Senior
Unsecured Notes Indenture and (iv) the Subordinated Notes pursuant to a Permitted
Subordinated Notes Refinancing; or

     (b)   amend, modify or change in any material respect, or consent or agree to any such
amendment, modification or change to, any of the terms of any such Debt (other than any
Permitted Subordinated Indenture Amendments and any such amendment, modification or change
to the terms of any Debt which would extend the maturity or reduce the amount of any payment
of principal thereof or which would reduce the rate or extend the date for payment of
interest thereon without the consent of the Agent).

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          7.10   Limitation on Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate (other than a Subsidiary) unless such transaction is (a)
otherwise permitted under this Agreement, and (b) upon fair and reasonable terms no less favorable
to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm’s
length transaction with a Person which is not an Affiliate.

          7.11   Limitation on Sales and Leasebacks. Enter into any Sale/Leaseback after the
Closing Date unless such transaction constitutes a Permitted Sale/Leaseback; provided that the
Borrower and its Subsidiaries may not enter into any Sale/Leaseback with an Unrestricted
Subsidiary.

          7.12   Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower
to end on a day other than December 31.

          7.13  
Unrestricted Subsidiaries. (a) Create or otherwise designate any Subsidiary as an Unrestricted Subsidiary unless the
terms set forth in the definition of Unrestricted Subsidiary are complied with respect to such
Subsidiary and no Default or Event of Default then exists (unless the creation or designation of
the Unrestricted Subsidiary would cure the Default or Event of Default) or would result from the
designation, creation and operation of such Unrestricted Subsidiary.

          (b)   Without the prior written consent of the Majority Lenders, change the characterization
of a Subsidiary from a Subsidiary to an Unrestricted Subsidiary or an Unrestricted Subsidiary to a
Subsidiary; provided however, the prior written consent of the Majority Lenders
shall not be required if (A) no Default or Event of Default shall have occurred and be continuing
at such time or would result therefrom, (B) after giving effect to such re-characterization, each
of the representations and warranties made by in the Borrower in or pursuant to this Agreement or
the Collateral Documents shall be true and correct in all material respects as of the date of such
re-characterization, (C) if re-characterized as a Subsidiary, such Subsidiary shall have complied
with the provisions of Article III as if it were a new Subsidiary and (D) the Borrower provides the
Agent five Banking Days advance written notice of its intent to re-characterize such Subsidiary.

          (c)   Permit any Unrestricted Subsidiary to fail to comply with the requirements set forth in
the definition of “Unrestricted Subsidiary.”

          7.14   Tax Allocation and Indemnity Agreement. Amend, modify or change, or consent or
agree to any amendment, modification or change to the Tax Allocation and Indemnity Agreement in any
manner which is materially adverse to the Lenders.

          7.15   Negative Pledge Clauses. Enter into or suffer to exist or become effective any
agreement that prohibits or limits the ability of the Borrower or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now
owned or hereafter acquired, to secure the Obligations other than pursuant to (a) this Agreement
and the other Credit Documents, (b) any agreements governing any purchase money Liens or
obligations under Capitalized Leases otherwise permitted hereby (in which case, any

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prohibition or limitation shall only be effective against the assets financed thereby), (c)
the Subordinated Notes Indentures and the Senior Unsecured Notes Indenture, (d) any arrangement or
agreement arising in connection with a disposition permitted under this Agreement so long as such
restrictions apply only to the asset to be disposed of pending completion of such disposition, (e)
any agreement with respect to the Debt of any Person existing at the time such Person becomes a
Subsidiary after the date hereof so long as such prohibitions or limitations apply only with
respect to the properties and revenues of such Subsidiary, (f) customary restrictions in leases,
subleases, licenses and sublicenses, (g) any agreement with respect to any Real Estate Financing
Subsidiary so long as such prohibitions or limitations apply only with respect to the properties
and revenues of such Real Estate Financing Subsidiary, (h) restrictions applicable to any Joint
Venture pursuant to the applicable joint venture agreement so long as such restrictions apply only
to the properties and revenues of such Joint Venture or the Capital Stock of such Joint Venture
(and the Borrower hereby agrees to use reasonable efforts to cause any such restriction in respect
of the Capital Stock of such Joint Venture to be waived or made inapplicable with respect to a Lien
and security interest on such Capital Stock in favor of the Collateral Agent to secure the Secured
Obligations) and (i) any restrictions existing as of the Closing Date.

ARTICLE VIII.

EVENTS OF DEFAULT

          If one or more of the following events (herein called “Events of Default”) shall occur
and be continuing:

          8.01   Nonpayment. Borrower shall fail to pay (i) when due, any portion of principal
hereunder or under the Notes in accordance with the terms hereof or thereof, (ii) when due any
interest hereunder or under the Notes and such failure shall continue unremedied for a period of
three Banking Days after such interest was due, or (iii) when due any fee or others sums hereunder
and such failure shall continue unremedied for a period of five Banking Days after such amounts are
due.

          8.02   Representation or Warranty. Any representation or warranty made by Borrower or
any Subsidiary herein or in any other Credit Document or in any agreement, instrument or
certificate executed or delivered to Lenders, Agent or the Collateral Agent pursuant hereto or in
connection with any transaction contemplated here shall prove to have been false or misleading in
any material respect when made or when deemed to have been made;

          8.03   Judgments. There shall be entered against Borrower or any of its Subsidiaries
one or more judgments (or any judgment against an ERISA Affiliate, if such judgment is in favor of
a Multiemployer Plan) in excess of Five Million Dollars ($5,000,000) in the aggregate at any one
time outstanding excluding those judgments (i) that have been outstanding less than thirty (30)
calendar days from the entry thereof or (ii) during the time which a stay of enforcement of such
judgment is in effect by reason of a pending appeal or otherwise or (iii) for and to the extent
which Borrower or such Subsidiary is insured and with respect to which the insurer has accepted
coverage in writing.

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          8.04   Voluntary Bankruptcy. Borrower or any Guarantor shall fail to pay, or admit in
writing its inability to pay, its debts generally as they come due, or shall file any petition or
action for relief under any bankruptcy, reorganization, insolvency or moratorium law, or any other
law or laws for the relief of, or relating to, debtors, or Borrower or any Guarantor shall take any
corporate action to authorize, or in furtherance of, any of the foregoing.

          8.05   Involuntary Bankruptcy. Involuntary petition shall be filed under any
bankruptcy statute against Borrower or any Guarantor, or a custodian, receiver, trustee, assignee
for the benefit of creditors (or other similar official) shall be appointed to take possession,
custody or control of the properties of Borrower or any Guarantor, unless such petition or
appointment is set aside or withdrawn or ceases to be in effect within sixty (60) days from the
date of said filing or appointment.

          8.06   Change of Control Event. A Change of Control Event shall occur.

          8.07   Cross Default. Any breach or default shall occur with respect to any Debt or
any operating lease agreement in excess of Five Million Dollars ($5,000,000) (except with respect
to Debt under this Agreement) individually or in the aggregate, under which Borrower or any of its
Subsidiaries may be obligated as borrower or guarantor, if such breach or default consists of the
failure to pay any such indebtedness when due whether by acceleration or otherwise (and remains
uncured or continues beyond any applicable grace period) or if such breach or default results in or
permits (or, with the passage of time, the giving of notice or both, may permit) the acceleration
of any such indebtedness of or the termination of any commitment to lend to Borrower or any such
Subsidiary. The Lenders acknowledge that 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 deliver the financial statements required by such Section shall not in and of
itself constitute a Default or an Event of Default under this Agreement until the day which is 2
Banking Days before the day which is 30 days after a notice of default of the type described in
Section 5.1(c) of the Senior Unsecured Notes Indenture or Section 5.1(c) of the Subordinated Notes
Indenture, as applicable, has been delivered. The Borrower acknowledges that the foregoing
acknowledgements and agreements by the Lenders under this Agreement do not apply when holders of
Debt obligations of the Borrower and its Subsidiaries exercise their remedies against the Borrower
and its Subsidiaries on the basis of an applicable cross default clause.

          8.08   ERISA. (a)  The occurrence of a Termination Event with respect to one or more
Plans and/or one or more Multiemployer Plans if Borrower’s maximum liability (as measured, (A) in
the case of a Termination Event described in clauses (i) through (iii) of the definition of
“Termination Event”, by the amount by which plan assets are insufficient to satisfy benefit
liabilities upon termination under ERISA with respect to each Plan as to which such Termination
Event has occurred, (B) in the case of a Termination Event described in clause (iv) of said
definition, by the withdrawal liability under Section 4063 of ERISA with respect to each Plan as to
which such Termination Event has occurred, and (C) in the case of a Termination Event described in
clause (v) of the definition of “Termination Event”, by the excess, if any of (i) the aggregate of
annual contributions due or paid during a plan year plus payments and interest due or paid pursuant
to Section 4219 of ERISA during the same plan year, with respect to each Multiemployer Plan as to
which a Termination Event has occurred, over (ii) the annual

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contribution amount due or paid for such Multiemployer Plan for the plan year preceding the
plan year in which such Termination Event occurred) which could arise upon the occurrence of all
such Termination Events that occur within a twelve consecutive month period exceeds One Million
Dollars ($1,000,000); or

          (b)   The aggregate withdrawal liability which could be incurred under Section 4201 of ERISA
of Borrower and all ERISA Affiliates, collectively, upon a complete withdrawal, within the meaning
of Section 4203 of ERISA, from each and all Multiemployer Plans to which each is or has contributed
within the past five calendar years, plus the aggregate of the excess of benefit liabilities,
within the meaning of Section 4001(a)(16) of ERISA, of each Plan upon termination of such Plan over
the assets of such Plan, exceeds Five Million Dollars ($5,000,000).

          8.09   Specific Defaults. (i) Borrower shall fail duly and promptly to perform or
observe any term or provision specified in any of Sections 6.01, 6.02(e), 6.05, 6.06, 6.13 or 6.14
or Article VII hereof, (ii) Borrower shall fail duly and promptly to perform or observe any term or
provision specified in Section 6.12 or 6.18 and shall not remedy such failure to perform or observe
such term or provision within five Banking Days or (iii) Borrower shall fail to perform or observe
any term or provision specified in Section 6.09 and shall not remedy such failure to perform or
observe any term or provision specified in such Section 6.09 within 10 calendar days.

          8.10   Guarantee and Collateral Agreement; Impairment of Collateral Documents. (a)  
Any breach or default shall occur under the Guarantee and Collateral Agreement or the Guarantee and
Collateral Agreement shall be revoked by, or become ineffective as to, the Borrower or any
Guarantor; provided, however, that any merger, liquidation, consolidation or
transfer of any Guarantor with any other Guarantor or Borrower in accordance with Section 7.05(c)
or Section 7.05(d) shall not constitute an Event of Default under this Agreement;

          (b)   (i)  any provision of any Collateral Document (other than the collateral assignments of
tenant’s rights in leases) necessary for the practical realization of the substantial benefits
thereof shall for any reason cease to be valid and binding on or enforceable against Borrower
(other than pursuant to a failure of the Agent, any Collateral Agent or the Lenders to take any
action within the sole control of such Person) or any Subsidiary or Borrower or any Subsidiary
shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or

                  (ii)   any of the Collateral Documents shall for any reason (other than pursuant to the terms
thereof) cease to create a valid security interest in the Collateral purported to be covered
thereby or such security interest shall for any reason cease to be a perfected security interest
having the priority purported to be created by such Collateral Document (other than by or as a
result of any action by the Collateral Agent).

          8.11   Condemnation. Any governmental authority shall condemn, seize or appropriate
any property of Borrower or any Subsidiary if the fair market value of the property prior to being
condemned, seized or taken is equal to or greater than Five Million Dollars ($5,000,000) and if
such governmental authority fails to compensate such entity for such taking within one (1) year
after such entity loses quiet enjoyment of such property due to such taking in an amount at least
equal to the fair market value as a going concern of the property taken.

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          8.12   Public Filings. The Borrower and its Subsidiaries shall pay or agree in
writing to pay fines or penalties in excess of $10,000,000 in the aggregate (other than from
insurance proceeds or from amounts otherwise reimbursed to the Borrower by third parties to whom
the Borrower and its Subsidiaries are not providing credit or similar support) in connection with
(i) SEC investigations in connection with the matters described in the Public Filings, (ii) the DOJ
Investigation or (iii) other matters disclosed in the Public Filings.

          8.13   Actual or Asserted Invalidity. (i) This Agreement, any Note, any Collateral
Document or any instrument or certificate executed or delivered to Lenders, the Agent or the
Collateral Agent pursuant to this Agreement or in connection with any transaction contemplated
herewith shall cease, for any reason (other than solely as a result of any action or inaction on
the part of the Agent or any of the Lenders), to be in full force and effect, or the Borrower or
any of its Affiliates shall so assert or (ii) any Lien created thereby or subordination provision
therein shall cease to be enforceable and of the same effect and priority purported to be created
thereby as a result of any action or inaction on the part of the Borrower or any of its Affiliates.

          8.14   Failure to Constitute Senior Indebtedness. Any Secured Obligation shall fail
to constitute Senior Indebtedness and Designated Senior Indebtedness under the Subordinated Notes
Indenture.

          8.15   Other Defaults. Borrower or any Subsidiary shall breach, or default under, any
term, condition, provision, covenant, representation or warranty contained in this Agreement not
specifically referred to in this Article or in any Collateral Document, if such breach or default
shall continue for thirty (30) days after notice from Agent as required by Majority Lenders;

THEN:

     (a)   In the case of an Event of Default other than one referred to in Section 8.04 or
8.05 of this Article VIII, upon request of Majority Lenders to Agent, any obligation on the
part of Lenders to make or continue the Credit or any obligation on the part of any Issuing
Lender to issue or amend any Letter of Credit shall terminate and, at the further option of
Majority Lenders, Agent shall declare all sums of principal and interest outstanding on the
Credit and all other sums outstanding under or in respect of this Agreement and the Notes
immediately due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or other notices or demands of any kind or
character (other than as stated in any of the foregoing sections of this Article VIII), all
of which are hereby expressly waived by Borrower; and

     (b)   in the case of an Event of Default referred to in Section 8.04 or 8.05 of this
Article VIII, Lenders’ obligations to make or continue the Credit and the Issuing Lenders’
obligations to issue or amend any Letter of Credit shall be automatically cancelled and all
sums of principal and interest on the Credit and all other sums outstanding under or in
respect of this Agreement and the Notes shall automatically become immediately due and
payable without notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, all of which are hereby expressly waived by Borrower.

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Agent shall promptly advise Borrower of any declaration under clause (a), above, but failure to do
so shall not impair the effectiveness of such declaration. Additionally, upon the occurrence of
any Event of Default, Agent, at the request of the Majority Lenders, shall require Borrower to
deposit immediately with Agent cash collateral pursuant to documentation reasonably acceptable to
the Agent, for application against drawings under any Letter of Credit issued for Borrower’s
account hereunder, in an amount equal to the undrawn amount of such Letter of Credit. Any amount
so deposited that is not applied to satisfy drawings under such Letter of Credit will be repaid
with interest (at Agent’s applicable certificate of deposit rate in effect on the date of such
deposit) to Borrower, provided that Lenders have received all other amounts due to them
under this Agreement and the Notes. Borrower shall not make (or declare) any Restricted Payments
otherwise permitted under Section 7.01 if a Default or an Event of Default has occurred and is
continuing on the date of such payment (or declaration), or would result from such payment (or
declaration).

ARTICLE IX.

MISCELLANEOUS

          9.01   Notices. Except as otherwise provided herein, any notice required hereunder
shall be in writing, and shall be deemed to have been validly served, given or delivered (i) four
(4) Banking Days following deposit in the United States mails, with proper postage prepaid, and
addressed to the party to be notified; (ii) upon delivery thereof if delivered by hand to the party
to be notified; (iii) on the Banking Day after delivery to a reputable overnight courier, with all
charges prepaid, and addressed to the party to be notified; or (iv) upon acknowledgment of receipt
thereof if transmitted by telecopy to a valid telecopier number for the party to be notified; in
each case such notification shall be addressed to Borrower at:

Bally Total Fitness Holding Corporation

8700 West Bryn Mawr, 2nd Floor

Chicago, Illinois 60631

Attention: General Counsel

Telecopy: 773-399-0126

Phone: 773-380-3000

and shall be addressed to Agent at:

JPMorgan Chase Bank, N.A.

270 Park Avenue, 15th Floor

New York, New York 10017

Attention: Ruby Tulloch

Telecopy: 212-270-6937

Phone: 212-270-1467

and with respect to the other parties hereto, as set forth on Schedule 9.01 hereof, or to such
other address as each party may designate for itself by like notice. Notices to Agent shall not be
effective until received by Agent.

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          Notices and other communications to the Lenders hereunder may be delivered or furnished by
electronic communications pursuant to procedures approved by the Agent; provided that the foregoing
shall not apply to notices pursuant to Section 2 unless otherwise agreed by the Agent and the
applicable Lender. The Agent or the Borrower may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to procedures approved
by it; provided that approval of such procedures may be limited to particular notices or
communications.

          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.

          9.02   Successors and Assigns. This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns; provided, however,
that Borrower shall not assign this Agreement or any of the rights of Borrower hereunder without
the prior written consent of each Lender. Any purported assignment in contravention of the
foregoing shall be null and void.

          9.03   Lenders’ Obligations Several. The obligations of each Lender under this
Agreement are several. Neither Agent, Collateral Agent nor any Lender shall be liable for the
failure of any other Lender to perform its obligations under this Agreement.

          9.04   Assignments; Participations. (a)  Any Lender other than any Conduit Lender
(each an “Assignor”) may, with the consent of Agent, each Issuing Lender to whom
obligations are owed in respect of Letters of Credit issued by it and (unless a Default or Event of
Default has occurred and is continuing) Borrower, which consent of Agent, such Issuing Lenders and
the Borrower shall not be unreasonably withheld or delayed, at any time assign and delegate to one
or more banks or other entities and may, with notice to Borrower, Agent and each Issuing Lender,
and with consent of Agent and such Issuing Lenders, but without the consent of Borrower, assign to
any Affiliate of a Lender, an Approved Fund or any other Lender (each an “Assignee”), all
or any part of the Advances, the Delayed-Draw Term Loan Commitment, the Revolving Credit Commitment
(including the L/C Commitment), any Letter of Credit participations, reimbursement obligations in
respect of any Letter of Credit or any other rights or obligations of such Lender hereunder;
provided, however, that except in the case of an assignment to a Lender, any Lender
Affiliate or an Approved Fund, such assignment must be in a minimum amount (unless otherwise agreed
in writing by the Borrower, Agent and each Issuing Lender) of One Million Dollars ($1,000,000) (or,
if less, the full amount of such Assignor’s Advances, Letter of Credit Participations,
reimbursement obligations in respect of any Letter of Credit or any other rights and obligations of
such Lender hereunder); provided, further, that any assignment of Term Advances or
Delayed-Draw Term Loan Commitments shall not require the consent of the Issuing Lender or, with
respect to such assignment to any Affiliate of any Lender, an Approved Fund or any other Lender,
the Agent and provided, further that (i) Borrower shall not be required to pay any
increased costs or taxes pursuant to Section 2.16 or 2.17 by reason of any such assignment; (ii)
Borrower and Agent shall be entitled to continue to deal solely and directly with such Assignor in
connection with the interests so assigned to the Assignee until written notice of such assignment,
together with payment instructions, addresses and related information with respect to the Assignee
shall have been given to Borrower, Agent and each

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Issuing Lender by such Assignor and the Assignee; and (iii) such Assignor shall not be
released from its obligations hereunder with respect to the assigned portion of any such rights or
obligations until the Assignee shall have delivered to Borrower and Agent an agreement to be bound
by the terms and conditions of this Agreement, which agreement shall be substantially in the form
of Exhibit K (an “Assignment and Acceptance”), and the Assignor shall have paid a
processing fee to Agent for each assignment hereunder (provided, that concurrent assignments by any
Lender to two or more Approved Funds shall be counted as one assignment for purposes of assessing
assignment fees) in the amount of Three Thousand Five Hundred Dollars $3,500, and thereupon shall
be released from its obligations with respect to the assigned portion. Notwithstanding the
foregoing, any Conduit Lender may assign at any time to its designating Lender hereunder without
the consent of the Borrower or the Agent any or all of the Advances it may have made hereunder and
pursuant to its designation agreement and without regard to the limitations set forth in the first
sentence of this Section 9.04(a).

          (b)   Any Lender other than any Conduit Lender may, without the consent of Agent, any other
Lender to whom obligations are owed in respect of Letters of Credit issued by it or Borrower, at
any time sell to one or more Lenders or other entities (a “Participant”) participating
interests in any Advances, any Delayed-Draw Term Loan Commitment, any Revolving Credit Commitment,
any Letter of Credit participations or any reimbursement obligations of such Lender in respect of
any Letter of Credit hereunder; provided, however, that such participation shall
not increase the amount payable by Borrower in respect of taxes pursuant to Section 2.16 and,
provided further that (i) such Lender’s obligations under this Agreement shall
remain unchanged; (ii) such Lender shall remain solely responsible for the performance of its
obligations hereunder; (iii) Borrower and Agent shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this Agreement; (iv) no
Lender shall transfer, grant or assign any participation under which the Participant shall have
rights to approve any amendment or waiver of this Agreement except to the extent such amendment or
waiver would (A) extend the Revolving Credit Termination Date or the Term Loan Termination Date
beyond October 1, 2010, or the scheduled date for the payment of any installment of principal or
interest of the Advances in which such Participant is participating, (B) reduce the amount of any
scheduled installment of principal of the Advances hereunder in which such Participant is
participating, (C) reduce the interest rate applicable to Advances hereunder in which such
Participant is participating, (D) reduce any fees or other amounts payable hereunder in which such
Participant is participating; and (v) such Lender shall require its Participants to comply with the
provisions of Section 10.03(b). In the case of any such participation, the Participant shall not
have any rights under this Agreement or any of the other documents in connection herewith and all
amounts payable by Borrower hereunder shall be determined as if such Lender had not sold such
participation, except that Borrower agrees that if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of set-off in respect of
its participating interest in amounts owing under this Agreement and the Notes to the same extent
as if the amount of its participating interest were owing directly to it as a lender under this
Agreement. The Borrower agrees that each Participant shall be entitled to the benefits of Sections
2.16, 2.17 and 2.18 with respect to its participation in the Commitments and the Advances and
Letters of Credit outstanding from time to time as if it was a Lender; provided that, in
the case of Sections 2.16, 2.17 and 2.18, such Participant shall have complied with the
requirements of said Section and provided, further, that

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no Participant shall be entitled to receive any greater amount pursuant to any such Section
than the transferor Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no such transfer
occurred.

          (c)   Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a
“Transferee”) and any prospective Transferee such financial and other information in such
Lender’s possession concerning Borrower or its Subsidiaries which has been delivered to Lenders
pursuant to this Agreement or which has been delivered to Lenders by Borrower in connection with
Lenders’ credit evaluation of Borrower prior to entering into this Agreement.

          (d)   Nothing herein shall prohibit any Lender from pledging or assigning any Note in
accordance with applicable law, including to any Federal Reserve Bank. In the case of any Lender
that is a fund that invests in bank loans, such Lender may, without the consent of Borrower or the
Agent, collaterally assign or pledge all or any portion of its rights under this Agreement,
including the Term Advances and Term Notes or any other instrument evidencing its rights as a
Lender under this Agreement, to any holder of, trustee for, or any other representative of holders
of, obligations owed or securities issued, by such fund, as security for such obligations or
securities.

          (e)   The Agent shall, on behalf of the Borrower, maintain at its address referred to in
Section 9.01 a copy of each Assignment and Acceptance delivered to it and a register (the
“Register”) for the recordation of the names and addresses of the Lenders and the
Commitments of, and the principal amount of the Advances owing to, each Lender from time to time.
The entries in the Register shall constitute prima facie evidence of the foregoing
information, in the absence of manifest error, and the Borrower, each other Credit Party, the Agent
and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the
Advances and any Notes evidencing the Advances recorded therein for all purposes of this Agreement.
Any assignment of any Advance, whether or not evidenced by a Note, shall be effective only upon
appropriate entries with respect thereto being made in the Register (and each Note shall expressly
so provide). Any assignment or transfer of all or part of an Advance evidenced by a Note shall be
registered on the Register only upon surrender for registration of assignment or transfer of the
Note evidencing such Advance, accompanied by a duly executed Assignment and Acceptance, and
thereupon one or more new Notes shall be issued to the designated Assignee.

          (f)   Upon its receipt of an Assignment and Acceptance executed by an Assignor, an Assignee
and any other Person whose consent is required by this Section 9.04, together with payment to the
Agent of the registration and processing fee referred to in paragraph (a) of this Section 9.04, the
Agent shall (i) promptly accept such Assignment and Acceptance and (ii) record the information
contained therein in the Register on the effective date determined pursuant thereto.

          (g)   Each of the Borrower, each Lender and the Agent hereby confirms that it will not
institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender
any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state
bankruptcy or similar law, for one year and one day after the payment in full of the latest
maturing commercial paper note issued by such Conduit Lender; provided, however, that

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each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless
each other party hereto for any loss, cost, damage or expense arising out of its inability to
institute such a proceeding against such Conduit Lender during such period of forbearance.

          9.05   Delays and Waivers. No delay or omission by Agent, Collateral Agent, Arranger
or Lenders to exercise any right under this Agreement, the Collateral Documents or any instrument
or agreement contemplated hereunder or thereunder shall impair any such right, nor shall it be
construed to be a waiver thereof. No waiver of any single breach or default under this Agreement
shall be deemed a waiver of any other breach or default. Any waiver, consent or approval under
this Agreement must be in writing to be effective.

          9.06   Costs and Expenses. Borrower agrees:

     (a)   to pay or reimburse Agent, the Collateral Agent, the Arranger and the Issuing
Lenders within thirty days of written demand (together with backup documentation supporting
such reimbursement request) for all reasonable out-of-pocket costs and expenses incurred by
them in connection with the development, preparation, delivery, administration and execution
of, and any amendment, supplement or modification to, this Agreement, any Collateral
Document and any other documents or instruments prepared in connection herewith or
therewith, the consummation of the transactions contemplated hereby and thereby, and the
consummation of the transactions to occur on the Closing Date, including, without
limitation, (i) the reasonable fees and out-of-pocket expenses of outside and local counsel
and special tax counsel to Agent and the Collateral Agent with respect thereto and (ii) the
reasonable fees and reasonable out-of-pocket expenses of Agent’s outside accounting
consultant;

     (b)   to pay or reimburse each Lender, the Collateral Agent, the Agent, the Arranger
and the Issuing Lenders within thirty days of written demand (together with backup
documentation supporting such reimbursement request) for all reasonable costs and expenses
incurred by any of them in connection with the enforcement or preservation of any rights
under this Agreement, the Notes, any Collateral Document, and any other documents or
instruments prepared in connection herewith or therewith and in connection with any
refinancing or restructuring of the Credit in the nature of a “work-out”, including, without
limitation, reasonable fees and out-of-pocket expenses of one outside counsel and local
counsel in each appropriate jurisdiction (and the allocated cost of staff counsel) to Agent,
the Collateral Agent and to each of the several Lenders (unless there is an actual conflict
of interest in which case each such party with such conflict shall be entitled to retain
separate outside counsel and local counsel in each appropriate jurisdiction); and

     (c)   to pay or reimburse Agent, the Arranger or the Collateral Agent within thirty
days of written demand (together with backup documentation supporting such reimbursement
request) for all reasonable appraisal, accounting, audit, search, recordation and filing
fees, incurred or sustained by them in connection with the matters referred to under
paragraphs (a) and (b) above.

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          9.07   Telephone Indemnity. Borrower shall protect Lenders and Agent and hold them
harmless from and not liable for any and all loss, damage, claim or expense (including, without
limitation, reasonable attorneys’ fees and the allocated costs of any Lender’s in-house legal
counsel) incurred by Agent or Lenders in connection with or in relation to any act or any failure
to act upon telephone instructions received by Lenders or Agent from Borrower or any Person who has
identified himself as an authorized officer of Borrower, whether or not the instructions are
actually given by an authorized officer of Borrower.

          9.08   Other Indemnity. (a)  Borrower agrees to indemnify and hold harmless Agent,
the Collateral Agent, each Lender and each of their respective officers, directors, agents and
employees, and trustees and advisors of an Approved Fund, from and against any and all claims,
damages, liabilities, costs and expenses (including, without limitation, reasonable fees, expenses
and disbursements of counsel) which may be incurred by or asserted against Agent, the Collateral
Agent, the Arranger, the Syndication Agent, any Lender, any Issuing Lender or any such other
indemnified Person in connection with or arising out of any investigation, litigation or proceeding
related to this Agreement, the Advances, the Term Loan Commitments, the Revolving Credit
Commitments, the Letters of Credit, the use of proceeds of the Advances or Letters of Credit or the
negotiation and preparation of documentation in connection herewith or therewith, whether or not
Agent, the Collateral Agent, the Arranger, the Syndication Agent, any Issuing Lender or such Lender
is a party thereto; provided, however, that Borrower shall not be required to
indemnify any such indemnified Person from or against any portion of such claims, damages,
liabilities or expenses arising out of gross negligence, willful misconduct or bad faith of such
indemnified Person. The foregoing indemnification shall be binding on the Borrower forever, and
shall survive repayment of the Obligations and the release of any liens under the Collateral
Documents.

          (b)   Borrower hereby agrees to indemnify, defend and hold harmless Agent, the Collateral
Agent, the Issuing Lenders and each Lender, and each of their respective officers, directors,
employees and agents, and trustees and advisors of an Approved Fund, from and against any and all
claims, losses, liabilities, damages and expenses (including, without limitation, reasonable
attorneys’ fees), which may be incurred by or asserted against Agent, the Collateral Agent, the
Issuing Lenders or any Lender or any such indemnified Person in connection with or arising out of
any investigation, litigation or proceeding, or any action taken by any Person, with respect to any
Hazardous Materials Claim arising out of or related to any of the Properties which are subject to a
Lien in favor of the Collateral Agent as contemplated hereunder (including, without limitation, any
Hazardous Materials Claim arising out of or relating to any (i) release of Hazardous Materials on,
upon, under or into any such Properties or (ii) damage to real or personal property or natural
resources and/or harm or injury to Persons alleged to have resulted from such release of Hazardous
Materials on, upon or into any such Properties); provided, however, that Borrower
shall not be required to indemnify, defend or hold harmless any such indemnified Person from or
against any portion of such loss, liability, damage or expense arising out of the gross negligence,
willful misconduct or bad faith of such indemnified Person. The foregoing indemnification is the
personal obligation of Borrower, binding on Borrower forever, and shall survive repayment of the
Obligations and release of record of the mortgages or deeds of trust in favor of Collateral Agent
encumbering the Properties and any transfer of the Properties by foreclosure or by deed in lieu of
foreclosure. The foregoing indemnification shall not be affected or negated by any exculpatory
clause that may be contained

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in any of the Collateral Documents. It is expressly understood and agreed that to the extent
that Collateral Agent and/or Lenders are strictly liable under any such law, regulation, ordinance
or requirement, Borrower’s obligation to Collateral Agent and Lenders under this indemnity shall
likewise be without regard to fault on the part of Borrower or its Subsidiaries with respect to the
violation or condition which results in liability to Collateral Agent and/or Lenders;
provided, however, that Borrower shall not be required to indemnify, defend or hold
harmless any such indemnified Person from or against any portion of such loss, liability, damage or
expense arising after the Collateral Agent shall have foreclosed or otherwise taken possession of
such property which is caused by any action or inaction of the Collateral Agent after such time.

          (c)   Agent, the Collateral Agent and each Lender agree that in the event that any such
investigation, litigation or proceeding is asserted or threatened in writing or instituted against
it or any of its officers, directors, agents and employees, or trustees and advisors of an Approved
Fund, or any remedial, removal or response action is requested of it or any of its officers,
directors, agents and employees, or trustees and advisors of an Approved Fund, for which Agent, the
Collateral Agent or any Lender may desire indemnity or defense hereunder, Agent, the Collateral
Agent or such Lender shall promptly notify Borrower in writing.

          (d)   Borrower at the request of Agent, the Collateral Agent or any Lender, shall have the
obligation to defend against such investigation, litigation or proceeding or requested remedial,
removal or response action, and Agent, in any event, may participate in the defense thereof with
legal counsel of Agent’s choice if Agent asserts defenses that raise potential conflicts of
interest with Borrower. No action taken by legal counsel chosen by Agent or any Lender in
defending against any such investigation, litigation or proceeding or requested remedial, removal
or response action shall vitiate or in any way impair Borrower’s obligation and duty hereunder to
indemnify and hold harmless Agent, the Collateral Agent and each Lender (unless such action is
grossly negligent).

          9.09   Choice of Law. EXCEPT FOR COLLATERAL DOCUMENTS GOVERNED BY THE LAWS OF ANOTHER
STATE OR COUNTRY, AGENT, SYNDICATION AGENT, COLLATERAL AGENT AND LENDERS AND BORROWER AGREE THAT
THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, THE NOTES AND ALL OTHER
DOCUMENTS EXECUTED IN CONNECTION HEREWITH, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

          9.10   Personal Jurisdiction; Waiver. AGENT, COLLATERAL AGENT AND LENDERS MAY ENFORCE
ANY CLAIM ARISING UNDER THIS AGREEMENT, THE NOTES, OR ANY COLLATERAL DOCUMENT IN ANY STATE OR
FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN CHICAGO, ILLINOIS OR NEW YORK, NEW
YORK. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT TO ANY SUCH CLAIM,
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS. EACH OF THE
BORROWER AND ITS SUBSIDIARIES HEREBY

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IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SECTION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.

          9.11   Service of Process. THE PARTIES HERETO IRREVOCABLY CONSENT TO THE SERVICE OF
PROCESS OF ANY OF THE AFORESAID COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS PROVIDED
HEREIN NOT LESS THAN FIVE (5) DAYS AFTER THE APPLICABLE SUMMONS IS ISSUED AND SHALL BECOME
EFFECTIVE UPON MAILING. NOTHING CONTAINED IN THIS SECTION 9.11 SHALL AFFECT THE RIGHT OF AGENT,
SYNDICATION AGENT, COLLATERAL AGENT, ANY LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER
OR ANY GUARANTOR IN ANY OTHER JURISDICTION.

          9.12   Waiver of Jury Trial. EACH OF AGENT, COLLATERAL AGENT, SYNDICATION AGENT,
LENDERS AND BORROWER WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN AGENT, COLLATERAL AGENT, SYNDICATION AGENT,
LENDERS AND/OR BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTES
RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

          9.13   Section Headings. Section headings are for reference only, and shall not
affect the interpretation or meaning of any provision of this Agreement.

          9.14   Severability. The illegality or unenforceability of any provision of this
Agreement or any instrument or agreement required hereunder shall not in any way affect or impair
the legality or enforceability of the remaining provisions of this Agreement or any instrument or
agreement required hereunder.

          9.15   Counterparts. This Agreement may be executed in as many counterparts as may
be deemed necessary or convenient, and by the different parties hereto on separate counterparts
(provided that Borrower shall execute each counterpart), each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one and the same
agreement.

          9.16   No Reliance by Lenders. Lenders hereby acknowledge that they have not, in good
faith, relied upon any margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System) as collateral in extending or maintaining the loans under this Agreement.

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          9.17   Entire Agreement. This Agreement, any writing referred to in Section 2.15 and
any agreement, document or instrument attached hereto or referred to herein (i) integrate all the
terms and conditions mentioned herein or incidental hereto, (ii) supersede all oral negotiations
and prior writings in respect to the subject matter hereof, and (iii) are intended by the parties
as the final expression of the agreement with respect to the terms and conditions set forth in this
Agreement and any such agreement, document or instrument (including such letter agreement) and as
the complete and exclusive statement of the terms agreed to by the parties.

          9.18   Confidentiality. Each Lender and Agent agree to keep information obtained by
it pursuant hereto and the other Collateral Documents confidential in accordance with such Lender’s
or Agent’s, as the case may be, customary practices and agrees that it will only use such
information in connection with the transactions contemplated by this Agreement and not disclose any
of such information other than (i) to such Lender’s or Agent’s, as the case may be, employees,
representatives, agents or affiliates who are advised of the confidential nature of such
information, (ii) to the extent such information presently is or hereafter becomes available to
such Lender or Agent, as the case may be, on a non-confidential basis from a source other than
Borrower or such information that is in the public domain at the time of disclosure, (iii) to the
extent disclosure is required by law, regulation, subpoena or judicial order or process (which
requirement or order shall be promptly notified to Borrower unless such notice is legally
prohibited) or requested or required by bank regulators or auditors or any administrative body or
commission to whose jurisdiction such Lender or Agent, as the case may be, may be subject, (iv) to
assignees or participants or potential assignees or participants who agree to be bound by the
provisions of this Section 9.18, (v) to the extent required in connection with any litigation
between Borrower and/or any Guarantor and any Lender, Syndication Agent, Collateral Agent or Agent,
(vi) following an Event of Default, in connection with the sale or other realization on any
Collateral under any Collateral Document, or (vii) with Borrower’s prior written consent.

          9.19   Existing Credit Agreement to Remain in Full Force and Effect. This Agreement
shall be deemed to be an amendment to and restatement of the Existing Credit Agreement and the
Existing Credit Agreement as amended and restated hereby shall remain in full force and effect and
is hereby ratified and confirmed in all respects. All references to the Existing Credit Agreement
in any other agreement or document shall, on and after the Closing Date, be deemed to refer to the
Existing Credit Agreement as amended and restated hereby, and all references to “Bank” or “Banks”
in any other agreement or document shall, on and after the Closing Date, be deemed to be references
to “Lender” and “Lenders”, respectively. The Borrower agrees, acknowledges and affirms that (i)
each of the Collateral Documents to which it is a party shall remain in full force and effect and
shall constitute security for all extensions of credit pursuant to the Existing Credit Agreement as
amended and restated hereby and (ii) any reference to the Existing Credit Agreement appearing in
any such Collateral Document shall on and after the Closing Date be deemed to refer to the Existing
Credit Agreement as amended and restated hereby.

          9.20   Replacement of Lenders. If any Lender does not consent to any proposed
amendment, modification, waiver or termination of the Credit Documents pursuant to Section 10.06
requiring the consent of all affected Lenders in respect of which the consent of the Majority
Lenders is obtained (any such Lender, a “Non-Consenting Lender”), then the Borrower shall
have the right to replace in its entirety such Lender (the “Replaced Lender”), on five

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Banking Days’ prior written notice to the Agent and such Replaced Lender, with one or more
other Persons (collectively, the “Replacement Lender”) reasonably acceptable to the Agent,
the Borrower and, in the event such Replaced Lender is a Revolving Credit Lender, the Issuing
Lender (which acceptance in any case shall not be unreasonably withheld); provided, that: (i) at
the time of any replacement pursuant to this Section 9.20, the Replaced Lender and the Replacement
Lender shall enter into one or more Assignment and Acceptance, substantially in the form of Exhibit
K (appropriately completed), pursuant to which the Replacement Lender shall acquire all of the
Commitments, participating interests in Letters of Credit, and outstanding Advances of the Replaced
Lender and, in connection therewith, shall pay to the Replaced Lender in respect thereof an amount
equal to the sum of (a) an amount equal to the principal of, and all accrued but unpaid interest
on, all outstanding Advances of the Replaced Lender and (b) an amount equal to all accrued, but
theretofore unpaid fees owing to the Replaced Lender and (c) any other amounts payable to the
Replaced Lender under this Agreement. Upon the execution of the respective assignment
documentation, the making of the appropriate entries in the Register, the payment of amounts
referred to in the preceding sentence and, if so requested by the Replacement Lender, delivery to
the Replacement Lender of appropriate Notes executed by the Borrower, the Replacement Lender shall
become a Lender hereunder, and the Replaced Lender shall cease to constitute a Lender hereunder,
except with respect to indemnification provisions under this Agreement, which shall survive as to
such Replaced Lender. For the avoidance of doubt, it is understood that neither the Agent nor the
Syndication Agent nor any Lender shall be obligated to be or to find any Replacement Lender.

ARTICLE X.

RELATION OF LENDERS

          10.01   Agent and Collateral Agent; Enforcement of Guaranties. (a)  Each Lender
hereby irrevocably appoints, designates and authorizes Agent to take such action on its behalf
under the provisions of this Agreement and each other instrument or agreement contemplated
hereunder and to exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or such other instrument or agreement, together with such powers as are
reasonably incidental thereto. Each Lender agrees that no Lender shall have the right individually
to enforce the Guarantee and Collateral Agreement, the Mortgages or other Collateral Documents and
hereby appoints Agent to act upon the direction of the Majority Lenders to enforce each such
Agreement. JPMorgan Chase Bank, N.A. and the Operating Banks agree that none of such Lenders shall
take any action to enforce the Operating Bank Guaranty, respectively, until Agent has commenced to
enforce the Guarantee and Collateral Agreement upon the direction of the Majority Lenders pursuant
to the preceding sentence. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement or in such other instrument or agreement, Agent shall not have any duties or any
fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any such other instrument
or agreement or otherwise exist against the Agent. Agent may execute any of its duties under this
Agreement by or through agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.

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          (b)   Each Lender hereby authorizes the Collateral Agent to enter into the Collateral
Documents to which it is a party and to take all action contemplated by the Collateral Agency
Agreement; provided that the Collateral Agent shall not enter into or consent to any
amendment, modification, termination or waiver of any provision contained in any Collateral
Document or take any action thereunder without the direction of Agent. Except as permitted by
Section 10.13, the Agent shall not direct the Collateral Agent to enter into or consent to any
amendment, modification, termination or waiver of any provision of any Collateral Document or
direct the Collateral Agent to take any action thereunder without the prior consent of the Majority
Lenders. Each Lender agrees that no Lender shall have any right individually to seek or to enforce
or to realize upon the security granted to the Collateral Agent under the Collateral Documents, it
being understood and agreed that such rights and remedies may be exercised by the Collateral Agent
for the benefit of all of the Secured Creditors upon the terms of the Collateral Documents and the
Collateral Agreement.

          10.02   Pro Rata Sharing. All principal, interest and fee payments on the Revolving
Credit (other than sums under Sections 2.14(a)(ii), 2.14(a)(iii) and 2.15 or other provisions which
provide for payments to specific Lenders) shall be divided pro rata among Lenders according to
their respective Revolving Credit Commitment Percentages, all principal, interest and fee payments
on the Delayed-Draw Term Loan Facility (other than sums under Section 2.15 or other provisions
which provide for payments to specific Lenders) shall be divided pro rata among the Lenders
according to their respective Delayed-Draw Term Loan Percentages and all principal, interest and
fee payments on the Tranche B Term Loan Facility (other than sums under Section 2.15 or other
provisions which provide for payments to specific Lenders) shall be divided pro rata among Lenders
according to their respective Tranche B Term Advances. All sums realized under the Guarantee and
Collateral Agreement (or any guaranty executed and delivered pursuant to Section 3.04) and all
proceeds of Collateral distributed to Lenders under the Collateral Agency Agreement (subject to
Section 10.13(f)) shall be allocated as set forth in the Collateral Agency Agreement.

          10.03   Set-off. (a)  Subject to the rights of the Secured Creditors with respect to
any Collateral and in addition to any Liens granted by Borrower or any of its Subsidiaries to the
Collateral Agent and any rights now or hereafter granted under applicable law and not by way of
limitation of any such Lien or rights, upon the occurrence and during the continuance of an Event
of Default, each Secured Creditor is hereby authorized by Borrower at any time and from time to
time with the prior consent of the Agent, without notice to Borrower, or to any other Person (any
such notice being hereby expressly waived) to set-off all deposits (excluding payroll, tax, and
trust accounts) of Borrower and any other Debt at any time held or owing by such Secured Creditor
to or for the credit of Borrower against and on account of the Secured Obligations owing to such
Secured Creditor irrespective of whether or not Agent or such Secured Creditor shall have made
demand under this Agreement or any Collateral Document and although the Secured Obligations may be
unmatured. Each of the Lenders agrees that it shall not, without the express consent of Agent,
set-off against the Obligations or any other amounts owing to such Lender any accounts of Borrower
now or hereafter maintained with such Lender. Each Lender further agrees that it shall not, unless
specifically requested to do so by Agent, take or cause to be taken any action, including, without
limitation, the commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any

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of the Collateral for the purpose of which is, or could be, to give such Lender any preference
or priority against any other Secured Creditor with respect to the Collateral.

          (b)   If at any time or times any Lender shall receive by payment, foreclosure, set-off or
otherwise, any proceeds of any Collateral or any payments with respect to the Secured Obligations
arising under, or relating to, this Agreement or the Collateral Documents, except for any such
proceeds or payments received by such Lender or any Issuing Lender from Agent or Collateral Agent
pursuant to the terms of this Agreement or the Collateral Agency Agreement, such Lender shall
promptly purchase, without recourse or warranty, an undivided interest and participation in the
Secured Obligations owed to the other Lenders (or, after an Event of Default, the other Secured
Creditors) so that such excess payment received shall be applied ratably as among Lenders in
accordance with their respective Commitment Percentages (or, after an Event of Default among the
Secured Creditors as provided for in the Collateral Agency Agreement); provided,
however, that if all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be rescinded in whole or in
part, as applicable, and the applicable portion of the purchase price paid therefor shall be
returned to such purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess payment.
Notwithstanding any contrary provision contained herein, the proceeds of any drawing under any
Letter of Credit issued hereunder in favor of JPMorgan Chase Bank, N.A. in its individual capacity
(without affecting JPMorgan Chase Bank, N.A.’s obligation to purchase a participation in any such
Letter of Credit in accordance with Section 2.19(c)(i)) shall be for JPMorgan Chase Bank N.A.’s
sole benefit.

          (c)   Each Secured Creditor other than in its capacity as a Lender shall be entitled to any
rights conferred upon it under this Agreement or any of the Collateral Documents only on the
condition and understanding that it shall be bound by the terms of this Section 10.03 to the same
extent as Lenders.

          10.04   Liability of Agent. Neither Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action taken or
omitted to be taken by any of them under or in connection with this Agreement (except for its or
such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any
of the Lenders for any recital, statement, representation or warranty made by Borrower or any
Subsidiary or any officer thereof contained in this Agreement or in any other instrument or
agreement contemplated hereunder or in any certificate, report, statement or other document
referred to or provided for in, or received by Agent under or in connection with, this Agreement or
any other instrument or agreement contemplated hereunder or for the value of any Collateral or the
validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other
instrument or agreement contemplated hereunder or for any failure of Borrower or any Subsidiary to
perform its obligations hereunder or thereunder. Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of agreements
contained in, or conditions of, this Agreement or any other instrument or agreement contemplated
hereunder, or to inspect the properties, books or records of Borrower or any Subsidiary.

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          10.05   Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, telecopy, telex or telephone message, electronic message, statement or other
document or conversation believed by it to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons and upon advice and statements of legal counsel (including
counsel to Borrower or any Guarantor), independent accountants and other experts selected by Agent.
Agent shall be fully justified in failing or refusing to take any action under this Agreement or
any other instruction or agreement contemplated hereunder unless it shall first receive such advice
or concurrence of the Majority Lenders as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such action. Agent shall
in all cases be fully protected in acting, or in refraining from acting, under this Agreement or
any other instrument or agreement contemplated hereunder in accordance with a request or consent of
the Majority Lenders and such request and any action taken or failure to act pursuant thereto shall
be binding upon all Lenders.

          10.06   Approvals; Amendments. This Agreement and the Collateral Documents may be
amended or waived only upon the prior express written consent of Borrower or Guarantors, as the
case may be, party thereto and the Majority Lenders (provided that any Control Agreement
may be amended or waived with the consent of the respective parties thereto). Upon any occasion
requiring or permitting an approval, consent, waiver, election or other action on the part of
Majority Lenders, action shall be taken by Agent for and on behalf or for the benefit of all
Lenders upon the direction of Majority Lenders, and any such action shall be binding on all
Lenders; provided, however, that unless each Lender directly and adversely affected
thereby (it being understood that, for the purposes of Section 10.06 (d), (e) and (g), all Lenders
shall be deemed to be directly affected thereby) agree in writing, no amendment, modification,
consent or waiver shall be effective which:

     (a)   increases the amount of any Commitment of any Lender or extends the expiry date
thereof,

     (b)   reduces interest, principal, prepayment premium (if any, owed pursuant to Section
2.12(b)), commissions or fees owing hereunder,

     (c)   extends the scheduled date on which any sum is due hereunder,

     (d)   releases all or substantially all of the Guarantors from their obligations under
the Guarantee and Collateral Agreement or, subject to the proviso in Section 10.13(c),
releases all or substantially all of the Collateral (except (i) in connection with
dispositions thereof permitted under this Agreement, (ii) as permitted by subsection
10.13(b), (iii) any Guarantor may be released from its obligations under the Credit
Documents if all of the Capital Stock of, or substantially all of the assets of, such
Guarantor are disposed of in a transaction permitted by this Agreement or (iv) as otherwise
expressly permitted by this Agreement),

     (e)   reduces the percentage specified in the definition of “Majority Lenders”,

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     (f)   amends or waives the provisions of this Section 10.06, or

     (g)   amends or waives any provision requiring consent of a specified percentage of
Lenders without consent of such percentage of Lenders.

          Notwithstanding the foregoing, (i) the Agent and the Collateral Agent may enter into technical
amendments to the Collateral Agency Agreement without the consent of the Lenders, (ii) the Agent
and the Collateral Agent may enter into amendments to the Operating Bank Guaranty replacing Annex I
thereto without the consent of the Lenders and (iii) no amendment, modification, consent or waiver
shall be effective which reduces the amount of any mandatory prepayment under Section 2.13 without
the consent of the holders of at least a majority in interest of each Facility.

          Further, notwithstanding anything to the contrary contained in Section 10.6, if within sixty
days following the Closing Date, the Agent and the Borrower shall have jointly identified an
obvious error or any error or omission of a technical or immaterial nature, in each case, in any
provision of the Loan Documents, then the Agent and the Borrower shall be permitted to amend such
provision and such amendment shall become effective without any further action or consent of any
other party to any Credit Document if the same is not objected to in writing by the Majority
Lenders within five Business Days following receipt of notice thereof.

          10.07   Notice of Default. Agent shall not be deemed to have knowledge or notice of
the occurrence of any Event of Default, except with respect to defaults in the payment of
principal, interest, commissions and fees payable to Agent hereunder for the account of Lenders,
unless Agent shall have received notice from a Lender or Borrower referring to this Agreement,
describing such Event of Default and stating that such notice is a “notice of default”. In the
event that Agent receives such a notice, Agent shall give prompt notice thereof to Lenders. Agent
shall take such action with respect to such Event of Default as shall be requested by the Majority
Lenders in accordance with Article VIII; provided, however, that unless and until
Agent shall have received any such request, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Event of Default as it shall deem
advisable in the best interests of Lenders.

          10.08   Credit Decision. Each Lender expressly acknowledges that neither Agent nor
any other Lender nor any of their Affiliates nor any officer, director, employee, agent or
attorney-in-fact of any of them has made any representation or warranty to it and that no act by
Agent or any other Lender hereafter taken, including any review of the affairs of Borrower and its
Subsidiaries and their Affiliates, shall be deemed to constitute any representation or warranty by
Agent or any other Lender to such Lender. Each Lender represents to Agent and to each other Lender
that it has, independently and without reliance upon Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own appraisal of and investigation
into the business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and Guarantors and made its own decision to enter into this Agreement
and extend credit to Borrower hereunder (without reliance on the Agent or any other Lender). Each
Lender also represents that it will, independently and without reliance upon Agent or any other
Lender and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in

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taking or not taking action under this Agreement, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of Borrower and Guarantors (without reliance on the Agent or any
other Lender). Except for notices, reports and other documents expressly required to be furnished
to Lenders by Agent hereunder, Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of Borrower or any Guarantor which may
come into the possession of Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.

          10.09   Lenders’ Indemnity. Each Lender agrees to indemnify Agent (to the extent not
reimbursed by or on behalf of Borrower and without limiting the obligation of Borrower to do so),
ratably, according to the sum of (i) its Revolving Credit Commitments (or, if the Revolving Credit
Commitments have been terminated, the sum of its outstanding Revolving Advances, participating
interests in Letters of Credit and unreimbursed drawings in respect of Letters of Credit), (ii) its
Delayed-Draw Term Loan Commitments (or if the Delayed-Draw Term Loan Commitments shall have been
terminated, the sum of the outstanding Delayed-Draw Term Advances) and (iii) its outstanding
Tranche B Term Advances, in each case determined in effect on the date on which indemnification is
sought under this Section (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Advances shall have been paid in full, ratably in
accordance with such sum immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind whatsoever which may at any time (including at any time following the
repayment of the Advances or the Letters of Credit) be imposed on, incurred by or asserted against
Agent in any way relating to or arising out of this Agreement or any document contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby or any action
taken or omitted by Agent under or in connection with any of the foregoing; provided
however, that no Lender shall be liable for the payment to Agent of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from Agent’s gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including reasonable fees and expenses of counsel and
the allocated cost of in-house counsel) incurred by Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any Collateral Document, or any document contemplated by or
referred to herein to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrower.

          10.10   Agent as Lender. JPMorgan Chase Bank, N.A. shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were not Agent; and the
term “Lenders” shall include JPMorgan Chase Bank, N.A. in its individual capacity. JPMorgan Chase
Bank, N.A. and its subsidiaries and affiliates may accept deposits from, lend money to, act as
agent or trustee for other lenders to, and generally engage in any kind of banking, trust or other
business with Borrower or any of its Subsidiaries or Affiliates as if it were not Agent.

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          10.11   Notice of Transfer. Subject to Section 9.04(a), Agent may deem and treat a
Lender party to this Agreement as the owner of such Lender’s portion of the Credit for all purposes
hereof unless and until a written notice of the assignment or transfer thereof executed by such
Lender shall have been received by Agent.

          10.12   Resignation of Agent. Agent may resign upon 30 days’ written notice to
Lenders and Borrower. Upon any such resignation, Majority Lenders shall have the right to appoint
a successor Agent (which shall be either a Lender or a commercial bank with capital and surplus in
excess of One Hundred Million Dollars ($100,000,000) and which successor Agent, unless a Default or
an Event of Default has occurred and is continuing, shall be reasonably acceptable to Borrower).
If no successor Agent shall have accepted such appointment within thirty (30) days after the
retiring Agent’s giving of notice of resignation, the retiring Agent may, on behalf of Lenders,
appoint a successor Agent. Upon the acceptance by the successor Agent of its appointment
hereunder, the successor Agent shall succeed to and become vested with all the rights and
obligations of the retiring Agent, and the retiring Agent shall be discharged from its obligations
under this Agreement. The provisions of this Article X and Sections 9.06, 9.07 and 9.08 shall
inure to the benefit of the retiring Agent as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.

          10.13   Collateral Matters. (a)  Agent may from time to time, before or after the
occurrence of an Event of Default, make such disbursements and advances to the Collateral Agent
(“Agent Advances”) which Agent, in its sole discretion, deems necessary or desirable to
preserve or protect the Collateral or any portion thereof, to enhance the likelihood or maximize
the amount of repayment of the Obligations or to pay any other amount chargeable to Borrower or any
Guarantor pursuant to the terms of this Agreement or any Collateral Document, including, without
limitation, costs, fees and expenses as described in Section 9.06; provided,
however, that the Agent Advances shall not exceed Two Hundred Fifty Thousand Dollars
($250,000) without the prior written consent of Majority Lenders. The Agent Advances shall be
repayable on demand and be secured by the Collateral. The Agent Advances shall not constitute
Advances but shall otherwise constitute Obligations hereunder. Agent shall notify each Lender in
writing of each such Agent Advance, which notice shall include a description of the purpose of such
Agent Advance. Without limitation to its obligations pursuant to Section 10.09, each Lender agrees
that it shall make available to Agent, upon Agent’s demand, in immediately available funds, the
amount equal to such Lender’s Commitment Percentage of each such Agent Advance. If such funds are
not made available to Agent by such Lender within one (1) Banking Day after Agent’s demand
therefor, Agent will be entitled to recover any such amount from such Lender together with interest
thereon at the Federal Funds Rate for each day during the period commencing the date of such demand
and ending on the date such amount is received.

          (b)   Lenders acknowledge that the Borrower and its Subsidiaries have created and will create
Liens permitted by this Agreement on a substantial portion of their property, including Collateral,
to secure obligations owed to Persons other than the Secured Creditors and that the Borrower and
its Subsidiaries from time to time have requested and will request the Agent and Collateral Agent
to execute and deliver releases and subordinations with respect to Liens on the Collateral created
by the Collateral Documents in connection with transactions permitted by this Agreement (such as
the Borrower and its Subsidiaries obtaining financing on equipment and other property secured by
Liens described in clauses (iv) and (xiii) of the

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definition of “Permitted Liens”). Lenders hereby irrevocably authorize Agent, at its option
and in its discretion, to direct the Collateral Agent to release or subordinate on terms
satisfactory to the Collateral Agent any Lien granted to or held by the Collateral Agent upon any
Collateral (i) upon termination of the Revolving Credit Commitments and Term Loan Commitments and
indefeasible payment in full and satisfaction of all of the Obligations; or (ii) constituting
property being sold or disposed of if the sale or disposition is permitted hereunder; or (iii)
constituting property in which neither Borrower nor any Guarantor owned an interest at the time the
Lien was granted or at any time thereafter; or (iv) constituting property leased to Borrower or any
Guarantor; or (v) if approved, authorized or ratified in writing by the Majority Lenders (subject
to Section 10.06(d)); or (vi) subject to a Permitted Lien or other Lien permitted by Section 7.03;
or (vii) not owned by the Borrower or any Guarantor. Upon request by Agent at any time, Lenders
will confirm in writing Agent’s authority to so direct the release of particular types or items of
Collateral pursuant to this Section 10.13(b). Without limitation of the foregoing, the Lenders
approve the form of, and authorize the Agent and the Collateral Agent to enter into at the request
of the Borrower, subordination agreements substantially in the form of Exhibit L hereto. The
Lenders hereby irrevocably authorize Agent, at its option and discretion (1) to direct the
Collateral Agent to release and subordinate, on terms satisfactory to the Collateral Agent, Liens
on Collateral which is also subject to Permitted Liens, (2) to execute any release, subordination
or acknowledgement documents requested by the Borrower in order to effect any release or
subordination described in this paragraph (b) and (3) to execute acknowledgements with respect to
leases to the effect that the Property subject to such leases is not subject to the Liens created
by the Credit Documents or Collateral, and the Agent and the Collateral Agent shall have no
liability to the Secured Creditors for actions taken pursuant to this paragraph (b). This
paragraph (b) is intended as an authorization by the Lenders to permit the Agent and the Collateral
Agent to take the actions described herein and neither the Borrower nor any of its Subsidiaries or
any other Person shall be entitled to the benefits hereof. In reliance on and pursuant to the
foregoing authority the Agent and the Collateral Agent may enter into subordination agreements and
take other actions requested by the Borrower in order to provide assurance to purchase money
financing sources and their assignees and successors of their priority in particular items of
Collateral, notwithstanding that such financing sources and their assignees and successors may have
failed to maintain perfected first priority security interests thereon.

          (c)   Without in any manner limiting Agent’s authority to act without any specific or further
authorization or consent by the Majority Lenders (as set forth in Section 10.13(b) above), each
Lender agrees to confirm in writing, upon request by Borrower, the authority to direct the release
of Collateral conferred upon the Agent under clauses (i) through (vii) of Section 10.13(b) above.
Upon receipt by Agent of confirmation from the Majority Lenders of its authority to direct the
release of any particular item or types of Collateral, Agent shall (and is hereby irrevocably
authorized by Lenders to) direct the Collateral Agent to execute such documents as may be necessary
to evidence the release of the Liens granted to the Collateral Agent for the benefit of the Secured
Creditors herein or pursuant hereto upon such Collateral; provided, however, that
(i) Agent shall not be required to direct the Collateral Agent to execute any such document on
terms which, in Agent’s opinion, would expose Agent or the Collateral Agent to liability or create
any obligation or entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations
or any Liens upon (or obligations of Borrower and its

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Subsidiaries in respect of) all interests retained by Borrower and its Subsidiaries,
including (without limitation) the proceeds of any sale, all of which shall continue to constitute
part of the Collateral.

          (d) Neither Agent nor Collateral Agent shall have any obligation whatsoever to any Lender to
assure that the Collateral exists or is owned by Borrower or any of its Subsidiaries or is cared
for, protected or insured or has been encumbered or that the Liens granted to the Agent or the
Collateral Agent pursuant to any Collateral Document have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or
to continue exercising, any of the rights, authorities and powers granted or available to Agent or
Collateral Agent in this Section 10.13 or in any of the Collateral Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission or event related thereto, each
of Agent and Collateral Agent may act in any manner it may deem appropriate, in its sole
discretion, given Agent’s and Collateral Agent’s own interest in the Collateral as one of the
Lenders and that Agent and Collateral Agent shall have no duty or liability whatsoever to any
Lender (except as specifically provided in this Agreement and the Collateral Documents).

          EACH LENDER FURTHER ACKNOWLEDGES AND AGREES THAT AGENT AND COLLATERAL AGENT SHALL NOT BE
RESPONSIBLE FOR, AND SHALL HAVE NO LIABILITY OR OBLIGATION WITH RESPECT TO, THE VALIDITY,
EFFECTIVENESS, GENUINENESS, ENFORCEABILITY OR SUFFICIENCY OF THIS AGREEMENT, THE NOTES, THE
COLLATERAL DOCUMENTS, ANY OTHER INSTRUMENT OR AGREEMENT CONTEMPLATED HEREUNDER OR THEREUNDER, ANY
ACTION TAKEN OR NOT TAKEN OR ANY DECISION MADE BY ANY PERSON (OTHER THAN AGENT, OR COLLATERAL
AGENT, AS THE CASE MAY BE) WITH RESPECT TO ANY THEREOF OR WITH RESPECT TO THE COLLATERAL, THE
FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO PERFORM ITS OBLIGATIONS HEREUNDER OR THEREUNDER, ANY
MISREPRESENTATION BY BORROWER OR ANY SUBSIDIARY HEREUNDER OR THEREUNDER, OR THE VALUE OF ANY
COLLATERAL OR THE CREATION, ATTACHMENT, PERFECTION OR PRIORITY OF ANY SECURITY INTEREST OR LIEN
PURPORTED TO BE CREATED BY THE COLLATERAL DOCUMENTS, THIS AGREEMENT OR SUCH OTHER INSTRUMENTS OR
AGREEMENTS AND THAT AGENT, AS COLLATERAL AGENT AND AGENT, HAS UNDERTAKEN NO INDEPENDENT REVIEW OR
ANALYSIS WITH RESPECT TO ANY OF THE FOREGOING.

          (e) The benefit of the Collateral Documents and of the provisions of this Agreement relating
to the Collateral shall extend to and be available in respect of the Secured Obligations (as
defined in the Collateral Agency Agreement) solely on the condition and understanding, as among
Agent and Lenders, that (i) the Secured Obligations shall be entitled to the benefit of the
Collateral to the extent expressly set forth in the Collateral Documents, and to such extent the
Collateral Agent shall hold, and have the right and power to act with respect to, the Collateral on
behalf of and as agent for the holders of the Secured Obligations; but Agent in its separate
capacity as agent hereunder is acting solely as agent for the Lenders and shall have no separate
fiduciary duty, duty of loyalty, duty of care, duty of disclosure or other obligations whatsoever
to any holder of Secured Obligations; and (ii) all matters, acts and omissions relating

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in any manner to the Collateral, or the omission, creation, perfection, priority, abandonment
or release of any Lien, shall be governed solely by the provisions of this Agreement and the
Collateral Documents, and no separate Lien, right, power or remedy shall arise or exist in favor of
any Lender under any separate instrument or agreement or in respect of any Secured Obligations; and
(iii) each Lender shall be bound by all actions taken or omitted, in accordance with the provisions
of this Agreement or the Collateral Documents, by the Collateral Agent, at the direction of Agent
on behalf of the Lenders; and (iv) no holder of Secured Obligations shall exercise any right of
setoff, bank’s lien or similar right except as expressly provided in Section 10.03.

          (f) Any Collateral proceeds received by Agent from the Collateral Agent pursuant to Section
4(b) clause Third of the Collateral Agency Agreement shall be applied and paid to the
Obligations as follows (unless Agent and Majority Lenders otherwise agree):

     First: To Agent and the Collateral Agent in an amount equal to all costs and
expenses (other than principal and interest) incurred in connection with performing their
respective duties hereunder and under the Collateral Documents, including, without
limitation, those related to or in connection with the administration of this Agreement or
the enforcement of their respective rights under the Collateral Documents;

     Second: To the Lenders and the Issuing Lenders in an amount equal to all
accrued and unpaid interest and accrued and unpaid fees and commissions payable pursuant to
Section 2.14 outstanding hereunder or under the Notes and, if such proceeds shall be
insufficient to pay such amounts in full, then ratably (without priority of any one over any
other) to the Lenders and the Issuing Lenders in proportion to the unpaid amounts of such
accrued and unpaid interest, fees and commissions owed to the respective Lender or Issuing
Lender, as the case may be;

     Third: To the Lenders in an amount equal to all unpaid principal of the
outstanding Advances, to the Issuing Lenders in the amount of any unreimbursed Letter of
Credit drawings (to the extent they have not been converted into a Revolving Advance) and to
Agent for deposit as cash collateral, for application against drawings under any Letters of
Credit, up to an amount equal to the undrawn amount of such Letters of Credit and, if such
proceeds shall be insufficient to pay such amounts in full, then ratably (without priority
of any one over any other) to the Lenders, the Issuing Lenders and the Agent in proportion
of such amounts owed under this clause Third to the respective Lender, Issuing Lender or
Agent, as the case may be;

     Fourth: To any accrued and unpaid fees, commissions and other sums payable
pursuant to this Agreement and not paid pursuant to clause Second of this provision and, if
such proceeds shall be insufficient to make such payments in full, then ratably (without
priority of any one obligation over any other) in proportion to the unpaid amounts of
accrued and unpaid fees, commissions and other sums so owed; and

     Fifth: Any surplus then remaining shall be paid to Borrower or its successors
or assigns, or to whomever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct.

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          10.14 Collateral Agent. The Collateral Agent shall be entitled to the standards of care, indemnities and other
rights set forth in this Article Ten as are set forth for the Agent, mutatis mutandis, except as
may be expressly provided otherwise hereunder, or in the Collateral Documents.

          10.15 Documentation Agent and Syndication Agent. Neither the Documentation Agent nor the Syndication Agent shall have any rights, duties or
responsibilities hereunder in its capacity as such.

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

	 	 	 	 	 
	 	 	BALLY TOTAL FITNESS HOLDING CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	/s/ Ronald Eidell
	 

	 	 	 	 
	 

	 	 	 	Name: Ronald Eidell
	 

	 	 	 	Title: Chief Financial Officer

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	 	 	JPMORGAN CHASE BANK,
N.A., as Agent and as a Lender
	 
	 	 	 	 
	 

	 	By:	 	/s/ Barry Bergman
	 

	 	 	 	 
	 

	 	 	 	Name: Barry Bergman
	 

	 	 	 	Title: Managing Director

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	 	 	MORGAN STANLEY SENIOR FUNDING, INC., as
	 	 	Syndication Agent and as a Lender
	 
	 	 	 	 
	 

	 	By:	 	/s/ Jason Colodell
	 

	 	 	 	 
	 

	 	 	 	Name: Jason Colodell
	 

	 	 	 	Title: Vice President

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	 	 	GOLDMAN SACHS CREDIT
PARTNERS L.P., as a Lender
	 
	 	 	 	 
	 

	 	By:	 	/s/ John Friedman
	 

	 	 	 	 
	 

	 	 	 	Name: John Friedman
	 

	 	 	 	Title: Managing Director

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	 	 	CANYON CAPITAL ADVISORS LLC, as a Lender
	 
	 	 	 	 
	 

	 	By:	 	/s/ Richard Katz
	 

	 	 	 	 
	 

	 	 	 	Name: Richard Katz
	 

	 	 	 	Title: Authorized Signatory

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Schedule 1.01(b)

GAAP EBITDA ADJUSTMENTS

	 	 	 	 	 
	determination period	 	 
	(month ending)	 	Maximum Allowed
	November 30, 2006 through August 31, 2007
	 	$	13,000,000	 
	September 30, 2007
	 	$	10,000,000	 
	October 31, 2007
	 	$	8,000,000	 
	November 30, 2007
	 	$	6,000,000	 
	December 31, 2007 and thereafter
	 	$	4,000,000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}]]