Document:

exv10w24

 

Exhibit 10.24

Execution

TENDER AGREEMENT

between

ALBERT LIOU

and

PAREXEL (TAIWAN), INC.

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I
	 	AGREEMENT TO TENDER	 	 	1	 
	1.1.
	 	Tender of the Shares by the Stockholder	 	 	1	 
	1.2.
	 	Further Assurances	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE II
	 	REPRESENTATIONS OF THE STOCKHOLDER REGARDING THE SHARES	 	 	2	 
	2.1.
	 	Title	 	 	2	 
	2.2.
	 	Authority	 	 	2	 
	2.3.
	 	Regulatory Approvals	 	 	3	 
	2.4.
	 	Brokers	 	 	3	 
	 
	 	 	 	 	 	 
	ARTICLE III
	 	REPRESENTATIONS OF THE STOCKHOLDER REGARDING THE COMPANY	 	 	3	 
	3.1.
	 	Organization, Qualification and Corporate Power	 	 	3	 
	3.2.
	 	Capitalization	 	 	4	 
	3.3.
	 	Noncontravention	 	 	4	 
	3.4.
	 	Subsidiaries	 	 	5	 
	3.5.
	 	Financial Statements	 	 	5	 
	3.6.
	 	Absence of Certain Changes	 	 	6	 
	3.7.
	 	Undisclosed Liabilities	 	 	6	 
	3.8.
	 	Tax Matters	 	 	6	 
	3.9.
	 	Assets	 	 	7	 
	3.10.
	 	Owned Real Property	 	 	7	 
	3.11.
	 	Real Property Leases	 	 	7	 
	3.12.
	 	Intellectual Property	 	 	8	 
	3.13.
	 	Contracts	 	 	9	 
	3.14.
	 	Accounts Receivable	 	 	11	 
	3.15.
	 	Powers of Attorney	 	 	11	 
	3.16.
	 	Insurance	 	 	11	 
	3.17.
	 	Litigation	 	 	11	 
	3.18.
	 	Warranties	 	 	12	 
	3.19.
	 	Employees	 	 	12	 
	3.20.
	 	Employee Benefits	 	 	12	 
	3.21.
	 	Environmental Matters	 	 	14	 
	3.22.
	 	Legal Compliance	 	 	14	 
	3.23.
	 	Customers and Suppliers	 	 	14	 
	3.24.
	 	Permits	 	 	14	 
	3.25.
	 	Certain Business Relationships With Affiliates	 	 	14	 
	3.26.
	 	Brokers’ Fees	 	 	14	 
	3.27.
	 	Disclosure	 	 	15	 
	3.28.
	 	Regulatory Compliance	 	 	15	 
	3.29.
	 	Patient Information	 	 	16	 

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	 	 	 	 	Page	 
	ARTICLE IV
	 	REPRESENTATIONS OF THE BUYER	 	 	17	 
	4.1.
	 	Organization, Qualification and Corporate Power	 	 	17	 
	4.2.
	 	Authorization of Transaction	 	 	17	 
	4.3.
	 	Noncontravention	 	 	17	 
	4.4.
	 	Brokers’ Fees	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE V
	 	COVENANTS	 	 	18	 
	5.1.
	 	Closing Efforts	 	 	18	 
	5.2.
	 	Governmental and Third Party Notices and Consents	 	 	18	 
	5.3.
	 	Operation of Business	 	 	18	 
	5.4.
	 	Access to Information	 	 	20	 
	5.5.
	 	Notice of Breaches	 	 	21	 
	5.6.
	 	Exclusivity	 	 	21	 
	     From the date of this Agreement until the end of the Interim Period:	 	 	21	 
	5.7.
	 	Expenses	 	 	22	 
	5.8.
	 	Cooperation With Other Stockholders	 	 	22	 
	5.9.
	 	Necessary Corporate Actions	 	 	22	 
	5.10.
	 	Repurchase of Shares in Apex Korea	 	 	23	 
	5.11.
	 	Employee Stock Options	 	 	23	 
	5.12.
	 	Board Observation Rights	 	 	23	 
	 
	 	 	 	 	 	 
	ARTICLE VI
	 	INDEMNIFICATION	 	 	23	 
	6.1.
	 	Indemnification by the Stockholder	 	 	23	 
	6.2.
	 	Indemnification by the Buyer	 	 	24	 
	6.3.
	 	Indemnification Claims	 	 	24	 
	6.4.
	 	Survival of Representations and Warranties	 	 	26	 
	6.5.
	 	Limitations	 	 	26	 
	 
	 	 	 	 	 	 
	ARTICLE VII
	 	Post-Closing Agreements	 	 	27	 
	7.1.
	 	No Solicitation or Hiring of Former Employees	 	 	27	 
	 
	 	 	 	 	 	 
	ARTICLE VIII Termination of Agreement	 	 	27	 
	8.1.
	 	Automatic Termination	 	 	27	 
	8.2.
	 	Termination by Agreement of the Parties	 	 	28	 
	8.3.
	 	Termination by Reason of Breach	 	 	28	 
	8.4.
	 	Effect of Termination	 	 	28	 
	 
	 	 	 	 	 	 
	ARTICLE IX
	 	Dispute Resolution	 	 	28	 
	9.1.
	 	General	 	 	28	 
	9.2.
	 	Consent of the Parties	 	 	28	 
	9.3.
	 	Arbitration	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE X
	 	DEFINITIONS	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE XI
	 	MISCELLANEOUS	 	 	35	 
	11.1.
	 	Press Releases and Announcements	 	 	35	 
	11.2.
	 	Notices	 	 	35	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	11.3.
	 	Successors and Assigns	 	 	36	 
	11.4.
	 	Entire Agreement; Amendments; Attachments	 	 	36	 
	11.5.
	 	Severability	 	 	37	 
	11.6.
	 	No Third Party Beneficiaries	 	 	37	 
	11.7.
	 	Governing Law	 	 	37	 
	11.8.
	 	Section Headings	 	 	37	 
	11.9.
	 	Counterparts and Facsimile Signature	 	 	37	 

iii

 

TENDER AGREEMENT

     This Tender Agreement (the “Agreement”) entered into as of June 7, 2007, by and between
Parexel (Taiwan), Inc., a corporation organized under the laws of the Republic of China (the
“Buyer”) and Albert Liou (the “Stockholder”).

Preliminary Statement

     1. The Stockholder is the beneficial owner of 6,201,497 of the issued and outstanding shares
of Common Stock (the “Shares”) in Apex International Clinical Research Co., Ltd. (the “Company”), a
company incorporated under the laws of the Republic of China which constitutes, in the aggregate,
not less than 29% of the issued and outstanding shares of Common Stock of the Company.

     2. The Buyer is interested in acquiring the Company pursuant to a tender offer to acquire all
of the outstanding shares of the Company at a price of NT$82.94 per share, and subsequently merge
the Company with and into the Buyer.

     3. As a condition to the willingness of the Buyer to further pursue the acquisition of the
Company, the Buyer and the Stockholder both agree to enter into this Agreement.

     NOW, THEREFORE, in consideration of the representations, warranties and covenants herein
contained, the Parties agree as follows:

ARTICLE I

AGREEMENT TO TENDER

     1.1. Tender of the Shares by the Stockholder. Promptly after the Buyer obtains the
agreement of stockholders of the Company representing not less than 63%, on a fully diluted basis,
of the issued and outstanding Common Stock of the Company (or such lesser percentage as the Buyer
shall specify in a notice to the Stockholder) to accept a tender offer of NT$82.94 per share of
Common Stock, the Buyer agrees to launch such tender offer to acquire all of the issued and
outstanding shares of Common Stock of the Company (the “Tender Offer”) after making applicable
filings with the Securities and Futures Bureau, Financial Supervisory Commission (the “FSC”) of the
ROC and making a public announcement in accordance with the ROC Regulations Governing Tender Offers
for Purchase of Securities of a Public Company (the “Tender Offer Regulations”), it being
understood that the Buyer’s success in such efforts requires the recommendation of the Board of
Directors of the Company, the approval of the Buyer’s Board of Directors at its sole discretion and
the fulfillment of certain other conditions. The Stockholder agrees to accept the Tender Offer and
tender all the Shares pursuant to the Tender Offer launched in accordance with the applicable ROC
laws and regulations. Such tender shall be made immediately following the commencement of the
Tender Offer on the date of such commencement. The Stockholder agrees that he shall not withdraw
any Shares tendered pursuant to the Tender Offer unless this Agreement terminates pursuant to
Section 8.1. The Stockholder further agrees that he will cooperate with the Buyer, as and to the
extent reasonably

 

 

requested by the Buyer, to effect the transfer of the Shares to the Buyer pursuant to the
Tender Offer as contemplated by this Agreement. The Stockholder’s obligations under this Agreement
are subject to the Buyer’s compliance with this Agreement and all other ancillary agreements
entered into between the parties in connection with the Tender Offer.

     1.2. Further Assurances.

          (a) Within two (2) business days after launching the Tender Offer, the Stockholder shall use
his Reasonable Best Efforts to take, or cause to be taken, all actions, and to do, or cause to be
done and cooperate with the Buyer in order to do, all things necessary, proper or advisable under
the applicable laws or otherwise to express his support to the Tender Offer, including, without
limitation, to cause the Board of Directors of the Company to adopt an affirmative resolution to
this effect.

          (b) From and after the date hereof and until this Agreement terminates pursuant to Section
8.1, at any meeting of the Board of Directors of the Company, however called, relating to any
proposed action with respect to any matters relevant to the transactions contemplated by this
Agreement, the Stockholder shall cause his representatives in the Board of Directors to appear at
each Board of Directors meeting and cast votes at the meeting in a manner to further the purpose
contemplated by this Agreement.

          (c) From time to time after the launching of the Tender Offer, at the Buyer’s request and
without further consideration, the Stockholder shall promptly execute and deliver such instruments
of sale, transfer, conveyance, assignment and confirmation, and take all such other action as the
Buyer may reasonably request, to transfer, convey and assign to the Buyer, and to confirm the
Buyer’s title to, the Shares and to use Reasonable Best Effort to assist the Buyer in exercising
all rights with respect thereto and to carry out the purpose and intent of this Agreement.

ARTICLE II

REPRESENTATIONS OF THE STOCKHOLDER REGARDING THE SHARES

     The Stockholder represents and warrants to the Buyer that the statements contained in this
Article II are true and correct as of the date of this Agreement and will be true and correct as of
the Closing as though made as of the Closing.

     2.1. Title. The Stockholder has good and marketable title to the Shares which are to
be transferred to the Buyer by the Stockholder pursuant hereto, free and clear of any and all
covenants, conditions, restrictions, voting trust arrangements, liens, charges, encumbrances,
options and adverse claims or rights whatsoever.

     2.2. Authority. The Stockholder has the full right, power and authority to enter into
this Agreement and to transfer, convey and sell to the Buyer at the Closing the Shares to be sold

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by the Stockholder hereunder and upon consummation of the purchase contemplated hereby, the
Buyer will acquire from the Stockholder good and marketable title to such Shares, free and clear of
all covenants, conditions, restrictions, voting trust arrangements, liens, charges, encumbrances,
options and adverse claims or rights whatsoever. This Agreement has been duly and validly executed
and delivered by the Stockholder and constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.

     2.3. Regulatory Approvals. The Stockholder is not a party to, subject to or bound by
any agreement or any judgment, order, writ, prohibition, injunction or decree of any court or other
governmental body which would prevent the execution or delivery of this Agreement by the
Stockholder or the transfer, conveyance and sale of the Shares to be sold by the Stockholder to the
Buyer pursuant to the terms hereof.

     2.4. Brokers. The Stockholder has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions contemplated by this
Agreement.

ARTICLE III

REPRESENTATIONS OF THE STOCKHOLDER REGARDING THE COMPANY

          The Stockholder represents and warrants to the Buyer that, except as set forth in the
Disclosure Schedule, the statements contained in this Article III are true and correct as of the
date of this Agreement and will be true and correct as of the Closing as though made as of the
Closing, except to the extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties will be true and correct as of
such date). The Disclosure Schedule shall be arranged in sections and subsections corresponding to
the numbered and lettered sections and subsections contained in this Article III. The
representations and warranties set forth in this Article III shall be qualified by the Disclosure
Schedule, and to the extent such information is disclosed, shall not form a basis for claims for
indemnification pursuant to Article VI. Notwithstanding anything to the contrary contained in the
Disclosure Schedule or in this Agreement, the information and disclosures contained in any section
of the Disclosure Schedule shall be deemed to be disclosed and incorporated by reference in any
other section of the Disclosure Schedule as though fully set forth in such other section for which
the applicability of such information and disclosure is reasonably apparent on the face of such
information or disclosure. For purposes of this Article III, the phrase “to the knowledge of the
Stockholder” or any phrase of similar import shall be deemed to refer to the actual knowledge of
the Stockholder after reasonable inquiry of appropriate employees and agents of the Company with
respect to the matter in question.

     3.1. Organization, Qualification and Corporate Power. The Company is a corporation
duly organized, validly existing and good standing under the laws of the ROC. The Company is duly
qualified to conduct business and is in good standing under the laws of each jurisdiction in which
the nature of its business or the ownership or leasing of its properties requires such
qualification, except to the extent that the failure to be so qualified or in good standing would
not

 - 3 - 

 

have a Company Material Adverse Effect. The Company has all requisite corporate power and
authority to carry on the businesses in which it is engaged and to own and use the properties owned
and used by it. The Company has furnished to the Buyer complete and accurate copies of its
Articles of Incorporation and By-laws. The Company is not in default under or in violation of any
provision of its Articles of Incorporation or By-laws.

     3.2. Capitalization.

          (a) The authorized capital stock of the Company consists of 55,000,000 shares of Common Stock,
of which, as of the date of this Agreement, 20,999,999 shares were issued and outstanding.

          (b) All of the issued and outstanding shares of capital stock of the Company have been and on
the Closing Date will be duly authorized, validly issued, fully paid and free of all preemptive
rights. Except for stock options issued to employees exercisable for an aggregate of 633,000
shares of Common Stock of the Company, among which 195,000 have vested as of January 13, 2007 (on a
fully converted basis), there are no outstanding or authorized options, warrants, rights, calls,
convertible instruments, agreements or commitments to which the Company is a party or which are
binding upon the Company providing for the issuance, disposition or acquisition of any of its
capital stock. There are no agreements, voting trusts, proxies or understandings with respect to
the voting, or registration of any shares of capital stock of the Company other than as
contemplated by this Agreement. All of the issued and outstanding shares of capital stock of the
Company were issued in compliance with all applicable laws.

     3.3. Noncontravention. Except as set forth in Section 3.3 of the Disclosure Schedule,
the consummation of the transactions contemplated hereby, will not (a) conflict with or violate any
provision of the Articles of Incorporation or By-laws of the Company or the charter, by-laws or
other organizational document of any Subsidiary, (b) require on the part of the Company or any
Subsidiary any notice to or filing with, or any permit, authorization, consent or approval of, any
Governmental Entity except for the ROC reporting, filing and approval requirements to which the
Buyer is subject, (c) conflict with, result in a breach of, constitute (with or without due notice
or lapse of time or both) a default under, result in the acceleration of obligations under, create
in any party the right to terminate, modify or cancel, or require any notice, consent or waiver
under, any contract or instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound or to which any of their respective assets is subject except for
any such conflict, breach or default that would not have a Company Material Adverse Effect, (d)
result in the imposition of any Security Interest upon any assets of the Company or any Subsidiary
or (e) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the
Company, any Subsidiary or any of their respective properties or assets.

 - 4 - 

 

     3.4. Subsidiaries.

          (a) Section 3.4 of the Disclosure Schedule sets forth: (i) the name of each Subsidiary; (ii)
the number and type of outstanding equity securities of each Subsidiary and a list of the holders
thereof; (iii) the jurisdiction of organization of each Subsidiary; (iv) the names of the officers
and directors of each Subsidiary; and (v) the jurisdictions in which each Subsidiary is qualified
or holds licenses to do business as a foreign corporation or other entity.

          (b) Each Subsidiary is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Each Subsidiary is duly qualified to
conduct business and is in good standing under the laws of each jurisdiction in which the nature of
its businesses or the ownership or leasing of its properties requires such qualification except to
the extent that the failure to be so qualified or in good standing would not have a Company
Material Adverse Effect. Each Subsidiary has all requisite power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and used by it. The
Company has delivered to the Buyer complete and accurate copies of the Articles of Incorporation,
By-laws or other organizational documents of each Subsidiary. No Subsidiary is in default under or
in violation of any provision of its Articles of Incorporation, By-laws or other organizational
documents. All of the issued and outstanding shares of capital stock of each Subsidiary are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive rights. Other than
shares of APEX Korea Co., Ltd. (“Apex Korea”), all shares of each Subsidiary that are held of
record or owned beneficially by either the Company or any Subsidiary are held or owned free and
clear of any restrictions on transfer, claims, Security Interests, options, warrants, rights,
contracts, calls, commitments, equities and demands. Other than in respect of the shares of Apex
Korea, there are no outstanding or authorized options, warrants, rights, agreements or commitments
to which the Company or any Subsidiary is a party or which are binding on any of them providing for
the issuance, disposition or acquisition of any capital stock of any Subsidiary. There are no
outstanding stock appreciation, phantom stock or similar rights with respect to any Subsidiary.
There are no voting trusts, proxies or other agreements or understandings with respect to the
voting of any capital stock of any Subsidiary.

          (c) Except for the offices in Thailand, India, Indonesia, Australia and New Zealand, the
Company does not control directly or indirectly or have any direct or indirect equity participation
or similar interest in any corporation, partnership, limited liability company, joint venture,
trust or other business association or entity which is not a Subsidiary.

     3.5. Financial Statements. The Company has provided to the Buyer the Financial
Statements of the Company. The Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby, fairly present the
consolidated financial condition, results of operations and cash flows of the Company and the
Subsidiaries as of the respective dates thereof and for the periods referred to therein and are
consistent with the books and records of the Company and the Subsidiaries.

 - 5 - 

 

     3.6. Absence of Certain Changes. Except for the purchase of the shares of Apex Korea
and except as set forth in Section 3.6 of the Disclosure Schedule, since the Most Recent Balance
Sheet Date, (a) there has occurred no event or development which, individually or in the aggregate,
has had, or could reasonably be expected to have in the future, a Company Material Adverse Effect,
and (b) neither the Company nor any Subsidiary has taken any of the actions set forth in paragraphs
(a) through (n) of Section 5.3 during the Interim Period.

     3.7. Undisclosed Liabilities. Except as set forth in Section 3.7 of the Disclosure
Schedule, none of the Company or any of its Subsidiaries has any liability (whether known or
unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to
become due), except for (a) liabilities shown on the Most Recent Balance Sheet, (b) liabilities
which have arisen since the Most Recent Balance Sheet Date in the Ordinary Course of Business and
(c) contractual and other liabilities incurred in the Ordinary Course of Business which are not
required by GAAP to be reflected on a balance sheet and that are not in the aggregate material.

     3.8. Tax Matters.

          (a) Except as stated in the Section 3.8 Disclosure Schedule, each of the Company and the
Subsidiaries has filed on a timely basis in each jurisdiction in which it is required by applicable
law all Tax Returns that it was required to file, and all such Tax Returns were complete and
accurate except for any such failure to be complete and accurate which will not result in a Company
Material Adverse Effect. Each of the Company and the Subsidiaries has paid on a timely basis all
Taxes that were due and payable. The unpaid Taxes of the Company and the Subsidiaries for tax
periods through the Most Recent Balance Sheet Date do not exceed the accruals and reserves for
Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the Most Recent Balance Sheet. Except as otherwise
required in compliance with the applicable laws and regulations regarding the withholding of Taxes
for employees, neither the Company nor any Subsidiary has any actual or potential liability for any
Tax obligation of any taxpayer (including any affiliated group of corporations or other entities
that included the Company or any Subsidiary during a prior period) other than the Company and the
Subsidiaries. All Taxes that the Company or any Subsidiary is or was required by law to withhold
or collect have been duly withheld or collected and, to the extent required, have been paid to the
proper Governmental Entity.

          (b) The Company has delivered to the Buyer complete and accurate copies of all income Tax
Returns, examination reports and statements of deficiencies assessed against or agreed to by the
Company or any Subsidiary since December 31, 2001. The Tax Returns of the Company have been
reviewed by the applicable Governmental Entity or are closed by the applicable statute of
limitations for all taxable years through the taxable year specified in Section 3.8 of the
Disclosure Schedule. No examination or audit of any Tax Return of the Company or any Subsidiary by
any Governmental Entity is currently in progress or threatened or

 - 6 - 

 

contemplated. Neither the Company nor any Subsidiary (to the knowledge of the Stockholder)
has been informed by any jurisdiction that the jurisdiction believes that the Company or Subsidiary
was required to file any Tax Return that was not filed. Neither the Company nor any Subsidiary has
waived any statute of limitations with respect to Taxes or agreed to an extension of time with
respect to a Tax assessment or deficiency.

          (c) Except as set forth in Section 3.8 of the Disclosure Schedule, the Company and each
Subsidiary have complied with all applicable laws and regulations with respect to transfer pricing,
including, without limitation, those relating to intercompany transactions, including those arising
from historical subcontracting arrangements.

          (d) Except as set forth in Section 3.8 of the Disclosure Schedule, neither the Company nor any
Subsidiary has any Tax liability arising from or in connection with (i) the disallowance of any
deductions attributable to the write off of receivables or cancellation of indebtedness income,
(ii) the failure to pay applicable stamp duties or (iii) any other disallowance of Tax deductions.

     3.9. Assets. The Company or the applicable Subsidiary is the true and lawful owner,
and has good title to, all of the assets (tangible or intangible) purported to be owned by the
Company or the Subsidiaries, free and clear of all Security Interests. Each of the Company and the
Subsidiaries owns or leases all tangible assets sufficient for the conduct of its businesses as
presently conducted and as presently proposed to be conducted. Each such tangible asset is free
from material defects, has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear) and is suitable for the purposes
for which it presently is used.

     3.10. Owned Real Property. Neither the Company nor any Subsidiary owns any real
property.

     3.11. Real Property Leases. Section 3.11 of the Disclosure Schedule lists all Leases
and lists the term of such Lease, any extension and expansion options, and the rent payable
thereunder. The Company has delivered to the Buyer complete and accurate copies of the Leases.
With respect to each Lease:

          (a) such Lease is legal, valid, binding, enforceable and in full force and effect;

          (b) such Lease will continue to be legal, valid, binding, enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing;

          (c) neither the Company nor any Subsidiary nor, to the knowledge of the Stockholder, any other
party, is in breach or violation of, or default under, any such Lease, and no event has occurred,
is pending or, to the knowledge of the Stockholder, is threatened, which, after the giving of
notice, with lapse of time, or otherwise, would constitute a breach or default

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by the Company or any Subsidiary or, to the knowledge of the Stockholder, any other party
under such Lease;

          (d) there are no disputes, oral agreements or forbearance programs in effect as to such Lease;

          (e) except for (i) the sublease of office space from CSM to the Company (located at 6F of the
current building where the Company is located with the size of approximately 35 Pings), (ii) the
sublease of a parking lot from CSM to a third party and (iii) the sublease of a parking lot from
the Company to a third party, neither the Company nor any Subsidiary has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold;
and

          (f) to the knowledge of the Stockholder, all facilities leased or subleased thereunder are
supplied with utilities and other services adequate for the operation of said facilities.

     3.12. Intellectual Property.

          (a) Section 3.12(a) of the Disclosure Schedule lists (i) each patent, patent application,
copyright registration or application therefor, mask work registration or application therefor, and
trademark, service mark and domain name registration or application therefor of the Company or any
Subsidiary and (ii) each Customer Deliverable of the Company or any Subsidiary.

          (b) Each of the Company and the Subsidiaries owns or has the right to use all Intellectual
Property necessary (i) to use, market and distribute the Customer Deliverables and (ii) to operate
the Internal Systems. Each item of Company Intellectual Property will be owned or available for
use by the Company or such Subsidiary immediately following the Closing on substantially identical
terms and conditions as it was immediately prior to the Closing. The Company or the appropriate
Subsidiary has taken all reasonable measures to protect the proprietary nature of each item of
Company Intellectual Property, and to maintain in confidence all trade secrets and confidential
information, that it owns or uses. No other person or entity has any rights to any of the Company
Intellectual Property owned by the Company or the Subsidiaries (except pursuant to agreements or
licenses specified in Section 3.12(d) of the Disclosure Schedule), and, to the knowledge of the
Stockholder, no other person or entity is infringing, violating or misappropriating any of the
Company Intellectual Property.

          (c) None of the Customer Deliverables, or the marketing, distribution, provision or use
thereof, infringes or violates, or constitutes a misappropriation of, any Intellectual Property
rights of any person or entity. None of the Internal Systems, or the use thereof, infringes or
violates, or constitutes a misappropriation of, any Intellectual Property rights of any person or
entity. Section 3.12(c) of the Disclosure Schedule lists any complaint, claim or notice, or
written threat thereof, received by the Company or any Subsidiary alleging any such

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infringement, violation or misappropriation; and the Company has provided to the Buyer
complete and accurate copies of all written documentation in the possession of the Company or any
Subsidiary relating to any such complaint, claim, notice or threat. The Company has provided to
the Buyer complete and accurate copies of all written documentation in the Company’s possession
relating to claims or disputes known to the Company concerning any Company Intellectual Property.

          (d) Section 3.12(d) of the Disclosure Schedule identifies each license or other agreement
pursuant to which the Company or a Subsidiary has licensed, distributed or otherwise granted any
rights to any third party with respect to, any Company Intellectual Property. Except as described
in Section 3.12(d) of the Disclosure Schedule, neither the Company nor any Subsidiary has agreed to
indemnify any person or entity against any infringement, violation or misappropriation of any
Intellectual Property rights with respect to any Customer Deliverables.

          (e) Section 3.12(e) of the Disclosure Schedule identifies each item of Company Intellectual
Property that is owned by a party other than the Company or a Subsidiary, and the license or
agreement pursuant to which the Company or a Subsidiary uses it (excluding off-the-shelf software
programs licensed by the Company pursuant to “shrink wrap” licenses).

          (f) Except for the software set forth in Section 3.12(e) of the Disclosure Schedule, all of
the copyrightable materials incorporated in or bundled with the Customer Deliverables have been
created by employees of the Company or a Subsidiary within the scope of their employment by the
Company or a Subsidiary or by independent contractors of the Company or a Subsidiary who have
executed agreements expressly assigning all right, title and interest in such copyrightable
materials to the Company or a Subsidiary. No portion of such copyrightable materials was jointly
developed with any third party.

     3.13. Contracts.

          (a) Section 3.13 of the Disclosure Schedule lists the following agreements (written or oral)
to which the Company or any Subsidiary is a party as of the date of this Agreement, and pursuant to
which the Company or any Subsidiary has ongoing rights or obligations:

               (i) except for equipment leases related to copier machines, any agreement (or group of related
agreements) for the lease of personal property from or to third parties;

               (ii) any agreement concerning the establishment or operation of a partnership, joint venture
or limited liability company;

               (iii) any agreement (or group of related agreements) under which it has created, incurred,
assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including
capitalized lease obligations) involving more than NT$2,000,000 or

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under which it has imposed (or may impose) a Security Interest on any of its assets, tangible
or intangible;

               (iv) any agreement for the disposition of any significant portion of the assets or business of
the Company or any Subsidiary (other than sales of products in the Ordinary Course of Business) or
any agreement for the acquisition of the assets or business of any other entity (other than
purchases of inventory or components in the Ordinary Course of Business);

               (v) any agreement concerning confidentiality or non-competition;

               (vi) any employment or consulting agreement, other than the Company’s standard form of offer
letter;

               (vii) any agreement involving any current or former officer, director or stockholder of the
Company or an Affiliate thereof;

               (viii) except for the service contracts with customers, any agreement under which the
consequences of a default or termination would reasonably be expected to have a Company Material
Adverse Effect;

               (ix) any agreement which contains any provisions requiring the Company or any Subsidiary to
indemnify any other party (excluding indemnities contained in agreements for the purchase, sale or
license of products or services entered into in the Ordinary Course of Business);

               (x) any agreement the Company has entered into pursuant to which the Company has agreed to
render services to customers, including, but not limited to, agreements (whether oral arrangements
or letters of intent) included in the Company’s backlog and not evidenced by an executed definitive
written contract for clinical research services;

               (xi) except for the purchase of the shares of stock of Apex Korea, any other agreement (or
group of related agreements) either involving more than US$150,000 or not entered into in the
Ordinary Course of Business; and

               (xii) any agreement under which the Company or any Subsidiary has granted “most favored
nation” pricing provisions.

          (b) Except for oral agreements, letters of intent or backlog not evidenced by an executed
definitive written contract for clinical research services, the Company has delivered to the Buyer
a complete and accurate copy of each agreement listed in Section 3.12 or Section 3.13 of the
Disclosure Schedule in all material respects. With respect to each agreement so listed: (i) the
agreement is legal, valid, binding and enforceable and in full force and effect; (ii) the agreement
will continue to be legal, valid, binding and enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect

 - 10 - 

 

immediately prior to the Closing; and (iii) neither the Company nor any Subsidiary nor, to the
knowledge of the Stockholder, any other party, is in breach or violation of, or default under, any
such agreement, and no event has occurred, is pending or, to the knowledge of the Stockholder, is
threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a
breach or default by the Company or any Subsidiary or, to the knowledge of the Stockholder, any
other party under such agreement.

     3.14. Accounts Receivable. Except as set forth in 3.14 Disclosure Schedule, all
accounts receivable of the Company and the Subsidiaries reflected on the Most Recent Balance Sheet
(other than those paid since such date) are valid receivables subject to no setoffs or
counterclaims and are current and collectible. All accounts receivable of the Company and the
Subsidiaries that have arisen since the Most Recent Balance Sheet Date are valid receivables
subject to no setoffs or counterclaims and are collectible. A complete and accurate list of the
accounts receivable as of April 30, 2007, showing the aging thereof, is included in Section 3.14 of
the Disclosure Schedule. Neither the Company nor any Subsidiary has received any written notice
from an account debtor stating that any account receivable in an amount in excess of NT$330,000 is
subject to any contest, claim or setoff by such account debtor. For the avoidance of doubt, there
is no assurance that all accounts receivable will be fully collected.

     3.15. Powers of Attorney. There are no outstanding powers of attorney executed on
behalf of the Company or any Subsidiary.

     3.16. Insurance. Section 3.16 of the Disclosure Schedule lists each material
insurance policy (including fire, theft, casualty, comprehensive general liability, workers
compensation, product liability and automobile insurance policies and bond and surety
arrangements) to which the Company or any Subsidiary is a party, all of which are in full force and
effect. Such insurance policies are of the type and in amounts customarily carried by
organizations conducting businesses or owning assets similar to those of the Company and the
Subsidiaries. There is no material claim pending under any such policy as to which coverage has
been questioned, denied or disputed by the underwriter of such policy. All premiums due and
payable under all such policies have been paid, neither the Company nor any Subsidiary may be
liable for retroactive premiums or similar payments, and the Company and the Subsidiaries are
otherwise in compliance in all material respects with the terms of such policies. The Stockholder
has no knowledge of any threatened termination of, or premium increase with respect to, any such
policy. Each such policy will continue to be enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect immediately prior to the
Closing.

     3.17. Litigation. There is no Legal Proceeding which is pending, or to the knowledge
of the Stockholder, has been threatened in writing against the Company or any Subsidiary which (a)
a third party seeks damages or equitable relief against the Company or any Subsidiary or (b) in any
manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated

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by this Agreement. There are no judgments, orders or decrees outstanding against the Company
or any Subsidiary.

     3.18. Warranties. After the completion of the services based on the service contracts
with customers, neither the Company nor any Subsidiary is obligated to re-perform any studies for a
customer that it had previously conducted without charge or refund any portion of the fees
collected pursuant to any studies previously performed.

     3.19. Employees.

          (a) Section 3.19 of the Disclosure Schedule contains a list of the top 10% highly compensated
employees of the Company and each Subsidiary (on a consolidated basis), along with the position and
the annual rate of compensation of each such person. Each current employee of the Company and past
employee of the Company within the last three years has entered into a confidentiality/assignment
of inventions agreement with the Company, a copy or form of which has previously been delivered to
the Buyer. Section 3.19 of the Disclosure Schedule contains a list of all employees of the Company
or any Subsidiary who are a party to a non-competition agreement with the Company or any
Subsidiary. All of the agreements referenced in the two preceding sentences will continue to be
legal, valid, binding and enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect immediately prior to the Closing. To the
knowledge of the Stockholder, except as set forth in Section 3.19 of the Disclosure Schedule, no
key employee or group of employees has any plans to terminate employment with the Company or any
Subsidiary.

          (b) Neither the Company nor any Subsidiary is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Stockholder has no knowledge of any
organizational effort made or threatened, either currently or within the past two years, by or on
behalf of any labor union with respect to employees of the Company or any Subsidiary.

          (c) All the employees of the Company have adopted the new pension scheme in accordance with
the Labor Pension Act effective as of July 1, 2005.

     3.20. Employee Benefits.

          (a) Section 3.20(a) of the Disclosure Schedule contains a complete and accurate list of all
Company Plans. Complete and accurate copies of all Company Plans which have been reduced to
writing have been delivered to the Buyer.

          (b) Each Company Plan has been administered in all material respects in accordance with its
terms and each of the Company and the Subsidiaries has in all material respects met its obligations
with respect to each Company Plan and has made all required

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contributions thereto. The Company, each Subsidiary, and each Company Plan are in compliance
in all material respects with the currently applicable provisions of applicable law. All filings
and reports as to each Company Plan required to have been submitted by applicable law have been
duly submitted.

          (c) There are no unfunded obligations under any Company Plan providing benefits after
termination of employment to any employee of the Company or any Subsidiary (or to any beneficiary
of any such employee), including but not limited to retiree health coverage and deferred
compensation, if applicable.

          (d) No act or omission has occurred and no condition exists with respect to any Company Plan
that would subject the Company or any Subsidiary to (i) any material fine, penalty, tax or
liability of any kind, or (ii) any contractual indemnification or contribution obligation
protecting any fiduciary, insurer or service provider with respect to any Company Plan.

          (e) Unless otherwise in compliance with laws and regulations, each Company Plan is amendable
and terminable unilaterally by the Company at any time without liability or expense to the Company
or such Company Plan as a result thereof (other than for benefits accrued through the date of
termination or amendment and reasonable administrative expenses related thereto) and no Company
Plan, plan documentation or agreement, summary plan description or other written communication
distributed generally to employees by its terms prohibits the Company from amending or terminating
any such Company Plan.

          (f) Section 3.20(f) of the Disclosure Schedule discloses each: (i) agreement with any
stockholder, director, executive officer or other key employee of the Company or any Subsidiary (A)
the benefits of which are contingent, or the terms of which are altered, upon the occurrence of a
transaction involving the Company or any Subsidiary of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or compensation guarantee or
(C) except for benefits to employees required by applicable labor standard laws and regulations,
providing severance benefits or other benefits after the termination of employment of such
director, executive officer or key employee, and agreement or plan binding the Company or any
Subsidiary, including any stock option plan, stock appreciation right plan, restricted stock plan,
stock purchase plan, severance benefit plan or Company Plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of
the transactions contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this Agreement.

          (g) Section 3.20(g) of the Disclosure Schedule sets forth the policy of the Company and any
Subsidiary with respect to accrued vacation, accrued sick time and earned time off and the amount
of such liabilities as of April 30, 2007.

 - 13 - 

 

     3.21. Environmental Matters. Each of the Company and the Subsidiaries has complied in
all material respects with all Environmental Laws that are applicable to the Company’s business.

     3.22. Legal Compliance. Each of the Company and the Subsidiaries is currently
conducting, and have at all times since formation conducted, their respective businesses in
compliance with each applicable law (including rules and regulations thereunder) of any local or
foreign government, or any Governmental Entity, except for any violations or defaults that,
individually or in the aggregate, have not had and would not reasonably be expected to have a
Company Material Adverse Effect. Neither the Company nor any Subsidiary has received any notice or
communication from any Governmental Entity regarding the Company’s policies and practices or
alleging noncompliance with any applicable law, rule or regulation. For the avoidance of doubt,
the Company has not established any legal entities for its operations in Thailand, India,
Indonesia, Australia or New Zealand.

     3.23. Customers and Suppliers. Except as set forth in the 3.23 Disclosure Schedule,
no customer that accounted for more than 3% of the consolidated revenues of the Company during the
last full fiscal year or the interim period through the Most Recent Balance Sheet Date or the sole
supplier of any significant product or service to the Company or a Subsidiary has indicated within
the past year that it will stop, or decrease the rate of, buying services or supplying services or
products, as applicable, to the Company or any Subsidiary.

     3.24. Permits. Section 3.24 of the Disclosure Schedule sets forth a list of all
Permits issued to or held by the Company or any Subsidiary. Such listed Permits are the only
Permits that are required for the Company and the Subsidiaries to conduct their respective
businesses as presently conducted. Each such Permit is in full force and effect; the Company or
the applicable Subsidiary is in compliance with the terms of each such Permit; and, to the
knowledge of the Stockholder, no suspension or cancellation of such Permit is threatened and there
is no basis for believing that such Permit will not be renewable upon expiration. Each such Permit
will continue in full force and effect immediately following the Closing.

     3.25. Certain Business Relationships With Affiliates. No Affiliate of the Company or
of any Subsidiary (a) owns any property or right, tangible or intangible, which is used in the
business of the Company or any Subsidiary, (b) has any claim or cause of action against the Company
or any Subsidiary, or (c) owes any money to, or is owed any money by, the Company or any
Subsidiary. Section 3.25 of the Disclosure Schedule describes any transactions or relationships
between the Company or a Subsidiary and any Affiliate thereof which occurred or have existed since
the beginning of the time period covered by the Financial Statements.

     3.26. Brokers’ Fees. Neither the Company nor any Subsidiary has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement

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     3.27. Disclosure. No representation or warranty by the Stockholder contained in this
Agreement, and no statement contained in the Disclosure Schedule or any other document, certificate
or other instrument delivered or to be delivered by or on behalf of the Company or the Stockholder
pursuant to this Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in light of the circumstances under which
it was or will be made, in order to make the statements herein or therein not misleading.

     3.28. Regulatory Compliance.

          (a) The Company and its Subsidiaries have conducted, and if still pending are conducting, all
clinical trials in compliance, in all material respects, with (i) all customer protocols as
approved by institutional review boards and similar authorities, (ii) procedures and controls
pursuant to accepted professional and scientific standards and (iii) all laws, regulations, orders,
guidances and policies applicable in the jurisdictions in which the Company and its Subsidiaries
are conducting clinical trials and any international guidelines or regulations referenced in the
contract or study protocol relating to clinical investigations, and pre- and post-marketing adverse
drug experience reporting, and all other pre- and post-marketing reporting requirements, as
applicable.

          (b) Neither the Company nor any Subsidiary has made any materially false statements on, or
material omissions from, any representations, reports or other submissions, whether oral, written,
or electronically delivered, to any customer or to any applicable Governmental Entity or in or from
any other records and documentation prepared or maintained to comply with the requirements of any
customer or any applicable Governmental Entity relating to any such clinical trial. Neither the
Company nor any Subsidiary has committed any act, made any statement or failed to make any
statement to any applicable Governmental Entity that would breach the requirements of such
Governmental Entity.

          (c) None of the Company, any Subsidiary nor the facilities owned or used by the Company or any
Subsidiary are subject to any adverse inspection, finding of deficiency, finding of non-compliance,
regulatory or warning letter, investigation, notice, or other compliance or enforcement action,
from or by any applicable Governmental Entity or any counterpart regulatory authority in any other
applicable jurisdiction. There are no pending, or to the Stockholder’s knowledge, threatened
civil, criminal or administrative actions, suits, demands, claims, hearings, investigations, demand
letters, proceedings, complaints or requests for information by any applicable Governmental Entity
or any counterpart regulatory authority related to the Company or any Subsidiary. There is no act,
omission, event, or circumstance, to the knowledge of the Stockholder, that would reasonably be
expected to give rise to any such action, suit, demand, claim, hearing, investigation, demand
letter, proceeding, complaint or request for information or any such liability. Except for
periodic inspections of clinical trial data from time to time in the Ordinary Course of Business
(none of which has resulted in any penalty against the Company or any Subsidiary), neither any
applicable Governmental Entity nor any

 - 15 - 

 

counterpart regulatory authority has commenced, or to the knowledge of the Stockholder,
threatened to initiate, any action to place a clinical hold order on, or otherwise terminate, delay
or suspend, any proposed or ongoing clinical investigation conducted or proposed to be conducted by
the Company or any Subsidiary. For the avoidance of doubt, the foregoing shall not apply to the
termination, delay or suspension of any clinical investigation by the sponsor thereof unrelated to
the acts or omissions of the Company or any Subsidiary.

          (d) None of the Company, any Subsidiary, nor to the knowledge of the Stockholder, any key
employee of the Company, or any Subsidiary or other person for which the Company or any Subsidiary
is responsible, has been convicted of any crime or engaged in any conduct that would reasonably be
expected to result in debarment under any local or foreign law or regulation, and none of the
Company, any Subsidiary or any such person has been so debarred.

          (e) For clinical trials conducted or being conducted by the Company or any Subsidiary, to the
extent required by customers, the Company or such Subsidiary involved in the clinical trials has
disclosed in writing to the Company’s customers any potential conflict of interest that may result
in personal or family gain for the employees, financial or otherwise.

          (f) The Company and each Subsidiary has fulfilled its obligations relating to the monitoring
of the procurement of any informed consent from each participant in a clinical trial being
conducted by the Company or any Subsidiary in all material respects.

     3.29. Patient Information.

          (a) The Company and each Subsidiary are and have been in compliance with all applicable laws,
regulations and contractual commitments concerning privacy, security, coding, and transaction
standards for individually identifiable information pertaining to patients and/or research subjects
(“Patient Information”).

          (b) Any Patient Information obtained by the Company or any Subsidiary was so obtained either
(i) from the patient in connection with treatment, (ii) from a health care provider for treatment
purposes, (iii) in accordance with a valid patient authorization under applicable law, (iv)
pursuant to a waiver of such authorization under applicable law or (v) as a limited data set
pursuant to applicable law. None of the Company, any Subsidiary or any other person for which the
Company or any Subsidiary is responsible has conducted an unauthorized acquisition of Patient
Information.

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ARTICLE IV

REPRESENTATIONS OF THE BUYER

          The Buyer represents and warrants to the Stockholder as follows:

     4.1. Organization, Qualification and Corporate Power. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of its incorporation.
The Buyer is duly qualified to conduct business and is in corporate and tax good standing under the
laws of each jurisdiction in which the nature of its businesses or the ownership or leasing of its
properties requires such qualification, except where the failure to be so qualified or in good
standing would not have a Buyer Material Adverse Effect. The Buyer has all requisite corporate
power and authority to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it.

     4.2. Authorization of Transaction. The Buyer has all requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The execution and
delivery by the Buyer of this Agreement and the consummation by the Buyer of the transactions
contemplated hereby have been duly and validly authorized by all necessary corporate action on the
part of the Buyer. This Agreement has been duly and validly executed and delivered by the Buyer
and constitutes a valid and binding obligation of the Buyer, enforceable against it in accordance
with its terms.

     4.3. Noncontravention. Neither the execution and delivery by the Buyer of this
Agreement, nor the consummation by the Buyer of the transactions contemplated hereby will (a)
conflict with or violate any provision of the Articles of Incorporation or By-laws of the Buyer,
(b) require on the part of the Buyer any filing with, or permit, authorization, consent or approval
of, any Governmental Entity, except (1) application(s) for the foreign investment approval(s) with
the Investment Commission, Ministry of Economic Affairs; (2) a combination notification filing with
the Taiwan Fair Trade Commission; and (3) a filing to the Securities and Futures Bureau for the
Tender Offer, (c) conflict with, result in breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of obligations under, create in
any party any right to terminate, modify or cancel, or require any notice, consent or waiver under,
any contract or instrument to which the Buyer is a party or by which it is bound or to which its
assets are subject, or (d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Buyer or any of its properties or assets.

     4.4. Brokers’ Fees. The Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions contemplated by this
Agreement for which the Stockholder would be responsible.

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ARTICLE V

COVENANTS

     5.1. Closing Efforts. Each of the Parties shall use its Reasonable Best Efforts to
take all actions and to do all things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement, including using its Reasonable Best Efforts to ensure that (i) its
representations and warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to consummate the transactions
contemplated by this Agreement are satisfied.

     5.2. Governmental and Third Party Notices and Consents.

          (a) Each Party shall use its Reasonable Best Efforts to obtain, at its expense, all waivers,
permits, consents, approvals or other authorizations from Governmental Entities, and to effect all
registrations, filings and notices with or to Governmental Entities, as may be required for such
Party to consummate the transactions contemplated by this Agreement and to otherwise comply with
all applicable laws and regulations in connection with the consummation of the transactions
contemplated by this Agreement.

          (b) The Stockholder shall use his Reasonable Best Efforts to obtain all such waivers, consents
or approvals from third parties, and to give all such notices to third parties, as are required to
be listed in the Disclosure Schedule, at the Company’s expense.

          5.3. Operation of Business. Except as contemplated by this Agreement, during the
period from the date of this Agreement until the Buyer’s representatives are elected as the
directors and supervisors of the Company and take control of the Board of Directors (the “Interim
Period”), the Stockholder shall use his Reasonable Best Efforts to cause the Company (and to cause
each Subsidiary) and to cause each of the Directors of the Company (and each of the Directors of
each Subsidiary) to conduct the operations of the Company in the Ordinary Course of Business and in
compliance with all applicable laws and regulations and, to the extent consistent therewith, use
its Reasonable Best Efforts to preserve intact its current business organization, keep its physical
assets in good working condition, keep available the services of its current officers and employees
and preserve its relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in any material respect.
Without limiting the generality of the foregoing, during the Interim Period, the Stockholder shall
use his Reasonable Best Efforts to cause the Company not to (and to cause each Subsidiary not to)
and to a cause each of the Directors of the Company not to, without the written consent of the
Buyer:

          (a) except for the sale of shares of Apex Korea, issue or sell any stock or other securities
of the Company or any Subsidiary or any options, warrants or rights to acquire any such stock or
other securities (except pursuant to the conversion or exercise of options or warrants outstanding
on the date hereof), or amend any of the terms of (including the vesting of) any options, warrants
or restricted stock agreements, or repurchase or redeem any stock or other

 - 18 - 

 

securities of the Company (except from former and current employees in accordance with
agreements providing for the redemption of shares at NT$10 per unit of option);

          (b) split, combine or reclassify any shares of its capital stock; or declare, set aside or pay
any dividend or other distribution (whether in cash, stock or property or any combination thereof)
in respect of its capital stock;

          (c) create, incur or assume any indebtedness (including obligations in respect of capital
leases); assume, guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or entity; or make any loans or
advances to any other person or entity;

          (d) enter into, adopt or amend any Employee Benefit Plan or any employment or severance
agreement or arrangement of the type described in Section 3.20(g) or (except for normal increases
in the Ordinary Course of Business for employees who are not Affiliates) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms of, its directors,
officers or employees, generally or individually, or pay any bonus or other benefit to its
directors, officers or employees (except for existing payment obligations listed in Section 3.20 of
the Disclosure Schedule) or hire any new officers or (except in the Ordinary Course of Business)
any new employees;

          (e) except for the acquisition of the shares of the Apex Korea, acquire, sell, lease, license
or dispose of any assets or property (including any shares or other equity interests in or
securities of any Subsidiary or any corporation, partnership, association or other business
organization or division thereof), other than purchases and sales of assets in the Ordinary Course
of Business;

          (f) mortgage or pledge any of its property or assets or subject any such property or assets to
any Security Interest;

          (g) discharge or satisfy any Security Interest or pay any obligation or liability other than
in the Ordinary Course of Business;

          (h) amend its Articles of Incorporation, By-laws or other organizational documents;

          (i) change its accounting methods, principles or practices, except insofar as may be required
by a generally applicable change in GAAP, or make any new elections, or changes to any current
elections, with respect to Taxes (except for taxes in connection with sub-contracts of services to
Subsidiaries)

          (j) enter into, amend, terminate, take or omit to take any action that would constitute a
violation of or default under, or waive any rights under, any contract or agreement of

 - 19 - 

 

a nature required to be listed in Section 3.11, Section 3.12 or Section 3.13 of the Disclosure
Schedule;

          (k) appoint or change the auditors and auditing certified public accountants;

          (l) appoint or remove or settle the terms of appointment of any member of management reporting
directly to the Board of Directors;

          (m) except for the acquisition of the shares of the Apex Korea, make or commit to make any
capital expenditure or acquire any investment or asset in excess of US$10,000 per item or US$30,000
in the aggregate;

          (n) institute or settle any Legal Proceeding;

          (o) take any action or fail to take any action permitted by this Agreement with the knowledge
that such action or failure to take action would result in any of the representations and
warranties of the Company set forth in this Agreement becoming untrue;

          (p) commence any case, proceeding or other action (A) under any bankruptcy, insolvency or
similar law seeking to have an order of relief entered with respect to it or seeking to adjudicate
it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding up,
liquidation, dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official for it or all or
substantial part of its property, make a general assignment for the benefit of its creditors; or
admit in writing its inability to pay its debts when they become due; or

          (q) agree in writing or otherwise to take any of the foregoing actions.

     5.4. Access to Information. The Stockholder shall use his Reasonable Best Efforts to
cause the Company (and to cause each Subsidiary) to permit representatives of the Buyer to have
full access (at all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company and the Subsidiaries) to all premises, properties, financial,
tax and accounting records (including the work papers of the Company’s independent accountants),
contracts, other records and documents, and personnel, of or pertaining to the Company and each
Subsidiary. Notwithstanding anything to the contrary in this Agreement, the Stockholder and the
Company and Subsidiaries shall not be required to disclose any information to the Buyer if such
disclosure would, in the Stockholder’s sole discretion, (i) cause significant competitive harm to
the Company if the transactions contemplated hereby are not consummated, (ii) jeopardize any
attorney-client or other legal privilege, or (iii) contravene any applicable Laws, fiduciary duty
or binding agreement entered into prior to the date hereof.

 - 20 - 

 

     5.5. Notice of Breaches.

          (a) From the date of this Agreement until the Closing, the Stockholder shall promptly deliver
to the Buyer supplemental information concerning events or circumstances occurring subsequent to
the date hereof which would render any representation, warranty or statement in this Agreement or
the Disclosure Schedule inaccurate or incomplete at any time after the date of this Agreement until
the Closing. No such supplemental information shall be deemed to avoid or cure any
misrepresentation or breach of warranty or constitute an amendment of any representation, warranty
or statement in this Agreement or the Disclosure Schedule.

          (b) From the date of this Agreement until the Closing, the Buyer shall promptly deliver to the
Stockholder supplemental information concerning events or circumstances occurring subsequent to the
date hereof which would render any representation or warranty in this Agreement inaccurate or
incomplete at any time after the date of this Agreement until the Closing. No such supplemental
information shall be deemed to avoid or cure any misrepresentation or breach of warranty or
constitute an amendment of any representation or warranty in this Agreement.

     5.6. Exclusivity.

          From the date of this Agreement until the end of the Interim Period:

          (a) the Stockholder shall not (and shall use his Reasonable Best Efforts to cause the Company
not to) directly or indirectly, through any officer, director, employee, representative, agent or
otherwise, (i) initiate, solicit, encourage or otherwise facilitate any inquiry, proposal, offer or
discussion with any party (other than the Buyer) concerning any merger, reorganization,
consolidation, recapitalization, business combination, liquidation, dissolution, share exchange,
sale of stock, sale of material assets or similar business transaction involving the Company, any
Subsidiary or any division of the Company, (ii) furnish any non-public information concerning the
business, properties or assets of the Company, any Subsidiary or any division of the Company to any
party (other than the Buyer) or (iii) engage in discussions or negotiations with any party (other
than the Buyer) concerning any such transaction.

          (b) the Stockholder shall (and shall use his Reasonable Best Efforts to cause the Company to)
immediately notify any party with which discussions or negotiations of the nature described in
paragraph (a) above were pending that the Company is terminating such discussions or negotiations.
If the Stockholder receives any inquiry, proposal or offer of the nature described in paragraph (a)
above, the Stockholder shall, within one business day after such receipt, notify the Buyer of such
inquiry, proposal or offer, including the identity of the other party and the terms of such
inquiry, proposal or offer.

          (c) Except for participation in the Tender Offer, the Stockholder hereby agrees, while this
Agreement is in effect, and except as expressly contemplated hereby, not to

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sell, transfer, pledge, encumber, assign, distribute, gift or otherwise dispose of
(collectively, a “Transfer”) or enter into any contract, option or other arrangement or
understanding with respect to any Transfer (whether by actual disposition or effective economic
disposition due to hedging, cash settlement or otherwise) of, any of the Shares, any additional
shares of the Company’s common stock and options to purchase shares of the Company’s common stock
acquired beneficially or of record by the Stockholder after the date hereof, or any interest
therein; provided, that the foregoing shall not restrict the Stockholder from making Transfers to
effect estate planning and gifts so long as the transferee in such Transfer shall execute an
agreement to be bound by the terms of this Agreement and such Transfer shall not result in the
incurrence of any lien upon any Shares. The Stockholder agrees, while this Agreement is in effect,
to notify the Buyer promptly in writing of the number of any additional shares of the Company’s
Common stock, any options to purchase shares of the Company’s common stock or other securities of
the Company acquired by the Stockholder, if any, after the date hereof.

     5.7. Expenses. Except as set forth in Article VI, each party shall pay its own costs
and expenses (including legal and accounting fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.

     5.8. Cooperation With Other Stockholders. At the Buyer’s request and without further
consideration, the Stockholder shall use Reasonable Best Efforts to assist the Buyer in obtaining
the agreement of stockholders of the Company representing not less than 62% of the issued and
outstanding shares of Common Stock of the Company to accept the Tender Offer with respect to such
other stockholders’ shares of Common Stock.

     5.9. Necessary Corporate Actions. The Stockholder shall, subject to the closing of
the Tender Offer, procure the fulfillment of the following:

          (a) to convene a Board of Directors meeting within three (3) business days after the Buyer
publicly announces the Tender Offer to adopt resolutions to convene an extraordinary shareholders
meeting on or before the Closing Date to (i) approve a proposal for amendment of the Articles of
Incorporation of the Company to, among others, reduce the number of the Company’s Directors from
seven (7) to five (5), and supervisors from three (3) to two (2), as may be requested by the Buyer,
and (ii) elect five (5) Directors and two (2) supervisors of the Company with persons designated by
the Buyer in their personal capacity (collectively the “Required Shareholders’ Resolutions”). At
the extraordinary shareholders meeting, the Stockholder shall vote his Shares and shall use
Reasonable Best Efforts to obtain sufficient votes either by way of proxy or by personal votes of
other shareholders to procure the adoption of the Required Shareholders’ Resolution;

          (b) to convene a separate Board of Directors meeting prior to the Closing and cause the Board
of Directors of the Company to: (i) approve the merger of the Company with the Buyer; and (ii) to
authorize the Stockholder to execute a merger agreement on behalf of the Company with the Buyer;
and

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          (c) if the Required Shareholders Resolutions have not been successfully adopted pursuant to
Paragraph (a) above on or prior to the Closing Date, to cause the Board of Directors of the Company
to convene another extraordinary shareholders meeting on a date requested by the Buyer after the
Closing to amend the Company’s Articles of Incorporation as requested by the Buyer and to replace
and elect all the directors and supervisors of the Company with persons designated by the Buyer,
and if necessary, to approve other matters adopted by the Board of Directors.

     5.10. Repurchase of Shares in Apex Korea. The Stockholder shall cause the Company to
repurchase all issued and outstanding shares of Apex Korea, at a price per share not to exceed
US$11.00, on or before the Closing Date, such that Apex Korea shall be a wholly owned subsidiary of
the Company.

     5.11. Employee Stock Options. The Stockholder shall use his Reasonable Best Efforts
to cause the Company to amend the Regulations for Issuance and Subscription of 2003 Employees Stock
Options to allow the employees vested with the options to be entitled to convert all the options
during the Tender Offer period, and obtain the approval from the Securities and Futures Bureau for
the amendments. Moreover, the Stockholder shall use his Reasonable Best Efforts to have the
employees execute agreements with the Buyer agreeing to tender the employees’ shares in the Tender
Offer or sell the shares to the Buyer, at the Buyer’s request, at any time.

     5.12. Board Observation Rights. From and after the date of this Agreement, the
Stockholder shall provide the Buyer with reasonable advance notice of any scheduled or unscheduled
meetings of the Board of Directors of the Company. The Stockholder shall provide a representative
of the Buyer with an opportunity to attend (in person or telephonically) any and all such meetings.
The Buyer’s representative shall be permitted to observe and record the proceedings of meeting,
but shall not be entitled to vote upon, or otherwise participate in, any matters that may arise at
such meetings.

ARTICLE VI

INDEMNIFICATION

     6.1. Indemnification by the Stockholder. The Stockholder shall indemnify the Buyer,
and hold it harmless against, any and all Damages incurred or suffered by the Buyer or any
Affiliate thereof resulting from, relating to or constituting:

          (a) any breach, as of the date of this Agreement or as of the Closing Date, of any
representation or warranty of the Stockholder contained in this Agreement or any other agreement or
instrument furnished by the Company or the Stockholder to the Buyer pursuant to this Agreement; or

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          (b) any failure to perform any covenant or agreement of the Stockholder contained in this
Agreement or any agreement or instrument furnished by the Company or the Stockholder to the Buyer
pursuant to this Agreement.

     6.2. Indemnification by the Buyer. The Buyer shall indemnify the Stockholder in
respect of, and hold him harmless against, any and all Damages incurred or suffered by the
Stockholder resulting from, relating to or constituting:

          (a) any breach, as of the date of this Agreement or as of the Closing Date, of any
representation or warranty of the Buyer contained in this Agreement or any other agreement or
instrument furnished by the Buyer to the Stockholder pursuant to this Agreement; or

          (b) any failure to perform any covenant or agreement of the Buyer contained in this Agreement
or any agreement or instrument furnished by the Buyer to the Stockholder pursuant to this
Agreement.

     6.3. Indemnification Claims.

          (a) An Indemnified Party shall give written notification to the Indemnifying Party of the
commencement of any Third Party Action. Such notification shall be given within 20 days after
receipt by the Indemnified Party of notice of such Third Party Action, and shall describe in
reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis
for such Third Party Action and the amount of the claimed damages; provided, however, that no delay
or failure on the part of the Indemnified Party in so notifying the Indemnifying Party shall
relieve the Indemnifying Party of any liability or obligation hereunder except to the extent of any
damage or liability caused by or arising out of such failure. Within 20 days after delivery of
such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified
Party, assume control of the defense of such Third Party Action with counsel reasonably
satisfactory to the Indemnified Party; provided that (i) the Indemnifying Party may only assume
control of such defense if (A) it acknowledges in writing to the Indemnified Party that any
damages, fines, costs or other liabilities that may be assessed against the Indemnified Party in
connection with such Third Party Action constitute Damages for which the Indemnified Party shall be
indemnified pursuant to this Article VI and (B) the ad damnum is less than or equal to the amount
of Damages for which the Indemnifying Party is liable under this Article VI and (ii) the
Indemnifying Party may not assume control of the defense of any Third Party Action involving
criminal liability or in which equitable relief is sought against the Indemnified Party. If the
Indemnifying Party does not, or is not permitted under the terms hereof to, so assume control of
the defense of a Third Party Action, the Indemnified Party shall control such defense. The
Non-controlling Party may participate in such defense at its own expense. The Controlling Party
shall keep the Non-controlling Party advised of the status of such Third Party Action and the
defense thereof and shall consider in good faith recommendations made by the Non-controlling Party
with respect thereto. The Non-controlling Party shall furnish the Controlling Party with such
information as it may have with respect to such Third Party Action (including copies of any
summons, complaint or other pleading which may have been served on such party

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and any written claim, demand, invoice, billing or other document evidencing or asserting the
same) and shall otherwise cooperate with and assist the Controlling Party in the defense of such
Third Party Action. The fees and expenses of counsel to the Indemnified Party with respect to a
Third Party Action shall be considered Damages for purposes of this Agreement if (i) the
Indemnified Party controls the defense of such Third Party Action pursuant to the terms of this
Section 6.3(a) or (ii) the Indemnifying Party assumes control of such defense and the Indemnified
Party reasonably concludes that the Indemnifying Party and the Indemnified Party have conflicting
interests or different defenses available with respect to such Third Party Action. The
Indemnifying Party shall not agree to any settlement of, or the entry of any judgment arising from,
any Third Party Action without the prior written consent of the Indemnified Party, which shall not
be unreasonably withheld, conditioned or delayed. The Indemnified Party shall not agree to any
settlement of, or the entry of any judgment arising from, any such Third Party Action without the
prior written consent of the Indemnifying Party, which shall not be unreasonably withheld,
conditioned or delayed.

          (b) In order to seek indemnification under this Article VI, an Indemnified Party shall deliver
a Claim Notice to the Indemnifying Party.

          (c) Within 20 days after delivery of a Claim Notice, the Indemnifying Party shall deliver to
the Indemnified Party a Response, in which the Indemnifying Party shall: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in which case the Response
shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Claimed
Amount, by check or by wire transfer; (ii) agree that the Indemnified Party is entitled to receive
the Agreed Amount (in which case the Response shall be accompanied by a payment by the Indemnifying
Party to the Indemnified Party of the Agreed Amount, by check or by wire transfer; or (iii) dispute
that the Indemnified Party is entitled to receive any of the Claimed Amount. The Buyer shall have
the right to offset any Claimed Amount due to the Stockholder under that certain Non-Compete
Agreement dated as of the date hereof by and between the Stockholder and the Company and under that
certain Software Transfer Agreement dated as of the date hereof by and between the Stockholder and
the Company. In the event the Stockholder contests the Buyer’s entitlement to any portion of the
Claimed Amount, such disputed portion shall be paid to an escrow agent selected by the Buyer and
reasonably approved by the Stockholder pending final resolution of such dispute.

          (d) Notwithstanding the other provisions of this Section 6.3, if a third party asserts (other
than by means of a lawsuit) that an Indemnified Party is liable to such third party for a monetary
or other obligation which may constitute or result in Damages for which such Indemnified Party may
be entitled to indemnification pursuant to this Article VI, and such Indemnified Party reasonably
determines that it has a valid business reason to fulfill such obligation, then (i) such
Indemnified Party shall be entitled to satisfy such obligation, without prior notice to or consent
from the Indemnifying Party, (ii) such Indemnified Party may subsequently make a claim for
indemnification in accordance with the provisions of this Article VI, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the

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provisions of this Article VI, for any such Damages for which it is entitled to indemnification pursuant to
this Article VI (subject to the right of the Indemnifying Party to dispute the Indemnified Party’s
entitlement to indemnification, or the amount for which it is entitled to indemnification, under
the terms of this Article VI).

     6.4. Survival of Representations and Warranties. All representations and warranties
that are covered by the indemnification agreements in Section 6.1(a) and Section 6.2(a) shall (a)
survive the Closing and (b) shall expire on the date 12 months following the Closing Date, except
that (i) the representations and warranties set forth in Article II and Sections 3.1, 3.2, 4.1 and
4.2 shall survive the Closing without limitation and (ii) the representations and warranties set
forth in Sections 3.8, 3.20 and 3.21 shall survive until 30 days following expiration of all
statutes of limitation applicable to the matters referred to therein. If an Indemnified Party
delivers to an Indemnifying Party, before expiration of a representation or warranty, either a
Claim Notice based upon a breach of such representation or warranty, or an Expected Claim Notice
based upon a breach of such representation or warranty, then the applicable representation or
warranty shall survive until, but only for purposes of, the resolution of the matter covered by
such notice. If the legal proceeding or written claim with respect to which an Expected Claim
Notice has been given is definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party. The rights to indemnification
set forth in this Article VI shall not be affected by (i) any investigation conducted by or on
behalf of an Indemnified Party or any knowledge acquired (or capable of being acquired) by an
Indemnified Party, whether before or after the date of this Agreement or the Closing Date
(including through supplements to the Disclosure Schedule permitted by Section 5.5, with respect to
the inaccuracy or noncompliance with any representation, warranty, covenant or obligation which is
the subject of indemnification hereunder or (ii) any waiver by an Indemnified Party of any closing
condition relating to the accuracy of representations and warranties or the performance of or
compliance with agreements and covenants.

     6.5. Limitations.

          (a) Notwithstanding anything to the contrary herein, (i) the aggregate liability of the
Stockholder for Damages under Section 6.1(a) shall not exceed US$500,000 and (ii) the Stockholder
shall not be liable under Section 6.1(a) unless and until the aggregate Damages for which he would
otherwise be liable under Section 6.1(a) exceed US$250,000 (at which point the Stockholder shall
become liable for the aggregate Damages under Section 6.1(a), and not just amounts in excess of
US$250,000); provided that the limitation set forth in this sentence shall not apply to (1) a claim
pursuant to Section 6.1(a) relating to a breach of the representations and warranties set forth in
Article II or Sections 3.1, or 3.2 (2) a claim arising from fraud or willful misconduct or (3) a
claim arising from any misrepresentation made by the Stockholder or omission of the Stockholder in
connection with the trading of the Company’s shares as emerging stock in the GreTai Securities
Market; and provided further that the limitation set forth in subsection (ii) of this sentence
shall not apply to a claim pursuant to Section 6.1(a) relating to a breach of Sections 3.8 or 3.20.
For purposes solely of this Article VI, all representations and

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warranties of the Stockholder in Articles II and III, other than those set forth in Section
3.6 and 3.27, shall be construed as if the term “material” and any reference to “Company Material
Adverse Effect” (and variations thereof) were omitted from such representations and warranties.

          (b) Notwithstanding anything to the contrary herein, (i) the aggregate liability of the Buyer
for Damages under Section 6.2(a) shall not exceed US$500,000, and (ii) the Buyer shall not be
liable under Section 6.2(a) unless and until the aggregate Damages for which it would otherwise be
liable under Section 6.2(a) exceed US$250,000 (at which point the Buyer shall become liable for the
aggregate Damages under Section 6.2(a), and not just amounts in excess of US$250,000); provided
that the limitation set forth in this sentence shall not apply to (1) a claim pursuant to Section
6.2(a) relating to a breach of the representations and warranties set forth in Sections 4.1 or 4.2.
For purposes solely of this Article VI, all representations and warranties of the Buyer in Article
IV shall be construed as if the term “material” and any reference to “Buyer Material Adverse
Effect” (and variations thereof) were omitted from such representations and warranties.

          (c) Except with respect to claims based on fraud, after the Closing, the rights of the
Indemnified Parties under this Article VI shall be the exclusive remedy of the Indemnified Parties
with respect to claims resulting from or relating to any misrepresentation, breach of warranty or
failure to perform any covenant or agreement contained in this Agreement.

ARTICLE VII

POST-CLOSING AGREEMENTS

          The Stockholder agrees that from and after the Closing Date:

     7.1. No Solicitation or Hiring of Former Employees. Except as provided by law, for a
period of three (3) years after the Closing Date, neither the Stockholder nor any Affiliate thereof
shall (a) solicit any person who was an employee of either the Company or any of the Subsidiaries
on the date hereof or the Closing Date to terminate his employment with the Buyer (or the Company
or any of the Subsidiaries, as the case may be) or to become an employee of the Stockholder or such
Affiliate, or (b) hire any person who was such an employee on the date hereof or on the Closing
Date.

ARTICLE VIII

TERMINATION OF AGREEMENT

     8.1. Automatic Termination. This Agreement shall terminate automatically, without any
action on the part of any Party hereto, upon the earliest to occur of: (a) the Closing, (b) July
31, 2007, if the Tender Offer has not by then been publicly announced, (c) if the commencement of
the Tender Offer period has not begun within five (5) business days after the public announcement
referenced in the immediately preceding clause, (d) the ROC Fair Trade Commission disapproves the
proposed combination of the Company with Buyer, or (e) the

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Tender Offer fails to result in the Buyer acquiring at least 33% of the shares of Common Stock
of the Company.

     8.2. Termination by Agreement of the Parties. This Agreement may be terminated by the
mutual written agreement of the parties hereto. In the event of such termination by agreement, the
Buyer shall have no further obligation or liability to the Stockholder or the Company under this
Agreement, and the Stockholder shall have no further obligation or liability to the Buyer under
this Agreement.

     8.3. Termination by Reason of Breach.

          (a) This Agreement may be terminated by the Stockholder by giving written notice to the Buyer
in the event the Buyer is in breach of any representation, warranty or covenant contained in this
Agreement, and such breach, individually or in combination with any other such breach, is not cured
within 30 days following delivery by the Stockholder to the Buyer of written notice of such breach.

          (b) This Agreement may be terminated by the Buyer by giving written notice to the Stockholder
in the event that the Stockholder is in breach of any representation, warranty or covenant
contained in this Agreement, and such breach, individually or in combination with any other such
breach, is not cured within 30 days following delivery by the Buyer of written notice of such
breach.

     8.4. Effect of Termination. If any Party terminates this Agreement pursuant to
Section 8, all obligations of the Parties hereunder shall terminate without any liability of any
Party to any other Party (except for any liability of any Party for willful breaches of this
Agreement).

ARTICLE IX

DISPUTE RESOLUTION

     9.1. General. In the event that any dispute should arise between the Parties hereto
with respect to any matter covered by this Agreement, including, without limitation, the occurrence
of a breach of this Agreement prior to the Closing, the Parties hereto shall resolve such dispute
in accordance with the procedures set forth in this Article IX.

     9.2. Consent of the Parties. In the event of any dispute between the Parties with
respect to any matter covered by this Agreement, the parties shall first use their best efforts to
resolve such dispute among themselves. If the parties are unable to resolve the dispute within 30
calendar days after the commencement of efforts to resolve the dispute, the dispute will be
submitted to arbitration in accordance with Section 9.3 hereof.

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     9.3.Arbitration.

          (a) Either the Buyer or the Stockholder may submit any matter referred to in Section 9.2
hereof to arbitration by notifying the other party hereto, in writing, of such dispute. Within 10
days after receipt of such notice, the Buyer and the Stockholder shall each designate in writing
one arbitrator to resolve the dispute, and the two arbitrators so designated shall designate a
third arbitrator who shall serve as the chairperson of the arbitration panel; provided, that if the
two arbitrators hereto cannot agree on the third arbitrator within 10 days after their
appointments, whichever is later, the arbitrator in question shall be selected by the ROC
Arbitration Association. An arbitrator so designated shall not be an employee, consultant,
officer, director or stockholder of any Party hereto or any Affiliate of any Party to this
Agreement.

          (b) The arbitration shall be governed by the ROC Arbitration Act and the rules of the ROC
Arbitration Association; provided, that the arbitrators shall have sole discretion with regard to
the admissibility of evidence.

          (c) The arbitrators shall use their best efforts to rule on each disputed issue within six (6)
months after the completion of the hearings described in paragraph (c) above. The determination of
the arbitrator as to the resolution of any dispute shall be binding and conclusive upon all parties
hereto. All rulings of the arbitrator shall be in writing.

          (d) The prevailing party in any arbitration shall be entitled to an award of reasonable
attorneys’ fees incurred in connection with the arbitration. The non-prevailing party shall pay
such fees, together with the fees of the arbitrator and the costs and expenses of the arbitration.

          (e) Any arbitration pursuant to this Section 9.3 shall be conducted in Taipei City.

ARTICLE X

DEFINITIONS

     For purposes of this Agreement, each of the following terms shall have the meaning set forth
below.

“Affiliate” means, with respect to any person, any person directly or indirectly
controlling, controlled by or under common control with such other person.

“Agreed Amount” shall mean part, but not all, of the Claimed Amount.

“Apex Korea” shall have the meaning set forth in Section 3.4(b).

“Buyer” shall have the meaning set forth in the first paragraph of this Agreement.

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“Buyer Material Adverse Effect” shall mean any material adverse change, event,
circumstance or development with respect to, or material adverse effect on, the business,
assets, liabilities, capitalization, prospects, condition (financial or other), or results
of operations of the Buyer. For the avoidance of doubt, the parties agree that the terms
“material”, “materially” or “materiality” as used in this Agreement with an initial lower
case “m” shall have their respective customary and ordinary meanings, without regard to the
meaning ascribed to Buyer Material Adverse Effect.

“Claim Notice” shall mean written notification which contains (i) a description of
the Damages incurred or reasonably expected to be incurred by the Indemnified Party and the
Claimed Amount of such Damages, to the extent then known, (ii) a statement that the
Indemnified Party is entitled to indemnification under Article VI for such Damages and a
reasonable explanation of the basis therefor, and (iii) a demand for payment in the amount
of such Damages.

“Claimed Amount” shall mean the amount of any Damages incurred or reasonably
expected to be incurred by the Indemnified Party.

“Closing” shall mean the closing of the Tender Offer, upon which the Buyer shall
settle the purchase price of the Shares with the Stockholder and the tender offer agent of
the Buyer shall complete the transfer registration of the Shares.

“Closing Date” shall mean the date three (3) business days after the end of the
Tender Offer period or otherwise stipulated in the prospectus for the Tender Offer,
whichever is later.

“Common Stock” shall mean the shares of common stock, NT$10 par value per share, of
the Company.

“Company” shall have the meaning set forth in the Preliminary Statement of this
Agreement.

“Company Intellectual Property” shall mean the Intellectual Property owned by or
licensed to the Company or a Subsidiary and covering, incorporated in, underlying or used in
connection with the Customer Deliverables or the Internal Systems.

“Company Material Adverse Effect” shall mean any material adverse change, event,
circumstance or development with respect to, or material adverse effect on, (i) the
business, assets, liabilities, capitalization, prospects, condition (financial or other), or
results of operations of the Company and the Subsidiaries, taken as a whole, or (ii) the
ability of the Buyer to operate the business of the Company and each of the Subsidiaries
immediately after the Closing. For the avoidance of doubt, the parties agree that the terms
“material”, “materially” or “materiality” as used in this Agreement with an initial

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lower case “m” shall have their respective customary and ordinary meanings, without regard
to the meaning ascribed to Company Material Adverse Effect.

“Company Plan” shall mean any Employee Benefit Plan maintained, or contributed to,
by the Company or any Subsidiary.

“Controlling Party” shall mean the party controlling the defense of any Third Party
Action.

“Customer Deliverables” shall mean the services that the Company or any Subsidiary
(i) currently provides, or (ii) has provided within the previous three years.

“Damages” shall mean any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown, or due or to
become due or otherwise), diminution in value, monetary damages, fines, fees, penalties,
interest obligations, deficiencies, losses and expenses (including amounts paid in
settlement, interest, court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of litigation), other
than those costs and expenses of arbitration of a Dispute which are to be borne by the
Indemnified Party and the Indemnifying Party as set forth in Section 6.3(e).

“Disclosure Schedule” shall mean the disclosure schedule provided by the Stockholder
to the Buyer on the date hereof, as the same may be supplemented pursuant to Section 5.5.

“Dispute” shall mean the dispute resulting if the Indemnifying Party in a Response
disputes its liability for all or part of the Claimed Amount.

“Employee Benefit Plan” shall mean any employee pension benefit plan and any other
written or oral plan, agreement or arrangement involving direct or indirect compensation,
including insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, or other forms of incentive
compensation or post-retirement compensation.

“Environmental Law” shall mean any local or foreign law, statute, rule, order,
directive, judgment, Permit or regulation or the common law relating to the environment,
occupational health and safety, or exposure of persons or property to Materials of
Environmental Concern, including any statute, regulation, administrative decision or order
pertaining to: (i) the presence of or the treatment, storage, disposal, generation,
transportation, handling, distribution, manufacture, processing, use, import, export,
labeling, recycling, registration, investigation or remediation of Materials of
Environmental Concern or documentation related to the foregoing; (ii) air, water and noise
pollution; (iii) groundwater and soil contamination; (iv) the release, threatened release,
or accidental release into the environment, the workplace or other areas of Materials of
Environmental Concern, including emissions, discharges, injections, spills,

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escapes or dumping of Materials of Environmental Concern; (v) transfer of interests in or
control of real property which may be contaminated; (vi) community or worker right-to-know
disclosures with respect to Materials of Environmental Concern; (vii) the protection of wild
life, marine life and wetlands, and endangered and threatened species; (viii) storage tanks,
vessels, containers, abandoned or discarded barrels and other closed receptacles; and (ix)
health and safety of employees and other persons.

“Expected Claim Notice” shall mean a notice that, as a result of a legal proceeding
instituted by or written claim made by a third party, an Indemnified Party reasonably
expects to incur Damages for which it is entitled to indemnification under Article VI.

“Financial Statements” shall mean:

     (a) the audited consolidated balance sheets and statements of income, changes in
stockholders’ equity and cash flows of the Company as of the end of and for each of the last
two fiscal years, and

     (b) the Most Recent Balance Sheet.

“FSC” shall have the meaning set forth in Section 1.1.

“GAAP” shall mean generally accepted accounting principles in the Republic of China.

“Governmental Entity” shall mean any court, arbitrational tribunal, administrative
agency or commission or other governmental or regulatory authority or agency.

“Indemnified Party” shall mean a party entitled, or seeking to assert rights, to
indemnification under Article VI.

“Indemnifying Party” shall mean the party from whom indemnification is sought by the
Indemnified Party.

“Intellectual Property” shall mean all:

     (a) patents, patent applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, reexamination, utility model, certificate of
invention and design patents, patent applications, registrations and applications for
registrations;

     (b) trademarks, service marks, trade dress, Internet domain names, logos, trade names
and corporate names and registrations and applications for registration thereof;

     (c) copyrights and registrations and applications for registration thereof;

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     (d) mask works and registrations and applications for registration thereof;

     (e) computer software, data and documentation;

     (f) inventions, trade secrets and confidential business information, whether patentable
or nonpatentable and whether or not reduced to practice, know-how, manufacturing and product
processes and techniques, research and development information, copyrightable works,
financial, marketing and business data, pricing and cost information, business and marketing
plans and customer and supplier lists and information;

     (g) other proprietary rights relating to any of the foregoing (including remedies
against infringements thereof and rights of protection of interest therein under the laws of
all jurisdictions); and

     (h) copies and tangible embodiments thereof.

“Interim Period” shall have the meaning set forth in Section 5.3.

“Internal Systems” shall mean the internal systems of the Company or any Subsidiary
that are used in its business or operations, including computer hardware systems, software
applications and embedded systems.

“Lease” shall mean any lease or sublease pursuant to which the Company or a
Subsidiary leases or subleases from another party any real property.

“Legal Proceeding” shall mean any action, suit, proceeding, claim, arbitration or
investigation before any Governmental Entity or before any arbitrator.

“Materials of Environmental Concern” shall mean any: pollutants, contaminants or
hazardous substances, pesticides, solid wastes and hazardous wastes, chemicals, other
hazardous, radioactive or toxic materials, oil, petroleum and petroleum products (and
fractions thereof), or any other material (or article containing such material) listed or
subject to regulation under any law, statute, rule, regulation, order, Permit, or directive
due to its potential, directly or indirectly, to harm the environment or the health of
humans or other living beings.

“Most Recent Balance Sheet” shall mean the audited consolidated balance sheet of the
Company as of the Most Recent Balance Sheet Date.

“Most Recent Balance Sheet Date” shall mean December 31, 2006.

“Non-controlling Party” shall mean the party not controlling the defense of any
Third Party Action.

 - 33 - 

 

“Ordinary Course of Business” shall mean the ordinary course of business consistent
with past custom and practice (including with respect to frequency and amount).

“Parties” shall mean the Buyer and the Stockholder.

“Patient Information” shall have the meaning set forth in Section 3.30(a).

“Permits” shall mean all permits, licenses, registrations, certificates, orders,
approvals, franchises, variances and similar rights issued by or obtained from any
Governmental Entity (including those issued or required under Environmental Laws and those
relating to the occupancy or use of owned or leased real property).

“Reasonable Best Efforts” shall mean best efforts, to the extent commercially
reasonable.

“Required Shareholders’ Resolutions” shall have the meaning set forth in Section
5.9(a).

“Response” shall mean a written response containing the information provided for in
Section 6.3(c).

“ROC” or “Taiwan” shall mean the Republic of China.

“Security Interest” shall mean any mortgage, pledge, security interest, encumbrance,
charge or other lien (whether arising by contract or by operation of law), other than (i)
mechanic’s, materialmen’s, and similar liens, (ii) liens arising under worker’s
compensation, unemployment insurance, social security, retirement, and similar legislation
and (iii) liens on goods in transit incurred pursuant to documentary letters of credit, in
each case arising in the Ordinary Course of Business of the Company and not material to the
Company.

“Shareholders Meeting” shall have the meaning set forth in Section 5.8.

“Shares” shall have the meaning set forth in the Preliminary Statement.

“Stockholder” shall have the meaning set forth in the first paragraph of this
Agreement.

“Subsidiary” shall mean any corporation, partnership, trust, limited liability
company or other non-corporate business enterprise in which the Company (or another
Subsidiary) holds stock or other ownership interests representing (a) more than 50% of the
voting power of all outstanding stock or ownership interests of such entity or (b) the right
to receive more than 50% of the net assets of such entity available for distribution to the
holders of outstanding stock or ownership interests upon a liquidation or dissolution of
such entity.

“Taxes” shall mean all taxes, charges, fees, levies or other similar assessments or
liabilities, including income, gross receipts, ad valorem, premium, value-added, excise,

 - 34 - 

 

real property, personal property, sales, use, transfer, withholding, employment,
unemployment, insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease, service, service use,
severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes
imposed by any local or foreign government, or any agency thereof, or other political
subdivision of any such government, and any interest, fines, penalties, assessments or
additions to tax resulting from, attributable to or incurred in connection with any tax or
any contest or dispute thereof.

“Tax Returns” shall mean all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection with Taxes.

“Tender Offer” shall have the meaning set forth in Section 1.1.

“Tender Offer Regulations” shall have the meaning set forth in Section 1.1.

“Third Party Action” shall mean any suit or proceeding by a person or entity other
than a Party for which indemnification may be sought by a Party under Article VI.

“Transfer” shall have the meaning set forth in Section 5.6(c).

ARTICLE XI

MISCELLANEOUS

     11.1. Press Releases and Announcements. No Party shall issue any press release or
public announcement relating to the subject matter of this Agreement without the prior written
approval of the other Parties; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law, regulation or stock
market rule (in which case the disclosing Party shall use reasonable efforts to advise the other
Parties and provide them with a copy of the proposed disclosure prior to making the disclosure).

     11.2. Notices. Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered personally or sent by telex, federal express, registered
or certified mail, postage prepaid, addressed as follows or to such other address of which the
parties may have given notice:

	 	 	 	 	 
	 

	 	To the Buyer:
	 	c/o PAREXEL International Corporation
	 

	 	 	 	200 West Street
	 

	 	 	 	Waltham, MA 02451
	 

	 	 	 	Facsimile: 602-445-2680
	 

	 	 	 	Attn: Josef Von Rickenbach

 - 35 - 

 

	 	 	 	 	 
	 

	 	With a copy to:
	 	c/o PAREXEL International Corporation
	 

	 	 	 	200 West Street
	 

	 	 	 	Waltham, MA 02451
	 

	 	 	 	Facsimile: 781-434-5040
	 

	 	 	 	Attn: C. Douglas Batt
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Wilmer Cutler Pickering Hale and Dorr LLP
	 

	 	 	 	60 State Street
	 

	 	 	 	Boston, MA 02109
	 

	 	 	 	Facsimile: 617-526-5000
	 

	 	 	 	Attn: Jeffrey A. Hermanson, Esq.
	 

	 	 	 	     David E. Redlick, Esq.
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Lee and Li, Attorneys at Law
	 

	 	 	 	7F, No. 201, Tun Hua N. Road
	 

	 	 	 	Taipei 105, Taiwan, R.O.C.
	 

	 	 	 	Facsimile: 886-2-2713-3966
	 

	 	 	 	Attn: Joyce Fan, Esq.
	 
	 	 	 	 
	 

	 	To the Stockholder:
	 	Albert Liou
	 

	 	 	 	6F, No. 78, Neijiang Street, Wanhua District,
	 

	 	 	 	Taipei, Taiwan
	 
	 	 	 	 
	 

	 	With a copy to:
	 	LCS & Partners
	 

	 	 	 	5F, No. 8, Sinyi Rd., Taipei City, Taiwan
	 

	 	 	 	Attn: Mark Harty

Unless otherwise specified herein, such notices or other communications shall be deemed received
(a) on the date delivered, if delivered personally, or (b) three business days after being sent, if
sent by registered or certified mail.

     11.3. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors and assigns, except that the Buyer,
on the one hand, and the Stockholder, on the other hand, may not assign their respective
obligations hereunder without the prior written consent of the other Party; provided, however, that
the Buyer may assign this Agreement, and its rights and obligations hereunder, to a subsidiary or
Affiliate of the Buyer. Any assignment in contravention of this provision shall be void. No
assignment shall release the Buyer or the Stockholder from any obligation or liability under this
Agreement.

     11.4. Entire Agreement; Amendments; Attachments. This Agreement, all Schedules and
Exhibits hereto, and all agreements and instruments to be delivered by the Parties pursuant hereto
represent the entire understanding and agreement between the Parties hereto with respect to the
subject matter hereof and supersede all prior oral and written and all contemporaneous oral
negotiations, commitments and understandings between such Parties. The Buyer and the

 - 36 - 

 

Stockholder may amend or modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by the Buyer and the Stockholder. If the provisions of any Schedule or
Exhibit to this Agreement are inconsistent with the provisions of this Agreement, the provisions of
the Agreement shall prevail. The Exhibits and Schedules attached hereto or to be attached
hereafter are hereby incorporated as integral parts of this Agreement.

     11.5. Severability. Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability, without affecting in any way the remaining
provisions hereof in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.

     11.6. No Third Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any person other than the Parties and their respective successors and permitted
assigns; provided, however, that the provisions of Article VI concerning indemnification are
intended for the benefit of the individuals specified therein.

     11.7. Governing Law. This Agreement (including the validity and applicability of the
arbitration provisions of this Agreement, the conduct of any arbitration of a Dispute, the
enforcement of any arbitral award made hereunder and any other questions of arbitration law or
procedure arising hereunder) shall be governed by and construed in accordance with the laws of the
ROC without giving effect to any choice or conflict of law provision or rule that would cause the
application of laws of any jurisdictions other than those of the ROC.

     11.8. Section Headings. The section headings are for the convenience of the parties
and in no way alter, modify, amend, limit, or restrict the contractual obligations of the parties.

     11.9. Counterparts and Facsimile Signature. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. This Agreement may be executed by facsimile signature.

 - 37 - 

 

     IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of and on
the date first above written.

	 	 	 	 	 
	 	BUYER:

PAREXEL (TAIWAN), INC.

 	 
	 	By:  	/s/ James F. Winschel, Jr.
 	 
	 
	 	 	Name: James F. Winschel, Jr. 	 
	 	 	Title:  	 	 
	 
	 	STOCKHOLDER:

 	 
	 	By:  	       /s/ Albert Liou
 	 
	 	 	 	 
	 	 	Name:  Albert Liou 	 
	 

 - 38 -exv10w1

 

 

SUPERPRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT

among

BALLY TOTAL FITNESS HOLDING CORPORATION,

debtor and debtor-in-possession,

as Borrower

The Several Banks and other Financial Institutions

Parties Hereto

MORGAN STANLEY SENIOR FUNDING, INC.,

as Administrative Agent and Collateral Agent

WELLS FARGO FOOTHILL, LLC,

as Revolving Credit Agent and as Issuing Lender

and

THE CIT GROUP/BUSINESS CREDIT, INC.,

as Revolving Syndication Agent

Dated as of August 22, 2007

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I DEFINITIONS AND ACCOUNTING TERMINOLOGY
	 	 	2	 
	 
	 	 	 	 
	Section 1.01 Certain Definitions
	 	 	2	 
	Section 1.02 Financial Standards
	 	 	24	 
	Section 1.03 Interpretation
	 	 	25	 
	 
	 	 	 	 
	ARTICLE II THE CREDIT
	 	 	25	 
	 
	 	 	 	 
	Section 2.01 The Revolving Credit
	 	 	25	 
	Section 2.02 Requests for Revolving Loans
	 	 	26	 
	Section 2.03 Term Loan Facility
	 	 	26	 
	Section 2.04 [Reserved].
	 	 	27	 
	Section 2.05 Repayment of Term Loans
	 	 	27	 
	Section 2.06 Lending Branch and Evidence of Credit
	 	 	27	 
	Section 2.07 Conversion and Continuation Options
	 	 	28	 
	Section 2.08 Computation of and Payment of Interest
	 	 	28	 
	Section 2.09 Payment of Loans
	 	 	30	 
	Section 2.10 Payments
	 	 	30	 
	Section 2.11 Optional Termination or Reduction of Commitment Amounts
	 	 	31	 
	Section 2.12 Optional Prepayments
	 	 	31	 
	Section 2.13 Mandatory Prepayments
	 	 	32	 
	Section 2.14 Fees
	 	 	32	 
	Section 2.15 Agency Fees
	 	 	33	 
	Section 2.16 Taxes
	 	 	33	 
	Section 2.17 Increased Costs; Illegality; Indemnity
	 	 	36	 
	Section 2.18 Capital Adequacy
	 	 	37	 
	Section 2.19 Letters of Credit
	 	 	38	 
	Section 2.20 Call Protection
	 	 	46	 
	Section 2.21 Priority and Liens
	 	 	46	 
	 
	 	 	 	 
	ARTICLE III SECURITY
	 	 	48	 
	 
	 	 	 	 
	Section 3.01 Security
	 	 	48	 
	Section 3.02 [Reserved
	 	 	49	 
	Section 3.03 [Reserved
	 	 	49	 
	Section 3.04 New Guarantors
	 	 	49	 
	Section 3.05 [Reserved].
	 	 	49	 
	Section 3.06 Reserved].
	 	 	49	 
	Section 3.07 [Reserved].
	 	 	50	 
	Section 3.08 Collateral Agency Agreement
	 	 	50	 

 

 

	 	 	 	 	 
	 	 	Page
	ARTICLE IV CONDITIONS PRECEDENT
	 	 	50	 
	 
	 	 	 	 
	Section 4.01 Conditions Precedent to Closing Date
	 	 	50	 
	Section 4.02 Conditions Precedent to Each Loan and Letter of Credit
	 	 	54	 
	Section 4.03 Determinations Under Sections 4.01 and 4.02
	 	 	55	 
	 
	 	 	 	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES
	 	 	55	 
	 
	 	 	 	 
	Section 5.01 Borrower’s Existence
	 	 	55	 
	Section 5.02 Subsidiaries’ Existence
	 	 	56	 
	Section 5.03 Borrower’s and Subsidiaries’ Powers
	 	 	56	 
	Section 5.04 Power of Officers
	 	 	56	 
	Section 5.05 Government Approvals
	 	 	56	 
	Section 5.06 Compliance With Laws
	 	 	56	 
	Section 5.07 Enforceability of Agreement
	 	 	57	 
	Section 5.08 Title to Property
	 	 	57	 
	Section 5.09 Litigation
	 	 	57	 
	Section 5.10 Secured Superpriority Obligations
	 	 	57	 
	Section 5.11 Compliance with Margin Requirements
	 	 	57	 
	Section 5.12 Subsidiaries
	 	 	57	 
	Section 5.13 Information
	 	 	57	 
	Section 5.14 ERISA
	 	 	58	 
	Section 5.15 Investment Company Act of 1940
	 	 	58	 
	Section 5.16 No Restrictions on Subsidiaries
	 	 	58	 
	Section 5.17 [Reserved
	 	 	59	 
	Section 5.18 Environmental Matters
	 	 	59	 
	Section 5.19 Collateral Documents
	 	 	59	 
	Section 5.20 Copyrights, Patents, Trademarks and Licenses, etc.
	 	 	60	 
	Section 5.21 Accuracy of Information, etc.
	 	 	60	 
	 
	 	 	 	 
	ARTICLE VI AFFIRMATIVE COVENANTS
	 	 	61	 
	 
	 	 	 	 
	Section 6.01 Use of Proceeds and Letters of Credit
	 	 	61	 
	Section 6.02 Notices
	 	 	61	 
	Section 6.03 Financial Statements, Reports, Etc.
	 	 	62	 
	Section 6.04 Further Assurances
	 	 	64	 
	Section 6.05 Existence, Etc.
	 	 	64	 
	Section 6.06 [Reserved
	 	 	64	 
	Section 6.07 Payment of Post Petition Obligations
	 	 	64	 
	Section 6.08 Compliance with Laws
	 	 	64	 
	Section 6.09 Insurance and Condemnation
	 	 	64	 
	Section 6.10 Adequate Books
	 	 	65	 
	Section 6.11 ERISA
	 	 	65	 
	Section 6.12 Minimum Liquidity
	 	 	66	 
	Section 6.13 Hazardous Materials
	 	 	66	 
	 
	 	 	 	 
	ARTICLE VII NEGATIVE COVENANTS
	 	 	66	 

2

 

	 	 	 	 	 
	 	 	Page
	Section 7.01 Investments and Restricted Payments
	 	 	67	 
	Section 7.02 Other Obligations
	 	 	68	 
	Section 7.03 Other Security
	 	 	70	 
	Section 7.04 [Reserved]
	 	 	70	 
	Section 7.05 Liquidation; Merger
	 	 	70	 
	Section 7.06 Prepetition Prepayments and Amendments of Prepetition Facility
	 	 	71	 
	Section 7.07 Change in Business
	 	 	71	 
	Section 7.08 Disposal of Assets
	 	 	71	 
	Section 7.09 Limitation on Transactions with Affiliates
	 	 	73	 
	Section 7.10 Limitation on Sales and Leasebacks
	 	 	73	 
	Section 7.11 Limitation on Changes in Fiscal Year
	 	 	73	 
	Section 7.12 [Reserved].
	 	 	73	 
	Section 7.13 Negative Pledge Clauses
	 	 	73	 
	Section 7.14 Maximum Senior Secured Leverage Ratio.
	 	 	74	 
	Section 7.15 Bankruptcy Matters
	 	 	74	 
	 
	 	 	 	 
	ARTICLE VIII EVENTS OF DEFAULT
	 	 	74	 
	 
	 	 	 	 
	Section 8.01 Nonpayment
	 	 	75	 
	Section 8.02 Representation or Warranty
	 	 	75	 
	Section 8.03 Judgments
	 	 	75	 
	Section 8.04 Change of Control Event
	 	 	75	 
	Section 8.05 Cross Default
	 	 	75	 
	Section 8.06 ERISA
	 	 	75	 
	Section 8.07 Specific Defaults
	 	 	76	 
	Section 8.08 Guarantee and Collateral Agreement; Impairment of Collateral Documents
	 	 	76	 
	Section 8.09 Defaults Pertaining to the Cases
	 	 	76	 
	Section 8.10 Actual or Asserted Invalidity
	 	 	77	 
	Section 8.11 Other Defaults
	 	 	77	 
	 
	 	 	 	 
	ARTICLE IX MISCELLANEOUS
	 	 	78	 
	 
	 	 	 	 
	Section 9.01 Notices
	 	 	78	 
	Section 9.02 Successors and Assigns
	 	 	80	 
	Section 9.03 Lenders’ Obligations Several
	 	 	80	 
	Section 9.04 Assignments; Participations
	 	 	80	 
	Section 9.05 Delays and Waivers
	 	 	82	 
	Section 9.06 Costs and Expenses
	 	 	82	 
	Section 9.07 Telephone Indemnity
	 	 	83	 
	Section 9.08 Other Indemnity
	 	 	83	 
	Section 9.09 Choice of Law
	 	 	85	 
	Section 9.10 Personal Jurisdiction; Waiver
	 	 	85	 
	Section 9.11 Service of Process
	 	 	85	 
	Section 9.12 Waiver of Jury Trial
	 	 	86	 
	Section 9.13 Section Headings
	 	 	86	 

3

 

	 	 	 	 	 
	 	 	Page
	Section 9.14 Severability
	 	 	86	 
	Section 9.15 Counterparts
	 	 	86	 
	Section 9.16 No Reliance by Lenders
	 	 	86	 
	Section 9.17 Entire Agreement
	 	 	86	 
	Section 9.18 Confidentiality
	 	 	86	 
	Section 9.19 [Reserved
	 	 	87	 
	Section 9.20 Replacement of Lenders
	 	 	87	 
	 
	 	 	 	 
	ARTICLE X RELATION OF LENDERS
	 	 	88	 
	 
	 	 	 	 
	Section 10.01 Agents; Enforcement of Guaranties
	 	 	88	 
	Section 10.02 Pro Rata Sharing
	 	 	88	 
	Section 10.03 Set-off
	 	 	89	 
	Section 10.04 Liability of Agents
	 	 	90	 
	Section 10.05 Reliance by Agents
	 	 	90	 
	Section 10.06 Approvals; Amendments
	 	 	90	 
	Section 10.07 Notice of Default
	 	 	92	 
	Section 10.08 Credit Decision
	 	 	92	 
	Section 10.09 Lenders’ Indemnity
	 	 	92	 
	Section 10.10 Agents as Lender
	 	 	93	 
	Section 10.11 Notice of Transfer
	 	 	93	 
	Section 10.12 Resignation of Agent
	 	 	93	 
	Section 10.13 Collateral Matters
	 	 	94	 
	Section 10.14 Collateral Agent
	 	 	98	 
	Section 10.15 Conversion
	 	 	98	 

4

 

	 	 	 	 	 
	SCHEDULES	 	 
	 
	 	 	 	 
	 

	 	Schedule 1.01(a)
	 	Existing Liens
	 

	 	Schedule 1.01(b)
	 	Unrestricted Subsidiaries
	 

	 	Schedule 1.01(c)
	 	Pro Forma EBITDA Threshold
	 

	 	Schedule 1.01(d)
	 	Letters of Credit Outstanding
	 

	 	Schedule 4.01(dd)
	 	Historical Consolidated EBITDA
	 

	 	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 6.09
	 	Insurance
	 

	 	Schedule 7.01(h)
	 	Investments and Intercompany Loans
	 

	 	Schedule 7.02(b)
	 	Existing 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 Term Note
	 

	 	Exhibit H.
	 	Form of Opinions of Borrower’s Special Counsel
	 

	 	Exhibit I.
	 	Form of Opinion of General Counsel
	 

	 	Exhibit J.
	 	Form of Assignment and Acceptance
	 

	 	Exhibit K.
	 	Form of Final Order
	 

	 	Exhibit L.
	 	Form of Exit Credit Agreement
	 

	 	Exhibit M.
	 	Form of Alternative Exit Credit Agreement

 

 

SUPERPRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT

          This Superpriority Debtor-in-Possession Credit Agreement, dated as of August 22, 2007 (this
“Agreement”), among BALLY TOTAL FITNESS HOLDING CORPORATION, a Delaware corporation and a
debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code
(“Borrower”), the banks and other financial institutions from time to time party hereto
(collectively, “Lenders” and individually, a “Lender”), WELLS FARGO FOOTHILL, LLC,
as revolving credit agent (in such capacity, the “Revolving Credit Agent”) and as Issuing
Lender, THE CIT GROUP/BUSINESS CREDIT, INC., as revolving syndication agent (in such capacity, the
“Revolving Syndication Agent”) and MORGAN STANLEY SENIOR FUNDING, INC., as administrative
agent for the Lenders (in such capacity, the “Administrative Agent”) and as collateral
agent for the Lenders (in such capacity, the “Collateral Agent”), and is entered into with
respect to the following:

RECITALS

          1. On July 31, 2007 (the “Filing Date”), Borrower and certain of Borrower’s
subsidiaries filed voluntary petitions with the Bankruptcy Court initiating the Cases and have
continued in the possession of their assets and in the management of their business pursuant to
Sections 1107 and 1108 of the Bankruptcy Code.

          2. Borrower has requested that the Lenders provide a credit facility to Borrower in an
aggregate principal amount not to exceed $292,000,000, which credit facility shall consist of (a) a
secured revolving credit facility in an aggregate principal amount of $50,000,000, including a
letter of credit subfacility of $40,000,000 (the “Revolving Credit Facility”), and (b) a
term loan facility in an aggregate principal amount of $242,000,000 (the “Term Loan
Facility” and collectively with the Revolving Credit Facility, the “Facility”).

          3. The proceeds of the Facility will be used (i) to repay the Prepetition Facility in full on
the Closing Date, (ii) to pay related fees and expenses associated with negotiation, execution and
delivery of this Agreement, (iii) to make Prepetition Payments solely to the extent approved by the
Bankruptcy Court and permitted hereunder and (iv) for working capital and other general corporate
purposes of the Borrower and the Guarantors to the extent permitted hereunder.

          4. To provide security for the repayment of all obligations of any kind of the Credit Parties
hereunder and under the other Credit Documents, including (i) direct borrowings, and (ii)
reimbursement obligations under Letters of Credit, each of the Credit Parties will provide to the
Collateral Agent (for the benefit of the Secured Creditors) the following (all as more fully
described herein):

               (a) pursuant to Section 364(c)(1) of the Bankruptcy Code, a super-priority claim in the Cases,

               (b) pursuant to Section 364(c)(2) of the Bankruptcy Code, a perfected first priority Lien on
all unencumbered property and assets of the Credit Parties of any kind,

 

 

               (c) pursuant to Section 364(c)(3) of the Bankruptcy Code and subject to clause (d) below, a
perfected Lien on the property of the Credit Parties as more fully described herein, subject to
unavoidable (x) valid and perfected Liens in existence at the time of the commencement of the
Cases, (y) valid Liens in existence at the time of such commencement that are perfected subsequent
to such commencement as permitted by Section 546(b) of the Bankruptcy Code (the Liens described in
clause (x) above and this clause (y), being “Existing Liens”), other than with respect to
the Primed Liens, and (z) post-petition Capitalized Leases or purchase money financings permitted
to be entered into hereunder, and

               (d) pursuant to Section 364(d)(1) of the Bankruptcy Code, be secured by a perfected first
priority, senior priming Lien on all the property of the Credit Parties of any kind that secure
obligations under the Prepetition Facility and any Liens that are junior to such Liens, all of
which existing Liens (the “Primed Liens”) shall be primed by and made subject and
subordinate to the perfected first priority senior Liens to be granted to the Collateral Agent,
which senior priming Liens in favor of the Collateral Agent shall also prime any Liens arising
after the commencement of the Cases to provide adequate protection in respect of any Primed Liens
but shall not prime Liens, if any, to which the Primed Liens are subject at the time of the
commencement of the Cases;

subject only to the Carve-Out (as defined herein).

          In consideration of the premises and other valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMINOLOGY

          Section 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):

          “Administrative Agent” means Morgan Stanley Senior Funding, Inc., or any successor
agent thereto.

          “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.

          “Agents” means the Administrative Agent, the Collateral Agent, the Revolving Credit
Agent and the Revolving Syndication Agent.

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

          “Alternative Conversion Conditions” has the meaning assigned in Section 10.15(b).

          “Alternative Exit Credit Agreement” means the Exit Credit Agreement in substantially
the form of Exhibit M hereto, as amended, modified, supplemented or otherwise modified from time to
time.

2

 

          “Alternative Exit Credit Facility Fee Letter” means that certain Alternative Exit
Credit Facility Fee Letter, dated August 13, 2007, between Morgan Stanley Senior Funding, Inc. and
Borrower, as amended, supplemented or otherwise modified from time to time.

          “Alternative Exit Loan Documents” has the meaning assigned in Section 10.15(b).

          “Alternative Exit Loans” has the meaning assigned in Section 10.15(b).

          “Applicable Margin” means, at any time, (a) with respect to Revolving Loans (i) that
are Eurodollar Rate Loans, 2.00%, and (ii) that are Reference Rate Loans, 1.00%; (b) with respect
to Term Loans (i) that are Eurodollar Rate Loans, 4.25%, and (ii) that are Reference Rate Loans,
3.25%; (c) with respect to Letter of Credit fees, 2.00%; and (d) with respect to any other payment
obligations hereunder bearing interest based on the Reference Rate, 1.00%.

          “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 Morgan Stanley Senior Funding, 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 Loans, dealings in foreign currencies and exchange between banks may be
carried on in London, England.

          “Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as
now and hereafter in effect, or any successor statute.

          “Bankruptcy Court” means the United States Bankruptcy Court for the Southern District
of New York.

          “Borrowing Date” means, with respect to each Loan, the date such Loan 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.

          “Carve-Out” has the meaning assigned in Section 2.21(a).

          “Carve-Out Trigger Notice” has the meaning assigned in Section 2.21(a).

          “Cases” means the cases of Borrower and the Guarantors currently pending under Chapter
11 of the Bankruptcy Code.

3

 

          “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” shall be deemed to have occurred if a majority of the seats
on the Board of Directors of the Borrower are occupied by Persons who were neither (i) nominated by
the Board of Directors of the Borrower nor (ii) appointed by directors so nominated.

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

          “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 or the Final Order 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 Loans 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 Loan Agents in the form of Exhibit B hereto, as amended, supplemented or
otherwise modified.

4

 

          “Collateral Agent” means Morgan Stanley Senior Funding, Inc., 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 Operating Bank Guaranty, and all other security
agreements, mortgages, deeds of trust, 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, and Term Loan Commitment, collectively, as to all the Lenders, the
“Commitments”.

          “Commitment Percentage” means, as to each Lender, its Revolving Credit Commitment
Percentage and its Term Loan Commitment Percentage, as applicable.

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

          “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 Consolidated EBITDA for the twelve month period
most recently ended prior to the date of determination for which financial statements have been
delivered pursuant to Section 6.03, adjusted on a pro forma basis to give effect to dispositions
made during (or after) such twelve month period pursuant to Section 7.08(f), (n) and (o) and
acquisitions permitted under this Agreement made during (or after) such twelve month period, on the
following basis:

               (a) cash rent obligations related to Permitted Sale/Leasebacks shall be deducted from
Consolidated EBITDA as if such transaction had been consummated on the first day of such twelve
month period;

               (b) cash club contribution (net of associated overhead cost additions) of clubs having actual
operations during such twelve month period acquired by Borrower during

5

 

such twelve month period
(which may be a negative number), shall be included in Consolidated EBITDA for the period during
which such clubs had actual operations as if such transaction had been consummated on the first day
of such twelve month period;

               (c) cash club contribution (net of associated overhead cost savings) of clubs disposed during
the prior twelve month period (which may be a negative number), shall be excluded from Consolidated
EBITDA as if such transaction had been consummated on the first day of such twelve month period;
and

               (d) cash rent obligations in respect of leases or subleases disposed under Section 7.08
(o)(ii) shall be added-back to Consolidated EBITDA as if such disposals had been consummated on the
first day of such twelve month period.

          “Consolidated EBITDA” means, with respect to Borrower and its Subsidiaries on a
consolidated basis, without duplication, for any period of determination, Consolidated Net Income
(loss) plus to the extent deducted in determining Consolidated Net Income (loss): (a)
income, withholding (including foreign), franchise or similar taxes paid or accrued during such
period, (b) consolidated interest expense calculated in accordance with GAAP and Letter of Credit
fees, (c) depreciation, amortization (including non-cash amortization of debt discount or deferred
financing costs) and non-cash impairment charges, (d) all other non-cash charges, (e) cash
restructuring charges, fees, expenses, settlements and claims related to Borrower’s
restructuring/reorganization efforts associated with its Chapter 11 proceeding, (f) other cash
restructuring charges, including third-party professional fees for operational and financial
advisory services, provided that such charges shall not exceed $6.0 million for the six months
ending December 31, 2007 and $8.0 million for fiscal year 2008, (g) cash public company expenses
incurred in fiscal year 2007, (h) cash expenses incurred by Borrower or any Subsidiary to the
extent actually reimbursed by a third party, (i) cash severance payments made to employees or
officers, (j) cash fees, costs and expenses incurred in connection with this financing, and any
other debt or equity issuances, refinancings, acquisitions, investments or dispositions permitted
by this Agreement, (k) to the extent covered by insurance under which insurer has been notified and
has not denied coverage, expenses with respect to liability or casualty events or business
interruption, (l) cash fees and expenses associated with the SEC investigation, the DOJ
Investigation and related shareholder litigation and litigation relating to insurance rescission
and indemnity claims, provided that such charges shall not exceed $2 million for the six months
ending December 31, 2007 and $4 million in the aggregate for fiscal year 2008, (m) penalties,
judgments and settlements associated with the SEC investigation, the DOJ Investigation, litigation
relating to insurance rescission and related shareholder litigation, (n) any operating losses,
including pre-opening expenses and losses, attributable to new clubs open for less than 12 months,
not to exceed $3.0 million in any fiscal year and (o) extraordinary cash one time club improvement
project expenses, IT expenses, and business process improvements related expenses not to exceed
$5.0 million in any fiscal year in the aggregate,
minus (a) cash payments made during such period in respect of non-cash items added
back in a prior period, plus or minus (a) changes in deferred revenue for such
period, as applicable and (b) the difference between GAAP rental expense reflected on Borrower’s
Consolidated Income Statement and cash rent expense.

6

 

          “Consolidated Net Income” of Borrower means, for any period, the consolidated net
income (or loss) of 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 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 Borrower or one of its Subsidiaries, (iii) net income (or loss) of any Person combined
with 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.

          “Consummation Date” means the date of the Consummation of the Plan of Reorganization.

          “Consummation of the Plan of Reorganization” means the occurrence of the Effective
Date (as defined in the Plan of Reorganization) and the substantial consummation of the Plan of
Reorganization within the meaning of Section 1101(2) of the Bankruptcy Code.

          “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.

          “Conversion Conditions” has the meaning assigned in Section 10.15(a).

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

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

          “Credit Parties” means 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 or
accrued expenses 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
Agreement, and (v) without duplication of any amount of Debt included in clause (i), (ii), (iii) or
(iv) of this definition, all Guaranties made by such Person.

7

 

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

          “Defaulting Lender” shall mean any Lender that (a) has failed to fund any portion of
the Loans or participations in any Letter of Credit required to be funded hereunder within one (1)
Banking Day of the date required to be funded by it hereunder, unless the subject of a good faith
dispute or subsequently cured, (b) has otherwise failed to pay over to the Agents or any Lender (or
its banking Affiliates) any other amount required to be paid by it hereunder within one (1) Banking
Day of the date when due, unless the subject of a good faith dispute or subsequently cured, or (c)
has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

          “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 Credit 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 Borrower in writing to the Administrative Agent including, from time to
time following the Closing Date, at the option of Borrower, by delivery of an updated Annex 1.

          “DIP and Exit Credit Facility Fee Letter” means that certain DIP and Exit Credit
Facility Fee Letter, dated June 29, 2007, between Morgan Stanley Senior Funding, Inc. and Borrower,
as amended, supplemented or otherwise modified from time to time.

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

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

          “Domestic Subsidiary” means any Subsidiary of 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
Loan, 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.

8

 

          “Eurodollar Base Rate” means, with respect to each day during each Interest Period
pertaining to a Eurodollar Rate Loan, 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 Banking 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 applicable Loan Agent
or, in the absence of such availability, by reference to the rate at which the applicable Loan
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 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 Loan, 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 Loans” means Loans the rate of interest applicable to which is based
upon the Eurodollar Rate.

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

          “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to
time.

          “Existing Lien” has the meaning assigned in the recitals hereto.

          “Exit Credit Agreement” means the Exit Credit Agreement in substantially the form of
Exhibit L hereto, as amended, supplemented or otherwise modified from time to time.

          “Exit Loan Documents” has the meaning assigned in Section 10.15(a).

          “Exit Loans” has the meaning assigned in Section 10.15(a).

          “Facility” has the meaning assigned in the recitals hereto.

          “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

9

 

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
applicable Loan Agent from three (3) Federal funds brokers of recognized standing selected by it.

          “Fee Letters” means the collective reference to the DIP and Exit Credit Facility Fee
Letter and the Alternative Exit Credit Facility Fee Letter.

          “Filing Date” has the meaning assigned in the recitals hereto.

          “Final Order” has the meaning assigned in Section 4.01(j).

          “Foreign Subsidiaries” means any Subsidiary of Borrower organized under the laws of
any jurisdiction outside the United States of America.

          “Franchise Program” means a program under which Borrower or its Subsidiaries grant
franchises to third parties which require franchisees, among other things, to pay fees to Borrower
and/or its Subsidiaries, make use of certain collection and administrative services of Borrower and
its Subsidiaries and contribute to a national advertising program and which entitle the
franchisees, among other things, to receive training from 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 Borrower and its Subsidiaries, and to sell
memberships to use facilities of the franchisee and Borrower and its Subsidiaries. A Franchise
Program may include the conversion of certain facilities owned by 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.

          “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 domestic Subsidiaries that are signatories to the
Guarantee and Collateral Agreement 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

10

 

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 assigned 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 (“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.

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

11

 

          “Interest Expense Hedging Agreement Counterparties” means (i) each counterparty to an
Interest Expense Hedging Agreement, if at the date of entering into such Interest Expense Hedging
Agreement such person was the Arranger (or Affiliate of the Arranger) or a Lender (or an Affiliate
of a Lender), (ii) JPMorgan Chase Bank, N.A. (as successor in interest to Bank One, NA) in
connection with the Interest Expense Hedging Agreement dated October 9, 2003 and (iii) Deutsche
Bank AG in connection with the Interest Expense Hedging Agreement dated September 15, 2003 (as
amended on September 23, 2003).

          “Interest Payment Date” means (a) as to any Reference Rate Loan, the last Banking Day
of each March, June, September and December, (b) as to any Eurodollar Rate Loan having an Interest
Period of three months or less, the last day of such Interest Period, (c) as to any Eurodollar Rate
Loan 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 Loan, the Revolving Credit Termination Date, (e) as to any
Term Loan, the Termination Date and (f) as to any Loan, 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 Loan that is a Reference Rate Loan) made in
respect thereof.

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

               (a) initially, the period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Rate Loan and ending one, two, three or six months or two weeks
thereafter, or if available from each of the affected Lenders, nine months or twelve months, as
selected by 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 Loan and ending one, two, three or six months or two weeks
thereafter, or if available from each of the affected Lenders, nine months or twelve months, as
selected by Borrower by irrevocable notice to the applicable Loan 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 Loan 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 Loan that would otherwise extend beyond the
Revolving Credit Termination Date shall end on the Revolving Credit Termination Date;

12

 

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

     (4) any Interest Period pertaining to a Eurodollar Rate Loan 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) Borrower shall select Interest Periods in such a way so that no Eurodollar Rate
Loans 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 Wells Fargo Foothill, LLC, in its capacity as the issuer of
Letters of Credit hereunder, and other Lenders having Revolving Credit Commitments acceptable to
the Revolving Credit Agent and Borrower.

          “Lenders” shall have the meaning set forth in the preamble hereto.

          “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 the applicable Loan Agent and Borrower.

          “Letter of Credit” means any letter of credit issued by an Issuing Lender pursuant to
Section 2.19 and all letters of credit issued under the Prepetition Facility that are outstanding
on the date hereof and are identified on Schedule 1.01(d) hereto.

          “L/C Commitments” means the commitments of Revolving Credit Lenders to issue or
participate in Letters of Credit and to make L/C Loans 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 lesser of (i)
$40,000,000 and (ii) 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)).

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          “Liquidity” means, as of any date of determination, an amount equal to the sum of (a)
cash and Cash Equivalents held by Borrower and its Subsidiaries in any account subject to a
perfected, first priority Lien in favor of the Collateral Agent or held with a Lender (in an
aggregate amount at any time not to exceed $2,000,000 for all such accounts held with Lenders),
plus, (b) the unutilized amount of Revolving Credit Commitments available to be drawn on
such date by Borrower (with satisfaction of the applicable conditions precedent to such extension
of credit to be tested as of such date); provided that (x) amounts held in payroll, tax, trust and
similar accounts or (y) amounts pledged to Persons on a first priority basis (other than (i) the
Secured Parties or (ii) Persons as permitted by clauses (iii), (ix) (xiv) and (xvii) of the
definition of “Permitted Lien”) shall be excluded in calculating Liquidity.

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

          “Loan Agent” means the Revolving Credit Agent and/or the Administrative Agent, as the
context requires.

          “Majority Lenders” means at any time Lenders holding more than 50% of the sum of (i)
the aggregate unpaid principal amount of Term Loans then outstanding, and (ii) the Revolving Credit
Commitments then in effect or, if the Revolving Credit Commitments have been terminated, the
Revolving Loans and participating interests in Letters of Credit and unreimbursed drawings in
respect of Letters of Credit then outstanding.

          “Majority Revolving Lenders” means at any time Lenders holding more than 50% of the
Revolving Credit Commitments then in effect or, if the Revolving Credit Commitments have been
terminated, the Revolving Loans and participating interests in Letters of Credit and unreimbursed
drawings in respect of Letters of Credit then outstanding.

          “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 Change” means any event, development or circumstance that has had or
would reasonably be expected to have a Material Adverse Effect.

          “Material Adverse Effect” means a material adverse effect on (a) the business,
operations, property, or financial condition of 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 Agents or the Lenders hereunder or thereunder or
(c) the ability of Borrower and its Subsidiaries taken as a whole to perform when due their
respective obligations under the Credit Documents.

          “Maturity Date” means the earlier of (a) March 31, 2008 and (b) the Consummation Date.

          “Membership Receivables” means all right, title and interest of Borrower and its
Domestic Subsidiaries in payment obligations (however characterized), including accounts and
receivables, owed to or owned by 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 Borrower and its Subsidiaries,

14

 

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
Borrower or any Domestic Subsidiary of 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, Borrower and its Domestic Subsidiaries or one or more health clubs owned or operated by
Borrower or any Domestic Subsidiary of 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.

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

          “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 (x)
professionals’ fees and expenses, investment banking fees and expenses, underwriting discounts and
fees, arrangement fees, commitment fees and any other customary fees, costs and expenses actually
incurred in connection therewith and (y) amounts applied to the repayment of other Debt in the
event Prepayment Debt was intended to refinance such Debt and such Prepayment Debt is permitted to
refinance such other Debt in accordance with the terms hereof and (b) in connection with the sale,
lease or other disposition (but excluding any such disposition permitted by Sections 7.08(a), (d)
(with respect to clause (d), so long as the proceeds of all such dispositions are less than $1
million in the aggregate during the relevant calendar year), (g) and (i)) of any asset or the
occurrence of any Casualty Event, cash proceeds (including cash received by any of deferred
payments or purchase price adjustments but only as and when so received) received by Borrower or
any of its Subsidiaries from the sale, lease or other disposition of any asset of such Person or
any insurance proceeds or condemnation awards net of (x) customary costs, fees and expenses
incurred in connection with such transaction or in connection with the collection of insurance
proceeds or condemnation awards, (y) taxes paid or payable as a result of such transaction and (z)
amounts applied to the repayment of other Debt secured by a Permitted Lien on the asset disposed of
or subject to such Casualty Event; provided that so long as the proceeds from (a) or (b) hereof are
reinvested (or are contractually committed to be reinvested) for capital, refurbishment or
improvement expenditures for existing fitness facilities, investment in IT systems, or capital
expenditures for new fitness facilities or other assets used or useful in the business (excluding
current assets but including Capital Stock)) of Borrower or its Subsidiaries within 360 days from
receipt of such proceeds (or within 180 days from the date a contractual commitment to so
reinvest), such proceeds shall not constitute Net Cash Proceeds.

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

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

          “Obligations” means all loans, advances, Loans, debts, liabilities and monetary
obligations owing to Agents, any Lender, any Issuing Lender, any of the Interest Expense

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Hedging
Agreement Counterparties 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 of the Interest
Expense Hedging Agreement Counterparties, 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 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 from time to time, 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 $10,000,000 minus
the amount by which obligations secured by Liens pursuant to clause (ix) of the definition of
“Permitted Liens” exceeds $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 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 (i) the Lenders (and their Affiliates or financing
institutions that were Lenders) listed on Annex 1 to the Operating Bank Guaranty (as updated from
time to time), (ii) 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, (iii) JPMorgan Chase Bank, N.A. and (iv) J.P. Morgan Securities, Inc.

          “Patriot Act” means the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Title III of Pub.
L. 107-56, signed into law October 26, 2001.

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

          (i) Liens for prepetition taxes, assessments, governmental charges or levies (provided
the enforcement and collection of the same are subject to the automatic stay in the Cases)
and Liens for postpetition taxes, assessments, governmental charges or levies either not yet
delinquent (or, if delinquent, in an aggregate amount not in excess of

16

 

$2,000,000) 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 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 and deposits made
with claims processors for Borrower’s self-insurance program representing pre-funding of
benefit payments due employees thereunder;

          (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 in respect of
prepetition obligations (provided the enforcement and collection of the same are subject to
the automatic stay in the Cases) or in respect of postpetition 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) 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 and proceeds thereof;

          (v) Other Liens, so long as the aggregate amount of all such other Liens does not
exceed at any time an aggregate amount of $5,000,000;

          (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;

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          (ix) Liens related to (A) credit card processing agreements, (B) agreements with any
Lender or Affiliate of a Lender or JPMorgan Chase Bank, N.A. relating to the issuance of
corporate credit cards to employees of Borrower and its Subsidiaries or (C) cash management
obligations, so long as the aggregate amount secured by the Liens described in clauses (A),
(B) and (C) above does not exceed at any time an aggregate amount of $14,000,000;

          (x) Other existing Liens listed on Schedule 1.01(a) and Liens securing refinancings,
refundings, renewals or extensions of the obligations secured by 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 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 Borrower or such Subsidiary in connection with the
acquisition of property (real or personal) by 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
Debt, (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 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 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 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
Debt permitted under Section 7.02;

18

 

          (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 Borrower’s or any of its Subsidiaries’ obligations with respect to letters of credit
issued for the credit of Borrower of one of its Subsidiaries, so long as the obligations so
secured are permitted hereunder.

          “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 Borrower or any of its Subsidiaries) on terms reasonably satisfactory
to the Administrative Agent; provided, that such assets are sold at no less than Fair
Market Value and for at least 90% cash consideration.

          “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.

          “Plan of Reorganization” means the Amended Plan of Reorganization of the Borrower and
its Subsidiaries pursuant to Chapter 11 of the United States
Bankruptcy Code, dated August 17,
2007, together with all schedules and exhibits thereto, as confirmed by the Confirmation Order,
together with any amendments, supplements or modifications thereto that have been approved or
authorized by the Bankruptcy Court prior to the Closing Date, which amendments, supplements and/or
modifications shall be reasonably satisfactory to the Administrative Agent.

          “Prepetition Facility” means that certain Amended and Restated Credit Agreement, dated
as of October 16, 2006 among Borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as
agent, and Morgan Stanley Senior Funding, Inc., as syndication agent, and all documents,
instruments and agreements (including, without limitation, all collateral and

19

 

security documents)
executed or delivered in connection therewith (as the credit agreement and each other document,
instrument and agreement has been amended, modified, supplemented or restated prior to the Filing
Date).

          “Prepetition Payments” means any payment (by way of adequate protection or otherwise)
of principal or interest or otherwise on account of any prepetition Debt or other obligations or
claims (including trade payables and payments in respect of reclamation claims) of Borrower or any
Guarantor.

          “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
Majority Lenders.

          “Primed Liens” has the meaning assigned in the recitals hereto.

          “Pro Forma EBITDA Threshold” means, for any period of determination, the amount of
Consolidated Adjusted EBITDA set forth for such period on Schedule 1.01(c) attached hereto.

          “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.

          “Real Estate Financing Subsidiary” means Bally Real Estate I, LLC.

          “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” means the rate of interest per
annum published by the Wall Street Journal from time to time as the prime lending rate.

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

          “Register” has the meaning assigned in Section 9.04(e).

          “Replaced Lender” has the meaning assigned in Section 9.20 hereof.

          “Replacement Lender” has the meaning assigned in Section 9.20 hereof.

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

          “Responsible Officer” means the chief executive officer, president, chief financial
officer, treasurer, vice president, controller or chief accounting officer of Borrower or the
Guarantor, if applicable, but in any event, with respect to financial matters, the chief financial
officer, treasurer, controller or chief accounting officer of Borrower or a Guarantor, if
applicable.

20

 

          “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.

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

          “Revolving Credit Agent” has the meaning assigned in the preamble.

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

          “Revolving Credit Commitment Amount” means $50,000,000, 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 “Revolving Credit 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 Loans, 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
Loans, 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 Facility” has the meaning assigned in the recitals hereto.

          “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 Loan or a
participation in a Letter of Credit.

          “Revolving Credit Register” has the meaning assigned in Section 9.04(e).

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

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     (a) the date the Revolving Credit Commitment Amount is terminated by 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, and

     (b) the Termination Date.

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

          “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.

          “Revolving Syndication Agent” has the meaning assigned in the preamble.

          “Sale/Leaseback” means any transaction or series of related transactions pursuant to
which 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 Exchange Act, as amended from time to time, or any successor thereto.

          “Secured Creditors” means, collectively, the Agents, the Lenders, the Issuing Lenders
and the Operating Banks in their separate financial arrangements with Borrower, the Agents, the
Lenders or the Issuing Lenders, and the Interest Expense Hedging Agreement Counterparties, each in
connection with the Secured Obligations.

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

          “Senior Secured Leverage Ratio” means, as of the last day of any fiscal quarter, the
ratio of (a) the sum of (i) the aggregate principal amount of Loans outstanding under this
Agreement, plus (ii) the aggregate face amount of all undrawn Letters of Credit issued under this
Agreement, plus (iii) all other Consolidated Debt of the Borrower and its Subsidiaries that is
secured by a first priority lien on any assets of the Borrower or any of its Subsidiaries
(including Debt in respect of Capitalized Leases) to (b) Consolidated Adjusted EBITDA for the four
fiscal quarter period ending on such date.

          “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, the definition of “Subsidiary” shall not include any Unrestricted Subsidiary.
Unless the reference is specifically otherwise, “Subsidiary” shall refer to a Subsidiary of
Borrower.

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          “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 2.5% 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 2.5% of the aggregate gross revenues
of Borrower and its Subsidiaries taken as a whole, for such period. The aggregate amount of all
non-Substantial Subsidiaries shall not exceed 5% of the aggregate book value of the assets of
Borrower and its Subsidiaries taken as a whole or 5% of the aggregate gross revenues of Borrower
and its Subsidiaries taken as a whole, for any period.

          “Superpriority Claim” means a claim against Borrower or any Guarantor in any of the
Cases which is an administrative expense claim having priority over any or all administrative
expenses of the kind specified in Sections 503(b) or 507(b) of the Bankruptcy Code.

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

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

          “Term Loan Commitment” has the meaning assigned in Section 2.03(a) hereof.

          “Term Loan Commitment Amount” means $242,000,000.

          “Term Loan Commitment Percentage” means, as to each Lender, the percentage set forth
opposite such Lender’s name under the column entitled “Term Loan Commitment Percentage” on Exhibit
C hereto or, if such Lender shall have acquired or disposed of any amount of Term Loans 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 Term Loans and the denominator of
which is the amount of the aggregate Term Loans then outstanding.

          “Term Loan Facility” has the meaning assigned in the recitals hereto.

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

          “Termination Date” means the earliest to occur of (i) the Maturity Date, (ii) the
Consummation Date, (iii) the termination or expiration of Borrower’s exclusive right to propose and
solicit acceptances to a chapter 11 plan pursuant to Section 1121 of the Bankruptcy Code and (iv)
the acceleration of the Term Loans, the Revolving Loans and the termination of the Revolving Credit
Commitment in accordance with the terms of this Agreement.

          “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

23

 

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 Interest Expense Hedging
Agreement, after taking into account the effect of any legally enforceable netting agreement
relating to such Interest Expense Hedging Agreement, (a) if such Interest Expense Hedging Agreement
has been terminated as of such date, an amount equal to the termination value determined in
accordance with such Interest Expense Hedging Agreement and (b) if such Interest Expense Hedging
Agreement has not been terminated as of such date, an amount equal to the mark-to-market value for
such Interest Expense Hedging Agreement, 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 Interest Expense
Hedging Agreement.

          “Transactions” means shall mean the execution, delivery and performance by Borrower
and Guarantors of this Agreement and the other Credit Documents to which they may be a party, the
creation of the Liens in the Collateral in favor of the Collateral Agent, the borrowing of Loans,
the use of the proceeds thereof, the repayment of the Prepetition Facility, and the request for and
issuance of Letters of Credit hereunder.

          “Transferee” has the meaning assigned in Section 9.04(c).

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

          “Unrestricted Subsidiary” means any Subsidiary of Borrower that exists on the Closing
Date and is so designated as an Unrestricted Subsidiary on Schedule 1.01(b).

          “Unrestricted Subsidiary Indebtedness” of any Unrestricted Subsidiary means Debt of
such Unrestricted Subsidiary (a) as to which neither Borrower nor any Subsidiary is directly or
indirectly liable (by virtue of 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 Borrower
or any Subsidiary to declare, a default on such Debt of Borrower or any Subsidiary or cause the
payment thereof to be accelerated or payable prior to its stated maturity.

          “Voting Stock” means any class or classes of Capital Stock of Borrower pursuant to
which the holders thereof have the general voting power under ordinary circumstances to elect at
least a majority of the Board of Directors of Borrower.

          Section 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

24

 

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 Borrower and (b) any mark-to-market adjustments to any derivatives (including
embedded derivatives contained in other debt or equity instruments under FAS 133).

          Section 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. The terms “knowledge”, “aware” or words of similar
import shall mean, when used in reference to Borrower or the Guarantors, the actual knowledge of
any Responsible Officer.

ARTICLE II

THE CREDIT

          Section 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”), provided, that no Lender shall make any Loan if,
after giving effect to such Revolving Loan, the aggregate outstanding principal amount of all
Revolving Loans plus 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
Revolving Credit Commitment Amount.

               (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) (without penalty or premium), subject to the reductions required by Section
2.13 hereof and the reductions permitted by Section 2.11 hereof.

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               (c) The Revolving Credit may from time to time consist of (i) Eurodollar Rate Loans, (ii)
Reference Rate Loans or (iii) a combination thereof, as determined by Borrower and notified to the
Revolving Credit Agent in accordance with Section 2.02.

          Section 2.02 Requests for Revolving Loans.
(a) Each Revolving Loan shall be made upon the request of Borrower received by Revolving Credit
Agent by 1:00 p.m., New York time, on the Borrowing Date therefor in the case of Reference Rate
Loans and three (3) Banking Days prior to the Borrowing Date therefor in the case of Eurodollar
Rate Loans, specifying: (i) the Borrowing Date for such Revolving Loan, which shall be a Banking
Day; (ii) the amount of such Revolving Loan; (iii) whether the Revolving Loan is to be of Reference
Rate Loans, Eurodollar Rate Loans or a combination thereof; (iv) if the Revolving Loan is to
consist entirely or partly of Eurodollar Rate Loans, the amount of such Eurodollar Rate Loans and
the length of the initial Interest Period therefor; and (v) the account of Borrower with the
Revolving Credit Agent for the deposit of the proceeds of such Revolving Loan. Notwithstanding the
foregoing, all Revolving Loans to be made on the Closing Date shall be Reference Rate Loans.

               (b) Each request for a Revolving Loan may be made in writing or by telephone or electronic
transmission (subject to Section 9.01), provided, however, that any such telephonic
request shall be confirmed immediately by telecopier and also in writing delivered to the Revolving
Credit 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 Revolving Credit Agent shall promptly notify
Lenders thereof.

               (d) Each Reference Rate Loan hereunder shall be in the minimum aggregate amount of $1,000,000
or in integral multiples of $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 Loans then
outstanding is less than $1,000,000, such lesser amount). Each Eurodollar Rate Loan shall be in
the minimum aggregate amount of $5,000,000 or in integral multiples of $1,000,000 in excess
thereof.

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

          Section 2.03 Term Loan Facility.
(a) Subject to the terms and conditions of this Agreement, each Lender severally agrees to make
a term loan (a “Term Loan”) to Borrower on the Closing Date in an amount equal to such
Lender’s Term Loan Commitment Percentage of the Term Loan Commitment Amount (as to
each Lender, its “Term Loan Commitment”). Amounts of Term Loans repaid or prepaid may not
be reborrowed.

               (b) The Term Loans may from time to time consist of (i) Eurodollar Rate Loans, (ii) Reference
Rate Loans or (iii) a combination thereof, as determined by Borrower and notified to the
Administrative Agent in accordance with Section 2.07.

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          Section 2.04 [Reserved].

          Section 2.05 Repayment of Term Loans. Borrower shall repay to the Term Lenders the aggregate principal amount of all Term Loans
outstanding on the Termination Date.

          Section 2.06 Lending Branch and Evidence of Credit. (a) Borrower hereby unconditionally promises to pay to the applicable Loan Agent for the
account of each Lender (i) the then unpaid principal amount of each Revolving Loan made by such
Lender on the Revolving Credit Termination Date (or such earlier date on which the Loans become due
and payable pursuant to Article VIII) and (ii) the then unpaid principal amount of each Term Loan
made by such Lender in accordance with Section 2.05. Borrower hereby further agrees to pay
interest on the unpaid principal amount of the Loans 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 Borrower to such Lender resulting from each Loan 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 Administrative 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 Term Loan 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 Borrower to each Term
Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent
hereunder from Borrower and each Term Lender’s share thereof.

               (d) The Revolving Credit Agent shall maintain the Revolving Credit 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 Loan 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 Borrower to each Revolving Credit Lender hereunder and (iii) both the amount of any sum
received by the Revolving Credit Agent hereunder from Borrower and each Revolving Credit Lender’s
share thereof.

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

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               (f) Borrower agrees that, upon the request of either Loan Agent at the request of any Lender,
Borrower will promptly 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.

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

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

               (b) Any Eurodollar Rate Loans may be continued as such upon the expiration of the then current
Interest Period with respect thereto by Borrower’s giving notice to the applicable Loan 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 Loan, provided that no
Eurodollar Rate Loan may be continued as such when any Event of Default has occurred and is
continuing and the Majority Lenders have provided notice to Borrower that such a continuation of a
Eurodollar Rate Loan is not appropriate, and provided, further, that if 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 Loans shall be automatically converted to
Reference Rate Loans on the last day of such then expiring Interest Period.

          Section 2.08 Computation of and Payment of Interest. (a) From and including the relevant Borrowing Date to the payment in full of all Obligations
(other than contingent indemnification obligations for which no claim has been made), the
outstanding principal balance of each Loan 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 Loans, at the Reference Rate for each day
plus the Applicable Margin; and

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

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

               (c) Interest on Reference Rate Loans 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, upon written demand from either the
Administrative Agent or the Majority Lenders 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 Loan, the sum of the rate of interest otherwise applicable to such unpaid amount plus 2% or (B)
in the case of any other overdue interest or fees due hereunder, 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, the entire principal amount of the
Loans 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 applicable Loan Agent pursuant to any
provision of this Agreement shall be conclusive and binding on Borrower and the Lenders in the
absence of manifest error. The applicable Loan Agent shall, at the request of Borrower, deliver to
Borrower a statement showing the quotations used by the applicable Loan Agent in determining any
interest rate pursuant to Section 2.08(a).

               (f) If, after the Closing Date, but prior to the first day of any Interest Period:

                         (i) Administrative Agent shall have reasonably determined (which determination
shall be conclusive and binding upon 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) Administrative 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

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(as conclusively
certified by such Lenders) of making or maintaining their affected Loans during such
Interest Period,

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

          Section 2.09 Payment of Loans. Borrower shall repay the outstanding amount of (a) all Revolving Loans on the Revolving Credit
Termination Date and (b) all Term Loans on the Termination Date.

          Section 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 the
applicable Loan Agent’s address for payments indicated on the signature page of this Agreement.

               (b) Each Lender agrees that upon receipt of notice from either Loan Agent, it will make the
funds which it is to Loan hereunder available to such Loan Agent at such Loan 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 such Agent will thereupon Loan to Borrower the amount so received
from Lenders.

               (c) Payment of all sums under this Agreement shall be made by Borrower to the applicable Loan
Agent for the account of Lenders, and the applicable Loan 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 3:00 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 the applicable Loan 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 the
applicable Loan Agent the amount which would constitute its applicable Commitment Percentage of the
Loans to be made on such date, the applicable Loan Agent may assume that such Lender has made such
amount available to the applicable Loan 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 Loan available to the applicable Loan Agent after a
borrowing date, such Lender shall pay to the

30

 

applicable Loan 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 Loan was made available to the
applicable Loan Agent (the “Out of Funds Period”) multiplied by (ii) an amount equal to its
applicable Commitment Percentage of such Loan 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 the
applicable Loan 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 Loan is not in fact made available to the applicable Loan Agent by such
Lender within one (1) Banking Day after a Borrowing Date, the applicable Loan Agent shall be
entitled to recover such amount, with interest thereon at the rate per annum then applicable to the
Loans hereunder, on demand from Borrower, without prejudice to the applicable Loan Agent’s and
Borrower’s rights against such Defaulting Lender.

               (e) Unless the applicable Loan 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, the applicable Loan Agent may assume that Borrower will
make such payment to the applicable Loan 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 the applicable Loan Agent by Borrower within one (1) Banking Day
after such payment is due, the applicable Loan Agent shall be entitled to recover from each Lender
the amount paid to it by the applicable Loan 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 the applicable Loan 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 the applicable Loan Agent submitted to any
Lender with respect to any amounts owing under this paragraph (e) shall be conclusive in the
absence of manifest error.

          Section 2.11 Optional Termination or Reduction of Commitment Amounts. Borrower shall have the right, upon not less than three (3) Banking Days’ notice to the
Revolving Credit 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 $1,000,000 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(b)) below the sum of (i)
the principal amount of the outstanding Revolving Loans, (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.

          Section 2.12 Optional Prepayments. Upon written notice (or telephone or electric
transmission notice confirmed promptly in writing)
received by the applicable Loan Agent not later than 1:00 p.m., New York City time, on the date
thereof, Borrower may at any time prepay any Reference Rate Loan in full or in part, without
premium or penalty, in the

31

 

amount of $1,000,000 or an integral multiple of $500,000 in excess
thereof (or, if the outstanding principal amount of all Reference Rate Loans is less than
$1,000,000, such lesser amount). Upon written notice (or telephone or electric transmission notice
confirmed promptly in writing) received by the applicable Loan Agent not later than 1:00 p.m., New
York time, received at least one (1) Banking Day prior to the date of prepayment, which notice
shall specify the date and amount of prepayment and the amount of Eurodollar Rate Loans being
prepaid, Borrower may on the last day of any Interest Period with respect thereto prepay any
Eurodollar Rate Loan 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 $5,000,000 or an integral multiple of
$1,000,000 in excess thereof. Each such prepayment of Revolving Loans made pursuant to this
Section 2.12 may be reborrowed subject to the terms and conditions of this Agreement. Prepayments
of Term Loans may not be reborrowed. Any prepayments of Revolving Loans or Term Loans, as the case
may be, made pursuant to this Section 2.12 shall be applied first to Reference Rate Loans then
outstanding and then to Eurodollar Rate Loans then outstanding, subject to Section 2.17(d). Any
prepayments of Term Loans made pursuant to this Section 2.12 shall be applied to Term Loans ratably
and to the remaining installments of each thereof in direct order of maturity.

          Section 2.13 Mandatory Prepayments. (a) 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, subject
to Section 2.20 and other than costs required to be paid pursuant to Section 2.17(d),
first, to make a mandatory prepayment of the Term Loans, and second, to make a
mandatory prepayment of the outstanding Revolving Loans or, to the extent that at such time no
Revolving Loans are outstanding, to cash collateralize any outstanding Letters of Credit, in an
amount equal to 100% of such Net Cash Proceeds.

               (b) If at any time (A) the sum of the aggregate principal amount of the outstanding Revolving
Loans 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 Loans 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 Loan or cash collateralization or
replacement of any Letter of Credit hereunder (except for any prepayment pursuant to Section 2.12
of any Loan that is a Reference
Rate Loan) shall be accompanied by the payment of accrued interest on the amount prepaid to
the date of payment.

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

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

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               (a) in respect of each Letter of Credit, (i) 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) minus one-fourth percent (1/4%), 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 March,
June, September and December 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-fourth 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 elapsed) on the last Banking Day of each March, June,
September and December 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;

                         (iii) all customary and reasonable costs and out-of-pocket 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 Loans, 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 March, June, September and December and on the Revolving Credit Termination Date; and

               (c) all other fees not set forth in this Section 2.14, but set forth in the DIP and Exit
Credit Facility Fee Letter in the amounts, and at the times, provided therein.

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

          Section 2.16 Taxes.

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               (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 each Agent, taxes imposed on its net income,
and franchise taxes imposed on it, by the jurisdiction under the laws of which such
Lender or such 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 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 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 any Loan Agent shall be required
by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or any
Loan Agent,

                         (i) the sum payable by Borrower shall be increased as may be necessary so that
after Borrower or the applicable Loan Agent has made all required deductions
(including deductions applicable to additional sums payable under this Section 2.16)
such Lender or such Loan 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 the applicable Loan Agent shall make such deductions and

                         (iii) Borrower or the applicable Loan 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 any Loan Agent hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement (hereinafter referred to as “Other Taxes”).

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               (c) Borrower will indemnify each Lender and each Loan 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 such Loan 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 such Loan 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 Borrower and each Loan 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 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 Borrower at any time it determines that it is
no longer in a position to provide any previously delivered certificate to Borrower (or any other
form of certification adopted by the 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 materially disadvantageous to such Lender.

               (f) If Borrower determines in good faith that a reasonable basis exists for contesting any
Indemnified Taxes of Other Taxes for which additional amounts have been
paid under this Section 2.16, the relevant Lender, Loan Agent or Issuing Lender shall
cooperate with Borrower in challenging such Indemnified Taxes or Other Taxes, at Borrower’s sole
expense, if so requested by Borrower in writing.

               (g) If a Loan Agent or a Lender determines, in its reasonable discretion, that it has received
a refund of any Taxes or Other Taxes as to which it has been indemnified by Borrower or with
respect to which Borrower has paid additional amounts pursuant to this Section 2.16, it shall pay
over such refund to Borrower (but only to the extent of indemnity payments made, or additional
amounts paid, by Borrower under this Section 2.16 with respect to the Taxes or Other Taxes giving
rise to such refund), net of all out-of-pocket expenses of the applicable Loan Agent or such Lender
and without interest (other than any interest paid by the relevant Governmental Authority with
respect to such refund); provided, that Borrower, upon the request of the applicable Loan Agent or
such Lender, agrees to repay the amount paid over to Borrower

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(plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the Paying Agent or such Lender in
the event the Paying Agent or such Lender is required to repay such refund to such Governmental
Authority. This Section shall not be construed to require the Agent or any Lender to make available
its tax returns (or any other information relating to its taxes which it deems confidential) to
Borrower or any other Person.

               (h) Without prejudice to the survival of any other agreement of Borrower hereunder, the
agreements and obligations of 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.

          Section 2.17 Increased Costs; Illegality; Indemnity. (a)Borrower shall reimburse or compensate each Lender, within 30 days of written demand
(including documentation reasonably supporting such request) by such Lender, for all costs
incurred, actual losses suffered (other than 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
reasonable 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 Loan 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) after the closing date;

                         (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 after the Closing
Date; or

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

               (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, 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).

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               (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 after the Closing Date shall
make it unlawful for any Lender to make or maintain Eurodollar Rate Loans as contemplated by this
Agreement, (A) the commitment of such Lender hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such and convert Reference Rate Loans to Eurodollar Rate Loans shall
forthwith be cancelled and (B) such Lender’s Loans then outstanding as Eurodollar Rate Loans, if
any, shall if required by law, be converted automatically to Reference Rate Loans on the respective
last days of the then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Rate Loan occurs on a day which
is not the last day of the then current Interest Period with respect thereto, Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to paragraph (d) below.

               (d) Borrower agrees to indemnify each Lender and to hold each Lender harmless from any actual
loss (other than lost profits) or out-of-pocket expense which such Lender may sustain or incur as a
consequence of (A) default by Borrower in payment when due of the principal amount of or interest
on any Eurodollar Rate Loan, (B) default by Borrower in making a borrowing of, conversion into or
continuation of Eurodollar Rate Loans after Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement, (C) default by Borrower in making any prepayment
after Borrower has given a notice thereof in accordance with the provisions of this Agreement or
(D) the making of a prepayment of Eurodollar Rate Loans 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 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.

               (e) Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant
to this Section 2.17 shall not constitute a waiver of such Lender’s or Issuing Bank’s right to
demand such compensation; provided that no Borrower shall not be required to compensate a Lender or
an Issuing Bank pursuant to this Section 2.17 for any increased costs or reductions incurred more
than 180 days prior to the date that such Lender or Issuing Bank, as applicable, notifies such
Borrower of the change in law giving rise to such increased costs or reductions and of such
Lender’s or Issuing Bank’s intention to claim
compensation therefor; provided, further that, if the change in law giving rise to such
increased costs or reductions is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.

          Section 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

37

 

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, within 30 days of written demand including documentation reasonably supporting such request
by such Lender, Borrower shall immediately pay to such Lender, from time to time as specified by
such Lender, additional amounts sufficient to compensate such Lender for such increase.

          Section 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 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 Loans plus the aggregate amount of unreimbursed drawings under Letters of
Credit would exceed the Revolving Credit Commitment Amount.

                         (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 the Revolving
Credit Agent, or from the Revolving Credit 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

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                              (C) such requested Letter of Credit has an expiration date
which is after March 31, 2008, unless arrangements reasonably
satisfactory to the Issuing Lender have been made for cash
collateralization, return or backstop letter of credit for such
Letter of Credit on or prior to the Revolving Credit Termination
Date.

          (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 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 Revolving Credit Agent and the Issuing Lender shall have
received the request from 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 (or waived) 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 the Revolving Credit Agent and the Issuing Lender at least
seven (7) days (or such shorter time as the Revolving Credit Agent may agree in a
particular instance) prior to the proposed date of issuance.

                         (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 March 31,
2008, unless arrangements reasonably satisfactory to the Issuing Lender have been
made on or prior to the Revolving Credit Termination

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Date for cash
collateralization, return or backstop letter of credit for such Letter of Credit.

                         (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 Revolving Credit 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 (or waived), then subject to the terms and
conditions of this 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 Revolving Credit 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 the Revolving Credit Agent a copy of such Letter of Credit.
The Revolving 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) Banking 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
THAT OCCUR AFTER THE REVOLVING CREDIT TERMINATION DATE. EACH SUCH LENDER
ACKNOWLEDGES AND IRREVOCABLY AGREES THAT ITS PARTICIPATING INTEREST APPLIES TO SUCH
LETTERS OF CREDIT BOTH BEFORE AND AFTER THE REVOLVING CREDIT TERMINATION DATE
INCLUDING, WITHOUT LIMITATION, DURING THE PERIOD FOLLOWING THE REVOLVING CREDIT
TERMINATION DATE.

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                         (ii) Borrower shall reimburse the Revolving Credit 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. 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 the
Revolving Credit 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 the Revolving Credit
Agent and the Revolving Credit 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 Loan be made by the Lenders with a Revolving
Credit 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 the Revolving
Credit 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 Loans shall be paid to the Revolving Credit Agent
which will, in turn, disburse such proceeds to the Issuing Lender as reimbursement
for such drawings.

                         (iii) Any unreimbursed Letter of Credit drawing which shall not be converted
into a Revolving Loan 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 (without waiver) 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. The
Revolving Credit 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
the Revolving Credit 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 such unreimbursed drawing. If any Lender so notified shall fail to
make available to the Revolving Credit 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

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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
Loans. The Revolving Credit 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 the Revolving Credit 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 the Revolving Credit Agent with
such Lender’s Revolving Credit Commitment Percentage of the amount of any payment or
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 the Revolving Credit 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 the
Revolving Credit 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;

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

                         (ii) If the Revolving Credit 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 the Revolving
Credit 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 the Revolving Credit Agent, forthwith return to the
Revolving Credit Agent or the Issuing Lender its Revolving Credit Commitment
Percentage of any amounts so returned by the Revolving Credit 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 the Revolving Credit Agent or
the Issuing Lender, at a rate per annum equal to the Federal Funds Rate.

               (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:

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                         (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;

                         (E) 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;

                         (F) 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;

                         (G) 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 (i) any
action constituting the Issuing Lender’s gross negligence or willful
misconduct or (ii) payment or performance; or

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

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               (g) Requests Regarding Renewals and Extensions of Renewable Letters of Credit.
Borrower shall deliver to the Revolving Credit 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 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 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
Borrower which would cause the expiry date of such Renewable Letter of Credit to extend beyond
March 31, 2008. For purposes of this Section 2.19(g), valid delivery by Borrower of the required
request shall be deemed to have occurred only upon actual receipt of such notice by the Revolving
Credit Agent and the Issuing Lender. If 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 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 Borrower, 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 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 the Revolving Credit Termination Date, Borrower shall either (A) deposit in an account with
the Revolving Credit Agent, in the name of the Revolving Credit Agent and for the benefit of the
Lenders, an amount in cash equal to 103% of the aggregate undrawn amount under all such Letters of
Credit as of such date or (B) provide one or more letters of credit from an issuer reasonably
satisfactory to Issuing Lender naming the Revolving Credit Agent as beneficiary in a face amount
equal to such Letter of Credit which remains

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outstanding on the Revolving Credit Termination Date.
The obligation to deposit such cash collateral or provide such back-to-back letter(s) of credit
shall become effective immediately, and such deposit, if applicable, shall become immediately due
and payable, without demand or other notice of any kind. Such deposit shall be held by the
Revolving Credit Agent as collateral for the payment and performance of the obligations of Borrower
hereunder. The Revolving Credit 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 reasonable discretion of the
Revolving Credit Agent and at 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 Revolving Credit 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
Borrower in respect of drawings under such Letters of Credit at such time.

          Section 2.20 Call Protection.

               (a) If for any reason the Term Loans are repaid other than by conversion into the loans under
the Exit Credit Agreement or the Alternative Exit Credit Agreement pursuant to Section 10.15(a) or
(b), Borrower shall pay to the Lenders concurrently with such repayment an exit fee equal to 1% of
the principal amount repaid; and

               (b) If (i) the Term Loans are repaid from any source other than by conversion into the loans
under the Alternative Exit Credit Agreement pursuant to Section 10.15(b) (other than by reason of
the failure of a condition precedent to such conversion to be satisfied or waived by Majority
Lenders (excluding conditions precedent the satisfaction of which are within the control of
Borrower)) and (ii) the Consummation of the Plan of Reorganization includes any transaction of any
kind with, or any funding or financing of any kind provided by, Harbinger Capital Partners Masters
Fund I Ltd. or Liberation Investment Group LLC, or any respective Affiliate thereof, then Borrower
shall pay (A) to the Lenders concurrently with such repayment an additional exit fee equal to the
sum of (x) 2.5% of the original aggregate principal amount of the Term Loan Facility and (y) 3.5%
of the aggregate principal amount of the Revolving Credit Commitments in effect as of the Closing
Date and (B) to the Arranger any unpaid balance of the Alternative Exit Facility Commitment Fee (as
defined in the Alternative Exit Credit Facility Fee Letter).

          Section 2.21 Priority and Liens. (a) Superpriority Claims and Liens. Borrower hereby covenants, represents and warrants
that, upon entry of the Final Order, the Obligations of Borrower and the Guarantors under the
Credit Documents: (i) pursuant to Section 364(c)(1) of the Bankruptcy Code, shall at all times
constitute joint and several allowed administrative expense claims in the Cases having priority
over all administrative expenses of the kind specified in Sections 503(b), 507(a) or 507(b) of the
Bankruptcy Code; (ii) pursuant to Section 364(c)(2) of the Bankruptcy Code, shall at all times be
secured by a perfected first priority Lien on all tangible and intangible property of Borrower and
the Guarantors that is not subject to Existing Liens or post-petition Liens permitted hereunder
that secure (A) post-petition Capitalized Leases or purchase money financings permitted to be
entered into hereunder or (B) obligations not to exceed $4 million, owing to JPMorgan Chase, N.A.,
in connection with procurement card

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obligations and the cash management system of the Borrower and
the Guarantor (collectively, “Cash Management Obligations”); (iii) pursuant to Section
364(c)(3) of the Bankruptcy Code, shall be secured by a perfected Lien upon all tangible and
intangible property of Borrower and the Guarantors that is subject to Existing Liens and to
post-petition Liens permitted hereunder that secure post-petition Capitalized Leases or purchase
money financings permitted to be entered into hereunder or Cash Management Obligations, junior to
such Existing Liens and the Liens granted in connection with such Cash Management Obligations,
Capitalized Leases and purchase money financings; and (iv) pursuant to Section 364(d)(1) of the
Bankruptcy Code, shall be secured by a perfected first priority, senior priming Lien on all of the
tangible and intangible property of Borrower and the Guarantors that is subject to existing Liens
that secure Borrower’s and the Guarantors’ Debt and other obligations under the Prepetition
Facility and any Liens that are junior thereto (but subject to any Existing Liens to which the
Liens being primed hereby are subject or become subject subsequent to the Filing Date as permitted
by Section 546(b) of the Bankruptcy Code), including any Liens granted on or after the Filing Date
to provide adequate protection in respect of the Prepetition Facility (provided, that
notwithstanding anything to the contrary in clauses (a)(ii) to (a)(iv) herein, in no event shall
the Obligations be secured by any pledge in excess of 65% of the capital stock of its direct
foreign subsidiaries or any of the capital stock or interests of indirect foreign subsidiaries (if
adverse tax consequences could result to the Borrower or the Guarantors) or joint ventures interest
(if otherwise prohibited or requiring the consent of any third party)); in the case of each of
clauses (i) through (iv) subject only to (x) on and after delivery of notice by the applicable
Agent to the Borrower that an Event of Default has occurred and the Lenders desire to trigger the
Carve-Out (a “Carve-Out Trigger Notice”), the payment of allowed and unpaid professional
fees and disbursements incurred by Borrower and the Guarantors, any statutory committees appointed
in the Cases, and the adhoc noteholders’ committee, on or after the date of delivery of the
Carve-Out Trigger Notice in an aggregate amount not in excess of $5,000,000 plus the amount of
unpaid professional fees and expenses incurred by Borrower and Guarantors prior to the date of
delivery of the Carve-Out Trigger Notice and (y) the payment of fees pursuant to 28 U.S.C. § 1930
((x) and (y), together, the “Carve-Out”), provided that, except as
otherwise provided in the Final Order, no portion of the Carve-Out shall be utilized for the
payment of professional fees and disbursements incurred in connection with any challenge to the
amount, extent, priority, validity, perfection or enforcement of the indebtedness of Borrower and
the Guarantors owing to the lenders, agents or indemnified parties under the Facility or to the
collateral securing the Facility. The Lenders agree that so long as no Event of Default shall have
occurred and be continuing, Borrower and the Guarantors shall be permitted to pay compensation and
reimbursement of expenses allowed and payable under 11 U.S.C. § 330 and 11 U.S.C. § 331, as the
same may be due and payable, and the same shall not reduce the Carve-Out. The foregoing shall not
be construed as a consent to the allowance of any fees and expenses referred to above and shall not
affect the right of the Agents and the Lenders to object to the allowance and payment of such
amounts.

               (b) Real Property. Subject in all respects to the terms of the Final Order, the
priorities set forth in Section 2.21(a) above and to the Carve-Out, Borrower grants, and shall
cause each Guarantor to grant, to the Collateral Agent on behalf of the Secured Creditors a
security interest in, and mortgage on, all of the right, title and interest of Borrower and the
Guarantors in all real property owned by Borrower or any of the Guarantors, together in each case
with all of the right, title and interest of Borrower and such Guarantor in and to all buildings,
improvements, and fixtures related thereto, all general intangibles relating thereto and

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all proceeds thereof. Borrower shall, and shall cause each Guarantor to, acknowledge that, pursuant to
the Final Order, the Liens in favor of the Collateral Agent on behalf of the Secured Creditors in
all of such real property shall be perfected without the recordation of any instruments of mortgage
or assignment. Borrower agrees, and shall cause each Guarantor to agree, that upon the reasonable
request of the Collateral Agent, Borrower and such Guarantor shall promptly enter into separate fee
mortgages in recordable form with respect to such properties on terms reasonably satisfactory to
the Collateral Agent.

               (c) Set Off. Subject to Article VIII hereof, upon the occurrence and during the
continuance of any Event of Default, each Agent and each Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law and without further order of or
application to the Bankruptcy Court, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) (other than payroll, trust and tax accounts) at any time held
and other indebtedness at any time owing by each such Agent and each such Lender to or for the
credit or the account of Borrower or any Guarantor against any and all of the obligations of
Borrower or such Guarantor under the Credit Documents, whether or not such obligations are then
due. The rights of each Lender and each Agent under this Section 2.21(c) are in addition to other
rights and remedies which such they may have upon the occurrence and during the continuance of any
Event of Default under the Credit Documents or the Final Order.

               (d) Discharge. Borrower agrees, and shall cause each Guarantor to agree, that (i) its
obligations hereunder shall not be discharged by the entry of an order confirming the Plan of
Reorganization (and Borrower and each Guarantor, pursuant to Section 1141(d)(4) of the Bankruptcy
Code, hereby waives any such discharge) and (ii) the Superpriority Claim granted to the Agents and
the Lenders pursuant to the Final Order and described in Section 2.21(a) and the Liens granted to
the Collateral Agent pursuant to the Final Order and the Collateral Documents shall not be affected
in any manner by the entry of an order confirming the Plan of Reorganization.

ARTICLE III

SECURITY

          Section 3.01 Security.

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

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delivered by them
hereunder and the Final Order. Upon the effective date of the sale of all of the stock owned by
Borrower or any Subsidiary of any Guarantor (other than any sale to another Credit Party), 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 (other than any sale to another
Credit Party), in each case to the extent permitted hereunder, the Collateral Agent shall promptly
release (i) such Guarantor from all obligations under the Guarantee and Collateral Agreement and
(ii) any security interests in the Capital Stock of such Guarantor.

               (b) If any assets are acquired by Borrower or any Guarantor after the Closing Date (other than
assets constituting Collateral under any Collateral Documents that become subject to the Lien of
such Collateral Document upon acquisition thereof without any action of any Lender), Borrower will
promptly notify the Collateral Agent and the Administrative Agent thereof in writing and at the
Collateral Agent’s request within thirty (30) days of such notice, will cause such assets to be
subjected to a Lien securing the Secured Obligations to the extent not excluded from the definition
of “Collateral” under the Credit Documents, subject to preexisting Liens on such assets permitted
hereunder and other Liens permitted hereunder, and will take, and cause the Guarantors to take,
such actions as shall be necessary to grant and perfect such Liens, including actions described in
this Section, all at the expense of Borrower and Guarantors; provided that, if such asset
is the capital stock of another Person is directly owned by Borrower or any Guarantor and such
Person is organized under the laws of a jurisdiction other than the United States of America or any
state thereof or the District of Columbia, Capital Stock of such Subsidiary to be pledged shall be
limited to 65% of the outstanding of voting Capital Stock of such Subsidiary.

          Section 3.02 [Reserved.]

          Section 3.03 [Reserved.]

          Section 3.04 New Guarantors.
Borrower shall cause each Domestic Subsidiary which is hereafter created or acquired (but
excluding (i) Unrestricted Subsidiaries, (ii) Lincoln Indemnity Company, (iii) Bally ARA
Corporation and (iv) any Subsidiary that is not a Substantial Subsidiary) to promptly execute and
deliver a supplement or addendum to each of the Guarantee and Collateral Agreement and the
Operating Bank Guaranty within 30 days of acquisition or formation, as applicable, 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 the Administrative 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 the Administrative
Agent and the Collateral Agent.

          Section 3.05 [Reserved].

          Section 3.06 [Reserved].

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          Section 3.07 [Reserved].

Section 3.08 Collateral Agency Agreement.
Each Lender authorizes and instructs the Loan Agents 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 on 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 Loan Agents and the Operating Banks.

ARTICLE IV

CONDITIONS PRECEDENT

          Section 4.01 Conditions Precedent to Closing Date. This Agreement shall become effective as of the Closing Date, subject to the satisfaction (or
waiver by Majority Lenders) of the conditions precedent that on or prior to the Closing Date:

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

               (b) Guarantee and Collateral Agreement. Borrower and each of the Guarantors shall
have duly executed and delivered to the Collateral Agent a Guarantee and
Collateral Agreement in substantially the form of Exhibit A, together with all
documents, certificates, forms and filing fees that the Collateral Agent may deem necessary to
perfect and protect the liens and security interests created under the Guarantee and Collateral
Agreement, including, without limitation, financing statements in form and substance reasonably
acceptable to the Collateral Agent, as may be required to grant, continue and maintain an
enforceable security interest in the Collateral (subject to the terms hereof and of the other
Credit Documents) in accordance with the Uniform Commercial Code as enacted in all relevant
jurisdictions.

               (c) [Reserved].

               (d) [Reserved].

               (e) [Reserved].

               (f) Patriot Act. Each Agent shall have received, at least one (1) Banking Day prior
to the Closing Date, all documentation and other information required by regulatory authorities
under applicable “know your customer” and anti-money laundering rules and regulations, including
without limitation the Patriot Act.

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               (g) Operating Bank Guaranty. Borrower and each applicable Guarantor shall have duly
executed and delivered to the Collateral Agent the Operating Bank Guaranty, substantially in the
form of Exhibit E.

               (h) Collateral Agency Agreement. The Collateral Agent shall have received a fully
executed copy of the Collateral Agency Agreement, substantially in the form of Exhibit B.

               (i) Pledge of Shares. The Collateral Agent shall have received (x) (i) 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 otherwise required to be pledged hereunder, and (ii) the certificates representing
65% of the certificated shares of the Foreign Subsidiaries owned directly by 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.

               (j) Final Order. At the time of the making of the initial Loans or at the time of the
issuance of the initial Letters of Credit, whichever first occurs, the Agents and the Lenders shall
have received a certified copy of an order of the Bankruptcy Court in substantially the form of
Exhibit K (the “Final Order”) approving the Credit Documents, the granting the
Superpriority Claim status and the senior priming and other Liens described in Section 2.21 hereof
and provided for in the Collateral Documents which Final Order (i) shall have been entered, upon an
application or motion of Borrower reasonably satisfactory in form and substance to each Agent, on
such prior notice to such parties as may in each case be reasonably satisfactory to each Agent,
(ii) shall authorize extensions of credit in amounts not in excess of an amount to be set forth in
the Final Order, which shall be satisfactory to each Agent, (iii) shall approve the payment by the
Borrower of all of the fees provided for in the Credit Documents (including the Fee Letters), (iv)
shall be in full force and effect, (v) shall approve the payment in
full and termination of the Prepetition Facility with proceeds of the initial Loans, (vi)
shall approve the priority of the Liens and Superpriority Claims granted pursuant to the Bankruptcy
Code Sections 364(c)(1), (2) and (3) and 364(d), (vii) shall deem the Obligations to have been
extended by the Lenders in good faith as that term is used in Bankruptcy Code Section 364(e), and
as to which no stay of the Final Order is in effect.

               (k) First Day Orders. All of the “first day orders” entered by the Bankruptcy Court
in the Cases shall be reasonably satisfactory in form and substance to each Agent.

               (l) Filings. 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 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 Collateral Agent, necessary to perfect the Liens on the Collateral) shall have been
authorized by 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.

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               (m) Lien Searches. The Administrative Agent and the Collateral Agent shall have
received UCC searches (including tax liens and judgments) conducted in the jurisdictions in which
Borrower and the Guarantors are incorporated (dated as of a recent date), reflecting the absence of
Liens and encumbrances on the assets of Borrower and the Guarantors other than Liens permitted
hereunder.

               (n) Projections. Borrower shall have delivered to the Administrative Agent a
financial forecast, including income statements, balance sheets and cash flow statements through
its fiscal year ending December 31, 2009, in form and substance reasonably satisfactory to the
Administrative Agent.

               (o) Insurance Policies. (i) There shall have been delivered to the Administrative
Agent and the Collateral Agent a certificate evidencing Borrower’s and its Subsidiaries’ insurance
coverage in form and substance reasonably satisfactory to the Administrative Agent and the
Collateral Agent shall have been named as loss payee and additional insured (as their interests may
appear), on such policies of insurance of Borrower and the Guarantors and such policies of
insurance shall provide that such policies may not be modified, reduced or cancelled absent thirty
(30) days prior written notice to the Collateral Agent.

               (p) [Reserved].

               (q) Borrower’s Incorporation Papers. There shall have been delivered to the
Administrative Agent, 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 Borrower’s by-laws, certified by the
Secretary or an Assistant Secretary of Borrower.

               (r) Borrower’s Corporate Resolution. There shall have been delivered to the
Administrative Agent, 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 commencement of the Cases (with
respect to Borrower) and the borrowing provided for herein and the execution, delivery and
performance of this Agreement and the other Credit Documents to which it is a party and any other
instrument or agreement required hereunder.

               (s) Borrower’s Incumbency Certificate. There shall have been delivered to the
Administrative Agent, 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, 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.

               (t) Guarantors’ Incorporation Papers. There shall have been delivered to the
Administrative Agent, a copy of each such Guarantor’s certificate of incorporation or articles of
association and by-laws or partnership agreement, as the case may be, certified by the Secretary or
an Assistant Secretary of such Guarantor.

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               (u) Guarantors’ Resolutions. There shall have been delivered to the Administrative
Agent, with respect to each Guarantor, a copy of a resolution or resolutions passed by the Board of
Directors (or similar body) of each Guarantor, certified by the Secretary or an Assistant Secretary
of such Guarantor as being in full force and effect on the Closing Date, authorizing the
commencement of the Cases (with respect to each such Guarantor) and execution, delivery and
performance of the Collateral Documents to which it is a party.

               (v) Guarantors’ Incumbency Certificates. There shall have been delivered to the
Administrative Agent, with respect to each Guarantor, a certificate, signed by the Secretary or an
Assistant Secretary of each Guarantor and dated the Closing Date, as to the incumbency, and
containing the specimen signature or signatures, 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).

               (w) Good Standing Certificates. There shall have been delivered to the Administrative
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.

               (x) Opinions of Counsel to Borrower, etc. There shall have been delivered to the
Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent and
its counsel, an opinion, dated the Closing Date, of (i) Kirkland & Ellis LLP, special counsel for
Borrower and the Guarantors, substantially in the form of Exhibit H hereto, and (ii) Marc
Bassewitz, Esq., or other acceptable in-house counsel, substantially in the form of Exhibit I
hereto.

               (y) Officer’s Certificate. There shall have been delivered to the Administrative
Agent, in form and substance satisfactory to the Administrative 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; and

                         (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.

               (z) Plan of Reorganization. Borrower and the Guarantors shall have filed with the
Bankruptcy Court the Plan of Reorganization and disclosure statements reasonably satisfactory to
the Administrative Agent and the Plan of Reorganization shall have been accepted by all impaired
classes of creditors entitled to vote on the Plan of Reorganization under the Bankruptcy Code.

               (aa) Consents. All governmental and third party consents and approvals necessary in
connection with the financing contemplated hereby and the continuing operations of Borrower and the
Guarantors shall have been obtained, in form and substance reasonably satisfactory to the
Administrative Agent, and be in full force and effect.

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               (bb) [Reserved].

               (cc) Repayment of Prepetition Facility. The Prepetition Facility shall have been
repaid in full and terminated, and all action necessary to release all collateral pledged to secure
the Loans and other obligations thereunder (including hedge and cash management obligations) shall
have been taken, in form and substance reasonably satisfactory to the Administrative Agent.

               (dd) Minimum EBITDA. Borrower shall have Consolidated EBITDA for the last 12 months
for which financial statements are available of at least $62,500,000; provided that for any
calendar month ending on or prior to June 30, 2007, Consolidated EBITDA for such calendar month
shall be deemed to be the amount set forth on Schedule 4.01(dd) for such calendar month.

               (ee) Minimum Liquidity. On the Closing Date, Borrower shall have Liquidity equal to
or greater than $25,000,000.

               (ff) [Reserved].

               (gg) Payment of Fees and Expenses. The Agents shall have received, for the account of
the Lenders and for their own accounts, 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.

               (hh) Cash Flow Projection. The Agents shall have received the most recent available
13-week cash flow projection reflecting anticipated cash receipts and disbursements (in form and
substance reasonably satisfactory to the Administrative Agent) for the 13 week period following
August 6, 2007.

               (ii) No Material Adverse Effect. The Agents shall have determined in their reasonable
discretion that there has not occurred since March 31, 2007 any change, event, circumstance or
development that, individually or in the aggregate, has had or could reasonably be expected to have
a Material Adverse Effect (other than the events leading up to and resulting from the filing of the
Cases).

               (jj) Closing Date. The Closing Date shall occur no later than 45 days after the
Filing Date.

               (kk) Review of Debt Instruments. The Agents shall have reviewed, and shall in their
reasonable discretion be satisfied with, the debt instruments and indentures to be issued in
connection with the consummation of the Plan of Reorganization.

          Section 4.02 Conditions Precedent to Each Loan and Letter of Credit.
The obligation of each Lender to make any Loan or to issue any Letter of Credit (or to renew or

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extend any Letter of Credit) hereunder is subject to the satisfaction (or waiver) following
conditions precedent:

               (a) No Default or Event of Default has occurred and is continuing on the date of each Loan 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 Final Order shall be in full force and effect and shall not have been vacated, stayed,
reversed, modified or amended in any respect without the prior written consent of each Agent and
the Majority Lenders, and if the Final Order is the subject of a pending appeal in any respect,
neither the making of the Loans nor the issuance of any Letter of Credit nor the performance by
Borrower or any Guarantor of any of their respective obligations under any of the Credit Documents
shall be subject to a stay pending appeal;

               (c) The applicable Loan Agent shall have received a notice with respect to the borrowing, to
the extent required by Sections 2.02 or 2.19(b)(i), as applicable; and

               (d) The representations and warranties contained herein and in the other Credit Documents
shall be true and correct in all material respects on the date of each Loan 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, in such case, shall
be true and correct in all material respects as of such date, and except for changes which are
expressly permitted by this Agreement.

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.

          Section 4.03 Determinations Under Sections 4.01 and 4.02.
For purposes of determining compliance with the conditions specified in Section 4.01 and 4.02,
each applicable Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to such Lender unless an officer of the applicable Loan Agent
responsible for the transactions contemplated by the Credit Documents shall have received notice
from such Lender prior to the Closing Date specifying its objection thereto, and such Lender shall
not have made available to the applicable Loan Agent such Lender’s ratable portion of such
Borrowing.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

          Borrower represents and warrants to each Lender and the Agents that:

          Section 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

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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.

          Section 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.

          Section 5.03 Borrower’s and Subsidiaries’ Powers.
Upon the entry of the Final Order, 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, subject to the entry of the
Final Order, 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 or by-laws or other
equivalent organizational document 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 except (other than in the case of any charter or by-laws or other equivalent
organizational document) to the extent such conflict could not reasonably be expected to result in
a Material Adverse Effect.

          Section 5.04 Power of Officers. Upon the entry of the Final Order, 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.

          Section 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, other than (i) the filing of financing statements, mortgages and
intellectual property filings, (ii) the filings and consents contemplated by the Collateral
Documents, (iii) entry of the Final Order, (iv) approvals, consents and exemptions that have been
obtained prior to the Closing Date and (v) consents, approvals and exemptions that the failure to
do so in the aggregate would not reasonably be expected to result in a Material Adverse Effect.

          Section 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

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agreement required hereunder, except where the failure to so comply
would not reasonably be expected to have a Material Adverse Effect.

          Section 5.07 Enforceability of Agreement. Upon the entry of the Final Order, each of this Agreement, the Notes and each of the other
Credit Documents to which 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).

          Section 5.08 Title to Property. Borrower and its Subsidiaries have good title to their respective owned material personal
properties and assets, and good and marketable title to their respective owned material real
properties which, in each case are necessary to the conduct of its business, 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.

          Section 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 in writing against Borrower or any Subsidiary
or their respective property, which have a reasonable likelihood of adverse
determination and such determination could reasonably be expected to have a Material Adverse
Effect.

          Section 5.10 Secured Superpriority Obligations. On and after the Closing Date and the entry of the Final Order, the Final Order and the Credit
Documents are sufficient to provide the Superpriority Claims and Liens described in, and with the
priority provided in, Section 2.21 of this Agreement. The Final Order is in full force and effect
and has not been vacated, reversed, modified, amended, rescinded or stayed without the prior
written consent of Agents and the Majority Lenders.

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

          Section 5.12 Subsidiaries. As of the Closing Date, all of Borrower’s Subsidiaries existing as of the Closing Date are
listed on Exhibit D hereto.

          Section 5.13 Information. The audited consolidated financial statements of Borrower and its Subsidiaries for the fiscal
year ending December 31, 2006, and the unaudited consolidated financial statements of Borrower and
its subsidiaries for the fiscal quarters ending March 31, 2007 and June 30, 2007, have been
furnished by Borrower to Lenders. Such financial statements have been prepared in accordance with
GAAP and practices consistently applied and

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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 March 31, 2007, there has been no Material Adverse Change (other than (i)
changes that are contemplated in the Plan of Reorganization, (ii) any events leading up to the
filing of the Chapter 11 case disclosed in Borrower’s public filings made prior to the date hereof,
and (iii) the filing of the Chapter 11 case with the Bankruptcy Court and events ancillary thereto
or resulting therefrom).

          Section 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 $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 $5,000,000).

          Section 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” or is required to be registered as an “investment company”,
within the meaning of the Investment Company Act of 1940, as amended.

          Section 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 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, assignment or licensing of any lease or license 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; (f)
restrictions in any agreement in effect at the time any Person becomes a Subsidiary of Borrower or
a Guarantor, provided that

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such agreement was not entered in contemplation of such Person becoming
a Subsidiary; (g) customary provisions in partnership agreements, limited liability company
organizational governance documents, joint venture agreements and other similar agreements entered
into in the ordinary course of business that restrict the payment of dividends from such
partnership, limited liability company, joint venture or similar Person; and (h) 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 (g), 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.

          Section 5.17 [Reserved.]

          Section 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 in
each case 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 could 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 could 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 could reasonably be expected to have a Material Adverse Effect; and

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

          Section 5.19 Collateral Documents. (a) Upon the entry of the Final Order, the provisions of each of the Collateral Documents
together with the Final Order are effective to create in favor of the Collateral Agent, for the
benefit of the Secured Creditors, a legal, valid and enforceable (subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and
subject to general principles of equity, regardless of whether considered in a proceeding in equity
or at law) security interest in all right, title and interest of Borrower and its Subsidiaries in
the Collateral described therein.

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               (b) [Reserved].

               (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, the completion of the filings and other actions described in Schedule 3 to
the Guarantee and Collateral Agreement, and the Final Order shall be effective to create, in favor
of the Collateral Agent, for the ratable benefit of the Secured Creditors, a fully perfected Lien
(except for Permitted Liens) 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.

          Section 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.

          Section 5.21 Accuracy of Information, etc.
No statement or written information (other than projections (“Projections”), budgets,
forward looking statements, estimates or general material data), contained in this Agreement, any
other Credit Document, the “private” Confidential Information Memorandum dated July 20, 2007, or
any other document, certificate or statement furnished by or on behalf of any Credit Party (about
the Credit Parties) to the Agents or the Lenders, or any of them, for use in connection with the
transactions contemplated by this Agreement or the other Credit Documents, contain 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. Projections and pro
forma financial information delivered by the Credit Parties to the Agents or Lenders in connection
with this Agreement are based upon cash revenue and cash EBITDA principles (consistent with the
format previously presented by Borrower to Administrative Agent) and upon good faith estimates and
assumptions believed by management of 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.

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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, 6.07,
6.08, 6.09, 6.10, 6.11 and 6.15, it will cause each Subsidiary to, unless Majority Lenders waive
compliance in writing:

          Section 6.01 Use of Proceeds and Letters of Credit. Use the proceeds of the Revolving Loans solely (a) to repay the Prepetition Facility in full on
the Closing Date, (b) to pay related fees and expenses associated with (i) negotiation, execution
and delivery of this Agreement and (ii) the filing of the Cases, (c) to make Prepetition Payments
solely to the extent approved by the Bankruptcy Court and permitted hereunder, and (d) for working
capital and other general corporate purposes of the Borrower and the Guarantors to the extent
permitted hereunder.

          Section 6.02 Notices. Promptly, but within five (5) Banking Days of a Responsible Officer obtaining knowledge thereof,
unless otherwise provided below, give written notice to the Administrative Agent of:

               (a) except for matters previously disclosed on Schedule 5.09 and public filings with the SEC
(unless there is a significant development with respect to these matters), any litigation against
Borrower or any Subsidiary with a reasonable likelihood of adverse determination and such
determination could reasonably be expected to result in a Material Adverse Effect;

               (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 which has
a reasonable likelihood of adverse determination and such determination 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
$1,000,000 which have been filed and attached to property of Borrower and 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

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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 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 $5,000,000 or more (to the extent not covered by written,
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 $5,000,000 or more (to the extent not covered by 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
$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) any loss, damage, or destruction to the Collateral in excess of $2,000,000 for each such
casualty, whether or not covered by insurance; or

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

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

               (a) 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 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 in each case, presented both with and without Unrestricted Subsidiaries). Each of
such financial statements shall be certified by a responsible

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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 Borrower within the time period set forth above shall satisfy
Borrower’s obligations pursuant to this paragraph (a);

               (b) 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;

               (c) 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;

               (d) (A) contemporaneous with the delivery of the financial statements set forth in Section
6.03(c), 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
Section 6.12 as of the end of such applicable period and to the extent tested as of such date and
(B) contemporaneous with the delivery of the financial statements set forth in Section 6.03(a), 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 6.12. 7.01, 7.02, 7.08,
7.10 and 7.14, as of the end of such applicable period and to the extent tested as of such date,
(ii) if Borrower or any Subsidiary is not in compliance therewith, showing such failure to comply,
the amount thereof and explaining the reason therefor, and (iii) stating that to such persons
knowledge 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

               (e) No later than the first Monday of each calendar month (or first Tuesday of September),
provide the Administrative Agent with an updated 13-week rolling cash flow projection reflecting
anticipated cash receipts and disbursements (in form and substance reasonably satisfactory to the
Administrative Agent) together with a comparison of such cash flow projections to the cash flow
projections provided for the immediately preceding month and an explanation of the variance of such
actual results from those reflected in such cash forecast for the preceding month.

               (f) no later than 25 days after each month, a monthly report detailing (i) professional fees
and expenses that have been billed but unpaid to date in the Cases, (ii) the accumulated
“hold-back” of professional fees and expenses to date, and (iii) the total professional fees paid
in the Cases during such month and to date.

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                    (g) promptly after the same is available, copies of all pleadings, motions, applications,
judicial information, financial information and other documents filed by or on behalf of any Credit
Party with the Bankruptcy Court in the Cases, or distributed by or on behalf of the any Credit
Party to any official committee appointed in the Cases.

Information required to be delivered pursuant to Section 6.03(a) and (b) shall be deemed to have
been delivered to the Administrative Agent on the date on which Borrower provides written notice to
the Administrative 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).

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

          Section 6.05 Existence, Etc. Maintain and preserve its existence and all rights,
privileges and franchises now enjoyed and necessary for use in its business except (a)(i) if in the
reasonable business judgment of Borrower it is no longer necessary for Borrower and the Guarantors
to preserve and maintain any such right, privilege, qualification, permit, license or franchise,
and (ii) such failure to preserve the same could not, in the aggregate (with all other such
failures), reasonably be expected to have a Material Adverse Effect, and (b) as otherwise permitted
in connection with (i) sales of assets permitted by Section 7.08 or (ii) mergers, liquidations and
dissolutions permitted by Section 7.05. Borrower shall (and shall cause its Subsidiaries to) keep
all its properties material to its operations consistent with industry practice in satisfactory
working order and condition (ordinary wear and tear condemnation and casualty excluded) , except
where the failure to keep such
property in satisfactory working order and condition in the aggregate could not reasonably be
expected to have a Material Adverse Effect.

          Section 6.06 [Reserved.].

          Section 6.07 Payment of Post Petition Obligations. Pay all material postpetition
obligations, including tax claims, when due, except (i) 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 or (ii) where the failure to keep to make such payments
could not reasonably be expected to have a Material Adverse Effect.

          Section 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.

          Section 6.09 Insurance and Condemnation.

                    (a) In addition to the requirements set forth in the Collateral Documents, (i) keep its
properties insured at all times, against such risks, including fire and other risks insured against
by extended coverage, as is customary with companies of the same or similar size in the same or
similar businesses and otherwise on terms and conditions and with

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insurance carriers which are
reasonably satisfactory to the Collateral Agent; (ii) maintain in full force and effect public
liability insurance against claims for personal injury or death or property damage occurring upon,
in, about or in connection with the use of any properties owned, occupied or controlled by Borrower
or any Guarantor, as the case may be, in such amounts and with such deductibles as are customary
with companies of the same or similar size in the same or similar businesses and in the same
geographic area; and (iii) maintain such other insurance or self insurance as may be required by
law to. Schedule 6.09 sets forth the insurance maintained by the Credit Parties on the Closing
Date. The Agents and Lenders agree such insurance set forth on Schedule 6.09 is reasonably
satisfactory as of the date hereof.

                    (b) All such insurance (other than workmen’s compensation insurance and directors’ and
officers’ insurance) relating to assets of Borrower or the Guarantors 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 the Guarantors, for the benefit of the Collateral Agent and each
Secured Creditor, as their interests may appear, and shall not permit modification, reduction or
cancellation in the absence of thirty (30) days prior written notice to the Collateral Agent.

                    (c) Notwithstanding the foregoing, the rights of the Agents 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 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.

          Section 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 the Loan Agents or Collateral Agent (or any Lender
who is subject to a confidentiality agreement, if accompanying such employees or agents of the Loan
Agents or Collateral Agent) 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, Borrower shall only be required to
reimburse the reasonable out-of-pocket costs and expenses of the Agents incurred in connection with
one such inspection in any fiscal year.

          Section 6.11 ERISA. Make prompt payment contributions required to meet the minimum funding
standards of ERISA (including any funding waivers granted thereunder) or as 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 except
to the extent failure to comply could not reasonably be expected to result in a Material Adverse
Effect.

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          Section 6.12 Minimum Liquidity. On the last day of any fiscal month of Borrower, maintain
Liquidity equal to or greater than $25,000,000.

          Section 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).

     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.

     The Agents and their respective 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. The
Agents are under no duty, however, to visit or observe any such property, and any
such acts by the Agents shall be solely for the purposes of protecting Lenders’
security and preserving Lenders’ rights under the Collateral Documents. No site
visit or observation by the Agents shall result in a waiver of any default of
Borrower or any Subsidiary or impose any liability on the Agents or Lenders. In no
event shall any site visit or observation by the Agents 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
Borrower nor any other party is entitled to rely on any site visit or observation by
the Agents. The Agents owe no duty to inform Borrower or any other party of any
Hazardous Materials or any other adverse condition affecting any such property. The
Agents 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 any Agent. In each instance, the Agents shall give Borrower
reasonable notice before entering any such property. The Agents shall make
reasonable efforts to avoid interfering with the use of any such property in
exercising any rights provided in this Section 6.13.

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

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,

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7.02, 7.03,
7.05, 7.07, 7.08, 7.10, 7.12 and 7.13, it will not permit any Subsidiary to, unless Majority
Lenders waive compliance in writing:

          Section 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 Borrower;

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

          (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
$2,500,000 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 100% 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) Investments by 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 if Liquidity
exceeds $30,000,000 after giving pro forma effect to any such Investment; 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, $20,000,000 (plus any dividends, distributions and repayments in respect of
Investments existing on the Closing Date) and (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

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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(f);

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

          (h) 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(h);

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

          (j) Investments resulting from entering into Interest Expense Hedging Agreements;

          (k) 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

          (l) Investments arising out of the receipt by 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; and

          (m) Such other Investments in an amount not to exceed $3,000,000 at anytime outstanding.

          Section 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;

                    (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 aggregate principal amount
of the Debt on the Closing Date listed on such Schedule (plus any fees,

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premiums or interest
related thereto) so refinanced, the average life to maturity of each installment or principal of
such Refinancing Debt shall not be earlier than the average life to maturity 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 Borrower to any of its Subsidiaries and of any Guarantor to Borrower or any other
Guarantor;

                    (e) Debt of 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 Borrower and its Subsidiaries in respect of Capital Leases or
Purchase Money Debt in an aggregate principal amount not to exceed $100,000,000; 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 Administrative 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;

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

                    (i) Debt of Borrower consisting of (x) repurchase obligations with respect to Capital Stock of
Borrower issued to directors, consultants, managers, officers and employees of 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 Borrower to directors, consultants, managers, officers and employees
(or their spouses or estates) of Borrower and its Subsidiaries to purchase or redeem Capital Stock
of Borrower issued to such director, consultant, manager, officer or employee to the extent such
purchase or redemption is permitted hereunder;

                    (j) 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;

                    (k) Debt in respect of Interest Expense Hedging Agreements entered into in the ordinary course
of business to hedge against actual exposure risk not for speculative purpose;

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                    (l) 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;

                    (m) Debt of a person that becomes a Subsidiary after the date hereof pursuant to an
acquisition, which Debt exists at the time such person becomes a Subsidiary and is not created in
contemplation thereof, or in connection with such person becoming a Subsidiary, and any extensions,
renewals, or replacements of such Debt if the terms and
conditions thereof (including the terms and conditions of any Guarantee or other credit
support for such Debt are not less favorable to the obligor thereon or to the Lenders than the Debt
being refinanced or extended, and the average life to maturity thereof is greater than or equal to
that of the Debt being refinanced or extended; provided such Debt shall not (i) include Debt of an
obligor that was not an obligor with respect to the Debt being extended, renewed or refinanced,
(ii) exceed in a principal amount the Debt being renewed, extended or refinanced plus accrued
interest, costs, fees and other expenses directly attributable to such renewal, extension or
refinancing, or (iii) include Debt of an obligor incurred, created or assumed if any Default or
Event of Default has occurred and is continuing or would result therefrom; and

                    (n) other unsecured Debt of Borrower or the Guarantors in an aggregate principal amount not
exceeding $50,000,000 at any time outstanding.

          Section 7.03 Other Security. 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.

          Section 7.04 [Reserved]

          Section 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 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 Borrower) with any other corporation so long as Borrower is the surviving
corporation, no 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 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

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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.

          Section 7.06 Prepetition Prepayments and Amendments of Prepetition Facility. (a) Make any
Prepetition Payment other than (i) as permitted under the Final Order, (ii) as permitted under any
“first day order” or (iii) any Prepetition Payment otherwise consented to by the Agents and
permitted by order of the Bankruptcy Court, or (b) waive, amend, supplement, modify, terminate or
release the provisions of (i) any prepetition Debt or (ii) any document, agreement or instrument
evidencing, creating or governing any postpetition Debt or any other material prepetition or
postpetition agreement if, in the case of clause (i) and (ii), the same could reasonably be
expected to adversely affect the Agents or the Lenders.

          Section 7.07 Change in Business. Engage in any business activities or operations
substantially and materially different from or unrelated or those business activities existing on
the Closing Date or those which are ancillary, supportive or complementary thereto;
provided, however, that this Section 7.07 shall not prohibit 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,
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.

          Section 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 its trade

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name or other Intellectual
Property pursuant to franchising and other arrangements permitted by this Section 7.08;

                    (e) Borrower and its Subsidiaries may license, for at least 75% cash consideration, 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 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 and any related assets, including memberships to Persons which
simultaneously become franchisees pursuant to a Franchise Program; provided that (i) such
assets are sold at their net Fair Market Value for at least 75% cash consideration (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) 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) 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
Borrower and its Subsidiaries and (ii) payment of such Membership Receivables is made to Demand
Deposit Accounts subject to Control Agreements to the extent required herein;

                    (i) 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 (i) subject to a 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, and in each case, for at least 75% cash consideration;

                    (n) disposition of assets not otherwise permitted under this Section 7.08 for Fair Market
Value and at least 75% cash consideration provided that the total Fair Market

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Value of all assets
sold pursuant to this clause does not exceed (individually or in the aggregate) $5,000,000 per
fiscal year; and

                    (o) Borrower and its Subsidiaries may dispose of (i) assets consisting of health and fitness
clubs (and related liabilities) and any assets related thereto, including memberships, for Fair
Market Value (“Permitted Club Sales”), (ii) any interests in leases or subleases, and (iii)
pursuant to Permitted Sale/Leasebacks; provided (i) that Borrower’s Consolidated Adjusted EBITDA is
not less than the Pro Forma EBITDA Threshold, (ii) that such assets shall not include any
Intellectual Property material to the business of Borrower or any of its Subsidiaries (other than
non-exclusive licensing otherwise permitted hereunder); and (iii) except to the extent the
consideration received for such disposition consists of substantially like assets, cash
consideration received shall exceed 75% of the total consideration for such dispositions (except
pursuant to Permitted Sale/Leasebacks, in which case the cash consideration received shall be at
least 90% of the total consideration for such dispositions).

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

          Section 7.09 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) (i)
otherwise permitted under this Agreement, and (ii) upon fair and reasonable terms no less favorable
to 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, or (b) such transaction is contemplated
by the Plan of Reorganization and consummated on or after the Consummation Date.

          Section 7.10 Limitation on Sales and Leasebacks. Enter into any Sale/Leaseback after the
Closing Date unless such transaction constitutes a Permitted Sale/Leaseback; provided that Borrower
and its Subsidiaries may not enter into any Sale/Leaseback with an Unrestricted Subsidiary.

          Section 7.11 Limitation on Changes in Fiscal Year. Permit the fiscal year of Borrower to
end on a day other than December 31.

          Section 7.12 [Reserved].

          Section 7.13 Negative Pledge Clauses. Enter into or suffer to exist or become effective
any agreement that prohibits or limits the ability of 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 prohibition or
limitation shall only be effective against the assets financed thereby), (c) 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, (d) any agreement with respect to the
Debt of any Person

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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, (e) customary restrictions in leases, subleases, licenses and sublicenses, (f) 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, (g) 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 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.

          Section 7.14 Maximum Senior Secured Leverage Ratio. Permit the Senior Secured
Leverage Ratio, as at the end of any fiscal quarter, to exceed 5.50 to 1.

          Section 7.15 Bankruptcy Matters.

                    (a) Incur, create, assume, suffer to exist or permit any other Superpriority Claim which is
pari passu with or senior to the claims of the Secured Creditors against the Credit Parties
hereunder, except for the Carve-Out.

                    (b) Seek or consent to, any modification, stay, vacation or amendment to (i) any “first day
order” having an adverse effect on the rights of the Lenders under this Agreement, or (ii) the
Final Order.

                    (c) Seek or consent to any order seeking authority to take any action prior to the
effectiveness of the Plan of Reorganization that is prohibited by the terms of this Agreement or
the other Credit Documents or refrain from taking any action that is required to be taken by the
terms of this Agreement or any of the other Credit Documents.

                    (d) Seek or consent to any plan of reorganization or liquidation unless all of the Obligations
(other than contingent indemnification obligations) are to be paid in full in cash or other
immediately available funds and the arrangements provided for herein terminated pursuant thereto
prior to or contemporaneously with the effectiveness of such plan.

                    (e) Seek or consent to a sale of substantially all of the Collateral unless all of the
Obligations are to be paid from the proceeds thereof.

ARTICLE VIII

EVENTS OF DEFAULT

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

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          Section 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
five 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 ten Banking Days after such amounts are
due;

          Section 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 written certificate executed or
delivered to Lenders, Loan Agents or the Collateral Agent shall prove to have been false or
materially misleading when made or when deemed to have been made;

          Section 8.03 Judgments. There shall be entered against Borrower or any of its Subsidiaries
one or more final judgments (or any judgment against an ERISA Affiliate, if such judgment is in
favor of a Multiemployer Plan) in excess of $10,000,000 in the aggregate at any one time
outstanding excluding those judgments (i) that have been outstanding less than forty five (45)
consecutive 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 has insurance or third party indemnification
with respect to which the insurer has not denied coverage in writing;

          Section 8.04 Change of Control Event. A Change of Control Event shall occur;

          Section 8.05 Cross Default. (a) Any breach or default shall occur with respect to any
postpetition Debt in excess of $10,000,000 (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, waiver or amendment) or if such breach or default (after giving effect
to any grace period, waiver or amendment) 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;

                    (b) Failure to make postpetition rental payments in excess of $5,000,000 individually or in
the aggregate in respect of any operating leases (other than to the extent any such amount is being
contested in good faith and after giving effect to any grace period, waiver or amendment of such
operating lease);

          Section 8.06 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

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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 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 $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 $5,000,000;

          Section 8.07 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) or 6.05 or Article VII
hereof, (ii) Borrower shall fail duly and promptly to perform or observe any term or provision
specified in Section 6.12 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;

          Section 8.08 Guarantee and Collateral Agreement; Impairment of Collateral Documents. (a)
any material 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 any Loan Agent, the 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

                    (b) any of the Collateral Documents shall for any reason (other than pursuant to the terms
thereof) cease to create a valid security interest in any Collateral with a Fair Market Value in
excess of $1,000,000 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);

          Section 8.09 Defaults Pertaining to the Cases. (a) Any of the Cases shall be dismissed or
converted to a case under Chapter 7 of the Bankruptcy Code or Borrower or any Guarantor shall file
a motion or other pleading seeking the dismissal of any of the Cases under Section 1112 of the
Bankruptcy Code or otherwise; a trustee under Chapter 7 or Chapter 11 of the Bankruptcy Code, a
responsible officer or an examiner with enlarged powers relating to the operation of the business
(powers beyond those set forth in Section 1106(a)(3) and (4) of the

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Bankruptcy Code) under Section
1106(b) of the Bankruptcy Code shall be appointed in any of the Cases; or

                    (b) Borrower’s Board of Directors shall authorize a liquidation of Borrower’s business; or an
application shall be filed by Borrower or any Guarantor for the approval of any other Superpriority
Claim (other than the Carve-Out) in any of the Cases which is pari passu with or senior to the
claims of the Agents and the Lenders against Borrower or any Guarantor hereunder, or there shall
arise or be granted any such pari passu or senior Superpriority Claim; or

                    (c) the Bankruptcy Court shall enter an order or orders granting relief from the automatic
stay applicable under Section 362 of the Bankruptcy Code to the holder or holders of any security
interest to permit foreclosure (or the granting of a deed in lieu of foreclosure or the like) on
any Collateral of the Borrower or any of the Guarantors which have a value in excess of $500,000 in
the aggregate; or

                    (d) the Plan of Reorganization shall not have been confirmed pursuant to an order of the
Bankruptcy Court on or by March 31, 2008; or

                    (e) an order of the Bankruptcy Court shall be entered reversing, staying for a period in
excess of 5 Banking Days, vacating or (without the consent of the Agents and the Majority Lenders)
otherwise amending, supplementing or modifying the Final Order or any Credit Document.

          Section 8.10 Actual or Asserted Invalidity. (a) This Agreement, any Note, any Collateral
Document or any instrument or certificate executed or delivered to Lenders or any 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 any Agent or any of
the Lenders or solely with respect to
any portion of Collateral with a Fair Market Value of less than $1,000,000), to be in full force
and effect, or Borrower or any of its Affiliates shall so assert or (b) 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 Borrower or
any of its Affiliates; or

          Section 8.11 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 Administrative Agent as required by
Majority Lenders;

THEN, subject to the terms, conditions and provisions of the Final Order, (i) upon request of
Majority Lenders to Administrative Agent and notice of Administrative Agent to Borrower, and
without further order of or application to the Bankruptcy Court, 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 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

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VIII), all of
which are hereby expressly waived by Borrower; and (ii) with five (5) Banking Days’ prior written
notice to Borrower (with a copy to counsel for the Official Creditors’ Committee appointed in the
Cases, and to the United States Trustee for the District in which the Cases are pending), and
without further order of or application to the Bankruptcy Court, the applicable Agent, at the
request of the Majority Lenders, may:

                    (a) 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.

                    (b) Require Borrower to deposit immediately with Revolving Credit Agent cash collateral
pursuant to documentation reasonably acceptable to the Revolving Credit 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 or remains
following the waiver of all such Events of Default will be promptly repaid with interest (at
the Revolving Credit 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.

                    (c) In accordance with Section 10.03, set-off amounts in any deposit or securities
accounts maintained with any Agent or any Lender (other than payroll, tax and trust
accounts) and apply such amounts to the obligations of the Credit Parties hereunder and
under the other Credit Documents.

                    (d) Exercise any and all other remedies with respect to the Collateral under the Credit
Documents and under applicable law available to the Agents and the Lenders.

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

          Section 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

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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 applicable Agent at:

Administrative Agent

Morgan Stanley Senior Funding, Inc.

1585 Broadway, Floor 2

New York, NY 10036

Attention: Jim Farner

Telecopy: (646) 329-9929

Phone: (212) 761-1596

Revolving Credit Agent

Wells Fargo Foothill, LLC

2450 Colorado Avenue

Suite 300 West

Santa Monica, CA 90404

Attention: Samantha Mendez

Telecopy: (310) 453-7446

Phone: (310) 453-7246

Collateral Agent

Morgan Stanley Senior Funding, Inc.

1585 Broadway, Floor 2

New York, NY 10036

Attention: Jim Farner

Telecopy: (646) 329-9929

Phone: (212) 761-1596

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 an Agent shall not
be effective until received by such Agent.

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

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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.

          Section 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.

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

          Section 9.04 Assignments; Participations. (a) Any Lender (each an “Assignor”) may, with the consent of the applicable Loan Agent,
each Issuing Lender to whom obligations are owed in respect of Letters of Credit issued by it and
(unless an Event of Default has occurred and is continuing) Borrower, which consent of such
applicable Loan Agent, such Issuing Lenders and 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, the applicable Loan Agent and each Issuing Lender, and with consent of the
applicable Loan 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 Loans, 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 Borrower, the applicable Loan
Agent and each Issuing Lender) of $1,000,000 (or, if less, the full amount of such Assignor’s
Loans, 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 Loans shall not require the consent of the Issuing
Lender or the Revolving Credit Agent or, with respect to such assignment to any Affiliate of any
Lender, an Approved Fund or any other Lender, either Loan 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 the applicable
Loan 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, the applicable Loan Agent and each 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 the applicable Loan Agent an agreement to be bound by the
terms and conditions of this

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Agreement, which agreement shall be substantially in the form of
Exhibit J (an “Assignment and Acceptance”).

                    (b) Any Lender may, without the consent of the applicable Loan Agent or Borrower, 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 Loans, 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 the
applicable Loan 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 scheduled date for the payment of any installment of principal or interest of the Loans
in which such Participant is participating, (B) reduce the amount of any scheduled installment of
principal of the Loans hereunder in which such Participant is
participating, (C) reduce the interest rate applicable to Loans hereunder in which such
Participant is participating (other than as a result of a waiver of (i) default interest or (ii)
any Default or Event of Default), (D) reduce any fees or other amounts payable hereunder in which
such Participant is participating (other than as a result of a waiver of (i) default interest or
(ii) any Default or Event of Default); and (v) such Lender shall require its Participants to comply
with the provisions of Section 10.03(b). 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 Loans 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 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; provided that any
Transferee or prospective Transferee shall have been advised of and agreed to be bound by the
provisions of Section 9.18.

                    (d) Nothing herein shall prohibit any Lender from pledging or collaterally 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 applicable Loan Agent, collaterally assign or pledge all or any portion of its rights under
this Agreement, including the Term Loans and Term Notes or any other instrument evidencing its
rights as a Lender under this Agreement, to any holder of,

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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 Revolving Credit Agent shall, on behalf of 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
“Revolving Credit Register”) for the recordation of the names and addresses of the
Revolving Lenders and the Revolving Credit Commitments of, and the principal amount of the
Revolving Loans owing to, each Revolving Credit Lender from time to time and the Administrative
Agent shall, on behalf of 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 Term Lenders and the Term Loan Commitments of, and
the principal amount of the Term Loans owing to, each Term Lender from time to time. The entries
in the Revolving Credit Register and the Register, as applicable, shall constitute prima
facie evidence of the foregoing information, in the absence of manifest error, and
Borrower, each other Credit Party, the applicable Loan Agent and the Lenders shall treat each
Person whose name is recorded in the Register as the owner of the Loans and any Notes evidencing
the Loans recorded therein for all purposes of this Agreement. Any assignment of any Loan, whether
or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto
being made in the Revolving Credit Register and the Register, as applicable,
(and each Note shall expressly so provide). Any assignment or transfer of all or part of an
Loan evidenced by a Note shall be registered on the Revolving Credit Register and the Register, as
applicable, only upon surrender for registration of assignment or transfer of the Note evidencing
such Loan, accompanied by a duly executed Assignment and Acceptance, and thereupon one or more new
Notes shall be issued to the designated Assignee. Borrower shall be entitled to review the
Revolving Credit Register and the Register from time to time during regular business hours.

                    (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
applicable Loan Agent of the registration and processing fee referred to in paragraph (a) of this
Section 9.04, the applicable Loan Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) record the information contained therein in the Revolving Credit Register or Register, as
applicable, on the effective date determined pursuant thereto.

          Section 9.05 Delays and Waivers. No delay or omission by any 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.

          Section 9.06 Costs and Expenses. Borrower agrees:

                    (a) to pay or reimburse any 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

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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, the reasonable fees and out-of-pocket expenses of one primary
counsel to the Agents and one local counsel in each appropriate jurisdiction with respect thereto;

                    (b) to pay or reimburse each Lender, each 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 out-of-pocket 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 Obligations in the nature of a
“work-out”, including, without limitation, reasonable fees and out-of-pocket expenses of two
consultants or restructuring advisors (such
consultants or restructuring advisors shall be reasonably acceptable to Borrower) and one
outside counsel and one local counsel in each appropriate jurisdiction to the Agents 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 counsel); and

                    (c) to pay or reimburse Agents or the Arranger 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.

          Section 9.07 Telephone Indemnity. Borrower shall protect Lenders and the Agents and hold
them harmless from and not liable for any and all actual loss, damage, claim or expense (including,
without limitation, reasonable attorneys’ fees of one counsel) incurred by Agents or Lenders in
connection with or in relation to any act or any failure to act upon telephone instructions
received by Lenders or Agents 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 except to the extent such action or failure to act is a result of any such
Agent’s or any such Lender’s (or their officer’s, director’s, employee’s or agent’s) gross
negligence, bad faith or willful misconduct as determined by a final decision of a court of
competent jurisdiction).

          Section 9.08 Other Indemnity. (a) Borrower agrees to indemnify and hold harmless the
Agents, each Lender and each of their respective officers, directors, agents and employees, (each
an “Indemnified Person”), 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 Agents, the Arranger 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 Loans, the Term Loan Commitments, the
Revolving Credit Commitments, the Letters of Credit, the use of proceeds of the Loans or Letters of
Credit or the negotiation and preparation of documentation in connection herewith or therewith,
whether or not any Agent, the Arranger, any Issuing Lender or such Lender is a party thereto;
provided, however, that Borrower shall not be required to

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indemnify any such
Indemnified Person from or against any portion of such claims, damages, liabilities or to the
extent such claim, damage, loss, liability or expense is (i) determined by a final decision of a
court of competent jurisdiction to have resulted from the bad faith, gross negligence, willful
misconduct or bad faith of such Indemnified Person or its officers, directors, employees or agents
to the extent acting at the direction of such Indemnified Person, (ii) from a material breach of a
Credit Document by such Indemnified Person or its officers, directors, employees or agents acting
at the direction of such Indemnified Person, or (iii) from a dispute is solely between Indemnified
Persons or their respective officers, affiliates, directors, employees, agents, advisors,
controlling persons, members and successors and permitted assigns of such Indemnified Person not
arising from an act or omission of Borrower or its Subsidiaries. The foregoing indemnification
shall be binding on Borrower forever, and shall survive repayment of the Obligations and the
release of any liens under the Collateral Documents. (a) Borrower hereby agrees to indemnify,
defend and hold harmless the Agents, the Issuing Lenders and each Lender, and each of their
respective officers, directors, employees and agents, from and against any and all claims, losses,
liabilities, damages and expenses (including, without limitation, reasonable attorneys’ fees of one
counsel for all Indemnified Persons) to the extent no actual conflict exists, which may be incurred
by or asserted against any Agent, Issuing Lender or 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 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) The Agents 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,

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directors, agents and
employees, or trustees and advisors of an Approved Fund, for which any Agent or Lender may desire
indemnity or defense hereunder, such Agent or Lender shall promptly notify Borrower in writing.

                    (d) Borrower at the request of any Agent or Lender, shall have the obligation to defend
against such investigation, litigation or proceeding or requested remedial, removal or response
action, and any Agent, in any event, may participate in the defense thereof with legal counsel of
such Agent’s choice if such Agent asserts defenses that raise potential conflicts of interest with
Borrower. No action taken by legal counsel chosen by any 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 each Agent and each Lender (unless such
action is grossly negligent or constitutes bad faith or willful misconduct).

          Section 9.09 Choice of Law. EXCEPT FOR COLLATERAL DOCUMENTS GOVERNED BY THE LAWS OF
ANOTHER STATE OR COUNTRY, THE AGENTS 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.

          Section 9.10 Personal Jurisdiction; Waiver. THE AGENTS AND LENDERS SHALL ENFORCE ANY CLAIM
ARISING UNDER THIS AGREEMENT, THE NOTES, OR ANY COLLATERAL DOCUMENT IN THE BANKRUPTCY COURT, AND IF
THE BANKRUPTCY COURT DOES NOT HAVE (OR ABSTAINS FROM) JURISDICTION, THE AGENTS AND LENDERS MAY
ENFORCE EACH CLAIM 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 BORROWER AND ITS SUBSIDIARIES HEREBY 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.

          Section 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 ANY
AGENT, ANY LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN

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ANY OTHER MANNER PERMITTED BY LAW OR
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER OR ANY GUARANTOR IN ANY OTHER
JURISDICTION.

          Section 9.12 Waiver of Jury Trial. EACH AGENT, EACH LENDER AND BORROWER WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN ANY AGENT, ANY LENDER 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.

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

          Section 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.

          Section 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. Delivery by telecopier or electronic transmission of an executed counterpart of a
signature page to this Agreement shall be effective as delivery of an original executed counterpart
of this Agreement.

          Section 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.

          Section 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.

          Section 9.18 Confidentiality. Each Lender and each Agent agree to keep information obtained by it pursuant hereto and the
other Collateral Documents confidential , 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 such

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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 such 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 such 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 or any Agent, (vi) following an Event of
Default, in connection with any proceeding in the Bankruptcy Court to enforce their rights under
the Credit Documents or with the sale or other realization on any Collateral under any Collateral
Document, or (vii) with Borrower’s prior written consent.

          Section 9.19 [Reserved.].

          Section 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 Borrower shall have
the right to replace in its entirety such Lender (the “Replaced Lender”), on five Banking
Days’ prior written notice (or such shorter notice as agreed by the applicable Loan Agent) to the
applicable Loan Agent and such Replaced Lender, with one or more other Persons (collectively, the
“Replacement Lender”) reasonably acceptable to the applicable Loan Agent, 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 J (appropriately
completed), pursuant to which the Replacement Lender shall acquire all of the Commitments,
participating interests in Letters of Credit, and outstanding Loans 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 Loans 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 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; provided, that is agreed that the applicable Loan Agent may execute the assignment
documentation on behalf of the Non-Consenting Lender to the extent such Non-Consenting Lender
refuses and all other conditions herein have been satisfied. For the avoidance of doubt, it is
understood that neither any Agent nor any Lender shall be obligated to be or to find any
Replacement Lender.

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ARTICLE X

RELATION OF LENDERS

          Section 10.01 Agents; Enforcement of Guaranties. (a) Each Lender hereby irrevocably
appoints, designates and authorizes the Agents 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 or the other Collateral Documents and hereby appoints the
Collateral Agent to act upon the direction of the Majority Lenders to enforce each such Agreement.
The Operating Banks agree that none of such Lenders shall take any action to enforce the Operating
Bank Guaranty, respectively, until the Collateral 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, no Agent shall 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 any Agent. Each 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. No Agent shall be responsible for the negligence
or misconduct of any agent or attorney-in-fact that it selects with reasonable care.

                    (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 the Loan Agent. Except as permitted by Section
10.13, the Loan Agents 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.

          Section 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, and all principal, interest and fee
payments on the 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 Term Loans. All sums realized under the Guarantee and Collateral Agreement (or
any guaranty executed and delivered pursuant to Section

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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.

          Section 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 applicable Loan 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, petty cash 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 the applicable
Loan Agent or such Secured Creditor shall have made demand under this Agreement or any Collateral
Document and to the extent the Secured Obligations are matured. Each of the Lenders agrees that it
shall not, without the express consent of the applicable Loan 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 the applicable Loan 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 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 the applicable Loan 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.

                    (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.

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          Section 10.04 Liability of Agents. No Agent nor any of their respective 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 or its officers, directors, employees agents, attorneys-in-fact or Affiliates)
own gross negligence or willful misconduct or bad faith) 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 any 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. No Agent shall 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.

          Section 10.05 Reliance by Agents. Each 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 in good faith 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 any Agent. Each 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. Each 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.

          Section 10.06 Approvals; Amendments. Subject to the other provisions of this Section
10.06, 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. 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 an 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 (i) unless each
Lender directly and adversely affected thereby (it being understood that, for the purposes of
Section 10.06 (d), (e) or (g), all Lenders shall be deemed to be directly affected thereby) agree
in writing, no amendment, modification, consent or waiver shall be effective which:

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

                    (b) reduces interest (other than as a result of waiving a Default, Event of Default or default
interest), principal, 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) and Section
10.13(e), releases all or substantially all of the Collateral (except (i) in connection with
dispositions thereof permitted under this Agreement, (ii) as permitted by subsections 10.13(b) or
(d), (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”,

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

                    (g) reduces a specified percentage required for consent in any other provision requiring
consent of a specified percentage of Lenders without consent of such percentage of Lenders, and

(ii) unless (x) all Revolving Credit Lenders, if there are two (2) or less Revolving Credit Lenders
or (y) the Majority Revolving Lenders, and the Revolving Credit Agent agree in writing, no
amendment, modification, consent or waiver shall be effective which waives or otherwise adversely
effects the rights of the Revolving Credit Lenders under 10.13(g).

          Notwithstanding the foregoing, (i) the Agents may enter into technical amendments to the
Collateral Agency Agreement without the consent of the Lenders, (ii) the Agents may enter into
amendments to the Operating Bank Guaranty replacing Annex I thereto without the consent of the
Lenders, (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. Notwithstanding anything to the contrary herein, no
Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent
hereunder (other than any to which its consent is required under clauses (a) through (g) above),
except that the Commitment of such Lender may not be increased without the consent of such Lender
(it being understood that any Commitment or Loan held or deemed held by any Defaulting Lender shall
be excluded from a vote of the Lenders hereunder requiring any consent of the Lenders).

          Further, notwithstanding anything to the contrary contained in Section 10.06, if the Agents
and 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 Credit Documents, then the Agents and
Borrower shall be permitted to amend such provision and such amendment shall

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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 Banking Days following receipt of notice
thereof.

          Section 10.07 Notice of Default. No Agent shall 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 such 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 any Agent receives such a notice, such Agent shall give prompt notice thereof to
Lenders. The Agents 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 the Agents shall have received any such request, any such
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 such Agent shall deem advisable in the best interests of
Lenders.

          Section 10.08 Credit Decision. Each Lender expressly acknowledges that neither Agents nor
any other Lender nor any of their respective Affiliates nor any respective 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 any 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 any Agent or any other Lender to such Lender. Each Lender represents
to each Agent and to each other Lender that it has, independently and without reliance upon any
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 any Agent or any
other Lender). Each Lender also represents that it will, independently and without reliance upon
any 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
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 any Agent or any
other Lender). Except for notices, reports and other documents expressly required to be furnished
to Lenders by an Agent hereunder, the Agents 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 any Agent or any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates.

          Section 10.09 Lenders’ Indemnity. Each Lender agrees to indemnify each 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 Loans,
participating interests in Letters of Credit and unreimbursed drawings in respect of Letters of
Credit), and (ii) its outstanding Term Loans, in each case determined in effect on the

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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 Loans 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 Loans or the Letters of Credit) be imposed on, incurred by or asserted against any
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 any Agent under or in connection with any of the foregoing; provided
however, that no Lender shall be liable for the payment to any Agent of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from such Agent’s gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse each 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 any such 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 such Agent is not reimbursed for such expenses by or on
behalf of Borrower.

          Section 10.10 Agents as Lender. Each Agent 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 each Agent
in its individual capacity. Each Agent 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 an Agent.

          Section 10.11 Notice of Transfer. Subject to Section 9.04(a), the applicable Loan 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 the applicable Loan Agent.

          Section 10.12 Resignation of Agent. Any Agent may resign upon forty-five (45) days’
written notice to Lenders and Borrower. Upon any such resignation, the Majority Lenders shall have
the right to appoint (or, in the case of the resignation of the Collateral Agent, shall have the
right to direct the Administrative Agent to appoint) a successor to such Agent (which shall be
either a Lender or a commercial bank with capital and surplus in excess of $500,000,000 and which
successor, unless an Event of Default under Section 8.01 has occurred and is continuing, shall be
reasonably acceptable to Borrower). If no successor shall have accepted such appointment within
forty-five (45) days after the retiring Agent’s giving of notice of resignation, the retiring Agent
may, on behalf of Lenders, appoint a successor with the consent of Borrower (not to be unreasonably
withheld or delayed). Upon the acceptance by the successor of its appointment hereunder, the
successor 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

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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 an Agent under
this Agreement.

          Section 10.13 Collateral Matters. (a) Each Loan 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 Loans”) which Loan 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 Loans shall not exceed $250,000 without the prior
written consent of Majority Lenders. The Agent Loans shall be repayable on written demand and be
secured by the Collateral. The Agent Loans shall not constitute Loans but shall otherwise
constitute Obligations hereunder. The applicable Loan Agent shall notify each Lender in writing of
each such Agent Loan, which notice shall include a description of the purpose of such Agent Loan.
Without limitation to its obligations pursuant to Section 10.09, each Lender agrees that it shall
make available to the applicable Loan Agent, upon the applicable Loan Agent’s demand, in
immediately available funds, the amount equal to such Lender’s Commitment Percentage of each such
Agent Loan. If such funds are not made available to the applicable Loan Agent by such
Lender within one (1) Banking Day after the applicable Loan Agent’s demand therefor, the applicable
Loan 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 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 Borrower and its
Subsidiaries from time to time have requested and will request the Loans Agents 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 Borrower and its Subsidiaries obtaining financing on equipment and other property secured
by Liens described in the definition of “Permitted Liens”). Lenders hereby irrevocably authorize
the applicable Loan Agent, at its option and in its discretion, to direct the Collateral Agent to
release or subordinate on terms reasonably 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, as applicable, 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 Borrower
or any Guarantor. Upon request by the applicable Loan Agent at any time, Lenders will confirm in
writing the applicable Loan Agent’s authority to so direct the release of particular types or items
of Collateral pursuant to this Section 10.13(b). The Lenders hereby irrevocably authorize Loan
Agents, at their option and discretion (1) to direct the Collateral Agent to release and
subordinate, on terms reasonably

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satisfactory to the Collateral Agent and the Borrower, Liens on
Collateral which is also subject to Permitted Liens, (2) to execute any release, subordination or
acknowledgement documents requested by 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 Loan Agents 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 Loan Agents and the Collateral Agent to
take the actions described herein and neither 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 Loan Agents and the Collateral Agent may enter into subordination agreements and take
other actions requested by 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 any 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 Loan Agents under clauses (i)
through (vii) of Section 10.13(b) above. Upon receipt by any Loan Agent of confirmation from the
Majority Lenders of its authority to direct the release of any particular item or types of
Collateral, such Loan 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) such Loan Agent shall not be
required to direct the Collateral Agent to execute any such document on terms which, in such Loan
Agent’s opinion, would expose any 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 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) The Lenders hereby irrevocably agree that the Loan Agents and Collateral Agent are
authorized to release the Liens in favor of the Secured Creditors upon the termination of the
Commitments, payment and satisfaction in full in cash of all Secured Obligations owing as of the
date of such termination (other than contingent indemnification obligations). The Lenders
authorize the Collateral Agent to execute and deliver any documentation evidencing the release of
such Liens.

                    (e) No 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 Loan Agents 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

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continue exercising, any
of the rights, authorities and powers granted or available to Loan Agents 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 the Loan Agents
and Collateral Agent may act in any manner it may deem appropriate, in its sole discretion, given
each Loan Agent’s and Collateral Agent’s own interest in the Collateral as one of the Lenders and
that the Loan Agents 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 THE LOAN AGENTS 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 ANY AGENT) WITH RESPECT TO
ANY THEREOF OR WITH RESPECT TO THE COLLATERAL, THE FAILURE OF 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 THE AGENTS HAVE UNDERTAKEN NO INDEPENDENT REVIEW OR ANALYSIS WITH RESPECT TO
ANY OF THE FOREGOING.

                    (f) 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 the
Agents 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 Collateral 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
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 any
Loan 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.

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                    (g) Any Collateral proceeds received by any Loan 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:

     First: To each Loan Agent, the Revolving Syndication 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 Revolving Credit 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 in respect of Revolving
Loans hereunder or under the Revolving 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 Revolving Credit Lenders and the Issuing Lenders in
proportion to the unpaid amounts of such accrued and unpaid interest, fees and
commissions owed to the respective Revolving Credit Lenders or Issuing Lender,
as the case may be;

     Third: To the Revolving Credit Lenders in an amount equal to all
unpaid principal of the outstanding Revolving Loans, 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 Loan), to Revolving Credit 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, to Interest Expense
Hedging Agreement Counterparties, up to an amount equal to all unpaid Obligations in
respect of Interest Expense Hedging Agreements 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 Revolving Credit Lenders, the Issuing Lenders, the Revolving
Credit Agent and the Interest Expense Hedging Agreement Counterparties in proportion
of such amounts owed under this clause Third to the respective Revolving Credit
Lender, Issuing Lender, Revolving Credit Agent or Interest Expense Hedging Agreement
Counterparties, as the case may be;

     Fourth: To the Term 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 Term 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 Term Lenders in proportion to the unpaid amounts of
such accrued and unpaid interest, fees and commissions owed to the respective Term
Lender;

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     Fifth: To the Term Lenders in an amount equal to all unpaid principal
of the outstanding Term Loans, if such proceeds shall be insufficient to pay such
amounts in full, then ratably (without priority of any one over any other) to the
Term Lenders, in proportion of such amounts owed under this clause Fifth to the
respective Term Lender;

     Sixth: To any accrued and unpaid fees, commissions and other sums
payable pursuant to this Agreement and not paid pursuant to clauses Second through
Fifth 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

     Seventh: 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.

          Section 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 any other Agent, mutatis mutandis, except as may
be expressly provided otherwise hereunder, or in the Collateral Documents.

          Section 10.15 Conversion. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Borrower herein, the Lenders hereby agree:

                    (a) upon the Consummation of the Plan of Reorganization, the occurrence of the Backstop Rights
Offering Effective Date Condition (as defined in the Plan of Reorganization), and the satisfaction
or waiver by the Majority Lenders of all other conditions set forth in Section 4.01 of the Exit
Credit Agreement (the “Conversion Conditions”), so long as no Event of Default has occurred
and is continuing, to convert and continue all of the then outstanding principal amount of the
Loans under this Agreement into the equivalent amount and type of “Loans” as defined in the Exit
Credit Agreement (the “Exit Loans”). Upon the Administrative Agent’s determination that
the Conversion Conditions have been met, such conversion shall (i) occur automatically, without
action of any of the Lenders or any other Person, and (ii) be evidenced by the execution and
delivery of the Exit Credit Agreement and the other “Credit Documents” as defined in the Exit
Credit Agreement (collectively, the “Exit Loan Documents”) by the Borrower, the Guarantors
and the Administrative Agent. The Exit Loans shall be governed by the Exit Loan Documents; or

                    (b) upon the Consummation of the Plan of Reorganization, the occurrence of the Harbinger
Investment Effective Date Condition (as defined in the Plan of Reorganization), and the
satisfaction or waiver by the Majority Lenders of all other conditions set forth in Section 4.01 of
the Alternative Exit Credit Agreement (the “Alternative Conversion Conditions”), so long as
no Event of Default has occurred and is continuing, to convert and continue all of the then
outstanding principal amount of the Loans under this Agreement into the equivalent amount and type
of “Loans” as defined in the Alternative Exit Credit Agreement (the

98

 

“Alternative Exit
Loans”). Upon the Administrative Agent’s determination that the Alternative Conversion
Conditions have been met, such conversion shall (i) occur automatically, without action of any of
the Lenders or any other Person, and (ii) be evidenced by the execution and delivery of the
Alternative Exit Credit Agreement and the other “Credit Documents” as defined in the Alternative
Exit Credit Agreement (collectively, the “Alternative Exit Loan Documents”) by the
Borrower, the Guarantors and the Administrative Agent. The Alternative Exit Loans shall be
governed by the Alternative Exit Loan Documents.

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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, as debtor and debtor-in-

possession

 	 
	 	By:  	/s/ Marc D. Bassewitz
 	 
	 	 	Name:  	Marc. D. Bassewitz 	 
	 	 	Title:  	Senior Vice President 	 
	 
	 	MORGAN STANLEY SENIOR FUNDING, INC., 

as Administrative Agent, Collateral Agent and as a

Lender

 	 
	 	By:  	/s/ Gavin Balera
 	 
	 	 	Name:  	Gavin Balera 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	WELLS FARGO FOOTHILL, LLC, as Revolving

Credit Agent and as Issuing Lender

 	 
	 	By:  	/s/ Sanat Amladi
 	 
	 	 	Name:  	Sanat Amladi 	 
	 	 	Title:  	Vice President 	 
	 
	 	THE CIT GROUP/BUSINESS CREDIT, INC., as 

Revolving Syndication Agent

 	 
	 	By:  	/s/ Jack A. Myers
 	 
	 	 	Name:  	Jack A. Myers 	 
	 	 	Title:  	Vice President 	 
	 

 

 

	 	 	 	 	 
	 	THE CIT/GROUP BUSINESS CREDIT, INC.,

as Lender
 	 

	 	
 	 
	 	By:  	/s/ Jack A. Myers
 	 
	 	 	Name:  	Jack A. Myers 	 
	 	 	Title:  	Vice President 	 
	 

2

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