Document:

Exhibit 10.1

 

SIXTH AMENDED AND RESTATED CREDIT AGREEMENT,

 

 

dated as of May 8, 2006

 

(amending and restating the Fifth Amended and Restated

Credit Agreement, dated as of January 21, 2004),

 

among

 

 

WEIGHT WATCHERS INTERNATIONAL, INC.,

as the Borrower,

 

 

VARIOUS FINANCIAL INSTITUTIONS,

as the Lenders,

 

 

JPMORGAN CHASE BANK, N.A.,

as the Syndication Agent,

 

 

JPMORGAN SECURITIES INC.,

a Lead Arranger and a Book Manager,

 

 

THE BANK OF NOVA SCOTIA,

as the Administrative Agent,

a Lead Arranger and a Book Manager,

 

 

and

 

 

BANK OF AMERICA, N.A.,

FORTIS CAPITAL CORP.

and

UNION BANK OF CALIFORNIA, N.A.,

as Co-Documentation Agents.

 

 

Table of Contents

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  I

  	
  DEFINITIONS AND ACCOUNTING TERMS

  	
  3

  
	
  SECTION 1.1.

  	
  Defined Terms

  	
  3

  
	
  SECTION 1.2.

  	
  Use of Defined Terms

  	
  30

  
	
  SECTION 1.3.

  	
  Cross-References

  	
  30

  
	
  SECTION 1.4.

  	
  Accounting and Financial Determinations

  	
  31

  
	
  SECTION 1.5.

  	
  Currency Conversions

  	
  31

  
	
   

  	
   

  
	
  ARTICLE II

  	
  COMMITMENTS, BORROWING AND
  ISSUANCE PROCEDURES, NOTES AND LETTERS OF CREDIT

  	
  31

  
	
  SECTION 2.1.

  	
  Loan Commitments

  	
  31

  
	
  SECTION 2.1.1.

  	
  Term Loan Commitments

  	
  31

  
	
  SECTION 2.1.2.

  	
  Revolving Loan Commitment and Swing Line Loan
  Commitment

  	
  32

  
	
  SECTION 2.1.3.

  	
  Letter of Credit Commitment

  	
  32

  
	
  SECTION 2.1.4.

  	
  Lenders Not Permitted or Required to Make Loans

  	
  33

  
	
  SECTION 2.1.5.

  	
  Issuer Not Permitted or Required to Issue Letters of
  Credit

  	
  33

  
	
  SECTION 2.1.6.

  	
  Designated Additional Loans

  	
  33

  
	
  SECTION 2.2.

  	
  Reduction of the Commitment Amounts

  	
  34

  
	
  SECTION 2.2.1.

  	
  Optional

  	
  34

  
	
  SECTION 2.2.2.

  	
  Mandatory

  	
  35

  
	
  SECTION 2.3.

  	
  Borrowing Procedures and Funding Maintenance

  	
  35

  
	
  SECTION 2.3.1.

  	
  Term Loans and Revolving Loans

  	
  35

  
	
  SECTION 2.3.2.

  	
  Swing Line Loans

  	
  36

  
	
  SECTION 2.4.

  	
  Continuation and Conversion Elections

  	
  37

  
	
  SECTION 2.5.

  	
  Funding

  	
  38

  
	
  SECTION 2.6.

  	
  Issuance Procedures

  	
  38

  
	
  SECTION 2.6.1.

  	
  Other Lenders’ Participation

  	
  38

  
	
  SECTION 2.6.2.

  	
  Disbursements; Conversion to Revolving Loans

  	
  39

  
	
  SECTION 2.6.3.

  	
  Reimbursement

  	
  39

  
	
  SECTION 2.6.4.

  	
  Deemed Disbursements

  	
  40

  
	
  SECTION 2.6.5.

  	
  Nature of Reimbursement Obligations

  	
  40

  
				

 

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  SECTION 2.7.

  	
  Notes

  	
  41

  
	
  SECTION 2.8.

  	
  Registered Notes

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPAYMENTS, PREPAYMENTS,
  INTEREST AND FEES

  	
  42

  
	
  SECTION 3.1.

  	
  Repayments and Prepayments; Application

  	
  42

  
	
  SECTION 3.1.1.

  	
  Repayments and Prepayments

  	
  42

  
	
  SECTION 3.1.2.

  	
  Application

  	
  44

  
	
  SECTION 3.2.

  	
  Interest Provisions

  	
  45

  
	
  SECTION 3.2.1.

  	
  Rates

  	
  45

  
	
  SECTION 3.2.2.

  	
  Post-Maturity Rates

  	
  45

  
	
  SECTION 3.2.3.

  	
  Payment Dates

  	
  45

  
	
  SECTION 3.3.

  	
  Fees

  	
  46

  
	
  SECTION 3.3.1.

  	
  Commitment Fee

  	
  46

  
	
  SECTION 3.3.2.

  	
  Fees

  	
  46

  
	
  SECTION 3.3.3.

  	
  Letter of Credit Fee

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  CERTAIN LIBO RATE AND OTHER
  PROVISIONS

  	
  47

  
	
  SECTION 4.1.

  	
  LIBO Rate Lending Unlawful

  	
  47

  
	
  SECTION 4.2.

  	
  Deposits Unavailable

  	
  47

  
	
  SECTION 4.3.

  	
  Increased LIBO Rate Loan Costs, etc

  	
  47

  
	
  SECTION 4.4.

  	
  Funding Losses

  	
  48

  
	
  SECTION 4.5.

  	
  Increased Capital Costs

  	
  48

  
	
  SECTION 4.6.

  	
  Taxes

  	
  49

  
	
  SECTION 4.7.

  	
  Payments, Computations, etc

  	
  51

  
	
  SECTION 4.8.

  	
  Sharing of Payments

  	
  51

  
	
  SECTION 4.9.

  	
  Setoff

  	
  52

  
	
  SECTION 4.10.

  	
  Mitigation

  	
  52

  
	
  SECTION 4.11.

  	
  Replacement of Lenders

  	
  53

  
	
   

  	
   

  
	
  ARTICLE V

  	
  CONDITIONS TO EFFECTIVENESS AND
  TO FUTURE CREDIT EXTENSIONS

  	
  54

  
	
  SECTION 5.1.

  	
  Conditions Precedent to the Effectiveness of this
  Agreement and Making of Credit Extensions

  	
  54

  
				

 

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  SECTION 5.1.1.

  	
  Resolutions, etc

  	
  54

  
	
  SECTION 5.1.2.

  	
  Effective Date Certificate

  	
  54

  
	
  SECTION 5.1.3.

  	
  Delivery of Notes

  	
  54

  
	
  SECTION 5.1.4.

  	
  Affirmation and Consent

  	
  54

  
	
  SECTION 5.1.5.

  	
  Opinions of Counsel

  	
  54

  
	
  SECTION 5.1.6.

  	
  Required Approvals

  	
  55

  
	
  SECTION 5.1.7.

  	
  Litigation; Proceedings

  	
  55

  
	
  SECTION 5.2.

  	
  All Credit Extensions

  	
  55

  
	
  SECTION 5.2.1.

  	
  Compliance with Warranties, No Default, etc

  	
  55

  
	
  SECTION 5.2.2.

  	
  Credit Extension Request

  	
  55

  
	
  SECTION 5.2.3.

  	
  Satisfactory Legal Form

  	
  56

  
	
   

  	
   

  
	
  ARTICLE VI

  	
  REPRESENTATIONS AND WARRANTIES

  	
  56

  
	
  SECTION 6.1.

  	
  Organization, etc

  	
  56

  
	
  SECTION 6.2.

  	
  Due Authorization, Non-Contravention, etc

  	
  56

  
	
  SECTION 6.3.

  	
  Government Approval, Regulation, etc

  	
  57

  
	
  SECTION 6.4.

  	
  Validity, etc

  	
  57

  
	
  SECTION 6.5.

  	
  No Material Adverse Change

  	
  57

  
	
  SECTION 6.6.

  	
  Litigation, Labor Controversies, etc

  	
  57

  
	
  SECTION 6.7.

  	
  Subsidiaries

  	
  57

  
	
  SECTION 6.8.

  	
  Ownership of Properties

  	
  57

  
	
  SECTION 6.9.

  	
  Taxes

  	
  58

  
	
  SECTION 6.10.

  	
  Pension and Welfare Plans

  	
  58

  
	
  SECTION 6.11.

  	
  Environmental Warranties

  	
  58

  
	
  SECTION 6.12.

  	
  Regulations U and X

  	
  59

  
	
  SECTION 6.13.

  	
  Accuracy of Information

  	
  59

  
	
  SECTION 6.14.

  	
  Seniority of Obligations, etc

  	
  60

  
	
  SECTION 6.15.

  	
  Solvency

  	
  60

  
	
   

  	
   

  
	
  ARTICLE VII

  	
  COVENANTS

  	
  60

  
	
  SECTION 7.1.

  	
  Affirmative Covenants

  	
  60

  
				

 

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  SECTION 7.1.1.

  	
  Financial Information, Reports, Notices, etc

  	
  60

  
	
  SECTION 7.1.2.

  	
  Compliance with Laws, etc

  	
  62

  
	
  SECTION 7.1.3.

  	
  Maintenance of Properties

  	
  62

  
	
  SECTION 7.1.4.

  	
  Insurance

  	
  63

  
	
  SECTION 7.1.5.

  	
  Books and Records

  	
  63

  
	
  SECTION 7.1.6.

  	
  Environmental Covenant

  	
  63

  
	
  SECTION 7.1.7.

  	
  Future Subsidiaries

  	
  64

  
	
  SECTION 7.1.8.

  	
  Future Leased Property and Future Acquisitions of
  Real Property

  	
  65

  
	
  SECTION 7.1.9.

  	
  Use of Proceeds, etc

  	
  66

  
	
  SECTION 7.2.

  	
  Negative Covenants

  	
  66

  
	
  SECTION 7.2.1.

  	
  Business Activities

  	
  66

  
	
  SECTION 7.2.2.

  	
  Indebtedness

  	
  66

  
	
  SECTION 7.2.3.

  	
  Liens

  	
  68

  
	
  SECTION 7.2.4.

  	
  Financial Condition

  	
  69

  
	
  SECTION 7.2.5.

  	
  Investments

  	
  69

  
	
  SECTION 7.2.6.

  	
  Restricted Payments, etc

  	
  71

  
	
  SECTION 7.2.7.

  	
  [INTENTIONALLY OMITTED]

  	
  72

  
	
  SECTION 7.2.8.

  	
  Consolidation, Merger, etc

  	
  72

  
	
  SECTION 7.2.9.

  	
  Asset Dispositions, etc

  	
  73

  
	
  SECTION 7.2.10.

  	
  Modification of Certain Agreements

  	
  73

  
	
  SECTION 7.2.11.

  	
  Transactions with Affiliates

  	
  74

  
	
  SECTION 7.2.12.

  	
  Negative Pledges, Restrictive Agreements, etc

  	
  74

  
	
  SECTION 7.2.13.

  	
  Stock of Subsidiaries

  	
  75

  
	
  SECTION 7.2.14.

  	
  Sale and Leaseback

  	
  75

  
	
  SECTION 7.2.15.

  	
  Fiscal Year

  	
  75

  
	
  SECTION 7.2.16.

  	
  Designation of Senior Indebtedness

  	
  75

  
	
   

  	
   

  
	
  ARTICLE VIII

  	
  [INTENTIONALLY OMITTED]

  	
  76

  
	
   

  	
   

  
	
  ARTICLE IX

  	
  EVENTS OF DEFAULT

  	
  76

  
				

 

iv

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 9.1.

  	
  Listing of Events of Default

  	
  76

  
	
  SECTION 9.1.1.

  	
  Non-Payment of Obligations

  	
  76

  
	
  SECTION 9.1.2.

  	
  Breach of Warranty

  	
  76

  
	
  SECTION 9.1.3.

  	
  Non-Performance of Certain Covenants and Obligations

  	
  76

  
	
  SECTION 9.1.4.

  	
  Non-Performance of Other Covenants and Obligations

  	
  76

  
	
  SECTION 9.1.5.

  	
  Default on Other Indebtedness

  	
  76

  
	
  SECTION 9.1.6.

  	
  Judgments

  	
  77

  
	
  SECTION 9.1.7.

  	
  Pension Plans

  	
  77

  
	
  SECTION 9.1.8.

  	
  Change in Control

  	
  77

  
	
  SECTION 9.1.9.

  	
  Bankruptcy, Insolvency, etc

  	
  77

  
	
  SECTION 9.1.10.

  	
  Impairment of Security, etc

  	
  78

  
	
  SECTION 9.1.11.

  	
  Subordinated Debt

  	
  78

  
	
  SECTION 9.1.12.

  	
  Redemption

  	
  78

  
	
  SECTION 9.2.

  	
  Action if Bankruptcy, etc

  	
  78

  
	
  SECTION 9.3.

  	
  Action if Other Event of Default

  	
  79

  
	
   

  	
   

  
	
  ARTICLE X

  	
  THE AGENTS

  	
  79

  
	
  SECTION 10.1.

  	
  Actions

  	
  79

  
	
  SECTION 10.2.

  	
  Funding Reliance, etc

  	
  80

  
	
  SECTION 10.3.

  	
  Exculpation

  	
  80

  
	
  SECTION 10.4.

  	
  Successor

  	
  80

  
	
  SECTION 10.5.

  	
  Credit Extensions by each Agent

  	
  81

  
	
  SECTION 10.6.

  	
  Credit Decisions

  	
  81

  
	
  SECTION 10.7.

  	
  Copies, etc

  	
  81

  
	
  SECTION 10.8.

  	
  Reliance by the Administrative Agent

  	
  82

  
	
  SECTION 10.9.

  	
  Defaults

  	
  82

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  MISCELLANEOUS PROVISIONS

  	
  82

  
	
  SECTION 11.1.

  	
  Waivers, Amendments, etc

  	
  82

  
	
  SECTION 11.2.

  	
  Notices

  	
  84

  
	
  SECTION 11.3.

  	
  Payment of Costs and Expenses

  	
  84

  
				

 

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  SECTION 11.4.

  	
  Indemnification

  	
  85

  
	
  SECTION 11.5.

  	
  Survival

  	
  86

  
	
  SECTION 11.6.

  	
  Severability

  	
  86

  
	
  SECTION 11.7.

  	
  Headings

  	
  86

  
	
  SECTION 11.8.

  	
  Execution in Counterparts; Effectiveness

  	
  86

  
	
  SECTION 11.9.

  	
  Governing Law; Entire Agreement

  	
  86

  
	
  SECTION 11.10.

  	
  Successors and Assigns

  	
  87

  
	
  SECTION 11.11.

  	
  Sale and Transfer of Loans and Notes; Participations
  in Loans and Notes

  	
  87

  
	
  SECTION 11.11.1.

  	
  Assignments

  	
  87

  
	
  SECTION 11.11.2.

  	
  Participations

  	
  89

  
	
  SECTION 11.11.3.

  	
  Register

  	
  90

  
	
  SECTION 11.12.

  	
  Other Transactions

  	
  91

  
	
  SECTION 11.13.

  	
  Forum Selection and Consent to Jurisdiction

  	
  91

  
	
  SECTION 11.14.

  	
  Waiver of Jury Trial

  	
  92

  
	
  SECTION 11.15.

  	
  Confidentiality

  	
  92

  
	
  SECTION 11.16.

  	
  Judgment Currency

  	
  93

  
	
  SECTION 11.17.

  	
  Release of Security Interests

  	
  93

  
				

 

vi

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE I

  	
  -

  	
  Disclosure
  Schedule

  	
   

  
	
  SCHEDULE II

  	
  -

  	
  Commitments
  and Percentages

  	
   

  
	
  SCHEDULE III

  	
  -

  	
  Notice
  Information, Domestic Offices and LIBOR Offices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A-1

  	
  -

  	
  Form of Revolving Note

  	
   

  
	
  EXHIBIT A-2

  	
  -

  	
  Form of Swing Line Note

  	
   

  
	
  EXHIBIT A-3

  	
  -

  	
  Form of Term A Note

  	
   

  
	
  EXHIBIT A-4

  	
  -

  	
  Form of Registered Note

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT B-1

  	
  -

  	
  Form of Borrowing Request

  	
   

  
	
  EXHIBIT B-2

  	
  -

  	
  Form of Issuance Request

  	
   

  
	
  EXHIBIT C

  	
  -

  	
  Form of Continuation/Conversion Notice

  	
   

  
	
  EXHIBIT D

  	
  -

  	
  Form of Lender Assignment Agreement

  	
   

  
	
  EXHIBIT E

  	
  -

  	
  Form of Compliance Certificate

  	
   

  
	
  EXHIBIT F

  	
  -

  	
  Form of Effective Date Certificate

  	
   

  

 

vii

 

SIXTH AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS SIXTH AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 8,
2006 (amending and restating the Fifth Amended and Restated Credit Agreement,
dated as of January 21, 2004), is among WEIGHT WATCHERS INTERNATIONAL, INC., a
Virginia corporation (the “Borrower”), the various financial
institutions as are or may become parties hereto (collectively, the “Lenders”),
JPMORGAN CHASE BANK, N.A. (“JPM CHASE”), as the syndication agent (in
such capacity, the “Syndication Agent”), JPMORGAN SECURITIES INC. (“JPM”),
as a lead arranger (in such capacity, a “Lead Arranger”), and THE BANK
OF NOVA SCOTIA (“Scotia Capital”), as (x) the administrative agent
for the Lenders, and (y) a lead arranger for the Lenders (in such capacities,
the “Administrative Agent” and a “Lead Arranger”, respectively)
and as Issuer (as defined below).

 

W  I  T  N  E  S
S  E  T  H:

 

WHEREAS, pursuant to the Fifth Amended and Restated
Credit Agreement, dated as of January 21, 2004 (as amended, supplemented or
otherwise modified prior to the date hereof, the “Existing Credit Agreement”),
among the Borrower, certain financial institutions and other Persons from time
to time party thereto (the “Existing Lenders”) and the Agents, the
Existing Lenders made or continued the following extensions of credit to the
Borrower which currently remain outstanding on the Effective Date in the
amounts set forth below:

 

(a)           the term B loans made thereunder (the “Existing
Term B Loans”) are outstanding on the Effective Date in an aggregate
principal amount of $146,625,000;

 

(b)           the additional tranche of term loans made
thereunder (the “Existing Designated Additional Term B Loans”) are
outstanding on the Effective Date in an aggregate principal amount of
$147,750,000;

 

(c)           the continuation of the revolving loans
(the “Existing Revolving Loans”) and the swing line loans (the “Existing
Swing Line Loans”; together with the Existing Term B Loans, the
Existing Designated Additional Term B Loans and the Existing Revolving Loans,
the “Existing Loans”) to the Borrower, of which an aggregate principal
amount of $181,500,000 remain outstanding on the Effective Date, and the
rollover of letters of credit issued under the Existing Credit Agreement, of
which an aggregate principal amount of $1,343,922.75 remain outstanding on the
Effective Date;

 

WHEREAS, in connection with the Current Refinancing
(defined below) and the ongoing working capital and general corporate needs of
the Borrower, the Borrower desires to, among other things, refinance the
Existing Loans (the “Current Refinancing”) with Loans under this
Agreement and maintain and obtain the Commitments to make Credit Extensions set
forth herein;

 

WHEREAS, the Borrower has requested that the Existing
Credit Agreement be amended and restated in its entirety to become effective
and binding on the Borrower pursuant to the terms of this Agreement and the
Lenders (including the Existing Lenders) have agreed to amend and restate the
Existing Credit Agreement in its entirety to read as set forth in this
Agreement, and it has been agreed by the parties to the Existing Credit
Agreement that the letters of credit issued and outstanding under the Existing
Credit Agreement (the “Existing Letters of Credit”) shall be

 

 

governed by and deemed to be
outstanding under the amended and restated terms and conditions contained in
this Agreement, with the intent that the terms of this Agreement shall
supersede the terms of the Existing Credit Agreement (each of which shall
hereafter have no further effect upon the parties thereto, other than as
referenced herein and other than for accrued fees and expenses, and
indemnification provisions, accrued and owing under the terms of the Existing Credit
Agreement on or prior to the date hereof or arising (in the case of an
indemnification) under the terms of the Existing Credit Agreement, in each case
to the extent provided for in the Existing Credit Agreement); provided,
that any Rate Protection Agreements with any one or more Existing Lenders (or
their respective Affiliates) shall continue unamended and in full force and
effect;

 

WHEREAS, the Borrower desires to obtain or continue
the following financing facilities from the Lenders as set forth below:

 

(a)           a revolving loan commitment (to include
availability for revolving loans, swing line loans and letters of credit)
pursuant to which Borrowings of revolving loans are and will continue to be
made to the Borrower from time to time as set forth herein;

 

(b)           a letter of credit commitment pursuant to
which the Issuer will continue to issue letters of credit for the account of
the Borrower or any of its Subsidiaries (as defined below) from time to time;
and

 

(c)           a term loan commitment pursuant to which
Borrowings of term loans are made to the Borrower on the Effective Date;

 

WHEREAS, all Obligations shall continue to be and
shall be guaranteed pursuant to the Subsidiary Guaranty executed and delivered
by each Subsidiary party thereto and secured pursuant to the Collateral
Documents executed and delivered by the Borrower and the applicable
Subsidiaries pursuant to the Existing Credit Agreement (provided that
certain Subsidiaries are being released from the Subsidiary Guaranty and the
applicable Collateral Documents and certain other collateral is being released
from the Collateral Documents, in each case pursuant to Section 11.17(a));
and

 

WHEREAS, the Lenders and the
Issuer are willing, on the terms and subject to the conditions hereinafter set
forth, to so amend and restate the Existing Credit Agreement and to maintain or extend
such Commitments and make such Loans to the Borrower and issue or maintain (or
participate in) Letters of Credit for the account of the Borrower;

 

NOW, THEREFORE, the parties hereto hereby agree to
amend and restate the Existing Credit Agreement, and the Existing Credit
Agreement is amended and restated in its entirety as set forth herein.

 

2

 

ARTICLE
I

DEFINITIONS AND ACCOUNTING TERMS

 

SECTION 1.1. Defined
Terms. The following terms (whether or not underscored) when used in this
Agreement, including its preamble and recitals, shall, except where the context
otherwise requires, have the following meanings (such meanings to be equally applicable
to the singular and plural forms thereof):

 

“Administrative Agent” is defined in the preamble
and includes each other Person as shall have subsequently been appointed as the
successor Administrative Agent pursuant to Section 10.4.

 

“Affected Lender” is defined in Section 4.11.

 

“Affiliate” of any Person means any other
Person which, directly or indirectly, controls, is controlled by or is under
common control with such Person (excluding any trustee under, or any committee
with responsibility for administering, any Plan). A Person shall be deemed to
be “controlled by” any other Person if such other Person possesses, directly or
indirectly, power

 

(a)           to vote 15% or more of the securities (on
a fully diluted basis) having ordinary voting power for the election of
directors or managing general partners; or

 

(b)           to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.

 

“Agents” means, collectively, the
Administrative Agent and the Syndication Agent.

 

“Agreement” means, on any date, this Credit
Agreement, as amended and restated hereby and as further amended, supplemented,
amended and restated, or otherwise modified from time to time and in effect on
such date.

 

“Alternate Base Rate” means, on any date and
with respect to all Base Rate Loans, a fluctuating rate of interest per annum
equal to the higher of

 

(c)           the rate of interest most recently
established by the Administrative Agent at its Domestic Office as its base rate
for U.S. Dollar loans in the United States; and

 

(d)           the Federal Funds Rate most recently
determined by the Administrative Agent plus 1/2 of 1%.

 

The Alternate Base Rate is not necessarily intended to
be the lowest rate of interest determined by the Administrative Agent in
connection with extensions of credit. Changes in the rate of interest on that
portion of any Loans maintained as Base Rate Loans will take effect
simultaneously with each change in the Alternate Base Rate. The Administrative
Agent will give notice promptly to the Borrower and the Lenders of changes in
the Alternate Base Rate.

 

3

 

“Applicable Commitment Fee Margin” means the
applicable percentage set forth below corresponding to the relevant Net Debt to
EBITDA Ratio:

 

	
  Net Debt
  to EBITDA

  Ratio

  	
   

  	
  Applicable

  Commitment Fee

  Margin

  	
   

  
	
  >
  2.00:1

  	
   

  	
  0.200%

  	
   

  
	
  < 2.00:1
  and > 1.50:1

  	
   

  	
  0.175%

  	
   

  
	
  < 1.50

  	
   

  	
  0.150%

  	
   

  

 

Notwithstanding anything to the contrary set forth in
this Agreement (including the then effective Net Debt to EBITDA Ratio), the
Applicable Commitment Fee Margin for Revolving Loans from the Effective Date
through (and including) the date of delivery of the Compliance Certificate
(pursuant to clause (c) of Section 7.1.1) in respect of the
Fiscal Quarter ended September 30, 2006 shall be at least 0.175%. The Net Debt
to EBITDA Ratio used to compute the Applicable Commitment Fee Margin shall be
the Net Debt to EBITDA Ratio set forth in the Compliance Certificate most
recently delivered by the Borrower to the Administrative Agent. Changes in the
Applicable Commitment Fee Margin resulting from a change in the Net Debt to
EBITDA Ratio shall become effective upon delivery by the Borrower to the
Administrative Agent of a new Compliance Certificate pursuant to clause (c)
of Section 7.1.1. If the Borrower fails to deliver a Compliance
Certificate within the time period set forth in clause (a) or (b)
of Section 7.1.1, as applicable (the “Applicable Delivery Date”),
the Applicable Commitment Fee Margin from and including the day after the Applicable
Delivery Date to but not including the date the Borrower delivers to the
Administrative Agent a Compliance Certificate shall equal the highest
Applicable Commitment Fee Margin set forth above.

 

“Applicable Delivery Date” shall have the
meaning set forth in the definition of “Applicable Commitment Fee Margin”.

 

“Applicable Margin” means the applicable
percentage set forth below corresponding to the relevant Net Debt to EBITDA
Ratio:

 

(a)           For Term A Loans, Designated Additional
Term A Loans and Revolving Loans:

 

	
  Net Debt
  to EBITDA

  Ratio

  	
   

  	
  Applicable

  Margin For

  Base Rate Loans

  	
   

  	
  Applicable

  Margin For

  LIBO Rate Loans

  	
   

  
	
  > 2.00:1

  	
   

  	
  0%

  	
   

  	
  1.000%

  	
   

  
	
  < 2.00:1 and >
  1.50:1

  	
   

  	
  0%

  	
   

  	
  0.875%

  	
   

  
	
  < 1.50

  	
   

  	
  0%

  	
   

  	
  0.750%

  	
   

  

 

Notwithstanding anything to the contrary set forth in
this Agreement (including the then effective Net Debt to EBITDA Ratio), the
Applicable Margin for all LIBO Rate Loans from the Effective Date through (and
including) the date of delivery of the Compliance Certificate (pursuant to clause (c)
of Section 7.1.1) in respect of the Fiscal Quarter ended September 30,
2006

 

4

 

shall be at least 0.875%. The Net Debt to EBITDA Ratio
used to compute the Applicable Margin shall be the Net Debt to EBITDA Ratio set
forth in the Compliance Certificate most recently delivered by the Borrower to
the Administrative Agent. Changes in the Applicable Margin resulting from a
change in the Net Debt to EBITDA Ratio shall become effective upon delivery by
the Borrower to the Administrative Agent of a new Compliance Certificate
pursuant to clause (c) of Section 7.1.1. If the Borrower fails to
deliver a Compliance Certificate on or prior to the Applicable Delivery Date,
the Applicable Margin from and including the day after the Applicable Delivery
Date to but not including the date the Borrower delivers to the Administrative
Agent a Compliance Certificate shall equal the highest Applicable Margin set
forth above.

 

(b)           The Applicable Margin for Designated New
Term Loans shall be determined pursuant to Section 2.1.6.

 

“ARTAL” means ARTAL Luxembourg S.A., a
corporation organized under the laws of Luxembourg.

 

“Assignee Lender”
is defined in Section 11.11.1.

 

“Authorized Officer” means, relative to any
Obligor, those of its officers whose signatures and incumbency shall have been
certified to the Administrative Agent and the Lenders in writing from time to
time.

 

“Average Life” means, as of the date of
determination, with respect to any Indebtedness, the quotient obtained by
dividing:

 

(a)           the sum of the products of numbers of
years from the date of determination to the dates of each successive scheduled
principal payment of or redemption or similar payment with respect to such
Indebtedness multiplied by the amount of such payment

 

by

 

(b)           the sum of all such payments.

 

“Base Rate Loan” means a Loan bearing interest
at a fluctuating rate determined by reference to the Alternate Base Rate.

 

“Borrower” is defined in the preamble.

 

“Borrowing” means the Loans of the same type
and, in the case of LIBO Rate Loans, having the same Interest Period made by
the relevant Lenders on the same Business Day and pursuant to the same
Borrowing Request in accordance with Section 2.1.

 

“Borrowing Request” means a loan request and
certificate duly executed by an Authorized Officer of the Borrower,
substantially in the form of Exhibit B-1 hereto.

 

5

 

“Business Day”
means

 

(e)           any day which is neither a Saturday or
Sunday nor a legal holiday on which banks are authorized or required to be
closed in New York City; and

 

(f)            relative to the making, continuing,
prepaying or repaying of any LIBO Rate Loans, any day on which dealings in U.S.
Dollars are carried on in the London interbank market.

 

“Capital Expenditures” means for any period,
the sum, without duplication, of

 

(g)           the aggregate amount of all expenditures
of the Borrower and its Subsidiaries for fixed or capital assets made during
such period which, in accordance with GAAP, would be classified as capital
expenditures; and

 

(h)           the aggregate amount of all Capitalized
Lease Liabilities incurred during such period.

 

“Capital Securities” means, (i) any and
all shares, interests, participations or other equivalents of or interests in
(however designated) corporate stock, including shares of preferred or
preference stock, (ii) all partnership interests (whether general or
limited) in any Person which is a partnership, (iii) all membership
interests or limited liability company interests in any limited liability
company, and (iv) all equity or ownership interests in any Person of any
other type.

 

“Capitalized Lease Liabilities” means, without
duplication, all monetary obligations of the Borrower or any of its
Subsidiaries under any leasing or similar arrangement which, in accordance with
GAAP, would be classified as capitalized leases, and, for purposes of this
Agreement and each other Loan Document, the amount of such obligations shall be
the capitalized amount thereof, determined in accordance with GAAP, and the
stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.

 

“Cash Equivalent
Investment” means, at any time:

 

(i)            any evidence of Indebtedness, maturing
not more than one year after such time, issued or guaranteed by the United
States Government;

 

(j)            commercial paper, maturing not more than
nine months from the date of issue, which is issued by

 

(i)            a corporation (other than an Affiliate of
any Obligor) organized under the laws of any state of the United States or of
the District of Columbia and rated at least A-l by S&P or P-l by Moody’s,
or

 

(ii)           any Lender which is an Eligible
Institution (or its holding company);

 

6

 

(k)           any certificate of deposit or bankers
acceptance, maturing not more than one year after such time, which is issued by
either

 

(i)            a commercial banking institution that is
a member of the Federal Reserve System and has a combined capital and surplus
and undivided profits of not less than $500,000,000, or

 

(ii)           any Lender;

 

(l)            short-term tax-exempt securities rated
not lower than MIG-1/1+ by either Moody’s or S&P with provisions for
liquidity or maturity accommodations of 183 days or less;

 

(m)          any money market or similar fund the
assets of which are comprised exclusively of any of the items specified in clauses
(a) through (d) above and as to which withdrawals are permitted at
least every 90 days; or

 

(n)           in the case of any Subsidiary of the
Borrower organized in a jurisdiction outside the United States:  (i) direct obligations of the sovereign
nation (or any agency thereof) in which such Subsidiary is organized and is
conducting business or in obligations fully and unconditionally guaranteed by
such sovereign nation (or any agency thereof), (ii) investments of the
type and maturity described in clauses (a) through (e) above of
foreign obligors, which investments or obligors (or the parents of such obligors)
have ratings described in such clauses or equivalent ratings from comparable
foreign ratings agencies or (iii) investments of the type and maturity
described in clauses (a) through (e) above of foreign obligors
(or the parents of such obligors), which investments or obligors (or the
parents of such obligors) are not rated as provided above but which are, in the
reasonable judgment of the Borrower, comparable in investment quality to such
investments and obligors (or the parents of such obligors); provided
that the aggregate face amount outstanding at any time of such investments of
all foreign Subsidiaries of the Borrower made pursuant to this clause (iii) does not exceed $25,000,000.

 

“CERCLA” means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.

 

“CERCLIS” means the Comprehensive Environmental
Response Compensation Liability Information System List.

 

“Change in Control”
means

 

(o)           any “person” or “group” (as such terms
are used in Rule 13d-5 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and Sections 13(d) and 14(d) of the Exchange
Act) of persons (other than the Permitted ARTAL Investor Group) becomes,
directly or indirectly, in a single transaction or in a related series of transactions
by way of merger, consolidation, or other business combination or otherwise,
the “beneficial owner” (as such term is used in Rule 13d-3 of the Exchange
Act) of more than 20% of the total voting power in the aggregate of all classes
of Capital Securities of

 

7

 

the
Borrower then outstanding entitled to vote generally in elections of directors
of the Borrower;

 

(p)           at all times, as applicable, individuals
who on the Effective Date constituted the Board of Directors of the Borrower
(together with any new directors whose election to such Board or whose
nomination for election by the stockholders of the Borrower was approved by a
member of the Permitted ARTAL Investor Group or a vote of 66.67% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the
Borrower then in office;

 

(q)           at all times, as applicable, the failure
of the Borrower to own, free and clear of all Liens (other than in favor of the
Administrative Agent pursuant to a Loan Document), all of the outstanding
shares of Capital Securities of each of UKHC1, UKHC2 and WW Australia (other
than shares of Capital Securities issued pursuant to a Local Management Plan),
in each case on a fully diluted basis; or

 

(r)            the occurrence of any “Change of Control”
(or similar term) under (and as defined in) any Sub Debt Document or any other
document evidencing Indebtedness in excess of $1,000,000.

 

“Code” means the Internal Revenue Code of 1986,
as amended.

 

“Collateral Documents” means, collectively, the
Security Agreements, the Pledge Agreements and any Mortgages.

 

“Commitment” means, as the context may require,
a Lender’s Letter of Credit Commitment, Revolving Loan Commitment, Swing Line
Loan Commitment or Term A Loan Commitment.

 

“Commitment Amount” means, as the context may
require, the Letter of Credit Commitment Amount, the Revolving Loan Commitment
Amount, the Swing Line Loan Commitment Amount or the Term A Loan Commitment
Amount.

 

“Commitment Termination
Event” means

 

(s)           the occurrence of any Event of Default
described in clauses (a) through (d) of Section 9.1.9;
or

 

(t)            the occurrence and continuance of any
other Event of Default and either

 

(i)            the declaration of the Loans to be due
and payable pursuant to Section 9.3, or

 

(ii)           in the absence of such declaration, the
giving of notice by the Administrative Agent, acting at the direction of the
Required Lenders, to the Borrower that the Commitments have been terminated.

 

8

 

“Compliance Certificate” means a certificate
duly completed and executed by the chief financial Authorized Officer of the
Borrower, substantially in the form of Exhibit E hereto.

 

“Contingent Liability” means any agreement,
undertaking or arrangement by which any Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the indebtedness, obligation or any other liability of
any other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of any Person’s obligation under any
Contingent Liability shall (subject to any limitation set forth therein) be
deemed to be the outstanding principal amount (or maximum principal amount, if
larger) of the debt, obligation or other liability guaranteed thereby.

 

“Continuation/Conversion Notice” means a notice
of continuation or conversion and certificate duly executed by an Authorized
Officer of the Borrower, substantially in the form of Exhibit C
hereto.

 

“Controlled Group” means all members of a
controlled group of corporations and all members of a controlled group of
trades or businesses (whether or not incorporated) under common control which,
together with the Borrower, are treated as a single employer under Section
414(b) or 414(c) of the Code or Section 4001 of ERISA.

 

“Copyright Security Agreement” means the
Copyright Security Agreement, dated September 29, 1999, delivered by the
Borrower and each of its U.S. Subsidiaries party thereto in favor of the
Administrative Agent, as amended, supplemented, amended and restated or
otherwise modified.

 

“Credit Extension” means, as the context may
require,

 

(u)           the making of a Loan by a Lender; or

 

(v)           the issuance of any Letter of Credit, or
the extension of any Stated Expiry Date of any previously issued Letter of
Credit, by the Issuer.

 

“Current Refinancing” is defined in the second
recital.

 

“Debt” means the outstanding principal amount
of all Indebtedness of the Borrower and its Subsidiaries (other than WW.com and
its Subsidiaries until the occurrence of the Trigger Date) of the type referred
to in clauses (a), (b), (c) and (e) of the
definition of “Indebtedness” or any Contingent Liability in respect thereof.

 

“Default” means any Event of Default or any
condition, occurrence or event which, after notice or lapse of time or both,
would constitute an Event of Default.

 

“Designated Additional Revolving Loan Commitments”
is defined in Section 2.1.6.

 

“Designated Additional Term A Loans” is defined
in Section 2.1.6.

 

9

 

“Designated New Loan” means, as the context
requires, a Designated Additional Term A Loan and/or a Designated New Term
Loan.

 

“Designated New Term Loans” is defined in Section
2.1.6.

 

“Designated Subsidiary” means The Weight
Watchers Foundation, Inc., a New York not-for-profit corporation.

 

“Disbursement”
is defined in Section 2.6.2.

 

“Disbursement Date”
is defined in Section 2.6.2.

 

“Disbursement Due Date”
is defined in Section 2.6.2.

 

“Disclosure Schedule” means the Disclosure
Schedule attached hereto as Schedule I, as it may be amended,
supplemented or otherwise modified from time to time by the Borrower with the
written consent of the Required Lenders.

 

“Disposition” (or correlative words such as “Dispose”)
means any sale, transfer, lease contribution or other conveyance (including by
way of merger) of, or the granting of options, warrants or other rights to, any
of the Borrower’s or its Subsidiaries’, assets (including accounts receivable
and Capital Securities of Subsidiaries) to any other Person (other than to
another Obligor) in a single transaction or series of transactions.

 

“Domestic Office” means, relative to any
Lender, the office of such Lender designated as such on Schedule III
hereto or designated in the Lender Assignment Agreement or such other office of
a Lender (or any successor or assign of such Lender) within the United States
as may be designated from time to time by notice from such Lender, as the case
may be, to each other Person party hereto.

 

“EBITDA” means, for any applicable period, the
sum (without duplication) of

 

(w)          Net Income,

 

plus

 

(x)            the amount deducted, in determining Net
Income, representing amortization of assets (including amortization with
respect to goodwill, deferred financing costs, other non-cash interest and all
other intangible assets),

 

plus

 

(y)           the amount deducted, in determining Net
Income, of all income taxes (whether paid or deferred) of the Borrower and its
Subsidiaries,

 

plus

 

(z)            Interest Expense,

 

10

 

plus

 

(aa)         the amount deducted, in determining Net
Income, representing depreciation of assets,

 

plus

 

(bb)         an amount equal to all non-cash charges
deducted in arriving at Net Income,

 

plus

 

(cc)         an amount equal to all minority interest
charges deducted in determining Net Income (net of Restricted Payments made in
respect of such minority interest),

 

plus

 

(dd)         non-cash share-based compensation
expense,

 

plus

 

(ee)         the amount deducted, in determining Net
Income, due to foreign currency translation required by FASB 52 or FASB 133
arising after June 30, 1997,

 

minus

 

(ff)           an amount equal to the amount of all
non-cash credits included in arriving at Net Income;

 

provided that all calculations made under this
definition shall, at all times prior to the Trigger Date, exclude amounts
attributable to WW.com and its Subsidiaries.

 

“Effective Date” means the date on which all
the conditions precedent set forth in Article V have been satisfied
in the reasonable judgment of the Administrative Agent.

 

“Eligible Institution” means a financial
institution that either (a) has combined capital and surplus of not less than
$500,000,000 or its equivalent in Foreign Currency, whose long-term certificate
of deposit rating or long-term senior unsecured debt rating is rated “BBB” or
higher by S&P and “Baa2” or higher by Moody’s or an equivalent or higher
rating by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments or (b) is reasonably
acceptable to the Administrative Agent and, in the case of assignments of a
Revolving Loan and/or a Revolving Loan Commitment, the Issuer.

 

“Environmental Laws” means all applicable
federal, state, local or foreign statutes, laws, ordinances, codes, rules and
regulations (including consent decrees and administrative orders) relating to
public health and safety and protection of the environment.

 

“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended.

 

11

 

“Event of Default”
is defined in Section 9.1.

 

“Existing Credit
Agreement” is defined in the first
recital.

 

“Existing Designated Additional Term B Loans”
is defined in clause (b) of the first recital.

 

“Existing Guarantors” means the Guarantors
guaranteeing the obligations under the Existing Credit Agreement.

 

“Existing Lenders”
is defined in the first recital.

 

“Existing Loans” is defined in clause (c)
of the first recital.

 

“Existing Revolving Loans”
is defined in clause (c) of the first recital.

 

“Existing Swing Line
Loans” is defined in clause (c) of the first recital.

 

“Existing Syndication Agent” means Credit
Suisse (formerly known as Credit Suisse First Boston), acting through its
Cayman Islands Branch.

 

“Existing Term B
Loans” is defined in clause (a) of the first recital.

 

“Federal Funds Rate” means, for any period, a
fluctuating interest rate per annum equal for each day during such period to

 

(gg)         the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if such day
is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or

 

(hh)         if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it.

 

“Fee Letters” means, collectively, (a) the
confidential fee letter, dated as of July 20, 1999, between Artal
International S.A., a Luxembourg corporation (“AI”), and the
Administrative Agent, as assumed by ARTAL, (b) the confidential fee letter,
dated as of December 21, 2001, among the Borrower, the Administrative
Agent and the Existing Syndication Agent, (c) the confidential fee letter,
dated as of March 31, 2003, among the Borrower, the Administrative Agent and
the Existing Syndication Agent, (d) the confidential fee letter, dated as of
August 23, 2003, among the Borrower, the Administrative Agent and the Existing
Syndication Agent, (e) the confidential fee letter, dated as of January 21,
2004, among the Borrower, the Administrative Agent and the Existing Syndication
Agent and (e) the confidential fee letter, dated as of the Effective Date,
among the Borrower, the Administrative Agent, the Syndication Agent and the
Lead Arrangers, in each case, as amended, supplemented, restated or otherwise
modified from time to time pursuant to the terms thereof.

 

12

 

“Fiscal Quarter” means any three-month period
ending on the Saturday closest to March 31, June 30,
September 30, or December 31 of any Fiscal Year.

 

“Fiscal Year” means any year ending on the
Saturday closest to December 31 (e.g., the “2006 Fiscal Year”
refers to the Fiscal Year ending on December 30, 2006).

 

“Foreign Currency” means any currency other
than U.S. Dollars.

 

“Foreign Subsidiary” means any Subsidiary that
is not a U.S. Subsidiary.

 

“FPL” means Fortuity Pty. Ltd. (ACN 007 148
683), an Australian company incorporated in the State of Victoria which operates
the Weight Watchers classroom franchise and business in Victoria.

 

“F.R.S. Board” means the Board of Governors of
the Federal Reserve System or any successor thereto.

 

“Franchise Acquisition” means the acquisition
of any Weight Watchers franchise by the Borrower or one of its Subsidiaries.

 

“GAAP” means generally accepted accounting
principles in the United States applied on a consistent basis.

 

“Governmental Authority” means the government
of the United States of America, any other nation or any political subdivision
thereof, whether state or local (or the equivalent thereof), and any agency,
authority, instrumentality, regulatory body, court, central bank or other
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

 

“Guaranties” means, collectively, (a) the
Subsidiary Guaranty and (b) each other guaranty delivered from time to
time pursuant to the terms of this Agreement.

 

“Guarantor” means any Person which has or may
issue a Guaranty hereunder.

 

“Hazardous Material”
means

 

(ii)           any “hazardous substance”, as defined by
CERCLA or equivalent applicable foreign law;

 

(jj)           any “hazardous waste”, as defined by the
Resource Conservation and Recovery Act, as amended or equivalent applicable
foreign law;

 

(kk)         any petroleum product; or

 

(ll)           any 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 or imposing liability or standards of conduct concerning any

 

13

 

hazardous,
toxic or dangerous waste, substance or material, all as amended or hereafter
amended.

 

“Hedging Obligations” means, with respect to
any Person, all liabilities of such Person under interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and all other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or currency exchange rates, including but not limited to Rate
Protection Agreements.

 

“herein”, “hereof”, “hereto”, “hereunder”
and similar terms contained in this Agreement or any other Loan Document refer
to this Agreement or such other Loan Document, as the case may be, as a whole
and not to any particular Section, paragraph or provision of this Agreement or
such other Loan Document.

 

“HJH” means H.J. Heinz Company, a Pennsylvania
Corporation.

 

“Immaterial Subsidiary” means, at any date of
determination, any Subsidiary or group of Subsidiaries of the Borrower having
assets as at the end of or EBITDA for the immediately preceding four Fiscal
Quarter period for which the relevant financial information has been delivered
pursuant to clause (a) or clause (b) of Section 7.1.1 of
less than 5% of total assets of the Borrower and its Subsidiaries or
$2,000,000, respectively, individually or in the aggregate.

 

“Impermissible Qualification” means, relative
to the opinion or certification of any independent public accountant as to any
financial statement of any Obligor, any qualification or exception to such
opinion or certification

 

(mm)       which is of a “going concern” or similar
nature;

 

(nn)         which relates to the limited scope of
examination of matters relevant to such financial statement; or

 

(oo)         which relates to the treatment or
classification of any item in such financial statement and which, as a
condition to its removal, would require an adjustment to such item the effect
of which would be to cause such Obligor to be in default of any of its
obligations under Section 7.2.4.

 

“including” means including without limiting
the generality of any description preceding such term, and, for purposes of
this Agreement and each other Loan Document, the parties hereto agree that the
rule of ejusdem  generis shall not be applicable to limit a
general statement, which is followed by or referable to an enumeration of
specific matters, to matters similar to the matters specifically mentioned.

 

“Indebtedness” of any Person means, without
duplication:

 

(pp)         all obligations of such Person for
borrowed money and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments for borrowed money in respect
thereof;

 

14

 

(qq)         all obligations, contingent or otherwise,
relative to the face amount of all letters of credit, whether or not drawn, and
banker’s acceptances issued for the account of such Person;

 

(rr)           all obligations of such Person as lessee
under leases which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;

 

(ss)         net liabilities of such Person under all
Hedging Obligations;

 

(tt)           whether or not so included as liabilities
in accordance with GAAP, all obligations of such Person to pay the deferred
purchase price of property or services, other than indebtedness (excluding
prepaid interest thereon and interest not yet due) secured by a Lien on
property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether
or not such indebtedness shall have been assumed by such Person or is limited
in recourse; provided, however, that, for purposes of determining
the amount of any Indebtedness of the type described in this clause, if
recourse with respect to such Indebtedness is limited to specific property
financed with such Indebtedness, the amount of such Indebtedness shall be
limited to the fair market value (determined on a basis reasonably acceptable
to the Administrative Agent) of such property or the principal amount of such
Indebtedness, whichever is less; and

 

(uu)         all Contingent Liabilities of such Person
in respect of any of the foregoing;

 

provided, that, Indebtedness shall not include unsecured
Indebtedness incurred in the ordinary course of business in the nature of
accrued liabilities and open accounts extended by suppliers on normal trade
terms in connection with purchases of goods and services, but excluding the
Indebtedness incurred through the borrowing of money or Contingent Liabilities
in connection therewith. For all purposes of this Agreement, the Indebtedness
of any Person shall include the Indebtedness of any partnership or joint
venture in which such Person is a general partner or a joint venturer (to the
extent such Person is liable for such Indebtedness).

 

“Indemnified Liabilities”
is defined in Section 11.4.

 

“Indemnified Parties”
is defined in Section 11.4.

 

“Intercompany Subordination Agreement” means
the Intercompany Subordination Agreement, dated September 29, 1999, by
each of the Obligors in favor of the Administrative Agent, as amended, amended
and restated, supplemented or otherwise modified from time to time in
accordance with its terms.

 

“Interest Coverage Ratio” means, at the close
of any Fiscal Quarter, the ratio computed for the period consisting of such
Fiscal Quarter and each of the three immediately prior Fiscal Quarters of:

 

(vv)         EBITDA (for such period)

 

15

 

to

 

(ww)       Interest Expense (for such period).

 

“Interest Expense” means, for any Fiscal
Quarter, the aggregate consolidated cash interest expense (net of interest
income) of the Borrower and its Subsidiaries (other than WW.com and its
Subsidiaries until the occurrence of the Trigger Date) for such Fiscal Quarter,
as determined in accordance with GAAP, including the portion of any payments
made in respect of Capitalized Lease Liabilities allocable to interest expense.

 

“Interest Period” means, relative to any LIBO
Rate Loans, the period beginning on (and including) the date on which such LIBO
Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant
to Section 2.3.1 or 2.4 and shall end on (but exclude) the day
which numerically corresponds to such date one, two, three or six or, if within
the capabilities of each applicable Lender, nine or twelve months thereafter
(or, if such month has no numerically corresponding day, on the last Business
Day of such month), in either case as the Borrower may select in its relevant
notice pursuant to Section 2.3 or 2.4; provided, however,
that

 

(xx)          the Borrower shall not be permitted to
select Interest Periods to be in effect at any one time which have expiration
dates occurring on more than ten different dates;

 

(yy)         Interest Periods commencing on the same
date for Loans comprising part of the same Borrowing shall be of the same
duration;

 

(zz)          if such Interest Period would otherwise
end on a day which is not a Business Day, such Interest Period shall end on the
next following Business Day (unless such next following Business Day is the
first Business Day of a calendar month, in which case such Interest Period
shall end on the Business Day next preceding such numerically corresponding
day); and

 

(aaa)       no Interest Period for any Loan may end
later than the Stated Maturity Date for such Loan.

 

“Investment” means, relative to any Person,

 

(bbb)      any loan or advance made by such Person
to any other Person (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business);

 

(ccc)       any ownership or similar interest held by
such Person in any other Person; and

 

(ddd)      any purchase or other acquisition of all
or substantially all of the assets of any Person or any division thereof.

 

The amount of any Investment shall be the original
principal or capital amount thereof less all returns of principal or equity
thereon (and without adjustment by reason of the financial

 

16

 

condition of such other Person)
and shall, if made by the transfer or exchange of property other than cash, be
deemed to have been made in an original principal or capital amount equal to
the fair market value of such property at the time of such transfer or
exchange.

 

“Investment Grade Rating” means a corporate
credit rating equal to or higher than Baa3 (or the equivalent) by Moody’s or
BBB- (or the equivalent) by S&P.

 

“Investment Grade Rating Date” means the date
on which (a) the corporate credit rating assigned to the Borrower is an
Investment Grade Rating and (b) no Default shall have occurred and be
continuing.

 

“Issuance Request” means a Letter of Credit
request and certificate duly executed by an Authorized Officer of the Borrower,
substantially in the form of Exhibit B-2 hereto.

 

“Issuer” means, collectively, Scotia Capital or
JPM Chase, each in its individual capacity hereunder as issuer of the Letters
of Credit and such other Lender as may be designated by Scotia Capital (and
agreed to by the Borrower and such Lender) in its individual capacity as the
issuer of Letters of Credit.

 

“Lead Arrangers” means Scotia Capital and JPM.

 

“Lender Assignment Agreement” means a Lender
Assignment Agreement substantially in the form of Exhibit D hereto.

 

“Lenders” is defined in the preamble.

 

“Lender’s Environmental Liability” means any
and all losses, liabilities, obligations, penalties, claims, litigation,
demands, defenses, costs, judgments, suits, proceedings, damages (including
consequential damages), disbursements or expenses of any kind or nature
whatsoever (including reasonable attorneys’ fees at trial and appellate levels
and experts’ fees and disbursements and expenses incurred in investigating,
defending against or prosecuting any litigation, claim or proceeding) which may
at any time be imposed upon, incurred by or asserted or awarded against the
Administrative Agent, the Syndication Agent, any Lead Arranger, any Lender or any
Issuer or any of such Person’s Affiliates, shareholders, directors, officers,
employees, and agents in connection with or arising from:

 

(eee)       any Hazardous Material on, in, under or
affecting all or any portion of any property of the Borrower or any of its
Subsidiaries, the groundwater thereunder, or any surrounding areas thereof to
the extent caused by Releases from the Borrower or any of its Subsidiaries’ or
any of their respective predecessors’ properties;

 

(fff)         any misrepresentation, inaccuracy or
breach of any warranty, contained or referred to in Section 6.11;

 

(ggg)      any violation or claim of violation by
the Borrower or any of its Subsidiaries of any Environmental Laws; or

 

17

 

(hhh)      the imposition of any lien for damages
caused by or the recovery of any costs for the cleanup, release or threatened
release of Hazardous Material by the Borrower or any of its Subsidiaries, or in
connection with any property owned or formerly owned by the Borrower or any of
its Subsidiaries.

 

“Letter of Credit”
is defined in Section 2.1.3.

 

“Letter of Credit Commitment” means, with
respect to the Issuer, the Issuer’s obligation to issue Letters of Credit
pursuant to Section 2.1.3 and, with respect to each of the other Lenders
that has a Revolving Loan Commitment, the obligations of each such Lender to
participate in such Letters of Credit pursuant to Section 2.6.1.

 

“Letter of Credit Commitment Amount” means, on
any date, a maximum amount of $25,000,000, as such amount may be reduced from
time to time pursuant to Section 2.2.

 

“Letter of Credit Outstandings” means, on any
date, an amount equal to the sum of

 

(iii)          the then aggregate amount which is
undrawn and available under all issued and outstanding Letters of Credit,

 

plus

 

(jjj)          the then aggregate amount of all unpaid
and outstanding Reimbursement Obligations in respect of such Letters of Credit.

 

“LIBO Rate” means, relative to any Interest
Period for LIBO Rate Loans, the rate of interest equal to the average (rounded
upwards, if necessary, to the nearest 1/16 of 1%) of the rates per annum at
which U.S. Dollar deposits in immediately available funds are offered to the
Administrative Agent’s LIBOR Office in the London interbank market as at or
about 11:00 a.m. London time two Business Days prior to the beginning of such
Interest Period for delivery on the first day of such Interest Period, and in
an amount approximately equal to the amount of the Administrative Agent’s LIBO
Rate Loan and for a period approximately equal to such Interest Period.

 

“LIBO Rate Loan” means a Loan bearing interest,
at all times during an Interest Period applicable to such Loan, at a fixed rate
of interest determined by reference to the LIBO Rate (Reserve Adjusted).

 

“LIBO Rate (Reserve Adjusted)” means, relative
to any Loan to be made, continued or maintained as, or converted into, a LIBO
Rate Loan for any Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:

 

	
  LIBO Rate

  	
  =

  	
    LIBO Rate

  	
   

  
	
  (Reserve Adjusted)

  	
   

  	
  1.00 - LIBOR Reserve Percentage

  

 

The LIBO Rate (Reserve Adjusted) for any Interest
Period for LIBO Rate Loans will be determined by the Administrative Agent on
the basis of the LIBOR Reserve Percentage in effect

 

18

 

on, and the applicable rates
furnished to and received by the Administrative Agent from Scotia Capital, two
Business Days before the first day of such Interest Period.

 

“LIBOR Office” means, relative to any Lender,
the office of such Lender designated as such on Schedule III hereto or
designated in the Lender Assignment Agreement or such other office of a Lender
as designated from time to time by notice from such Lender to the Borrower and
the Administrative Agent, whether or not outside the United States, which shall
be making or maintaining LIBO Rate Loans of such Lender hereunder.

 

“LIBOR Reserve Percentage” means, relative to
any Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a
decimal) equal to the maximum aggregate reserve requirements (including all
basic, emergency, supplemental, marginal and other reserves and taking into
account any transitional adjustments or other scheduled changes in reserve
requirements) specified under regulations issued from time to time by the
F.R.S. Board and then applicable to assets or liabilities consisting of and
including “Eurocurrency Liabilities”, as currently defined in Regulation D of
the F.R.S. Board, having a term approximately equal or comparable to such
Interest Period.

 

“Lien” means any security interest, mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in property, or any filing
or recording of any instrument or document in respect of the foregoing, to
secure payment of a debt or performance of an obligation or other priority or
preferential arrangement of any kind or nature whatsoever.

 

“Loan” means, as the context may require, a
Revolving Loan, a Swing Line Loan, a Term A Loan and a Designated New Loan.

 

“Loan Document” means this Agreement, the
Notes, the Letters of Credit, each Rate Protection Agreement under which that
counterpart to such agreement is (or at the time such Rate Protection Agreement
was entered into, was) a Lender or an Affiliate of a Lender relating to Hedging
Obligations of the Borrower or any of its Subsidiaries, the Fee Letters, each
Pledge Agreement, each Guaranty, each Security Agreement, the Intercompany
Subordination Agreement and each other agreement, document or instrument
delivered in connection with this Agreement or any other Loan Document, whether
or not specifically mentioned herein or therein.

 

“Local Management Plan” means an equity plan or
program for (i) the sale or issuance of Capital Securities of a Subsidiary in
an amount not to exceed 5% of the outstanding common equity of such Subsidiary
to local management or a plan or program in respect of Subsidiaries of the
Borrower whose principal business is conducted outside of the United States,
(ii) the direct purchase from any member of the Permitted ARTAL Investor Group
by the Borrower management employees, in one transaction or a series of
transactions, of not more than 3% in the aggregate of the WWI Common Shares
owned by the members of the Permitted ARTAL Investor Group or (iii) the
issuance by the Borrower to its management employees, in one transaction or a
series of transactions, of stock options to purchase not more than 6% in the
aggregate of the WWI Common Shares on a fully diluted basis.

 

19

 

“Material Adverse Effect” means (a) a material
adverse effect on the financial condition, operations, assets, business or
properties of the Borrower and its Subsidiaries, taken as a whole, (b) a
material impairment other than an event or set of circumstances described in clause
(a) of the ability of any Obligor (other than any Immaterial Subsidiary) to
perform its respective material obligations under the Loan Documents to which
it is or will be a party, or (c) an impairment of the validity or
enforceability of, or a material impairment of the rights, remedies or benefits
available to the Administrative Agent, the Issuer or the Lenders under, this
Agreement or any other Loan Document.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Mortgage” means, collectively, each Mortgage
or Deed of Trust executed and delivered pursuant to the terms of this
Agreement, including clause (b) of Section 7.1.8, as such
Mortgage or Deed of Trust is amended, amended and restated, supplemented or
otherwise modified from time to time in accordance with its terms.

 

“Net Debt to EBITDA Ratio” means, as of the
last day of any Fiscal Quarter, the ratio of

 

(kkk)       Debt outstanding on the last day of such
Fiscal Quarter (less the amount of cash and Cash Equivalent Investments of the
Borrower and its Subsidiaries (other than WW.com and its Subsidiaries until the
occurrence of the Trigger Date) as of such date)

 

to

 

(b)           EBITDA computed for the period consisting
of such Fiscal Quarter and each of the three immediately preceding Fiscal
Quarters.

 

“Net Disposition Proceeds” means, with respect
to a Permitted Disposition of the assets of the Borrower or any of its
Subsidiaries (other than WW.com and its Subsidiaries until the occurrence of
the Trigger Date), the excess of

 

(a)           the gross cash proceeds received by the
Borrower or such Subsidiary from any Permitted Disposition and any cash
payments received in respect of promissory notes or other non-cash consideration
delivered to the Borrower or such Subsidiary in respect of any Permitted
Disposition,

 

less

 

(b)           the sum of

 

(i)            all reasonable and customary fees and
expenses with respect to legal, investment banking, brokerage and accounting
and other professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred in
connection with such Permitted Disposition which have not been paid to
Affiliates of the Borrower,

 

20

 

(ii)           all taxes and other governmental costs
and expenses actually paid or estimated by the Borrower (in good faith) to be
payable in cash in connection with such Permitted Disposition, and

 

(iii)          payments made by the Borrower or any of
its Subsidiaries to retire Indebtedness (other than the Loans) of the Borrower
or any of its Subsidiaries where payment of such Indebtedness is required in
connection with such Permitted Disposition;

 

provided, however, that if, after the payment of all
taxes with respect to such Permitted Disposition, the amount of estimated
taxes, if any, pursuant to clause (b)(ii) above exceeded the tax amount
actually paid in cash in respect of such Permitted Disposition, the aggregate
amount of such excess shall be immediately payable, pursuant to clause (b)
of Section 3.1.1, as Net Disposition Proceeds.

 

Notwithstanding the foregoing, Net Disposition
Proceeds shall not include fees or other amounts paid to the Borrower or its
Subsidiaries in respect of a license of intellectual property (not related to
the classroom business of the Borrower or its Subsidiaries) having customary
terms and conditions for similar licenses.

 

“Net Income” means, for any period, the net
income of the Borrower and its Subsidiaries (other than WW.com and its
Subsidiaries until the occurrence of the Trigger Date) for such period on a
consolidated basis, excluding extraordinary gains and extraordinary losses.

 

“Non-Excluded Taxes” means any taxes other than
(i) net income and franchise taxes imposed with respect to any Secured Party by
a Governmental Authority under the laws of which such Secured Party is
organized or in which it maintains its applicable lending office and (ii) any
taxes imposed on a Secured Party by any jurisdiction as a result of any former
or present connection between such Secured Party and such jurisdiction other
than a connection arising from a Secured Party entering into this Agreement or
making any Loan.

 

“Non-Guarantor Subsidiary” means the Designated
Subsidiary and any other Subsidiary of the Borrower other than any Person which
has or may issue a Guaranty hereunder.

 

“Non-U.S. Lender” means any Lender (including
each Assignee Lender) that is not (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any state thereof, or
(iii) any estate or trust that is subject to U.S. Federal income taxation
regardless of the source of its income.

 

“Note” means, as the context may require, a
Revolving Note, a Swing Line Note, a Registered Note, a Term A Note or any
promissory note representing a Designated New Loan.

 

“Obligations” means all obligations (monetary
or otherwise) of the Borrower and each other Obligor arising under or in
connection with this Agreement, the Notes, each Letter of Credit and each other
Loan Document, and Hedging Obligations owed to a Lender or an Affiliate thereof
(or a Person who was a Lender or an Affiliate thereof at the time such Hedging
Obligation was entered into) (unless such Lender or such Affiliate otherwise
agrees in writing).

 

21

 

“Obligor” means the Borrower or any other
Person (other than any Agent, any Lender or the Issuer) obligated under any
Loan Document.

 

“Organic Document” means, relative to any
Obligor, its certificate of incorporation, and its by-laws (or other similar
organizational and/or governing documents) and all shareholder agreements,
voting trusts and similar arrangements (or the foreign equivalent thereof)
applicable to any of its authorized shares of Capital Securities.

 

“Other Taxes” means any and all stamp,
documentary or similar taxes, or any other excise or property taxes or similar
levies that arise on account of any payment made or required to be made under
any Loan Document or from the execution, delivery, registration, recording or
enforcement of any Loan Document.

 

“Participant”
is defined in Section 11.11.2.

 

“Patent Security Agreement” means the Patent
Security Agreement, dated September 29, 1999, by the Borrower and each of
its U.S. Subsidiaries in favor of the Administrative Agent, as amended,
supplemented, amended and restated or otherwise modified.

 

“PBGC” means the Pension Benefit Guaranty
Corporation and any successor entity.

 

“Pension Plan” means a “pension plan”,
as such term is defined in section 3(2) of ERISA, which is subject to Title IV
of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of
ERISA), and to which the Borrower or any corporation, trade or business that
is, along with the Borrower, a member of a Controlled Group, has or within the
prior six years has had 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.

 

“Percentage” means, relative to any Lender, the
applicable percentage relating to Term A Loans, any Tranche of Designated New
Loans, Swing Line Loans or Revolving Loans, as the case may be, as set forth
opposite its name on Schedule II hereto under the applicable column
heading or set forth in Lender Assignment Agreement(s) under the applicable
column heading, as such percentage may be adjusted from time to time pursuant
to Lender Assignment Agreement(s) executed by such Lender and its Assignee
Lender(s) and delivered pursuant to Section 11.11. A Lender shall not
have any Commitment to make a particular Tranche of Loans (as the case may be)
if its percentage under the respective column heading is zero.

 

“Permitted Acquisition” means an acquisition
(whether pursuant to an acquisition of Capital Securities, assets or otherwise)
by the Borrower or any of the Subsidiaries from any Person of a business in
which the following conditions are satisfied:

 

(c)           immediately before and after giving
effect to such acquisition no Default shall have occurred and be continuing or
would result therefrom (including under Section 7.2.1);

 

(d)           if the acquisition is of Capital
Securities of a Person such Person becomes a Subsidiary; and

 

22

 

(e)           in the event the aggregate amount of
consideration (including cash and incurrence or assumption of Indebtedness)
exceeds $75,000,000 for such acquisition, the Borrower shall have delivered to
the Agents a Compliance Certificate for the period of four full Fiscal Quarters
immediately preceding such acquisition (prepared in good faith and in a manner
and using such methodology which is consistent with the most recent financial
statements delivered pursuant to Section 7.1.1) giving pro  forma
effect to the consummation of such acquisition and evidencing compliance with
the covenants set forth in Section 7.2.4.

 

“Permitted ARTAL Investor Group” means ARTAL or
any of its direct or indirect Wholly-owned Subsidiaries and ARTAL Group S.A., a
Luxembourg corporation or any of its direct or indirect Wholly-owned
Subsidiaries.

 

“Permitted Disposition” means a Disposition in
accordance with the terms of clause (b) (other than as permitted by clause (a))
of Section 7.2.9.

 

“Person” means any natural person, corporation,
partnership, firm, association, trust, government, governmental agency, limited
liability company or any other entity, whether acting in an individual,
fiduciary or other capacity.

 

“Plan” means any Pension Plan or Welfare Plan.

 

“Pledge Agreements” means, collectively,
(a) the WWI Pledge Agreement and (b) each other pledge agreement delivered
from time to time pursuant to clause (a)(ii) of Section 7.1.7, in
each case, as amended, amended and restated, supplemented or otherwise modified
from time to time pursuant to the terms thereof.

 

“Qualified Assets”
is defined in clause (b) of Section 3.1.1.

 

“Quarterly Payment Date” means the last day of
each March, June, September and December, or, if any such day is not a Business
Day, the next succeeding Business Day.

 

“Rate Protection Agreements” means,
collectively, arrangements entered into by any Person designed to protect such
Person against fluctuations in interest rates or currency exchange rates,
pursuant to the terms of this Agreement.

 

“Recapitalization” means those transactions
contemplated and undertaken pursuant to the Recapitalization Agreement.

 

“Recapitalization Agreement” means that certain
Recapitalization and Stock Purchase Agreement, dated as of July 22, 1999
among the Borrower, ARTAL and HJH.

 

“Refinance” means, in respect of any
Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem,
defease or retire, or to issue other Indebtedness in exchange or replacement
for such Indebtedness. “Refinanced” and “Refinancing” shall have correlative
meanings.

 

23

 

“Refinancing Indebtedness” means Indebtedness
that Refinances any Indebtedness of the Borrower or any of its Subsidiaries
existing on the Effective Date or otherwise permitted hereunder, including
Indebtedness that Refinances Refinancing Indebtedness; provided, however,
that:

 

(i)            such Refinancing Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced;

 

(ii)           such Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is incurred that is
equal to or greater than the Average Life of the Indebtedness being Refinanced;
and

 

(iii)          such Refinancing Indebtedness has an
aggregate principal amount (or if incurred with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or if incurred with original issue discount, the aggregate accreted
value) then outstanding or committed (plus fees and expenses, including any
premium and defeasance costs) under the Indebtedness being Refinanced;

 

provided further, however, that Refinancing
Indebtedness shall not include (A) Indebtedness of a Subsidiary that
Refinances Indebtedness of the Borrower or (B) Indebtedness of the
Borrower or a Subsidiary that Refinances Indebtedness of another Subsidiary.

 

“Refunded Swing Line Loans”
is defined in clause (b) of Section 2.3.2.

 

“Register” is
defined in Section 11.11.3.

 

“Registered Note” means a promissory note of
the Borrower payable to any Registered Noteholder, in the form of Exhibit A-4
hereto (as such promissory note may be amended, endorsed or otherwise modified
from time to time), evidencing the aggregate Indebtedness of the Borrower to
such Lender resulting from outstanding Term Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.

 

“Registered Noteholder” means any Lender that
has been issued a Registered Note.

 

“Reimbursement Obligation”
is defined in Section 2.6.3.

 

“Related Fund” means, with respect to any
Lender which is a fund that invests in loans, any other fund that invests in
loans and is advised, controlled or managed by the same investment advisor as
such Lender or by an Affiliate of such investment advisor or collateralized
debt or loan obligation fund advised, managed or operated by a Lender or an
Affiliate of a Lender.

 

“Release” means a “release”, as such
term is defined in CERCLA.

 

“Replacement Notice” is defined in Section
4.11.

 

“Required Lenders” means, at any time, Lenders
holding at least 51% of the Total Exposure Amount.

 

24

 

“Resource Conservation and Recovery Act” means
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et  seq.,
as in effect from time to time.

 

“Restricted Payments”
is defined in Section 7.2.6.

 

“Revolving Lender” is defined in clause (a) of Section
2.1.2.

 

“Revolving Loan”
is defined in clause (a) of Section 2.1.2.

 

“Revolving Loan
Commitment” is defined in clause (a)
of Section 2.1.2.

 

“Revolving Loan Commitment Amount” means, on
any date, $500,000,000, as such amount may be (i) reduced from time to time
pursuant to Section 2.2 or (ii) increased pursuant to Section 2.1.6.

 

“Revolving Loan
Commitment Termination Date” means the earliest of

 

(f)            June 30, 2011;

 

(g)           the date on which the Revolving Loan
Commitment Amount is terminated in full or reduced to zero pursuant to Section
2.2; and

 

(h)           the date on which any Commitment
Termination Event occurs.

 

Upon the occurrence of any event described in clauses
(b) or (c), the Revolving Loan Commitments shall terminate
automatically and without any further action.

 

“Revolving Note” means a promissory note of the
Borrower payable to a Lender, substantially in the form of Exhibit A-1
hereto (as such promissory note may be amended, endorsed or otherwise modified
from time to time), evidencing the aggregate Indebtedness of the Borrower to
such Lender resulting from outstanding Revolving Loans, and also means all
other promissory notes accepted from time to time in substitution therefor or
renewal thereof.

 

“S&P” means Standard & Poor’s Ratings
Group, a division of The McGraw-Hill Companies, Inc.

 

“Scotia Capital”
is defined in the preamble.

 

“Secured Parties” means, collectively, the
Lenders, the Issuer, the Administrative Agent, the Syndication Agent, the Lead
Arrangers, each counterparty to a Rate Protection Agreement that is (or at the
time such Rate Protection Agreement was entered into, was) a Lender or an
Affiliate thereof and (in each case) and each of their respective successors,
transferees and assigns.

 

“Security Agreements” means, collectively, (a)
the WWI Security Agreement, (b) the Patent Security Agreements, the Trademark
Security Agreements and the Copyright Security Agreements and (c) each other
security agreement executed and delivered from time to time

 

25

 

pursuant to clause (a)(i)
of Section 7.1.7, in each case, as amended, amended and restated,
supplemented or otherwise modified from time to time pursuant to the terms
thereof.

 

“Sellers” is defined in the second recital.

 

“Senior Debt” means all Debt other than
Subordinated Debt.

 

“Solvent” means, with respect to any Person on
a particular date, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including contingent
liabilities, of such Person, (b) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and matured,
(c) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person’s ability to pay as such debts and
liabilities mature, and (d) such Person is not engaged in business or a
transaction, and such person is not about to engage in business or a
transaction, for which such Person’s property would constitute an unreasonably
small capital. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.

 

“Stated Amount” of each Letter of Credit means
the total amount available to be drawn under such Letter of Credit upon the issuance
thereof.

 

“Stated Expiry Date”
is defined in Section 2.6.

 

“Stated Maturity” means, with respect to any
security, the date specified in such security as the fixed date on which the
final payment of principal of such security is due and payable, including
pursuant to any mandatory redemption provision (but excluding any provision
providing for the repurchase of such security at the option of the holder
thereof upon the happening of any contingency unless such contingency has
occurred).

 

“Stated Maturity Date”
means

 

(i)            in the case of any Revolving Loan, June
30, 2011;

 

(j)            in the case of any Term A Loan or
Designated Additional Term A Loan, June 30, 2011; and

 

(k)           in the case of any Designated New Term
Loan, as determined in accordance with Section 2.1.6.

 

“Sub Debt Documents” means, collectively, the
loan agreements, indentures, note purchase agreements, promissory notes,
guarantees, and other instruments and agreements evidencing the terms of
Subordinated Debt, as amended, supplemented, amended and restated or otherwise
modified in accordance with Section 7.2.10.

 

“Subordinated Debt” means any unsecured
subordinated Debt of the Borrower which shall (a) contain subordination
provisions that are no less favorable to the holders of “Senior

 

26

 

Indebtedness”, “Senior Debt” or
terms of similar import as used in the applicable Sub Debt Documents than
subordination provisions customarily contained in such documents for such type
of subordinated debt, (b) not provide for any amortization (in whole or in
part) of the Debt issued thereunder prior to 6 months after the Stated Maturity
Date for Term A Loans and (c) contain such other terms and conditions
which, taken as a whole, are comparable to those customarily contained in Sub
Debt Documents for such type of subordinated debt.

 

“Subordinated Guaranty” means, collectively,
any guaranty executed from time to time by any Subsidiary of the Borrower
pursuant to which the guarantor thereunder has any Contingent Liability with
respect to any Subordinated Debt, such Contingent Liability to be subordinated
on the same terms and conditions.

 

“Subordination Provisions”
is defined in Section 9.1.11.

 

“Subsidiary” means, with respect to any Person,
any corporation, partnership or other business entity of which more than 50% of
the outstanding Capital Securities (or other ownership interest) having
ordinary voting power to elect a majority of the board of directors, managers
or other voting members of the governing body of such entity (irrespective of
whether at the time Capital Securities (or other ownership interest) of any
other class or classes of such entity shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
such Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more other Subsidiaries of such Person. Unless the context
otherwise specifically requires, the term “Subsidiary” shall be a reference to
a Subsidiary of the Borrower.

 

“Subsidiary Guaranty” means the Guaranty, dated
September 29, 1999, by the signatories thereto in favor of the
Administrative Agent, as amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with its terms.

 

“Substitute Lender” is defined in Section
4.11.

 

“Swing Line Lender” means Scotia Capital (or
another Lender designated by Scotia Capital with the consent of the Borrower,
if such Lender agrees to be the Swing Line Lender hereunder), in such Person’s
capacity as the maker of Swing Line Loans.

 

“Swing Line Loan”
is defined in clause (b) of Section 2.1.2.

 

“Swing Line Loan Commitment” means, with
respect to the Swing Line Lender, the Swing Line Lender’s obligation pursuant
to clause (b) of Section 2.1.2 to make Swing Line Loans
and, with respect to each Revolving Lender (other than the Swing Line Lender),
such Revolving Lender’s obligation to participate in Swing Line Loans pursuant
to Section 2.3.2.

 

“Swing Line Loan Commitment Amount” means, on
any date, $15,000,000, as such amount may be reduced from time to time pursuant
to Section 2.2.

 

“Swing Line Note” means a promissory note of
the Borrower payable to the Swing Line Lender, in substantially the form of Exhibit
A-2 hereto (as such promissory note may be amended, endorsed or otherwise
modified from time to time), evidencing the aggregate Indebtedness of the
Borrower to the Swing Line Lender resulting from outstanding Swing Line

 

27

 

Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.

 

“Syndication Agent”
is defined in the preamble.

 

“Term A Loan”
is defined in clause (a) of Section 2.1.1.

 

“Term A Loan Commitment”
is defined in clause (a) of Section 2.1.1.

 

“Term A Loan Commitment
Amount” means $350,000,000.

 

“Term A Loan Lender” means any Lender which has
a Percentage of the Term A Loan Commitment Amount.

 

“Term A Note” means a promissory note of the
Borrower, payable to the order of any Lender, in the form of Exhibit A-3
hereto (as such promissory note may be amended, endorsed or otherwise modified
from time to time), evidencing the aggregate Indebtedness of the Borrower to
such Lender resulting from outstanding Term A Loans (including Designated
Additional Term A Loans), and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.

 

“Term Loans” means, collectively, the Term A
Loans and the Designated New Loans.

 

“Total Exposure Amount” means, on any date of
determination, the then outstanding principal amount of all Term Loans and the
then effective Revolving Loan Commitment Amount.

 

“Trademark Security Agreement” means the
Trademark Security Agreement, dated September 29, 1999, by the Borrower
and each of its U.S. Subsidiaries signatory thereto in favor of the
Administrative Agent, as amended, supplemented, amended and restated or
otherwise modified from time to time.

 

“Tranche” means, as the context may require,
the Loans constituting Term A Loans, Swing Line Loans, Revolving Loans or
Designated New Loans.

 

“Trigger Date” means the date on which WW.com
and its Subsidiaries no longer have any Indebtedness outstanding under the
WW.com Debt Documents and all commitments to make loans or other advances under
the WW.com Debt Documents have been terminated and neither WW.com or any of its
Subsidiaries has any other obligations outstanding under the WW.com Debt
Documents (other than obligations consisting of contingent indemnification
obligations).

 

“type” means, relative to any Loan, the portion
thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan.

 

“UCC” means the Uniform Commercial Code as in
effect from time to time in the State of New York.

 

28

 

“UKHC1” means Weight Watchers UK Holding Ltd, a
company incorporated under the laws of England.

 

“UKHC2” means Weight Watchers International
Ltd, a company incorporated under the laws of England.

 

“United States” or “U.S.” means the
United States of America, its fifty States and the District of Columbia.

 

“U.S. Dollar” and the sign “$” mean
lawful money of the United States.

 

“U.S. Subsidiary” means any Subsidiary that is
incorporated or organized under the laws of the United States or a state
thereof or the District of Columbia.

 

“Voting Stock” means, with respect to any
Person, Capital Securities of any class or kind ordinarily having the power to
vote for the election of directors, managers or other voting members of the
governing body of such Person.

 

“Waiver” means an agreement in favor of the
Administrative Agent for the benefit of the Lenders and the Issuer in form and
substance reasonably satisfactory to the Administrative Agent.

 

“Welfare Plan” means a “welfare plan”,
as such term is defined in section 3(1) of ERISA, and to which the Borrower or
any of its Subsidiaries has any liability.

 

“Wholly-owned Subsidiary” shall mean, with
respect to any Person, any Subsidiary of such Person all of the Capital
Securities (and all rights and options to purchase such Capital Securities) of
which, other than directors’ qualifying shares or shares sold pursuant to Local
Management Plans, are owned, beneficially and of record, by such Person and/or
one or more Wholly-owned Subsidiaries of such Person.

 

“WW.com” means WeightWatchers.com, Inc., a
Delaware corporation.

 

“WW.com Debt Documents” means, collectively,
(a) the First Lien Credit Agreement, dated as of December 16, 2005, among
WW.com, the lenders party thereto and the agents party thereto, (b) the Second
Lien Credit Agreement, dated as of December 16, 2005, among WW.com the lenders
party thereto and the agents party thereto and (c) any other document or
instrument evidencing all or any portion of any Indebtedness incurred to
refinance the Indebtedness incurred under the documents set forth in the
foregoing clause (a) or (b).

 

“WW Australia” means Weight Watchers
International Pty. Ltd. (ACN 070 836 449), an Australian company incorporated
in the State of New South Wales and resident in Australia and the direct corporate
parent of FPL.

 

“WWI Common Shares” means shares of common
stock of the Borrower, no par value.

 

“WWI Pledge Agreement” means the Pledge
Agreement, dated September 29, 1999, by the Borrower and its U.S.
Subsidiaries signatory thereto in favor of the Administrative Agent,

 

29

 

together with each supplement
thereto delivered pursuant to clause (a)(ii) of Section 7.1.7,
as amended, amended and restated, supplemented or otherwise modified from time
to time pursuant to the terms thereof.

 

“WWI Security Agreement” means the Security
Agreement, dated September 29, 1999, by the Borrower and all U.S. Subsidiaries
of the Borrower (other than (a) the Designated Subsidiary and (b) WW.com and
its Subsidiaries until the occurrence of the Trigger Date) in favor of the
Administrative Agent, together with each supplement thereto delivered pursuant
to clause (a)(i) of Section 7.1.7, as amended, amended and
restated, supplemented or otherwise modified from time to time pursuant to the
terms thereof.

 

SECTION 1.2. Use of
Defined Terms. Unless otherwise defined or the context otherwise requires,
terms for which meanings are provided in this Agreement shall have such
meanings when used in the Disclosure Schedule and in each other Loan Document,
notice and other communication delivered from time to time in connection with
this Agreement or any other Loan Document.

 

SECTION 1.3. Cross-References.
Unless otherwise specified, references in this Agreement and in each other Loan
Document to any Article or Section are references to such Article or Section of
this Agreement or such other Loan Document, as the case may be, and, unless
otherwise specified, references in any Article, Section or definition to any
clause are references to such clause of such Article, Section or definition.

 

SECTION 1.4. Accounting
and Financial Determinations. (a) 
All terms of an accounting or financial nature in this Agreement or any
other Loan Document shall be construed in accordance with GAAP, as in effect
from time to time; provided, however, that if the Borrower
notifies the Administrative Agent that the Borrower wishes to amend any
covenant in Section 7.2 or any related definition to eliminate the
effect of any change in GAAP occurring after the date of this Agreement on the
operation of such covenant (or if the Administrative Agent notifies the
Borrower that the Required Lenders wish to amend Section 7.2 or any
related definition for such purpose), then the Borrower’s compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Borrower
and the Required Lenders.

 

(b)           With respect to
any period of four consecutive Fiscal Quarters during which any Permitted
Acquisition or permitted Disposition occurs (and for purposes of determining
whether an acquisition is a Permitted Acquisition or a permitted Disposition
under Section 7.2.9 or would result in a Default), the Net Debt to
EBITDA Ratio shall be calculated with respect to such period on a pro  forma
basis after giving effect to such Permitted Acquisition or Disposition
(including, without duplication, (a) all pro  forma adjustments
permitted or required by Article 11 of Regulation S-X under the Securities Act
of 1933, as amended, and (b) pro  forma adjustments for cost
savings (net of continuing associated expenses) to the extent such cost savings
are factually supportable and have been realized or are reasonably expected to
be realized within 12 months following such Permitted Acquisition or
Disposition, provided that all such adjustments shall be set forth in a
reasonably detailed certificate of a financial Authorized Officer of the
Borrower), using, for purposes of making such calculations, the historical
financial statements of the Borrower and the Subsidiaries which shall be
reformulated as if such Permitted

 

30

 

Acquisition or Disposition, and
any other Permitted Acquisitions or Disposition that have been consummated
during the period, had been consummated on the first day of such period.

 

SECTION 1.5. Currency
Conversions. If it shall be necessary for purposes of this Agreement to
convert an amount in one currency into another currency, unless otherwise
provided herein, the exchange rate shall be determined by reference to the New
York foreign exchange selling rates (such determination to be made as at the
date of the relevant transaction), as determined by the Administrative Agent
(in accordance with its standard practices).

 

ARTICLE
II

COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES, NOTES AND LETTERS OF CREDIT

 

SECTION 2.1. Loan
Commitments. On the terms and subject to the conditions of this Agreement
(including Article V), the Lenders, the Swing Line Lender and the
Issuer severally agree to the continuation of Existing Loans and to make Credit
Extensions as set forth below.

 

SECTION 2.1.1. Term
Loan Commitments. Subject to compliance by the Obligors with the terms of Sections 2.1.4, 5.1
and 5.2:

 

(a)           in a single Borrowing occurring on the
Effective Date, each Lender that has a Term A Loan Commitment will make loans
(relative to such Lender, its “Term A Loans”) to the Borrower in an
amount equal to such Lender’s Percentage of the aggregate amount of the
Borrowing of Term A Loans requested by the Borrower to be made on such day
(with the commitment of each such Lender described in this clause (a)
herein referred to as its “Term A Loan Commitment”); and

 

(b)           no amounts paid or prepaid with respect
to Term A Loans may be reborrowed.

 

SECTION 2.1.2. Revolving
Loan Commitment and Swing Line Loan Commitment. Subject to compliance by
the Obligors with the terms of Section 2.1.4, Section 5.1 and Section 5.2,
the Revolving Loans and Swing Line Loans will be continued and/or made as set
forth below:

 

(a)           From time to time on any Business Day
occurring on or after the Effective Date but prior to the Revolving Loan
Commitment Termination Date, each Lender that has a Revolving Loan Commitment
(a “Revolving Lender”) will make loans (relative to such Lender, its “Revolving
Loans”) to the Borrower in U.S. Dollars, equal to such Lender’s Percentage
of the aggregate amount of the Borrowing of the Revolving Loans requested by
the Borrower to be made on such day. The Commitment of each Lender described in
this clause (a) is herein referred to as its “Revolving Loan
Commitment”. On the terms and subject to the conditions hereof, the
Borrower may from time to time borrow, prepay and reborrow the Revolving Loans.
All Existing Revolving Loans shall be continued as Revolving Loans hereunder.

 

31

 

(b)           From time to time on any Business Day
occurring on or after the Effective Date but prior to the Revolving Loan
Commitment Termination Date, the Swing Line Lender will make loans (relative to
the Swing Line Lender, its “Swing Line Loans”) to the Borrower equal to
the principal amount of the Swing Line Loans requested by the Borrower. On the
terms and subject to the conditions hereof, the Borrower may from time to time
borrow, prepay and reborrow such Swing Line Loans. All Existing Swing Line
Loans shall be continued as Swing Line Loans hereunder.

 

SECTION 2.1.3. Letter
of Credit Commitment. Subject to compliance by the Obligors with the terms
of Section 2.1.5, Section 5.1 and Section 5.2, from time
to time on any Business Day occurring on and after the Effective Date but prior
to the Revolving Loan Commitment Termination Date, the Issuer will:

 

(a)           issue one or more standby or documentary
letters of credit (each referred to as a “Letter of Credit”) for the
account of the Borrower in the Stated Amount requested by the Borrower on such
day; or

 

(b)           extend the Stated Expiry Date of an
existing standby Letter of Credit previously issued hereunder to a date not
later than the earlier of (x) the Revolving Loan Commitment Termination
Date and (y) one year from the date of such extension.

 

All Existing Letters of Credit shall be maintained as
Letters of Credit hereunder.

 

SECTION 2.1.4. Lenders
Not Permitted or Required to Make Loans. No Lender shall be permitted or
required to, and the Borrower shall not request that any Lender, make:

 

(a)           any Term A Loan if, after giving effect
thereto, the aggregate original principal amount of all the Term A Loans:

 

(i)            of all Lenders would exceed the Term A
Loan Commitment Amount; or

 

(ii)           of such Lender would exceed such Lender’s
Percentage of the Term A Loan Commitment Amount;

 

(b)           any Revolving Loan or Swing Line Loan if,
after giving effect thereto, the aggregate outstanding principal amount of all
the Revolving Loans and Swing Line Loans

 

(i)            of all the Lenders with Revolving Loan
Commitments, together with the aggregate amount of all Letter of Credit
Outstandings, would exceed the Revolving Loan Commitment Amount; or

 

(ii)           of such Lender with a Revolving Loan
Commitment (other than the Swing Line Lender), together with such Lender’s
Percentage of the aggregate amount of all Letter of Credit Outstandings, would
exceed such Lender’s Percentage of the Revolving Loan Commitment Amount; or

 

32

 

(c)           any Swing Line Loan if after giving
effect to the making of such Swing Line Loan, the outstanding principal amount
of all Swing Line Loans would exceed the then existing Swing Line Loan
Commitment Amount.

 

SECTION 2.1.5. Issuer
Not Permitted or Required to Issue Letters of Credit. The Issuer shall not
be permitted or required to issue any Letter of Credit if, after giving effect
thereto, (a) the aggregate amount of all Letter of Credit Outstandings
would exceed the Letter of Credit Commitment Amount or (b) the sum of the
aggregate amount of all Letter of Credit Outstandings plus the aggregate
principal amount of all Revolving Loans and Swing Line Loans then
outstanding would exceed the Revolving Loan Commitment Amount.

 

SECTION 2.1.6. Designated
Additional Loans. At any time that no Default has occurred and is
continuing, the Borrower may notify the Administrative Agent that the Borrower
is requesting that, on the terms and subject to the conditions contained in
this Agreement, the Lenders and/or other lenders not then a party to this
Agreement provide up to an aggregate amount of $400,000,000 in commitments to
provide (i) (A) additional Revolving Loan Commitments or (B) loans to be
provided under a new tranche of revolving loans which have terms and conditions
(including interest rate and maturity date), as mutually agreed to by the
Borrower, the Administrative Agent, the Syndication Agent and the Person(s)
providing such new tranche of Loans (in either case, “Designated Additional
Revolving Loan Commitments), (ii) additional Term A Loans (“Designated
Additional Term A Loans”) and/or (iii) loans to be provided under a new
tranche of term loans (“Designated New Term Loans”) which have terms and
conditions (including interest rate and amortization schedule), as mutually
agreed to by the Borrower, the Administrative Agent, the Syndication Agent and
the Person(s) providing such new tranche of Loans. Notwithstanding anything to
the contrary herein, the final maturity date of any new tranche of revolving
loans described in clause (i)(B) above shall be no earlier than the
Stated Maturity Date of the Revolving Loans and the final maturity date of any
Designated New Loans shall be no earlier than the Stated Maturity Date of the
Term A Loans. Upon receipt of any such notice, the Administrative Agent shall
use commercially reasonable efforts to arrange for the Lenders or other
Eligible Institutions to provide such additional commitments; provided
that the Administrative Agent will first offer each of the Lenders that then
has a Percentage of the Commitment or Loans of the type proposed to be obtained
a pro  rata portion of any such additional commitment. Nothing
contained in this Section 2.1.6 or otherwise in this Agreement is
intended to commit any Lender or any Agent to provide any portion of any such
additional commitments. If and to the extent that any Lenders and/or other
lenders agree, in their sole discretion, to provide any such additional
commitments, (i) in the case of Designated Additional Revolving Loan
Commitments of the type set forth in clause (i)(A) above, the Revolving
Loan Commitment Amount shall be increased by the amount of the additional
Revolving Loan Commitments agreed to be so provided, (ii) subject to compliance
with the terms of Section 5.2 and such other terms and conditions
mutually agreed to among the Borrower, the Administrative Agent, the Syndication
Agent and the Lenders providing any such other commitments, Loans of the type
requested by the Borrower will be made on the date as agreed among such
Persons, (iii) the Percentages of the respective Lenders in respect of the
applicable Commitment or type of Loan shall be proportionally adjusted
(provided that the Percentage of each Lender shall not be increased without the
consent of such Lender), (iv) in the case of Designated Additional Revolving
Loan Commitment of the type set forth in clause (i)(A) above at such
time and in such manner as the Borrower and the Administrative Agent shall
agree

 

33

 

(it being understood that the
Borrower and the Agents will use commercially reasonable efforts to avoid the
prepayment or assignment of any LIBO Rate Loan on a day other than the last day
of the Interest Period applicable thereto), the Lenders shall assign and assume
outstanding Revolving Loans and participations in outstanding Letters of Credit
so as to cause the amounts of such Revolving Loans and participations in
Letters of Credit held by each Lender to conform to the respective Percentages
of the Revolving Loan Commitment of the Lenders and (v) the Borrower shall
execute and deliver any additional Notes or other amendments or modifications
to this Agreement or any other Loan Document as the Administrative Agent may
reasonably request. Any fees payable in respect of any commitment provided for
in this Section 2.1.6 shall be as agreed to by the Borrower and the
Administrative Agent. Any designation of a commitment hereunder (i) shall be
irrevocable, (ii) shall reduce the amount of commitments that may be requested
under this Section 2.1.6  pro tanto and (iii) shall be in a
minimum principal amount of $5,000,000 and integral multiples of $1,000,000.

 

SECTION 2.2. Reduction
of the Commitment Amounts. The Commitment Amounts are subject to reductions
from time to time pursuant to this Section 2.2.

 

SECTION 2.2.1. Optional.
The Borrower may, from time to time on any Business Day occurring after
the time of the initial Credit Extension hereunder, voluntarily reduce the
Swing Line Loan Commitment Amount, the Letter of Credit Commitment Amount or
the Revolving Loan Commitment Amount; provided, however, that all
such reductions shall require at least three Business Days’ prior notice to the
Administrative Agent and be permanent, and any partial reduction of any
Commitment Amount shall be in a minimum amount of $1,000,000 and in an integral
multiple of $100,000. Any reduction of the Revolving Loan Commitment Amount
which reduces the Revolving Loan Commitment Amount below the sum of
(i) the Swing Line Loan Commitment Amount and (ii) the Letter of
Credit Commitment Amount shall result in an automatic and corresponding reduction
of the Swing Line Loan Commitment Amount and/or Letter of Credit Commitment
Amount (as directed by the Borrower in a notice to the Administrative Agent
delivered together with the notice of such voluntary reduction in the Revolving
Loan Commitment Amount) to an aggregate amount not in excess of the Revolving
Loan Commitment Amount, as so reduced, without any further action on the part
of the Swing Line Lender or the Issuer.

 

SECTION 2.2.2. Mandatory.
Following the prepayment in full of the Term Loans, the Revolving Loan
Commitment Amount shall, without any further action, automatically and
permanently be reduced on the date the Term Loans would otherwise have been
required to be prepaid with any Net Disposition Proceeds, in an amount equal to
the amount by which the Term Loans would otherwise be required to be prepaid if
Term Loans had been outstanding. Any reduction of the Revolving Loan Commitment
Amount which reduces the Revolving Loan Commitment Amount below the sum of
(i) the Swing Line Loan Commitment Amount and (ii) the Letter of
Credit Commitment Amount shall result in an automatic and corresponding
reduction of the Swing Line Loan Commitment Amount and/or Letter of Credit
Commitment Amount (as directed by the Borrower in a notice to the Administrative
Agent) to an aggregate amount not in excess of the Revolving Loan Commitment
Amount, as so reduced, without any further action on the part of the Swing Line
Lender or the Issuer.

 

34

 

SECTION 2.3. Borrowing
Procedures and Funding Maintenance. Loans shall be made by the Lenders in
accordance with this Section.

 

SECTION 2.3.1. Term
Loans and Revolving Loans. By delivering a Borrowing Request to the
Administrative Agent on or before 12:00 noon, New York time, on a Business Day,
the Borrower may from time to time irrevocably request, on not less than one
(in the case of Base Rate Loans) and three (in the case of LIBO Rate Loans) nor
more than (in each case) five Business Days’ notice, that a Borrowing be made, in
the case of LIBO Rate Loans, in a minimum amount of $2,000,000, and an integral
multiple of $500,000, and in the case of Base Rate Loans, in a minimum amount
of $500,000 and an integral multiple thereof or, in either case, in the unused
amount of the applicable Commitment. On the terms and subject to the conditions
of this Agreement, each Borrowing shall be comprised of the type of Loans, and
shall be made on the Business Day, specified in such Borrowing Request. On or
before 11:00 a.m., New York time, on such Business Day each Lender shall
deposit with the Administrative Agent same day funds in an amount equal to such
Lender’s Percentage of the requested Borrowing. Such deposit will be made to an
account which the Administrative Agent shall specify from time to time by
notice to the Lenders. To the extent funds are received from the Lenders, the
Administrative Agent shall make such funds available to the Borrower by wire
transfer to the accounts the Borrower shall have specified in its Borrowing
Request. No Lender’s obligation to make any Loan shall be affected by any other
Lender’s failure to make any Loan.

 

SECTION 2.3.2. Swing Line Loans.

 

(a)           By telephonic notice, promptly followed
(within three Business Days) by the delivery of a confirming Borrowing Request,
to the Swing Line Lender on or before 11:00 a.m., New York time, on a
Business Day, the Borrower may from time to time irrevocably request that Swing
Line Loans be made by the Swing Line Lender in an aggregate minimum principal
amount of $200,000 and an integral multiple of $100,000. Each request by the
Borrower for a Swing Line Loan shall constitute a representation and warranty
by the Borrower that on the date of such request and (if different) the date of
the making of the Swing Line Loan, both immediately before and after giving
effect to such Swing Line Loan and the application of the proceeds thereof, the
statements made in Section 5.2.1 are true and correct. All Swing Line
Loans shall be made as Base Rate Loans and shall not be entitled to be
converted into LIBO Rate Loans. The proceeds of each Swing Line Loan shall be
made available by the Swing Line Lender, by its close of business on the
Business Day telephonic notice is received by it as provided in the preceding
sentences, to the Borrower by wire transfer to the accounts the Borrower shall
have specified in its notice therefor.

 

(b)           If (i) any Swing Line Loan shall be
outstanding for more than four full Business Days or (ii) after giving
effect to any request for a Swing Line Loan or a Revolving Loan the aggregate
principal amount of Revolving Loans and Swing Line Loans outstanding to the
Swing Line Lender, together with the Swing Line Lender’s Percentage of all
Letter of Credit Outstandings, would exceed the Swing Line Lender’s Percentage of
the Revolving Loan Commitment Amount, the Swing Line Lender, at any time in its
sole and absolute discretion may request each Lender that has a Revolving Loan
Commitment, and each such Lender, including the Swing Line Lender hereby

 

35

 

agrees,
to make a Revolving Loan (which shall always be initially funded as a Base Rate
Loan) in an amount equal to such Lender’s Percentage of the amount of the Swing
Line Loans (“Refunded Swing Line Loans”) outstanding on the date such
notice is given. On or before 11:00 a.m. (New York time) on the first
Business Day following receipt by each Lender of a request to make Revolving
Loans as provided in the preceding sentence, each such Lender (other than the
Swing Line Lender) shall deposit in an account specified by the Administrative
Agent to the Lenders from time to time the amount so requested in same day
funds, whereupon such funds shall be immediately delivered to the Swing Line
Lender (and not the Borrower) and applied to repay the Refunded Swing Line
Loans. On the day such Revolving Loans are made, the Swing Line Lender’s
Percentage of the Refunded Swing Line Loans shall be deemed to be paid. Upon
the making of any Revolving Loan pursuant to this clause, the amount so funded
shall become due under such Lender’s Revolving Note and shall no longer be owed
under the Swing Line Note. Each Lender’s obligation to make the Revolving Loans
referred to in this clause shall be absolute and unconditional and shall not be
affected by any circumstance, including, (i) any setoff, counterclaim,
recoupment, defense or other right which such Lender may have against the Swing
Line Lender, the Borrower or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of any Default; (iii) any adverse
change in the condition (financial or otherwise) of the Borrower or any other
Obligor, subsequent to the date of the making of a Swing Line Loan;
(iv) the acceleration or maturity of any Loans or the termination of the
Revolving Loan Commitment after the making of any Swing Line Loan; (v) any
breach of this Agreement by the Borrower, any other Obligor or any other
Lender; or (vi) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.

 

(c)           In the event that (i) the Borrower
or any Subsidiary is subject to any bankruptcy or insolvency proceedings as
provided in Section 9.1.9 or (ii) the Swing Line Lender otherwise
requests, each Lender with a Revolving Loan Commitment shall acquire without
recourse or warranty an undivided participation interest equal to such Lender’s
Percentage of any Swing Line Loan otherwise required to be repaid by such
Lender pursuant to the preceding clause by paying to the Swing Line Lender on
the date on which such Lender would otherwise have been required to make a
Revolving Loan in respect of such Swing Line Loan pursuant to the preceding
clause, in same day funds, an amount equal to such Lender’s Percentage of such
Swing Line Loan, and no Revolving Loans shall be made by such Lender pursuant
to the preceding clause. From and after the date on which any Lender purchases
an undivided participation interest in a Swing Line Loan pursuant to this
clause, the Swing Line Lender shall distribute to such Lender (appropriately
adjusted, in the case of interest payments, to reflect the period of time
during which such Lender’s participation interest is outstanding and funded)
its ratable amount of all payments of principal and interest in respect of such
Swing Line Loan in like funds as received; provided, however,
that in the event such payment received by the Swing Line Lender is required to
be returned to the Borrower, such Lender shall return to the Swing Line Lender
the portion of any amounts which such Lender had received from the Swing Line
Lender in like funds.

 

(d)           Notwithstanding anything herein to the
contrary, the Swing Line Lender shall not be obligated to make any Swing Line
Loans if it has elected after the occurrence

 

36

 

of a
Default not to make Swing Line Loans and has notified the Borrower in writing
or by telephone of such election. The Swing Line Lender shall promptly give
notice to the Lenders of such election not to make Swing Line Loans.

 

SECTION 2.4. Continuation
and Conversion Elections. By delivering a Continuation/Conversion Notice to
the Administrative Agent on or before 12:00 noon, New York time, on a Business
Day, the Borrower may from time to time irrevocably elect, on not less than one
(in the case of a conversion of LIBO Rate Loans to Base Rate Loans) and three
(in the case of a continuation of LIBO Rate Loans or a conversion of Base Rate
Loans into LIBO Rate Loans) nor more than (in each case) five Business Days’
notice that all, or any portion in an aggregate minimum amount of $2,000,000
and an integral multiple of $500,000, in the case of the continuation of, or
conversion into, LIBO Rate Loans, or an aggregate minimum amount of $500,000
and an integral multiple thereof, in the case of the conversion into Base Rate
Loans (other than Swing Line Loans as provided in clause (a) of Section
2.3.2) be, in the case of Base Rate Loans, converted into LIBO Rate Loans
or, in the case of LIBO Rate Loans, be converted into a Base Rate Loan or
continued as a LIBO Rate Loan (in the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan at least
three Business Days before the last day of the then current Interest Period
with respect thereto, such LIBO Rate Loan shall, on such last day,
automatically convert to a Base Rate Loan); provided, however,
that (x) each such conversion or continuation shall be pro rated among the
applicable outstanding Loans of the relevant Lenders, and (y) no portion
of the outstanding principal amount of any Loans may be continued as, or be
converted into, LIBO Rate Loans when any Default has occurred and is
continuing.

 

SECTION 2.5. Funding.
Each Lender may, if it so elects, fulfill its obligation to make, continue or
convert LIBO Rate Loans hereunder by causing one of its foreign branches or
Affiliates (or an international banking facility created by such Lender) to
make or maintain such LIBO Rate Loan, so long as such action does not result in
increased costs to the Borrower; provided, however, that such
LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by
such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan
shall nevertheless be to such Lender for the account of such foreign branch,
Affiliate or international banking facility; and provided  further,
however, that such Lender shall cause such foreign branch, Affiliate or
international banking facility to comply with the applicable provisions of clause
(b) of Section 4.6 with respect to such LIBO Rate Loan. In addition,
the Borrower hereby consents and agrees that, for purposes of any determination
to be made for purposes of Sections 4.1, 4.2, 4.3 or 4.4,
it shall be conclusively assumed that each Lender elected to fund all LIBO Rate
Loans by purchasing U.S. Dollar deposits in its LIBOR Office’s interbank
eurodollar market.

 

SECTION 2.6. Issuance
Procedures. By delivering to the Administrative Agent an Issuance Request
on or before 12:00 noon, New York time, on a Business Day, the Borrower
may, from time to time irrevocably request, on not less than three nor more
than ten Business Days’ notice (or such shorter notice as may be acceptable to
the Issuer), in the case of an initial issuance of a Letter of Credit, and not
less than three nor more than ten Business Days’ notice (unless a shorter
notice period is acceptable to the Issuer) prior to the then existing Stated
Expiry Date of a Letter of Credit, in the case of a request for the extension
of the Stated Expiry Date of a Letter of Credit, that the Issuer issue, or
extend the Stated Expiry Date of, as the case may be, an

 

37

 

irrevocable Letter of Credit
for the Borrower’s account or for the account of any wholly-owned U.S.
Subsidiary of the Borrower that is a party to the Subsidiary Guaranty and the
WWI Security Agreement and whose outstanding Capital Securities is pledged to
the Administrative Agent for the benefit of the Lenders pursuant to the WWI
Pledge Agreement, in such form as may be requested by the Borrower and approved
by the Issuer, solely for the purposes described in Section 7.1.9. Notwithstanding
anything to the contrary contained herein or in any separate application for
any Letter of Credit, the Borrower hereby acknowledges and agrees that it shall
be obligated to reimburse the Issuer upon each Disbursement of a Letter of
Credit, and it shall be deemed to be the obligor for purposes of each such
Letter of Credit issued hereunder (whether the account party on such Letter of
Credit is the Borrower or a Subsidiary of the Borrower). Upon receipt of an
Issuance Request, the Administrative Agent shall promptly notify the Issuer and
each Lender thereof. Each Letter of Credit shall by its terms be stated to
expire on a date (its “Stated Expiry Date”) no later than the earlier to
occur of (i) the Revolving Loan Commitment Termination Date or (ii) one
year from the date of its issuance. The Issuer will make available to the
beneficiary thereof the original of each Letter of Credit which it issues
hereunder.

 

SECTION 2.6.1. Other
Lenders’ Participation. Upon the issuance of each Letter of Credit issued
by the Issuer pursuant hereto (or the continuation of an Existing Letter of
Credit hereunder), and without further action, each Lender (other than the
Issuer) that has a Revolving Loan Commitment shall be deemed to have
irrevocably purchased from the Issuer, to the extent of its Percentage to make
Revolving Loans, and the Issuer shall be deemed to have irrevocably granted and
sold to such Lender a participation interest in such Letter of Credit
(including the Contingent Liability and any Reimbursement Obligation and all
rights with respect thereto), and such Lender shall, to the extent of its
Revolving Loan Commitment Percentage, be responsible for reimbursing promptly
(and in any event within one Business Day) the Issuer for Reimbursement
Obligations which have not been reimbursed by the Borrower in accordance with Section
2.6.3. In addition, such Lender shall, to the extent of its Percentage to
make Revolving Loans, be entitled to receive a ratable portion of the Letter of
Credit fees payable pursuant to Section 3.3.3 with respect to each
Letter of Credit and of interest payable pursuant to Section 3.2 with
respect to any Reimbursement Obligation. To the extent that any Lender has
reimbursed the Issuer for a Disbursement as required by this Section, such
Lender shall be entitled to receive its ratable portion of any amounts
subsequently received (from the Borrower or otherwise) in respect of such
Disbursement.

 

SECTION 2.6.2. Disbursements;
Conversion to Revolving Loans. The Issuer will notify the Borrower and the
Administrative Agent promptly of the presentment for payment of any Letter of
Credit issued by the Issuer, together with notice of the date (the “Disbursement
Date”) such payment shall be made (each such payment, a “Disbursement”).
Subject to the terms and provisions of such Letter of Credit and this
Agreement, the Issuer shall make such payment to the beneficiary (or its
designee) of such Letter of Credit. Prior to 12:00 noon, New York time, on
the first Business Day following the Disbursement Date (the “Disbursement
Due Date”), the Borrower will reimburse the Administrative Agent, for the
account of the Issuer, for all amounts which the Issuer has disbursed under
such Letter of Credit, together with interest thereon at the rate per annum
otherwise applicable to Revolving Loans (made as Base Rate Loans) from and
including the Disbursement Date to but excluding the Disbursement Due Date and,
thereafter (unless such Disbursement is converted into a Base Rate Loan on the
Disbursement Due Date), at a rate per annum equal to the rate per annum then in
effect with respect to overdue Revolving

 

38

 

Loans (made as Base Rate Loans)
pursuant to Section 3.2.2 for the period from the Disbursement Due Date
through the date of such reimbursement; provided, however, that,
if no Default shall have then occurred and be continuing, unless the Borrower
has notified the Administrative Agent no later than one Business Day prior to
the Disbursement Due Date that it will reimburse the Issuer for the applicable
Disbursement, then the amount of the Disbursement shall be deemed to be a
Revolving Loan constituting a Base Rate Loan and following the giving of notice
thereof by the Administrative Agent to the Lenders, each Lender with a
commitment to make Revolving Loans (other than the Issuer) will deliver to the
Issuer on the Disbursement Due Date immediately available funds in an amount
equal to such Lender’s Percentage of such Revolving Loan. Each conversion of
Disbursement amounts into Revolving Loans shall constitute a representation and
warranty by the Borrower that on the date of the making of such Revolving Loan
all of the statements set forth in Section 5.2.1 are true and
correct.

 

SECTION 2.6.3. Reimbursement.
The obligation (a “Reimbursement Obligation”) of the Borrower under Section
2.6.2 to reimburse the Issuer with respect to each Disbursement (including
interest thereon) not converted into a Base Rate Loan pursuant to Section
2.6.2, and, upon the failure of the Borrower to reimburse the Issuer and
the giving of notice thereof by the Administrative Agent to the Lenders, each
Lender’s (to the extent it has a Revolving Loan Commitment) obligation under Section
2.6.1 to reimburse the Issuer or fund its Percentage of any Disbursement
converted into a Base Rate Loan, shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower or such Lender, as the case may be, may have or have
had against the Issuer or any such Lender, including any defense based upon the
failure of any Disbursement to conform to the terms of the applicable Letter of
Credit (if, in the Issuer’s good faith opinion, such Disbursement is determined
to be appropriate) or any non-application or misapplication by the beneficiary
of the proceeds of such Letter of Credit; provided, however, that
after paying in full its Reimbursement Obligation hereunder, nothing herein
shall adversely affect the right of the Borrower or such Lender, as the case
may be, to commence any proceeding against the Issuer for any wrongful
Disbursement made by the Issuer under a Letter of Credit as a result of acts or
omissions constituting gross negligence or willful misconduct on the part of
the Issuer.

 

SECTION 2.6.4. Deemed
Disbursements. Upon the occurrence and during the continuation of any Event
of Default of the type described in Section 9.1.9 or, with notice from
the Administrative Agent acting at the direction of the Required Lenders, upon
the occurrence and during the continuation of any other Event of Default,

 

(a)           an amount equal to that portion of all
Letter of Credit Outstandings attributable to the then aggregate amount which
is undrawn and available under all Letters of Credit issued and outstanding
shall, without demand upon or notice to the Borrower or any other Person, be
deemed to have been paid or disbursed by the Issuer under such Letters of Credit
(notwithstanding that such amount may not in fact have been so paid or
disbursed); and

 

(b)           upon notification by the Administrative
Agent to the Borrower of its obligations under this Section, the Borrower shall
be immediately obligated to reimburse the Issuer for the amount deemed to have
been so paid or disbursed by the Issuer.

 

39

 

Any amounts so payable by the Borrower pursuant to
this Section shall be deposited in cash with the Administrative Agent and held
as collateral security for the Obligations in connection with the Letters of
Credit issued by the Issuer. At such time when the Events of Default giving
rise to the deemed disbursements hereunder shall have been cured or waived, the
Administrative Agent shall return to the Borrower all amounts then on deposit
with the Administrative Agent pursuant to this Section, together with accrued
interest at the Federal Funds Rate, which have not been applied to the
satisfaction of such Obligations.

 

SECTION 2.6.5. Nature
of Reimbursement Obligations. The Borrower and, to the extent set forth in Section
2.6.1, each Lender with a Revolving Loan Commitment, shall assume all risks
of the acts, omissions or misuse of any Letter of Credit by the beneficiary
thereof. The Issuer (except to the extent of its own gross negligence or
willful misconduct) shall not be responsible for:

 

(a)           the form, validity, sufficiency,
accuracy, genuineness or legal effect of any Letter of Credit or any document
submitted by any party in connection with the application for and issuance of a
Letter of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;

 

(b)           the form, validity, sufficiency,
accuracy, genuineness or legal effect of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or the proceeds thereof in whole or in part, which may
prove to be invalid or ineffective for any reason;

 

(c)           failure of the beneficiary to comply
fully with conditions required in order to demand payment under a Letter of
Credit;

 

(d)           errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise; or

 

(e)           any loss or delay in the transmission or
otherwise of any document or draft required in order to make a Disbursement
under a Letter of Credit.

 

None of the foregoing shall affect, impair or prevent
the vesting of any of the rights or powers granted to the Issuer or any Lender
with a Revolving Loan Commitment hereunder. In furtherance and extension and
not in limitation or derogation of any of the foregoing, any action taken or
omitted to be taken by the Issuer in good faith (and not constituting gross
negligence or willful misconduct) shall be binding upon the Borrower, each
Obligor and each such Lender, and shall not put the Issuer under any resulting
liability to the Borrower, any Obligor or any such Lender, as the case may be.

 

SECTION 2.7. Notes. Each Lender’s Loans under a Commitment for a
Loan shall be evidenced, if such Lender shall request, by a Note payable to the
order of such Lender in a maximum principal amount equal to such Lender’s
Percentage of the original applicable Commitment Amount. All Swing Line Loans
made by the Swing Line Lender shall be evidenced by a Swing Line Note payable
to the order of the Swing Line Lender in a maximum principal amount equal to
the Swing Line Loan Commitment Amount. The Borrower hereby irrevocably authorizes
each Lender to make (or cause to be made) appropriate notations on the

 

40

 

grid attached to such Lender’s
Notes (or on any continuation of such grid), which notations, if made, shall
evidence, inter  alia, the date of, the outstanding principal of,
and the interest rate and Interest Period applicable to the Loans evidenced
thereby. Such notations shall be conclusive and binding on the Borrower absent
manifest error; provided, however, that the failure of any Lender
to make any such notations shall not limit or otherwise affect any Obligations
of the Borrower or any other Obligor.

 

SECTION 2.8. Registered
Notes. (a) 
Any Non-U.S. Lender that could become completely exempt from withholding
of any taxes in respect of payment of any interest due to such Non-U.S. Lender
under this Agreement if the Notes held by such Lender were in registered form
for U.S. Federal income tax purposes may request the Borrower (through the
Administrative Agent), and the Borrower agrees (i) to exchange for any
Notes held by such Lender, or (ii) to issue to such Lender on the date it
becomes a Lender, promissory notes(s) registered as provided in clause (b)
of this Section 2.8 (each a Registered Note). Registered Notes may not
be exchanged for Notes that are not Registered Notes.

 

(b)           The Administrative Agent shall enter, in
the Register, the name of the registered owner of the Non-U.S. Lender
Obligation(s) evidenced by a Registered Note.

 

(c)           The Register shall be available for inspection
by the Borrower and any Lender at any reasonable time upon reasonable prior
notice.

 

ARTICLE
III

REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

 

SECTION 3.1. Repayments
and Prepayments; Application.

 

SECTION 3.1.1. Repayments
and Prepayments. The Borrower shall repay in full the unpaid principal
amount of each Loan, as applicable, upon the Stated Maturity Date therefor. Prior
thereto,

 

(a)           the Borrower may, from time to time on
any Business Day, make a voluntary prepayment, in whole or in part, of the
outstanding principal amount of any

 

(i)            Loan (other than Swing Line Loans), provided,
however, that

 

(A)          any such prepayment of the Term Loans and
Designated New Term Loans shall be made pro  rata among such Term
Loans and Designated New Term Loans of the same type and if applicable, having
the same Interest Period as all Lenders that have made such Term Loans or
Designated New Term Loans, and any such prepayment of Revolving Loans shall be
made pro  rata among the Revolving Loans of the same type and, if
applicable, having the same Interest Period as all Lenders that have made such
Revolving Loans;

 

41

 

(B)           the Borrower shall comply with Section 4.4
in the event that any LIBO Rate Loan is prepaid on any day other than the last
day of the Interest Period for such Loan;

 

(C)           all such voluntary prepayments shall
require at least three but no more than five Business Days’ prior written
notice to the Administrative Agent; and

 

(D)          all such voluntary partial prepayments
shall be, in the case of LIBO Rate Loans, in an aggregate minimum amount of
$2,000,000 and an integral multiple of $500,000 and, in the case of Base Rate
Loans, in an aggregate minimum amount of $500,000 and an integral multiple
thereof; or

 

(ii)           Swing Line Loans, provided that
all such voluntary prepayments shall require prior telephonic notice to the
Swing Line Lender on or before 1:00 p.m., New York time, on the day of such
prepayment (such notice to be confirmed in writing within 24 hours thereafter);

 

(b)           the Borrower shall no later than one
Business Day following the receipt by the Borrower or any of its Subsidiaries
of any Net Disposition Proceeds, deliver to the Administrative Agent a
calculation of the amount of such Net Disposition Proceeds and, subject to the
following proviso, make a mandatory prepayment of the Term Loans in an
amount equal to 100% of such Net Disposition Proceeds, to be applied as set
forth in Section 3.1.2; provided, however, that, at
the option of the Borrower and so long as no Default shall have occurred and be
continuing, the Borrower may use or cause the appropriate Subsidiary to use the
Net Disposition Proceeds to purchase assets useful in the business of the
Borrower and its Subsidiaries or to purchase a majority controlling interest in
a Person owning such assets or to increase any such controlling interest
already maintained by it; provided, that if such Net Disposition
Proceeds arise from or are related to a Disposition of assets of a Guarantor
then any such reinvestment must either be made by or in a Guarantor or a Person
which upon the making of such reinvestment becomes a Guarantor (with such
assets or interests collectively referred to as “Qualified Assets”), in
each case, within 365 days after the consummation (and with the Net Disposition
Proceeds) of such Disposition, and in the event the Borrower elects to exercise
its right to purchase Qualified Assets with the Net Disposition Proceeds
pursuant to this clause, the Borrower shall deliver a certificate of an Authorized
Officer of the Borrower to the Administrative Agent within 30 days following
the receipt of Net Disposition Proceeds setting forth the amount of the Net
Disposition Proceeds which the Borrower expects to use to purchase Qualified
Assets during such 365 day period; provided  further, that the
Borrower and its Subsidiaries shall only be permitted to reinvest Net
Disposition Proceeds in Qualified Assets to the extent permitted by Section 7.2.5
over the term of this Agreement. If and to the extent that the Borrower has
elected to reinvest Net Disposition Proceeds as permitted above, then on the
date which is 365 days (in the case of clause (b)(i) below)
and 370 days (in the case of clause (b)(ii) below) after the relevant
Disposition, the Borrower shall (i) deliver a certificate of an Authorized
Officer of the Borrower to the Administrative Agent certifying as to the amount
and use of such Net 

 

42

 

Disposition
Proceeds actually used to purchase Qualified Assets and (ii) deliver to
the Administrative Agent, for application in accordance with this clause and Section 3.1.2,
an amount equal to the remaining unused Net Disposition Proceeds;

 

(c)           the Borrower shall, on each date when any
reduction in the Revolving Loan Commitment Amount shall become effective,
including pursuant to Section 2.2, make a mandatory prepayment of
Revolving Loans and (if necessary) Swing Line Loans, and (if necessary) deposit
with the Administrative Agent cash collateral for Letter of Credit
Outstandings) in an aggregate amount equal to the excess, if any, of the
aggregate outstanding principal amount of all Revolving Loans, Swing Line Loans
and Letters of Credit Outstanding over the Revolving Loan Commitment Amount as
so reduced;

 

(d)           the Borrower shall, on the Stated
Maturity Date and on each Quarterly Payment Date occurring on or during any
period set forth below, make a scheduled repayment of the aggregate outstanding
principal amount, if any, of all Term A Loans in an amount equal to the amount
set forth below opposite the Stated Maturity Date or such Quarterly Payment
Date (as such amounts may have otherwise been reduced pursuant to this
Agreement), as applicable:

 

	
  01/01/07 through (and including)

  	
   

  	
   

  	
   

  
	
  12/31/07

  	
   

  	
  $

  	
  4,375,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  01/01/08 through (and including)

  	
   

  	
   

  	
   

  
	
  12/31/08

  	
   

  	
  $

  	
  8,750,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  01/01/09 through (and including)

  	
   

  	
   

  	
   

  
	
  12/31/09

  	
   

  	
  $

  	
  13,125,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  01/01/10 through (and including)

  	
   

  	
   

  	
   

  
	
  12/31/10

  	
   

  	
  $

  	
  17,500,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/01/11 through (and including)

  	
   

  	
   

  	
   

  
	
  Stated
  Maturity Date for Term A Loans

  	
   

  	
  $

  	
  87,500,000.00

  	
  ;

  

 

provided, that each remaining amortization amount of
Term A Loans occurring after the date of the making of a Designated Additional
Term A Loan will be increased pro  rata by the aggregate principal
amount of any Designated Additional Term A Loan based on the percentage of the
original principal amount of Term A Loans payable on such Quarterly Payment
Date with any excess due and payable on the Stated Maturity Date for Term A
Loans.

 

(e)           the Borrower shall, immediately upon any
acceleration of the Stated Maturity Date of any Loans or Obligations pursuant
to Section 9.2 or Section 9.3, repay all Loans and provide
the Administrative Agent with cash collateral in an amount equal to the Letter
of Credit Outstandings, unless, pursuant to Section 9.3, only a portion
of all Loans and Obligations are so accelerated (in which case the portion so
accelerated shall be so prepaid or cash collateralized with the Administrative
Agent); and

 

43

 

(f)            the Borrower shall pay the principal
amount of the Designated New Term Loans at such times and in such amounts as
determined pursuant to Section 2.1.6.

 

Each prepayment of any Loans made pursuant to this
Section shall be without premium or penalty, except as may be required by Section
4.4. No prepayment of principal of any Revolving Loans or Swing Line Loans
pursuant to clause (a) of Section 3.1.1 shall cause a reduction
in the Revolving Loan Commitment Amount or the Swing Line Loan Commitment
Amount, as the case may be.

 

SECTION 3.1.2. Application.

 

(a)           Subject to clause (b), each
prepayment or repayment of the principal of the Loans shall be applied, to the
extent of such prepayment or repayment, first, to the principal amount
thereof being maintained as Base Rate Loans or bearing interest with reference
to the Base Rate, as the case may be, and second, to the principal
amount thereof being maintained as LIBO Rate Loans or bearing interest with
reference to the LIBO Rate, as the case may be.

 

(b)           Each voluntary prepayment of Term Loans
shall be applied at the direction of the Borrower until all such Term Loans
have been paid in full.

 

(c)           Each prepayment of Term Loans made
pursuant to clause (b) of Section 3.1.1 shall be applied pro
rata to a mandatory prepayment of the outstanding principal amount of
all Term Loans (with the amount of such prepayment of the Term Loans being
applied to the remaining Term Loan amortization payments, as the case may be,
required pursuant to clauses (d) and (g) of Section 3.1.1,
in each case pro  rata in accordance with the amount of each such
remaining amortization payment), until all such Term Loans have been paid in
full.

 

SECTION 3.2. Interest
Provisions. Interest on the outstanding principal amount of Loans shall
accrue and be payable in accordance with this Section 3.2.

 

SECTION 3.2.1. Rates. Pursuant to an appropriately delivered
Borrowing Request or Continuation/Conversion Notice, the Borrower may elect
that Loans comprising a Borrowing accrue interest at a rate per annum:

 

(a)           on that portion maintained from time to
time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time
to time in effect plus the Applicable Margin for such Loans; and

 

(b)           on that portion maintained as a LIBO Rate
Loan, during each Interest Period applicable thereto, equal to the sum of the
LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable
Margin for such Loans.

 

All LIBO Rate Loans shall bear interest from and
including the first day of the applicable Interest Period to (but not
including) the last day of such Interest Period at the interest rate determined
as applicable to such LIBO Rate Loan.

 

44

 

SECTION 3.2.2. Post-Maturity
Rates. After the date any principal amount of any Loan shall have
become due and payable (whether on the Stated Maturity Date, upon acceleration
or otherwise), or any other monetary Obligation (other than overdue
Reimbursement Obligations which shall bear interest as provided in Section 2.6.2)
of the Borrower shall have become due and payable, the Borrower shall pay, but
only to the extent permitted by law, interest (after as well as before
judgment) on such amounts at a rate per annum equal to:

 

(a)           in the case of any overdue principal
amount of Loans, overdue interest thereon, overdue commitment fees or other
overdue amounts owing in respect of Loans or other obligations (or the related
Commitments) under a particular Tranche, the rate that would otherwise be
applicable to Base Rate Loans under such Tranche pursuant to Section 3.2.1
plus 2%; and

 

(b)           in the case of overdue monetary
Obligations (other than as described in clause (a)), the Alternate
Base Rate plus 4%.

 

SECTION 3.2.3. Payment
Dates. Interest accrued on each Loan shall be payable, without duplication:

 

(a)           on the Stated Maturity Date therefor;

 

(b)           on the date of any payment or prepayment,
in whole or in part, of principal outstanding on such Loan;

 

(c)           with respect to Base Rate Loans, in
arrears on each Quarterly Payment Date occurring after the date of the initial
Borrowing hereunder;

 

(d)           with respect to LIBO Rate Loans, the last
day of each applicable Interest Period (and, if such Interest Period shall
exceed three months, on the third month anniversary of such Interest Period);

 

(e)           with respect to any Base Rate Loans
converted into LIBO Rate Loans on a day when interest would not otherwise have
been payable pursuant to clause (c), on the date of such conversion; and

 

(f)            on that portion of any Loans the Stated
Maturity Date of which is accelerated pursuant to Section 9.2 or Section
9.3, immediately upon such acceleration.

 

Interest accrued on Loans, Reimbursement Obligations
or other monetary Obligations arising under this Agreement or any other Loan
Document after the date such amount is due and payable (whether on the Stated
Maturity Date, upon acceleration or otherwise) shall be payable upon demand.

 

SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth
in this Section 3.3. All such fees shall be non-refundable.

 

SECTION 3.3.1. Commitment
Fee. The Borrower agrees to pay to the Administrative Agent for the account
of each Lender that has a Revolving Loan Commitment, for the period

 

45

 

(including any portion thereof
when any of the Lender’s Commitments are suspended by reason of the Borrower’s
inability to satisfy any condition of Article V) commencing on the
Effective Date and continuing through the Revolving Loan Commitment Termination
Date, a commitment fee at a rate per annum equal to the Applicable Commitment
Fee Margin, in each case on such Lender’s Percentage of the sum of the average
daily unused portion of the applicable Revolving Loan Commitment Amount (net of
Letter of Credit Outstandings). The commitment fees shall be payable by the
Borrower in arrears on each Quarterly Payment Date, and on the Revolving Loan
Commitment Termination Date. The making of Swing Line Loans by the Swing Line
Lender shall constitute the usage of the Revolving Loan Commitment with respect
to the Swing Line Lender only and the commitment fees to be paid by the
Borrower to the Lenders (other than the Swing Line Lender) shall be calculated
and paid accordingly.

 

SECTION 3.3.2. Fees.
The Borrower agrees to pay to the applicable Person, for its own account, the
non-refundable fees in the amounts and on the dates set forth in the applicable
Fee Letter.

 

SECTION 3.3.3. Letter
of Credit Fee. The Borrower agrees to pay to the Administrative Agent, for
the pro  rata account of the Issuer and each other Lender that has
a Revolving Loan Commitment, a Letter of Credit fee in an amount equal to the
Applicable Margin per annum for Revolving Loans that are maintained as LIBO
Rate Loans, multiplied by the aggregate Stated Amount of all outstanding
Letters of Credit, such fees being payable quarterly in arrears on each
Quarterly Payment Date. The Borrower further agrees to pay to the Issuer for
its own account an issuance fee in an amount as agreed to by the Borrower and
the Issuer.

 

ARTICLE
IV

CERTAIN LIBO RATE AND OTHER PROVISIONS

 

SECTION 4.1. LIBO Rate
Lending Unlawful. If any Lender shall determine (which determination shall,
upon notice thereof to the Borrower and the Lenders, be conclusive and binding
on the Borrower) that the introduction of or any change in or in the
interpretation of any law makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for such Lender to make,
continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate
Loan, the obligations of such Lender to make, continue, maintain or convert any
Loans as LIBO Rate Loans shall, upon such determination, forthwith be suspended
until such Lender shall notify the Administrative Agent that the circumstances
causing such suspension no longer exist (with the date of such notice being the
“Reinstatement Date”), and (i) all LIBO Rate Loans previously made
by such Lender shall automatically convert into Base Rate Loans at the end of
the then current Interest Periods with respect thereto or sooner, if required
by such law or assertion and (ii) all Loans thereafter made by such Lender
and outstanding prior to the Reinstatement Date shall be made as Base Rate
Loans, with interest thereon being payable on the same date that interest is
payable with respect to corresponding Borrowing of LIBO Rate Loans made by
Lenders not so affected.

 

46

 

SECTION 4.2. Deposits
Unavailable. If the Administrative Agent shall have determined that

 

(a)           U.S. Dollar deposits in the relevant
amount and for the relevant Interest Period are not available to the
Administrative Agent in its relevant market; or

 

(b)           by reason of circumstances affecting the
Administrative Agent’s relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBO Rate Loans,

 

then, upon notice from the Administrative Agent to the
Borrower and the Lenders, the obligations of all Lenders under Section 2.3
and Section 2.4 to make or continue any Loans as, or to convert any
Loans into, LIBO Rate Loans shall forthwith be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.

 

SECTION 4.3. Increased
LIBO Rate Loan Costs, etc. The Borrower agrees to reimburse each Lender for
any increase in the cost to such Lender of, or any reduction in the amount of
any sum receivable by such Lender in respect of, making, continuing or
maintaining (or of its obligation to make, continue or maintain) any Loans as,
or of converting (or of its obligation to convert) any Loans into, LIBO Rate
Loans (excluding any amounts, whether or not constituting taxes, referred to in
Section 4.6) arising after the date of any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other Governmental Authority that results in such increase in cost or
reduction in amounts receivable, except for such changes with respect to
increased capital costs and taxes which are governed by Sections 4.5 and
4.6, respectively. Such Lender shall promptly notify the Administrative
Agent and the Borrower in writing of the occurrence of any such event, such
notice to state, in reasonable detail, the reasons therefor and the additional
amount required fully to compensate such Lender for such increased cost or
reduced amount. Such additional amounts shall be payable by the Borrower
directly to such Lender within five days of its receipt of such notice, and
such notice shall, in the absence of manifest error, be conclusive and binding
on the Borrower.

 

SECTION 4.4. Funding
Losses. In the event any Lender shall incur any loss or expense (including
any loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to make, continue or maintain
any portion of the principal amount of any Loan as, or to convert any portion
of the principal amount of any Loan into, a LIBO Rate Loan) as a result of

 

(a)           any conversion or repayment or prepayment
of the principal amount of any LIBO Rate Loans on a date other than the
scheduled last day of the Interest Period applicable thereto, whether pursuant
to Section 3.1 or otherwise;

 

(b)           any Loans not being made as LIBO Rate
Loans in accordance with the Borrowing Request therefor; or

 

(c)           any Loans not being continued as, or
converted into, LIBO Rate Loans in accordance with the Continuation/Conversion
Notice therefor,

 

47

 

then, upon the written notice of such Lender to the
Borrower (with a copy to the Administrative Agent), the Borrower shall, within
five days of its receipt thereof, pay directly to such Lender such amount as
will (in the reasonable determination of such Lender) reimburse such Lender for
such loss or expense. Such written notice (which shall include calculations in
reasonable detail) shall, in the absence of manifest error, be conclusive and
binding on the Borrower.

 

SECTION 4.5. Increased
Capital Costs. If any change in, or the introduction, adoption,
effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation,
directive, guideline, decision or request (whether or not having the force of
law) of any court, central bank, regulator or other Governmental Authority
affects or would affect the amount of capital required or expected to be
maintained by any Lender or any Person controlling such Lender, and such Lender
determines (in its sole and absolute discretion) that the rate of return on its
or such controlling Person’s capital as a consequence of its Commitments,
participation in Letters of Credit or the Loans made or continued by such
Lender is reduced to a level below that which such Lender or such controlling
Person could have achieved but for the occurrence of any such circumstance,
then, in any such case upon notice from time to time by such Lender to the
Borrower, the Borrower shall immediately pay directly to such Lender additional
amounts sufficient to compensate such Lender or such controlling Person for
such reduction in rate of return. A statement of such Lender as to any such
additional amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower. In determining such amount, such Lender may use any method of
averaging and attribution that it (in its sole and absolute discretion) shall
deem applicable.

 

SECTION 4.6. Taxes.
The Borrower covenants and agrees as follows with respect to taxes:

 

(a)           Unless required by law, any and all
payments made by the Borrower under this Agreement and each other Loan Document
shall be made without setoff, counterclaim or other defense, and free and clear
of, and without deduction or withholding for or on account of, any taxes. In
the event that any taxes are required by law to be deducted or withheld from
any payment required to be made by the Borrower to or on behalf of any Secured
Party under any Loan Document, then:

 

(i)            subject to clause (f) below, if
such taxes are Non-Excluded Taxes, the Borrower shall together with such
payment pay an additional amount so that each Secured Party receives free and
clear of any Non-Excluded Taxes, the full amount which it would have received
if no such deduction or withholding of such Non-Excluded Taxes had been
required; and

 

(ii)           the Borrower shall pay to the relevant
Governmental Authority imposing such taxes the full amount of the deduction or
withholding made by it.

 

(b)           In addition, the Borrower shall pay any
and all Other Taxes imposed to the relevant Governmental Authority imposing
such Other Taxes in accordance with applicable law.

 

48

 

(c)           As promptly as practicable after the
payment of any taxes or Other Taxes, and in any event within 45 days of any
such payment being due, the Borrower shall furnish to the Administrative Agent
a copy of an official receipt (or a certified copy thereof), evidencing the
payment of such taxes or Other Taxes. The Administrative Agent shall make
copies thereof available to any Lender upon request therefor.

 

(d)           Subject to clause (f) below, the
Borrower shall indemnify each Secured Party for any Non-Excluded Taxes and
Other Taxes levied, imposed or assessed on (and whether or not paid directly
by) such Secured Party that have not been paid previously by the Borrower
(whether or not such Non-Excluded Taxes or Other Taxes are correctly or legally
asserted by the relevant Governmental Authority). Promptly upon having
knowledge that any such Non-Excluded Taxes or Other Taxes have been levied,
imposed or assessed, and promptly upon notice thereof by any Secured Party, the
Borrower shall pay such Non-Excluded Taxes or Other Taxes directly to the
relevant Governmental Authority (provided, however, that no
Secured Party shall be under any obligation to provide any such notice to the
Borrower). In addition, provided that the Borrower has been notified
promptly by a relevant Secured Party which has determined in its sole
discretion that a Non-Excluded Tax or Other Tax has been levied, imposed or
assessed against such Secured Party, the Borrower shall indemnify each Secured
Party for any incremental taxes that may become payable by such Secured Party
as a result of any failure of the Borrower to pay any taxes when due to the
appropriate Governmental Authority or to deliver to the Administrative Agent,
pursuant to clause (c) above, documentation evidencing the payment of
taxes or Other Taxes. With respect to indemnification for Non-Excluded Taxes
and Other Taxes actually paid by any Secured Party or the indemnification
provided in the immediately preceding sentence, such indemnification shall be
made within 30 days after the date such Secured Party makes written demand
therefor. The Borrower acknowledges that any payment made to any Secured Party
or to any Governmental Authority in respect of the indemnification obligations
of the Borrower provided in this clause shall constitute a payment in respect
of which the provisions of clause (a) above and this clause shall apply.

 

(e)           Each Non-U.S. Lender, on or prior to the
date on which such Non-U.S. Lender becomes a Lender hereunder (and from time to
time thereafter upon the request of the Borrower or the Administrative Agent,
but only for so long as such Non-U.S. Lender is legally entitled to do so),
shall deliver to the Borrower and the Administrative Agent either

 

(i)            two duly completed copies of either (x)
Internal Revenue Service Form W-8BEN or (y) Internal Revenue Service Form W-8EC1,
or in either case an applicable successor form, establishing, in either case, a
complete exemption from United States federal withholding taxes; or

 

(ii)           in the case of a Non-U.S. Lender that is
not legally entitled to deliver either form listed in clause (e)(i)(x)
above, (x) a certificate of a duly authorized officer of such Non-U.S. Lender
to the effect that such Non-U.S. Lender is not (A) a “bank” within the meaning
of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the
Borrower within the meaning of

 

49

 

Section
881(c)(3)(B) of the Code, or (C) a controlled foreign corporation receiving
interest from a related person within the meaning of Section 881(c)(3)(C) of
the Code (such certificate, an “Exemption Certificate”) and (y) two duly
completed copies of Internal Revenue Service Form W-8 or applicable successor
form.

 

(f)            The Borrower shall not be obligated to
gross up any payments to any Lender pursuant to clause (a) above,
or to indemnify any Lender pursuant to clause (d) above, in respect
of United States federal withholding taxes to the extent imposed as a result of
(i) the failure of such Lender to deliver to the Borrower the form or
forms and/or an Exemption Certificate, as applicable to such Lender, pursuant
to clause (e), (ii) such form or forms and/or Exemption
Certificate not establishing a complete exemption from U.S. federal withholding
tax or the information or certifications made therein by the Lender being
untrue or inaccurate on the date delivered in any material respect, or (iii)
the Lender designating a successor lending office at which it maintains its
Loans which has the effect of causing such Lender to become obligated for tax
payments in excess of those in effect immediately prior to such designation; provided,
however, that a Borrower shall be obligated to gross up any payments to
any such Lender pursuant to clause (a) above, and to indemnify any
such Lender pursuant to clause (d) above, in respect of United
States federal withholding taxes if (i) any such failure to deliver a form
or forms or an Exemption Certificate or the failure of such form or forms or
Exemption Certificate to establish a complete exemption from U.S. federal
withholding tax or inaccuracy or untruth contained therein resulted from a
change in any applicable statute, treaty, regulation or other applicable law or
any interpretation of any of the foregoing occurring after the date hereof,
which change rendered such Lender no longer legally entitled to deliver such
form or forms or Exemption Certificate or otherwise ineligible for a complete
exemption from U.S. federal withholding tax, or rendered the information or
certifications made in such form or forms or Exemption Certificate untrue or
inaccurate in a material respect, (ii) the redesignation of the Lender’s
lending office was made at the request of the Borrower or (iii) the
obligation to gross up payments to any such Lender pursuant to clause (a)
above or to indemnify any such Lender pursuant to clause (d) is
with respect to an Assignee Lender that becomes an Assignee Lender as a result
of an assignment made at the request of the Borrower.

 

(g)           If a Secured Party determines in its sole
discretion that it has received a refund in respect of Non-Excluded Taxes that
were paid by the Borrower, it shall pay the amount of such refund, together
with any other amounts paid by the Borrower in connection with such refunded
Non-Excluded Taxes, to the Borrower, net of any out-of-pocket expenses incurred
by such Secured Party in obtaining such refund, provided, however,
that the Borrower agrees to promptly return the amount of such refund to such
Secured Party to the extent that such Secured Party is required to repay such
refund to the IRS or any other tax authority. Nothing in this Section shall
require any Lender to disclose its tax preparation information.

 

SECTION 4.7. Payments,
Computations, etc. Unless otherwise expressly provided, all payments by or
on behalf of the Borrower pursuant to this Agreement, the Notes, each Letter of
Credit or any other Loan Document shall be made by the Borrower to the
Administrative Agent

 

50

 

for the pro  rata
account of the Lenders entitled to receive such payment. All such payments
required to be made to the Administrative Agent shall be made, without setoff,
deduction or counterclaim, not later than 12:00 noon, New York time, on the
date due, in same day or immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to the Borrower.
Funds received after that time shall be deemed to have been received by the
Administrative Agent on the next succeeding Business Day. The Administrative
Agent shall promptly remit in same day funds to each Lender its share, if any,
of such payments received by the Administrative Agent for the account of such
Lender. All interest and fees shall be computed on the basis of the actual
number of days (including the first day but excluding the last day) occurring
during the period for which such interest or fee is payable over a year
comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365
days or, if appropriate, 366 days). Whenever any payment to be made shall
otherwise be due on a day which is not a Business Day, such payment shall
(except as otherwise required by clause (c) of the definition of
the term “Interest Period”) be made on the next succeeding Business Day and
such extension of time shall be included in computing interest and fees, if
any, in connection with such payment.

 

SECTION 4.8. Sharing
of Payments. If any Lender shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of setoff or otherwise) on
account of any Loan or Reimbursement Obligation (other than pursuant to the
terms of Sections 4.3, 4.4 and 4.5) in excess of its pro
rata share of payments then or therewith obtained by all Lenders
entitled thereto, such Lender shall purchase from the other Lenders such
participation in Credit Extensions made by them as shall be necessary to cause
such purchasing Lender to share the excess payment or other recovery ratably
with each of them; provided, however, that if all or any portion
of the excess payment or other recovery is thereafter recovered from such
purchasing Lender, the purchase shall be rescinded and each Lender which has
sold a participation to the purchasing Lender shall repay to the purchasing
Lender the purchase price to the ratable extent of such recovery together with
an amount equal to such selling Lender’s ratable share (according to the
proportion of

 

(a)           the amount of such selling Lender’s
required repayment to the purchasing Lender

 

to

 

(b)           the total amount so recovered from the
purchasing Lender)

 

of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section may, to the fullest extent permitted by law, exercise
all its rights of payment (including pursuant to Section 4.9) with
respect to such participation as fully as if such Lender were the direct creditor
of the Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a setoff to which this Section applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders entitled under this Section
to share in the benefits of any recovery on such secured claim.

 

51

 

SECTION 4.9. Setoff.
Each Lender shall, upon the occurrence of any Default described in clauses
(a) through (d) of Section 9.1.9 or, with the consent of
the Required Lenders, upon the occurrence of any other Event of Default, have
the right to appropriate and apply to the payment of the Obligations owing to
it (whether or not then due), and (as security for such Obligations) the
Borrower hereby grants to each Lender a continuing security interest in, any
and all balances, credits, deposits, accounts or moneys of the Borrower then or
thereafter maintained with or otherwise held by such Lender; provided, however,
that any such appropriation and application shall be subject to the provisions
of Section 4.8. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and application made by such Lender;
provided, however, that the failure to give such notice shall not
affect the validity of such setoff and application. The rights of each Lender
under this Section are in addition to other rights and remedies (including
other rights of setoff under applicable law or otherwise) which such Lender may
have.

 

SECTION 4.10. Mitigation.
Each Lender agrees that if it makes any demand for payment under Sections
4.3, 4.4, 4.5, or 4.6, or if any adoption or change of
the type described in Section 4.1 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under Sections 4.3,
4.4, 4.5, or 4.6, or would eliminate or reduce the effect
of any adoption or change described in Section 4.1.

 

SECTION 4.11. Replacement
of Lenders. If any Lender (an “Affected Lender”) (a) fails to
consent to an election, consent, amendment, waiver or other modification to
this Agreement or other Loan Document that requires the consent of a greater
percentage of the Lenders than the Required Lenders and such election, consent,
amendment, waiver or other modification is otherwise consented to by the
Required Lenders, (b) makes a demand upon the Borrower for (or if the Borrower
is otherwise required to pay) amounts pursuant to Section 4.3, 4.5
or 4.6 (and the payment of such amounts are, and are likely to continue
to be, more onerous in the reasonable judgment of the Borrower than with
respect to the other Lenders) or (c) gives notice pursuant to Section 4.1
requiring a conversion of such Affected Lender’s LIBO Rate Loans to Base Rate
Loans or suspending such Lender’s obligation to make Loans as, or to convert
Loans into, LIBO Rate Loans, the Borrower may, within 30 days of the failure to
consent or receipt by the Borrower of such demand or notice, as the case may
be, give notice (a “Replacement Notice”) in writing to the
Administrative Agent and such Affected Lender of its intention to replace such
Affected Lender with a financial institution or other Person (a “Substitute
Lender”) designated in such Replacement Notice; provided that no
Replacement Notice may be given by the Borrower if (i) such replacement
conflicts with any applicable law or regulation, (ii) if applicable, such
Lender consents to such election, consent, amendment, waiver or other
modification, or (iii) if applicable, prior to any such replacement, such
Lender shall have taken any necessary action under Section 4.10 (if
applicable) so as to eliminate the continued need for payment of amounts owing
pursuant to Section  4.3, 4.5 or 4.6. If the
Administrative Agent (and, in the case of a proposed assignment of a Revolving
Loan Commitment, each Issuer and the Swing Line Lender) shall, in the exercise
of its reasonable discretion and within 30 days of its receipt of such
Replacement Notice, notify the Borrower and such Affected Lender in writing
that the Substitute Lender is satisfactory to the Administrative Agent (such
consent not being required where the

 

52

 

Substitute Lender is already a
Lender or an Affiliate of a Lender) and, in the case of a proposed assignment
of a Revolving Loan Commitment, each Issuer and the Swing Line Lender (such
consent not being required where the Substitute Lender is already a Lender with
a Revolving Loan Commitment) then such Affected Lender shall, subject to the
payment of any amounts due pursuant to Section 4.4, assign, in
accordance with Section 11.11.1, all of its Commitments, Loans, Notes
(if any) and other rights and obligations under this Agreement and all other
Loan Documents (including its rights in Reimbursement Obligations, if
applicable) to such Substitute Lender; provided that (i) such assignment
shall be without recourse, representation or warranty (other than those set
forth in the Lender Assignment Agreement) and shall be on terms and conditions
reasonably satisfactory to such Substitute Lender, (ii) the purchase price paid
by such Substitute Lender shall be in the amount of such Affected Lender’s
Loans and its percentage of outstanding Reimbursement Obligations, together
with all accrued and unpaid interest and fees in respect thereof, plus all
other amounts (including the amounts demanded and unreimbursed under Sections
4.3, 4.5 and 4.6), owing to such Affected Lender hereunder
and (iii) the Borrower shall pay to the Administrative Agent all reasonable
out-of-pocket expenses incurred in connection with such assignment and
assumption (including the processing fees described in Section 11.11.1).
Upon the effective date of an assignment described above, the Substitute Lender
shall become a “Lender” for all purposes under the Loan Documents. Each Lender
hereby grants to the Administrative Agent an irrevocable power of attorney
(which power is coupled with an interest) to execute and deliver, on behalf of
such Lender as assignor, any assignment agreement necessary to effectuate any
assignment of such Lender’s interests hereunder in the circumstances contemplated
by this Section 4.11.

 

ARTICLE
V

CONDITIONS TO EFFECTIVENESS AND TO FUTURE CREDIT EXTENSIONS

 

SECTION 5.1. Conditions
Precedent to the Effectiveness of this Agreement and Making of Credit
Extensions. The conditions to effectiveness of this Agreement and the
obligations of the Lenders to make Loans under this Agreement shall be subject
to the prior or concurrent satisfaction of each of the conditions set forth in
this Article.

 

SECTION 5.1.1. Resolutions,
etc. The Administrative Agent shall have received from the Borrower a
certificate, dated the Effective Date, of its Secretary or Assistant Secretary
(or Authorized Officer serving a similar function, in the case of other than a
corporation) as to:

 

(a)           resolutions of the Borrower’s Board of
Directors (or other similar governing body) then in full force and effect
authorizing, as applicable, the execution, delivery and performance of this
Agreement, the Notes and each other Loan Document to be executed by the
Borrower; and

 

(b)           the incumbency and signatures of the
Borrower’s Authorized Officers authorized to execute and deliver this Agreement
and each other Loan Document to be executed by the Borrower;

 

53

 

upon which certificate each Lender may conclusively
rely until each such Lender shall have received a further certificate of the
Borrower canceling or amending the prior certificate.

 

SECTION 5.1.2. Effective
Date Certificate. The Administrative Agent shall have received a
certificate substantially in the form of Exhibit F hereto, dated the Effective
Date and duly executed and delivered by the chief executive, financial or
accounting (or equivalent) Authorized Officer of the Borrower.

 

SECTION 5.1.3. Delivery
of Notes. The Administrative Agent shall have received, for the account of
each Lender that has requested a Note, if any, such Lender’s Note, duly
executed and delivered by an Authorized Officer of the Borrower.

 

SECTION 5.1.4. Affirmation
and Consent. The Administrative Agent shall have received an affirmation
and consent, dated as of the Effective Date and duly executed by an Authorized
Officer of each Guarantor, in form and substance satisfactory to the
Administrative Agent.

 

SECTION 5.1.5. Opinions
of Counsel. The Administrative Agent shall have received opinions, dated
the Effective Date and addressed to the Administrative Agent and all Lenders,
from:

 

(a)           Simpson Thacher & Bartlett LLP,
special New York counsel to the Borrower and each other Obligor, in form and
substance satisfactory to the Administrative Agent; and

 

(b)           Hunton & Williams LLP, special
Virginia counsel to the Borrower, in form and substance satisfactory to the
Administrative Agent.

 

SECTION 5.1.6. Required
Approvals. The Administrative Agent shall be satisfied that all material
governmental and third party approvals necessary or advisable in connection
with the financing contemplated hereby and the continuing operations of the
Borrower and its Subsidiaries have been duly obtained and are in full force and
effect, and that all applicable waiting periods have expired without any action
being taken or threatened by any competent authority which would restrain,
prevent or otherwise impose adverse conditions on the financing hereof.

 

SECTION 5.1.7. Litigation;
Proceedings. The Administrative Agent shall be satisfied that there does
not exist any restraining order, injunction or other pending or threatened
litigation, proceedings or investigations which (i) contests any aspect of any
of the transactions contemplated by any Loan Documents or (ii) could reasonably
be expected to have a material adverse effect on any of the consolidated
business, financial conditions or results of operations of the Borrower and its
Subsidiaries, taken as a whole.

 

SECTION 5.2. All
Credit Extensions. The obligation of each Lender and the Issuer to make any
Credit Extension (but subject to clauses (b) and (c) of Section
2.3.2) shall be subject to the satisfaction of each of the conditions
precedent set forth in this Section 5.2.

 

54

 

SECTION 5.2.1. Compliance
with Warranties, No Default, etc. Both before and after giving effect to
any Credit Extension the following statements shall be true and correct:

 

(a)           the representations and warranties set
forth in Article VI and in each other Loan Document shall, in each case,
be true and correct in all material respects with the same effect as if then
made (unless stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date);

 

(b)           no material adverse development shall
have occurred in any litigation, action, proceeding, labor controversy,
arbitration or governmental investigation disclosed pursuant to Section 6.6;

 

(c)           the sum of (x) the aggregate
outstanding principal amount of all Revolving Loans and Swing Line Loans and
(y) all Letter of Credit Outstandings does not exceed the Revolving Loan
Commitment Amount; and

 

(d)           no Default shall have then occurred and
be continuing.

 

SECTION 5.2.2. Credit
Extension Request. The Administrative Agent shall have received a
Borrowing Request, if Loans (other than Swing Line Loans) are being requested,
or an Issuance Request, if a Letter of Credit is being issued or extended. Each
of the delivery of a Borrowing Request or an Issuance Request and the
acceptance by the Borrower of the proceeds of such Credit Extension shall
constitute a representation and warranty by the Borrower that on the date of
such Credit Extension (both immediately before and after giving effect to such
Credit Extension and the application of the proceeds thereof) the statements
made in Section 5.2.1 are true and correct.

 

SECTION 5.2.3. Satisfactory
Legal Form. All documents executed or submitted pursuant hereto by or on
behalf of the Borrower or any of its Subsidiaries or any other Obligors shall
be reasonably satisfactory in form and substance to the Administrative Agent
and its counsel; the Administrative Agent and its counsel shall have received
all information, as the Administrative Agent or its counsel may reasonably
request.

 

ARTICLE
VI

REPRESENTATIONS AND WARRANTIES

 

In order to induce the Lenders, the Issuer and the
Administrative Agent to enter into this Agreement, continue the Existing
Letters of Credit as Letters of Credit hereunder, the Existing Revolving Loans
as Revolving Loans hereunder and the Existing Swing Line Loans as Swing Line
Loans hereunder and to make Credit Extensions hereunder, the Borrower
represents and warrants unto the Administrative Agent, the Issuer and each
Lender as set forth in this Article VI.

 

SECTION 6.1. Organization,
etc. The Borrower and each of its Subsidiaries (a) is a
corporation validly organized and existing and in good standing under the laws
of the jurisdiction

 

55

 

of its incorporation, is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the nature of its business requires such qualification,
except to the extent that the failure to qualify would not reasonably be
expected to result in a Material Adverse Effect, and (b) has full power
and authority and holds all requisite governmental licenses, permits and other
approvals to (x) enter into and perform its Obligations under this
Agreement, the Notes and each other Loan Document to which it is a party and
(y) own and hold under lease its property and to conduct its business
substantially as currently conducted by it except, in the case of this clause (b)(y),
where the failure could not reasonably be expected to result in a Material
Adverse Effect.

 

SECTION 6.2. Due
Authorization, Non-Contravention, etc. The execution, delivery and
performance by the Borrower of this Agreement, the Notes and each other Loan
Document executed or to be executed by it, and the execution, delivery and
performance by each other Obligor of each Loan Document executed or to be
executed by it and the Borrower are within each such Obligor’s corporate
powers, have been duly authorized by all necessary corporate action, and do not

 

(a)           contravene any such Obligor’s Organic
Documents;

 

(b)           contravene any contractual restriction,
law or governmental regulation or court decree or order binding on or affecting
any such Obligor, where such contravention, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect; or

 

(c)           result in, or require the creation or
imposition of, any Lien on any of the Obligor’s properties, except pursuant to
the terms of a Loan Document.

 

SECTION 6.3. Government
Approval, Regulation, etc. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
or other Person, is required for the due execution, delivery or performance by
any Obligor of this Agreement, the Notes or any other Loan Document to which it
is a party, except as have been duly obtained or made and are in full force and
effect or those which the failure to obtain or make could not reasonably be
expected to have a Material Adverse Effect. Neither the Borrower nor any of its
Subsidiaries is an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

 

SECTION 6.4. Validity,
etc. This Agreement constitutes, and the Notes and each other Loan
Document executed by any Obligor will, on the due execution and delivery
thereof, constitute, the legal, valid and binding obligations of such Obligor
enforceable in accordance with their respective terms; in each case with
respect to this Section 6.4 subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

 

56

 

SECTION 6.5. No
Material Adverse Change. Since December 31, 2005, there has been no
material adverse change in the financial condition, operations, assets,
business or properties of the Borrower and its Subsidiaries, taken as a whole.

 

SECTION 6.6. Litigation,
Labor Controversies, etc. There is no pending or, to the
knowledge of the Borrower, threatened litigation, action, proceeding, labor
controversy arbitration or governmental investigation affecting any Obligor, or
any of their respective properties, businesses, assets or revenues, which
(a) could reasonably be expected to result in a Material Adverse Effect,
except as disclosed in Item 6.6 (“Litigation”) of the Disclosure
Schedule, or (b) purports to affect the legality, validity or
enforceability of any Sub Debt Document, this Agreement, the Notes or any other
Loan Document.

 

SECTION 6.7. Subsidiaries.
The Borrower has no Subsidiaries, except those Subsidiaries:

 

(a)           which are identified in Item 6.7 (“Existing
Subsidiaries”) of the Disclosure Schedule; or

 

(b)           which are permitted to have been acquired
in accordance with Section 7.2.5 or 7.2.8.

 

SECTION 6.8. Ownership
of Properties. The Borrower and each of its Subsidiaries own good
title to all of their properties and assets (other than insignificant
properties and assets), real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, trade names, service marks
and copyrights), free and clear of all Liens or material claims (including
material infringement claims with respect to patents, trademarks, copyrights
and the like) except as permitted pursuant to Section 7.2.3.

 

SECTION 6.9. Taxes.
The Borrower and each of its Subsidiaries has filed all Federal, State, foreign
and other material tax returns and reports required by law to have been filed
by it and has paid all taxes and governmental charges thereby shown to be
owing, except any such taxes or charges which are being contested in good faith
by appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.

 

SECTION 6.10. Pension
and Welfare Plans. No Pension Plan has been terminated that has resulted in
a liability to the Borrower of more than $5,000,000, and no contribution
failure has occurred with respect to any Pension Plan sufficient to give rise
to a Lien under section 302(f) of ERISA in excess of $5,000,000. No condition
exists or event or transaction has occurred with respect to any Pension Plan
which could reasonably be expected to result in the incurrence by the Borrower
of any material liability, fine or penalty other than such condition, event or
transaction which would not reasonably be expected to have a Material Adverse
Effect. Except as disclosed in Item 6.10 (“Employee Benefit
Plans”) of the Disclosure Schedule, since the date of the last financial
statement of the Borrower, the Borrower has not materially increased any
contingent liability with respect to any post-retirement benefit under a
Welfare Plan, other than liability for continuation coverage described in Part
6 of Subtitle B of Title I of ERISA.

 

57

 

SECTION 6.11. Environmental
Warranties. Except as set forth in Item 6.11 (“Environmental
Matters”) of the Disclosure Schedule or as, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect:

 

(a)           all facilities and property (including
underlying groundwater) owned or leased by the Borrower or any of its
Subsidiaries have been, and continue to be, owned or leased by the Borrower and
its Subsidiaries in compliance with all Environmental Laws;

 

(b)           there have been no past, and there are no
pending or threatened

 

(i)            written claims, complaints, notices or
requests for information received by the Borrower or any of its Subsidiaries
with respect to any alleged violation of any Environmental Law, or

 

(ii)           written complaints, notices or inquiries
to the Borrower or any of its Subsidiaries regarding potential liability under
any Environmental Law;

 

(c)           to the best knowledge of the Borrower,
there have been no Releases of Hazardous Materials at, on or under any property
now or previously owned or leased by the Borrower or any of its Subsidiaries;

 

(d)           the Borrower and its Subsidiaries have
been issued and are in compliance with all permits, certificates, approvals,
licenses and other authorizations relating to environmental matters and
necessary or desirable for their businesses;

 

(e)           no property now or previously owned or
leased by the Borrower or any of its Subsidiaries is listed or, to the
knowledge of the Borrower or any of its Subsidiaries, proposed for listing
(with respect to owned property only) on the National Priorities List pursuant
to CERCLA, on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up;

 

(f)            to the best knowledge of the Borrower,
there are no underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any property now or previously owned or leased by
the Borrower or any of its Subsidiaries;

 

(g)           the Borrower and its Subsidiaries have
not directly transported or directly arranged for the transportation of any
Hazardous Material to any location (i) which is listed or to the knowledge of
the Borrower or any of its Subsidiaries, proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state
list, or (ii) which is the subject of federal, state or local enforcement
actions or other investigations;

 

(h)           to the best knowledge of the Borrower,
there are no polychlorinated biphenyls or friable asbestos present in a manner
or condition at any property now or previously owned or leased by the Borrower
or any of its Subsidiaries; and

 

(i)            to the best knowledge of the Borrower, no
conditions exist at, on or under any property now or previously owned or leased
by the Borrower or any of its

 

58

 

Subsidiaries
which, with the passage of time, or the giving of notice or both, would give
rise to liability under any Environmental Law.

 

SECTION 6.12. Regulations
U and X. No Obligor is engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock, and no proceeds of any Credit
Extensions will be used to purchase or carry margin stock or otherwise for a
purpose which violates, or would be inconsistent with, F.R.S. Board
Regulation U or Regulation X. Terms for which meanings are provided in
F.R.S. Board Regulation U or Regulation X or any regulations substituted
therefor, as from time to time in effect, are used in this Section with such
meanings.

 

SECTION 6.13. Accuracy
of Information. All material factual information concerning the financial
condition, operations or prospects of the Borrower and its Subsidiaries
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to the Administrative Agent, the Issuer or any Lender for purposes of or
in connection with this Agreement or any transaction contemplated hereby is,
and all other such factual information hereafter furnished by or on behalf of
the Borrower to the Administrative Agent, the Issuer or any Lender will be,
true and accurate in every material respect on the date as of which such
information is dated or certified and such information is not, or shall not be,
as the case may be, incomplete by omitting to state any material fact necessary
to make such information not misleading.

 

Any term or provision of
this Section to the contrary notwithstanding, insofar as any of the factual
information described above includes assumptions, estimates, projections or
opinions, no representation or warranty is made herein with respect thereto; provided,
however, that to the extent any such assumptions, estimates, projections
or opinions are based on factual matters, the Borrower has reviewed such
factual matters and nothing has come to its attention in the context of such
review which would lead it to believe that such factual matters were not or are
not true and correct in all material respects or that such factual matters omit
to state any material fact necessary to make such assumptions, estimates,
projections or opinions not misleading in any material respect.

 

SECTION 6.14. Seniority
of Obligations, etc. The Borrower has the power and authority to incur
Subordinated Debt as provided for under the Sub Debt Documents applicable
thereto and has duly authorized, executed and delivered the Sub Debt Documents
applicable thereto. The Borrower has issued, pursuant to due authorization, any
Subordinated Debt under the applicable Sub Debt Documents, and such Sub Debt
Documents constitute the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with its respective terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally, general equitable principles (whether considered
in a proceeding in equity or at law) and an implied covenant of good faith and
fair dealing. The subordination provisions of any Subordinated Debt contained
in the applicable Sub Debt Documents are enforceable against the holders of
such Subordinated Debt by the holder of any “Senior Debt” (or similar term
referring to the Obligations, as applicable) in such Sub Debt Documents, which
has not effectively waived the benefits thereof. All monetary Obligations,
including those to pay principal of and interest (including post-petition
interest, whether or not permitted as a claim) on the Loans and Reimbursement
Obligations, and fees and expenses in connection therewith, constitute “Senior

 

59

 

Debt” (or similar term
referring to the Obligations, as applicable) in such Sub Debt Documents, and
all such Obligations are entitled to the benefits of the subordination created
by such Sub Debt Documents. The Borrower acknowledges that the Administrative
Agent and each Lender is entering into this Agreement, and is extending its
Commitments, in reliance upon the subordination provisions of (or to be
contained in) the Sub Debt Documents and this Section.

 

SECTION 6.15. Solvency.
The incurrence of the Credit Extensions hereunder, the incurrence by the
Borrower of the Indebtedness represented by the Notes and the execution and
delivery of the Guaranties by the Obligors parties thereto, will not involve or
result in any fraudulent transfer or fraudulent conveyance under the provisions
of Section 548 of the Bankruptcy Code (11 U.S.C. §101 et  seq., as
from time to time hereafter amended, and any successor or similar statute) or
any applicable state law respecting fraudulent transfers or fraudulent conveyances.
The Borrower and each of its Subsidiaries is Solvent.

 

ARTICLE
VII

COVENANTS

 

SECTION 7.1. Affirmative
Covenants. The Borrower agrees with the Administrative Agent, the Issuer
and each Lender that, until all Commitments have terminated, all Letters of
Credit have terminated or expired and all Obligations have been paid and
performed in full, the Borrower will perform its obligations set forth below.

 

SECTION 7.1.1. Financial
Information, Reports, Notices, etc. The Borrower will furnish to each
Lender, the Issuer and the Administrative Agent copies of the following
financial statements, reports, notices and information:

 

(a)           as soon as available and in any event
within 60 days after the end of each of the first three Fiscal Quarters of
each Fiscal Year of the Borrower (or, if the Borrower is required to file such
information on a Form 10-Q with the Securities and Exchange Commission,
promptly following such filing), a consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of such Fiscal Quarter, together with the
related consolidated statement of earnings and cash flow for such Fiscal
Quarter and for the period commencing at the end of the previous Fiscal Year
and ending with the end of such Fiscal Quarter (it being understood that the
foregoing requirement may be satisfied by delivery of the Borrower’s report to
the Securities and Exchange Commission on Form 10-Q), certified by the chief
financial Authorized Officer of the Borrower;

 

(b)           as soon as available and in any event
within 120 days after the end of each Fiscal Year of the Borrower (or, if
the Borrower is required to file such information on a Form 10-K with the
Securities and Exchange Commission, promptly following such filing), a copy of
the annual audit report for such Fiscal Year for the Borrower and its
Subsidiaries, including therein a consolidated balance sheet for the Borrower
and its Subsidiaries as of the end of such Fiscal Year, together with the
related consolidated statement of earnings and cash flow of the Borrower and
its Subsidiaries for such Fiscal Year (it being understood that the foregoing
requirement may be satisfied by delivery of

 

60

 

the
Borrower’s report to the Securities and Exchange Commission on Form 10-K), in
each case certified (without any Impermissible Qualification) by
PricewaterhouseCoopers LLP or another “Big Four” firm, together with a
certificate from such accountants to the effect that, in making the examination
necessary for the signing of such annual report by such accountants, they have
not become aware of any Default that has occurred and is continuing, or, if
they have become aware of such Default, describing such Default and the steps,
if any, being taken to cure it;

 

(c)           together with the delivery of the
financial information required pursuant to clauses (a) and (b), a
Compliance Certificate, executed by the chief financial Authorized Officer of
the Borrower, showing (in reasonable detail and with appropriate calculations
and computations in all respects satisfactory to the Administrative Agent)
compliance with the financial covenants set forth in Section 7.2.4;

 

(d)           as soon as possible and in any event
within three Business Days after obtaining knowledge of the occurrence of each
Default, a statement of the chief financial Authorized Officer of the Borrower
setting forth details of such Default and the action which the Borrower has
taken and proposes to take with respect thereto;

 

(e)           as soon as possible and in any event
within five Business Days after (x) the occurrence of any material adverse
development with respect to any litigation, action, proceeding, or labor
controversy described in Section 6.6 and the action which the Borrower
has taken and proposes to take with respect thereto or (y) the
commencement of any labor controversy, litigation, action, proceeding of the
type described in Section 6.6, notice thereof and of the action
which the Borrower has taken and proposes to take with respect thereto;

 

(f)            promptly after the sending or filing
thereof, copies of all reports and registration statements which the Borrower
or any of its Subsidiaries files with the Securities and Exchange Commission or
any national securities exchange or any foreign equivalent;

 

(g)           as soon as practicable after the chief
financial officer or the chief executive officer of the Borrower or a member of
the Borrower’s Controlled Group becomes aware of (i) formal steps in
writing to terminate any Pension Plan or (ii) the occurrence of any event
with respect to a Pension Plan which, in the case of (i) or (ii), could
reasonably be expected to result in a contribution to such Pension Plan by (or
a liability to) the Borrower or a member of the Borrower’s Controlled Group in
excess of $5,000,000, (iii) the failure to make a required contribution to
any Pension Plan if such failure is sufficient to give rise to a Lien under
section 302(f) of ERISA, (iv) the taking of any action with respect
to a Pension Plan which could reasonably be expected to result in the requirement
that the Borrower furnish a bond to the PBGC or such Pension Plan or
(v) any material increase in the contingent liability of the Borrower with
respect to any post-retirement Welfare Plan benefit, notice thereof and copies
of all documentation relating thereto;

 

61

 

(h)           promptly following the delivery or
receipt, as the case may be, of any material written notice or communication
pursuant to or in connection with any Sub Debt Document, a copy of such notice
or communication; and

 

(i)            such other information respecting the
condition or operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Lender or the Issuer may from time to time reasonably
request.

 

SECTION 7.1.2. Compliance
with Laws, etc. The Borrower will, and will cause each of its Subsidiaries
to, comply in all material respects with all applicable laws, rules,
regulations and orders, such compliance to include:

 

(a)           the maintenance and preservation of its
corporate existence and qualification as a foreign corporation, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; and

 

(b)           the payment, before the same become
delinquent, of all material taxes, assessments and governmental charges imposed
upon it or upon its property except to the extent being contested in good faith
by appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.

 

SECTION 7.1.3. Maintenance
of Properties. The Borrower will, and will cause each of its Subsidiaries
to, maintain, preserve, protect and keep its properties (other than
insignificant properties) in good repair, working order and condition (ordinary
wear and tear excepted), and make necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted at all times unless the Borrower determines in good faith
that the continued maintenance of any of its properties is no longer
economically desirable.

 

SECTION 7.1.4. Insurance.
The Borrower will, and will cause each of its Subsidiaries to,

 

(a)           maintain insurance on its property with
financially sound and reputable insurance companies against loss and damage in
at least the amounts (and with only those deductibles) customarily maintained,
and against such risks as are typically insured against in the same general
area, by Persons of comparable size engaged in the same or similar business as
the Borrower and its Subsidiaries; and

 

(b)           maintain all worker’s compensation,
employer’s liability insurance or similar insurance as may be required under
the laws of any state or jurisdiction in which it may be engaged in business.

 

Without limiting the foregoing, all insurance policies
required pursuant to this Section (other than those with respect to WW.com and
its Subsidiaries until the occurrence of the Trigger Date) shall (i) name
the Administrative Agent on behalf of Secured Parties as mortgagee and/or loss
payee (in the case of property insurance) or additional insured (in the case of
liability insurance), as applicable, and provide that no cancellation or
modification of the policies will be made

 

62

 

without thirty days’ prior
written notice to the Administrative Agent and (ii) be in addition to any
requirements to maintain specific types of insurance contained in the other
Loan Documents.

 

SECTION 7.1.5. Books
and Records. The Borrower will, and will cause each of its Subsidiaries to,
keep books and records which accurately reflect in all material respects all of
its business affairs and transactions and permit the Administrative Agent, the
Issuer and each Lender or any of their respective representatives, at
reasonable times and intervals, and upon reasonable notice, to visit all of its
offices, to discuss its financial matters with its officers and independent
public accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower’s financial matters with the Issuer and each
Lender or its representatives whether or not any representative of the Borrower
is present) and to examine, and photocopy extracts from, any of its books or
other corporate records.

 

SECTION 7.1.6. Environmental
Covenant. The Borrower will, and will cause each of its Subsidiaries to,

 

(a)           use and operate all of its facilities and
properties in compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance therewith, and handle
all Hazardous Materials in compliance with all applicable Environmental Laws,
in each case except where the failure to comply with the terms of this clause
could not reasonably be expected to have a Material Adverse Effect;

 

(b)           promptly notify the Administrative Agent
and provide copies of all written claims, complaints, notices or inquiries
relating to the condition of its facilities and properties or compliance with
Environmental Laws which relate to environmental matters which would have, or
would reasonably be expected to have, a Material Adverse Effect, and promptly
cure and have dismissed with prejudice any material actions and proceedings
relating to compliance with Environmental Laws, except to the extent being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP have been set aside on their books; and

 

(c)           provide such information and
certifications which the Administrative Agent may reasonably request from time
to time to evidence compliance with this Section 7.1.6.

 

SECTION 7.1.7. Future
Subsidiaries.

 

(a)           Upon any Person becoming a U.S.
Subsidiary of the Borrower (other than WW.com or its Subsidiaries until the
occurrence of the Trigger Date), the Borrower shall notify the Administrative
Agent and shall promptly cause such Subsidiary to execute and deliver to the
Administrative Agent a supplement (in form and substance satisfactory to the
Administrative Agent) to the Subsidiary Guaranty.

 

(b)           Prior to the occurrence of the Investment
Grade Rating Date, upon any Person becoming a U.S. Subsidiary of the Borrower,
or upon the Borrower or any of its Subsidiaries (other than WW.com or its
Subsidiaries until the occurrence of the Trigger

 

63

 

Date) acquiring additional Capital Securities of any
existing Subsidiary, the Borrower shall notify the Administrative Agent of such
acquisition, and

 

(i)            the Borrower shall promptly cause such
Subsidiary to execute and deliver to the Administrative Agent (A) a supplement
(in form and substance satisfactory to the Administrative Agent) to the WWI
Security Agreement and (B) if such Subsidiary owns any real property
having a value as determined in good faith by the Administrative Agent in
excess of $2,000,000, a Mortgage, together with acknowledgment copies of
Uniform Commercial Code financing statements (form UCC-1) delivered by the
Subsidiary naming the Subsidiary as the debtor and the Administrative Agent as
the secured party, or other similar instruments or documents, filed under the
Uniform Commercial Code and any other applicable recording statutes, in the
case of real property, of all jurisdictions as may be necessary or, in the
opinion of the Administrative Agent, desirable to perfect the security interest
of the Administrative Agent pursuant to the applicable Security Agreement or a
Mortgage, as the case may be; and

 

(ii)           the Borrower shall promptly deliver, or
cause to be delivered, to the Administrative Agent under a supplement (in form
and substance satisfactory to the Administrative Agent) to the WWI Pledge
Agreement, certificates (if any) representing all of the issued and outstanding
shares of Capital Securities of such Subsidiary (to the extent required to be
delivered pursuant to the applicable Pledge Agreement) owned by the Borrower or
any of its Subsidiaries, as the case may be, along with undated stock powers
for such certificates, executed in blank, or, if any securities subject thereto
are uncertificated securities, confirmation and evidence satisfactory to the
Administrative Agent that appropriate book entries have been made in the
relevant books or records of a financial intermediary or the issuer of such
securities, as the case may be, under applicable law resulting in the
perfection of the security interest granted in favor of the Administrative
Agent pursuant to the terms of the applicable Pledge Agreement; provided,
that notwithstanding anything to the contrary herein or in any Loan Document,
in no event shall more than 65% of the Voting Stock of any Foreign Subsidiary
be required to be pledged and in no event shall any Foreign Subsidiary be
required to pledge Capital Securities of its Subsidiaries (unless in each case
such pledge would not result in a materially adverse tax consequences to the
Borrower and its Subsidiaries, taken as a whole), together, in each case, with
such opinions, in form and substance and from counsel satisfactory to the
Administrative Agent, as the Administrative Agent may reasonably require.

 

(c)           On the Trigger Date the Borrower shall,
and shall cause WW.com and its Subsidiaries to, execute and/or deliver to the
Administrative Agent (i) a supplement (in form and substance satisfactory to
the Administrative Agent) to the Subsidiary Guaranty and (ii) so long as the
Investment Grade Rating Date has not occurred, all of the documents and
instruments set forth in the foregoing clauses (a) and (b) of
this Section with respect to WW.com and its Subsidiaries (to the extent
applicable).

 

64

 

SECTION 7.1.8. Future
Leased Property and Future Acquisitions of Real Property.

 

(a)           Prior to the Investment Grade Rating
Date, prior to entering into any new lease of real property or renewing any
existing lease of real property, the Borrower shall, and shall cause each of
its U.S. Subsidiaries (other than WW.com or its Subsidiaries until the
occurrence of the Trigger Date) to, use its (and their) best efforts (which
shall not require the expenditure of cash or the making of any material
concessions under the relevant lease) to deliver to the Administrative Agent a
Waiver executed by the lessor of any real property that is to be leased by the
Borrower or any such U.S. Subsidiary for a term in excess of one year in any
state which by statute grants such lessor a “landlord’s” (or similar) Lien
which is superior to the Administrative Agent’s, to the extent the value of any
personal property of the Borrower or such U.S. Subsidiary to be held at such
leased property exceeds (or it is anticipated that the value of such personal
property will, at any point in time during the term of such leasehold term,
exceed) $5,000,000.

 

(b)           Prior to the Investment Grade Rating
Date, in the event that the Borrower or any of its U.S. Subsidiaries (other
than WW.com or its Subsidiaries until the occurrence of the Trigger Date) shall
acquire any real property having a value as determined in good faith by the
Administrative Agent in excess of $2,000,000, the Borrower or the applicable
Subsidiary shall, promptly after such acquisition, execute a Mortgage and
provide the Administrative Agent with

 

(i)            evidence of the completion (or
satisfactory arrangements for the completion) of all recordings and filings of
such Mortgage as may be necessary or, in the reasonable opinion of the
Administrative Agent, desirable effectively to create a valid, perfected first
priority Lien, subject to Liens permitted by Section 7.2.3, against
the properties purported to be covered thereby;

 

(ii)           mortgagee’s title insurance policies in
favor of the Administrative Agent and the Lenders in amounts and in form and
substance and issued by insurers, reasonably satisfactory to the Administrative
Agent, with respect to the property purported to be covered by such Mortgage,
insuring that title to such property is marketable and that the interests
created by the Mortgage constitute valid first Liens thereon free and clear of
all defects and encumbrances other than as approved by the Administrative
Agent, and such policies shall also include a revolving credit endorsement and
such other endorsements as the Administrative Agent shall request and shall be
accompanied by evidence of the payment in full of all premiums thereon; and

 

(iii)          such other approvals, opinions, or
documents as the Administrative Agent may reasonably request.

 

(c)           On the Trigger Date so long as the
Investment Grade Rating Date has not occurred, the Borrower shall, and shall
cause WW.com and its Subsidiaries to, execute and/or deliver to the
Administrative Agent the agreements, instruments, approvals, opinions and other
documents, as applicable, set forth in the foregoing clauses (a) and (b)
of this Section (to the extent applicable).

 

65

 

SECTION 7.1.9. Use of
Proceeds, etc. The proceeds of the Credit Extensions shall be applied by
the Borrower as follows:

 

(a)           the proceeds of the Term A Loans and
Revolving Loans borrowed on the Effective Date shall be applied by the Borrower
(i) to fund the Current Refinancing and (ii) to finance the payment of the
fees and expenses related to the Current Refinancing; and

 

(b)           the proceeds of all other Revolving
Loans, Swing Line Loans and any Term Loans incurred pursuant to Section
2.1.6, and the issuance of Letters of Credit from time to time, shall be
used for working capital and general corporate purposes of the Borrower and its
Subsidiaries.

 

SECTION 7.2. Negative
Covenants. The Borrower agrees with the Administrative Agent, the Issuer
and each Lender that, until all Commitments have terminated, all Letters of
Credit have terminated or expired and all Obligations have been paid and
performed in full, the Borrower will perform the obligations set forth in this Section 7.2.

 

SECTION 7.2.1. Business
Activities. The Borrower will not, and will not permit any of its
Subsidiaries to, engage in any business activity, except business activities of
the type in which the Borrower and its Subsidiaries are engaged on the
Effective Date and such activities as may be incidental, similar or related
thereto.

 

SECTION 7.2.2. Indebtedness.
The Borrower will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist or otherwise become or be liable in respect of
any Indebtedness, other than, without duplication, the following:

 

(a)           Indebtedness in respect of the Credit
Extensions and other Obligations;

 

(b)           [INTENTIONALLY OMITTED];

 

(c)           Indebtedness identified in Item 7.2.2(c)
(“Ongoing Indebtedness”) of the Disclosure Schedule, and any Refinancing
Indebtedness;

 

(d)           Indebtedness incurred by the Borrower or
any of its Subsidiaries (i) (x) to any Person providing financing for the
acquisition of any assets permitted to be acquired pursuant to Section 7.2.8
to finance its acquisition of such assets and (y) in respect of
Capitalized Lease Liabilities in an aggregate amount for clauses (x) and
(y) not to exceed $10,000,000 at any time and (ii) from time to
time for general corporate purposes in a maximum aggregate amount of all
Indebtedness incurred pursuant to this clause (ii) not at any time to
exceed $25,000,000 less the then aggregate outstanding Indebtedness of
Subsidiaries which are not Guarantors permitted under clause (f)(iii) below;

 

(e)           Hedging Obligations of the Borrower or
any of its Subsidiaries;

 

(f)            intercompany Indebtedness of the Borrower
owing to any of its Subsidiaries or any Subsidiary of the Borrower (other than
the Designated Subsidiary and WW.com and its Subsidiaries until the occurrence
of the Trigger Date) owing to the

 

66

 

Borrower
or any other Subsidiary of the Borrower or of the Borrower to any Subsidiary of
the Borrower, which Indebtedness

 

(i)            if between Guarantors shall be evidenced
by one or more promissory notes in form and substance satisfactory to the
Administrative Agent which have been duly executed and delivered to (and
endorsed to the order of) the Administrative Agent in pledge pursuant to a
supplement to the applicable Pledge Agreement;

 

(ii)           if between Guarantors (other than
Indebtedness incurred by the Borrower) shall, except in the case of
Indebtedness of the Borrower owing to any of its Subsidiaries, not be forgiven
or otherwise discharged for any consideration other than payment in cash in the
currency in which such Indebtedness was loaned or advanced unless the
Administrative Agent otherwise consents; and

 

(iii)          owing by Subsidiaries which are not
Guarantors to Guarantors shall not exceed $25,000,000 in the aggregate at any
time outstanding;

 

(g)           unsecured Debt of the Borrower, so long
as after giving pro  forma effect to the incurrence of such Debt
the Borrower can demonstrate compliance with the covenants set forth in Section
7.2.4;

 

(h)           [reserved];

 

(i)            each Subordinated Guaranty;

 

(j)            (i) guarantees by the Borrower or any
Guarantor of any Indebtedness of the Borrower or any Guarantor and (ii)
guarantees by any Subsidiary that is not a Guarantor of any Indebtedness of any
other Subsidiary that is not a Guarantor and (iii) guarantees by the Borrower
or any Guarantor of any unsecured Indebtedness of any Subsidiary that is not a
Guarantor incurred pursuant to clause (d)(ii)
of this Section; provided, that in each case, the Indebtedness being
guaranteed is otherwise permitted by this Section;

 

(k)           Indebtedness incurred or assumed in connection
with a Franchise Acquisition in an amount not to exceed $30,000,000 per
Franchise Acquisition; and

 

(l)            until the occurrence of the Trigger Date,
Indebtedness of WW.com and its Subsidiaries in an amount not to exceed
$250,000,000;

 

provided, however, that no Indebtedness otherwise
permitted by clause (d), (f) (as such clause relates to Loans
made by the Borrower to its Subsidiaries) or (g) may be incurred if,
after giving effect to the incurrence thereof, any Default shall have occurred
and be continuing.

 

SECTION 7.2.3. Liens.
The Borrower will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist any Lien upon any of its property, revenues or
assets, whether now owned or hereafter acquired, except:

 

67

 

(a)           Liens securing payment of the
Obligations, granted pursuant to any Loan Document;

 

(b)           [INTENTIONALLY OMITTED];

 

(c)           Liens to secure payment of Indebtedness
of the type permitted and described in clause (c) of Section 7.2.2;

 

(d)           Liens granted by the Borrower or any of
its Subsidiaries to secure payment of Indebtedness of the type permitted and
described in (x) clause (d)(i) of Section 7.2.2; provided,
that the obligations secured thereby do not exceed in the aggregate $5,000,000
at any time outstanding and (y) clause (d)(ii) of Section 7.2.2
owed by Subsidiaries which are not Guarantors to non-Affiliates; provided
that the obligations secured thereby do not exceed $7,500,000 in the aggregate
at any one time outstanding;

 

(e)           Liens for taxes, assessments or other
governmental charges or levies, including Liens pursuant to Section 107(l)
of CERCLA or other similar law, not at the time delinquent or thereafter
payable without penalty or being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books;

 

(f)            Liens of carriers, warehousemen,
mechanics, repairmen, materialmen and landlords or other like liens incurred by
the Borrower or any of its Subsidiaries in the ordinary course of business for
sums not overdue for a period of more than 30 days or being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books;

 

(g)           Liens incurred by the Borrower or any of
its Subsidiaries in the ordinary course of business in connection with workmen’s
compensation, unemployment insurance or other forms of governmental insurance
or benefits, or to secure performance of tenders, statutory obligations,
insurance obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds;

 

(h)           judgment Liens in existence less than
30 days after the entry thereof or with respect to which execution has
been stayed or the payment of which is covered in full by a bond or (subject to
a customary deductible) by insurance maintained with responsible insurance
companies;

 

(i)            Liens with respect to recorded minor
imperfections of title and easements, rights-of-way, restrictions,
reservations, permits, servitudes and other similar encumbrances on real
property and fixtures which do not materially detract from the value or materially
impair the use by the Borrower or any such Subsidiary in the ordinary course of
their business of the property subject thereto;

 

(j)            leases or subleases granted by the
Borrower or any of its Subsidiaries to any other Person in the ordinary course
of business;

 

68

 

(k)           Liens in the nature of trustees’ Liens
granted pursuant to any indenture governing any Indebtedness permitted by Section
7.2.2, in each case in favor of the trustee under such indenture and securing
only obligations to pay compensation to such trustee, to reimburse its expenses
and to indemnify it under the terms thereof; and

 

(l)            until the occurrence of the Trigger Date,
Liens granted by WW.com or its Subsidiaries to secure payment of Indebtedness
of the type permitted and described in clause (l) of Section 7.2.2;
and

 

(m)          until the occurrence of the Trigger Date,
Liens on Capital Securities of WW.com granted by the Borrower to secure payment
of Indebtedness of the type permitted and described in clause (l) of Section
7.2.2.

 

SECTION 7.2.4. Financial Condition.

 

(a)           Net Debt to EBITDA Ratio. The Borrower will not permit the Net
Debt to EBITDA Ratio as of the end of any Fiscal Quarter to be greater than
3.00 to 1.00.

 

(b)           Interest Coverage Ratio. The Borrower will not permit the
Interest Coverage Ratio as of the end of any Fiscal Quarter to be less than
3.00 to 1.00.

 

SECTION 7.2.5. Investments.
The Borrower will not, and will not permit any of its Subsidiaries to, make,
incur, assume or suffer to exist any Investment in any other Person, except:

 

(a)           Investments existing on the date hereof
and identified in Item 7.2.5(a) (“Ongoing Investments”) of the
Disclosure Schedule;

 

(b)           Cash Equivalent Investments;

 

(c)           without duplication, Investments permitted
as Indebtedness pursuant to Section 7.2.2;

 

(d)           without duplication, Investments
permitted as Capital Expenditures;

 

(e)           Investments by the Borrower in any of its
Subsidiaries (i) which have executed Guaranties, or by any such Subsidiary in
any of its Subsidiaries which have executed Guaranties, by way of contributions
to capital and (ii) which have not executed Guaranties in an aggregate amount
not to exceed $30,000,000, or by any such Subsidiary in any of its
Subsidiaries, by way of contributions to capital;

 

(f)            Investments made by the Borrower or any
of its Subsidiaries, solely with proceeds which have been contributed, directly
or indirectly, to such Subsidiary as cash equity from holders of the Borrower’s
common stock for the purpose of making an Investment identified in a notice to
the Administrative Agent on or prior to the date that such capital contribution
is made;

 

69

 

(g)           Investments by the Borrower or any of its
Subsidiaries to the extent the consideration received pursuant to clause (b)(i)
of Section 7.2.9 is not all cash;

 

(h)           [reserved];

 

(i)            other Investments made by the Borrower or
any of the Guarantors in an aggregate amount not to exceed $30,000,000;

 

(j)            other Investments made by any Non-Guarantor
Subsidiary in another Non-Guarantor Subsidiary;

 

(k)           other Investments made by the Borrower or
any Subsidiary in Qualified Assets, to the extent permitted under clause (b)
of Section 3.1.1;

 

(l)            Investments made by the Borrower in the
Designated Subsidiary in an aggregate amount not to exceed $1,500,000;

 

(m)          Investments permitted under Section
7.2.6;

 

(n)           Investments by the Borrower or any
Subsidiary constituting Permitted Acquisitions; and

 

(o)           until the occurrence of the Trigger Date,
other Investments made by WW.com and its Subsidiaries.

 

provided, however,
that

 

(i)            any Investment which when made complies
with the requirements of the definition of the term “Cash Equivalent Investment”
may continue to be held notwithstanding that such Investment if made thereafter
would not comply with such requirements;

 

(ii)           the Investments permitted above shall
only be permitted to be made to the extent not prohibited in whole or in part
by the terms of any Subordinated Debt or Sub Debt Document;

 

(iii)          no Investment otherwise permitted by clause
(e), (f), (g) or (i) shall be permitted to be made if,
immediately before or after giving effect thereto, any Default shall have
occurred and be continuing; and

 

(iv)          except as permitted under clause (a)
above, no more than $2,000,000 of Investments may be made in the Designated
Subsidiary unless the Designated Subsidiary shall have taken the actions set
forth in Section 7.1.7.

 

SECTION 7.2.6. Restricted
Payments, etc. On and at all times after the Effective Date,

 

(a)           subject to clause (b)(ii), the
Borrower will not declare, pay or make any dividend or distribution (in cash,
property or obligations) on any shares of any class of

 

70

 

Capital
Securities (now or hereafter outstanding) of the Borrower or on any warrants,
options or other rights with respect to any shares of any class of Capital
Securities (now or hereafter outstanding) of the Borrower (other than dividends
or distributions payable in its common stock or warrants to purchase its common
stock or splits or reclassifications of its stock into additional or other
shares of its common stock) or apply, or permit any of its Subsidiaries to
apply, any of its funds, property or assets to the purchase, redemption, sinking
fund or other retirement of, or agree or permit any of its Subsidiaries to
purchase or redeem, any shares of any class of Capital Securities (now or
hereafter outstanding) of the Borrower, or warrants, options or other rights
with respect to any shares of any class of Capital Securities (now or hereafter
outstanding) of the Borrower (collectively, “Restricted Payments”); provided,
that:

 

(i)            subject to clause (ii) below, the
Borrower may make Restricted Payments of dividends on the Borrower’s Capital Securities
so long as no Default has occurred and is continuing or would be caused
thereby;

 

(ii)           the Borrower may make Restricted Payments
of extraordinary dividends or to repurchase the Borrower’s Capital Securities
so long as no Default has occurred and is continuing or would be caused
thereby; provided, however, if the Investment Grade Rating Date
has not occurred, such Restricted Payments shall not exceed $150,000,000 in the
aggregate in any Fiscal Year for those Fiscal Quarters in such Fiscal Year
during which either (a) the Net Debt to EBITDA Ratio is equal to or greater
than 2.50:1 as set forth in the Compliance Certificate most recently delivered
to the Administrative Agent or (b) the Net Debt to EBITDA Ratio is equal to or
greater than 2.50:1 after giving pro  forma effect to such
Restricted Payments as of (and including) the computation date of the
Compliance Certificate most recently delivered to the Administrative Agent; and

 

(iii)          the Borrower may repurchase its stock
held by employees constituting management, in an amount not to exceed
$5,000,000 in any Fiscal Year and an aggregate amount of $20,000,000 (amounts
unused in any Fiscal Year may be used in the immediately succeeding Fiscal
Year);

 

(b)           the Borrower will not, and will not
permit any of its Subsidiaries to

 

(i)            make any payment or prepayment of
principal of, or interest on, any Subordinated Debt other than (A) in the case
of interest only, on the stated, scheduled date for such payment of interest
set forth in the applicable Sub Debt Documents or (B) which would not violate
the terms of this Agreement or the subordination provisions of the applicable
Sub Debt Documents; or

 

(ii)           redeem, retire, purchase or defease any
Subordinated Debt unless no Default has occurred and is continuing or would
result therefrom; and

 

(c)           the Borrower will not, and will not
permit any Subsidiary to, make any deposit for any of the foregoing purposes
(except in connection with any permitted expenditure described in clauses (a) and (b) above).

 

71

 

SECTION 7.2.7. [INTENTIONALLY
OMITTED]

 

SECTION 7.2.8. Consolidation,
Merger, etc. The Borrower will not, and will not permit any of its
Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or
with, any other corporation, or purchase or otherwise acquire all or
substantially all of the assets of any Person (or of any division thereof)
except:

 

(a)           any such Subsidiary may liquidate or
dissolve voluntarily into, and may merge with and into, the Borrower (so long
as the Borrower is the surviving corporation of such combination or merger) or
any other Subsidiary, and the assets or stock of any Subsidiary may be
purchased or otherwise acquired by the Borrower or any other Subsidiary; provided,
that notwithstanding the above, (i) a Subsidiary may only liquidate or
dissolve into, or merge with and into, another Subsidiary of the Borrower if,
after giving effect to such combination or merger, the Borrower continues to
own (directly or indirectly), and the Administrative Agent continues to have
pledged to it pursuant to a supplement to the WWI Pledge Agreement, a
percentage of the issued and outstanding shares of Capital Securities (on a
fully diluted basis) of the Subsidiary surviving such combination or merger that
is equal to or in excess of the percentage of the issued and outstanding shares
of Capital Securities (on a fully diluted basis) of the Subsidiary that does
not survive such combination or merger that was (immediately prior to the
combination or merger) owned by the Borrower or pledged to the Administrative
Agent and (ii) if such Subsidiary is a Guarantor the surviving corporation
must be a Guarantor;

 

(b)           so long as no Default has occurred and is
continuing or would occur after giving effect thereto, the Borrower or any of
its Subsidiaries may make Investments permitted under Section 7.2.5
(including any Permitted Acquisition); and

 

(c)           a Subsidiary may merge with another
Person in a transaction permitted by clause (b) of Section 7.2.9.

 

SECTION 7.2.9. Asset
Dispositions, etc. Subject to the definition of Change in Control, the
Borrower will not, and will not permit any of its Subsidiaries to, Dispose of
all or any part of its assets, whether now owned or hereafter acquired
(including accounts receivable and Capital Securities of Subsidiaries) to any
Person, unless

 

(a)           such Disposition is made by the Borrower
or any of its Subsidiaries and is (i) in the ordinary course of its business
(and does not constitute a Disposition of all or a substantial part of the
Borrower or such Subsidiary’s assets) or is of obsolete or worn out property or
(ii) permitted by clause (a) or (b) of Section 7.2.8;

 

(b)           (i) such Disposition (other than of
Capital Securities) is made by the Borrower or any of its Subsidiaries and is for
fair market value and the consideration consists of no less than 75% in cash,
(ii) the Net Disposition Proceeds received from such Disposition, together with
the Net Disposition Proceeds of all other assets sold, transferred, leased,
contributed or conveyed pursuant to this clause (b) since the
Effective Date, does not exceed (individually or in the aggregate) an amount
equal to 10% of the assets of the Borrower and its Subsidiaries (other than
WW.com and its Subsidiaries until

 

72

 

the
occurrence of the Trigger Date) taken as a whole (calculated at the time such
Disposition is to be made) over the term of this Agreement and (iii) the
Net Disposition Proceeds generated from such Disposition not theretofore reinvested
in Qualified Assets in accordance with clause (b) of Section 3.1.1
(with the amount permitted to be so reinvested in Qualified Assets in any event
not to exceed $7,500,000 over the term of this Agreement) is applied as Net
Disposition Proceeds to prepay the Loans pursuant to the terms of clause (b)
of Section 3.1.1 and Section 3.1.2;

 

(c)           such Disposition is made pursuant to a
Local Management Plan; or

 

(d)           until the occurrence of the Trigger Date,
Dispositions made by WW.com and its Subsidiaries.

 

SECTION 7.2.10. Modification of Certain Agreements.

 

(a)           The Borrower will not, and will not
permit any of its Subsidiaries to, consent to any amendment, supplement,
amendment and restatement, waiver or other modification of any of the terms or
provisions contained in, or applicable to, the Recapitalization Agreement or
any schedules, exhibits or agreements related thereto, in each case which would
adversely affect the rights or remedies of the Lenders, or the Borrower’s or
any Subsidiary’s ability to perform hereunder or under any Loan Document.

 

(b)           Except as otherwise permitted pursuant to
the terms of this Agreement, without the prior written consent of the Required
Lenders, the Borrower will not consent to any amendment, supplement or other
modification of any of the terms or provisions contained in, or applicable to,
any Subordinated Debt or any Sub Debt Document (including any Subordinated
Guaranty), or make any payment in order to obtain an amendment thereof or
change thereto, if the effect of such amendment, supplement, modification or
change is to (i) increase the principal amount of, or increase the interest
rate on, or add or increase any fee with respect to such Subordinated Debt or
any such Sub Debt Document, advance any dates upon which payments of principal
or interest are due thereon or change any of the covenants with respect thereto
in a manner which is more restrictive to the Borrower or any of its
Subsidiaries or (ii) change any event of default or condition to an event of
default with respect thereto, change the redemption, prepayment or defeasance
provisions thereof, change the subordination provisions thereof, or change any
collateral therefor (other than to release such collateral), if (in the case of
this clause (b)(ii)), the effect of such amendment or change,
individually or together with all other amendments or changes made, is to
increase the obligations of the obligor thereunder or to confer any additional
rights on the holders of such Subordinated Debt, or any such Sub Debt Document
(or a trustee or other representative on their behalf).

 

SECTION 7.2.11. Transactions
with Affiliates. The Borrower will not, and will not permit any of its
Subsidiaries to, enter into, or cause, suffer or permit to exist any
arrangement or contract with any of their other Affiliates (other than any
Obligor)

 

73

 

(a)           unless (i) such arrangement or
contract is fair and equitable to the Borrower or such Subsidiary and is an
arrangement or contract of the kind which would be entered into by a prudent
Person in the position of the Borrower or such Subsidiary with a Person which
is not one of their Affiliates; and (ii) if such arrangement or contract
involves an amount in excess of $25,000,000, the terms of such arrangement or
contract are set forth in writing and a majority of directors of the Borrower
have determined in good faith that the criteria set forth in clause (i) are satisfied and have
approved such arrangement or contract as evidenced by appropriate resolutions
of the board of directors of the Borrower or the relevant Subsidiary; or (iii)
such arrangement is set forth on Item 7.2.11 of the Disclosure Schedule;
and

 

(b)           except that, so long as no Default or
Event of Default has occurred and is continuing or would be caused thereby, the
Borrower and its Subsidiaries may pay (i) annual management, consulting,
monitoring and advisory fees to The Invus Group, Ltd. in an aggregate total
amount in any Fiscal Year not to exceed the greater of (x) $1,000,000 and
(y) 1.0% of EBITDA for the relevant period, and any related out-of-pocket
expenses and (ii) fees to The Invus Group, Ltd. and its Affiliates in
connection with any acquisition or divestiture transaction entered into by the
Borrower or any Subsidiary; provided, however, that the aggregate
amount of fees paid to The Invus Group, Ltd. and its Affiliates in respect of
any acquisition or divestiture transaction shall not exceed 1% of the total
amount of such transaction.

 

SECTION 7.2.12. Negative
Pledges, Restrictive Agreements, etc. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any agreement (excluding (i) any
restrictions existing under the Loan Documents or, in the case of clauses (a)(i)
and (b), any other agreements in effect on the date hereof, (ii) in
the case of clauses (a)(i) and (b), any restrictions with
respect to a Subsidiary imposed pursuant to an agreement which has been entered
into in connection with the sale or disposition of all or substantially all of
the Capital Securities or assets of such Subsidiary pursuant to a transaction
otherwise permitted hereby, (iii) in the case of clause (a),
restrictions in respect of Indebtedness secured by Liens permitted by Section 7.2.3,
but only to the extent such restrictions apply to the assets encumbered
thereby, (iv) in the case of clause (a), restrictions under any Sub
Debt Document, (v) any restrictions existing under any agreement that
amends, refinances or replaces any agreement containing the restrictions
referred to in clause (i), (ii) or (iii) above or (vi) in
the case of clauses (a)(i) and (b), any restrictions with respect
to WW.com and its Subsidiaries imposed pursuant to the WW.com Debt Documents; provided,
that the terms and conditions of any such agreement referred to in clause (i),
(ii) or (iii) are not materially less favorable to the Lenders or
materially more restrictive to any Obligor a party thereto than those under the
agreement so amended, refinanced or replaced) prohibiting

 

(a)           the (i) creation or assumption of
any Lien upon its properties, revenues or assets, whether now owned or
hereafter acquired, or (ii) ability of the Borrower or any other Obligor
to amend or otherwise modify this Agreement or any other Loan Document; or

 

(b)           the ability of any Subsidiary to make any
payments, directly or indirectly, to the Borrower by way of dividends,
advances, repayments of loans or advances, reimbursements of management and
other intercompany charges, expenses and accruals

 

74

 

or
other returns on investments, or any other agreement or arrangement which
restricts the ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower.

 

SECTION 7.2.13. Stock
of Subsidiaries. The Borrower will not (other than in connection with a
Permitted Acquisition or an Investment), and will not permit any of its
Subsidiaries to issue any Capital Securities (whether for value or otherwise)
to any Person other than the Borrower or another Wholly-owned Subsidiary of the
Borrower except in connection with a Local Management Plan.

 

SECTION 7.2.14. Sale
and Leaseback. The Borrower will not, and will not permit any of its
Subsidiaries to, enter into any agreement or arrangement with any other Person
providing for the leasing by the Borrower or any of its Subsidiaries of real or
personal property which has been or is to be sold or transferred by the
Borrower or any of its Subsidiaries to such other Person or to any other Person
to whom funds have been or are to be advanced by such Person on the security of
such property or rental obligations of the Borrower or any of its Subsidiaries.

 

SECTION 7.2.15. Fiscal
Year. The Borrower will not and will not permit any of its Subsidiaries to
change its Fiscal Year, unless such change brings the Fiscal Year of such
Subsidiary into conformity with the Fiscal Year of the Borrower.

 

SECTION 7.2.16. Designation
of Senior Indebtedness. The Borrower will not designate any Indebtedness
(other than Indebtedness hereunder) as “Designated Senior Indebtedness” (or any
analogous term) in any Sub Debt Document.

 

ARTICLE
VIII

[INTENTIONALLY OMITTED]

 

ARTICLE
IX

EVENTS OF DEFAULT

 

SECTION 9.1. Listing
of Events of Default. Each of the following events or occurrences described
in this Section 9.1 shall constitute an “Event of Default”.

 

SECTION 9.1.1. Non-Payment
of Obligations. The Borrower shall default in the payment or prepayment of
any Reimbursement Obligation (including pursuant to Sections 2.6
and 2.6.2) on the applicable Disbursement Due Date or any deposit of
cash for collateral purposes on the date required pursuant to Section 2.6.4
or any principal of any Loan when due, or any Obligor (including the Borrower)
shall default (and such default shall continue unremedied for a period of three
Business Days) in the payment when due of any interest or commitment fee or of
any other monetary Obligation.

 

SECTION 9.1.2. Breach
of Warranty. Any representation or warranty of the Borrower or any other
Obligor made or deemed to be made hereunder or in any other Loan Document

 

75

 

executed by it or any other
writing or certificate furnished by or on behalf of the Borrower or any other
Obligor to the Administrative Agent, the Issuer or any Lender for the purposes
of or in connection with this Agreement or any such other Loan Document
(including any certificates delivered pursuant to Article V) is or
shall be incorrect when made in any material respect.

 

SECTION 9.1.3. Non-Performance
of Certain Covenants and Obligations. The Borrower shall default in the due
performance and observance of any of its obligations under Section 7.1.9
or Section 7.2.

 

SECTION 9.1.4. Non-Performance
of Other Covenants and Obligations. Any Obligor shall default in the due
performance and observance of any other agreement contained herein or in any
other Loan Document executed by it, and such default shall continue unremedied
for a period of 30 days after notice thereof shall have been given to the
Borrower by the Administrative Agent at the direction of the Required Lenders.

 

SECTION 9.1.5. Default
on Other Indebtedness. A default shall occur (i) in the payment when due
(subject to any applicable grace period), whether by acceleration or otherwise,
of any Indebtedness, other than Indebtedness described in Section 9.1.1,
of the Borrower or any of its Subsidiaries or any other Obligor having a
principal amount, individually or in the aggregate, in excess of $1,000,000, or
(ii) in the performance or observance of any obligation or condition with
respect to such Indebtedness having a principal amount, individually or in the
aggregate, in excess of $5,000,000 if the effect of such default is to
accelerate the maturity of any such Indebtedness or such default shall continue
unremedied for any applicable period of time sufficient to permit the holder or
holders of such Indebtedness, or any trustee or agent for such holders, to
cause such Indebtedness to become due and payable prior to its expressed
maturity.

 

SECTION 9.1.6. Judgments.
Any judgment or order for the payment of money in excess of $1,000,000 (not
covered by insurance from a responsible insurance company that is not denying
its liability with respect thereto) shall be rendered against the Borrower or
any of its Subsidiaries or any other Obligor and remain unpaid and either

 

(a)           enforcement proceedings shall have been
commenced by any creditor upon such judgment or order; or

 

(b)           there shall be any period of 60
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect.

 

SECTION 9.1.7. Pension
Plans. Any of the following events shall occur with respect to any Pension
Plan:

 

(a)           the termination of any Pension Plan if,
as a result of such termination, the Borrower or any Subsidiary would be
required to make a contribution to such Pension Plan, or would reasonably
expect to incur a liability or obligation to such Pension Plan, in excess of
$5,000,000; or

 

(b)           a contribution failure occurs with
respect to any Pension Plan sufficient to give rise to a Lien under section 302(f)
of ERISA in an amount in excess of $5,000,000.

 

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SECTION 9.1.8. Change
in Control. Any Change in Control shall occur.

 

SECTION 9.1.9. Bankruptcy,
Insolvency, etc. The Borrower or any of its Subsidiaries (other than
any Immaterial Subsidiary or the Designated Subsidiary) or any other Obligor
shall

 

(a)           become insolvent or generally fail to
pay, or admit in writing its inability or unwillingness to pay, debts as they
become due;

 

(b)           apply for, consent to, or acquiesce in,
the appointment of a trustee, receiver, sequestrator or other custodian for the
Borrower or any of its Subsidiaries or any other Obligor or any property of any
thereof, or make a general assignment for the benefit of creditors;

 

(c)           in the absence of such application,
consent or acquiescence, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for the Borrower or any of
its Subsidiaries or any other Obligor or for a substantial part of the property
of any thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within 60 days, provided that the Borrower or
each Subsidiary and each other Obligor hereby expressly authorizes the
Administrative Agent, the Issuer and each Lender to appear in any court
conducting any relevant proceeding during such 60-day period to preserve,
protect and defend their rights under the Loan Documents;

 

(d)           permit or suffer to exist the
commencement of any bankruptcy, reorganization, debt arrangement or other case
or proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Borrower or any of its
Subsidiaries or any other Obligor, and, if any such case or proceeding is not
commenced by the Borrower or such Subsidiary or such other Obligor, such case
or proceeding shall be consented to or acquiesced in by the Borrower or such
Subsidiary or such other Obligor or shall result in the entry of an order for
relief or shall remain for 60 days undismissed, provided that the
Borrower, each Subsidiary and each other Obligor hereby expressly authorizes
the Administrative Agent, the Issuer and each Lender to appear in any court
conducting any such case or proceeding during such 60-day period to preserve,
protect and defend their rights under the Loan Documents; or

 

(e)           take any action (corporate or otherwise)
authorizing, or in furtherance of, any of the foregoing.

 

SECTION 9.1.10. Impairment
of Security, etc. Any Loan Document, or any Lien granted thereunder, shall
(except in accordance with its terms), in whole or in part, terminate, cease to
be in full force and effect or cease to be the legally valid, binding and
enforceable obligation of any Obligor party thereto; the Borrower or any other
Obligor shall, directly or indirectly, contest in any manner the effectiveness,
validity, binding nature or enforceability thereof; or any Lien securing any
Obligation shall, in whole or in part, cease to be a perfected first priority
Lien, subject only to those exceptions expressly permitted by such Loan
Document, except to the extent any event referred to above (a) results from the
failure of the Administrative Agent to maintain possession of certificates
representing securities pledged under the WWI Pledge Agreement or to file
continuation statements under the Uniform Commercial Code of any

 

77

 

applicable jurisdiction or (b)
is covered by a lender’s title insurance policy and the relevant insurer
promptly after the occurrence thereof shall have acknowledged in writing that
the same is covered by such title insurance policy.

 

SECTION 9.1.11. Subordinated
Debt. The subordination provisions relating to any Subordinated Debt (the “Subordination
Provisions”) shall fail to be enforceable by the Lenders (which have not
effectively waived the benefits thereof) in accordance with the terms thereof,
or the principal or interest on any Loan, Reimbursement Obligation or other
monetary Obligations shall fail to constitute Senior Debt, or the same (or any
other similar term) used to define the monetary Obligations.

 

SECTION 9.1.12. Redemption.
Any holder of any Subordinated Debt shall file an action seeking the rescission
thereof or damages or injunctive relief relating thereto; or any event shall
occur which, under the terms of any agreement or indenture relating to
Subordinated Debt, shall require the Borrower or any of its Subsidiaries to purchase,
redeem or otherwise acquire or offer to purchase, redeem or otherwise acquire
all or any portion of the principal amount of the Subordinated Debt (other than
as provided under Section 7.2.6); or the Borrower or any of its
Subsidiaries shall for any other reason purchase, redeem or otherwise acquire
or offer to purchase, redeem or otherwise acquire, or make any other payments
in respect of the principal amount of any such Subordinated Debt (other than as
provided under Section 7.2.6).

 

SECTION 9.2. Action if
Bankruptcy, etc. If any Event of Default described in clauses (a)
through (d) of Section 9.1.9 shall occur with respect to the
Borrower, any Subsidiary or any other Obligor, the Commitments (if not
theretofore terminated) shall automatically terminate and the outstanding
principal amount of all outstanding Loans and all other Obligations shall
automatically be and become immediately due and payable, without notice or
demand.

 

SECTION 9.3. Action if
Other Event of Default. If any Event of Default (other than any Event of
Default described in clauses (a) through (d) of Section 9.1.9
with respect to the Borrower or any Subsidiary or any other Obligor) shall
occur for any reason, whether voluntary or involuntary, and be continuing, the
Administrative Agent, upon the direction of the Required Lenders, shall by
notice to the Borrower declare all or any portion of the outstanding principal
amount of the Loans and other Obligations to be due and payable, require the
Borrower to provide cash collateral to be deposited with the Administrative
Agent in an amount equal to the Stated Amount of all issued Letters of Credit
and/or declare the Commitments (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of such Loans and other Obligations
which shall be so declared due and payable shall be and become immediately due
and payable, without further notice, demand or presentment, the Borrower shall
deposit with the Administrative Agent cash collateral in an amount equal to the
Stated Amount of all issued Letters of Credit and/or, as the case may be, the
Commitments shall terminate.

 

78

 

ARTICLE
X

THE AGENTS

 

SECTION 10.1. Actions.
Each Lender hereby appoints Scotia Capital as its Administrative Agent and as a
Lead Agent and Book Manager under and for purposes of this Agreement, the Notes
and each other Loan Document. Each Lender authorizes the Administrative Agent
to act on behalf of such Lender under this Agreement, the Notes, and each other
Loan Document and, in the absence of other written instructions from the
Required Lenders received from time to time by the Administrative Agent (with
respect to which the Administrative Agent agrees that it will comply, except as
otherwise provided in this Section or as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of the Administrative Agent by the terms hereof and thereof,
together with such powers as may be reasonably incidental thereto. Each Lender
hereby appoints JPM Chase as the Syndication Agent and JPM as a Lead Agent and
Book Manager. Each Lender hereby indemnifies (which indemnity shall survive any
termination of this Agreement) each Agent, ratably in accordance with their
respective Term Loans outstanding and Commitments (or, if no Term Loans or
Commitments are at the time outstanding and in effect, then ratably in
accordance with the principal amount of Term Loans and their respective
Commitments as in effect in each case on the date of the termination of this
Agreement), from and against any and all liabilities, obligations, losses,
damages, claims, costs or expenses of any kind or nature whatsoever which may
at any time be imposed on, incurred by, or asserted against, the Agents in any
way relating to or arising out of this Agreement, the Notes and any other Loan
Document, including reasonable attorneys’ fees, and as to which any Agent is
not reimbursed by the Borrower or any other Obligor (and without limiting the
obligation of the Borrower or any other Obligor to do so); provided, however,
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, claims, costs or expenses which are
determined by a court of competent jurisdiction in a final proceeding to have
resulted solely from an Agent’s gross negligence or willful misconduct. The
Agents shall not be required to take any action hereunder, under the Notes or
under any other Loan Document, or to prosecute or defend any suit in respect of
this Agreement, the Notes or any other Loan Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of the Agents shall be
or become, in any Agent’s determination, inadequate, any Agent may call for
additional indemnification from the Lenders and cease to do the acts
indemnified against hereunder until such additional indemnity is given. Notwithstanding
the foregoing, the Lead Arrangers and Book Managers shall have no duties,
obligations or liabilities under any Loan Document.

 

SECTION 10.2. Funding
Reliance, etc. Unless the Administrative Agent shall have been notified by
telephone, confirmed in writing, by any Lender by 5:00 p.m., New York time, on
the day prior to a Borrowing that such Lender will not make available the
amount which would constitute its Percentage of such Borrowing on the date
specified therefor, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If and to
the extent that such Lender shall not have made such amount available to the
Administrative Agent, such Lender severally agrees and the Borrower agrees to
repay the Administrative Agent forthwith on demand such corresponding amount
together with

 

79

 

interest thereon, for each day
from the date the Administrative Agent made such amount available to the
Borrower to the date such amount is repaid to the Administrative Agent, at the
interest rate applicable at the time to Loans comprising such Borrowing (in the
case of the Borrower) and (in the case of a Lender), at the Federal Funds Rate
(for the first two Business Days after which such amount has not been repaid,
and thereafter at the interest rate applicable to Loans comprising such
Borrowing.

 

SECTION 10.3. Exculpation.
Neither any Agent nor any of their respective directors, officers, employees or
agents shall be liable to any Lender for any action taken or omitted to be
taken by it under this Agreement or any other Loan Document, or in connection
herewith or therewith, except for its own willful misconduct or gross
negligence, nor responsible for any recitals or warranties herein or therein,
nor for the effectiveness, enforceability, validity or due execution of this
Agreement or any other Loan Document, nor for the creation, perfection or
priority of any Liens purported to be created by any of the Loan Documents, or
the validity, genuineness, enforceability, existence, value or sufficiency of
any collateral security, nor to make any inquiry respecting the performance by
the Borrower of its obligations hereunder or under any other Loan Document. Any
such inquiry which may be made by any Agent shall not obligate it to make any
further inquiry or to take any action. The Agents shall be entitled to rely
upon advice of counsel concerning legal matters and upon any notice, consent,
certificate, statement or writing which the Agents believe to be genuine and to
have been presented by a proper Person.

 

SECTION 10.4. Successor.
The Syndication Agent may resign as such upon one Business Day’s notice to the
Borrower and the Administrative Agent. The Administrative Agent may resign as
such at any time upon at least 30 days prior notice to the Borrower and all
Lenders. If the Administrative Agent at any time shall resign, the Required
Lenders may, with the prior consent of the Borrower (which consent shall not be
unreasonably withheld), appoint another Lender as a successor Administrative
Agent which shall thereupon become the Administrative Agent hereunder. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent’s giving notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the U.S. (or any State thereof) or a
U.S. branch or agency of a commercial banking institution, and having a
combined capital and surplus of at least $250,000,000; provided, however,
that if, such retiring Administrative Agent is unable to find a commercial
banking institution which is willing to accept such appointment and which meets
the qualifications set forth in above, the retiring Administrative Agent’s
resignation shall nevertheless thereupon become effective and the Lenders shall
assume and perform all of the duties of the Administrative Agent hereunder
until such time, if any, as the Required Lenders appoint a successor as
provided for above. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall be entitled to receive from the retiring
Administrative Agent such documents of transfer and assignment as such
successor Administrative Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations under this

 

80

 

Agreement. After any retiring
Administrative Agent’s resignation hereunder as the Administrative Agent, the
provisions of

 

(a)           this Article X shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the Administrative
Agent under this Agreement; and

 

(b)           Section 11.3 and Section 11.4 shall continue
to inure to its benefit.

 

SECTION 10.5. Credit
Extensions by each Agent. Each Agent shall have the same rights and powers
with respect to (x) the Credit Extensions made by it or any of its
Affiliates, and (y) the Notes held by it or any of its Affiliates as any
other Lender and may exercise the same as if it were not an Agent. Each Agent
and its respective Affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any Subsidiary or Affiliate
of the Borrower, as if such Agent were not an Agent hereunder.

 

SECTION 10.6. Credit
Decisions. Each Lender acknowledges that it has, independently of each
Agent and each other Lender, and based on such Lender’s review of the financial
information of the Borrower, this Agreement, the other Loan Documents (the
terms and provisions of which being satisfactory to such Lender) and such other
documents, information and investigations as such Lender has deemed
appropriate, made its own credit decision to extend its Commitments. Each
Lender also acknowledges that it will, independently of each Agent and each
other Lender, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights and
privileges available to it under this Agreement or any other Loan Document.

 

SECTION 10.7. Copies,
etc. The Administrative Agent shall give prompt notice to each Lender of
each notice or request required or permitted to be given to the Administrative
Agent by the Borrower pursuant to the terms of this Agreement (unless
concurrently delivered to the Lenders by the Borrower). The Administrative
Agent will distribute to each Lender each document or instrument received for
its account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Lenders by the
Administrative Agent in accordance with the terms of this Agreement.

 

SECTION 10.8. Reliance
by the Administrative Agent. The Administrative Agent shall be entitled to
rely upon any certification, notice or other communication (including any thereof
by telephone, telecopy, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Administrative Agent. As to any matters not
expressly provided for by this Agreement or any other Loan Document, the
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance with instructions
given by the Required Lenders or all of the Lenders as is required in such
circumstance, and such instructions of such Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders. For purposes
of applying amounts in accordance with this Section, the Administrative Agent
shall be entitled to rely upon any Secured Party that has entered into a Rate
Protection Agreement with any Obligor for a determination (which such Secured
Party agrees to provide or cause to be

 

81

 

provided upon request of the
Administrative Agent) of the outstanding Secured Obligations owed to such
Secured Party under any Rate Protection Agreement. Unless it has actual knowledge
evidenced by way of written notice from any such Secured Party and the Borrower
to the contrary, the Administrative Agent, in acting hereunder and under each
other Loan Document, shall be entitled to assume that no Rate Protection
Agreements or Obligations in respect thereof are in existence or outstanding
between any Secured Party and any Obligor.

 

SECTION 10.9. Defaults.
The Administrative Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default unless the Administrative Agent has received notice
from a Lender or the Borrower specifying such Default and stating that such
notice is a “Notice of Default”. In the event that the Administrative Agent
receives such a notice of the occurrence of a Default, the Administrative Agent
shall give prompt notice thereof to the Lenders. The Administrative Agent shall
(subject to Section 11.1) take such action with respect to such Default
as shall be directed by the Required Lenders; provided, that
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interest of the Lenders except to the extent that
this Agreement expressly requires that such action be taken, or not be taken,
only with the consent or upon the authorization of the Required Lenders or all
Lenders.

 

ARTICLE
XI

MISCELLANEOUS PROVISIONS

 

SECTION 11.1. Waivers,
Amendments, etc. The provisions of this Agreement and of each other Loan
Document may from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and consented to by the
Borrower and the Required Lenders; provided, however, that no
such amendment, modification or waiver shall:

 

(a)           modify Section 4.8 (as it relates
to sharing of payments) or this Section 11.1, in each case, without the
consent of all Lenders;

 

(b)           increase any Lender’s Percentage of any
Commitment Amount, increase the aggregate amount of any Loans to be made by a
Lender pursuant to its Commitments, extend the Revolving Loan Commitment
Termination Date of Credit Extensions made (or participated in) by a Lender or
reduce any fees described in Article III payable to any Lender without
the consent of such Lender;

 

(c)           extend the final Stated Maturity Date for
any Lender’s Loan, or reduce the principal amount of or rate of interest on any
Lender’s Loan or extend the date on which scheduled payments of principal, or
payments of interest or fees are payable in respect of any Lender’s Loans, in
each case, without the consent of such Lender (it being understood and agreed,
however, that any vote to rescind any acceleration made pursuant to Section
9.2 and Section 9.3 of amounts owing with respect to the Loans and
other Obligations shall only require the vote of the Required Lenders);

 

82

 

(d)           reduce the percentage set forth in the
definition of “Required Lenders” or any requirement hereunder that any
particular action be taken by all Lenders without the consent of all Lenders;

 

(e)           increase the Stated Amount of any Letter
of Credit, unless consented to by the Issuer of such Letter of Credit, or
extend the Stated Expiry Date of any Letter of Credit to a date which is
subsequent to the Revolving Loan Commitment Termination Date, unless consented
to by the Issuer of such Letter of Credit and all Revolving Lenders;

 

(f)            except as otherwise expressly provided in
this Agreement or another Loan Document, release (i) any Guarantor from its
obligations under a Guaranty other than in connection with a Disposition of all
or substantially all of the Capital Securities of such Guarantor in a
transaction permitted by Section 7.2.9 as in effect from time to time or
(ii) all or substantially all of the collateral under the Loan Documents,
in either case without the consent of all Lenders;

 

(g)           change any of the terms of clause (c)
of Section 2.1.4 or Section 2.3.2 without the consent of the Swing
Line Lender; or

 

(h)           affect adversely the interests, rights or
obligations of the Administrative Agent (in its capacity as the Administrative
Agent), the Syndication Agent (in its capacity as the Syndication Agent) or any
Issuer (in its capacity as Issuer), unless consented to by the Administrative
Agent, the Syndication Agent or such Issuer, as the case may be.

 

No failure or delay on the part of the Administrative
Agent, the Syndication Agent, any Issuer or any Lender in exercising any power
or right under this Agreement or any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. No notice to or demand on the Borrower or any other
Obligor in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Administrative Agent, the
Syndication Agent, any Issuer or any Lender under this Agreement or any other
Loan Document shall, except as may be otherwise stated in such waiver or
approval, be applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.

 

SECTION 11.2. Notices.
All notices and other communications provided to any party hereto under this
Agreement or any other Loan Document shall be in writing or by facsimile and
addressed, delivered or transmitted to such party at its address or facsimile
number set forth on Schedule III hereto or set forth in the Lender
Assignment Agreement or at such other address or facsimile number as may be
designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid or if properly addressed and
sent by pre-paid courier service, shall be deemed given when received; any
notice, if transmitted by facsimile, shall be deemed given when transmitted
(telephonic confirmation in the case of facsimile).

 

83

 

SECTION 11.3. Payment
of Costs and Expenses. The Borrower agrees to pay on demand all reasonable
expenses of the Administrative Agent (including the reasonable fees and
out-of-pocket expenses of Mayer, Brown, Rowe & Maw LLP, special New York
counsel to the Administrative Agent and of local counsel, if any, who may be
retained by counsel to the Administrative Agent) in connection with:

 

(a)           the syndication by the Agents of the
Loans, the negotiation, preparation, execution and delivery of this Agreement
and of each other Loan Document, including schedules and exhibits, and any
amendments, waivers, consents, supplements or other modifications to this
Agreement or any other Loan Document as may from time to time hereafter be
required, whether or not the transactions contemplated thereby are consummated;

 

(b)           the filing, recording, refiling or
rerecording of each Mortgage, each Pledge Agreement and each Security Agreement
and/or any Uniform Commercial Code financing statements or other instruments
relating thereto and all amendments, supplements and modifications to any
thereof and any and all other documents or instruments of further assurance
required to be filed or recorded or refiled or rerecorded by the terms hereof
or of such Mortgage, Pledge Agreement or Security Agreement; and

 

(c)           the preparation and review of the form of
any document or instrument relevant to this Agreement or any other Loan
Document.

 

The Borrower further agrees to pay, and to save each Agent,
the Issuer and the Lenders harmless from all liability for, any stamp or other
similar taxes which may be payable in connection with the execution or delivery
of this Agreement, the Credit Extensions made hereunder, or the issuance of the
Notes and Letters of Credit or any other Loan Documents. The Borrower also
agrees to reimburse the Administrative Agent, the Issuer and each Lender upon
demand for all reasonable out-of-pocket expenses (including attorneys’ fees and
legal expenses) incurred by the Administrative Agent, the Issuer or such Lender
in connection with (x) the negotiation of any restructuring or “work-out”,
whether or not consummated, of any Obligations and (y) the enforcement of
any Obligations.

 

SECTION 11.4. Indemnification.
In consideration of the execution and delivery of this Agreement by each Lender
and the extension of the Commitments, the Borrower hereby indemnifies,
exonerates and holds the Administrative Agent, the Syndication Agent, the
Issuer and each Lender and each of their respective Affiliates, and each of
their respective partners, officers, directors, employees and agents, and each
other Person controlling any of the foregoing within the meaning of either
Section 15 of the Securities Act of 1933, as amended, or Section 20 of the
Securities Exchange Act of 1934, as amended (collectively, the “Indemnified
Parties”), free and harmless from and against any and all actions, causes
of action, suits, losses, costs, liabilities, obligations, claims and damages,
and expenses actually incurred in connection therewith (irrespective of whether
any such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys’ fees and disbursements
(collectively, the “Indemnified Liabilities”), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to

 

84

 

(a)           any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of any
Credit Extension;

 

(b)           the entering into and performance of this
Agreement and any other Loan Document by any of the Indemnified Parties
(including any action brought by or on behalf of the Borrower as the result of
any determination by the Required Lenders pursuant to Article V not to
make any Credit Extension);

 

(c)           any investigation, litigation or
proceeding related to any acquisition or proposed acquisition by the Borrower
or any of its Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not the Administrative Agent, the Syndication Agent, the
Issuer or such Lender is party thereto;

 

(d)           any investigation, litigation or
proceeding related to any environmental cleanup, audit, compliance or other
matter relating to the protection of the environment or the Release by the
Borrower or any of its Subsidiaries of any Hazardous Material;

 

(e)           the presence on or under, or the escape,
seepage, leakage, spillage, discharge, emission, discharging or releases from, any
real property owned or operated by the Borrower or any Subsidiary thereof of
any Hazardous Material present on or under such property in a manner giving
rise to liability at or prior to the time the Borrower or such Subsidiary owned
or operated such property (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any Environmental
Law), regardless of whether caused by, or within the control of, the Borrower
or such Subsidiary; or

 

(f)            each Lender’s Environmental Liability
(the indemnification herein shall survive repayment of the Notes and any
transfer of the property of the Borrower or any of its Subsidiaries by
foreclosure or by a deed in lieu of foreclosure for any Lender’s Environmental
Liability, regardless of whether caused by, or within the control of, the
Borrower or such Subsidiary);

 

except for any such Indemnified Liabilities arising
for the account of a particular Indemnified Party by reason of the relevant
Indemnified Party’s gross negligence or willful misconduct. The Borrower and
its permitted successors and assigns hereby waive, release and agree not to
make any claim, or bring any cost recovery action against, the Administrative
Agent, the Syndication Agent, the Issuer or any Lender under CERCLA or any
state equivalent, or any similar law now existing or hereafter enacted, except
to the extent arising out of the gross negligence or willful misconduct of any
Indemnified Party. It is expressly understood and agreed that to the extent
that any of such Persons is strictly liable under any Environmental Laws, the
Borrower’s obligation to such Person under this indemnity shall likewise be
without regard to fault on the part of the Borrower with respect to the
violation or condition which results in liability of such Person. If and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.

 

85

 

SECTION 11.5. Survival.
The obligations of the Borrower under Sections 4.3, 4.4, 4.5,
4.6, 11.3 and 11.4, and the obligations of the Lenders
under Sections 4.8 and 10.1, shall in each case survive any
termination of this Agreement, the payment in full of all Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments. The representations and warranties made by the Borrower and each
other Obligor in this Agreement and in each other Loan Document shall survive
the execution and delivery of this Agreement and each such other Loan Document.

 

SECTION 11.6. Severability.
Any provision of this Agreement or any other Loan Document which is prohibited
or unenforceable in any jurisdiction shall, as to such provision and such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement or such Loan Document or affecting the validity or enforceability of
such provision in any other jurisdiction.

 

SECTION 11.7. Headings.
The various headings of this Agreement and of each other Loan Document are
inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or such other Loan Document or any provisions
hereof or thereof.

 

SECTION 11.8. Execution
in Counterparts; Effectiveness. This Agreement may be executed by the
parties hereto in several counterparts each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower, the Agents and each Lender (or notice
thereof satisfactory to the Administrative Agent), shall have been received by
the Administrative Agent.

 

SECTION 11.9. Governing
Law; Entire Agreement. THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN
DOCUMENT (OTHER THAN THE LETTERS OF CREDIT, TO THE EXTENT SPECIFIED BELOW AND
EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN A LOAN DOCUMENT), INCLUDING
PROVISIONS WITH RESPECT TO INTEREST, LOAN CHARGES AND COMMITMENT FEES, SHALL
EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND
5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). EACH LETTER OF
CREDIT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OR
RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO LAWS OR RULES ARE
DESIGNATED, THE INTERNATIONAL STANDBY PRACTICES (ISP98—INTERNATIONAL CHAMBER OF
COMMERCE PUBLICATION NUMBER 590 (THE “ISP RULES”)) AND, AS TO MATTERS
NOT GOVERNED BY THE ISP RULES, THE INTERNAL LAWS OF THE STATE OF NEW YORK. This
Agreement and the other Loan Documents constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and thereof
and supersede any prior agreements, written or oral, with respect thereto.

 

SECTION 11.10. Successors
and Assigns. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns; provided,
however, that:

 

86

 

(a)           the Borrower may not assign or transfer
its rights or obligations hereunder without the prior written consent of the
Administrative Agent and all Lenders; and

 

(b)           the rights of sale, assignment and
transfer of the Lenders are subject to Section 11.11.

 

SECTION 11.11. Sale
and Transfer of Loans and Notes; Participations in Loans and Notes. Each
Lender may assign, or sell participations in, its Loans, Letters of Credit and
Commitments to one or more other Persons, on a non pro  rata
basis, in accordance with this Section 11.11.

 

SECTION 11.11.1. Assignments.
Any Lender,

 

(a)           with the written consents of the Borrower
and the Administrative Agent (which consents shall not be unreasonably delayed
or withheld and which consent, in the case of the Borrower, shall be deemed to
have been given in the absence of a written notice delivered by the Borrower to
the Administrative Agent, on or before the fifth Business Day after receipt by
the Borrower of such Lender’s request for such consent), may at any time assign
and delegate to one or more commercial banks or other financial institutions;
and

 

(b)           with notice to the Borrower and the
Administrative Agent, but without the consent of the Borrower or the
Administrative Agent, may assign and delegate to any of its Affiliates, Related
Fund or to any other Lender,

 

(each Person described in either of the foregoing
clauses as being the Person to whom such assignment and delegation is to be
made, being hereinafter referred to as an “Assignee Lender”), all or any
fraction of such Lender’s total Loans, participations in Letters of Credit and
Letter of Credit Outstandings with respect thereto and Commitments in a minimum
aggregate amount of $1,000,000 or the then remaining amount of a Lender’s type
of Loan or Commitment; provided, however, that (i) with respect
to assignments of Revolving Loans, the assigning Lender must assign a pro
rata portion of each of its Revolving Loan Commitments, Revolving Loans
and interest in Letters of Credit Outstandings, (ii) the Administrative Agent,
in its own discretion, or by instruction from the Issuer, may refuse acceptance
of an assignment of Revolving Loans and Revolving Loan Commitments to a Person
not satisfying long-term certificate of deposit ratings published by S&P or
Moody’s, of at least BBB- or Baa3, respectively, or (unless otherwise agreed to
by the Issuer), if such assignment would, pursuant to any applicable laws,
rules or regulations, be binding on the Issuer, result in a reduced rate of
return to the Issuer or require the Issuer to set aside capital in an amount
that is greater than that which is required to be set aside for other Lenders
participating in the Letters of Credit, and (iii) such minimum assignment
amounts shall not apply to assignments among Lenders, their Affiliates and
Related Funds; provided, further, that any such Assignee Lender
will comply, if applicable, with the provisions contained in Section 4.6
and the Borrower, each other Obligor and the Administrative Agent shall be
entitled to continue to deal solely and directly with such Lender in connection
with the interests so assigned and delegated to an Assignee Lender until

 

87

 

(i)            written notice of such assignment and
delegation, together with payment instructions, addresses and related
information with respect to such Assignee Lender, shall have been given to the
Borrower and the Administrative Agent by such Lender and such Assignee Lender;

 

(ii)           such Lender and such Assignee Lender
shall have executed and delivered to the Borrower and the Administrative Agent
a Lender Assignment Agreement, accepted by the Administrative Agent; and

 

(iii)          the processing fees described below shall
have been paid.

 

From and after the date that the Administrative Agent
accepts such Lender Assignment Agreement and records the information contained
therein in the Register pursuant to Section 11.11.3, (x) the
Assignee Lender thereunder shall be deemed automatically to have become a party
hereto and to the extent that rights and obligations hereunder have been
assigned and delegated to such Assignee Lender in connection with such Lender
Assignment Agreement shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (y) the assignor Lender,
to the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Agreement, shall be
released from its obligations hereunder and under the other Loan Documents. Within
ten Business Days after its receipt of notice that the Administrative Agent has
received an executed Lender Assignment Agreement, the Borrower shall execute
and deliver to the Administrative Agent (for delivery to the relevant Assignee
Lender), to the extent required by the Assignee Lender, new Notes evidencing
such Assignee Lender’s assigned Loans and Commitments and, if the assignor
Lender has retained Loans and Commitments hereunder, replacement Notes in the
principal amount of the Loans and Commitments, as the case may be, retained by
the assignor Lender hereunder (such Notes to be in exchange for, but not in
payment of, those Notes, then held by such assignor Lender). Each such Note
shall be dated the date of the predecessor Notes. The assignor Lender shall
mark the predecessor Notes “exchanged” and deliver them to the Borrower. Accrued
interest on that part of the predecessor Notes evidenced by the new Notes and
accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued
interest on that part of the predecessor Notes evidenced by the replacement Notes
shall be paid to the assignor Lender. Accrued interest and accrued fees shall
be paid at the same time or times provided in the predecessor Notes and in this
Agreement. Such assignor Lender or such Assignee Lender must also pay a
processing fee to the Administrative Agent upon delivery of any Lender
Assignment Agreement, in the amount of $3,500, unless such assignment and
delegation is by a Lender to its Affiliate or if such assignment and delegation
is by a Lender to the Federal Reserve Bank or other creditor, as provided
below; provided however that for purposes of paying such processing fee,
same-day assignments to Affiliates and/or Related Funds of a Lender shall be
treated as a single assignment. Any attempted assignment and delegation not
made in accordance with this Section 11.11.1 shall be null and void.

 

Notwithstanding any other term of this Section
11.11.1, the agreement of the Swing Line Lender to provide the Swing Line
Loan Commitment shall not impair or otherwise restrict in any manner the ability
of the Swing Line Lender to make any assignment of its Loans or Commitments, it
being understood and agreed that the Swing Line Lender may terminate its Swing
Line Loan Commitment, to the extent such Swing Line Commitment would exceed its

 

88

 

Revolving Loan Commitment after
giving effect to such assignment, in connection with the making of any
assignment. Nothing contained in this Section 11.11.1 shall
restrict or prohibit any Lender from pledging its rights (but not its
obligations to make Loans) under this Agreement and/or its Loans and/or its
Notes hereunder to a Federal Reserve Bank (or in the case of a Lender which is
a fund, to the trustee of, or other Eligible Institution affiliated with, such
fund for the benefit of its investors) or other creditor in support of
borrowings made by such Lender from such Federal Reserve Bank or other
creditor.

 

In the event that S&P or Moody’s shall, after the
date that any Lender with a Commitment to make Revolving Loans or participate
in Letters of Credit or Swing Line Loans becomes a Lender, downgrade the
long-term certificate of deposit rating or long-term senior unsecured debt
rating of such Lender, and the resulting rating shall be below BBB- or Baa3,
then each of the Issuer and (if different) the Swing Line Lender shall have the
right, but not the obligation, upon notice to such Lender and the
Administrative Agent, to replace such Lender with an Assignee Lender in
accordance with and subject to the restrictions contained in this Section, and
such Lender hereby agrees to transfer and assign without recourse (in
accordance with and subject to the restrictions contained in this Section) all
its interests, rights and obligations in respect of its Revolving Loan Commitment
under this Agreement to such Assignee Lender; provided, however,
that (i) no such assignment shall conflict with any law, rule and
regulation or order of any governmental authority and (ii) such Assignee
Lender shall pay to such Lender in immediately available funds on the date of
such assignment the principal of and interest and fees (if any) accrued to the
date of payment on the Loans made, and Letters of Credit participated in, by
such Lender hereunder and all other amounts accrued for such Lender’s account
or owed to it hereunder.

 

SECTION 11.11.2. Participations.

 

(a)           Any Lender may at any time sell to
one or more commercial banks or other Persons (each of such commercial banks
and other Persons being herein called a “Participant”) participating interests
in any of the Loans, Commitments, or other interests of such Lender hereunder; provided,
however, that

 

(i)            no participation contemplated in this
Section shall relieve such Lender from its Commitments or its other
obligations hereunder or under any other Loan Document;

 

(ii)           such Lender shall remain solely
responsible for the performance of its Commitments and such other obligations;

 

(iii)          the Borrower and each other Obligor and
the Administrative Agent shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement and each of the other Loan Documents;

 

(iv)          no Participant, unless such Participant
is an Affiliate of such Lender, or Related Fund or is itself a Lender, shall be
entitled to require such Lender to take or refrain from taking any action
hereunder or under any other

 

89

 

Loan
Document, except that such Lender may agree with any Participant that such
Lender will not, without such Participant’s consent, take any action of the
type described in clause (a), (b), (f) or, to the extent
requiring the consent of each Lender, clause (c) of Section 11.1;
and

 

(v)           the Borrower shall not be required to pay
any amount under this Agreement that is greater than the amount which it would
have been required to pay had no participating interest been sold.

 

The Borrower acknowledges and agrees, subject to clause
(v) above, that each Participant, for purposes of Sections 4.3, 4.4,
4.5, 4.6, 4.8, 4.9, 11.3 and 11.4,
shall be considered a Lender. Each Participant shall only be indemnified for
increased costs pursuant to Section 4.3, 4.5 or 4.6 if and
to the extent that the Lender which sold such participating interest to such
Participant concurrently is entitled to make, and does make, a claim on the
Borrower for such increased costs. Any Lender that sells a participating
interest in any Loan, Commitment or other interest to a Participant under this
Section shall indemnify and hold harmless the Borrower and the Administrative
Agent from and against any taxes, penalties, interest or other costs or losses
(including reasonable attorneys’ fees and expenses) incurred or payable by the
Borrower or the Administrative Agent as a result of the failure of the Borrower
or the Administrative Agent to comply with its obligations to deduct or
withhold any taxes from any payments made pursuant to this Agreement to such
Lender or the Administrative Agent, as the case may be, which taxes would not
have been incurred or payable if such Participant had been a Non-U.S. Lender
that was entitled to deliver to the Borrower, the Administrative Agent or such
Lender, and did in fact so deliver, a duly completed and valid (x) Internal
Revenue Service Form W-8BEN or (y) Internal Revenue Service Form W-8EC1 (or in
either case an applicable successor form) entitling such Participant to receive
payments under this Agreement without deduction or withholding of any United
States federal taxes.

 

SECTION
11.11.3. Register. The Borrower hereby designates the Administrative
Agent to serve as the Borrower’s agent, and the Administrative Agent hereby
accepts such designation, solely for the purpose of this Section, to maintain a
register (the “Register”) on which the Administrative Agent will record
each Lender’s Commitment, the Loans made by each Lender and the Notes
evidencing such Loans, and each repayment in respect of the principal amount of
the Loans of each Lender and annexed to which the Administrative Agent shall
retain a copy of each Lender Assignment Agreement delivered to the
Administrative Agent pursuant to this Section. Failure to make any recordation,
or any error in such recordation, shall not affect the Borrower’s or any other
Obligor’s Obligations in respect of such Loans or Notes. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Lenders shall treat each Person in
whose name a Loan and related Note is registered as the owner thereof for all
purposes of this Agreement, notwithstanding notice or any provision herein to
the contrary. A Lender’s Commitment and the Loans made pursuant thereto and the
Notes evidencing such Loans may be assigned or otherwise transferred in whole
or in part only by registration of such assignment or transfer in the Register.
Any assignment or transfer of a Lender’s Commitment or the Loans or the Notes
evidencing such Loans made pursuant thereto shall be registered in the Register
only upon delivery to the Administrative Agent of a Lender Assignment Agreement
duly executed by the assignor thereof. No assignment or transfer of a Lender’s
Commitment or Loans or the Notes evidencing such

 

90

 

Loans shall be effective unless
such assignment or transfer shall have been recorded in the Register by the
Administrative Agent as provided in this Section. No Lender Assignment
Agreement shall be effective until recorded in the Register. Upon its receipt
of a Lender Assignment Agreement duly executed by the assigning Lender, the
Assignee Lender and any other Person whose consent or acknowledgement is
required pursuant to Section 11.11.1, the Administrative Agent shall
promptly (i) accept such Lender Assignment Agreement and (ii) record the
information contained therein in the Register.

 

SECTION 11.12. Other
Transactions. Nothing contained herein shall preclude the Administrative
Agent, the Issuer or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
the Borrower or any of its Affiliates in which the Borrower or such Affiliate
is not restricted hereby from engaging with any other Person.

 

SECTION 11.13. Forum
Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, THE
LENDERS, ANY ISSUER OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH SHALL
BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF
NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
ADMINISTRATIVE AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES
SPECIFIED IN SECTION 11.2. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE
OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY,
THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW
SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS.

 

SECTION 11.14. Waiver
of Jury Trial. THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, EACH
LENDER, EACH ISSUER AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS IT MAY
HAVE TO A TRIAL BY

 

91

 

JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE
AGENT, THE SYNDICATION AGENT, SUCH LENDER, SUCH ISSUER OR THE BORROWER IN
CONNECTION HEREWITH OR THEREWITH. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT, THE
SYNDICATION AGENT, EACH LENDER AND EACH ISSUER ENTERING INTO THIS AGREEMENT AND
EACH SUCH OTHER LOAN DOCUMENT.

 

SECTION 11.15. Confidentiality.
The Lenders shall hold all non-public information obtained pursuant to or in
connection with this Agreement or obtained by such Lender based on a review of
the books and records of the Borrower or any of its Subsidiaries in accordance
with their customary procedures for handling confidential information of this
nature, but may make disclosure to any of their examiners, Affiliates, outside
auditors, counsel and other professional advisors or to any direct or indirect
contractual counterparty in swap agreements or such contractual counterparty’s
professional advisor (so long as such contractual counterparty or professional
advisor to such contractual counterparty agrees to be bound by the provisions
of this Section) in connection with this Agreement or as reasonably required by
any potential bona  fide transferee, participant or assignee, or
in connection with the exercise of remedies under a Loan Document, or as
requested by any governmental agency or representative thereof or pursuant to
legal process or to any quasi-regulatory authority (including the National
Association of Insurance Commissioners); provided, however, that:

 

(a)           unless specifically prohibited by
applicable law or court order, each Lender shall notify the Borrower of any
request by any governmental agency or representative thereof (other than any
such request in connection with an examination of the financial condition of
such Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information;

 

(b)           prior to any such disclosure pursuant to
this Section 11.15, each Lender shall require any such potential
transferee, participant and assignee receiving a disclosure of non-public
information to agree in writing

 

(i)            to be bound by this Section 11.15;
and

 

(ii)           to require such Person to require any
other Person to whom such Person discloses such non-public information to be
similarly bound by this Section 11.15; and

 

(c)           except as may be required by an order of
a court of competent jurisdiction and to the extent set forth therein, no
Lender shall be obligated or required to return any materials furnished by the
Borrower or any Subsidiary.

 

92

 

Notwithstanding the
foregoing paragraphs of this Section, any party to this Agreement (and each
Affiliate, director, officer, employee, agent or representative of the
foregoing or such Affiliate) may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transactions
contemplated herein and all materials of any kind (including opinions or other
tax analyses) that are provided to such party relating to such tax treatment or
tax structure. The foregoing language is not intended to waive
any confidentiality obligations otherwise applicable under this Agreement
except with respect to the information and materials specifically referenced in
the preceding sentence. This
authorization does not extend to disclosure of any other information, including
(a) the identity of participants or potential participants in the transactions
contemplated herein, (b) the existence or status of any negotiations, or (c)
any financial, business, legal or personal information of or regarding a party
or its affiliates, or of or regarding any participants or potential
participants in the transactions contemplated herein (or any of their
respective affiliates), in each case to the extent such other information is
not related to the tax treatment or tax structure of the transactions
contemplated herein.

 

SECTION 11.16. Judgment
Currency. If, for the purpose of obtaining judgment in any court, it is
necessary to convert a sum due hereunder, under any Note or under any other
Loan Document in another currency into U.S. Dollars or into a Foreign Currency,
as the case may be, the parties hereto agree, to the fullest extent that they
may effectively do so, that the rate of exchange used shall be that at which,
in accordance with normal banking procedures, the applicable Secured Party
could purchase such other currency with U.S. Dollars or with such Foreign
Currency, as the case may be, in New York City, at the close of business on the
Business Day immediately preceding the day on which final judgment is given,
together with any premiums and costs of exchange payable in connection with
such purchase.

 

SECTION 11.17. Release of Security Interests.

 

(a)           As of the Effective Date, the
Administrative Agent hereby releases (and is hereby irrevocably authorized by
each Lender (without requirement of notice to or consent of any Lender) to
release) and agrees to take any action requested by the Borrower having the
effect of releasing (i) any guarantee obligations of, and collateral granted or
pledged by, any Foreign Subsidiary pursuant to the Existing Credit Agreement and
the Loan Documents related thereto and (ii) any Capital Securities pledged by
the Borrower or its U.S. Subsidiaries pursuant to the WWI Pledge Agreement
consisting of more than 65% of the Voting Stock of any Foreign Subsidiary.

 

(b)           Notwithstanding anything to the contrary
contained herein or in any other Loan Document, the Administrative Agent is
hereby irrevocably authorized by each Lender (without requirement of notice to
or consent of any Lender except as expressly required by Section 11.1)
to take any action requested by the Borrower having the effect of releasing any
collateral or guarantee obligations (i) to the extent necessary to permit
consummation of any transaction expressly permitted by any Loan Document or
that has been consented to in accordance with Section 11.1 or (ii) under
the circumstances described in clause (c) below.

 

93

 

(c)           Upon the occurrence of the Investment
Grade Rating Date or at such time as the Loans, the Reimbursement Obligations
and the other obligations under the Loan Documents shall have been paid in
full, the Commitments have been terminated and no Letters of Credit shall be
outstanding, the collateral shall be released from the Liens created by the
Collateral Documents and all obligations thereunder (other than those expressly
stated to survive such termination) of the Administrative Agent and each
Obligor thereunder shall terminate (in the case of the Security Agreements, all
without delivery of any instrument or performance of any act by any Person).

 

94

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.

 

	
   

  	
  WEIGHT WATCHERS
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JEFFREY FIARMAN

  	
   

  
	
   

  	
  Name:

  	
  Jeffrey Fiarman

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NOVA
  SCOTIA, as

  
	
   

  	
  Administrative
  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ BRIAN S. ALLEN

  	
   

  
	
   

  	
  Name:

  	
  Brian S. Allen

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE
  BANK, NA., as Syndication

  
	
   

  	
  Agent and as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ TARA LYNNE MOORE

  	
   

  
	
   

  	
  Name:

  	
  Tara Lynne Moore

  
	
   

  	
  Title:

  	
  Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  SCOTIABANC INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ WILLIAM E. ZARRETT

  	
   

  
	
   

  	
  Name:

  	
  William E. Zarrett

  
	
   

  	
  Title:

  	
  Managing Director

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVEN J. MELICHAREK

  	
   

  
	
   

  	
  Name:

  	
  Steven J. Melicharek

  
	
   

  	
  Title:

  	
  SVP/Credit Products
  Officer

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  FORTIS CAPITAL CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  CLAY JACKSON

  	
   

  
	
   

  	
  Name:

  	
  Clay Jackson

  
	
   

  	
  Title:

  	
  Managing Director -
  Corporate Banking.

  
	
   

  	
   

  	
  Food, Beverage &
  Consumer Goods,

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ EGENS MICHIEL VAN
  ITERSON SCHOLTEN

  	
   

  
	
   

  	
  Name:

  	
  Egens Michiel Van Iteson
  Scholten

  
	
   

  	
  Title:

  	
  Vice President – Corporate
  Banking

  
	
   

  	
   

  	
  Food, Beverage &
  Consumer Goods

  
						

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  UNION BANK OF CALIFORNIA, NA.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MARISSA PETRI

  	
   

  
	
   

  	
  Name:

  	
  Marissa Petri

  
	
   

  	
  Title:

  	
  Investment Banking Officer

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  CQMMERZBANK AG, NEW YORK AND

  
	
   

  	
  GRAND CAYMAN BRANCHES

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  ANDREW P. LUSK

  	
   

  
	
   

  	
  Name:

  	
  Andrew P. Lusk

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ BARBARA PETERS

  	
   

  
	
   

  	
  Name:

  	
  Barbara Peters

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  U.S. BANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  PATRICK H. MCGRAW, JR.

  	
   

  
	
   

  	
  Name:

  	
  Patrick H. McGraw, Jr.

  
	
   

  	
  Title:

  	
  Vice President U.S. Bank, N.A.

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WACHOVIA BANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ALAN GREEN

  	
   

  
	
   

  	
  Name:

  	
  Alan Green

  
	
   

  	
  Title:

  	
  Senior Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BAYERISCHE LANDESBANK, ACTING

  
	
   

  	
  THROUGH ITS NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STUART SCHULMAN

  	
   

  
	
   

  	
  Name:

  	
  Stuart Schulman

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ NORMAN MCCLAVE

  	
   

  
	
   

  	
  Name:

  	
  Norman McClave

  
	
   

  	
  Title:

  	
  First Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHARTER ONE BANK N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MARY ANN KLEMM

  	
   

  
	
   

  	
  Name:

  	
  Mary Ann Klemm

  
	
   

  	
  Title:

  	
  Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CITIBANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN J. BURKE

  	
   

  
	
   

  	
  Name:

  	
  John J. Burke

  
	
   

  	
  Title:

  	
  GVP

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC BANK USA, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ ALAN LAMANTIA

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Alan LaMantia

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MIZUHO CORPORATE BANK. LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ JAMES FAYEN

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James Fayen

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SOVEREIGN BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ ANTONIA BADOLATO

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Antonia Badolato

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MERRILL LYNCH BANK USA.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ LOUIS ALDER

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Louis Alder

  
	
   

  	
   

  	
  Title:

  	
  Director

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COOPERATIVE CENTRALE RAIFFEISEN-

  
	
   

  	
  BOERENLEENBANK B.A. “RABOBANK

  
	
   

  	
  INTERNATIONAL”, NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ TAMIRA TREFFERS-HERRERA

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Tamira Treffers-Herrera

  
	
   

  	
   

  	
  Title:

  	
  Executive Director

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ BRETT DELFINO

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Brett Delfino

  
	
   

  	
   

  	
  Title:

  	
  Executive Director

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CRÉDIT INDUSTRIEL ET COMMERCIAL

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/BRIAN O’LEARY

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Brian O’Leary

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ MARCUS EDWARD

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Marcus Edward

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CREDIT SUISSE CAYMAN ISLANDS BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ SARAH WU

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Sarah Wu

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ NUPUR
  KUMAR

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Nupur Kumar

  
	
   

  	
   

  	
  Title:

  	
  Associate

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NATEXIS BANQUES POPULAIRES

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ CAROLINE VÉROT MOORE

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Caroline Vérot Moore

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ FRANK MADDEN

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Frank Madden

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NORTH FORK BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ PHILIP DAVI

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Philip Davi

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UNITED OVERSEAS BANK LIMITED, NEW

  
	
   

  	
  YORK AGENCY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ KWONG YEW WONG

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Kwong Yew Wong

  
	
   

  	
   

  	
  Title:

  	
  First Vice President &

  
	
   

  	
   

  	
  General Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ MARIO SHENG

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mario Sheng

  
	
   

  	
   

  	
  Title:

  	
  Assistant Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE GOVERNOR AND COMPANY OF THE

  
	
   

  	
  BANK OF IRELAND

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ FIONA O’CONNOR

  	
   

  
	
   

  	
   

  	
  Name:   Fiona O’Connor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ AUVEEN O’HANLON

  	
   

  
	
   

  	
   

  	
  Name:   Auveen O’Hanlon

  

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TD BANKNORTH, N.A

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ JOHN MERCIER

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John Mercier

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BANK LEUMI USA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ JOUNG HEE HONG

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joung Hee Hong

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ ROGER GROSSMAN

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Roger Grossman

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  BANK OF TOKYO-MITSUBISHI UFJ TRUST

  
	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ MICHAEL L. ZION

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael L. Zion

  
	
   

  	
   

  	
   Title:

  	
  Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PEOPLE’S BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ FRANCIS J. MCGINN

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Francis J. McGinn

  
	
   

  	
   

  	
   Title:

  	
  Vice President

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ RONALD F. CARAPEZZI

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Ronald F. Carapezzi

  
	
   

  	
   

  	
  Title:

  	
  Duly Authorized Signatory

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STATE BANK OF INDIA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ RAKESH CHANDRA

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Rakesh Chandra

  
	
   

  	
   

  	
   Title:

  	
  Vice President & Head (CREDIT)

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIRST COMMERCIAL BANK NEW YORK

  
	
   

  	
  AGENCY

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ HELEN TONG

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Helen Tong

  
	
   

  	
   

  	
  Title

  	
  VP & ManagerExhibit 10.1

 

This OUTSOURCING AGREEMENT (“Agreement”), dated as of January 15,
2006 (the “Agreement Date”), is by and between Creditek LLC, Inc., a New Jersey
corporation having its principal place of business at 9 Sylvan Way, Suite 165,
Parsippany, NJ 07054 (“OUTSOURCER”), and dj Orthopedics, LLC, having its
principal place of business at 2985 Scott Street, Vista, CA 92083 (“CLIENT”).

 

W I T N E S S E T H:

 

WHEREAS, the
purpose of this Agreement is to establish the general terms and conditions
applicable to OUTSOURCER’s provision of revenue cycle outsourcing services to
CLIENT for which CLIENT and OUTSOURCER desire to enter into this Agreement; and

 

WHEREAS,
OUTSOURCER desires to provide to CLIENT, and CLIENT desires to obtain from
OUTSOURCER, the revenue cycle outsourcing services described in this Agreement
on the terms and conditions set forth in this Agreement.

 

NOW,
THEREFORE, for and in consideration of the agreements set forth below, CLIENT
and OUTSOURCER agree as follows:

 

ARTICLE I
DEFINITIONS AND CONSTRUCTION

 

Section
1.1                                   Definitions.

 

The following
defined terms used in this Agreement shall have the meanings specified below:

 

“Abandoned
Call” shall mean a call where caller has hung up after being placed on hold by
an automated or manual OUTSOURCER system.

 

“Account”
means the right to payment for services rendered or to be rendered to Patients
in connection with the OfficeCare or Insurance Business of CLIENT.

 

“Accounts
Receivable” or “A/R” means the aggregate of all open Accounts, valued at Charge
amounts.

 

“Account Touch”
shall mean each one of the following activities, performed in connection with
the processing and collection of Accounts: data entry, insurance verification,
insurance Pre-Authorization, billing and re-billing, incoming and outgoing
phone calls, faxes, incoming or outgoing letters, claim status research on a
payer’s website, denial posting and cash posting.

 

“Additional
OUTSOURCER Service Location” shall mean any location from which OUTSOURCER
provides the Services.

 

 

“Affiliate”
shall mean, with respect to a Party, any entity controlling, controlled by or
under common control with, such Party. 
The terms “control”, “controlling” and “controlled”, as used in this
definition, shall mean the legal, beneficial or equitable ownership, direct or
indirect, of more than 50 percent of the aggregate of the voting equity
interests in such entity.

 

“Agreement
Date” shall have the meaning set forth in the introduction.

 

“Allowances”
shall mean the reserve that represents the difference between the value of the
Accounts Receivable and the anticipated cash value of the Net Accounts
Receivable.

 

“ASA” or “Average
Speed to Answer” shall mean the time it takes for a customer service phone call
to be answered by OUTSOURCER after call is connected to the OUTSOURCER system.

 

“Assumptions”
shall mean the assumptions that substantially form the basis for the Fees and
are summarized on Exhibit F.

 

“Batching”
shall mean aggregating daily PPAs.

 

“Bill Date”
shall mean the date in which an Accounts is first billed, on paper or
electronically, to a Third Party Payer.

 

“Cash Receipts”,
as used herein, includes, without limitation, all payments received,
transferred in or posted to, regardless of source and without exception, which
apply to the Accounts, whether by
cash, check, wire transfer, credit card, receipt by CLIENT, CLIENT’s bank,
lender, agent, or lock box, or payment off-set with or by a Third Party Payer.
Cash Receipts exclude payments received by the CLIENT’s Collection Agency after
an Account has been written off from OUTSOURCER’s Systems.

 

“Change in
Scope of Service(s)” shall mean any service that is (a) outside the scope of
the Required Services, (b) requires staffing, technology, software changes, or
other resources in addition to or different than those required for performance
of the Required Services or (c) requires additional start-up expenses not
otherwise required for performance of the Required Services.

 

“Change in
Scope of Service Levels” shall mean any service levels established by OUTSOURCER
and CLIENT in connection with the Change in Scope of Services.

 

“Change Order”
shall have the meaning set forth in Section 3.2.

 

2

 

“Charge” shall
mean the invoice value of a PPA at CLIENT’s non discounted pricing (i.e., gross
revenue before contractual allowable).

 

“Claim” shall
mean any civil, criminal, administrative or investigative action or proceeding
against a Party.

 

“CLIENT Agents”
shall mean the agents, subcontractors and representatives of CLIENT, including
CLIENT’s employees, distributors and their agents and employees and/or CLIENT’s
independent sales agents or sales representatives.

 

“CLIENT
Collection Agency” shall mean a third party collection agency hired by CLIENT
for purposes of collecting Accounts that have remained open for 15 months and
have been written off in OUTSOURCER Systems as set forth on Exhibit A.

 

“CLIENT
Contract Executive” shall have the meaning set forth in Section 4.1.

 

“CLIENT Data”
shall mean all data and information submitted to OUTSOURCER or OUTSOURCER
Agents in tangible form (including electronic form) by CLIENT or obtained,
developed or produced by OUTSOURCER or OUTSOURCER Agents on behalf of CLIENT.

 

“CLIENT Event
of Default” shall have the meaning set forth in Section 18.1(a)(ii).

 

“CLIENT
Intellectual Property” shall have the meaning set forth in Section 8.2.

 

“CLIENT
Service Location” shall mean CLIENT’s facility located at 2980 Scott Street,
Vista, CA.

 

“Closed
Account” shall mean a zero balance Account.

 

“Confidential
Information” shall mean the terms and conditions of this Agreement and all
information, data (including CLIENT Data) knowledge and know-how (in whatever
form and however communicated) relating directly or indirectly to the
disclosing party (or to its Affiliates or contractors, or to its or their
businesses, operations, properties, products, markets or financial positions)
that is delivered or disclosed by such party or any of its officers, directors,
partners, members, employees, agents, Affiliates or shareholders to the other
party in writing, electronically, orally or through visual means, or that such
party learns or obtains aurally, through observation or analyses,
interpretations, compilations, studies or evaluations of such information, data,
knowledge or know-how.

 

“Contract Year”
shall mean each 12-month period commencing on the Effective Date during
the Term.

 

3

 

“Date of Entry”
shall mean the date when all or part of the PPA information is entered into the
Systems

 

“Date of
Receipt” shall mean the date in which OUTSOURCER receives the PPAs from CLIENT.

 

“Date of
Service” shall mean the date in which the CLIENT’s product was
prescribed/ordered for the Patient, as recorded on the PPA.

 

“Default Cure Period” shall mean the cure
periods set forth on Exhibit E.

 

“Delinquent
Account” shall mean an Account which remains unpaid in part or in full until
the earlier to occur of (i) the date on which OUTSOURCER’s reasonable
collection efforts (as outlined in Exhibit A) have been expended, or (ii) the
date which is 15 months after Date of Entry in respect of such Account.

 

“DME” shall
mean Durable Medical Equipment and/or supply.

 

“Effective
Date” shall mean March 1, 2006

 

“ERP System”
shall mean CLIENT’s JD Edwards ERP system, the functional replacement of such
system, or its then current financial systems in use.

 

“Event of
Default” shall mean, with respect to OUTSOURCER, an OUTSOURCER Event of Default
and, with respect to CLIENT, a CLIENT Event of Default.

 

“Fees” shall
mean the fees for the Services as described on Exhibit B and any other amounts
payable by CLIENT to OUTSOURCER pursuant to this Agreement in respect of the
Services provided hereunder.

 

“Force Majeure
Event” shall have the meaning set forth in Section 11.2.

 

“HIPAA” has
the meaning set forth in Section 3.5.

 

“Imaging
System” shall mean a system with the capability to store and retrieve digital
images of such documents as PPAs, explanation of benefits/payments, checks and
correspondence.

 

“Improved
Technology” shall mean new information processing technology developments,
including new software and hardware developments and project implementation
techniques, that could reasonably be expected to have an impact on CLIENT’s
business.

 

4

 

“Insurance
Business” shall mean the business of CLIENT in which CLIENT provides an
inventory of DME and orthopedic braces to CLIENT Agents who in turn furnish DME
and orthopedic braces to Patients of Physician Practices as prescribed by
Physicians as part of an office visit.

 

“JD Edwards”
or “JD Edwards ERP system” shall mean CLIENT’s JD Edwards ERP system.

 

“Management
Committee” shall have the meaning set forth in Section 7.1.

 

“Measurement
Period” shall mean the 90 day period that precedes the Termination Period.

 

“Measurement
Touches” shall mean the number of Account Touches recorded during the
Measurement Period.

 

“Medicare
Account” shall mean an account where the primary payer is the Medicare program.

 

“Month End Process”
shall mean the end of month updating and reporting of all Accounts reflecting
Services provided during the month just ended.

 

“Net Accounts
Receivable” shall mean the aggregate expected cash value of all Accounts.

 

 “Net Revenue” shall mean the anticipated cash
value of Charges (net of CLIENT and Patient adjustments and write-offs and
Third Party Payer contractual discounts, adjustments and write-offs).

 

“Official
Action” shall mean any action of a governmental or regulatory authority or any
court or tribunal of competent jurisdiction restraining or enjoining the
transition with respect to the Services at a CLIENT Service Location, or any
particular part of such transition, or the performance of either Party’s
obligations hereunder.

 

“OfficeCare”
shall mean the business of CLIENT in which CLIENT provides an inventory of DME
to Physician Practices which practices, in turn, furnish to their Patients as
part of an office visit.

 

“Open Account”
shall mean an Account with an open balance.

 

“Order” shall
mean a PPA that has been entered into the Systems.

 

“OUTSOURCER
Agents” shall mean the agents, subcontractors, suppliers and representatives of
OUTSOURCER.

 

5

 

“OUTSOURCER
Collection Agency” shall mean OUTSOURCER’s Affiliate responsible for sending
out letters to Patients in respect of Delinquent Accounts or Open Accounts.

 

“OUTSOURCER
Contract Executive” shall have the meaning set forth in Section 6.1.

 

“OUTSOURCER
Event of Default” shall have the meaning set forth in Section 18.1(a)(i).

 

“OUTSOURCER
Intellectual Property” shall have the meaning set forth in Section 8.1.

 

“OUTSOURCER
Service Location” shall mean OUTSOURCER’s processing centers in Wilkes Barre,
Pennsylvania and/or in Jaipur, India

 

“Parties” shall
mean CLIENT and OUTSOURCER, collectively.

 

“Party” shall
mean either CLIENT or OUTSOURCER, as the case may be.

 

“Patient”
shall mean patients of Physician Practices who receive OfficeCare or Insurance
Business products and supplies for which CLIENT bills Third Party Payers or
Patients.

 

“Physician”
shall have the meaning set forth in the definition of “Physician Practices”.

 

“Physician
Practices” shall mean the independent practices of orthopedic physicians (“Physicians”)
that have agreed to stock CLIENT’s products for the benefit of Patients.

 

“Pre-Termination
Accounts” shall have the meaning set forth in Section18.2(b)

 

“Prime Rate”
shall mean the United States of America prime rate as recorded in the New York
edition of the Wall Street Journal the day of such receipt or payment, as the
case may be.

 

“Proprietary
Processes” shall mean those processes that the CLIENT and OUTSOURCER agree are
proprietary to CLIENT and as such subject to the same protections applied to
confidential information and CLIENT Intellectual Property as described in
Section 8.2.

 

6

 

“Protected
Health Information” shall have the meaning set forth in 14.5.

 

“PPA” shall
mean the Patient Procedure Authorization forms issued by the Physician Practice
which indicates the OfficeCare and/or Insurance Business Product prescribed to
the Patient as well as the Patient’s insurance and demographic information.

 

“Required
Services” shall mean the services described on Exhibit A as such services apply
to OUTSOURCER or on Exhibit D as such services apply to CLIENT.

 

“Residuals”
shall have the meaning set forth in Section 15.4.

 

“Self Pay”
shall mean an Account where the Patient is responsible for the open balance.

 

“Service
Levels” shall mean those performance standards set forth on Exhibit B and the
performance standards established by OUTSOURCER and CLIENT in connection with
any Change in Scope of Services.

 

“Service
Location” shall mean the CLIENT Service Location, the OUTSOURCER Service
Location or any Additional OUTSOURCER Service Location.

 

“Services”
shall mean the Required Services and the Change in Scope of Services,
collectively.

 

“Systems”
shall mean MaxPro (OUTSOURCER’s proprietary workflow management system) and
Medical Manager (OUTSOURCER’s licensed order entry, patient accounting and cash
posting system) and/or their functional replacements.

 

“Term” shall
have the meaning set forth in Section 2.1.

 

“Termination
Date” shall mean the date when OUTSOURCER ceases to provide services under this
Agreement.

 

“Termination
Period” shall mean the 90 day period preceding the Termination Date.

 

“Termination
Touches” shall mean the number of Account Touches recorded during the
Termination Period.

 

“Third Party
Payers” shall mean third party payers, including Medicare, Medicaid, auto
accident insurance carriers, commercial insurance carriers, Worker’s
Compensation, health maintenance organizations and preferred provider
organizations.

 

7

 

Section 1.2                                   References;
Exhibits

 

In this
Agreement and the Exhibits to this Agreement: (i) the Exhibits to this
Agreement shall be incorporated into and deemed part of this Agreement and all
references to this Agreement shall include the Exhibits to this Agreement; (ii)
references to any law or regulation shall mean references to the law or
regulation in changed or supplemented form or to a newly adopted law or
regulation replacing a previous law or regulation; and (iii) references to the
word “including” or the phrase “e.g.” in this Agreement shall mean “including,
without limitation”.

 

The following
Exhibits are the Exhibits to this Agreement:

 

	
  Exhibit

  	
   

  	
  Description

  
	
  A

  	
   

  	
  OUTSOURCER
  Required Services

  
	
   

  	
   

  	
   

  
	
  B

  	
   

  	
  Service Levels, Penalties, and Bonuses

  
	
   

  	
   

  	
   

  
	
  C

  	
   

  	
  Fees

  
	
   

  	
   

  	
   

  
	
  D

  	
   

  	
  CLIENT Required Services

  
	
   

  	
   

  	
   

  
	
  E

  	
   

  	
  Events of Default and Cure Periods

  
	
   

  	
   

  	
   

  
	
  F

  	
   

  	
  Assumptions

  
	
   

  	
   

  	
   

  
	
  G

  	
   

  	
  Schedule of Unamortized Implementation Costs

  

 

Section 1.3                                   Headings.

 

The article
and section headings and the table of contents are for reference and
convenience only and shall not be considered in the interpretation of this
Agreement.

 

ARTICLE
II TERM

Section 2.1                                   Term.

 

The term of
this Agreement (the “Term”) shall be from the Agreement Date through the date
which is five years after the Effective Date (such date, the “Expiration Date”),
unless terminated earlier pursuant to Article XVIIII.  This Agreement will automatically be extended
for two additional terms of 12 months each unless OUTSOURCER or CLIENT gives
written notice to the other at least 180 days prior to the expiration of the
Term or any subsequent term.

 

8

 

ARTICLE
III SERVICES.

 

Section 3.1                                   Generally.

 

Subject to the
time periods for certain Required Services set forth on Exhibit B, during the
Term, OUTSOURCER shall be responsible for providing to CLIENT the Required
Services as specified on Exhibit A and such additional Change in Scope of
Services that may be from time to time mutually agreed upon in writing among
the Parties in the manner set forth in Section 3.2.  The responsibilities of CLIENT with respect
to the Required Services are set forth on Exhibit D.

 

Section 3.2                                   Change
in Scope of Services.

 

CLIENT may
from time to time during the Term request (1) on going additions or changes to
the scope of the individual component tasks included in the Required Services
and/or (2) new or additional on going services, collectively a “Change in Scope
of Services”. Within 15 business days of receipt of such a request from CLIENT,
if OUTSOURCER elects to perform such Change in Scope of Services, OUTSOURCER
shall provide CLIENT with (1) a written description of the work OUTSOURCER
anticipates performing in connection with such Change in Scope of Service, (2)
a schedule for commencing and completing the Change in Scope of Service,
(3) (a) the price for such Change in Scope of Service, if CLIENT has
requested a fixed price for such Change in Scope of Service, or (b) an estimate
of the time, resources and prices for such Change in Scope of Service, if
CLIENT has requested a time and materials quotation for such Change in Scope of
Service, and (4) when appropriate, the resources necessary to provide the
Change in Scope of Service.  OUTSOURCER
shall not begin performing any Change in Scope of Service until CLIENT Contract
Executive has provided OUTSOURCER with written authorization to perform the
Change in Scope of Service.  The document
(the “Change Order”) evidencing each agreed upon Change in Scope of Service
shall reference Exhibit A and be deemed an amendment thereto.

 

Section 3.3                                   Service
Locations.

 

(a)          The
Services shall be provided at the OUTSOURCER Service Locations; provided,
however, OUTSOURCER, upon written notice to CLIENT, may provide Services from
Additional OUTSOURCER Service Locations at its sole discretion at no additional
cost to CLIENT.

 

Section 3.4                                   Provision
of Technology.

 

In connection
with the provision of the Services hereunder, during the Term:

 

(a)          OUTSOURCER
shall use the most current (or within one release of the current) release of
its Systems;

 

(b)         OUTSOURCER
shall provide interfaces from OUTSOURCER Systems to CLIENT’s JD Edwards ERP
system

 

9

 

(c)          OUTSOURCER
shall be responsible for all costs associated with maintaining the
communication pipeline (including redundancy systems) between the CLIENT
Service Location and OUTSOURCER Service Locations; and

 

(d)         CLIENT
shall obtain the necessary approvals, if any, to enable the OUTSOURCER Systems
to interface with CLIENT’s JD Edwards ERP system.

 

Section 3.5                                   HIPAA
Compliance.

 

The Parties
agree to comply with all applicable federal and state laws and/or regulations
regarding the security, integrity and confidentiality of patient health
information and any subsequent amendments thereto, including any regulations,
standards or rules promulgated under the Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”).  In
the event any state or federal laws or regulations, now existing or hereinafter
enacted, are interpreted by either Party to require amendment of this Agreement
and/or require OUTSOURCER to perform Out of Scope Services, the Parties shall
negotiate in good faith to amend this Agreement to comply with such law or
regulation.

 

Section 3.6                                   Compliance
With Disclosure Law.

 

Subject to and
in accordance with Section 952 of the Omnibus Budget Reconciliation Act of
1980, the Parties shall, until the expiration of four (4) years after the
termination of this Agreement, upon written request, make available to the
Secretary of the Department of Health and Human Services (HHS) or the Secretary’s
duly authorized representatives, this Agreement and such books, documents, and
records as are necessary to certify the nature and extent of costs under this
Agreement.  This provision shall apply
only if the value or cost of this Agreement equals Ten Thousand Dollars
($10,000) or more over a twelve (12) month period.

 

Section 3.7                                   Changes
in Law and Regulations.

 

(a)          OUTSOURCER
and CLIENT shall work together to identify the impact of any legislative
enactments and regulatory requirements that may relate to how CLIENT uses, and
OUTSOURCER delivers, the Services. 
OUTSOURCER shall be responsible for any fines and penalties arising from
any noncompliance by OUTSOURCER or OUTSOURCER Agents with the laws relating to
the delivery of the Services, to the extent that such noncompliance was not
caused by CLIENT.  CLIENT shall be
responsible for any fines and penalties arising from any noncompliance by
CLIENT with the laws relating to its use of the Services, to the extent that
such noncompliance was not caused by OUTSOURCER or OUTSOURCER Agents.

 

(b)         OUTSOURCER
shall use commercially reasonable efforts to perform the Services regardless of
changes in legislative enactments or regulatory requirements.  If such changes prevent OUTSOURCER from
performing its obligations under this Agreement, OUTSOURCER shall develop and,
upon CLIENT’s approval, implement a suitable work around until such time as
OUTSOURCER can perform its

 

10

 

obligations under this Agreement without such
work around.  Upon the implementation of
such work around, the Parties shall, if applicable, agree upon and implement an
equitable adjustment to the Fees.

 

Section 3.8                                   Non-Solicitation.

 

Except as
otherwise expressly provided in this Agreement or with OUTSOURCER’s prior
written consent, during the Term and for two years after termination or
expiration of this Agreement, CLIENT agrees not to solicit or hire any of
OUTSOURCER’s or its Affiliates’ and contractors’, partners, employees and
agents that become known to CLIENT as a result of the Services provided under
this Agreement.  Except as otherwise
expressly provided in this Agreement or with CLIENT’s prior written consent,
during the Term of this Agreement and for two years after termination or
expiration of this Agreement, OUTSOURCER agrees not to solicit or hire any of
CLIENT’s, or its Affiliates’ and contractors’, partners, employees and agents
that become known to OUTSOURCER as a result of providing the Services under this
Agreement.  Notwithstanding the foregoing
either Party may at any time hire any contractor, partner, employee or agent of
the other Party that responds to a general solicitation to the public.

 

Section 3.9                                   Non
Compete.

 

(a)          During
the Term of this Agreement and for three years thereafter, OUTSOURCER shall not
engage in any business in direct competition of OfficeCare and Insurance
Business (a “Competing Business”). 
Nothing in this Section 3.9 shall prohibit OUTSOURCER from (a) providing
services (including services of the type set forth on Exhibit A) to a Person
engaged in a Competing Business, or (b) owning capital stock or other equity or
voting interest of a Person not Controlled by OUTSOURCER engaging in a
Competing Business.

 

(b)         For
purposes of this Section 3.9:

 

(i)                                     “Controlled”
shall mean (x) in respect of a Person, direct or indirect beneficial ownership
of a majority of the profits or voting interest of such Person, or the direct
or indirect power to elect a majority of the directors, managers, trustees or
persons holding positions with such Person with different names but comparable
responsibilities, or (y) in respect of a business, beneficial ownership of a
majority interest in the assets and properties thereof or Control (as defined
in clause (x) of this definition) of a Person having direct or indirect
beneficial ownership of a majority interest in the assets and properties of
such business.

(ii)                                  “Person”
shall mean any individual, corporation, partnership (general, limited or
limited liability), limited liability company, association, firm, trust or
other entity or organization.

 

11

 

Section 3.10                            Cooperation.

 

During the
Term each Party shall provide to the other Party reasonable cooperation and assistance
in connection with its performance of its obligations under this Agreement.

 

ARTICLE
IV CLIENT RESPONSIBILITIES.

 

In addition to
any specific obligations for which CLIENT is given responsibility in this
Agreement, CLIENT shall perform the following responsibilities during the Term
of this Agreement.

 

Section 4.1                                   CLIENT
Contract Executive.

 

CLIENT shall
appoint an individual (the “CLIENT Contract Executive”) who from the Agreement
Date shall serve as the primary CLIENT representative under this Agreement.  The CLIENT Contract Executive shall (1) have
overall responsibility for managing and coordinating the performance of CLIENT’s
obligations under this Agreement, (2) be authorized to act for and on behalf of
CLIENT with respect to all matters relating to this Agreement, (3) define and
communicate the CLIENT’s business priorities to OUTSOURCER, (4) make timely
decisions that would impact the OUTSOURCER’s ability to perform under this
Agreement; and (5) facilitate the implementation of this Agreement throughout
CLIENT’s entire organization.  OUTSOURCER
may rely upon the representations and agreements of the CLIENT Contract
Executive as lawfully binding on the CLIENT; provided, however, the CLIENT
Contract Executive shall not have the authority to enter into written
agreements to modify or supersede this Agreement.

 

Section 4.2                                   Billing
and Collection.

 

(a)          CLIENT
represents and warrants that neither CLIENT or CLIENT Agents nor any other
service provider will perform, as of the Effective Date and during the Term,
the Services outlined on Exhibit A on behalf of CLIENT’s OfficeCare and
Insurance Businesses.

 

(b)         CLIENT
shall promptly notify the OUTSOURCER of any and all notices received by CLIENT
or CLIENT Agents from a Patient regarding an outstanding invoice in respect of
an Account, or regarding OUTSOURCER’s collection efforts regarding any
outstanding Patient invoice.

 

(c)          CLIENT
shall in good faith work with OUTSOURCER so OUTSOURCER can efficiently and
effectively perform the Services. In particular, CLIENT agrees that it will
work with each Physician Practice and CLIENT Agents to provide OUTSOURCER with
accurate and timely Patient insurance and demographic information necessary to
bill each account on the CLIENT’s behalf.

 

12

 

ARTICLE
V SERVICE LEVELS.

 

Section 5.1                                   Service
Levels.

 

As of the
Effective Date, OUTSOURCER shall perform the Services in accordance with
generally accepted industry standards and in accordance with the specifications
and representations made in this Agreement, including the Service Levels set
forth in Exhibit B.

 

Section 5.2                                   Adjustment
of Service Levels.

 

Either Party
may, at any time upon notice to the other Party, initiate negotiations to
review and, upon agreement by the Management Committee (See Section 7.1),
adjust any Service Level which such Party in good faith believes is
inappropriate at the time.  Any decision
by the Management Committee to adjust any Service Level must be made by a vote
that includes the affirmative vote of at least one representative of each
Party.

 

Section 5.3                                   Root-Cause
Analysis.

 

Within five
days of receipt of a notice from CLIENT with respect to OUTSOURCER’s failure to
provide the Services in accordance with the Service Levels, OUTSOURCER shall
(1) initiate a root-cause analysis to identify the cause of such failure,
(2) provide CLIENT with a report detailing the cause of, and procedure for
correcting, such failure, (3) develop a plan to correct such failure, (4)
provide CLIENT with assurance satisfactory to CLIENT that such failure will not
recur after the procedure has been completed, and (5) subject to Section
18.1(a), OUTSOURCER shall have 30 days to cure service level deficiencies
unless otherwise specified in Exhibit E.

 

Section 5.4                                   Measurement
and Monitoring Tools.

 

OUTSOURCER
shall implement the necessary measurement and monitoring tools and procedures
required to measure and report OUTSOURCER’s performance of the Services against
the applicable Service Levels.  Such
measurement and monitoring shall permit reporting at a level of detail
sufficient to verify compliance with the Service Levels and shall be subject to
audit by CLIENT in the manner set forth in Article XIV.  OUTSOURCER shall provide CLIENT and CLIENT
Agents with reasonable amounts of information and access to such tools and
procedures upon request, for verification purposes.

 

Section 5.5                                   Continuous
Improvement and Best Practices.

 

OUTSOURCER
shall:  (1) on a continuous basis, as
part of its total quality management process, identify, as appropriate, ways to
improve the Service Levels; and (2) identify and apply proven techniques and
tools from other installations within its operations that would benefit CLIENT
either operationally or financially.

 

13

 

ARTICLE
VI PROJECT TEAM.

 

Section 6.1                                   OUTSOURCER
Contract Executive.

 

OUTSOURCER
shall appoint an individual (the “OUTSOURCER Contract Executive”) and designate
his/her backup who from the Agreement Date shall serve as the primary
OUTSOURCER representative under this Agreement. 
OUTSOURCER’s appointment of any OUTSOURCER Contract Executive shall be
subject to CLIENT’s reasonable approval. 
The OUTSOURCER Contract Executive shall (1) have overall responsibility
for managing and coordinating the performance of OUTSOURCER’s obligations under
this Agreement and (2) be authorized to act for and on behalf of OUTSOURCER
with respect to all matters relating to this Agreement. CLIENT may rely upon
the representations and agreements of the OUTSOURCER Contract Executive as
lawfully binding on the OUTSOURCER; provided, however, the OUTSOURCER Contract
Executive shall not have the authority to enter into written agreements to
modify or supersede this Agreement, except to the extent this Agreement is
modified by Change Orders executed by the OUTSOURCER Contract Executive.

 

Section 6.2                                   Subcontractors.

 

(a)          OUTSOURCER
shall have the right at its sole discretion to use subcontractors to assist
OUTSOURCER in performing work related to the Services, subject, however, to
such subcontractor(s) entering into appropriate agreements requiring such
subcontractor(s) to adhere to the HIPAA, confidentiality and non-disclosure
provisions of this Agreement.

 

(b)         OUTSOURCER
shall be responsible for the work and activities of each of its subcontractors,
including compliance with the terms of this Agreement.  OUTSOURCER shall be responsible for all
payments to its subcontractors.

 

ARTICLE
VII MANAGEMENT AND CONTROL.

 

Section 7.1                                   Management
Committee.

 

Upon execution
of this Agreement, the CLIENT and the OUTSOURCER shall each appoint two
representatives to serve on a management committee (the “Management Committee”).  The Management Committee shall be authorized
and responsible for (1) overseeing the provision of the Services and each Party’s
performance under this Agreement and (2) monitoring and resolving
disagreements regarding the provision of the Services and the Service Levels
and each Party’s performance under this Agreement.  A Party may change any of its representatives
on the Management Committee upon notice to the other Party.

 

14

 

ARTICLE
VIII INTELLECTUAL PROPERTY RIGHTS.

 

Section 8.1                                   OUTSOURCER
Intellectual Property.

 

(a)          For
purposes of this Agreement, “OUTSOURCER Intellectual Property” shall mean all
software or other intellectual property (including any writings, discoveries,
inventions or other materials covered by any rights of copyright, trademark or
patent or any rights similar thereto, whether registered or unregistered, or
otherwise protectible as trade secret, proprietary or confidential information)
owned or developed by, or otherwise proprietary to, OUTSOURCER.  OUTSOURCER Intellectual Property shall also
include all programs and documentation therefor and the tangible media on which
such programs are recorded, as well as all reports, technology, training
materials, forms, specifications, and other intellectual property owned or
developed by or proprietary to OUTSOURCER, for use in providing the Services
hereunder or otherwise in its business.

 

(b)         Subject
to Section 18.2(e)(ii), all OUTSOURCER Intellectual Property is and will remain
the property and confidential information of OUTSOURCER or its third party
licensors, and CLIENT shall have no right, title or interest therein except to
the extent of such limited right to use such particular portions thereof as are
necessary to enable the Parties to perform their respective obligations
hereunder or except as may otherwise be provided in any separate license
agreements.  No use of OUTSOURCER
Intellectual Property at or in connection with any Service Location or
equipment containing OUTSOURCER Intellectual Property shall confer any rights
in such OUTSOURCER Intellectual Property on CLIENT.

 

Section 8.2                                   CLIENT
Intellectual Property.

 

(a)          For
purposes of this Agreement, “CLIENT Intellectual Property” shall mean all
software or other intellectual property (including any writings, discoveries,
inventions or other materials covered by any rights of copyright, trademark or
patent or any rights similar thereto, whether registered or unregistered, or
otherwise protectible as trade secret, proprietary or confidential information)
owned or developed by, or otherwise proprietary to, CLIENT.  CLIENT Intellectual Property shall also
include all programs and documentation therefore and the tangible media on
which such programs are recorded, as well as all reports, technology, training
materials, forms, specifications, and other intellectual property owned or
developed by or proprietary to CLIENT.

 

(b)         All
CLIENT Intellectual Property is and will remain the property and confidential
information of CLIENT or its third party licensors, and OUTSOURCER shall have
no right, title or interest therein except to the extent of such limited right
to use such particular portions thereof as are necessary to enable the Parties
to perform their respective obligations hereunder or except as may otherwise be
provided in any separate license agreements. 
No use of CLIENT Intellectual Property at or in connection with any
Service Location or equipment containing CLIENT Intellectual

 

15

 

Property shall confer any rights in such
CLIENT Intellectual Property on OUTSOURCER.

 

(c)  CLIENT Intellectual property will include
processes that CLIENT and OUTSOURCER agree are CLIENT proprietary
processes.  CLIENT from time to time will
request OUTSOURCER to consider processes proprietary.  Such requests will be in writing.  OUTSOURCER will evidence its consent in
writing.  Such consent will not be
unreasonably withheld.  To the extent
there is a disagreement between CLIENT and OUTSOURCER regarding proprietary
processes, disputes will be processed in accordance with Article VI Dispute
Resolution.

 

ARTICLE
IX

 

Section 9.1                                   Improvements.

 

Each Party
shall communicate to the other party any Improvements (defined below) which
that Party makes during the term of this Agreement to the CLIENT Intellectual
Property or the OUTSOURCER Intellectual Property as it applies to the Services
promptly after the Party has substantially completed each such
Improvement.  Any Improvements to the
CLIENT Intellectual Property shall belong to and be the sole property of the
CLIENT, irrespective of whether developed by CLIENT or OUTSOURCER, and any
Improvements to the OUTSOURCER Intellectual Property shall belong to and be the
sole property of OUTSOURCER, irrespective of whether developed by OUTSOURCER or
CLIENT, and each Party shall execute such consents and assignments as may be
necessary to effectuate the transfer of the ownership of such Improvements as
contemplated herein.  Subject to Section
18.2(e)(ii), each Party hereby grants the other party, while this Agreement is
in effect, a nonexclusive license to use the Improvements of the CLIENT
Intellectual Property or the OUTSOURCER Intellectual Property, as the case may
be, solely in connection with the Services and the performance of this
Agreement.  For purposes of this
Agreement, the term “Improvements” means improvements, upgrades, enhancements,
revisions, new versions or models or releases, adaptations, and other
modifications of the CLIENT Intellectual Property or the OUTSOURCER
Intellectual Property, as the case may be, which are, in majority part, either
derived directly from or dependent on and which produce other versions of or
new uses for the CLIENT Intellectual Property or the OUTSOURCER Intellectual
Property, as the case may be, but “Improvements” shall not mean new inventions,
discoveries, ideas, concepts, designs or products which are either developed
independently of the CLIENT Intellectual Property or the OUTSOURCER
Intellectual Property, as the case may be, or whose essential principles,
features, composition or qualities are derived, in the majority part, from
sources other than the CLIENT Intellectual Property or the OUTSOURCER
Intellectual Property, as the case may be.

 

16

 

ARTICLE
X DATA AND REPORTS.

 

Section 10.1                            Ownership
of CLIENT Data.

 

All CLIENT
Data is, or will be, and shall remain the property of CLIENT.  CLIENT Data shall not, without CLIENT’s
written approval, be (1) used by OUTSOURCER or OUTSOURCER Agents other
than in connection with providing the Services, (2) disclosed, sold,
assigned, leased or otherwise provided to third parties by OUTSOURCER or
OUTSOURCER Agents or (3) commercially exploited by or on behalf of
OUTSOURCER or OUTSOURCER Agents.

 

Section 10.2                            Errors.

 

Except to the
extent OUTSOURCER is required by Exhibit A to identify errors, or an error
otherwise becomes actually known to OUTSOURCER: 
(i) OUTSOURCER may accept as correct, accurate, and reliable, without
any further inquiry, all information, data, documents, and other records
delivered, supplied, or made available to OUTSOURCER hereunder by CLIENT or at
the direction or under the authority of CLIENT in connection with the
performance by OUTSOURCER of the Services, and may assume that CLIENT has
provided it with all information in the possession or control of CLIENT which
is necessary for the performance of the Services; and (ii) OUTSOURCER shall
have no responsibility or liability for any error, inadequacy, or omission
which results from untimely, inaccurate or incomplete information, data,
documents, or other records delivered, supplied, or made available to OUTSOURCER
by CLIENT or at the direction or under the authority of CLIENT, except to the
extent such liability is caused by OUTSOURCER’s failure to perform Services in
accordance with the terms of this Agreement.

 

ARTICLE
XI CONTINUED PROVISION OF SERVICES.

 

Section 11.1                            Business
Continuity Plan.

 

OUTSOURCER has
made its Business Continuity Plan available to CLIENT and CLIENT acknowledges
and agrees that CLIENT has read and understands the terms of such Business
Continuity Plan.

 

Section 11.2                            Force
Majeure.

 

(a)          If
and to the extent that either Party’s performance of any of its obligations
pursuant to this Agreement is prevented, hindered or delayed by fire, flood,
earthquake, elements of nature or acts of God, acts of war, terrorism, riots,
civil disorders, rebellions or revolutions, third party strikes, third party
lockouts or labor difficulties or any other cause beyond the reasonable control
of such Party (each, a “Force Majeure Event”) and such non-performance
could not have been prevented by reasonable precautions, then the non-performing
Party shall be excused from any further

 

17

 

performance of those obligations affected by
the Force Majeure Event for as long as such Force Majeure Event continues and
such Party continues to use its commercially reasonable efforts to recommence
performance whenever and to whatever extent possible without delay, including
through the use of alternate sources, work around plans or other means.

 

(b)         The
Party whose performance is prevented, hindered or delayed by a Force Majeure
Event (“the Notifying Party”) shall immediately notify the other Party by
telephone (or other means as may be available if telecommunication is
unavailable), to be confirmed in writing within 24 hours of the occurrence of
the Force Majeure Event and describe in reasonable detail the nature of the
Force Majeure Event and the Notifying Party shall be excused from any further
performance of those of its obligations affected by the Force Majeure Event
until normal performance can be recommenced.

 

(c)          The
occurrence of a Force Majeure Event does not limit or otherwise affect
OUTSOURCER’s obligation to provide either normal disaster recovery procedures
or any other disaster recovery services described in Section 11.1.

 

Section 11.3                            Service
Level Adjustment.

 

Upon the
occurrence of a Force Majeure Event, CLIENT acknowledges and agrees that the
Service Levels will need to be adjusted for a period of time to account for the
Services affected by the Force Majeure Event. 
The Parties agree to negotiate in good faith to determine a time frame
and plan for lowering the Service Levels during the pendency of such Force
Majeure Event.  In the event that the
Parties are unable to agree on such adjusted Service Levels, the matter shall
be resolved through the dispute resolution process set forth in Article XVII.

 

ARTICLE
XII PAYMENTS TO OUTSOURCER.

 

Section 12.1                            Fees.

 

In
consideration of OUTSOURCER providing the Services, CLIENT shall pay to
OUTSOURCER the Fees.  OUTSOURCER’s invoicing
calculation(s), price elements and price data shall be provided to CLIENT in
sufficient detail to substantiate calculation of the Fees charged to
CLIENT.  Except as expressly set forth in
this Agreement, there shall be no charge or fees payable by CLIENT in respect
of OUTSOURCER’s performance of its obligations pursuant to this Agreement.

 

Section 12.2                            Adjustment
to Fees, Services and Service Levels.

 

The Fees,
Services and Service Levels are based on Assumptions that the Parties believe
fairly represent the current conditions under which the Services will be
delivered during the Term. Starting one year after the Effective Date and
annually thereafter, the Parties agree to compare actual results for the year
just ended against the

 

18

 

Assumptions presented on Exhibit F. Each time the actual results vary
from the Assumptions by more than 10%, the Parties agree to negotiate in good
faith to define and mutually agree upon adjustments to Fees, Services and Service
Levels that shall be consistent with the intent of the Parties.  Any such agreed adjustment shall be set forth
in a Change Order.

 

Section 12.3                            Expenses.

 

All expenses
relating to the Services are included in the Fees and shall not be reimbursed
by CLIENT unless agreed to by CLIENT in writing.

 

Section 12.4                            Proration.

 

All periodic
fees or charges under this Agreement are to be computed on a calendar month
basis and shall be prorated on a per diem basis for any partial month.

 

Section 12.5                            Patient/Third
Party Payer Settlements.

 

(a)          Notwithstanding
anything in this Agreement to the contrary, OUTSOURCER shall have the right, on
a case by case basis where there is a demonstrated need by a Patient or Third
Party Payer to negotiate settlements involving payments by such Patient or
Third Party Payer, as the case may be, of at least seventy percent (70%) of the
invoice amount, less Allowances, without the prior approval by CLIENT.  OUTSOURCER will create a monthly report which
shall provide the summary settlement information by number of Accounts affected
and dollars settled.  OUTSOURCER will
review report with CLIENT Contract Executive quarterly to ensure settlements
are appropriate to business needs as determined by CLIENT.

 

(b)         Subject
to Section 12.5(a), OUTSOURCER intends to develop a policy to give OUTSOURCER
the opportunity to negotiate, with Third Party Payers and Patients, special
payment terms in respect of OfficeCare and Insurance Business Accounts.  Upon approval of such plan by CLIENT,
OUTSOURCER shall have the right, without CLIENT’s prior approval, to negotiate
special payment terms with Third Party Payers and Patients that are consistent
with such plan.

 

ARTICLE XIII PAYMENT SCHEDULE AND INVOICES.

 

Section 13.1                            Fees.

 

OUTSOURCER
shall issue an invoice to CLIENT on the last day of each month for the Fees
then due. The Fees shall be due and payable to OUTSOURCER by wire funds
transfer or other means acceptable to OUTSOURCER, to an account specified by
OUTSOURCER, within 30 days from invoice date.

 

19

 

Section 13.2                            Time
of Payment.

 

Any sum due
pursuant to this Agreement, for which payment is not otherwise specified, shall
be due and payable 30 days after receipt by the Party who owes such invoice of
notice from the other Party in respect of such sum.

 

Section 13.3                            Detailed
Invoices.

 

OUTSOURCER
shall provide invoices with sufficient detail to justify the Fees.

 

Section 13.4                            Late
Fees.

 

Any amount not
paid within 20 days after the date due pursuant to this Agreement shall bear
interest, at the Prime Rate, from the date such amount was due until the date
such amount is paid.

 

 

ARTICLE
XIV AUDITS.

 

Section 14.1                            Services.

 

Upon
reasonable notice from CLIENT or OUTSOURCER (for purposes of this Section 14.1
the “Requesting Party”), OUTSOURCER and OUTSOURCER Agents or CLIENT and CLIENT
Agents, as the case may be (for purposes of this Section 14.1, the “Other
Party) shall provide Requesting Party Agents, and any of Requesting Party’s
regulators, with access to and any assistance that they may reasonably require
with respect to the relevant Service Location and the systems for the purpose
of performing audits or inspections of the Services and the business of
Requesting Party relating to the Services. 
The Other Party shall, subject to its standard security requirements,
provide, and shall cause its Agents to provide, such Requesting Party Agents or
regulators any assistance that they may reasonably require, provided such
assistance does not unreasonably interfere with Other Party’s performance of
its obligations hereunder, and, with respect to OUTSOURCER, the performance of
the Services in accordance with the Service Levels.  The Other Party shall not provide Requesting
Party Agents or regulators with access to Other Party customers’ information or
data.  Subject to Article IX and Article
X, the Other Party shall provide Requesting Party Agents and regulators with
access to Other Party’s proprietary data relating to the Services, to the
extent required to perform audits described in this Section 14.1.  If any audit by an auditor designated by
Requesting Party or a regulatory authority, results in Other Party being
notified that it or Other Party Agents are not in compliance with any law,
regulation or audit requirement, Other Party shall, and shall cause Other Party
Agents to, take actions to comply with such audit.  Requesting Party shall bear the expense of
any such compliance that is (1) required by any law, regulation or other
audit requirement relating to Requesting Party’s business or (2) necessary
due to Requesting Party’s noncompliance with any law, regulation or audit
requirement imposed on Requesting Party. 
Other Party shall bear the expense of any such compliance that is
(a) required by any law, regulation or other audit requirement relating to
Other Party’s

 

20

 

business or (b) necessary due to Other Party’s or Other Party Agents’
noncompliance with any law, regulation or audit requirement imposed on Other
Party or Other Party Agents.

 

Section 14.2                            Fees.

 

Upon
reasonable notice, each Party shall provide the other Party and its Agents
access to such financial records and supporting documentation as may be
reasonably requested by the requesting Party to audit the records and
documentation relating to the Cash Receipts and the Fees charged to
CLIENT.  If, as a result of such audit,
it is determined that OUTSOURCER has overcharged or undercharged CLIENT, the
Party that determined such error shall promptly notify the other Party and
promptly pay to CLIENT or OUTSOURCER the amount of the overcharge or
undercharge as the case may be, plus interest at the Prime Rate per year,
calculated from the date of receipt by OUTSOURCER of such incorrect amount
until the date of payment to CLIENT or OUTSOURCER, as the case may be.

 

Section 14.3                            Record
Retention.

 

Except as
otherwise required by applicable law, OUTSOURCER shall not be required to
retain any records or documentation relating to CLIENT or the Services provided
under this Agreement so long as originals of such documentation have been
provided to CLIENT for imaging and/or storage.

 

Section 14.4                            Facilities.

 

In the event
of an audit described in this Article XIV, the Parties agree to give each other
and their respective Agents reasonable access to the premises where such audit
is being performed and such space (reasonably available), office furnishings
(including lockable cabinets), telephone and facsimile service, utilities and
office-related equipment and duplicating services as the requesting Party
may reasonably require to perform the audits described in this Article.

 

 

ARTICLE
XV CONFIDENTIALITY; PROTECTED HEALTH INFORMATION

 

Section 15.1                            General
Obligations.

 

(a)          Each
Party agrees that it shall not disclose to any third party any Confidential
Information (including any information about the Fees) which it learns during
the course of the performance of this Agreement, without the prior written
consent of the other Party, except as necessary for OUTSOURCER’s provision of
Services hereunder or as required by law, regulation, or order of a court or
regulatory agency or other authority having jurisdiction thereover, provided,
however, that the Party under such obligation of disclosure shall promptly
notify the other Party to afford that Party, at that Party’s expense, an
opportunity to object to such disclosure. 
Each Party shall treat the other’s Confidential Information with the
same level of care as it treats its own

 

21

 

confidential information of like import, but
not less than a reasonable level of care, shall disclose it within its own
organization only on a need-to-know basis, and shall inform those to whom it
rightfully discloses such Confidential Information of their obligations of
confidentiality and non-disclosure hereunder.

 

(b)         Notwithstanding
the foregoing,

 

(i)                                     the
confidentiality obligations set forth in this Section 15.1 shall not apply to
any information which the recipient party can establish to have become publicly
available without its breach of this Agreement, been independently developed or
obtained by the recipient party outside the scope of this Agreement and without
reference to the other’s Confidential Information received under this
Agreement, been already known to recipient when disclosed hereunder, or been
rightfully obtained by the recipient party from third parties without an
obligation of confidentiality;

 

(ii)                                  OUTSOURCER
may disclose general information relating to the scope of Services and the
duration of this Agreement to potential buyers of OUTSOURCER and persons or
entities engaged in the valuation of OUTSOURCER or its Affiliates;

 

(iii)                               OUTSOURCER
may disclose information relating to the identity of CLIENT as a client of
OUTSOURCER, the scope of Services and other general terms of this Agreement to
current or potential clients;

 

(iv)                              CLIENT
may disclose general information relating to the scope of Services and the
duration of this Agreement to potential buyers of CLIENT or any one or more
Affiliates of CLIENT;

 

(v)                                 either
Party may disclose the provisions of this Agreement to bankers, public
accountants, auditors, and other financial institutions in the ordinary course
of business;

 

(vi)                              either
Party may disclose the provisions of this Agreement to the extent required by
any applicable law, regulation or rules of any stock exchange; provided,
however, the Party disclosing the other Party’s Confidential Information
promptly notifies the other Party of such disclosure; and

 

(vii)                           CLIENT
shall not (except pursuant to (iv), (v) and (vi) above)) disclose to any third
party the Fees set forth in this Agreement.

 

Section 15.2                            Injunctive
Relief.

 

Each Party
acknowledges that the other Party may suffer irreparable damage in the event of
a breach or threatened breach of any provision of this Article.  Accordingly, in such event, notwithstanding
Article XVII, such Party shall be entitled to preliminary and final injunctive
relief, as well as any and all other applicable remedies at law or equity,
including the recovery of damages.

 

22

 

Section 15.3                            No
License.

 

The Parties
acknowledge that (i) each Party maintains that the Confidential Information
contains valuable trade secrets and (ii) all rights to Confidential Information
are reserved by the disclosing party.  No
license, express or implied, by estoppel or otherwise, under any trade secret
right, trademark, patent, copyright or other proprietary right or applications
that are now or may hereafter be owned by a party, is granted by the disclosure
of Confidential Information under this Agreement.

 

Section 15.4                            Residuals.

 

Except (1) as
may relate to CLIENT’s customer information (including customer lists),
personnel information of CLIENT, financial information relating to CLIENT
(except as may have been publicly disclosed by CLIENT pursuant to CLIENT’s
Regulatory Requirements), product pricing information, product specifications
and designs and manufacturing processes (which shall be deemed CLIENT
Confidential Information subject to Section 15.1), (2) to the extent such use
misappropriates the other Party’s trade secret rights (but, with respect to (1)
and (2), excluding general data processing ideas, concepts, know-how and
techniques) and (3) to the extent such use infringes the other Party’s
copyright, patent and other proprietary rights, neither Party is restricted
pursuant to this Agreement from using any data processing ideas, concepts,
know-how and techniques that are mentally retained in the unaided memories of
the receiving Party’s employees (and not intentionally memorized for the
purpose of later recording or use) (“Residuals”), including in the development,
manufacturing and marketing of products and services.  Each of the Parties agrees that it shall not
disclose (a) the source of the Residuals, (b) any financial, statistical,
personnel or customer data of the other Party or (c) the business plans of the
other Party.  Other than the rights to
use Residuals, neither of the Parties shall use any portion of the other Party’s
Confidential Information, except in connection with its obligations pursuant to
this Agreement.

 

Section 15.5                            HIPAA
Obligations.

 

(a)          The
Parties acknowledge that in connection with the performance of the Services
hereunder, OUTSOURCER will receive, use and disclose “Protected Health
Information” (as such term is defined under the Standards for Privacy of
Individually Identifiable Health Information mandated by HIPAA).  OUTSOURCER shall store the Protected Health
Information in a separate data set within OUTSOURCER’s Systems.  Except as otherwise permitted under this
Agreement or required by law, OUTSOURCER shall not use or disclose the
Protected Health Information for any purpose other than in performing its
Services hereunder.  In the event OUTSOURCER
is required by law to disclose the Protected Health Information, OUTSOURCER
shall provide CLIENT with written notice setting forth the required disclosure
in advance of making such disclosure.

 

23

 

(b)         OUTSOURCER
shall implement appropriate safeguards to prevent the use and disclosure of the
Protected Health Information other than as permitted under this Agreement.  OUTSOURCER shall require any OUTSOURCER
Agents that receive, use or access the Protected Health Information in
connection with the Services to be performed under this Agreement to agree to
the same restrictions and conditions on the use and disclosure of the Protected
Health Information that apply to OUTSOURCER under this Agreement.  OUTSOURCER shall provide CLIENT with written
notice of any use or disclosure of the Protected Health Information not
authorized by this Agreement of which OUTSOURCER becomes aware.

 

(c)          At
CLIENT’s request, OUTSOURCER shall provide CLIENT with information necessary
for CLIENT to respond to an individual’s request for an accounting of
disclosures of his or her Protected Health Information.

 

(d)         OUTSOURCER
shall make its internal practices, books, and records relating to the use and
disclosure of the Protected Health Information available to the Secretary of
the Department of Health and Human Services for purposes of determining
OUTSOURCER’s compliance with the privacy standards.  At CLIENT’s request, OUTSOURCER shall make
available for inspection, during normal business hours, all records, books,
polices and procedures relating to the use and disclosure of the Protected
Health Information, within ten (10) business days of such request, for the
purpose of determining OUTSOURCER’s compliance with this section.

 

(e)          Upon
the termination of the Agreement for any reason whatsoever, OUTSOURCER shall,
if feasible, return or with CLIENT’s consent destroy all Protected Health
Information in its possession or in the possession of OUTSOURCER Agents, and
retain no copies.  If such return or
destruction is not feasible, the OUTSOURCER shall give written notice to CLIENT
of the following: (i) a statement that the OUTSOURCER has determined that it is
infeasible to return or destroy Protected Health Information in its possession;
(ii) the specific reasons for such determination; and (iii) assurance that the
OUTSOURCER will continue to extend any and all protections, limitations and
restriction contained in the Agreement to the retained Protected Health
Information, and will further limit the use and/or disclosure of the Protected
Health Information retained to its use and/or disclosure only for the
purpose(s) that make the return or destruction of the Protected Health
Information infeasible.

 

ARTICLE XVI REPRESENTATIONS AND WARRANTIES.

 

Section 16.1                            By
CLIENT.

 

CLIENT
represents and warrants that:

 

(a)          CLIENT
is a limited liability company, duly organized, validly existing and in good
standing under the laws of the State of Delaware.

 

24

 

(b)         CLIENT
has all requisite limited liability company power and authority to execute,
deliver and perform its obligations under this Agreement.

 

(c)          CLIENT
is duly licensed, authorized or qualified to do business and is in good
standing in every jurisdiction in which a license, authorization or
qualification is required for the ownership or leasing of its assets or the
transaction of business of the character transacted by it, except where the
failure to be so licensed, authorized or qualified would not have a material
adverse effect on CLIENT’s ability to fulfill its obligations under this
Agreement.

 

(d)         The
execution, delivery and performance of this Agreement has been duly authorized
by CLIENT.

 

(e)          CLIENT
shall comply with all applicable Federal, state and local laws (including
HIPAA) and regulations applicable to CLIENT and shall obtain all applicable
permits and licenses required of CLIENT in connection with its obligations
under this Agreement.

 

(f)            CLIENT
has not disclosed any Confidential Information of OUTSOURCER as of the
Agreement Date.

 

(g)         There
is no outstanding litigation, arbitrated matter or other dispute to which
CLIENT is a party which would reasonably be expected to have a potential or
actual material adverse effect on CLIENT’s or OUTSOURCER’s ability to fulfill
its respective obligations under this Agreement.

 

(h)         To
its knowledge the CLIENT Intellectual Property does not and will not infringe
upon the proprietary rights of any third party.

 

(i)             Subject
to Section 15.5, the OUTSOURCER is authorized to receive from CLIENT and CLIENT
Agents (including the CLIENT’s sales representatives who interface with the
Physicians where the OfficeCare and Insurance Business orders are placed)
Protected Health Information in connection with the performance of the Services
hereunder.  CLIENT shall cause all CLIENT
Agents that will provide Protected Health Information to OUTSOURCER in
connection with OUTSOURCER’s performance of the Services to execute a Business
Associate (as defined under HIPAA) agreement in a form reasonably satisfactory
to OUTSOURCER.

 

Section 16.2                            By
OUTSOURCER.

 

OUTSOURCER
represents and warrants that:

 

(a)          OUTSOURCER
is a corporation duly incorporated, validly existing and in good standing under
the laws of New Jersey.

 

(b)         OUTSOURCER
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.

 

25

 

(c)          OUTSOURCER
is duly licensed, authorized or qualified to do business and is in good
standing in every jurisdiction in which a license, authorization or
qualification is required for the ownership or leasing of its assets or the
transaction of business of the character transacted by it, except where the
failure to be so licensed, authorized or qualified would not have a material
adverse effect on OUTSOURCER’s ability to fulfill its obligations under this
Agreement.

 

(d)         The
execution, delivery and performance of this Agreement has been duly authorized
by OUTSOURCER.

 

(e)          OUTSOURCER
shall comply with all applicable Federal, state and local laws (including
HIPAA) and regulations applicable to OUTSOURCER and shall obtain all applicable
permits and licenses required of OUTSOURCER in connection with its obligations
under this Agreement.

 

(f)            OUTSOURCER
has not disclosed any Confidential Information of CLIENT as of the Agreement
Date.

 

(g)         There
is no outstanding litigation, arbitrated matter or other dispute to which
OUTSOURCER is a party which would reasonably be expected to have a potential or
actual material adverse effect on CLIENT’s or OUTSOURCER’s ability to fulfill
its respective obligations under this Agreement.

 

(h)         To
its knowledge the OUTSOURCER Intellectual Property does not and will not
infringe upon the proprietary rights of any third party.

 

(i)             OUTSOURCER’s
practices shall be in accordance with the Fair Debt Collection Practices Act.

 

Section 16.3                            DISCLAIMER
OF WARRANTIES.

 

EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTIES AND
SPECIFICALLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

 

ARTICLE
XVII DISPUTE RESOLUTION.

 

Section 17.1                            Contract
Executives.

 

All disputes
relating to this Agreement shall initially be referred by the Party raising the
dispute to the CLIENT Contract Executive and the OUTSOURCER Contract
Executive.  If such Contract Executives
are unable to resolve the dispute within 10 business days after referral of the
matter to them, the Parties shall submit the dispute to the Management
Committee.

 

26

 

Section 17.2                            Management
Committee.

 

The Management
Committee shall meet at least once every calendar quarter during the Term (or
at such other time as either Party may designate in a notice to the other
Party) for the purpose of reviewing the overall performance of the Parties’
respective obligations under this Agreement and resolving disputes, if any,
that may arise under this Agreement.  The
Management Committee shall consider disputes in the order such disputes are
brought before it.  In the event the
Management Committee is unable to resolve a dispute within 10 business days of
the date of the meeting during which such dispute was considered, the Management
Committee shall notify the senior management of each Party.

 

Section 17.3                            Senior
Management.

 

Either Party
may, upon notice and within five business days of receipt of a notice from the
Management Committee pursuant to Section 17,2, elect to utilize a non-binding
resolution procedure whereby each presents its case before a panel consisting
of two senior executives of each of the Parties who are not members of the
Management Committee and, if such executives can agree upon such an individual,
a mutually acceptable neutral advisor. 
If a Party elects to use the procedure set forth in this Section 17.3,
the other Party shall participate.  The
hearing shall occur no more than 10 business days after a Party serves notice
to use the procedure set forth in this Section 17.3.  If the matter cannot be resolved by such
senior executives, the neutral advisor, if one has been agreed upon, may be
asked to assist such senior executives in evaluating the strengths and weaknesses
of each Party’s position on the merits of the dispute.  The Parties shall each bear their respective
costs incurred in connection with the procedure set forth in this Section 17.3,
except that they shall share equally the fees and expenses of the neutral
advisor, if any, and the cost of the facility for the hearing.

 

Section 17.4                            Arbitration.

 

(a)          If
a dispute is not resolved pursuant to Section 17.3, then either Party may, upon
notice to the other Party submit the dispute to binding arbitration in
accordance with this Section 17.4.

 

(b)         The
arbitration shall be held in before a panel of three arbitrators in the state
of the principal United States office of the Party against whom the arbitration
is brought.  Either Party may, upon
notice to the other Party, demand arbitration by serving on the other Party a
statement of the dispute, the facts relating or giving rise to such dispute and
the name of the arbitrator selected by it.

 

(c)          Within
five days after receipt of such notice, the other Party shall name its
arbitrator, and the two arbitrators named by the Parties shall, within five
days after the date of such notice, select the third arbitrator.

 

27

 

(d)         The
arbitration shall be administered by the American Arbitration Association and
be governed by the Commercial Arbitration Rules of the American Arbitration
Association, as may be amended from time to time, except as expressly provided
in this Section 17.4.  The arbitrators
may not amend or disregard any provision of this Section 17.4.

 

(e)          The
arbitrators shall allow such discovery as is appropriate to the purposes of
arbitration in accomplishing a fair, speedy and cost-effective resolution of
disputes.  The arbitrators shall
reference the rules of evidence of the Federal Rules of Civil Procedure then in
effect in setting the scope and direction of such discovery.

 

(f)            The
decision of and award rendered by the arbitrators shall be final and binding on
the Parties.  Judgment on the award of
the arbitrators may be entered in and enforced by any court of competent
jurisdiction.  The arbitrators shall have
no authority to award damages in excess or in contravention of Article XX of
this Agreement.

 

(g)         The
costs of the arbitration proceedings conducted pursuant to this Section 17.4
shall be paid by the Party designated by the arbitrators.

 

Section 17.5                            Continuity
of Services.

 

OUTSOURCER
acknowledges that the performance of its obligations pursuant to this Agreement
is critical to the business and operations of CLIENT.  Accordingly, in the event of any dispute
between CLIENT and OUTSOURCER, each Party shall continue to perform its
obligations (including payment pursuant to Articles XII and XIII, except for
any such amounts as are actually in dispute) under this Agreement in good faith
during the pendency of such dispute resolution proceedings unless and until
this Agreement is terminated in accordance with the provisions hereof.

 

Section 17.6                            Expedited
Dispute Resolution.

 

Notwithstanding
anything to the contrary contained in this Agreement, in the event of a dispute
relating to or arising out of a Default Notice, the dispute resolution
procedures described in Sections 17.1, 17.2 and 17.3 must be commenced and
completed within the Default Cure Period.

 

Section 17.7                            Third
Party Claims.

 

Notwithstanding
the above dispute resolution provisions, in the event that a third party
initiates a judicial action against either Party hereto in connection with or
arising out of this Agreement, that Party shall have the right to seek to
implead the other Party into that action, and the above dispute resolution
provisions shall not be a bar to such impleader.

 

28

 

ARTICLE
XVIII TERMINATION.

 

Section 18.1                            Conditions
of Termination.

 

In addition to
expiration at the end of the Term specified in Article II, this Agreement may
be terminated under the following circumstances:

 

(a)          Termination
for Cause.

 

(i)                                     By
CLIENT:

 

If OUTSOURCER,
subject to Exhibit E, fails to perform any of its material obligations under
this Agreement (an “OUTSOURCER Event of Default”), and, upon written notice of
such Event of Default (the “Default Notice”) from CLIENT, does not cure such
Event of Default within the Default Cure Period specified on Exhibit E for the
type of default, then CLIENT may, by giving written termination notice to
OUTSOURCER, ter­minate this Agreement as of the date specified in the
termination notice.

 

(ii)                                  By
OUTSOURCER:

 

If CLIENT
fails to perform any of its material obligations under this Agreement
(including, subject to Section 11.2 (i) materially failing to pay any invoices
in the manner set forth in Sections 13.2 and 13.4 as applicable; (ii)
materially failing to perform the CLIENT Required Services outlined on Exhibit
D; or (iii) materially failing to deliver (or to cause CLIENT Agents to
deliver) Patient Procedure Authorization forms to OUTSOURCER in the manner set
forth in Exhibit A) (each a “CLIENT Event of Default”), and, upon Default
Notice from OUTSOURCER, does not cure such Event of Default within 60 days of
such Default Notice, then OUTSOURCER may, by giving written termination notice
to CLIENT, terminate this Agreement as of the date specified in the termination
notice.

 

(b)         Termination
for Insolvency.

 

If either
Party files for bankruptcy, becomes or is declared insolvent, or is the subject
of any proceedings related to its liquidation, insolvency or for the
appointment of a receiver or similar officer for it, makes an assignment for
the benefit of all of its creditors, or enters into an agreement for the
composition, extension, or readjustment of substantially all of its obligation
(in any event, the “Dissolving Party”), then the other Party may, by giving
written notice to the Dissolving Party, terminate this Agreement as of a date
specified in such notice of termination, but not sooner than 30 days after the
such notice.

 

(c)          Termination
upon Change of Control

 

In the event of a CLIENT Change of Control (as defined below) of
CLIENT, the person or entity acquiring Control of CLIENT (or in the event of a
sale of substantially all of the assets of CLIENT in which this Agreement is
not assumed by such

 

29

 

acquiring person or entity, CLIENT itself) shall have the right to give
a written termination notice to OUTSOURCER to terminate this Agreement as of
the date specified in such notice of termination, but no sooner than 120 days
after the date of such notice.

 

In the event of an OUTSOURCER Change of Control (as defined below) of
OUTSOURCER or OUTSOURCER Affiliate, the person or entity acquiring control of
OUTSOURCER or OUTSOURCER Affiliate (or in the event of a sale of substantially
all of the assets of OUTSOURCER or OUTSOURCER Affiliate in which this Agreement
is not assumed by such acquiring person or entity, OUTSOURCER or OUTSOURCER
Affiliate itself) shall have the right to give a written termination notice to
CLIENT to terminate this Agreement as of the date specified in such notice of
termination, but no sooner than 120 days after the date of such notice.

 

For purposes of this Agreement, a “CLIENT Change of Control” shall mean
with respect to CLIENT (i) any sale of shares, merger, consolidation,
reorganization or similar transaction whereby there is a change in (x) the legal, beneficial or equitable
ownership, directly or indirectly, of more than fifty percent (50%) of the
voting stock of CLIENT or (y) the ability, directly or indirectly, to direct
the voting of a majority of the directors of CLIENT’s board of directors,
whether through appointment, voting agreement or otherwise; or (ii) a sale of
substantially all of the assets of CLIENT.

 

For purposes of this Agreement, an “OUTSOURCER Change of Control” shall
mean with respect to OUTSOURCER or OUTSOURCER Affiliate (i) any sale of shares,
merger, consolidation, reorganization or similar transaction whereby there is a
change in (x) the
legal, beneficial or equitable ownership, directly or indirectly, of more than
fifty percent (50%) of the voting stock of OUTSOURCER or OUTSOURCER Affiliate
or (y) the ability, directly or indirectly, to direct the voting of a majority
of the directors of OUTSOURCEROUTSOURCER’s or OUTSOURCER Affiliate’s board of
directors, whether through appointment, voting agreement or otherwise; or (ii)
a sale of substantially all of the assets of OUTSOURCER or OUTSOURCER
Affiliate.

 

Section 18.2                            Effects
of all Terminations.

 

If this
Agreement is terminated by any reason whatsoever, upon such termination:

 

(a)          CLIENT
shall continue to pay OUTSOURCER for all Services performed by OUTSOURCER under
this Agreement through the Termination Date.

 

(b)         During
the Termination Period, OUTSOURCER shall continue to perform the same number of
Account Touches as performed during the Measurement Period, net of any changes
in volume.  If the number of the number
of Termination

 

30

 

Touches is less than the number of the
Measurement Touches by more than 20%, then OUTSOURCER shall pay the Termination
Touch Penalty to CLIENT.  “Termination
Touch Penalty” means that amount equal to the product of A multiplied by B
multiplied by C, in which

 

A = the quotient of (u) Net Revenue during Measurement Period, divided
by (v) Measurement Touches;

 

B = the difference between (w) Measurement Touches and (x) Termination
Touches; and

 

C = the product of (y) 1.2 and (z) .0725.

 

The following example is for illustration purposes only:

 

Measurement Touches: 100,000

Termination Touches: 90,000

Net Revenue during Measurement Period: $6,000,000

OUTSOURCER fee: 7.36% of Net Revenue (as a proxy for Cash Receipts)

 

Termination Touch Penalty             =
(6,000,000/100,000) x (100,000-90,000) x 1.2 x .0725

= $52,200

 

(c)          OUTSOURCER
shall continue to collect, and CLIENT shall pay OUTSOURCER Fees for Cash
Receipts received by CLIENT from Third Party Payers and Patients during the 30
day period after the Termination Date but only to the extent such payments are
in respect of Patient Dates of Service on or prior to the Termination Date
(such pre-termination Accounts, the “Pre-Termination Accounts”).

 

(d)         CLIENT
shall post the payments received in respect of the Pre-Termination Accounts and
shall cause OUTSOURCER to have access to CLIENT’s systems (including its ERP
System) (x) to validate the amounts posted and (y) to invoice OUTSOURCER’s Fees
to CLIENT.

 

(e)          Upon
CLIENT’s written request, at no cost to CLIENT, OUTSOURCER shall,

 

(i)                                     within
30 days of the notice of termination deliver or otherwise make available to
CLIENT (x) in electronic format, all CLIENT Data in OUTSOURCER’s possession and
(y) all records, correspondence, written files and other CLIENT-related
materials in OUTSOURCER’s possession; and

 

(ii)                                  unless
and until CLIENT engages (x) in a business in competition with OUTSOURCER or
(y) the services of another service provider to perform Services in all or in
part equivalent to those services included on Exhibit A for CLIENT or its
Affiliates, OUTSOURCER shall grant to CLIENT a royalty free, non-exclusive
limited license to use all OUTSOURCER Intellectual Property to include

 

31

 

policies, procedures and forms with the
exception of any MaxPro software used by CLIENT or OUTSOURCER in connection
with the performance of the Services.

 

(f)            If
this Agreement is terminated for a CLIENT Change of Control prior to the date
which is five years after the Effective Date, then CLIENT shall pay to
OUTSOURCER, in immediately available funds, the unamortized implementation
costs based on the methodology set forth on Exhibit G.

 

ARTICLE
XIX INDEMNITIES.

 

Section 19.1                            Indemnification
in General. 

 

This Article
sets forth the rights and obligations of CLIENT and OUTSOURCER concerning
indemnification.  References in this
Article to CLIENT or OUTSOURCER as an indemnified person includes CLIENT’s or
OUTSOURCER’s sub­sidi­aries and Affiliates and its and their respective
officers, directors and employees acting within the scope of their duties, and
its and their successors and assigns. 
References in this Arti­cle to a party “indemnifying” the other means
the indemnifying party shall, pur­su­ant to the provisions of Section 19.6,
indemnify and hold the other harmless from, against and in respect of any
liabilities, obligations, claims, damages, costs and ex­penses (including court
costs, reasonable costs of investigation and reasonable at­tor­neys’ fees and
expenses as they are incurred) incurred by the indemnified party by reason of
any action, suit, proceeding, claim or demand of or by or settlement with a
third party (“Claims”).  References in
this Article to an act or omission includes acts or omissions by a party’s
employees, agents, contractors or other representatives.

 

Section 19.2                            Indemnification
Concerning Damage and Injury.

 

(a)          CLIENT
indemnifies OUTSOURCER against any Claims by a third party arising out of the
death, bodily or personal injury of any person or damage to the property of any
third party to the extent caused by CLIENT.

 

(b)         OUTSOURCER
indemnifies CLIENT against any Claims by a third party arising out of the
death, bodily or personal injury of any person or damage to the property of any
third party to the extent caused by OUTSOURCER.

 

Section 19.3                            Intellectual
Property Indemnity.

 

(a)          CLIENT
indemnifies OUTSOURCER against any Claim that any CLIENT Intellectual Property
used by OUTSOURCER in connection with the Services infringes any patent,
copyright, or other intellectual property right of a third party unless such
infringement results from OUTSOURCER’s use of such CLIENT Intellectual Property
in a manner which was not authorized by CLIENT.

(b)         OUTSOURCER
indemnifies CLIENT against any Claim that any OUTSOURCER Intellectual Property
used by CLIENT in connection with the

 

32

 

performance of its obligations under this
Agreement infringes any patent, copyright, or other intellectual property right
of a third party unless such infringement results from CLIENT’s use of such
OUTSOURCER Intellectual Property in a manner which was not authorized by
OUTSOURCER.

 

Section 19.4                            Indemnity
for Violation of Law.

 

Each Party
indemnifies the other against any claim, fine, fee or other charge imposed upon
or assessed against the other party by a governmental authority arising out of
an alleged violation of applicable law (including HIPAA) by the indemnifying
party.

 

Section 19.5                            Other
Indemnities.

 

(a)          CLIENT
indemnifies OUTSOURCER against any Claim resulting from any breach of the
representations, warranties and covenants of CLIENT in this Agreement.

 

(b)         OUTSOURCER
indemnifies CLIENT against any Claim resulting from any breach of the
representations, warranties and covenants of OUTSOURCER in this Agreement.

 

Section 19.6                            Indemnification
Procedure.

 

(a)          The
party claiming Indemnification under this Article (the “Indemnified Party”)
shall deliver written notice (an “Indemnity Notice”) to the party against whom
indemnity is claimed (the “Indemnitor”) within the earlier of 10 days of re­ceipt
of notice or 30 days from discovery of any matters which may give rise to a
Claim.  An Indemnity Notice shall set
forth in reasonable detail to the extent then avail­able the facts concerning
the Claim and the basis on which the Indemnified Party believes this indemnity
applies.  The failure to give such
Indemnity Notice shall not affect the right of the Indemnified Party to indemnity
hereunder unless and to the extent that such failure has materially and
adversely affected the defense of such Claims by the Indemnitor.  At any time after 30 days from the giving of
such Indem­nity Notice, the Indemnified Party may, at its option, contest,
settle or otherwise com­­promise, or pay such Claim, unless it shall have
received notice from the Indem­nitor that Indemnitor intends, at Indemnitor’s
sole cost and expense, to assume and control the defense of any such matter, in
which case the Indemnified Party shall have the right, at no cost or expense to
Indemnitor, to participate in such defense. 
If the Indemnitor does not assume the defense of such matter, and in any
event until Indemnitor states in writing that it shall assume the defense, Indemnitor
shall pay the costs of the Indemnified Party arising out of the defense until
the defense is as­sumed; provided, however, that the Indemnitor shall have the
right, at its own cost and expense, to participate in such defense and
Indemnified Party shall consult with Indemnitor and obtain Indem­nitor’s
consent, which shall not be unreasonably with­held or delayed, to any payment
or settlement of any such Claim.  The
Indem­nified Party may not settle a Claim after the Indemnitor assumes the
defense with­out the consent of the Indemnitor or unless the Indemnified Party
first agrees to release the Indemnitor from

 

33

 

any obligation to indemnify the Indemnified
Party with respect to such Claim.  If
Indemnitor proposes to settle, com­promise or pay a Claim it may do so (1) with
the consent of the Indemnified Party (which consent shall not be unrea­sonably
withheld or delayed) or (2) without the consent of the Indemnified Party pro­vided
such settlement or compromise involves solely the payment of money and includes
a release by any third party making such Claim against the Indemnified Party of
all claims against the Indemnified Party which were the subject of the in­dem­nification.  The Indemnified Party shall take all appro­priate
action to permit and authorize Indemnitor to assume and control the defense of
any such Claim.  Indem­nitor shall keep
the Indemnified Party fully apprised at all times as to the status of the
defense.  If Indemnitor does not assume
the defense, the Indemnified Party shall keep Indemnitor apprised at all times
as to the status of the defense.

 

(b)         Following
indemnification as provided herein, an Indemnitor shall be sub­rogated to all
rights of the Indemnified Party with respect to all third parties re­lating to
the matter for which indemnification has been made.

 

Section 19.7                            Exclusive
Remedy.

 

The
indemnification rights of each Indemnified Party pur­suant to this Article
shall be the exclusive remedy of such Indemnified Party against the
Indemnifying Party with respect to the third party Claim to which such indem­nification
relates; provided, however, that such Indemnified Party shall retain the right
to seek wholly non-monetary injunctive or other equitable remedies with re­spect
to such Claim.

 

ARTICLE
XX LIMITATION OF LIABILITY.

 

Section 20.1                            Limitation
of Liability.

 

(a)          NEITHER
PARTY’S (INCLUDING ITS SUBSIDIARIES AND AFFILIATES) AGGREGATE LIABILITY TO THE
OTHER PARTY (INCLUDING ITS SUBSIDIARIES AND AFFILIATES) FOR DAMAGES ARISING
UNDER OR RELATING TO THIS AGREEMENT UNDER ANY AND ALL CLAIMS OF ANY TYPE OR
NATURE, BASED ON ANY THEORY OF LIABILITY (INCLUDING CONTRACT, TORT, NEGLIGENCE,
WARRANTY OR STRICT LIABILITY), SHALL EXCEED THE AMOUNT OF FEES PAID BY CLIENT
TO OUTSOURCER WITHIN THE SIX MONTH PERIOD IMMEDIATELY PRECEDING THE MONTH IN
WHICH THE CAUSE OF ACTION OF SUCH DAMAGES AROSE.

 

(b)         NEITHER
PARTY SHALL BE LIABLE FOR INDIRECT, INCIDENTAL, EXEMPLARY, SPECIAL OR
CONSEQUENTIAL DAMAGES OR LOST OR ANTICIPATED REVENUES OR PROFITS (INCLUDING BAD
DEBT LOSSES OR NON-PAYMENT OF ACCOUNTS FOR ANY REASON) ARISING UNDER OR
RELATING TO THIS AGREEMENT EVEN IF THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.

 

34

 

Section 20.2                            Exclusions.

 

The limitations or exculpation of liability set forth in Section 20.1
are not applicable to (i) the failure of CLIENT to make payments due under this
Agreement; (ii) indemnification claims as set forth in Section 19.3; (iii) damages
caused by the intentional misconduct of the breaching party; and (iv) any
Termination Fees.

 

ARTICLE XXI
INSURANCE; RISK OF LOSS

 

Section 21.1                            Insurance.

 

During the Term OUTSOURCER shall maintain and keep in full force and
effect, at its sole cost and expense, insurance as set forth below with an
insurance company licensed to do business in the location where the Services
are to be performed.

 

(a)                                  Commercial
General Liability insurance including, without limitation, contractual
liability coverage that indicates this Agreement is a “covered contract,”
premises, completed operations, broad-form property damage, independent
contractors and personal injury liability in an amount not less than $1,000,000
each occurrence and $1,000,000 aggregate.

 

(b)                                 Workers
Compensation insurance in accordance with statutory requirements as well as
Employer’s Liability Insurance with limits not less than $500,000 and such insurance shall cover all individuals who will be
used in any capacity by OUTSOURCER in performing Services;

 

(c)                                  Fidelity
Bond/Commercial Crime insurance covering employee dishonesty, including,
without limitation, dishonest acts of OUTSOURCER and its employees, agents or
subcontractors and such insurance shall also include third party liability
coverage and be written for limits not less than $1,000,000

 

(d)                                 Professional
Liability insurance for operations performed for CLIENT and its employees or
customers with limits of liability not less than $1,000,000 each claim and
$3,000,000 aggregate; and

 

(e)                                  Umbrella/Excess
Liability insurance on a follow form basis with a limit of not less than
$5,000,000 for each occurrence and $5,000,000 aggregate
and such umbrella insurance shall name as underlying policies the Commercial
General Liability, and Employer’s Liability insurance coverage required above.

 

Section 21.2                            Risk
of Loss.

 

Each Party is responsible for the risk of loss or damage to all
tangible property, real or personal, owned or leased by it.

 

35

 

ARTICLE XXII
MISCELLANEOUS PROVISIONS.

 

Section 22.1                            Assignment.

 

Except for OUTSOURCER’s use of subcontractors to perform the
obligations of OUTSOURCER under this Agreement, neither Party shall, without
the consent of the other Party, assign this Agreement, or any amounts payable
pursuant to this Agreement; provided, however, either Party may assign this
Agreement to an Affiliate of such Party. The consent of a Party to any
assignment of this Agreement shall not constitute such Party’s consent to
further assignment. This Agreement shall be binding on the Parties and their
respective successors and permitted assigns. Any assignment in contravention of
this Section 22.1 shall be void.

 

Section 22.2                            Notices.

 

Except as otherwise specified in this Agreement, all notices, requests,
consents, approvals and other communications required or permitted under this
Agreement shall be in writing and shall be deemed given when sent by telecopy
to the telecopy number specified below. A copy of any such notice shall also be
sent by express air mail on the date such notice is transmitted by telecopy to
the address specified below:

 

In the case of notice to CLIENT:

 

dj Orthopedics, LLC

2985 Scott Street

Vista, CA 92083-8339

 

Attention:                                    

 

Telecopy No.:   (760) 734-3595

 

with a copy to:

 

Mr. Donald M. Roberts

General Counsel

2985 Scott Street

Vista, CA 92083-8339

 

Telecopy No.:   (760) 734-3536

 

In the case of notice to OUTSOURCER:

 

Creditek LLC

9 Sylvan Way, Suite 165,

Parsippany, NJ 07054

 

36

 

Attention: Linda White, SVP Finance

 

Telecopy No.:   800 487 9749

 

Either Party may change its address or
telecopy number for notification purposes by giving the other Party notice of
the new address or telecopy number and the date upon which it will become
effective.

 

Section 22.3                            Counterparts.

 

This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one single agreement between the Parties.

 

Section 22.4                            Relationship.

 

(a)                                  The
Parties intend to create an independent contractor relationship and nothing
contained in this Agreement shall be construed to make either CLIENT or
OUTSOURCER partners, joint venturers, principals, agents or employees of the
other. No officer, director, employee, OUTSOURCER Agent or Affiliate retained
by OUTSOURCER to perform work on CLIENT’s behalf under this Agreement shall be
deemed to be an employee, agent or contractor of CLIENT. Neither Party shall
have any right, power or authority, express or implied, to bind the other.

 

(b)                                 Each
Party shall be responsible for the management, direction and control of its
employees and such employees shall not be employees of the other Party.

 

Section 22.5                            Consents,
Approvals and Requests.

 

Except as specifically set forth in this Agreement, all consents and
approvals to be given by either Party under this Agreement shall not be
unreasonably withheld or delayed and each Party shall make only reasonable
requests under this Agreement.

 

Section 22.6                            Severability.

 

If any provision of this Agreement is held by a court of competent
jurisdiction to be contrary to law, then the remaining provisions of this
Agreement, if capable of substantial performance, shall remain in full force
and effect and such remaining provisions shall be deemed to be restated to
reflect the original intentions of the Parties as nearly as possible, in
accordance with applicable law.

 

Section 22.7                            Waiver.

 

No delay or omission by either Party to exercise any right or power it
has under this Agreement shall impair or be construed as a waiver of such right
or power. A waiver by any Party of any breach or covenant shall not be
construed to be a waiver of

 

37

 

any succeeding breach or any other covenant. All
waivers must be in writing and signed by the Party waiving its rights.

 

Section 22.8                            Entire
Agreement.

 

This Agreement and the Exhibits to this Agreement represent the entire
agreement between the Parties with respect to its subject matter, and there are
no other representations, understandings or agreements between the Parties
relative to such subject matter.

 

Section 22.9                            Amendments.

 

No amendment to, or change, waiver or discharge of, any provision of
this Agreement shall be valid unless in writing and signed by an authorized
representative of both Parties. Any terms and conditions varying from this
Agreement on any purchase order from the other Party are void.

 

Section 22.10                     Survival.

 

The terms of Section 3.5, Section 3.6, Section 3.8, Article VIII,
Article XV, Section 16.1(a), Section 16.1(b), Section 16.1(i), Section 16.2(a),
Section 16.2(b), Article XVII, Article XIX, Article XX, Section 22.10, and
Section 22.12 shall survive the expiration or termination of this Agreement.

 

Section 22.11                     Third
Party Beneficiaries.

 

Except as otherwise provided in this Agreement, each Party intends that
this Agreement shall not benefit, or create any right or cause of action in or
on behalf of, any person or entity other than CLIENT and OUTSOURCER.

 

Section 22.12                     Governing
Law.

 

Except as required by local law in any jurisdiction outside of the
United States, this Agreement and the rights and obligations of the Parties
under this Agreement shall be construed in accordance with and be governed by
the laws of the State of California, without giving effect to the principles
thereof relating to the conflicts of law.

 

Section 22.13                     Covenant
of Further Assurances.

 

CLIENT and OUTSOURCER covenant and agree that, subsequent to the
execution and delivery of this Agreement and without any additional
consideration each of CLIENT and OUTSOURCER shall execute and deliver any
further legal instruments which are or may become necessary to effectuate the
purposes of this Agreement.

 

38

 

Section 22.14                     Negotiated
Terms.

 

The Parties agree that the terms and conditions of this Agreement are
the result of negotiations between the Parties and that this Agreement shall
not be construed in favor of or against any Party by reason of the extent to
which any Party or its professional advisors participated in the preparation of
this Agreement.

 

Section 22.15                     Time
Periods.

 

If a time period is not specified for an approval, consent, agreement,
notification or performance, then such time period shall be deemed to be that
which is reasonable under the circumstances, but in no event more than five
business days, unless otherwise agreed by the Parties.

 

IN WITNESS WHEREOF, CLIENT and OUTSOURCER
have each caused this Agreement to be executed and delivered by its duly
authorized representative.

 

 

	
  Creditek LLC

  	
  dj Orthopedics, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ed Berenblum

  	
   

  	
  By:

  	
  /s/ Luke Faulstick

  	
   

  
	
  Name: Ed Berenblum

  	
  Name: Luke Faulstick

  
	
  Title: Executive Vice President

  	
  Title: Sr. VP Operations

  
						

 

39

 

OUTSOURCING AGREEMENT

 

 

dated as of January15, 2006

 

 

by and between

 

 

Creditek, LLC

 

 

and

 

 

dj Orthopedics, LLC

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I
  DEFINITIONS AND CONSTRUCTION

  	
   

  	
  1

  
	
   

  	
   

  
	
   

  	
  Section 1.1

  	
  Definitions

  	
  1

  
	
   

  	
  Section 1.2

  	
  References;
  Exhibits

  	
  8

  
	
   

  	
  Section 1.3

  	
  Headings

  	
  8

  
	
   

  	
   

  
	
  ARTICLE II
  TERM

  	
   

  	
  8

  
	
   

  	
   

  
	
   

  	
  Section 2.1

  	
  Term

  	
  8

  
	
   

  	
   

  
	
  ARTICLE III
  SERVICES

  	
  8

  
	
   

  	
   

  
	
   

  	
  Section 3.1

  	
  Generally

  	
  8

  
	
   

  	
  Section 3.2

  	
  Change in
  Scope of Services

  	
  9

  
	
   

  	
  Section 3.3

  	
  Service
  Locations

  	
  9

  
	
   

  	
  Section 3.4

  	
  Provision of
  Technology

  	
  9

  
	
   

  	
  Section 3.5

  	
  HIPAA
  Compliance

  	
  10

  
	
   

  	
  Section 3.6

  	
  Compliance
  With Disclosure Law

  	
  10

  
	
   

  	
  Section 3.7

  	
  Changes in
  Law and Regulations

  	
  10

  
	
   

  	
  Section 3.8

  	
  Non-Solicitation

  	
  11

  
	
   

  	
  Section 3.9

  	
  Non Compete

  	
  11

  
	
   

  	
  Section 3.10

  	
  Cooperation

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV
  CLIENT RESPONSIBILITIES

  	
  12

  
	
   

  	
   

  
	
   

  	
  Section 4.1

  	
  CLIENT
  Contract Executive

  	
  12

  
	
   

  	
  Section 4.2

  	
  Billing and
  Collection

  	
  12

  
	
   

  	
   

  
	
  ARTICLE V
  SERVICE LEVELS

  	
  13

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 5.1

  	
  Service
  Levels

  	
  13

  
	
   

  	
  Section 5.2

  	
  Adjustment
  of Service Levels

  	
  13

  
	
   

  	
  Section 5.3

  	
  Root-Cause
  Analysis

  	
  13

  
	
   

  	
  Section 5.4

  	
  Measurement
  and Monitoring Tools

  	
  13

  
	
   

  	
  Section 5.5

  	
  Continuous
  Improvement and Best Practices

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI
  PROJECT TEAM

  	
  14

  
	
   

  	
   

  
	
   

  	
  Section 6.1

  	
  OUTSOURCER
  Contract Executive

  	
  14

  
	
   

  	
  Section 6.2

  	
  Subcontractors

  	
  14

  
	
   

  	
   

  
	
  ARTICLE VII
  MANAGEMENT AND CONTROL

  	
  14

  
	
   

  	
   

  
	
   

  	
  Section 7.1

  	
  Management
  Committee

  	
  14

  
	
   

  	
   

  
	
  ARTICLE VIII
  INTELLECTUAL PROPERTY RIGHTS

  	
  15

  
	
   

  	
   

  
	
   

  	
  Section 8.1

  	
  OUTSOURCER
  Intellectual Property

  	
  15

  
	
   

  	
  Section 8.2

  	
  CLIENT
  Intellectual Property

  	
  15

  
						

 

 

	
  ARTICLE IX
  IMPROVEMENTS

  	
   

  
	
   

  	
   

  
	
   

  	
  Section 9.1

  	
  Improvements

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE X
  DATA AND REPORTS

  	
  17

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 10.1

  	
  Ownership of
  CLIENT Data

  	
  17

  
	
   

  	
  Section 10.2

  	
  Errors

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI
  CONTINUED PROVISION OF SERVICES

  	
  17

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 11.1

  	
  Business
  Continuity Plan

  	
  17

  
	
   

  	
  Section 11.2

  	
  Force
  Majeure

  	
  17

  
	
   

  	
  Section 11.3

  	
  Service
  Level Adjustment

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII
  PAYMENTS TO OUTSOURCER

  	
  18

  
	
   

  	
   

  
	
   

  	
  Section 12.1

  	
  Fees

  	
  18

  
	
   

  	
  Section 12.2

  	
  Adjustment
  to Fees, Services and Service Levels

  	
  18

  
	
   

  	
  Section 12.3

  	
  Expenses

  	
  19

  
	
   

  	
  Section 12.4

  	
  Proration

  	
  19

  
	
   

  	
  Section 12.5

  	
  Patient/Third
  Party Payer Settlements

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII
  PAYMENT SCHEDULE AND INVOICES

  	
  19

  
	
   

  	
   

  
	
   

  	
  Section 13.1

  	
  Fees

  	
  19

  
	
   

  	
  Section 13.2

  	
  Time of
  Payment

  	
  20

  
	
   

  	
  Section 13.3

  	
  Detailed
  Invoices

  	
  20

  
	
   

  	
  Section 13.4

  	
  Late Fees

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV
  AUDITS

  	
  20

  
	
   

  	
   

  
	
   

  	
  Section 14.1

  	
  Services

  	
  20

  
	
   

  	
  Section 14.2

  	
  Fees

  	
  21

  
	
   

  	
  Section 14.3

  	
  Record
  Retention

  	
  21

  
	
   

  	
  Section 14.4

  	
  Facilities

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV
  CONFIDENTIALITY; PROTECTED HEALTH INFORMATION

  	
  21

  
	
   

  	
   

  
	
   

  	
  Section 15.1

  	
  General
  Obligations

  	
  21

  
	
   

  	
  Section 15.2

  	
  Injunctive
  Relief

  	
  22

  
	
   

  	
  Section 15.3

  	
  No License

  	
  23

  
	
   

  	
  Section 15.4

  	
  Residuals

  	
  23

  
	
   

  	
  Section 15.5

  	
  HIPAA
  Obligations

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI
  REPRESENTATIONS AND WARRANTIES

  	
  24

  
	
   

  	
   

  
	
   

  	
  Section 16.1

  	
  By CLIENT

  	
  24

  
	
   

  	
  Section 16.2

  	
  By
  OUTSOURCER

  	
  25

  
	
   

  	
  Section 16.3

  	
  DISCLAIMER
  OF WARRANTIES

  	
  26

  

 

 

	
  ARTICLE XVII
  DISPUTE RESOLUTION

  	
  26

  
	
   

  	
   

  
	
   

  	
  Section 17.1

  	
  Contract
  Executives

  	
  26

  
	
   

  	
  Section 17.2

  	
  Management
  Committee

  	
  27

  
	
   

  	
  Section 17.3

  	
  Senior
  Management

  	
  27

  
	
   

  	
  Section 17.4

  	
  Arbitration

  	
  27

  
	
   

  	
  Section 17.5

  	
  Continuity
  of Services

  	
  28

  
	
   

  	
  Section 17.6

  	
  Expedited
  Dispute Resolution

  	
  28

  
	
   

  	
  Section 17.7

  	
  Third Party
  Claims

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XVIII TERMINATION

  	
  29

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 18.1

  	
  Conditions
  of Termination

  	
  29

  
	
   

  	
  Section 18.2

  	
  Effects of
  all Terminations

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIX
  INDEMNITIES

  	
  32

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 19.1

  	
  Indemnification
  in General

  	
  32

  
	
   

  	
  Section 19.2

  	
  Indemnification
  Concerning Damage and Injury

  	
  32

  
	
   

  	
  Section 19.3

  	
  Intellectual
  Property Indemnity

  	
  32

  
	
   

  	
  Section 19.4

  	
  Indemnity
  for Violation of Law

  	
  32

  
	
   

  	
  Section 19.5

  	
  Other
  Indemnities

  	
  33

  
	
   

  	
  Section 19.6

  	
  Indemnification
  Procedure

  	
  33

  
	
   

  	
  Section 19.7

  	
  Exclusive
  Remedy

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE XX
  LIMITATION OF LIABILITY

  	
  34

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 20.1

  	
  Limitation
  of Liability

  	
  34

  
	
   

  	
  Section 20.2

  	
  Exclusions

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE XXI
  INSURANCE; RISK OF LOSS

  	
  35

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 21.1

  	
  Insurance

  	
  35

  
	
   

  	
  Section 21.2

  	
  Risk of Loss

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE XXII
  MISCELLANEOUS PROVISIONS

  	
  36

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 22.1

  	
  Assignment

  	
  36

  
	
   

  	
  Section 22.2

  	
  Notices

  	
  36

  
	
   

  	
  Section 22.3

  	
  Counterparts

  	
  37

  
	
   

  	
  Section 22.4

  	
  Relationship

  	
  37

  
	
   

  	
  Section 22.5

  	
  Consents,
  Approvals and Requests

  	
  37

  
	
   

  	
  Section 22.6

  	
  Severability

  	
  37

  
	
   

  	
  Section 22.7

  	
  Waiver

  	
  37

  
	
   

  	
  Section 22.8

  	
  Entire
  Agreement

  	
  38

  
	
   

  	
  Section 22.9

  	
  Amendments

  	
  38

  
	
   

  	
  Section
  22.10

  	
  Survival

  	
  38

  
	
   

  	
  Section
  22.11

  	
  Third Party
  Beneficiaries

  	
  38

  
	
   

  	
  Section
  22.12

  	
  Governing
  Law

  	
  38

  
	
   

  	
  Section
  22.13

  	
  Covenant of
  Further Assurances

  	
  38

  
	
   

  	
  Section
  22.14

  	
  Negotiated
  Terms

  	
  39

  
	
   

  	
  Section
  22.15

  	
  Time Periods

  	
  39

  

 

 

EXHIBIT A

 

OUTSOURCER
REQUIRED SERVICES; CHANGE IN SCOPE OF SERVICES

 

A. REQUIRED SERVICES FOR OFFICECARE ACCOUNTS

 

1)              Order
Receipt:

 

a)              CLIENT
shall be (or shall cause CLIENT Agents to be), at CLIENT’s cost, responsible
for Batching and delivering to OUTSOURCER the relevant PPAs for each Physician
Practice, which currently, or in the future, stocks CLIENT’s products for
distribution to its Patients.

 

b)             OUTSOURCER and CLIENT
shall work together with CLIENT Agents to ensure that, on average, the time
elapsed from Date of Service to Date of Receipt is less than or equal to 14
days.

 

Project Staff shall
be responsible for unpacking PPAs received and preparing these for data entry
into OUTSOURCER’s Systems.

 

2)              Order
Entry:

 

a)              The following are OUTSOURCER’s responsibilities
regarding entry of OfficeCare Orders into Outsourcer’s Systems:

 

i)                 Reviewing
the PPA prior to entering the data and, to the extent possible, identifying
missing, incomplete or incorrect information.

 

ii)              Implementing
a process to communicate with Physician Practices and/or CLIENT’s Agents to
obtain missing and/or correct the information necessary to bill for the
services provided to Patients.

 

iii)           Entering
the content of the PPA forms into the Systems.

 

iv)          Organizing
and passing PPA forms to OUTSOURCER’s imaging department for timely imaging.

 

b)             CLIENT shall be responsible for determining the
appropriate procedure code (HCPCS or its functional replacement) and Charge for
each service it provided to the Patients.

 

3)              Verification
of insurance coverage:

 

a)              As required by the
Third Party Payer and based on the type of and charge for the supply provided
to Patients, OUTSOURCER shall contact the Third Party Payer to ascertain
whether the Patient is covered for the DME products they have or shall receive,
as well as the Patient’s and Third Party Payer’s financial responsibilities.

 

b)             Required verification
of insurance coverage shall occur within 48 hours after an Order is entered in
the Systems.

 

4)              Pre-Authorization
of insurance coverage:

 

a)              As required by
CLIENT’s managed care agreements, OUTSOURCER will obtain insurance
Pre-Authorization for OfficeCare products that have already been dispensed to
Patients by Physician Offices. In those instances where the Pre-Authorization is
denied by the Third Party Payer, OUTSOURCER will seek payment from Patient.

 

1

 

5)              Billing:

 

a)              OUTSOURCER shall
invoice the appropriate Third Party Payers and/or Patients on CLIENT’s behalf
in accordance with payer specific requirements, including any additional
required documentation.

 

b)             To the extent
possible it is technically and economically possible, OUTSOURCER shall bill
Third Party Payers electronically rather than on paper.

 

6)              Follow-up:

 

a)              OUTSOURCER shall
develop a schedule, which shall be available for CLIENT’s inspection, detailing
the expected follow-up and collections cycle (billing to payment received) for
each Third Party Payer or Third Party Payer group. This schedule will be used
by OUTSOURCER to trigger phone calls and/or letters to Third Party Payers to
inquire about delayed payments.

 

b)             OUTSOURCER shall
follow-up on every Account, aged less than or equal to 180 from Date of Service
as of 3/1/06, until such Account is fully paid, transferred to a Self Pay
category or becomes a Delinquent Account. OUTSOURCER shall, at its own
discretion, select and follow up on Accounts aged over 180 days from Date of
Service as of 3/1/06 until such Accounts are fully or partially paid,
transferred to a Self Pay category or become Delinquent Accounts

 

c)              To the extent
problems are identified during its discussions/correspondence with Third Party
Payers, OUTSOURCER shall correct such problems and be responsible for
resubmitting a completed/amended bill to Third Party Payers.

 

d)             OUTSOURCER may update
the above referenced schedule as new information on Third Party Payer payment
patterns becomes available during the Term of this Agreement.

 

7)              Collections:

 

a)              For Accounts that
remain unpaid after the follow-up activities identified above, OUTSOURCER shall
review the Patient’s file, contact the Third Party Payer and identify the
reason for the denial or partial payment. To the extent possible, OUTSOURCER
shall correct the problem and resubmit the bill, and required additional
documentation, if any, to the Third Party Payer for payment.

 

8)              Bill
Patient for Self Pay account:

 

a)              For
Self Pay balances greater than $ 150 but less than or equal to $250, OUTSOURCER
shall mail to Patient two letters on CLIENT letterhead and two letters on
OUTSOURCER’s Collection Agency letterhead, and shall make one phone call to
Patient.

 

b)             For
Self Pay balances over $250, OUTSOURCER shall mail to Patient three letters on
CLIENT letterhead, plus up to three letters on OUTSOURCER Collection Agency
letterhead and shall make two phone calls to Patient.

 

c)              For
Self Pay balances less than or equal to $ 150, OUTSOURCER shall mail to Patient
two letters on CLIENT letterhead and two letters on OUTSOURCER’s Collection
Agency letterhead.

 

d)             OUTSOURCER
shall develop, and review with CLIENT Contract Executive for approval, a
schedule with the timing of statement submission, letter submission and
placement of phone calls contemplated in 8a through 8c above by the Effective
Date.

 

2

 

e)              The
letters shall provide Patients with the phone number for OUTSOURCER’s customer
service center, where the caller shall be greeted as if they had called CLIENT
directly.

 

f)                Delinquent
Accounts shall be returned to CLIENT for referral to a CLIENT Collection
Agency.

 

9)              Cash
Posting:

 

a)              CLIENT shall open or
use an existing lock-box with a financial institution meeting the requirements
of the OUTSOURCER (the “Financial Institution”). Payments received at this lock-box
shall in all cases belong to CLIENT. The Financial Institution shall have the
capability of receiving and posting Third Party Payer electronic remittances.

 

b)             CLIENT shall open a
credit card payment lock-box with a Financial Institution of its choice.

 

c)              The Financial
Institutions identified above shall remit daily information to OUTSOURCER
detailing payments received. OUTSOURCER shall post this information on its
System.

 

d)             A copy of all Cash
Receipts received by CLIENT, other than through the lock-boxes identified
above, shall also be promptly remitted to OUTSOURCER for posting on its
Systems.

 

e)              OUTSOURCER will
endorse in CLIENT’s name all Cash Receipts received for Services performed by
CLIENT, but made payable to or sent to OUTSOURCER or its Affiliates in
connection with this Agreement.

 

f)                CLIENT is
responsible to ensure that Financial Institutions shall have the capability to
track OfficeCare and Insurance Business Cash Receipts separately from those of
any other CLIENT business.

 

10)        Refunds:

 

a)              OUTSOURCER shall
submit refund requests to CLIENT monthly with proper supporting documentation,
but in every case within the time frame allowing CLIENT a minimum of two weeks
to process, issue and deliver payment to Refundee before payment or offset deadlines
take effect.

 

11)        Managed
Care Contracting:

 

a)              CLIENT will utilize
best efforts to procure contracts with Third Party Payers as recommended by
OUTSOURCER.

 

b)             As requested by
OUTSOURCER and within reasonable limits, CLIENT’s staff shall assist OUTSOURCER
to negotiate payments and/or resolve payment disputes with Third Party Payers
with whom CLIENT has contractual relations.

 

12)        Customer
Service:

 

a)              OUTSOURCER shall
provide a call center, and a dedicated toll free number, to answer questions
within the scope of the Services from Patients regarding services/supplies
provided by the CLIENT to these Patients.

 

b)             OUTSOURCER’s call
center shall be capable of providing information to Patients on their accounts
and of collecting, from Patients, the insurance and/or demographic

 

3

 

information required to bill Third Party Payers for these services.
Call center staff shall have the capability of taking credit card payment
information from Patients. OUTSOURCER shall be responsible for processing this
information with the relevant Financial Institution.

 

c)              OUTSOURCER shall
measure call center performance and report monthly to CLIENT. OUTSOURCER shall
investigate the root cause for declines in customer service performance and
propose corrective action plans for CLIENT’s approval.

 

13)        Information
Technology:

 

a)              OUTSOURCER shall
provide the Systems, which are required for the performance of the Services.

 

b)             CLIENT shall be
responsible for its own ERP System (currently JD Edwards).

 

c)              OUTSOURCER shall
provide, at its cost, the means to download daily Patient financial,
transaction and unit information from its Systems to JD Edwards in a format
specified by CLIENT

 

d)             OUTSOURCER shall be
responsible for maintaining, at its own cost and for the duration of this
Agreement, an Imaging System to scan PPA and Explanation of Benefits (EOB),
Explanation of Payments (EOP) and other relevant forms.

 

e)              OUTSOURCER shall
provide, at its cost, the means to download information from its Imaging System
daily into the CLIENT’s Imaging System

 

f)                OUTSOURCER will
receive Third Party Payer EOBs, EOPs and other relevant documentation at its
Service Location or from the Financial Institution, as the case may be, and
enter this information into its System.

 

g)             OUTSOURCER shall
maintain all relevant licenses for its Systems.

 

h)             CLIENT shall maintain all relevant licenses for its
ERP System and Imaging System.

 

i)                 OUTSOURCER’s
Systems shall be available, at the CLIENT’s Service Location, for use for the
Project Staff and CLIENT’s personnel in a manner consistent with the terms and
conditions of the Agreement.

 

14)        Communications:

 

a)              OUTSOURCER shall, at
its own cost, provide the communications links and dedicated data lines between
CLIENT and OUTSOURCER Service Locations and toll free number required to
provide Customer Service as described in 12 above.

 

15)        Reporting:

 

a)              OUTSOURCER shall
provide CLIENT with up to 5 Custom Reports per year, free of charge. CLIENT
shall specify whether these reports will be run daily, weekly or monthly. The
Parties agree to utilize the Change Order process provided in this Agreement
any time the CLIENT requires more that 5 Custom Reports to be produced during a
given year.

 

4

 

16)        Staffing:

 

a)              OUTSOURCER shall
provide the Project Staff that shall be required to perform the Services.
OUTSOURCER shall be responsible for training such Project Staff.

 

17)        Continuous
Process Improvement:

 

a)              OUTSOURCER will
strive to improve all revenue cycle processes listed above. OUTSOURCER will
conduct root cause analysis on all process deficiencies to aid in continuous
process improvement efforts.

 

b)             OUTSOURCER process
improvement efforts shall follow Six Sigma and Lean approach and methodologies.

 

18)        CLIENT
Collection Agency Efforts:

 

a)              Delinquent Accounts
will be referred by OUTSOURCER, after prompt review by CLIENT, to CLIENT
Collection Agency.

 

b)             Accounts referred to
a CLIENT Collection Agency will be written-off in OUTSOURCER’s System at the
time of referral.

 

c)              OUTSOURCER will
provide an electronic file with the Account’s information (e.g. notes, payment
history) to the CLIENT Collection Agency.

 

d)             CLIENT will be
responsible for all fees paid to the CLIENT Collection Agency.

 

19)        Other
Costs:

 

a)              OUTSOURCER’s Fees will cover all costs for outbound
postage, electronic billing, and reasonably required travel for its management
and staff needed to perform the Services.

 

B. REQUIRED SERVICES FOR INSURANCE ACCOUNTS

 

1)              Follow-up:

 

a)              OUTSOURCER shall
develop a schedule, which shall be available for CLIENT’s inspection, detailing
the expected follow-up and collections cycle (billing to payment received) for
each Third Party Payer or Third Party Payer group. This schedule will be used
by OUTSOURCER to trigger phone calls and/or letters to Third Party Payers to
inquire about delayed payments.

 

b)             OUTSOURCER will
follow-up on every Account, aged less than or equal to 180 days from Date of
Service as of 3/1/06, until such Account is fully paid, transferred to a Self
Pay category or becomes a Delinquent Account. OUTSOURCER shall, at its own
discretion, select and follow up on Accounts aged over 180 days from Date of
Service as of 3/1/06 until such Accounts are fully or partially paid,
transferred to a Self Pay category or become Delinquent Accounts

 

c)              To the extent
problems are identified during its discussions/correspondence with Third Party
Payers, OUTSOURCER shall correct such problems and be responsible for
resubmitting a completed/amended bill to Third Party Payers.

 

5

 

d)             OUTSOURCER may update
the above referenced schedule as new information on Third Party Payer payment
patterns becomes available during the Term of this Agreement.

 

e)              CLIENT shall be responsible for determining the
appropriate procedure code (HCPCS or its functional replacement) and Charge for
each service it provided to the Patients.

 

2)              Collections:

 

a)              For Accounts that
remain unpaid after the follow-up activities identified above, OUTSOURCER shall
review the Patient’s file, contact the Third Party Payer and identify the
reason for the denial or partial payment. To the extent possible, OUTSOURCER
shall correct the problem and resubmit the bill, and required additional
documentation, if any, to the Third Party Payer for payment.

 

3)              Bill
Patient for Self Pay account:

 

a)              For
Self Pay balances greater than $ 150 but less than or equal to $250, OUTSOURCER
shall mail to Patient two letters on CLIENT letterhead and two letters on
OUTSOURCER’s Collection Agency letterhead, and shall make one phone call to
Patient.

 

b)             For
Self Pay balances over $250, OUTSOURCER shall mail to Patient three letters on
CLIENT letterhead, plus up to three letters on OUTSOURCER Collection Agency
letterhead and shall make two phone calls to Patient.

 

c)              For
Self Pay balances less than or equal to $ 150 OUTSOURCER shall mail to Patient
two letters on CLIENT letterhead and two letters on OUTSOURCER’s Collection
Agency letterhead.

 

d)             OUTSOURCER
shall develop and review with CLIENT Contract Executive for approval, a
schedule with the timing of statement submission, letter submission and
placement of phone calls contemplated in 8a through 8c above by the Effective
Date.

 

e)              The
letters shall provide Patients with the phone number for OUTSOURCER’s customer
service center, where the caller shall be greeted as if they had called CLIENT
directly.

 

f)                Delinquent
Accounts shall be returned to CLIENT for referral to a CLIENT Collection
Agency.

 

4)              Cash
Posting:

 

a)              CLIENT shall open or
use an existing lock-box with a financial institution meeting the requirements
of the OUTSOURCER (the “Financial Institution”). Payments received at this
lock-box shall in all cases belong to CLIENT. The Financial Institution shall
have the capability of receiving and posting Third Party Payer electronic
remittances.

 

b)             CLIENT shall open a
credit card payment lock-box with a Financial Institution of its choice.

 

c)              The Financial
Institutions identified above shall remit daily information to OUTSOURCER
detailing payments received. OUTSOURCER shall post this information on its
System.

 

d)             A copy of all Cash
Receipts received by CLIENT, other than through the lock-boxes identified
above, shall also be promptly remitted to OUTSOURCER for posting on its
Systems.

 

6

 

e)              OUTSOURCER will
endorse in CLIENT’s name all Cash Receipts received for Services performed by
CLIENT, but made payable to or sent to OUTSOURCER or its Affiliates in connection
with this Agreement.

 

f)                CLIENT is
responsible to ensure that Financial Institutions shall have the capability to
track OfficeCare and Insurance Business Cash Receipts separately from those of
any other CLIENT business.

 

5)              Refunds:

 

a)              OUTSOURCER shall
submit refund requests to CLIENT monthly with proper supporting documentation,
but in every case within the time frame allowing CLIENT a minimum of two weeks
to process, issue and deliver payment to Refundee before payment or offset
deadlines take effect.

 

6)              Managed
Care Contracting:

 

a)              CLIENT will utilize
best efforts to procure contracts with Third Party Payers as recommended by
OUTSOURCER.

 

b)             As requested by
OUTSOURCER and within reasonable limits, CLIENT’s staff shall assist OUTSOURCER
to negotiate payments and/or resolve payment disputes with Third Party Payers
with whom CLIENT has contractual relations.

 

7)              Customer
Service:

 

a)              OUTSOURCER shall
provide a call center, and a dedicated toll free number, to answer questions
within the scope of the Services from Patients regarding services/supplies
provided by the CLIENT to these Patients.

 

b)             OUTSOURCER’s call
center shall be capable of providing information to Patients on their accounts
and of collecting, from Patients, the insurance and/or demographic information
required to bill Third Party Payers for these services. Call center staff shall
have the capability of taking credit card payment information from Patients.
OUTSOURCER shall be responsible for processing this information with the
relevant Financial Institution.

 

8)              Information
Technology:

 

a)              OUTSOURCER shall
provide the Systems, which are required for the performance of the Services.

 

b)             CLIENT shall be
responsible for its own ERP System (currently JD Edwards).

 

c)              OUTSOURCER shall
provide, at its cost, the means to download daily Patient financial,
transaction and unit information from its Systems to JD Edwards in a format
specified by CLIENT

 

d)             OUTSOURCER shall be
responsible for maintaining, at its own cost and for the duration of this Agreement,
an Imaging System to scan PPA and Explanation of Benefits (EOB), Explanation of
Payments (EOP) and other relevant forms.

 

e)              OUTSOURCER shall
provide, at its cost, the means to download information from its Imaging System
daily into the CLIENT’s Imaging System

 

7

 

f)                OUTSOURCER will
receive Third Party Payer EOBs, EOPs and other relevant documentation at its
Service Location or from the Financial Institution, as the case may be, and
enter this information into its System.

 

g)             OUTSOURCER shall
maintain all relevant licenses for its Systems.

 

h)             CLIENT shall maintain
all relevant licenses for its ERP System and Imaging Systems.

 

i)                 OUTSOURCER’s
Systems shall be available, at the CLIENT’s Service Location, for use for the
Project Staff and CLIENT’s personnel in a manner consistent with the terms and
conditions of the Agreement.

 

9)              Communications:

 

a)              OUTSOURCER shall, at
its own cost, provide the communications links and dedicated data lines between
CLIENT and OUTSOURCER Service Locations and toll free number required to
provide Customer Service as described in 12 above.

 

10)        Reporting:

 

a)              OUTSOURCER shall
provide CLIENT with up to 5 Custom Reports per year, free of charge. The
Parties agree to utilize the Change Order process provided in this Agreement
any time the CLIENT requires more that 5 Custom Reports to be produced during a
given year.

 

11)        Staffing:

 

a)              OUTSOURCER shall
provide the Project Staff that shall be required to perform the Services. OUTSOURCER
shall be responsible for training such Project Staff.

 

12)        Continuous
Process Improvement:

 

a)              OUTSOURCER will
continue to improve all revenue cycle processes listed above. OUTSOURCER will
conduct root cause analysis on all process deficiencies to aid in continuous
process improvement efforts.

 

13)        CLIENT
Collection Agency Efforts:

 

a)              Delinquent Accounts
will be referred by OUTSOURCER, after prompt review by CLIENT, to CLIENT
Collection Agency.

 

b)             Accounts referred to
a CLIENT Collection Agency will be written-off in OUTSOURCER’s System at the
time of referral.

 

c)              OUTSOURCER will
provide an electronic file with the Account’s information (e.g. notes, payment
history) to the CLIENT Collection Agency.

 

d)             CLIENT will be
responsible for all fees paid to the CLIENT Collection Agency.

 

14)        Other
Costs:

 

a)              OUTSOURCER’s Fees will cover all costs for outbound
postage, electronic billing, and reasonably required travel for its management
and staff needed to perform the Services.

 

8

 

C. TRANSITION OF ORDER ENTRY AND INSURANCE VERIFICATION RESPONSIBILITIES
FROM CLIENT TO OUTSOURCER FOR MEDICARE ACCOUNTS

 

(a) By 5/30/06
OUTSOURCER shall assume the Required Services outlined on Exhibit A, Section A,
Items 1 through 5, for CLIENT’s Accounts where the Medicare program is the
primary payer. The fees for these services are included in the Base Fees.

 

OUTSOURCER represents that it is
familiar and experienced in Medicare billing and covenants to comply in all
respects with the applicable Medicare rules and regulations regarding billing,
collecting and record-keeping of Medicare claims.

 

9

 

EXHIBIT B

 

SERVICE
LEVELS, PENALTIES AND BONUSES

 

A.                                    Customer
Service

 

1)              Call
center metrics:

 

a)              ASA (average speed
to answer):

 

i)                 OUTSOURCER
average speed to answer all CLIENT Patient service calls may not exceed thirty
seconds during any one week period (during Hours of Operation).

 

ii)              CLIENT
does not expect OUTSORCER to reach the performance levels outlined on Exhibit
B, Section A, Item 1(a)(i) until 120 days from the Effective Date

 

b)             Abandonment Rate:

 

i)                 OUTSOURCER
average Call Center Abandonment Rate (Abandoned Calls/Total Calls) may not
exceed 5% during any one week period (during Hours of Operation).

 

ii)              CLIENT
does not expect OUTSORCER to reach the performance levels outlined on Exhibit
B, Section A, Item 1(b)(i) until 120 days from the Effective Date.

 

c)              Reporting of metrics defined on 1a and 1b shall
commence on the Effective Date

 

2)              File
transfers to CLIENT’s ERP System

 

a)              On
a nightly basis, OUTSOURCER will download a file or files from its Systems to
CLIENT’s ERP System

 

b)             On
a nightly basis, OUTSOURCER will download a file or files from its Imaging
System into CLIENT’s Imaging System

 

3)              The
Parties shall work together to define and implement a process to track and
resolve Patient complaints.

 

a)              During
the first two months from the Effective Date, the parties shall measure the
performance of Patient complaints (the “Baseline Patient Complaint Level”).

 

b)             The
process to track Patient complaints shall collect sufficient information to
determine whether the Patient complaint is due to OUTSOURCER or CLIENT
shortcomings.

 

B.                                    Managed
care contracting

 

1)              CLIENT
shall use commercially reasonable efforts to execute contracts with managed
care providers as recommended by OUTSOURCER in support of improving Cash
Receipts.

 

2)              OUTSOURCER
shall have no liability to CLIENT for Patient and/or Third Party Payer credit
losses and non-payment, including non-payment due to trade practices, payment
slowdown, insolvency, bankruptcy, CLIENT business matters or practices, or for
any reasons outside the scope of OUTSOURCER’s obligations under the Agreement.
Third Party Payers that are generally slowing their payments (as determined
through publicly available information) or otherwise evidencing financial
problems or those that are placed for collection, are insolvent or in a
bankruptcy, reorganization or insolvency proceeding, will be considered
Non-Complying Payers.  Non-

 

10

 

Complying Payers will be
identified and agreed to by CLIENT and OUTSOURCER on a monthly basis and will
be excluded for purposes of calculating Service Levels, penalties or bonuses.
OUTSOURCER will, however, continue to perform Services under this Agreement for
Non-Complying Payers.

 

C.                                    Information Technology

 

1.               System
Uptime

 

a)              The OUTSOURCER
Systems and call center phone systems shall be available an average of 95% of
any one-month period during the Hours of Operation set forth in 2) below.

 

i)                 System
Outage Notification

 

(1)          OUTSOURCER
shall notify CLIENT of any system outages, during Hours of Operation, which
lasts more than two hours.

 

(2)          If
system outage is discovered by CLIENT, CLIENT shall use the following
escalation plan to notify OUTSOURCER of the downtime:

 

(a)          Call
to OUTSOURCER help desk at (973) 515- 4900, 455

 

(b)         Call
to Chris Fallon at 877 591 7101, ext 315

 

(c)          Call
to CIO

 

or to such other numbers as designated in writing by OUTSOURCER
Contract Executive from time to time.

 

2.               Hours
of Operation

 

a)              The Systems shall be
available to CLIENT users from 9 a.m. – 8 p.m. EST Monday through Friday.

 

b)             OUTSOURCER
shall maintain and accept full responsibility for all software license
requirements for the Systems and any other systems utilized or contemplated for
executing the operations of this Agreement.

 

c)              In
addition, Outsourcer will make all reasonable efforts to provide CLIENT with
uninterrupted access (conceptually intended to mean 24 hours, Monday through
Saturday) to data repository/reporting facilities. Such access excludes
scheduled nightly backup and weekly regular maintenance efforts, the schedule
of which OUTSOURCER will provide to CLIENT and may change at any time, or
emergency maintenance as may be required from time to time. OUTSOURCER may use
the escalation plan outlined in Exhibit B, Part D, Section 1(a)(i)(3) to report
data repository/reporting facilities outages outside the Hours of Operations.

 

D.            Financial

 

1)              Days
Sales Outstanding (DSO) for Accounts included in Exhibit A, Items A and B

 

a)              Definitions:

 

i)                 “Accounting
Period” shall mean the CLIENT’s division of the calendar year into 12 periods
that may or may not coincide with calendar months.

 

ii)              “Net
Revenue per Day” for a given Accounting Period, shall mean Net Revenue, for the
Accounting Period, divided by the number of work days in that Accounting Period

 

11

 

iii)           “Average
Net Revenue per Day” shall mean the mathematical average of the Net Revenue per
Day computed over a period the includes the current Accounting Period plus the
preceding two Accounting Periods

 

iv)          “Average
Net Revenue per Year”, computed for each Accounting Period, shall mean the
product of Average Net Revenue per Day times 253 (or times the Parties’ agreed
upon number of work days per year, which computation shall exclude National,
State, Local and CLIENT holidays observed by CLIENT.

 

v)             Net
Revenue, as used in this section, shall mean the aggregate Net Revenue for the
OfficeCare and Insurance Accounts identified on Exhibit A.

 

vi)          Net
Accounts receivable, as used in this section, shall mean the aggregate Net
Accounts Receivable for the OfficeCare and Insurance Accounts identified on
Exhibit A.

 

b)             For
each Accounting Period, DSO shall be computed as Net Accounts Receivable
divided by Average Net Revenue per Year.

 

c)              Baseline
DSO shall be 105 days.

 

d)             The
Parties shall work together to define a write-off policy for partially paid
and/or aged Accounts. In all cases, Delinquent Accounts shall be promptly
written-off from OUTSOURCER Systems and excluded from CLIENT’s DSO computation.

 

2.               For
each Accounting Period after the Effective Date, CLIENT shall calculate DSO and
notify OUTSOURCER of DSO results. If DSO is greater than 105 days for any three
consecutive months, OUTSOURCER shall:

 

i)                 Investigate
decline in performance.

 

ii)              Develop
an action plan acceptable to the CLIENT to improve DSO.

 

iii)           Report
action plan and implementation schedule to CLIENT Contract Executive within 5
business days of DSO notification.

 

iv)          Implement
action plan within 7 business days of DSO notification.

 

v)             Satisfactorily
resolve the root cause for the decline in performance.

 

12

 

EXHIBIT C

 

FEES

 

1.               Base Fee for Services described on
Exhibit A

 

Fees
shall be computed by dividing the annual project cost of $ 2,620,000 by all
Cash Receipts received during 2005 and applied in OUTSOURCER’s Medical Manager
system. The Parties agree that Cash Receipts so computed shall neither be less
than $ 34.2 million nor more than $ 34.9 million. The Parties further agree to
work together to determine, prior to 3/1/06, the actual Cash Receipts used in
the above calculation. The Fees so determined shall remain fixed during the
Term. A monthly bonus shall be added to the Fees computed in 1. above in
consideration of increases in Net Revenue

 

2.               The
monthly Month of Service Bonus will be calculated using the methodology set
forth in a) through c) below:

 

a.               The Baseline OfficeCare Collections Ratio (“CR”) is
43% The Baseline Insurance CR is 54%

 

b.              Commencing
eight months after the Effective Date (the then “Current Month”), and monthly
thereafter, OUTSOURCER will report the Month of Service Collections Ratio (“MOSCR”)
separately for OfficeCare and Insurance Accounts.

 

c.               For
each of the seven (7) Months of Service preceding the Current Month where the
MOSCR is greater than the CR, OUTSOURCER will compute a Month of Service Bonus,
separately for OfficeCare and Insurance Accounts, as follows:

 

i.                  If
(MOSCR-CR)*100/CR is greater than or equal to .5 (one half of one percent) but
less than 5 (five percent), the Month of Service Bonus will be equal to .2
times (MOSCR-CR) times Month of Service Charges

 

ii.               If
(MOSCR-CR)*100/CR is greater than or equal to 5 (five percent) but less than 20
(twenty percent), the Month of Service Bonus will be equal to (.05 times Month
of Service Charges times .2) plus (.075 times (MOSCR-(CR*1.05)) times Month of
Service Charges)

 

iii.            If
(MOSCR-CR)*100/CR is greater than or equal to 20 (twenty percent), the Month of
Service Bonus will be equal to (.05 times Month of Service Charges times .2),
plus (.075 times Month of Service Charges times .15) plus (.05 times
(MOSCR-(CR*1.2)) times Month of Service Charges)

 

iv.           OUTSOURCER
will invoice the Month of Service Bonus monthly to CLIENT. CLIENT shall pay the
Month of Service Bonus in accordance with the terms of Section 12.2 of the
Agreement.

 

d.              OUTSOURCER shall be entitled to receive the Month of
Service Bonus, computed as indicated above, for up to eight months after the
Termination Date. CLIENT shall provide OUTSOURCER access to its systems
throughout such eight-month period to allow OUTSOURCER to calculate the bonus
and to invoice CLIENT when a bonus is due.

 

13

 

e.               The Month of Service Charges used in computing the
Month of Service Bonus will exclude all price changes implemented on or after
3/1/06.

 

f.                 The Parties agree to revisit the Net
Revenue Bonus calculation every time CLIENT implements price changes expected
to result in an increase of at least 5% in total annual Charges

 

g.              The Month of Service Bonus shall not be paid each
month where the DSO, as computed in Exhibit B, Section D, Item 1 exceeds 105
days.

 

Definitions:

 

“Month of
Service” shall mean the month and year in which a PPA is/was entered into the
Systems.

 

“Month of
Service Charges” shall mean the Charges generated during the Month of Service

 

“Month of Service Collections” shall mean the
aggregate Cash Receipts, for the eight-month period that encompasses the Month
of Service and the following seven months, for Accounts with Date of Entry
during the Month of Service.

 

“Month of Service Collections Ratio” shall be
computed as Month of Service Collections divided by the Baseline Collections
Ratio

 

3.               Additional OUTSOURCER fees due to reduced volume

 

At each contract anniversary date, the
Parties shall compare the total number of Products entered into the Systems
during the 12-month period preceding the anniversary date (the “Annual Product
Volume”), against the baseline Product volume of 413,330 units (which
corresponds to Charges, at the pricing effective on 12/31/05, of $ 64.53
Million). During the Term, for each 12-month period where the Annual Product
Volume is less than the baseline Product volume, CLIENT shall pay OUTSOURCER a
one time annual payment of:

 

a.               $
100,000 if Annual Product Volume less baseline Product volume is less than or
equal to zero.

 

b.              $
50,000 if Annual Product Volume less baseline Product volume is greater than
zero but less than or equal to 43,100.

 

c.               Zero
if Annual Product Volume less baseline Product volume is greater than 43,100.

 

OUTSOURCER
will invoice the Additional OUTSOURCER fees annually to CLIENT. CLIENT shall
pay these fees in accordance with the terms of Section 12.2 of the Agreement.

 

14

 

EXHIBIT
D

CLIENT
REQUIRED SERVICES

 

A. REQUIRED
SERVICES FOR ALL INSURANCE ACCOUNTS AGED LESS THAN 180 DAYS, FROM DATE OF
SERVICE, AS OF THE EFFECTIVE DATE

 

1)              Order
Entry:

 

a)              The following are
CLIENT’s responsibilities regarding entry of Insurance Orders on Outsourcer’s
Systems:

 

i)                 Reviewing
the PPA prior to entering the data and, to the extent possible, identifying
missing, incomplete or incorrect information.

 

ii)              Implementing
a process to communicate with Physician Practices and/or CLIENT’s Agents to
obtain missing and/or correct the information necessary to bill for the services
provided to Patients.

 

iii)           Entering
the content of the PPA forms into the Systems within seven business days from
Date of Service.

 

iv)          Forwarding
the PPA forms to OUTSOURCER’s imaging department for imaging and storage.

 

2)              Verification
of insurance coverage:

 

a)              CLIENT shall contact
the Third Party Payer to ascertain whether the Patient is covered for the DME
products they have or shall receive, as well as the Patient’s and Third Party
Payer’s financial responsibilities.

 

b)             Required verification
of insurance coverage shall occur before an Order is billed to a Third Party
Payer.

 

3)              Pre-Authorization
of insurance coverage:

 

a)              CLIENT shall get
prior approval from the Patient’s Third Party Payer prior to the supply being
delivered to the Patient.

 

4)              Billing:

 

a)              CLIENT shall invoice
the appropriate Third Party Payers and/or Patients in accordance with payer
specific requirements, including any additional required documentation.

 

b)             The Bill Date for
Insurance Accounts shall be no later than seven days after the Date of Service.
The computation of OUTSOURCER service level requirements outlined on Exhibit B,
sections A and B shall exclude Insurance Accounts with Bill Dates later than
eight days after the Date of Service.

 

5)              Other:

 

a)              CLIENT shall bear all costs related to printing and
distributing PPA forms to Physician Clinics for all Accounts

 

b)             CLIENT shall bear all costs related to bank lock-box
fees for all Accounts

 

15

 

FOR
DISCUSSION PURPOSES ONLY

 

EXHIBIT E

 

EVENTS OF
DEFAULT AND CURE PERIODS

 

Each of the following constitute an exclusive
OUTSOURCER Event of Default with respect to the subject matter covered by such
Event of Default. Upon the occurrence of a below mentioned Event of Default and
upon receipt of Default Notice from CLIENT, OUTSOURCER shall cure (or, in the
case of 1) below, mitigate) such OUTSOURCER Event of Default within the time
periods set forth below:

 

1)              With
regard to OUTSOURCER’s obligations to comply with HIPAA, Department of Health
and Human Services, Medicare, Medicaid, or Office of Inspector General
regulations, an Event of Default has occurred only if OUTSOURCER is in material
non-compliance with such regulations and such non-compliance is first validated
by an independent third party selected by the Parties. Upon such Event of
Default, OUTSOURCER shall have 30 days after its receipt of Default Notice to
take commercially reasonable action to cure or mitigate any harmful effect
known to OUTSOURCER as a result of such violation. Any cure or mitigation of
such default shall be determined by such independent third party and validated
by the CLIENT.

 

2)              An
Event of Default has occurred only if OUTSOURCER knowingly engages in corporate
malfeasance and such malfeasance is first validated by an independent third
party selected by the Parties. There shall be no cure period for such Event of
Default.

 

3)              An
Event of Default shall have occurred with respect to the Service Level
requirements set forth below only if OUTSOURCER fails to satisfy the specific
parameters described below.

 

a)              System
Uptime/Access. An Event of Default has occurred with respect to OUTSOURCER’s
System Uptime/Access obligations in Exhibit B, Part C, only if the OUTSOURCER
Systems are inaccessible for data entry, reporting and analysis more than 5%
for any one month period during the Hours of Operation set forth on Exhibit B,
Part D. OUTSOURCER shall have 30 days after its receipt of Default Notice to
cure such Event of Default.

 

4)              Call
center metrics:

 

a)              An Event of Default
has occurred with respect to OUTSOURCER’S ASA (average speed to answer)
requirements only if the average ASA for Patient and CLIENT Agent calls exceeds
90 seconds during any two-week period (during Hours of Operation).

 

b)             An Event of Default
has occurred with respect to OUTSOURCER’S Abandonment Rate/Blocked Calls Rate
for Patient and CLIENT Agent calls only if the average Abandonment Rate
(Abandoned Calls/Total Calls) exceeds 30% during any two-week period (during
Hours of Operation).

 

c)              Measurement and reporting of metrics defined on 3a and
3b shall commence 180 days after the Effective Date

 

4)              An
OUTSOURCER Event of Default has occurred with respect of the requirements set
on Exhibit B, Section A, Item 3 only if average actual performance during a one

 

16

 

month period is 30% worse than the Baseline
Patient Complaint Level for complaints due to OUTSOURCER shortcomings.

 

5)              Other
Events of Default covering subject matters not covered in this Exhibit G shall
be cured by OUTSOURCER within 30 days after OUTSOURCER’s receipt of the Default
Notice.

 

17

 

FOR
DISCUSSION PURPOSES ONLY

 

EXHIBIT
F

 

ASSUMPTIONS

 

1.               Baseline
volumes

 

•                  344,163
Accounts per year (325,947 OfficeCare and 18,216 Insurance)

 

•                  413,327
Products per year

 

•                  Average
number of Products per Account: 1.12

 

•                  2.15%
of the Accounts have Charges of $ 25 or less

 

•                  Average
OfficeCare Charge per Account: $ 141

 

•                  Average
Insurance Charge per Account: $ 1,026

 

2.               Percentage
of Medicare Accounts

 

•                  16.4%
of OfficeCare Accounts

 

•                  11.4%
of Insurance Accounts

 

3.               Average
Charges for Medicare Accounts

 

•                  OfficeCare:
$ 133

 

•                  Insurance:
$ 874

 

4.               There
are no capitated Accounts

 

18

 

FOR
DISCUSSION PURPOSES ONLY

 

EXHIBIT
G

SCHEDULE
OF UNAMORTIZED IMPLEMENTATION COSTS

 

1.              Upon termination prior to the date
that is five years after the Effective Date, CLIENT shall pay OUTSOURCER the
unamortized portion of OUTSORCER implementation costs presented below:

 

	
  Medical Manager replacement

  	
   

  	
  180,000

  	
   

  
	
  Billing engine

  	
   

  	
  87,500

  	
   

  
	
  Self pay web site

  	
   

  	
  22,500

  	
   

  
	
  Document management set up

  	
   

  	
  50,000

  	
   

  
	
  Severance US staff

  	
   

  	
  23,625

  	
   

  
	
  Salaries and benefits for staff overlap

  	
   

  	
  264,528

  	
   

  
	
  US overhead for staff overlap

  	
   

  	
  109,418

  	
   

  
	
   

  	
   

  	
  $

  	
  737,571

  	
   

  
					

 

2.               Example
of computation methodology of unamortized implementation costs borne by CLIENT
pursuant to Section 18.2 (f) of this Agreement is as follows:

 

•                  CLIENT
termination costs= (60 less number of months from the Effective Date through
the Termination Date) times ($ 737,571/60)

 

•                  For
example, if termination occurred during month 13 after the Effective Date,
termination costs would be: (60-13)*12,293= $ 577,764

 

19

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