Document:

exv10w6

 

Exhibit 10.6

OMNIBUS AGREEMENT

AMONG

UNIVERSAL COMPRESSION HOLDINGS, INC.

UNIVERSAL COMPRESSION, INC.

UCI LEASING HOLDING GP LLC

UCI COMPRESSOR HOLDING, L.P.

UCO GP, LLC

UCO GENERAL PARTNER, LP

UNIVERSAL COMPRESSION PARTNERS, L.P.

UCLP OLP GP LLC

UC OPERATING PARTNERSHIP, L.P.

UCLP LEASING GP LLC

AND

UCLP LEASING, L.P.

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE I DEFINITIONS
	 	 	1	 
	1.1 Definitions
	 	 	1	 
	ARTICLE II NON-COMPETITION AND BUSINESS OPPORTUNITIES
	 	 	9	 
	2.1 UCH Restricted Business
	 	 	9	 
	2.2 Partnership Restricted Business
	 	 	9	 
	2.3 Permitted Exceptions
	 	 	9	 
	2.4 Restricted Business Procedures.
	 	 	11	 
	2.5 Scope of the Prohibition
	 	 	13	 
	2.6 New Customers
	 	 	13	 
	2.7 Enforcement
	 	 	14	 
	2.8 Termination
	 	 	14	 
	ARTICLE III SERVICES
	 	 	14	 
	3.1 Provision, Allocation and Reimbursement for Services
	 	 	14	 
	3.2 Limitations on Reimbursement.
	 	 	15	 
	ARTICLE IV COMPRESSION EQUIPMENT TRANSFERS
	 	 	16	 
	4.1 Transfer Mechanics
	 	 	16	 
	4.2 Settlement; Appraised Value
	 	 	18	 
	4.3 Appraisal
	 	 	19	 
	4.4 Like-Kind Exchange Treatment
	 	 	20	 
	4.5 Other Sales Permitted
	 	 	20	 
	4.6 Termination
	 	 	20	 
	ARTICLE V NEWLY FABRICATED COMPRESSION EQUIPMENT PURCHASES
	 	 	20	 
	ARTICLE VI LICENSE
	 	 	21	 
	6.1 Grant of License
	 	 	21	 
	6.2 Restrictions on Marks
	 	 	21	 
	6.3 Ownership
	 	 	21	 
	6.4 Confidentiality
	 	 	21	 
	6.5 Estoppel
	 	 	21	 
	6.6 Warranties; Disclaimers.
	 	 	22	 
	6.7 In the Event of Termination
	 	 	22	 
	ARTICLE VII INDEMNIFICATION
	 	 	22	 
	7.1 Environmental Indemnification.
	 	 	22	 
	7.2 Additional Indemnification.
	 	 	23	 
	7.3 Limitations Regarding Indemnification.
	 	 	24	 
	7.4 Indemnification Procedures
	 	 	24	 
	ARTICLE VIII MISCELLANEOUS
	 	 	26	 
	8.1 Choice of Law; Submission to Jurisdiction
	 	 	26	 
	8.2 Notice
	 	 	26	 
	8.3 Entire Agreement
	 	 	26	 
	8.4 Termination
	 	 	27	 
	8.5 Effect of Waiver or Consent
	 	 	27	 
	8.6 Amendment or Modification
	 	 	27	 
	8.7 Assignment; Third Party Beneficiaries
	 	 	27	 
	8.8 Counterparts
	 	 	27	 
	8.9 Severability
	 	 	27	 

 

 

	 	 	 	 	 
	8.10 Gender, Parts, Articles and Sections
	 	 	27	 
	8.11 Further Assurances
	 	 	28	 
	8.12 Withholding or Granting of Consent
	 	 	28	 
	8.13 Laws and Regulations
	 	 	28	 
	8.14
Negation of Rights of Limited Partners, Assignees and Third Parties
	 	28
	8.15 No Recourse Against Officers or Directors
	 	 	28	 

EXHIBITS AND SCHEDULES

Exhibit A — Form Bill of Sale

Exhibit B — Form Compression Equipment Lease Agreement

Schedule 1.1 — Fixed Margin Percentage

Schedule 3.1(a) — Services

Schedule 3.1(b) — Excluded Services

Schedule 6.1 — Marks

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OMNIBUS AGREEMENT

     THIS OMNIBUS AGREEMENT is entered into on, and effective as of, the Closing Date (as defined
herein), and is by and among Universal Compression Holdings, Inc., a Delaware corporation (“UCH”),
Universal Compression, Inc., a Texas corporation (“UCI”), UCI Leasing Holding GP LLC, a Delaware
limited liability company, UCI Compressor Holding, L.P., a Delaware limited partnership, UCO GP,
LLC, a Delaware limited liability company (“UCO LLC”), UCO General Partner, L.P., a Delaware
limited partnership (the “General Partner”), Universal Compression Partners, L.P., a Delaware
limited partnership (the “Partnership”), UCLP OLP GP LLC, a Delaware limited liability company
(“OLP GP”), UC Operating Partnership, L.P. (the “OLP”), UCLP Leasing GP LLC, a Delaware limited
liability company, and UCLP Leasing, L.P. The above-named entities are sometimes referred to in
this Agreement each as a “Party” and collectively as the “Parties.”

RECITALS:

     The Parties desire by their execution of this Agreement to evidence their understanding, (i)
as more fully set forth in Article II, with respect to (a) those business opportunities that the
UCH Entities (as defined herein) will not pursue and (b) those business opportunities that the
Partnership Group (as defined herein) will not pursue, (ii) as more fully set forth in Article III,
with respect to certain reimbursement obligations of the Partnership Group, (iii) as more fully set
forth in Articles IV and V, with respect to certain opportunities for the Parties to purchase,
sell, transfer and lease Compression Equipment (as defined herein) among the Parties, and (iv) as
more fully set forth in Article VI, with respect to grants of intellectual property from the
Licensor (as defined herein) to the Licensees (as defined herein).

     In consideration of the premises and the covenants, conditions, and agreements contained
herein, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

       1.1 Definitions

          (a) Capitalized terms used herein but not defined shall have the meanings given them in the
Partnership Agreement.

          (b) As used in this Agreement, the following terms shall have the respective meanings set
forth below:

     “Acquired Partnership Restricted Business” has the meaning given such term in Section
2.3(g).

     “Acquired UCH Restricted Business” has the meaning given such term in Section 2.3(h).

     “Acquiring Party” has the meaning given such term in Section 2.4(a).

 

 

     “Affiliate” has the meaning given to such term in the Partnership Agreement.

     “Agreement” means this Omnibus Agreement, as it may be amended, modified or
supplemented from time to time in accordance with the terms hereof.

     “Appraiser” means any of [Standard & Poor’s Corporate Value Consulting, Valuation
Research Corporation and Marshall and Stevens] as selected by UCH, with the consent of the
General Partner, which consent shall not be unreasonably withheld, or any other appraiser
that is independent with respect to the UCH Entities and the Partnership Entities and their
respective affiliates within the meaning of the code of professional ethics of the American
Society of Appraisers as selected by mutual consent of UCH and the General Partner.

     “Appraisal” means an appraisal of Compression Equipment prepared by an Appraiser in
conformity with, and subject to, the requirements of the code of professional ethics and
standards of professional conduct of the American Society of Appraisers. The Appraisal
shall specify value based upon the cost or income approach or a combination thereof for the
Compression Equipment appraised.

     “Appraised Value” means an amount equal to (A) either (i) the most recent Appraisal
with respect to a particular piece of Compression Equipment owned by the DCCSB or the
Partnership Group at the time of the Appraisal or (ii) with respect to a particular piece
of Compression Equipment for which an Appraisal has not been conducted, the Appraised Value
of substantially similar Compression Equipment, plus (B) any costs incurred by the
Transferor pursuant to Section 4.1(a)(iv) to the extent such costs include overhauls,
modifications or retrofittings that are not reflected in the value assigned to the
Compression Equipment pursuant to clause (A) above.

     “Average Horsepower” means, with respect to a particular fiscal quarter, the quotient
of (i) the sum of the aggregate amount of Compression Equipment horsepower owned or leased
by the Partnership Group that was working and not idle on the last day of the month
immediately preceding such quarter and on the last day of each of the three months during
such quarter, divided by (ii) four.

     “Business Day” means any day other than a Saturday, a Sunday or a day on which banking
institutions in Houston, Texas are authorized or are obligated by law, executive order or
governmental decree to be closed.

     “Cause” has the meaning ascribed thereto in the Partnership Agreement.

     “CCSB” means the DCCSB and the international contract compression services business of
the UCH Entities, collectively.

     “Change of Control” means, with respect to any Person (the “Applicable Person”), any of
the following events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the Applicable Person’s
assets to any other Person, unless immediately following such sale, lease, exchange or other
transfer such assets are owned, directly or indirectly, by the

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Applicable Person; (ii) the dissolution or liquidation of the Applicable Person; (iii)
the consolidation or merger of the Applicable Person with or into another Person, other than
any such transaction where (a) the outstanding Voting Securities of the Applicable Person
are changed into or exchanged for Voting Securities of the surviving Person or its parent
and (b) the holders of the Voting Securities of the Applicable Person immediately prior to
such transaction own, directly or indirectly, not less than a majority of the outstanding
Voting Securities of the surviving Person or its parent immediately after such transaction;
and (iv) a “person” or “group” (within the meaning of Sections 13(d) or 14(d)(2) of the
Exchange Act) being or becoming the “beneficial owner” (as defined in Rules 13d-3 and 13d-5
under the Exchange Act) of more than 50% of all of the then outstanding Voting Securities of
the Applicable Person, except in a merger or consolidation which would not constitute a
Change of Control under clause (iii) above.

     “Closing Date” means the date of the closing of the initial public offering of Common
Units.

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

     “Common Unit” has the meaning given such term in the Partnership Agreement.

     “Compression Equipment” means natural gas compressor units, together with any tangible
components thereof, all related appliances, parts, accessories, appurtenances, accessions,
additions, improvements and replacements thereto, all other equipment or components of any
nature from time to time incorporated or installed therein and all substitutions for any of
the foregoing.

     “Competitive Services” means the provision by a Person of natural gas contract
compression services to a third-party customer whether pursuant to the Form Compression
Services Agreement or any other compression services agreement, a lease arrangement pursuant
to which such Person leases Compression Equipment to a third-party customer and is required
to provide other compression services to such customer (whether as part of one agreement or
pursuant to a lease agreement and related services agreement) or otherwise; provided,
however, that, for the avoidance of doubt, Competitive Services do not include the
fabrication of Compression Equipment by such Person, the sale by such Person of Compression
Equipment to a third-party customer, the sale by such Person of materials, parts or
equipment that are components of or used in the operation of Compression Equipment, the
leasing by such Person of Compression Equipment without the provision of any related
services or the operation, maintenance, service, repair or overhaul by such Person of
Compression Equipment owned by a third party customer.

     “Conflicts Committee” has the meaning given such term in the Partnership Agreement.

     “Contribution Agreement” means that certain Contribution, Conveyance and Assumption
Agreement, dated as of the Closing Date, among UCI, UCO LLC, the General Partner, the
Partnership and the other parties named thereto, together with the

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additional conveyance documents and instruments contemplated or referenced thereunder,
as such may be amended, supplemented or restated from time to time.

     “Conversion Condition” has the meaning given such term in Section 2.4(b).

     “Cost of Sales” means any costs incurred of the type included in the “Cost of sales
(excluding depreciation expense)” line item in the consolidated statement of operations of
the Partnership prepared in accordance with GAAP.

     “Cost of Sales Limit” has the meaning given such term in Section 3.2(a).

     “Covered Environmental Losses” is defined in Section 7.1.

     “DCCSB” means the domestic contract compression services business of the UCH Entities
conducted through UCH’s Domestic Contract Compression Segment, excluding the business of the
Partnership Entities.

     “DCCSB Horsepower” means, with respect to a particular fiscal quarter, the quotient of
(i) the sum of the aggregate amount of Compression Equipment horsepower owned by DCCSB
(excluding units designated “for sale only” by UCH), regardless of whether such Compression
Equipment is working or idle, on the last day of the month immediately preceding such
quarter and on the last day of each of the three months during such quarter, divided by (ii)
four.

     “Direct Compression Equipment Costs and Expenses” means those costs and expenses
directly attributable to the transportation, operation, maintenance or repair of any
Compression Equipment owned by the Partnership Group.

     “Effective Time” has the meaning given such term in Section 4.1(b).

     “Environmental Laws” means all federal, state, and local laws, statutes, rules,
regulations, orders and ordinances, legally enforceable requirements and rules of common law
relating to protection of the environment including, without limitation, the federal
Comprehensive Environmental Response, Compensation, and Liability Act, the Superfund
Amendments Reauthorization Act, the Resource Conservation and Recovery Act, the Clean Air
Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Oil
Pollution Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act and
other environmental conservation and protection laws, each as amended through the Closing
Date.

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

     “Fabricated Cost” means the total costs (other than any allocations of general and
administrative expenses) incurred in fabricating a particular item of Compression Equipment,
as determined by the books and records of UCH, prepared in accordance with GAAP.

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     “Fixed Margin Amount” means the amount resulting from the product of (i) the Fabricated
Cost and (ii) the percentage, expressed as a decimal, set forth on Schedule 1.1 to
this Agreement, which Schedule may be amended from time to time with the approval of the
Conflicts Committee.

     “Form Bill of Sale” means the form of Bill of Sale attached hereto as Exhibit A.

     “Form Compression Services Agreement” means the standard form of agreement pursuant to
which members of the Partnership Group provides Competitive Services to Partnership
Customers as of the date hereof.

     “Form Lease Agreement” means the form of Compression Equipment Lease Agreement attached
hereto as Exhibit B, which Exhibit may be amended or replaced with a new form of Compression
Equipment Lease Agreement from time to time with the approval of UCH and the Conflicts
Committee.

     “GAAP” means generally accepted accounting principles in the United States,
consistently applied

     “General Partner” has the meaning given such term in the introduction to this
Agreement.

     “Hazardous Substance” means (a) any substance that is designated, defined or classified
as a hazardous waste, hazardous material, pollutant, contaminant or toxic or hazardous
substance, or that is otherwise regulated under any Environmental Law, including, without
limitation, any hazardous substance as such term is defined under the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, and (b) petroleum,
petroleum products, crude oil, gasoline, fuel oil, motor oil, waste oil, diesel fuel, jet
fuel and other petroleum hydrocarbons whether refined or unrefined and (c) asbestos, whether
in a friable or a non-friable condition, and polychlorinated biphenyls.

     “Indemnified Party” means either the Partnership Group or UCH, as the case may be, each
in its capacity as a party entitled to indemnification in accordance with Article VII.

     “Indemnifying Party” means either the Partnership Group or UCH, as the case may be,
each in its capacity as a party from whom indemnification may be required in accordance with
Article VII.

     “Licensees” means, for purposes of Article VI hereof, the Partnership Entities.

     “Licensor” means, for purposes of Article VI hereof, UCH or UCI, as applicable.

     “Liens” means any mortgages, pledges, security interests, liens, charges, claims,
restrictions, easements or other encumbrances of any nature.

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     “Limit Period” means the period commencing on the Closing Date and ending on the last
day of the fiscal quarter in which the second anniversary of the Closing Date occurs.

     “Marks” means all trademarks, trade names, logos and/or service marks identified on
Schedule 6.1 attached hereto, which Schedule may be amended from time to time with
the approval of UCH and the Conflicts Committee.

     “New Customer” means any Person that is not a UCH Customer or a Partnership Customer
and that informs any of the Parties hereto of a need for Competitive Services.

     “Non-Qualifying Business” has the meaning given to such term in Section 2.4(b).

     “Offer” has the meaning given such term in Section 2.4(a).

     “Offer Period” has the meaning given such term in Section 2.4(b)(ii)(A).

     “Offered Assets” has the meaning given such term in Section 2.4(a).

     “Offeree” has the meaning given such term in Section 2.4(a).

     “OLP” has the meaning given such term in the introduction to this Agreement.

     “OLP GP” has the meaning given such term in the introduction to this Agreement.

     “Organizational Documents” means certificates or articles of incorporation, by-laws,
certificates of formation, limited liability company operating agreements, certificates of
limited partnership or limited partnership agreements or other formation or governing
documents of a particular entity.

     “Other Losses” is defined in 7.2(a).

     “Partnership” has the meaning given such term in the introduction to this Agreement.

     “Partnership Agreement” means the First Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of the Closing Date, as such agreement is in effect
on the Closing Date, to which reference is hereby made for all purposes of this Agreement.
An amendment or modification to the Partnership Agreement subsequent to the Closing Date
shall be given effect for the purposes of this Agreement only if it has received the
approval of the Conflicts Committee that would be required, if any, pursuant to Section 8.6
hereof if such amendment or modification were an amendment or modification of this
Agreement.

     “Partnership Assets” means the compression services contracts, compression services
customer relationships and Compression Equipment, directly or indirectly

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conveyed, contributed or otherwise transferred to the Partnership Group as of the
Closing Date pursuant to the Contribution Agreement.

     “Partnership Customers” means the customers of the Partnership Group as of the date of this Agreement, together with any New Customer that enters
into an agreement with a member of the Partnership Group pursuant to which such member of
the Partnership Group agrees to provide Competitive Services to such New Customer.
Partnership Customers shall not include any Released Partnership Customers.

     “Partnership Entities” means UCO LLC, the General Partner and each member of the
Partnership Group; and “Partnership Entity” means any of the Partnership Entities.

     “Partnership Group” means the Partnership, the OLP and any Subsidiary of the
Partnership or the OLP.

     “Partnership Horsepower” means, with respect to a particular fiscal quarter, the
quotient of (i) the sum of the aggregate amount of Compression Equipment horsepower owned or
leased by the Partnership Group, regardless of whether such Compression Equipment is working
or idle, on the last day of the month immediately preceding such quarter and on the last day
of each of the three months during such quarter, divided by (ii) four.

     “Partnership Restricted Business” has the meaning given such term in Section 2.2.

     “Party” or “Parties” have the meaning given such terms in the introduction to this
Agreement.

     “Percentage Interest” means, with respect to a particular fiscal quarter, the value
(expressed as a percentage) obtained by multiplying (i) 100 by (ii) the quotient of (x) the
Partnership Horsepower divided by (y) the Total Domestic Horsepower.

     “Person” has the meaning given such term in the Partnership Agreement.

     “Purchase Agreement” has the meaning given such term in Section 2.4(a).

     “Qualifying Business” has the meaning given such term in Section 2.4(b).

     “Released Partnership Customers” means those customers of the Partnership Group that
are designated as “Released Partnership Customers” pursuant to Section 2.3(g).

     “Released UCH Customers” means those customers of the UCH Entities that are designated
as “Released UCH Customers” pursuant to Section 2.3(h).

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     “Retained Assets” means the assets and investments owned by UCH and any of its
Affiliates that were not conveyed, contributed or otherwise transferred to the Partnership
Group pursuant to the Contribution Agreement.

     “Services” has the meaning given such term in Section 3.1(a).

     “Site” means the geographic site at which a particular item of Compression Equipment
engaged in Competitive Services is fixed, as further specified by the customer contract, or
any schedule there, pursuant to which such Competitive Services are being provided.

     “Subsidiary” has the meaning given such term in the Partnership Agreement.

     “Total Domestic Horsepower” means, with respect to a particular fiscal quarter, the sum
of the DCCSB Horsepower and the Partnership Horsepower.

     “Transferee” means a transferee of Compression Equipment pursuant to Article IV.

     “Transferor” means a transferor of Compression Equipment pursuant to Article IV.

     “UCH” has the meaning given such term in the introduction to this Agreement.

     “UCH Customers” means the customers of the UCH Entities as of date of this Agreement, together with any New Customer that enters into an agreement
with a UCH Entity pursuant to which such UCH Entity agrees to provide Competitive Services
to such New Customer. UCH Customers shall not include any Released UCH Customers.

     “UCH Entities” means UCH and any Person (other than the Partnership Entities)
controlled, directly or indirectly, by UCH; and “UCH Entity” means any of the UCH Entities.

     “UCH Restricted Business” has the meaning given such term in Section 2.1.

     “UCI” has the meaning given such term in the introduction to this Agreement.

     “UCO LLC” has the meaning given such term in the introduction to this Agreement.

     “Voluntary Cleanup Program” means a program of the United States or a state of the
United States enacted pursuant to Environmental Laws which provides for a mechanism for the
written approval of, or authorization to conduct, voluntary remedial action for the
clean-up, removal or remediation of contamination that exceeds actionable levels established
pursuant to Environmental Laws.

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     “Voting Securities” of a Person means securities of any class of such Person entitling
the holders thereof to vote in the election of, or to appoint, members of the board of
directors or other similar governing body of the Person; provided, that if such Person is a
limited partnership, Voting Securities of such Person shall be the general partner interest
in such Person.

ARTICLE II

NON-COMPETITION AND BUSINESS OPPORTUNITIES

       2.1 UCH Restricted Business. Subject to Section 2.8 and except as permitted by Section 2.3,
each of the UCH Entities shall be prohibited from providing (whether directly or through the
acquisition of or investment in equity or debt securities in any Person) Competitive Services to
any Partnership Customer, in any state or territory of the United States (other than on behalf of a
member of the Partnership Group) (the “UCH Restricted Business”).

       2.2 Partnership Restricted Business. Subject to Section 2.8 and except as permitted by
Section 2.3, each of the Partnership Entities shall be prohibited from providing (whether directly
or through the acquisition of or investment in equity or debt securities in any Person) Competitive
Services to any UCH Customer, in any state or territory of the United States (the “Partnership
Restricted Business”).

       2.3 Permitted Exceptions. Notwithstanding any provision of Sections 2.1 or 2.2 to the
contrary, the Parties may engage in any of the following activities to the extent permitted below:

     (a) The UCH Entities may engage in any UCH Restricted Business with the prior written
approval of the Conflicts Committee.

     (b) The UCH Entities may own securities of any class of any member of the Partnership
Group.

     (c) The Partnership Entities may engage in any Partnership Restricted Business with the
prior written approval of UCH.

     (d) The UCH Entities may purchase and own in the aggregate not more than five percent
of any class of securities of any entity engaged in any UCH Restricted Business (but without
otherwise participating in, managing or directing the activities of such entity).

     (e) The Partnership Entities may purchase and own in the aggregate not more than five
percent of any class of securities of any entity engaged in any Partnership Restricted
Business (but without otherwise participating, managing or directing the activities of such
entity).

     (f) If a Partnership Customer (or that customer’s applicable business), on the one
hand, and a UCH Customer (or that customer’s applicable business), on the other hand, merge,
consolidate, amalgamate or are otherwise combined, each of the Partnership Entities and the
UCH Entities may continue to provide Competitive Services to the

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applicable combined entity
or business. Upon such an occurrence, UCH and the Conflicts Committee shall negotiate in
good faith, if and to the extent determined in the good faith of UCH and the Conflicts
Committee to be necessary, to implement procedures or such other arrangements to protect the
value to each of the Partnership Entities, on the one hand, and the UCH Entities, on the
other hand, of their respective businesses of providing Competitive Services to each such
customer or its applicable business, as applicable.

     (g) The UCH Entities may purchase and own (i) any class of securities in any entity
engaged (in whole or in part) in any UCH Restricted Business or (ii) any business or assets
otherwise engaged or deployed in any UCH Restricted Business; provided, (x) in the good
faith judgment of the Board of Directors of UCH, the aggregate value of the UCH Restricted
Business owned by such entity or otherwise to be acquired by the UCH Entities shall be less
than 50% of the aggregate value of the business and assets owned by such entity or otherwise
to be acquired by the UCH Entities and (y) the Partnership Group is offered the opportunity
to acquire the UCH Restricted Business owned by such entity or otherwise acquired by the UCH
Entities (in each case, the “Acquired UCH Restricted Business”) in accordance with Section
2.4. During the pendency of the procedures described in Section 2.4, the UCH Entities shall
be entitled to own and operate the Acquired UCH Restricted Business. In the event that the
General Partner (with the approval of the Conflicts Committee) elects not to purchase such
Acquired UCH Restricted Business whether pursuant to Section 2.4(b)(i) or Section
2.4(b)(ii)(B)(2), the UCH Entities shall be entitled to continue to own and operate the
Acquired UCH Restricted Business and the Competitive Services customers of the Acquired UCH
Restricted Business at the time of the consummation of such acquisition shall no longer be
Partnership Customers for purposes of this Agreement, but rather shall be designated
“Released Partnership Customers.” Without the prior written approval of the Conflicts
Committee, subject to Section 2.8, the UCH Entities shall be prohibited from providing
(whether directly or through the acquisition of or investment in equity or debt securities
of any Person) Competitive Services to a particular Released Partnership Customer at the
particular Site at which the Partnership Group was providing Competitive Services to such
Released Partnership Customer on the date of the acquisition by the UCH Entities of the
applicable UCH Restricted Business pursuant to which such customer was designated a Released
Partnership Customer.

     (h) The Partnership Entities may purchase and own (i) any class of securities in any
entity engaged (in whole or in part) in any Partnership Restricted Business or (ii) any
business or assets otherwise engaged or deployed in any Partnership Restricted Business;
provided, (i) in the good faith judgment of the Conflicts Committee, the aggregate value of
the Partnership Restricted Business owned by such entity or otherwise to be acquired by the
Partnership Entities shall be less than 50% of the aggregate value of the business and
assets owned by such entity or otherwise to be acquired by the Partnership Entities and (ii)
UCH is offered the opportunity to acquire the Partnership Restricted Business owned by such entity or otherwise acquired by the Partnership
Entities (in each case, the “Acquired Partnership Restricted Business”) in accordance with
Section 2.4. During the pendency of the procedures described in Section 2.4, the
Partnership Entities shall be entitled to own and operate the Acquired Partnership

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Restricted Business. In the event that UCH elects not to purchase such Acquired Partnership
Restricted Businesses whether pursuant to Section 2.4(b)(i) or Section 2.4(b)(ii)(B)(2), the
Partnership Entities shall be entitled to continue to own and operate the Acquired
Partnership Restricted Business and the Competitive Services customers of the Acquired
Partnership Restricted Business at the time of the consummation of such acquisition shall no
longer be UCH Customers for purposes of this Agreement, but rather shall be designated
“Released UCH Customers.” Without the prior written approval of UCH, subject to Section
2.8, the members of the Partnership Group shall be prohibited from providing (whether
directly or through the acquisition of or investment in equity or debt securities of any
Person) Competitive Services to a particular Released UCH Customer at the particular Site at
which UCH Entities were providing Competitive Services to such Released UCH Customer on the
date of the acquisition by the Partnership Group of the applicable Partnership Restricted
Business pursuant to which such customer was designated a Released UCH Customer.

       2.4 Restricted Business Procedures.

     (a) Within 30 days following the consummation of the acquisition of an Acquired UCH
Restricted Business or an Acquired Partnership Restricted Business by a UCH Entity or a
Partnership Entity, as the case may be (in each such case such Person shall be referred to
as, an “Acquiring Party”), the Acquiring Party shall notify in writing (x) the Partnership,
if the Acquiring Party is a UCH Entity or (y) UCH, if the Acquiring Party is a Partnership
Entity, of such acquisition. The Person that is so notified shall be referred to herein as
the “Offeree.” Such notice shall include an offer (the “Offer”) by the Acquiring Party to
sell the Acquired UCH Restricted Business or the Acquired Partnership Restricted Business,
as the case may be (the “Offered Assets”), to the Offeree, together with a proposed
definitive agreement to effectuate the purchase and sale of the Offered Assets (the
“Purchase Agreement”). The Offer shall set forth the Acquiring Party’s proposed terms
relating to the sale of the Offered Assets to the Offeree, including the purchase price, any
liabilities to be assumed by the Offeree as part of the Offer and the other terms of the
Offer; provided, that the representations and warranties regarding the Offered Assets and
the indemnification provision contained in the Purchase Agreement shall be substantially
consistent with the terms contained in the definitive purchase agreement pursuant to which
the Acquiring Party acquired the Offered Assets or the entity that owned the Offered Assets,
subject to such adjustments that the Acquiring Party reasonably determines are necessary to
reflect the differences in the transaction.

     (b) As soon as practicable after the Offer is made, the Acquiring Party will deliver to
the Offeree all information prepared by or on behalf of or in the possession of such
Acquiring Party relating to the Offered Assets and reasonably requested by the Offeree. As
soon as practicable, but in any event, within 60 days after receipt of the notification
called for in Section 2.4(a), the Offeree shall notify the Acquiring Party in writing that
either:

     (i) the Offeree (with the concurrence of the Conflicts Committee if the Offeree
is the Partnership) has elected not to purchase (or not to cause any of its
Subsdiaries to purchase) any of such Offered Assets; or

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     (ii) the Offeree (with the concurrence of the Conflicts Committee if the
Offeree is the Partnership) has elected to purchase (or to cause any of its
Subsidiaries to purchase) all of such Offered Assets; provided, that if the Offeree
is the Partnership, and in the opinion of outside counsel to the Partnership
Entities, less than 90% of the gross income from the operations of such Offered
Assets consists of “qualifying income” under Section 7704 of the Code (such portion
of such Offered Assets that does not so qualify being referred to herein as the
“Non-Qualifying Business”), then the Partnership (with the concurrence of the
Conflicts Committee) may condition its obligation to purchase the Non-Qualifying
Business (but not the portion of the Offered Assets that do not constitute the
Non-Qualifying Business (the “Qualifying Business”)) on the conversion of the
agreements pursuant to which the Non-Qualifying Business provides Competitive
Services to its customers to agreements substantively similar to the Form
Compression Services Agreement from a federal income tax treatment perspective (from
the Partnership’s perspective) and otherwise having substantially the same economic
terms as the agreements being converted (the “Conversion Condition”); provided
further, that in such event, each of the UCH Entities and the Partnership Entities
shall use commercially reasonable efforts to satisfy the Conversion Condition as
soon as commercially practicable. If the Offeree elects to purchase the Offered
Assets, the following procedures shall be followed:

     A. After the receipt of the Offer by the Offeree, the Acquiring Party
and the Offeree shall negotiate in good faith the fair market value of the
Offered Assets that are subject to the Offer (including the specific fair
market value of any Offered Assets that constitute a Non-Qualifying
Business) and the other terms of the Offer on which the Offered Assets will
be sold to the Offeree. If the Acquiring Party and the Offeree agree (with
the concurrence of the Conflicts Committee) on the fair market value of the
Offered Assets that are subject to the Offer and the other terms of the
Offer during the 30-day period (the “Offer Period”) after receipt by the
Acquiring Party of the Offeree’s election to purchase (or to cause any
Subsidiary of the Offeree to purchase) the Offered Assets, the Offeree shall
purchase (or cause any of its Subsidiaries to purchase) and the Acquiring
Party shall sell the Offered Assets on such terms as soon as commercially
practicable after such agreement has been reached, which obligation may
require such parties to purchase the Qualifying Business prior to
satisfaction of the Conversion Condition.

     B. If the Acquiring Party and the Offeree are unable to agree on the
fair market value of the Offered Assets that are subject to the Offer or on
any other terms of the Offer during the Offer Period, the Acquiring Party
and the Offeree will engage an independent investment banking firm
prior to the end of the Offer Period to determine the fair market value
of the Offered Assets (including the specific fair market value of any
Offered Assets that constitute a Non-Qualifying Business) and/or the other
terms on which the Acquiring Party and the Offeree are unable to agree. In

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determining the fair market value and other terms on which the Offered
Assets are to be sold, the investment banking firm will have access to the
proposed sale and purchase values and terms for the Offer submitted by the
Acquiring Party and the Offeree, respectively, and to all information
prepared by or on behalf of the Acquiring Party relating to the Offered
Assets and reasonably requested by the investment banking firm. In
determining the terms on which the Offered Assets are to be sold (other than
the fair market value of the Offered Assets), the investment banking firm
shall give substantial weight to the terms contained in the definitive
purchase agreement pursuant to which the Acquiring Party acquired the
Offered Assets or the entity that owned the Offered Assets. Such investment
banking firm will determine the fair market value of the Offered Assets
and/or the other terms on which the Acquiring Party and the Offeree are
unable to agree within 60 days of its engagement and furnish the Acquiring
Party and the Offeree its determination. The fees and expenses of the
investment banking firm will be divided equally between the Acquiring Party
and the Offeree. Upon receipt of such determination, the Offeree will have
the option, but not the obligation, to (with the concurrence of the
Conflicts Committee if the Offeree is the Partnership):

     1. purchase the Offered Assets on such terms as determined
above; or

     2. elect not to purchase such Offered Assets.

If the Offeree elects to so purchase the Offered Assets, the Offeree shall
purchase (or cause any of its Subsidiaries to purchase) and the Acquiring
Party shall sell the Offered Assets on such terms as soon as commercially
practicable after such agreement has been reached, which obligation may
require such parties to purchase the Qualifying Business prior to
satisfaction of the Conversion Condition.

       2.5 Scope of the Prohibition. Except as provided in this Article II, each of the Parties
shall be free to engage (whether directly or through the acquisition of or investment in equity or
debt interests in any Person) in any business activity whatsoever, including those that may be in
direct competition with any of the other Parties.

       2.6 New Customers. The Parties agree that any offer by any of the Parties hereto to provide
Competitive Services to New Customers in any state or territory of the United States shall be first
made on behalf of the Partnership Entities and shall include an offer to provide such Competitive
Services under an agreement substantially in the form of the Form Compression Services Agreement.
If the New Customer is unwilling to enter into an agreement with a Partnership Entity that is
substantively similar to the Form Compression Services Agreement from a federal income tax
treatment perspective (from the Partnership’s perspective), a UCH Entity may enter into an
agreement to provide Competitive Services to such New Customer for its own account provided that
any agreement between such UCH Entity and such New Customer

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is not substantively similar to the
Form Compression Services Agreement from a federal income tax treatment perspective (from the
Partnership’s perspective). If a New Customer enters into an agreement with a member of the
Partnership Group for Competitive Services, then such New Customer will then constitute a
Partnership Customer for the purposes of this Agreement and if, in accordance with this Section
2.6, a New Customer enters into an agreement with a UCH Entity for Competitive Services, then such
New Customer will then constitute a UCH Customer for the purposes of this Agreement.

       2.7 Enforcement. Each Party agrees and acknowledges that the other Parties hereto do not have
an adequate remedy at law for the breach by such Party of the covenants and agreements set forth in
this Article II, and that any breach by such Party of the covenants and agreements set forth in
this Article II would result in irreparable harm to the other Parties hereto. Each Party further
agrees and acknowledges that the other Parties hereto may, in addition to the other remedies that
may be available to the other Parties hereto, file a suit in equity to enjoin such Party from such
breach, and consents to the issuance of injunctive relief under this Agreement.

       2.8 Termination. Unless this Agreement has otherwise terminated pursuant to Section 8.4, this
Article II shall terminate on the third anniversary of the Closing Date. In addition, unless this
Agreement has otherwise been terminated pursuant to Section 8.4 or this Article II has otherwise
been terminated pursuant to the first sentence of this Section 2.8, Sections 2.1, 2.2, 2.3, 2.4 and
2.6 shall terminate upon a Change of Control of UCH. Unless this Agreement has otherwise
terminated pursuant to Section 8.4 or this Article II has terminated pursuant to the first sentence
of this Section 2.8, and in the event that Sections 2.1, 2.2, 2.3, 2.4 and 2.6 terminate pursuant
to the immediately preceding sentence, without the prior written approval of the Conflicts
Committee, the UCH Entities shall be prohibited from providing (whether directly or through the
acquisition of or investment in equity or debt securities of any Person) Competitive Services to a
particular Partnership Customer at the particular Site at which the Partnership Group was providing
Competitive Services to such Partnership Customer on the date of the Change of Control of UCH.

ARTICLE III

SERVICES

       3.1 Provision, Allocation and Reimbursement for Services

     (a) Subject to Article V, the UCH Entities shall, upon the reasonable request of the
General Partner, provide the Partnership Group with all personnel and services reasonably
necessary to run the business of the Partnership Group, which services may include, without
limitation, those services set forth on Schedule 3.1(a) (collectively, the
“Services”). For the avoidance of doubt, the Services shall not include the services
described on Schedule 3.1(b). These Services shall be substantially
similar in nature to the services of such type previously provided by UCH in connection with
its management

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and operation of the Partnership Assets during the twelve (12) month period
prior to the Closing Date.

     (b) The UCH Entities shall provide the Services to the Partnership Group in a manner
that is in the good faith judgment of UCH commercially reasonable; provided, that for so
long as the UCH Entities exercise at least the same degree of care, skill and prudence in
providing the Services as customarily exercised by it for its own operation of the DCCSB,
then UCH will be deemed to have provided such Services in a commercially reasonable manner.
EXCEPT AS SET FORTH IN THE PRECEDING SENTENCE, THE UCH ENTITIES MAKE NO (AND HEREBY DISCLAIM
AND NEGATE ANY AND ALL) WARRANTIES OR REPRESENTATIONS WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE SERVICES. IN NO EVENT SHALL ANY UCH ENTITY OR ANY OF THEIR AFFILIATES BE
LIABLE TO ANY MEMBER OF THE PARTNERSHIP GROUP OR TO ANY OTHER PERSON FOR ANY EXEMPLARY,
PUNITIVE, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES RESULTING FROM ANY ERROR
IN THE PERFORMANCE OF THE SERVICES, REGARDLESS OF WHETHER THE PERSON PROVIDING SUCH
SERVICES, ITS AFFILIATES, OR OTHERS MAY BE WHOLLY, CONCURRENTLY, PARTIALLY, OR SOLELY
NEGLIGENT OR OTHERWISE AT FAULT.

     (c) Any Direct Compression Equipment Costs and Expenses that are incurred by any UCH
Entity in connection with providing the Services shall be allocated to the Partnership at
the actual cost to the applicable UCH Entity providing such Services.

     (d) The General Partner shall be entitled to allocate to the Partnership any costs and
expenses (other than Direct Compression Equipment Costs and Expenses) incurred by any UCH
Entity in connection with providing the Services on any reasonable basis determined by the
General Partner. In the event that such Services are associated with UCH’s operation of
both of the businesses of the DCCSB and the Partnership Group, including, without
limitation, general and administrative functions, such reasonable basis may include, at the
election of the General Partner, allocating a portion
of such costs and expenses incurred during a particular period to the Partnership on a
pro rata basis based on the Partnership Group’s Percentage Interest.

     (e) Subject to Section 3.2, the Partnership Group hereby agrees to reimburse the UCH
Entities for all costs and expenses allocated to the Partnership Group in accordance with
the manners set forth in Sections 3.1(c) and (d).

       3.2 Limitations on Reimbursement.

     (a) Notwithstanding Section 3.1, the amount that the UCH Entities are entitled to
receive from the Partnership Group pursuant to Section 3.1 for selling, general and
administrative costs during any particular quarter during the Limit Period shall not exceed
$2.5 million (the “SG&A Limit”). The SG&A Limit shall be reduced by any selling, general
and administrative costs incurred directly by the Partnership Group during the applicable
period. In the event that during the Limit Period the Partnership

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Group makes any
acquisitions of assets or businesses or the business of the Partnership Group otherwise
expands after the Closing Date, then the Parties shall negotiate in good faith any
appropriate increase in the SG&A Limit in order to account for any adjustments in the nature
and extent of the selling, general and administrative services provided by the UCH Entities
to the Partnership Group, with any such increase in the SG&A Limit subject to the approval
of the Conflicts Committee.

     (b) Notwithstanding Section 3.1, the amount that the UCH Entities are entitled to
receive from the Partnership Group pursuant to Section 3.1 for Cost of Sales during any
particular quarter during the Limit Period shall not exceed $16.95 times the Average
Horsepower of the Partnership Group during such quarter (the “Cost of Sales Limit”). The
Cost of Sales Limit shall be reduced by any Cost of Sales incurred directly by the
Partnership Group during the applicable period. In the event that during the Limit Period
the Partnership Group makes any acquisitions of assets or businesses or the business of the
Partnership Group otherwise expands after the Closing Date, then the Parties shall negotiate
in good faith any appropriate increase in the Cost of Sales Limit in order to account for
any adjustments in the Cost of Sales of the Partnership Group (on a per horsepower basis) as
a result of such acquisition or expansion, with any such increase in the Cost of Sales Limit
subject to the approval of the Conflicts Committee.

ARTICLE IV

COMPRESSION EQUIPMENT TRANSFERS

       4.1 Transfer Mechanics

     (a) In the event that UCH determines in good faith that there exists a need on the part
of the CCSB or on the part of the Partnership Group to transfer Compression Equipment
between the UCH Entities, on the one hand, and the Partnership Group, on the other hand, to
meet the compression services obligations of either of the CCSB or the Partnership Group,
such Compression Equipment shall be so transferred (or, to the extent provided in Section
4.2, leased), at the election of UCH, from a member of the UCH Entities to a member of the
Partnership Group, or from a member of the Partnership
Group to a member of the UCH Entities, as the case may be; provided, that all of the
following conditions are satisfied with respect to such transfer or lease (each such
transfer or lease for the purposes of this Article IV, unless set forth otherwise, a
“transfer”) at the Effective Time (as defined below) of such transfer:

     (i) Except as provided in Section 4.2 in respect of Compression Equipment that
is leased, such transfer will constitute a valid and absolute transfer (each such
transfer, as the case may be, constituting a “true sale” for bankruptcy law
purposes) of all right, title and interest of the Transferor in, to and under the
transferred Compression Equipment, free and clear of any Liens except for any Liens
created by the Transferee;

     (ii) Such transfer will not conflict with any of the terms and provisions of,
result in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under, the organizational

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documents of the Transferor or the Transferee, or any material term of any
indenture, agreement, mortgage, deed of trust, derivative instrument or other
instrument to which the Transferor or Transferee or any of their respective
subsidiaries is a party or by which either of them is bound, or result in the
creation or imposition of any Lien upon any of their respective properties pursuant
to the terms of any such indenture, agreement, mortgage, deed of trust, derivative
instrument or other instrument, or violate any law or any order, rule, or regulation
applicable to the Transferor or Transferee or any of their respective subsidiaries
of any court or of any federal or state regulatory body, administrative agency, or
other governmental authority having jurisdiction over either of them or any of their
respective properties;

     (iii) Except as otherwise provided in this Article IV, such transfer will not
cause any member of the Partnership Group to suffer a loss of revenue under any
existing customer contract for Competitive Services or to incur any material
liabilities not reimbursed by the UCH Entities; and

     (iv) The Compression Equipment will be transferred in a condition appropriate
for the Transferee’s anticipated commercial use of such Compression Equipment;
provided, that such anticipated commercial use shall be consistent with such
equipment’s historical use; provided further, that (A) any repairs or modifications,
or any costs associated therewith, required to make such Compression Equipment
appropriate for the Transferee’s anticipated commercial use of such Compression
Equipment shall be the obligation of the Transferor and (B) the Transferee shall
have communicated its anticipated commercial use of such Compression Equipment to
the Transferor at least ten (10) Business Days prior to the anticipated date of such
transfer, failing which, the Transferor may transfer the Compression Equipment in
its then current condition.

In connection with each proposed transfer, each of the Transferee and the Transferor will
use their respective commercially reasonable efforts to cause the conditions set forth above
to be satisfied as of the Effective Time (as defined below).

     (b) All transfers of Compression Equipment pursuant to this Section 4.1 shall be deemed
to take place at 12:01 a.m. on the date of transfer (the “Effective Time”) and shall include
all of the following assets, rights and properties of the Transferor with respect to such
transferred Compression Equipment; provided, that with respect to transfers that are
effected under a lease pursuant to Section 4.2, the following assets, rights and properties
shall be so transferred to the extent provided for in, and not inconsistent with, the
relevant lease agreement, and except as provided below:

     (i) All Transferor-owned appliances, parts, instruments, machinery, accessories
and other equipment attached or installed thereto;

     (ii) The rights of the Transferor under all permits relating exclusively to
such Compression Equipment, to the extent that such permits are transferable

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and the
transfer of which is authorized or consented to by any third parties required to
make such transfer effective as to third parties;

     (iii) Except in the case of a lease, all warranties and guarantees, if any,
express or implied, existing for the benefit of the Transferor in connection with
such Compression Equipment to the extent assignable;

     (iv) Except in the case of a lease, any fuels, lubricants and maintenance
supplies exclusively related to such Compression Equipment;

     (v) Except in the case of a lease, all vendor information, catalogs, technical
information, specifications, designs, drawings and maintenance records related to
such Compression Equipment and to which the Transferor has ready access without
undue effort; and

     (vi) Except in the case of a lease, all rights, claims or choses in action of
the Transferor against any Person relating exclusively to such Compression
Equipment.

     (c) Except as provided in Section 4.2 in respect of Compression Equipment that is
leased, on the date of any transfer of Compression Equipment, the Transferor shall deliver
or cause to be delivered to the Transferee the following:

     (i) A general conveyance or bill of sale in the form of the Form Bill of Sale
transferring to Transferee, as of the Effective Time, good, marketable and
indefeasible title to all of the tangible personal property contemplated by Section
4.2(b) and included in the transferred Compression Equipment, free and clear of any
Liens, except for any Liens created by the Transferee;

     (ii) All appropriate documents for the assignment as of the Effective Time of
the Transferor’s rights under the permits referred to in Section 4.1(b)(ii),
together with all consents of third parties required to make such assignments
effective as to such third parties; and

     (iii) Such other instruments of transfer and assignment in respect of the
transferred Compression Equipment as the Transferee shall reasonably require and as
shall be consistent with the terms and provisions of this Agreement.

       4.2 Settlement; Appraised Value

     (a) Prior to the Effective Time of any transfer pursuant to Section 4.1, the
Partnership Group and UCH will determine the aggregate Appraised Value of the Compression
Equipment to be so transferred.

     (b) In consideration for such transfer, the Transferee, at its discretion (subject to
the provisos of Sections 4.2(b)(ii) and (ii) and subject to Sections 4.2(b) and (c)), shall
take any one or more of the following actions prior to or contemporaneously with the
Effective Time of such transfer:

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     (i) Transfer Compression Equipment to the Transferor of equal or greater
Appraised Value than the Appraised Value of the Compression Equipment to be
transferred to the Transferee pursuant to Section 4.1 (provided, that if such
Compression Equipment is of greater Appraised Value than the Appraised Value of the
Compression Equipment to be transferred to the Transferee pursuant to Section 4.1,
such excess Appraised Value shall be deemed to be a transfer of Compression
Equipment with a value equal to such excess Appraised Value and Transferor shall be
required to take one or more of the actions contemplated by this Section 4.2(b) in
consideration for such excess Appraised Value) in accordance with this Article IV;

     (ii) Execute and deliver a lease agreement substantially in the form of the
Form Lease Agreement pursuant to which the Transferee agrees to lease from the
Transferor the Compression Equipment to be transferred to the Transferee pursuant to
Section 4.1, which lease
agreement shall be counter-signed by the Transferor (provided, however, that the
ability of the Transferee to execute and deliver such a lease may be limited in the
sole discretion of UCH, to the extent that a UCH Entity is the Transferor, or in the
sole discretion of the Conflicts Committee, to the extent that a member of the
Partnership Group is the Transferor); or

     (iii) Deliver to the Transferor cash (or an obligation to make payment in cash
no later than the end of the fiscal quarter in which the transfer is effected) in
the amount of the aggregate Appraised Value of the Compression Equipment to be
transferred to the Transferee pursuant to Section 4.1 (provided, however, that the
ability of the Transferee to make such a payment may be limited in the sole
discretion of UCH, to the extent that a UCH Entity is the Transferor, or in the sole
discretion of the Conflicts Committee, to the extent that a member of the
Partnership Group is the Transferor).

     (c) In the event that the Transferee cannot through the use of its commercially
reasonable efforts provide adequate consideration to the Transferor for Compression
Equipment to be transferred in any of the manners set forth in Section 4.2(b), then no
such transfer pursuant to the terms of this Article IV shall occur.

     (d) Notwithstanding Section 4.2(b), if the Transferor is a member of the Partnership
Group, the Transferee shall not be entitled to take the actions contemplated by Section
4.2(b)(ii) if such action would cause the Partnership to be treated as an association
taxable as a corporation or otherwise to be taxed as an entity for federal income tax
purposes. In such event, if compliance by UCH with Sections 4.2(i) or (iii) is not
commercially practicable, the Partnership and UCH shall negotiate in good faith to reach
agreement on another manner in which to reimburse the Partnership for such Compression
Equipment; provided, that the final terms of such reimbursement shall be approved by the
Conflicts Committee.

       4.3 Appraisal. UCH shall, at its sole cost and expense, cause an Appraisal of all Compression
Equipment then owned by the CCSB and the Partnership Group to be conducted

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and prepared (i) no
later than the end of the fiscal quarter in which the second anniversary of the Closing Date occurs
and (ii) no less frequently than every two years thereafter.

       4.4 Like-Kind Exchange Treatment. Each Party agrees to cooperate to the extent reasonably
necessary to allow the other, if the other so desires, to treat the transactions contemplated by
Section 4.1(b) as a like-kind exchange under Section 1031 of the Code, and relevant Treasury
regulations and/or under relevant state law provisions, if any. Any Party seeking such treatment
acknowledges that it has consulted or will consult with independent tax counsel regarding the
applicability and benefits/detriments of such treatment and in no way has relied upon any
representations of the other party regarding the same.

       4.5 Other Sales Permitted. Nothing otherwise set forth in this Article IV shall be deemed to
preclude any of the UCH Entities and any member of the Partnership Group from negotiating or
consummating at any time the purchase and sale of newly fabricated Compression Equipment, existing
Compression Equipment or all or any part of the DCCSB; provided, however, that such negotiations or
purchase and sale shall be conducted pursuant to the terms and procedures then mutually agreed upon
by UCH and the General Partner or the Conflicts Committee, as applicable.

       4.6 Termination. Unless this Agreement has otherwise terminated pursuant to Section 8.4, this
Article IV shall terminate on the first to occur of the following: (i) the third anniversary of
the Closing Date and (iii) a Change of Control of UCH.

ARTICLE V

NEWLY FABRICATED COMPRESSION EQUIPMENT PURCHASES

     The Parties hereby acknowledge that none of the UCH Entities is under any obligation to offer
or sell to any member of the Partnership Group newly fabricated Compression Equipment and no member
of the Partnership Group is under any obligation to purchase from any of the UCH Entities newly
fabricated Compression Equipment; provided, that in the event that the General Partner and UCH
mutually agree to enter into, or cause their respective Affiliates to enter into, a purchase and
sale agreement for the purchase and sale of newly fabricated Compression Equipment, (i) such
purchase and sale shall be subject to the standard terms
and conditions then utilized by the UCH Entities for purchases and
sales of newly fabricated Compression Equipment and (ii)
any member of the Partnership Group shall be permitted to purchase such Compression Equipment for a
price that is not more than the Fabricated Cost of such Compression Equipment plus the Fixed Margin
Amount.

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ARTICLE VI

LICENSE

       6.1 Grant of License. Subject to the terms and conditions herein, Licensor hereby grants to
Licensees the right and license to use the Marks solely in connection with the Licensees’
businesses and the services performed therewith within the United States during the term of this
Agreement.

       6.2 Restrictions on Marks. In order to ensure the quality of uses under the Marks, and to
protect the goodwill of the Marks, Licensees agree as follows:

     (a) Licensees will only use the Marks in formats approved by Licensor and only in
strict association with Licensees’ businesses and the services performed therewith;

     (b) Prior to publishing any new format or appearance of the Marks or any new
advertising or promotional materials that incorporate the Marks, Licensees shall first
provide such format, appearance or materials to Licensor for its approval. If Licensor does
not inform Licensees in writing within fourteen (14) days from the date of the receipt of
such new format, appearance, or materials that such new format, appearance, or materials is
unacceptable, then such new format, appearance or materials shall be deemed to be acceptable
and approved by Licensor. Licensor may withhold approval of any proposed changes to the
format, appearance or materials which Licensees propose to use in Licensor’s sole
discretion; and

     (c) Licensees shall not use any other trademarks, service marks, trade names or logos
in connection with the Marks.

       6.3 Ownership. Licensor shall own all right, title and interest, including all goodwill
relating thereto, in and to the Marks, and all trademark rights embodied therein shall at all times
be solely vested in Licensor. Licensees have no right, title, interest or claim of ownership in the
Marks, except for the licenses granted in this Agreement. All use of the Marks shall inure to the
benefit of Licensor. Licensees agree that they will not attack the title of Licensor in and to the
Marks.

       6.4 Confidentiality. The Licensees shall maintain in strictest confidence all confidential or
nonpublic information or material disclosed by Licensor and in the materials supplied hereunder in
connection with the license of the Marks, whether in writing or orally and whether or not marked as
confidential. Such confidential information includes, but is not limited to, algorithms,
inventions, ideas, processes, computer system architecture and design, operator interfaces,
operational systems, technical information, technical specifications, training and instruction
manuals, and the like. In furtherance of the foregoing confidentiality obligation, Licensees shall
limit disclosure of such confidential information to those of their employees, contractors or
agents having a need to access the confidential information for the purpose of exercising rights
granted hereunder.

       6.5 Estoppel. Nothing in this Agreement shall be construed as conferring by implication,
estoppel, or otherwise upon Licensees (a) any license or other right under the

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intellectual
property rights of Licensor other than the license granted herein to the Marks as set forth
expressly herein or (b) any license rights other than those expressly granted herein.

       6.6 Warranties; Disclaimers.

     (a) The Licensor represents and warrants that (i) it owns and has the right to license
the Marks licensed under this Agreement and (ii) the Marks do not infringe upon the rights
of any third parties.

     (b) EXCEPT FOR THE WARRANTIES AND REPRESENTATIONS DESCRIBED IN SECTION 6.6(a), LICENSOR
DISCLAIMS ANY AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR
WRITTEN) WITH RESPECT TO THE SUBJECT MATTER HEREOF, OR ANY PART THEREOF, INCLUDING ANY AND
ALL IMPLIED WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS OR SUITABILITY FOR
ANY PURPOSE (WHETHER ANY LICENSEE KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS
OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE) WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF
CUSTOM OR USAGE IN THE TRADE OR BY COURSE OF DEALING.

       6.7 In the Event of Termination. In the event of termination of this Agreement pursuant to Section 8.4 or otherwise, the
Licensees’ right to utilize or possess the Marks licensed under this Agreement shall automatically
cease, and concurrently with such termination of this Agreement, the Licensees shall (i) cease all
use of the Marks and shall adopt new trademarks, service marks, and trade names that are not
confusingly similar to the Marks and (ii) no later than ninety (90) days following the termination
of this Agreement, the General Partner shall have caused each of the Partnership Entities to change
its legal name so that there is no longer any reference therein to the name “Universal
Compression,” any name or d/b/a then used by any UCH Entity or any variation, derivation or
abbreviation thereof, and in connection therewith, the General Partner shall cause each such
Partnership Entity to make all necessary filings of certificates with the Secretary of State of the
State of Delaware and to otherwise amend its Organizational Documents by such date.

ARTICLE VII

INDEMNIFICATION

       7.1 Environmental Indemnification.

     (a) Subject to Section 7.3, UCH shall indemnify, defend and hold harmless the
Partnership Group from and against any environmental claims, losses and expenses (including,
without limitation, court costs and reasonable attorney’s and expert’s fees) of any and
every kind or character, known or unknown, fixed or contingent, suffered or incurred by the
Partnership Group by reason of or arising out of:

     (i) any violation of Environmental Laws associated with the ownership or
operation of the Partnership Assets; or

-22-

 

     (ii) any event or condition associated with ownership or operation of the
Partnership Assets (including, without limitation, the presence of Hazardous
Substances on, under, about or migrating to or from the Partnership Assets or the
disposal or release of Hazardous Substances generated by operation of the
Partnership Assets) including, without limitation, (A) the cost and expense of any
investigation, assessment, evaluation, monitoring, containment, cleanup, repair,
restoration, remediation, or other corrective action required or necessary under
Environmental Laws or to satisfy any applicable Voluntary Cleanup Program, (B) the
cost or expense of the preparation and implementation of any closure, remedial,
corrective action or other plans required or necessary under Environmental Laws or
to satisfy any applicable Voluntary Cleanup Program and (C) the cost and expense for
any environmental pre-trial, trial, or appellate legal or litigation support work;
provided, in the case of clauses (A) and (B) such cost and expense shall not
included the costs of and associated with project management and soil and ground
water monitoring;

but only to the extent that such violation complained of under Section 7.1(a)(i) or such
events or conditions included under Section 7.1(a)(ii) occurred before the Closing Date
(collectively, “Covered Environmental Losses”).

     (b) The Partnership Group shall indemnify, defend and hold harmless UCH and its
Affiliates from and against any Covered Environmental Losses suffered or incurred by UCH and
its Affiliates relating to the Partnership Assets occurring on or after the Closing Date,
except to the extent that the Partnership Group is indemnified with respect to any of such
Covered Environmental Losses under Section 7.1(a), and unless such indemnification would not
be permitted under the Partnership Agreement by reason of one of the provisos contained in
Section 7.7(a) of the Partnership Agreement.

     (c) Except for claims for Covered Environmental Losses made before the third
anniversary of the Closing Date, which shall not terminate, all indemnification obligations
in this Section 7.1 shall terminate on the third anniversary of the Closing Date.

       7.2 Additional Indemnification.

     (a) In addition to and not in limitation of the indemnification provided under Section
7.1(a), subject to Section 7.3 and except as otherwise set forth in any Exhibit hereto, UCH
shall indemnify, defend and hold harmless the Partnership Group from and against any claims,
losses and expenses (including, without limitation, court costs and reasonable attorney’s
and expert’s fees) of any and every kind or character, known or unknown, fixed or
contingent, suffered or incurred by the Partnership Group (“Other Losses”) by reason of or
arising out of:

     (i) failure to convey good and defensible title to the Partnership Assets to
one or more members of the Partnership Group, and such failure render the
Partnership Group unable to use or operate the Partnership Assets in

-23-

 

substantially
the same manner as they were operated by the UCH Entities immediately prior to the
Closing Date;

     (ii) events and conditions associated with the Retained Assets whether
occurring before or after the Closing Date; and

     (iii) all federal, state and local income tax liabilities attributable to the
operation of the Partnership Assets prior to the Closing Date, including any such
income tax liabilities of UCH that may result from the consummation of the formation
transactions for the Partnership Entities;

provided, however, that in the case of clauses (i) and (ii) above, such indemnification
obligations shall terminate on the third anniversary of the Closing Date; and that in the
case of clause (iii) above, such indemnification obligations shall survive until sixty (60)
days after the termination of any applicable statute of limitations.

     (b) In addition to and not in limitation of the indemnification provided under Section
7.1(b) and the Partnership Agreement and except as otherwise set forth in any Exhibit
hereto, the Partnership Group shall indemnify, defend and hold harmless UCH and its
Affiliates from and against any claims, losses and expenses (including, without limitation,
court costs and reasonable attorney’s and expert’s fees) of any and every kind or character,
known or unknown, fixed or contingent, suffered or incurred by UCH and
its Affiliates by reason of or arising out of events and conditions associated with the
operation of the Partnership Assets and occurring on or after the Closing Date unless such
indemnification would not be permitted under the Partnership Agreement by reason of one of
the provisos contained in Section 7.7(a) of the Partnership Agreement.

       7.3 Limitations Regarding Indemnification. (a) The aggregate liability of UCH under
Section 7.1(a) shall not exceed $5.0 million.

     (b) No claims may be made against UCH for indemnification pursuant to Sections 7.1(a)
or 7.2(a) unless the aggregate dollar amount of the Losses suffered or incurred by the
Partnership Group or the Partnership Indemnitees exceed $250,000, after such time UCH shall
be liable for the full amount of such claims, subject to the limitations of Section 7.3(a).

     (c) Notwithstanding anything herein to the contrary, in no event shall UCH have any
indemnification obligations under Section 7.1(a) for claims made as a result of additions to
or modifications of Environmental Laws promulgated after the Closing Date.

       7.4 Indemnification Procedures

     (a) The Indemnified Party agrees that promptly after it becomes aware of facts giving
rise to a claim for indemnification under this Article VII, it will provide notice thereof
in writing to the Indemnifying Party, specifying the nature of and specific basis for such
claim; provided, however, that the Indemnified Party shall not submit claims more frequently
than once a calendar quarter (or twice in the case of the last

-24-

 

calendar quarter prior to the
expiration of the applicable indemnity coverage under this Agreement).

     (b) The Indemnifying Party shall have the right to control all aspects of the defense
of (and any counterclaims with respect to) any claims brought against the Indemnified Party
that are covered by the indemnification under this Article VII, including, without
limitation, the selection of counsel, determination of whether to appeal any decision of any
court and the settling of any such matter or any issues relating thereto; provided, however,
that no such settlement shall be entered into without the consent of the Indemnified Party
(with the concurrence of the Conflicts Committee in the case of the Partnership Group)
unless it includes a full release of the Indemnified Party from such matter or issues, as
the case may be, and does not include the admission of fault, culpability or a failure to
act, by or on behalf of such Indemnified Party.

     (c) The Indemnified Party agrees to cooperate fully with the Indemnifying Party, with
respect to all aspects of the defense of any claims covered by the indemnification under
this Article VII, including, without limitation, the prompt furnishing to the Indemnifying
Party of any correspondence or other notice relating thereto that the Indemnified Party may
receive, permitting the name of the Indemnified Party to be utilized in connection with such
defense, the making available to the Indemnifying Party of any files, records or other
information of the Indemnified Party
that the Indemnifying Party considers relevant to such defense and the making available
to the Indemnifying Party, at no cost to the Indemnifying Party, of any employees of the
Indemnified Party; provided, however, that in connection therewith the Indemnifying Party
agrees to use reasonable efforts to minimize the impact thereof on the operations of the
Indemnified Party and further agrees to endeavor to maintain the confidentiality of all
files, records and other information furnished by the Indemnified Party pursuant to this
Section 7.4. In no event shall the obligation of the Indemnified Party to cooperate with
the Indemnifying Party as set forth in the immediately preceding sentence be construed as
imposing upon the Indemnified Party an obligation to hire and pay for counsel in connection
with the defense of any claims covered by the indemnification set forth in this Article VII;
provided, however, that the Indemnified Party may, at its own option, cost and expense, hire
and pay for counsel in connection with any such defense. The Indemnifying Party agrees to
keep any such counsel hired by the Indemnified Party informed as to the status of any such
defense, but the Indemnifying Party shall have the right to retain sole control over such
defense.

     (d) In determining the amount of any loss, cost, damage or expense for which the
Indemnified Party is entitled to indemnification under this Agreement, the gross amount of
the indemnification will be reduced by (i) any insurance proceeds realized by the
Indemnified Party and (ii) all amounts recovered by the Indemnified Party under contractual
indemnities from third Persons. The Partnership hereby agrees to use commercially
reasonable efforts to realize any applicable insurance proceeds or amounts recoverable under
such contractual indemnities.

     (e) The date on which the Indemnifying Party receives notification of a claim for
indemnification shall determine whether such claim is timely made.

-25-

 

ARTICLE VIII

MISCELLANEOUS

       8.1 Choice of Law; Submission to Jurisdiction. This Agreement shall be subject to and governed
by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might
refer the construction or interpretation of this Agreement to the laws of another state. Each Party
hereby submits to the jurisdiction of the state and federal courts in the State of Texas and to
venue in Texas.

       8.2 Notice. All notices, requests or consents provided for or permitted to be given pursuant
to this Agreement must be in writing and must be given by depositing same in the United States
mail, addressed to the Person to be notified, postpaid, and registered or certified with return
receipt requested or by delivering such notice in person or by telecopier or telegram to such
Party. Notice given by personal delivery or mail shall be effective upon actual receipt. Notice
given by telegram or telecopier shall be effective upon actual receipt if received during the
recipient’s normal business hours, or at the beginning of the recipient’s next business day after
receipt if not received during the recipient’s normal business hours. All notices to be sent to a
Party pursuant
to this Agreement shall be sent to or made at the address set forth below or at such other
address as such Party may stipulate to the other Parties in the manner provided in this Section
8.2.

For notices to any of the UCH Entities:

4444 Brittmoore Road

Houston, Texas 77041-8004

Phone: (713) 335-7000

Fax:       713-466-6720

Attention: Chief Operating Officer

For notices to any of the Partnership Entities:

4444 Brittmoore Road

Houston, Texas 77041-8004

Phone: (713) 335-7000

Fax:       713-466-6720

Attention: Chief Financial Officer

       8.3 Entire Agreement. This Agreement constitutes the entire agreement of the Parties relating
to the matters contained herein, superseding all prior contracts or agreements, whether oral or
written, relating to the matters contained herein.

-26-

 

       8.4 Termination. This Agreement, other than the provisions set forth in Articles VII and VIII
hereof, shall terminate upon a Change of Control of UCO LLC, the General Partner or the
Partnership, other than any Change of Control of UCO LLC, the General Partner or the Partnership
deemed to have occurred pursuant to clause (iv) of the definition of Change of Control solely as a
result of a Change of Control of UCH.

       8.5 Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or
of any breach or default by any Person in the performance by such Person of its obligations
hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such Person of the same or any other obligations of such Person
hereunder. Failure on the part of a Party to complain of any act of any Person or to declare any
Person in default, irrespective of how long such failure continues, shall not constitute a waiver
by such Party of its rights hereunder until the applicable statute of limitations period has run.

       8.6 Amendment or Modification. This Agreement may be amended or modified from time to time
only by the written agreement of all the Parties; provided, however, that the Partnership and the
OLP may not, without the prior approval of the Conflicts Committee, agree to any amendment or
modification
of this Agreement that the General Partner determines will adversely affect the holders of
Common Units. Each such instrument shall be reduced to writing and shall be designated on its face
an “Amendment” or an “Addendum” to this Agreement.

       8.7 Assignment; Third Party Beneficiaries. Any Party shall have the right to assign its
rights under this Agreement without the consent of any other Party, but no Party shall have the
right to assign its obligations under this Agreement without the consent of the other Parties.
Subject to the limitations set forth in Section 8.14, each of the Parties hereto specifically
intends that each entity comprising the UCH Entities and each entity comprising the Partnership
Entities, as applicable, whether or not a Party to this Agreement, shall be entitled to assert
rights and remedies hereunder as third-party beneficiaries hereto with respect to those provisions
of this Agreement affording a right, benefit or privilege to any such entity.

       8.8 Counterparts. This Agreement may be executed in any number of counterparts (including
facsimile counterparts) with the same effect as if all signatory Parties had signed the same
document. All counterparts shall be construed together and shall constitute one and the same
instrument.

       8.9 Severability. If any provision of this Agreement or the application thereof to any Person
or circumstance shall be held invalid or unenforceable to any extent, the remainder of this
Agreement and the application of such provision to other Persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.

       8.10 Gender, Parts, Articles and Sections. Whenever the context requires, the gender of all
words used in this Agreement shall include the masculine, feminine and neuter, and the number of
all words shall include the singular and plural. All references to Article numbers and Section
numbers refer to Articles and Sections of this Agreement.

-27-

 

       8.11 Further Assurances. In connection with this Agreement and all transactions contemplated
by this Agreement, each Party agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or appropriate to effectuate,
carry out and perform all of the terms, provisions and conditions of this Agreement and all such
transactions.

       8.12 Withholding or Granting of Consent. Except as otherwise expressly provided in this
Agreement, each Party may, with respect to any consent or approval that it is entitled to grant
pursuant to this Agreement, grant or withhold such consent or approval in its sole and uncontrolled
discretion, with or without cause, and subject to such conditions as it shall deem appropriate.

       8.13 Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no
Party shall be required to take any act, or fail to take any act, under this Agreement if the
effect thereof would be to cause such Party to be in violation of any applicable law, statute, rule
or regulation.

       8.14 Negation of Rights of Limited Partners, Assignees and Third Parties. The provisions of
this Agreement are enforceable solely by the Parties, and no shareholder, limited partner, member,
or assignee of UCH, UCI, UCO LLC, the General Partner, the Partnership, the OLP GP or the OLP or
other Person shall have the right, separate and apart from UCH, UCI, UCO LLC, the General Partner,
the Partnership, the OLP GP or the OLP, to enforce any provision of this Agreement or to compel any
Party to comply with the terms of this Agreement.

       8.15 No Recourse Against Officers or Directors. For the avoidance of doubt, the provisions of
this Agreement shall not give rise to any right of recourse against any officer or director of UCH
or any Partnership Entity.

[Signature pages follow.]

-28-

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement on, and effective as of, the
Closing Date.

	 	 	 	 	 
	 	UNIVERSAL COMPRESSION HOLDINGS,

INC.

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

	 	 	 	 	 
	 	UNIVERSAL COMPRESSION, INC.

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

	 	 	 	 	 
	 	UCI LEASING HOLDING GP LLC

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

	 	 	 	 	 
	 	UCI LEASING COMPRESSOR HOLDING, L.P.

By: UCI LEASING HOLDING GP LLC,
       its general partner

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

	 	 	 	 	 
	 	UCO GP, LLC

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 

Signature Page — Omnibus Agreement

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	UCO GENERAL PARTNER, LP

By: UCO GP, LLC, its general partner

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

	 	 	 	 	 
	 	UNIVERSAL COMPRESSION PARTNERS,

L.P.

By: UCO GENERAL PARTNER, LP, 
       its general partner

By: UCO GP, LLC, its general partner

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

	 	 	 	 	 
	 	UCLP OLP GP LLC

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

	 	 	 	 	 
	 	UC OPERATING PARTNERSHIP, L.P.

By: UCLP OLP GP LLC, its general partner

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

Signature Page — Omnibus Agreement

 

 

	 	 	 	 	 
	 	UCLP LEASING GP LLC

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

	 	 	 	 	 
	 	UCLP LEASING, L.P.

By: UCLP LEASING GP LLC, its general partner

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

Signature Page — Omnibus Agreement

 

 

Schedule 1.1

[Fixed Margin Percentage]

11.1%

 

 

Schedule 3.1(a)

[Services]

	1)	 	operations,
	 
	2)	 	marketing,
	 
	3)	 	maintenance and repair of Compression Equipment,
	 
	4)	 	periodic overhauls of Compression Equipment,
	 
	5)	 	inventory management,
	 
	6)	 	legal,
	 
	7)	 	accounting,
	 
	8)	 	treasury,
	 
	9)	 	insurance administration and claims processing,
	 
	10)	 	risk management,
	 
	11)	 	health, safety and environmental,
	 
	12)	 	information technology,
	 
	13)	 	human resources,
	 
	14)	 	credit,
	 
	15)	 	payroll,
	 
	16)	 	internal audit,
	 
	17)	 	taxes,
	 
	18)	 	engineering,
	 
	19)	 	facilities management,
	 
	20)	 	investor relations,
	 
	21)	 	ERP,
	 
	22)	 	training,
	 
	23)	 	executive,
	 
	24)	 	sales, and
	 
	25)	 	business development

 

 

Schedule 3.1(b)

[Excluded Services]

	1.	 	Fabrication and sale of new Compression Equipment.

 

 

Schedule 6.1

[Marks]

 

 

Exhibit A

FORM ASSIGNMENT AND BILL OF SALE

     For valuable consideration, the receipt of which is hereby acknowledged,
_________, a [place of formation] [entity type] (“Seller”) hereby SELLS, GRANTS,
ASSIGNS and TRANSFERS to _________, a [place of formation] [entity type]
(“Purchaser”), effective as of _________, 200___, good, marketable and indefeasible title to
all of Seller’s right, title and interest in, to and under the Compression Equipment described on
Exhibit A attached hereto and made a part hereof for all purposes, together with all
assets, rights and properties related to such Compression Equipment of the sort described in
Section 4.2(b) of the Omnibus Agreement (as defined below) (collectively, the “Assets”):

     The Seller, in its name and in the name of its successors and assigns, hereby represents that
it has the power and authority to sell or otherwise transfer the Assets in the manner provided in
this Assignment and Bill of Sale and that the Assets are free and clear of all Liens, except for
any Liens created by Purchaser. THE ASSETS ARE BEING SOLD WITHOUT ANY WARRANTIES, WHETHER EXPRESS
OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF FITNESS
FOR USE OR MERCHANTABILITY.

     Seller does hereby bind itself, its successors and assigns, to forever warrant and defend the
title to the Assets unto Purchaser, its successors and assigns against the lawful claim or claims
of any person whomsoever claiming an interest in the Assets. Purchaser hereby assumes and agrees to
indemnify, protect, defend and hold Seller harmless from and against all of the liabilities and
obligations of every kind and nature, arising out of, in connection with or related to, the
ownership, operation, use, repair, transfer, transportation or any other activity whatsoever in
respect of the Assets on and after the date hereof.

     Seller covenants and agrees to execute and deliver to Purchaser all such other additional
instruments and other documents and will do all such other acts and things as may be necessary to
fully assign to Purchaser, or its successors and assigns, all of the Assets.

     All of the provisions hereof shall inure to the benefit of and be binding upon the respective
heirs, successors and assigns of Seller and Purchaser.

     Terms used herein but not defined herein shall have the meanings assigned to such terms in the
Omnibus Agreement dated as of October ___, 2006 by and among Universal Compression Holdings, Inc.,
Universal Compression, Inc., UCI Leasing Holding GP LLC, UCI Compressor Holding, L.P., UCO GP, LLC,
UCO General Partner, LP, Universal Compression Partners, L.P., UCLP OLP GP LLC, UC Operating
Partnership, L.P., UCLP Leasing GP LLC and UCLP Leasing, L.P. (the “Omnibus Agreement”).

A-1

 

          IN WITNESS WHEREOF, Seller has caused this Assignment and Bill of Sale to be executed on
_________, ___200_.

	 	 	 	 	 
	 	 	“SELLER”
	 	 	[     ]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	“BUYER”
	 	 	[     ]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

A-2

 

	 	 	 
	THE STATE OF TEXAS

	 	§
	 

	 	§
	COUNTY OF HARRIS

	 	§

     BEFORE ME, the undersigned authority, on this day personally appeared _________
[name], _________ [title] of _________ [Seller’s name], a
______ [place of formation] _________ [entity type], known to me to be
the person whose name is subscribed to the foregoing instrument and acknowledged to me that he
executed the same for the purpose and consideration therein expressed and on behalf of said
corporation.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE this ___ day of _________, 20___.

	 	 	 	 	 	 	 	 	 
	(S E A L)
	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	Notary Public in and for the State of	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	My Commission Expires:	 	 	 	 
	 	 	 	 	 	 	 

 

	 	 	 	 	 
	THE STATE OF

	 	 	 	§
	 

	 	 	 	 
	 

	 	 	 	§
	COUNTY OF

	 	 	 	§
	 

	 	 	 	 

     BEFORE ME, the undersigned authority, on this day personally appeared _________[name],
_________[title] of _________[Seller’s name], a _________[place
of formation] _________[entity type], known to me to be the person whose name is
subscribed to the foregoing instrument and acknowledged to me that he executed the same for the
purpose and consideration therein expressed and on behalf of said corporation.

     GIVEN UNDER MY HAND AND SEAL OF OFFICE this ___ day of _________, 20___.

	 	 	 	 	 	 	 	 	 
	(S E A L)
	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	Notary Public in and for the State of	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	My Commission Expires:	 	 	 	 
	 	 	 	 	 	 	 

A-3

 

Exhibit B

GAS COMPRESSOR EQUIPMENT MASTER RENTAL AGREEMENT

     This Gas Compressor Equipment Master Rental Agreement with all Schedule(s),
hereinafter referred to as the (“Agreement”), is made between          (“Lessor”) and          (“Lessee”).

Lessor and Lessee Agree as follows:

1. Lease. Subject to and on the terms and conditions herein set forth in Article IV of the Omnibus
Agreement among Universal Compression Holdings, Inc., Universal Compression, Inc., UCI Leasing
Holding GP LLC, UCI Compressor Holding, L.P., UCO GP, LLC, UCO General Partner, LP, Universal
Compression Partners, L.P., UCLP OLP GP LLC, UC Operating Partnership, L.P., UCLP Leasing GP LLC
and UCLP Leasing, L.P. (the “Omnibus Agreement”) and herein, Lessor hereby agrees to lease to
Lessee, and Lessee hereby agrees to lease from Lessor, the personal property described as the
“Equipment” on the respective Equipment Lease schedule(s) executed by Lessee and Lessor from time
to time hereunder upon agreement of Lessor and Lessee. Each Schedule shall, upon execution, be
deemed to incorporate all of the provisions of this Agreement except as otherwise set forth
therein.

2. Term and Rent. Except as otherwise provided herein, this Agreement shall terminate on the later
to occur of (i) termination of the Omnibus Agreement and (ii) termination of the last existing
Schedule issued hereunder. Each Schedule shall set forth the term of the lease (“Minimum Term”)
and the number and amount of rental payments for the Equipment listed thereon, which Lessee shall
pay as set forth. If Lessee fails to pay any rental or other sum when due, Lessee also shall pay
to Lessor interest thereon from the due date thereof to the date of payment at a rate equal to the
lesser of 18% per annum or the maximum rate permitted by applicable law (“Applicable Rate”). All
payments by Lessee hereunder shall be payable at the office of Lessor set forth below, or at such
other place as Lessor from time to time may designate in writing. It is the intent of the parties
that each Schedule shall have a Minimum Term that is no greater than a whole or fractional month
less than 75% of the useful life of the Equipment subject to said Schedule. Notwithstanding
anything in this Agreement to the contrary, a Schedule may be terminated prior to the expiration of
its Minimum Term upon the purchase and sale or exchange between Lessor and Lessee of the Equipment
subject to said Schedule in accordance with the term of the Omnibus Agreement.

3. Taxes. Lessee agrees to reimburse, promptly when due, all license fees and assessments and all
sales, use, property, excise and other taxes or charges (including any interest and penalties), now
or hereafter imposed by any governmental body or agency upon the Equipment or the purchase,
ownership, possession, leasing, operation, use, or disposition thereof hereunder, or the rentals or
other payments hereunder (excluding taxes on or measured by the net income of Lessor) and prepare
and file promptly with the appropriate offices any and all tax and other similar returns required
to be filed with respect thereto (sending copies thereof to Lessor) or, if requested by Lessor,
notify Lessor of such requirement and furnish Lessor with all information required by Lessor so
that it may effect such filing.

4. Inspection and Acceptance. Within 48 hours after delivery of the Equipment to be leased to
Lessee under each Schedule, Lessee shall inspect the Equipment. Unless within said 48 hour period
Lessee notifies Lessor in writing to the contrary stating the details of any defects, Lessee shall
be conclusively presumed to have accepted the Equipment in its then condition. If within said 48
hour period Lessee notifies Lessor in writing of the unacceptability of the Equipment, Lessor’s
obligations to lease the Equipment shall cease forthwith. Upon acceptance of delivery, Lessee
assumes the care, custody, supervision and control of the Equipment and of any and all persons or
property in the vicinity of the Equipment during the time of delivery, operation and return.
Lessee acknowledges that all Equipment rented hereunder and specified in the Schedule(s) is of the
size, design and capacity selected for the operating conditions furnished to Lessor by Lessee and
is suitable for Lessee’s purposes. Lessee acknowledges that that Lessor is not the manufacturer or
supplier of the Equipment and any quotations or recommendations made by Lessor are based on
information supplied by Lessee and the manufacturer or supplier of the Equipment.

5. Freight. Lessee agrees to bear all of the cost of connecting the Equipment and of disconnecting
the Equipment prior to returning the Equipment to Lessor. Except as otherwise provided in the
Schedule, all costs of transporting the Equipment from Lessor’s yard to Lessee’s Site described on
the Schedule and of transporting the Equipment from such Site back to Lessor’s yard will be at the
expense of Lessee.

6. Insurance. Lessee shall, at Lessee’s sole cost and expense, maintain insurance or
Lessor-approved self-insurance in such amounts, against such risks (including, without limitation,
all risk and public liability insurance with respect to the Equipment), with such carriers and in
such form as shall be satisfactory to Lessor naming Lessee as an insured and Lessor as an
additional insured. Lessee shall provide Lessor with evidence of such insurance. The policies for
such insurance shall provide that Lessor receive thirty (30) days notice of any termination,
cancellation or alteration of the terms of such insurance, shall provide that the coverage afforded
to Lessor shall not be rescinded, impaired or invalidated by any act or neglect of lessee and shall
provide for waiver

B-1

 

of subrogation and contribution by Lessee and Lessee’s insured against Lessor and Lessor’s
employees and agents.

     7. Use / Lessee’s Responsibilities. Lessee agrees to use the Equipment in a careful and prudent
manner with competent agents, employees or subcontractors only for the compression of gas in
accordance with the specifications of the manufacturer of the Equipment. Lessee agrees to pay for
damages to the Equipment resulting from free water, excessive condensate or foreign solids, or
impurities contained in the gas stream. Lessee further agrees to pay for all damages to the
Equipment resulting from abusive use, failure to maintain the Equipment in accordance with this
agreement or from any negligence on the part of Lessee, its agents, employees or subcontractors.

     In addition to any Lessee obligations contained elsewhere in this Agreement and within any
Schedules hereto, Lessee agrees at Lessee’s own risk and expense to, subject to Paragraph 23, make
all repairs and replacements necessary to maintain, preserve and keep the Equipment in good order
and condition and Lessee shall:

          a. Provide Lessor with authorized ingress and egress to and from the site designated in the
Schedule for installation of the Equipment (the “Site”). Should Lessor be denied access to the
Site for any reason not reasonably within Lessor’s control, any time lost by Lessor shall be paid
for by Lessee at the applicable rate. Recognizing that Lessee has superior knowledge of the Site
and access routes to the Site, Lessee must advise Lessor of any conditions or obstructions which
Lessor might encounter while en route to the Site. Lessee agrees to maintain the road and Site in
such a condition that will allow free access and movement to and from the Site in an ordinarily
equipped highway type vehicle. If because of an attribute of Lessee’s operations, Lessor is
required to use any specialized transportation equipment, cranes or other services and supplies,
Lessee shall furnish the same at its expense and without cost to Lessor;

          b. Prepare a sound location at the Site adequate in size and capable of properly supporting
the Equipment; and

          c. Immediately mitigate and repair any stoppage, malfunction or leaks of oil or coolant from
the Equipment.

8. No Maintenance / Bare Rental. Lessee acknowledges that Lessor is providing the Equipment as a
“bare rental” and, therefore, Lessor will have no maintenance or repair obligations with respect to
the Equipment.

9. Inspection. Lessor shall have the right at all reasonable times to enter upon the premises
where the Equipment may be located for the purpose of inspecting it or observing its use.

10. Title; Personal Property; Encumbrances; Location. Lessee covenants that:

          a. The Equipment is and shall remain personal property and shall not be attached to or become
part of any realty;

          b. The Equipment will be installed and used at the location specified in the Schedule
pertaining thereto and that it shall not be removed therefrom without the permission of Lessor;

          c. That Lessee will not, except as expressly authorized in this Agreement, sell, secrete,
mortgage, assign, transfer, lease, sublet, loan part with possession of, or encumber the Equipment
or permit any liens or charges to become effective thereon or permit or attempt to do any of the
acts aforesaid. Lessee agrees, at Lessee’s own expense, to take such action as may be necessary to
remove any such encumbrance, lien or charge and to prevent any third party from acquiring any other
interest in the Equipment (including, without limitation, by reason of such Equipment being deemed
to be a fixture or a part of any realty); and

          d. Lessee will not change or remove any insignia, serial number or lettering of the Equipment.

11. Licenses, Permits and Compliance. Lessee, at its sole expense, shall;

          a. Comply with all applicable rules and regulations of any Federal, Provincial, State, County,
City, local, municipal or regulatory agency (hereinafter referred to as “Governing Bodies”)
relating to the construction or operation of the Equipment in the Location, or environmental
requirements associated therewith (including but not limited to air emission, noise and
environmental discharges); and

          b. Obtain and maintain throughout the Minimum Term, or any extension thereof, any and all
licenses and/or permit fees assessed as a result of this Agreement or against said Equipment.
Lessee further agrees to defend, protect, indemnify and hold harmless Lessor from any and all
liability associated with its failure to comply with the foregoing provision.

12. Waste Disposal. Lessee bears responsibility for disposal of liquids, solid, and hazardous waste
discharged by the Equipment at the location in accordance with federal, state and local
environmental rules and regulations.

13. Events of Default; Remedies; Expenses. In the event that:

B-2

 

          a. Lessee shall default in the payment of any installment of rent or other sum payable under
this Agreement or default in the observance or performance of any other covenant or agreement in
this Agreement and the failure to cure said default within ten (10) days after notice by Lessor; or

          b. Lessee shall dissolve, or become insolvent (however evidenced) or bankrupt, commit any
act of bankruptcy, make an assignment for the benefit of creditors, suspend the transaction of its
usual business or consent to the appointment of a trustee or receiver, or a trustee or a receiver
shall be appointed for Lessee or for a substantial part of its property, or bankruptcy,
reorganization, insolvency, or similar proceedings shall be instituted by or against Lessee; or

          c. an order, judgment, or decree shall be entered against Lessee by a court of competent
jurisdiction and such order, judgment or decree shall continue unpaid or unsatisfied and in effect
for any period of sixty (60) consecutive days without a stay of execution, or any execution or writ
or process shall be issues in connection with any action or proceeding against Lessee or its
property whereby the Equipment or any substantial part of Lessee’s property may be taken or
restrained; or

          d. any indebtedness of Lessee for borrowed money shall become due and payable by acceleration
of maturity thereof;

          e. Lessor shall in good faith believe that the prospect of payment or performance by Lessee is
impaired,

then and in any such event, Lessor may, by written notice to Lessee:

               (1) Immediately terminate this Agreement as to any or all Schedules, at its option, and
Lessee’s rights thereunder; and/or

               (2) Declare immediately due, and payable all rental installments and other sums hereunder
forthwith due and payable whereupon the same shall forthwith become due and payable as liquidated
damages and not as a penalty; and/or

               (3) Proceed by appropriate court action or actions either at law or in equity, to enforce
performance by Lessee of the applicable covenants of this Agreement or to recover damages for the
breach thereof; and/or

               (4) Without necessity of process or other legal action, enter onto the premises of Lessee or
such other premises as the Equipment may then be located and stop the operation of the Equipment
and/or take possession of the Equipment, disconnecting and separating the Equipment from any other
property and using all force necessary or permitted by applicable law, without Lessor incurring any
liability to Lessee or any other person arising out of the taking of any such action. Lessee
agrees to and shall indemnify and hold harmless Lessor from any and all claims, losses, damages,
causes of action, suits and liabilities of any kind arising in favor of Lessee, or any interest
owner that Lessee represents or serves as operator and arising out of or in connection with the
stopping of the operation of the Equipment and/or the removal of the Equipment as aforesaid,
whether same result from the forfeiture of any oil, gas or mineral lease, damage to a producing
reservoir or lease operations, lost production or other event or condition. In addition, Lessee
shall continue to be liable for all other indemnities under this Agreement and for all legal fees
and other costs and expenses resulting from the foregoing defaults or the exercise of Lessor’s
remedies. Lessor shall be entitled to take or retain, by way of offset against any or all amounts
due and owing under this Agreement, any assets, tangible or intangible, of Lessee which may then be
in the possession of Lessor, its correspondents or agents, wheresoever situated.

14. Holding Over. Unless a party gives the other party thirty (30) days advance written notice of
termination prior to the expiration of the Minimum Term specified in a Schedule, that Schedule will
continue to bind the parties on a month-to-month basis as to the Equipment, subject thereafter to
termination by either party with thirty (30) days advance written notice. Notwithstanding the
foregoing, after the expiration of the Minimum Term, Lessor may modify the rental fees and other
charges assessed under this Agreement.

15. Indemnity of Lessor.

          a. Lessee is responsible and liable for loss of or damage to Equipment arising between the
time of delivery and redelivery of the Equipment and Lessee shall protect, defend, indemnify and
hold Lessor harmless from and against any such loss or damage, however arising, including but not
limited to, improper operation, improper maintenance (unless Lessor performs maintenance),
negligent acts of Lessee, compression of dirty or wet gas, fire, freezing, theft, windstorm,
hailstorm, flood, riot, insurrection or explosion, except to the extent such loss or damage arises
directly as a result of the negligence of Lessor.

          b. Lessee shall protect, defend, indemnify and hold Lessor harmless from and against any loss,
damage, liability, suit, expense, cost or claim, however occurring as the result of loss of or
damage to property (other than the Equipment), arising between the time of delivery and redelivery
of the Equipment, whether such property is owned by Lessee or third party, and for injury to or
death of persons, whether Lessee or its employees or third parties.

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16. Savings Clause. The parties agree that the indemnities in this Agreement are limited to the
extent necessary to comply with applicable state or federal law and that this Agreement shall be
deemed to be amended to comply with those laws to the extent their requirements are at variance
with any indemnification provisions set forth in this Agreement.

17. Limitation of Liability. In no event shall Lessor, its agents and employees (for purposes of
this Paragraph 17, such persons shall collectively be referred to as “Lessor”) be liable to Lessee,
for any general, compensatory, special indirect, incidental or consequential damages related to or
in connection with the use and operation of the Equipment and/or the performance of this Agreement,
including but not limited to any injury, loss or damage to any property, any loss of profits or
business opportunity, and any loss of use of the Equipment, irrespective of the reason or cause of
such damages, whether any of such damages occur during or after the period of this Agreement, or
that the claim for such damages is based on warranty, contract, tort or other theory of any nature
whatsoever.

18. Assignment By Lessor. Lessor may assign its rights and delegate its duties under this
Agreement. Lessor covenants to Lessee that Lessor is empowered to execute this Agreement.
Conditioned upon Lessee’s performing the conditions hereof, Lessee shall peaceably and quietly
hold, possess and use the Equipment during the Minimum Term and any extensions thereof without
hindrance. If Lessor assigns the rents reserved herein or all or any of Lessor’s rights hereunder,
such assignee’s rights shall be independent of any claim of Lessee against Lessor. Lessee on
receiving notice of any such assignment shall abide thereby and make payment as may therein be
directed. Following such assignment, the term “Lessor’ shall be deemed to include or refer to
Lessor’s assignee, except such assignee’s rights shall be independent of any claim of Lessee
against Lessor as hereinabove provided.

19. Assignment and Subleasing by Lessee. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS PARAGRAPH
19, LESSEE SHALL NOT, WITHOUT THE PRIOR CONSENT OF LESSOR, ASSIGN, TRANSFER OR ENCUMBER ITS RIGHTS,
INTERESTS OR OBLIGATIONS UNDER THIS AGREEMENT. ANY ATTEMPTED ASSIGNMENT, TRANSFER OR ENCUMBRANCE
BY LESSEE OF ITS RIGHTS, INTERESTS OR OBLIGATIONS UNDER THIS AGREEMENT SHALL BE NULL AND VOID. So
long as no material event of default shall have occurred and be continuing, Lessee may, without the
consent of Lessor, sublease one or more of the Equipment to any third party (each third part a
“User” and each such lease a “User Lease”), provided that all of the following requirements shall
be satisfied with respect to each such User Lease entered into pursuant to this Paragraph 19:

          a. the Equipment is and will remain physically located within the United States;

          b. such User Lease shall be in writing, shall identify the Equipment by unit number, engine,
frame and number of cylinders and shall expressly prohibit any further sublease or transfer by User
of any rights or interests in the Equipment without Lessee’s permission;

          c. such User Lease shall prohibit the User from making any alterations or modifications to the
Compressors that would violate the provisions of Paragraph 23 of this Agreement; and

          d. such User Lease shall require the User (and/or Lessee) (i) to maintain the Equipment in
accordance with Paragraph 7 and the relevant Schedule and (ii) to engage in activities with the
Equipment in a manner consistent with the Equipment’s intended purpose and in accordance with the
Equipment’s specifications.

          No such subleasing by Lessee will reduce or affect any of the obligations of Lessee hereunder
or the rights of Lessor under this Agreement, and all of the obligations of Lessee hereunder shall
be and remain primary and shall continue in full force and effect as the obligations of a principal
and not of a guarantor or surety.

20. No Lessor Equipment Warranties. LESSOR LEASES THE EQUIPMENT TO LESSEE AS-IS AND EXPRESSLY
DISCLAIMS AND MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION, DESIGN, QUALITY,
CAPACITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF, OR ANY OTHER MATTER, CONCERNING
THE EQUIPMENT. LESSEE HEREBY WAIVES ANY CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE
LIABILITY IN TORT) IT MAY HAVE AGAINST LESSOR FOR ANY LOSS, DAMAGE (INCLUDING INCIDENTAL OR
CONSEQUENTIAL DAMAGE) OR EXPENSES CAUSED BY OR RELATING TO THE EQUIPMENT.

21. Enforceability. If any part hereof is contrary to, prohibited by or deemed invalid under
applicable laws or regulations of any jurisdiction, such provision shall be inapplicable and deemed
omitted but shall not invalidate the remaining provisions hereof.

22. No Conditional Sale. It is the intention of the parties hereto to hereby create a lease on the
Equipment described herein, and not a conditional sale. To provide solely for the eventuality that
a court might hold this to be a conditional sale, Lessor hereby retains a purchase money security
interest to secure payment of the sales price of the Equipment as determined by such court, and
Lessee grants to Lessor all rights given to a secured party under the Uniform Commercial Code in
addition to Lessor’s other rights hereunder. It is the intention of the

B-4

 

parties that the Equipment shall be deemed personal property and that it not be deemed a fixture,
even though it may be attached in some manner to realty. To provide solely for the eventuality
that a court might also hold the Equipment to be a fixture, the parties state for the purpose of
complying with the legal requirements for a financing statement that collateral is or includes
fixtures and the Equipment is affixed or is to be affixed to the lands described in the
Schedule(s).

23. Alterations.

          a. Except as required or permitted by this Agreement, and subject to this Paragraph 23, Lessee
shall not modify or alter the Equipment without the prior approval of Lessor.

          b. In case the Equipment (or any part or component thereof) is required to be altered, added
to, replaced or modified in order to comply with applicable law (any such alteration, additional
replacement or modification, a “Required Alteration”), Lessee agrees to promptly make (or cause to
be made) such Required Alteration at its own expense. Thereupon, title to such Required Alteration
shall, without further act, immediately become the property of Lessor, free and clear of all liens
and such Required Alteration shall immediately become subject to the terms and conditions of this
Agreement.

          c. Lessee may make any optional renovation, improvement, addition, or alteration to the
Equipment (“Optional Alteration”) provided that such Optional Alteration does not impair the value,
use or remaining useful life of such Equipment. In the event an Optional Alteration is readily
removable without impairing the value, use or remaining useful life of the Equipment, and is not a
part or appliance which replaces any part or appliance originally incorporated or installed in or
attached to such Equipment on the effective date of the relevant Schedule, Lessee may (or, if
requested by Lessor shall) remove such Optional Alteration whereupon such Optional Alteration will
remain the property of Lessee. To the extent such Optional Alteration is not readily removable
without impairing the value, use or remaining useful life of the Equipment to which such Optional
Alteration has been made, or is a part or appliance which replaces any part or appliance originally
incorporated or installed in or attached to such Equipment on the effective date of the relevant
Schedule, such Optional Alteration shall, without further act, immediately be and become the
property of, and title shall vest in, Lessor, free and clear of all liens and shall be subject to
the terms of this Agreement. Any parts installed or replacements made by Lessee upon the Equipment
pursuant to its obligation to maintain and keep the Equipments in the condition required pursuant
to the terms of this Agreement shall be considered accessions to such Equipment and ownership
thereof shall be immediately vested in Lessor.

24. Miscellaneous.

          a. No covenant or condition of this Agreement can be waived or changed except by the written
consent of both parties. Forbearance or indulgence by Lessor in any regard whatsoever shall not
constitute a waiver or change of the covenant or condition to be performed by Lessee to which the
same may apply, and until complete performance by Lessee of said covenant or condition, Lessor
shall be entitled to invoke any remedy available to Lessor under this Agreement or by law or equity
despite said forbearance or indulgence. Waiver of any defaults shall not waive any other default.

          b. Service of all notices under this Agreement shall be sufficient if mailed to the party
involved at its respective address set forth below, or at such address as such party may provide in
writing. Any such notices mailed to such address shall be effective when deposited in the United
States mail, duly addressed and with postage prepaid.

          c. “Lessor” and “Lessee” as used in this Agreement shall include the heirs, executors,
administrators, successors, sub-lessees and/or assigns of such parties.

          d. If more than one Lessee executes this Agreement, their obligations under this Agreement
shall be joint and several.

          e. Lessee will, if requested by Lessor, join with Lessor in executing one or more financing
statements, as may be desired by Lessor, in form satisfactory to Lessor.

          f. In case of conflict between provisions found in this Agreement and those listed in the
Schedule(s) hereto, the provisions on the Schedule(s) shall prevail.

          g. The law governing this Agreement shall be that of the State of Texas in force at the date
of this Agreement, excepting any conflict of laws provisions that provide for the application of
the laws of another jurisdiction.

          h. Lessor and Lessee agree that venue of any lawsuit arising from or in connection with the
terms of this Agreement shall be in Houston, Harris County, Texas.

          i. This Agreement contains the full agreement between the parties. No representation or
promise has been made by either party to the other as an inducement to enter into this Agreement.
Lessor does not in any way or for any purpose become partner of Lessee, or a joint venture, or a
member of a joint enterprise with Lessee.

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          j. Lessee hereby waives its right to receive a copy of any financing statement or financing
change statement registered by Lessor in connection with this Agreement.

          k. Lessor and Lessee hereby agree that no rights or remedies referred to in Article 2A of the
Uniform Commercial Code shall be conferred upon either Lessor or Lessee unless expressly granted in
this Agreement..

          l. If Lessee at any time shall fail to pay any sum which Lessee is required by this Agreement
to pay or shall fail to do or perform any other act Lessee is required by this Agreement to do or
perform, Lessor at its option may pay such sum or do or perform such act (or have it performed by a
third party), and Lessee shall reimburse Lessor on demand for the amount of such payment and for
the cost and expenses which may be incurred by Lessor for such acts or performance, together with
interest thereon at the Applicable Rate from the date of demand until paid.

          m. This Agreement is based on the applicable laws existing at the time of its execution. Any
changes, including changes in governmental enforcement practices, revisions or new applicable laws,
including without limitation those related to taxes, permits, fees and duties, that have the effect
of increasing Lessor’s burden, including but not limited to cost, time-consumption and risk
exposure, shall entitle Lessor to fair and equitable Agreement modifications, which modifications
the parties agree to work toward in good faith and in a timely fashion, failing which Lessor may
terminate this Agreement or any Schedule(s) hereunder immediately upon written notice to Lessee.

Executed this       day of           , 200   .

LESSOR:

	 	 	 	 	 	 	 	 	 
	BY:

	 	 	 	TITLE:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	Please Print Name and Title

LESSEE:

	 	 	 	 	 	 	 	 	 
	BY:

	 	 	 	TITLE:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	Please Print Name and Title
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	Street Address or Post Office Box
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	City, State/Province and Zip Code
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	Phone Number
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	Fax Number

B-6

 

SCHEDULE ‘A’ TO GAS COMPRESSOR EQUIPMENT MASTER RENTAL AGREEMENT

(BARE RENTAL)

	 	 	 
	Lessee:

	 	Date:
	 
	 	 
	Attention:

	 	Quote #

In accordance with your request, we are pleased to offer the herein described compression equipment
for your application on the ___lease in ___(detail, to the extent
available, section, township, range, county/parish, state and country) (“Site”). This unit is
capable of the following estimated performance. Actual field operating conditions can cause actual
compressor capacities to vary.

	 	 	 	 	 
	Unit #

	 	 	 	Engine
	Frame

	 	 	 	Cylinders

	 	 	 	 	 	 	 	 	 
	SUCTION PRESSURE

	 	PSIG	 	 	 	 	 	 
	 

	 	 	 	 
	 	 
	 	 
	DISCHARGE PRESSURE

	 	PSIG	 	 	 	 	 	 
	 

	 	 	 	 
	 	 
	 	 
	COMPRESSOR

	 	BHP	 	 	 	 	 	 
	 

	 	 	 	 
	 	 
	 	 
	OPERATING

	 	RPM	 	 	 	 	 	 
	 

	 	 	 	 
	 	 
	 	 
	INTAKE TEMPERATURE

	 	°F	 	 	 	 	 	 
	 

	 	 	 	 
	 	 
	 	 

	 	 	 	 	 	 	 
	 

	 	SPECIFIC
	 	GRAVITY	 	 
	 

	 	 	 	 	 	 
	 

	 	ALTITUDE
	 	FT	 	 
	 

	 	 	 	 	 	 
	H2S

	 	Process Gas
	 	(PPM)
	 	*
	 

	 	 	 	 	 	 
	H2S

	 	Fuel Gas
	 	(PPM)
	 	**
	 

	 	 	 	 	 	 
	AMBIENT

	 	TEMP.
	 	°F	 	 
	 

	 	 	 	 	 	 

 

			
	*	 	H2S process gas content equal to or greater than 100 PPM triggers the
applicability of Lessor’s “High H2S Process Gas Content Schedule.”
	 
	**	 	H2S fuel gas content limits are addressed on Page 2 of this Schedule.

Delivery can be made to Site in ___ weeks from date of execution of
this Schedule but is subject to prior sale or rental and credit approval.

RENTAL RATE is ___ [The Rental Rate will be determined based on the Appraised
Value (as defined in the Omnibus Agreement) of the Equipment in accordance with
the following formula: $4.76 per leased horsepower per month] per month, plus
taxes, for a minimum of ___ months guaranteed (“Minimum Term”). (This quote
is valid for a period of 30 days. Please check with Lessor prior to ordering
after 30 days has expired.) [The Minimum Term will match the term of the
underlying customer contract under which the Equipment will be employed.]

The rental
rate shall be payable monthly in advance
at                    ’s (“Lessor”)
Houston office, commencing from the date of shipment or 15 days after unit is
ready, whichever occurs first. Upon expiration of the Minimum Term, the rental
shall continue from month to month. Either party may terminate this agreement
at the expiration of the Minimum Term or thereafter upon thirty (30) days
advanced written notice. Lessor’s obligation to provide the Equipment shall
cease upon the effective date of termination, but the Rental Rate shall
continue to be assessed until the later of expiration of such thirty (30) days
or return of the Equipment to designated terminal, in good condition, normal
wear and tear excepted.

When executed by Lessor and Lessee, this Schedule A shall apply to the GAS COMPRESSOR EQUIPMENT
MASTER RENTAL AGREEMENT (or equivalent master agreement) executed by Lessee and Lessor (or their
respective predecessors or affiliates) and dated as shown below (the “Master Agreement”) whether or
not attached hereto, and shall be deemed an individual agreement between the parties hereto for the
Equipment described herein, upon the terms and conditions stated herein and in the Master
Agreement. Unless otherwise defined herein, terms have the meanings set forth in the Master
Agreement.

Master Agreement Date:

Exceptions or adders to the terms and conditions in this agreement are as follows:

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	Freight Charges To Site From

	 	 	 	Paid for by	 	 
	 

	 	 
	 	 	 	 
	Freight Charges From Site To

	 	 	 	Paid for by	 	 
	 

	 	 
	 	 	 	 

Quote #:

LESSOR’S AND LESSEE’S RESPONSIBILITIES

Lessor —

     In addition to the responsibilities detailed in the Master Agreement, Lessor shall furnish the following:

Equipment described on Page 1 of this Schedule A.

At Lessor’s option, semi-annual maintenance inspections of Equipment by Lessor
and invoiced to Lessee at Lessor’s then-prevailing standard rates.

Lessee —

     In addition to the responsibilities detailed in the Master Agreement, Lessee shall furnish the
following:

Preventive maintenance, inspections and repairs to all engines, compressors and accessory parts forming the
Equipment (both labor and necessary parts), including without limitation:

	 	•	 	Major overhauls of the engine, including without limitation the cylinder heads;
	 
	 	•	 	Major overhauls on the compressor, including without limitation repair or replacement of major castings on
the compressor frame and cylinders;
	 
	 	•	 	All normal wear items, including compressor packing, rings and valves;
	 
	 	•	 	Engine ignition system, including spark plugs, wiring harnesses and magnetos;
	 
	 	•	 	Engine starters, carburetors, turbochargers, fuel gas system, water pump, compressor lubricator system and
any other equipment that is externally mounted on the engine;
	 
	 	•	 	Repair and maintenance of the control panel and associated shutdown switches and fusible plugs, including
without limitation any other controls in the panel, all tubing, fittings and devices associated with the
instrumentation system and fire loop system;
	 
	 	•	 	Scrubber controls, tubing and fittings;
	 
	 	•	 	All relief valves, manual valves, actuated valves and controllers;
	 
	 	•	 	Maintenance of the fin fan cooler, including replacement or repair of bearings and fan blades;
	 
	 	•	 	Monthly adjustments on the engine and compressor per Lessor’s guidelines;
	 
	 	•	 	Anti-freeze in accordance with Lessor’s requirements;
	 
	 	•	 	Lubricants and related filters in accordance with Lessor’s requirements; and
	 
	 	•	 	Daily inspections/monitoring.

Competent and prudent Equipment operator for normal operations.

All fees, assessments and taxes (including ad valorem, which will not be prorated) applicable to Equipment.

Provide an inlet separator for the Equipment to remove solids (such as sand) and all entrained liquids from the gas
stream; Lessee hereby acknowledging that the scrubber provided by Lessor with the Equipment is only an emergency
scrubber.

Site preparation, including suitable sand or gravel pad or concrete base as required.

Valves and piping to suction and discharge flanges, and fuel gas inlet(s) of compressor(s).

Suction to discharge bypass piping and suction pressure control valve (if required).

All installation expenses.

Suitable, sweet, dry natural gas fuel for engine use with 900 to 1100 BTU/ft3 and no more than 10 ppm H2S.

Air/gas pressure of with sufficient pressure and volume for engine starting.

Provide, connect and maintain a properly functioning waste discharge system downstream of the Equipment, including
an outlet connection from the skid drain and all pipes, connections, the blow casing and tank downstream of the skid
drain; and remove and dispose of all fluids discharged by the discharge tank, the blow casing and any pipes or
connections to the skid plus collection and disposal of such liquids from the Equipment’s skid and any other liquids
incidental to Equipment operations.

Equipment Site with ingress and egress satisfactory to Lessor.

Disconnection of Equipment and Site restoration expenses.

Site fencing, if requested by Lessor.

Any and all necessary equipment, supplies and services not specifically listed as Lessor’s responsibility, above.

The following responsibilities apply when Site is offshore or in inland waterways:

Suitable platform or barge capable of supporting the Equipment.

All
transportation (including air and water) and cranes necessary for delivery, installation, maintenance, repair and
removal of the Equipment.

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All transportation (including air and water) for Lessor personnel, parts, tools and supplies.

Cost for any standby time in excess of 4 hours that is beyond the direct control of Lessor (including due to
inclement weather that, in the sole but reasonable discretion of Lessor impedes safe travel).

Quote #:

               Third party services or materials not listed above as Lessor’s responsibility that are
furnished by Lessor at Lessee’s request will be charged to Lessee at Lessor’s actual cost plus 20%.

               Lessor’s services or materials not listed above as Lessor’s responsibility that are furnished
by Lessor at Lessee’s request will be charged to Lessee at Lessor’s then-prevailing standard rates.

               ACKNOWLEDGED and ACCEPTED by the undersigned, duly-authorized representatives of the parties
as of the date first shown above.

     LESSOR:

	 	 	 
	Submitted by

	 	 
	 

	 	 

	 	 	 
	Return original and all correspondence to:
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 
	 
	 	 

LESSEE:

	 	 	 
	 
	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	By:
	 	 
	 

	 	 
	 
	 	 
	Title:
	 	 
	 

	 	 

B-9exv10w1

 

EXHIBIT-10.1

	 	 	 
	JPMORGAN CHASE BANK, N.A.

	 	MORGAN STANLEY SENIOR FUNDING,
INC. 
	J.P. MORGAN SECURITIES INC.
	 	1585 BROADWAY
	270 PARK AVENUE
	 	NEW YORK, NEW YORK 10036
	NEW YORK, NEW YORK 10017
	 	 
	 
	 	 
	CANYON CAPITAL ADVISORS LLC

	 	GOLDMAN SACHS CREDIT PARTNERS L.P.
	9665
WILSHIRE BOULEVARD, SUITE 200
	 	ONE NEW YORK PLAZA
	BEVERLY
HILLS, CALIFORNIA 90212
	 	NEW YORK, NEW YORK 10004
	 
	 	 
	 

	 	October 3, 2006

Bally Total Fitness Holding Corporation

Senior Secured Credit Facilities

Commitment Letter

Bally Total Fitness Holding Corporation

8700 West Bryn Mawr, 2nd Floor

Chicago, Illinois 60631

Ladies and Gentlemen:

     Bally Total
 Fitness Holding Corporation (the “Borrower”) has advised JPMorgan Chase
Bank, N.A. (“JPMCB”), J.P. Morgan Securities Inc. (“JPMorgan”), Morgan
 Stanley Senior Funding, Inc.
(“Morgan Stanley”), Canyon Capital Advisors LLC on behalf of its managed accounts and
funds (“Canyon”) and Goldman Sachs Credit Partners
L.P. (“Goldman Sachs”; together
 with JPMCB, Morgan
Stanley and Canyon, the “Lead Lenders”; the Lead Lenders, together with JPMorgan, the
“Commitment Parties”) that Bally Total Fitness Holding Corporation, a Delaware corporation
(the “Borrower”), requires a tranche B term loan facility in the amount of $205,900,000
(the “Tranche B Term Loan Facility”), a delayed-draw term loan facility in the amount of
$34,100,000 (the “Delayed-Draw Term Loan Facility” and, together with the Tranche B Term
Loan Facility, the “Term Loan Facilities”), and a revolving credit facility in the amount
of $40,000,000 (the “Revolving Credit Facility” and, together with the Tranche B Term Loan
Facility and the Delayed-Draw Term Loan Facility, the “Facilities”) in order to refinance
the credit facilities outstanding under its Existing Credit Agreement, dated as of November 18,
1997, as amended and restated as of October 14, 2004, as amended (the “Existing Credit
Agreement”; capitalized terms used and not otherwise defined herein having the meaning
specified therein), and to amend certain provisions of the Existing Credit Agreement as may be
agreed upon by the Lead Lenders and the Borrower. The Facilities will be made available through an
amendment and restatement of the Existing Credit Agreement (the Existing Credit Agreement, as
amended and restated as contemplated hereby, the “Amended and Restated Credit Agreement”).

     With regard to the
 foregoing, (a) JPMCB is pleased to advise you of its commitment to provide
$145,000,000 of the original principal amount of the Facilities, (b) Morgan Stanley is pleased to
advise you of its commitment to provide $75,000,000 of the

 

 

					
	Bally Total Fitness	 	 	 	 
	  Holding Corporation
	 	2
	 	October 3, 2006

original principal amount of the Facilities, (c) Goldman Sachs is pleased to advise you of its
commitment to provide $30,000,000 of the original principal amount of the Facilities and (d) Canyon
is pleased to advise you of its commitment to provide $30,000,000 of the original principal amount
of the Facilities, in each case allocated on a ratable basis to the Revolving Credit Facility, the
Tranche B Term Loan Facility and the Delayed-Draw Term Loan Facility, in each case upon the terms
and subject to the conditions set forth or referred to in this commitment letter (the
“Commitment Letter”) and in the Summary of Terms and Conditions attached hereto as Exhibit
A (the “Term Sheet”).

     Furthermore, JPMorgan (“Lead Arranger”) is pleased to advise you that it is willing to
act as sole exclusive lead arranger and sole bookrunner for the Facilities and the Amended and
Restated Credit Agreement upon the terms and subject to the conditions set forth or referred to in
this Commitment Letter and in the Term Sheet. JPMorgan will be on the “left” in all marketing
materials and announcements. It is agreed that JPMCB will act as the sole and exclusive
administrative agent (in such capacity, the “Administrative Agent”) and collateral agent
(in such capacity, the “Collateral Agent”), that Morgan Stanley will act as the sole and
exclusive syndication agent (in such capacity, the “Syndication Agent”) and JPMorgan will
act as the sole and exclusive lead arranger and sole bookrunner for the Facilities, and each will,
in such capacities, perform the duties and exercise the authority customarily performed and
exercised by it in such roles. You agree that no other agents, co-agents or arrangers will be
appointed, no other titles will be awarded and no compensation (other than that expressly
contemplated by the Term Sheet and the Fee Letters referred to below) will be paid in connection
with the Facilities and the Amended and Restated Credit Agreement unless you and we shall so agree.

     Each Lead Lender anticipates, prior to or after the execution of definitive financing
documentation for the Facilities, to syndicate, through the Lead Arranger, its commitments
hereunder in respect of the Facilities to financial institutions (together with the Lead Lenders,
the “Lenders”) arranged by the Lead Arranger and approved by the Borrower (such approval
not to be unreasonably withheld or delayed). The Lead Arranger intends to commence syndication
efforts promptly upon the execution of this Commitment Letter, and you agree actively to assist the
Lead Arranger in completing a syndication satisfactory to the Commitment Parties and the Borrower;
provided, however, the commitments described herein are not subject to satisfactory
syndication. Such assistance shall include (a) your using commercially reasonable efforts to
ensure that the syndication efforts benefit materially from your existing lending relationships,
(b) direct contact between senior management of the Borrower and the Lenders, (c) as set forth in
the next paragraph, assistance in the preparation of materials to be used in connection with the
syndication and amendment solicitation (collectively, with the Term Sheet, the “Information
Materials”) and (d) the hosting, with the Lead Arranger, of one meeting of Lenders.

     You will assist us in preparing Information Materials, including Confidential Information
Memoranda, for distribution to existing and prospective Lenders. You also will assist us in
preparing an additional version of the Information Materials (the “Public-Side Version”) to
be used by existing and prospective Lenders’ public-side employees and

 

 

					
	Bally Total Fitness	 	 	 	 
	  Holding Corporation
	 	3
	 	October 3, 2006

representatives (“Public-Siders”) who do not wish to receive material non-public
information (within the meaning of United States federal securities laws) with respect to the
Borrower, its affiliates and any of its securities (“MNPI”) and who may be engaged in
investment and other market related activities with respect to any such entity’s securities or
loans. Before distribution of any Information Materials, you agree to execute and deliver to us
(i) a letter in which you authorize distribution of the Information Materials to an existing or
prospective Lender’s employees and representatives willing to receive MNPI
(“Private-Siders”) and (ii) a separate letter in which you authorize distribution of the
Public-Side Version to Public-Siders and represent that no MNPI is contained therein;
provided, however, that the letter described in the preceding clauses (i) and (ii)
shall be satisfactory to you and your counsel.

     The Borrower agrees that the following documents may be distributed to both Private-Siders and
Public-Siders, unless the Borrower advises the Lead Arranger in writing (including by email) within
a reasonable time prior to their intended distribution that such materials should only be
distributed to Private-Siders: (a) administrative materials prepared by the Commitment Parties for
existing or prospective Lenders (such as a lender meeting invitation, lender allocation, if any,
and funding and closing memoranda) and (b) notification of changes in the terms of the Facilities.
If you advise us that any of the foregoing should be distributed only to Private-Siders, then
Public-Siders will not receive such materials without further discussions with you.

     The Borrower hereby authorizes the Commitment Parties to distribute drafts of definitive
documentation with respect to the Facilities to Private-Siders and Public-Siders.

     JPMorgan, in its capacity as Lead Arranger, will manage, in consultation with you, all aspects
of the syndication, including decisions as to the selection of institutions to be approached and
when they will be approached, when their commitments will be accepted, which institutions will
participate (subject in each case to your approval, which will not be unreasonably withheld or
delayed), the allocation of the commitments among the Lenders and the amount and distribution of
fees among the Lenders (with fees being paid to the Lead Lenders in
accordance with the Fee Letter). In its capacity as Lead Arranger, JPMorgan will have no responsibility
other than to arrange the syndication as set forth herein and in no event shall be subject to any
fiduciary or other implied duties. Additionally, the Borrower
acknowledges and agrees that, none of the Lenders or their affiliates are advising the Borrower as to any legal, tax, investment, accounting
or regulatory matters in any jurisdiction. The Borrower shall consult with its own advisors
concerning such matters and shall be responsible for making its own independent investigation and
appraisal of the transactions contemplated hereby, and the Lead Arranger shall have no
responsibility or liability to the Borrower with respect thereto.

     JPMorgan, each of the Lenders and each of their respective affiliates may have economic interests
that conflict with those of the Borrower. The Borrower acknowledges and agrees that (i) the
transactions contemplated by this Commitment Letter and Fee Letter are arm’s-length commercial
transactions between JPMorgan and the Lenders, on the one hand, and the Borrower, on the other,
(ii) in connection therewith and with the process leading to such transaction, each of JPMorgan and
each Lender is acting solely as a principal and not the agent or fiduciary of the Borrower, (iii)
none of JPMorgan or any of the Lenders has assumed an advisory or fiduciary responsibility in favor
of the Borrower with respect to the transactions contemplated hereby or the process leading thereto
(irrespective of whether such person or any of its affiliates has advised or is currently advising
the Borrower on other matters) or any other obligation to the Borrower except the obligations
expressly set forth in this Commitment Letter or the Fee Letter and (iv) the Borrower has consulted
its own legal and financial advisors to the extent it deemed appropriate. The Borrower agrees that
it will not claim that any of JPMorgan or any of the Lenders has rendered advisory services of any
nature or respect, or owes a fiduciary or similar duty to JPMorgan, in connection with such
transaction.

     To assist the Lead Arranger in its syndication efforts, you agree promptly to prepare and
provide to the Commitment Parties all information with respect to the Borrower and the other
transactions contemplated hereby, including all financial information and projections (the
“Projections”), as we may reasonably request in connection with the arrangement and
syndication of the Facilities. You hereby represent and covenant that (a) all information, other
than the Projections (the “Information”), that has been or will be made available to any
Commitment Party by you or any of your representatives is or will be, when furnished, complete and
correct in all material respects and does not or will not, when furnished, contain any untrue

 

 

					
	Bally Total Fitness	 	 	 	 
	  Holding Corporation
	 	4
	 	October 3, 2006

statement to your knowledge of a material fact or omit to state a material fact necessary in
order to make the statements contained therein not materially misleading in light of the
circumstances under which such statements are made and (b) the Projections that have been or will
be made available to any Commitment Party by you or any of your representatives have been or will
be prepared in good faith based upon assumptions believed to be reasonable at the time such
Projections were prepared and delivered, it being understood that projections are by their nature
uncertain, no assurances are given that such projection will be attained and actual results could
materially differ. You understand that in arranging and syndicating the Facilities we may use and
rely on the Information and Projections without independent verification thereof.

     As consideration for each Lead Lender’s commitments and agreements hereunder and the Lead
Arranger’s agreement to perform the services described herein, you agree to pay to JPMCB (for
allocation as provided in the Fee Letter) the nonrefundable fees set forth in the Term Sheet, the
Fee Letter dated the date hereof and delivered herewith (the “Fee Letter”) and the
Administration Fee Letter dated the date hereof and delivered herewith (the “Administration Fee
Letter” and, together with the Fee Letter, the “Fee Letters”).

     Each Lead Lender’s commitments and agreements hereunder and the agreements of the Lead
Arranger to perform its services described herein are subject to (a) there not occurring or
becoming known to us since the date hereof any event, development or circumstance that has had or
could reasonably be expected to have a material adverse effect on the business, operations,
property or financial condition of the Borrower and its subsidiaries, taken as a whole (other than
as disclosed in the Borrower’s reports filed with the SEC on Form 10-K for its fiscal year ended
December 31, 2005, on Form 10-Q filed for its fiscal quarters ended March 31, 2006 and June 30,
2006 and on Form 8-K in 2006 prior to the date hereof (the “Public Filings”)), (b) our not
becoming aware after the date hereof of any information or other matter materially and adversely
affecting the Borrower or the transactions contemplated hereby which is inconsistent with any such
information or other matter disclosed to us prior to the date hereof, (c) there not having occurred
a material disruption of or material adverse change in financial, banking or capital market
conditions that, in our reasonable judgment, could materially impair the arranging and syndication
of the Facilities, (d) our satisfaction that prior to and during the arranging of the Facilities
and the consent solicitation in respect of the Amended and Restated Credit Agreement there shall be
no competing offering, placement or arrangement of any debt securities or bank financing by or on
behalf of the Borrower or any subsidiary thereof (other than those financings described to you
prior to the date hereof), (e) the negotiation, execution and delivery on or before October 31,
2006 of definitive documentation with respect to the Facilities on terms substantially similar to
the Term Sheet reasonably satisfactory to each Lead Lender and its counsel and the Borrower and its
counsel and (f) the other conditions set forth or referred to in the Term Sheet. The terms and
conditions of each Lead Lender’s commitments and agreements hereunder and of the Facilities are not
limited to those set forth herein and in the Term Sheet. Those matters that are not covered by the
provisions hereof and of the Term Sheet are subject to the reasonable approval and agreement of
each of the Commitment Parties and the Borrower.

 

 

 
					
	Bally Total Fitness	 	 	 	 
	  Holding Corporation
	 	5
	 	October 3, 2006

     You agree (a) to indemnify and hold harmless each Commitment Party, its respective affiliates
and their respective officers, directors, employees, advisors, and agents (each, an
“indemnified person”) from and against any and all losses, claims, damages and liabilities
to which any such indemnified person may become subject arising out of or in connection with this
Commitment Letter, the Facilities, the use of the proceeds thereof, any related transaction or any
claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of
whether any indemnified person is a party thereto, and to reimburse each indemnified person within
thirty days of written demand (together with appropriate back-up documentation) for any legal or
other expenses incurred in connection with investigating or defending any of the foregoing,
provided that the foregoing indemnity will not, as to any indemnified person, apply to
losses, claims, damages, liabilities or related expenses to the extent they are found by a final,
non-appealable judgment of a court to arise from the willful misconduct, bad faith or gross
negligence of such indemnified person, and (b) to reimburse each Commitment Party and its
affiliates within thirty days of written demand (together with appropriate back-up documentation)
for all reasonable out-of-pocket expenses (including syndication expenses, reasonable out-of-pocket
travel expenses, and reasonable fees, charges and disbursements of Simpson Thacher & Bartlett LLP,
acting as counsel for the Commitment Parties) incurred in connection with the Facilities and any
related documentation (including this Commitment Letter, the Term Sheet, the Fee Letters and the
definitive financing documentation) or the administration, amendment, modification or waiver
thereof. No indemnified person shall be liable for any damages arising from the use by
unauthorized persons of Information, Projections or other materials sent through electronic,
telecommunication or other information transmission systems that are intercepted by such persons.
Neither the Borrower and its subsidiaries nor any indemnified person shall be liable for any
punitive, indirect or consequential damages in connection with its activities related to the
Facilities.

     You acknowledge that each Lead Lender and its affiliates (the term “Lead Lender” being
understood to refer hereinafter in this paragraph to include such affiliates) may be providing debt
financing, equity capital or other services (including financial advisory services) to other
companies in respect of which you may have conflicting interests regarding the transactions
described herein and otherwise. No Lead Lender will use confidential information obtained from you
by virtue of the transactions contemplated by this Commitment Letter or its other relationships
with you in connection with the performance by such Lead Lender of services for other companies,
and such Lead Lender will not furnish any such information to other companies. You also
acknowledge that no Lead Lender has any obligation to use in connection with the transactions
contemplated by this Commitment Letter, or to furnish to you, confidential information obtained
from other companies.

     This Commitment Letter shall not be assignable by you without the prior written consent of
each Commitment Party (and any purported assignment without such consent shall be null and void),
is intended to be solely for the benefit of the parties hereto and is not intended to confer any
benefits upon, or create any rights in favor of, any person other than the parties hereto. This
Commitment Letter may not be amended or waived except by an instrument in writing signed by you and
each Commitment Party. This Commitment Letter may be executed in any number of counterparts, each
of which shall be an original, and all of which, when taken

 

 

					
	Bally Total Fitness	 	 	 	 
	  Holding Corporation
	 	6
	 	October 3, 2006

together, shall constitute one agreement. Delivery of an executed signature page of this
Commitment Letter by facsimile transmission or electronic transmission of a PDF (or similar file)
shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter
and the Fee Letters are the only agreements that have been entered into among us with respect to
the Facilities and the Amended and Restated Credit Agreement, and set forth the entire
understanding of the parties with respect thereto. This Commitment Letter shall be governed by,
and construed in accordance with, the laws of the State of New York.

     Each party hereto consents to the nonexclusive jurisdiction and venue of the state or federal
courts located in the City of New York. Each party hereto irrevocably waives, to the fullest
extent permitted by applicable law, (a) any objection that it may now or hereafter have to the
laying of venue of any such legal proceeding in the state or federal courts located in the City of
New York and (b) any right it may have to a trial by jury in any suit, action, proceeding, claim or
counterclaim brought by or on behalf of any party related to or arising out of this Commitment
Letter, the Term Sheet, the transactions contemplated hereby or the performance of services
hereunder.

     This Commitment Letter is delivered to you on the understanding that neither this Commitment
Letter, the Term Sheet or the Fee Letters nor any of their terms or substance shall be disclosed,
directly or indirectly, to any other person except (a) to your directors, officers, employees,
agents and advisors who are directly involved in the consideration of this matter or (b) as may be
compelled in a judicial or administrative proceeding or as otherwise required by law (in which case
you agree to inform us promptly thereof), provided, that the foregoing restrictions shall
cease to apply after this Commitment Letter has been accepted by you and, provided
further, that in any event (other than as described in clauses (a) and (b) above) you shall
not disclose either Fee Letter or the terms and substance thereof. Each Commitment Party agrees to
treat all non-public information provided to them by or on behalf of the Borrower hereunder
confidentially in accordance with their customary practices.

     Each of the Commitment Parties hereby notifies you that, pursuant to the requirements of the
USA Patriot Act, Title III of Pub. L. 107-56 (signed into law on October 26, 2001) (the
“Patriot Act”), it is required to obtain, verify and record information that identifies the
Borrower and each Guarantor (as defined in the Term Sheet), which information includes names and
addresses and other information that will allow such Lender to identify the Borrower and each
Guarantor in accordance with the Patriot Act.

     The reimbursement, indemnification and confidentiality provisions contained herein and in the
Fee Letters shall remain in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the termination of this
Commitment Letter or any Commitment Party’s commitments or agreements hereunder.

     If the foregoing correctly sets forth our agreement, please indicate your acceptance of the
terms hereof and of the Term Sheet and the Fee Letters by returning to JPMCB executed counterparts
hereof and of the Fee Letters not later than 5:00 p.m., New York City time, on October 4, 2006.
The Commitment Parties’ respective commitments and agreements

 

 

					
	Bally Total Fitness	 	 	 	 
	  Holding Corporation
	 	7
	 	October 3, 2006

herein will expire at such time in the event JPMCB has not received such executed counterparts
in accordance with the immediately preceding sentence.

[Rest of page intentionally left blank]

 

 

     JPMCB, JPMorgan, Morgan Stanley, Goldman Sachs and Canyon are pleased to have been given the
opportunity to assist you in connection with this important financing.

	 	 	 	 	 
	 	Very truly yours,

JPMORGAN CHASE BANK, N.A.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	J.P.MORGAN SECURITIES INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	MORGAN STANLEY SENIOR FUNDING, INC.

 	 
	 	By:  	 	 
	 	 	Title: Authorized Signatory	 
	 
	 	GOLDMAN SACHS CREDIT PARTNERS L.P.

 	 
	 	By:  	 	 
	 	 	Title: Authorized Signature	 
	 
	 	CANYON CAPITAL ADVISORS LLC

  on behalf of its managed accounts and funds

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 

Commitment Letter

 

 

Accepted and agreed to

as of the date first

written above by:

BALLY TOTAL FITNESS HOLDING CORPORATION

	 	 	 	 
	 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

Commitment Letter

 

 

Exhibit A

BALLY TOTAL FITNESS HOLDING CORPORATION

SENIOR SECURED CREDIT FACILITIES

Summary of Terms and Conditions

October 2006

     Bally Total Fitness Holding Corporation, a Delaware corporation (the “Borrower”)
requires a term loan facility in the amount of $205,900,000 (the “Tranche B Term Loan
Facility”), a delayed-draw term loan facility in the amount of $34,100,000 (the “Delayed-Draw
Term Loan Facility” and together with the Tranche B Term Loan Facility, the “Term Loan
Facilities”) and a revolving credit facility in the amount of $40,000,000 (the “Revolving
Credit Facility” and, together with the Term Loan Facilities, the “Facilities”) in
order to refinance its Credit Agreement, dated as of November 18, 1997, as amended and restated as
of October 14, 2004, as amended (the “Existing Credit Agreement”), and to amend certain
provisions of the Existing Credit Agreement. The Facilities will be made available through an
amendment and restatement of the Existing Credit Agreement (the Existing Credit Agreement, as
amended and restated, the “Amended and Restated Credit Agreement”). Except as contemplated
by this Summary of Terms and Conditions, the terms and provisions of the Existing Credit Agreement
shall remain the same. Capitalized terms defined in the Existing Credit Agreement and not
otherwise defined herein are used herein as therein defined. Set forth below is a summary of the
terms and conditions for the Facilities and the Amended and Restated Credit Agreement:

I. Parties

	 	 	 
	Borrower:

	 	Bally Total Fitness Holding Corporation (the “Borrower”).
	 
	 	 
	Guarantors:

	 	Each of the Borrower’s direct and indirect domestic subsidiaries other than Unrestricted
Subsidiaries, Lincoln Indemnity Company, Finance Subsidiaries and Real Estate Financing
Subsidiaries (the “Guarantors”; the Borrower and the Guarantors, collectively, the “Credit
Parties”).
	 
	 	 
	Sole and Exclusive
	 	 
	Lead Arranger
	 	 
	and Sole Bookrunner:

	 	J.P.Morgan Securities Inc. (in such capacity, the “Lead Arranger”).
	 
	 	 
	Administrative Agent:

	 	JPMorgan Chase Bank, N.A. (“JPMCB” and, in such capacity, the “Administrative Agent”).
	 
	 	 
	Syndication Agent:

	 	Morgan Stanley Senior Funding, Inc. (“Morgan Stanley” and, in such capacity, the “Syndication Agent”).

 

 

2

	 	 	 
	Lenders:

	 	A syndicate of banks, financial institutions and other entities (including JPMCB, Morgan Stanley,
Canyon Capital Advisors LLC (“Canyon”) and Goldman Sachs Credit
Partners L.P. (“Goldman Sachs”)) either constituting lenders under the Existing Credit Agreement that
have consented to the Amended and Restated Credit Agreement or identified by JPMCB and arranged by
the Lead Arranger and reasonably acceptable to the Borrower (collectively, the “Lenders”).

II. Revolving Credit Facility

	 	 	 
	Type and Amount of Facility:

	 	Revolving credit facility (the “Revolving Credit Facility”) in the amount of $40,000,000 (the
commitments thereunder, the “Revolving Credit Commitments” and the loans thereunder, the
“Revolving Credit Loans”).
	 
	 	 
	Availability:

	 	The Revolving Credit Facility shall be available on a revolving basis during the period commencing
on the Closing Date (as hereinafter defined) and ending on the earlier of (i) October 1, 2010 and
(ii) the Early Maturity Date (such earlier date, the “Revolving Credit Termination Date”). As
used herein, “Early Maturity Date” means the date 14 days prior to the maturity date of the
Borrower’s 9-7/8% Senior Subordinated Notes due 2007 (the
“Senior Subordinated Notes”), including if all
such Senior Subordinated Notes have been extended (as extended from time to time); provided,
however such extended maturity date for the Facilities shall not be later than October 1, 2010.
To the extent the Senior Subordinated Notes are not otherwise extended, the Senior Subordinated
Notes shall be repaid, renewed or extended on terms reasonably satisfactory to JPMorgan by their
maturity date; provided, however, a refinancing, renewal or other extension on terms consistent
with or better than the existing Senior Subordinated Notes Indenture shall be acceptable to
JPMorgan and provided, further that the consent of JPMorgan shall not be required for (i) the
issuance of common equity of the Borrower to holders of Senior Subordinated Notes as consideration
for amendments and or extensions, (ii) increases in interest rates on the Senior Subordinated
Notes which are payable in kind at the Borrower’s option, (iii) other amendments or revisions
which do not require cash payments and which are not adverse to the Lenders and (iv) reimbursement
of out-of-pocket expenses of such holders (“Permitted Subordinated Indenture Amendments”).
	 
	 	 
	Letters of Credit:

	 	The Revolving Credit Facility shall be available for the issuance of letters of credit (the
“Letters of Credit”) by JPMCB and, with the consent of the Administrative Agent,

 

 

3

	 	 	 
	 

	 	any other Lender designated by the Borrower (in such capacity,
the “Issuing Lender”). No Letter of Credit shall have
an expiration date after the date which is five business days
prior to the Revolving Credit Termination Date.
	 
	 	 
	 

	 	Letters of Credit outstanding under the Existing Credit Agreement shall be deemed to be issued under the Amended and Restated Credit
Agreement.
	 
	 	 
	 

	 	Drawings under any Letter of Credit shall be reimbursed by the Borrower (whether
with its own funds or with the proceeds of Revolving Credit Loans) no later than
the business day following notice. To the extent that the Borrower does not so
reimburse the Issuing Lender, the Lenders under the Revolving Credit Facility
shall be irrevocably and unconditionally obligated to reimburse the Issuing
Lender on a pro rata basis.
	 
	 	 
	 

	 	The unconditional obligation of Lenders under the Revolving Credit Facility
shall apply to Letters of Credit which expire after the Early Maturity Date.
	 
	 	 
	Maturity:

	 	The Revolving Credit Termination Date.
	 
	 	 
	Purpose:

	 	The proceeds of the Revolving Credit Loans shall be used for general corporate
purposes, including to finance permitted expansions and investments, and to
finance working capital needs.

III. Term Loan Facilities

	 	 	 
	Types and Amounts of
	 	 
	Facilities:

	 	Tranche B Term Loan Facility: A tranche B term loan
facility (the “Tranche B Term Loan Facility”) in an
aggregate principal amount of $205,900,000 (the
commitments thereunder, the “Tranche B Term
Commitments”, and the loans thereunder, the “Tranche
B Term Loans”).
	 
	 	 
	 

	 	Delayed-Draw Term Loan Facility: A delayed-draw term
loan facility (the “Delayed-Draw Term Loan Facility”;
together with the Tranche B Term Loan Facility, the
“Term Loan Facilities”; and the Term Loan Facilities
together with the Revolving Credit Facility, the
“Facilities”) in an aggregate original principal
amount of $34,100,000 (the commitments thereunder,
the “Delayed-Draw Commitments”; together with the
Tranche B Term Commitments, the “Term

 

 

4

	 	 	 
	 

	 	Commitments”; the Term Commitments together with the Revolving Credit
Commitments, the “Commitments”); the loans thereunder, the “Delayed-Draw Term
Loans”; together with the Tranche B Term Loans, the “Term Loans”; and the Term
Loans together with any Revolving Credit Loans, the “Loans”).
	 
	 	 
	Availability:

	 	The Tranche B Term Loans shall be made in a single
drawing on the Closing Date.
	 
	 	 
	 

	 	The Delayed-Draw Term Loans may be made no more
frequently than monthly and in a minimum amount of
$1,000,000 during the period commencing on the
Closing Date and ending on the day which is 18 months
after the Closing Date.
	 
	 	 
	Maturity:

	 	The earlier to occur of (i) October 1, 2010 and (ii)
the Early Maturity Date (such earlier date, the “Term
Loan Termination Date”).
	 
	 	 
	Amortization:

	 	The Tranche B Term Loans shall be repayable in equal
consecutive quarterly installments, beginning
October 31, 2007, in an amount equal to 0.25% of
the original principal amount of the Term Loans;
provided, that the entire balance of unpaid principal
outstanding on the Term Loans shall be repaid on the
Term Loan Termination Date.
	 
	 	 
	 

	 	The Delayed-Draw Term Loans shall be repaid in a
single installment on the Term Loan Termination Date.
	 
	 	 
	Proceeds:

	 	The proceeds of the Tranche B Term Loans shall be
used to refinance indebtedness of the Borrower under
the term loan facility and the revolving credit
facility outstanding under the Existing Credit
Agreement, and to pay fees and expenses related to
such refinancing.
	 
	 	 
	 

	 	The remaining proceeds of the Tranche B Term Loans may be used
for other general corporate purposes of the Borrower and its
subsidiaries including, without limitation, to finance their
working capital needs.
	 
	 	 
	 

	 	The proceeds of the Delayed-Draw Term Loans may be used to
finance or refinance capital expenditures made by the Borrower
and/or its subsidiaries after the Closing Date.

 

 

5

IV. Certain Payment Provisions Applicable to the Facilities

	 	 	 
	Fees and Interest Rates:

	 	As set forth on Annex I.
	 
	 	 
	Optional Prepayments and
	 	 
	Commitment Reductions:

	 	Loans may be prepaid and Commitments may be
reduced by the Borrower in minimum amounts
substantially as set forth in the Existing
Credit Agreement.
	 
	 	 
	 

	 	Optional and mandatory prepayments of the Term Loans
(including reductions of unutilized
Delayed-Draw Commitments) made on or prior
to the first anniversary of the Closing Date
shall be accompanied by a prepayment premium
equal to 1% of the principal amount to be
prepaid (or reduced); provided that such prepayment premium shall not
be payable with respect to (i) mandatory prepayments based on excess
cash flow or (ii) the first $25,000,000 of mandatory prepayments
made from asset sales if option (A) of clause (i) in the next
succeeding paragraph is selected.
	 
	 	 
	Mandatory Prepayments:

	 	The Term Loans shall be prepaid, the
Delayed-Draw Term Commitments shall be
permanently reduced and outstanding
Revolving Credit Loans shall be prepaid (but
Revolving Credit Commitments shall not be
reduced) by (i) 100% of the net proceeds of
any sale or other disposition (including as
a result of casualty or condemnation) by the
Borrower or any of its restricted
subsidiaries of any assets (subject to
exceptions to be agreed upon; provided that,
at the Borrower’s option, the Borrower and
its restricted subsidiaries may retain
either (A) up to $25 million of net cash
proceeds from Permitted Sale/Leasebacks and
up to $25 million of net cash proceeds from
Non-Core Asset Sales (as each such term is
defined below under “Negative Covenants”)
and, thereafter, may retain 50% of
incremental net cash proceeds from Permitted
Sale/Leasebacks and Non-Core Asset Sales up
to an aggregate amount of $25 million of
incremental net cash proceeds or (B) up to
$50 million of net cash proceeds from
Permitted Sale/Leasebacks and/or Non-Core
Asset Sales), (ii) 100% of the net proceeds
of the incurrence of any indebtedness by the
Borrower or any of its restricted
subsidiaries (subject to exceptions to be
agreed upon), and (iii) 50% of excess cash
flow (to be defined in a manner consistent
with the Existing Credit Agreement) for each
fiscal year of the Borrower (commencing with
the 2006 fiscal year).
	 
	 	 
	 

	 	All such amounts shall be applied, first, to the
prepayment of the Term Loans, second, to the permanent
reduction of the Delayed-Draw Term Commitments and,
third, to the prepayment of the Revolving Credit Loans.
Each such prepayment of the Term Loans shall be applied to the
Delayed-Draw Term Loans and the Tranche B Term Loans ratably and
to the installments thereof in the direct order of

 

 

6

	 	 	 
	 

	 	maturity and may not be reborrowed.
	 
	 	 
	 

	 	The Revolving Credit Loans shall be prepaid and the Letters of
Credit shall be cash collateralized or replaced to the extent
such extensions of credit exceed the amount of the Revolving
Credit Commitments.

V. Collateral

	 	 	 
	 

	 	The obligations of each Credit Party in respect
of the Facilities shall be secured ratably with
the obligations under any Interest Rate Hedging
Agreement with any person which is a Lender (or
any Affiliate thereof) at the time such Interest
Rate Hedging Agreement is entered into and up to
$10,000,000 of cash management obligations, by a
perfected first priority security interest (or,
with respect to any item of collateral, such
other priority as currently secures the Existing
Credit Agreement) in substantially all of its
tangible and intangible assets (including,
without limitation, accounts receivables,
intellectual property, owned real property,
leased real property (to the extent required by
the Existing Credit Agreement) and all of the
capital stock of each of the Borrower’s direct
and indirect domestic subsidiaries and 65% of
the capital stock of each of the Borrower’s
first-tier foreign subsidiaries unless such a
pledge of the foreign subsidiary’s capital stock
would result in materially adverse tax
consequences or is not legally permissible).
Notwithstanding the foregoing, the collateral
shall not include the capital stock of Lincoln
Indemnity Company or any Subsidiaries of
Unrestricted Subsidiaries.

VI. Certain Conditions

	 	 	 
	Initial Conditions:

	 	The effectiveness of the Amended and Restated
Credit Agreement, as well as the availability of
the Facilities, shall be conditioned upon
satisfaction (or waiver) of, among other things,
the “on-going conditions” set forth below and
the following conditions precedent (the date
upon which all such conditions precedent shall
be satisfied, the “Closing Date”) on or before
October 31, 2006:
	 
	 	 
	 

	 	(a)   The Amended and Restated Credit Agreement, and
confirmations, amendments and/or restatements of related credit
and collateral documentation (the “Amended and Restated
Credit Documentation” and, together with the Amended and
Restated Credit Agreement, the “Credit Documentation”)
shall have been executed and delivered by each Credit Party and
the Lenders as appropriate. The Credit Documentation shall be
substantially similar to the Existing

 

 

7

	 	 	 
	 

	 	Credit Agreement and related credit and collateral documents,
with such changes as are needed to reflect the terms set forth
in this Term Sheet or are mutually agreed to by the Borrower and
the Lenders.
	 
	 	 
	 

	 	(b)   The Lenders, the Administrative Agent and the Lead
Arranger shall have received all fees required to be paid, and
all reasonable expenses for which invoices have been presented,
on or before the Closing Date.
	 
	 	 
	 

	 	(c)   All necessary material consents to the financing
contemplated hereby and the collateral security therefor shall
have been obtained and be in full force and effect.
	 
	 	 
	 

	 	(d)   All action required to create, perfect and preserve the
priority of the Liens on the collateral for the Facilities (and
the guarantees thereof) shall have been taken (including the
filing of UCC financing statements, recording of mortgages and
filings with respect to intellectual property); provided
that real estate collateral matters may be completed by the date
which is 60 days after the Closing Date.
	 
	 	 
	 

	 	(e)   The Lenders shall have received such legal opinions
(including opinions as to New York law matters and no conflicts
with respect to the existing senior notes and senior
subordinated notes indenture of the Borrower), documents and
other instruments as are customary for transactions of this type
or as they may reasonably request, it being agreed that the
requirements of this paragraph shall be substantially consistent
with the corresponding opinions, documents and instruments
delivered in connection with the Existing Credit Agreement to
the extent applicable.
	 
	 	 
	 

	 	(f)   The Borrower shall have paid all unpaid accrued interest,
fees (including fronting fees in respect of all Letters of
Credit outstanding under the Existing Credit Agreement) and
commissions under the Existing Credit Agreement. The Lenders
shall have made such payments among themselves and to lenders
under the Existing Credit Agreement as directed by the
Administrative Agent in order that all amounts outstanding under
the revolving credit facility under the Existing Credit
Agreement shall have been repaid in full with the proceeds of
Tranche B Term Loans and the Facilities shall be appropriately
allocated among the Lenders.
	 
	 	 
	 

	 	(g)   The chief financial officer of the Borrower shall have
delivered a certificate in form and substance reasonably

 

 

8

	 	 	 
	 

	 	satisfactory to the Administrative Agent demonstrating in
reasonable detail that the Amended and Restated Credit Agreement
and related obligations (including cash management obligations)
do not and will not violate the existing senior notes or senior
subordinated notes indenture of the Borrower and its
subsidiaries.
	 
	 	 
	 

	 	(h)   The Borrower shall have delivered to the Lenders a
financial forecast, including income statements, balance sheets
and cash flow statements through 2010, in form and substance
reasonably satisfactory to the Administrative Agent.
	 
	 	 
	On-Going Conditions:

	 	The making of each extension of credit shall be conditioned
upon (a) the accuracy in all material respects of all representations and
warranties in the Credit Documentation (including, without limitation, the
senior debt representation), (b) there being no default or event of default in
existence at the time of, or after giving effect to the making of, such
extension of credit and (c) there shall not have occurred since the Closing
Date any event, development or circumstance which has had or could reasonably
be expected to have a Material Adverse Effect. As used herein and in the
Credit Documentation a “Material Adverse Effect” shall mean a material adverse
effect on (x) the business, operations, property or financial condition of the
Borrower and its subsidiaries taken as a whole (other than as disclosed in the
Public Filings), (y) the validity or enforceability of any of the Credit
Documentation or the rights and remedies of the Administrative Agent and the
Lenders thereunder or (z) the ability of the Borrower and its subsidiaries
taken as a whole to perform their respective obligations under the Credit
Documentation.

VII. Certain Documentation Matters

	 	 	 
	 

	 	The Credit Documentation
shall contain representations, warranties, covenants
and events of default customary for financings of
this type and consistent with the Existing Credit
Agreement and other terms reasonably deemed
appropriate by the Administrative Agent and
reasonably agreed to by the Borrower, including,
without limitation:

 

 

9

	 	 	 
	Representations and
	 	 
	Warranties:

	 	Financial statements; absence of undisclosed
liabilities; existence; compliance with law; power
and authority; enforceability of Credit
Documentation; no conflict with law or contractual
obligations; no material litigation; no default;
ownership of property; liens; intellectual
property; taxes; Federal Reserve regulations;
ERISA; Investment Company Act; subsidiaries;
restrictions on subsidiaries; senior debt;
environmental matters; accuracy of disclosure; and
creation and perfection of security interests.
	 
	 	 
	Affirmative Covenants:

	 	Delivery of financial statements relating to the
Borrower and its subsidiaries (it being understood
that a going-concern qualification or a
Sarbanes-Oxley qualification by the Borrower’s
auditors shall not be a default or event of default
under the Facilities provided the Borrower is
otherwise in compliance with the terms of the
Facilities, including the financial covenants),
reports, accountants’ letters, projections,
officers’ certificates and other information
reasonably requested by the Lenders (including
monthly compliance reports); delivery of 13-week
cash forecasts, updated monthly, in form and
substance reasonably satisfactory to the
Administrative Agent; payment of other obligations;
continuation of business and maintenance of
existence and material rights and privileges;
compliance with laws; maintenance of property and
insurance; ownership of subsidiaries; maintenance
of books and records; right of the Lenders to
inspect property and books and records; notices of
defaults, litigation, labor controversies and other
material events; material notices from holders of
subordinated debt; ERISA compliance; enforcement of
tax agreements; compliance with environmental laws;
further assurances (including, without limitation,
with respect to security interests in
after-acquired property); use of proceeds; and
payment of real estate taxes.
	 
	 	 
	 

	 	In addition, the Borrower will agree to raise at least $20 million of
additional net cash proceeds on or prior to December 31, 2006 from Permitted
Sale/Leasebacks and/or Non-Core Asset Sales.
	 
	 	 
	Financial Covenants:

	 	(a) Minimum LTM Consolidated Cash EBITDA (to be
defined in a manner reasonably satisfactory to the
Administrative Agent and the Borrower), tested
monthly.

 

 

10

	 	 	 
	 

	 	(b) Minimum Liquidity (to be defined in a manner reasonably
satisfactory to the Administrative Agent and the Borrower),
tested monthly.
	 
	 	 
	Negative Covenants:

	 	Limitations on: indebtedness; liens; guarantee
obligations; mergers, consolidations, liquidations,
dissolutions and mergers; sales of assets; investments
and restricted payments; payments and modifications of
subordinated and other debt instruments; transactions
with affiliates; sale and leasebacks; changes in
fiscal year; negative pledge clauses; changes in lines
of business; finance subsidiaries; unrestricted
subsidiaries; and amendments to the Tax Allocation and
Indemnity Agreement, dated as of January 9, 1996.

	 
	 	 
	 
	 	The negative covenants in the Existing Credit
Agreement will be revised as required by the
Administrative Agent, including the following
revisions:
	 
	 	 
	 

	 	•    The Borrower will be permitted to sell non-core assets
to be agreed upon for fair market value (“Non-Core
Asset Sales”).

	 
	 	 
	 

	 	•     The Borrower will be permitted to enter into
sale/leaseback transactions at fair market value having
terms reasonably satisfactory to the Administrative Agent
(together with appropriate documentation that the resulting
obligations are permitted by the Borrower under the
existing senior notes and senior subordinated notes
indentures) with respect to certain fitness centers to be
agreed upon (“Permitted Sale/Leasebacks”).

	 
	 	 
	 

	 	•     The Borrower and its subsidiaries will not be permitted
to sell assets (subject to exceptions to be agreed upon as
long as the net cash proceeds thereof are applied to
permanently reduce the Facilities) except for Non-Core
Asset Sales and Permitted Sale/Leasebacks.

	 
	 	 
	 

	 	•     The Borrower and its subsidiaries will not be permitted
to issue or incur additional debt (subject to de minimis
exceptions) unless the net cash proceeds thereof are used
to permanently reduce the Facilities.

	 
	 	 
	 

	 	•     The ability of the Borrower and its subsidiaries to
finance assets with third parties will be limited.

	 
	 	 
	 

	 	•     The negative covenants will be amended (including,
without limitation, the negative covenants with respect to

 

 

11

	 	 	 
	 

	 	      Indebtedness and Liens) to permit the Borrower and its
subsidiaries to (i) finance insurance premiums and (ii)
obtain letters of credit, including letters of credit in
favor of Lincoln Indemnity (it being agreed that such
letter of credit obligations may be secured by up to $4.0
million of cash collateral to the extent the Borrower and
its restricted subsidiaries have received at least $4.0
million of net cash proceeds from the Permitted
Sale/Leasebacks and/or Non-Core Asset Sales).

	 
	 	 
	 

	 	•     The Borrower and its subsidiaries shall be permitted to
enter into and make investments in joint ventures by
contributing assets (provided that the amount of cash to be
contributed shall not exceed the amount permitted by the
general investment basket set forth in the Existing Credit
Agreement) on terms to be agreed upon.

	 
	 	 
	 

	 	•     The Borrower shall be able to enter into Permitted
Subordinated Indenture Amendments.

	 
	 	 
	Events of Default:

	 	Nonpayment of principal when due; nonpayment of
interest, fees or other amounts when due (subject to a
grace period consistent with the Existing Credit
Agreement); material inaccuracy of representations and
warranties; violation of covenants (subject, in the
case of certain affirmative covenants, to a grace
period set forth in the Existing Credit Agreement);
cross-default (as set forth in the Existing Credit
Agreement with a 28 day grace period (rather than a 10
day grace period) for all subsequent periods for
defaults under the existing senior notes and senior
subordinated notes indentures related to delivery of
financial statements); bankruptcy events; certain ERISA
events; judgments in excess of $5,000,000; actual or
asserted invalidity or impairment of any guarantee or
security document, subordination provisions or security
interest; condemnation of certain property; payments in
excess of $10,000,000 with respect to fines, penalties
and similar payments with respect to matters disclosed
in the Public Filings; and a change of control.
	 
	 	 
	Voting:

	 	Amendments and waivers with respect to the Credit
Documentation shall require the approval of Lenders
holding not less than 51% of the aggregate amount of
the Loans, participations in Letters of Credit and
unused Commitments under the Facilities (the “Majority
Lenders”), except that (a) the consent of each Lender
directly affected thereby shall be required with
respect to (i) reductions in the amount or

 

 

12

	 	 	 
	 

	 	extensions of scheduled principal installments or the scheduled final date of
maturity of any Loan, (ii) reductions in the rate of interest or any fee or
other amount or extensions of any scheduled due date thereof, and (iii)
increases in the amount or extension of the expiry date of any Lender’s
Commitment and (b) the consent of 100% of the Lenders shall be required with
respect to (i) modifications to any of the voting percentages and (ii) releases
of all or substantially all of the Guarantors or of all or substantially all of
the collateral. The Credit Documentation will provide for customary lender
replacement rights, including, without limitation, regarding non-consenting
Lenders in respect of amendment or waiver requests requiring the approval of
all Lenders for which the approval of the Majority Lenders has been obtained.
	 
	 	 
	Assignments
	 	 
	And Participations:

	 	The Lenders shall be permitted to assign and sell
participations in their Loans and Commitments,
subject, in the case of assignments, to the consent
of the Administrative Agent, the Issuing Lender and
the Borrower (which consent in each case shall not be
unreasonably withheld and shall not be required from
the Borrower during the existence of a default or
Event of Default or if the assignment is to an
affiliate, an Approved Fund or to an existing
Lender); provided that any assignment of a Term Loan,
a Term Commitment or a Delayed-Draw Commitment shall
not require the consent of the Issuing Lender or,
with respect to assignments to an affiliate, an
Approved Fund or to an existing Lender, the
Administrative Agent. In the case of partial
assignments (other than to another Lender, an
Approved Fund or to an affiliate of a Lender), the
minimum assignment amount shall be $1,000,000 in each
case unless otherwise agreed by the Borrower, the
Issuing Lender and the Administrative Agent.
Participants shall have the same benefits as the
Lenders with respect to yield protection and
increased cost provisions. Voting rights of
participants shall be limited to those matters with
respect to which the affirmative vote of the Lender
from which it purchased its participation would be
required as a directly affected Lender as described
under “Voting” above. Pledges of Loans in accordance
with applicable law shall be permitted without
restriction.
	 
	 	 
	Yield Protection:

	 	The Credit Documentation shall contain customary
provisions (a) protecting the Lenders against
increased costs or loss of yield resulting from
changes in reserve, tax, capital adequacy and other
requirements of law and from the imposition of or

 

 

13

	 	 	 
	 

	 	changes in withholding or other taxes and (b) indemnifying the Lenders for
“breakage costs” incurred in connection with, among other things, any
prepayment of a Eurodollar Loan (as defined in Annex I) on a day other than the
last day of an interest period with respect thereto.
	 
	 	 
	Expenses and
	 	 
	Indemnification:

	 	The Borrower shall pay (a) all reasonable
out-of-pocket expenses of JPMCB, the
Administrative Agent and the Lead Arranger
associated with the syndication of the
Facilities and the preparation, execution,
delivery and administration of the Credit
Documentation and any amendment or waiver
with respect thereto (including the
reasonable fees and disbursement charges of
counsel) and (b) all reasonable
out-of-pocket expenses of the Administrative
Agent, the Lead Arranger and the other
Lenders (including the reasonable fees,
disbursements and other charges of counsel)
in connection with the enforcement of the
Credit Documentation.
	 
	 	 
	 

	 	The Administrative Agent, the Syndication
Agent, the Lead Arranger and the Lenders
(and their affiliates and their respective
officers, directors, employees, advisors and
agents) will be indemnified and held
harmless against any loss, liability, cost
or expense incurred in respect of the
financing contemplated hereby or the use or
the proposed use of proceeds thereof (except
to the extent resulting from the gross
negligence, bad faith or willful misconduct
of the indemnified party).
	 
	 	 
	Governing Law and Forum:

	 	State of New York.
	 
	 	 
	Counsel to the Administrative
	 	 
	Agent, the Syndication Agent
	 	 
	and the Lead Arranger:

	 	Simpson Thacher & Bartlett LLP.

 

 

Annex I

Interest and Certain Fees

	 	 	 
	Interest Rate Options:

	 	The Borrower may elect that the Loans comprising each borrowing bear
interest at a rate per annum equal to:
	 
	 	 
	 

	 	(i) the Reference Rate plus the Applicable Margin; or
	 
	 	 
	 

	 	(ii) the Eurodollar Rate plus the Applicable Margin.
	 
	 	 
	 

	 	As used herein:
	 
	 	 
	 

	 	“Reference Rate” means the higher of (i) the rate
of interest publicly announced by JPMCB as its
prime rate in effect at its principal office in
New York City (the “Prime Rate”) and (ii) the
federal funds effective rate from time to time
plus 0.5%.
	 
	 	 
	 

	 	“Eurodollar Rate” means the rate appearing on page
3750 of the Telerate Service (adjusted for
statutory reserve requirements for eurocurrency
liabilities) as the rate for eurodollar deposits
for one, two, three or six months (as selected by
the Borrower).
	 
	 	 
	 

	 	The applicable margins (the “Applicable Margins”)
shall be (i) in the case of Loans bearing interest
based upon the Eurodollar Rate, 4.75% and (ii) in
the case of Loans bearing interest based upon the
Reference Rate, 3.75%.
	 
	 	 
	Interest Payment Dates:

	 	In the case of Loans bearing interest based upon
the Reference Rate (“Reference Rate Loans”),
quarterly in arrears.
	 
	 	 
	 

	 	In the case of Loans bearing interest based upon
the Eurodollar Rate (“Eurodollar Loans”), on the
last day of each relevant interest period and, in
the case of any interest period longer than three
months, on each successive date three months after
the first day of such interest period.
	 
	 	 
	Commitment Fees:

	 	The Borrower shall pay a commitment fee calculated
at a rate per annum equal to .50% on the average
daily unused portion of the Revolving Credit
Commitments, payable quarterly in arrears. The
Borrower shall pay a commitment fee calculated at
a rate per annum equal to 1.00% on the daily
unused portion of the Delayed-Draw Term
Commitments, payable in arrears on a quarterly
basis and on each date Delayed-Draw Term Loans are
made.

 

 

2

	 	 	 
	Letter of Credit Fees:

	 	The Borrower shall pay a commission on all
outstanding Letters of Credit at a per annum rate
equal to the Applicable Margin for Eurodollar
Loans set forth above on the face amount of each
such Letter of Credit. Such commission shall be
shared ratably among the Lenders participating in
the Revolving Credit Facility (including the
Issuing Lender) and shall be payable quarterly in
arrears.
	 
	 	 
	 

	 	A fronting fee equal to .25% per annum on the face
amount of each Letter of Credit shall be payable
quarterly in arrears to the Issuing Lender for its
own account. In addition, customary
administrative, issuance, amendment, payment and
negotiation charges shall be payable to the
Issuing Lender for its own account.
	 
	 	 
	Default Rate:

	 	At any time when the Borrower is in default in the
payment of any amount of principal due under the
Facilities, such amount shall bear interest at 2%
above the rate otherwise applicable thereto.
Overdue interest, fees and other amounts shall
bear interest at 2% above the rate applicable to
Reference Rate Loans. All principal of the Loans
shall bear interest at 2% above the rate otherwise
applicable thereto upon the occurrence of an Event
of Default based on the Borrower’s failure to make
payments when due under the Facilities.
	 
	 	 
	Rate and Fee Basis:

	 	All per annum rates shall be calculated on the
basis of a year of 360 days (or 365/366 days, in
the case of Reference Rate Loans the interest rate
payable on which is then based on the Prime Rate)
for actual days elapsed.

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