CONSENT AGREEMENT (TCP)
EXECUTION COPY
CONSENT AGREEMENT (TCP)
This Consent Agreement (“Agreement”) is dated as of August 24, 2005, and is made by
and between Bally Total Fitness Holding Corporation, a Delaware corporation (“Bally” or the
“Company”), and the Persons listed on the signature pages attached hereto (collectively,
the “Holder”). Certain capitalized terms used herein and not otherwise defined have the
meanings set forth in Article VI hereof.
WHEREAS, the Holder is the beneficial owner of $129,235,000 in aggregate principal amount of 9
7/8% Senior Subordinated Notes due 2007 of the Company (the “Notes”) issued pursuant to the
Indenture, dated as of December 16, 1998, between the Company and U.S. Bank National Association,
as trustee (the “Indenture”); and
WHEREAS, the Company desires to seek waivers through November 30, 2005 (the “Waiver”)
of any Default or Event of Default (as such terms are defined in the Indenture) arising from the
failure to comply with the covenants set forth in Sections 7.4 and 10.17 of the Indenture, which
require Bally to file with the SEC, and furnish to the Trustee and holders of Notes, the reports
required to be filed by the Company pursuant to the Exchange Act; and
WHEREAS, Section 9.2 of the Indenture provides that, with the consent of the holders of at
least a majority in aggregate principal amount of the outstanding Notes, the Company and the
Trustee may enter into an indenture supplemental to the Indenture for the purpose of amending,
modifying or changing the Indenture or the Notes; and
WHEREAS, Section 5.13 of the Indenture provides that the holders of at least a majority in
aggregate principal amount of the outstanding Notes may waive any past Default under the Indenture;
and
WHEREAS, to effect the Waiver, the Company and the Trustee must enter into a indenture
supplemental to the Indenture (the “Supplemental Indenture”) in accordance with Section 9.2
of the Indenture that includes a waiver of past Defaults under Section 5.13 of the Indenture; and
WHEREAS, the Holder (along with other holders who together with the Holder beneficially own a
majority in aggregate principal amount of Notes outstanding under the Indenture) has agreed with
the Company to consent to the Waiver, subject to the conditions set forth below; and
NOW, THEREFORE, in consideration of the premises and the representations, warranties,
covenants and agreements herein contained and intending to be legally bound hereby, Bally and the
Holder hereby agree as follows:
ARTICLE I
DELIVERY OF CONSENT FOR WAIVER AND RELATED MATTERS
DELIVERY OF CONSENT FOR WAIVER AND RELATED MATTERS
Section 1.1 (a) Acknowledgement. The Holder acknowledges that Bally has
failed to file or may fail to file with the SEC, and has failed or may fail to furnish to holders
of Notes and
the Trustee certain of the reports and notices required by Sections 7.4, 10.17 and 10.18(b) of
the Indenture and applicable provisions of the Exchange Act.
(b) Waiver. Pursuant to Sections 5.13, 9.2 and 10.19 of the Indenture, subject to
Article V below, the Holder hereby irrevocably waives any Default or Event of Default that has
arisen or may arise under the Indenture as a result of a failure by Bally to comply fully with
Sections 7.4, 10.17 and 10.18(b) of the Indenture at any time prior to the close of business on
November 30, 2005 and hereby authorizes the Trustee to enter into the Supplemental Indenture in
form and substance satisfactory to the Trustee for purposes of implementing the foregoing waiver;
provided, however, that in no event shall this waiver be effective with respect to any Default or
Event of Default that exists or would exist after the close of business on November 30, 2005 if
Bally fails to comply fully with the provisions of Sections 7.4, 10.17 or 10.18(b) of the Indenture
prior to 5PM, eastern standard time, on November 30, 2005. Upon execution of the Supplemental
Indenture, the Notice of Default delivered by the Holder on August 4, 2005 shall be withdrawn and
shall no longer be effective.
Section 1.2 Further Action by Holder. As soon as practicable after the
effectiveness of the Waiver as provided in Article V below, the Holder shall instruct the DTC
Participant(s) through which it beneficially owns the Notes to execute and deliver a consent form
and shall instruct such DTC Participant(s) to take all such further action as may be necessary to
effect the consent of the Holder evidenced by this Agreement on behalf of such Holder. In
addition, the Holder shall, at the written request of Bally, at any time and from time to time
following the execution of this Agreement execute and deliver to Bally all such further instruments
and take all such further action as may be reasonably necessary or appropriate in order to confirm
or carry out its obligations under this Agreement and the transactions contemplated hereby.
Section 1.3 Delivery of Consent for Waiver; Consent Payment. Upon the
effectiveness of the Waiver as provided in Article V of this Agreement, the Holder shall be deemed
to have transferred and delivered to Bally or any of its Agents, its consent to the Waiver as set
forth in Section 1.1(b). When (i) Bally receives sufficient consents so that, when taken together
with this Agreement, it has received consents from a majority in aggregate principal amount of
Notes outstanding under the Indenture and (ii) the other conditions set forth in Article V are
satisfied, it will enter into the Supplemental Indenture with the Trustee as soon as practicable
thereafter, but in no event later than 2 business days thereafter. In consideration of such
consent to the Waiver, Bally shall, or shall cause its transfer agent and registrar (the
“Transfer Agent”) to issue and deliver to the Holder certificates representing 9.2308
shares (collectively, the “Shares”) of the Company’s common stock, par value $0.01 per
share (“Common Stock”), per $1,000 in principal amount of Notes beneficially owned by such
Holder (the “Consent Fee”). The Company will instruct its transfer agent to issue the
Shares representing the Consent Fee within two business days after the execution of the
Supplemental Indenture, and will instruct the transfer agent to deliver the Shares in payment of
the Consent Fee as promptly as practicable thereafter. Fractional shares that would otherwise be
issuable will be rounded to the nearest whole number, with fractions equal to or greater than 0.5
being rounded up and fractions less than 0.5 being rounded down.
Section 1.4 Restricted Securities. The Holder understands that the Shares are
being issued only in a transaction not involving any public offering in the United States within
the
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meaning of the Securities Act, the Shares have not been registered under the Securities Act or
any other applicable securities law, that the Shares will be “restricted securities” within the
meaning of Rule 144 under the Securities Act and that (A) prior to the expiration of the holding
period applicable to sales of restricted securities pursuant to Rule 144 under the Securities Act,
the Shares may be offered, resold, pledged or otherwise transferred only in accordance with any
applicable securities laws of any state of the United States or any other applicable jurisdiction
(i) (a) in a transaction meeting the requirements of Rule 144 under the Securities Act, (b) outside
the U.S. to a foreign purchaser in a transaction meeting the requirements of Regulation S, or (c)
pursuant to a transaction that is otherwise exempt from the registration requirements of the
Securities Act and state securities laws, (ii) to Bally or (iii) pursuant to an effective
registration statement under the Securities Act and (B) the Holder will notify any subsequent
purchaser from it of the resale restrictions set forth in (A) above, if then applicable. The
Holder agrees that the certificates representing the Shares shall bear a restrictive legend in
substantially the following form:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ACQUIRED IN A
TRANSACTION THAT WAS NOT REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION THEREFROM TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR LAWS.”
Section 1.5 (a) Consent Payment to Other Holders of Notes. After the
execution of this Agreement and the Supplemental Indenture, the Company agrees to make a consent
payment in exchange for a Waiver to all other holders of Notes who have certified to the Company
that they are “accredited investors” as defined in Rule 501 of Regulation D promulgated under the
Securities Act of either $20.00 in cash or 9.2308 shares of Common Stock per $1,000 principal
amount of Notes held by such other holders, at the election of the holder thereof, subject to
compliance with applicable law. All other holders of Notes who have not certified to the Company
that they are “accredited investors” will be paid $20.00 in cash per $1,000 principal amount of
Notes held by such holders in exchange for a Waiver.
(b) Stock Purchase. At the request of the Company, the Holder hereby agrees to
purchase for cash shares of Common Stock from the Company (the “Additional Shares”) up to
the number of shares equal to the sum of (i) the number of shares that would have been paid to all
other consenting holders of Notes had such holders elected to receive shares of Common Stock
pursuant to Section 1.5(a) above and (ii) the number of shares that would have been paid to
consenting holders that have not certified to the Company that they are “accredited investors” had
such holders made such certification and elected to receive shares of Common Stock pursuant to
Section 1.5(a) above, in each case, at a per share price equal to (i) the cash consideration per
$1,000 principal amount of Notes described in Section 1.5(a) divided by (ii) the number of shares
of Common Stock per $1,000 principal amount of Notes described in
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Section 1.5(a). Such purchase and sale shall be completed the third business day after the
Company provides notice to Holder of its request that Holder purchase such shares. Such shares
shall be subject to Section 1.4.
Section 1.6 Prohibition of Certain Actions. The Holder agrees that, for a
period ending on the earliest of (a) one (1) year from the date of this Agreement, (b) the date of
the first annual meeting of the Company held for the purpose of electing directors after the date
of this Agreement, and (c) the occurrence of an Event of Default (as defined in the applicable
document) under the Indenture, the Senior Note Indenture or Section 8.04, 8.05 or 8.09 (solely as a
result of a default under Section 6.12, 6.14 or 6.15) of the Credit Agreement (as in effect as of
the date of the amendment thereto pursuant to which the lenders thereunder approve the consent
payments described in this Agreement but giving effect to such amendment with respect to the
covenant calculations described in Exhibit A hereto only if the terms of such amendment are no more
favorable to the Company than as set forth on Exhibit A, and provided that any waiver, consent or
other action after the date of such amendment thereof on the part of the lenders pursuant to the
Credit Agreement shall not be deemed to cure or otherwise affect such Event of Default for purposes
of this Agreement), unless such action shall have been specifically invited in writing by the Board
of Directors of the Company, such Holder will not, and will not direct any of its Agents, in any
manner to, directly or indirectly, (A) effect or seek, offer or propose (whether publicly or
otherwise) to effect, or cause or participate in or in any way assist any other person to effect or
seek, offer or propose (whether publicly or otherwise) to effect or participate in (i) the
nomination of any person to the Board of Directors of the Company; (ii) any “solicitation” of
“proxies” (as such terms are used in the proxy rules of the SEC) or consents to vote any voting
securities of the Company with respect to any director nominee that has not been nominated by the
Board of Directors or a shareholder proposal that has not been supported by the Board of Directors;
or (iii) or propose or publicly support any such shareholder proposal, (B) form, join or in any way
participate in a “group” (as defined under Section 13d-5 of the Exchange Act), which may engage in
any of the foregoing matters set forth in (A) above or (C) otherwise make any public announcement
that is adverse or critical of the management or the Board of Directors of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BALLY
REPRESENTATIONS AND WARRANTIES OF BALLY
The Company represents and warrants to the Holder as follows:
Section 2.1 Organization and Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority (i) to own, lease and operate its
properties, to carry on its business as now being conducted and (ii) to execute, deliver and
perform its obligations under this Agreement, including entering into the Supplemental Indenture,
and the other agreements to be executed by the Company in connection herewith and to consummate the
transactions contemplated hereby and thereby. The Company and its Subsidiaries are duly qualified
to do business and are in good standing in all jurisdictions wherein such qualification is
necessary and where failure so to qualify would have a material adverse effect on their business,
properties, operations, condition (financial or other), results of
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operations or prospects of the Company and its Subsidiaries, taken as a whole. The Company has
no equity investment in any person other than its Subsidiaries.
Section 2.2 Issuance of the Shares. The Shares and any Additional Shares will
be duly authorized and when issued in accordance with the terms hereof will be validly issued,
fully paid and nonassessable. There are no preemptive or similar rights of any stockholder of the
Company or any other person to acquire the Shares or the Additional Shares.
Section 2.3 Consent Agreement and Other Transaction Documents. This Agreement
and the other agreements and instruments contemplated hereby have been duly and validly authorized
by the Company, this Agreement has been, and each of the other agreements contemplated by this
Agreement will be, duly executed and delivered by the Company and this Agreement is, and each of
the other agreements contemplated by this Agreement will be, a valid and binding obligation of the
Company enforceable in accordance with its terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors’ rights generally.
Section 2.4 Non-Contravention. The execution and delivery by the Company of
this Agreement and the other agreements and transactions contemplated hereby to which the Company
is a party, do not and will not, with or without the giving of notice or the lapse of time, or both
(i) result in any violation of any terms of the charter documents of the Company; (ii) conflict
with or result in a breach by the Company or any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust or other agreement or instrument to which the
Company is a party or by which the Company or any of its properties or assets is bound or affected
or (iii) violate or contravene any applicable law, rule or regulation or any applicable decree,
judgment or order of any court or Governmental Body having jurisdiction over the Company or any of
its properties or assets.
Section 2.5 Certain Securities Law Matters. Assuming the accuracy of the
representations and warranties of the Holder set forth in Article III hereof, the Shares and any
Additional Shares may be issued to the Holder pursuant to this Agreement without registration under
the Securities Act by reason of Section 4(2) thereof and similar provisions under applicable state
securities laws.
Section 2.6 Capitalization. The authorized capital stock of the Company is
(a) 60,200,000 shares of Common Stock and (b) 10,000,000 shares of preferred stock, par value $.01
per share (the “Preferred Stock”). All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and nonassessable, have no
preemptive rights and, to our knowledge, have been issued in accordance with applicable securities
laws. As of June 30, 2005, there were: (a) 34,645,133 shares of Common Stock outstanding and (b)
there were no shares of Preferred Stock outstanding. As of August 4, 2005, the Company had
outstanding options, warrants and similar rights entitling the holders to purchase or acquire
4,753,600 shares of Common Stock and 1,404,570 shares of Common Stock reserved for future grants
under the Company’s equity incentive plans. Other than as set forth in the preceding sentence, the
Company does not have outstanding any securities (or obligation to issue any such securities)
convertible into, exchangeable for or otherwise entitling the holders thereof to acquire shares of
Common Stock. The Company has duly reserved from its authorized
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and unissued shares of Common Stock the full number of shares required for (a) all options,
warrants, convertible securities and other rights to acquire shares of Common Stock which are
outstanding and (b) all shares of Common Stock and options and other rights to acquire shares of
Common Stock which may be issued or granted under the stock option and similar plans which have
been adopted by the Company or any of its Subsidiaries.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE HOLDER
REPRESENTATIONS AND WARRANTIES OF THE HOLDER
The Holder represents and warrants to the Company as follows:
Section 3.1 Organization and Standing of the Holder. The Holder is duly
organized, validly existing and in good standing under the laws of its jurisdiction of its
incorporation or formation and has all requisite power and authority to own and operate its
properties, to carry on its business as now conducted and to enter into and, as applicable, perform
its obligations hereunder.
Section 3.2 Consent Agreement and Other Transaction Documents. This Agreement
and each other agreement contemplated hereby to which the Holder is a party have been duly and
validly authorized on behalf of the Holder. This Agreement has been, and each of the other
agreements contemplated by this Agreement will be, duly executed and delivered by the Holder and
this Agreement is, and each of the other agreements contemplated by this Agreement will be, a valid
and binding obligation of the Holder enforceable in accordance with their terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors’ rights generally.
Section 3.3 Non-Contravention. The execution and delivery by the Holder of
this Agreement and the transactions contemplated hereby to which the Holder is a party, do not and
will not, with or without the giving of notice or the lapse of time, or both (i) result in any
violation of any terms of the organizational documents of the Holder; (ii) conflict with or result
in a breach by the Holder or any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the Holder is a party
or by which the Holder or any of its properties or assets is bound or affected or (iii) violate or
contravene any applicable law, rule or regulation or any applicable decree, judgment or order of
any court or Governmental Body having jurisdiction over the Holder or any of its properties or
assets.
Section 3.4 Ownership. The Holder is the beneficial owner of the aggregate
principal amount of Notes as set forth under Holder’s name on the signature page hereto. There are
no outstanding agreements, arrangements or understandings under which such Holder or its nominee
may be obligated to Transfer any of the Notes.
Section 3.5 Investor Representations. The Holder is knowledgeable,
sophisticated and experienced in making, and is qualified to make, decisions with respect to
investments in shares representing an investment decision like that involved in the acquisition of
the Shares and the Additional Shares, including investments in securities issued by the Company.
The Holder is acquiring the number of Shares and the Additional Shares set forth in Sections 1.3
and 1.5 above
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in the ordinary course of its business and for its own account for investment (as defined for
purposes of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976 and the regulations thereunder)
only, and has no present intention of distributing any of the Shares or Additional Shares nor any
arrangement or understanding with any other persons regarding the distribution of such Shares
within the meaning of Section 2(11) of the Securities Act. The Holder is an “accredited investor”
within the meaning of Rule 501 of Regulation D promulgated under the Securities Act. The Holder
understands that the Shares and the Additional Shares are being issued to it in reliance on
specific exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of, and the Holder’s
compliance with, the representations, warranties, agreements, acknowledgments and understandings of
the Holder set forth herein in order to determine the availability of such exemptions and the
eligibility of the Holder to acquire the shares of Common Stock.
Section 3.6 Information Provided. The Holder has received and has had an
opportunity to review, and has been furnished with, all materials relating to the business,
finances and operations of the Company and materials relating to the issuance of the Shares which
have been requested by the Holder. In that regard, the Holder acknowledges that Bally has failed
to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and its
Quarterly Reports on Form 10-Q for the quarters ended June 30, 2004, September 30, 2004, March 31,
2005 and June 30, 2005, and that the Audit Committee of the Company’s Board of Directors has
determined that the previously issued financial statements for the years ended December 31, 2000
through 2003 and the quarter ended March 31, 2004 should not be relied upon. The Holder has been
afforded the opportunity to ask questions of the Company and has received satisfactory answers to
any such inquiries; and the Holder understands that its investment in the Shares and Additional
Shares involves a high degree of risk and that no Governmental Body has passed on or made any
recommendation or endorsement of the Shares or any Additional Shares.
Section 3.7 Terms of Consent. The terms of this Agreement were the result of
negotiations between the Holder, the Company, and representatives of the Company and the Holder and
the Holder was given the opportunity to review and comment upon the proposed terms of this
Agreement.
ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES
CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES
Section 4.1 Further Action by Bally. (a) Bally shall, at the written request
of the Holder, at any time and from time to time following the execution of this Agreement, execute
and deliver to the Holder all such further instruments and take all such further action as may be
reasonably necessary or appropriate in order to confirm or carry out its obligations under this
Agreement and the transactions contemplated hereby.
(b) So long as the restrictions in Section 1.6 above are effective, Bally shall provide to
Holder an officer’s certificate with respect to compliance with the covenants described in Section
1.6(c) within one business day after a compliance certificate is required to be delivered to the
Agent under the Credit Agreement pursuant to Section 6.03(e) of the Credit Agreement.
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Section 4.2 Publicity. Neither the Company nor the Holder shall, nor shall
they permit their respective Agents to, issue or cause the publication of any press release or make
any other public statement, filing or announcement with respect to this Agreement and the
transactions contemplated hereby without the prior approval of the other party; provided,
however, that the Company shall be entitled, without the prior approval of the Holder, to
make any press release or other public disclosure with respect to such transactions as is required
by applicable law or the NYSE; provided further, that the Company shall not
specifically name the Holder in any such release without the prior approval of the Holder unless
specifically required by applicable law or the NYSE to name the Holder. The Company and the Holder
shall cooperate in issuing press releases or otherwise making public statements with respect to
this Agreement and the transactions contemplated hereby, which cooperation shall include first
consulting the other party hereto concerning the requirement for, and timing and content of, such
public announcement.
Section 4.3 (a) Registration of Shares. Promptly after the execution of this
Agreement, the Company will enter into a customary registration rights agreement for the benefit of
the holders that will be issued shares of Common Stock in exchange for the Waiver (the “Eligible
Holders”), in a form reasonably acceptable to the Holder and its counsel, which will provide that
at such time as the Company becomes eligible to use a short form registration statement on Form S-3
or any successor form, upon written request from Eligible Holders holding a majority of the shares
of Common Stock issued in exchange for the Waiver (including the Additional Shares issued to the
Holder pursuant to Section 1.5(b) above), the Company shall use commercially reasonable efforts to
file a shelf registration statement as soon as practicable, but in no event later than 30 days
after such written notice is delivered, registering the resale of the Shares by the Eligible
Holders thereof and the resale of the Additional Shares by the Holder, pursuant to Rule 415 under
the Securities Act and have such shelf registration statement declared effective as soon as
practicable. So long as any Eligible Holder owns Shares (or, in the case of the Holder, Additional
Shares), the Company will file any amendments and/or supplements to the shelf registration
statement under the Securities Act covering the sale of the Shares by the Eligible Holder (or the
Additional Shares by the Holder), and supplement and keep current any prospectus forming a part of
such shelf registration statement, as may be necessary to permit the Company to comply with the
Securities Act and the rules and regulations thereunder through the second anniversary of the later
of (i) the issue date of the Shares or (ii) the issue date of the Additional Shares. The Company’s
obligation to file the shelf registration statement and keep it current shall depend on the Company
receiving from the Eligible Holders in writing such information regarding the Eligible Holders and
the distribution of the Shares and Additional Shares as the Company may, from time to time,
reasonably request. Notwithstanding anything to the contrary herein, the Company may delay or
suspend the effectiveness of the shelf registration statement, for a reasonable period of time, but
not in excess of an aggregate of 60 days in an calendar year, if the Company provides to the
Eligible Holders a certificate executed by the chief executive officer of the Company certifying
that the Board of Directors of the Company has determined reasonably and in good faith that the
initial effectiveness of the shelf registration statement or the continuing effectiveness thereof
would require the disclosure of material, non-public information that would be detrimental to the
Company if so disclosed or would otherwise materially adversely affect a financing, acquisition,
disposition, merger or other material transaction. Until such time as the shelf registration
statement is declared effective, the Eligible Holders shall also be granted “piggyback”
registration rights with respect to any registration proposed by the Company of its Common Stock
(other than on Forms S-8 or S-4).
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(b) All expenses incident to the Company’s performance of or compliance with its obligations
under the registration rights agreement will be borne by the Company, including, without
limitation, the reimbursement of the Eligible Holders for the reasonable expenses of one legal
counsel incurred relating to the registration of the Shares and the Additional Shares as set forth
above.
Section 4.4 Approval Right. Without the prior approval of the Holder,
Bally will not: (i) increase the consideration payable to the holders of the Senior Notes for a
similar waiver under the Senior Notes Indenture with respect to Bally’s failure to comply with its
reporting obligations thereunder in excess of $15.00 per $1,000 in principal amount of the Senior
Notes; or (ii) increase the consideration payable to the lenders under the Credit Agreement for
their approval of the waivers under the Indenture and Senior Notes Indenture and the related
consent payments in excess of $10.00 per $1,000 in principal amount of commitment thereunder.
ARTICLE V
CONDITIONS PRECEDENT TO EFFECTIVENESS
CONDITIONS PRECEDENT TO EFFECTIVENESS
The effectiveness of the Waiver provided by the Holder pursuant to Section 1.1 of this
Agreement and the obligation of the Company to pay the Consent Fee pursuant to Section 1.3 of this
Agreement are subject to the following conditions:
Section 5.1 Consents. Bally having received: (i) requisite consents from
holders of its Senior Notes in order to effect a proposed waiver under the Senior Note Indenture
similar to the Waiver; (ii) consents relating to the Waiver and the similar waiver under the Senior
Note Indenture and the related consent payments having been received from the necessary lenders
under the Credit Agreement.
Section 5.2 No Violations. In the sole judgment of the Company, there shall
not be any law or regulation, any injunction or action or other proceeding (pending or threatened)
that (in the case of any action or proceeding if adversely determined) would make lawful, invalid
or enjoin the implementation of the Waiver or payment of the Consent Fee or that would question the
legality or validity thereof.
ARTICLE VI
DEFINITIONS
DEFINITIONS
Section 6.1 Definitions. As used in this Agreement, in addition to the terms
defined elsewhere, the following terms shall have the meanings set forth below, unless the context
otherwise requires:
“Action” shall mean any action, suit or legal, administrative or arbitral proceeding
or investigation before any Governmental Body.
“Agent” shall mean, with respect to any Person, any officer, director, employee,
stockholder, controlling person (within the meaning of the Securities Act), affiliate or authorized
agent of such Person.
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“Credit Agreement” shall mean the Credit Agreement, dated as of November 18, 1997 (as
amended and restated as of October 14, 2004), among Bally Total Fitness Holding Corporation, as
Borrower, the Several Banks and Other Financial Institutions Parties Thereto, JPMorgan Chase Bank,
as Agent, Deutsche Bank Securities Inc., as Syndication Agent, LaSalle Bank National Association,
as Documentation Agent, and JPMorgan Securities Inc., as Sole Lead Arranger and Sole Bookrunner.
“DTC” shall mean The Depository Trust Company, a limited purpose trust company.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Governmental Body” shall mean any government or political subdivision thereof,
whether federal, state, local or foreign, or any agency or instrumentality of any such government
or political subdivision thereof, or any federal or state court or arbitrator.
“Holder” shall have the definition set forth in the first paragraph of this Agreement
and all of its successors and assigns.
“Lien” shall mean any lien, pledge, mortgage, security interest, charge, option or
other encumbrance or adverse claim of any kind.
“Losses” shall mean, with respect to any Person, all losses, claims, damages,
liabilities (including cost of preparation and attorneys’ fees) and out-of-pocket expenses of such
Person.
“Participant” shall mean a participating organization in DTC.
“Person” means any individual, corporation, partnership, joint venture, trust, estate,
limited liability company, unincorporated organization or governmental agency.
“SEC” means the Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Senior Note Indenture” means the Indenture, dated as of July 2, 2003 (as supplemented
on July 22, 2003), by and among Bally Total Fitness Holding Corporation, as Issuer, the Guarantors
party thereto and U.S. Bank National Association, as Trustee.
“Senior Notes” means the 10 1/2% Senior Notes due 2011 of Bally Total Fitness Holding
Corporation.
“Subsidiary” means any Person, a majority of the capital stock of which is owned by
the Company or another Subsidiary of the Company.
“Trustee” shall mean U.S. Bank National Association.
ARTICLE VII
MISCELLANEOUS
MISCELLANEOUS
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Section 7.1 Costs, Expenses and Taxes. Each party shall bear its own costs
and expenses in connection with the preparation, execution and delivery of this Agreement and the
issuance of the Shares and payment of the cash consideration; provided, however, that the Company
will pay for the reasonable fees and expenses of counsel to the Holder in connection with this
Agreement and the transactions contemplated hereby, including, without limitation, any actions
requested by the Company pursuant to Section 1.2. The Company shall pay any and all stamp and
other taxes payable or determined to be payable in connection with the execution and delivery of
this Agreement and the delivery of consent for the cash and Shares.
Section 7.2 Survival of Representations. The representations, warranties,
covenants and agreements of the Holder and the Company contained in this Agreement shall survive
the execution of the Supplemental Indenture.
Section 7.3 Prior Agreements. This Agreement and the other agreements
contemplated hereby constitute the entire agreement between the parties concerning the subject
matter hereof and supersedes any prior representations, understandings or agreements. There are no
representations, warranties, agreements, conditions or covenants, of any nature whatsoever (whether
express or implied, written or oral) between the parties hereto with respect to such subject matter
except as expressly set forth herein and in the other agreements contemplated hereby.
Section 7.4 Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any other provision or
the validity and enforceability of this Agreement in any other jurisdiction.
Section 7.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CHOICE OF
LAW RULES.
Section 7.6 Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of, or affect the interpretation
of, this Agreement.
Section 7.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same instrument, and either
of the parties hereto may execute this Agreement by signing any such counterpart. A facsimile
transmission of this Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party.
Section 7.8 Assignment; Binding Effect. The Holder shall not convey, assign
or otherwise transfer any of its rights or obligations under this Agreement without the express
written consent of Bally, and Bally shall not convey, assign or otherwise transfer any of its
rights and obligations under this Agreement without the express written consent of the Holder.
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement will limit or otherwise
restrict the ability of the Holder to transfer its Notes, but the consent of such Holder to the
Waiver will bind every subsequent holder of the Notes.
11
Section 7.9 Waiver; Remedies. No delay on the part of any Holder or Bally in
exercising any right, power or privilege under this Agreement shall operate as a wavier thereof,
nor shall any waiver on the part of any Holder or Bally of any right, power or privilege under this
Agreement operate as a waiver of any other right, power or privilege of such party under this
Agreement, nor shall any single or partial exercise of any right, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any other right, power
or privilege under this Agreement.
Section 7.10 Amendment. This Agreement may be modified or amended only by
written agreement of the parties to this Agreement.
Section 7.11 Termination. This Agreement shall automatically terminate without
any action by the parties hereto if the Supplemental Indenture implementing the Waiver has not been
executed and become effective by 6:00pm Eastern Daylight Time on September 2, 2005. In addition,
this Agreement may be terminated at the option of the Holder prior to effectiveness of the Waiver:
(i) for any reason beginning at 6:00pm Eastern Daylight Time on August 30, 2005; or (ii) at any
time before such time and date upon the occurrence of any development affecting the Company, its
business, assets, results of operations or financial condition (including without limitation the
announcement of any proposed transaction affecting any of the foregoing) deemed by the Holder in
its sole and absolute discretion to render the Waiver inadvisable. Any such revocation shall be
effective if communicated by electronic mail to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ at ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇.
Section 7.12 Liability. The obligations hereunder of each of the entities on
the signature pages hereto that comprise the Holder shall be several, and not joint, and each such
entity shall only be obligated with respect to its pro rata portion of any such obligation based on
its percentage ownership of the aggregate principal amount of Notes reflected on the signature
pages hereto.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have caused this
Agreement to be executed by their respective duly authorized officers, as of the date first above
written.
| BALLY TOTAL FITNESS HOLDING CORPORATION | ||||
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Title: | Senior Vice President, General Counsel | |||
| and Corporate Secretary | ||||
| NAME OF BENEFICIAL HOLDERS: | ||||
Date: August 24, 2005 |
||||
| SPECIAL VALUE BOND FUND II, LLC | ||||
| By: | SVIM/MSM II, LLC | |||
| Its: | Managing Member | |||
| By: | ▇▇▇▇▇▇▇▇▇▇ & CO., LLC | |||
| Its: | Managing Member | |||
| By: | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Title: | Principal | |||
| SPECIAL VALUE ABSOLUTE RETURN FUND, LLC | ||||
| By: | SVAR/MM, LLC | |||
| Its: | Managing Member | |||
| By: | ▇▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS, LLC | |||
| Its: | Managing Member | |||
| By: | ▇▇▇▇▇▇▇▇▇▇ & CO., LLC | |||
| Its: | Managing Member | |||
| By: | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Title: | Principal | |||
| SPECIAL VALUE OPPORTUNITIES FUND, LLC | ||||
| By: | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Title: | President | |||
| SPECIAL VALUE EXPANSION FUND, LLC | ||||
| By: | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||
| Title: | President | |||
| Aggregate Principal Amount Held: | ||||
| $129,235,000 of principal amount of Notes | ||||
| Name of Custodians: | ||||
| Bank of New York | ||||
| ▇▇▇▇▇ Fargo | ||||