EXHIBIT 10.1
CONFORMED COPY
FIRST AMENDMENT AND
WAIVER
FIRST AMENDMENT AND WAIVER, dated as of March 31, 2005 (this
“ Amendment ”), under the CREDIT AGREEMENT,
dated as of November 18, 1997, as amended and restated as of
October 14, 2004 (as in effect on the date immediately prior to the
date hereof, the “ Credit Agreement ”), among
BALLY TOTAL FITNESS HOLDING CORPORATION, a Delaware corporation
(the “Borrower ”), the lenders parties thereto
(the “ Lenders ”), JPMORGAN CHASE BANK, N.A., as
agent for the Lenders (the “ Agent ”), DEUTSCHE
BANK SECURITIES, INC., as Syndication Agent, and LASALLE BANK
NATIONAL ASSOCIATION, as Documentation Agent. Terms used herein,
but not defined, shall have the respective meanings set forth in
the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower has requested, and the undersigned Lenders
wish to consent to, certain amendments to and waivers of the Credit
Agreement;
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Amendment to
Section 1.01 of the Credit Agreement . (a) Section 1.01 of the
Credit Agreement is hereby amended by adding the following
definition in proper alphabetical order:
|
|
“ DOJ Investigation ” shall mean investigations,
requests for information and related matters initiated by the
Justice Department in connection with the previously announced
restatements of the Borrower’s financial statements and
related matters.
|
|
|
“ First Amendment ” shall mean the First
Amendment and Waiver dated as of March 31, 2005 to this
Agreement.
|
|
|
“ First Amendment Effective Date ” shall mean
the “Effective Date”, as defined in the First
Amendment, which date is March 31, 2005.
|
(b) The definition of “GAAP EBITDA” in Section 1.01 of
the Credit Agreement is hereby amended by (i) deleting the word
“and” which appears before clause (xi) and substituting
therefor a comma, deleting the period following clause (xi) and
(ii) adding the following at the end thereof:
|
|
, (xii)
investigation and restructuring cash fees and expenses in
connection with the matters described in the Disclosure Letter, the
DOJ Investigation and related matters and cash fees and expenses in
connection with matters relating to the preparation and
implementation of the revised business plan to be delivered
pursuant to Section 6.03(m) up to a maximum of (a) $5,000,000
incurred during the
|
2
|
|
fiscal year
ended December 31, 2004 and (b) $5,000,000 incurred during the
fiscal year ending December 31, 2005, (xiii) cash fines and
settlement payments in connection with the matters described in the
Disclosure Letter, the DOJ Investigation and related matters to the
extent paid by and not reimbursed to the Borrower or its
Subsidiaries in such period from insurance proceeds or by other
third parties (it being agreed that if any such cash fine or
settlement payment shall be so reimbursed in a subsequent period,
the amount of such reimbursement shall be deducted at such time in
calculating GAAP EBITDA) and (xiv) a cumulative non-cash charge for
the fiscal year of the Borrower ending on December 31, 2004 in an
aggregate amount not to exceed $5,000,000 relating to adjustments
of lease expense as a result of recalculating such lease expense on
a straight-line basis, provided , that the Borrower shall
have delivered to the Lenders in form and substance reasonably
satisfactory to the Agent a calculation of such non-cash charge
certified by a responsible officer of the Borrower as being
complete and correct in all material respects.
|
2. Amendment to
Section 6.03 of the Credit Agreement . (a) Section 6.03 of the
Credit Agreement is hereby amended by deleting clause (d) and
replacing it with the following:
|
|
(d) not later than forty (40) days after the end of each fiscal
month (other than the last month in each fiscal quarter),
Borrower’s unaudited consolidated statements of income and
cash flows for that portion of the fiscal year ending with such
month and its unaudited consolidated balance sheet as of the last
day of such fiscal month, certified by a responsible officer of
Borrower as being complete and correct in all material respects and
fairly presenting in all material respects its results of
operations and cash flows and financial condition and including a
comparison to the same period (or date, in the case of balance
sheets) for the prior fiscal year;
|
(b) Section 6.03 of the Credit Agreement is hereby amended (i) by
deleting the word “and” which appears at the end of
clause (j), (ii) deleting the period at the end of clause (k) and
substituting therefor a comma and (iii) adding the following at the
end thereof:
|
|
(l) no later than the first Monday of each calendar month,
beginning April 11, 2005, a forecast of the sources and uses of
cash by the Borrower and its Subsidiaries (including Unrestricted
Subsidiaries) on a weekly basis for the succeeding thirteen (13)
calendar weeks, together with, commencing with the forecast to be
delivered on May 2, 2005, a report describing variances of sources
and uses from previously delivered forecasts, all in form and
substance reasonably satisfactory to the Agent and its financial
advisor, if any; and
|
|
|
(m) no later than July 1, 2005, a revised business plan for the
Borrower and its Subsidiaries.
|
3. Amendment to
Section 7.06 of the Credit Agreement . Section 7.06 of the
Credit Agreement is hereby amended by deleting the table of
permitted Capital Expenditures and replacing it with the
following:
3
|
|
Fiscal Year
|
Permitted
Capital Expenditures
|
|
4. Amendment to
Section 8.12 . Section 8.12 of the Credit Agreement is hereby
amended by deleting such Section in its entirety and replacing it
with the following:
|
|
8.12 Class Actions/SEC Proceedings/DOJ Investigation . The
Borrower and its Subsidiaries shall pay or agree in writing to pay
damages, penalties or similar amounts in excess of $10,000,000 in
the aggregate (other than from insurance proceeds or from amounts
otherwise reimbursed to the Borrower by third parties to whom the
Borrower and its Subsidiaries are not providing credit or similar
support) in connection with (i) the securities class action
lawsuits filed against the Borrower and related SEC investigations
in connection with the matters described in the Disclosure Letter,
(ii) the DOJ Investigation or (iii) other matters disclosed in the
Disclosure Letter.
|
5. Waivers;
Acknowledgement .
(a) The Lenders waive any Default or Event of Default that has
resulted or might result from the occurrence of any of the
following prior to the Effective Date (as defined below): (i)
failure by the Borrower to timely pay the fees and expenses of
counsel to the Agent in connection with the preparation of the
Credit Agreement; (ii) failure by the Borrower to execute and
record leasehold mortgages with respect to leasehold interests
existing on the Closing Date by the date required by Section
3.05(c) of the Credit Agreement; (iii) failure by the Borrower to
notify the Agent of any Event of Default described in clauses (i),
(ii), (iv) and (v) of this Section 5; (iv) failure of the Borrower
to deliver projections for 2005 on the date required by Section
6.03(f) of the Credit Agreement; and (v) failure of the Borrower to
deliver its unaudited consolidated statement of income for the
fiscal month of January 2005 on the date required by Section
6.03(d) of the Credit Agreement.
(b) The Lenders acknowledge and agree that the Borrower’s
compliance with the requirements of Sections 6.12 and 6.14 of the
Credit Agreement as of the fiscal quarter of the Borrower ended
December 31, 2004 shall be determined as if the adjustments set
forth in Section 1 of this Amendment were effective as of December
31, 2004.
6. CIT
Subordination Agreement . The Lenders authorize the Agent and
the Collateral Agent to execute and deliver a lien subordination
agreement substantially in the form of Exhibit N to the Credit
Agreement with respect to various items of equipment (and proceeds
thereof) financed by The CIT Group/Equipment Financing, Inc.
(“CIT”). The Borrower represents that the amount of
Indebtedness owed to CIT and its affiliates which is secured
by
4
such equipment is approximately
$7,200,000 on the date hereof. The Lenders acknowledge that
pursuant to Section 10.13 of the Credit Agreement the Agent and the
Collateral Agent have the authority to enter into, and have entered
into, lien subordination agreements from time to time with respect
to the Collateral.
7. Financial
Advisor . The Borrower acknowledges that the Lenders are
considering retaining a financial advisor in connection with the
Borrower’s obligations under the Credit Agreement. The
Borrower agrees to pay the reasonable fees and expenses of such
financial advisor (including an upfront retainer) promptly
following receipt of an invoice (with backup detail supporting the
invoiced amount, subject to attorney-client privilege/work product
considerations) from time to time. The Lenders have advised the
Borrower that they expect the scope of the financial
advisor’s work to be limited to review of the
Borrower’s unaudited 2004 financial results and financial
statements, review of the Borrower’s unaudited financial
results and financial statements for the first fiscal quarter of
2005 and for the months of February, April and May 2005, review of
the Borrower’s restated financial statements for prior
periods and a review and analysis of the revised business plan of
the Borrower to be delivered on or prior to July 1, 2005. It is
expected that such financial advisor’s work will be completed
on or about July 21, 2005.
8. Conditions to
Effectiveness of this Amendment . This Amendment shall become
effective as of the date first set forth above (the “
Effective Date ”) at such time as:
(i) the Agent shall have received counterparts of this Amendment
duly executed and delivered by a duly authorized officer of each of
the Borrower, each Guarantor and the Majority Lenders;
