-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OzXDegIKWbL4fhPdR1J0/0urLxPibB7HZmPpkdLYpuDrP5u6QVw296xQJDE6VKX2 FSg+A+2zAFBvLqGyO0+NbA== 0000919574-07-003554.txt : 20070731 0000919574-07-003554.hdr.sgml : 20070731 20070730193903 ACCESSION NUMBER: 0000919574-07-003554 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20070731 DATE AS OF CHANGE: 20070730 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BALLY TOTAL FITNESS HOLDING CORP CENTRAL INDEX KEY: 0000770944 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEMBERSHIP SPORTS & RECREATION CLUBS [7997] IRS NUMBER: 363228107 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-47769 FILM NUMBER: 071010804 BUSINESS ADDRESS: STREET 1: 8700 WEST BRYN MAWR AVENUE STREET 2: SECOND FLOOR CITY: CHICAGO STATE: IL ZIP: 60631 BUSINESS PHONE: 773-380-3000 MAIL ADDRESS: STREET 1: 8700 WEST BRYN MAWR AVENUE STREET 2: SECOND FLOOR CITY: CHICAGO STATE: IL ZIP: 60631 FORMER COMPANY: FORMER CONFORMED NAME: BALLYS HEALTH & TENNIS CORP DATE OF NAME CHANGE: 19940526 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. CENTRAL INDEX KEY: 0001233563 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: C/O INTERNATIONAL FUND SERVICES LIMITED STREET 2: THIRD FL, BISHOP'S SQUARE REDMOND'S HILL CITY: DUBLIN 2 STATE: L2 ZIP: 00000 BUSINESS PHONE: 2125216972 MAIL ADDRESS: STREET 1: C/O INTERNATIONAL FUND SERVICES LIMITED STREET 2: THIRD FL, BISHOP'S SQUARE REDMOND'S HILL CITY: DUBLIN 2 STATE: L2 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: HARBERT DISTRESSED INVESTMENT MASTER FUND LTD DATE OF NAME CHANGE: 20030516 SC 13D/A 1 d797406_13d-a.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------- SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 1) Bally Total Fitness Holding Corporation - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.01 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 05873K108 - -------------------------------------------------------------------------------- (CUSIP Number) William R. Lucas, Jr. One Riverchase Parkway South Birmingham, Alabama 35244 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 27, 2007 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. - ---------- (1) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 05873K108 --------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Harbinger Capital Partners Master Fund I, Ltd. 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] 3. SEC USE ONLY 4. SOURCE OF FUNDS* WC 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] 6. CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON 7. SOLE VOTING POWER 0 8. SHARED VOTING POWER 412,570* 9. SOLE DISPOSITIVE POWER 0 10. SHARED DISPOSITIVE POWER 412,570* 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,619,450 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.2% 14. TYPE OF REPORTING PERSON* CO - ---------- * This figure excludes 2,710,042 Shares which are directly owned by Liberation Investments, L.P., 1,461,838 Shares which are directly owned by Liberation Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel Pearlman. The Reporting Persons are deemed to be the beneficial owners of such Shares as a result of their membership in the Group (as defined below). CUSIP No. 05873K108 --------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Harbinger Capital Partners Offshore Manager, L.L.C. 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] 3. SEC USE ONLY 4. SOURCE OF FUNDS* AF 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON 7. SOLE VOTING POWER 0 8. SHARED VOTING POWER 412,570* 9. SOLE DISPOSITIVE POWER 0 10. SHARED DISPOSITIVE POWER 412,570* 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,619,450 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.2% 14. TYPE OF REPORTING PERSON* CO - ---------- * This figure excludes 2,710,042 Shares which are directly owned by Liberation Investments, L.P., 1,461,838 Shares which are directly owned by Liberation Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel Pearlman. The Reporting Persons are deemed to be the beneficial owners of such Shares as a result of their membership in the Group. CUSIP No. 05873K108 --------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) HMC Investors, L.L.C. 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] 3. SEC USE ONLY 4. SOURCE OF FUNDS* AF 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON 7. SOLE VOTING POWER 0 8. SHARED VOTING POWER 412,570* 9. SOLE DISPOSITIVE POWER 0 10. SHARED DISPOSITIVE POWER 412,570* 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,619,450 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.2% 14. TYPE OF REPORTING PERSON* CO - ---------- * This figure excludes 2,710,042 Shares which are directly owned by Liberation Investments, L.P., 1,461,838 Shares which are directly owned by Liberation Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel Pearlman. The Reporting Persons are deemed to be the beneficial owners of such Shares as a result of their membership in the Group. CUSIP No. 05873K108 --------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Harbert Management Corporation 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] 3. SEC USE ONLY 4. SOURCE OF FUNDS* AF 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] 6. CITIZENSHIP OR PLACE OF ORGANIZATION Alabama NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON 7. SOLE VOTING POWER 0 8. SHARED VOTING POWER 412,570* 9. SOLE DISPOSITIVE POWER 0 10. SHARED DISPOSITIVE POWER 412,570* 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,619,450 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.2% 14. TYPE OF REPORTING PERSON* CO - ---------- * This figure excludes 2,710,042 Shares which are directly owned by Liberation Investments, L.P., 1,461,838 Shares which are directly owned by Liberation Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel Pearlman. The Reporting Persons are deemed to be the beneficial owners of such Shares as a result of their membership in the Group. CUSIP No. 05873K108 --------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Philip Falcone 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] 3. SEC USE ONLY 4. SOURCE OF FUNDS* AF 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON 7. SOLE VOTING POWER 0 8. SHARED VOTING POWER 412,570* 9. SOLE DISPOSITIVE POWER 0 10. SHARED DISPOSITIVE POWER 412,570* 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,619,450 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.2% 14. TYPE OF REPORTING PERSON* IN - ---------- * This figure excludes 2,710,042 Shares which are directly owned by Liberation Investments, L.P., 1,461,838 Shares which are directly owned by Liberation Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel Pearlman. The Reporting Persons are deemed to be the beneficial owners of such Shares as a result of their membership in the Group. CUSIP No. 05873K108 --------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Raymond J. Harbert 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] 3. SEC USE ONLY 4. SOURCE OF FUNDS* AF 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON 7. SOLE VOTING POWER 0 8. SHARED VOTING POWER 412,570* 9. SOLE DISPOSITIVE POWER 0 10. SHARED DISPOSITIVE POWER 412,570* 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,619,450 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.2% 14. TYPE OF REPORTING PERSON* IN - ---------- * This figure excludes 2,710,042 Shares which are directly owned by Liberation Investments, L.P., 1,461,838 Shares which are directly owned by Liberation Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel Pearlman. The Reporting Persons are deemed to be the beneficial owners of such Shares as a result of their membership in the Group. CUSIP No. 05873K108 --------------------- 1. NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Michael D. Luce 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] 3. SEC USE ONLY 4. SOURCE OF FUNDS* AF 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [_] 6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON 7. SOLE VOTING POWER 0 8. SHARED VOTING POWER 412,570* 9. SOLE DISPOSITIVE POWER 0 10. SHARED DISPOSITIVE POWER 412,570* 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,619,450 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.2% 14. TYPE OF REPORTING PERSON* IN - ---------- * This figure excludes 2,710,042 Shares which are directly owned by Liberation Investments, L.P., 1,461,838 Shares which are directly owned by Liberation Investments, Ltd. and 35,000 Shares which are directly owned by Emanuel Pearlman. The Reporting Persons are deemed to be the beneficial owners of such Shares as a result of their membership in the Group. CUSIP No. 05873K108 --------------------- This Amendment No. 1 to Schedule 13D ("Amendment No. 1") amends and supplements the Schedule 13D filed with the Securities and Exchange Commission on July 5, 2007 (the "Schedule 13D"), by Harbinger Capital Partners Master Fund I, Ltd. (the "Master Fund"), Harbinger Capital Partners Offshore Manager, L.L.C. ("Harbinger Management"), the investment manager of the Master Fund, HMC Investors, L.L.C., its managing member ("HMC Investors"), Harbert Management Corporation ("HMC"), the managing member of HMC Investors, Philip Falcone, a shareholder of HMC and the portfolio manager of the Master Fund, Raymond J. Harbert, a shareholder of HMC, and Michael D. Luce, a shareholder of HMC (each of the Master Fund, Harbinger Management, HMC Investors, HMC, Philip Falcone, Raymond J. Harbert and Michael D. Luce may be referred to herein as a "Reporting Person" and collectively may be referred to as "Reporting Persons" and, together with Liberation Investments, L.P., Liberation Investments, Ltd., Liberation Investment Group, LLC and Emanuel Pearlman, the "Group") relating to shares of common stock (the "Common Stock"), $.01 par value per share, of Bally Total Fitness Holding Corporation (the "Company"). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Schedule 13D. As specifically amended and supplemented by this Amendment No. 1, the Schedule 13D shall remain in full force and effect. - -------------------------------------------------------------------------------- Item 1. Security and Issuer. NO MATERIAL CHANGE FROM THE SCHEDULE 13D FILED ON JULY 5, 2007. - -------------------------------------------------------------------------------- Item 2. Identity and Background. NO MATERIAL CHANGE FROM THE SCHEDULE 13D FILED ON JULY 5, 2007. - -------------------------------------------------------------------------------- Item 3. Source and Amount of Funds or Other Consideration. NO MATERIAL CHANGE FROM THE SCHEDULE 13D FILED ON JULY 5, 2007. - -------------------------------------------------------------------------------- Item 4. Purpose of Transaction. ITEM 4 OF THE SCHEDULE 13D FILED ON JULY 5, 2007 IS HEREBY AMENDED AND SUPPLEMENTED BY ADDING THE FOLLOWING IMMEDIATELY AFTER THE LAST PARAGRAPH THEREOF: On July 27, 2007, the Company issued a press release (the "Press Release") stating that it has been unable to reach agreement on an alternative restructuring proposal put forth by the Group and has determined that the prompt filing of the Company's chapter 11 plan of reorganization in bankruptcy court is appropriate. Prior to the issuance of the Press Release, the Group had delivered a proposed revised plan of reorganization taking into account its lengthy negotiations with the Company and the Company's stakeholders (the "Revised Shareholder Plan"), which was substantially in the form attached hereto as Exhibit F. The Revised Shareholder Plan incorporated changes to the Shareholder Plan delivered by the Group on July 4, 2007, including the following: o a total cash investment of $228.5 million for 100% of the equity of the reorganized Company; o a cash payment to each current equity holder of the Company of its pro rata share of $16.5 million, or approximately $0.40 per share, in full satisfaction, settlement, discharge and release of its claims (instead of the continued ownership of equity in the reorganized Company and participation in a rights offering as previously provided for in the Shareholder Plan); and o a reduction in the aggregate principal amount of the Company's senior subordinated notes (the "Sub Notes") to $200 million, and an increase in the interest rate on the Sub Notes by 200 basis points. Notwithstanding the terms of the Revised Shareholder Plan, the Group has been and remains willing to provide the current equity holders with some combination of cash and equity in the reorganized Company in respect of their claims and to permit current equity holders of the Company to participate in a rights offering on the terms originally proposed in the Shareholder Plan. Since the Company's issuance of the Press Release, the Group has continued its discussions with the Company and its stakeholders regarding the terms of the Revised Shareholder Plan, and has been in negotiations with the Company's proposed DIP lender and a third-party lender (collectively, the "Lenders") in order to obtain proposals for commitments to provide financing to the Company. As negotiations with the Company, its stakeholders and the Lenders evolve, the Group's ultimate proposal may differ materially from the terms of the Revised Shareholder Plan, the draft Investment Agreement attached hereto as Exhibit G, the draft Restructuring Support Agreement between the Company and certain members of the Group attached hereto as Exhibit H (the "Group RSA"), and a Restructuring Support Agreement among the Company, certain members of the Group and the holders of the Sub Notes (which shall be substantially similar to the Group RSA). In addition, the Group may pursue other alternatives to maximize the value of their investment in the Company or to facilitate the consummation of a plan of reorganization of the Company. The Group remains committed to working with the Company and its stakeholders with the hopes that the parties can agree on a plan of reorganization that is in the best interests of the Company and its stakeholders. The Reporting Persons have no plans or proposals as of the date of this filing which, other than as expressly set forth above, relate to, or would result in, any of the actions enumerated in clauses (a) through (j) of Item 4 of Schedule 13D. - -------------------------------------------------------------------------------- Item 5. Interest in Securities of the Issuer. NO MATERIAL CHANGE FROM THE SCHEDULE 13D FILED ON JULY 5, 2007. - -------------------------------------------------------------------------------- Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. NO MATERIAL CHANGE FROM THE SCHEDULE 13D FILED ON JULY 5, 2007. - -------------------------------------------------------------------------------- Item 7. Material to be Filed as Exhibits. ITEM 7 FROM THE SCHEDULE 13D FILED ON JULY 5, 2007 IS HEREBY AMENDED TO INCLUDE THE FOLLOWING EXHIBITS: Exhibit F: Proposed Revised Plan of Reorganization of the Issuer and its Affiliate Debtors. Exhibit G: Draft Investment Agreement between the Issuer, Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P. Exhibit H: Draft Restructuring Support Agreement between the Issuer, its Affiliate Debtors, Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., Liberation Investments, L.P. and Liberation Investments, Ltd. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Harbinger Capital Partners Master Fund I, Ltd. By: Harbinger Capital Partners Offshore Manager, L.L.C. By: HMC Investors, L.L.C., Managing Member By: /s/ William R. Lucas, Jr. -------------------------- Harbinger Capital Partners Offshore Manager, L.L.C. By: HMC Investors, L.L.C., Managing Member By: /s/ William R. Lucas, Jr. -------------------------- HMC Investors, L.L.C. By: /s/ William R. Lucas, Jr. -------------------------- Harbert Management Corporation By: /s/ William R. Lucas, Jr. -------------------------- /s/ Philip Falcone - -------------------------- Philip Falcone /s/ Raymond J. Harbert - -------------------------- Raymond J. Harbert /s/ Michael D. Luce - -------------------------- Michael D. Luce July 30, 2007 Attention. Intentional misstatements or omissions of fact constitute federal criminal violations (see 18 U.S.C. 1001). SK 03773 0003 797406 EX-99.F 2 d797392_ex99-f.txt Draft 7/30/07 For Discussion Purposes Only IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK In re ) Chapter 11 ) ) Case No. 07-______________________ BALLY TOTAL FITNESS OF GREATER ) (Joint Administration Requested) NEW YORK, INC., et al.,(1) ) ) ) Honorable ________________________ Debtors. ) ) JOINT PREPACKAGED CHAPTER 11 PLAN OF REORGANIZATION OF BALLY TOTAL FITNESS HOLDING CORPORATION AND ITS AFFILIATE DEBTORS Dated: July __, 2007 New York, New York - ---------- (1) The Debtors in these proceedings are: Bally Total Fitness Holding Corporation, Bally Total Fitness Corporation, Bally ARA Corporation, Bally Fitness Franchising, Inc., Bally Franchise RSC, Inc., Bally Franchising Holdings, Inc., Bally Real Estate I LLC, Bally REFS West Hartford, LLC, Bally Sports Clubs, Inc., Bally Total Fitness Franchising, Inc., Bally Total Fitness International, Inc., Bally Total Fitness of California, Inc., Bally Total Fitness of Colorado, Inc., Bally Total Fitness of Connecticut Coast, Inc., Bally Total Fitness of Connecticut Valley, Inc., Bally Total Fitness of Greater New York, Inc., Bally Total Fitness of Minnesota, Inc., Bally Total Fitness of Missouri, Inc., Bally Total Fitness of Philadelphia, Inc., Bally Total Fitness of Rhode Island, Inc., Bally Total Fitness of the Mid-Atlantic, Inc., Bally Total Fitness of the Midwest, Inc., Bally Total Fitness of the Southeast, Inc., Bally Total Fitness of Toledo, Inc., Bally Total Fitness of Upstate New York, Inc., BTF Cincinnati Corporation, BTF Europe Corporation, BTF Indianapolis Corporation, BTF Minneapolis Corporation, BTF/CFI, Inc., BTFCC, Inc., BTFF Corporation, Greater Philly No. 1 Holding Company, Greater Philly No. 2 Holding Company, Health & Tennis Corporation of New York, Holiday Health Clubs of the East Coast, Inc., Holiday/Southeast Holding Corp., Jack LaLanne Holding Corp., New Fitness Holding Co., Inc., Nycon Holding Co., Inc., Rhode Island Holding Company, Tidelands Holiday Health Clubs, Inc., and U.S. Health, Inc. TABLE OF CONTENTS ARTICLE ONE DEFINED TERMS AND RULES OF INTERPRETATION..........................1 1.1 Defined Terms........................................................1 1.2 Exhibits and Plan Schedules.........................................15 1.3 Rules of Interpretation and Computation of Time.....................15 ARTICLE TWO CLASSIFICATION OF CLAIMS AND INTERESTS............................16 2.1 Unclassified Claims.................................................17 2.2 Unimpaired Classes of Claims and Interests..........................17 2.3 Impaired Classes of Claims and Interests............................17 2.4 Impaired Classes of Interests (deemed to have rejected this Plan and, therefore, not entitled to vote on this Plan under section 1126(g)of the Bankruptcy Code)...........17 ARTICLE THREE TREATMENT OF CLAIMS AND INTERESTS...............................18 3.1 Unclassified Claims.................................................18 3.2 Unimpaired Classes of Claims........................................19 3.3 Impaired Classes of Claims and Interests............................20 3.4 Unimpaired Class of Interests.......................................22 3.5 Special Provision Regarding Unimpaired Claims.......................22 ARTICLE FOUR ACCEPTANCE OR REJECTION OF THE PLAN..............................22 4.1 Impaired Classes of Claims Entitled to Vote.........................22 4.2 Acceptance by an Impaired Class.....................................22 4.3 Presumed Acceptances by Unimpaired Classes..........................22 4.4 Presumed Rejection by Certain Impaired Classes......................22 4.5 Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code.....23 4.6 Elimination of Vacant Classes.......................................23 ARTICLE FIVE MEANS FOR IMPLEMENTATION OF THE PLAN.............................23 5.1 Limited Substantive Consolidation for Purposes of Treating Impaired Claims Other Than Impaired Claims Against Only Bally...........................................23 5.2 Restructuring Transactions..........................................24 5.3 Continued Legal Existence and Vesting of Assets in the Reorganized Debtors..........................................25 5.4 Corporate Governance, Directors, Officers, and Corporate Action................................................25 5.5 Cancellation of Notes, Instruments, Debentures, Preferred Stock and Common Stock....................................26 5.6 Issuance of New Securities and Related Documentation................27 5.7 Exit Financing......................................................28 5.8 Investment and Agreement............................................28 5.9 Sources of Cash for Plan Distributions..............................28 5.10 Old Affiliate Interests.............................................28 5.11 Intercompany Claims.................................................29 ARTICLE SIX PROVISIONS GOVERNING DISTRIBUTIONS................................29 6.1 Distributions for Claims and Interests Allowed as of the Effective Date....................................29 6.2 No Postpetition Interest on Claims..................................29 6.3 Distributions by Reorganized Debtors................................29 6.4 Delivery of Distributions and Undeliverable or Unclaimed Distributions..........................................30 6.5 Record Date for Distributions.......................................30 6.6 Allocation of Plan Distributions Between Principal and Interest......................................31 6.7 Means of Cash Payment...............................................31 6.8 Withholding and Reporting Requirements..............................31 6.9 Setoffs.............................................................31 6.10 Fractional Shares...................................................32 6.11 Surrender of Canceled Notes and Canceled Instruments of Securities..................................32 6.12 Lost, Stolen, Mutilated, or Destroyed Debt Securities...............32 ARTICLE SEVEN TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES...........33 7.1 Assumption of Executory Contracts and Unexpired Leases..............33 7.2 Claims Based on Rejection of Executory Contracts or Unexpired Leases.......................................33 7.3 Cure of Defaults of Assumed Executory Contracts and Unexpired Leases......................................34 7.4 Compensation and Benefit Programs...................................34 7.5 Workers' Compensation Programs......................................34 ARTICLE EIGHT PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS AND INTERESTS............................35 8.1 Resolution of Disputed Claims and Interests.........................35 8.2 No Distributions Pending Allowance..................................35 8.3 Distributions on Account of Disputed Claims and Interests Once They Are Allowed and Additional Distributions on Account of Previously Allowed Claims and Interests..........................36 ARTICLE NINE CONFIRMATION AND CONSUMMATION OF THE PLAN........................36 9.1 Conditions to Confirmation..........................................36 9.2 Conditions to Effective Date........................................36 9.3 Waiver of Conditions................................................38 9.4 Consequences of Non-Occurrence of Effective Date....................38 ARTICLE TEN EFFECT OF PLAN CONFIRMATION.......................................39 10.1 Binding Effect; Plan Binds All Holders of Claims and Interests......39 10.2 Releases and Related Injunctions....................................39 10.3 Discharge of Claims.................................................40 10.4 Preservation of Rights of Action; Settlement of Litigation Claims................................................40 10.5 Exculpation and Limitation of Liability.............................41 10.6 Injunctions.........................................................41 10.7 Term of Bankruptcy Injunction or Stays..............................42 10.8 Termination of Subordination Rights and Settlement of Related Claims........................................42 ARTICLE ELEVEN RETENTION OF JURISDICTION......................................42 ARTICLE TWELVE MISCELLANEOUS PROVISIONS.......................................44 12.1 Effectuating Documents and Further Transactions.....................44 12.2 Authority to Act....................................................44 12.3 Exemption from Transfer Taxes.......................................44 12.4 Bar Dates for Administrative Claims.................................45 12.5 Payment of Statutory Fees...........................................45 12.6 Amendment or Modification of the Plan...............................45 12.7 Severability of Plan Provisions.....................................46 12.8 Successors and Assigns..............................................46 12.9 Revocation, Withdrawal, or Non-Consummation.........................46 12.10 Notice ...........................................................46 12.11 Governing Law.......................................................47 12.12 Tax Reporting and Compliance........................................47 12.13 Schedules...........................................................48 12.14 Filing of Additional Documents......................................48 12.15 No Strict Construction..............................................48 12.16 Conflicts...........................................................48 12.17 Dissolution of Committees...........................................48 12.18 Fees and Expenses...................................................48 EXHIBITS Exhibit A Amended Certificate of Incorporation of Reorganized Bally Exhibit B Amended By-Laws of Reorganized Bally Exhibit C Investment Agreement Exhibit D DIP Credit Agreement Term Sheet Exhibit E Rejection Claims List Exhibit F New Credit Agreement Term Sheet Exhibit G New Senior Second Lien Notes Indenture Exhibit H New Subordinated Notes Indenture Exhibit I Prepetition Management Incentive Plan Exhibit J First Restructuring Support Agreement Exhibit K Second Restructuring Support Agreement PLAN SCHEDULES -------------- Plan Schedule 1.1(a) Non-Exclusive List of Litigation Claims, including derivative actions Plan Schedule 1.1(b) Non-Exclusive List of Subordinated Claims INTRODUCTION ------------ Bally Total Fitness Holding Corporation ("Bally") and the other above-captioned debtors and debtors-in-possession (collectively, the "Debtors") propose the following prepackaged joint plan of reorganization for the resolution of the outstanding claims against and interests in the Debtors. Reference is made to the Disclosure Statement (as that term is defined herein and distributed contemporaneously herewith) for a discussion of the Debtors' history, business, properties and operations, projections for those operations, risk factors, a summary and analysis of this Plan (as that term is defined herein), and certain related matters including, among other things, certain tax matters, the securities to be issued under this Plan and the proposed substantive consolidation of the Debtors' cases for certain limited purposes. Subject to certain restrictions and requirements set forth in 11 U.S.C. ss. 1127 and Fed. R. Bankr. P. 3019, the Debtors reserve the right to alter, amend, modify, revoke or withdraw this Plan prior to its substantial consummation. ARTICLE ONE DEFINED TERMS AND RULES OF INTERPRETATION 1.1 Defined Terms. Capitalized terms used in this Plan shall have the meanings set forth below. Any term that is not otherwise defined herein, but that is used in the Bankruptcy Code or the Bankruptcy Rules, will have the meaning given to that term in the Bankruptcy Code or the Bankruptcy Rules, as applicable. Administrative Claim means a Claim for costs and expenses of administration of the Chapter 11 Cases that are Allowed under section 503(b), 507(b), or 1114(e)(2) of the Bankruptcy Code, including, without limitation: (a) any actual and necessary costs and expenses incurred after the Petition Date of preserving the Debtors' Estates and operating the businesses of the Debtors (such as wages, salaries, and commissions for services and payments for inventory, leased equipment, and premises); (b) compensation for legal, financial, advisory, accounting, and other services and reimbursement of expenses Allowed by the Bankruptcy Court under section 327, 330, 331, 363, or 503(b) of the Bankruptcy Code to the extent incurred prior to the Effective Date; (c) all fees and charges assessed against the Debtors' Estates under section 1930, chapter 123, of title 28, United States Code; (d) any amounts and obligations owed and outstanding under the DIP Credit Agreement; (e) the reasonable legal fees and expenses of the New Investors and Liberation in connection with the Chapter 11 Cases and the negotiation, confirmation and implementation of this Plan and the transactions contemplated hereby; (f) the Prepetition Senior Notes Indenture Amendment Fee, (g) the Prepetition Senior Notes Indenture Trustee Fees, and (h) the Prepetition Senior Subordinated Notes Indenture Trustee Fees. Administrative Claims Bar Date means the Business Day which is thirty (30) days after the Effective Date or such other date as approved by order of the Bankruptcy Court. Affiliate Debtor(s) means, individually or collectively, a Debtor or Debtors other than Bally, as applicable. Allowed means, with respect to a Claim or Interest, an Allowed Claim or an Allowed Interest in a particular Class or category specified. Any reference herein to a particular Allowed Claim includes both the secured and unsecured portions of such Claim. Allowed Claim means any Claim or portion thereof that is not a Disputed Claim and (a) that has been listed by a Debtor in its Schedules (if such Schedules are required by order of the Bankruptcy Court) as liquidated in amount and not disputed or contingent and for which no contrary proof of claim has been filed; (b) as to which no objection to allowance has been timely interposed in accordance with section 502 of the Bankruptcy Code and Bankruptcy Rule 2007 or such other applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy Court, or as to which any objection has been determined by a Final Order to the extent such objection is determined in favor of the respective holder; (c) as to which, upon the lifting of the automatic stay pursuant to section 362 of the Bankruptcy Code, the liability of the Debtors (allowance and the amount thereof) is determined by Final Order of a court of competent jurisdiction other than the Bankruptcy Court; or (d) that is expressly allowed by this Plan. The term "Allowed Claim" shall not, for purposes of computing distributions under this Plan, include interest on such Claim from and after the Petition Date, except as provided in section 506(b) of the Bankruptcy Code or as otherwise expressly set forth in this Plan. Allowed _____ Claim means an Allowed Claim of the type described. Allowed Interest means any Interest or portion thereof that is not a Disputed Interest and (a) that has been listed by Bally in its Schedules (if such Schedules are required by order of the Bankruptcy Court) and for which no contrary proof of interest has been filed; (b) as to which no objection to allowance has been timely interposed in accordance with section 502 of the Bankruptcy Code or such other applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy Court, or as to which any objection has been determined by a Final Order to the extent such objection is determined in favor of the respective holder; or (c) that is expressly allowed by this Plan. Allowed_____ Interest means an Allowed Interest of the type described. Amended Certificate of Incorporation and By-Laws means the amended and restated certificate of incorporation and by-laws of Reorganized Bally in substantially the form attached to this Plan as Exhibit A and Exhibit B, respectively. Avoidance and Other Actions means any and all avoidance, recovery, subordination or other actions or remedies that may be brought by and on behalf of the Debtors or their Estates under the Bankruptcy Code or applicable non-bankruptcy law, including, without limitation, actions or remedies arising under sections 510 and 542-553 of the Bankruptcy Code. Ballot means each of the ballot forms distributed to each Holder of an Impaired Claim or Impaired Interest that is entitled to vote to accept or reject this Plan and on which the Holder is to indicate, among other things, acceptance or rejection of this Plan. Bally means Bally Total Fitness Holding Corporation, a Delaware corporation, debtor-in-possession in these Chapter 11 Cases pending in the Bankruptcy Court. Bankruptcy Code means title 11 of the United States Code, as now in effect or hereafter amended so as to be applicable in the Chapter 11 Cases. Bankruptcy Court means the United States Bankruptcy Court for the Southern District of New York, or any other court with jurisdiction over the Chapter 11 Cases. Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure and the local rules of the Bankruptcy Court, as now in effect or hereafter amended. Bar Date means, (i) with respect to the Holders of Rejection Claims, the bar date for Filing proofs of Claim in the Chapter 11 Cases as set forth in Section 7.2 of this Plan and (ii) with respect to the Holders of Subordinated Claims, the date that is thirty (30) days after the Petition Date or such other date ordered by the Bankruptcy Court. Business Day means any day, other than a Saturday, Sunday, or "legal holiday" (as defined in Bankruptcy Rule 9006(a)). Cash means legal tender of the United States of America and equivalents thereof. Causes of Action means, without limitation, any and all claims, causes of action, demands, rights, actions, suits, damages, injuries, remedies, obligations, liabilities, accounts, defenses, offsets, powers, privileges, licenses and franchises of any kind or character whatsoever, known, unknown, accrued or to accrue, contingent or non-contingent, matured or unmatured, suspected or unsuspected, foreseen or unforeseen, whether arising before, on or after the Petition Date, in contract or in tort, in law or in equity, or under any other theory of law, whether asserted or assertable directly or derivatively in law or equity or otherwise by way of claim, counterclaim, cross-claim, third party action, action for indemnity or contribution or otherwise, including, without limitation, the Avoidance and Other Actions. Chapter 11 Cases means (a) when used with reference to a particular Debtor, the case under chapter 11 of the Bankruptcy Code commenced by the Debtor in the Bankruptcy Court, and (b) when used with reference to all Debtors, the cases under chapter 11 of the Bankruptcy Code commenced by the Debtors in the Bankruptcy Court. Claim means a "claim" as defined in section 101(5) of the Bankruptcy Code. Claims Objection Deadline means the last day for Filing objections to Rejection Claims and Subordinated Claims, which day shall be (i) the later of (a) thirty (30) days after the Effective Date or (b) sixty (60) days after the Filing of a proof of claim for, or request for payment of, such Claim, or (ii) such other date as the Bankruptcy Court may order. Class means a category of Holders of Claims or Interests, as described in Article II hereof. Collateral means any property or interest in property of the Debtors' Estates that is subject to a valid and enforceable Lien to secure a Claim. Confirmation Date means the date on which the clerk of the Bankruptcy Court enters the Confirmation Order on the docket of the Bankruptcy Court. Confirmation Hearing means the hearing held by the Bankruptcy Court pursuant to sections 105(d)(2)(B)(vi) and 1128 of the Bankruptcy Code to consider (i) approval of the Disclosure Statement under sections 1125 and 1126(b) of the Bankruptcy Code and (ii) confirmation of this Plan, as such hearing may be adjourned or continued from time to time. Confirmation Order means the order of the Bankruptcy Court confirming this Plan pursuant to section 1129 of the Bankruptcy Code. Creditors' Committee means the official committee of unsecured creditors of the Debtors appointed by the United States Trustee in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code, if any. Debtor(s) means, individually, any of the Debtors and, collectively, all of the above-captioned debtors and debtors-in-possession. DIP Agent means the administrative agent under the DIP Credit Agreement, and its successors and assigns. DIP Credit Agreement means the debtor-in-possession secured credit agreement governing the terms of the DIP Loan Facility to be entered into by Bally, as borrower, the Affiliate Debtors, as guarantors, DIP Agent and DIP Lenders (as amended, modified, or supplemented from time to time), if the Debtors determine a DIP Credit Agreement is necessary, with terms no less favorable in the aggregate for the Debtors than those in the DIP Credit Agreement Term Sheet. DIP Credit Agreement Obligations means any loans and other indebtedness and obligations of any or all of the Debtors to any or all of the DIP Agent and the DIP Lenders pursuant to the DIP Credit Agreement and the other DIP Credit Documents. DIP Credit Agreement Term Sheet means the term sheet attached to this Plan as Exhibit D. DIP Credit Documents means all of the agreements, documents and instruments entered into in connection with the DIP Credit Agreement. DIP Lenders means each of the financial institutions party to the DIP Credit Agreement and identified as "Lenders" therein, and their respective successors and assigns. DIP Lenders Claims means any and all Claims of, and any other obligations and liabilities owed to, the DIP Agent and DIP Lenders arising from or related to the DIP Credit Agreement and any other DIP Credit Document, including, without limitation, the DIP Credit Agreement Obligations. DIP Lenders Liens means any security interests and Liens granted by any Debtor to the DIP Agent and/or any DIP Lender in order to secure the repayment of any DIP Lenders Claims. DIP Loan Facility means the credit facility in the aggregate principal amount not to exceed $292,000,000 to be provided to the Debtors during the Chapter 11 Cases pursuant to the DIP Credit Agreement if the Debtors determine a DIP Credit Agreement is necessary, the proceeds of which would be used to refinance the Prepetition Lenders Claims and for general corporate purposes. Disbursing Agent means the Reorganized Debtors or any party designated by the Reorganized Debtors to serve as disbursing agent under this Plan. For purposes of distributions under this Plan to the Holders of Allowed Prepetition Lenders Claims, Allowed Prepetition Senior Notes Claims and Allowed Prepetition Senior Subordinated Notes Claims and Old Common Stock in Bally, the Prepetition Agent, the Prepetition Senior Notes Indenture Trustee, the Prepetition Senior Subordinated Notes Indenture Trustee and the transfer agent for the Old Common Stock in Bally, respectively, will be and shall act as the Disbursing Agent. Disclosure Statement means that certain disclosure statement (including all exhibits and schedules thereto) dated as of [____], relating to this Plan. Disputed Claim means a Claim, or any portion thereof, that (a) if the Debtors are required by order of the Bankruptcy Court to file Schedules, (i) has not been Scheduled by the Debtors or has been Scheduled at zero, or has been Scheduled as contingent, unliquidated or disputed and for which no proof of claim has been timely filed with the Bankruptcy Court or (ii) is in excess of the amount Scheduled as other than disputed, contingent or unliquidated, (b) is the subject of an objection or request for estimation filed in the Bankruptcy Court and which objection or request for estimation has not been withdrawn or overruled by a Final Order of the Bankruptcy Court, (c) is a Subordinated Claim and/or (d) is otherwise disputed by any of the Debtors in accordance with applicable law, which dispute has not been withdrawn, resolved or overruled by Final Order. Disputed Interest means an Interest, or any portion thereof, that (a) if the Debtors are required by order of the Bankruptcy Court to file Schedules, (i) has not been Scheduled by the Debtors or has been Scheduled at zero, and for which no proof of interest has been timely filed with the Bankruptcy Court or (ii) is in excess of the amount Scheduled, (b) is the subject of an objection or request for estimation filed in the Bankruptcy Court and which objection or request for estimation has not been withdrawn or overruled by a Final Order of the Bankruptcy Court, and/or (c) is otherwise disputed by any of the Debtors in accordance with applicable law, which dispute has not been withdrawn, resolved or overruled by Final Order. Distribution Record Date means the Confirmation Date. Effective Date means the Business Day that this Plan becomes effective as provided in Article IX hereof. Entity means an "entity" as defined in section 101(15) of the Bankruptcy Code. Equity Committee means the official committee of equity holders of the Debtors appointed by the United States Trustee in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code, if any. Estate(s) means, individually, the estate of each of the Debtors and, collectively, the estates of all of the Debtors created under section 541 of the Bankruptcy Code. Exchange Act means the Securities Exchange Act of 1934, 15 U.S.C. ss.ss. 78a et seq., as amended. Exhibit means an exhibit annexed to either this Plan or as an appendix to the Disclosure Statement (as such exhibits are amended, modified or otherwise supplemented from time to time). File, Filed, or Filing means file, filed, or filing with the Bankruptcy Court or its authorized designee in the Chapter 11 Cases. Final Order means an order of the Bankruptcy Court as to which the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or rehearing shall then be pending or as to which any right to appeal, petition for certiorari, reargue, or rehear shall have been waived in writing in form and substance satisfactory to the Debtors or the Reorganized Debtors, or, in the event that an appeal, writ of certiorari or reargument, or rehearing thereof has been sought, such order of the Bankruptcy Court shall have been determined by the highest court to which such order was appealed, or certiorari, reargument or rehearing shall have been denied and the time to take any further appeal, petition for certiorari, or move for reargument or rehearing shall have expired; provided, however, that the possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules, may be filed with respect to such order shall not preclude such order from being a Final Order. First Restructuring Support Agreement means that certain Restructuring Support Agreement, dated as of July __, 2007 between Bally, the New Investors and Liberation, in substantially the form attached hereto as Exhibit J. Holder means a Person or an Entity holding a Claim or Interest and, with respect to Prepetition Senior Notes Claims and Prepetition Senior Subordinated Notes Claims and Old Common Stock of Bally, the beneficial holder thereof as of the applicable date of determination or any authorized agent of such Person or Entity who has completed and executed a Ballot or on whose behalf a Master Ballot has been completed and executed in accordance with the voting instructions that are attached to the Ballot or Master Ballot, as applicable. Impaired means, when used in reference to a Claim or Interest, a Claim or Interest that is impaired within the meaning of section 1124 of the Bankruptcy Code. Impaired Unsecured Claim means any (a) Prepetition Senior Notes Claim, (b) Prepetition Senior Subordinated Notes Claim, or (c) Rejection Claim. Initial Distribution Date means the date as determined by the Reorganized Debtors upon which the initial distributions of property under this Plan will be made to Holders of Allowed Claims and Allowed Interests, which date shall be as soon as practicable after the Effective Date unless otherwise extended by order of the Bankruptcy Court; provided that with respect to Subordinated Claims, the Initial Distribution Date shall not occur before the expiration of the Bar Date. Intercompany Claim means (a) any account reflecting intercompany book entries by one Debtor with respect to any other Debtor or (b) any Claim that is not reflected in such book entries and is held by a Debtor against any other Debtor. Interest means the legal, equitable, contractual, and other rights of the Holders of any ownership interest in any Debtor existing as of the Petition Date, including, without limitation, the Old Common Stock, which shall also include the rights of any Person or Entity to purchase or demand the issuance of any of the foregoing and shall include: (a) conversion, exchange, voting, participation, and dividend rights; (b) liquidation preferences; (c) options, warrants, and put rights; and (d) share-appreciation rights. Investment Agreement means that certain Investment Agreement dated July __, 2007 by and among Bally and the New Investors, a copy of which is attached to this Plan as Exhibit C. IRC means the Internal Revenue Code of 1986, as amended. IRS means the Internal Revenue Service of the United States of America. Liberation means Liberation Investment Group and its affiliates. Lien means a "lien" as defined in section 101(37) of the Bankruptcy Code, and, with respect to any asset, includes, without limitation, any mortgage, lien, pledge, charge, security interest or other encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. Litigation Claims means the claims, rights of action, suits or proceedings, whether in law or in equity, whether known or unknown, that any Debtor or Estate may hold against any Person or Entity, including, without limitation, the Causes of Action of any Debtor. A non-exclusive list of the Litigation Claims held by the Debtors as of the Petition Date is attached hereto as Plan Schedule 1.1(a), which shall be deemed to include the derivative actions filed against the Debtors listed on such Plan Schedule and any Causes of Action against any Person or Entity listed on Exhibit E to this Plan. Master Ballot means the ballot distributed to holders of record of the Prepetition Senior Notes and Prepetition Senior Subordinated Notes to record the votes of the beneficial holders thereof as of the Voting Record Date. New Agent means the administrative agent under the New Credit Agreement, and its successors and assigns. New Common Stock means the shares of common stock of Reorganized Bally authorized to be issued pursuant to this Plan and the Amended Certificate of Incorporation and By-Laws. New Credit Agreement means that certain secured credit agreement between Reorganized Bally, as borrower, those entities identified as "Guarantors" in the New Credit Agreement, New Agent and New Lenders (as amended, modified, or supplemented from time to time), in an aggregate principal amount of at least $292 million, and with terms no less favorable to the Reorganized Debtors than those in the New Credit Agreement Term Sheet, and which may be effectuated by an amendment to, amendment and restatement of, or refinancing of, the Prepetition Credit Agreement, and in the event a DIP Loan Facility is assumed by the Reorganized Debtors, the New Credit Agreement may incorporate and govern the terms of the assumed DIP Loan Facility on terms no less favorable for the Reorganized Debtors than those set forth in the New Credit Agreement Term Sheet; provided that the New Credit Agreement or any amendment, modification or supplement thereto (whether or not effectuated by an amendment to, amendment and restatement of, or refinancing of, the Prepetition Credit Agreement and whether or not it incorporates and governs the terms of the assumed DIP Loan Facility) (x) shall be on terms no less favorable to the Reorganized Debtors than those in the New Credit Agreement Term Sheet and as set forth on Exhibit D to the Investment Agreement, and (y) shall be approved by the New Investors. New Credit Agreement Term Sheet means the term sheet attached to this Plan as Exhibit F. New Investors means Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund L.P. New Lenders means each of the financial institutions party to the New Credit Agreement and identified as "Lenders" therein, and their respective successors and assigns. New Securities and Documents has the meaning given in Section 5.6 of this Plan. New Senior Second Lien Notes means the New Senior Second Lien Notes due 2011 that may be issued in the sole discretion of Reorganized Bally under the New Senior Second Lien Notes Indenture in the aggregate principal amount of $247,337,500. The New Senior Second Lien Notes shall be senior in priority of payment over the New Subordinated Notes. The New Senior Second Lien Notes will be secured by Liens on the same assets that secure the obligations under the New Credit Agreement and subordinate in priority to the Liens securing the obligations under the New Credit Agreement as set forth in the New Credit Agreement Term Sheet. New Senior Second Lien Notes Indenture means that certain Indenture, to be dated as of the Effective Date, among Reorganized Bally, as issuer, certain Affiliate Debtors, as guarantors, and the New Senior Second Lien Notes Indenture Trustee, relating to the New Senior Second Lien Notes, substantially in the form of Exhibit G attached to this Plan. New Senior Second Lien Notes Indenture Trustee means HSBC, as the indenture trustee under the New Senior Second Lien Notes Indenture, and its successors and assigns. New Subordinated Notes means the New Senior Subordinated Notes due 2013 to be issued by Reorganized Bally under the New Subordinated Notes Indenture in the aggregate principal amount of $200 million. The New Subordinated Notes shall be subordinate in priority of payment to the New Senior Second Lien Notes or any refinancing thereof. New Subordinated Notes Indenture means that certain Amended and Restated Indenture, to be dated as of the Effective Date, among Reorganized Bally, as issuer, and the New Subordinated Notes Indenture Trustee, relating to the New Subordinated Notes, substantially in the form of Exhibit H attached to this Plan. New Subordinated Notes Indenture Trustee means HSBC, as the indenture trustee under the New Subordinated Notes Indenture, and its successors and assigns. Non-Tax Priority Claim means a Claim, other than an Administrative Claim or Priority Tax Claim, that is entitled to priority in payment pursuant to section 507(a) of the Bankruptcy Code. Old Affiliate Interests means, collectively, the shares of stock, whether common or preferred, general and limited partnership interests, or member or other ownership interests of the Affiliate Debtors, as applicable, issued and outstanding as of the Petition Date, and all options, warrants, calls, rights, puts, awards, commitments, or any other agreements of any character to acquire such stock or interests. Old Common Stock means the common stock of Bally that is outstanding immediately prior to the Petition Date, including, without limitation, treasury stock and any other such interests that are authorized to be issued but have not been issued. Old Common Stock Cash Amount means $16.5 million. Old Unexercised Equity Interests means all unexercised options, warrants, calls, rights, puts, awards, commitments, or any other agreements of any character to acquire Old Common Stock. Other Secured Claim means a Secured Claim other than an Administrative Claim, Secured Tax Claim or Prepetition Lenders Claim. Person means any natural person, corporation, general or limited partnership, limited liability company, firm, trust, association, government, governmental agency or other Entity, whether acting in an individual, fiduciary or other capacity. Petition Date means the date on which the Debtors file their petitions for relief commencing the Chapter 11 Cases. Plan means this prepackaged joint chapter 11 plan of reorganization, including the Exhibits and Plan Schedules and all supplements, appendices, and schedules thereto, either in its present form or as the same may be altered, amended, modified or otherwise supplemented from time to time. Plan Schedule means a schedule annexed to either this Plan or as an appendix to the Disclosure Statement (as amended, modified or otherwise supplemented from time to time). Prepetition Agent means JPMorgan Chase Bank, N.A., as the administrative agent under the Prepetition Credit Agreement, and its successors and assigns. Prepetition Credit Agreement means that certain amended and restated credit agreement, dated as of October 16, 2006 (as amended, modified, or supplemented from time to time), by and among Bally, as borrower, certain Affiliate Debtors as Guarantors, Prepetition Agent and Prepetition Lenders. Prepetition Credit Agreement Notes means, collectively, the notes evidencing the Prepetition Credit Agreement Obligations that were issued by Bally prior to the Petition Date to the Prepetition Agent and Prepetition Lenders under the Prepetition Credit Agreement. Prepetition Credit Agreement Obligations means the "Obligations" as described and defined in the Prepetition Credit Agreement. Prepetition Credit Documents means the "Credit Documents" as described and defined in the Prepetition Credit Agreement. Prepetition Lenders means each of the financial institutions party to the Prepetition Credit Agreement and identified as "Lenders" therein, and their respective successors and assigns. Prepetition Lenders Claims means any and all Claims of, and any other obligations and liabilities owed to, the Prepetition Agent and Prepetition Lenders arising from or related to the Prepetition Credit Agreement and any other Prepetition Credit Document, including, without limitation, the Prepetition Credit Agreement Obligations, which Claims shall be deemed, pursuant to sections 502 and 506 of the Bankruptcy Code, Allowed secured claims pursuant to this Plan in the aggregate principal amount of $262,400,000, plus interest and reasonable fees, costs and expenses that have accrued but remain unpaid as of the Effective Date pursuant to the Prepetition Credit Documents (which final aggregate amount shall be set forth in the Confirmation Order). Prepetition Lenders Liens means the security interests and Liens granted by any Debtor to the Prepetition Agent and/or any Prepetition Lender in order to secure the repayment of any Prepetition Lenders Claims. Prepetition Management Incentive Plan means that certain management incentive plan approved by the Board of Directors of Bally on or about May 28, 2007, as amended from time to time, and described in Exhibit I attached hereto. Prepetition Senior Noteholders means the Holders of the Prepetition Senior Notes Claims. Prepetition Senior Notes means the 10.5% Senior Notes due 2011 issued by Bally prior to the Petition Date under the Prepetition Senior Notes Indenture or any refinancing thereof. Prepetition Senior Notes Claims means any and all Claims, obligations and liabilities arising from or related to the Prepetition Senior Notes and/or Prepetition Senior Notes Indenture, including, without limitation, the "Indenture Obligations" (as such term is defined in the Prepetition Senior Notes Indenture), which Claims shall be Allowed in the aggregate principal amount of $235,000,000, plus interest and reasonable fees, costs and expenses that have accrued but remain unpaid as of the Petition Date pursuant to the Prepetition Senior Notes Indenture (which final aggregate amount shall be set forth in the Confirmation Order). Prepetition Senior Notes Indenture Amendment Fee means that certain amendment fee in the aggregate amount of $4,700,000, which fee shall be (i) in consideration of the amendments to the Prepetition Senior Notes Indenture as reflected in the New Prepetition Senior Notes Indenture; and (ii) paid to the Prepetition Senior Notes Indenture Trustee for the benefit of all Prepetition Senior Noteholders and shared on a Pro Rata basis with such holders. Prepetition Senior Notes Indenture means that certain Indenture, dated as of July 2, 2003, among Bally, as issuer, certain Affiliate Debtors, as guarantors, and the Prepetition Senior Notes Indenture Trustee, relating to the Prepetition Senior Notes (as amended, modified, or supplemented from time to time). Prepetition Senior Notes Indenture Trustee means HSBC, as the indenture trustee under the Prepetition Senior Notes Indenture, and its successors and assigns. Prepetition Senior Notes Indenture Trustee Fees means the reasonable, unpaid out-of-pocket costs and expenses incurred by the Prepetition Senior Notes Indenture Trustee through the Effective Date in accordance with the Prepetition Senior Note Indenture. Prepetition Senior Subordinated Noteholders means the Holders of the Prepetition Senior Subordinated Notes Claims. Prepetition Senior Subordinated Notes means, collectively, the 9.875% Senior Subordinated Notes due 2007, Series B, and the 9.875% Senior Subordinated Notes due 2007, Series D, issued by Bally prior to the Petition Date under the Prepetition Senior Subordinated Notes Indenture. Prepetition Senior Subordinated Notes Claims means any and all Claims, obligations and liabilities arising from or related to the Prepetition Senior Subordinated Notes and/or Prepetition Senior Subordinated Notes Indenture, including, without limitation, the "Indenture Obligations" (as such term is defined in the Prepetition Senior Subordinated Notes Indenture), which Claims shall be Allowed in the aggregate amount (including accrued and unpaid interest) of $323,041,667. Prepetition Senior Subordinated Notes Indenture means, collectively, that certain Indenture, dated as of October 7, 1997, and that certain Indenture, dated as of December 16, 1998, in each case by and between Bally, as issuer, and the Prepetition Senior Subordinated Notes Indenture Trustee, relating to the Prepetition Senior Subordinated Notes (as amended, modified, or supplemented from time to time). Prepetition Senior Subordinated Notes Indenture Trustee means HSBC, as the indenture trustee under the Prepetition Senior Subordinated Notes Indenture, and its successors and assigns. Prepetition Senior Subordinated Notes Indenture Trustee Fees means the reasonable, unpaid out-of-pocket costs and expenses incurred by the Prepetition Senior Subordinated Notes Indenture Trustee through the Effective Date in accordance with the Prepetition Senior Subordinated Note Indenture. Priority Tax Claim means a Claim of a governmental unit of the kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code, including a Secured Tax Claim. Professional means (a) any professional employed in the Chapter 11 Cases pursuant to section 327 or 1103 of the Bankruptcy Code or otherwise and (b) any professional or other Entity seeking compensation or reimbursement of expenses in connection with the Chapter 11 Cases pursuant to section 503(b)(4) of the Bankruptcy Code. Professional Fees means an Administrative Claim of a Professional for compensation for services rendered or reimbursement of costs, expenses or other charges incurred after the Petition Date and prior to and including the Effective Date (including expenses of the members of the Creditors' Committee incurred as members of the Creditors' Committee in discharge of their duties as such). Professional Fees Bar Date means the Business Day which is sixty (60) days after the Effective Date or such other date as approved by order of the Bankruptcy Court. Pro Rata means with respect to a distribution regarding a particular Class (or several Classes taken as a whole), the proportion that (a) the Allowed amount of a Claim or Interest in a particular Class (or several Classes taken as a whole) bears to (b) the aggregate Allowed amount of all Claims or Interests in such Class (or several Classes taken as a whole), unless this Plan provides otherwise. Quarterly Distribution Date means the last Business Day of the month following the end of each calendar quarter after the Effective Date; provided, however, that if the Effective Date is within thirty (30) days of the end of a calendar quarter, then the first Quarterly Distribution Date will be the last Business Day of the month following the end of the first calendar quarter after the calendar quarter in which the Effective Date falls. Reinstated means, with respect to any Claim, (a) leaving unaltered the legal, equitable, and contractual rights to which a Claim entitles the holder of such Claim in accordance with Section 1124 of the Bankruptcy Code or (b) notwithstanding any contractual provision or applicable law that entitles the holder of such Claim to demand or receive accelerated payment of such Claim after the occurrence of a default: (i) curing any such default that occurred before or after the Petition Date, other than a default of a kind specified in section 365(b)(2) of the Bankruptcy Code or of a kind that section 365(b)(2) of the Bankruptcy Code expressly does not require to be cured; (ii) reinstating the maturity of such Claim as such maturity existed before such default; (iii) compensating the holder of such Claim for any damages incurred as a result of any reasonable reliance by such Holder on such contractual provision or such applicable law; (iv) if such Claim arises from any failure to perform a non-monetary obligation, other than a default arising from failure to operate a non-residential real property lease subject to section 365(b)(1)(A) of the Bankruptcy Code, compensating the Holder of such Claim (other than any Debtor or an insider of any Debtor) for any actual pecuniary loss incurred by such Holder as a result of such failure; and (v) not otherwise altering the legal, equitable, or contractual rights to which such Claim entitles the Holder of such Claim. Rejection Claim means an unsecured claim listed on the Rejection Claims List. Rejection Claims List means the list of Rejection Claims set forth on Exhibit E to this Plan. Related Persons means, with respect to any Person, such Person's predecessors, successors, assigns and present and former affiliates (whether by operation of law or otherwise) and each of their respective members, partners, equity-holders, officers, directors, employees, representatives, advisors, attorneys, agents and professionals, in each case acting in such capacity on or any time after the Petition Date, and any Person claiming by or through any of them; provided, however, that no insurers of the Debtors and no Person or Entity listed on Exhibit E to this Plan shall constitute a Related Person. Released Parties means, collectively, (i) the Debtors, their Estates, and the Reorganized Debtors, (ii) the New Investors, (iii) Liberation, (iv) the Creditors' Committee, (v) the Equity Committee, and the respective Related Persons of each of the foregoing; provided, however, that no Person or Entity listed on Exhibit E to this Plan shall be considered or deemed a Released Party. Reorganized Bally means Bally Total Fitness Holding Corporation, a Delaware corporation, as reorganized pursuant to this Plan on or after the Effective Date. Reorganized Debtors means the Debtors as reorganized pursuant to this Plan on or after the Effective Date. Restructuring Transactions has the meaning ascribed thereto in Section 5.2 of this Plan. Scheduled means with respect to any Claim or Interest, the status and amount, if any, of such Claim or Interest as set forth in the Schedules, if any such Schedules are required to be filed by order of the Bankruptcy Court. Schedules means the schedules of assets and liabilities, the list of Holders of Interests and the statements of financial affairs, if any, Filed by the Debtors pursuant to section 521 of the Bankruptcy Code and Bankruptcy Rules, as such schedules have been or may be further modified, amended or supplemented in accordance with Bankruptcy Rule 1009 or orders of the Bankruptcy Court. Second Restructuring Support Agreement means that certain Restructuring Support Agreement, dated as of July __, 2007 between Bally, the New Investors and the Plan Support Parties (as defined therein), in substantially the form attached hereto as Exhibit K. Secured Claim means a Claim that is secured by a Lien on property in which a Debtor's Estate has an interest or that is subject to setoff under section 553 of the Bankruptcy Code, to the extent of the value of the Claim holder's interest in the applicable Estate's interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to section 506(a) of the Bankruptcy Code or, in the case of setoff, pursuant to section 553 of the Bankruptcy Code. Secured Tax Claim means any Secured Claim which, absent its secured status, would be entitled to priority in right of payment under section 507(a)(8) of the Bankruptcy Code. Securities Act means the Securities Act of 1933, 15 U.S.C. ss.ss. 77c-77aa, as now in effect or hereafter amended. Subordinated Claim means any Claim which is subordinated to Claims in Classes 6-A and 6-B pursuant to section 510(b) of the Bankruptcy Code. A non-exclusive list of the Subordinated Claims is attached to this Plan as Plan Schedule 1.1(b). Substantive Consolidation Order means the order, or provision of the Confirmation Order, substantively consolidating the Chapter 11 Cases on the limited basis as provided in Section 5.1 of this Plan. Transfer or Transferable means, with respect to any security or the right to receive a security or to participate in any offering of any security, (i) the sale, transfer, pledge, hypothecation, encumbrance, assignment, constructive sale, participation in, or other disposition of such security or right or the beneficial ownership thereof, (ii) the offer to make such a sale, transfer, constructive sale, or other disposition, and (iii) each option, agreement, arrangement, or understanding, whether or not in writing and whether or not directly or indirectly, to effect any of the foregoing. The term "constructive sale" for purposes of this definition means (i) a short sale with respect to such security or right, (ii) entering into or acquiring an offsetting derivative contract with respect to such security or right, (iii) entering into or acquiring a futures or forward contract to deliver such security or right, or (iv) entering into any transaction that has substantially the same effect as any of the foregoing. The term "beneficially owned" or "beneficial ownership" as used in this definition shall include, with respect to any security or right, the beneficial ownership of such security or right by a Person and by any direct or indirect subsidiary of such Person. Unimpaired Claim means a Claim that is not impaired within the meaning of section 1124 of the Bankruptcy Code. Unimpaired Unsecured Claim means a Claim that is not an Administrative Claim, Priority Tax Claim, Non-Tax Priority Claim, Other Secured Claim, Prepetition Lenders Claim, Impaired Unsecured Claim, Subordinated Claim or Intercompany Claim. Voting Deadline means [__________]. Voting Record Date means [__________]. 1.2 Exhibits and Plan Schedules. All Exhibits and Plan Schedules are incorporated into and are a part of this Plan as if set forth in full herein. Holders of Claims and Interests may obtain a copy of the Exhibits and Plan Schedules upon written request to the Debtors. The Exhibits and Plan Schedules may be inspected in the office of the clerk of the Bankruptcy Court or its designee during normal business hours or obtained by written request to counsel to the Debtors. 1.3 Rules of Interpretation and Computation of Time. For purposes of this Plan, unless otherwise provided herein: (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, will include both the singular and the plural; (b) unless otherwise provided in this Plan, any reference in this Plan to a contract, instrument, release, or other agreement or document being in a particular form or on particular terms and conditions means that such document will be substantially in such form or substantially on such terms and conditions; (c) any reference in this Plan to an existing document or schedule Filed or to be Filed means such document or schedule, as it may have been or may be amended, modified, or supplemented pursuant to this Plan; (d) any reference to an Entity as a Holder of a Claim or Interest includes that Entity's successors and assigns; (e) all references in this Plan to Sections, Articles, and Schedules are references to Sections, Articles, and Schedules of or to this Plan; (f) the words "herein," "hereunder," and "hereto" refer to this Plan in its entirety rather than to a particular portion of this Plan; (g) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of this Plan; (h) subject to the provisions of any contract, certificates of incorporation, by-laws, instrument, release, or other agreement or document entered into in connection with this Plan, the rights and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, federal law, including the Bankruptcy Code and Bankruptcy Rules; (i) the rules of construction set forth in section 102 of the Bankruptcy Code will apply to this Plan; and (j) in computing any period of time prescribed or allowed by this Plan, the provisions of Bankruptcy Rule 9006(a) will apply. ARTICLE TWO CLASSIFICATION OF CLAIMS AND INTERESTS All Claims and Interests, except Administrative Claims and Priority Tax Claims, are placed in the Classes set forth below. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims have not been classified as described below. This Plan constitutes a single plan of reorganization for all Debtors for all purposes, including, without limitation, for voting, confirmation, and distribution purposes. A Claim or Interest is placed in a particular Class only to the extent that the Claim or Interest falls within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Interest falls within the description of such other Classes. A Claim or Interest is also placed in a particular Class for the purpose of receiving distributions pursuant to this Plan only to the extent that such Claim or Interest is an Allowed Claim or Interest in that Class and such Claim or Interest has not been paid, released, or otherwise settled prior to the Effective Date. As described more fully in Section 5.1 below, this Plan contemplates and is predicated upon entry of an order substantively consolidating the Debtors for the limited purposes of voting, confirmation and distribution with respect to Allowed Class 5 and 6-B Claims only. Summary of Classification of Claims and Interests ------------------------------------------------- Class Claim Status Voting Rights - ----- ----- ------ ------------- 1. Non-Tax Priority Claims Unimpaired Deemed to Accept 2. Other Secured Claims Unimpaired Deemed to Accept 3. Unimpaired Unsecured Claims Unimpaired Deemed to Accept 4. Prepetition Lenders Claims Unimpaired Deemed to Accept 5. Prepetition Senior Notes Claims Impaired Entitled to Vote 6-A. Prepetition Senior Subordinated Impaired Entitled to Vote Notes Claims 6-B. Rejection Claims Impaired Entitled to Vote 7. Subordinated Claims Impaired Deemed to Reject 8. Old Common Stock in Bally Impaired Deemed to Reject 9. Old Unexercised Equity Interests Impaired Deemed to Reject 10. Old Affiliate Interests Unimpaired Deemed to Accept 2.1 Unclassified Claims (not entitled to vote on this Plan) (a) Administrative Claims. (b) Priority Tax Claims. 2.2 Unimpaired Classes of Claims and Interests (deemed to have accepted this Plan and, therefore, not entitled to vote on this Plan under section 1126(f) of the Bankruptcy Code). (i) Class 1: Class 1 consists of all Non-Tax Priority Claims. (ii) Class 2: Class 2 consists of all Other Secured Claims. Class 2 consists of separate subclasses for each Other Secured Claim that may exist against the Debtors. (iii) Class 3: Class 3 consists of all Unimpaired Unsecured Claims. (iv) Class 4: Class 4 consists of all Prepetition Lenders Claims. (v) Class 10: Class 10 consists of all Old Affiliate Interests. 2.3 Impaired Classes of Claims and Interests (entitled to vote on this Plan). (i) Class 5: Class 5 consists of all Prepetition Senior Notes Claims. (ii) Class 6-A: Class 6-A consists of all Prepetition Senior Subordinated Notes Claims. (iii) Class 6-B: Class 6-B consists of all Rejection Claims. 2.4 Impaired Classes of Interests (deemed to have rejected this Plan and, therefore, not entitled to vote on this Plan under section 1126(g) of the Bankruptcy Code). (i) Class 7: Class 7 consists of all Subordinated Claims. (i) Class 8: Class 8 consists of all Old Common Stock of Bally. (ii) Class 9: Class 9 consists of all Old Unexercised Equity Interests of Bally. ARTICLE THREE TREATMENT OF CLAIMS AND INTERESTS 3.1 Unclassified Claims (a) Administrative Claims Generally. Subject to the provisions of sections 330(a), 331, and 503(b) of the Bankruptcy Code, each Administrative Claim shall be paid by the Debtors or Reorganized Debtors, at their election, (i) in full, in Cash, in such amounts as are incurred in the ordinary course of business by the Debtors, or in such amounts as such Administrative Claim is Allowed by the Bankruptcy Court upon the later of the Effective Date or the date upon which there is a Final Order allowing such Administrative Claim, (ii) upon such other terms as may exist in the ordinary course of such Debtor's business or (iii) upon such other terms as may be agreed upon in writing between the Holder of such Administrative Claim and the Debtors, in each case in full satisfaction, settlement, discharge and release of, and in exchange for, such Administrative Claim. (i) Professional Fees. All final fee applications for Professional Fees incurred prior to the Effective Date and for services rendered during or in connection with the Chapter 11 Cases shall be filed with the Bankruptcy Court no later than the Professional Fees Bar Date. (ii) Claims Arising Under the DIP Credit Agreement. On the Effective Date, any and all DIP Lenders Claims shall be (A) paid in full in Cash, (B) assumed by the applicable Reorganized Debtors on terms and conditions acceptable to the Holders of such Claims, which terms and conditions may be evidenced by the New Credit Agreement or in some other manner acceptable to such Holders with terms no less favorable in the aggregate for the Debtors and/or Reorganized Debtors than those in the New Credit Agreement, or (C) satisfied in such other manner with terms no less favorable in the aggregate for the Debtors and/or Reorganized Debtors than those in the New Credit Agreement as the applicable Debtors or Reorganized Debtors and such Holders shall have agreed in writing. On the full payment or other satisfaction of such Claims, unless such DIP Lenders Liens have been continued as part of the treatment of such Claims pursuant to clause (B) or (C) above and the Confirmation Order, the DIP Lenders Liens shall be deemed released, terminated and extinguished, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person. To the extent the DIP Credit Documents bind the Holders of DIP Lenders Claims as to the manner in which their Claims may be treated pursuant to this Plan, no further agreement or consent from such Holders shall be necessary in order to provide such treatment in accordance with the provisions hereof. (b) Priority Tax Claims. The legal, equitable and contractual rights of the Holders of Priority Tax Claims are unaltered by this Plan. On, or as soon as reasonably practicable after, the later of (i) the Initial Distribution Date if such Priority Tax Claim is an Allowed Priority Tax Claim as of the Effective Date or (ii) the date on which such Priority Tax Claim becomes an Allowed Priority Tax Claim, each Holder of an Allowed Priority Tax Claim shall receive in full satisfaction, settlement, discharge and release of, and in exchange for, such Allowed Priority Tax Claim, at the election of the applicable Debtor (A) Cash equal to the amount of such Allowed Priority Tax Claim; (B) such other less favorable treatment as to which the applicable Debtor or Reorganized Debtor and the Holder of such Allowed Priority Tax Claim shall have agreed upon in writing; or (C) such other treatment such that it will not be impaired pursuant to section 1124 of the Bankruptcy Code, including payment in accordance with the provisions of section 1129(a)(9)(C) of the Bankruptcy Code; provided, however, that Priority Tax Claims incurred by the applicable Debtor in the ordinary course of business may be paid in the ordinary course of business in accordance with such applicable terms and conditions relating thereto in the discretion of the applicable Debtor or Reorganized Debtor without further notice to or order of the Bankruptcy Court. Each Holder of an Allowed Secured Tax Claim shall retain the Liens securing its Allowed Secured Tax Claim as of the Effective Date until full and final payment of such Allowed Secured Tax Claim is made as provided herein. On the full payment or other satisfaction of such obligations, the Liens securing such Allowed Secured Tax Claim shall be deemed released, terminated and extinguished, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person. 3.2 Unimpaired Classes of Claims (a) Class 1: Non-Tax Priority Claims. The legal, equitable and contractual rights of the Holders of Class 1 Claims are unaltered by this Plan. On, or as soon as reasonably practicable after, the later of (i) the Initial Distribution Date if such Class 1 Claim is an Allowed Class 1 Claim on the Effective Date or (ii) the date on which such Class 1 Claim becomes an Allowed Class 1 Claim, each Holder of an Allowed Class 1 Claim shall receive in full satisfaction, settlement, discharge and release of, and in exchange for, such Allowed Class 1 Claim, at the election of the applicable Debtor: (A) Cash equal to the amount of such Allowed Class 1 Claim; (B) such other less favorable treatment as to which the applicable Debtor or Reorganized Debtor and the Holder of such Allowed Class 1 Claim shall have agreed upon in writing; or (C) such other treatment such that it will not be impaired pursuant to section 1124 of the Bankruptcy Code; provided, however, that Class 1 Claims incurred by the applicable Debtor in the ordinary course of business may be paid in the ordinary course of business in accordance with the terms and conditions of any agreements relating thereto in the discretion of the applicable Debtor or Reorganized Debtor without further notice to or order of the Bankruptcy Court. (b) Class 2: Other Secured Claims. The legal, equitable and contractual rights of the Holders of Class 2 Claims are unaltered by this Plan. On, or as soon as reasonably practicable after, the later of (i) the Initial Distribution Date if such Class 2 Claim is an Allowed Class 2 Claim on the Effective Date or (ii) the date on which such Class 2 Claim becomes an Allowed Class 2 Claim, each Holder of an Allowed Class 2 Claim shall receive in full satisfaction, settlement, discharge and release of, and in exchange for, such Allowed Class 2 Claims, at the election of the applicable Debtor: (A) Cash equal to the amount of such Allowed Class 2 Claim; (B) such other less favorable treatment as to which the applicable Debtor or Reorganized Debtor and the Holder of such Allowed Class 2 Claim shall have agreed upon in writing; or (C) such other treatment such that it will not be impaired pursuant to section 1124 of the Bankruptcy Code; provided, however, that Class 2 Claims incurred by the applicable Debtor in the ordinary course of business may be paid in the ordinary course of business in accordance with the terms and conditions of any agreements relating thereto in the discretion of the applicable Debtor or Reorganized Debtor without further notice to or order of the Bankruptcy Court. Each Holder of an Allowed Other Secured Claim shall retain the Liens securing its Allowed Other Secured Claim as of the Effective Date until full and final payment of such Allowed Other Secured Claim is made as provided herein. On the full payment or other satisfaction of such obligations, the Liens securing such Allowed Other Secured Claim shall be deemed released, terminated and extinguished, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person. (c) Class 3: Unimpaired Unsecured Claims. The legal, equitable and contractual rights of the Holders of Class 3 Claims are unaltered by this Plan. On, or as soon as reasonably practicable after, the later of (i) the Initial Distribution Date if such Class 3 Claim is Allowed on the Effective Date or (ii) the date on which such Class 3 Claim becomes Allowed, each Holder of an Allowed Class 3 Claim shall receive in full satisfaction, settlement, discharge and release of, and in exchange for, such Allowed Class 3 Claim, at the election of the applicable Debtor: (A) Cash equal to the amount of such Allowed Class 3 Claim; (B) such other less favorable treatment as to which the applicable Debtor or Reorganized Debtor and the Holder of such Allowed Class 3 Claim shall have agreed upon in writing; or (C) such other treatment such that it will not be impaired pursuant to section 1124 of the Bankruptcy Code; provided, however, that Class 3 Claims incurred by the applicable Debtor in the ordinary course of business may be paid in the ordinary course of business in accordance with the terms and conditions of any agreements relating thereto in the discretion of the applicable Debtor or Reorganized Debtor without further notice to or order of the Bankruptcy Court. (d) Class 4: Prepetition Lenders Claims. Unless earlier refinanced by a DIP Loan Facility, on the Effective Date, any and all Allowed Class 4 Claims shall be (A) paid in full in Cash, (B) assumed by the applicable Reorganized Debtors on terms and conditions acceptable to the Holders of such Claims, which terms and conditions may be evidenced by the New Credit Agreement or in some other manner acceptable to such Holders with terms no less favorable in the aggregate for the Debtors and/or Reorganized Debtors than those in the New Credit Agreement, or (C) satisfied in such other manner with terms no less favorable in the aggregate for the Debtors and/or Reorganized Debtors than those in the New Credit Agreement as the applicable Debtors or Reorganized Debtors and such Holders shall have agreed in writing. On the full payment or other satisfaction of such Claims, unless such Prepetition Lenders Liens have been continued as part of the treatment of such Claims pursuant to clause (B) or (C) above and the Confirmation Order, the Prepetition Lenders Liens shall be deemed released, terminated and extinguished, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person. To the extent the Prepetition Credit Documents bind the Holders of Class 4 Claims as to the manner in which their Claims may be treated pursuant to this Plan, no further agreement or consent from such Holders shall be necessary in order to provide such treatment in accordance with the provisions hereof. 3.3 Impaired Classes of Claims and Interests (a) Class 5: Prepetition Senior Notes Claims. On, or as soon as reasonably practicable after, the Effective Date, in the sole discretion of the Debtors, the holders of Prepetition Senior Notes Claims shall, in full satisfaction, settlement, discharge and release of, and in exchange for, their Allowed Class 5 Claims, (i) be paid in full in Cash, including accrued and unpaid interest, or (ii) have the Prepetition Senior Notes Indenture replaced in its entirety by the New Senior Second Lien Notes Indenture and receive: (i) their Pro Rata share of the New Senior Second Lien Notes; and (ii) their Pro Rata share of the Prepetition Senior Notes Indenture Amendment Fee. (b) Class 6-A: Prepetition Senior Subordinated Notes Claims. On, or as soon as reasonably practicable after the Effective Date, each holder of a Prepetition Senior Subordinated Notes Claim shall, in the sole discretion of the Debtors and in full satisfaction, settlement, discharge and release of, and in exchange for, such Allowed Class 6-A Claim, (i) be paid in full in Cash, (ii) receive its Pro Rata share of the New Subordinated Notes, or (iii) receive a combination of (i) and (ii); provided, however, that the Cash payment on the Effective Date to holders of Prepetition Senior Subordinated Notes Claims shall aggregate no less than $122 million. On the Effective Date, the Prepetition Senior Subordinated Notes Indenture shall be replaced in its entirety by the New Subordinated Notes Indenture. (c) Class 6-B: Rejection Claims. On, or as soon as reasonably practicable after, the later of (i) the Initial Distribution Date if such Class 6-B Claim is Allowed on the Effective Date or (ii) the date on which such Class 6-B Claim becomes Allowed, each Holder of an Allowed Class 6-B Claim shall receive, at the election of the Debtors and in full satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 6-B Claim, (A) Cash equal to the amount of such Allowed Class 6-B Claim; (B) such other less favorable treatment as to which the Debtors or Reorganized Debtors and the Holder of such Allowed Class 6-B Claim shall have agreed upon in writing; or (C) regular installment payments in Cash: (x) of a total value, as of the Effective Date, equal to the Allowed amount of such Claim; (y) which total value shall include simple interest to accrue on any outstanding balance of such Allowed Claim starting on the Effective Date at a fixed interest rate equal to 12 3/8% per annum; and (z) over a period ending not later than five years after the Effective Date. Any such installment payments shall be made in equal quarterly Cash payments beginning on the first Quarterly Distribution Date following the Effective Date, and continuing on each subsequent Quarterly Distribution Date thereafter until payment in full of the Allowed Class 6-B Claim. (d) Class 7: Subordinated Claims. The legal, equitable and contractual rights of the Holders of Class 7 Claims are unaltered by this Plan. On, or as soon as reasonably practicable after, the later of (i) the Initial Distribution Date if such Class 7 Claim is Allowed on the Effective Date or (ii) the date on which such Class 7 Claim becomes Allowed, each Holder of an Allowed Class 7 Claim shall receive in full satisfaction, settlement, discharge and release of, and in exchange for, such Allowed Class 7 Claim, their Pro Rata Share of the Old Common Stock Cash Amount. (e) Class 8: Old Common Stock of Bally. On or as soon as reasonably practicable after the Effective Date, each holder of an Allowed Claim or Interest representing Old Common Stock of Bally, in full satisfaction, settlement, discharge and release of such Class 8 Interest, will be entitled, to their Pro Rata Share of the Old Common Stock Cash Amount. (e) Class 9: Old Unexercised Equity Interests. On the Effective Date, the Old Unexercised Equity Interests of Bally will be cancelled, and the Holders of such Old Unexercised Equity Interests shall not receive any distribution or retain any property on account of such Old Unexercised Equity Interests. 3.4 Unimpaired Class of Interests Class 10: Old Affiliate Interests. Notwithstanding anything in this Plan to the contrary, on the Effective Date, the Old Affiliate Interests shall remain effective and outstanding and be owned and held by the same applicable Person(s) that held and/or owned such Interests immediately prior to the Effective Date. 3.5 Special Provision Regarding Unimpaired Claims Except as otherwise provided in this Plan, nothing shall affect the Debtors' or Reorganized Debtors' rights, remedies and defenses, both legal and equitable, with respect to any Unimpaired Claims or claims and actions arising from or under any executory contract or unexpired lease assumed or rejected by the Debtors, including, but not limited to, all rights with respect to legal and equitable defenses, including setoff or recoupment. ARTICLE FOUR ACCEPTANCE OR REJECTION OF THE PLAN 4.1 Impaired Classes of Claims Entitled to Vote Holders of Claims in Classes 5 and 6-A are entitled to vote to accept or reject this Plan. 4.2 Acceptance by an Impaired Class In accordance with section 1126(c) of the Bankruptcy Code and except as provided in section 1126(e) of the Bankruptcy Code, an Impaired Class of Claims shall have accepted this Plan if this Plan is accepted by the Holders of at least two-thirds (2/3) in dollar amount and more than one-half (1/2) in number of the Allowed Claims of such Class that have timely and properly voted to accept or reject this Plan. 4.3 Presumed Acceptances by Unimpaired Classes Classes 1, 2, 3, 4, and 10 are Unimpaired by this Plan. Accordingly, under section 1126(f) of the Bankruptcy Code, Holders of such Claims and Interests are conclusively presumed to accept this Plan, and the votes of the Holders of such Claims and Interests will not be solicited. 4.4 Presumed Rejection by Certain Impaired Classes Holders of Allowed Class 9 Old Unexercised Equity Interests are not entitled to receive or retain any property under this Plan. Accordingly, under Section 1126(g) of the Bankruptcy Code, the votes of Holders of Interests in Class 9 will not be solicited and such Holders are deemed to reject this Plan. In addition, the Debtors are not soliciting the votes of Holders of Class 6-B Claims, Class 7 Subordinated Claims and Class 8 Old Common Stock. 4.5 Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code Because certain Classes are deemed to have rejected this Plan, the Debtors will request confirmation of this Plan, as it may be modified from time to time, under section 1129(b) of the Bankruptcy Code. The Debtors reserve the right to alter, amend, modify, revoke or withdraw this Plan or any Exhibit or Plan Schedule in order to satisfy the requirements of section 1129(b) of the Bankruptcy Code, if necessary. 4.6 Elimination of Vacant Classes Any Class of Claims that is not occupied as of the commencement of the Confirmation Hearing by an Allowed Claim or a claim temporarily allowed under Bankruptcy Rule 3018, or as to which no vote is cast, shall be deemed eliminated from this Plan for purposes of voting to accept or reject this Plan and for purposes of determining acceptance or rejection of this Plan by such Class pursuant to section 1129(a)(8) of the Bankruptcy Code. ARTICLE FIVE MEANS FOR IMPLEMENTATION OF THE PLAN 5.1 Limited Substantive Consolidation (a) Limited Substantive Consolidation. This Plan contemplates and is predicated upon entry of an order substantively consolidating the Debtors solely for the limited purposes of treating Class 5 and 6-B Claims, including, without limitation, for voting, confirmation and distribution purposes. This Plan does not contemplate the substantive consolidation of the Debtors with respect to the other Classes of Claims or Interests set forth in this Plan, or for any other purpose. Accordingly, for voting, confirmation and distribution purposes, (i) any obligation of any Debtor and all guarantees with respect to Class 5 and 6-B Claims thereof executed by one or more of the other Debtors shall be treated as a single obligation and any obligation of two or more Debtors, and all multiple Impaired Claims against such entities on account of such joint obligations, shall be treated and Allowed only as a single Impaired Claim against the consolidated Debtors, and (ii) each Class 5 and 6-B Claim filed or to be filed against any Debtor shall be deemed filed against the consolidated Debtors and shall be deemed a single Class 5 and 6-B Claim, as applicable, against and a single obligation of the consolidated Debtors. Except as set forth in this Section 5.1, such limited substantive consolidation shall not and shall not be deemed to (other than for purposes related to this Plan): (i) affect the legal and corporate structures of the Reorganized Debtors, subject to the right of the Debtors or Reorganized Debtors to effect Restructuring Transactions as provided in Section 5.2 of this Plan, (ii) cause any Debtor to be liable for any Impaired Claim or Unimpaired Claim under this Plan for which it otherwise is not liable, and the liability for any such Claim shall not be affected by such substantive consolidation, (iii) affect Intercompany Claims of Debtors against Debtors, (iv) modify, affect or otherwise alter the Old Affiliate Interests, (v) affect any obligations under any leases or contracts assumed in this Plan or otherwise arising subsequent to the filing of the Chapter 11 Cases, or (vi) affect any obligations to pay quarterly fees to the United States Trustee. (b) Substantive Consolidation Order. Unless the Bankruptcy Court has approved such limited substantive consolidation of the Chapter 11 Cases by a prior order, this Plan shall serve as, and shall be deemed to be, a motion for entry of an order substantively consolidating the Debtors on the limited basis as provided in Section 5.1 hereof. If no objection to substantive consolidation is timely filed and served by any Holder of an Impaired Claim affected by this Plan as provided herein on or before the deadline for objection to confirmation of this Plan, the Substantive Consolidation Order (which may be the Confirmation Order) may be entered by the Bankruptcy Court without further notice and hearing as to such substantive consolidation. If any such objections are timely filed and served, a hearing with respect to the substantive consolidation of the Chapter 11 Cases and the objections thereto shall be scheduled by the Bankruptcy Court, which hearing may, but is not required to, coincide with the Confirmation Hearing. 5.2 Restructuring Transactions On or after the Effective Date and without limiting any rights and remedies of the Debtors or Reorganized Debtors under this Plan or applicable law, the applicable Reorganized Debtors may enter into such transactions and may take such actions as may be necessary or appropriate to effect a corporate restructuring of their respective businesses, to otherwise simplify the overall corporate structure of the Reorganized Debtors, or to reincorporate certain of the Affiliate Debtors under the laws of jurisdictions other than the laws of which the applicable Affiliate Debtors are presently incorporated. Such restructuring may include one or more mergers, consolidations, restructures, dispositions, liquidations, or dissolutions, as may be determined by the Debtors or Reorganized Debtors to be necessary or appropriate (collectively, the "Restructuring Transactions"). The actions to effect the Restructuring Transactions may include (i) the execution and delivery of appropriate agreements or other documents of merger, consolidation, restructuring, disposition, liquidation, or dissolution containing terms that are consistent with the terms of this Plan and that satisfy the applicable requirements of applicable state law and such other terms to which the applicable entities may agree; (ii) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any asset, property, right, liability, duty, or obligation on terms consistent with the terms of this Plan and having such other terms to which the applicable entities may agree; (iii) the filing of appropriate certificates or articles of merger, consolidation, or dissolution pursuant to applicable state law; and (iv) all other actions that the applicable entities determine to be necessary or appropriate, including making filings or recordings that may be required by applicable state law in connection with such transactions. The Restructuring Transactions may include one or more mergers, consolidations, restructures, dispositions, liquidations, or dissolutions, as may be determined by the Reorganized Debtors to be necessary or appropriate to result in substantially all of the respective assets, properties, rights, liabilities, duties, and obligations of certain of the Reorganized Debtors vesting in one or more surviving, resulting, or acquiring corporations. In each case in which the surviving, resulting, or acquiring corporation in any such transaction is a successor to a Reorganized Debtor, such surviving, resulting, or acquiring corporation will perform the obligations of the applicable Reorganized Debtor pursuant to this Plan to pay or otherwise satisfy the Allowed Claims against such Reorganized Debtor, except as provided in any contract, instrument, or other agreement or document effecting a disposition to such surviving, resulting, or acquiring corporation, which may provide that another Reorganized Debtor will perform such obligations. 5.3 Continued Legal Existence and Vesting of Assets in the Reorganized Debtors Subject to the Restructuring Transactions permitted by Section 5.2 of this Plan, after the Effective Date, the Reorganized Debtors shall continue to exist as separate legal entities in accordance with the applicable law in the respective jurisdiction in which they are incorporated or formed and pursuant to their respective certificates or articles of incorporation and by-laws, or other applicable organizational documents, in effect immediately prior to the Effective Date, except to the extent such certificates or articles of incorporation and by-laws, or other applicable organizational documents, are amended, amended and restated or otherwise modified under this Plan. Notwithstanding anything to the contrary in this Plan, including Section 5.1 hereof as to the limited substantive consolidation provided therein, the Claims of a particular Debtor or Reorganized Debtor shall remain the obligations solely of such Debtor or Reorganized Debtor and shall not become obligations of any other Debtor or Reorganized Debtor solely by virtue of this Plan or the Chapter 11 Cases. Except as otherwise provided in this Plan or the Confirmation Order, on and after the Effective Date, all property and assets of the Estates of the Debtors, including all claims, rights, and Litigation Claims of the Debtors, and any other property acquired by the Debtors or the Reorganized Debtors under or in connection with this Plan, shall vest in the Reorganized Debtors free and clear of all Claims, Liens, charges, other encumbrances, and Interests, subject to the Restructuring Transactions and Liens which survive the occurrence of the Effective Date as described in Article III of this Plan. On and after the Effective Date, the Reorganized Debtors may operate their businesses and may use, acquire, and dispose of property and compromise or settle any Claims without supervision of or approval by the Bankruptcy Court and free and clear of any restrictions of the Bankruptcy Code or the Bankruptcy Rules, other than restrictions expressly imposed by this Plan or the Confirmation Order. Without limiting the foregoing, the Reorganized Debtors may pay the charges that they incur on or after the Effective Date for Professionals' fees, disbursements, expenses, or related support services without application or notice to, or order of, the Bankruptcy Court. 5.4 Corporate Governance, Directors, Officers, and Corporate Action (a) Certificates of Incorporation and By-Laws. The certificates or articles of incorporation and by-laws of each of the Debtors shall be amended as necessary to satisfy the provisions of this Plan and the Bankruptcy Code, and shall (i) include, among other things, pursuant to section 1123(a)(6) of the Bankruptcy Code, a provision prohibiting the issuance of non-voting equity securities, but only to the extent required by section 1123(a)(6) of the Bankruptcy Code; (ii) authorize the issuance of New Common Stock in an amount not less than the amount necessary to permit the distributions thereof required or contemplated by this Plan; and (iii) to the extent necessary or appropriate, include such provisions as may be needed to effectuate and consummate this Plan and the transactions contemplated herein. After the Effective Date, the Reorganized Debtors may amend and restate their respective certificates or articles of incorporation and by-laws, and other applicable organizational documents, as permitted by applicable law. (b) Directors and Officers of the Reorganized Debtors. Subject to any requirement of Bankruptcy Court approval pursuant to section 1129(a)(5) of the Bankruptcy Code, as of the Effective Date, the initial officers of Reorganized Bally and the Reorganized Affiliate Debtors shall be the respective officers of Bally and the Affiliate Debtors existing immediately prior to the Effective Date. On the Effective Date, the board of directors of Reorganized Bally and the Reorganized Affiliate Debtors shall be selected by the New Investors and shall be deemed to have been approved by all members of the board of directors of Bally and the Affiliate Debtors immediately prior to the Effective Date. Pursuant to section 1129(a)(5) of the Bankruptcy Code, the Debtors will disclose, at or prior to the Confirmation Hearing, the identity and affiliations of any Person proposed to serve on the initial board of directors of Reorganized Bally and the Reorganized Affiliate Debtors, and, to the extent such Person is an insider other than by virtue of being a director, the nature of any compensation for such Person. The length of the initial term of each director shall be one year. Each such director and officer shall serve from and after the Effective Date pursuant to applicable law and the terms of the Amended Certificate of Incorporation, the other constituent and organizational documents of the Reorganized Debtors. The existing board of directors of Bally and the Affiliate Debtors will be deemed to have resigned on and as of the Effective Date. (c) Corporate Action. On the Effective Date, the adoption of the Amended Certificate of Incorporation and By-Laws and similar constituent and organizational documents, and the selection of directors and officers for, each of the Reorganized Debtors, and all other actions contemplated by or described in this Plan with respect thereto, shall be authorized and approved and be binding and in full force and effect in all respects (subject to the provisions of this Plan and the Confirmation Order), in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule (other than filing such organizational documents with the applicable governmental unit as required by applicable law) or the vote, consent, authorization or approval of any Person. All matters provided for in this Plan involving the legal or corporate structure of the Debtors or the Reorganized Debtors, and any legal or corporate action required by the Debtors or the Reorganized Debtors in connection with this Plan, shall be deemed to have occurred and shall be in full force and effect in all respects, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or any requirement of further action, vote or other approval or authorization by the security holders, officers or directors of the Debtors or the Reorganized Debtors or by any other Person. On the Effective Date, the appropriate officers of the Debtors and Reorganized Debtors and members of their respective boards of directors are authorized to issue, execute, and deliver, and consummate the transactions contemplated by, the contracts, agreements, documents, guarantees, pledges, consents, securities, certificates, resolutions and instruments contemplated by or described in this Plan in the name of and on behalf of the Debtors and Reorganized Debtors, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or any requirement of further action, vote or other approval or authorization by any Person. 5.5 Cancellation of Notes, Instruments, Debentures, Preferred Stock and Common Stock On the Effective Date, except as otherwise provided in this Plan or the Confirmation Order, (i) the Prepetition Senior Notes, the Prepetition Senior Subordinated Notes, the Old Common Stock in Bally, and any other notes, bonds (with the exception of any surety bonds outstanding), indentures, or other instruments or documents evidencing or creating any indebtedness or obligations of a Debtor that are Impaired under this Plan shall be cancelled and extinguished, and (ii) the obligations of the Debtors under any agreements, documents, indentures, or certificates of designation governing the Prepetition Senior Notes, Prepetition Senior Subordinated Notes, Old Common Stock in Bally and any other notes, bonds, indentures, or other instruments or documents evidencing or creating any indebtedness or obligations of a Debtor that are Impaired under this Plan shall be, and are hereby, discharged, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or any requirement of further action, vote or other approval or authorization by the security holders, officers or directors of the Debtors or the Reorganized Debtors or by any other Person. Notwithstanding the foregoing, the Prepetition Senior Notes Indenture and the Prepetition Senior Subordinated Notes Indenture shall continue in effect solely for the purposes of: (i) allowing Prepetition Senior Noteholders and Prepetition Senior Subordinated Noteholders to receive distributions under this Plan; and (ii) allowing and preserving the rights of the Prepetition Senior Notes Indenture Trustee and the Prepetition Senior Subordinated Notes Indenture Trustee to make distributions in satisfaction of Allowed Prepetition Senior Notes Claims and Allowed Prepetition Senior Subordinated Notes Indenture, but in all cases subject to the terms and conditions of the Prepetition Senior Notes Claims and Allowed Prepetition Senior Subordinated Notes Indenture. The Prepetition Senior Notes Indenture Trustee and the Prepetition Senior Subordinated Notes Indenture Trustee shall be entitled to reasonable compensation to the extent that they perform services for the Prepetition Senior Noteholders and the Prepetition Senior Subordinated Noteholders, respectively, after the Effective Date and in accordance with the terms of the Prepetition Senior Notes Indenture and the Prepetition Senior Subordinated Notes Indenture, without further notice to or order of the Bankruptcy Court. As of the Effective Date, the Prepetition Senior Notes and the Prepetition Senior Subordinated Notes shall be surrendered to the Prepetition Senior Notes Indenture Trustee and the Prepetition Senior Subordinated Notes Indenture Trustee, respectively, in accordance with the terms of the Prepetition Senior Notes Indenture and the Prepetition Senior Subordinated Notes Indenture. All surrendered and canceled Prepetition Senior Notes and Prepetition Senior Subordinated Notes held by the Prepetition Senior Notes Indenture Trustee and the Prepetition Senior Subordinated Notes Indenture Trustee shall be disposed of in accordance with the applicable terms and conditions of the Prepetition Senior Notes Indenture and the Prepetition Senior Subordinated Notes Indenture. 5.6 Issuance of New Securities and Related Documentation On, or as soon as reasonably practicable after, the Effective Date, Reorganized Bally is authorized to and shall issue the New Common Stock, the New Senior Second Lien Notes, the New Subordinated Notes, and any and all other securities, notes, stock, instruments, certificates, and other documents or agreements required to be issued, executed or delivered pursuant to this Plan (collectively, the "New Securities and Documents"), in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person. The issuance of the New Securities and Documents and the distribution thereof under this Plan shall be exempt from registration under applicable securities laws pursuant to section 1145(a) of the Bankruptcy Code. Without limiting the effect of section 1145 of the Bankruptcy Code, all documents, agreements, and instruments entered into and delivered on or as of the Effective Date contemplated by or in furtherance of this Plan, including, without limitation, the New Credit Agreement, the New Senior Second Lien Notes Indenture, the New Subordinated Notes Indenture and any other agreement or document related to or entered into in connection with any of the foregoing, shall become, and the Investment and Investment Purchase Agreement shall remain, effective and binding in accordance with their respective terms and conditions upon the parties thereto, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person (other than as expressly required by such applicable agreement). When duly issued and delivered and paid for as provided for in this Plan and pursuant to the Investment Agreement, the New Common Stock will be duly authorized, validly issued and outstanding, fully paid and non-assessable. Upon the Effective Date, after giving effect to the transactions contemplated hereby, the authorized capital stock of Reorganized Bally shall be that number of shares of New Common Stock designated herein, and the shares of New Common Stock outstanding shall consist solely of the shares of New Common Stock to be issued to the New Investors. 5.7 Exit Financing On the Effective Date, the Reorganized Debtors shall be authorized to enter into the New Credit Agreement, as well as execute, deliver, file, record and issue any notes, documents, or agreements in connection therewith, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person (other than as expressly required by the New Credit Agreement). 5.8 Investment and Agreement To the extent not previously authorized by Final Order of the Bankruptcy Court, on the Effective Date, the Reorganized Debtors shall be authorized to consummate and effectuate the transactions contemplated by the Investment Agreement without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person. Pursuant to the Investment Agreement, the New Investors will acquire 100% of the New Common Stock issued on the Effective Date from Reorganized Bally in exchange for an aggregate purchase price of approximately $200 million, all as more dully described in the Investment Agreement. 5.9 Sources of Cash for Plan Distributions Except as otherwise provided in this Plan or the Confirmation Order, all Cash necessary for the Reorganized Debtors to make payments pursuant to this Plan shall be obtained from existing Cash balances, the operations of the Debtors and the Reorganized Debtors, the New Credit Agreement, and the Investment Agreement. The Reorganized Debtors may also make such payments using Cash received from their subsidiaries through the Reorganized Debtors' consolidated cash management systems. 5.10 Old Affiliate Interests Notwithstanding anything in this Plan to the contrary, on the Effective Date, the Old Affiliate Interests shall remain effective and outstanding and be owned and held by the same applicable Person(s) that held and/or owned such Interests immediately prior to the Effective Date. Each Affiliate Debtor shall continue to be governed by the terms and conditions of its applicable organizational documents as in effect immediately prior to the Effective Date, as amended or modified by this Plan. 5.11 Intercompany Claims Notwithstanding anything in this Plan to the contrary, on the Effective Date, the Intercompany Claims of Debtors against Debtors shall be Reinstated or discharged and satisfied at the option of the Reorganized Debtors by contributions, distributions, or otherwise. ARTICLE SIX PROVISIONS GOVERNING DISTRIBUTIONS 6.1 Distributions for Claims and Interests Allowed as of the Effective Date Except as otherwise provided herein or as ordered by the Bankruptcy Court, distributions to be made on account of Claims and Interests that are Allowed Claims and Allowed Interests as of the Effective Date shall be made on the Effective Date or as soon thereafter as is practicable. Any distribution to be made on the Effective Date pursuant to this Plan shall be deemed as having been made on the Effective Date if such distribution is made on the Effective Date or as soon thereafter as is practicable. Any payment or distribution required to be made under this Plan on a day other than a Business Day shall be made on the next succeeding Business Day. Distributions on account of Disputed Claims and Disputed Interests that first become Allowed Claims and Allowed Interests after the Effective Date shall be made pursuant to Section 8.3 of this Plan. 6.2 No Postpetition Interest on Claims Unless otherwise specifically provided for in this Plan or the Confirmation Order, or required by applicable bankruptcy law, postpetition interest shall not accrue or be paid on any Claims, and no Holder of a Claim (other than a Holder of an Administrative Claim under the DIP Credit Agreement with respect to such Administrative Claims) shall be entitled to interest accruing on or after the Petition Date on any Claim. 6.3 Distributions by Reorganized Debtors Other than as specifically set forth below, the Reorganized Debtors or the Disbursing Agent shall make all distributions required to be distributed under this Plan. Distributions on account of Prepetition Lenders Claims, Prepetition Senior Notes Claims, Prepetition Senior Subordinated Notes Claims and Old Common Stock in Bally shall be made to the Prepetition Agent, the Prepetition Senior Notes Indenture Trustee, Prepetition Senior Subordinated Notes Indenture Trustee and the applicable transfer agent for the Old Common Stock, respectively. The Reorganized Debtors may employ or contract with other entities to assist in or make the distributions required by this Plan. 6.4 Delivery of Distributions and Undeliverable or Unclaimed Distributions (a) Delivery of Distributions in General. Distributions to Holders of Allowed Claims and Allowed Interests shall be made at the addresses set forth in the Debtors' records unless such addresses are superseded by proofs of claim or interest or transfers of claim filed pursuant to Bankruptcy Rule 3001. (b) Undeliverable and Unclaimed Distributions. (i) Holding of Undeliverable and Unclaimed Distributions. If the distribution to any Holder of an Allowed Claim or Allowed Interest is returned to the Disbursing Agent as undeliverable or is otherwise unclaimed, no further distributions shall be made to such Holder unless and until the Disbursing Agent is notified in writing of such Holder's then current address. (ii) After Distributions Become Deliverable. The Disbursing Agent shall make all distributions that have become deliverable or have been claimed since the Initial Distribution Date as soon as practicable after such distribution has become deliverable or has been claimed. (iii) Failure to Claim Undeliverable Distributions. Any Holder of an Allowed Claim or Allowed Interest (or any successor or assignee or other Person or Entity claiming by, through, or on behalf of, such Holder) that does not assert a right pursuant to this Plan for an undeliverable or unclaimed distribution within one (1) year after the later of the Effective Date or the date such distribution is due shall be deemed to have forfeited its rights for such undeliverable or unclaimed distribution and shall be forever barred and enjoined from asserting any such rights for an undeliverable or unclaimed distribution against the Debtors or their Estates, the Reorganized Debtors or their property. In such cases, any Cash for distribution on account of such rights for undeliverable or unclaimed distributions shall become the property of the Estates free of any restrictions thereon and notwithstanding any federal or state escheat laws to the contrary. Any New Senior Second Lien Notes, New Subordinated Notes, and/or other New Securities and Documents held for distribution on account of such Claim or Interest shall be canceled and of no further force or effect. Nothing contained in this Plan shall require the Debtors, Reorganized Debtors, or any Disbursing Agent to attempt to locate any Holder of an Allowed Claim or Allowed Interest. 6.5 Record Date for Distributions The Disbursing Agent and the Reorganized Debtors will have no obligation to recognize the Transfer of, or the sale of any participation in, any Allowed Claim or Allowed Interest that occurs after the close of business on the Distribution Record Date, and will be entitled for all purposes herein to recognize and distribute securities, property, notices and other documents only to those Holders of Allowed Claims and Allowed Interests who are Holders of such Claims and Interests, or participants therein, as of the close of business on the Distribution Record Date. The Disbursing Agent and the Reorganized Debtors shall be entitled to recognize and deal for all purposes under this Plan with only those record holders stated on the official claims and interest register, or their books and records, as of the close of business on the Distribution Record Date. 6.6 Allocation of Plan Distributions Between Principal and Interest To the extent that any Allowed Claim entitled to a distribution under this Plan is comprised of indebtedness and accrued but unpaid interest thereon, such distribution shall, to the extent permitted by applicable law, be allocated for income tax purposes to the principal amount of the Claim first and then, to the extent that the consideration exceeds the principal amount of the Claim, to the portion of such Claim representing accrued but unpaid interest. 6.7 Means of Cash Payment Payments of Cash made pursuant to this Plan shall be in U.S. dollars and shall be made, at the option and in the sole discretion of the Reorganized Debtors, by (a) checks drawn on, or (b) wire transfer from, a domestic bank selected by the Reorganized Debtors. Cash payments to foreign creditors may be made, at the option of the Reorganized Debtors, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction. 6.8 Withholding and Reporting Requirements In connection with this Plan and all distributions hereunder, the Reorganized Debtors shall comply with all withholding and reporting requirements imposed by any federal, state, local, or foreign taxing authority, and all distributions hereunder shall be subject to any such withholding and reporting requirements. The Reorganized Debtors shall be authorized to take any and all actions that may be necessary or appropriate to comply with such withholding and reporting requirements. All persons holding Claims and Interests shall be required to provide any information necessary to effect information reporting and the withholding of such taxes. Notwithstanding any other provision of this Plan to the contrary, (i) each Holder of an Allowed Claim or Allowed Interest shall have the sole and exclusive responsibility for the satisfaction and payment of any tax obligations imposed by any governmental unit, including income, withholding, and other tax obligations, on account of such distribution, and (ii) no distribution shall be made to or on behalf of such Holder pursuant to this Plan unless and until such Holder has made arrangements satisfactory to the Reorganized Debtors for the payment and satisfaction of such tax obligations. Any Cash, New Common Stock, New Senior Second Lien Notes, New Subordinated Notes, other New Securities and Documents and/or other consideration or property to be distributed pursuant to this Plan shall, pending the implementation of such arrangements, be treated as an undeliverable distribution pursuant to Section 6.4 of this Plan. 6.9 Setoffs The Reorganized Debtors may, pursuant to section 553 of the Bankruptcy Code or applicable non-bankruptcy laws, but shall not be required to, set off against any Claim, the payments or other distributions to be made pursuant to this Plan in respect of such Claim, or claims of any nature whatsoever that the Debtors or the Reorganized Debtors may have against the Holder of such Claim; provided, however, that neither the failure to do so nor the allowance of any Claim hereunder shall constitute a waiver or release by the Reorganized Debtors of any such claim that the Debtors or the Reorganized Debtors may have against such Holder. 6.10 Fractional Shares No fractional shares of New Common Stock shall be distributed. Where a fractional share would otherwise be called for, the actual issuance shall reflect a rounding up (in the case of .50 or more than .50) of such fraction to the nearest whole share of New Common Stock or a rounding down of such fraction (in the case of less than .50). 6.11 Surrender of Canceled Notes and Canceled Instruments of Securities (a) Generally. As a condition precedent to receiving any distribution pursuant to this Plan on account of an Allowed Claim or Allowed Interest evidenced by the instruments, securities, notes, or other documentation canceled pursuant to Section 5.5 of this Plan, the Holder of such Claim or Interest shall tender the applicable instruments, securities, notes or other documentation evidencing such Claim or Interest to the Reorganized Debtors or other applicable Disbursing Agent unless waived in writing by the Debtors or the Reorganized Debtors, as applicable. (b) Prepetition Notes. Each Holder of a Prepetition Senior Subordinated Notes Claim or a Prepetition Senior Notes Claim shall tender its respective Prepetition Senior Subordinated Notes or Prepetition Senior Notes relating to such Claim to the Reorganized Debtors or Disbursing Agent in accordance with written instructions to be provided to such Holders by the Reorganized Debtors or the Prepetition Senior Subordinated Notes Indenture Trustee or the Prepetition Senior Notes Indenture Trustee as promptly as practicable following the Effective Date. Such instructions shall specify that delivery of such Prepetition Senior Subordinated Notes or Prepetition Senior Notes will be effected, and risk of loss and title thereto will pass, only upon the proper delivery of such Prepetition Senior Subordinated Notes or Prepetition Senior Notes with a letter of transmittal in accordance with such instructions. All surrendered Prepetition Senior Subordinated Notes and Prepetition Senior Notes shall be marked as canceled. (c) Failure to Surrender Security Instruments. Any Holder of a Prepetition Senior Notes Claim, Prepetition Senior Subordinated Notes Claim and/or Old Common Stock in Bally that fails to surrender or is deemed to have failed to surrender the applicable note or security required to be tendered hereunder within one (1) year after the Effective Date shall have its Claim and Interest and its distribution pursuant to this Plan on account of such Claim or Interest discharged and shall be forever barred from asserting any such Claim or Interest against the Reorganized Debtors or their respective property. In such cases, any Cash, New Common Stock, New Subordinated Notes, New Senior Second Lien Notes, New Securities and Documents and/or other consideration or property held for distribution on account of such Claim or Interest shall be disposed of pursuant to Section 6.4(iii) of this Plan. 6.12 Lost, Stolen, Mutilated, or Destroyed Debt Securities In addition to any requirements under any applicable agreement and applicable law, any Holder of a Claim or Interest evidenced by a security or note that has been lost, stolen, mutilated, or destroyed shall, in lieu of surrendering such security or note to the extent required by this Plan, deliver to the Reorganized Debtors and other applicable Disbursing Agent: (x) evidence reasonably satisfactory to the Reorganized Debtors and other applicable Disbursing Agent of such loss, theft, mutilation, or destruction; and (y) such security or indemnity as may be required by the Reorganized Debtors and other applicable Disbursing Agent to hold such party harmless from any damages, liabilities, or costs incurred in treating such individual as a Holder of an Allowed Claim or Allowed Interest. Upon compliance with this Section 6.12 as determined by the Debtors or Reorganized Debtors by a Holder of a Claim or Interest evidenced by a security or note, such Holder shall, for all purposes under this Plan, be deemed to have surrendered such security or note to the Reorganized Debtors and other applicable Disbursing Agent. ARTICLE SEVEN TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES 7.1 Assumption of Executory Contracts and Unexpired Leases On the Effective Date, all executory contracts and unexpired leases of the Debtors will be deemed assumed in accordance with, and subject to, the provisions and requirements of sections 365 and 1123 of the Bankruptcy Code, except those executory contracts (including, without limitation, employment agreements) and unexpired leases that (i) have been rejected by order of the Bankruptcy Court, (ii) are the subject of a motion to reject pending on the Effective Date, (iii) are identified on Exhibit E hereto (which may be amended by the Debtors (with the consent of the New Investors) to add or remove executory contracts and unexpired leases by filing with the Bankruptcy Court an amended Exhibit E and serving them on the affected contract parties at any time on or prior to five (5) days prior to the deadline set by the Bankruptcy Court for Filing objections to confirmation of this Plan), or (iv) are rejected pursuant to the terms of this Plan. Without amending or altering any prior order of the Bankruptcy Court approving the assumption or rejection of any executory contract or unexpired lease, entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of such assumptions and rejections pursuant to sections 365(a) and 1123 of the Bankruptcy Code. To the extent any provision in any executory contract or unexpired lease assumed pursuant to this Plan (including, without limitation, any "change of control" provision) restricts or prevents, or purports to restrict or prevent, or is breached or deemed breached by, the applicable Reorganized Debtor's assumption of such executory contract or unexpired lease, then such provision shall be deemed modified such that the transactions contemplated by this Plan shall not entitle the non-debtor party thereto to terminate such executory contract or unexpired lease or to exercise any other default-related rights with respect thereto. Each executory contract and unexpired lease assumed pursuant to this Article VII shall revest in and be fully enforceable by the respective Reorganized Debtor in accordance with its terms, except as modified by the provisions of this Plan, any order of the Bankruptcy Court authorizing and providing for its assumption, or applicable law. 7.2 Claims Based on Rejection of Executory Contracts or Unexpired Leases All proofs of claim with respect to Claims arising from or in connection with the rejection of executory contracts or unexpired leases, if any, must be filed with the Bankruptcy Court within thirty (30) days after the date of entry of an order of the Bankruptcy Court approving such rejection or, if listed in Exhibit E, thirty (30) days after the date of entry of the Confirmation Order. Any Claims arising from or in connection with the rejection of an executory contract or unexpired lease not filed within such time will be forever barred from assertion against the Debtors or Reorganized Debtors, their Estates, or property unless otherwise ordered by the Bankruptcy Court or provided for in this Plan. 7.3 Cure of Defaults of Assumed Executory Contracts and Unexpired Leases Any monetary amounts by which each executory contract and unexpired lease to be assumed pursuant to this Plan is in default shall be satisfied, pursuant to section 365(b)(1) of the Bankruptcy Code, by payment of the default amount in Cash on the Effective Date or on such other terms as the parties to each such executory contract or unexpired lease may otherwise agree in writing. In the event of a dispute pertaining to assumption or assignment, the cure payments required by section 365(b)(1) of the Bankruptcy Code shall be made following the resolution of the dispute in accordance with Section 8.1 of this Plan. 7.4 Compensation and Benefit Programs Except as otherwise expressly provided in this Plan or listed on Exhibit E hereto, all employment and severance policies, and all compensation and benefit plans, policies, and programs of the Debtors applicable to their employees, retirees, and non-employee directors and the employees and retirees of its subsidiaries, including, without limitation, all savings plans, retirement plans, healthcare plans, disability plans, severance benefit plans, incentive plans (including, without limitation, the Prepetition Management Incentive Plan), life, and accidental death and dismemberment insurance plans, are treated as executory contracts under this Plan and on the Effective Date will be assumed pursuant to the provisions of sections 365 and 1123 of the Bankruptcy Code. Any payment obligations under any assumed employment contracts and benefit plans that have been or purport to have been accelerated as a result of the commencement of any Chapter 11 Case or the consummation of any transactions contemplated by this Plan shall be reinstated and such acceleration shall be rescinded and deemed not to have occurred. 7.5 Workers' Compensation Programs Except as otherwise expressly provided in this Plan, as of the Effective Date, the Debtors and the Reorganized Debtors shall continue to honor their obligations under: (i) all applicable workers' compensation laws in states in which the Reorganized Debtors operate; and (ii) the Debtors' written contracts, agreements, agreements of indemnity, self-insurer workers' compensation bonds, and any other policies, programs, and plans regarding or relating to workers' compensation and workers' compensation insurance. All such contracts and agreements are treated as executory contracts under this Plan and on the Effective Date will be assumed pursuant to the provisions of sections 365 and 1123 of the Bankruptcy Code. ARTICLE EIGHT PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS AND INTERESTS 8.1 Resolution of Disputed Claims and Interests (a) Rejection Claims and Subordinated Claims. Holders of Rejection Claims and Subordinated Claims must File proofs of claims prior to the Bar Date. No later than the Claims Objection Deadline (unless extended by an order of the Bankruptcy Court), the Debtors or the Reorganized Debtors, as the case may be, shall file objections to such Claims with the Bankruptcy Court and serve such objections upon the Holders of such Claims to which objections are made. Nothing contained herein, however, shall limit the Reorganized Debtors' right to object to Claims, if any, filed or amended after the Claims Objection Deadline. The Debtors and the Reorganized Debtors shall be authorized to, and shall, resolve all Rejection Claims and Subordinated Claims by withdrawing or settling such objections thereto, or by litigating to Final Order in the Bankruptcy Court, the validity, nature, and/or amount thereof. (b) All Other Claims and Interests. Except as otherwise provided in this Plan, holders of Claims and Interests other than Holders of Rejection Claims and Subordinated Claims shall not be required to file a proof of claim or proof of interest, and no such parties should file a proof of claim or proof of interest. Unless disputed by a holder of a Claim or Interest or by the Debtors, the amount set forth in the Schedules (if the Debtors are required to file Schedules) or in the books and records of the Debtors (if the Debtors are not required to file Schedules) shall constitute the amount of the Allowed Claim or Allowed Interest of such holder. If any such holder of a Claim or Interest disagrees with the Debtors' determination with respect to the Allowed amount of such Holder's Claim or Interest, such Holder must so advise the Debtors in writing (at any time whether prior to or after the Effective Date), in which event the Claim or Interest will be a Disputed Claim or Disputed Interest. The Debtors intend to attempt to resolve any such disputes consensually or through judicial means outside the Bankruptcy Court (and no further Bankruptcy Court order shall be required in connection with such resolutions). Nevertheless, the Debtors may, in their discretion, File with the Bankruptcy Court (or any other court of competent jurisdiction) an objection to the allowance of any Claim or Interest or any other appropriate motion or adversary proceeding with respect thereto. All such objections will be litigated to Final Order; provided, however, that the Debtors may compromise and settle, withdraw or resolve by any other method approved by the Bankruptcy Court, any objection to Claims and Interests without further order of the Bankruptcy Court. 8.2 No Distributions Pending Allowance Notwithstanding any other provision of this Plan to the contrary, no payments or distributions of any kind or nature shall be made with respect to all or any portion of a Disputed Claim or Disputed Interest unless and until all objections to such Disputed Claim or Disputed Interest have been settled or withdrawn or have been determined by Final Order, and the Disputed Claim has become an Allowed Claim or the Disputed Interest has become an Allowed Interest. 8.3 Distributions on Account of Disputed Claims and Interests Once They Are Allowed and Additional Distributions on Account of Previously Allowed Claims and Interests On each Quarterly Distribution Date (or such earlier date as determined by the Reorganized Debtors in their sole discretion but subject to Section 8.2 of this Plan), the Reorganized Debtors will make distributions (a) on account of any Disputed Claim that has become an Allowed Claim during the preceding calendar quarter or any Disputed Interest that has become an Allowed Interest during the preceding calendar quarter, and (b) on account of previously Allowed Claims and Allowed Interests of property that would have been distributed to the Holders of such Claim or Interest on the dates distributions previously were made to Holders of Allowed Claims and Allowed Interests in such Class had the Disputed Claims or Disputed Interests that have become Allowed Claims or Allowed Interests been Allowed on such dates. Such distributions will be made pursuant to the applicable provisions of Article III of this Plan. Holders of such Claims and Interests that are ultimately Allowed will also be entitled to receive, on the basis of the amount ultimately Allowed, the amount of any dividends or other distributions, if any, received on account of the shares of New Common Stock and New Subordinated Notes, between the date such Claim or Interest is Allowed and the date such stock or notes are actually distributed to the Holders of such Allowed Claim or Allowed Interest. 8.4 Reserve for Disputed Subordinated Claims and Old Common Stock in Bally Prior to making any distributions of Cash to Holders of Allowed Subordinated Claims or Allowed Old Common Stock, the applicable Disbursing Agent shall establish appropriate reserves for Disputed Subordinated Claims and Disputed Old Common Stock to withhold from any such distributions one hundred percent (100%) of distributions to which Holders of Disputed Subordinated Claims and Disputed Old Common Stock would be entitled under this Plan as of such date if such Disputed Subordinated Claims and Disputed Old Common Stock were Allowed in the amount asserted by the Holder thereof in its respective timely filed proof of claim or proof of interest; provided, however, that the Debtors and the Reorganized Debtors shall have the right to file a motion seeking to estimate such amounts. The Disbursing Agent shall also establish appropriate reserves for Disputed Claims in other Classes as it determines necessary and appropriate. ARTICLE NINE CONFIRMATION AND CONSUMMATION OF THE PLAN 9.1 Conditions to Confirmation It shall be a condition precedent to confirmation of this Plan that the Bankruptcy Court shall have entered a Confirmation Order reasonably acceptable in form and substance to the Debtors and the New Investors. 9.2 Conditions to Effective Date Each of the following is a condition precedent to the occurrence of the Effective Date: (a) The Effective Date shall have occurred on or before [__________], 2007. (b) The Confirmation Order confirming this Plan, as such Plan may have been amended or modified, in form and substance reasonably satisfactory to the Debtors and the New Investors, shall have been entered and docketed by the Bankruptcy Court, and such order shall have become a Final Order and shall provide that: (i) the Debtors and Reorganized Debtors are authorized to take all actions necessary or appropriate to enter into, implement, and consummate the contracts, instruments, releases, leases, indentures, and other agreements or documents contemplated by or described in this Plan; (ii) the provisions of the Confirmation Order are non-severable and mutually dependent; (iii) the Reorganized Debtors are authorized to issue the New Common Stock, the New Senior Second Lien Notes, the New Subordinated Notes and any other New Securities and Documents, and enter into the New Credit Agreement, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person (other than as expressly required by such applicable agreement); (iv) the New Common Stock, the New Senior Second Lien Notes, the New Subordinated Notes, the Investment Agreement and any other New Securities and Documents issued or deemed issued under this Plan in exchange for Claims against the Debtors, or principally in exchange for such Claims and partly for cash or property, are exempt from registration under the Securities Act of 1933 pursuant to section 1145 of the Bankruptcy Code, except to the extent that Holders of any of the foregoing are "underwriters," as that term is defined in section 1145 of the Bankruptcy Code. (v) the Debtors, the Reorganized Debtors, the New Investors and Liberation and their respective Related Persons shall be deemed to have (a) solicited acceptances of the Plan in good faith and in compliance with the applicable provisions of the Bankruptcy Code, including without limitation, sections 1125 and 1126(b) of the Bankruptcy Code, and any applicable non-bankruptcy law, rule or regulation governing the adequacy of disclosure in connection with such solicitation and (b) participated in good faith and in compliance with the applicable provisions of the Bankruptcy Code in the offer and issuance of any securities under the Plan and, therefore, are not, and on account of such offer, issuance and solicitation will not be, liable at any time for any violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or the offer and issuance of any securities under the Plan, including pursuant to the Investment Agreement. (c) The following agreements, in form and substance reasonably acceptable to the Reorganized Debtors and the New Investors, shall have been executed and delivered by the Reorganized Debtors and such other parties deemed necessary by the Reorganized Debtors and the New Investors, and all conditions precedent thereto shall have been satisfied: (i) the New Credit Agreement and all related documents provided for therein or contemplated thereby; (ii) the New Senior Second Lien Notes Indenture; and (iii) the New Subordinated Notes Indenture. (d) The Amended Certificate of Incorporation and By-laws and other amended organizational documents, as necessary, shall have been filed with the applicable authority of each Debtor's respective jurisdiction of incorporation or formation in accordance with such jurisdiction's applicable laws. (e) All actions, documents, certificates and agreements necessary to implement this Plan shall have been effected or executed and delivered to the required parties and, to the extent required under this Plan or the Confirmation Order, filed with the applicable governmental authorities in accordance with applicable laws. (f) There shall be no existing breach under the Investment Agreement, which shall be in full force and effect, and the New Investors shall have purchased and received all shares of New Common Stock to be distributed to them under the Investment Agreement and the Debtors shall have received the applicable purchase price specified therein in Cash. 9.3 Waiver of Conditions Each of the conditions set forth in Section 9.2 of this Plan may be waived in whole or in part by the Debtors, in consultation with and after obtaining the consent of the New Investors given in writing or on the record in the Chapter 11 Cases, without any other notice to parties in interest or notice to or order of the Bankruptcy Court and without a hearing. The failure to satisfy or waive a condition to the Effective Date may be asserted by the Debtors or the Reorganized Debtors regardless of the circumstances giving rise to the failure of such condition to be satisfied. The failure of a Debtor or Reorganized Debtor to exercise any of the foregoing rights shall not be deemed a waiver of any other rights, and each right shall be deemed an ongoing right that may be asserted at any time. 9.4 Consequences of Non-Occurrence of Effective Date If each of the conditions to consummation and the occurrence of the Effective Date has not been satisfied or duly waived on or before the first Business Day that is thirty (30) days after the Confirmation Date, or such later date as shall be consented to by the Debtors and the New Investors, then upon motion by the Debtors and upon notice to such parties in interest as the Bankruptcy Court may direct, the Confirmation Order shall be vacated by the Bankruptcy Court. If the Confirmation Order is so vacated, the Plan shall be null and void in all respects, and nothing contained in the Plan shall constitute a waiver or release of any Claims by, or against, any of the Debtors or the allowance of any Administrative Expense or Claim. ARTICLE TEN EFFECT OF PLAN CONFIRMATION 10.1 Binding Effect; Plan Binds All Holders of Claims and Interests On the Effective Date, and effective as of the Effective Date, this Plan shall, and shall be deemed to, be binding upon and inure to the benefit of the Debtors, all present and former Holders of Claims against and Interests in any Debtor, and their respective successors and assigns, including, but not limited to, the Reorganized Debtors, regardless of whether any such Holder failed to vote to accept or reject this Plan or affirmatively voted to reject this Plan. 10.2 Releases and Related Injunctions (a) Releases by the Debtors. Effective as of the Effective Date, for good and valuable consideration, the adequacy of which is hereby confirmed, the Debtors and Reorganized Debtors, in their individual capacities and as debtors in possession, will be deemed to forever release, waive, and discharge all claims, obligations, suits, judgments, damages, demands, debts, rights, Causes of Action, and liabilities (other than the rights of the Debtors or Reorganized Debtors to enforce this Plan and the contracts, instruments, releases, indentures, and other agreements or documents delivered under or in connection with this Plan or assumed pursuant to this Plan), whether liquidated or unliquidated, fixed or contingent, matured, or unmatured, known or unknown, foreseen, or unforeseen, then existing or thereafter arising, in law, equity, or otherwise that are based in whole or part on any act, omission, transaction, event, or other occurrence taking place on or prior to the Effective Date in any way relating to the Debtors, the Reorganized Debtors, the Chapter 11 Cases, the Disclosure Statement, the First Restructuring Support Agreement, the Second Restructuring Support Agreement, the Investment Agreement or this Plan (or the solicitation of votes on this Plan), and that could have been asserted by or on behalf of the Debtors, their Estates or the Reorganized Debtors against any of the Released Parties, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person. (b) Releases by Holders of Claims and Interests. Effective as of the Effective Date, for good and valuable consideration and in consideration for the obligations of the Debtors and the Reorganized Debtors under this Plan and the property, securities, contracts, instruments, releases, and other agreements or documents to be delivered in connection with this Plan, to the fullest extent permissible under applicable law, the Holders of Claims or Old Common Stock, and each of their respective Related Persons, will be deemed to completely and forever release, waive, void, extinguish, and discharge the Debtors and Reorganized Debtors, and each of their respective Related Persons, from any and all claims, demands, debts, rights, Causes of Action, or liabilities (other than the right to enforce the Debtors' or the Reorganized Debtors' obligations under this Plan, and the contracts, instruments, releases, agreements, and documents delivered under this Plan), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise, that are based in whole or in part on any act or omission, transaction, event, or other occurrence taking place on or prior to the Effective Date in any way relating to the Debtors, the Reorganized Debtors, the Chapter 11 Cases, the Disclosure Statement, the First Restructuring Support Agreement, the Second Restructuring Support Agreement, the Investment Agreement or this Plan (or the solicitation of votes on this Plan) and that could have been asserted by or on behalf of (whether directly or derivatively), or against, the Debtors, their Estates or the Reorganized Debtors or against any of their respective Related Persons, in each case without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any Person. (c) Injunction Related to Releases. The Confirmation Order will permanently enjoin the commencement or prosecution by any Person or Entity, whether directly, derivatively or otherwise, of any claims, obligations, suits, judgments, damages, demands, debts, rights, Causes of Action, or liabilities released pursuant to this Plan, including but not limited to the claims, obligations, suits, judgments, damages, demands, debts, rights, Causes of Action, or liabilities released in this Section 10.2. 10.3 Discharge of Claims To the fullest extent provided under section 1141(d)(1)(A) and other applicable provisions of the Bankruptcy Code, except as otherwise expressly provided by this Plan or the Confirmation Order, all consideration distributed under this Plan shall be in exchange for, and in complete satisfaction, settlement, discharge, and release of, all Claims of any kind or nature whatsoever against the Debtors or any of their assets or properties, and regardless of whether any property shall have been distributed or retained pursuant to this Plan on account of such Claims. Except as otherwise expressly provided by this Plan or the Confirmation Order, upon the Effective Date, the Debtors, and each of them, shall be deemed discharged and released under and to the fullest extent provided under section 1141(d)(1)(A) of the Bankruptcy Code from any and all Claims of any kind or nature whatsoever, including, but not limited to, demands and liabilities that arose before the Confirmation Date, and all debts of the kind specified in section 502(g), 502(h), or 502(i) of the Bankruptcy Code. 10.4 Preservation of Rights of Action; Settlement of Litigation Claims (a) Preservation of Rights of Action. Except as otherwise provided in this Plan, the Confirmation Order, or in any document, instrument, release, or other agreement entered into in connection with this Plan or approved by order of the Bankruptcy Court, in accordance with section 1123(b) of the Bankruptcy Code, the Debtors and their Estates shall retain the Litigation Claims. The Reorganized Debtors, as the successors in interest to the Debtors and the Estates, may, and shall have the exclusive right to, enforce, sue on, settle, compromise, transfer or assign (or decline to do any of the foregoing) any or all of the Litigation Claims, including, without limitation, any and all derivative actions pending or otherwise existing against the Debtors as of the Effective Date. Notwithstanding the foregoing, the Debtors and the Reorganized Debtors shall not file, commence, or pursue any claim, right, or cause of action under section 547 of the Bankruptcy Code; provided, however, that, notwithstanding any statute of limitations, the Debtors and Reorganized Debtors shall have the right to assert or raise such Causes of Action (a) as defenses or counterclaims (up to the amount asserted in the Claims against the Debtors) with respect to any Disputed Claim, and (b) in connection with the Claims objection process with respect to a Claim that is not an Allowed Claim, in which case such Causes of Action can be raised as an objection to such Claim and not as defenses or counterclaims. (b) Settlement of Litigation Claims. At any time after the Confirmation Date and before the Effective Date, notwithstanding anything in this Plan to the contrary, the Debtors may settle any or all of the Litigation Claims with the approval of the Bankruptcy Court pursuant to Bankruptcy Rule 9019. After the Effective Date, the Reorganized Debtors may, and shall have the exclusive right to, compromise and settle any Claims against them and claims they may have against other Person or Entity, including, without limitation, the Litigation Claims, without notice to or approval from the Bankruptcy Court, including, without limitation, any and all derivative actions pending or otherwise existing against the Debtors as of the Effective Date. 10.5 Exculpation and Limitation of Liability (a) None of the Released Parties shall have or incur any liability to, or be subject to any right of action by, any Holder of a Claim or an Interest, or any other party in interest, or any of their respective agents, employees, representatives, financial advisors, attorneys, or agents acting in such capacity, or affiliates, or any of their successors or assigns, or any other Released Party, for any act or omission in connection with, relating to, or arising out of, the Chapter 11 Cases, formulating, negotiating, or implementing this Plan, the First Restructuring Support Agreement, the Second Restructuring Support Agreement, the prepetition or postpetition solicitation of acceptances of this Plan, the Investment Agreement and the acts taken thereunder, the pursuit of confirmation of this Plan, the confirmation of this Plan, the consummation of this Plan, or the administration of this Plan or the property to be distributed under this Plan, except for their respective actions that constitute fraud, willful misconduct, gross negligence, or criminal conduct as determined by a Final Order entered by a court of competent jurisdiction. Without limiting the foregoing, the Released Parties shall in all respects be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities under this Plan. 10.6 Injunctions (a) Except as otherwise provided in this Plan or in any document, instrument, release, or other agreement entered into in connection with this Plan or approved by order of the Bankruptcy Court, the Confirmation Order shall provide, among other things, that from and after the Effective Date all Persons or Entities who have held, hold, or may hold Claims against or Interests in the Debtors are (i) permanently enjoined from taking any of the following actions against the Estate(s), or any of their property, on account of any such Claims or Interests and (ii) permanently enjoined from taking any of the following actions against any of the Debtors, the Reorganized Debtors or their property on account of such Claims or Interests: (A) commencing or continuing, in any manner or in any place, any action, or other proceeding; (B) enforcing, attaching, collecting, or recovering in any manner any judgment, award, decree or order; (C) creating, perfecting, or enforcing any Lien or encumbrance; (D) asserting a setoff or right of subrogation of any kind against any debt, liability or obligation due to the Debtors; and (E) commencing or continuing, in any manner or in any place, any action that does not comply with or is inconsistent with the provisions of this Plan; provided, however, that nothing contained herein shall preclude such Persons or Entities from exercising their rights pursuant to and consistent with the terms of this Plan and the contracts, instruments, releases, indentures, and other agreements or documents delivered under or in connection with this Plan. (b) By accepting distributions pursuant to this Plan, each Holder of an Allowed Claim or Allowed Interest will be deemed to have specifically consented to the injunctions set forth in this Section 10.6. 10.7 Term of Bankruptcy Injunction or Stays All injunctions or stays provided for in the Chapter 11 Cases under section 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Effective Date. 10.8 Termination of Subordination Rights and Settlement of Related Claims The classification and manner of satisfying all Claims and Interests under this Plan take into consideration all subordination rights, whether arising by contract or under general principles of equitable subordination, section 510(b) or 510(c) of the Bankruptcy Code, or otherwise. All subordination rights that a Holder of a Claim or Interest may have with respect to any distribution to be made pursuant to this Plan will be discharged and terminated, and all actions related to the enforcement of such subordination rights will be permanently enjoined. Accordingly, distributions pursuant to this Plan to Holders of Allowed Claims and Allowed Interests will not be subject to payment to a beneficiary of such terminated subordination rights, or to levy, garnishment, attachment, or other legal process by a beneficiary of such terminated subordination rights; provided, however, that nothing contained herein shall preclude any Person or Entity from exercising their rights pursuant to and consistent with the terms of this Plan and the contracts, instruments, releases, indentures, and other agreements or documents delivered under or in connection with this Plan. ARTICLE ELEVEN RETENTION OF JURISDICTION Pursuant to sections 105(c) and 1142 of the Bankruptcy Code and notwithstanding entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court will retain jurisdiction over all matters arising in, arising under, and/or related to, the Chapter 11 Cases and this Plan to the fullest extent permitted by law, including, among other things, jurisdiction to: (a) Allow, disallow, determine, liquidate, classify, estimate, or establish the priority or secured or unsecured status of any Claim or Interest, including the resolution of any request for payment of any Administrative Claim and the resolution of any objections to the allowance or priority of Claims or Interests; (b) Resolve any matters related to the assumption, assumption and assignment, or rejection of any executory contract or unexpired lease to which any Debtor is a party or with respect to which any Debtor or the Reorganized Debtor may be liable and to hear, determine, and, if necessary, liquidate any Claims arising therefrom; (c) Ensure that distributions to Holders of Allowed Claims or Allowed Interests are accomplished pursuant to the provisions of this Plan; (d) Decide or resolve any motions, adversary proceedings, contested, or litigated matters and any other matters and grant or deny any applications involving the Debtors that may be pending on the Effective Date; (e) Enter such orders as may be necessary or appropriate to implement or consummate the provisions of this Plan and all contracts, instruments, releases, and other agreements or documents created in connection with this Plan, the Disclosure Statement, or the Confirmation Order; (f) Resolve any cases, controversies, suits, or disputes that may arise in connection with the consummation, interpretation, or enforcement of this Plan, including, without limitation, any contract, instrument, release, or other agreement or document that is executed or created pursuant to this Plan, or any Entity's rights arising from or obligations incurred in connection with this Plan or such documents; (g) Modify this Plan before or after the Effective Date pursuant to section 1127 of the Bankruptcy Code or modify the Disclosure Statement, the Confirmation Order, or any contract, instrument, release, or other agreement or document created in connection with this Plan, the Disclosure Statement or the Confirmation Order, or remedy any defect or omission or reconcile any inconsistency in any Bankruptcy Court order, this Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument, release, or other agreement or document created in connection with this Plan, the Disclosure Statement, or the Confirmation Order, in such manner as may be necessary or appropriate to consummate this Plan; (h) Hear and determine all applications for compensation and reimbursement of expenses of Professionals under this Plan or under sections 327, 330, 331, 363, 503(b), 1103, and 1129(c)(9) of the Bankruptcy Code, provided, however, that from and after the Effective Date the payment of fees and expenses of the Reorganized Debtors, including counsel fees, shall be made in the ordinary course of business and shall not be subject to the approval of the Bankruptcy Court; (i) Issue injunctions, enter and implement other orders, or take such other actions as may be necessary or appropriate to restrain interference by any Person or Entity with consummation, implementation, or enforcement of this Plan or the Confirmation Order; (j) Hear and determine causes of action by or on behalf of the Debtors or the Reorganized Debtors; (k) Hear and determine matters concerning state, local and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code; (l) Enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason or in any respect modified, stayed, reversed, revoked, or vacated, or distributions pursuant to this Plan are enjoined or stayed; (m) Determine any other matters that may arise in connection with or relate to this Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument, release, or other agreement, or document created in connection with this Plan, the Disclosure Statement or the Confirmation Order; (n) Enforce all orders, judgments, injunctions, releases, exculpations, indemnifications, and rulings entered in connection with the Chapter 11 Cases; (o) Hear and determine all matters related to (i) the property of the Estates from and after the Confirmation Date and (ii) the activities of the Reorganized Debtors; (p) Hear and determine the Litigation Claims by or on behalf of the Debtors or Reorganized Debtors; (q) Hear and determine such other matters as may be provided in the Confirmation Order or as may be authorized under the Bankruptcy Code; and (r) Enter an order closing the Chapter 11 Cases. ARTICLE TWELVE MISCELLANEOUS PROVISIONS 12.1 Effectuating Documents and Further Transactions Each of the Debtors or the Reorganized Debtors is authorized to execute, deliver, file, or record such contracts, instruments, releases, consents, certificates, resolutions, programs and other agreements and/or documents and take such acts and actions as may be reasonable, necessary or appropriate to effectuate, implement, consummate and/or further evidence the terms and conditions of this Plan, any notes or securities issued pursuant to this Plan, and any transactions described in or contemplated by this Plan. 12.2 Authority to Act Prior to, on, or after the Effective Date (as appropriate), all matters expressly provided for under this Plan that would otherwise require approval of the stockholders, security holders, officers, directors, partners, managers, members or other owners of one or more of the Debtors or the Reorganized Debtors shall be deemed to have occurred and shall be in effect prior to, on, or after the Effective Date (as appropriate) pursuant to the applicable law of the states in which the Debtors or Reorganized Debtors are formed, without any requirement of further vote, consent, approval, authorization or other action by such stockholders, security holders, officers, directors, partners, managers, members or other owners of such entities or notice to, order of, or hearing before the Bankruptcy Court. 12.3 Exemption from Transfer Taxes Pursuant to section 1146(c) of the Bankruptcy Code, (a) the issuance, transfer, or exchange (or deemed issuance, transfer or exchange) of notes or equity securities under this Plan, including, without limitation, the New Senior Second Lien Notes, the New Subordinated Notes, the New Common Stock, and the other New Securities and Documents; (b) the creation of any mortgage, deed of trust, Lien, pledge, or other security interest; (c) the making or assignment of any lease or sublease; or (d) the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with, this Plan (including, without limitation, any merger agreements, agreements of consolidation, restructuring, disposition, liquidation, or dissolution, deeds, bills of sale, and transfers of tangible property) will not be subject to any stamp tax, recording tax, personal property tax, real estate transfer tax, sales tax, use tax, transaction privilege tax (including, without limitation such taxes on prime contracting and owner-builder sales), privilege taxes (including, without limitation, privilege taxes on construction contracting with regard to speculative builders and owner builders), and other similar taxes. Unless the Bankruptcy Court orders otherwise, all sales, transfers, and assignments of owned and leased property approved by the Bankruptcy Court on or prior to the Effective Date, shall be deemed to have been in furtherance of, or in connection with, this Plan. 12.4 Bar Dates for Administrative Claims To the extent necessary, the Confirmation Order will establish an Administrative Claims Bar Date for filing Administrative Claims, except for Administrative Claims arising under the DIP Credit Agreement as provided in Section 3.1(a)(ii) of this Plan and Administrative Claims for Professional Fees (which shall be subject to the Professional Fees Bar Date). Holders of alleged Administrative Claims not paid prior to the Effective Date shall submit proofs of Claim on or before such Administrative Claims Bar Date or forever be barred from doing so (unless such alleged Administrative Claim is incurred in the ordinary course of business by the Debtors and is not yet past-due, in which case the applicable Administrative Claims Bar Date shall be thirty (30) days after such due date or as otherwise ordered by the Bankruptcy Court). The notice of Confirmation to be delivered pursuant to Bankruptcy Rule 3020(c) and 2002(f) will set forth such date and constitute notice of this Administrative Claims Bar Date. The Debtors and the Reorganized Debtors shall have thirty (30) days (or such longer period as may be allowed by order of the Bankruptcy Court) following the Administrative Claims Bar Date to review and File objections to such Administrative Claims, if necessary, and the Bankruptcy Court shall hear and determine the amount of such Administrative Claims. 12.5 Payment of Statutory Fees All fees payable pursuant to section 1930 of title 28, United States Code, as determined by the Bankruptcy Court at the Confirmation Hearing, shall be paid on the Effective Date. 12.6 Amendment or Modification of the Plan Subject to section 1127 of the Bankruptcy Code and, to the extent applicable, sections 1122, 1123, and 1125 of the Bankruptcy Code, the Debtors reserve the right to alter, amend, or modify this Plan at any time prior to or after the Confirmation Date but prior to the substantial consummation of this Plan. A Holder of a Claim or Interest that has accepted this Plan shall be deemed to have accepted this Plan, as altered, amended or modified, if the proposed alteration, amendment or modification does not materially and adversely change the treatment of the Claim or Interest of such Holder. 12.7 Severability of Plan Provisions If, prior to the Confirmation Date, any term or provision of this Plan is determined by the Bankruptcy Court to be invalid, void, or unenforceable, the Bankruptcy Court will have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void, or unenforceable, and such term or provision will then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of this Plan will remain in full force and effect and will in no way be affected, impaired, or invalidated by such holding, alteration, or interpretation. The Confirmation Order will constitute a judicial determination and will provide that each term and provision of this Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms. 12.8 Successors and Assigns This Plan shall be binding upon and inure to the benefit of the Debtors, and their respective successors and assigns, including, without limitation, the Reorganized Debtors. The rights, benefits, and obligations of any Person or Entity named or referred to in this Plan shall be binding on, and shall inure to the benefit of, any heir, executor, administrator, successor, or assign of such Person or Entity. 12.9 Revocation, Withdrawal, or Non-Consummation The Debtors reserve the right to revoke or withdraw this Plan as to any or all of the Debtors prior to the Confirmation Date and to file subsequent plans of reorganization. If the Debtors revoke or withdraw this Plan as to any or all of the Debtors, or if confirmation or consummation as to any or all of the Debtors does not occur, then, with respect to such Debtors, except as otherwise provided by the Debtors, (a) this Plan shall be null and void in all respects, (b) any settlement or compromise embodied in this Plan (including the fixing or limiting to an amount certain any Claim or Interest or Class of Claims or Interests), assumption or rejection of executory contracts or leases affected by this Plan, and any document or agreement executed pursuant to this Plan shall be deemed null and void, and (c) nothing contained in this Plan shall (i) constitute a waiver or release of any Claims by or against, or any Interests in, such Debtors or any other Person or Entity, (ii) prejudice in any manner the rights of such Debtors or any other Person or Entity, or (iii) constitute an admission of any sort by the Debtors or any other Person or Entity. 12.10 Notice All notices, requests, and demands to or upon the Debtors or the Reorganized Debtors to be effective shall be in writing and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed as follows: If to any Debtor or Reorganized Debtor: Bally Total Fitness 8700 Bryn Mawr Avenue Chicago, Illinois 60631 Attention: Marc D. Bassewitz Fax: (773) 399-0126 with a copy (which shall not Latham & Watkins LLP constitute notice hereunder), to: Sears Tower, Suite 5800 233 South Wacker Drive Chicago, Illinois 60606 Attention: David S. Heller Tel: (312) 876-7700 Fax: (312) 993-9767 If to the New Investors: Kasowitz, Benson, Torres & Friedman LLP 1633 Broadway New York, New York 10019 Attention: Andrew K. Glenn Tel: (212) 507-1700 Fax: (212) 507-1800 Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, New York 10036 Attention: Shari K. Krouner, Esq. Tel: (212) 715-9222 Fax: (212) 715-8000 12.11 Governing Law Except to the extent that the Bankruptcy Code, the Bankruptcy Rules or other federal law is applicable, or to the extent that an exhibit or schedule to this Plan provides otherwise, the rights and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, the laws of New York, without giving effect to the principles of conflicts of law of such jurisdiction. 12.12 Tax Reporting and Compliance The Reorganized Debtors are hereby authorized, on behalf of each of the Debtors, to request an expedited determination under section 505(b) of the Bankruptcy Code of the tax liability of the Debtors for all taxable periods ending after the Petition Date through, and including, the Effective Date. 12.13 Schedules All exhibits and schedules to this Plan, including the Exhibits and Plan Schedules, are incorporated and are a part of this Plan as if set forth in full herein. 12.14 Filing of Additional Documents On or before substantial consummation of this Plan, the Debtors shall File such agreements and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of this Plan. 12.15 No Strict Construction This Plan is the product of extensive discussions and negotiations between and among, inter alia, the Debtors and the New Investors. Each of the foregoing was represented by counsel of its choice who either (a) participated in the formulation and documentation of, or (b) was afforded the opportunity to review and provide comments on, this Plan, the Disclosure Statement, Exhibits and Plan Schedules, and the agreements and documents ancillary or related thereto. Accordingly, unless explicitly indicated otherwise, the general rule of contract construction known as "contra proferentem" shall not apply to the construction or interpretation of any provision of this Plan, the Disclosure Statement, Exhibits and Plan Schedules, and the documents ancillary and related thereto. 12.16 Conflicts In the event that a provision of the Disclosure Statement conflicts with a provision of this Plan, the terms of this Plan shall govern and control to the extent of such conflict. 12.17 Dissolution of Committees The Creditors' Committee and the Equity Committee appointed in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code, if any, shall be dissolved on the Confirmation Date. 12.18 Fees and Expenses From and after the Effective Date, the Reorganized Debtors shall, in the ordinary course of business and without the necessity for any approval by the Bankruptcy Court, pay the reasonable fees and expenses of professional persons thereafter incurred, including those fees and expenses incurred in connection with the implementation and consummation of this Plan. Dated: New York, New York July __, 2007 Respectfully Submitted, BALLY TOTAL FITNESS HOLDING CORPORATION By: /s/ DRAFT -------------------------------- Name: Don R. Kornstein Title: Chief Restructuring Officer Each Debtor Listed on Appendix 1 By: /s/ DRAFT -------------------------------- Name: Don R. Kornstein Title: Chief Restructuring Officer David S. Heller (pro hac vice motion pending) Richard A. Levy (pro hac vice motion pending) Keith A. Simon (pro hac vice motion pending) Sears Tower, Suite 5800 233 South Wacker Drive Chicago, Illinois 60606-6401 Telephone: (312) 876-7700 Facsimile: (312) 993-9767 -and- John W. Weiss (JW-4222) 885 Third Avenue, Suite 1000 New York, New York 10022 Telephone: (212) 906-1200 Proposed Counsel for Debtors and Debtors-in- Possession Appendix 1 Bally ARA Corporation Bally Fitness Franchising, Inc. Bally Franchise RSC, Inc. Bally Franchising Holdings, Inc. Bally Real Estate I LLC Bally REFS West Hartford, LLC Bally Sports Clubs, Inc. Bally Total Fitness Corporation Bally Total Fitness Franchising, Inc. Bally Total Fitness Holding Corporation Bally Total Fitness International, Inc. Bally Total Fitness of California, Inc. Bally Total Fitness of Colorado, Inc. Bally Total Fitness of Connecticut Coast, Inc. Bally Total Fitness of Connecticut Valley, Inc. Bally Total Fitness of Greater New York, Inc. Bally Total Fitness of Minnesota, Inc. Bally Total Fitness of Missouri, Inc. Bally Total Fitness of Philadelphia, Inc. Bally Total Fitness of Rhode Island, Inc. Bally Total Fitness of the Mid-Atlantic, Inc. Bally Total Fitness of the Midwest, Inc. Bally Total Fitness of the Southeast, Inc. Bally Total Fitness of Toledo, Inc. Bally Total Fitness of Upstate New York, Inc. BTF Cincinnati Corporation BTF Europe Corporation BTF Indianapolis Corporation BTF Minneapolis Corporation BTF/CFI, Inc. BTFCC, Inc. BTFF Corporation Greater Philly No. 1 Holding Company Greater Philly No. 2 Holding Company Health & Tennis Corporation of New York Holiday Health Clubs of the East Coast, Inc. Holiday/Southeast Holding Corp. Jack LaLanne Holding Corp. New Fitness Holding Co., Inc. Nycon Holding Co., Inc. Rhode Island Holding Company Tidelands Holiday Health Clubs, Inc. U.S. Health, Inc. EX-99.G 3 d797396_ex99-g.txt Draft 7/30/07 For Discussion Purposes Only INVESTMENT AGREEMENT by and among BALLY TOTAL FITNESS HOLDING CORPORATION, as debtor and debtor-in-possession, and HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD., and HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P., as Investors Dated as of July [o], 2007 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS....................................................................1 Section 1.1 Definitions.....................................................1 ARTICLE II PURCHASE AND SALE OF SHARES....................................................9 Section 2.1 Issuance and Sale of New Investor Shares........................9 Section 2.2 Payment of the New Investor Share Purchase Price................9 Section 2.3 Investor Share Notice...........................................9 ARTICLE III THE CLOSING...................................................................10 Section 3.1 The Closing....................................................10 Section 3.2 Deliveries.....................................................10 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................11 Section 4.1 Organization...................................................11 Section 4.2 Due Authorization, Execution and Delivery; Enforceability......11 Section 4.3 Capitalization.................................................11 Section 4.4 Consents.......................................................11 Section 4.5 No Conflicts...................................................12 Section 4.6 No Registration................................................12 Section 4.7 Financial Statements...........................................12 Section 4.8 No Fiduciary Representation....................................12 Section 4.9 Title to Property..............................................13 Section 4.10 Litigation.....................................................13 Section 4.11 ERISA..........................................................13 Section 4.12 Copyrights, Patents, Trademarks and Licenses, etc..............13 Section 4.13 Environmental..................................................13 Section 4.14 Compliance with Laws...........................................14 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE INVESTORS...............................14 Section 5.1 Organization...................................................15 Section 5.2 Due Authorization..............................................15 Section 5.3 Consents and Approvals.........................................15 Section 5.4 No Violations..................................................15 Section 5.5 Financing......................................................16 Section 5.6 Investment Representations.....................................16 Section 5.7 [Dollar Revenues...............................................16 ARTICLE VI COVENANTS.....................................................................16 Section 6.1 Conduct of Business Pending the Closing........................16 Section 6.2 No Solicitation of Alternative Proposals.......................19 Section 6.3 Cooperation; Access to Information.............................21 Section 6.4 HSR Act........................................................22 Section 6.5 Further Actions; Reasonable Efforts............................22 Section 6.6 Use of Proceeds................................................23 Section 6.7 Notification of Certain Matters................................23 Section 6.8 Compliance with Other Agreements...............................23 Section 6.9 Information....................................................23 Section 6.10 Assumption of Agreement........................................23 ARTICLE VII CONDITIONS....................................................................24 Section 7.1 Conditions to the Obligations of the Investors.................24 Section 7.2 Conditions to the Obligations of the Company...................25 ARTICLE VIII TERMINATION; BREAK-UP FEE; FEES AND EXPENSES..................................25 Section 8.1 Termination....................................................25 Section 8.2 Break-Up Fee; Fees and Expenses................................27 ARTICLE IX INDEMNIFICATION...............................................................28 Section 9.1 Indemnification................................................28 Section 9.2 Notice; Assumed Defense........................................29 Section 9.3 Settlements....................................................29 Section 9.4 Limitation on Liability........................................30 ARTICLE X SUBSIDIARY GUARANTEE..........................................................30 Section 10.1 Guarantee......................................................30 ARTICLE XI MISCELLANEOUS.................................................................30 Section 11.1 Certain Matters................................................30 Section 11.2 Governing Law..................................................30 Section 11.3 Jurisdiction; Forum; Service of Process; Waiver of Jury Trial..30 Section 11.4 Successors and Assigns.........................................31 Section 11.5 Entire Agreement; Amendment....................................31 Section 11.6 Notices........................................................31 Section 11.7 Delays or Omissions............................................32 Section 11.8 Several Obligations of Investors...............................33 Section 11.9 Counterparts...................................................33 Section 11.10 Severability...................................................33 Section 11.11 Construction...................................................33 Section 11.12 Headings.......................................................33 Section 11.13 Public Announcement............................................33 Exhibits Exhibit A - Amended Plan of Reorganization Exhibit B - Form of Investor Share Notice Exhibit C - Subsidiary Guarantors Exhibit D - Certain Financing Terms Schedules Company Disclosure Schedule Investors Disclosure Schedule INVESTMENT AGREEMENT This INVESTMENT AGREEMENT (as it may be amended, restated, supplemented or otherwise modified from time to time, this "Agreement") is made as of July __, 2007, by and among Bally Total Fitness Holding Corporation, a Delaware corporation, in its capacity as debtor and debtor in possession (the "Company"), the subsidiary guarantors set forth in Exhibit C hereto (the "Subsidiary Guarantors"), as guarantors, and Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P. (collectively, including any affiliates thereof, the "Investors"). RECITALS WHEREAS, the Company and certain of its direct and indirect subsidiaries (as more particularly defined in the Plan (as defined below), the "Debtors") intend to file chapter 11 petitions under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. ss.ss. 101-1330 (as amended, the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") in order to effectuate a financial and corporate restructuring of the Debtors through the Plan (such chapter 11 cases, as more particularly defined in the Plan, the "Chapter 11 Cases"); WHEREAS, the Company desires to undertake the Restructuring (as hereinafter defined) in accordance with the Plan (as hereinafter defined); WHEREAS, in connection with the Restructuring, the Investors desire to make a significant new investment in Reorganized Bally (as hereinafter defined) in exchange for newly issued equity of Reorganized Bally; WHEREAS, to implement such investment, the Investors desire to acquire from the Reorganized Bally, and the Company desires to issue to the Investors, upon the terms and subject to the conditions set forth herein, the New Investor Shares (as hereinafter defined); NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. For the purposes of this Agreement, the following terms shall have the following meanings: "Action" shall mean any litigation, suit, claim, action, administrative, arbitral or other proceeding, inquiry, audit, hearing, petition, grievance, complaint, challenge or governmental or regulatory investigation. "Affiliate" shall have the meaning ascribed thereto in Rule 12b-2 promulgated under the Exchange Act. For the purposes of this Agreement, the Company and its subsidiaries shall not be deemed to be Affiliates of Harbinger, and Harbinger shall not be deemed to be Affiliates of the Company and its subsidiaries. "Agreement" shall have the meaning ascribed thereto in the Preamble. "Alternative Proposal" shall have the meaning ascribed thereto in Section 6.2. "Assumed Contract" shall mean any contract of the Debtors that is not set forth on Exhibit E to the Plan, as amended from time to time. "Assumption Orders" shall mean the order or orders entered by the Bankruptcy Court (which may include the Confirmation Order) approving the assumption of the Assumed Contracts, in form and substance reasonably satisfactory to the Investors. "Bankruptcy Code" shall have the meaning ascribed thereto in the Recitals. "Bankruptcy Court" shall have the meaning ascribed thereto in the Recitals. "Board of Directors" shall mean the Board of Directors of the Company (or Reorganized Bally, as the case may be). "Break-Up Fee" shall have the meaning ascribed thereto in Section 8.2(a). "Business Day" shall mean any day excluding Saturday, Sunday, or any other day on which banking institutions located in New York, New York are required or authorized to be closed. "Business Plan" shall mean that 2007-2011 business plan of the Company, dated June 27, 2007. "Cash Collateral Order" shall mean, collectively, (i) any and all cash collateral orders entered by the Bankruptcy Court in any of the Chapter 11 Cases with respect to the use of cash collateral pursuant the Old Credit Agreement or (ii) any other cash collateral order entered by the Bankruptcy Court in any of the Chapter 11 Cases, which, with respect to each of (i) and (ii), shall be reasonably acceptable to the Investors. "Chapter 11 Cases" shall have the meaning ascribed thereto in the Recitals. "Closing" shall have the meaning ascribed thereto in Section 3.1. "Closing Date" shall have the meaning ascribed thereto in Section 3.1. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Company" shall have the meaning ascribed thereto in the Preamble. "Company Disclosure Schedule" shall have the meaning ascribed thereto in Article IV. "Company Securities" shall mean (x) shares of capital stock or other voting securities of the Company, (y) securities of the Company convertible into or exchangeable for shares of capital stock or other voting securities of the Company or (z) options (including cash settlement options), warrants or other rights to acquire shares of capital stock or other voting securities of the Company. "Confirmation Order" shall mean an order entered by the Bankruptcy Court in the Chapter 11 Cases confirming the Plan pursuant to Section 1129 of the Bankruptcy Code, which order shall include orders of the Bankruptcy Court that have the effect, except as contemplated by the Plan, of vesting all licenses, permits, authorizations, registrations and other governmental or regulatory requirements to conduct the business of the Debtors in the Reorganized Debtors without any further action, filing, notice, declaration or registration by them, and which shall find that the Investors have acted in good faith in connection with the Chapter 11 Cases and the Plan, and which shall otherwise be in form and substance reasonably acceptable to the Investors. "Debtors" shall have the meaning ascribed thereto in the Recitals. "DIP Loan Facility" shall have the meaning ascribed thereto in the Plan, as it may be amended, restated, supplemented and otherwise modified from time to time in accordance with the terms thereof and with the consent of the Investors. "Disclosure Statement" shall mean the disclosure statement that will be filed in connection with the Plan in the Chapter 11 Cases, as amended. "Effective Date" shall have the meaning ascribed thereto in the Plan. "Employee Benefit Plan" shall mean, at any date, any employee pension benefit plan (as defined in Section 3(2) of ERISA) which is subject to Title IV of ERISA (other than a Multiemployer Plan) and to which Borrower or any ERISA Affiliate may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA "Encumbrance" shall mean any lien, encumbrance, security interest, option, pledge, mortgage, deed of trust, hypothecation, conditional sale or restriction on transfer of title or voting, whether imposed by agreement, understanding, law, equity or otherwise, except for any restrictions on transfer generally arising under any applicable federal or state securities laws. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulations promulgated thereunder. "ERISA Affiliate" means any corporation, trade or business that is, along with Borrower, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Section 414 of the Code or Section 4001 of ERISA. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Exchange Act shall include reference to the comparable section, if any, of such successor federal statute. "Excluded Parties" shall mean each of Anschutz Investment Company, Goldman, Sachs & Co., Special Value Opportunities Fund, LLC, Special Value Expansion Fund, LLC, Special Value Continuation Partners, LP and Tennenbaum Opportunities Partners V, LP. "Expenses" shall have the meaning ascribed thereto in Section 8.2(b). "GAAP" shall mean generally accepted accounting principles in the United States, as in effect from time to time, consistently applied. "Governmental Entity" shall mean any supranational, national, foreign, federal, state or local judicial, legislative, executive, administrative or regulatory body or authority. "Governmental Requirement" shall mean all consents, approvals, authorizations of, declarations, filings, or registrations with, any Governmental Entity required to be made or obtained by either the Company or any of its subsidiaries in connection with the execution, delivery, and performance of this Agreement or any of the other Transaction Documents and the transactions contemplated hereby and thereby, including, without limitation, (i) the filing of a new or amended and restated certificate of incorporation, or other applicable organizational filings, for one or more of the Reorganized Debtors with the Secretary of State (or similar state authority) of such Reorganized Debtor's state of incorporation or organization, (ii) any required filings (and expiration of applicable waiting periods) under the HSR Act, and (iii) the Confirmation Order. "Hazardous Materials" means any (i) "hazardous substance" or "toxic substances," as those terms are defined by the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq. and the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802, all as amended or hereafter amended; (ii) "hazardous waste", as defined by the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., as amended or hereafter amended; (iii) pollutant or contaminant or hazardous, dangerous or toxic chemical, material, or substance within the meaning of any other applicable federal, state or local law, regulation, ordinance, or requirement (including consent decrees and administrative orders) relating to protection of health, safety or the environment, as amended or hereafter amended; (iv) crude oil or any fraction thereof which is liquid at standard conditions of temperature and pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute); (v) any radioactive material, including any source, special nuclear or by-product material as defined at 42 U.S.C. ss. 2011 et seq., as amended or hereafter amended; (vi) asbestos or asbestos containing material ("ACM") in any form or condition and (vii) polychlorinated biphenyls ("PCBs") or substances or compounds containing PCBs. "Hazardous Materials Laws" means any federal, state or local statute, regulation, ordinance or other legal requirement (including consent decrees and administrative orders) relating to protection of health, safety or environment, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Clean Water Act, 33 U.S.C. ss. 1251 et seq.; the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. ss. 651 et seq.; the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ss. 2601 et seq.; any similar state or local laws; any regulations promulgated pursuant to any of the foregoing; and all of the foregoing as amended or hereafter amended. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Intellectual Property" shall mean collectively, all rights, priorities and privileges of the Company or any of its subsidiaries relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses and trade secrets and all rights to sue at law or in equity or any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Investment" shall have the meaning ascribed thereto in Section 2.2. "Investors" shall have the meaning ascribed thereto in the Preamble. "Investors Disclosure Schedule" shall have the meaning ascribed thereto in Article V. "Investor Share Notice" shall have the meaning ascribed thereto in Section 2.6. "Knowledge" of the Company shall mean the knowledge, after due inquiry, of any of the Persons identified on Section 1.1 of the Company Disclosure Schedule, such Persons to be mutually agreed to by the parties hereto. "Law" shall mean any law, statute, ordinance, rule, regulation, order, judgment, decree or body of law of any Governmental Entity. "Liberation" shall mean Liberation Investments, L.P. and Liberation Investments, Ltd. "Material Adverse Effect" shall mean, when used in connection with the Debtors, the Company or Reorganized Bally, any change, effect, event, condition, circumstance, occurrence or development that is, or is reasonably likely to be, materially adverse to the business, property, assets, liabilities, operations, results of operations or condition, financial or otherwise, of the Debtors or which materially impair, or would be reasonably likely to materially impair, the ability of the Debtors and the Company (taken as a whole) or Reorganized Bally to perform its obligations under this Agreement or have a materially adverse effect on or prevent or materially delay the consummation of the transactions contemplated by this Agreement, taken as a whole, other than (i) any effect directly resulting from the public announcement of and compliance with the terms and conditions of this Agreement or the transactions contemplated hereby (including, without limitation, the commencement of chapter 11 bankruptcy cases for Bally and the consequences thereof), (ii) any effect that results from events, circumstances or situations affecting the fitness industry and/or the United States economy generally, so long as such effect does not disproportionately affect the Debtors or the Company, (iii) any effect that results from events, circumstances or situations affecting general worldwide economic or capital market conditions, including acts of war, acts of terrorism or natural disasters, so long as such effect does not disproportionately affect the Debtors or the Company, or (iv) any changes in the Company's financial condition reflected in the Updated Financial Information. "Material Contract" shall mean any of the following, other than in connection with the purchase of inventory in the Ordinary Course of Business: (i) any (x) lease for real property, or (y) lease for personal property, in each case, which requires aggregate payments by the Debtors of $500,000 or more in any calendar year; (ii) any contract for the purchase of materials, supplies, goods, services, equipment or other assets that has a term of at least one year following the Closing and which requires aggregate payments by the Debtors of $2,000,000 or more in any calendar year; (iii) any contract that requires annual aggregate payments by the Debtors after Closing of $2,000,000 or more; (iv) any sales, distribution or other similar contracts not entered into in the Ordinary Course of Business providing for the sale by the Debtors of materials, supplies, goods, services, equipment or other assets that requires annual aggregate payments after Closing of $2,000,000 or more; (v) any partnership, joint venture or other similar contract to which any of the Debtors is a party; (vi) any employment agreements or amendments to employment agreements pursuant to which any employee will receive over $750,000 in either cash or securities; or (vii) any other contract, the loss of which would be reasonably likely to result in a Material Adverse Effect. "Multiemployer Plan" has the meaning ascribed to it in Section 3(37) of ERISA. "New Common Shares" shall mean shares of New Common Stock. "New Common Stock" shall have the meaning ascribed thereto in the Plan. "New Credit Agreement" shall have the meaning ascribed thereto in the Plan. "New Investor Purchase Price" shall have the meaning ascribed thereto in Section 2.2. "New Investor Shares" shall mean New Common Shares to be issued by Reorganized Bally to the Investors under the Plan and as provided in Article II hereto. "Old Credit Agreement" shall mean that certain Amended and Restated Credit Agreement, dated as of October 16, 2006, by and among, Bally Total Fitness Holding Corporation, as Borrower, the several banks and other financial institutions parties thereto, JPMorgan Chase Bank, N.A., as Agent, and Morgan Stanley Senior Funding, Inc., as Syndication Agent. "Ordinary Course of Business" shall mean the ordinary course of business of the Debtors consistent with past custom and practice as of the date hereof (including with respect to frequency and amount). "Permitted Encumbrances" shall mean any Encumbrance (i) permitted under the DIP Loan Facility or the Old Credit Agreement, as the case may be; (ii) included in the definition of "Permitted Encumbrance" in the Old Credit Agreement; and (iii) arising in the Ordinary Course of Business that are not incurred in connection with the borrowing of money and that would not materially interfere with the conduct of the business of the Company or any of its subsidiaries. "Person" shall mean any individual, firm, corporation, limited liability company, partnership, company, trust or other entity, and shall include any successor (by merger or otherwise) of such entity. "Petition Date" shall mean the date on which the Debtors file voluntary petitions for reorganization relief in the Chapter 11 Cases under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. "Plan" shall mean the amended plan of reorganization to be filed by the Company with the Bankruptcy Court on or about the date of this Agreement, in substantially the form attached hereto as Exhibit A and with such further changes as may be reasonably acceptable to the Debtors and the Investors, together with all schedules and exhibits thereto. "Plan Support Parties" shall mean Liberation and the Excluded Parties. "Prepetition Management Incentive Plan" shall have the meaning ascribed thereto in the Plan. "Representatives" shall, with respect to any Person, mean the directors, officers, employees, representatives, agents and advisors (including any investment banker, financial advisor, attorney, accountant or other representative retained by any of them or acting on their behalf) of such Person. "Required Consent" shall mean any consent under an Assumed Contract required so that the execution, delivery and/or performance by the Company of this Agreement, the consummation of the transactions contemplated by this Agreement, and the assumption and/or continued enforcement thereof by the Company or a subsidiary or any of the Reorganized Debtors will not result in any breach of or constitute a default (or an event which with or without notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, such Assumed Contract, or result in the creation of a Encumbrance, other than a Permitted Encumbrance, on any property or asset of the Company or any subsidiary except where the failure to obtain any such consent or consents would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. For all purposes of this Agreement, the Company or any subsidiary shall be deemed to have obtained a Required Consent if, and to the extent that, pursuant to the Plan, the Confirmation Order and/or the Assumption Orders the Company (or the applicable subsidiary) is authorized to assume the Assumed Contracts pursuant to section 365 of the Bankruptcy Code. "Reorganized Bally" shall mean the Reorganized Debtor whose New Common Shares will be issued pursuant to the Plan. "Reorganized Debtors" shall mean the entities, which may include one or more new holding companies and operating companies to be formed pursuant to the Plan, that will carry out the business of the Company and its subsidiaries upon emergence from bankruptcy under chapter 11 of the Bankruptcy Code. "Restructuring" shall mean the consummation of the financial restructuring of the Company and its subsidiaries contemplated under the Plan to occur on the Effective Date. "Restructuring Support Agreements" shall mean, collectively, (i) that certain Restructuring Support Agreement, dated as of the date hereof, by and among the Debtors, the Investors and Liberation, and (ii) that certain Restructuring Support Agreement, dated as of the date hereof, by and among the Debtors, the Investors and the Plan Support Parties. "SEC" shall mean the United States Securities and Exchange Commission and any successor Governmental Entity. "SEC Reports" shall mean any and all proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any other documents filed by the Company under the Exchange Act. "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Act shall include reference to the comparable section, if any, of such successor federal statute. "Significant Subsidiary" shall have the meaning assigned to it under Rule 1-02 of Regulation S-X promulgated under the Exchange Act. "Subscription Payment Date" shall have the meaning ascribed thereto in the Plan. "subsidiary" of any Person means, on any date, any Person (i) the accounts of which would be consolidated with and into those of the applicable Person in such Person's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date or (ii) of which securities or other ownership interests representing more than fifty percent of the equity or more than fifty percent of the ordinary voting power or, in the case of a partnership, more than fifty percent of the general partnership interests or more than fifty percent of the profits or losses of which are, as of such date, owned, controlled or held by the applicable Person or one or more subsidiaries of such Person. "Subsidiary Guarantors" shall have the meaning ascribed thereto in the Preamble. "Superior Proposal" shall have the meaning ascribed thereto in Section 6.2. "Tax" shall mean all taxes of any kind, charges, fees, customs, duties, imposts, levies or other assessments, including, without limitation, all net income, gross receipts, ad valorem, value added, transfer, gains, franchise, profits, inventory, net worth, capital stock, asset, sales, use, license, estimated withholding, payroll, transaction, capital, employment, social security, workers compensation, unemployment, excise, any interest and any penalties, additions to tax or additional amounts, imposed by any taxing authority (domestic or foreign) and shall include any transferee liability in respect of Taxes. "Tax Return" shall mean all returns, declarations, reports, forms, estimates, information returns and statements required to be filed in respect of any Taxes or to be supplied to a taxing authority in connection with any Taxes. "Tennenbaum" shall mean Tennenbaum Opportunities Partners V, LP. "Transaction Documents" shall mean this Agreement, the Restructuring Support Agreements and all other contracts, agreements, schedules, certificates, orders and other documents being executed and delivered by the parties hereto pursuant to or in connection with this Agreement. "Updated Financial Information" shall mean the updated financial information of the Company dated May 3, 2007 or June 13, 2007, which has previously been delivered to representatives of the Investors. "WARN Act" shall mean the Worker Adjustment and Retraining Notification Act of 1988, as amended from time to time. ARTICLE II PURCHASE AND SALE OF SHARES Section 2.1 Issuance and Sale of New Investor Shares. Upon the terms and subject to the conditions set forth herein, including that the Effective Date of the Plan will occur contemporaneously with the Closing Date, Reorganized Bally agrees to issue, sell and deliver to the Investors and the Investors agree, severally and not jointly, to acquire from Reorganized Bally the number of New Investor Shares to be set forth in the Investor Share Notice, the total number of such New Investor Shares to equal 100% of the New Common Shares (subject only to dilution with respect to the Prepetition Management Incentive Plan), to be authorized, issued and outstanding by Reorganized Bally on the Closing Date in exchange for the payment of the New Investor Purchase Price. Section 2.2 Payment of the New Investor Share Purchase Price. The aggregate purchase price for the New Investor Shares will be $228.5 million (the "New Investor Share Purchase Price"). At the Closing, in consideration of the issuance of the New Investor Shares to the Investors pursuant to Section 2.1, each Investor shall pay to Reorganized Bally the portion of the New Investor Share Purchase Price set forth in the Investor Share Notice, payable in cash by wire transfer of immediately available funds to an account designated in writing by the Debtors at least three (3) Business Days prior to the Closing Date. The payment of the consideration set forth in this Section 2.2, in whole or in part, shall sometimes be referred to herein as the "Investment." Section 2.3 Investor Share Notice. No later than two (2) Business Days prior to the Closing, the Investors shall deliver a written notice to the Company specifying the number of New Investor Shares to be issued to each Investors, substantially in the form attached hereto as Exhibit B (the "Investor Share Notice"). ARTICLE III THE CLOSING Section 3.1 The Closing. The closing of the purchase and sale of the New Investor Shares hereunder and the other transactions contemplated hereby (the "Closing") shall take place at the offices of _________________, located at _________________, at a date (the "Closing Date") and time to be mutually agreed upon by the Company and the Investors, which shall be a date that is at least three (3) Business Days but no more than ten (10) Business Days after the date following the satisfaction (or waiver by the Investors and/or the Company, as appropriate) of all of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions); provided, however, that in the event the Company and the Investors are not able mutually to agree on a Closing Date in accordance with the immediately preceding clause, the parties agree that the Closing Date shall be on the tenth (10th) Business Day following the satisfaction or waiver of all the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions); and provided, further, that the Closing Date shall be the same date as the Effective Date of the Plan. At the Closing and subject to the terms and conditions hereof, the acquisition of equity contemplated by Article II hereof shall be deemed to have occurred Section 3.2 Deliveries. At the Closing: (a) Reorganized Bally shall deliver certificates to each Investor, evidencing the aggregate number of New Investor Shares (as set forth in the Investor Share Notice) being indefeasibly issued to each such Investor herewith and registered in the name of such Investor or, to the extent designated by such Investor to the Debtors at least three (3) Business Days prior to the Closing Date, to an Affiliate thereof, as its nominee or designee (with the individual certificates in such amounts as the each Investor shall specify to Debtors at least three (3) Business Days prior to the Closing Date); (b) The Investors shall pay to Reorganized Bally the New Investor Purchase Price; (c) To the extent not previously executed and/or delivered, the Company (and/or Reorganized Bally, as the case may be) shall execute and/or deliver, or cause to be executed and/or delivered, to the Investors (i) each of the Transaction Documents and any other document, certificate or other instrument required to be executed and/or delivered by the Company (and/or Reorganized Bally, as the case may be) under this Agreement, and (ii) a certificate, dated as of the Closing Date and signed by the Senior Vice President, Secretary and General Counsel of the Company, certifying as to the matters set forth in Section 7.1(g). (d) To the extent not previously executed and/or delivered, each Investor shall execute and/or deliver, or cause to be executed and/or delivered, to the Company (or Reorganized Bally, as the case may be) (i) each of the Transaction Documents and any other document, certificate or other instrument required to be executed and/or delivered by such Investor under this Agreement, and (ii) a certificate, dated as of the Closing Date and signed by such Investor, certifying as to the matters set forth in Section 7.2(e). ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as specifically set forth in the disclosure schedule prepared and signed by the Company (the "Company Disclosure Schedule") and delivered to the Investors simultaneously with the execution and delivery hereof, the Company represents and warrants to each Investor that all of the statements contained in this Article IV are true and correct as of the date of this Agreement (or, if made as of a specified date, as of such date). Section 4.1 Organization. (a) Each of the Company and its Significant Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. (b) Each of the Company and its subsidiaries (i) is duly qualified or licensed to do business as a foreign corporation and is in good standing under the laws of each jurisdiction where the nature of the property owned or leased by it or the nature of the business conducted by it makes such qualification or license necessary, except where any such failure to be so qualified or licensed, individually in the aggregate, would not result in a Material Adverse Effect; and (ii) has all corporate power and authority to own and operate its properties, to lease the property it operates under lease and to conduct its business, except where any such failure to own and/or operate, individually in the aggregate, would not result in a Material Adverse Effect. Section 4.2 Due Authorization, Execution and Delivery; Enforceability. The Company has the requisite corporate power and authority to enter into, execute and deliver this Agreement and the other Transaction Documents and, subject to the Governmental Requirements, to perform its obligations hereunder, including the issuance of the New Investor Shares, and has taken all necessary corporate action required for the due authorization, execution, delivery and, subject to the Governmental Requirements, performance by it of this Agreement and the other Transaction Documents. Subject to the Governmental Requirements, this Agreement constitutes the legally valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. Section 4.3 Capitalization. Except as disclosed in the SEC Reports, as of the Closing Date all issued and outstanding capital stock or other ownership interests of each subsidiary will be owned by the Company or a wholly-owned subsidiary free and clear of any Encumbrance other than Permitted Encumbrances. At the Closing, all of the outstanding shares of capital stock each of the Company's subsidiaries will be duly authorized and validly issued, fully paid and non-assessable. Section 4.4 Consents. Subject to, and after giving effect to, the Governmental Requirements, none of the execution, delivery or performance of this Agreement and the other Transaction Documents by the Company, including the issuance of the New Investor Shares by it, will require any consent of, authorization by, exemption from, filing with, or notice to any Governmental Entity or any other Person, other than any authorization pursuant to Section 365 of the Bankruptcy Code in accordance with the Plan, the Confirmation Order and/or the Assumption Order. Section 4.5 No Conflicts. Except for, and after giving effect to, the Governmental Requirements, and subject to the occurrence of the Effective Date, the execution, delivery and performance of this Agreement by the Company, including the issuance of the New Investor Shares, and the consummation of the transactions contemplated hereby, will not (a) conflict with or result in any breach of any provision of its certificate of incorporation or bylaws as in effect on the Effective Date, (b) conflict with or result in the breach of the terms, conditions or provisions of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give rise to any right of termination, acceleration or cancellation under, any material agreement, lease, mortgage, license, indenture, instrument or other contract to which it or any of its subsidiaries is a party or by which any of its or any of its subsidiaries' properties or assets are bound as in effect on the Effective Date, or (c) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, federal and state securities laws and regulations) applicable to it or any of its subsidiaries or by which any of its or its subsidiaries' properties or assets are bound or affected as in effect on the Effective Date, except in the case of clauses (b) and (c), as would not, individually or in the aggregate, result in a Material Adverse Effect. Section 4.6 No Registration. Assuming the accuracy of the representations and warranties of the Investors set forth in this Agreement, no registration of the New Investor Shares under the Securities Act is required for the purchase of the New Investor Shares by the Investors in the manner contemplated by this Agreement. Section 4.7 Financial Statements. The Company has heretofore delivered to the Investors an unaudited consolidated balance sheet as of March 31, 2007 (the "First Quarter 2007 Balance Sheet"). The First Quarter 2007 Balance Sheet was prepared in conformity with GAAP (except as provided below in this Section 4.7), is complete and correct in all material respects and fairly presents in all material respects the assets and liabilities of the Company and its subsidiaries as of March 31, 2007; provided, however, that the Investors acknowledge that (i) the Company's method of recognition of deferred revenue is uncertain as of the date hereof and may not have been conducted in accordance with GAAP and (ii) the Company's reserves in respect of worker's compensation, general liability and health insurance as reflected on the First Quarter 2007 Balance Sheet do not include the Company's estimates of potential recoveries for such liabilities. Except as described in this Section 4.7, neither the Company nor any of its subsidiaries has any contingent obligation, contingent liability, or liability for taxes, long term lease or unusual forward of long term commitment or other material liability, liquidated or unliquidated, that could reasonably be expected to have a Material Adverse Effect and is not reflected on the First Quarter 2007 Balance Sheet. Section 4.8 No Fiduciary Representation. Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that (a) the transactions contemplated hereby are arm's length commercial transactions between the Company, on the one hand, and the Investors, on the other, (b) in connection therewith and with the processes leading to such transactions, each Investor is acting solely as a principal and not the agent or fiduciary of the Company or its debtor estate, (c) no Investor has assumed an advisory or fiduciary responsibility in favor of the Company or its debtor estate with respect to any legal, tax, investment, accounting, regulatory or other matters involving the transactions contemplated herein or the processes leading thereto (irrespective of whether such Investor has advised or is currently advising the Company on other matters), and (d) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate. The Company agrees that it will not claim that any Investor has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company or its shareholders or estate, in connection with the transactions contemplated herein or the processes leading thereto. Section 4.9 Title to Property. The Company and its subsidiaries have good title to their respective owned personal properties and assets, and good and marketable title to their respective owned real properties which, in each case are necessary to the conduct of its business, free and clear of all Encumbrances, except for Permitted Encumbrances on such properties and assets, except where the failure to have such title does not, or would not reasonably to, have a Material Adverse Effect. The execution, delivery or performance of this Agreement and the other Transaction Documents will not result in the creation of any Encumbrance. Section 4.10 Litigation. Except as disclosed on Section 4.10 of the Company Disclosure Schedule, there are no suits, proceedings, claims or disputes pending or, to the knowledge of the Company, threatened in writing against or affecting the Company or any subsidiary or their respective property, which have a reasonable likelihood of adverse determination and such determination could reasonably be expected to have a Material Adverse Effect. Section 4.11 ERISA. Except as would not have, or reasonably be expected to have, a Material Adverse Effect, (i) each Employee Benefit Plan is in compliance in all respects with the applicable provisions of ERISA, the Code and any other applicable federal or state law, and (ii) except as listed on Section 4.11 of the Company Disclosure Schedule no event or condition is occurring nor is there any present intent to cause any such event or condition to occur with respect to any Employee Benefit Plan. The Company is not a party to any Multiemployer Plan. Section 4.12 Copyrights, Patents, Trademarks and Licenses, etc. Except as disclosed in Section 4.12 of the Company Disclosure Schedule, the Company and its subsidiaries own or are licensed or otherwise have the right to use all of the Intellectual Property that is reasonably necessary for the operations of their respective businesses as currently conducted, without material conflict with the rights of any other Person with respect thereto, except where the failure to be in compliance with this sentence would not have a Material Adverse Effect. To the best knowledge of the Company, except as would not have a Material Adverse Effect, (i) no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Company or any of its Subsidiaries infringes upon any rights obtained by any other Person, and (ii) no claim or litigation regarding any of the foregoing is pending or threatened in writing. Section 4.13 Environmental. As of the Closing Date: (a) except as disclosed on Section 4.13(a) of the Company Disclosure Schedule, the property, assets and operations of the Company and its subsidiaries comply in all material respects with all applicable Hazardous Materials Laws and all governmental permits required thereunder relating to the use and/or operation thereof (except in each case to the extent that failure to comply with such Hazardous Materials Laws or applicable permits would not reasonably be expected to have a Material Adverse Effect); (b) to the knowledge of the Company, (i) none of the real properties currently or, to the Knowledge of the Company, formerly owned, leased or operated by the Company or any subsidiary (including groundwater under such real properties) (the "Properties")of the Company and its subsidiaries related thereto, is the subject of federal or state investigation mandating any remedial action, involving expenditures, which is needed to respond to a release of any Hazardous Materials into the environment where such expenditures could reasonably be expected to have a Material Adverse Effect, (ii) there are no underground storage tanks present on or under any of the Properties the presence of which could reasonably be expected to have a Material Adverse Effect, and (iii) there are no pending or threatened in writing: (A) actions or proceedings from any governmental agency or any other person or entity regarding the disposal of Hazardous Materials, or regarding any Hazardous Materials Laws or evaluation, or (B) liens or governmental actions, notices of violations, notices of noncompliance or other proceedings of any kind relating to any of the Hazardous Materials Laws with respect to the Properties where such actions, proceedings or liens could reasonably be expected to have a Material Adverse Effect; and (c) neither the Company nor any of its subsidiaries has any liability in connection with any release of any Hazardous Materials into the environment, except where such liability would not have, or reasonably be expected to have, a Material Adverse Effect. Section 4.14 Compliance with Laws. Except as set forth in Section 4.14 of the Company Disclosure Schedule, the Company and its subsidiaries are in compliance in all material respects with all Laws, and neither the Company nor any of its subsidiaries has received any notice of any such alleged material violation of Law, in each case, except where such failures to comply or violations would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company and its subsidiaries hold all licenses, franchises, permits, consents, registrations, certificates, and other material governmental or regulatory permits, authorizations or approvals necessary or required for the operation of the business as presently conducted and for the ownership, lease or operation of the assets of the Company and its subsidiaries ("Material Licenses and Permits"), except for failures to hold or have such Material Licenses and Permits would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE INVESTORS Except as specifically set forth in the disclosure schedules prepared and signed by the respective Investors (collectively, the "Investors Disclosure Schedule") and delivered to the Company simultaneously with the execution and delivery hereof, each Investor, severally and not jointly, hereby represents and warrants to the Company that all of the statements contained in this Article V are true and correct with respect to itself as of the date of this Agreement (or, if made as of a specified date, as of such date) and shall be true and correct with respect to itself as of the Closing Date (or, if made as of a specified date, as of such date). Section 5.1 Organization. Such Investor is a corporation or other legal entity duly organized, validly existing and (in the jurisdictions recognizing the concept) in good standing under the laws of the jurisdiction in which it is organized and has the requisite corporate or other power and authority to own, lease and operate its properties and to conduct its business as it is now being conducted. Section 5.2 Due Authorization. (a) Such Investor has all right, power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party, to consummate the transactions contemplated hereby and thereby and to comply with the terms, conditions and provisions hereof and thereof applicable to such Investor. (b) The execution, delivery and performance by such Investor of this Agreement and each of the other Transaction Documents to which it is a party, the compliance by such Investor with each of the provisions of this Agreement and each of the Transaction Documents and the consummation of the transactions contemplated hereby and thereby, are within the power and authority of such Investor, have been duly authorized and approved by the requisite actions of such Investor and do not require any further authorization or consent of such Investor or its beneficial owners. This Agreement is the legal, valid and binding agreement of such Investor, enforceable against such Investor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws from time to time affecting the enforcement of creditors' rights generally. Section 5.3 Consents and Approvals. To the knowledge of such Investor, no consent, approval, or authorization of, declaration, filing, or registration with, any Governmental Entity is required to be made or obtained by it in connection with the execution, delivery, and performance of this Agreement or any of the other Transaction Documents contemplated hereby, except for the Governmental Requirements. Section 5.4 No Violations. Assuming that the Governmental Requirements and Required Consents will be satisfied, made or obtained and will remain in full force and effect and the conditions set forth in Article VII will be satisfied, neither the execution, delivery or performance by such Investor of this Agreement or any of the other Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby, will: (i) conflict with, or result in a breach or a violation of, any provision of the certificate of incorporation or bylaws or other organizational documents of such Investor or (ii) constitute, with or without notice or the passage of time or both, a breach, violation or default, create an Encumbrance (other than any Permitted Encumbrance) or give rise to any right of termination, modification, cancellation, prepayment, suspension, limitation, revocation or acceleration, under any Law or any provision of any agreement or other instrument to which such Investor is a party or pursuant to which such Investor or any of its respective assets or properties is subject, except for breaches, violations, defaults, Encumbrances (other than Permitted Encumbrances), or rights of termination, modification, cancellation, prepayment, suspension, limitation, revocation or acceleration which, individually or in the aggregate, are not material and would not materially adversely affect the ability of such Investor to perform its obligations under this Agreement or any of the Transaction Documents. Section 5.5 Financing. Such Investor has, and at the Closing will have, available to it funds in amounts sufficient to pay its portion of the New Investor Share Purchase Price. Section 5.6 Investment Representations. (a) Such Investor understands that the New Investor Shares have not been registered under the Securities Act. (b) Such Investor has substantial experience in evaluating and investing in private placement transactions of securities so that it is capable of evaluating the merits and risks of its investment in Reorganized Bally and has the capacity to protect its own interests, and can afford the loss of its investment in the New Investor Shares. (c) Such Investor is acquiring its portion of the New Investor Shares for its own account for investment only, and not with a view towards their distribution. Such Investors agree that New Investor Shares may not be sold or transferred unless such New Investor Shares have subsequently been registered under the Securities Act or an exemption from registration is available and such shares are sold or otherwise transferred in accordance therewith. (d) Such Investor represents that it is an accredited investor within the meaning of Regulation D under the Securities Act. Section 5.7 [Dollar Revenues. None of the entities included within such Investor's ultimate parent entity (as such terms are understood under the HSR Act) derives any dollar revenues from operations in industries within the 6-digit NAICS industry code from which the Company derives dollar revenues, which 6-digit NAICS industry code are set forth on Section 5.7 of the Company Disclosure Schedule.] ARTICLE VI COVENANTS Section 6.1 Conduct of Business Pending the Closing. Except as otherwise expressly contemplated by this Agreement and the Plan or any of the other Transaction Documents or as consented to by the Investors in writing, such consent not to be unreasonably withheld or delayed, or as required by the Bankruptcy Code, during the period from the date of this Agreement through and including the Closing Date, the Company shall, and shall cause each of its subsidiaries and Affiliates to, (a) conduct its operations and business in the Ordinary Course of Business, including, without limitation, paying its vendors, trade creditors and other creditors, in a manner consistent with the Business Plan; (b) use commercially reasonable efforts to preserve intact its business relationships with third parties; and (c) confer with the Investors on operational matters of a material nature. The Company shall give the Investors prompt notice of any event, condition or circumstance occurring from the date hereof through the Closing Date that would constitute a violation or breach of (i) any representation or warranty, whether made as of the date hereof or as of the Closing Date or (ii) any covenant of the Company in either case contained in this Agreement or any other Transaction Document. Without limiting the generality of the foregoing, except as otherwise expressly contemplated by this Agreement and the Plan or any of the other Transaction Documents or as consented to by the Investors, such consent not to be unreasonably withheld or delayed, the Company shall not, and shall not permit any of its subsidiaries or Affiliates, to: (a) amend its charter, bylaws or other comparable organizational documents other than in accordance with this Agreement or as contemplated by the Plan; (b) acquire any "business", as defined in Rule 3-05(a)(2) of Regulation S-X (whether by merger, consolidation, purchase of assets or otherwise) or acquire any, or increase any existing, equity interest in any Person not a subsidiary (whether through a purchase of stock or other ownership interest, establishment of a joint venture or otherwise); (c) after the Petition Date, (i) assume pursuant to Section 365 of the Bankruptcy Code any contract set forth in Exhibit E to the Plan, or (ii) fail to promptly file and diligently prosecute a motion to reject pursuant to Section 365 of the Bankruptcy Code any contract designated in writing by any Investor for rejection, provided that such written designation is delivered no less than [__] days prior to the Debtors' scheduled confirmation hearing or any other deadline provided in the Plan or set by the Bankruptcy Court; (d) other than in the Ordinary Course of Business, enter into, amend or terminate any Material Contract; (e) adopt a plan of complete or partial liquidation, dissolution, merger (except for mergers between or among the Company and/or its subsidiaries), consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries; (f) change any material Tax, pension, regulatory or, except in accordance with GAAP or the suggestion of the Company's independent registered public accounting firm, financial accounting policies, procedures, practices, methods or principles used by it; (g) make, change or rescind any material Tax election; fail to duly and timely file any material Tax Return or other documents required to be filed with any Governmental Entity, subject to timely extensions permitted by applicable Law; (h) other than in the Ordinary Course of Business, extend the statute of limitations with respect to any Tax or settle or compromise any material federal, state, local or foreign Tax liability or audit; (i) (A) waive, release, assign, settle or compromise any pending or threatened Action (i) having an amount exceeding of $25,000 individually or $500,000 in the aggregate, (ii) which in any event relates to the transactions contemplated hereby, or (iii) is brought by any current, former or purported holder of any Company Securities in such capacity and such agreement, settlement or consent to judgment exceeds $100,000 in the aggregate, (B) enter into any waiver, release, assignment, settlement or compromise of any pending or threatened Action that does not (i) include an unconditional release of the Company, its subsidiaries and/or Reorganized Bally (as applicable) from all liability arising out of such proceeding and (ii) provide that the Company, its subsidiaries and/or Reorganized Bally (as applicable) does not admit any fault or guilt with respect to the subject matter of such Action, or (C) enter into any deferred prosecution agreement or agreement with any operational covenants; (j) enter into any agreement, settlement or consent to judgment with any Governmental Entity relating to any Action (i) with respect to Company Securities, (ii) that requires the payment of any monetary amount in excess of $100,000 in the aggregate, or (iii) that admits any fault or guilt; (k) take any action that would give rise to a claim under the WARN Act or any similar state law or regulation because of a "plant closing" or "mass layoff" (each as defined in the WARN Act); (l) other than as set forth in the Plan, (i) establish, modify or increase, in any material respect, the benefits under, or promise to establish, modify or increase in any material respect the benefits under, any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including without limitation, the granting of stock options, stock appreciation rights, performance awards, or restricted stock awards), stock purchase or other employee benefit plan; (ii) enter into any employment, consulting or severance agreement outside of the Ordinary Course of Business where the dollar amount payable under any such agreement exceeds $25,000 per annum or $50,000 over its term; (iii) otherwise increase, in any material respect, the compensation payable to any directors, or officers, or employees of the Company; or (iii) establish, adopt or enter into any collective bargaining agreement; provided that, with respect to clauses (i) and (iii) hereof, any such increase in compensation or benefits is (A) pursuant to an existing agreement or plan, is in amount or value of benefits consistent with the past practices of the Company and does not exceed $50,000 per annum, or (B) required by applicable Law; (m) other than in the Ordinary Course of Business, (i) sell, exchange, license or otherwise dispose of any of its real properties or other material assets, (ii) enter into any new joint ventures or similar projects or (iii) mortgage any of its real property or grant any security interest in any of its other assets except for Permitted Encumbrances; (n) (i) incur any additional indebtedness for borrowed money or in connection with capital leases or sale-leaseback transactions, in each case other than as permitted by the DIP Loan Facility, the Old Credit Agreement or the Cash Collateral Order, (ii) other than in the Ordinary Course of Business, incur any indemnification obligations or other material liabilities, except as permitted by the DIP Loan Facility, the Old Credit Agreement or the Cash Collateral Order or as contemplated by the Plan, (iii) other than in the Ordinary Course of Business, make any loans, advances, restricted payments or capital contributions to, or investments in, any Person (excluding any subsidiary), except as permitted by the DIP Loan Facility, the Old Credit Agreement or the Cash Collateral Order or as contemplated by the Plan; (iv) other than in the Ordinary Course of Business, pay any pre-Petition Date liabilities, claims, obligations, costs or expenses except as may be permitted to be paid by a Bankruptcy Court order entered (or pursuant to a motion made, so long as the amount provided for in any pending motion is not materially in excess of the amounts reflected in the Business Plan), (v) pay any post-Petition Date liabilities, claims, obligations, costs or expenses, other than those incurred in the Ordinary Course of Business or permitted to be paid by any covenant contained herein or pursuant to a Bankruptcy Court order, in each case so long as such amounts are not materially in excess of the amounts reflected in the Business Plan, or (v) amend or otherwise modify any agreements or instruments governing the Debtors' financing arrangements in any material respect other than as contemplated by the Plan; (o) enter into any new agreement or amend any existing agreement containing a non-competition, geographical restriction or similar covenant, in each case in a manner materially adverse to the Investors or Reorganized Bally; (p) fail to maintain in full force and effect insurance policies covering the Company and/or any of its subsidiaries and their respective properties, assets and businesses in a form and amount consistent with the current insurance program applicable to the Company and/or any of its subsidiaries (except in the Ordinary Course of Business to the extent any such policies expire in accordance with their terms and they are replaced with policies consistent with good practice for independent health club companies, subject to insurance market conditions); (q) enter into any new consulting, retention or executive employment agreements or arrangements that individually exceed $35,000 per month, or terminate or replace any member of the Company's senior management; or (r) agree to take any of the foregoing actions. Section 6.2 No Solicitation of Alternative Proposals. (a) Commencing on the date hereof, the Company shall (and shall cause its subsidiaries, Affiliates, Representatives, and subsidiaries' and Affiliates' Representatives to) (i) immediately cease and terminate all existing discussions or negotiations, if any, with any Persons conducted prior to the date of this Agreement with respect to or that could reasonably be expected to lead to an Alternative Transaction (as hereinafter defined), (ii) use its commercially reasonable to obtain the destruction of, in accordance with the terms of any applicable confidentiality agreement, any nonpublic information previously furnished by the Company, its subsidiaries or Affiliates, or any of their respective Representatives to any third-party (other than the Excluded Parties) in connection with any Alternative Proposal or any discussions, correspondence or negotiations relating to a potential Alternative Proposal, and prevent any such third-party (including all Excluded Parties other than Tennenbaum) from accessing any online data rooms containing nonpublic information regarding the Company, and (iii) comply with this Section 6.2. (b) During the period commencing on the date of this Agreement and continuing until the earlier of (x) the Closing Date and (y) the termination of this Agreement in accordance with Section 8.1 (the "No-Shop Period"), the Company shall not (and shall cause its subsidiaries, Affiliates, Representatives, and subsidiaries' and Affiliates' Representatives not to) directly or indirectly (i) solicit, initiate, encourage or take any other action designed to solicit an Alternative Transaction, (ii) participate in any written correspondence, discussions or negotiations regarding any Alternative Transaction, (iii) enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Alternative Transaction or (iv) furnish any nonpublic information to any third parties. (c) Notwithstanding anything to the contrary that may be set forth in Section 6.2(b), if, during the No-Shop Period, the Board of Directors determines in good faith that it is required to authorize such actions to comply with its fiduciary duties under any applicable Law, including the Bankruptcy Code, the Company or any of its Representatives may take any of the actions referred to in clauses (ii) and (iv) of Section 6.2(b) with respect to any Person that during the No-Shop Period delivered a written, unsolicited bona fide Alternative Proposal so long as (A) the Company and its Representatives are not in violation of this Section 6.2, and (B) the Board of Directors has concluded that such Alternative Proposal is a Superior Proposal. In addition, at any time during the No-Shop Period, so long as the Company and its Representatives are not in violation of this Section 6.2, the Company, its subsidiaries or any of their respective Representatives will be permitted to execute an agreement providing for a Superior Proposal or recommend any such Superior Proposal to the creditors or interest holders of the Company only if (i) the Company shall have delivered such Superior Proposal to the Investors pursuant to Section 6.2(d); (ii) the Investors do not, within five (5) Business Days of receipt of such Superior Proposal, make an offer to revise the transactions contemplated by this Agreement and the Plan, such that in the good faith opinion of the Board of Directors (in consultation with its financial advisors and legal counsel) such revised transaction provides an equal or higher transaction value or is otherwise more favorable to the Company and its creditors and interest holders than the Superior Proposal; (iii) the Company pays the fees and expenses of the Investors as provided in Section 8.2 including, without limitation, the Break-Up Fee. (d) From the date hereof until the earlier of (x) the Closing Date and (y) the termination of this Agreement in accordance with Section 8.1, the Company shall promptly (and in no event later than two (2) days) deliver to the Investors all written communications delivered to or received by the Company or its Representatives making or materially modifying any Alternative Proposal, including without limitation copies of all expressions of interest, term sheets, letters of intent, offers, proposed agreements or otherwise, and shall regularly update (not less than once every week) the Investors concerning such matters. No Person who has made an Alternative Proposal shall be provided non-public information by the Company unless such Person has executed a customary confidentiality agreement; provided that such confidentiality agreement shall (a) be on no more favorable terms to the third-party than the terms of any confidentiality agreement then in effect between the Company and any of the Investors, and (b) not prohibit the Company from delivering any notice required by this Section 6.2(d). In addition, the Company and its Representatives shall provide the Investors two (2) days prior written notice before initially delivering any non-public information in connection with an Alternative Proposal or the granting of access by the Company or its Representatives to the properties, books or records of the Company to any Person that informs the Company or its Representatives that it is considering making, or has made an Alternative Proposal. The Company agrees that it shall not, and shall cause the Company's subsidiaries not to, enter into any confidentiality agreement or other agreement with any person subsequent to the date of this Agreement which prohibits the Company from providing such information to the Investors. The Company agrees that neither it nor any of its subsidiaries shall terminate, waive, amend or modify any provision or any existing standstill or confidentiality agreement to which it or any of its subsidiaries is a party and that it and its subsidiaries shall enforce the provisions of any such agreement, except to the extent that the Board of Directors determines (after consultation with its financial advisors and legal counsel) that acting in such manner would be inconsistent with its fiduciary duties under applicable Law. (e) As used in this Agreement, "Alternative Transaction" shall mean any actual or proposed transaction or offer for a transaction involving any or all of (i) a plan of reorganization or other financial and/or corporate restructuring of any or all of the Debtors, other than the Plan, (ii) the issuance, sale, transfer, exchange or other disposition of any equity or debt interests, or any material assets of the Debtors, (iii) a merger, consolidation, business combination, liquidation, recapitalization or refinancing, (iv) any similar transaction involving any or all of the Debtors, or (v) any transaction through which the Debtors exit bankruptcy. "Alternative Proposal" shall mean an Alternative Transaction. (f) As used in this Agreement, "Superior Transaction" shall mean an Alternative Transaction with respect to which the Board of Directors (after consultation with its financial advisors and legal counsel) has determined in its good faith opinion, in comparison with the transactions contemplated by this Agreement and the Plan: (i) each and every creditor group and interest holder will be treated better under such Alternative Transaction; (ii) the transactions contemplated by the Alternative Transaction have at least the same certainty and timing of closing as the transactions contemplated by this Agreement and the Plan; (iii) the transactions contemplated by the Alternative Transaction are fully financed or have an unconditional commitment for full financing; (iv) the Alternative Transaction provides a higher total transaction value after taking into account the payment of the Break-Up Fee and Expenses; (v) the Alternative Transaction does not contemplate the incurrence by the Company or its subsidiaries of more debt; (vi) the aggregate purchase price for the equity of Reorganized Bally is at least $250 million in cash. "Superior Proposal" shall mean a proposal relating to a Superior Transaction. Section 6.3 Cooperation; Access to Information. (a) From the date hereof through the earlier of termination hereof and the Closing Date, the Company shall, and shall cause each of its subsidiaries and, to the extent any other Person is controlled directly or indirectly by the Company, each such other Person to, give each Investor and its agents, attorneys, accountants, and representatives, reasonable, non-exclusive access, during normal business hours upon reasonable notice, to the books, contracts, records and other documents, and personnel of the Company, its subsidiaries and such other Persons; provided, however, that none of the foregoing shall unreasonably interfere with the conduct of business of the Debtors, their subsidiaries, or such other Persons. (b) The Company and each Investor agrees to cooperate fully in facilitating the access provided for under this Agreement in accordance with mutually acceptable procedures, which procedures shall require, among other things, that all requests for such access: (i) be made to the Chief Financial Officer of the Company or such other person as the Company may designate in writing to the Investors, and (ii) specify the representatives of each Investor to whom such access is to be provided and the scope and nature of the access requested. Further, the Company shall be permitted to have any of its representatives present during any requested meetings or discussions. (c) The preceding subsections of this Section 6.3 shall not require the disclosure of any information if, in the Company's reasonable determination (after consultation with counsel), such information is reasonably believed to be (i) subject to an attorney-client or work product privileges and disclosure would result in the loss of such privileges or (ii) subject to a binding confidentiality agreement entered into as of the date hereof and disclosure would cause a breach of such confidentiality agreement. The Company will use its commercially reasonable efforts, including commercially reasonable efforts to obtain appropriate consents or waivers under any confidentiality agreement, to disclose all such information requested by each Investor and to provide a privilege log for any information not so provided. In the case that attorney-client or work product privileges apply, the parties shall use their commercially reasonable efforts to make appropriate substitute disclosure arrangements. (d) Any information acquired by the Investors pursuant to the preceding subsections of this Section 6.3 shall not diminish or obviate any of the representations, warranties, covenants or agreements of the Company contained in this Agreement. Section 6.4 HSR Act. No later than ten (10) Business Days after the date of the execution hereof, at the Company's expense, the Investors and the Company will each make any filings required under the HSR Act in connection with the transactions contemplated hereby. Each party hereto will cooperate with the other party hereto in accomplishing such filings and will keep the other party apprised of the status of any inquires made by any Governmental Entity with respect to this Agreement or the transactions contemplated hereby. Unless otherwise agreed by the Investors, the Closing of the transactions contemplated hereby is expressly conditioned upon the waiting period relating to any such filings having duly expired or been duly terminated by the appropriate Governmental Entities without the commencement of any action by any such Governmental Entities to restrain or postpone the transactions contemplated hereby. Each of the parties hereto shall use its commercially reasonable to cause the waiting period under the HSR Act to expire or be terminated, and to otherwise obtain all regulatory approvals in connection with any other antitrust approvals, as promptly as possible after the execution of this Agreement. Section 6.5 Further Actions; Reasonable Efforts. Without waiving any right to terminate this Agreement under Section 8.1, upon the terms and subject to the conditions hereof, the Company and each of the Investors, as the case may be, agree to use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with other parties-in-interest in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by hereby, including without limitation (w) obtaining all Governmental Requirements, (x) obtaining all Required Consents, (y) defending any lawsuits or other legal proceedings, whether judicial or administrative, challenging the consummation of the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity or any restraint vacated or reversed, and (z) executing and delivering any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, the Transaction Documents. In addition, the Company shall (i) as promptly as practicable, but in all events no later thirty (30) days the date hereof, seek approval of the Bankruptcy Court of the Commitment Fee provisions of Section 2.5 hereof and the Break-Up Fee and Expenses provisions of Section 8.2 hereof, (ii) provide indefeasible payment to the Investors of all Expenses incurred by the Investors in accordance with Section 8.2(b) hereof, (iii) as promptly as practical, make appropriate amendments or modifications to the Plan and related Disclosure Statement to the extent necessary to reflect the transactions contemplated hereby, which amendments and modifications shall be in form and substance reasonably acceptable to the Investors, (iv) as promptly as practicable, seek to obtain entry of the Disclosure Statement and (v) as promptly as practicable seek to obtain approval of the Confirmation Order with respect to the Plan by [?], 2007, which Confirmation Order shall provide, among other things, that the issue and sale of the New Common Shares pursuant to this Agreement shall at the time of their issuance be duly authorized and validly issued and outstanding, fully paid and non-assessable, exempt from registration and free and clear of any Encumbrances of any kind. Section 6.6 Use of Proceeds. The proceeds received by Reorganized Bally in respect of the Investment shall be used by the Reorganized Debtors in accordance with the Plan and for general corporate purposes. Section 6.7 Notification of Certain Matters. From the date hereof through the earlier of termination and the Closing Date, each party hereto shall give prompt notice to the other party hereto of the occurrence, or failure to occur, of any event that has caused any of such party's representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect or of any failure to comply with or satisfy any covenant, condition or agreement in any material respect to be complied with or satisfied by it hereunder; provided, however, that no such notification shall be deemed for any purpose under this Agreement to permit such party to alter or amend such party's representations and warranties contained herein. Section 6.8 Compliance with Other Agreements. The Company shall comply with its obligations under the Restructuring Support Agreements. Section 6.9 Information. (a) Between the date hereof and the earlier of the termination and the Closing Date, the Investors shall comply with reasonable requests from the Company for information concerning the Investors to the extent necessary in preparation of the Plan or the Disclosure Statement. (b) The Company shall promptly provide the Investors with copies of proposed final drafts (which shall be full, complete and accurate) of all documents, motions, orders, filings or pleadings that the Company proposes to file with the Bankruptcy Court which relate to the approval of the Disclosure Statement, the confirmation of the Plan or any provision therein or the consummation of the transactions contemplated hereby or thereby and will provide the Investors with reasonable opportunity to review such filings before made. Section 6.10 Assumption of Agreement. On the Petition Date, the Company shall file a motion pursuant to sections 363 and 365 of the Bankruptcy Code seeking approval of the Company's assumption of this Agreement, including the Break-Up Fee and Expenses provisions of Section 8.2. The Company shall obtain Court approval of such assumption no later than thirty (30) days after the Petition Date. ARTICLE VII CONDITIONS Section 7.1 Conditions to the Obligations of the Investors. The obligation of the Investors to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of each of the following conditions; provided, however, that the Investors may, in their sole and absolute discretion, waive any or all of the following conditions: (a) Restructuring Support Agreements. Each of the Restructuring Support Agreements shall not have terminated, and no material default under either such agreement by the Company or any of Plan Support Parties shall have occurred, unless waived by the Investors or cured within the time period specified in, and otherwise in accordance with, the applicable Restructuring Support Agreement; (b) Consents and Approvals. All Required Consents and material Governmental Requirements shall have been obtained or deemed obtained by operation of the Plan, the Confirmation Order and/or the Assumption Orders and shall be in full force and effect; (c) Final Orders Approving the Plan. The Confirmation Order and any Assumption Orders, each in form and substance reasonably satisfactory to the Investors, approving the Plan and the assumption of the Assumed Contracts shall have been entered by the Bankruptcy Court and shall have become final orders; (d) Plan Effectiveness. All conditions precedent to the effectiveness of the Plan (other than those relating to the Closing hereunder) shall have been fully satisfied or waived by the Investors in its discretion and the Plan shall not have been amended or modified in any material respect without the consent of the Investors; (e) Material Adverse Effect. No Material Adverse Effect shall have occurred and be continuing since the date of this Agreement; (f) Assumption of Agreement. The Debtors shall have assumed this Agreement pursuant to Section 363 and Section 365 of the Bankruptcy Code; (g) Other Conditions. (i) The Debtors shall have performed in all material respects their obligations hereunder (or cured any default thereof within the period specified herein or as extended by waiver or consent) required to be performed by them at or prior to the Closing, and (ii) the representations and warranties of the Debtors contained in this Agreement shall be true and correct in all material respects, in each case, at and as of the Closing Date (except, if made as of a specified date, then only as of such date); (h) No Injunction. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction (each, a "Restraint") preventing consummation of any of the transactions contemplated hereby shall be in effect; and (i) Financing. The New Credit Agreement shall be in full force and effect and there shall exist no material breach of or default under the New Credit Agreement by any party thereto that has not been waived or consented to by the requisite lenders or the Company (as applicable) thereunder, provided that the Investors are provided with evidence reasonably satisfactory to them of such waiver or consent. Section 7.2 Conditions to the Obligations of the Company. The obligation of the Company to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Closing of each of the following conditions: (a) Restructuring Support Agreements. Neither of the Restructuring Support Agreements shall have terminated; (b) Consents and Approvals. All Required Consents and material Governmental Requirements shall have been obtained or deemed obtained by operation of the Plan, the Confirmation Order and/or the Assumption Orders and shall be in full force and effect; (c) Plan Effectiveness. All conditions to the occurrence of the Effective Date shall have occurred; (d) Other Conditions. (i) Each Investor shall have performed in all material respects its obligations hereunder (or cured any default thereof within the period specified herein or as extended by waiver or consent) required to be performed by it at or prior to the Payment Date, and (ii) the representations and warranties of each Investor contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date (except, if made as of a specified date, then only as of such date); and (e) No Injunction. No Restraint preventing consummation of any of the transactions contemplated hereby shall be in effect. ARTICLE VIII TERMINATION; BREAK-UP FEE; FEES AND EXPENSES Section 8.1 Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date notwithstanding the fact that any requisite authorization and approval of the transactions contemplated hereby shall have been received and, other than as provided in Section 8.2, no party hereto shall have any liability to any other party hereto as a result of its invoking its rights to terminate this Agreement pursuant to this Section 8.1 (provided that any such termination shall not relieve any party from liability for a breach of any provision hereof prior to such termination): (a) by the mutual written consent of the Investors and the Company; (b) by the Investors: (i) if the Debtors fail to commence the Chapter 11 Cases by 11:59 p.m. prevailing Eastern Time on (x) [?], 2007[, or (y) if the Chapter 11 Cases are filed as prepackaged bankruptcy cases, [?], 2007, in the event a prepackaged solicitation is commenced by [?], 2007]; (ii) if the Board of Directors withdraws or changes its recommendation of this Agreement in a manner materially adverse to the Investors or recommends an Alternative Proposal; (iii) if the Company or any of its Representatives (A) executes and delivers a written agreement, letter of intent or agreement in principle (whether or not binding) providing for any Alternative Transaction or publicly announces its intention to enter into an Alternative Transaction, or (B) takes any action in the Bankruptcy Court for the purposes of obtaining approval of any Alternative Proposal; (iv) if (A) the Debtors unilaterally withdraw the Plan, move to voluntarily dismiss any of the Chapter 11 Cases, move for conversion of any of the Chapter 11 Cases to Chapter 7 of the Bankruptcy Code, or move for appointment of an examiner with expanded powers pursuant to Section 1104 of the Bankruptcy Code in any of the Chapter 11 Cases (except as permitted under the Restructuring Support Agreements), (B) any of the Chapter 11 Cases shall have been dismissed or converted to a case under Chapter 7 of the Bankruptcy Code, (C) an interim or permanent trustee shall be appointed in any of the Chapter 11 Cases, or a responsible officer or an examiner with powers beyond the duty to investigate and report (as set forth in Sections 1106(a)(3) and (4) of the Bankruptcy Code) shall be appointed in any of the Chapter 11 Cases, or (D) the Debtors' exclusive right to file a Chapter 11 Plan pursuant to Section 1121 of the Bankruptcy Code shall have terminated; (v) if the Effective Date of the Plan has not occurred by 11:59 p.m. prevailing Eastern Time on [o], 2007 (the "Outside Date") or, in the event that votes on the Plan are not solicited prior to the filing of the Chapter 11 Cases, if the Disclosure Statement relating to the Plan has not been approved by the Bankruptcy Court by 11:59 p.m. prevailing Eastern Time on [o], 2007; (vi) if the Company shall be (A) in breach of any representation or warranty made by it hereunder that is qualified by materiality (taking into account such materiality), (B) in material breach of any of any representation or warranty made by it hereunder that is not qualified by materiality, or (C) in breach of any of its obligations hereunder, and such breach cannot be or has not been cured or waived by the Investors on or before the earlier of (x) the fifth (5th) Business Day after the giving of written notice to the Company or (y) the Outside Date; (vii) if there shall be any Law that makes consummation of the transactions contemplated by this Agreement or the other Transaction Documents illegal or otherwise prohibited or if any court of competent jurisdiction or Governmental Entity shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the consummation of any of the transactions contemplated hereby or by the other Transaction Documents and such order, decree, ruling or other action shall have become final and non-appealable; (viii) if any of the Debtors breaches either of the Restructuring Support Agreements in any material respect and such breach is not cured on or before the fifth (5th) Business Day after delivery of notice of such breach or, if the Chapter 11 Cases are then pending, on or before the fifth (5th) Business Day after the filing of a motion for relieve from the automatic stay to permit the delivery of such notice (in which case this Agreement shall automatically terminate on the fifth (5th) Business Day after the filing of such motion unless such breach has been cured by such time); (ix) if the provisions governing the Investors' right to receive the Break-Up Fee or the Expenses as set forth in Section 8.2 hereof have not been approved by the Bankruptcy Court by the date that is thirty (30) days after the Petition Date; (x) if, on or after the date hereof, there occurs or is continuing a change, event or occurrence which, individually or in the aggregate, has or would reasonably expected to have a Material Adverse Effect and such Material Adverse Effect cannot be cured by the Outside Date; or (xi) if the terms of either the proposed New Credit Agreement or the proposed DIP Loan Facility (A) are less favorable to the Company, the Debtors or the Reorganized Debtors (as the case may be) than those contained in the New Credit Agreement Term Sheet (as such term is defined in the Plan) or those set forth in Exhibit D hereto, or (B) are otherwise unacceptable to the Investors. (c) by the Company: (i) if any Investor shall be in material breach of its representations, warranties and obligations hereunder, and such breach cannot be or has not been cured or waived by the Company on or before the (x) the fifth (5th) Business Day after the giving of written notice to the Company or (y) the Outside Date; or (ii) (A) the Board of Directors determines in good faith that termination of this Agreement is necessary in order for the Company to accept any Alternative Proposal, or (B) the Bankruptcy Court on its own accord and not at the request of (or by the acquiescence of) the Company has ordered the Company to terminate this Agreement in order to accept any Alternative Proposal; provided that the Company shall have the right to terminate this Agreement pursuant to clause (A) above only if it has complied in all material respects with the provisions of Section 6.2; Section 8.2 Break-Up Fee; Fees and Expenses. (a) If (X) the Company terminates this Agreement pursuant to Section 8.1(c)(ii), (Y) the Company consummates an Alternative Transaction within eighteen (18) months following the termination of this Agreement, other than any termination pursuant to Sections 8.1(a), 8.1(c)(i) or 8.2(b)(xi), or (Z) if the Investors terminate this Agreement pursuant to Sections 8.1(b)(i)-(vi) and Sections 8.1(b)(viii)-(x); then, in any such case, the Company shall pay to the Investors a fee, in cash, equal to $10 million (the "Break-Up Fee"). Any payment required to be made pursuant to this Section 8.2(a) shall be made to the Investors, in accordance with the percentage set forth in the Investor Share Notice, by wire transfer of immediately available same day funds to an account designated by each Investor, within five (5) Business Days after the event giving rise to the right of payment. (b) In addition to any other rights or remedies available to the Investors, the Company agrees to reimburse or pay, as the case may be, all out-of-pocket costs, fees and expenses reasonably incurred by each Investor or its Affiliates, including fees, costs and expenses of any professionals (including financial advisors, outside legal counsel, accountants, experts and consultants) retained by any of the Investors or their respective Affiliates in connection with or related to the authorization, preparation, investigation, negotiation, execution and performance of this Agreement, the transactions contemplated hereby and the Chapter 11 Cases and other judicial and regulatory proceedings related to such transactions and the Chapter 11 Cases (collectively, the "Expenses") to the extent incurred from and after May 1, 2007 through the Effective Date (and reasonable post-Closing costs and expenses related to the Closing) or the earlier termination of this Agreement so long as it is not terminated by the Company pursuant to Section 8.1(c)(i) hereof. The Company shall provide indefeasible payment to the Investors of all Expenses on or before the earlier of (x) the Closing Date and (y) the termination of this Agreement in accordance with Section 8.1. (c) The provisions of this Section 8.2 shall survive termination of this Agreement. The provision for the payment of the Break-Up Fee and the Expenses set forth in this Section 8.2 and the Commitment Fee set forth in Section 2.5 is an integral part of the transactions contemplated by this Agreement and without this provision the Investors would not have entered into this Agreement and such Break-Up Fee, Expenses and Commitment Fee shall constitute an allowed administrative expense of the Company under Section 503(b)(1) and 507(a)(1) of the Bankruptcy Code. ARTICLE IX INDEMNIFICATION Section 9.1 Indemnification. Whether or not the this Agreement is terminated or the transactions contemplated by this Agreement or the Plan are consummated, the Company (in such capacity, the "Indemnifying Party") shall indemnify and hold harmless each Investor, their respective Affiliates and their respective officers, directors, employees, agents and controlling persons (each, an "Indemnified Person") from and against any and all losses, claims, damages, liabilities and reasonable expenses ("Losses"), joint or several, to which any such Indemnified Person may become subject arising out of or in connection with any Action instituted by a third party with respect to this Agreement or the other Transaction Documents, or the transactions contemplated by any of the foregoing and shall reimburse such Indemnified Persons for any reasonable legal or other reasonable out-of-pocket expenses as they are incurred in connection with investigating, responding to or defending any of the foregoing; provided that the foregoing indemnification will not apply to Losses (i) arising out of or in connection with the failure of any Indemnified Person to comply with the covenants and agreements contained in this Agreement or the Restructuring Support Agreements; or (ii) to the extent that they resulted from (a) any breach by such Indemnified Person of this Agreement or the Restructuring Support Agreements, or (b) gross negligence, bad faith or willful misconduct on the part of such Indemnified Person. The indemnity, reimbursement and contribution obligations of the Indemnifying Party under this Article IX shall be in addition to any liability that the Indemnifying Party may otherwise have to an Indemnified Person and shall bind and inure to the benefit of any successors, assigns, heirs and personal representatives of the Indemnifying Party and any Indemnified Person. Section 9.2 Notice; Assumed Defense. Promptly after receipt by an Indemnified Person of notice of the commencement of any Actions with respect to which the Indemnified Person may be entitled to indemnification hereunder, such Indemnified Person will, if a claim is to be made hereunder against the Indemnifying Party in respect thereof, notify the Indemnifying Party in writing of the commencement thereof; provided that (i) the omission so to notify the Indemnifying Party will not relieve the Indemnifying Party from any liability that it may have hereunder except to the extent it has been materially prejudiced by such failure and (ii) the omission so to notify the Indemnifying Party will not relieve it from any liability that it may have to an Indemnified Person otherwise than on account of this Article IX. In case any such Actions are brought against any Indemnified Person and it notifies the Indemnifying Party of the commencement thereof, the Indemnifying Party will be entitled to participate therein, and, to the extent that it may elect by written notice delivered to such Indemnified Person, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Person; provided that if the defendants in any such Actions include both such Indemnified Person and the Indemnifying Party and such Indemnified Person shall have concluded that there may be legal defenses available to it that are different from or additional to those available to the Indemnifying Party, such Indemnified Person shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such Actions on behalf of such Indemnified Person. Upon receipt of notice from the Indemnifying Party to such Indemnified Person of its election so to assume the defense of such Actions and approval by such Indemnified Person of counsel, the Indemnifying Party shall not be liable to such Indemnified Person for expenses incurred by such Indemnified Person in connection with the defense thereof (other than reasonable costs of investigation) unless (i) such Indemnified Person shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Indemnifying Party shall not be liable for the expenses of more than one separate counsel in any jurisdiction, approved by the Investors, representing the Indemnified Persons who are parties to such Actions), (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to such Indemnified Person to represent such Indemnified Person within a reasonable time after notice of commencement of the Actions or (iii) the Indemnifying Party shall have authorized in writing the employment of counsel for such Indemnified Person. Section 9.3 Settlements. The Indemnifying Party shall not be liable for any settlement of any Actions effected without its written consent (which consent shall not be unreasonably withheld). If any settlement of any Action is consummated with the written consent of the Indemnifying Party or if there is a final judgment for the plaintiff in any such Actions, the Indemnifying Party agrees to indemnify and hold harmless each Indemnified Person from and against any and all Losses by reason of such settlement or judgment in accordance with, and subject to the limitations of, the provisions of this Article IX. The Indemnifying Party shall not, without the prior written consent of an Indemnified Person (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened Actions in respect of which indemnity has been sought hereunder by such Indemnified Person unless (i) such settlement includes an unconditional release of such Indemnified Person in form and substance satisfactory to such Indemnified Person from all liability on the claims that are the subject matter of such Actions and (ii) such settlement does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person. Section 9.4 Limitation on Liability. If the Company terminates this Agreement pursuant to Section 8.1(c)(i) hereof, the Investors shall not be liable to the Debtors for any punitive or consequential damages as a result thereof, provided, that in no event shall the Investors be liable for damages hereunder in excess of $50 million. ARTICLE X SUBSIDIARY GUARANTEE Section 10.1 Guarantee. Each of the Subsidiary Guarantors hereby unconditionally guarantees the prompt and complete payment of all amounts payable by the Company hereunder and the prompt and complete performance of all other obligations, contingent or otherwise, of the Company hereunder. Notwithstanding anything to the contrary contained herein, the obligations of each Subsidiary Guarantor pursuant to this Section 10.1 shall survive the Closing or earlier termination of this Agreement. ARTICLE XI MISCELLANEOUS Section 11.1 Certain Matters. (a) If, at the time of their execution of this Agreement, the Investors had actual knowledge of any breach by the Company of any representation or warranty contained herein, (i) the Investors shall not have the right to terminate this Agreement pursuant to Section 8.1 based on such breach, and (ii) the Investors shall have no claim against the Company for such breach. (b) If, at the time of their execution of this Agreement, the Debtors had actual knowledge of any breach by the Investors of any representation or warranty contained herein, (i) the Debtors shall not have the right to terminate this Agreement pursuant to Section 8.1 based on such breach, and (ii) the Debtors shall have no claim against the Investors for such breach. Section 11.2 Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal and substantive Laws of the State of New York. Section 11.3 Jurisdiction; Forum; Service of Process; Waiver of Jury Trial. With respect to any Action arising out of or relating to this Agreement, the Company and the Investors hereby irrevocably: (a) submit to (i) the exclusive jurisdiction of the Bankruptcy Court for so long as the Chapter 11 Cases are open or (ii) the jurisdiction of any New York State court or any Federal court of the United States sitting in New York for so long as the Chapter 11 Cases are not open, for any Action arising out of or relating to this Agreement or the other Transaction Documents and the transactions contemplated hereby and thereby (and the Company agrees not to commence any Action relating hereto or thereto except in such Court) and waives any objection to venue being laid in the Bankruptcy Court whether based on the grounds of forum non conveniens or otherwise; (b) consent to service of process in any Action by the mailing of copies thereof by registered or certified mail, postage prepaid, or by recognized international express carrier or delivery service, to the Company or each Investor at their respective addresses referred to in Section 11.6 hereof; provided, however, that nothing herein shall affect the right of any party hereto to serve process in any other manner permitted by law; and (c) waive, to the fullest extent permitted by law, any right it may have to a trial by jury in any Action directly, or indirectly arising out of, under or in connection with this Agreement or the other Transaction Documents. Section 11.4 Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors by operation of law of the parties hereto. No assignment of this Agreement (other than assignments by any Investor to any of its Affiliates) may be made by any party at any time, whether or not by operation of law, without the other parties' prior written consent. Only the parties to this Agreement or their successors shall have rights under this Agreement. Section 11.5 Entire Agreement; Amendment. This Agreement (including the Exhibits, Schedules and Annexes attached hereto), the other Transaction Documents and the Plan constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and supersedes all prior agreements relating to the subject matter hereof. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and by the Investors. No waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provision hereof (whether or not similar). No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. For periods prior to the Effective Date, the parties agree that to the extent any provision of the Plan relating to the Investors conflicts with any provision of this Agreement, the provisions of this Agreement shall control. After the Effective Date, in the event that any terms of this Agreement conflict with any terms of the Plan, the terms of the Plan shall control. Section 11.6 Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient and effective if contained in a written instrument (i) delivered in person, when such delivery is made at the address specified at the address specified in this Section 11.5, (ii) sent by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 11.6 and appropriate confirmation is received, (iii) nationally recognized overnight courier, the next day or (iv) first class registered or certified mail, return receipt requested, postage prepaid, 5 days after deposit, in each case, addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by such party to the other parties: (i) If to the Company or to any subsidiary that is a Debtor: Bally Total Fitness Holding Corporation 8700 West Bryn Mawr Avenue Chicago, IL 60631 Fax: (773) 399-0126 Attn: Marc D. Bassewitz With a copy to: Latham & Watkins LLP Sears Tower, Suite 5800 233 South Wacker Drive Chicago, IL 60606 Fax: (312) 993-9767 Attn: David S. Heller, Esq. Mark D. Gerstein, Esq. (ii) If to either Investor: Harbinger Capital Partners Master Fund I, Ltd. or Harbinger Capital Partners Special Situations Fund, L.P. c/o Harbinger Capital Partners 555 Madison Avenue 16th Floor New York, New York 10022 Fax: (212) 508-3721 Attn: Howard Kagan With a copy to: Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, New York 10036 Fax: 212-715-8000 Attn: Shari K. Krouner, Esq. And: Kasowitz, Benson, Torres & Friedman LLP 1633 Broadway New York, New York 10019 Fax: (212) 506-1800 Attn: Andrew K. Glenn, Esq. Section 11.7 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to the Company or the Investors upon any breach or default of any party under this Agreement, shall impair any such right, power or remedy of the Company or the Investors nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of the Company or the Investors of any breach or default under this Agreement, or any waiver on the part of any such party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to the Company or the Investors shall be cumulative and not alternative. Section 11.8 Several Obligations of Investors. The parties agree that all obligations of the Investors hereunder shall be several and not joint. Section 11.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which may be executed by only one of the parties hereto, each of which shall be enforceable against the party actually executing such counterpart, and all of which together shall constitute one instrument. Any signature delivered by facsimile or electronic mail shall have the same effect as an original hereto. Section 11.10 Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provisions; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. Section 11.11 Construction. All references in this Agreement to Exhibits, Schedules, Articles, Sections, subsections, clauses and other subdivisions refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections, clauses and other subdivisions of this Agreement unless expressly provided otherwise. The words "this Agreement," "herein," "hereby," "hereunder" and "hereof" and words of similar import, refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The words "this Section," "this subsection" and words of similar import, refer only to the Sections or subsections hereof in which such words occur. The word "including" (in its various forms) means "including, without limitation." Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise expressly requires. Unless the context otherwise requires, all defined terms contained herein shall include the singular and plural and the conjunctive and disjunctive forms of such defined terms. Section 11.12 Headings. The table of contents and headings used in this Agreement are used for convenience only, do not constitute a part of this Agreement and are not to be considered in construing or interpreting this Agreement. Section 11.13 Public Announcement. The Company and the Investors shall, to the extent reasonably practicable, consult with the other regarding the content of any press releases, public announcements or filings with Governmental Entities concerning the transactions contemplated by the Transaction Documents. [SIGNATURE PAGES TO FOLLOW] IN WITNESS WHEREOF, each of the undersigned has caused the foregoing Agreement to be executed as of the date first above written. BALLY TOTAL FITNESS HOLDING CORPORATION By: ____________________________ Name: Title: The Subsidiary Guarantor Listed in Exhibit C Hereto By: ____________________________ Name: Title: HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. By: Harbinger Capital Partners Offshore Manager, L.L.C., as investment manager By: ____________________________ Name: Joel B. Piassick Title: Executive Vice President HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P. By: Harbinger Capital Partners Special Situations GP, LLC, as general partner By: ____________________________ Name: William R. Lucas, Jr. Title: Senior Vice-President and General Counsel [Signature page to Investment and Backstop Purchase Agreement] EXHIBIT A AMENDED PLAN OF REORGANIZATION EXHIBIT B FORM OF INVESTOR SHARE NOTICE Number of Percentage of Total Dollar Name and Address New Investor Outstanding New Amount of of Investor Shares Acquired Common Shares Investment - ----------- --------------- ------------- ---------- Harbinger Capital Partners Master Fund I, Ltd. Harbinger Capital Partners Special Situations Fund, L.P. Total EXHIBIT C SUBSIDIARY GUARANTORS Bally ARA Corporation Bally Fitness Franchising, Inc. Bally Franchise RSC, Inc. Bally Franchising Holdings, Inc. Bally Real Estate I LLC Bally REFS West Hartford, LLC Bally Sports Clubs, Inc. Bally Total Fitness Corporation Bally Total Fitness Franchising, Inc. Bally Total Fitness Holding Corporation Bally Total Fitness International, Inc. Bally Total Fitness of California, Inc. Bally Total Fitness of Colorado, Inc. Bally Total Fitness of Connecticut Coast, Inc. Bally Total Fitness of Connecticut Valley, Inc. Bally Total Fitness of Greater New York, Inc. Bally Total Fitness of Minnesota, Inc. Bally Total Fitness of Missouri, Inc. Bally Total Fitness of Philadelphia, Inc. Bally Total Fitness of Rhode Island, Inc. Bally Total Fitness of the Mid-Atlantic, Inc. Bally Total Fitness of the Midwest, Inc. Bally Total Fitness of the Southeast, Inc. Bally Total Fitness of Toledo, Inc. Bally Total Fitness of Upstate New York, Inc. BTF Cincinnati Corporation BTF Europe Corporation BTF Indianapolis Corporation BTF Minneapolis Corporation BTF/CFI, Inc. BTFCC, Inc. BTFF Corporation Greater Philly No. 1 Holding Company Greater Philly No. 2 Holding Company Health & Tennis Corporation of New York Holiday Health Clubs of the East Coast, Inc. Holiday/Southeast Holding Corp. Jack LaLanne Holding Corp. New Fitness Holding Co., Inc. Nycon Holding Co., Inc. Rhode Island Holding Company Tidelands Holiday Health Clubs, Inc. U.S. Health, Inc. EXHIBIT D CERTAIN FINANCING TERMS SK 03773 0003 797396 EX-99.H 4 d797398_ex99-h.txt Draft 7/30/07 For Discussion Purposes Only RESTRUCTURING SUPPORT AGREEMENT This RESTRUCTURING SUPPORT AGREEMENT is made and entered into as of July __, 2007 (the "Agreement") by and among (i) Bally Total Fitness Holding Corporation, a Delaware corporation ("BTF") and each of its affiliates that may or will constitute one of the debtors in the Chapter 11 Cases (collectively, "Bally"), and (ii) Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund L.P., and Liberation Investments, L.P. and Liberation Investments, Ltd. (each, a "Plan Support Party"). W H E R E A S : A. Bally contemplates a restructuring (the "Restructuring") pursuant to the terms of the form of plan of reorganization (the "Plan") attached hereto as Exhibit A. B. Bally and each Plan Support Party (each a "Party" and collectively, the "Parties") anticipate that the Restructuring will be implemented through the Plan and other documentation. NOW, THEREFORE, in consideration of the covenants and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each Party, intending to be legally bound hereby, agrees as follows: 1. Definitions. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Appendix to this Agreement. 2. Agreement Effective Date. This Agreement shall be effective at 12:01 a.m. prevailing Eastern Time on the date on which the following conditions have been satisfied (the "Agreement Effective Date"): (a) Bally shall have executed and delivered counterpart signature pages to this Agreement to the Plan Support Parties; (b) each of the Plan Support Parties shall have delivered to Bally an executed counterpart of this Agreement, and (c) the Investment Agreement has been duly executed by the parties thereto. 3. Commitment of Plan Support Parties. Subject to (i) the occurrence of the Agreement Effective Date, but prior to the occurrence of the Termination Date (if applicable), and (ii) delivery and review of the Definitive Documents, including, but not limited to, the Plan and the Disclosure Statement, and so long as the Definitive Documents are consistent with the terms of the Restructuring as set forth in the Plan, each Plan Support Party shall: (a) following the commencement of the Chapter 11 Cases, not (i) object, on any grounds, to confirmation of the Plan, except to the extent that the terms of the Plan to be confirmed are inconsistent with the terms contained in the Plan, or (ii) directly or indirectly seek, solicit, support or encourage (x) any objection to the Plan or (y) any other plan of reorganization or liquidation; and (b) not take any other action, including, without limitation, initiating any legal proceeding that is inconsistent with, or that would delay consummation of, the transactions embodied in the Plan, and upon completion, the Definitive Documents. 4. Bally Commitment. Subject to the provisions of the Investment Agreement, Bally shall use its reasonable best efforts to (i) support and complete the transactions embodied in the Plan and the Investment Agreement, (ii) do all things reasonably necessary and appropriate in furtherance of the transactions embodied in the Plan and the Investment Agreement, including, without limitation (x) filing a motion and seeking Court approval of Bally's assumption of the Investment Agreement, (y) taking all steps reasonably necessary and desirable to obtain an order of the Bankruptcy Court confirming the Plan on or before [________________], 2007, and (z) taking all steps reasonably necessary and desirable to cause the effective date of the Plan to occur on or before [________________], 2007, (iii) obtain any and all required regulatory and/or third-party approvals for the transactions embodied in the Plan and the Investment Agreement, and (iv) not take any action that is inconsistent with, or is intended or is reasonably likely to interfere with or impede or delay consummation of, the Restructuring and the transactions embodied in the Plan and the Investment Agreement. 5. Termination. This Agreement may be terminated and shall thereafter be of no further force or effect upon the termination of the Investment Agreement. As to any Plan Support Party, the date on which such Plan Support Party delivers a notice to the Investors of the occurrence of a Termination Event shall be referred to as the "Termination Date". 6. Transfer of Common Stock. If, following execution of this Agreement by a Plan Support Party, such Plan Support Party hypothecates, pledges, conveys, transfers, assigns or sells (collectively, a "Transfer") all or a part of the Common Stock held by such Plan Support Party to any Person (each such Person, a "Transferee"), Transferee must, as a condition precedent to the settlement of such Transfer, execute an assumption in substantially the form set forth hereto as Exhibit B (the "Assumption Agreement"). To the maximum extent permitted by applicable law, any Transfer that is made in violation of the immediately preceding sentence shall be null and void. A Plan Support Party shall provide to Bally a copy of the executed Assumption Agreement within three Business Days of the execution of an agreement (or trade confirmation) in respect of such Transfer. 7. Plan Support Party Representations. Each Plan Support Party severally and not jointly represents and warrants to each other Party that: a) as of the date of this Agreement, it is the beneficial owner of the face amount of the Common Stock, or is the nominee, investment manager or advisor for beneficial holders of the Common Stock, as such Plan Support Party has represented in writing to counsel for Bally, which amount Bally and each Plan Support Party understands and acknowledges is proprietary and confidential to such Plan Support Party; b) other than pursuant to this Agreement, such Common Stock is free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction, right of first refusal or other limitation on disposition or encumbrances of any kind, that would adversely affect in any way such Plan Support Party's performance of its obligations contained in this Agreement at the time such obligations are required to be performed; and c) as of the date of this Agreement, it is not aware of any event that, due to any fiduciary or similar duty to any other person, would prevent it from taking any action required of it under this Agreement. 8. Cooperation. Prior to the commencement of and during the Chapter 11 Cases, Bally shall, except (a) in an emergency where it is not reasonably practicable or (b) upon consent of counsel to the Plan Support Parties, provide draft copies of all motions or applications and other documents Bally intends to file with the Bankruptcy Court to counsel for the Plan Support Parties no later than three Business Days prior to the date when Bally intends to file any such document and shall consult in good faith with counsel to the Plan Support Parties regarding the form and substance of any such proposed filing with the Bankruptcy Court. 9. Service on Official Committee. Notwithstanding anything herein to the contrary, if a Plan Support Party is appointed to and serves on an official committee in the Chapter 11 Cases, the terms of this Agreement shall not be construed to limit such Plan Support Party's exercise of its fiduciary duties in its role as a member of such committee, and any exercise of such fiduciary duties shall not be deemed to constitute a breach of the terms of this Agreement; provided, however, that serving as a member of such committee shall not relieve the Plan Support Party of any obligations to support confirmation of the Plan; provided, further, that nothing in this Agreement shall be construed as requiring any Plan Support Party to serve on any official committee in the Chapter 11 Cases. 10. Party Representations. Each Party represents to each other Party that, as of the date of this Agreement, such Party is duly organized, validly existing, and in good standing under the laws of the state of its organization, and has all requisite corporate, partnership, or limited liability company power and authority to enter into this Agreement and to carry out the transactions contemplated by, and perform its respective obligations under, this Agreement. 11. Entire Agreement. This Agreement, including schedules and annexes, constitutes the entire agreement of the Parties with respect to the subject matter of this Agreement, and supersedes all other prior negotiations, agreements and understandings, whether written or oral, among the Parties with respect to the subject matter of this Agreement; provided, however, that any confidentiality agreement executed by any Plan Support Party shall survive this Agreement and shall continue to be in full force and effect, in accordance with the terms thereof, irrespective of the terms hereof; provided, further, that the Parties shall enter into various definitive documents upon the effective date of the Plan to give effect to the transactions contemplated in this Agreement. 12. Survival of Agreement. Each of the Parties acknowledges and agrees that this Agreement is being executed in connection with negotiations concerning a possible financial restructuring of Bally and in contemplation of a possible bankruptcy filing by Bally, and (a) the rights granted in this Agreement are enforceable by each signatory hereto without approval of the Bankruptcy Court, (b) the exercise of such rights will not violate the automatic stay provisions of the Bankruptcy Code and (c) Bally hereby waives its right to assert a contrary position in the Bally bankruptcy cases, if any, with respect to the foregoing. 13. Acquisition of Additional Common Stock. This Agreement shall in no way be construed to preclude any Plan Support Party from acquiring additional Common Stock; provided, however, that any such additional Common Stock automatically shall be deemed to be subject to the terms of this Agreement. A Plan Support Party shall notify counsel for the Plan Support Parties, in writing, of any Common Stock acquired by it within three Business Days of the execution of an agreement (or trade confirmation) in respect of such acquisition. 14. Public Announcements. Except as required by applicable law or regulation, or the rules of any applicable stock exchange or regulatory body, or in filings to be made with the Bankruptcy Court, neither Bally nor the Plan Support Parties shall, nor shall they permit any of their respective affiliates to, make any public announcement or otherwise communicate with any news media in respect of this Agreement or the transactions contemplated hereby or by the Definitive Documents without the prior written consent of the other parties hereto (which consent shall not be unreasonably withheld or delayed); provided, however, that notwithstanding the forgoing Bally shall issue a press release no later than 8:00 a.m. prevailing Eastern Time on [___________], 2007 substantially in the form attached hereto as Exhibit D, and shall promptly thereafter, file with the SEC a current report on Form 8-K filing the press release, this Agreement, and the Plan. Notwithstanding the forgoing, if Bally fails to issue a press release in compliance with the previous sentence, any of the Plan Support Parties may issue a press release containing all material information relating to the transactions contemplated hereby. 15. Waiver. If the transactions contemplated herein are not consummated, or following the occurrence of the Termination Date, if applicable, nothing shall be construed herein as a waiver by any Party of any or all of such Party's rights and the Parties expressly reserve any and all of their respective rights. Pursuant to Federal Rule of Evidence 408 and any other applicable rules of evidence, this Agreement and all negotiations relating hereto shall not be admissible into evidence in any proceeding other than a proceeding to enforce its terms. 16. Counterparts. This Agreement may be executed in one or more counterparts, each of which, when so executed, shall constitute the same instrument and the counterparts may be delivered by facsimile transmission or by electronic mail in portable document format (.pdf). 17. Amendments. Except as otherwise provided herein, this Agreement may not be modified, amended or supplemented without prior written consent of Bally and each Plan Support Party. 18. Headings. The headings of the sections, paragraphs, subsections and subparagraphs of this Agreement are inserted for convenience only and shall not affect the interpretation hereof. 19. Specific Performance. It is understood and agreed by the Parties that money damages would be an insufficient remedy for any breach of this Agreement by any Party and each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief as a remedy of any such breach, including, without limitation, an order of the Bankruptcy Court or other court of competent jurisdiction requiring any Party to comply promptly with any of its obligations hereunder. 20. Relationship Among Parties. Notwithstanding anything herein to the contrary, the duties and obligations of the Plan Support Parties under this Agreement shall be several, not joint. In this regard, it is understood and agreed that any Plan Support Party may, subject to compliance with paragraphs 6 and 13 of this Agreement, trade in the Common Stock or other debt or equity securities of Bally and its Subsidiaries without the consent of Bally or any other Plan Support Party, subject to applicable securities laws. No Plan Support Party shall have any responsibility for any such trading by any other entity by virtue of this Agreement. No prior history, pattern or practice of sharing confidences among or between Plan Support Parties shall in any way affect or negate this understanding and agreement. 21. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to such state's choice of law provisions which would require the application of the law of any other jurisdiction. By its execution and delivery of this Agreement, each of the Parties irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter arising under or arising out of or in connection with this Agreement or for recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may be brought in the United States District Court for the Southern District of New York, and by execution and delivery of this Agreement, each of the Parties irrevocably accepts and submits itself to the exclusive jurisdiction of such court, generally and unconditionally, with respect to any such action, suit or proceeding. Notwithstanding the foregoing consent to New York jurisdiction, if the Chapter 11 Cases are commenced, each Party agrees that the Bankruptcy Court shall have exclusive jurisdiction of all matters arising out of or in connection with this Agreement. 22. Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile or electronic transmission or mailed (first class postage prepaid) to the parties at the following addresses, email addresses, or facsimile numbers: If to a Plan Support Party, to the address set forth beneath such Plan Support Party's name below, with a copy to: Kasowitz, Benson, Torres & Friedman LLP 1633 Broadway New York, New York 10019 Attention: Andrew K. Glenn (aglenn@kasowitz.com) Tel: (212) 507-1700 Fax: (212) 507-1800 Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, New York 10036 Attn: Shari K. Krouner, Esq. (skrouner@kramerlevin.com) Tel: (212) 715-9222 Fax: (212) 715-8000 If to Bally: Bally Total Fitness Holding Corporation 8700 West Bryn Mawr Avenue Chicago, IL 60631 Attn: Marc D. Bassewitz Facsimile: (773) 399-0126 with a copy to: Latham & Watkins LLP Sears Tower, Suite 5800 233 South Wacker Drive Chicago, IL 60606 Attn: Mark D. Gerstein, Esq. (mark.gerstein@lw.com) Attn: David S. Heller, Esq. (david.heller@lw.com) Facsimile: (312) 993-9767 23. No Third-Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of the Parties hereto and their respective successors and permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any other person. 24. Not a Solicitation. This Agreement does not constitute (a) an offer for the purchase, sale, exchange, hypothecation, or other transfer of securities for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934, or (b) a solicitation of votes on a chapter 11 plan of reorganization for purposes of the Bankruptcy Code. [Signature Pages Follow] IN WITNESS WHEREOF, Bally and the Plan Support Parties have executed this Agreement as of the date first written above. BALLY TOTAL FITNESS HOLDING CORPORATION By: _________________________________ Name: Title: On behalf of the Subsidiary Guarantors listed on Exhibit C hereto: By: _________________________________ Name: Title: The undersigned agrees to this Restructuring Support Agreement and to become a Plan Support Party. PLAN SUPPORT PARTY: __________________________ By: _________________________________ Name: Title: Address: ______________________________ ______________________________ ______________________________ ______________________________ Facsimile No.: Attn.: Appendix - Defined Terms The following terms shall have the following definitions: "Bankruptcy Code" means title 11 of the United States Code. "Bankruptcy Court" means the United States Bankruptcy Court for the Southern District of New York. "Business Day" means a day (other than a Saturday or Sunday) on which banks are open for general business in New York City. "Chapter 11 Cases" means the voluntary chapter 11 proceedings to be commenced by the Filing Entities for the principal purpose of consummating the Plan. "Common Stock" means common stock in BTF. "Definitive Documents" means the Investment Agreement, the Disclosure Statement, the Plan, the DIP Financing, the Exit Financing, and all related documents, exhibits, annexes, and schedules, as such documents may be amended, modified or supplemented from time to time in accordance with the terms hereof, reflecting the transactions embodied in the Plan, which documents shall contain terms (i) substantially in accordance with the terms set forth in the Plan and (ii) with respect to terms not set forth in, and not inconsistent with, the Plan, reasonably acceptable to each of the Plan Support Parties, which acceptance shall not be unreasonably withheld or delayed. "DIP Financing" means that certain debtor in possession financing to be described in the DIP Term Sheet (which shall be attached to the Disclosure Statement). "Disclosure Statement" means the disclosure statement in respect of the Plan describing, among other things, the transactions contemplated by the Plan. "Exit Financing" means that certain exit financing to be described in the Exit Financing Term Sheet (which shall be attached to the Disclosure Statement). "Investment Agreement" means the agreement to be executed by Ball and the Investors for an equity contribution to be made by the Investors in the amount of [___] pursuant to the Plan. "Investors" means, collectively, Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund L.P. "Liberation" means Liberation Investment Group and its affiliates. "Person" means and includes an individual, a partnership, a joint venture, a limited liability company, a corporation, a trust, an unincorporated organization, a group, or any legal entity or association. "Plan Support Parties", and each individually, a "Plan Support Party", means the holders of Common Stock that are party to this Agreement. Exhibit A Plan of Reorganization ---------------------- Exhibit B Assumption Agreement -------------------- Reference is hereby made to that certain Restructuring Support Agreement (as such agreement may be amended, modified or supplemented from time to time, the "Restructuring Support Agreement") among Bally Total Fitness Holding Corporation, the Bally Subsidiaries and the shareholders party thereto. Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Restructuring Support Agreement. As a condition precedent to becoming the beneficial holder or owner of [_____] shares of Common Stock (as defined in the Restructuring Support Agreement), the undersigned ______________ (the "Transferee"), hereby agrees to become bound by the terms, conditions and obligations set forth in the Restructuring Support Agreement. This Assumption Agreement shall take effect and shall become an integral part of the Restructuring Support Agreement immediately upon its execution and the Transferee shall be deemed to be bound by all of the terms, conditions and obligations of the Restructuring Support Agreement as of the date thereof. IN WITNESS WHEREOF, the ASSUMPTION AGREEMENT has been duly executed by each of the undersigned as of the date specified below. Date: __________, 200[_] __________________________________ ___________________________________ Name of Transferor Name of Transferee __________________________________ ___________________________________ Authorized Signatory of Transferor Authorized Signatory of Transferee __________________________________ ___________________________________ (Type or Print Name and Title (Type or Print Name and Title of of Authorized Signatory) Authorized Signatory) Address of Plan Support Party: ___________________________________ ___________________________________ ___________________________________ Attn: ____________________________ Tel: ____________________________ Fax: ____________________________ Email: ____________________________ Exhibit C List of Subsidiary Guarantors ----------------------------- BALLY FITNESS FRANCHISING, INC. BALLY FRANCHISE RSC, INC. BALLY FRANCHISING HOLDINGS, INC. BALLY TOTAL FITNESS CORPORATION BALLY TOTAL FITNESS HOLDING CORPORATION BALLY TOTAL FITNESS INTERNATIONAL, INC. BALLY TOTAL FITNESS OF MISSOURI, INC. BALLY TOTAL FITNESS OF TOLEDO, INC. BALLY REFS WEST HARTFORD, LLC BALLY TOTAL FITNESS OF CONNECTICUT COAST, INC. BALLY TOTAL FITNESS OF CONNECTICUT VALLEY, INC. GREATER PHILLY NO. 1 HOLDING COMPANY GREATER PHILLY NO. 2 HOLDING COMPANY HEALTH & TENNIS CORPORATION OF NEW YORK HOLIDAY HEALTH CLUBS OF THE EAST COAST, INC. BALLY TOTAL FITNESS OF UPSTATE NEW YORK, INC. BALLY TOTAL FITNESS OF COLORADO, INC. BALLY TOTAL FITNESS OF THE SOUTHEAST, INC. HOLIDAY/ SOUTHEAST HOLDING CORP. BALLY TOTAL FITNESS OF CALIFORNIA, INC. BALLY TOTAL FITNESS OF THE MID-ATLANTIC, INC. BTF/CFI, INC. BALLY TOTAL FITNESS OF GREATER NEW YORK, INC. JACK LA LANNE HOLDING CORP. BALLY SPORTS CLUBS, INC. NEW FITNESS HOLDING CO., INC. NYCON HOLDING CO., INC. BALLY TOTAL FITNESS OF PHILADELPHIA, INC. BALLY TOTAL FITNESS OF RHODE ISLAND, INC. RHODE ISLAND HOLDING COMPANY BALLY TOTAL FITNESS OF THE MIDWEST, INC. BALLY TOTAL FITNESS OF MINNESOTA, INC. TIDELANDS HOLIDAY HEALTH CLUBS, INC. U.S. HEALTH, INC. BALLY TOTAL FITNESS FRANCHISING, INC. Exhibit D PRESS RELEASE ------------- SK 03773 0003 797398 -----END PRIVACY-ENHANCED MESSAGE-----