EXHIBIT 10.2

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CREDIT AGREEMENT
AMONG
BALLY TOTAL FITNESS HOLDING CORPORATION, as Borrower
The Several Banks and other Financial Institutions Parties Hereto
JPMORGAN CHASE BANK, as Agent
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Syndication Agent
and
LASALLE BANK NATIONAL ASSOCIATION, as Documentation Agent
Dated as of November 18, 1997
As Amended and Restated as of July 2, 2003
JPMORGAN SECURITIES INC., and DEUTSCHE BANK SECURITIES INC., as Co-Lead
Arrangers and Bookrunners

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TABLE OF CONTENTS

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ARTICLE I. DEFINITIONS AND ACCOUNTING TERMINOLOGY........................................1

        1.01   Certain Definitions.......................................................1

        1.02   Financial Standards......................................................27

        1.03   Interpretation...........................................................27

ARTICLE II. THE CREDIT..................................................................28

        2.01   The Revolving Credit.....................................................28

        2.02   Requests for Advances....................................................28

        2.03   [Reserved]...............................................................29

        2.04   [Reserved]...............................................................29

        2.05   [Reserved]...............................................................29

        2.06   Lending Branch and Evidence of Credit....................................29

        2.07   Conversion and Continuation Options......................................30

        2.08   Computation of and Payment of Interest...................................30

        2.09   Payment of Advances......................................................32

        2.10   Payments.................................................................32

        2.11   Optional Termination or Reduction of Revolving Credit Commitment
                 Amount.................................................................33

        2.12   Optional Prepayments.....................................................33

        2.13   Mandatory Prepayments....................................................34

        2.14   Fees.....................................................................34

        2.15   Agency Fees..............................................................35

        2.16   Taxes....................................................................35

        2.17   Increased Costs; Illegality; Indemnity...................................37

        2.18   Capital Adequacy.........................................................38

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        2.19   Letters of Credit........................................................39

ARTICLE III. SECURITY...................................................................46

        3.01   Security.................................................................46

        3.02   Collateral Documents.....................................................47

        3.03   Priority of Security Interest............................................47

        3.04   New Guarantors...........................................................47

        3.05   Real Property Matters....................................................47

        3.06   Exceptions...............................................................48

        3.07   Pledge of Capital Stock..................................................48

ARTICLE IV. CONDITIONS PRECEDENT........................................................48

        4.01   Conditions Precedent to Closing Date.....................................48

        4.02   Conditions Precedent to Each Advance and Letter of Credit................54

ARTICLE V. REPRESENTATIONS AND WARRANTIES...............................................54

        5.01   Borrower’s Existence.....................................................54

        5.02   Subsidiaries’ Existence..................................................54

        5.03   Borrower’s and Subsidiaries’ Powers......................................55

        5.04   Power of Officers........................................................55

        5.05   Government Approvals.....................................................55

        5.06   Compliance With Laws.....................................................55

        5.07   Enforceability of Agreement..............................................55

        5.08   Title to Property........................................................56

        5.09   Litigation...............................................................56

        5.10   Events of Default........................................................56

        5.11   Compliance with Margin Requirements......................................56

        5.12   Subsidiaries.............................................................56

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        5.13   Financial Information....................................................56

        5.14   ERISA....................................................................56

        5.15   Investment Company Act of 1940...........................................57

        5.16   No Restrictions on Subsidiaries..........................................57

        5.17   Senior Indebtedness......................................................57

        5.18   Environmental Matters....................................................57

        5.19   Collateral Documents.....................................................58

        5.20   Copyrights, Patents, Trademarks and Licenses, etc........................59

        5.21   Accuracy of Information, etc.............................................59

        5.22   Permitted Indebtedness...................................................59

ARTICLE VI. AFFIRMATIVE COVENANTS.......................................................60

        6.01   Use of Proceeds and Letters of Credit....................................60

        6.02   Notices..................................................................60

        6.03   Financial Statements, Reports, Etc.......................................62

        6.04   Further Assurances.......................................................64

        6.05   Existence, Etc...........................................................64

        6.06   Ownership of Stock of Subsidiaries.......................................64

        6.07   Payment of Obligations...................................................64

        6.08   Compliance with Laws.....................................................64

        6.09   Insurance and Condemnation...............................................65

        6.10   Adequate Books...........................................................67

        6.11   ERISA....................................................................67

        6.12   Interest Coverage........................................................68

        6.13   Hazardous Materials......................................................68

        6.14   Total Leverage Ratio.....................................................69

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        6.15   Senior Secured Leverage Ratio............................................69

        6.16   Real Estate Taxes........................................................69

        6.17   Real Estate Collateral; Schedule 1.01....................................70

        6.18   Control Agreements.......................................................70

ARTICLE VII. NEGATIVE COVENANTS.........................................................71

        7.01   Investments and Restricted Payments......................................71

        7.02   Other Obligations........................................................73

        7.03   Other Security...........................................................75

        7.04   Subordinated Debt; Senior Unsecured Notes................................76

        7.05   Liquidation; Merger......................................................77

        7.06   Capital Expenditures.....................................................77

        7.07   Change in Business.......................................................78

        7.08   Disposal of Assets.......................................................78

        7.09   Limitation on Optional Payments and Modifications of Debt
                 Instruments and Receivables Program Documents..........................80

        7.10   Limitation on Transactions with Affiliates...............................81

        7.11   Limitation on Sales and Leasebacks.......................................82

        7.12   Limitation on Changes in Fiscal Year.....................................82

        7.13   Funding Corp.; Finance Subsidiaries......................................82

        7.14   Unrestricted Subsidiaries................................................82

        7.15   Tax Allocation and Indemnity Agreement...................................83

ARTICLE VIII. EVENTS OF DEFAULT.........................................................83

        8.01   Nonpayment...............................................................83

        8.02   Representation or Warranty...............................................83

        8.03   Judgments................................................................83

        8.04   Voluntary Bankruptcy.....................................................84

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        8.05   Involuntary Bankruptcy...................................................84

        8.06   Change of Control Event..................................................84

        8.07   Cross Default............................................................84

        8.08   ERISA....................................................................84

        8.09   Specific Defaults........................................................85

        8.10   Guarantee and Collateral Agreement; Impairment of Collateral
                 Documents..............................................................85

        8.11   Condemnation.............................................................85

        8.12   Payout Event.............................................................85

        8.13   Actual or Asserted Invalidity............................................86

        8.14   Other Defaults...........................................................86

ARTICLE IX. MISCELLANEOUS...............................................................87

        9.01   Notices..................................................................87

        9.02   Successors and Assigns...................................................88

        9.03   Lenders’ Obligations Several.............................................88

        9.04   Assignments; Participations..............................................88

        9.05   Delays and Waivers.......................................................90

        9.06   Costs and Expenses.......................................................91

        9.07   Telephone Indemnity......................................................91

        9.08   Other Indemnity..........................................................91

        9.09   Choice of Law............................................................93

        9.10   Personal Jurisdiction; Waiver............................................93

        9.11   Service of Process.......................................................93

        9.12   Waiver of Jury Trial.....................................................93

        9.13   Section Headings.........................................................94

        9.14   Severability.............................................................94

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        9.15   Counterparts.............................................................94

        9.16   No Reliance by Lenders...................................................94

        9.17   Entire Agreement.........................................................94

        9.18   Confidentiality..........................................................94

        9.19   Receivables Program Savings Clause.......................................95

        9.20   Existing Credit Agreement to Remain in Full Force and Effect.............95

ARTICLE X. RELATION OF LENDERS..........................................................95

        10.01   Agent and Collateral Agent; Enforcement of Guaranties...................95

        10.02   Pro Rata Sharing........................................................96

        10.03   Set-off.................................................................96

        10.04   Liability of Agent......................................................97

        10.05   Reliance by Agent.......................................................98

        10.06   Approvals; Amendments...................................................98

        10.07   Notice of Default.......................................................99

        10.08   Credit Decision.........................................................99

        10.09   Lenders’ Indemnity.....................................................100

        10.10   Agent as Lender........................................................100

        10.11   Notice of Transfer.....................................................100

        10.12   Resignation of Agent...................................................101

        10.13   Collateral Matters.....................................................101

        10.14   Collateral Agent.......................................................104

        10.15   Documentation Agent and Syndication Agent..............................104

        10.16   Exiting Lenders........................................................104

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SCHEDULES

        Schedule 1.01       Existing Liens
        Schedule 1.01(b)    [Reserved]
        Schedule 1.01(c)    Unrestricted Subsidiaries
        Schedule 2.19(b)    Letters of Credit
        Schedule 3.05       Existing Mortgage Collateral Properties
        Schedule 4.01(l)    Closing Date Non-Mortgaged Properties
        Schedule 5.09       Litigation
        Schedule 5.14       ERISA Matters
        Schedule 5.16       Restrictions on Subsidiaries
        Schedule 5.18       Environmental Matters
        Schedule 5.20       Trademark Disputes
        Schedule 6.02(a)    Additional Disclosed Litigation
        Schedule 6.17       Additional Mortgaged Properties
        Schedule 7.02(b)    Existing Debt
        Schedule 7.09(a)    Prepayable Debt
        Schedule 9.01       Addresses for Notices

EXHIBITS

        Exhibit A.          Form of Guarantee and Collateral Agreement
        Exhibit B.          Form of Collateral Agency Agreement
        Exhibit C.          List of Commitment Percentages
        Exhibit D.          List of Subsidiaries
        Exhibit E.          Form of Operating Bank Guaranty
        Exhibit F.          List of Real Estate Documents
        Exhibit G.          [Reserved]
        Exhibit H.          Form of Note
        Exhibit I.          [Reserved]
        Exhibit J.          Form of Opinions of Borrower’s Counsel
        Exhibit K.          Form of Opinion of General Counsel
        Exhibit L.          [Reserved]
        Exhibit M.          Form of Assignment and Acceptance
        Exhibit N           Forms of Subordination Agreement

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CREDIT AGREEMENT

                     This Credit Agreement, dated as of November 18, 1997, as
amended and restated as of July 2, 2003 (the “Credit Agreement”), among BALLY
TOTAL FITNESS HOLDING CORPORATION, a Delaware corporation (“Borrower”), the
banks and other financial institutions named on the signature pages of this
Agreement (collectively, “Lenders” and individually, a “Lender”), JPMORGAN CHASE
BANK (formerly known as THE CHASE MANHATTAN BANK), as agent for Lenders (in such
capacity, “Agent”), DEUTSCHE BANK TRUST COMPANY AMERICAS, as syndication agent
(in such capacity, the “Syndication Agent”), and LASALLE BANK NATIONAL
ASSOCIATION, as documentation agent (in such capacity, the “Documentation
Agent”), is entered into with respect to the following:

                     1. The Borrower, certain of the Lenders, certain other
lenders and the Agent are parties to the Credit Agreement dated as of November
18, 1997, as amended and restated as of November 10, 1999, and as further
amended and restated as of December 21, 2001, as amended (the “Existing Credit
Agreement”).

                     2. The Borrower has requested that the Existing Credit
Agreement be amended and restated (a) to terminate the Term Loan Facility (as
defined in the Existing Credit Agreement), (b) to extend the Revolving Credit
Termination Date, (c) to permit the issuance by the Borrower of $200,000,000 of
its senior unsecured notes (defined herein as the “Senior Unsecured Notes“), (d)
to amend certain covenants and (e) otherwise to amend the Existing Credit
Agreement and restate it in its entirety as more fully set forth herein.

                     3. Certain parties to the Existing Credit Agreement and the
other Credit Parties (as herein defined) desire to continue in full force and
effect all of the indebtedness, guarantees, liens and security interests created
under the Existing Credit Agreement and all guarantee and collateral documents
delivered in connection therewith under this Agreement and the Credit Documents.

                     4. The Lenders and the Agent are willing to so amend and
restate the Existing Credit Agreement, and the Lenders not now parties to the
Existing Credit Agreement are willing to become parties hereto, but only on the
terms and subject to the conditions set forth herein;

                     In consideration of the premises and other valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree that on the Closing Date (as hereinafter defined)
the Existing Credit Agreement shall be amended and restated in its entirety as
follows:

ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMINOLOGY

                     1.01   Certain Definitions. In addition to the terms
defined elsewhere in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):

 

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         “Advance” means a borrowing under the Revolving Credit pursuant to
Section 2.01 or 2.19(c)(ii) hereof; collectively, the “Advances”.

         “Affiliate” of any Person means any other Person directly or indirectly
Controlling or Controlled by or under direct or indirect common Control with
such Person.

         “Agreement” shall mean the Existing Credit Agreement, as amended and
restated by this Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.

         “Applicable Margin” means, at any time, with respect to Advances and
Letter of Credit fees, the rate per annum based on the Total Leverage Ratio of
the Borrower, set forth in the following matrix which shall apply to each Type
of Advance and the Letter of Credit fee payable pursuant to Section 2.14(a)(i),
as applicable:

               |====================|===============|================================|
               |   Total Leverage   |   Eurodollar  |    Reference    |  Letter of   |
               |       Ratio        |     Margin    |   Rate Margin   | Credit Rate  |
               |====================|===============|=================|==============|
               |     x > 3.75       |      3.75%    |      2.75%      |      2.75%   |
               |--------------------|---------------|-----------------|--------------|
               |  2.75 < x < 3.75   |      3.50%    |      2.50%      |      2.50%   |
               |--------------------|---------------|-----------------|--------------|
               |     x < 2.75       |      3.25%    |      2.25%      |      2.25%   |
               |=====================================================================|

Changes in the Applicable Margin resulting from changes in the Total Leverage
Ratio shall become effective on the date (the “Adjustment Date”) on which
financial statements are delivered to the Lenders pursuant to Section 6.03 (but
in any event not later than the 50th day after the end of each of the first
three quarterly periods of each fiscal year or the 105th day after the end of
each fiscal year, as the case may be) and shall remain in effect until the next
change to be effected pursuant to this paragraph. Each determination of the
Total Leverage Ratio pursuant to this definition shall be made with respect to
the period of four consecutive fiscal quarters of the Borrower ending at the end
of the period covered by the relevant financial statements. For the period from
the Closing Date to the date financial statements are delivered pursuant to
Section 6.03(b) with respect to the fiscal quarter ending September 30, 2003,
the Total Leverage Ratio shall be presumed to be greater than or equal to 3.75
to 1 for purposes of this definition.

         “Approved Fund” means any Person (other than a natural person) that is
engaged in making, purchasing, holding or investing in bank loans and similar
extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.

         “Banking Day” means a day other than Saturday or Sunday on which (i)
banks are open for business in New York City and (ii) for any calculation,
determination or other matter with respect to Eurodollar Rate Advances, dealings
in foreign currencies and exchange between banks may be carried on in London,
England.

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         “Borrowing Date” means, with respect to each Advance, the date such
Advance is made.

         “BTFC” means Bally Total Fitness Corporation, a Delaware corporation
(formerly named Health & Tennis Corporation of America).

         “Capital Expenditures” for any period means, with respect to the
Borrower and its Subsidiaries, the amount identified on the Borrower’s
Consolidated Statement of Cash Flows (adjusted to remove expenditures of
Unrestricted Subsidiaries) on the line titled “Cash Used in Investing
Activities” for such period. Notwithstanding the foregoing, Capital
Expenditures, regardless of how reported in the Borrower’s Consolidated
Statement of Cash Flows, shall not include expenditures funded by proceeds from
the issuance of Capital Stock if such Capital Stock is issued within 90 days
before or after the making of such expenditures.

         “Capitalized Lease” means any lease which is or should be, in
accordance with GAAP, capitalized on the balance sheet of the lessee.

         “Capital Stock” of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person’s
capital stock or other equity interests whether now outstanding or issued after
the Closing Date.

         “Cash Equivalents” means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than 12 months from the date of acquisition, (ii) Dollar denominated time
deposits, certificates of deposit and bankers acceptances of any Lender or any
bank whose short-term commercial paper rating from Standard & Poor’s Ratings
Group, a division of McGraw-Hill (“S&P”), is at least A-1 or the equivalent
thereof or from Moody’s Investors Service, Inc. (“Moody’s”) is at least P-1 or
the equivalent thereof (any such Lender, an “Approved Lender”), with maturities
of not more than 12 months from the date of acquisition, (iii) repurchase
obligations with a term of not more than seven days for underlying securities of
the type described in clause (i) entered into with an Approved Lender, (iv)
commercial paper issued by, or guaranteed by, any Approved Lender or by the
parent company of any Approved Lender or commercial paper issued by, or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or
the equivalent thereof by Moody’s, or issued by, or guaranteed by, any
industrial company with a long term unsecured debt rating of at least A or A2,
or the equivalent of each thereof, from S&P or Moody’s, respectively, and in
each case maturing within 12 months after the date of acquisition and (v) any
fund or funds making substantially all of their investments in investments of
the type described in clauses (i) through (iv) above.

         “Change of Control Event” means, without limitation, (a) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group (within the meaning of the Securities Exchange Act of 1934
and the rules of the

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Securities and Exchange Commission thereunder as in effect on the date hereof),
of shares representing more than 30% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of the Borrower; (b)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of the Borrower by Persons who were neither (i) nominated by the board
of directors of the Borrower nor (ii) appointed by directors so nominated; (c)
the acquisition of direct or indirect Control of the Borrower by any Person or
group; or (d) a “change of control” (however denominated) shall occur with
respect to the Receivables Program, any Subordinated Debt or the Senior
Unsecured Notes.

         “Closing Date” means the date on which all of the conditions in Section
4.01 are satisfied.

         “Closing Date Non-Mortgaged Properties” has the meaning set forth in
Section 4.01(l).

         “Code” means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute.

         “Collateral” means all real, personal and mixed property and interests
in property and proceeds thereof now owned or hereafter acquired by Borrower or
any Guarantor and their respective Subsidiaries in or upon which a security
interest, pledge, lien or mortgage is, or is purported to be, granted to the
Lenders or the Collateral Agent pursuant to the Collateral Documents for the
benefit of the Secured Creditors whether under this Agreement or under any other
documents, instruments or writings executed by any such Persons in connection
with Advances or other credit extensions made hereunder and delivered to the
Collateral Agent or the Lenders.

                 “Collateral Agency Agreement” means the Collateral Agency
Agreement among the Collateral Agent and the Secured Creditors in the form of
Exhibit B hereto, as amended, supplemented or otherwise modified.

         “Collateral Agent” means JPMorgan Chase Bank or any successor agent
thereto acting as Collateral Agent for the Secured Creditors pursuant to the
Collateral Agency Agreement.

         “Collateral Documents” means, collectively, (i) the Guarantee and
Collateral Agreement, the Collateral Agency Agreement, the Mortgages, the
Mortgage Amendments, the Operating Bank Guaranty and all other security
agreements, mortgages, deeds of trust, patent and trademark assignments,
certificates of title, lease assignments, guarantees and other agreements
between Borrower or any Guarantor and their respective Subsidiaries and any of
the Lenders or the Collateral Agent for the benefit of the Lenders or the
Secured Creditors, now or hereafter delivered to any of the Lenders or the
Collateral Agent pursuant to or in connection with the transactions contemplated
hereby, and all financing statements (or comparable documents) now or hereafter
filed in accordance with the Uniform Commercial Code (or comparable law) against
Borrower or any Guarantor or any Subsidiaries in favor of any of the Lenders or

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the Collateral Agent for the benefit of the Lenders or the Secured Creditors and
(ii) any amendments, supplements, modifications, renewals, replacements,
consolidations, substitutions and extensions of any of the foregoing.

         “Commitment” means, as to any Lender, such Lender’s Revolving Credit
Commitment and L/C Commitment; collectively, as to all the Lenders, the
“Commitments”.

         “Commitment Percentage” means, as to each Lender, the percentage set
forth opposite such Lender’s name under the column entitled “Commitment
Percentage” on Exhibit C hereto or, if such Lender shall have acquired or
disposed of any interest in the Revolving Credit pursuant to Section 9.04(a), on
the applicable instrument of assignment, which is the percentage equivalent of a
fraction, the numerator of which is such Lender’s Revolving Credit Commitment
and the denominator of which is the Revolving Credit Commitment Amount (or, if
the Revolving Credit Commitments have been terminated, the sum of its
outstanding Advances, participating interests in Letters of Credit and
unreimbursed drawings in respect of Letters of Credit as a percentage of the
aggregate amount of outstanding Advances, participating interests in Letters of
Credit and unreimbursed drawings in respect of Letters of Credit).

         “Commitment Reductions” shall mean the amount of the permanent
reductions of the Revolving Credit Commitment Amount resulting from the
application of Sections 2.11 or any other provision contained herein.

         “Conduit Lender” means any special purpose corporation organized and
administered by any Lender for the purpose of making Advances otherwise required
to be made by such Lender and designated by such Lender in a written instrument;
provided, that the designation by any Lender of a Conduit Lender shall not
relieve the designating Lender of any of its obligations to make an Advance
under this Agreement if, for any reason, its Conduit Lender fails to make such
Advance, and the designating Lender (and not the Conduit Lender) shall have the
sole right and responsibility to deliver all consents and waivers required or
requested under this Agreement with respect to its Conduit Lender, and provided,
further, that no Conduit Lender shall (a) be entitled to receive any greater
amount pursuant to Section 2.16, 2.17, 2.18 or 9.06 than the designating Lender
would have been entitled to receive in respect of the extensions of credit made
by such Conduit Lender or (b) be deemed to have any Commitment.

         “Confirmation and Consent” means, the Guarantees and Collateral
Documents Confirmation dated as of July 2, 2003, to the Guarantee and Collateral
Agreement, the Operating Bank Guaranty and the Mortgages.

         “Consolidated” or “consolidated” means (i) when used herein with
reference to financial statements, ratios, assets, liabilities, operating
accounts or operations of Borrower and its Subsidiaries, that any calculations
have been made by combining the assets and liabilities of Borrower and its
Subsidiaries after eliminating all intercompany items; and (ii) when used herein
with reference to a Subsidiary, a Subsidiary the financial statements of which
have been presented together with those of Borrower.

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         “Consolidated Adjusted EBITDA” means GAAP EBITDA of the Borrower and
its Subsidiaries, calculated on a trailing 12-month basis in accordance with
GAAP as in effect from time to time, adding back (to the extent deducted in
calculating GAAP EBITDA) for all New Clubs, in the aggregate, the actual GAAP
EBITDA loss incurred by such New Clubs during a trailing 12-month period ending
on the date of determination (the “New Clubs Adjustment”), provided that such
New Clubs Adjustment may not exceed $3,000,000 during any such twelve (12) month
period. For purposes of calculating the Total Leverage Ratio and Senior Secured
Leverage Ratio, if the Borrower or any Subsidiary has acquired any Person, line
of business or health and fitness club within any applicable trailing 12-month
period, Consolidated Adjusted EBITDA for such period shall be calculated on a
pro forma basis (and adjusted for immediately realizable cost savings) as if
such acquisition occurred on the first day of such period, as set forth in a
certificate of a duly authorized financial officer of the Borrower.

         “Consolidated Interest Expense” means, for any period, the aggregate
amount of interest that, in accordance with GAAP, would be set forth opposite
the caption “interest expense” or any like caption on a consolidated income
statement of the Borrower and its Subsidiaries (including, but not limited to,
imputed interest on Capitalized Leases, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers’ acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other non-cash
interest expense (other than previously capitalized interest amortized to cost
of sales)) plus, without duplication, all interest accrued or paid by the
Borrower or any of its Subsidiaries under any Guaranty of Debt (including a
Guaranty of principal, interest or any combination thereof) of any Person for
such period, in each case determined on a consolidated basis in accordance with
GAAP.

         “Consolidated Net Income” of the Borrower means, for any period, the
consolidated net income (or loss) of the Borrower and its Subsidiaries for such
period as determined in accordance with GAAP, adjusted, to the extent included
in calculating such net income (or loss), by excluding (i) all extraordinary
gains or losses (less all fees and expenses relating thereto), (ii) the portion
of net income (or loss) of the Borrower and its Subsidiaries allocable to
minority interests in unconsolidated Persons to the extent that cash dividends
or distributions have not actually been received by the Borrower or one of its
Subsidiaries, (iii) net income (or loss) of any Person combined with the
Borrower or any of its subsidiaries on a “pooling of interests” basis
attributable to any period prior to the date of combination, (iv) any gain or
loss, net of taxes, realized upon the termination of any Plan, (v) any gains or
losses (less all fees and expenses relating thereto) in respect of dispositions
of assets other than in the ordinary course of business, and (vi) the net income
of any Subsidiary to the extent that the declaration of the dividends or similar
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Subsidiary or its stockholders.

6

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         “Consolidated Total Debt” means for the Borrower for any period, the
sum (without duplication) of (i) all indebtedness of the Borrower and its
Subsidiaries for borrowed money, including, without limitation, reimbursement
obligations with respect to letters of credit, whether or not matured or whether
or not such letters of credit have been drawn (excluding reimbursement
obligations to the extent that any letter of credit has been cash collateralized
on terms satisfactory to the issuer of such letter of credit), (ii) indebtedness
under the Receivables Program Documents and Receivables Financing Transactions,
whether or not constituting Debt or indebtedness under GAAP, (iii) all
obligations of the Borrower and its Subsidiaries with respect to Capitalized
Leases determined in accordance with GAAP, (iv) all Guaranties (without
duplication of any amount of Debt included in another clause of this definition)
made by the Borrower and its Subsidiaries, (v) all obligations of the Borrower
and its Subsidiaries representing the deferred purchase price of real or
personal property or of services (other than current trade liabilities incurred
in the ordinary course of business and payable in accordance with customary
practices), and (vi) all indebtedness arising under any Interest Expense Hedging
Arrangement of the Borrower and its Subsidiaries (excluding to the extent
otherwise included in (i), (a) any Interest Expense Hedging Arrangement with
respect to the Receivables Program and (b) up to $25,000,000 of recourse
indebtedness under the Credit Card Program Agreement), in each case calculated
on a consolidated basis.

         “Contract Receivables” means, during any period of determination, gross
accounts receivable of Borrower and its Subsidiaries created from the sale to
customers, on an installment payment basis, of membership contracts for the use
of fitness or exercise centers, other than Receivables Program Receivables.

         “Control” means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

         “Credit Card Program Agreement” means the Credit Card Program Agreement
dated December 21, 1995 between the Borrower, Renaissance Bankcard Services Inc.
and Orchard Federal Savings Bank (or a substitute agreement with a substitute
provider), including the attachments thereto.

         “Credit Agreement” has the meaning assigned in the recitals hereto.

         “Credit Documents” means, collectively, this Agreement, the Notes and
the Collateral Documents.

         “Credit Parties” means the Borrower and each of its Subsidiaries which
is a party to a Credit Document.

         “Debt” means for any Person (i) all indebtedness of such Person for
borrowed money (including, without limitation, reimbursement and all other
obligations with respect to letters of credit, whether or not matured), (ii) all
obligations of such Person representing the deferred purchase price of real or
personal property or of services (other

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than current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (iii) the amount of all
obligations of such Person under Capitalized Leases determined in accordance
with GAAP, (iv) all indebtedness arising under any Interest Expense Hedging
Arrangement, and (v) without duplication of any amount of Debt included in
clause (i), (ii), (iii) or (iv) of this definition, all Guaranties made by such
Person. Notwithstanding the foregoing, “Debt” shall not include up to
$25,000,000 of recourse indebtedness under the Credit Card Program Agreement.

         “Default” shall mean an event which with the giving of notice, passage
of time or both would constitute an Event of Default.

         “Demand Deposit Accounts” means the demand deposit accounts listed on
Annex 1 to the Operating Bank Guaranty maintained by Borrower and/or any of its
Subsidiaries with the respective Lenders identified on such Annex, and other
demand deposit accounts established by Borrower or any of its Subsidiaries with
any Lender after the date hereof which shall be promptly identified by such
Lender in writing to Agent, Borrower and the Guarantors.

         “Designated Senior Indebtedness” means Designated Senior Indebtedness
of Borrower as defined in each of the 1997 Indenture and the 1998 Indenture.

         “Dollars” and “$” mean United States dollars.

         “Domestic Subsidiary” means any Subsidiary of the Borrower organized
under the laws of any jurisdiction within the United States.

         “Early Termination Date” means April 15, 2007 if the Subordinated Notes
have not been repaid in full by that date on terms reasonably satisfactory to
the Lenders or pursuant to a Permitted Subordinated Notes Refinancing.

         “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.

         “Eurocurrency Reserve Requirements” means, for any day as applied to a
Eurodollar Rate Advance, the aggregate (without duplication) of the rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal Reserve
System or other governmental authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for eurocurrency funding (currently
referred to as “Eurocurrency Liabilities” in Regulation D of such Board)
maintained by a member bank of such System.

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         “Eurodollar Base Rate”: with respect to each day during each Interest
Period pertaining to a Eurodollar Rate Advance, the rate per annum determined on
the basis of the rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period appearing on
Page 3750 of the Dow Jones Markets screen as of 11:00 A.M., London time, two
Business Days prior to the beginning of such Interest Period. In the event that
such rate does not appear on Page 3750 of the Dow Jones Markets screen (or
otherwise on such screen), the “Eurodollar Base Rate” shall be determined by
reference to such other comparable publicly available service for displaying
eurodollar rates as may be selected by the Agent or, in the absence of such
availability, by reference to the rate at which the Agent is offered Dollar
deposits at or about 11:00 A.M., New York City time, two Banking Days prior to
the beginning of such Interest Period in the interbank eurodollar market where
its eurodollar and foreign currency and exchange operations are then being
conducted for delivery on the first day of such Interest Period for the number
of days comprised therein.

         “Eurodollar Rate” means, with respect to each day during each Interest
Period pertaining to a Eurodollar Rate Advance, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the nearest
1/100th of 1%):

  Eurodollar Base Rate    

--------------------------------------------------------------------------------

    1.00 – Eurocurrency Reserve Requirements  

         “Eurodollar Rate Advances” means Advances the rate of interest
applicable to which is based upon the Eurodollar Rate.

         “Event of Default” means any event listed in Article VIII.

         “Exchangeable Transferor Certificate” shall have the meaning attributed
to such term in the Pooling & Servicing Agreement.

         “Existing Credit Agreement” has the meaning set forth in the recitals
hereto.

         “Existing Mortgage Collateral Properties” has the meaning set forth in
Section 3.05.

         “Existing Owned Properties” has the meaning set forth in Section
7.03(b).

         “Fair Market Value” means, with respect to any asset or property, the
sale value that would be obtained in an arm’s-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.

         “Federal Funds Rate” means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Banking Day, for the next preceding Banking Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Banking Day, the average of the

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quotations for such day on such transactions received by the Agent from three
(3) Federal funds brokers of recognized standing selected by it.

         “Finance Subsidiary” means (i) Funding Corp. and (ii) any wholly-owned
special purpose Subsidiary created by the Borrower whose sole activity is
engaging in Receivables Financing Transactions.

         “Foreign Subsidiaries” means (x) Bally Matrix Fitness Centre Ltd., a
corporation organized under the laws of Ontario, Canada, and (y) any other
Subsidiary of the Borrower organized under the laws of any jurisdiction outside
the United States of America, which is created or acquired in accordance with
the terms of this Agreement.

         “Franchise Program” means a program under which the Borrower or its
Subsidiaries grant franchises to third parties which require franchisees, among
other things, to pay fees to the Borrower and/or its Subsidiaries, make use of
certain collection and administrative services of the Borrower and its
Subsidiaries and contribute to a national advertising program and which entitle
the franchisees, among other things, to receive training from the Borrower and
its Subsidiaries, to have nonexclusive licenses to use on a limited basis
certain service marks, trademarks and trade names and other intellectual
property of or licensed to the Borrower and its Subsidiaries, and to sell
memberships to use facilities of the franchisee and the Borrower and its
Subsidiaries. A Franchise Program may include the conversion of certain
facilities owned by the Borrower or its Subsidiaries to franchised facilities,
so long as such conversions are consummated on terms and conditions permitted
under this Agreement.

         “Free Cash Flow” means for any period the difference between, as
reported on the Borrower’s Consolidated Statement of Cash Flows (adjusted to
remove Unrestricted Subsidiaries) for such period, “Cash provided by operating
activities” and “Cash used in investing activities”.

         “Funding Corp.” means H&T Receivable Funding Corporation, a Delaware
corporation and a wholly-owned Subsidiary of BTFC.

         “GAAP” means generally accepted accounting principles in the United
States of America in effect from time to time.

         “GAAP EBITDA” means with respect to the Borrower and its Subsidiaries
on a consolidated basis, without duplication, for any period of determination,
(i) Consolidated Net Income (loss), plus, to the extent deducted in determining
Consolidated Net Income (loss), (ii) provision for taxes, (iii) Consolidated
Interest Expense, (iv) depreciation and amortization, all calculated in
accordance with GAAP, (v) for any period that includes the Borrower’s fourth
fiscal quarter in 2002 or the first fiscal quarter in 2003, a one-time, pre-tax
non-cash charge of up to $50,000,000 in the aggregate taken by the Borrower in
either of such quarters in connection with the adjustment to the reserve for bad
debts and cancellations, (vi) any non-cash charges solely related to stock-based
compensation; provided, that, to the extent any non-cash expense under this
clause (vi) subsequently requires any cash disbursement, such disbursement
expense will be subtracted from

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GAAP EBITDA in the applicable period, (vii) for any period that includes the
Borrower’s third fiscal quarter in 2002, the $2,500,000 non-cash portion of the
$6,500,000 one-time charge related to settlement of class-action litigation
taken in such third quarter, (viii) a one-time non-cash charge of up to
$30,000,000 to be taken by the Borrower between the Closing Date and June 30,
2004 in connection with the sale of receivables (it being agreed that if any
such non-cash charge shall subsequently become a cash charge, the amount of such
cash charge shall be deducted at such time in calculating GAAP EBITDA) and (ix)
the cumulative non-cash charge resulting from a change in accounting principles.

         “Guarantee and Collateral Agreement” means the Guarantee and Collateral
Agreement in the form of Exhibit A hereto, as amended, supplemented or otherwise
modified.

         “Guarantors” means collectively, the Subsidiaries listed on Exhibit D
hereto (other than Unrestricted Subsidiaries, Foreign Subsidiaries, Lincoln
Indemnity Company and Finance Subsidiaries) and any other Subsidiary which
hereafter becomes a Guarantor pursuant to Section 3.04 (each individually a
“Guarantor”).

         “Guaranty” means, as applied to any Debt, (i) a guaranty (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of any part or all of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn under letters of credit.

         “H&T Master Trust” means the trust created by the Pooling & Servicing
Agreement.

         “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. § 9601 et seq.
and the Hazardous Materials Transportation Act, 49 U.S.C. § 1802, all as amended
or hereafter amended; (ii) “hazardous waste”, as defined by the Resource
Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 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. § 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.

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         “Hazardous Materials Claims” has the meaning ascribed to it in Section
6.02(f).

         “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. § 9601 et seq.; the
Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 6901 et seq.; the
Clean Air Act, 42 U.S.C. § 7401 et seq.; the Clean Water Act, 33 U.S.C. § 1251
et seq.; the Occupational Safety and Health Act (“OSHA”), 29 U.S.C. § 651 et
seq.; the Toxic Substances Control Act (“TSCA”), 15 U.S.C. § 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.

         “Intangible Asset” means any asset which is treated as an intangible
asset in conformity with GAAP, including, without limitation, leasehold rights,
franchise rights, non-compete agreements, goodwill, unamortized debt discounts,
patents, patent applications, trademarks, trade names, copyrights and licenses.

         “Interest Expense Hedging Arrangement” means an interest rate swap, cap
or collar agreement or similar arrangement entered into with the intent of
protecting the Borrower or a Guarantor against fluctuations in interest rates or
the exchange of notional interest obligations, either generally or under
specific contingencies.

         “Interest Payment Date” means (a) as to any Reference Rate Advance, the
last Banking Day of each March, June, September and December, (b) as to any
Eurodollar Rate Advance having an Interest Period of three months or less, the
last day of such Interest Period, (c) as to any Eurodollar Rate Advance having
an Interest Period longer than three months, (i) each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period and
(ii) the last day of such Interest Period and (d) as to any Advance, in addition
to any applicable dates under clauses (a), (b) and (c) above, the date of any
repayment or prepayment (except for any prepayment pursuant to Section 2.12 of
any Advance that is a Reference Rate Advance) made in respect thereof.

         “Interest Period” means with respect to any Eurodollar Rate Advance:

         (a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Rate Advance and
ending one, two, three or six months thereafter, as selected by the Borrower in
its notice of borrowing or notice of conversion, as the case may be, given with
respect thereto; and

         (b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Rate Advance and ending
one, two, three or six months thereafter, as selected by the Borrower by
irrevocable notice to the Agent not less than three Banking Days prior to the
last day of the then current Interest Period with respect thereto;

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provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:

         (1) if any Interest Period pertaining to a Eurodollar Rate Advance
would otherwise end on a day that is not a Banking Day, such Interest Period
shall be extended to the next succeeding Banking Day unless the result of such
extension would be to carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately preceding Banking
Day;

         (2) any Interest Period for any Advance that would otherwise extend
beyond the Revolving Credit Termination Date shall end on the Revolving Credit
Termination Date;

         (3) [reserved];

         (4) any Interest Period pertaining to a Eurodollar Rate Advance that
begins on the last Banking Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Banking Day of a calendar month; and

         (5) the Borrower shall select Interest Periods in such a way so that no
Eurodollar Rate Advances will be required to be repaid prior to the last day of
an Interest Period therefor.

         “Investment” means any direct or indirect loans, advances, capital
contributions or transfers of assets, and any direct or indirect purchases and
other acquisitions of, or a beneficial interest in, any capital stock or other
securities; provided, however, that the allocation of corporate overhead to
Foreign Subsidiaries shall not constitute an “Investment”. The amount of any
Investment not consisting of cash shall equal the Fair Market Value of such
Investment at the time it is made.

         “Issuing Lender” means JPMorgan Chase Bank and other Lenders having
Revolving Credit Commitments acceptable to the Agent and the Borrower.

         “JPMorgan Chase Bank” means JPMorgan Chase Bank, a New York banking
corporation.

         “Lending Branch” means with respect to each Lender the branches or
offices specified on the signature pages hereto or such other of its branches or
offices as such Lender may from time to time designate in writing to Agent and
Borrower.

         “Lenders” shall have the meaning set forth in the recitals hereto;
provided, that unless the context otherwise requires, each reference herein to
the Lenders shall be deemed to include any Conduit Lender.

         “Letter of Credit” means any letter of credit issued by an Issuing
Lender pursuant to Section 2.19.

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         “L/C Commitments” means the commitments of Lenders to issue or
participate in Letters of Credit and to make L/C Advances pursuant to Section
2.19 in the aggregate maximum amount specified in Section 2.19(a)(i), as such
amount may be reduced or terminated from time to time hereunder.

         “L/C Commitment Amount” means, at any time, the difference between (i)
the lesser of (a) the Revolving Credit Commitment Amount at such time and (b)
$30,000,000 and (ii) any L/C Commitment Reductions.

         “L/C Commitment Reductions” means the amount of the permanent
reductions of the L/C Commitment Amount resulting from the application of
Section 2.11 or any other provision contained herein.

         “Lien” means a mortgage, security interest, pledge, deed of trust,
encumbrance, lien, option, tax lien, mechanics’ lien, materialmen’s lien or
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code).

         “Majority Lenders” means at any time Lenders holding more than 51% of
the Revolving Credit Commitments then in effect or, if the Revolving Credit
Commitments have been terminated, the Advances and participating interests in
Letters of Credit and unreimbursed drawings in respect of Letters of Credit then
outstanding.

         “Margin Regulations” means Regulations T, U and X of the Board of
Governors of the Federal Reserve System, as amended from time to time.

         “Material Adverse Effect” means a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as whole, (b) the validity or
enforceability of (i) this Agreement, any of the Notes or any of the other
Credit Documents or (ii) the rights or remedies of the Agent and the Lenders
hereunder or thereunder or (c) the ability of the Borrower and its Subsidiaries
taken as a whole to perform their respective obligations under the Credit
Documents.

         “Mortgage Amendment” means each of the Amendments to Mortgages in the
form requested by the Agent, to be executed by the Borrower or the various
Guarantors in order to continue for the benefit of the Collateral Agent, on
behalf of the Secured Creditors, the Liens created by the Mortgages delivered
under the Existing Credit Agreement.

         “Mortgages” means all fee mortgages, leasehold mortgages, assignments
of leases, mortgage deeds, deeds of trust, deeds to secure debt, security
agreements, and other similar instruments described on Exhibit F attached
hereto, executed or to be executed by the Borrower or the various Guarantors
which shall provide the Collateral Agent, for the benefit of the Secured
Creditors, a Lien on or other interest in any portion of any real property in
which the Borrower or any Guarantor owns an interest.

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         “Multiemployer Plan” has the meaning ascribed to it in Section 3(37) of
ERISA.

         “Net Cash Proceeds” means (a) in connection with any issuance or
incurrence of Debt (except any incurrence of Debt permitted under Section 7.02
(excluding Section 7.02(e), Section 7.09(c), Section 7.09(d) and Section
7.09(e)), the cash proceeds received from such issuance or incurrence, net of
attorneys’ fees, investment banking fees, accountants’ fees, underwriting
discounts and commissions and other customary fees and expenses actually
incurred in connection therewith and (b) in connection with the sale, lease,
assignment or other disposition of any asset (other than sales by the Borrower
or a Subsidiary of the Borrower of common stock (or common stock equivalents) of
the Borrower), cash proceeds (including any cash received by way of deferred
payments, purchase price adjustments or otherwise, but only as and when so
received) received by the Borrower or any of its Subsidiaries from the sale,
lease, assignment or other disposition (but excluding any such disposition
permitted by Sections 7.08(a), (b), (c), (e) or (f) or the proviso to Section
7.08(d), and excluding any such proceeds to the extent they constitute
Reinvestment Proceeds) of any asset or property of such Person or any insurance
or condemnation awards net of (i) the reasonable and customary costs directly
incurred in connection with such transaction, (ii) taxes actually paid or in
good faith estimated to be payable as a result thereof and (iii) amounts applied
to the repayment of other Debt secured by a Permitted Lien on the asset disposed
of. If in determining “Net Cash Proceeds”, amounts are deducted for estimated
taxes payable, and such amounts are not actually paid when due by the Borrower
in cash in accordance with all applicable laws, then such deducted amounts shall
constitute “Net Cash Proceeds”. Cash proceeds from the sale of uncollectible
receivables to a collection agency or similar organization pursuant to Section
7.08(g) and cash received by the Borrower or its Subsidiaries related to
membership contracts receivable originated for the account of third parties
and/or serviced by third parties shall not constitute “Net Cash Proceeds”.

         “New Clubs” means, with respect to any date, the collective reference
to each health and fitness club (i) owned and operated by the Borrower or any
Subsidiary and (ii) opened within 18-months prior to such date.

         “New Ventures” means the collective reference to each Person (other
than Subsidiaries and Unrestricted Subsidiaries) in which the Borrower or any
Subsidiary makes its initial Investment after the date hereof.

         “1998 Indenture” means that certain Indenture dated as of December 16,
1998 between Borrower and U.S. Bank National Association, as trustee (and any
successor trustee thereto) relating to the 1998 Subordinated Notes.

         “1998 Subordinated Notes” has the meaning ascribed to it in the
definition of Subordinated Debt.

         “1996-1 Certificates” means the certificates executed by Funding Corp.
and authenticated by the trustee under the Pooling & Servicing Agreement
representing interests in Series 1996-1 of the H&T Master Trust.

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         “1996-1 Supplement” means the Series 1996-1 Supplement, dated as of
December 16, 1996, by and among Funding Corp., BTFC and Chase Bank of Texas,
National Association (f/k/a Texas Commerce Bank National Association), as
trustee, supplementing the Pooling & Servicing Agreement, as the same may be
amended, supplemented or otherwise modified in accordance with the terms of this
Agreement.

         “1997 Indenture” means that certain Indenture, dated as of October 7,
1997, between Borrower and First Trust National Association, as trustee (and any
successor trustee thereto) relating to the 1997 Subordinated Notes.

         “1997 Subordinated Notes” has the meaning ascribed to it in the
definition of Subordinated Debt.

         “Note” means the master promissory note of Borrower payable to the
order of a Lender in substantially the form of Exhibit H hereto; and “Notes”
means all of such Notes.

         “Obligations” means all loans, advances, debts, liabilities,
obligations, covenants and duties owing to Agent, the Collateral Agent, any
Lender, any Issuing Lender or any of them or any of their respective successors
and assigns, of any kind or nature, present or future, arising under this
Agreement or under the Notes or under any Collateral Document or under any
Interest Expense Hedging Agreement with any Lender, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening
or amendment of a letter of credit (or payment of any draft drawn thereunder),
loan, guaranty, indemnification, or in any other manner, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however acquired. The
term includes, without limitation, all interest (whether or not such interest
would be an allowed claim in a bankruptcy or similar proceeding against the
Borrower or any Guarantor), charges, expenses, fees, reasonable attorneys’ fees
and disbursements and paralegals’ fees, and any other sums chargeable to
Borrower or any Guarantor under this Agreement or any other Collateral Document.

         “Operating Bank Guaranty” means the Guaranty Agreement in the form of
Exhibit E hereto, as amended, supplemented or otherwise modified, pursuant to
which each of the Guarantors shall guaranty the payment of the Operating Bank
Obligations to the extent set forth therein.

         “Operating Bank Obligations” means, collectively at any time, up to Ten
Million Dollars ($10,000,000) in the aggregate (including, without limitation,
principal, interest, fees, costs and expenses) of the obligations of Borrower
and/or any of its Subsidiaries to one or more of the Operating Banks (including,
without limitation, JPMorgan Chase Bank in its individual capacity) at such time
under or by reason of any customary banking deposit or disbursement transaction
or service performed for Borrower or any of its Subsidiaries in connection with
the Demand Deposit Accounts.

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         “Operating Banks” means the Lenders listed on Annex 1 to the Operating
Bank Guaranty and other Lenders at which Borrower or any of its Subsidiaries may
from time to time establish Demand Deposit Accounts.

         “PBGC” means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

         “Permitted Liens” means any one or more of the following:

         (i)   Liens for taxes, assessments, governmental charges or levies
either not yet delinquent (or, if delinquent, in an aggregate amount not in
excess of $500,000) or the validity of which is being contested in good faith in
an appropriate manner diligently pursued and as to which adequate reserves for
the unpaid amount shall have been set aside in conformity with GAAP;

         (ii)   Deposits or pledges to secure the payment of, or to secure the
Borrower’s obligations with respect to letters of credit that secure the payment
of, workers’ compensation, unemployment insurance or social security or other
retirement benefits or obligations (exclusive of liens arising under ERISA), or
to secure the performance of bids, trade contracts, leases, public or statutory
obligations, surety or appeal bonds and other obligations of a like nature
incurred in the ordinary course of business;

         (iii)   Materialmen’s, mechanics’, landlords’, workmen’s, repairmen’s,
employees’ or other like liens arising in the ordinary course of business to
secure obligations not yet delinquent or being contested in good faith and as to
which adequate reserves for the unpaid amount shall have been set aside in
conformity with GAAP or as to which adequate bonds shall have been obtained;

         (iv)   Purchase money liens, purchase money security interests,
mortgages or title retention arrangements upon or in any property (real or
personal) acquired or held by Borrower or its Subsidiaries in the ordinary
course of business to secure Debt (including, without limitation, Capitalized
Leases) permitted hereunder (provided that the security agreement or conditional
sales or other title retention contract pursuant to which the Lien on such
property is created shall be entered into within 180 days (except as otherwise
permitted by Section 7.03(b)) after the purchase or substantial completion of
the construction of such property) and incurred solely for the purpose of
financing the acquisition of such property or improvements upon such property,
or renewals, extensions or refinancing thereof; provided, that any renewal,
extension or refinancing thereof shall not consist of any capitalization of
interest on the original Debt and such Liens do not extend to any property of
Borrower or any Subsidiary other than the property acquired or financed with the
original purchase money Debt;

         (v)   Other Liens, so long as the aggregate amount of all such other
Liens does not exceed at any time an aggregate amount of Two Million Dollars
($2,000,000);

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         (vi)   Other non-monetary Liens which do not have a material adverse
effect on the value or use of the property subject to such Liens;

         (vii)   Precautionary UCC filings executed by Borrower or any
Subsidiary, as lessee, in the ordinary course of business, on equipment,
leasehold improvements and furnishings;

         (viii)   Liens under the Collateral Documents;

         (ix)   Liens related to credit card processing agreements, so long as
the aggregate amount of such Liens does not exceed at any time an aggregate
amount of Five Million Dollars ($5,000,000);

         (x)   Other existing Liens listed on Schedule 1.01 (as updated pursuant
to Section 6.17);

         (xi)   Liens created after the Closing Date securing Debt of the
Borrower or any Subsidiary of the type described in clause (iii) of the
definition of “Debt”, the incurrence of which Debt is in the ordinary course of
business of the Borrower or such Subsidiary, and any renewals, extensions or
refinancings of such Debt permitted hereunder that do not consist of any
capitalization of interest on the original Debt, provided that such Liens shall
not extend to or encumber any property other than the property financed by such
Debt;

         (xii)   Liens on the Collateral securing revolving credit commitments,
term loan commitments or letter of credit commitments from other banks or
financial institutions until the Revolving Credit Termination Date permitted
under Section 7.02(e); provided that such Liens are pari passu or subordinated
to the Liens of the Collateral Agent and the Lenders hereunder and under the
Collateral Documents;

         (xiii)   (a) Liens on the Receivables Program Receivables created
pursuant to the Receivables Program Documents, and (b) Liens on the Receivables
Assets created pursuant to a Receivables Financing Transaction;

         (xiv)   in addition to Liens permitted under clause (iv) above, Liens
on the capital stock and assets of a Subsidiary acquired after the Closing Date
so long as (a) such Liens do not cover or extend to any other stock or assets of
the Borrower and its Subsidiaries and (b) the only obligations secured by such
Liens are (1) purchase money seller Debt incurred to finance the acquisition of
such stock or assets and existing Debt which was not created in contemplation of
such acquisition and is secured by a pledge of such stock and may also be
secured by a pledge of such assets (such existing Debt, “Assumed Debt”),
incurred or assumed in connection with an acquisition permitted by Section
7.01(e) in an aggregate amount not to exceed $20,000,000 at any time
outstanding, and (2) existing Debt assumed in connection with an acquisition
permitted by Section 7.01(e) which was not created in contemplation of such
acquisition and is secured by a pledge of such assets (but not a pledge of such
stock).

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         “Permitted Real Estate Financing Transactions” has the meaning assigned
in Section 7.03(b).

         “Permitted Subordinated Notes Refinancing” means the repayment in full
of the Subordinated Notes from the proceeds of common equity of the Borrower or
of other Subordinated Debt of the Borrower requiring no principal payments on or
prior to December 31, 2008, which, in each case, is issued contemporaneously
with the repayment of the Subordinated Notes and, in the case of an issuance of
Subordinated Debt, on terms reasonably satisfactory to the Majority Lenders.

         “Person” means an individual, a corporation, a partnership, limited
liability company, a joint venture, an association, a trust or any other entity
or organization, including a governmental or political subdivision or an agent
or instrumentality thereof.

         “Plan” means, 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.

         “Pooling & Servicing Agreement” means the Pooling & Servicing
Agreement, dated as of June 26, 1995, as amended and restated by the Amended and
Restated Pooling and Servicing Agreement dated as of December 16, 1996, among
Funding Corp., BTFC, and Chase Bank of Texas, National Association (f/k/a Texas
Commerce Bank National Association), as trustee, as the same may be amended,
supplemented or otherwise modified in accordance with the terms of this
Agreement.

         “Properties” means all real properties owned in fee by Borrower or its
Subsidiaries and all real properties in which Borrower or its Subsidiaries hold
a leasehold interest.

         “Purchase Agreement” means the Purchase Agreement, dated as of June 26,
1995, as amended and restated by the Amended and Restated Purchase Agreement
dated as of December 16, 1996, between Funding Corp. and BTFC, as the same may
be amended, supplemented or otherwise modified in accordance with the terms of
this Agreement.

         “Real Estate Financing Subsidiary” has the meaning assigned in Section
7.03(b).

         “Receivables Assets” means property of BTFC and its Domestic
Subsidiaries of the type described in clauses (a), (b) and (c) of the definition
of “Receivables Program Receivables” sold in a Receivables Financing
Transaction; provided that any such property shall automatically cease to
constitute “Receivables Assets” if any such property is returned to BTFC or a
Subsidiary in accordance with such Receivables Financing Transaction or is not
subject to a Lien in connection with such Receivables Financing Transaction.

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         “Receivables Financing Transaction” means any sale by BTFC or a
Domestic Subsidiary of Receivables Assets to a Finance Subsidiary intended to be
a true sale transaction and the corresponding sale or pledge of such Receivables
Assets (or an interest therein) by the Finance Subsidiary (including increases
in the Receivables Program Certificates); provided, however that (i) the terms,
conditions and structure (including the legal and organizational structure of
the Finance Subsidiary and the restrictions imposed on its activities) of and
the documentation incidental to any such transactions must be reasonably
acceptable to the Agent, (ii) the Borrower and its Subsidiaries provide no
credit support (other than customary limited recourse based upon the
collectibility of the Receivables Assets) or collateral (other than the
Receivables Assets so sold), and (iii) the documents governing any such
transactions do not contain any cross-defaults or cross-acceleration to Debt of
the Borrower and its Subsidiaries (other than any such provisions that are not
more restrictive than those set forth in the Receivables Program Documents). The
Borrower shall deliver a certificate to the Agent concurrently with the
effectiveness of any Receivables Financing Transaction certifying that such
Receivables Financing Transaction complies with the requirements of this
Agreement.

         “Receivables Program” means the program of sales of Receivables Program
Receivables from time to time by the Borrower and its Subsidiaries to the H&T
Master Trust pursuant to, and in accordance with the terms and conditions of,
the Receivables Program Documents.

         “Receivables Program Certificates” means, collectively, the 1996-1
Certificates, the 2001-1 Certificates and all other certificates issued pursuant
to the Pooling & Servicing Agreement or any supplement thereto representing
interests in any series of the H&T Master Trust (other than any such certificate
held by Funding Corp. or any other Subsidiary of the Borrower), as the same may
be amended, supplemented or otherwise modified in accordance with the terms of
this Agreement.

         “Receivables Program Documents” means, collectively, the Pooling &
Servicing Agreement, the 1996-1 Supplement, the 1996-1 Certificates, the 2001-1
Certificates, the 2001-1 Supplement, all other supplements to the Pooling &
Servicing Agreement (including, without limitation, any supplement relating to
any series of Refinancing Certificates), all other Receivables Program
Certificates, the Purchase Agreement, all other purchase agreements with respect
to Receivables Program Receivables entered into in connection with the Pooling &
Servicing Agreement, and all other agreements entered into in connection with
the Receivables Program, including, without limitation, any servicing agreements
entered into with any servicer of the Receivables Program Receivables, as any of
the same may be amended, supplemented or otherwise modified in accordance with
the terms of this Agreement.

         “Receivables Program Receivable” means all right, title and interest
transferred to the H&T Master Trust for the benefit of the holders of the
Receivable Program Certificates, pursuant to the Receivables Program Documents,
in (a) the right to payment of amounts in respect of the membership fee
(including any sales tax thereon) and finance charges relating thereto under an
agreement made by BTFC or another Subsidiary of

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BTFC, in the form of a written retail installment sale contract, for membership
in and the right to use facilities at, and obtain services from, one or more
health clubs owned by BTFC or another Subsidiary of BTFC, (b) prior to the
release thereof pursuant to Section 2.2(b) of the Pooling & Servicing Agreement
from the Trust Property (as defined in the Pooling & Servicing Agreement), all
amounts paid from time to time pursuant to such written retail installment sale
contract in respect of monthly dues, nsf fees, late payment fees, cancellation
fees for relocation cancellations, transfer fees to transfer a membership, lost
membership card replacement fees, or other payments not constituting Collections
or Transferor Collections (as defined in the Pooling & Servicing Agreement), and
proceeds thereof (including without limitation amounts held in accounts for the
benefit of the H&T Master Trust and investments of such amounts), and (c) such
written retail installment sale contract and any rights against the originator
or seller thereof under the Purchase Agreement or the other purchase agreements
included in the Receivables Program Documents, provided that any such right,
title or interest in any of the property identified in the foregoing clauses
(a), (b) or (c) of this definition shall automatically cease to constitute
“Receivables Program Receivables” at such time as (I) each of the following
conditions is satisfied: (i) all Receivables Program Certificates are paid in
full, (ii) the H&T Master Trust is terminated pursuant to Section 12.1 of the
Pooling & Servicing Agreement and, pursuant to Section 12.4 of the Pooling &
Servicing Agreement, the Exchangeable Transferor Certificate is surrendered to
the trustee in connection with the reconveyance by the trustee to Funding Corp.
of all right, title and interest of the H&T Master Trust in the Receivables
Program Receivables and other property of the H&T Master Trust (except for
amounts held by the trustee pursuant to Section 12.3(b) of the Pooling &
Servicing Agreement), and (iii) in accordance with GAAP, the accounts receivable
constituting Receivables Program Receivables prior to such reconveyance are upon
such reconveyance properly included within Contract Receivables on the
consolidated balance sheet of the Borrower and its consolidated Subsidiaries or
(II) such right, title or interest is returned to BTFC or a Subsidiary in
accordance with the Receivables Program Documents or is no longer subject to the
Receivables Program Documents.

         “Reference Rate” means, for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1%
and (c) the Federal Funds Effective Rate in effect on such day plus ½ of 1%. For
purposes hereof: “Prime Rate” shall mean the rate of interest per annum publicly
announced from time to time by JPMorgan Chase Bank as its prime rate (the Prime
Rate not being intended to be the lowest rate of interest charged by the
JPMorgan Chase Bank in connection with extensions of credit to debtors) in
effect at its principal office in New York City (each change in the Prime Rate
to be effective on the date such change is publicly announced); “Base CD Rate”
shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate
and (ii) a fraction, the numerator of which is one and the denominator of which
is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate;
“Three-Month Secondary CD Rate” shall mean, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding Business
Day) by the Board of Governors of the Federal Reserve System (the “Board”)
through the public information telephone line

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of the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of major
money center banks in New York City received at approximately 10:00 A.M., New
York City time, on such day (or, if such day shall not be a Business Day, on the
next preceding Business Day) by the Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it; “C/D
Assessment Rate”: for any day as applied to any Reference Rate Advance, the
annual assessment rate in effect on such day that is payable by a member of the
Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the
“FDIC”) classified as well-capitalized and within supervisory subgroup “B” (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. § 327.4 (or any successor provision) to the FDIC (or any successor) for
the FDIC’s (or such successor’s) insuring time deposits at offices of such
institution in the United States; “C/D Reserve Percentage”: for any day as
applied to any Reference Rate Advance, that percentage (expressed as a decimal)
which is in effect on such day, as prescribed by the Board, for determining the
maximum reserve requirement for a Depositary Institution (as defined in
Regulation D of the Board as in effect from time to time) in respect of new
non-personal time deposits in Dollars having a maturity of 30 days or more; and
“Federal Funds Effective Rate” shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Agent from three
federal funds brokers of recognized standing selected by it. If for any reason
the Agent shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Base CD Rate or the Federal
Funds Effective Rate, or both, for any reason, including the inability or
failure of the Agent to obtain sufficient quotations in accordance with the
terms thereof, the Reference Rate shall be determined without regard to clause
(b) or (c), or both, of the first sentence of this definition, as appropriate,
until the circumstances giving rise to such inability no longer exist. Any
change in the Reference Rate due to a change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the
effective day of such change in the Prime Rate, the Three-Month Secondary CD
Rate or the Federal Funds Effective Rate, respectively.

         “Reference Rate Advance” means an Advance the rate of interest
applicable to which is based upon the Reference Rate.

         “Refinancing Certificates” has the meaning ascribed to it in Section
7.09(d).

         “Register” has the meaning ascribed to it in Section 9.04(e).

         “Reinvestment Proceeds” means, at any time, all net proceeds of
dispositions of assets (other than sales by the Borrower or a Subsidiary of the
Borrower of common stock (or common stock equivalents) of the Borrower) by
Borrower and its Subsidiaries

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(but excluding any such dispositions permitted by Sections 7.08(a), (b), (c),
(e) or (f) or the proviso to Section 7.08(d)), to the extent, without
duplication, that (i) such net proceeds have not yet been applied to the
acquisition of properties and other assets that replace the properties and
assets that were the subject of such disposition or properties and assets that
will be used in the businesses of the Borrower or its Subsidiaries existing on
the Closing Date (or in businesses reasonably related or complementary thereto)
or to the prepayment of the Advances in accordance with Section 2.13(a), and
with respect to which less than 360 days has elapsed since the disposition
giving rise to such proceeds, or (ii) an amount equal to or greater than such
net proceeds has been applied to the acquisition of properties and other assets
that (as determined by the board of directors of the Borrower) replace the
properties and assets that were the subject of such disposition or properties
and assets that will be used in the businesses of the Borrower or its
Subsidiaries existing on the Closing Date (or in businesses reasonably related
or complementary thereto) within 180 days prior to the disposition giving rise
to such proceeds, provided that, to the extent that the Borrower and its
Subsidiaries receive in excess of $10,000,000 of Net Cash Proceeds from
dispositions (but excluding any such dispositions permitted by Sections 7.08(a),
(b), (c), (e) or (f) or the proviso to Section 7.08(d)) in any fiscal year of
the Borrower, such excess shall not be Reinvestment Proceeds.

         “Reinvestment Proceeds Amount” means, at any time, the aggregate amount
of Reinvestment Proceeds at such time.

         “Reportable Event” shall be as defined in Section 4043 of ERISA.

         “Restricted Payment” means with respect to any Person (a) any dividend
or other distribution of assets, properties, cash, rights, obligations or
securities, direct or indirect, on account of any shares of any class of the
capital stock or other equity interests of such Person; or (b) any amount paid
in redemption, retirement, repurchase, direct or indirect, of (x) any shares of
any class of capital stock or other equity interests or (y) any warrants,
options or other rights to acquire any shares of any class of capital stock or
other equity interests of such Person.

         “Revolving Credit” means the credit available to Borrower under Article
II hereof.

         “Revolving Credit Commitment” has the meaning ascribed to it in Section
2.01(a) hereof.

         “Revolving Credit Commitment Amount” means $90,000,000, less any
Revolving Credit Commitment Reductions; provided that the Borrower may request
that the Revolving Credit Commitment Amount be increased from time to time in an
aggregate amount not to exceed $25,000,000 as long as (i) any such increase (a
“Revolving Credit Commitment Amount Increase”) shall be in a minimum amount of
$5,000,000, (ii) no Default or Event of Default shall exist immediately
preceding or following any Revolving Credit Commitment Amount Increase, (iii)
any Revolving Credit Commitment Amount Increase shall be made available by
lenders (which may

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include Persons not theretofore Lenders under this Agreement), and pursuant to
technical procedures (such as non-pro rata funding and fundings during
Eurodollar interest periods), satisfactory to the Agent and (iv) the Borrower
and its Subsidiaries shall have taken such action, including executing and
delivering satisfactory amendments to the mortgages and providing satisfactory
title insurance, as the Agent may request in order to provide that each such
Revolving Credit Commitment Amount Increase and related Obligations are secured
by a perfected Lien on the Collateral having the priority existing immediately
prior to such increase. No Lender shall be required to provide any Revolving
Credit Commitment Amount Increase.

         “Revolving Credit Commitment Amount Increase” has the meaning assigned
in the definition of “Revolving Credit Commitment Amount”.

         “Revolving Credit Commitment Period” means the period from and
including the date of this Agreement to but excluding the Revolving Credit
Termination Date.

         “Revolving Credit Commitment Reductions” means the amount of the
permanent reductions of the Revolving Credit Commitment Amount resulting from
the application of Sections 2.11 or any other provision contained herein.

         “Revolving Credit Termination Date” means the earliest to occur of:

         (a) the date the Revolving Credit Commitment Amount is terminated by
the Borrower pursuant to Section 2.11 or is otherwise terminated or reduced to
zero pursuant to the terms of this Agreement, provided that all amounts payable
under this Agreement in respect of the Revolving Credit and the Notes are fully
repaid on or prior to such date,

         (b) the date the Revolving Credit hereunder is terminated or
accelerated pursuant to Article VIII,

         (c) June 30, 2008, and

         (d) the Early Termination Date.

         “Secured Creditors” means, collectively, JPMorgan Chase Bank and the
Operating Banks in their separate financial arrangements with the Borrower, and
the Agent, the Collateral Agent, the Lenders and the Issuing Lenders, each in
connection with the Secured Obligations.

         “Secured Obligations” means, collectively, the Obligations and the
Operating Bank Obligations.

         “Senior Indebtedness” means Senior Indebtedness of the Borrower as
defined in each of the 1997 Indenture and the 1998 Indenture.

         “Senior Unsecured Notes” means the Borrower’s 10.5% Senior Notes due
2011, issued under and pursuant to the Senior Unsecured Notes Indenture

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         “Senior Unsecured Notes Indenture” means that certain Indenture dated
as of July 2, 2003 among the Borrower, the Subsidiaries party thereto and U.S.
Bank National Asociation, as trustee (and any successor trustee thereto)
relating to the Senior Unsecured Notes.

         “Senior Secured Leverage Ratio” means at any time the ratio of (i)
Consolidated Total Debt less the aggregate principal amount of (x) Subordinated
Debt and (y) Senior Unsecured Notes at such time to (ii) Consolidated Adjusted
EBITDA for the period of four consecutive fiscal quarters of the Borrower most
recently ended.

         “Subordinated Debt” means (a) Borrower’s 9-7/8% Senior Subordinated
Notes due 2007, issued under and pursuant to the 1997 Indenture (“1997
Subordinated Notes”), (b) Borrower’s 9-7/8% Senior Subordinated Notes due 2007,
issued under and pursuant to the 1998 Indenture (together with any of Borrower’s
9-7/8% Senior Subordinated Notes due 2007 issued under the 1998 Indenture in
exchange therefor, the “1998 Subordinated Notes” and together with the 1997
Subordinated Notes, the “Subordinated Notes”), and (c) any other Debt of
Borrower which is subordinated to the Debt created under this Agreement and the
Notes in a manner and containing terms and provisions satisfactory to Majority
Lenders.

         “Subordinated Notes” has the meaning ascribed to it in the definition
of Subordinated Debt.

         “Subsidiary” means any corporation, association or other business
entity of which a Person owns, directly or indirectly, more than fifty percent
(50%) of the voting securities thereof or which such Person otherwise controls;
provided that, other than for purposes of Sections 5.12, 6.08 and 7.14, the
definition of “Subsidiary” shall not include any Unrestricted Subsidiary. Unless
the reference is specifically otherwise, “Subsidiary” shall refer to a
Subsidiary of Borrower.

         “Substantial Subsidiary” means any Subsidiary of Borrower with respect
to which (a) the aggregate book value of its assets, determined in accordance
with GAAP at such time, is greater than 1% of the aggregate book value of the
assets of Borrower and its Subsidiaries taken as a whole or (b) the aggregate
gross revenues of such Subsidiary, determined in accordance with GAAP for the
immediately preceding fiscal quarter, is greater than 1% of the aggregate gross
revenues of Borrower and its Subsidiaries taken as a whole, for such period.

         “Tax Allocation and Indemnity Agreement” means the Tax Allocation and
Indemnity Agreement, dated as of January 9, 1996, among Bally Entertainment
Corporation, a Delaware corporation, the Borrower and their respective direct
and indirect subsidiaries.

         “Termination Event” means (i) the institution of steps by Borrower, an
ERISA Affiliate, PBGC or any other Person under Section 4041 or 4042, as
applicable, of ERISA to terminate a Plan, (ii) the occurrence of a Reportable
Event which is a basis under Section 4042 of ERISA for PBGC to institute steps
to terminate a Plan, (iii) the

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occurrence of a contribution failure with respect to a Plan sufficient to give
rise to a lien under Section 302(f) of ERISA, (iv) the withdrawal by Borrower or
any ERISA Affiliate from a Plan as to which it is a substantial employer under
Sections 4062(e) and 4063 of ERISA or (v) the withdrawal by Borrower or any
ERISA Affiliate from a Multiemployer Plan under Section 4203 or 4205 of ERISA.

         “Total Leverage Ratio” means at any time the ratio of Consolidated
Total Debt at such time to Consolidated Adjusted EBITDA for the period of four
consecutive fiscal quarters of the Borrower most recently ended.

         “Transferee” has the meaning ascribed to it in Section 9.04(c).

         “2001-1 Certificates” means the certificates executed by Funding Corp.
and authenticated by the trustee under the Pooling & Servicing Agreement
representing interests in Series 2001-1 of the H&T Master Trust.

         “2001-1 Supplement” means the Series 2001-1 Supplement, dated as of
November 30, 2001, by and among Funding Corp., BTFC and JPMorgan Chase Bank, as
trustee, supplementing the Pooling & Servicing Agreement, as the same may be
amended, supplemented or otherwise modified in accordance with the terms of this
Agreement.

         “Type” means, as to any Advance, its nature as a Reference Rate Advance
or a Eurodollar Rate Advance.

         “Unrestricted Subsidiary” means (i) any Subsidiary of the Borrower that
exists on the Closing Date and is so designated as an Unrestricted Subsidiary on
Schedule 1.01(c), (ii) any subsidiary of the Borrower that at the time of
determination shall be an Unrestricted Subsidiary (as designated by the Board of
Directors of the Borrower, as provided below), and (iii) any subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any subsidiary of
the Borrower (including any newly acquired or newly formed subsidiary) to be an
Unrestricted Subsidiary if all of the following conditions apply: (a) neither
the Borrower nor any of its Subsidiaries provides guarantees or other credit
support for Debt or other obligations of such Unrestricted Subsidiary (including
any undertaking, agreement or instrument evidencing such Debt or obligations),
(b) such Unrestricted Subsidiary is not liable, directly or indirectly, with
respect to any Debt other than Unrestricted Subsidiary Indebtedness, (c) any
Investment by the Borrower in such Unrestricted Subsidiary made as a result of
designating such subsidiary an Unrestricted Subsidiary shall not violate the
provisions described under Section 7.01 and such Unrestricted Subsidiary is not
party to any agreement, contract, arrangement or understanding at such time with
the Borrower or any other Subsidiary of the Borrower unless the terms of any
such agreement, contract, arrangement or understanding are no less favorable to
the Borrower or such other Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Borrower or, in the event such
condition is not satisfied, the value of such agreement, contract, arrangement
or understanding to such Unrestricted Subsidiary shall be deemed an Investment,
and (d) such Unrestricted Subsidiary does not own any Capital Stock in any

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Subsidiary of the Borrower which is not simultaneously being designated an
Unrestricted Subsidiary. Any such designation by the Board of Directors shall be
evidenced to the Agent by filing with the Agent a resolution of the Board of
Directors of the Borrower giving effect to such designation and an officer’s
certificate certifying that such designation complies with the foregoing
conditions and any Investment by the Borrower in such Unrestricted Subsidiary
shall be deemed the making of an Investment on the date of designation in an
amount equal to the greater of (1) the net book value of such Investment or (2)
the Fair Market Value of such Investment as determined in good faith by the
Board of Directors (and evidenced by a resolution of the Board of Directors).
The Board of Directors may designate any Unrestricted Subsidiary as a
Subsidiary; provided (i) that, if such Unrestricted Subsidiary has any Debt,
immediately after giving effect to such designation, no Default or Event of
Default would result, and (ii) that all Debt of such Subsidiary shall be deemed
to be incurred on the date such Unrestricted Subsidiary becomes a Subsidiary.

         “Unrestricted Subsidiary Indebtedness” of any Unrestricted Subsidiary
means Debt of such Unrestricted Subsidiary (a) as to which neither the Borrower
nor any Subsidiary is directly or indirectly liable (by virtue of the Borrower
or any such Subsidiary being the primary obligor on, guarantor of, or otherwise
liable in any respect to, such Debt), and (b) which, upon the occurrence of a
default with respect thereto, does not result in, or permit any holder of any
Debt of the Borrower or any Subsidiary to declare, a default on such Debt of the
Borrower or any Subsidiary or cause the payment thereof to be accelerated or
payable prior to its stated maturity.

                     1.02   Financial Standards. All accounting terms not
expressly defined herein shall be construed, except where the context otherwise
requires or if it has otherwise been indicated herein, in accordance with GAAP.
If any changes in accounting principles are hereafter occasioned by promulgation
of rules, regulations, pronouncements or opinions by or are otherwise required
by the Securities and Exchange Commission, the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions), and any of such changes result in a
change in the method of calculation, or affect the results of such calculation,
of any of the financial covenants and the definitions relating to such financial
covenants, then the parties hereto agree to enter into and diligently pursue
negotiations in order to amend such financial covenants or terms in accordance
with Section 10.06 hereof so as to equitably reflect such changes, with the
desired result that the criteria for evaluating Borrower’s financial condition
and results of operations shall be the same after such changes as if such
changes had not been made.

                     1.03   Interpretation. References to Exhibits and Schedules
are to those to this Agreement, unless otherwise indicated. References to
agreements and other contractual instruments shall be deemed to include all
exhibits and appendices attached thereto and all amendments, supplements and
other modifications to such instruments, but only to the extent such amendments,
supplements and other modifications are not prohibited by the terms of this
Agreement; and references to Persons include their respective permitted
successors and assigns and, in the case of governmental authorities, Persons
succeeding to their respective functions and capacities.

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ARTICLE II.
THE CREDIT

                     2.01   The Revolving Credit. (a)  From time to time during
the Revolving Credit Commitment Period and subject to the terms and conditions
of this Agreement, each Lender severally agrees to lend to Borrower sums at any
one time outstanding not in excess of an aggregate amount equal to such Lender’s
Commitment Percentage of the Revolving Credit Commitment Amount (as to each
Lender; its “Revolving Credit Commitment”) provided, that no Lender shall make
any Advance if, after giving effect to such Advance, the aggregate outstanding
principal amount of all Advances plus the aggregate undrawn amount of all
Letters of Credit then outstanding plus the aggregate amount of all unreimbursed
drawings under Letters of Credit would exceed the Revolving Credit Commitment
Amount. Each Lender’s maximum obligation under the Revolving Credit at any time
is the amount derived by multiplying its Commitment Percentage by the Revolving
Credit Commitment Amount. Advances made under the Existing Credit Agreement and
outstanding and not repaid on the Closing Date shall continue outstanding under
this Agreement and be deemed to be Advances made by the Lenders pursuant to this
Agreement.

                     (b)   The Revolving Credit is a revolving credit and
Borrower may, prior to the Revolving Credit Termination Date, borrow, repay and
reborrow amounts repaid up to the maximum amount available under Section
2.01(a), subject to the reductions permitted by Section 2.11 hereof.

                     (c)   The Revolving Credit may from time to time consist of
(i) Eurodollar Rate Advances, (ii) Reference Rate Advances or (iii) a
combination thereof, as determined by the Borrower and notified to the Agent in
accordance with Section 2.02, provided that no Advance shall be made as a
Eurodollar Rate Advance after the day that is one month prior to the Revolving
Credit Termination Date.

                     2.02   Requests for Advances. (a)  Each Advance shall be
made upon the irrevocable request of Borrower received by Agent by 12:00 p.m.
noon, New York time, on the Borrowing Date therefor in the case of Reference
Rate Advances and three (3) Banking Days prior to the Borrowing Date therefor in
the case of Eurodollar Rate Advances, specifying: (i) the Borrowing Date for
such Advance, which shall be a Banking Day; (ii) the amount of such Advance;
(iii) whether the Advance is to be of Reference Rate Advances, Eurodollar Rate
Advances or a combination thereof; (iv) if the Advance is to consist entirely or
partly of Eurodollar Rate Advances, the amount of such Eurodollar Rate Advances
and the length of the initial Interest Period therefor; and (v) the account of
Borrower with Agent for the deposit of the proceeds of such Advance.
Notwithstanding the foregoing, all Advances to be made on the Closing Date shall
be Reference Rate Advances.

                     (b)   Each request for a Advance may be made in writing or
by telephone, provided, however, that any such telephonic request shall be
confirmed immediately by telecopier and also in writing delivered to Agent by
Borrower not more than three (3) Banking Days after the date such telephonic
request is made, provided, however, that telephonic requests shall be subject to
the indemnity provisions set forth in Section 9.07 hereof.

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                     (c)   Upon receipt of such borrowing request, Agent shall
promptly notify Lenders thereof.

                     (d)   Each Reference Rate Advance hereunder shall be in the
minimum aggregate amount of One Million Dollars ($1,000,000) or in integral
multiples of Five Hundred Thousand Dollars ($500,000) in excess thereof (or, if
the excess of the Revolving Credit Commitments then in effect over the aggregate
principal amount of all Advances then outstanding is less than $1,000,000, such
lesser amount). Each Eurodollar Rate Advance shall be in the minimum aggregate
amount of Five Million Dollars ($5,000,000) or in integral multiples of One
Million Dollars ($1,000,000) in excess thereof.

                     (e)   Each Advance shall be made on a pro rata basis by all
Lenders having Revolving Credit Commitments, and each Lender’s portion of each
Advance shall be equal to its Commitment Percentage of such Advance.

                     2.03   [Reserved].

                     2.04   [Reserved].

                     2.05   [Reserved].

                     2.06   Lending Branch and Evidence of Credit. (a)  The
Borrower hereby unconditionally promises to pay to the Agent for the account of
each Lender the then unpaid principal amount of each Advance made by such Lender
on the Revolving Credit Termination Date (or such earlier date on which the
Advances become due and payable pursuant to Article VIII). The Borrower hereby
further agrees to pay interest on the unpaid principal amount of the Advances
made to it from time to time outstanding from the Closing Date until payment in
full thereof at the rates per annum, and on the dates, set forth in Section
2.08.

                     (b)   Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of the Borrower to
such Lender resulting from each Advance made by such Lender from time to time,
including the amounts of principal and interest payable and paid to such Lender
from time to time under this Agreement.

                     (c)   The Agent shall maintain the Register pursuant to
Section 9.04(e), and a subaccount therein for each Lender in which shall be
recorded (i) the amount of each Advance made hereunder, the Type thereof and
each Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) both the amount of any sum received by the Agent
hereunder from the Borrower and each Lender’s share thereof.

                     (d)   The entries made in the Register and the accounts of
each Lender maintained pursuant to Section 2.06(c) shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the Borrower therein recorded; provided, however,
that the failure of any Lender or the Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the obligation of
any Borrower to repay (with applicable interest) the Loans made to the Borrower
by such Lender in accordance with the terms of this Agreement.

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                     (e)   The Borrower agrees that, upon the request to the
Agent by any Lender, the Borrower will execute and deliver to such Lender a Note
with appropriate insertions as to date and principal amount.

                     (f)   Each Lender’s proportionate interest in each Advance
and each payment to such Lender under this Agreement and the Notes shall be made
for the account of such Lender’s Lending Branch.

                     2.07   Conversion and Continuation Options. (a)  The
Borrower may elect from time to time to convert Eurodollar Rate Advances to
Reference Rate Advances by giving the Agent at least two Banking Days’ prior
irrevocable notice of such election, provided that any such conversion of
Eurodollar Rate Advances may only be made on the last day of an Interest Period
with respect thereto. The Borrower may elect from time to time to convert
Reference Rate Advances to Eurodollar Rate Advances by giving the Agent at least
three Banking Days’ prior irrevocable notice of such election. Any such notice
of conversion to Eurodollar Rate Advances shall specify the length of the
initial Interest Period or Interest Periods therefor. Upon receipt of any such
notice the Agent shall promptly notify each Lender thereof. All or any part of
outstanding Eurodollar Rate Advances or Reference Rate Advances may be converted
as provided herein, provided that (i) no Advance may be converted into a
Eurodollar Rate Advance when any Default or Event of Default has occurred and is
continuing and the Agent or the Majority Lenders have determined that such a
conversion is not appropriate, and (ii) no Advance may be converted into a
Eurodollar Rate Advance after the date that is one month prior to the relevant
Revolving Credit Termination Date.

                     (b)   Any Eurodollar Rate Advances may be continued as such
upon the expiration of the then current Interest Period with respect thereto by
the Borrower’s giving notice to the Agent, in accordance with the applicable
provisions of the term “Interest Period” set forth in Section 1.01, of the
length of the next Interest Period to be applicable to such Advance, provided
that no Eurodollar Rate Advance may be continued as such (i) when any Default or
Event of Default has occurred and is continuing and the Agent or the Majority
Lenders have determined that such a continuation of a Eurodollar Rate Advance is
not appropriate, or (ii) after the date that is one month prior to the Revolving
Credit Termination Date and provided, further, that if the Borrower shall fail
to give any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Advances
shall be automatically converted to Reference Rate Advances on the last day of
such then expiring Interest Period.

                     2.08   Computation of and Payment of Interest. (a)  From
and including the relevant Borrowing Date to the payment in full of all
Obligations, the outstanding principal balance of each Advance hereunder,
subject to Section 2.08(d) hereof, shall bear interest until paid in full at a
rate per annum equal to:

           (i)   with respect to Reference Rate Advances, at the Reference Rate
for each day plus the Applicable Margin; and

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           (ii)   with respect to Eurodollar Rate Advances, for each day during
an Interest Period therefor, at the Eurodollar Rate for such day plus the
Applicable Margin;

                     (b)   Interest on each Advance shall be paid in arrears on
each Interest Payment Date. Interest shall also be payable on the date of any
prepayment of Advances pursuant to Section 2.12 or 2.13 (except for any
prepayment pursuant to Section 2.12 of any Advance that is a Reference Rate
Advance) for the portion of the Advances so prepaid and upon payment (including
prepayment) in full thereof and, after the occurrence and during the continuance
of any Event of Default, interest shall be payable on demand.

                     (c)   Interest on Reference Rate Advances calculated on the
basis of the Prime Rate shall be computed on the basis of a year of three
hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may
be; otherwise, interest and fees payable hereunder shall be computed on the
basis of a year of three hundred sixty (360) days, in each case for actual days
elapsed, including the first day and excluding the last day.

                     (d)   During the period (i) from and including the stated
due date for payment of any amount under this Agreement or the date of
acceleration of any amount pursuant to Article VIII which Borrower fails to pay
on such due date or date of acceleration and (ii) to but excluding the date on
which such amount is paid in full, Borrower shall, on demand and to the extent
permitted by applicable law, pay interest on such unpaid amount at a rate per
annum equal to (A) in the case of overdue principal of any Advance, the sum of
the rate of interest otherwise applicable to such unpaid amount plus two percent
(2%) or (B) in the case of any other overdue amount, the Reference Rate plus the
Applicable Margin plus 2%; provided, however, that upon the occurrence and
during the continuation of an Event of Default under Section 8.01(a), the entire
principal amount of the Advances outstanding hereunder and under the Notes shall
bear interest as provided in this Section 2.08(d). Interest under this Section
2.08(d) shall be computed on the basis of a three hundred sixty (360) day year
and actual days elapsed.

                     (e)   Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The Agent shall,
at the request of the Borrower, deliver to the Borrower a statement showing the
quotations used by the Agent in determining any interest rate pursuant to
Section 2.08(a).

                     (f)   If prior to the first day of any Interest Period:

           (i)   the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period, or

           (ii)   the Agent shall have received notice from the Majority Lenders
that the Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as conclusively
certified

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by such Lenders) of making or maintaining their affected Advances during such
Interest Period,

then the Agent shall give telecopy or telephonic notice thereof to the Borrower
and the Lenders as soon as practicable thereafter. If such notice is given (x)
any Eurodollar Rate Advances requested to be made on the first day of such
Interest Period shall be made as Reference Rate Advances, (y) any Advances that
were to have been converted on the first day of such Interest Period to
Eurodollar Rate Advances shall be converted to or continued as Reference Rate
Advances and (z) any outstanding Eurodollar Rate Advances shall be converted, on
the first day of such requested Interest Period, to Reference Rate Advances.
Until such notice has been withdrawn by the Agent, no further Eurodollar Rate
Advances shall be made or continued as such, nor shall the Borrower have the
right to convert Advances to Eurodollar Rate Advances. The Agent shall give
telecopy or telephonic notice of such withdrawal to the Borrower and the Lenders
as soon as practicable thereafter.

                     2.09   Payment of Advances. Borrower shall repay the
outstanding amount of all Advances on the Revolving Credit Termination Date.

                     2.10   Payments. (a)  Each payment to Borrower hereunder,
and each payment of principal, interest and other sums due from Borrower under
this Agreement shall be made in immediately available funds at Agent’s address
for payments indicated on the signature page of this Agreement.

                     (b)   Each Lender agrees that upon receipt of notice from
Agent, it will make the funds which it is to advance hereunder available to
Agent at Agent’s address for payments indicated on the signature page of this
Agreement not later than 1:00 p.m., New York time, on the date of disbursement,
and Agent will thereupon advance to Borrower the amount so received from
Lenders.

                     (c)   Payment of all sums under this Agreement shall be
made by Borrower to Agent for the account of Lenders, and the Agent shall
promptly distribute to each Lender its share of such payments by wire transfer
of immediately available funds. Each payment by Borrower shall be made without
setoff, deduction or counterclaim not later than 1:00 p.m., New York time, on
the day such payment is due. All sums received after such time shall be deemed
received on the next Banking Day and such extension of time shall be included in
the computation of payment of interest, fees or other sums, as the case may be.

                     (d)   Unless Agent shall have been notified by telephone
(confirmed in writing), by any Lender prior to a Borrowing Date, that such
Lender will not make available to Agent the amount which would constitute its
Commitment Percentage of the Advances to be made on such date, Agent may assume
that such Lender has made such amount available to Agent and, in reliance
thereon, may (but shall not be required to) make available to Borrower a
corresponding amount. If such Lender makes its Commitment Percentage of an
Advance available to Agent after a borrowing date, such Lender shall pay to
Agent on demand an amount equal to the product of (i) the daily average Federal
Funds Rate from and including the borrowing date to but excluding the date the
Commitment Percentage of such Advance was made available to Agent (the “Out of
Funds Period”) multiplied by (ii) an amount equal to its Commitment Percentage
of

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such Advance multiplied by (iii) the quotient of the number of days in the Out
of Funds Period divided by 365 or 366, as the case may be. A certificate from
Agent submitted to any Lender with respect to any amounts owing under this
paragraph (d) shall be conclusive in the absence of manifest error. If any
Lender’s Commitment Percentage of an Advance is not in fact made available to
Agent by such Lender within one (1) Banking Day after a Borrowing Date, Agent
shall be entitled to recover such amount, with interest thereon at the rate per
annum then applicable to the Advances hereunder, on demand from Borrower,
without prejudice to Agent’s and Borrower’s rights against such defaulting
Lender.

                     (e)   Unless Agent shall have been notified by telephone
(confirmed in writing), by Borrower, prior to any date on which a payment is due
hereunder, that Borrower will not make the required payment on such date, Agent
may assume that Borrower will make such payment to Agent and, in reliance upon
such assumption, may (but shall not be required to) make available to each
Lender the amount due to it on such date. If such amount is not in fact paid to
Agent by Borrower within one (1) Banking Day after such payment is due, Agent
shall be entitled to recover from each Lender the amount paid to it by Agent,
together with interest thereon in the amount equal to the product of (i) the
daily average Federal Funds Rate from and including the payment date to but
excluding the date the payment was made available to Agent (the “Out of Funds
Interval”) multiplied by (ii) an amount equal to the amount received by such
Lender multiplied by (iii) the quotient of the number of days in the Out of
Funds Interval divided by 365 or 366, as the case may be. A certificate from
Agent submitted to any Lender with respect to any amounts owing under this
paragraph (e) shall be conclusive in the absence of manifest error.

                     2.11   Optional Termination or Reduction of Revolving
Credit Commitment Amount. The Borrower shall have the right, upon not less than
five Banking Days’ notice to the Agent, to terminate the Revolving Credit
Commitments and the L/C Commitments or, from time to time, to reduce the
Revolving Credit Commitment Amount. Any such reduction shall be in an amount
equal to $2,000,000 or a whole multiple thereof and shall reduce permanently the
Revolving Credit Commitment Amount then in effect; provided, however, that the
Revolving Credit Commitment Amount may not at any time be reduced (after giving
effect to any prepayments made on the date of such reduction pursuant to Section
2.13(b)) below the sum of (i) the principal amount of the outstanding Advances,
(ii) the undrawn amount of all outstanding Letters of Credit and (iii) the
aggregate amount of all unreimbursed drawings under Letters of Credit on the
date of reduction or termination. Any Revolving Credit Commitment Reduction
pursuant to this Section 2.11 shall be permanent.

                     2.12   Optional Prepayments. Upon written notice (or
telephone notice confirmed promptly in writing) received by Agent not later than
12:00 noon, New York City time, on the date thereof, Borrower may at any time
prepay any Reference Rate Advance in full or in part, without premium or
penalty, in the amount of One Million Dollars ($1,000,000) or an integral
multiple of Five Hundred Thousand Dollars ($500,000) in excess thereof (or, if
the outstanding principal amount of all Reference Rate Advances is less that
$1,000,000, such lesser amount). Upon written notice (or telephone notice
confirmed promptly in writing) received by Agent not later than 12:00 noon, New
York time, received at least three (3) Banking Days prior to the date of
prepayment, which notice shall specify the date and amount of prepayment and the
amount of Eurodollar Rate Advances being prepaid, Borrower may on the last day
of any Interest Period with respect thereto prepay any Eurodollar Rate Advance
in full or in part, without premium or

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penalty (other than costs required to be paid pursuant to Section 2.17(d)), in
the amount of Five Million Dollars ($5,000,000) or an integral multiple of One
Million Dollars ($1,000,000) in excess thereof. Each such prepayment of Advances
made pursuant to this Section 2.12 may be reborrowed subject to the terms and
conditions of this Agreement. Any prepayments of Advances made pursuant to this
Section 2.12 shall be applied first to Reference Rate Advances then outstanding
and then to Eurodollar Rate Advances then outstanding, subject to Section
2.17(d).

                     2.13   Mandatory Prepayments . (a)  Within ten (10) days of
the date of receipt by Borrower or any of its Subsidiaries of any Net Cash
Proceeds, the Borrower shall make a mandatory prepayment, without premium or
penalty (other than costs required to be paid pursuant to Section 2.17(d)), of
the outstanding Advances (without any reduction of the Revolving Credit
Commitment Amount).

                     (b)   If at any time (A) the sum of the aggregate principal
amount of the outstanding Advances plus the aggregate undrawn amount of all
outstanding Letters of Credit plus the aggregate amount of all unreimbursed
drawings under Letters of Credit shall exceed (B) the Revolving Credit
Commitment Amount, Borrower shall, without demand or notice, prepay Advances or
cash collateralize or replace Letters of Credit in such amount as may be
necessary to eliminate such excess, and Borrower shall take such action on the
Banking Day on which Borrower learns or is notified of the excess, if Borrower
so learns or is so notified prior to 1:00 p.m. (New York City time) on such day,
and otherwise on the immediately succeeding Banking Day. Notwithstanding any
contrary provision contained herein, the prepayment of any Advance or cash
collateralization or replacement of any Letter of Credit hereunder (including,
without limitation, pursuant to this Section 2.13 or Section 2.11) shall be
accompanied by the payment of accrued interest on the amount prepaid to the date
of payment.

                     (c)   Any prepayments made pursuant to this Section 2.13
shall be applied first to Reference Rate Advances to the extent then outstanding
and then to Eurodollar Rate Advances to the extent then outstanding, subject to
Section 2.17(d).

                     2.14   Fees. Borrower shall pay to Agent for the ratable
benefit of each relevant Lender (except as otherwise provided):

           (a)   (i)  in respect of each Letter of Credit, a commission on the
maximum amount available for drawing under such Letter of Credit, calculated at
the rate per annum equal to the Letter of Credit Rate (as set forth under the
definition of Applicable Margin in Section 1.01; provided that for the period
from the Closing Date to the date financial statements are delivered pursuant to
Section 6.03(b) with respect to the fiscal quarter ending September 30, 2003,
the Total Leverage Ratio shall be presumed to be greater than or equal to 3.75
to 1 for purposes of calculating such commission) on the face amount of such
Letter of Credit, computed for the period from the date such Letter of Credit is
issued to the date upon which the next payment is due under this subsection
(and, thereafter, from the date of payment under this subsection to the date
upon which the next payment is due under this subsection), and payable quarterly
in arrears (calculated on the basis of a three hundred sixty (360) day year for
the actual days

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elapsed) on the last Banking Day of each March, June, September and December
after the issuance of such Letter of Credit and on the Revolving Credit
Termination Date;

           (ii)   a fronting fee in an amount equal to one-quarter percent
(1/4%) of the face amount of such Letter of Credit, computed for the period from
the date such Letter of Credit is issued to the date upon which the next payment
is due under this subsection (and, thereafter, from the date of payment under
this subsection to the date upon which the next payment is due under this
subsection), and payable quarterly in arrears (calculated on the basis of a
three hundred sixty (360) day year for the actual days elapsed) on the last
Banking Day of each March, June, September and December after the issuance of
such Letter of Credit and on the Revolving Credit Termination Date; provided
that such fee shall be for the Issuing Lender’s sole account; and

           (iii)   all customary and normal costs and expenses as are incurred
or charged by the Issuing Lender in negotiating, issuing, effecting payment
under, amending or otherwise administering any Letter of Credit, provided that
payment of such costs and expenses shall be for the Issuing Lender’s sole
account; and

                     (b)   a commitment fee, at the rate per annum equal to (x)
0.75% for each day on which utilization (the aggregate amount of outstanding
Advances, Letters of Credit and unreimbursed drawings in respect of Letters of
Credit) of the Revolving Credit is equal to or less than 33% of the Revolving
Credit Commitment Amount or (y) 0.50% otherwise, on the difference between (i)
the average daily Revolving Credit Commitment Amount, and (ii) the average daily
principal amount of the outstanding Advances, participating interests in Letters
of Credit and unreimbursed drawings in respect of Letters of Credit. The
commitment fees under this Section 2.14(b) shall be payable quarterly in arrears
(calculated on the basis of a three hundred sixty (360) day year for the actual
days elapsed) payable on the last Banking Day of each March, June, September and
December and on the Revolving Credit Termination Date.

                     2.15   Agency Fees. The Borrower agrees to pay to the Agent
the fees in the amounts and on the dates as set forth in any fee agreements with
the Agent and to perform any other obligations contained therein.

                     2.16   Taxes.

                     (a)   All payments or reimbursements under this Agreement
and any instrument or agreement required hereunder shall be made free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding,

           (i)   in the case of each Lender and Agent, taxes imposed on its net
income, and franchise taxes imposed on it, by the jurisdiction under the laws of
which such Lender or Agent (as the case may be) is organized or any political
subdivision thereof,

           (ii)   in the case of each Lender, taxes imposed on its net income,
and franchise taxes imposed on it, by the jurisdiction of such Lender’s Lending
Branch or any political subdivision thereof, and

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           (iii)   in the case of each Lender that is not a U.S. person as
defined in Section 7701(a)(30) of the Code (“Non-U.S. Lender”), United States
federal withholding taxes that are (x) attributable to such Bank’s failure to
comply with the requirements of Section 2.16(d), (y) imposed on amounts payable
to such Lender at the time the Lender becomes a party to this Agreement, or (z)
imposed other than as a result of a change in treaty, law or regulation or the
application or interpretation thereof, except in the case of (x) or (y), to the
extent that such Bank’s assignor (if any) was entitled, at the time of
assignment, to receive additional amounts from the Borrower with respect to such
taxes.

(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as “Taxes”). If Borrower or Agent
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to any Lender or Agent,

           (i)   the sum payable by Borrower shall be increased as may be
necessary so that after Borrower or Agent has made all required deductions
(including deductions applicable to additional sums payable under this Section
2.16) such Lender or Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made,

           (ii)   Borrower or Agent shall make such deductions and

           (iii)   Borrower or Agent shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.

                     (b)   In addition, Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made by Borrower or by Agent
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement (hereinafter referred to as “Other Taxes”).

                     (c)   Borrower will indemnify each Lender and Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.16) paid by such Lender or Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be made within 30 days from the date such
Lender or Agent (as the case may be) makes written demand therefor. Any such
demand shall show in reasonable detail the amount payable and the calculations
used to determine such amount and shall provide reasonably acceptable evidence
of payment of such Tax or Other Tax.

                     (d)   Each Non-U.S. Lender shall deliver to the Borrower
and the Agent two copies of either U.S. Internal Revenue Service Form W-8 BEN or
Form W-8ECI, or any subsequent versions thereof or successors thereto properly
completed and duly executed by such Non-U.S. Lender claiming complete exemption
from, or a reduced rate of, U.S. federal withholding tax on all payments by the
Borrower under this Agreement. Such forms shall be delivered by each Non-U.S.
Lender on or before the date it becomes a party to this Agreement. In addition,
each

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Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender. Each
Non-U.S. Lender shall promptly notify the Borrower at any time it determines
that it is no longer in a position to provide any previously delivered
certificate to the Borrower (or any other form of certification adopted by the
U.S. taxing authorities for such purpose). Notwithstanding any other provision
of this Section 2.16(d), a Non-U.S. Lender shall not be required to deliver any
form pursuant to this Section 2.16(d) that such Non-U.S. Lender is not legally
able to deliver.

                     (e)   Any Lender claiming any additional amounts payable
pursuant to this Section 2.16 shall use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Lending Branch if the making of such a change would avoid
the need for, or reduce the amount of, any such additional amounts which may
thereafter accrue and would not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender.

                     (f)   Without prejudice to the survival of any other
agreement of Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.16 shall survive the payment in full of principal
and interest under this Agreement and the Notes and all other Obligations under
this Agreement.

                     2.17   Increased Costs; Illegality; Indemnity.
(a)  Borrower shall reimburse or compensate each Lender, upon demand by such
Lender, for all costs incurred, losses suffered (including lost profit) or
payments made by such Lender which are applied or allocated by such Lender to
the Revolving Credit (all as determined by such Lender in its sole and absolute
discretion) by reason of:

           (i)   any Lender’s being subject to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Advance made by it, or change in
the basis of taxation of payments to such Lender in respect thereof (except for
taxes covered by Section 2.16 and changes in the rate of tax on the overall net
income of such Lender);

           (ii)   the imposition, modification or holding applicable of any
reserve, special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination of
the Eurodollar Rate; or

           (iii)   compliance by such Lender with any direction, requirement or
request from any regulatory authority, whether or not having the force of law.

                     (b)   Any Lender seeking (i) reimbursement from Borrower
for the costs incurred, losses suffered or payments made as described in
subsection (a) of this Section 2.17, or (ii) payment from Borrower under Section
2.18 hereof, may recover such sums from Borrower by delivering to Borrower a
statement setting forth the amount owed to such Lender and showing how such
calculation was made, signed by a duly authorized officer of such Lender, which

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statement shall be conclusive evidence of the amount owed absent manifest error;
provided, however, that (A) reimbursement or payment under this subsection (b)
shall not be demanded by any Lender for the period prior to the Closing Date
(other than Lenders party to the Existing Credit Agreement; provided that no
claim shall be made by any Lender pursuant to the Existing Credit Agreement that
arose during the period prior to the closing date for the Existing Credit
Agreement), and (B) each Lender shall notify Borrower as promptly as practicable
of any event occurring after the date of this Agreement that would entitle such
Lender to reimbursement or payment under this subsection (b).

                     (c)   Notwithstanding any other provision herein, if the
adoption of or any change in any requirement of law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Rate Advances as contemplated by this Agreement, (A) the commitment
of such Lender hereunder to make Eurodollar Rate Advances, continue Eurodollar
Rate Advances as such and convert Reference Rate Advances to Eurodollar Rate
Advances shall forthwith be cancelled and (B) such Lender’s Advances then
outstanding as Eurodollar Rate Advances, if any, shall if required by law, be
converted automatically to Reference Rate Advances on the respective last days
of the then current Interest Periods with respect to such Advances or within
such earlier period as required by law. If any such conversion of a Eurodollar
Rate Advance occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Lender such
amounts, if any, as may be required pursuant to paragraph (d) below.

                     (d)   The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (A) default by the Borrower in payment when due of
the principal amount of or interest on any Eurodollar Rate Advance, (B) default
by the Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Rate Advances after the Borrower has given a notice requesting the
same in accordance with the provisions of this Agreement, (C) default by the
Borrower in making any prepayment after the Borrower has given a notice thereof
in accordance with the provisions of this Agreement or (D) the making of a
prepayment of Eurodollar Rate Advances on a day which is not the last day of an
Interest Period with respect thereto, including, without limitation, in each
case, any such loss or expense arising from the reemployment of funds obtained
by it or from fees payable to terminate the deposits from which such funds were
obtained. A certificate as to any amounts payable pursuant to this Section
submitted to the Borrower by any Lender shall be conclusive in the absence of
manifest error. The covenants contained in Subsections (b) and (d) of this
Section 2.17 shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.

                     2.18   Capital Adequacy. If any Lender shall have
determined that, after the date hereof, the adoption of any applicable law,
rule, regulation or guideline regarding capital adequacy, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central Lender or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Lending Branch or any corporation controlling such Lender) with any direction,
requirement or request regarding capital adequacy (whether or not having the
force of law) of any such authority, central Lender or comparable agency,
affects or would affect the amount of capital required or expected to be
maintained by such Lender or any corporation controlling such Lender and such
Lender (taking

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into consideration such Lender’s policies with respect to capital adequacy and
such Lender’s targeted return on capital) determines that the amount of such
capital is increased or required to be increased as a consequence of such
Lender’s obligations under this Agreement, then, upon demand by such Lender,
Borrower shall immediately pay to such Lender, from time to time as specified by
such Lender, additional amounts sufficient to compensate such Lender for such
increase.

                     2.19   Letters of Credit.

                     (a)  The Letters of Credit. (i)  From time to time during
the Revolving Credit Commitment Period, each Issuing Lender agrees on the terms
and conditions set forth herein to issue Letters of Credit for the account of
the Borrower; provided, that no Issuing Lender shall issue any Letter of Credit
if after giving effect to such issuance, the aggregate undrawn amount of all
Letters of Credit then outstanding plus the aggregate amount of all unreimbursed
drawings under Letters of Credit would exceed the L/C Commitment Amount;
provided, further, that no Issuing Lender shall issue any Letters of Credit if,
after giving effect to such issuance, the sum of the aggregate undrawn amount of
all Letters of Credit then outstanding plus the aggregate outstanding principal
amount of all Advances plus the aggregate amount of unreimbursed drawings under
Letters of Credit would exceed the Revolving Credit Commitment Amount; provided,
further, that no Issuing Lender shall issue any Letters of Credit subsequent to
the date which is 30 days prior to the Revolving Credit Termination Date. All
letters of credit issued under the Existing Credit Agreement and outstanding on
the Closing Date shall continue outstanding under this Agreement and be deemed
to be Letters of Credit issued by the Issuing Lender pursuant to this Agreement.

           (ii)   No Issuing Lender shall be under any obligation to issue any
Letter of Credit if:

                     (A)   any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin or restrain such
Issuing Lender from issuing such Letter of Credit or any legal requirement
applicable to such Issuing Lender or any request or directive (whether or not
having the force of law) from any governmental authority with jurisdiction over
such Issuing Lender shall prohibit, or request that such Issuing Lender refrain
from the issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon such Issuing Lender with respect to such Letter
of Credit any restriction or reserve or capital requirement (for which such
Issuing Lender is not otherwise compensated) not in effect on the Closing Date,
or any unreimbursed loss, cost or expense which was not applicable, in effect or
known to such Issuing Lender on the Closing Date and which such Issuing Lender
in good faith deems material to it; or

                     (B)   such Issuing Lender has received notice from Agent,
or from Agent at the request of any Lender, on or prior to the Banking Day
immediately prior to the requested date of issuance of such Letter of

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Credit that one or more of the conditions contained in Section 4.02 is not then
satisfied; or

                     (C)   such requested Letter of Credit has an expiration
date which is after the earlier of (x) five Banking Days prior to the Revolving
Credit Termination Date and (y) one year after the date of issuance (subject to
automatic renewals on terms satisfactory to the Issuing Lenders).

           (iii)   Subject to Section 2.19(g), Letters of Credit with a one-year
tenor may be by their terms automatically renewable (such automatically
renewable Letters of Credit hereby referred to as “Renewable Letters of Credit”)
for additional one-year periods (which shall in no event extend beyond the date
referred to in clause (x) of the preceding paragraph (a)(ii)(C)). The Issuing
Lender shall notify all beneficiaries of Renewable Letters of Credit that such
Letters of Credit shall not be renewed or extended unless the Agent and the
Issuing Lender shall have received the request from the Borrower required under
Section 2.19(g) and all conditions precedent to the issuance of Letters of
Credit set forth in Section 4.02 are satisfied at the time of such renewal or
extension (which time, for purposes of this Section and Section 4.02, shall be
deemed to be the time of such renewal or extension and not the expiry date of
such Letters of Credit).

                     (b)   Issuance of Letters of Credit.

           (i)   Each Letter of Credit shall be issued upon the irrevocable
written request of Borrower, received by Agent and the Issuing Lender at least
seven (7) days (or such shorter time as Agent may agree in a particular
instance) prior to the proposed date of issuance. Each Letter of Credit
outstanding under the Existing Credit Agreement which survives the Closing Date
shall be deemed to be reissued under this Agreement on the Closing Date as set
forth on Schedule 2.19(b).

           (ii)   Each request for issuance of a Letter of Credit shall be by
telecopy, confirmed immediately in writing, on the form specified by the Issuing
Lender as being its then customary form for letter of credit applications and
shall specify: (A) the proposed date of issuance (which shall be a Banking Day);
(B) the face amount of the Letter of Credit; (C) the date of expiration of the
Letter of Credit; (D) the purpose of such Letter of Credit, (E) the name and
address of the beneficiary thereof; (F) the documents to be presented by the
beneficiary of the Letter of Credit in case of any drawing thereunder; and (G)
the full text of any certificate to be presented by the beneficiary in case of
any drawing thereunder; provided that in the event that the form specified by
the Issuing Lender conflicts with any provisions of this Agreement, the
provisions in this Agreement shall govern.

           (iii)   No Letter of Credit shall be issued (or renewed or extended)
if such Letter of Credit would thereupon have an expiration date which is after
the date which is five Banking Days prior to the Revolving Credit Termination
Date.

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           (iv)   Unless an Issuing Lender has received notice on or before the
Banking Day immediately preceding the date such Issuing Lender is to issue a
requested Letter of Credit (A) from the Agent directing such Issuing Lender not
to issue such Letter of Credit because the amount specified in Section
2.19(a)(i) would be exceeded and/or (B) from any Lender that one or more
conditions specified in Section 4.02 are not then satisfied, then subject to the
terms and conditions of this Section 2.19 and provided that the applicable
conditions set forth in Section 4.02 hereof have been satisfied, such Issuing
Lender shall, on the requested date, issue a Letter of Credit for the account of
Borrower in accordance with the Issuing Lender’s usual and customary business
practices. Prior to issuing any Letter of Credit, the Issuing Lender of such
Letter of Credit will consult with the Agent to confirm that the amount
specified in Section 2.19(a)(i) would not be exceeded, and that the conditions
specified in Section 4.02 have been satisfied.

           (v)   Promptly after issuance of each Letter of Credit, the Issuing
Lender shall deliver to Borrower and Agent a copy of such Letter of Credit.
Agent shall promptly deliver a copy thereof to each other Lender. Each Letter of
Credit shall provide that, except as otherwise determined in the sole discretion
of the Issuing Lender, payment thereunder shall not be made earlier than two (2)
business days after receipt of any requisite documents demanding such payment.

           (vi)  All Letters of Credit shall be issued only in Dollars.

                     (c)  Participations, Drawings and Reimbursements.

           (i)   Immediately upon the issuance of each Letter of Credit, each
Lender (other than the Issuing Lender) shall be deemed to, and hereby agrees to,
have irrevocably purchased from the Issuing Lender a participation in such
Letter of Credit and each drawing thereunder in a percentage equal to the
Commitment Percentage of such Lender.

           (ii)   The Borrower shall reimburse the Agent for the full amount of
any drawing under the Letter of Credit on the same date such drawing is honored
by the Issuing Lender. In the event Borrower shall fail to reimburse Agent for
the full amount of any drawing on the same date such drawing is honored by the
Issuing Lender under any Letter of Credit, the Issuing Lender shall promptly
notify Agent and Agent shall as promptly as possible notify each Lender thereof
and Borrower shall be deemed to have requested that a Reference Rate Advance be
made by the Lenders to be disbursed on the date of payment by the Issuing Lender
under such Letter of Credit, subject to the amount of the unutilized portion of
the Revolving Credit Commitment Amount on such date and subject to the
conditions set forth in Section 4.02. Any notice given by the Issuing Lender or
Agent pursuant hereto may be oral if immediately confirmed in writing (including
telecopy or telex); provided that the lack of such an immediate confirmation
shall not affect the conclusiveness and binding effect of such notice. The
proceeds of such Advances shall be paid to the Agent which will, in turn,
disburse such proceeds to the Issuing Lender as reimbursement for such drawings.

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Notwithstanding the foregoing, if at any time an Event of Default described in
Section 8.05 or 8.06 has occurred and is continuing, such drawings shall be
reimbursed by the Lenders’ purchasing pro rata participation interests in such
Letter of Credit in amounts equal to each Lender’s Commitment Percentage of the
relevant amounts drawn.

           (iii)   Any unreimbursed Letter of Credit drawing which shall not be
converted into a Advance pursuant to Section 2.19(c)(ii) in whole or in part
because such conversion would have caused the Revolving Credit Commitment Amount
to be exceeded or because of Borrower’s failure to satisfy the conditions set
forth in Section 4.02, shall become due and payable upon the date such drawing
is paid by the Issuing Lender. Agent shall promptly notify Borrower and Lenders
of the occurrence of any unreimbursed drawing under a Letter of Credit. Any such
unreimbursed drawing shall bear interest at a rate per annum equal to the
Reference Rate plus the sum of the Applicable Margin and 2%.

           (iv)   Each Lender will, promptly upon receipt of notice of an
unreimbursed drawing under a Letter of Credit pursuant to Section 2.19(c)(iii),
make available to Agent for the account of the Issuing Lender an amount in
immediately available funds equal to its Commitment Percentage of the amount of
the such unreimbursed drawing. If any Lender so notified shall fail to make
available to Agent for the account of the Issuing Lender the amount of its
Commitment Percentage of any such unreimbursed drawing on the date the relevant
Letter of Credit drawing was honored by the Issuing Lender (the “Participation
Date”), then interest shall accrue on such Lender’s obligation to make such
payment, (i) from the Participation Date to but not including the second Banking
Day after the Participation Date at a rate per annum equal to the Federal Funds
Rate, and (ii) from the second Banking Day after the Participation Date at the
same rate specified in Section 2.08(a) for Reference Rate Advances. Agent will
as promptly as practicable (but in no event later than two (2) Banking Days
after the occurrence thereof) give notice of the occurrence of the Participation
Date, but failure of Agent to give any such notice on the Participation Date or
in sufficient time to enable any Lender to effect such payment on such date
shall not relieve such Lender from its obligations under this Section
2.19(c)(iv).

           (v)   The obligation of each Lender to provide Agent with such
Lender’s Commitment Percentage of the amount of any payment or disbursement made
by any Issuing Lender under any outstanding Letter of Credit shall be absolute
and unconditional under any and all circumstances and irrespective of any
setoff, counterclaim or defense to payment which such Lender may have or have
had against such Issuing Lender (or any other Lender), including, without
limitation, any defense based on the failure of the demand for payment under
such Letter of Credit to conform to the terms of such Letter of Credit or the
legality, validity, regularity or enforceability of such Letter of Credit or any
defense based on the identity of the transferee of such Letter of Credit or the
sufficiency of the transfer if such Letter of Credit is transferable; provided,
however, that Lenders shall not

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be obligated to reimburse such Issuing Lender for any wrongful payment or
disbursement made under any Letter of Credit as a result of acts or omissions
constituting gross negligence or willful misconduct on the part of such Issuing
Lender or any of its officers, employees or agents. Further, each Lender agrees
to perform its obligations under Section 2.19(c)(iv) despite the occurrence of a
Default or an Event of Default or any inability of Borrower to require such
Lender to fulfill its other obligations hereunder including, without limitation,
any inability resulting from the operation of Bankruptcy Code § 365(c)(2) (11
U.S.C. § 365(c)(2)) or otherwise.

                     (d)   Repayment of Participations.

           (i)   Upon and only upon receipt by Agent for the account of the
Issuing Lender of funds from Borrower,

                     (A)   in reimbursement of any payment made under a Letter
of Credit with respect to which any Lender has theretofore paid Agent for the
account of the Issuing Lender for such Lender’s participation in the Letter of
Credit pursuant to Section 2.19(c)(iv); or

                     (B)   in payment of interest thereon;

Agent will pay to each Lender which has funded its participating interest
therein, in the same funds as those received by Agent for the account of the
Issuing Lender, such Lender’s Commitment Percentage of such funds.

           (ii)   If Agent or the Issuing Lender is required at any time to
return to Borrower or to a trustee, receiver, liquidator, custodian or other
similar official any portion of the payments made by Borrower to Agent for the
account of the Issuing Lender pursuant to paragraph (i) in reimbursement of
payment made under the Letter of Credit or interest thereon, each Lender shall,
on demand of Agent, forthwith return to Agent or the Issuing Lender its
Commitment Percentage of any amounts so returned by Agent or the Issuing Lender
plus interest thereon from the date such demand is made to but not including the
date such amounts are returned by such Lender to Agent or the Issuing Lender, at
a rate per annum equal to the Federal Funds Rate.

                     (e)   Role of Issuing Lender. (i)  Each Issuing Lender will
exercise and give the same care and attention to any Letter of Credit as it
gives to its other letters of credit and similar obligations.

           (ii)   Each Lender participating in a Letter of Credit agrees that,
in paying any drawing under any Letter of Credit, the Issuing Lender shall not
have any responsibility to obtain any document (other than the sight draft and
certificates required by the Letter of Credit) or to ascertain or inquire as to
the validity or accuracy of any such document or the authority of the Person
delivering any such document. Neither the Issuing Lender nor any of its
representatives, officers, employees or agents shall be liable to any Lender
for:

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                     (A)   any action taken or omitted in connection herewith at
the request or with the approval of the Majority Lenders;

                     (B)   any action taken or omitted in the absence of gross
negligence or willful misconduct; or

                     (C)   the execution, effectiveness, genuineness, validity
or enforceability of any Letter of Credit or any other document contemplated
hereby or thereby.

                     (f)   Obligations Absolute. The obligations of Borrower
under this Agreement and any other agreements or instrument relating to any
Letter of Credit to reimburse each Issuing Lender shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and such other agreement or instrument under all circumstances,
including, without limitation, the following circumstances:

                     (A)   any lack of validity or enforceability of this
Agreement, any Letter of Credit, or any other agreement or instrument relating
thereto (collectively, the “L/C Related Documents”);

                     (B)   any change in the time, manner or place of payment
of, or in any other term of, all or any of the obligations of Borrower in
respect of any Letter of Credit or any other amendment or waiver of or any
consent to departure from all or any of the L/C Related Documents;

                     (C)   the existence of any claim, set-off, defense or other
right that Borrower may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such beneficiary
or any such transferee may be acting), the Issuing Lender or any other Person,
whether in connection with this Agreement, the transactions contemplated hereby
or by the L/C Related Documents or any unrelated transaction;

                     (D)   any statement and other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;

                     (E)   any payment by the Issuing Lender under any Letter of
Credit against presentation of a draft or certificate that does not strictly
comply with the terms of any Letter of Credit;

                     (F)   any exchange, release or non-perfection of any
Collateral, or any release or amendment or waiver of or consent to departure
from any Collateral Document, for all or any of the obligations of Borrower in
respect of any Letter of Credit;

                     (G)   any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including, without limitation,
any other

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circumstance that might otherwise constitute a defense available to, or a
discharge of, Borrower or any Guarantor but excluding any action constituting
the Issuing Lender’s gross negligence or willful misconduct; or

           (H)   the occurrence of a Default or an Event of Default.

                     (g)   Requests Regarding Renewals and Extensions of
Renewable Letters of Credit. The Borrower shall deliver to the Agent and the
applicable Issuing Lender, not earlier than thirty (30) days, and not later than
fourteen (14) days, before notice of non-renewal or non-extension is required
under the Renewable Letters of Credit issued by such Issuing Lender, a written
request for renewal or extension of each Renewable Letter of Credit which the
Borrower desires to renew or extend. Such request shall specify the required
date for notice by the Issuing Lender of non-renewal or non-extension under the
Renewable Letters of Credit and include a certification by the Borrower that as
of the date of such request, no Default or Event of Default shall have occurred
and be continuing and all of the representations and warranties contained in
this Agreement and the Collateral Documents are true and correct in all material
respects, except as to representations and warranties contained in Section 5.09
and which expressly relate to an earlier date and for changes which are
contemplated or permitted by this Agreement. No such request shall be made by
the Borrower which would cause the expiry date of such Renewable Letter of
Credit to extend beyond five Banking Days prior to the Revolving Credit
Termination Date. For purposes of this Section 2.19(g), valid delivery by the
Borrower of the required request shall be deemed to have occurred only upon
actual receipt of such notice by the Agent and the Issuing Lender. If the
Borrower fails to deliver such a notice within such period with respect to such
Renewable Letter of Credit, the Issuing Lender of such Renewable Letter of
Credit shall deliver appropriate notices of non-extension or non-renewal with
respect to such Renewable Letter of Credit.

                     (h)   If any change in any requirement of law shall either
(i) impose, modify or deem or make applicable any reserve, special deposit,
assessment or similar requirement against Letters of Credit issued by any
Issuing Lender or against a Lender’s participation in such Letter of Credit or
(ii) impose on any Issuing Lender or any Lender participating in such Letter of
Credit (a “Participating Lender”) any other condition regarding this Agreement
or any Letter of Credit, and the result of any event referred to in clause (i)
or (ii) above shall be to increase the cost to such Issuing Lender of issuing or
maintaining any Letter of Credit, or to such Participating Lender of purchasing
or maintaining such participating interest in any Letter of Credit (which
increase in cost shall be the result of such Issuing Lender’s, or Participating
Lender’s, as the case may be, reasonable allocation of the aggregate of such
cost increases resulting from such events), then from time to time following
notice by such Issuing Lender (or such Participating Lender, as the case may be)
to the Borrower, the Borrower shall pay to such Person, as specified by such
Person, additional amounts which shall be sufficient to compensate such Person
for such increased cost, together with interest on each such amount from the
date demanded until payment in full thereof at a rate per annum equal to the
Reference Rate plus the Applicable Margin plus 2% per annum. A certificate
submitted by such Issuing Lender or Participating Lender to the Borrower
concurrently with any such demand by such Person, shall be conclusive, absent
manifest error, as to the amount thereof.

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ARTICLE III.
SECURITY

                     3.01   Security.

                     (a)   As security for the prompt payment and performance of
all Secured Obligations of Borrower, Borrower has heretofore granted and
assigned or shall grant and assign, in accordance with the provisions of the
Collateral Documents applicable to Borrower, to the Collateral Agent for the
benefit of the Secured Creditors with respect to all of Borrower’s Secured
Obligations, all of its right, title and interest in and to all of the
Collateral. Additionally, all Secured Obligations shall be guaranteed by each
Guarantor under the Guarantee and Collateral Agreement and the Operating Bank
Guaranty, to the extent provided therein, and the obligations of the Guarantors
under the Guarantee and Collateral Agreement and the Operating Bank Guaranty
shall be secured pursuant to the terms of the Collateral Documents required to
be executed and delivered by them hereunder. Upon the effective date of the sale
of all of the stock owned by Borrower or any Subsidiary of, or the effective
date of the sale of all of the assets of, any Guarantor permitted hereunder,
such Guarantor shall be released from all obligations under the Guarantee and
Collateral Agreement.

                     (b)   Upon the application by the Borrower or any
Subsidiary of any Reinvestment Proceeds to the acquisition of any new property
or assets, the Borrower or such Subsidiary at its expense shall immediately
cause such acquired property or assets to become subject to Liens and security
interests in favor of the Collateral Agent to secure the Secured Obligations to
the same extent, and with the same priority, as the Liens and security interests
which covered or extended to the property or assets the disposition of which
gave rise to such Reinvestment Proceeds, provided, however, that if any portion
of the gross proceeds realized upon the disposition of such asset were applied
to discharge any Debt or other obligations secured by a Lien on such assets
which was prior to the Liens granted under the Collateral Documents, then there
shall not be permitted to be any Lien on the replacement property, other than
Liens under the Collateral Documents, except for Liens permitted pursuant to
clause (iv) of the definition of “Permitted Liens” in connection with the
acquisition of such replacement assets, provided that such Liens do not secure
Debt or other obligations in an amount in excess of the Debt or other
obligations discharged with respect to the asset disposed of (except for
acquisitions of individual items of replacement exercise equipment which may be
subject to purchase money financing on customary terms in accordance with the
practices of the Borrower and its Subsidiaries). Upon any such acquisition, such
acquired property or assets shall be deemed to constitute Collateral for all
purposes of this Agreement and the Collateral Documents, any collateral
documents executed and delivered by the Borrower or any of its Subsidiaries to
grant the liens and security interests required by this Section shall be deemed
to be Collateral Documents for all purposes of this Agreement and the other
Credit Documents, and any such application of Reinvestment Proceeds and
acquisition of such property or assets shall be deemed a representation and
warranty that, as of the date of such acquisition, all representations and
warranties contained in this Agreement and the Collateral Documents applicable
to such Collateral are true and correct in all material respects.

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                     3.02   Collateral Documents. The Borrower and the
Guarantors have heretofore executed and delivered or will execute and deliver to
the Collateral Agent certain Collateral Documents, and the Borrower shall
execute and deliver to the Collateral Agent for the benefit of the Secured
Creditors (and shall cause each Guarantor to so execute and deliver) all such
further Collateral Documents and such other collateral documents as may be
reasonably requested by the Collateral Agent in order to perfect and protect
Collateral Agent’s security interest in the Collateral granted pursuant to the
Collateral Documents, all in form and substance reasonably acceptable to the
Collateral Agent.

                     3.03   Priority of Security Interest. The lien and security
interest of the Collateral Agent in the Collateral shall, to the extent
permissible by applicable law, at all times, be and continue to be a first lien
in all jurisdictions, whether state, federal or foreign, subject to no other
Lien of any kind (except Permitted Liens).

                     3.04   New Guarantors. Borrower shall cause each Domestic
Subsidiary which is hereafter created or acquired (but in any event excluding
(i) Lincoln Indemnity Company, (ii) H&T Receivable Funding Corporation, (iii)
any Finance Subsidiary, (iv) any Real Estate Financing Subsidiary and (v) any
Subsidiary acquired after the Closing Date to the extent such Subsidiary is not
required to provide a security interest in its assets or cause its capital stock
to be pledged pursuant to Section 7.01(e) (but such Subsidiary described in
clause (v) shall be required to become a Guarantor)) to promptly execute and
deliver a supplement or addendum to each of the Guarantee and Collateral
Agreement and the Operating Bank Guaranty, in form and substance satisfactory to
the Collateral Agent, pursuant to which such Subsidiary shall become a party to
such agreements as a Grantor (as defined in the Guarantee and Collateral
Agreement) and guarantor, together with such Collateral Documents and other
documents, instruments and opinions reasonably requested by Agent or the
Collateral Agent in order to perfect and protect the Collateral Agent’s security
interest in the Collateral granted pursuant to such Collateral Documents, all in
form and substance reasonably satisfactory to Agent and the Collateral Agent.

                     3.05   Real Property Matters. As additional security for
the Secured Obligations, the Collateral Agent shall have received, with respect
to each parcel of real property listed on Schedule 3.05 (the “Existing Mortgage
Collateral Properties”), (i) a Mortgage Amendment, executed and delivered by a
duly authorized officer of each party thereto; (ii) an endorsement to each of
the existing title insurance policies updating the effective date and amending
the description of the existing insured mortgage to include the Mortgage
Amendment; and (iii) a no-lien affidavit executed by the president or other
officer of each respective mortgagor, in form satisfactory to the title company.

                     As additional security for the Secured Obligations,
Borrower agrees that in the event Borrower or any Guarantor acquires any real
property, then, from time to time, upon request of the Agent, Borrower shall, or
shall cause such Guarantor to, execute, deliver and record any new mortgages,
deeds of trust and similar instruments, or amendments to any existing mortgages,
deeds of trust and similar instruments (collectively, such existing and new
instruments are called the “Real Property Security Documents”) encumbering such
owned property, which Real Property Security Documents shall be substantially in
the same form as the Real Property Security Documents provided on and/or in
effect as of the date hereof. In connection with such hereafter owned or
otherwise acquired real property, Borrower agrees to

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provide, or cause the applicable Guarantor to provide, to the Collateral Agent
(a) surveys of said real property in the form described in Section 4.01(o) and
(b) mortgagee title insurance policies in the form and amount described in
Section 4.01(p) covering said real property.

                     3.06   Exceptions. Notwithstanding the foregoing, the
Borrower and its Subsidiaries shall not be required to (a) execute and deliver
Real Property Security Documents with respect to real property acquired after
the Closing Date that is subject to liens permitted by clause (iv) or (xiv) of
the definition of “Permitted Liens”, (b) cause any Subsidiary to provide a
security interest in its assets or cause its Capital Stock to be pledged to the
extent not required pursuant to Section 7.01(e) or (c) cause the assets of any
Real Estate Financing Subsidiary to be pledged as Collateral to the extent not
required pursuant to the definition of “Permitted Real Estate Financing
Transaction”.

                     3.07   Pledge of Capital Stock. Without limitation of the
foregoing, the Borrower and its Subsidiaries will pledge (a) the Capital Stock,
limited liability interests, or partnership interests, of any entity acquired
after the Closing Date in accordance with Section 7.01, subject to the
provisions of Section 3.06, (b) all Capital Stock of each Finance Subsidiary
which is owned by any Credit Party to be pledged as Collateral pursuant to the
Collateral Documents and (c) all Capital Stock of each Unrestricted Subsidiary
which is owned by any Credit Party to be pledged as Collateral pursuant to the
Collateral Documents.

ARTICLE IV.
CONDITIONS PRECEDENT

                     4.01   Conditions Precedent to Closing Date. This Agreement
shall become effective as of the Closing Date, subject to the conditions
precedent that Agent shall have received, for its account and the accounts of
the respective lenders party to the Existing Credit Agreement in accordance with
their interests, on or before the Closing Date, payment of all accrued and
unpaid interest, fees, expenses, breakage fees and related costs and expenses
payable under the Existing Credit Agreement in respect of the period prior to
the Closing Date and subject to the further conditions precedent that on or
prior to the Closing Date (subject to the additional time allotted in Section
6.17 for certain of such conditions to be satisfied):

                     (a)   Opinions of Counsel to Borrower, etc. There shall
have been delivered to Agent (with sufficient copies for distribution to all
Lenders), in form and substance satisfactory to Agent and its counsel, an
opinion, dated the Closing Date, of (i) Kahn Kleinman, L.P.A., counsel for
Borrower and the Guarantors, substantially in the form of Exhibit J-1 hereto,
(ii) Latham & Watkins, special counsel for the Borrower and the Guarantors,
substantially in the form of Exhibit J-2 hereto and (iii) Winston & Strawn,
special counsel for the Borrower and the Guarantors, substantially in the form
of Exhibit J-3 hereto;

                     (b)   Other Opinions. There shall have been delivered to
Agent (with sufficient copies for distribution to all Lenders), in form and
substance satisfactory to Agent and its counsel, an opinion, dated the Closing
Date, of Cary Gaan, Esq., or other acceptable in-house counsel, substantially in
the form of Exhibit K hereto;

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                     (c)   Borrower’s Incorporation Papers. There shall have
been delivered to Agent (with sufficient copies for distribution to all
Lenders), in form and substance satisfactory to Agent and its counsel, a copy of
Borrower’s certificate of incorporation, certified by the Secretary of State of
Delaware, as of a recent date, and a copy of the Borrower’s by-laws, certified
by the Secretary or an Assistant Secretary of Borrower;

                     (d)   Borrower’s Corporate Resolution. There shall have
been delivered to Agent (with sufficient copies for distribution to all
Lenders), in form and substance satisfactory to Agent and its counsel, a copy of
a resolution or resolutions passed by the Board of Directors of Borrower,
certified by the Secretary or an Assistant Secretary of Borrower as being in
full force and effect on the Closing Date, authorizing the borrowing provided
for herein and the execution, delivery and performance of this Agreement, the
Notes, the Collateral Documents to which it is a party and any other instrument
or agreement required hereunder;

                     (e)   Borrower’s Incumbency Certificate. There shall have
been delivered to Agent (with sufficient copies for distribution to all
Lenders), in form and substance satisfactory to Agent and its counsel, a
certificate, signed by the Secretary or an Assistant Secretary of Borrower and
dated the Closing Date, as to the incumbency, and containing the specimen
signature or signatures (not photocopied), of the person or persons authorized
to execute and deliver this Agreement, the Notes, the Collateral Documents to
which it is a party and any other instrument or agreement required hereunder on
behalf of Borrower;

                     (f)   Guarantors’ Incorporation Papers. There shall have
been delivered to Agent (with sufficient copies for distribution to all
Lenders), in form and substance satisfactory to Agent and its counsel, with
respect to each Guarantor which has not previously delivered such documents to
Agent, a copy of each such Guarantor’s certificate of incorporation or articles
of association and by-laws or partnership agreement, as the case may be,
certified by the Secretary or an Assistant Secretary of such Guarantor;

                     (g)   Guarantors’ Resolutions. There shall have been
delivered to Agent (with sufficient copies for distribution to all Lenders),
with respect to each Guarantor which has not previously delivered such documents
to Agent, in form and substance satisfactory to Agent and its counsel, a copy of
a resolution or resolutions passed by the Board of Directors (or similar body)
of each Guarantor (or, with respect to a Guarantor which is a partnership, of
such Guarantor’s general partner), certified by the Secretary or an Assistant
Secretary of such Guarantor (or general partner) as being in full force and
effect on the Closing Date, authorizing the execution, delivery and performance
of the Collateral Documents to which it is a party;

                     (h)   Guarantors’ Incumbency Certificates. There shall have
been delivered to Agent (with sufficient copies for distribution to all
Lenders), with respect to each Guarantor which has not previously delivered such
documents to Agent, in form and substance satisfactory to Agent and its counsel,
a certificate, signed by the Secretary or an Assistant Secretary of each
Guarantor (or, with respect to a Guarantor which is a partnership, of such
Guarantor’s general partner) and dated the Closing Date, as to the incumbency,
and containing the specimen signature or signatures (not photocopied), of the
person or persons authorized to execute and deliver the Collateral Documents to
which it is a party on behalf of such Guarantor (or on behalf of such general
partner for such Guarantor);

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                     (i)   Approvals and Consents. There shall have been
delivered to Agent (with sufficient copies for distribution to all Lenders), in
form and substance satisfactory to Agent and its counsel, certified copies of
all material approvals, consents, exemptions and other actions by, and notices
to and filings with, any governmental authority or any other Person and any
trustee or holder of any indebtedness or obligation of Borrower or of any
Guarantor which are required in connection with any transaction contemplated
hereby (other than landlords under leases and first mortgage holders
constituting Permitted Liens, but subject to Section 6.17), all of which shall
be in full force and effect;

                     (j)   Agreement. There shall have been delivered to Agent
(with sufficient copies for distribution to all Lenders), in form and substance
satisfactory to Agent and its counsel, sufficient counterparts of this
Agreement, duly executed by an authorized officer of Borrower;

                     (k)  [Reserved];

                     (l)   Collateral Documents. There shall have been delivered
to Agent (with sufficient copies for distribution to all Lenders), in form and
substance satisfactory to Agent and its counsel, sufficient counterparts of (i)
a Confirmation and Consent, in form reasonably satisfactory to the Agent,
executed by a duly authorized officer of each of the Borrower and the
Guarantors, (ii) Mortgages covering each of the Properties listed on Schedule
4.01(l) (the “Closing Date Non-Mortgaged Properties”), executed by a duly
authorized officer of each of the Borrower and each of the Guarantors which
holds an interest in the applicable Property and (iii) the other Collateral
Documents, executed by a duly authorized officer of each of the Borrower and the
Guarantors party to such Collateral Documents;

                     (m)   Pledge of Shares. The Collateral Agent shall have
received (x) (i) the certificates representing the certificated shares of
Funding Corp., each other Finance Subsidiary, each of the Guarantors listed on
Exhibit D hereto and each first-tier Subsidiary of such Guarantors, in each case
to the extent owned by a Credit Party, and (ii) the certificates representing
65% of the certificated shares of the Foreign Subsidiaries owned directly by the
Borrower or a Guarantor, which certificates are to be pledged pursuant to the
Guarantee and Collateral Agreement, together with (y) an undated stock power for
each such certificate executed in blank by a duly authorized officer of the
pledgor thereof;

                     (n)   Acknowledgements. If requested by the Agent, there
shall have been delivered to Agent (with sufficient copies for distribution to
all Lenders), in form and substance satisfactory to Agent and its counsel,
sufficient counterparts of an amendment and/or acknowledgment from each Person
which executed a consent or acknowledgement in connection with the Existing
Credit Agreement and any other document or agreement identified by the Agent
(including landlord’s consents and consents by other partners in partnerships to
the liens on certain interests in such partnerships created by the Collateral
Documents confirming that such consent or acknowledgement remains effective
after giving effect to the refinancing of the Existing Credit Agreement by this
Agreement, but excluding those consents and acknowledgements specified in
Exhibit L);

                     (o)   Surveys. The Agent shall have received, and the Title
Insurance Company (defined below) shall have received, (A) an as-built survey of
the sites of the Closing Date Non-

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Mortgaged Properties certified to the Agent and the Title Insurance Company in a
manner satisfactory to them, dated a date satisfactory to the Agent and the
Title Insurance Company by an independent professional licensed land surveyor
satisfactory to the Agent and the Title Insurance Company, and the surveys on
which they are based shall be made in accordance with the Minimum Standard
Detail Requirements for Land Title Surveys jointly established and adopted by
the American Land Title Association and the American Congress on Surveying and
Mapping in 1992, and, without limiting the generality of the foregoing, there
shall be surveyed and shown on such maps, plats or surveys the following: (i)
the locations on such sites of all the buildings, structures and other
improvements and the established building setback lines; (ii) the lines of
streets abutting the sites and width thereof; (iii) all access and other
easements appurtenant to the sites or necessary or desirable to use the sites;
(iv) all roadways, paths, driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the site, whether recorded,
apparent from a physical inspection of the sites or otherwise known to the
surveyor; (v) any encroachments on any adjoining property by the building
structures and improvements on the sites; and (vi) a legend relating to the
survey, or (B) in lieu of an as-built survey, the Borrower or its Subsidiaries
shall have delivered any affidavits or other documents required by the Title
Insurance Company to insure the state of facts set forth in a survey which was
previously included in a title insurance policy delivered by the Borrower or a
Subsidiary to the Agent. Surveys delivered to the Agent in connection with the
Existing Credit Agreement with respect to particular items of real property may
be deemed by the Agent sufficient to comply with this paragraph (o) for such
items.

                     (p)   Title Insurance Policy. The Agent shall have received
in respect of each of the Closing Date Non-Mortgaged Properties a mortgagee’s
title policy (or policies) or marked up unconditional binder for such insurance
dated the Closing Date. Each such policy shall (i) be in an amount satisfactory
to the Agent; (ii) be issued at ordinary rates; (iii) insure that the Mortgage
insured thereby creates a valid first Lien on such parcel free and clear of all
defects and encumbrances, except such as may be approved by the Agent; (iv) name
the Agent for the benefit of the Lenders as the insured thereunder; (v) be in
the form of ALTA Loan Policy (Amended 10/17/92); (vi) contain such endorsements
and affirmative coverage as the Agent may request and (vii) be issued by a title
company (the “Title Insurance Company”) satisfactory to the Agent. The Agent
shall have received evidence satisfactory to it that all premiums in respect of
each such policy, and all charges for mortgage recording tax, if any, have been
paid.

                     (q)   Flood Insurance. If requested by the Agent, the Agent
shall have received (i) a policy of flood insurance which (A) covers any parcel
of improved real property which is encumbered by any Mortgage, (B) is written in
an amount not less than the outstanding principal amount of the indebtedness
secured by such Mortgage which is reasonably allocable to such real property or
the maximum limit of coverage made available with respect to the particular type
of property under the National Flood Insurance Act of 1968, whichever is less,
and (C) has a term ending not earlier than the maturity of the indebtedness
secured by such Mortgage and (ii) confirmation that the Borrower has received
the notice required pursuant to Section 208(e)(3) of Regulation H of the Board
of Governors of the Federal Reserve System.

                     (r)   Copies of Documents. The Agent shall have received a
copy of all recorded documents referred to, or listed as exceptions to title in,
the title policy or policies referred to in

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Section 4.01(p) and a copy, certified by such parties as the Agent may deem
appropriate, of all other documents affecting the Closing Date Non-Mortgaged
Properties.

                     (s)   No Litigation. No litigation, inquiry, injunction or
restraining order shall be pending, entered or threatened (including any
proposed statute, rule or regulation) which, in the reasonable opinion of the
Majority Lenders, could have a Material Adverse Effect;

                     (t)   No Material Adverse Change. There shall not have
occurred since December 31, 2002 any change or development, which in either case
in the opinion of the Majority Lenders could have a Material Adverse Effect;

                     (u)   Filings. Any filings and other actions required to
create and perfect the appropriate security interests in all Collateral
(including, without limitation, the filing of duly executed financing statements
on Form UCC-1 in the jurisdictions set forth in Schedule 3 to the Guarantee and
Collateral Agreement and in any other jurisdiction, in the opinion of the Agent,
desirable to perfect the Liens on the Collateral) shall have been duly made or
taken (or, in the case of UCC-1s, executed and delivered in proper form for
filing), and all Collateral shall be free and clear of other liens other than
Permitted Liens.

                     (v)   Good Standing Certificates. There shall have been
delivered to Agent (with sufficient copies for distribution to all Lenders), in
form and substance satisfactory to Agent and its counsel, good standing
certificates (or bring-down telexes or other evidence of good standing) for
Borrower and for each Guarantor from the Secretary of State of the state of
incorporation of each such Person and good standing certificates (or similar
authorization to conduct business as a foreign corporation) for Borrower and
each Guarantor from the Secretary of State of each state with respect to which
Borrower makes the representations contained in Sections 5.01 and 5.02 hereof;

                     (w)   Payment of Fees and Expenses. The Agent shall have
received, for the account of the Lenders and for its own account, payment by
Borrower of all fees and expenses (including reasonable legal fees and expenses)
required to be paid hereunder, including without limitation, under Sections
2.09, 2.11 and 9.06, to the extent invoices therefor have been presented to
Borrower prior to the Closing Date;

                     (x)   Officer’s Certificate. There shall have been
delivered to Agent (with sufficient copies for distribution to all Lenders), in
form and substance satisfactory to Agent and its counsel, a certificate signed
by a Senior Vice President of Borrower, dated as of the Closing Date, certifying
that:

           (i)   the representations and warranties contained in Article V and
in each Collateral Document are true and correct in all material respects on and
as of such date, as though made on and as of such date;

           (ii)   no event has occurred and is continuing, or would result from
the transactions provided for herein, which has or would constitute an Event of
Default; and

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           (iii)   there has occurred since December 31, 2002, no development,
event or circumstance which has had or is reasonably likely to have a Material
Adverse Effect;

                     (y)   Insurance Policies. There shall have been delivered
to the Agent a certificate evidencing the Borrower’s and its Subsidiaries’
insurance coverage in form and substance reasonably satisfactory to the Agent;

                     (z)   Projections. There shall have been delivered to Agent
(with sufficient copies for distribution to all Lenders), in form and substance
satisfactory to Agent and its counsel, the consolidated plan and financial
forecast for the then current and next succeeding five (5) fiscal years of
Borrower and its Subsidiaries, including, without limitation, (i) a forecasted
consolidated balance sheet and a consolidated statement of income and cash flows
of Borrower for each such fiscal year, and (ii) forecasted consolidated
statements of income and cash flows of Borrower for each quarter of the first
such fiscal year. Such plan and forecast for the current fiscal year shall
include a summary of significant assumptions. The Lenders acknowledge that
projections satisfying the condition in this Section 4.01(z) have previously
been delivered by the Borrower;

                     (aa)   Senior Debt. The Borrower shall have delivered to
the Agent a certificate demonstrating in reasonable detail that the Borrower and
the other Credit Parties have the ability (i) under the 1997 Indenture and the
1998 Indenture to incur the indebtedness and other Obligations under the Credit
Documents and that the Obligations constitute Senior Indebtedness (as defined in
the 1997 Indenture and the 1998 Indenture) and (ii) under the Senior Unsecured
Notes Indenture to incur the indebtedness and other Obligations under the Credit
Documents and to create Liens on the Collateral therefor.

                     (bb)   Reallocation. The Lenders shall have made such
payments among themselves and to the lenders under the Existing Credit
Agreement, as directed by the Agent, so that the Advances outstanding on the
Closing Date are held by the Lenders in accordance with their respective
Commitment Percentages, and each Lender shall be deemed to have transferred any
interest transferred by it pursuant to such reallocation free and clear of any
Liens created by it. Advances (other than Term Advances, as such term is defined
in the Existing Credit Agreement) made under the Existing Credit Agreement and
outstanding on the Closing Date shall be continued outstanding hereunder and
shall be Advances under this Agreement.

                     (cc)   Other Evidence Agent May Require. There shall have
been delivered to Agent (with sufficient copies for distribution to all
Lenders), in form and substance satisfactory to Agent and its counsel, such
other evidence or documents as Agent may reasonably request consistent with the
other terms of this Agreement to establish the consummation of the transactions
contemplated hereby, the taking of all proceedings in connection herewith and
compliance with the conditions set forth in this Agreement.

                     (dd)   Senior Unsecured Notes. The Borrower shall have
issued at least $200,000,000 of its Senior Unsecured Notes, which Senior
Unsecured Notes shall have substantially the same terms set forth in the
Preliminary Offering Memorandum therefore dated June 18, 2003 and shall be
otherwise in form and substance satisfactory to the Agent.

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                     (ee)   Term Loan Facility. The Borrower shall have repaid
the Term Loan Facility under the Existing Credit Agreement in full with a
portion of the proceeds from the issuance of the Senior Unsecured Notes.

                     (ff)   Receivables Program. The Borrower shall have
committed funding in an aggregate amount equal to or greater than $100,000,000
under its Receivables Program and on terms and conditions satisfactory to the
Lenders.

                     4.02   Conditions Precedent to Each Advance and Letter of
Credit. The obligation of each Lender to make any Advance or to issue any Letter
of Credit (or to renew or extend any Letter of Credit) hereunder is subject to
the following conditions precedent:

           (a)   No Default or Event of Default has occurred and is continuing
on the date of each Advance or the date of issuance (or the date of renewal or
extension, as the case may be) of each Letter of Credit or would result from the
incurring of obligations by Borrower under this Agreement;

           (b)   The representations and warranties contained herein, in the
Collateral Documents and in any guaranty hereafter executed and delivered by a
new Guarantor pursuant to Section 3.04, shall be true and correct in all
material respects on the date of each Advance or the date of issuance (or the
date of renewal or extension, as the case may be) of each Letter of Credit,
except as to representations and warranties which expressly relate to an earlier
date and except for changes which are expressly permitted by this Agreement; and

           (c)   There has occurred since the Closing Date, no event,
development or circumstance which has had or is reasonably likely to have a
Material Adverse Effect.

Each borrowing by or credit extension to Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of each such borrowing or
credit extension that the conditions in Section 4.02 have been satisfied.

ARTICLE V.
REPRESENTATIONS AND WARRANTIES

                     Borrower represents and warrants to each Lender that:

                     5.01   Borrower’s Existence. Borrower is a corporation duly
organized and validly existing under the laws of the State of Delaware, and is
in good standing and properly licensed to conduct business in every jurisdiction
in which the nature of the business conducted by it makes such license and good
standing necessary and where failure to so comply would have a material adverse
effect on the consolidated financial condition or the business of Borrower and
its Subsidiaries.

                     5.02   Subsidiaries’ Existence. Each Substantial Subsidiary
is duly organized and validly existing under the laws of the jurisdiction of its
formation, and is in good standing and

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properly licensed to conduct business in the State in which its principal
operations are located and in every jurisdiction in which the nature of the
business conducted by it makes such compliance necessary and where failure to
comply would have a material adverse effect on the business of any such
Subsidiary. Each Guarantor which is not a Substantial Subsidiary is duly
organized and validly existing under the laws of the jurisdiction of its
formation and is in good standing and properly licensed to conduct business in
the State in which its principal operations are located and in every
jurisdiction in which the nature of the business conducted by it makes such
compliance necessary except where failure to comply with any of the foregoing
could not reasonably be expected to have a Material Adverse Effect.

                     5.03   Borrower’s and Subsidiaries’ Powers. The execution,
delivery and performance of this Agreement, the Notes, the other Credit
Documents and any other instrument or agreement required to be executed and
delivered by Borrower hereunder or any of its Subsidiaries are within Borrower’s
or such Subsidiary’s corporate or other appropriate powers, have been duly
authorized, and are not in conflict with the terms of any charter, by-law or
other organization papers of Borrower or such Subsidiary, or any material
instrument or agreement to which Borrower or any Subsidiary is a party or by
which Borrower or any Subsidiary is bound or affected (including, but not
limited to, the 1997 Indenture, the 1998 Indenture and the Senior Unsecured
Notes Indenture).

                     5.04   Power of Officers. The officers of Borrower and the
other Credit Parties executing this Agreement, the Notes, the other Credit
Documents and any other certificate, instrument or agreement required to be
delivered hereunder are duly authorized to execute same.

                     5.05   Government Approvals. No approval, consent,
exemption or other action by, or notice to or filing with, any governmental
authority is necessary in connection with the execution, delivery, performance
or enforcement of this Agreement, the Notes, the other Credit Documents or any
other instrument or agreement required hereunder, except as may have been
obtained and certified copies of which have been delivered to Agent or except
where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect.

                     5.06   Compliance With Laws. There is no law, rule or
regulation, nor is there any judgment, decree or order of any court or
governmental authority binding on Borrower or any Subsidiary, which would be
contravened by the execution, delivery, performance or enforcement of this
Agreement, the Notes, the other Credit Documents or any instrument or agreement
required hereunder, except where the failure to so comply would not reasonably
be expected to have a Material Adverse Effect.

                     5.07   Enforceability of Agreement. Each of this Agreement,
the Notes and each of the other Credit Documents to which the Borrower or any of
its Subsidiaries is a party are legal, valid and binding agreements and
obligations of Borrower, or such Subsidiary, as the case may be, enforceable
against Borrower or such Subsidiary, as the case may be, in accordance with
their respective terms, and any other instrument or agreement required
hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable, subject, in each case, to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).

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                     5.08   Title to Property. Borrower and its Subsidiaries
have good title to their respective personal properties and assets, and good and
marketable title to their respective real properties, free and clear of all
Liens, except for Permitted Liens on such properties and assets. The execution,
delivery or performance of this Agreement, the Notes, the other Credit Documents
or any instrument or agreement required hereunder will not result in the
creation of any Lien, other than in favor of the Secured Creditors pursuant to
the Collateral Documents.

                     5.09   Litigation. Except as disclosed on Schedule 5.09,
there are no suits, proceedings, claims or disputes pending or, to the knowledge
of Borrower, threatened against or affecting Borrower or any Subsidiary or their
respective property, which, as of the Closing Date, could reasonably be expected
to have a Material Adverse Effect and, as of any other date, in the reasonable
opinion of the Borrower could be expected to have a Material Adverse Effect.

                     5.10   Events of Default. No event has occurred and is
continuing or would result from the incurring of obligations by Borrower or its
Subsidiaries under this Agreement and the other Credit Documents which is a
Default or an Event of Default.

                     5.11   Compliance with Margin Requirements. Borrower is not
in violation of any provision of Section 7 of the Securities Exchange Act of
1934 or any Margin Regulation, nor will Borrower’s activities cause it to
violate such provision or any Margin Regulation.

                     5.12   Subsidiaries. All of Borrower’s Subsidiaries are
listed on Exhibit D hereto or on an amendment thereto delivered pursuant to
Section 6.03(d) hereof.

                     5.13   Financial Information. The audited consolidated
financial statements of Borrower and its Subsidiaries for the fiscal year ending
December 31, 2002 and the unaudited consolidated financial statements of the
Borrower and its subsidiaries for the fiscal quarter ending March 31, 2003 have
been furnished by Borrower to Lenders. Such financial statements have been
prepared in accordance with GAAP and practices consistently applied and
accurately and fairly present in all material respects the consolidated
financial condition and results of operations of the entities referred to
therein as of such dates. Since the date of the most recent audited financial
statements referred to above, there has been no change in Borrower’s
consolidated financial condition or results of operations sufficient to impair
Borrower’s ability to repay the Obligations in accordance with the terms hereof.
Neither Borrower nor any Subsidiary has any contingent obligations, liabilities
for taxes or other outstanding financial obligations which are material in the
aggregate, except those for which adequate reserves are established or as
disclosed in such statements or in the statements or reports delivered or to be
delivered for the period in which such obligations were incurred pursuant to
Section 6.03.

                     5.14   ERISA. Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and any other
applicable federal or state law, and except as listed on Schedule 5.14 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 Plan or Multiemployer Plan with
respect to which Borrower would be under an obligation to furnish a report to
Lenders in accordance with Section 6.02(d) hereof and which, taking all such
events or conditions arising within the last twelve-month period, in the
aggregate would result in liability to Borrower or an ERISA Affiliate in excess
of One Million Dollars ($1,000,000). For purposes of this

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representation and warranty, Borrower, or any ERISA Affiliate if not the Plan
administrator, shall be deemed to have knowledge of all facts attributable to
the Plan administrator designated pursuant to ERISA; provided, however, that the
foregoing representation with respect to Multiemployer Plans is made with
respect to matters of which Borrower or any ERISA Affiliate has actual
knowledge. The aggregate withdrawal liability under Section 4201 of ERISA which
could be incurred by Borrower and each ERISA Affiliate, collectively, upon a
complete withdrawal, within the meaning of Section 4203 of ERISA, from each and
all Multiemployer Plans to which each is contributing or has contributed within
the past five calendar years, plus the aggregate of the excess of benefit
liabilities, within the meaning of Section 4001(a)(16) of ERISA, of each Plan
upon termination of such Plan over the assets of such Plan, does not exceed Five
Million Dollars ($5,000,000).

                     5.15   Investment Company Act of 1940. Neither Borrower nor
any of its Subsidiaries is an “investment company” or a company “controlled” by
an “investment company”, within the meaning of the Investment Company Act of
1940, as amended.

                     5.16   No Restrictions on Subsidiaries. No Subsidiary is
prohibited by the terms of any agreement to which it is a party or by which it
is bound or affected from paying dividends to or making loans or advances to
Borrower or any Subsidiary directly controlling it, except (a) as disclosed in
Schedule 5.16; (b) restrictions imposed by this Agreement or any Collateral
Agreement; (c) customary non-assignment provisions restricting subletting or
assignment of any lease or assignment of any contract of any Subsidiary;
customary net worth provisions contained in leases and other agreements entered
into by a Subsidiary in the ordinary course of business; and customary
provisions in instruments or agreements relating to a Lien created, incurred or
assumed in accordance with this Agreement prohibiting the transfer of the
property subject to such Lien, in each case in existence on the Closing Date;
(d) restrictions on Debt secured by any Permitted Lien described in clauses
(iv), (xii), (xiii) or (xiv) of the definition of “Permitted Lien” limiting the
right of such Subsidiaries to dispose of the assets securing such Debt to the
extent that the agreement governing such Debt prohibits the transfer of such
assets as a Restricted Payment; (e) customary restrictions with respect to a
Subsidiary pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the capital stock or assets of such
Subsidiary; and (f) any restrictions pursuant to any agreement that extends,
refinances, renews or replaces any agreement containing any of the restrictions
described in the foregoing clauses (a) through (e), provided that the terms and
conditions of any such restrictions are not less favorable to the Lenders than
those under or pursuant to the agreement extended, refinanced, renewed or
replaced.

                     5.17   Senior Indebtedness. All sums outstanding under this
Agreement and the Notes and all other monetary obligations of the Borrower under
this Agreement and the other Credit Documents will constitute Senior
Indebtedness and Designated Senior Indebtedness.

                     5.18   Environmental Matters. As of the Closing Date:

                     (a)   except as disclosed on Schedule 5.18, the property,
assets and operations of Borrower and the Subsidiaries comply in all material
respects with all applicable Hazardous Materials Laws and all governmental
permits relating to the use and/or operation thereof (except to the extent that
failure to comply with such Hazardous Materials Laws or applicable permits

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would not have a material adverse effect on the business, operations,
properties, assets or financial condition of Borrower and its Subsidiaries taken
as a whole);

                     (b)   to the best knowledge of Borrower, after reasonable
inquiry, (i) none of the real property owned in fee, or the assets or operations
of Borrower and the 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, (ii) there are no underground storage tanks present on or under the
Properties owned in fee, and (iii) there are no pending or threatened: (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; and

                     (c)   neither Borrower nor any Subsidiary has any material
liability (material to the Borrower and its Subsidiaries taken as a whole) in
connection with any release of any Hazardous Materials into the environment.

                     5.19   Collateral Documents. (a)  The provisions of each of
the Collateral Documents (other than the Mortgages, subject to (b) below, and
the collateral assignments of tenant’s rights in leases) are effective to create
in favor of the Collateral Agent, for the benefit of the Secured Creditors, a
legal, valid and enforceable security interest in all right, title and interest
of Borrower and its Subsidiaries in the Collateral described therein; and
financing statements have been filed (or, in the case of UCC-1 financing
statements delivered on the Closing Date, executed and delivered in the proper
form for filing) in the offices in all of the jurisdictions listed in the
schedules to the Guarantee and Collateral Agreement.

                     (b)   Each Mortgage when delivered will be effective to
grant to the Collateral Agent for the benefit of the Secured Creditors, a legal,
valid and enforceable mortgage lien on all the right, title and interest of the
mortgagor under such Mortgage in the real property and fixtures described
therein. When each such Mortgage is duly recorded in the appropriate land
records offices and the mortgage recording fees and taxes in respect thereof are
paid and compliance is otherwise had with the formal requirements of state law
applicable to the recording of real estate mortgages generally, each such
Mortgage shall constitute a perfected first priority mortgage lien on such
mortgaged property (or, as required by Section 7.03(b), a perfected second
priority mortgage lien on such mortgaged property), subject to the encumbrances
and exceptions to title set forth therein and except as noted in the title
policies and title endorsements thereto delivered to the Collateral Agent and
described in Exhibit F, and such Mortgage also creates a legal, valid,
enforceable and perfected first lien on, and security interest in, all right,
title and interest of Borrower or such Subsidiary under such Mortgage in all
fixtures which are covered by such Mortgage, subject to no other Liens, except
the encumbrances and exceptions to title set forth therein and except as noted
in the title policies and title endorsements thereto delivered to the Collateral
Agent and described in Exhibit F and Permitted Liens.

                     (c)   The provisions of the Guarantee and Collateral
Agreement, after giving effect to (i) the delivery to the Collateral Agent of
the certificates representing the certificated shares of the capital stock and
other equity interests of the Subsidiaries described in the Guarantee and

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Collateral Agreement (the “Pledged Stock”) accompanied by appropriate undated
stock powers executed in blank, (ii) the registration of the Pledged Partnership
Interests (as defined in the Guarantee and Collateral Agreement and, together
with the Pledged Stock, the “Pledged Securities”) pursuant to the forms attached
as exhibits to the Guarantee and Collateral Agreement and (iii) the filing of
UCC-1 financing statements in the offices set forth on the schedules to such
Guarantee and Collateral Agreement, shall be effective to create, in favor of
the Collateral Agent, for the ratable benefit of the Secured Creditors, a fully
perfected first Lien on, and security interest in, all right, title and interest
of Borrower and the Guarantors in the “Collateral”, as defined in the Guarantee
and Collateral Agreement (except for Permitted Liens), and the Pledged Stock has
been delivered, where applicable, to the Collateral Agent or its nominee.

                     5.20   Copyrights, Patents, Trademarks and Licenses, etc.
Except as disclosed in Schedule 5.20, Borrower and its Subsidiaries own or are
licensed or otherwise have the right to use all of the patents, trademarks,
service marks, trade names, copyrights and franchises that are reasonably
necessary for the operations of their respective businesses as currently
conducted, without conflict with the rights of any other Person with respect
thereto and except where the failure to be in compliance with this sentence
would not have a material adverse effect on Borrower or any Substantial
Subsidiary. To the best knowledge of Borrower, no slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed by Borrower or any of its
Subsidiaries infringes upon any rights obtained by any other Person, except
where the failure to be in compliance with this sentence would not have a
material adverse effect on Borrower or any Substantial Subsidiary, and no claim
or litigation regarding any of the foregoing is pending or threatened.

                     5.21   Accuracy of Information, etc. No statement or
information contained in this Agreement, any other Credit Document, the
Confidential Information Memorandum dated June 2003 or any other document,
certificate or statement (other than Schedule 1.01 until such time Schedule 1.01
shall have been updated pursuant to Section 6.17) furnished by or on behalf of
any Credit Party to the Agent or the Lenders, or any of them, for use in
connection with the transactions contemplated by this Agreement or the other
Credit Documents, contained as of the date such statement, information, document
or certificate was so furnished (or, in the case of the Confidential Information
Memorandum, as of the date of this Agreement), any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements contained herein or therein not misleading. The projections and pro
forma financial information contained in the materials referenced above are
based upon good faith estimates and assumptions believed by management of the
Borrower to be reasonable at the time made, it being recognized by the Lenders
that such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth
therein by a material amount.

                     5.22   Permitted Indebtedness. All Indebtedness (as defined
in the Senior Unsecured Notes Indenture) outstanding under this Agreement and
the other Credit Documents is permitted by Sections 1.1 and 10.8 of the Senior
Unsecured Notes Indenture. All other sums outstanding under this Agreement and
the Notes and all other monetary obligations of the Credit Parties under the
Credit Documents are permitted under the Senior Unsecured Notes Indenture.

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All Liens on the Collateral are permitted by Sections 1.1 and 10.11 of the
Senior Unsecured Notes Indenture.

ARTICLE VI.
AFFIRMATIVE COVENANTS

                     Borrower covenants and agrees that so long as the Revolving
Credit shall remain available, and until the full and final payment of all
Obligations, it will, and with respect to Sections 6.01, 6.04, 6.05, 6.06, 6.07,
6.08, 6.09, 6.10, 6.11, 6.14, 6.16 and 6.17, it will cause each Subsidiary to,
unless Majority Lenders waive compliance in writing:

                     6.01   Use of Proceeds and Letters of Credit. Use (a) the
proceeds of the Advances solely (i) refinance and continue indebtedness under
the Existing Credit Agreement, (ii) for general corporate purposes, including to
finance expansions and investments permitted hereunder and (iii) for working
capital purposes in the ordinary course of business; and (b) the Letters of
Credit (i) to provide security as required under applicable state consumer
protection statutes and for utility deposits, (ii) to provide credit support for
insurance, construction bonds, rent deposits and utility bonds, (iii) to secure
the payment of workers’ compensation benefits and obligations, (iv) for the
purposes described in clause (ii) of the definition of “Permitted Liens” and to
provide credit support for the obligations described therein, and (v) for the
general corporate purposes of the Borrower and its Subsidiaries in the ordinary
course of business. For purposes of this Section 6.01, a “hostile takeover” of
another entity or a “tender offer” in furtherance of same is not a proper
purpose.

                     6.02   Notices. Promptly, but within five (5) Banking Days,
unless otherwise provided below, give written notice to Agent of:

           (a)   except for matters previously disclosed on Schedule 5.09 and
Schedule 6.02(a) (unless there is a significant development with respect to
these matters), any litigation affecting Borrower or any Subsidiary, the adverse
determination of which could materially and adversely affect the financial
condition or business of Borrower and its Subsidiaries taken as a whole, or
where the amount Borrower or such Subsidiary expects to pay the other parties to
the litigation is more than Two Million Dollars ($2,000,000);

           (b)   (i)  any dispute which may exist between Borrower or any
Subsidiary and any governmental regulatory body or law enforcement authority
which has not been previously disclosed and could have a material adverse effect
on its operations, and (ii) any lien for taxes (other than taxes unless such
taxes are due), assessments, governmental charges, or levies, in each case in
excess of One Million Dollars ($1,000,000), immediately upon the filing thereof
or the attachment thereof to any property of Borrower or any of its
Subsidiaries;

           (c)   any labor controversy resulting in or reasonably likely to
result in a strike against Borrower or any Subsidiary which could have a
Material Adverse Effect;

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           (d)   the occurrence of a Reportable Event with respect to any Plan
which could result in the incurrence by Borrower or any ERISA Affiliate of any
liability, fine or penalty; the institution of any steps to terminate any Plan
(together with copies of any communication between the PBGC and Borrower or any
ERISA Affiliate related to such termination); the institution of any steps to
withdraw from any Plan, within the meaning of Section 4062(e) or 4063 of ERISA,
or any Multiemployer Plan, within the meaning of Section 4203 or 4205 of ERISA;
the incurrence of any material increase in the contingent liability of Borrower
or any ERISA Affiliate with respect to any post-retirement welfare benefits; the
failure of Borrower or any other Person to make a required contribution to a
Plan if such failure is sufficient to give rise to a lien under Section 302(f)
of ERISA; or the adoption of an amendment to any Plan that pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA would require Borrower or an
ERISA Affiliate to provide security to the Plan in accordance with the
provisions of such Sections;

           (e)   any Default or Event of Default, specifying the nature and the
period of existence thereof and what action Borrower has taken or proposes to
take with respect thereto;

           (f)   upon, but in no event later than ten (10) days after, becoming
aware of (i) any and all enforcement, cleanup, removal or other governmental or
regulatory actions instituted, completed or threatened against Borrower or any
Subsidiary or any of their properties pursuant to any applicable Hazardous
Materials Laws which has the reasonable likelihood of subjecting Borrower or any
Subsidiary to environmental liability of Two Million Dollars ($2,000,000) or
more, (ii) all claims made or threatened by any third party against Borrower or
any Subsidiary with respect to or because of its or their property relating to
damage, responsibility, contribution, cost recovery, compensation, loss or
injury resulting from any Hazardous Materials which has the reasonable
likelihood of subjecting Borrower or any Subsidiary to environmental liability
of Two Million Dollars ($2,000,000) or more (the matters set forth in clauses
(i) and (ii) above are hereinafter referred to as “Hazardous Materials Claims”),
and (iii) any environmental or similar condition on any real property adjoining
or in the vicinity of the property of Borrower or any Subsidiary that could
reasonably be anticipated to cause the property owned by Borrower or any
Subsidiary or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use of such property under any
Hazardous Materials Laws, together with copies of all inquiries, reports or
notices relating to the matters set forth in clauses (i), (ii) and (iii);

           (g)   following receipt by Borrower of a material notice from any
holder or representative of Subordinated Debt or any Senior Unsecured Notes, a
copy of such notice and, concurrently with the sending of any notice by Borrower
to the holder or representative of any Subordinated Debt or any Senior Unsecured
Notes, a copy of such notice; and

           (h)   any other matter which has resulted or is reasonably likely to
result in a Material Adverse Effect.

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                     6.03   Financial Statements, Reports, Etc. Deliver or cause
to be delivered to the Agent, with copies for each of the Lenders:

           (a)   As soon as available but no later than fifty (50) days after
the close of each of the first three fiscal quarters of each of Borrower’s
fiscal years, Borrower’s unaudited consolidated statement of income and retained
earnings as of the close of such quarter, its consolidated balance sheet and
statement of income and retained earnings for that portion of the fiscal year
ending with such quarter, and its unaudited consolidated statement of cash flows
for that portion of the fiscal year ending with such quarter. Each of such
financial statements shall be certified by a responsible officer of Borrower as
being prepared in accordance with GAAP; provided, that the delivery to each
Lender of a Form 10-Q Quarterly Report of the Borrower within the time period
set forth above shall satisfy the Borrower’s obligations pursuant to this
paragraph (a);

           (b)   as soon as available but no later than one hundred five (105)
days after the close of each of its fiscal years, a copy of the unqualified,
audited financial statements of Borrower and such other audited financial
statements of Subsidiaries of Borrower that have been prepared (if any). Such
financial statements shall include at least the balance sheet of Borrower as of
the close of such year and statements of income and retained earnings and of
changes in financial position and cash flows for such year, prepared (in the
case of Borrower) on a consolidated basis, and such consolidated financial
statements shall be certified by Ernst & Young or by other independent public
accountants of national reputation selected by Borrower and reasonably
satisfactory to Lenders. The delivery to each Lender of a Form 10-K Annual
Report within the time period set forth above shall satisfy the Borrower’s
obligations pursuant to the preceding portion of this Section 6.03(b); provided
that the consolidated financial statements included in such Form 10-K shall be
certified by Ernst & Young or by other independent public accountants of
national reputation selected by Borrower and reasonably satisfactory to Lenders.
The accountants’ certification (x) shall not be qualified or limited because of
restricted or limited examination by such accountants of any material portion of
the records of Borrower or any such Subsidiary for which audited financial
statements have been prepared and (y) shall not contain a “going concern” or
like qualification or exception. Such accountants for Borrower shall state in a
letter to Lenders that in the course of their examination such accountants,
without undertaking any special procedures for the purpose of such certificate,
have obtained no knowledge of the occurrence of any condition, event or act
which would constitute a Default or an Event of Default, or, if such accountants
shall have obtained knowledge of any such violation, condition, event or act,
they shall specify in such letter all such violations, conditions, events and
acts and the nature and status thereof. If any of the materials required to be
delivered pursuant to paragraph (c) of this Section 6.03 are delivered in
connection with the delivery of the financial statements pursuant to this
Section 6.03(b), the Borrower shall not be required to deliver separately such
statements pursuant to such paragraph (c). Borrower shall promptly deliver to
Agent a copy of any management letters from such accountants to Borrower;

           (c)   promptly after filing with the Securities and Exchange
Commission, a copy of each Form 8-K Current Report, Form 10-K Annual Report,
Form 10-Q Quarterly Report

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and Form 11-K Annual Report, Annual Report to Shareholders, Proxy Statement and
Registration Statement of (i) Borrower and (ii) Borrower’s Subsidiaries;

           (d)   not later than forty (40) days after the end of each fiscal
month (other than the last month in each fiscal quarter), Borrower’s unaudited
consolidated statement of income for that portion of the fiscal year ending with
such month, certified by a responsible officer of Borrower as being complete and
correct and fairly presenting its results of operations and including a
comparison to the same period for the prior fiscal year;

           (e)   not later than fifty (50) days after the close of each of the
first three (3) quarters of the fiscal year of Borrower nor later than one
hundred five (105) days after the close of each of the Borrower’s fiscal years,
a quarterly certificate executed by any of the chief financial officer, vice
president, treasurer or controller of Borrower, stating that such officer is
familiar with this Agreement and the business and operations of Borrower and (i)
showing Borrower’s compliance with Sections 6.12, 6.14, 6.15, 7.01, 7.02, 7.08
and 7.11, (ii) if Borrower or any Subsidiary is not in compliance therewith,
showing such failure to comply, the amount thereof and explaining the reason
therefor, (iii) specifying changes during such quarter in the list of
Subsidiaries previously delivered by the Borrower to the Lenders, other than
changes previously reported to the Agent during such quarter, (iv) stating that
Borrower has performed all its obligations hereunder and under any judgment,
decree or order of any court or governmental authority binding on Borrower
except as may be contested in good faith upon advice of counsel and for the
possible payment of which adequate reserves are being maintained, (v) stating
that no event has occurred which constitutes a Default or an Event of Default,
or, if such event has occurred, the nature and status thereof and the steps that
Borrower is taking or has taken to cure the same and (vi) stating the name and
jurisdiction of organization of each Unrestricted Subsidiary created during such
quarter;

           (f)   commencing March 1, 2004, on such date and on the first day of
each March thereafter, projections which are similar in form and substance to
the projections delivered pursuant to Section 4.01(z);

           (g)   such other statements, lists of property and accounts, budgets,
forecasts or reports as Agent or any Lender may reasonably request;

           (h)   within 10 Banking Days after (i) the receipt of proceeds from a
disposition of assets which receipt causes the amount of Reinvestment Proceeds
not theretofore reinvested or applied to prepayment of Advances and cash
collateralization of Letters of Credit to exceed $5,000,000 or (ii) the receipt
of proceeds from the disposition of assets when the Reinvestment Proceeds not
theretofore reinvested or applied to prepayment of Advances and cash
collateralization of Letters of Credit exceeds $5,000,000, a statement of a
responsible officer of the Borrower certifying the amount of such proceeds and
the amount of Reinvestment Proceeds as of such date of receipt;

           (i)   concurrently with the delivery thereof pursuant to the
Receivables Program Documents or a Receivables Financing Transaction, a copy of
(A) each Settlement

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Statement (as defined in the Pooling & Servicing Agreement) delivered pursuant
to Section 3.4 of the Pooling & Servicing Agreement (or any comparable
settlement statement delivered under a Receivables Financing Transaction) and
(B) upon the request of any Lender, through Agent, each officer’s certificate
delivered pursuant to Section 3.5 of the Pooling & Servicing Agreement (or any
comparable certificates delivered under a Receivables Financing Transaction),
each independent accountant’s report and management letter delivered pursuant to
Section 3.6 of the Pooling & Servicing Agreement (or any comparable report or
letter delivered under a Receivables Financing Transaction) and such other
information relating to the Receivables Program or any Receivables Financing
Transaction as shall be requested by any Lender; and

           (j)   at each time financial statements of the Borrower are required
to be delivered pursuant to paragraph (a) or (b) above, copies of the combined
balance sheet of the Unrestricted Subsidiaries as of the close of the applicable
quarter or fiscal year and combined statements of income and retained earnings
of the Unrestricted Subsidiaries for the portion of the fiscal year then ended,
all set forth in a format which reconciles such financial statements of the
Unrestricted Subsidiaries to the corresponding financial statements delivered
pursuant to paragraphs (a) and (b).

                     6.04   Further Assurances. Borrower shall execute and
deliver, or cause to be executed and delivered, to Lenders, Agent or the
Collateral Agent, such documents and agreements, and shall take or cause to be
taken such actions, as Agent, the Collateral Agent or the Majority Lenders may,
from time to time reasonably request to carry out the terms and conditions of
this Agreement and all of the Collateral Documents.

                     6.05   Existence, Etc. Subject to Section 7.05, maintain
and preserve its existence and all rights, privileges and franchises now enjoyed
and necessary for use in its business, and keep all its properties material to
its operations consistent with industry practice in good working order and
condition.

                     6.06   Ownership of Stock of Subsidiaries. Subject to
Sections 7.05 and 7.08, maintain at least the same ownership of the capital
stock or other equity interests of each of its Subsidiaries as in effect on the
Closing Date.

                     6.07   Payment of Obligations. Pay all material
obligations, including tax claims, when due, except such as may be diligently
contested in good faith and by appropriate proceedings or as to which a bona
fide dispute may exist and for which adequate reserves are being maintained.

                     6.08   Compliance with Laws. At all times comply with all
laws, rules, regulations, orders and directions of any governmental authority
applicable to or having jurisdiction over it or its business, the violation of
which could have a material adverse effect on its financial condition or
continued operation, or on the validity or enforceability of this Agreement, any
of the Notes or any of the other Credit Documents, or the rights or remedies of
the Agent and the Lenders hereunder or thereunder.

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                     6.09   Insurance and Condemnation. Maintain at all times
substantially the same type of insurance coverage in respect of its properties
and assets as that maintained in respect thereof immediately prior to the
execution of this Agreement:

           (a)   in amounts not less than the amount of the coverage immediately
prior to the execution of this Agreement for all insurance other than that
described in clause (b) below including, without limitation, fire and extended
coverage insurance for the full and insurable replacement value of all buildings
and other improvements located on its properties and business interruption and
workmen’s compensation insurance. All such insurance (other than workmen’s
compensation insurance) relating to assets of Borrower or its Subsidiaries shall
name the Collateral Agent as loss payee (and in the case of each item of real
property on which the Collateral Agent has a security interest, mortgage loss
payee) and an additional insured for the interests relating to the assets of
Borrower and its Subsidiaries, for the benefit of the Collateral Agent and each
Secured Creditor, as their interests may appear, and shall not be modified,
reduced or cancelled in the absence of thirty (30) days prior written notice to
the Collateral Agent. Borrower shall promptly notify Agent of any loss, damage,
or destruction to the Collateral in excess of $2,000,000 for each such casualty,
whether or not covered by insurance. The Collateral Agent is hereby authorized
to collect all insurance proceeds directly. With respect to insurance proceeds
arising from loss, damage or other casualty to any of the Collateral or any part
thereof, such proceeds shall be applied as hereinafter provided. Destruction or
damage to any real or personal property of Borrower or any Subsidiary which
gives rise to insurance proceeds shall be deemed to be a disposition of such
property for purposes of Section 7.08(d); provided, however, that if the total
amount of the proceeds from such casualty is reasonably expected to be less than
$5,000,000 and neither an Event of Default nor a Default shall have occurred and
be continuing, Borrower shall have the exclusive right to negotiate a settlement
regarding such proceeds with the applicable insurance company and the Collateral
Agent shall promptly forward such proceeds to Borrower and the Borrower shall
use such proceeds to pay for the repair or replacement (it being agreed that a
destroyed or damaged fitness center may be replaced at any site within five
miles of the site of such fitness center) of the Collateral subject to such
casualty; provided, further, however, that if an Event of Default or a Default
shall have occurred and be continuing, or the proceeds of insurance from such
casualty are reasonably expected to be equal to or greater than $5,000,000,
Borrower shall not enter into any settlement agreement with the applicable
insurance company without the prior written consent of Agent, which consent
shall not be unreasonably withheld, and if a determination has been made by
Borrower, with the prior written consent of Agent, to utilize such proceeds to
replace or rebuild the Collateral affected by such casualty, the Collateral
Agent shall release such proceeds to Borrower from time to time during the
course of said reconstruction, repair or restoration, but not more often than
once each thirty (30) day interval, in accordance with the Collateral Agent’s
customary practices for disbursements of construction loans, including, without
limitation, customary conditions precedent to disbursement, provided that:

           (i)   at the time of any requested release of funds, no Event of
Default or Default shall have occurred and be continuing (to the extent such
Event of Default

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or Default is cured or waived, Borrower may again request the release of such
funds);

           (ii)   if at the time of any such request by Borrower the cost of
completing the repair, replacement or reconstruction, lien-free and ready for
use, is in excess of insurance proceeds and other sums then in the Collateral
Agent’s hand pursuant to this Section 6.09, funds to cover such excess shall
either (x) be promptly deposited by Borrower with the Collateral Agent and shall
be disbursed under this Section 6.09 in the same manner as insurance proceeds or
(y) to the extent some or all of such amount is available to be borrowed
pursuant to Section 2.01(a) hereof, Borrower may, in lieu of the deposit set
forth in subsection (x) above, elect to borrow such amounts as an Advance in
accordance with the terms of Article II hereof when and as needed to complete
the repair;

           (iii)   costs of administering this disbursement procedure shall be
paid by Borrower out of funds on deposit with the Collateral Agent or otherwise;

           (iv)   when repair, replacement or reconstruction has been completed
and paid for, all insurance proceeds then remaining in the Collateral Agent’s
hands shall be applied to the payment of the Obligations in accordance with
Section 7.08(d) and Section 2.13(a);

           (v)   the Collateral Agent shall be satisfied that, upon release of
such proceeds, it shall have for the ratable benefit of the Secured Creditors, a
first priority perfected security interest on all property acquired (or to be
acquired), but subject to Permitted Liens, with such proceeds; and

           (vi)   each release of funds shall be conditioned upon receipt by
Agent of such documentation as Agent may reasonably require such as bills of
sale, other evidences of ownership by the Borrower (or a Subsidiary) of property
acquired with such proceeds, completion certificates, waivers of mechanic’s
liens, etc.

The Collateral Agent shall, pending disbursement or application of funds in
accordance with the terms of this Section 6.09, hold any insurance proceeds (and
other funds deposited with it pursuant to clause (ii) above) deposited with it
in an interest bearing account as to which the Collateral Agent shall not be
liable in any respect to Borrower for any investment results. Interest thereon
shall be held and disposed of in the same manner as other monies held by the
Collateral Agent under this Section 6.09. On each anniversary date of this
Agreement, Borrower shall provide Agent with a summary of each insurance policy
satisfactory to Agent reflecting the insurance coverage required under this
Section 6.09 (together with complete copies of any insurance policies which
Agent may request promptly after such request but not later than six months
after such request). In the event of foreclosure of any mortgage or deed of
trust in favor of Collateral Agent encumbering the Properties or transfer of
title to the Properties in lieu of foreclosure, all right, title and interest of
Borrower in and to any insurance policies then in force with respect to the
Properties (other than liability policies of Borrower) shall pass to the
purchaser, grantee or assignee. In the event of any taking of any portion of any
of

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the Properties by condemnation, seizure or appropriation by any governmental
authority which does not constitute an Event of Default hereunder, all awards or
proceeds on account of said taking shall be collected and applied in the same
manner and shall be subject to the same conditions precedent to the disbursement
thereof as applicable to insurance proceeds under this Section 6.09.
Notwithstanding the foregoing, the rights of the Agent and the Lenders under
this paragraph (a) with respect to property and casualty insurance proceeds
relating to loss, destruction or damage, or a taking of, real property (x)
leased by the Borrower or any of its Subsidiaries or (y) which is subject to a
mortgage lien which is prior to the lien of any Mortgage in favor of the
Collateral Agent thereon, and for which in either case the Collateral Agent is
named as loss payee, shall be subordinate to the rights, if any, of the owner of
such real property or the holder of such prior mortgage lien to the extent such
owner or holder is also named as loss payee; and

           (b)   in an amount not less than One Hundred Million Dollars
($100,000,000) for general liability coverage, including both bodily injury and
property damage, on a per occurrence basis (the “Minimum Liability Coverage”),
provided, however, that the Minimum Liability Coverage may be reduced from time
to time to a coverage limit of not less than Twenty-Five Million Dollars
($25,000,000) on a per occurrence basis (the “Lowered Coverage”) if, within
thirty (30) days prior to the expiration of any Minimum Liability Coverage
policy, and thereafter within thirty (30) days after the end of each fiscal year
of Borrower until the Minimum Liability Coverage is reinstated, Borrower
delivers to Agent a certificate signed by the chief operating officer of
Borrower stating that Borrower has obtained a lesser amount of coverage, setting
forth the amount thereof, and that Borrower was unable to obtain Minimum
Liability Coverage and was able to obtain general liability coverage only in the
amount set forth in the Borrower’s certificate; provided, further, however, that
the Lowered Coverage may be reduced from time to time to a coverage limit of not
less than Twenty-Five Million Dollars ($25,000,000) on a “claims made” basis if,
within thirty (30) days prior to the expiration of any Lowered Coverage policy
and thereafter within thirty (30) days after the end of each fiscal year of
Borrower until the Minimum Liability Coverage is reinstated, Borrower delivers
to Agent a certificate signed by the chief operating officer of Borrower stating
that Borrower has obtained a lesser amount of coverage, setting forth the amount
thereof, and that Borrower was unable to obtain Minimum Liability Coverage or
Lowered Coverage and was able to obtain general liability coverage only in the
amount set forth in the Borrower’s certificate.

                     6.10   Adequate Books. Maintain adequate books, accounts
and records in accordance with GAAP, and at any reasonable time upon reasonable
notice, during normal business hours, permit employees or agents of each Lender
at any reasonable time to inspect its properties and examine or audit its books,
accounts and records and make copies and memoranda thereof.

                     6.11   ERISA. Make prompt payment contributions required to
meet the minimum funding standards of ERISA (including any funding waivers
granted thereunder) or as required pursuant to a collective bargaining agreement
and to maintain, and cause each of its ERISA Affiliates to maintain, each
employee benefit plan (as defined in Section 3(3) of ERISA)

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as to which it may have any liability in material compliance with all applicable
requirements of law and regulations.

                     6.12   Interest Coverage. At the end of any fiscal quarter
of the Borrower, commencing with the period ending September 30, 2003, maintain
a ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest
Expense, for any period of four consecutive fiscal quarters of the Borrower then
ended, equal to or greater than 2.50 to 1.0.

                     6.13   Hazardous Materials. (a)  Conduct, and cause each
Subsidiary to conduct, its operations and keep and maintain its property in
compliance with all Hazardous Materials Laws (except to the extent that failure
to comply with such Hazardous Materials Laws would not have a material adverse
effect on the business, operations, properties, assets or financial condition of
Borrower and its Subsidiaries taken as a whole).

           (b)   Conduct, and cause to be conducted, the ongoing operations of
Borrower and its Subsidiaries in a manner that will not give rise to the
imposition of liability, or require expenditures, under or in connection with
any Hazardous Materials Law (except for any liabilities or expenditure which, in
the aggregate, would not have a material adverse effect on the business,
operations, properties, assets or financial condition of Borrower and its
Subsidiaries taken as a whole.

           (c)   Agent and its agents and representatives shall have the right
at any reasonable time to enter and visit the property (whether owned or leased)
of Borrower or any of its Subsidiaries for the purpose of observing such
property. Agent is under no duty, however, to visit or observe any such
property, and any such acts by Agent shall be solely for the purposes of
protecting Lenders’ security and preserving Lenders’ rights under the Collateral
Documents. No site visit or observation by Agent shall result in a waiver of any
default of Borrower or any Subsidiary or impose any liability on Agent or
Lenders. In no event shall any site visit or observation by Agent be a
representation that Hazardous Materials are or are not present in, on, or under
such property, or that there has been or shall be compliance with any Hazardous
Materials Laws. Neither the Borrower nor any other party is entitled to rely on
any site visit or observation by Agent. Agent owes no duty to inform Borrower or
any other party of any Hazardous Materials or any other adverse condition
affecting any such property. Agent shall not be obligated to disclose to
Borrower or any other party any report or findings made as a result of, or in
connection with, any site visit or observation by Agent. In each instance, Agent
shall give Borrower reasonable notice before entering any such property. Agent
shall make reasonable efforts to avoid interfering with the use of any such
property in exercising any rights provided in this Section 6.13.

           (d)   At the Collateral Agent’s reasonable request, which the
Collateral Agent may make at all reasonable times and from time to time,
Borrower shall cause Phase I environmental audits of the Properties on which the
Collateral Agent has Liens to be conducted by technical consultants acceptable
to the Collateral Agent and detailed written reports thereof to be furnished to
the Collateral Agent, for its benefit, all in a form acceptable to the
Collateral Agent, provided that no more than one such audit may be

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required for any property unless at any time the Collateral Agent reasonably
determines that a material change in the environmental condition of such
property may have occurred. In the event said Phase I environmental audits
disclose any environmental condition of any of the Properties which could cause
a material violation of the Hazardous Materials Laws, Borrower shall cause a
Phase II environmental audit of the applicable Property to be conducted by said
technical consultant acceptable to the Collateral Agent and a detailed written
report thereof to be furnished to the Collateral Agent. Borrower shall take all
reasonable remedial measures indicated in said Phase II environmental audit
necessary to be in compliance with law. If Borrower fails to obtain said Phase I
or Phase II environmental audits as aforesaid, the Collateral Agent may, but
shall not be obligated to, cause said Phase I or Phase II environmental audits
to be conducted at Borrower’s sole cost.

           (e)   Borrower hereby acknowledges that nothing in this Section is
either intended to or actually does give Collateral Agent or the Lenders control
of Borrower’s or its Subsidiaries’ Properties or business or any of its or their
business decisions.

                     6.14   Total Leverage Ratio. Maintain the Total Leverage
Ratio at the end of each fiscal quarter of the Borrower set forth below at a
level not to exceed the level set forth opposite such period:

              |====================================|=======================|
              | Quarter Ending                     |    Maximum Allowed    |
              |====================================|=======================|
              | September 30, 2003 through         |         5.00x         |
              | December 31, 2004                  |                       |
              |------------------------------------|-----------------------|
              | March 31, 2005 and thereafter      |         4.75x         |
              |====================================|=======================|

                     6.15   Senior Secured Leverage Ratio. Maintain the Senior
Secured Leverage Ratio at the end of each fiscal quarter of the Borrower set
forth below at a level not to exceed the level set forth opposite such period:

              |====================================|=======================|
              | Quarter Ending                     |    Maximum Allowed    |
              |====================================|=======================|
              | September 30, 2003 through         |         2.00x         |
              | December 31, 2004                  |                       |
              |------------------------------------|-----------------------|
              | March 31, 2005 and thereafter      |         1.75x         |
              |====================================|=======================|

                     6.16   Real Estate Taxes. Borrower shall pay and discharge,
and shall cause its Subsidiaries to pay and discharge, as and when due and
payable, before any penalty attaches, all charges, impositions, levies,
assessments and taxes (whether general, special or otherwise), water charges,
sewer service charges and all other municipal or governmental charges,
impositions, levies, assessments and taxes of any kind or nature that may be at
any time levied, assessed or imposed upon or against any real property owned in
fee by any Subsidiary or in which any Subsidiary has a leasehold interest (but
only to the extent Borrower or any Subsidiary is required to pay such taxes in
accordance with the terms of the lease), and shall promptly deliver to
Collateral Agent upon Collateral Agent’s request therefor, duplicate receipts
evidencing payment thereof prior to delinquency. Notwithstanding anything to the
contrary in the foregoing,

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Borrower may contest any tax imposed, assessed, levied or due with respect to or
from said real property, by instituting and diligently and in good faith
prosecuting by appropriate judicial proceedings the validity or amount of a tax,
charge, imposition or assessment (said tax, charge, imposition or assessment
being hereinafter referred to in this Section as “impositions”) if (i) the
contest or decision relating thereto will not and cannot result in the
forfeiture of said real property or the Subsidiary’s leasehold interest therein
prior to or pending resolution of such contest and the invalidity, forfeiture,
loss of priority or unenforceability of Collateral Agent’s mortgage lien on said
real property or the Subsidiary’s leasehold interest therein will not and cannot
result from such contest or failure to pay such impositions, (ii) no Event of
Default shall exist hereunder, and (iii) prior to commencement and during the
duration of such proceeding, Borrower shall maintain adequate reserves on
account of the failure to pay such imposition and/or the contest of the amount
and/or validity thereof in accordance with GAAP. Upon resolution of such
contest, Borrower shall promptly pay the impositions then due. If, at any time
during the continuance of the contest described in the preceding sentence, said
real property or the Subsidiary’s leasehold interest therein is, in Collateral
Agent’s reasonable determination, in imminent danger of being forfeited, lost or
rendered invalid or unenforceable, then, in any of said events, Borrower shall,
at Collateral Agent’s demand, use the aforesaid reserve to pay such impositions
and if such reserve is insufficient to pay in full the required payment,
Borrower promptly shall pay the amount of such insufficiency.

                     6.17   Real Estate Collateral; Schedule 1.01.
Notwithstanding the provisions of Section 4.01, Borrower and the Subsidiaries
shall have met each of the requirements set forth in Sections 4.01(o)-(r) in
connection with the real property set forth on Schedule 6.17 no later than 60
days following the Closing Date. Notwithstanding the provisions of Section 3.05,
Borrower and the Subsidiaries shall have met each of the requirements set forth
in Section 3.05 in connection with the real property set forth on Schedule 3.05
no later than 60 days following the Closing Date. Upon Borrower’s receipt of all
Lien search results and in any event no later than July 31, 2003, Borrower shall
deliver an updated Schedule 1.01 which will only add valid liens that were
permitted under the Existing Credit Agreement and secure obligations permitted
under the Existing Credit Agreement.

                     6.18   Control Agreements. Within 90 days following the
Closing Date (and subject to the agreement of the depository banks), cause each
of its Demand Deposit Accounts and deposit accounts (as defined in the Guarantee
and Collateral Agreement) to be made subject to written control agreements with
the applicable depository banks and the Collateral Agent on terms satisfactory
to the Administrative Agent in order to perfect a Lien on such Accounts and
accounts in favor of the Secured Parties (“Controlled Accounts”). The Borrower
and its Subsidiaries will not open or create a Demand Deposit Account or deposit
account after the Closing Date unless such Account or account is subject to such
control arrangements. Notwithstanding the foregoing, the Borrower and its
Subsidiaries shall not be required to enter into such control arrangements with
respect to any Demand Deposit Account or deposit account if the balance from
time to time is, or is expected to be, less than $250,000. Commencing within 90
days following the Closing Date (and subject to the agreement of the depository
banks), the Borrower and its Subsidiaries (except those Subsidiaries identified
in clauses (i) through (vi) of the immediately following sentence) shall hold at
least 80% of all cash, cash equivalents and similar items in Controlled
Accounts. Notwithstanding anything in this Section 6.18 to the contrary, the
requirements of this Section 6.18 shall not apply in respect of deposit accounts
of

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(i) Lincoln Indemnity Company, (ii) H&T Receivable Funding Corporation, (iii)
any Finance Subsidiary, (iv) any Real Estate Financing Subsidiary, (v) any
Subsidiary acquired after the Closing Date to the extent such Subsidiary is not
required to provide a security interest in its assets or cause its capital stock
to be pledged pursuant to Section 7.01(e) and (vi) Foreign Subsidiaries.

ARTICLE VII.
NEGATIVE COVENANTS

                     Borrower covenants and agrees that so long as the Revolving
Credit shall remain available, and until full and final payment of all
Obligations, it will not, and with respect to Sections 7.01, 7.02, 7.03, 7.04,
7.05, 7.06, 7.07, 7.08, 7.09, 7.10, 7.11, 7.13 and 7.14, it will not permit any
Subsidiary to, unless Majority Lenders waive compliance in writing:

                     7.01   Investments and Restricted Payments. Except as
otherwise permitted herein, make any Investments in any Person or any Restricted
Payments except:

           (a)   Borrower or any Subsidiary may make Investments in any
Guarantor or in the Borrower;

           (b)   Any Subsidiary may make Restricted Payments to Borrower or any
Guarantor;

           (c)   Borrower may make Investments in Cash Equivalents;

           (d)   Investments may be made in the ordinary course of business
related to employees, such as payments in respect of relocation, travel
advances, and loans to employees to exercise stock options, all of which
Investments do not exceed in the aggregate at any one time One Million Dollars
($1,000,000);

           (e)   Borrower or any Subsidiary may acquire on a friendly basis at
least 51% of each class of capital stock, membership interests or partnership
interests, of any fitness center located in the United States, provided that
such fitness center shall immediately become a Guarantor and shall comply with
Section 3.04 hereof. As used in this Section 7.01(e), “fitness center” means any
corporation, limited liability company or partnership whose business is
comparable to any of the businesses currently operated by Borrower or any of its
Subsidiaries (other than a finance company). Notwithstanding the foregoing, the
Borrower and its Subsidiaries may finance all or part of the purchase price of
any such fitness center by the issuance of purchase money seller Debt or the
assumption of Assumed Debt subject to the following: (i) up to 30% of the
purchase price (including the assumption of any existing Debt) of any such
acquisition may consist of purchase money seller Debt and Assumed Debt, and such
seller Debt and Assumed Debt may be secured as permitted by clause (xiv) of the
definition of “Permitted Liens”, (ii) any other seller Debt and assumed Debt
issued to finance such acquisition shall be unsecured and shall be subordinated
to prior payment of the Obligations on terms satisfactory to the Agent and

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(iii) the Borrower and its Subsidiaries shall not be required to provide a
security interest in the assets or pledge the capital stock of such fitness
center (but such fitness center shall be required to become a Guarantor)
pursuant to Article III or the Credit Documents if such provision of a security
interest or such pledge is prohibited by the seller Debt or Assumed Debt
referred to in clause (i) (the Borrower agreeing that it shall use reasonable
efforts to cause such seller Debt and Assumed Debt to be unsecured and to permit
the capital stock and assets of such Subsidiary to be pledged to secure the
Obligations);

           (f)  Borrower and its Subsidiaries may make mandatory Investments in
Funding Corp., and Funding Corp. may make required Investments in the H&T Master
Trust and BTFC, in each case pursuant to and in accordance with the Receivables
Program Documents;

           (g)   Borrower and its Subsidiaries may make mandatory Investments in
Finance Subsidiaries, and Finance Subsidiaries may make related required
Investments, in each case pursuant to a Receivables Financing Transactions and
as long as such Investments are substantially comparable to those required by
the Receivables Program Documents;

           (h)   Investments by the Borrower and its Subsidiaries in New
Ventures, Foreign Subsidiaries, Lincoln Indemnity Company, non-Consolidated
Subsidiaries, Unrestricted Subsidiaries and Finance Subsidiaries (i) existing on
the Closing Date and (ii) made after the Closing Date; provided that (A) the
aggregate amount of such Investments made after the Closing Date (valued at the
time of the making thereof, and after taking into account any return after the
Closing Date from dividends, distributions and repayments in respect of such
Investments) does not exceed, at any one time outstanding, $25,000,000 (plus any
dividends, distributions and repayments in respect of Investments existing on
the Closing Date), (B) with respect to Investments in Finance Subsidiaries, the
only amount of such Investment to be considered in determining the $25,000,000
limit set forth above are those amounts in excess of the amounts allowed by
paragraph (f) and paragraph (g) of this Section 7.01 and (C) the cumulative
outstanding Investment in any Subsidiary on the date that such Subsidiary is
converted to an Unrestricted Subsidiary in accordance with the terms hereof
shall be deemed an Investment made on such conversion date in an Unrestricted
Subsidiary for purposes of determining compliance with this Section 7.01(h);

           (i)   Investments to the extent funded by common stock of the
Borrower issued after the Closing Date or the cash proceeds thereof received
after the Closing Date (and Investments of such cash proceeds), provided that
such proceeds from issuances of common stock may only be utilized for
Investments if used within nine months of the issuance of such stock;

           (j)   Investments consisting of cash reserves established, in the
ordinary course of the Borrower’s and its Subsidiaries’ business and consistent
with past practice, pursuant to the Credit Card Program Agreement; and

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           (k)   Investments in Real Estate Financing Subsidiaries consisting of
Existing Owned Properties made in connection with Permitted Real Estate
Financing Transactions.

Notwithstanding the foregoing, Investments made pursuant to the preceding
paragraph (h) shall be subject to the following restrictions: (i) (x) Collateral
(other than cash) having an aggregate value in excess of $5,000,000 may not be
transferred or invested (including in or to an Unrestricted Subsidiary) in any
one-year period (except that any portion of such permitted amount not used in
any year may be carried forward to subsequent years) and (y) intellectual
property may not be so transferred or invested and (ii) the Borrower and its
Subsidiaries shall not be permitted to make Investments (including in
Unrestricted Subsidiaries) in excess of $10,000,000 in the aggregate which have
the effect of paying, purchasing, redeeming or defeasing the Senior Unsecured
Notes or the Subordinated Notes or paying dividends on or purchasing or
redeeming Capital Stock of the Borrower (it being understood that the Borrower
and its Subsidiaries shall not provide Guarantees or other credit support with
respect to Unrestricted Subsidiaries).

                     7.02   Other Obligations. Except as provided in this
Agreement, create, incur, assume or permit to exist any Debt, or create, incur
or enter into any Guaranty of any Debt of any other Person, other than:

           (a)   the Secured Obligations;

           (b)   Any Debt existing on the Closing Date listed on Schedule
7.02(b) hereto, and any renewal, extension or refinancing of any purchase money
Debt listed on such Schedule (and identified as such on such Schedule) that does
not consist of any capitalization of interest on the original Debt; provided,
that, except in connection with the refinancing of such Debt pursuant to a
Permitted Real Estate Financing Transaction, the principal amount of such
renewal, extension or refinancing Debt (the “Refinancing Debt”) shall not exceed
the principal amount of the Debt on the Closing Date listed on such Schedule,
the maturity date of each installment or principal of such Refinancing Debt
shall not be earlier than the maturity date of the corresponding installment of
the original Debt, and the Liens securing the Refinancing Debt constitute
“Permitted Liens” under clause (iv) of the definition of such term;

           (c)   Standby letters of credit obtained in the ordinary course of
business;

           (d)   Debt of Borrower to any of its Subsidiaries and of any
Guarantor to Borrower or any other Guarantor;

           (e)   Debt under revolving credit commitments, term loan commitments
or letter of credit commitments made available by banks or other financial
institutions otherwise than under this Agreement to the extent that the
Revolving Credit Commitments shall have been permanently reduced by the amount
of such revolving credit commitments, term loan commitments or letter of credit
commitments on the date such revolving credit commitments, term loan commitments
or letter of credit commitments are incurred and the terms of such revolving
credit commitments, term loan commitments or letter of

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credit commitments are reasonably satisfactory to the Majority Lenders in all
material respects;

           (f)   additional Debt (including Guarantees of Debt permitted under
paragraph (g) of Section 7.02 to the extent such Guarantee would be in excess of
the amount permitted by paragraph (g) hereof) incurred or assumed by the
Borrower and its Subsidiaries in an aggregate principal amount not to exceed
$10,000,000; provided that (i) such Debt is not secured by any property
constituting Collateral under the Collateral Documents (except to the extent
that such Debt may be secured by Liens described under clause (iv) or (xiv) of
the definition of “Permitted Liens”), (ii) any unsecured purchase money seller
Debt is subordinated to the Obligations on terms reasonably satisfactory to the
Agent unless such seller Debt is not required to be subordinated pursuant to
Section 7.01(e) and (iii) before and after giving effect to the incurrence of
such Debt, no Default or Event of Default shall have occurred and be continuing
and provided, further, that (to avoid double counting) Guarantees of such Debt
shall not be considered Debt for the purposes of this paragraph (f) of this
Section 7.02;

           (g)   Guarantees of Debt permitted under paragraph (b) of this
Section 7.02 in an aggregate amount not to exceed $7,000,000;

           (h)   Debt incurred as an Investment permitted by Section 7.01;

           (i)   without duplication of Debt permitted by Section 7.02(b) above,
Debt of the Borrower consisting of the 1997 Subordinated Notes and the 1998
Subordinated Notes;

           (j)   Debt of the Borrower consisting of the Senior Unsecured Notes
and guarantees of the Senior Unsecured Notes by Subsidiaries to the extent such
Subsidiaries are Guarantors and pledge their assets as grantors under the
Collateral Documents;

           (k)   Debt in an aggregate principal amount not to exceed $20,000,000
at any time secured by Existing Owned Property pursuant to Permitted Real Estate
Financing Transactions; and

           (l)   other Debt of the Borrower and its Subsidiaries (including any
increases in the Receivables Program Documents and Receivables Financing
Transactions above $160,000,000 in the aggregate) as long as, immediately after
giving effect to the incurrence of such Debt and the use of the proceeds
thereof, the Borrower would be in compliance on a pro forma basis with Sections
6.12, 6.14 and 6.15 as of the most recently ended fiscal quarter, each
subsequent fiscal quarter and through the Revolving Credit Termination Date as
if such Debt was incurred on the first day of the relevant measurement period;
provided that (i) such Debt is not secured by any property constituting
Collateral under the Collateral Documents (except to the extent that such Debt
may be secured by Liens described under clause (iv), clause (xiii)(b) or clause
(xiv) of the definition of “Permitted Liens”), (ii) any unsecured purchase money
seller Debt and any unsecured assumed Debt is subordinated to the Obligations on
terms reasonably satisfactory to the Agent unless such seller Debt or assumed
Debt is not required to be subordinated pursuant to Section 7.01(e) and (iii)
before and after giving effect to the

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incurrence of such Debt, no Default or Event of Default shall have occurred and
be continuing and provided, further, that (to avoid double counting) Guarantees
of such Debt shall not be considered Debt for the purposes of this paragraph (l)
of this Section 7.02.

Notwithstanding the foregoing, (x) the Borrower will not permit any Subsidiary
or Unrestricted Subsidiary to Guaranty or provide credit support for any
Subordinated Debt, (y) the Borrower will not and will not permit any Subsidiary
or Unrestricted Subsidiary to Guaranty or provide credit support in respect of
any Unrestricted Subsidiary and (z) the Borrower will not permit any Real Estate
Financing Subsidiary to create, incur, assume or permit to exist any Debt
(including a Guaranty of the Senior Unsecured Notes) except Debt, if any,
permitted pursuant to clause (k) above and any Debt to the Secured Parties
required in connection with any second mortgage in favor of the Collateral Agent
required by Section 7.03(b).

                     7.03   Other Security. (a)  Other than as pursuant to a
Permitted Real Estate Financing Transaction or as expressly permitted under
Section 7.08, create, assume or suffer to exist any Lien on any of its or its
Subsidiaries’ property, real or personal or mixed (including without limitation,
any leasehold interests), whether now owned or hereafter acquired, except
Permitted Liens and licenses of intellectual property pursuant to a Franchise
Program.

                     (b)   The Borrower and its Subsidiaries shall be permitted
to enter into new transactions (as described in this Section 7.03(b), “Permitted
Real Estate Financing Transactions”) (including sale and leaseback transactions)
after the Closing Date to finance fee owned real property owned on the Closing
Date. Financing of fee owned real property owned on the Closing Date (“Existing
Owned Property”) may be done through special purpose financing Subsidiaries of
the Borrower to which title to the financed Existing Owned Property will be
transferred at the time of such financing (collectively, the “Real Estate
Financing Subsidiary”). If at the time of a financing after the Closing Date
title to the Existing Owned Property is not held by a Real Estate Financing
Subsidiary, the property owner must grant a second mortgage in favor of the
Collateral Agent on the financed Existing Owned Property. The loan amount of any
Existing Owned Property at loan closing shall be at least 50% of the fair market
value of such Existing Owned Property (as determined by a reputable independent
appraiser). The aggregate amount of Debt that may be incurred pursuant to such
financing of Existing Owned Property shall not exceed $20,000,000 at any time
outstanding. Net Cash Proceeds from sale and leaseback transactions entered into
by the Borrower or its Subsidiaries (including Real Estate Financing
Subsidiaries) shall (i) count against the sale and leaseback covenant set forth
in Section 7.11 and (ii) shall permanently reduce the $20,000,000 financing
limit set forth above. The Real Estate Financing Subsidiary will use
commercially reasonable efforts to grant a second mortgage in favor of the
Collateral Agent on any financed Existing Owned Property. Capital Stock of any
Real Estate Financing Subsidiary shall be pledged to the Collateral Agent, but
no assets of a Real Estate Financing Subsidiary need be pledged to the
Collateral Agent except for the second mortgages described above. Any such
financing may be supported solely by one or a combination of a guarantee of the
Debt by the Borrower and/or the financed real properties and/or the Real Estate
Financing Subsidiary’s rights under the lease(s) with respect to such real
property. No Real Estate Financing Subsidiary may be an Unrestricted Subsidiary.
Fee-owned real properties of any Real Estate Financing Subsidiary shall be
leased on an unsecured basis to the Borrower or one of its wholly-owned
Subsidiaries (such lease to a wholly-owned Subsidiary to be guaranteed on an
unsecured basis by the Borrower) pursuant to a lease in a form customary

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for other club facilities leased by the Credit Parties. Fee-owned real
properties acquired by the Credit Parties after the Closing Date will be
required to be pledged to the Collateral Agent pending their purchase money
financing and can be financed with purchase money financing within 270 days of
acquisition. Fee owned real properties which are not subject to a mortgage in
favor of third parties will be mortgaged as Collateral in favor of the
Collateral Agent pending refinancing in accordance with this provision.

                     7.04   Subordinated Debt; Senior Unsecured Notes. (a)  Pay
interest, principal, or premium on any Subordinated Debt (other than the
Subordinated Notes) if at the time of such payment or proposed payment there has
occurred and is continuing under this Agreement, or if as a result of any such
payment or proposed payment there would occur, a Default or an Event of Default;

           (b)   Pay interest, principal or premium on the 1997 Subordinated
Notes in violation of Article Thirteen of the 1997 Indenture, or make any
payment thereunder or with respect to any other Subordinated Debt to any holder
or the trustee named therein prior to one (1) Banking Day preceding the times
set forth therein for the payment of same, or make any payment, purchase or
redemption of the 1997 Subordinated Notes pursuant to Article Four, Five, Ten,
Eleven, Twelve or Thirteen of the 1997 Indenture or deliver any notice to the
trustee under the Indenture or the holders of the 1997 Subordinated Notes of its
intention to make any such payment, purchase or redemption, or make any “Company
Request” under Section 12.1 of the 1997 Indenture;

           (c)   Amend or waive any provision of the 1997 Indenture, the 1998
Indenture, the Subordinated Notes or any other agreement relating to
Subordinated Debt without first obtaining the consent of Majority Lenders;

           (d)   Prepay, redeem, defease, purchase or repurchase all or any part
of any Subordinated Debt including, but not limited to, the Subordinated Notes
(other than as permitted by Section 7.09(a) hereof), or take any action to
effect the foregoing without first obtaining the consent of Majority Lenders;

           (e)   Pay interest, principal or premium on the 1998 Subordinated
Notes in violation of Article Thirteen (or the comparable provisions of a
successor indenture) of the 1998 Indenture, or make any payment thereunder to
any holder or the trustee named therein prior to one (1) Banking Day preceding
the times set forth therein for the payment of same, or make any payment,
purchase or redemption of the 1998 Subordinated Notes pursuant to Article Four,
Five, Ten, Eleven, Twelve or Thirteen (or the comparable provisions of a
successor indenture) of the 1998 Indenture or deliver any notice to the trustee
under the 1998 Indenture or the holders of the 1998 Subordinated Notes of its
intention to make any such payment, purchase or redemption, or make any “Company
Request” under Section 12.1 (or the comparable provisions of a successor
indenture) of the 1998 Indenture;

           (f)   Make any payment with respect to any Senior Unsecured Notes to
any holder or the trustee named therein prior to one (1) Banking Day preceding
the times set forth therein for the payment of same, or make any payment,
purchase or redemption of the

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Senior Unsecured Notes pursuant to Article Four, Five, Ten, Eleven, Twelve or
Thirteen of the Senior Unsecured Notes Indenture or deliver any notice to the
trustee under the Senior Unsecured Notes Indenture or the holders of the Senior
Unsecured Notes of its intention to make any such payment, purchase or
redemption, or make any “Company Request” under Section 12.1 of the Senior
Unsecured Notes Indenture;

           (g)   Amend or waive any provision of the Senior Unsecured Notes
Indenture, the Senior Unsecured Notes or any other agreement relating thereto
without first obtaining the consent of Majority Lenders; or

           (h)   Prepay, redeem, defease, purchase or repurchase all or any part
of the Senior Unsecured Notes (other than as permitted by Section 7.09(a)
hereof), or take any action to effect the foregoing without first obtaining the
consent of Majority Lenders.

           (i)   Notwithstanding the provisions of Section 7.04 and Section
7.09, the Borrower may purchase or redeem the 1997 Subordinated Notes at an
aggregate price not in excess of $350,000 or, upon the date the redemption
prices provided in the 1997 Indenture are applicable, such redemption prices
plus accrued interest; provided that immediately after giving effect thereto, no
Default or Event of Default shall have resulted.

The only payments that the Borrower and its Subsidiaries (including Unrestricted
Subsidiaries) may make in respect of the Subordinated Debt and the Senior
Unsecured Notes are (i) scheduled payments of interest, (ii) payments permitted
by clause (ii) of the last sentence of Section 7.01 and (iii) payments permitted
by clauses (i), (iii) and (iv) of the second proviso of Section 7.09(a).

                     7.05   Liquidation; Merger. Liquidate or dissolve, or enter
into any consolidation, merger, partnership, joint venture or other combination,
or sell, lease or dispose of its business or assets as a whole or in an amount
which constitutes a substantial portion thereof; provided, however, that (a) any
Subsidiary may merge into, consolidate with or transfer its business or assets
to Borrower or any other Subsidiary (so long as such acquiring Subsidiary is a
Guarantor) pro rata, to the extent owned by Borrower or such Subsidiary, (b)
Borrower may merge with any other corporation so long as Borrower is the
surviving corporation and no Default or Event of Default would exist under this
Agreement after giving effect to such merger, (c) any Subsidiary may liquidate
or dissolve if upon such liquidation or dissolution all or substantially all of
the business or assets of such Subsidiary are distributed to Borrower or any
other Subsidiary (so long as such transferee Subsidiary is also a Guarantor) pro
rata, to the extent owned by Borrower or such Subsidiary, and (d) in the event
that a Subsidiary has distributed its business or assets to Borrower or any
Subsidiary pursuant to Section 7.05(c), neither Borrower nor any Subsidiary
shall be required to preserve any right, license, or franchise of such
Subsidiary or the corporate existence of such Subsidiary if the Board of
Directors of Borrower or the Subsidiary to which the business or assets of such
Subsidiary were distributed shall determine that the preservation thereof is no
longer desirable and that the loss thereof is not adverse in any material
respect to Lenders.

                     7.06   Capital Expenditures. Make or commit to make Capital
Expenditures in any fiscal year in excess of the amount set forth opposite such
fiscal year below:

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               |===========================|===========================|
               |                           |        Permitted          |
               |       Fiscal Year         |   Capital Expenditures    |
               |===========================|===========================|
               |          2003             |       $60,000,000         |
               |---------------------------|---------------------------|
               |          2004             |       $60,000,000         |
               |---------------------------|---------------------------|
               |          2005             |       $60,000,000         |
               |---------------------------|---------------------------|
               |          2006             |       $70,000,000         |
               |---------------------------|---------------------------|
               |          2007             |       $75,000,000         |
               |---------------------------|---------------------------|
               |          2008             |       $75,000,000         |
               |===========================|===========================|

Any such permitted amount not used in any fiscal year may be carried forward to
subsequent fiscal periods. In addition, the annual limit for each fiscal year
shall be increased by an amount equal to 50% of the Free Cash Flow generated in
the prior fiscal year. Any portion of such increase resulting from Free Cash
Flow not used in any fiscal year shall be carried forward to subsequent periods.
Notwithstanding the foregoing, at any time that the then aggregate unused
portion of the Revolving Credit Commitment Amount is less than $30,000,000, the
Borrower and its Subsidiaries may not make or commit to make any Capital
Expenditures other than (i) maintenance Capital Expenditures and (ii) Capital
Expenditures committed to pursuant to an enforceable written contract entered
into prior to the time at which the ability to make Capital Expenditures becomes
limited.

                     7.07   Change in Business. Engage in any business
activities or operations substantially and materially different from or
unrelated to business activities existing on the Closing Date; provided,
however, that this Section 7.07 shall not prohibit the Borrower or its
Subsidiaries from managing non-owned fitness centers or providing payment,
processing and collection services for non-owned fitness centers, or from
commencing and operating a Franchise Program, or from operating a captive
insurance company and, provided, further, the Borrower and its Subsidiaries may
elect to cease originating for their own account and/or servicing all or a
portion of membership contracts receivable and have third parties perform all or
some of such functions..

                     7.08   Disposal of Assets. Dispose of any accounts
receivable, any fixed or capital assets (including, without limitation, the
entering into of any sale and leaseback agreement covering any of its fixed or
capital assets), any Capital Stock of Subsidiaries or any Intangible Assets, or
enter into any license, franchise or sublease arrangements; provided, however,
that:

           (a)   dispositions of assets among and between Borrower and the
Guarantors shall not be prohibited hereunder;

           (b)   (i) the Borrower and its Subsidiaries may dispose of the
Receivables Program Receivables on the terms and subject to the conditions set
forth in the Receivables Program Documents, provided that none of such
Receivables Program Receivables may be so disposed of for the purpose of
supporting any series of Receivables Program Certificates other than the 1996-1
Certificates, the 2001-1 Certificates or other Receivables Program Certificates
permitted under this Agreement without the prior

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consent of the Majority Lenders; and (ii) the Borrower and its Subsidiaries may
dispose of Receivables Assets pursuant to a Receivables Financing Transaction;

           (c)   to the extent the Borrower or any Subsidiary may at any time be
a party to the Credit Card Program Agreement, licensing arrangements
contemplated by the Credit Card Program Agreement shall not be prohibited under
this Section 7.08;

           (d)   Borrower or any Subsidiary may dispose of accounts receivable,
fixed or capital assets (including, but not limited to (i) disposition of any
interest in the Exchangeable Transferor Certificate (including, but not limited
to, any such disposition in connection with any issuance of any additional
series of Receivables Program Certificates permitted under this Agreement) and
(ii) dispositions by sale and leaseback agreements covering fixed or capital
assets), capital stock or Intangible Assets, or enter into any license,
franchise or sublease arrangement (other than pursuant to a Franchise Program),
so long as the proceeds of such disposition, to the extent the same constitutes
Reinvestment Proceeds, shall be applied to the acquisition of properties and
other assets that (as determined by the board of directors of the Borrower)
replace the properties and assets that were the subject of such disposition or
properties and assets that will be used in the businesses of the Borrower or its
Subsidiaries existing on the Closing Date (or in businesses reasonably related
or complementary thereto), and otherwise the proceeds of such disposition shall
be applied to the prepayment of the Advances (without any reduction of the
Revolving Credit Commitment Amount), as set forth in Section 2.13; provided,
however, that (i) Borrower or any Subsidiary may dispose of surplus or obsolete
equipment or fixtures in the ordinary course of business, and up to Two Million
Five Hundred Thousand Dollars ($2,500,000) per year of the proceeds of such
dispositions shall not be subject to the requirements of this Section 7.08(d)
and (ii) Borrower and its Subsidiaries may license certain rights with respect
to its trade name or other intellectual property pursuant to franchising
arrangements permitted by Section 7.08(e) and the proceeds of such license and
franchise activities shall not be subject to the requirements of this Section
7.08(d);

           (e)   Borrower and its Subsidiaries may license certain rights with
respect to its trade name and other intellectual property (i) to franchisees for
the operation of health clubs pursuant to a Franchise Program and (ii) for other
purposes intended to generate proceeds to the Borrower;

           (f)   Borrower and its Subsidiaries may sell assets (and related
liabilities) consisting of health and fitness clubs to Persons which
simultaneously become franchisees pursuant to a Franchise Program; provided that
(i) such assets are sold at their net fair market value (taking into account the
amount of such liabilities) and (ii) the aggregate net cash proceeds arising
from such sales since the Closing Date do not exceed $5,000,000;

           (g)   the Borrower and its Subsidiaries may sell uncollectible
receivables to a collection or similar agency in lieu of in-house collection in
the ordinary course of business; and

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           (h)   the Borrower and its Subsidiaries may elect to cease
originating for their own account and/or servicing all or a portion of
membership contracts receivable and have third parties perform all or some of
such functions.

For purposes of this Section 7.08, dispositions of assets shall not include
sales by the Borrower or any Subsidiary of the Borrower of common stock (or
common stock equivalents) of the Borrower.

                     7.09   Limitation on Optional Payments and Modifications of
Debt Instruments and Receivables Program Documents. Without limitation of any
obligation under any other Section of this Article VII:

           (a)   make any optional payment or prepayment on or redemption or
purchase or defeasance of any Debt or make or set aside any sinking fund
payments with respect to any Debt (other than the Advances and reimbursement
obligations in respect of any Letter of Credit); provided, however, Borrower or
its Subsidiaries may prepay or make optional payments on any purchase money Debt
or Capitalized Leases where the Agent, for the benefit of the Lenders, is
granted a Lien in the relevant asset of the Borrower or its Subsidiary, as the
case may be, in the amount of such prepayment or optional payment; provided
further, however, the Borrower shall be permitted to redeem or prepay (i) the
Subordinated Notes from the proceeds of a public offering of the Borrower’s
common stock after the Closing Date, to the extent permitted by the “equity
clawback” provision set forth in Section 11.1(b) of the 1997 Indenture and the
1998 Indenture, (ii) Debt existing on the Closing Date and identified on
Schedule 7.09(a), (iii) the Senior Unsecured Notes from the proceeds of a public
offering of the Borrower’s common stock after the Closing Date, to the extent
permitted by the “equity clawback” provision set forth in Section 11.1(b) of the
Senior Unsecured Notes Indenture and (iv) the Subordinated Notes pursuant to a
Permitted Subordinated Notes Refinancing; or

           (b)   amend, modify or change in any material respect, or consent or
agree to any such amendment, modification or change to, any of the terms of any
such Debt (other than any such amendment, modification or change to the terms of
any Debt which would extend the maturity or reduce the amount of any payment of
principal thereof or which would reduce the rate or extend the date for payment
of interest thereon); or

           (c)   amend, modify or change, or consent or agree to any amendment,
modification or change to the Receivables Program Documents which would affect
the amortization of the Receivables Program Certificates thereunder (except for
an amendment to the Series 2001-1 Supplement providing for the amortization of
the Outstanding Certificate Amount (as such term is defined in the Series 2001-1
Supplement) in excess of $100,000,000), the collateral thereunder, the sale of
Receivables Program Receivables at a discount, or the interest rate (it being
agreed that the effective interest rate on the Receivable Program Certificates
may be increased in connection with any increase in the aggregate principal
amount of the Receivables Program Certificates as set forth in the proviso below
as long as the Borrower certifies in writing to the Agent prior to the effect of
such increase that, after giving effect thereto, the Borrower will be in
compliance on a pro forma basis with Sections 6.12, 6.14 and

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6.15 through the Revolving Credit Termination Date) applicable to the
Receivables Program Certificates or the Exchangeable Transferor Certificate
(other than any such amendment, modification or change which would extend the
maturity or reduce the amount of payment of principal on the affected
Receivables Program Certificates or which would reduce the rate or extend the
time of payment of any interest thereon, or would not increase any amount of
scheduled amortization for any period prior to the Revolving Credit Termination
Date); provided that the aggregate principal amount of the Receivable Program
Certificates can be increased if (i) such increase is in connection with a
corresponding increase in the amount of Receivable Program Receivables sold in
the Receivables Program and (ii) the terms governing such additional Receivable
Program Certificates are substantially similar to, or no less favorable to the
Borrower and its Subsidiaries than, the existing Receivable Program Certificates
(it being agreed that the effective interest rate on the Receivable Program
Certificates may be increased in connection with any such increase as long as
the Borrower certifies in writing to the Agent prior to the effect of such
increase that, after giving effect thereto, the Borrower will be in compliance
on a pro forma basis with Sections 6.12, 6.14 and 6.15 through the Revolving
Credit Termination Date); or

           (d)   permit any series of Receivables Program Certificates to be
issued other than the 1996-1 Certificates, the 2001-1 Certificates or as
contemplated by the proviso to the preceding paragraph (c), except that a series
of Receivables Program Certificates may be issued to replace or refinance the
1996-1 Certificates or the 2001-1 Certificates in whole or in part (such new
series of Receivables Program Certificates, a “Refinancing Series” and such new
Receivables Program Certificates, “Refinancing Certificates”) if such
Refinancing Series contains no material covenants and no Payout Events not
applicable to the 1996-1 Certificates or the 2001-1 Certificates and each of the
covenants and defaults contained in the supplement creating such replacement
series are not materially more burdensome or restrictive than those covenants
contained in the 1996-1 Supplement or the 2001-1 Supplement (it being agreed
that the effective interest rate on the Refinancing Certificates may be
increased in connection with any such replacement or refinancing as long as the
Borrower certifies in writing to the Agent prior to the effect of such
replacement or refinancing that, after giving effect thereto, the Borrower will
be in compliance on a pro forma basis with Sections 6.12, 6.14 and 6.15 through
the Revolving Credit Termination Date); or

           (e)   notwithstanding the foregoing paragraphs (c) and (d), the
Borrower and its Subsidiaries may enter into Receivables Financing Transactions
and may effect a Receivables Financing Transaction by (i) amending, modifying or
changing the Receivables Program Documents and (ii) issuing other series of
Receivables Financing Certificates.

                     7.10   Limitation on Transactions with Affiliates. Enter
into any transaction, including, without limitation, any purchase, sale, lease
or exchange of property or the rendering of any service, with any Affiliate
(other than a Subsidiary) unless such transaction is (a) otherwise permitted
under this Agreement, and (b) upon fair and reasonable terms no less favorable
to the Borrower or such Subsidiary, as the case may be, than it would obtain in
a comparable arm’s length transaction with a Person which is not an Affiliate.

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                     7.11   Limitation on Sales and Leasebacks. Enter into
arrangements after the Closing Date providing for the leasing by the Borrower or
any Subsidiary of real or personal property which has been or is to be sold or
transferred by the Borrower or such Subsidiary to a third person on the security
of such property or rental obligations of the Borrower or such Subsidiary if the
net proceeds from sale or transfer with respect to such arrangements exceed, in
the aggregate, $10,000,000; provided that the Borrower and its Subsidiaries may
not enter into any such transaction with an Unrestricted Subsidiary.

                     7.12   Limitation on Changes in Fiscal Year. Permit the
fiscal year of the Borrower to end on a day other than December 31.

                     7.13   Funding Corp.; Finance Subsidiaries. (a)  Permit
Funding Corp. to (i) assume, guarantee or otherwise become liable in any manner
with respect to any Debt other than Debt arising under the Purchase Agreement,
(ii) consolidate or merge with any Person, (iii) purchase or acquire any
business or property other than receipt or purchase of Receivables Program
Receivables under the Purchase Agreement for transfer to the H&T Master Trust
under the Pooling & Servicing Agreement, (iv) make any Investment in any Person
other than Investments in the H&T Master Trust and BTFC pursuant to the
Receivables Program Documents, (v) conduct any business other than the
transactions required to be performed by it under the Receivables Program
Documents, or (vi) create, assume or suffer to exist any Lien on any of its
property (including, without limitation, any Released Amounts (as defined in the
Pooling & Servicing Agreement)), whether now owned or hereafter acquired, except
Liens pursuant to, and in accordance with the terms of, the Receivables Program
Documents.

                     (b)   Fail to cause the management, business and affairs of
Funding Corp. to be conducted in a manner as required by the Receivables Program
Documents and consistent with the assumptions set forth in the opinion of
Winston & Strawn delivered in connection with the Pooling & Servicing Agreement
relating to the issue of whether Funding Corp. would be substantively
consolidated with BTFC in a bankruptcy of BTFC.

                     (c)   Permit any Finance Subsidiary to (i) assume,
guarantee or otherwise become liable in any manner with respect to any Debt
other than Debt arising under a Receivables Financing Transaction, (ii)
consolidate or merge with any Person, (iii) purchase or acquire any business or
property other than receipt or purchase of Receivables Assets in a Receivables
Financing Transaction, (iv) conduct any business other than the transactions to
be performed by it in a Receivables Financing Transaction or (v) create, assume
or suffer to exist any Lien on any of its property, whether now owed or
hereafter created, except Liens pursuant to and in accordance with the terms of
a Receivables Financing Transaction; and in connection therewith, the Borrower
shall provide a legal opinion from counsel to Borrower that such Finance
Subsidiary shall not be substantively consolidated with Borrower or its
Subsidiaries.

                     (d)   Fail to cause the management, business and affairs of
each Finance Subsidiary to be conducted in such a way as to maintain the
separate corporate existence of each Finance Subsidiary.

                     7.14   Unrestricted Subsidiaries. (a)  Create or otherwise
designate any Subsidiary as an Unrestricted Subsidiary unless the terms set
forth in the definition of

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Unrestricted Subsidiary are complied with respect to such Subsidiary and no
Default or Event of Default then exists (unless the creation or designation of
the Unrestricted Subsidiary would cure the Default or Event of Default) or would
result from the designation, creation and operation of such Unrestricted
Subsidiary.

                     (b)   Without the prior written consent of the Majority
Lenders, change the characterization of a Subsidiary from a Subsidiary to an
Unrestricted Subsidiary or an Unrestricted Subsidiary to a Subsidiary; provided
however, the prior written consent of the Majority Lenders shall not be required
if (A) no Default or Event of Default shall have occurred and be continuing at
such time or would result therefrom, (B) after giving effect to such
re-characterization, each of the representations and warranties made by in the
Borrower in or pursuant to this Agreement or the Collateral Documents shall be
true and correct in all material respects as of the date of such
re-characterization, (C) if re-characterized as a Subsidiary, such Subsidiary
shall have complied with the provisions of Article III as if it were a new
Subsidiary and (D) the Borrower provides the Agent five Banking Days advance
written notice of its intent to re-characterize such Subsidiary.

                     (c)   Permit any Unrestricted Subsidiary to fail to comply
with the requirements set forth in the definition of “Unrestricted Subsidiary.”

                     7.15   Tax Allocation and Indemnity Agreement. Amend,
modify or change, or consent or agree to any amendment, modification or change
to the Tax Allocation and Indemnity Agreement in any manner which is materially
adverse to the Lenders.

ARTICLE VIII.
EVENTS OF DEFAULT

                     If one or more of the following events (herein called
“Events of Default”) shall occur and be continuing:

                     8.01   Nonpayment. (a) Borrower shall fail to pay, when
due, any portion of principal or interest due hereunder or under the Notes in
accordance with the terms hereof or thereof; or

                     (b)   Borrower shall fail to pay, when due, any fees,
commissions or any other sum due hereunder in accordance with the terms hereof.

                     8.02   Representation or Warranty. Any representation or
warranty made by Borrower or any Subsidiary herein or in any other Credit
Document or in any agreement, instrument or certificate executed or delivered to
Lenders, Agent or the Collateral Agent pursuant hereto or in connection with any
transaction contemplated here shall prove to have been false or misleading in
any material respect when made or when deemed to have been made;

                     8.03   Judgments. There shall be entered against Borrower
or any of its Subsidiaries one or more judgments (or any judgment against an
ERISA Affiliate, if such

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judgment is in favor of a Multiemployer Plan) in excess of Two Million Dollars
($2,000,000) in the aggregate at any one time outstanding excluding those
judgments (i) that have been outstanding less than thirty (30) calendar days
from the entry thereof, (ii) for not more than Five Million Dollars ($5,000,000)
during the time which a stay of enforcement of such judgment is in effect by
reason of a pending appeal or otherwise or (iii) for and to the extent which
Borrower or such Subsidiary is insured and with respect to which the insurer has
admitted liability in writing.

                     8.04   Voluntary Bankruptcy. Borrower or any Guarantor
shall fail to pay, or admit in writing its inability to pay, its debts generally
as they come due, or shall file any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law, or any other law or
laws for the relief of, or relating to, debtors, or Borrower or any Guarantor
shall take any corporate action to authorize, or in furtherance of, any of the
foregoing.

                     8.05   Involuntary Bankruptcy. Involuntary petition shall
be filed under any bankruptcy statute against Borrower or any Guarantor, or a
custodian, receiver, trustee, assignee for the benefit of creditors (or other
similar official) shall be appointed to take possession, custody or control of
the properties of Borrower or any Guarantor, unless such petition or appointment
is set aside or withdrawn or ceases to be in effect within sixty (60) days from
the date of said filing or appointment.

                     8.06   Change of Control Event. A Change of Control Event
shall occur.

                     8.07   Cross Default. Any breach or default shall occur
with respect to any Debt or any operating lease agreement in excess of Five
Million Dollars ($5,000,000) (except with respect to Debt under this Agreement)
individually or in the aggregate, under which Borrower or any of its
Subsidiaries may be obligated as borrower or guarantor, if such breach or
default consists of the failure to pay any such indebtedness when due whether by
acceleration or otherwise (and remains uncured or continues beyond any
applicable grace period) or if such breach or default results in or permits (or,
with the passage of time, the giving of notice or both, may permit) the
acceleration of any such indebtedness of or the termination of any commitment to
lend to Borrower or any such Subsidiary.

                     8.08   ERISA. (a)  The occurrence of a Termination Event
with respect to one or more Plans and/or one or more Multiemployer Plans if
Borrower’s maximum liability (as measured, (A) in the case of a Termination
Event described in clauses (i) through (iii) of the definition of “Termination
Event”, by the amount by which plan assets are insufficient to satisfy benefit
liabilities upon termination under ERISA with respect to each Plan as to which
such Termination Event has occurred, (B) in the case of a Termination Event
described in clause (iv) of said definition, by the withdrawal liability under
Section 4063 of ERISA with respect to each Plan as to which such Termination
Event has occurred, and (C) in the case of a Termination Event described in
clause (v) of the definition of “Termination Event”, by the excess, if any of
(i) the aggregate of annual contributions due or paid during a plan year plus
payments and interest due or paid pursuant to Section 4219 of ERISA during the
same plan year, with respect to each Multiemployer Plan as to which a
Termination Event has occurred, over (ii) the annual contribution amount due or
paid for such Multiemployer Plan for the plan year preceding the plan year in
which such Termination Event occurred) which could arise upon the occurrence of

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all such Termination Events that occur within a twelve consecutive month period
exceeds One Million Dollars ($1,000,000); or

                     (b)   The aggregate withdrawal liability which could be
incurred under Section 4201 of ERISA of Borrower and all ERISA Affiliates,
collectively, upon a complete withdrawal, within the meaning of Section 4203 of
ERISA, from each and all Multiemployer Plans to which each is or has contributed
within the past five calendar years, plus the aggregate of the excess of benefit
liabilities, within the meaning of Section 4001(a)(16) of ERISA, of each Plan
upon termination of such Plan over the assets of such Plan, exceeds Five Million
Dollars ($5,000,000).

                     8.09   Specific Defaults. (i) Borrower shall fail duly and
promptly to perform or observe any term or provision specified in any of
Sections 6.01, 6.02(e), 6.05, 6.06, 6.12, 6.13, 6.14 or 6.15 or Article VII
hereof or (ii) Borrower shall fail to perform or observe any term or provision
specified in Section 6.09 and shall not remedy such failure to perform or
observe any term or provision specified in such Section 6.09 within 10 calendar
days.

                     8.10   Guarantee and Collateral Agreement; Impairment of
Collateral Documents. (a)   Any breach or default shall occur under the
Guarantee and Collateral Agreement or the Guarantee and Collateral Agreement
shall be revoked by, or become ineffective as to, the Borrower or any Guarantor;
provided, however, that any merger, liquidation, consolidation or transfer of
any Guarantor with any other Guarantor or Borrower in accordance with Section
7.05(c) or Section 7.05(d) shall not constitute an Event of Default under this
Agreement;

                     (b)   (i)  any provision of any Collateral Document (other
than the collateral assignments of tenant’s rights in leases) necessary for the
practical realization of the substantial benefits thereof shall for any reason
cease to be valid and binding on or enforceable against Borrower or any
Subsidiary or Borrower or any Subsidiary shall so state in writing or bring an
action to limit its obligations or liabilities thereunder; or

                            (ii)   any of the Collateral Documents shall for any
reason (other than pursuant to the terms thereof) cease to create a valid
security interest in the Collateral purported to be covered thereby or such
security interest shall for any reason cease to be a perfected security interest
having the priority purported to be created by such Collateral Document (other
than by or as a result of any action by the Collateral Agent).

                     8.11   Condemnation. Any governmental authority shall
condemn, seize or appropriate any property of Borrower or any Subsidiary if the
fair market value of the property prior to being condemned, seized or taken is
equal to or greater than Five Million Dollars ($5,000,000) and if such
governmental authority fails to compensate such entity for such taking within
one (1) year after such entity loses quiet enjoyment of such property due to
such taking in an amount at least equal to the fair market value as a going
concern of the property taken.

                     8.12   Payout Event. A “Payout Event” (as defined in the
Pooling & Servicing Agreement or in the 1996-1 Supplement to the Pooling &
Servicing Agreement or the 2001-1 Supplement to the Pooling & Servicing
Agreement including the occurrence of a Series 1996-1 Pay-Out-Event or a Series
2001-1 Pay-Out-Event, under Section 7 of the respective supplement, or any
future supplement to the Pooling and Servicing Agreement) shall have occurred
with

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respect to the 1996-1 Certificates or any other Receivables Program
Certificates, whether or not the occurrence or continuance of such Payout Event
has been waived; or a payout event or similar event (however characterized)
shall have occurred with respect to any Receivables Financing Transaction
entitling the lenders or purchasers thereunder to stop lending against or
purchasing Receivables Assets.

                     8.13   Actual or Asserted Invalidity. (i) This Agreement,
any Note, any Collateral Document or any instrument or certificate executed or
delivered to Lenders, the Agent or the Collateral Agent pursuant to this
Agreement or in connection with any transaction contemplated herewith shall
cease, for any reason (other than solely as a result of any action or inaction
on the part of the Agent or any of the Lenders), to be in full force and effect,
or the Borrower or any of its Affiliates shall so assert or (ii) any Lien
created thereby or subordination provision therein shall cease to be enforceable
and of the same effect and priority purported to be created thereby as a result
of any action or inaction on the part of the Borrower or any of its Affiliates.

                     8.14   Other Defaults. Borrower or any Subsidiary shall
breach, or default under, any term, condition, provision, covenant,
representation or warranty contained in this Agreement not specifically referred
to in this Article or in any Collateral Document, if such breach or default
shall continue for thirty (30) days after notice from Agent as required by
Majority Lenders;

THEN:

           (a)   In the case of an Event of Default other than one referred to
in Section 8.04 or 8.05 of this Article VIII, upon request of Majority Lenders
to Agent, any obligation on the part of Lenders to make or continue the
Revolving Credit or any obligation on the part of any Issuing Lender to issue or
amend any Letter of Credit shall terminate and, at the further option of
Majority Lenders, Agent shall declare all sums of principal and interest
outstanding on the Revolving Credit and all other sums outstanding under or in
respect of this Agreement and the Notes immediately due and payable, without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, or other notices or demands of any kind or character
(other than as stated in any of the foregoing sections of this Article VIII),
all of which are hereby expressly waived by Borrower; and

           (b)   in the case of an Event of Default referred to in Section 8.04
or 8.05 of this Article VIII, Lenders’ obligations to make or continue the
Revolving Credit and the Issuing Lenders’ obligations to issue or amend any
Letter of Credit shall be automatically cancelled and all sums of principal and
interest on the Revolving Credit and all other sums outstanding under or in
respect of this Agreement and the Notes shall automatically become immediately
due and payable without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, all of which are hereby expressly
waived by Borrower.

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Agent shall promptly advise Borrower of any declaration under clause (a), above,
but failure to do so shall not impair the effectiveness of such declaration.
Additionally, upon the occurrence of any Event of Default, Agent, at the request
of the Majority Lenders, shall require Borrower to deposit immediately with
Agent cash collateral pursuant to documentation reasonably acceptable to the
Agent, for application against drawings under any Letter of Credit issued for
Borrower’s account hereunder, in an amount equal to the undrawn amount of such
Letter of Credit. Any amount so deposited that is not applied to satisfy
drawings under such Letter of Credit will be repaid with interest (at Agent’s
applicable certificate of deposit rate in effect on the date of such deposit) to
Borrower, provided that Lenders have received all other amounts due to them
under this Agreement and the Notes. Borrower shall not make (or declare) any
Restricted Payments otherwise permitted under Section 7.01 if a Default or an
Event of Default has occurred and is continuing on the date of such payment (or
declaration), or would result from such payment (or declaration).

ARTICLE IX.
MISCELLANEOUS

                     9.01   Notices. Except as otherwise provided herein, any
notice required hereunder shall be in writing, and shall be deemed to have been
validly served, given or delivered (i) four (4) Banking Days following deposit
in the United States mails, with proper postage prepaid, and addressed to the
party to be notified; (ii) upon delivery thereof if delivered by hand to the
party to be notified; (iii) on the Banking Day after delivery to a reputable
overnight courier, with all charges prepaid, and addressed to the party to be
notified; or (iv) upon acknowledgment of receipt thereof if transmitted by
telecopy to a valid telecopier number for the party to be notified; in each case
such notification shall be addressed to Borrower at:

               Bally Total Fitness Holding Corporation
               8700 West Bryn Mawr, 2nd Floor
               Chicago, Illinois 60631
               Attention:  General Counsel
               Telecopy: 773-399-0126
               Phone: 773-380-3000

and shall be addressed to Agent at:

               JPMorgan Chase Bank
               227 W. Monroe, Suite 2800
               Chicago, Illinois  60606
               Attention:  ____________
               Telecopy:  312-541-____
               Phone:  312-541-4211
               With a copy to:

               JPMorgan Chase Bank Agency Services
               One Chase Manhattan Plaza, 8th Floor

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               New York, New York 10081
               Attention:  Katherine Graham
               Telecopy:  212-552-5662
               Phone:  212-552-7909

and with respect to the other parties hereto, as set forth on Schedule 9.01
hereof, or to such other address as each party may designate for itself by like
notice. Notices to Agent shall not be effective until received by Agent.

                     Notices and other communications to the Lenders hereunder
may be delivered or furnished by electronic communications pursuant to
procedures approved by the Agent; provided that the foregoing shall not apply to
notices pursuant to Section 2 unless otherwise agreed by the Agent and the
applicable Lender. The Agent or the Borrower may, in its discretion, agree to
accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or communications.

                     9.02   Successors and Assigns. This Agreement shall bind
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that Borrower shall not assign this Agreement or
any of the rights of Borrower hereunder without the prior written consent of
each Lender. Any purported assignment in contravention of the foregoing shall be
null and void.

                     9.03   Lenders’ Obligations Several. The obligations of
each Lender under this Agreement are several. Neither Agent, Collateral Agent
nor any Lender shall be liable for the failure of any other Lender to perform
its obligations under this Agreement.

                     9.04   Assignments; Participations. (a)  Any Lender other
than any Conduit Lender (each an “Assignor”) may, with the consent of Agent,
each Issuing Lender to whom obligations are owed in respect of Letters of Credit
issued by it and (unless a Default or Event of Default has occurred and is
continuing) Borrower, which consent of Agent, such Issuing Lenders and the
Borrower shall not be unreasonably withheld or delayed, at any time assign and
delegate to one or more banks or other entities and may, with notice to
Borrower, Agent and each Issuing Lender but without the consent of Borrower,
Agent or such Issuing Lenders, assign to any Affiliate of a Lender, an Approved
Fund or any other Lender (each an “Assignee”), all or any part of the Advances,
the Revolving Credit Commitment (including the L/C Commitment), any Letter of
Credit participations, reimbursement obligations in respect of any Letter of
Credit or any other rights or obligations of such Lender hereunder; provided,
however, that such assignment must be in a minimum amount (unless otherwise
agreed in writing by the Borrower, Agent and each Issuing Lender) of One Million
Dollars ($1,000,000) (or, if less, the full amount of such Assignor’s Advances,
Letter of Credit Participations, reimbursement obligations in respect of any
Letter of Credit or any other rights and obligations of such Lender hereunder);
provided, further, that (i) Borrower shall not be required to pay any increased
costs or taxes pursuant to Section 2.16 or 2.17 by reason of any such
assignment; (ii) Borrower and Agent shall be entitled to continue to deal solely
and directly with such Assignor in connection with the interests so assigned to
the Assignee until written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee
shall have

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been given to Borrower, Agent and each Issuing Lender by such Assignor and the
Assignee; and (iii) such Assignor shall not be released from its obligations
hereunder with respect to the assigned portion of any such rights or obligations
until the Assignee shall have delivered to Borrower and Agent an agreement to be
bound by the terms and conditions of this Agreement, which agreement shall be
substantially in the form of Exhibit M (an “Assignment and Acceptance”), and the
Assignor shall have paid a processing fee to Agent in the amount of Three
Thousand Five Hundred Dollars $3,500, and thereupon shall be released from its
obligations with respect to the assigned portion. Notwithstanding the foregoing,
any Conduit Lender may assign at any time to its designating Lender hereunder
without the consent of the Borrower or the Agent any or all of the Advances it
may have made hereunder and pursuant to its designation agreement and without
regard to the limitations set forth in the first sentence of this Section
9.04(a).

                     (b)   Any Lender other than any Conduit Lender may, without
the consent of Agent, any other Lender to whom obligations are owed in respect
of Letters of Credit issued by it or Borrower, at any time sell to one or more
Lenders or other entities (a “Participant”) participating interests in any
Advances, any Revolving Credit Commitment, any Letter of Credit participations
or any reimbursement obligations of such Lender in respect of any Letter of
Credit hereunder; provided, however, that such participation shall not increase
the amount payable by Borrower in respect of taxes pursuant to Section 2.16 and,
provided further that (i) such Lender’s obligations under this Agreement shall
remain unchanged; (ii) such Lender shall remain solely responsible for the
performance of its obligations hereunder; (iii) Borrower and Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement; (iv) no Lender shall
transfer, grant or assign any participation under which the Participant shall
have rights to approve any amendment or waiver of this Agreement except to the
extent such amendment or waiver would (A) extend the Revolving Credit
Termination Date beyond June 30, 2008, or the scheduled date for the payment of
any installment of principal or interest of the Advances in which such
Participant is participating, (B) reduce the amount of any scheduled installment
of principal of the Advances hereunder in which such Participant is
participating, (C) reduce the interest rate applicable to Advances hereunder in
which such Participant is participating or (D) reduce any fees or commissions
payable hereunder in which such Participant is participating; and (v) such
Lender shall require its Participants to comply with the provisions of Section
10.03(b). In the case of any such participation, the Participant shall not have
any rights under this Agreement or any of the other documents in connection
herewith and all amounts payable by Borrower hereunder shall be determined as if
such Lender had not sold such participation, except that Borrower agrees that if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement and
the Notes to the same extent as if the amount of its participating interest were
owing directly to it as a lender under this Agreement. The Borrower agrees that
each Participant shall be entitled to the benefits of Sections 2.16, 2.17 and
2.18 with respect to its participation in the Commitments and the Advances and
Letters of Credit outstanding from time to time as if it was a Lender; provided
that, in the case of Sections 2.16, 2.17 and 2.18, such Participant shall have
complied with the requirements of said Section and provided, further, that no
Participant shall be entitled to receive any greater amount pursuant to any such
Section than the transferor Lender would have been entitled to receive in
respect of the

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amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.

                     (c)   Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a “Transferee”) and any prospective Transferee
such financial and other information in such Lender’s possession concerning
Borrower or its Subsidiaries which has been delivered to Lenders pursuant to
this Agreement or which has been delivered to Lenders by Borrower in connection
with Lenders’ credit evaluation of Borrower prior to entering into this
Agreement.

                     (d)   Nothing herein shall prohibit any Lender from
pledging or assigning any Note in accordance with applicable law, including to
any Federal Reserve Bank.

                     (e)   The Agent shall, on behalf of the Borrower, maintain
at its address referred to in Section 9.01 a copy of each Assignment and
Acceptance delivered to it and a register (the “Register”) for the recordation
of the names and addresses of the Lenders and the Commitments of, and the
principal amount of the Advances owing to, each Lender from time to time. The
entries in the Register shall constitute prima facie evidence of the foregoing
information, in the absence of manifest error, and the Borrower, each other
Credit Party, the Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of the Advances and any Notes evidencing
the Advances recorded therein for all purposes of this Agreement. Any assignment
of any Advance, whether or not evidenced by a Note, shall be effective only upon
appropriate entries with respect thereto being made in the Register (and each
Note shall expressly so provide). Any assignment or transfer of all or part of
an Advance evidenced by a Note shall be registered on the Register only upon
surrender for registration of assignment or transfer of the Note evidencing such
Advance, accompanied by a duly executed Assignment and Acceptance, and thereupon
one or more new Notes shall be issued to the designated Assignee.

                     (f)   Upon its receipt of an Assignment and Acceptance
executed by an Assignor, an Assignee and any other Person whose consent is
required by this Section 9.04, together with payment to the Agent of the
registration and processing fee referred to in paragraph (a) of this Section
9.04, the Agent shall (i) promptly accept such Assignment and Acceptance and
(ii) record the information contained therein in the Register on the effective
date determined pursuant thereto.

                     (g)   Each of the Borrower, each Lender and the Agent
hereby confirms that it will not institute against a Conduit Lender or join any
other Person in instituting against a Conduit Lender any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding under any
state bankruptcy or similar law, for one year and one day after the payment in
full of the latest maturing commercial paper note issued by such Conduit Lender;
provided, however, that each Lender designating any Conduit Lender hereby agrees
to indemnify, save and hold harmless each other party hereto for any loss, cost,
damage or expense arising out of its inability to institute such a proceeding
against such Conduit Lender during such period of forbearance.

                     9.05   Delays and Waivers. No delay or omission by Agent,
Collateral Agent, Arranger or Lenders to exercise any right under this
Agreement, the Collateral Documents or any instrument or agreement contemplated
hereunder or thereunder shall impair any such right, nor shall it be construed
to be a waiver thereof. No waiver of any single breach or default under this

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Agreement shall be deemed a waiver of any other breach or default. Any waiver,
consent or approval under this Agreement must be in writing to be effective.

                     9.06   Costs and Expenses. Borrower agrees:

           (a)   to pay or reimburse Agent, the Collateral Agent, the Arranger
and the Issuing Lenders on demand for all reasonable out-of-pocket costs and
expenses incurred by them in connection with the development, preparation,
delivery, administration and execution of, and any amendment, supplement or
modification to, this Agreement, any Collateral Document and any other documents
or instruments prepared in connection herewith or therewith, the consummation of
the transactions contemplated hereby and thereby, and the consummation of the
transactions to occur on the Closing Date, including, without limitation, (i)
the reasonable fees and out-of-pocket expenses of outside and local counsel and
special tax counsel to Agent and the Collateral Agent (and the allocated cost of
Agent’s staff counsel) with respect thereto and (ii) the reasonable fees and
out-of-pocket expenses of Agent’s outside accounting consultant;

           (b)   to pay or reimburse each Lender, the Collateral Agent, the
Agent, the Arranger and the Issuing Lenders on demand for all reasonable costs
and expenses incurred by any of them in connection with the enforcement or
preservation of any rights under this Agreement, the Notes, any Collateral
Document, and any other documents or instruments prepared in connection herewith
or therewith and in connection with any refinancing or restructuring of the
Revolving Credit in the nature of a “work-out”, including, without limitation,
reasonable fees and out-of-pocket expenses of outside and local counsel (and the
allocated cost of staff counsel) to Agent, the Collateral Agent and to each of
the several Lenders; and

           (c)   to pay or reimburse Agent, the Arranger or the Collateral Agent
on demand for all reasonable appraisal, accounting, audit, search, recordation
and filing fees, incurred or sustained by them in connection with the matters
referred to under paragraphs (a) and (b) above.

                     9.07   Telephone Indemnity. Borrower shall protect Lenders
and Agent and hold them harmless from and not liable for any and all loss,
damage, claim or expense (including, without limitation, reasonable attorneys’
fees and the allocated costs of any Lender’s in-house legal counsel) incurred by
Agent or Lenders in connection with or in relation to any act or any failure to
act upon telephone instructions received by Lenders or Agent from Borrower or
any Person who has identified himself as an authorized officer of Borrower,
whether or not the instructions are actually given by an authorized officer of
Borrower.

                     9.08   Other Indemnity. (a)  Borrower agrees to indemnify
and hold harmless Agent, the Collateral Agent, each Lender and each of their
respective officers, directors, agents and employees from and against any and
all claims, damages, liabilities, costs and expenses (including, without
limitation, reasonable fees, expenses and disbursements of counsel) which may be
incurred by or asserted against Agent, the Collateral Agent, any Lender, any
Issuing Lender or any such other indemnified Person in connection with or
arising out of any investigation, litigation or proceeding related to this
Agreement, the Advances, the Revolving

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Credit Commitments, the Letters of Credit, the use of proceeds of the Advances
or Letters of Credit or the negotiation and preparation of documentation in
connection herewith or therewith, whether or not Agent, the Collateral Agent,
any Issuing Lender or such Lender is a party thereto; provided, however, that
Borrower shall not be required to indemnify any such indemnified Person from or
against any portion of such claims, damages, liabilities or expenses arising out
of gross negligence or willful misconduct of such indemnified Person. The
foregoing indemnification shall be binding on the Borrower forever, and shall
survive repayment of the Obligations and the release of any liens under the
Collateral Documents.

                     (b)   Borrower hereby agrees to indemnify, defend and hold
harmless Agent, the Collateral Agent, the Issuing Lenders and each Lender, and
each of their respective officers, directors, employees and agents, from and
against any and all claims, losses, liabilities, damages and expenses
(including, without limitation, reasonable attorneys’ fees), which may be
incurred by or asserted against Agent, the Collateral Agent, the Issuing Lenders
or any Lender or any such indemnified Person in connection with or arising out
of any investigation, litigation or proceeding, or any action taken by any
Person, with respect to any Hazardous Materials Claim arising out of or related
to any of the Properties which are subject to a Lien in favor of the Collateral
Agent as contemplated hereunder (including, without limitation, any Hazardous
Materials Claim arising out of or relating to any (i) release of Hazardous
Materials on, upon, under or into any such Properties or (ii) damage to real or
personal property or natural resources and/or harm or injury to Persons alleged
to have resulted from such release of Hazardous Materials on, upon or into any
such Properties); provided, however, that Borrower shall not be required to
indemnify, defend or hold harmless any such indemnified Person from or against
any portion of such loss, liability, damage or expense arising out of the gross
negligence or willful misconduct of such indemnified Person. The foregoing
indemnification is the personal obligation of Borrower, binding on Borrower
forever, and shall survive repayment of the Obligations and release of record of
the mortgages or deeds of trust in favor of Collateral Agent encumbering the
Properties and any transfer of the Properties by foreclosure or by deed in lieu
of foreclosure. The foregoing indemnification shall not be affected or negated
by any exculpatory clause that may be contained in any of the Collateral
Documents. It is expressly understood and agreed that to the extent that
Collateral Agent and/or Lenders are strictly liable under any such law,
regulation, ordinance or requirement, Borrower’s obligation to Collateral Agent
and Lenders under this indemnity shall likewise be without regard to fault on
the part of Borrower or its Subsidiaries with respect to the violation or
condition which results in liability to Collateral Agent and/or Lenders;
provided, however, that Borrower shall not be required to indemnify, defend or
hold harmless any such indemnified Person from or against any portion of such
loss, liability, damage or expense arising after the Collateral Agent shall have
foreclosed or otherwise taken possession of such property which is caused by any
action or inaction of the Collateral Agent after such time.

                     (c)   Agent, the Collateral Agent and each Lender agree
that in the event that any such investigation, litigation or proceeding is
asserted or threatened in writing or instituted against it or any of its
officers, directors, agents, and employees, or any remedial, removal or response
action is requested of it or any of its officers, directors, agents and
employees, for which Agent, the Collateral Agent or any Lender may desire
indemnity or defense hereunder, Agent, the Collateral Agent or such Lender shall
promptly notify Borrower in writing.

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                     (d)   Borrower at the request of Agent, the Collateral
Agent or any Lender, shall have the obligation to defend against such
investigation, litigation or proceeding or requested remedial, removal or
response action, and Agent, in any event, may participate in the defense thereof
with legal counsel of Agent’s choice if Agent asserts defenses that raise
potential conflicts of interest with Borrower. No action taken by legal counsel
chosen by Agent or any Lender in defending against any such investigation,
litigation or proceeding or requested remedial, removal or response action shall
vitiate or in any way impair Borrower’s obligation and duty hereunder to
indemnify and hold harmless Agent, the Collateral Agent and each Lender (unless
such action is grossly negligent).

                     9.09   Choice of Law. EXCEPT FOR COLLATERAL DOCUMENTS
GOVERNED BY THE LAWS OF ANOTHER STATE OR COUNTRY, AGENT, COLLATERAL AGENT AND
LENDERS AND BORROWER AGREE THAT THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, THE NOTES AND ALL OTHER
DOCUMENTS EXECUTED IN CONNECTION HEREWITH, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY, OR OTHERWISE, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

                     9.10   Personal Jurisdiction; Waiver. AGENT, COLLATERAL
AGENT AND LENDERS MAY ENFORCE ANY CLAIM ARISING UNDER THIS AGREEMENT, THE NOTES,
OR ANY COLLATERAL DOCUMENT IN ANY STATE OR FEDERAL COURT HAVING SUBJECT MATTER
JURISDICTION AND LOCATED IN CHICAGO, ILLINOIS OR NEW YORK, NEW YORK. FOR THE
PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT TO ANY SUCH CLAIM,
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH
COURTS. EACH OF THE BORROWER AND ITS SUBSIDIARIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN
THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.

                     9.11   Service of Process. THE PARTIES HERETO IRREVOCABLY
CONSENT TO THE SERVICE OF PROCESS OF ANY OF THE AFORESAID COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS PROVIDED HEREIN NOT LESS
THAN FIVE (5) DAYS AFTER THE APPLICABLE SUMMONS IS ISSUED AND SHALL BECOME
EFFECTIVE UPON MAILING. NOTHING CONTAINED IN THIS SECTION 9.11 SHALL AFFECT THE
RIGHT OF AGENT, COLLATERAL AGENT, ANY LENDER OR ANY HOLDER OF A NOTE TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST BORROWER OR ANY GUARANTOR IN ANY OTHER JURISDICTION.

                     9.12   Waiver of Jury Trial. EACH OF AGENT, COLLATERAL
AGENT, LENDERS AND BORROWER WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN

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RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN
AGENT, LENDERS AND BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.

                     9.13   Section Headings. Section headings are for reference
only, and shall not affect the interpretation or meaning of any provision of
this Agreement.

                     9.14   Severability. The illegality or unenforceability of
any provision of this Agreement or any instrument or agreement required
hereunder shall not in any way affect or impair the legality or enforceability
of the remaining provisions of this Agreement or any instrument or agreement
required hereunder.

                     9.15   Counterparts. This Agreement may be executed in as
many counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts (provided that Borrower shall execute
each counterpart), each of which, when so executed, shall be deemed an original,
but all such counterparts shall constitute but one and the same agreement.

                     9.16   No Reliance by Lenders. Lenders hereby acknowledge
that they have not, in good faith, relied upon any margin stock (as defined in
Regulation U of the Board of Governors of the Federal Reserve System) as
collateral in extending or maintaining the loans under this Agreement.

                     9.17   Entire Agreement. This Agreement, any writing
referred to in Section 2.15 and any agreement, document or instrument attached
hereto or referred to herein (i) integrate all the terms and conditions
mentioned herein or incidental hereto, (ii) supersede all oral negotiations and
prior writings in respect to the subject matter hereof, and (iii) are intended
by the parties as the final expression of the agreement with respect to the
terms and conditions set forth in this Agreement and any such agreement,
document or instrument (including such letter agreement) and as the complete and
exclusive statement of the terms agreed to by the parties.

                     9.18   Confidentiality. Each Lender and Agent agree to keep
information obtained by it pursuant hereto and the other Collateral Documents
confidential in accordance with such Lender’s or Agent’s, as the case may be,
customary practices and agrees that it will only use such information in
connection with the transactions contemplated by this Agreement and not disclose
any of such information other than (i) to such Lender’s or Agent’s, as the case
may be, employees, representatives, agents or affiliates who are advised of the
confidential nature of such information, (ii) to the extent such information
presently is or hereafter becomes available to such Lender or Agent, as the case
may be, on a non-confidential basis from a source other than Borrower or such
information that is in the public domain at the time of disclosure, (iii) to the
extent disclosure is required by law, regulation, subpoena or judicial order or
process (which requirement or order shall be promptly notified to Borrower
unless such notice is legally prohibited) or requested or required by bank
regulators or auditors or any administrative body or commission to whose
jurisdiction such Lender or Agent, as the case may be, may be subject, (iv)

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to assignees or participants or potential assignees or participants who agree to
be bound by the provisions of this Section 9.18, (v) to the extent required in
connection with any litigation between Borrower and/or any Guarantor and any
Lender or Agent, (vi) following an Event of Default, in connection with the sale
or other realization on any Collateral under any Collateral Document, or (vii)
with Borrower’s prior written consent. Notwithstanding anything herein to the
contrary, any Lender (and any employee, representative or other agent of such
Lender) may disclose to any and all persons, without limitation of any kind,
such Lender’s U.S. federal income tax treatment and the U.S. federal income tax
structure of the transactions contemplated hereby relating to such Lender and
all materials of any kind (including opinions or other tax analyses) that are
provided to it relating to such tax treatment and tax structure. However, no
disclosure of any information relating to such tax treatment or tax structure
may be made to the extent nondisclosure is reasonably necessary in order to
comply with applicable securities laws.

                     9.19   Receivables Program Savings Clause. Notwithstanding
anything to the contrary contained herein, in the event that any action taken by
the Borrower, any Guarantor or any Subsidiary (including Funding Corp.), which
is contemplated and permitted under the Receivables Program Documents, would
violate one or more provisions of this Agreement or any Collateral Document,
then such violation shall not constitute or give rise to a Default or Event of
Default hereunder or thereunder, provided that such action is permitted or
contemplated by one or more other provisions of this Agreement or the Collateral
Documents.

                     9.20   Existing Credit Agreement to Remain in Full Force
and Effect. This Agreement shall be deemed to be an amendment to and restatement
of the Existing Credit Agreement and the Existing Credit Agreement as amended
and restated hereby shall remain in full force and effect and is hereby ratified
and confirmed in all respects. All references to the Existing Credit Agreement
in any other agreement or document shall, on and after the Closing Date, be
deemed to refer to the Existing Credit Agreement as amended and restated hereby,
and all references to “Bank” or “Banks” in any other agreement or document
shall, on and after the Closing Date, be deemed to be references to “Lender” and
“Lenders”, respectively. The Borrower agrees, acknowledges and affirms that (i)
each of the Collateral Documents to which it is a party shall remain in full
force and effect and shall constitute security for all extensions of credit
pursuant to the Existing Credit Agreement as amended and restated hereby and
(ii) any reference to the Existing Credit Agreement appearing in any such
Collateral Document shall on and after the Closing Date be deemed to refer to
the Existing Credit Agreement as amended and restated hereby.

ARTICLE X.
RELATION OF LENDERS

                     10.01   Agent and Collateral Agent; Enforcement of
Guaranties. (a)  Each Lender hereby irrevocably appoints, designates and
authorizes Agent to take such action on its behalf under the provisions of this
Agreement and each other instrument or agreement contemplated hereunder and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or such other instrument or agreement, together with
such powers

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as are reasonably incidental thereto. Each Lender agrees that no Lender shall
have the right individually to enforce the Guarantee and Collateral Agreement,
the Mortgages or other Collateral Documents and hereby appoints Agent to act
upon the direction of the Majority Lenders to enforce each such Agreement.
JPMorgan Chase Bank and the Operating Banks agree that none of such Lenders
shall take any action to enforce the Operating Bank Guaranty, respectively,
until Agent has commenced to enforce the Guarantee and Collateral Agreement upon
the direction of the Majority Lenders pursuant to the preceding sentence.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in such other instrument or agreement, Agent shall not have any
duties or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any such other instrument or agreement or otherwise exist
against the Agent. Agent may execute any of its duties under this Agreement by
or through agents, employees or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.

                     (b)   Each Lender hereby authorizes the Collateral Agent to
enter into the Collateral Documents to which it is a party and to take all
action contemplated by the Collateral Agency Agreement; provided that the
Collateral Agent shall not enter into or consent to any amendment, modification,
termination or waiver of any provision contained in any Collateral Document or
take any action thereunder without the direction of Agent. Except as permitted
by Section 10.13, the Agent shall not direct the Collateral Agent to enter into
or consent to any amendment, modification, termination or waiver of any
provision of any Collateral Document or direct the Collateral Agent to take any
action thereunder without the prior consent of the Majority Lenders. Each Lender
agrees that no Lender shall have any right individually to seek or to enforce or
to realize upon the security granted to the Collateral Agent under the
Collateral Documents, it being understood and agreed that such rights and
remedies may be exercised by the Collateral Agent for the benefit of all of the
Secured Creditors upon the terms of the Collateral Documents and the Collateral
Agency Agreement.

                     10.02   Pro Rata Sharing. All principal, interest and fee
payments on the Revolving Credit (other than sums under Sections 2.14(a)(ii),
2.14(a)(iii) and 2.15) shall be divided pro rata among Lenders according to
their respective Commitment Percentages. All sums realized under the Guarantee
and Collateral Agreement (or any guaranty executed and delivered pursuant to
Section 3.04) and all proceeds of Collateral distributed to Lenders under the
Collateral Agency Agreement (subject to Section 10.13(f)) shall be divided pro
rata among Lenders.

                     10.03   Set-off. (a)  Subject to the rights of the Secured
Creditors with respect to any Collateral and in addition to any Liens granted by
Borrower or any of its Subsidiaries to the Collateral Agent and any rights now
or hereafter granted under applicable law and not by way of limitation of any
such Lien or rights, upon the occurrence and during the continuance of an Event
of Default, each Secured Creditor is hereby authorized by Borrower at any time
and from time to time with the prior consent of the Agent, without notice to
Borrower, or to any other Person (any such notice being hereby expressly waived)
to set-off all deposits of Borrower and any other Debt at any time held or owing
by such Secured Creditor to or for the credit of Borrower against and on account
of the Secured Obligations owing to such Secured Creditor

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irrespective of whether or not Agent or such Secured Creditor shall have made
demand under this Agreement or any Collateral Document and although the Secured
Obligations may be unmatured. Each of the Lenders agrees that it shall not,
without the express consent of Agent, set-off against the Obligations or any
other amounts owing to such Lender any accounts of Borrower now or hereafter
maintained with such Lender. Each Lender further agrees that it shall not,
unless specifically requested to do so by Agent, take or cause to be taken any
action, including, without limitation, the commencement of any legal or
equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral for the purpose of which is, or
could be, to give such Lender any preference or priority against any other
Secured Creditor with respect to the Collateral.

                     (b)   If at any time or times any Lender shall receive by
payment, foreclosure, set-off or otherwise, any proceeds of any Collateral or
any payments with respect to the Secured Obligations arising under, or relating
to, this Agreement or the Collateral Documents, except for any such proceeds or
payments received by such Lender or any Issuing Lender from Agent pursuant to
the terms of this Agreement, the Collateral Agency Agreement or any agreement
referred to in Section 2.15, such Lender shall promptly purchase, without
recourse or warranty, an undivided interest and participation in the Secured
Obligations owed to the other Lenders (or, after an Event of Default, the other
Secured Creditors) so that such excess payment received shall be applied ratably
as among Lenders in accordance with their respective Commitment Percentages;
(or, after an Event of Default, among the Secured Creditors as provided for in
the Collateral Agency Agreement); provided, however, that if all or part of such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor shall
be returned to such purchasing party, but without interest except to the extent
that such purchasing party is required to pay interest in connection with the
recovery of the excess payment. Notwithstanding any contrary provision contained
herein, the proceeds of any drawing under any Letter of Credit issued hereunder
in favor of JPMorgan Chase Bank in its individual capacity (without affecting
JPMorgan Chase Bank’s obligation to purchase a participation in any such Letter
of Credit in accordance with Section 2.19(c)(i)) shall be for JPMorgan Chase
Bank’s sole benefit.

                     (c)   Each Secured Creditor other than in its capacity as a
Lender shall be entitled to any rights conferred upon it under this Agreement or
any of the Collateral Documents only on the condition and understanding that it
shall be bound by the terms of this Section 10.03 to the same extent as Lenders.

                     10.04   Liability of Agent. Neither Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action taken or omitted to be taken by any of them under or
in connection with this Agreement (except for its or such Person’s own gross
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Lenders for any recital, statement, representation or warranty made by
Borrower or any Subsidiary or any officer thereof contained in this Agreement or
in any other instrument or agreement contemplated hereunder or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
instrument or agreement contemplated hereunder or for the value of any
Collateral or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any

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other instrument or agreement contemplated hereunder or for any failure of
Borrower or any Subsidiary to perform its obligations hereunder or thereunder.
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of agreements contained in, or
conditions of, this Agreement or any other instrument or agreement contemplated
hereunder, or to inspect the properties, books or records of Borrower or any
Subsidiary.

                     10.05   Reliance by Agent. Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, telecopy, telex or telephone
message, electronic message, statement or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including counsel to Borrower or any Guarantor), independent accountants and
other experts selected by Agent. Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other instruction or
agreement contemplated hereunder unless it shall first receive such advice or
concurrence of the Majority Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other instrument or agreement contemplated hereunder in accordance with a
request or consent of the Majority Lenders and such request and any action taken
or failure to act pursuant thereto shall be binding upon all Lenders.

                     10.06   Approvals; Amendments. This Agreement and the
Collateral Documents may be amended or waived only upon the prior express
written consent of Borrower or Guarantors, as the case may be, party thereto and
the Majority Lenders. Upon any occasion requiring or permitting an approval,
consent, waiver, election or other action on the part of Majority Lenders,
action shall be taken by Agent for and on behalf or for the benefit of all
Lenders upon the direction of Majority Lenders, and any such action shall be
binding on all Lenders; provided, however, that unless each Lender directly
affected thereby (it being understood that, for the purposes of Section 10.06
(d) and (e) all Lenders shall be deemed to be directly affected thereby) agree
in writing, no amendment, modification, consent or waiver shall be effective
which:

           (a)   increases the amount of the Revolving Credit or the amount of
the Revolving Credit Commitment of any Lender,

           (b)   reduces interest, principal, commissions or fees owing
hereunder,

           (c)   extends the scheduled date on which any sum is due hereunder,

           (d)   releases all or substantially all of the Guarantors from their
obligations under the Guarantee and Collateral Agreement or, subject to the
proviso in Section 10.13(a), releases all or substantially all of the Collateral
(except (i) in connection with dispositions thereof permitted under this
Agreement, (ii) as permitted by subsection 10.13(b), (iii) any Guarantor may be
released from its obligations under the Credit Documents if all of the Capital
Stock of, or substantially all of the assets of, such Guarantor are disposed of
in a

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transaction permitted by this Agreement or (iv) as otherwise expressly permitted
by this Agreement),

           (e)   changes the definition of “Majority Lenders”,

           (f)   amends or waives the provisions of Sections 2.19(a)(ii)(C),
Section 10.02 or this Section 10.06,

           (g)   changes the definition of “Interest Period”, or

           (h)   amends or waives any provision requiring consent of a specified
percentage of Lenders without consent of such percentage of Lenders.

                     Notwithstanding the foregoing, a Revolving Credit
Commitment Amount Increase made in accordance with the terms of the definition
of “Revolving Credit Commitment Amount” shall be effective with the express
written consent of Borrower, each Lender increasing its Revolving Credit
Commitment in connection therewith and the Agent, and the Borrower and the Agent
may enter into technical amendments to this Agreement in connection with the
funding of a Revolving Credit Commitment Amount Increase.

                     10.07   Notice of Default. Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default, except with
respect to defaults in the payment of principal, interest, commissions and fees
payable to Agent hereunder for the account of Lenders, unless Agent shall have
received notice from a Lender or Borrower referring to this Agreement,
describing such Event of Default and stating that such notice is a “notice of
default”. In the event that Agent receives such a notice, Agent shall give
prompt notice thereof to Lenders. Agent shall take such action with respect to
such Event of Default as shall be requested by the Majority Lenders in
accordance with Article VIII; provided, however, that unless and until Agent
shall have received any such request, Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Event
of Default as it shall deem advisable in the best interests of Lenders.

                     10.08   Credit Decision. Each Lender expressly acknowledges
that neither Agent nor any other Lender nor any of their Affiliates nor any
officer, director, employee, agent or attorney-in-fact of any of them has made
any representation or warranty to it and that no act by Agent or any other
Lender hereafter taken, including any review of the affairs of Borrower and its
Subsidiaries and their Affiliates, shall be deemed to constitute any
representation or warranty by Agent or any other Lender to such Lender. Each
Lender represents to Agent and to each other Lender that it has, independently
and without reliance upon Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of Borrower and Guarantors and made its own
decision to enter into this Agreement and extend credit to Borrower hereunder
(without reliance on the Agent or any other Lender). Each Lender also represents
that it will, independently and without reliance upon Agent or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such
investigations as it deems

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necessary to inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of Borrower and Guarantors
(without reliance on the Agent or any other Lender). Except for notices, reports
and other documents expressly required to be furnished to Lenders by Agent
hereunder, Agent shall not have any duty or responsibility to provide any Lender
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
Borrower or any Guarantor which may come into the possession of Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

                     10.09   Lenders’ Indemnity. Each Lender agrees to indemnify
Agent (to the extent not reimbursed by or on behalf of Borrower and without
limiting the obligation of Borrower to do so), ratably, according to its
Revolving Credit Commitments (or, if the Revolving Credit Commitments have been
terminated, the sum of its outstanding Advances, participating interests in
Letters of Credit and unreimbursed drawings in respect of Letters of Credit),
determined in effect on the date on which indemnification is sought under this
Section (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Advances shall have been paid in full,
ratably in accordance with such sum immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind
whatsoever which may at any time (including at any time following the repayment
of the Advances or the Letters of Credit) be imposed on, incurred by or asserted
against Agent in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by Agent under or
in connection with any of the foregoing; provided however, that no Lender shall
be liable for the payment to Agent of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from Agent’s gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including reasonable fees and expenses of counsel and the allocated
cost of in-house counsel) incurred by Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any
Collateral Document, or any document contemplated by or referred to herein to
the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrower.

                     10.10   Agent as Lender. JPMorgan Chase Bank shall have the
same rights and powers hereunder as any other Lender and may exercise the same
as though it were not Agent; and the term “Lenders” shall include JPMorgan Chase
Bank in its individual capacity. JPMorgan Chase Bank and its subsidiaries and
affiliates may accept deposits from, lend money to, act as agent or trustee for
other lenders to, and generally engage in any kind of banking, trust or other
business with Borrower or any of its Subsidiaries or Affiliates as if it were
not Agent.

                     10.11   Notice of Transfer. Subject to Section 9.04(a),
Agent may deem and treat a Lender party to this Agreement as the owner of such
Lender’s portion of the Revolving Credit for all purposes hereof unless and
until a written notice of the assignment or transfer thereof executed by such
Lender shall have been received by Agent.

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                     10.12   Resignation of Agent. Agent may resign upon 30
days’ written notice to Lenders and Borrower. Upon any such resignation,
Majority Lenders shall have the right to appoint a successor Agent (which shall
be either a Lender or a commercial bank with capital and surplus in excess of
One Hundred Million Dollars ($100,000,000) and which successor Agent, unless a
Default or an Event of Default has occurred and is continuing, shall be
reasonably acceptable to Borrower). If no successor Agent shall have accepted
such appointment within thirty (30) days after the retiring Agent’s giving of
notice of resignation, the retiring Agent may, on behalf of Lenders, appoint a
successor Agent. Upon the acceptance by the successor Agent of its appointment
hereunder, the successor Agent shall succeed to and become vested with all the
rights and obligations of the retiring Agent, and the retiring Agent shall be
discharged from its obligations under this Agreement. The provisions of this
Article X and Sections 9.06, 9.07 and 9.08 shall inure to the benefit of the
retiring Agent as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.

                     10.13   Collateral Matters. (a)  Agent may from time to
time, before or after the occurrence of an Event of Default, make such
disbursements and advances to the Collateral Agent (“Agent Advances”) which
Agent, in its sole discretion, deems necessary or desirable to preserve or
protect the Collateral or any portion thereof, to enhance the likelihood or
maximize the amount of repayment of the Obligations or to pay any other amount
chargeable to Borrower or any Guarantor pursuant to the terms of this Agreement
or any Collateral Document, including, without limitation, costs, fees and
expenses as described in Section 9.06; provided, however, that the Agent
Advances shall not exceed Two Hundred Fifty Thousand Dollars ($250,000) without
the prior written consent of Majority Lenders. The Agent Advances shall be
repayable on demand and be secured by the Collateral. The Agent Advances shall
not constitute Advances but shall otherwise constitute Obligations hereunder.
Agent shall notify each Lender in writing of each such Agent Advance, which
notice shall include a description of the purpose of such Agent Advance. Without
limitation to its obligations pursuant to Section 10.09, each Lender agrees that
it shall make available to Agent, upon Agent’s demand, in immediately available
funds, the amount equal to such Lender’s Commitment Percentage of each such
Agent Advance. If such funds are not made available to Agent by such Lender
within one (1) Banking Day after Agent’s demand therefor, Agent will be entitled
to recover any such amount from such Lender together with interest thereon at
the Federal Funds Rate for each day during the period commencing the date of
such demand and ending on the date such amount is received.

                     (b)   Lenders acknowledge that the Borrower and its
Subsidiaries have created and will create Liens permitted by this Agreement on a
substantial portion of their property, including Collateral, to secure
obligations owed to Persons other than the Secured Creditors and that the
Borrower and its Subsidiaries from time to time have requested and will request
the Agent and Collateral Agent to execute and deliver releases and
subordinations with respect to Liens on the Collateral created by the Collateral
Documents in connection with transactions permitted by this Agreement (such as
the Borrower and its Subsidiaries obtaining financing on equipment and other
property secured by Liens described in clause (iv) of the definition of
“Permitted Liens” and financing pursuant to Permitted Real Estate Financing
Transactions). Lenders hereby irrevocably authorize Agent, at its option and in
its discretion, to direct the Collateral Agent to release or subordinate on
terms satisfactory to the Collateral Agent any Lien granted to or held by the
Collateral Agent upon any Collateral (i) upon termination of the Revolving
Credit Commitments and indefeasible payment in full and satisfaction of all of
the

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Obligations; or (ii) constituting property being sold or disposed of if the sale
or disposition is permitted hereunder (including with respect to Receivables
Assets); or (iii) constituting property in which neither Borrower nor any
Guarantor owned an interest at the time the Lien was granted or at any time
thereafter; or (iv) constituting property leased to Borrower or any Guarantor;
or (v) if approved, authorized or ratified in writing by the Majority Lenders;
or (vi) subject to a Permitted Lien or other Lien permitted by Section 7.03; or
(vii) not owned by the Borrower or any Guarantor. Upon request by Agent at any
time, Lenders will confirm in writing Agent’s authority to so direct the release
of particular types or items of Collateral pursuant to this Section 10.13(b).
Without limitation of the foregoing, the Lenders approve the form of, and
authorize the Agent and the Collateral Agent to enter into at the request of the
Borrower, subordination agreements substantially in the form of Exhibit N
hereto. The Lenders hereby irrevocably authorize Agent, at its option and
discretion (1) to direct the Collateral Agent to release and subordinate, on
terms satisfactory to the Collateral Agent, Liens on Collateral which is also
subject to Permitted Liens, (2) to execute any release, subordination or
acknowledgement documents requested by the Borrower in order to effect any
release or subordination described in this paragraph (b) and (3) to execute
acknowledgements with respect to leases to the effect that the Property subject
to such leases is not subject to the Liens created by the Credit Documents or
Collateral, and the Agent and the Collateral Agent shall have no liability to
the Secured Creditors for actions taken pursuant to this paragraph (b). This
paragraph (b) is intended as an authorization by the Lenders to permit the Agent
and the Collateral Agent to take the actions described herein and neither the
Borrower nor any of its Subsidiaries or any other Person shall be entitled to
the benefits hereof.

                     (c)   Without in any manner limiting Agent’s authority to
act without any specific or further authorization or consent by the Majority
Lenders (as set forth in Section 10.13(b) above), each Lender agrees to confirm
in writing, upon request by Borrower, the authority to direct the release of
Collateral conferred upon the Agent under clauses (i) through (vii) of Section
10.13(b) above. Upon receipt by Agent of confirmation from the Majority Lenders
of its authority to direct the release of any particular item or types of
Collateral, Agent shall (and is hereby irrevocably authorized by Lenders to)
direct the Collateral Agent to execute such documents as may be necessary to
evidence the release of the Liens granted to the Collateral Agent for the
benefit of the Secured Creditors herein or pursuant hereto upon such Collateral;
provided, however, that (i) Agent shall not be required to direct the Collateral
Agent to execute any such document on terms which, in Agent’s opinion, would
expose Agent or the Collateral Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of Borrower and its
Subsidiaries in respect of) all interests retained by Borrower and its
Subsidiaries, including (without limitation) the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.

                     (d)   Neither Agent nor Collateral Agent shall have any
obligation whatsoever to any Lender to assure that the Collateral exists or is
owned by Borrower or any of its Subsidiaries or is cared for, protected or
insured or has been encumbered or that the Liens granted to the Agent or the
Collateral Agent pursuant to any Collateral Document have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or

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fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent or Collateral Agent in this Section 10.13 or in
any of the Collateral Documents, it being understood and agreed that in respect
of the Collateral, or any act, omission or event related thereto, each of Agent
and Collateral Agent may act in any manner it may deem appropriate, in its sole
discretion, given Agent’s and Collateral Agent’s own interest in the Collateral
as one of the Lenders and that Agent and Collateral Agent shall have no duty or
liability whatsoever to any Lender (except as specifically provided in this
Agreement and the Collateral Documents).

                     EACH LENDER FURTHER ACKNOWLEDGES AND AGREES THAT AGENT AND
COLLATERAL AGENT SHALL NOT BE RESPONSIBLE FOR, AND SHALL HAVE NO LIABILITY OR
OBLIGATION WITH RESPECT TO, THE VALIDITY, EFFECTIVENESS, GENUINENESS,
ENFORCEABILITY OR SUFFICIENCY OF THIS AGREEMENT, THE NOTES, THE COLLATERAL
DOCUMENTS, ANY OTHER INSTRUMENT OR AGREEMENT CONTEMPLATED HEREUNDER OR
THEREUNDER, ANY ACTION TAKEN OR NOT TAKEN OR ANY DECISION MADE BY ANY PERSON
(OTHER THAN AGENT, OR COLLATERAL AGENT, AS THE CASE MAY BE) WITH RESPECT TO ANY
THEREOF OR WITH RESPECT TO THE COLLATERAL, THE FAILURE OF THE BORROWER OR ANY
SUBSIDIARY TO PERFORM ITS OBLIGATIONS HEREUNDER OR THEREUNDER, ANY
MISREPRESENTATION BY BORROWER OR ANY SUBSIDIARY HEREUNDER OR THEREUNDER, OR THE
VALUE OF ANY COLLATERAL OR THE CREATION, ATTACHMENT, PERFECTION OR PRIORITY OF
ANY SECURITY INTEREST OR LIEN PURPORTED TO BE CREATED BY THE COLLATERAL
DOCUMENTS, THIS AGREEMENT OR SUCH OTHER INSTRUMENTS OR AGREEMENTS AND THAT
AGENT, AS COLLATERAL AGENT AND AGENT, HAS UNDERTAKEN NO INDEPENDENT REVIEW OR
ANALYSIS WITH RESPECT TO ANY OF THE FOREGOING.

                     (e)   The benefit of the Collateral Documents and of the
provisions of this Agreement relating to the Collateral shall extend to and be
available in respect of the Secured Obligations (as defined in the Collateral
Agency Agreement) solely on the condition and understanding, as among Agent and
Lenders, that (i) the Secured Obligations shall be entitled to the benefit of
the Collateral to the extent expressly set forth in the Collateral Documents,
and to such extent the Collateral Agent shall hold, and have the right and power
to act with respect to, the Collateral on behalf of and as agent for the holders
of the Secured Obligations; but Agent in its separate capacity as agent
hereunder is acting solely as agent for the Lenders and shall have no separate
fiduciary duty, duty of loyalty, duty of care, duty of disclosure or other
obligations whatsoever to any holder of Secured Obligations; and (ii) all
matters, acts and omissions relating in any manner to the Collateral, or the
omission, creation, perfection, priority, abandonment or release of any Lien,
shall be governed solely by the provisions of this Agreement and the Collateral
Documents, and no separate Lien, right, power or remedy shall arise or exist in
favor of any Lender under any separate instrument or agreement or in respect of
any Secured Obligations; and (iii) each Lender shall be bound by all actions
taken or omitted, in accordance with the provisions of this Agreement or the
Collateral Documents, by the Collateral Agent, at the direction of Agent on
behalf of the Lenders; and (iv) no holder of Secured Obligations shall exercise
any right of setoff, bank’s lien or similar right except as expressly provided
in Section 10.03.

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                     (f)   Any Collateral proceeds received by Agent from the
Collateral Agent pursuant to Section 3(b) of the Collateral Agency Agreement
shall be applied and paid to the Obligations as follows (unless Agent and
Majority Lenders otherwise agree):

           First: To Agent and the Collateral Agent in an amount equal to all
costs and expenses incurred in connection with performing their respective
duties hereunder and under the Collateral Documents, including, without
limitation, those related to or in connection with the administration of this
Agreement or the enforcement of their respective rights under the Collateral
Documents;

           Second: To any accrued and unpaid interest outstanding hereunder or
under the Notes;

           Third: To the unpaid principal of the outstanding Advances and to
Agent for deposit as cash collateral, for application against drawings under any
Letters of Credit, up to an amount equal to the undrawn amount of such Letters
of Credit;

           Fourth: To any accrued and unpaid fees, commissions or other sums
payable pursuant to this Agreement; and

           Fifth: Any surplus then remaining shall be paid to Borrower or its
successors or assigns, or to whomever may be lawfully entitled to receive the
same, or as a court of competent jurisdiction may direct.

                     10.14   Collateral Agent. The Collateral Agent shall be
entitled to the standards of care, indemnities and other rights set forth in
this Article Ten as are set forth for the Agent, mutatis mutandis, except as may
be expressly provided otherwise hereunder, or in the Collateral Documents.

                     10.15   Documentation Agent and Syndication Agent. Neither
the Documentation Agent nor the Syndication Agent shall have any rights, duties
or responsibilities hereunder in its capacity as such.

                     10.16   Exiting Lenders. Each of the lenders party to the
Existing Credit Agreement and not continuing as a Lender hereunder hereby agrees
that, upon its acceptance of the outstanding amounts owed to it under the
Existing Credit Agreement on the Closing Date, such lender shall have consented
to the amendment and restatement of the Existing Credit Agreement as provided
herein, the reallocation requirements set forth in Section 4.01(bb) hereof and
the assignment of the Advances and all other rights (including, but not limited
to, the rights set forth in Section 2.19 of the Existing Credit Agreement) under
the Existing Credit Agreement to the extent necessary to give effect to the
reallocation requirements set forth in Section 4.01(bb) hereof.

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                     IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by their duly authorized officers as of the day and year first above
written.

                                    BALLY TOTAL FITNESS HOLDING CORPORATION

                                    By:   __________________________________________
                                          Name:
                                          Title:

105

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                                    JPMORGAN CHASE BANK, as Agent and as a Lender

                                    By:   __________________________________________
                                          Name:
                                          Title:

106