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                                                                  Exhibit 4.69
                               
                               
                               SECURITY AGREEMENT


                  This SECURITY AGREEMENT (this "Agreement"), is entered into as
of March 31, 1998, between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, and each of the
undersigned subsidiaries of DISCOVERY ZONE, INC., a Delaware corporation, (each
a "Guarantor", and collectively "Guarantors"), with its chief executive office
located at the address reflected on Schedule 3.2.

                  WHEREAS, Borrower and Foothill are, contemporaneously
herewith, entering into the Loan Agreement;

                  WHEREAS, Borrower owns one hundred percent (100%) of the
issued and outstanding stock of each Guarantor;

                  WHEREAS, each Guarantor has executed that certain General
Continuing Guaranty, of even date herewith, in favor of Foothill (the
"Guaranty"), respecting certain obligations of Borrower owing to Foothill under
the Loan Agreement;

                  WHEREAS, each Guarantor desires to collateralize its
obligations under the Guaranty by granting to Foothill a security interest in
certain of its assets; and

                  WHEREAS, each Guarantor will benefit by virtue of the loan
from Foothill to Borrower.

                  NOW THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
each intending to be bound hereby, Foothill and each Guarantor agree as follows:

                  1.       DEFINITIONS AND CONSTRUCTION.

                           1.1 Definitions. All capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to them in the
Loan Agreement. As used in this Agreement, the following terms shall have the
following definitions:

                                   "Accounts" means all currently existing and
hereafter arising accounts, contract rights, and all other forms of obligations
owing to a Guarantor arising out of the sale, license, or lease of goods or
General Intangibles or the rendition of services by such Guarantor, irrespective
of whether earned by performance, and any and all credit insurance, guaranties,
or security therefor.


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                                   "Agreement" means this Security Agreement and
any extensions, riders, supplements, notes, amendments, or modifications to or
in connection with this Security Agreement.

                                   "Borrower" means Discovery Zone, Inc., a
Delaware corporation.

                                   "Code" means the New York Uniform Commercial
Code.

                                   "Collateral" means each of the following: the
Accounts; Guarantor's Books; the Equipment; the General Intangibles; the
Inventory; the Negotiable Collateral; any money, or other assets of each
Guarantor which now or hereafter come into the possession, custody, or control
of Foothill; and the proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Guarantor's Books, Equipment, General
Intangibles, Inventory, Negotiable Collateral, money, deposit accounts, or other
tangible or intangible property resulting from the sale, exchange, collection,
or other disposition of any of the foregoing, or any portion thereof or interest
therein, and the proceeds thereof.

                                   "Equipment" means all of a Guarantor's
present and hereafter acquired machinery, machine tools, motors, equipment,
furniture, furnishings, fixtures, vehicles (including motor vehicles and
trailers), tools, parts, dies, jigs, goods (other than consumer goods, farm
products, or Inventory), wherever located, and any interest of a Guarantor in
any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing, wherever located.

                                   "Event of Default" has the meaning ascribed
to it in Section 6.

                                   "General Intangibles" means all of a
Guarantor's present and future general intangibles and other personal property
(including contract rights, rights arising under common law, statutes, or
regulations, choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, source code, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds,
route lists, rights to payment and other rights under any royalty or licensing
agreements, infringements, claims, computer programs, computer discs, computer
tapes, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.

                                   "Guarantied Obligations" shall have the
meaning ascribed to it in the Guaranty.

                                   "Guarantor's Books" means all of a
Guarantor's books and records, including: ledgers; records indicating,
summarizing, or evidencing a Guarantor's properties or assets (including the
Collateral) or liabilities; all information relating to a Guarantor's business

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operations or financial condition; and all computer programs, disc or tape
files, printouts, runs, or other computer prepared information in respect of
such books and records.

                                   "Guarantor" has the meaning ascribed thereto
in the preamble to this Agreement.

                                   "Guaranty" means the General Continuing
Guaranty of the Guarantors to Foothill of even date herewith.

                                   "Inventory" means all present and future
inventory in which a Guarantor has any interest, including goods held for sale,
license, or lease or to be furnished under a contract of service and all of a
Guarantor's present and future raw materials, work in process, finished goods,
and packing and shipping materials, wherever located, and any documents of title
representing any of the above.

                                   "Investment Property" means "investment
property" as that term is defined in Section 9-115 of the Code.

                                   "Loan Agreement" means that certain Loan and
Security Agreement, dated as of even date herewith, between Borrower and
Foothill.

                                   "Negotiable Collateral" means all of a
Guarantor's present and future letters of credit, notes, drafts, instruments,
Investment Property, documents, personal property leases (wherein a Guarantor is
the lessor), chattel paper, and a Guarantor's Books relating to any of the
foregoing.

                                   "Secured Obligations" means all liabilities,
obligations, or undertakings owing by Guarantor to Foothill of any kind or
description arising out of or outstanding under, advanced or issued pursuant to,
or evidenced by the Guaranty, any other Loan Document heretofore, herewith, or
hereafter executed by Guarantor, or this Agreement, irrespective of whether for
the payment of money, whether direct or indirect, absolute or contingent, due or
to become due, voluntary or involuntary, whether now existing or hereafter
arising, and including all interest (including interest that accrues after the
filing of a case under the Bankruptcy Code) and any and all costs, fees
(including attorneys fees), and expenses which Guarantor is required to pay
pursuant to any of the foregoing, by law, or otherwise.

                           1.2 Code. Any terms used in this Agreement which are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.

                           1.3 Construction. Unless the context of this
Agreement clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby,"

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"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement or in any of the
other Loan Documents to this Agreement or any of the other Loan Documents shall
include all alterations, amendments, restatements, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable. In the event of a direct conflict between the terms
and provisions of this Agreement and the Loan Agreement, it is the intention of
the parties hereto that both such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each other. In
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of the Loan Agreement shall control and
govern; provided, however, that the inclusion herein of additional obligations
on the part of each Guarantor and supplemental rights and remedies in favor of
Foothill, in each case in respect of the Collateral, shall not be deemed a
conflict with the Loan Agreement.

                           1.4 Schedules and Exhibits. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated herein by
reference.

                  2. CREATION OF SECURITY INTEREST.

                           2.1 Grant of Security Interest. Each Guarantor hereby
grants to Foothill a continuing security interest in all currently existing and
hereafter acquired or arising Collateral in order to secure its payment and
performance of the Secured Obligations. Foothill's security interests in the
Collateral shall attach to all Collateral without further act on the part of
Foothill or such Guarantor. Anything contained in this Agreement or any other
Loan Document to the contrary notwithstanding, except for the sale of Inventory
to buyers in the ordinary course of business, no Guarantor has the authority,
express or implied, to dispose of any item or portion of the Collateral.

                           2.2 Negotiable Collateral. In the event that any
Collateral, including proceeds, is evidenced by or consists of Negotiable
Collateral, each Guarantor shall, immediately upon the request of Foothill,
endorse and assign such Negotiable Collateral to Foothill and deliver physical
possession of such Negotiable Collateral to Foothill.

                           2.3 Collection of Accounts, General Intangibles,
Negotiable Collateral. At any time, Foothill or Foothill's designee may: (a)
notify customers or Account Debtors of each Guarantor that the Accounts, General
Intangibles, or Negotiable Collateral have been assigned to Foothill or that
Foothill has a security interest therein; and (b) collect the Accounts, General
Intangibles, and Negotiable Collateral directly and charge the collection costs
and expenses to Borrower's loan account. Each Guarantor agrees that it will hold
in trust for Foothill, as Foothill's trustee, any cash receipts, checks, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds) that it receives and immediately will deliver
said cash receipts, checks, and other items of payment to Foothill in their
original form as received by such Guarantor.


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                           2.4 Delivery of Additional Documentation Required.
Each Guarantor shall execute, and deliver to Foothill, prior to or concurrently
with such Guarantor's execution and delivery of this Agreement and at any time
thereafter at the request of Foothill, all financing statements, continuation
financing statements, fixture filings, security agreements, chattel mortgages,
pledges, mortgages, deeds of trust, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that Foothill may
reasonably request, in form satisfactory to Foothill, to perfect and continue
perfected Foothill's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.

                           2.5 Power of Attorney. Each Guarantor hereby
irrevocably makes, constitutes, and appoints Foothill (and any of Foothill's
officers, employees, or agents designated by Foothill) as such Guarantor's true
and lawful attorney, with power to: (a) if such Guarantor refuses to, or fails
timely to execute and deliver any of the documents described in Section 2.4,
sign the name of such Guarantor on any of the documents described in Section
2.4; (b) at any time that an Event of Default has occurred and is continuing or
Foothill deems itself insecure (in accordance with Section 1-208 of the Code),
sign such Guarantor's name on any invoice or bill of lading relating to any
Account, drafts against Account Debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to Account Debtors; (c) send requests for
verification of Accounts; (d) at any time that an Event of Default has occurred
and is continuing or Foothill deems itself insecure (in accordance with Section
1-208 of the Code) endorse such Guarantor's name on any checks, notices,
acceptances, money orders, drafts, or other item of payment or security that may
come into Foothill's possession; (e) at any time that an Event of Default has
occurred and is continuing or Foothill deems itself insecure (in accordance with
Section 1-208 of the Code), notify the post office authorities to change the
address for delivery of such Guarantor's mail to an address designated by
Foothill, to receive and open all mail addressed to such Guarantor, and to
retain all mail relating to the Collateral and forward all other mail to such
Guarantor; (f) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself insecure (in accordance with Section 1-208
of the Code), make, settle, and adjust all claims under such Guarantor's
policies of insurance and make all determinations and decisions with respect to
such policies of insurance; and (g) at any time that an Event of Default has
occurred and is continuing or Foothill deems itself insecure (in accordance with
Section 1-208 of the Code), settle and adjust disputes and claims respecting the
Accounts directly with Account Debtors, for amounts and upon terms which
Foothill determines to be reasonable, and Foothill may cause to be executed and
delivered any documents and releases which Foothill determines to be necessary.
The appointment of Foothill as each Guarantor's attorney, and each and every one
of Foothill's rights and powers, being coupled with an interest, is irrevocable
until all of the Secured Obligations have been fully and finally repaid and
performed and Foothill's obligation to extend credit under the Loan Agreement is
terminated.

                           2.6 Right to Inspect. Foothill (through any of its
officers, employees, or agents) shall have the right, from time to time
hereafter to inspect each Guarantor's Books and to check, test, and appraise the
Collateral in order to verify each Guarantor's financial condition or the
amount, quality, value, condition of, or any other matter relating to, the
Collateral.

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                  3. REPRESENTATIONS AND WARRANTIES.

                           Each Guarantor represents and warrants as follows:

                           3.1 No Prior Encumbrances. Such Guarantor has good
and indefeasible title to the Collateral, free and clear of liens, claims,
security interests, or encumbrances except for Permitted Liens.

                           3.2 Place of Business/Chief Executive Office; FEIN.
Schedule 3.2 sets forth the address of the chief executive office of such
Guarantor, all other locations at which such Guarantor has a place of business,
and such Guarantor's FEIN.

                           3.3 Inventory. All Inventory is now and at all times
hereafter shall be of good and serviceable quality, free from defects.

                           3.4 Location of Inventory and Equipment. The
Inventory and Equipment are not stored with a bailee, warehouseman, or similar
party (without Foothill's prior written consent) and are located only at the
locations identified on Schedule 6.12 or otherwise permitted by Section 6.12 of
the Loan Agreement.

                           3.5 Inventory Records. Such Guarantor now keeps, and
hereafter at all times shall keep, correct and accurate records itemizing and
describing the kind, type, quality, and quantity of the Inventory, and such
Guarantor's cost therefor.

                           3.6 Due Organization and Qualification; Subsidiaries.
Such Guarantor is duly organized and existing and in good standing under the
laws of the jurisdiction of its incorporation and qualified and licensed to do
business in, and in good standing in, any state where the failure to be so
licensed or qualified reasonably could be expected to have a material adverse
effect on the business, operations, condition (financial or otherwise),
finances, or prospects of such Guarantor or on the value of the Collateral.

                           3.7 Due Authorization; No Conflict. The execution,
delivery, and performance of this Agreement, the Guaranty, and any other Loan
Document to which such Guarantor is a party are within such Guarantor's
corporate powers, have been duly authorized, and are not in conflict with nor,
constitute a breach of any provision contained in such Guarantor's Articles or
Certificate of Incorporation, By-laws, or any partnership or trust agreement
pertaining to such Guarantor, nor will they constitute an event of default under
any material agreement to which such Guarantor is now or may hereafter become a
party.

                           3.8 Litigation. There are no actions or proceedings
pending by or against such Guarantor before any court or administrative agency
and such Guarantor does not have knowledge or belief of any pending, threatened,
or imminent litigation, governmental investigations,

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or claims, complaints, actions, or prosecutions involving such Guarantor, except
for: (a) ongoing collection matters in which such Guarantor is the plaintiff;
(b) matters disclosed on Schedule 5.10; and (c) matters arising after the date
hereof that, if decided adversely to such Guarantor, would not materially impair
the prospect of repayment of the Secured Obligations or materially impair the
value or priority of Foothill's security interests in the Collateral.

                           3.9 Solvency. Such Guarantor is Solvent. No transfer
of property is being made by such Guarantor and no obligation is being incurred
by such Guarantor in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of such Guarantor.

                           3.10 Reliance by Foothill; Cumulative. The
warranties, representations, and agreements set forth herein shall be
conclusively presumed to have been relied upon by Foothill and shall be
cumulative and in addition to any and all other warranties, representations, and
agreements which such Guarantor shall now or hereinafter give, or cause to be
given, to Foothill.

                  4. AFFIRMATIVE COVENANTS.

                           Each Guarantor covenants and agrees that, until
payment in full of the Secured Obligations, and unless Foothill shall otherwise
consent in writing, such Guarantor shall do all of the following:

                           4.1 Schedules of Accounts. With such regularity as
Foothill shall require, provide Foothill with schedules describing all Accounts.
Foothill's failure to request such schedules or such Guarantor's failure to
execute and deliver such schedules shall not affect or limit Foothill's security
interests or other rights in and to the Accounts.

                           4.2 Inventory Reporting. From time to time hereafter,
but not less frequently than monthly, execute and deliver to Foothill a report
regarding such Guarantor's Inventory specifying such Guarantor's cost therefor
and further specifying such other information as Foothill may reasonably
request.

                           4.3 Title to Equipment. Upon Foothill's request,
deliver to Foothill, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment.

                           4.4 Maintenance of Equipment. Keep and maintain the
Equipment in good operating condition and repair (ordinary wear and tear
excepted), and make all necessary replacements thereto so that the value and
operating efficiency thereof shall at all times be maintained and preserved.
Such Guarantor shall not permit any item of Equipment to become a fixture to
real estate or an accession to other property, and the Equipment is now and
shall at all times remain personal property.


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                           4.5 Taxes. All assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against such Guarantor or any of its property have been paid, and shall
hereafter be paid in full, before delinquency or before the expiration of any
extension period. Such Guarantor shall make due and timely payment or deposit of
all taxes, assessments, or contributions required of it by law, and will execute
and deliver to Foothill, on demand, appropriate certificates attesting to the
payment or deposit thereof. Such Guarantor will make timely payment or deposit
of all tax payments and withholding taxes required of it by applicable laws, and
will, upon request, furnish Foothill with proof satisfactory to Foothill
indicating that such Guarantor has made such payments or deposits, other than
assessments or taxes that are the subject of a Permitted Protest.

                           4.6 Insurance.

                                    (a) At its expense, keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as are ordinarily insured against
by other owners in similar businesses. Such Guarantor also shall maintain
business interruption, public liability, product liability, and property damage
insurance relating to their ownership and use of the Collateral, as well as
insurance against larceny, embezzlement, and criminal misappropriation.

                                    (b) All such policies of insurance shall be
in such form, with such companies, and in such amounts as may be reasonably
satisfactory to Foothill. All such policies of insurance (except those of public
liability and property damage) shall contain a 438BFU lender's loss payable
endorsement, or an equivalent endorsement in a form satisfactory to Foothill,
showing Foothill as a loss payee thereof as its interest may appear, shall
contain a waiver of warranties, and shall specify that the insurer must give at
least ten (10) days prior written notice to Foothill before canceling its policy
for any reason. Such Guarantor shall deliver to Foothill certified copies of
such policies of insurance and evidence of the payment of all premiums therefor.
All proceeds payable under any such policy shall be payable to Foothill to be
applied on account of the Secured Obligations.

                           4.7 Foothill Expenses. Such Guarantor shall
immediately and without demand reimburse Foothill for all sums expended by
Foothill which constitute Foothill Expenses and such Guarantor hereby authorizes
and approves all advances and payments by Foothill for items constituting
Foothill Expenses.

                  5. NEGATIVE COVENANTS.

                           Each Guarantor covenants and agrees that until
payment in full of the Secured Obligations, it will not do any of the following
without Foothill's prior written consent:

                           5.1 Liens. Create, incur, assume, or permit to exist,
directly or indirectly, any lien on or with respect to any of its property or
assets, of any kind, whether now

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owned or hereafter acquired, or any income or profits therefrom, except for
Permitted Liens (including liens that are replacements of Permitted Liens to the
extent that the original indebtedness is refinanced under Section 7.1(f) of the
Loan Agreement and so long as the replacement liens secure only those assets or
property that secured the original indebtedness).

                           5.2 Restrictions on Fundamental Changes. Enter into
any acquisition, merger, consolidation, reorganization, or recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, assign, lease,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business, property, or assets,
whether now owned or hereafter acquired, or acquire by purchase or otherwise all
or substantially all of the properties, assets, stock, or other evidence of
beneficial ownership of any Person.

                           5.3 Extraordinary Transactions and Disposal of
Assets. Enter into any transaction not in the ordinary and usual course of such
Guarantor's business, including the sale, lease, or other disposition of,
moving, relocation, or transfer, whether by sale or otherwise, of any of such
Guarantor's properties or assets.

                           5.4 Change Name. Change such Guarantor's name, FEIN,
corporate structure (within the meaning of Section 9-402(7) of the Code), or
identity, or add any new fictitious name; provided, however, that such Guarantor
may change its name upon 30 days prior written notification thereof to Foothill
and so long as, at the time of such written notification, such Guarantor
provides any financing statements necessary to perfect and continue perfected
Foothill's security interests.

                           5.5 Guarantee. Guarantee or otherwise become in any
way liable with respect to the obligations of any third Person except by
endorsement of instruments or items of payment for deposit to the account of
such Guarantor or which are transmitted or turned over to Foothill and except
for the guarantee of the payment and performance of the Guarantied Obligations.

                           5.6 Nature of Business; Fiscal Year. (a) Make any
change in the principal nature of such Guarantor's business, or (b) without the
prior written consent of Foothill, which consent shall not unreasonably be
withheld, change the date of its fiscal year.

                           5.7 Transactions with Affiliates. Such Guarantor will
not directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of such Guarantor except for transactions which
are in the ordinary course of such Guarantor's business, upon fair and
reasonable terms and which are fully disclosed to Foothill and, no less
favorable to such Guarantor than would be obtained in arm's length transaction
with a non-Affiliate.

                           5.8 Suspension. Suspend or go out of business.


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                           5.9 Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees. Without thirty (30) days prior written
notification to Foothill, relocate its chief executive office to a new location,
unless, at the time of such written notification, such Guarantor provides any
financing statements or fixture filings necessary to perfect and continue
perfected Foothill's security interests and also provides to Foothill a
landlord's waiver in form and substance satisfactory to Foothill. The Inventory
and Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Foothill's prior written consent.


                  6. EVENTS OF DEFAULT.

                           Any one or more of the following events shall
constitute an event of default (each, an "Event of Default") under this
Agreement:

                           6.1 The occurrence of an Event of Default (as defined
in the Loan Agreement);

                           6.2 If any Guarantor fails or neglects to perform,
keep, or observe, in any material respect, any term, provision, condition,
covenant, or agreement contained in this Agreement or in the Guaranty, or in any
other present or future agreement between the Guarantors and Foothill;

                           6.3 If there is a material impairment of the prospect
of repayment of any portion of the Guarantied Obligations owing to Foothill or a
material impairment of the value or priority of Foothill's security interests in
the Collateral;

                           6.4 If a notice of lien, levy, or assessment is filed
of record with respect to any properties or assets of a Guarantor by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a lien,
whether choate or otherwise, upon any properties or assets of a Guarantor and
the same is not paid on the payment date thereof; and

                           6.5 If a judgment or other claim becomes a lien or
encumbrance upon any material portion of the properties or assets of the
Obligors taken as a whole;

                           6.6 If there is a default in any material agreement
to which a Guarantor is a party with one or more third Persons resulting in a
right by such third Persons, irrespective of whether exercised, to accelerate
the maturity of such Guarantor's obligations thereunder;

                           6.7 If a Guarantor makes any payment on account of
indebtedness that has been contractually subordinated in right of payment to the
payment of the Guarantied Obligations,

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except to the extent such payment is permitted by the terms hereof and by the
subordination provisions applicable to such indebtedness;

                           6.8 If any misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or report made to
Foothill by a Guarantor or any officer, employee, agent, or director of a
Guarantor, or if any such warranty or representation is withdrawn.

                  7.  FOOTHILL'S RIGHTS AND REMEDIES.

                           7.1 Rights and Remedies. Upon the occurrence of an
Event of Default, the security hereby constituted shall become enforceable and,
in addition to all other rights and remedies available to Foothill as provided
hereafter, Foothill may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by each Guarantor:

                                    (a) Proceed directly and at once, without
notice, against any Guarantor to collect and recover the full amount or any
portion of the Guarantied Obligations, without first proceeding against
Borrower, or against any security or collateral for the Guarantied Obligations.

                                    (b) Without notice to the Guarantors and
regardless of the acceptance of any security or collateral for the payment
hereof, appropriate and apply toward the payment of the Guarantied Obligations
(i) any indebtedness due or to become due from Foothill to any Guarantor and
(ii) any moneys, credits or other property belonging to any Guarantor at any
time held by or coming into the possession of Foothill.

                                    (c) May exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein and the
Guaranty or otherwise available to it, all the rights and remedies available to
it at law (including those of a secured party under the Code) or in equity.

                                    (d) Settle or adjust disputes and claims
directly with Account Debtors for amounts and upon terms which Foothill
considers advisable, and in such cases, Foothill will credit Borrower's loan
account with only the net amounts received by Foothill in payment of such
disputed Accounts after deducting all Foothill Expenses incurred or expended in
connection therewith;

                                    (e) [intentionally omitted];

                                    (f) Without notice or demand, make such
payments and do such acts as Foothill considers necessary or reasonable to
protect its security interest in the Collateral. Each Guarantor agrees to
assemble the Collateral if Foothill so requires, and to make the Collateral
available to Foothill as Foothill may designate. Each Guarantor authorizes
Foothill to enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any

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part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Foothill's determination appears to be prior or
superior to its security interest and to pay all expenses incurred in connection
therewith. With respect to any of each Guarantor's owned premises, such
Guarantor hereby grants Foothill a license to enter into possession of such
premises and to occupy the same, without charge, for up to one hundred twenty
(120) days in order to exercise any of Foothill's rights or remedies provided
herein, at law, in equity, or otherwise;

                                    (g) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Foothill is hereby granted a license or
other right to use, without charge, each Guarantor's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature, as
it pertains to the Collateral, in completing production of advertising for sale
and selling any Collateral, and each Guarantor's rights under all licenses and
all franchise agreements shall inure to Foothill's benefit;

                                    (h) Sell all or any part of the Collateral
at either a public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
any Guarantor's premises) as Foothill determines is commercially reasonable. It
is not necessary that the Collateral be present at any such sale. Foothill shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in any
Guarantor, which right or equity is hereby waived or released to the extent
permitted by law;

                                    (i) By an instrument in writing, appoint a
receiver (which term shall include a receiver and manager) of all or any part of
the Collateral and may remove or replace such receiver from time to time or may
institute proceedings in any court of competent jurisdiction for the appointment
of such receiver;

                                    (j) Require any Guarantor to establish a
lockbox or other restricted account satisfactory to Foothill for the collection
of Accounts of such Guarantor, General Intangibles, or Negotiable Collateral;

                                    (k) Notify customers or Account Debtors of
any Guarantor that the Accounts of such Guarantor, General Intangibles, or
Negotiable Collateral have been assigned to Foothill or that Foothill has a
security interest therein;

                                    (l) Collect the Accounts of each Guarantor,
General Intangibles, and Negotiable Collateral directly, and charge the
collection costs and expenses as Foothill Expenses; but, unless and until
Foothill does so or gives such Guarantor other written instructions, such
Guarantor shall collect all Accounts of such Guarantor, General Intangibles, and
Negotiable Collateral for Foothill, receive in trust all payments thereon as
Foothill's trustee, and immediately deliver said payments to Foothill in their
original form as received from such Account Debtor;

                                       12

<PAGE>



                                    (m) Any deficiency which exists after
disposition of the Collateral as provided above will be paid immediately by each
Guarantor up to the maximum amount, if any, of such Guarantor's liability under
the Guaranty. Any excess will be returned to each Guarantor, without interest
and subject to the rights of third parties, by Foothill.

Except as required by law, Foothill may take any or all of the foregoing action
without demand, presentment, protest, advertisement or notice of any kind to or
upon any Guarantor or any other person.

                           7.2 Remedies Cumulative. Foothill's rights and
remedies under this Agreement, the Loan Documents, and all other agreements
shall be cumulative. Foothill shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Foothill of one right or remedy shall be deemed an election, and no
waiver by Foothill of any Event of Default on Borrower's part shall be deemed a
continuing waiver. No delay by Foothill shall constitute a waiver, election, or
acquiescence by it.

                  8. TAXES AND EXPENSES REGARDING THE COLLATERAL.

                           If any Guarantor fails to pay any monies (whether
taxes, rents, assessments, insurance premiums, or otherwise) due to third
persons or entities, or fails to make any deposits or furnish any required proof
of payment or deposit, all as required under the terms of this Agreement, then,
to the extent that Foothill determines that such failure, by such Guarantor
could have a material adverse effect on Foothill's interests in the Collateral,
in its discretion and without prior notice to such Guarantor, Foothill may do
any or all of the following: (a) make payment of the same or any part thereof;
(b) set up such reserves in Borrower's loan account as Foothill deems necessary
to protect Foothill from the exposure created by such failure; or (c) obtain and
maintain insurance policies insuring such Guarantor's ownership and use of the
Collateral, and take any action with respect to such policies as Foothill deems
prudent. Any amounts paid or deposited by Foothill shall constitute Foothill
Expenses, shall immediately become additional Secured Obligations, shall bear
interest at the applicable rate described in the Loan Document, and shall be
secured by the Collateral. Any payments made by Foothill shall not constitute an
agreement by Foothill to make similar payments in the future or a waiver by
Foothill of any Event of Default under this Agreement. Foothill need not inquire
as to, or contest the validity of, any such expense, tax, security interest,
encumbrance, or lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing. Foothill shall use its best efforts to provide notice to such Guarantor
of any action taken by it under this Section 8.

                  9. WAIVERS; INDEMNIFICATION.

                           9.1 Demand; Protest; etc. To the extent permitted by
law, each Guarantor waives demand, protest, notice of protest, notice of default
or dishonor, notice of payment and nonpayment, notice of any default, nonpayment
at maturity, release, compromise,

                                       13

<PAGE>



settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Foothill on which such Guarantor may
in any way be liable.

                           9.2 Foothill's Liability for Collateral. So long as
Foothill complies with its obligations, if any, under Section 9-207 of the Code,
Foothill shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person. All risk of loss, damage, or destruction of
the Collateral shall be borne by the Guarantors.

                           9.3 Indemnification. Each Guarantor agrees to defend,
indemnify, save, and hold Foothill and its officers, employees, and agents
harmless against: (a) all obligations, demands, claims, and liabilities claimed
or asserted by any other Person, and (b) all losses (including attorneys fees
and disbursements) in any way suffered, incurred, or paid by Foothill as a
result of or in any way arising out of, following, or consequential to
transactions with Borrower or such Guarantor, whether under this Agreement, the
other Loan Documents or otherwise. This provision shall survive the termination
of this Agreement.

                           9.4 Waivers. (a) To the maximum extent permitted by
law, each Guarantor hereby waives: (i) notice of acceptance hereof; (ii) notice
of any loans or other financial accommodations made or extended under the Loan
Agreement, or the creation or existence of any Obligations; (iii) notice of the
amount of the Obligations, subject, however, to such Guarantor's right to make
inquiry of Foothill to ascertain the amount of the Obligations at any reasonable
time; (iv) notice of any adverse change in the financial condition of Borrower
or of any other fact that might increase such Guarantor's risk hereunder; (v)
notice of presentment for payment, demand, protest, and notice thereof as to any
instrument among the Loan Documents; (vi) notice of any unmatured Event of
Default or Event of Default under the Loan Agreement; and (vii) all other
notices (except if such notice is specifically required to be given to such
Guarantor under this Agreement) and demands to which such Guarantor might
otherwise be entitled.

                  (b) To the fullest extent permitted by applicable law, each
Guarantor waives the right by statute or otherwise to require Foothill to
institute suit against Borrower or to exhaust any rights and remedies which
Foothill has or may have against Borrower. Each Guarantor further waives any
defense arising by reason of any disability or other defense (other than the
defense that the Obligations shall have been fully and finally indefeasibly
paid) of Borrower or by reason of the cessation from any cause (other than that
the Obligations shall have been fully and finally indefeasibly paid) whatsoever
of the liability of Borrower in respect thereof.

                  (c) To the maximum extent permitted by law, each Guarantor
hereby waives: (i) any rights to assert against Foothill any defense (legal or
equitable), set-off, counterclaim, or claim which such Guarantor may now or at
any time hereafter have against Borrower or any other party liable to Foothill
on account of or with respect to the Obligations; (ii) any defense, set-off,
counterclaim, or claim, of any kind or nature, arising directly or indirectly
from the present or

                                       14

<PAGE>



future sufficiency, validity, or enforceability of the Obligations; (iii) any
defense arising by reason of any claim or defense based upon an election of
remedies by Foothill including, to the extent applicable, the provisions of
ss.ss. 580d and 726 of the California Code of Civil Procedure, or any similar
law of California or any other jurisdiction; (iv) the benefit of any statute of
limitations affecting such Guarantor's liability hereunder or the enforcement
thereof.

                  (d) To the maximum extent permitted by law, each Guarantor
hereby waives any right of subrogation such Guarantor has or may have as against
Borrower with respect to the Obligations. In addition, each Guarantor hereby
waives any right to proceed against Borrower, now or hereafter, for
contribution, indemnity, reimbursement, or any other suretyship rights and
claims (irrespective of whether direct or indirect, liquidated or contingent),
with respect to the Obligations. Each Guarantor also hereby waives any right to
proceed or to seek recourse against or with respect to any property or asset of
Borrower. Each Guarantor hereby agrees that, in light of the waivers contained
in this Section, such Guarantor shall not be deemed to be a "creditor" (as that
term is defined in the Bankruptcy Code or otherwise) of Borrower, whether for
purposes of the application of Sections 547 or 550 of the United States
Bankruptcy Code or otherwise.

                  (e) If any of the Secured Obligations at any time are secured
by a mortgage or deed of trust upon real property, Foothill may elect, in its
sole discretion, upon a default with respect to the Secured Obligations, to
foreclose such mortgage or deed of trust judicially or nonjudicially in any
manner permitted by law, before or after enforcing this Agreement, without
diminishing or affecting the liability of each Guarantor hereunder. Each
Guarantor understands that (a) by virtue of the operation of California's
antideficiency law applicable to nonjudicial foreclosures, or any similar law of
California or any other jurisdiction, an election by Foothill nonjudicially to
foreclose such a mortgage or deed of trust probably would have the effect of
impairing or destroying rights of subrogation, reimbursement, contribution, or
indemnity of such Guarantor against Borrower or guarantors or sureties, and (b)
absent the waiver given by such Guarantor herein, such an election might estop
Foothill from enforcing this Agreement against such Guarantor. Understanding the
foregoing, and understanding that each Guarantor is hereby relinquishing a
defense to the enforceability of this Agreement, each Guarantor hereby waives
any right to assert against Foothill any defense to the enforcement of this
Agreement, whether denominated "estoppel" or otherwise, based on or arising from
an election by Foothill nonjudicially to foreclose any such mortgage or deed of
trust. Each Guarantor understands that the effect of the foregoing waiver may be
that such Guarantor may have liability hereunder for amounts with respect to
which such Guarantor may be left without rights of subrogation, reimbursement,
contribution, or indemnity against Borrower or guarantors or sureties. Each
Guarantor also agrees that the "fair market value" provisions of Section 580a of
the California Code of Civil Procedure, or any similar law of California or any
other jurisdiction, shall have no applicability with respect to the
determination of such Guarantor's liability under this Agreement.

                  (f)      WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER
OR OTHER PROVISION SET FORTH IN THIS AGREEMENT, EACH GUARANTOR
HEREBY WAIVES, TO THE MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY

                                       15

<PAGE>



LAW, ANY AND ALL DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE
OF CALIFORNIA CIVIL CODE ss.ss. 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2838,
2839, 2845, 2848, 2849, AND 2850, TO THE EXTENT APPLICABLE, CALIFORNIA CODE OF
CIVIL PROCEDURE ss.ss. 580a, 580b, 580c, 580d, AND 726, AND, TO THE EXTENT
APPLICABLE, CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE, OR ANY SIMILAR
LAWS OF CALIFORNIA OR ANY OTHER JURISDICTION.

                  (g) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR
OTHER PROVISION SET FORTH IN THIS AGREEMENT, EACH GUARANTOR HEREBY WAIVES ALL
RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY FOOTHILL, EVEN
THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT
TO SECURITY FOR A SECURED OBLIGATION, HAS DESTROYED SUCH GUARANTOR'S RIGHTS OF
SUBROGATION AND REIMBURSEMENT AGAINST THE PRINCIPAL BY THE OPERATION OF SECTION
580d OF THE CODE OF CIVIL PROCEDURE OR OTHERWISE.


                  10.      NOTICES.

                           All notices and other communications hereunder to
Foothill shall be in writing and shall be mailed, sent or delivered in
accordance with the Loan Agreement and all notices and other communications
hereunder to each Guarantor shall be in writing and shall be mailed, sent or
delivered in care of Borrower in accordance with the Loan Agreement.

                  11.      CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

                           THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR, AT
THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. EACH GUARANTOR AND FOOTHILL WAIVES, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 11.


                                       16

<PAGE>



                           EACH GUARANTOR AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH GUARANTOR AND FOOTHILL REPRESENT THAT EACH
HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.

                  12.      DESTRUCTION OF GUARANTORS' DOCUMENTS.

                           All documents, schedules, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill four
(4) months after they are delivered to or received by Foothill, unless a
Guarantor requests, in writing, the return of said documents, schedules or other
papers and makes arrangements, at such Guarantor's expense, for their return.

                  13.      GENERAL PROVISIONS.

                           13.1 Effectiveness. This Agreement shall be binding
and deemed effective when executed by each Guarantor and accepted and executed
by Foothill.

                           13.2 Successors and Assigns. This Agreement shall
bind and inure to the benefit of the respective successors and assigns of each
of the parties; provided, however, that no Guarantor may assign this Agreement
or any rights or duties hereunder without Foothill's prior written consent and
any prohibited assignment shall be absolutely void. No consent to an assignment
by Foothill shall release any Guarantor from its Guarantied Obligations.
Foothill may assign this Agreement and its rights and duties hereunder and no
consent or approval by any Guarantor is required in connection with any such
assignment. Foothill reserves the right to sell, assign, transfer, negotiate, or
grant participations in all or any part of, or any interest in Foothill's rights
and benefits hereunder. In connection therewith, Foothill may disclose all
documents and information which Foothill now or hereafter may have relating to
any Guarantor or any Guarantor's business. To the extent that Foothill assigns
its rights and obligations to a third Person, Foothill thereafter shall be
released from such assigned obligations to any Guarantor and such assignment
shall effect a novation between the Guarantors and such third Person.

                           13.3 Section Headings. Headings and numbers have been
set forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.

                           13.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or any Guarantor, whether under

                                       17

<PAGE>



any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.

                           13.5 Severability of Provisions. Each provision of
this Agreement shall be severable from every other provision of this Agreement
for the purpose of determining the legal enforceability of any specific
provision.

                           13.6 Amendments in Writing. This Agreement can only
be amended by a writing signed by both Foothill and each of the Guarantors.

                           13.7 Counterparts. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement.

                           13.8 Revival and Reinstatement of Obligations. If the
incurrence or payment of the Secured Obligations by any Guarantor or the
transfer by any Guarantor to Foothill of any property of such Guarantor should
for any reason subsequently be declared to be void or voidable under any state
or federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Foothill is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of
Foothill related thereto, the liability of each Guarantor automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.

                           [Signature page to follow.]

                                       18

<PAGE>



                           IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date first written above.


                               DISCOVERY ZONE (CANADA) LIMITED,
                               a corporation organized under the laws of Canada



                               By  /s/ Robert Rooney
                                   ---------------------------------------
                               Title: Vice President


                               DISCOVERY ZONE (PUERTO RICO), INC.,
                               a Puerto Rico corporation



                               By  /s/ Robert Rooney
                                   ---------------------------------------
                               Title: Vice President


                               DISCOVERY ZONE LICENSING, INC.,
                               a Nevada corporation



                               By  /s/ Robert Rooney
                                   ---------------------------------------
                               Title: Vice President




                               FOOTHILL CAPITAL CORPORATION, a
                               California corporation


                               By  /s/ Brian Duffy
                                   ---------------------------------------
                                    Its: AVP

                                       19

<PAGE>



                               SECURITY AGREEMENT
                                  SCHEDULE 3.2



Discovery Zone (Canada) Limited

                                       FEIN:         52-2074150

           Chief Executive Office:         565 Taxter Road, Fifth Floor
                                           Elmsford, New York 10523

             Place(s) of Business:         150 W Dr., Unit 2A
                                           Hwy 7 & 410
                                           Brampton, Ontario L6T 4P9
                                           Canada

                                           360 Mayfield Common
                                           Edmonton, Alberta T5P 4K9
                                           Canada

                                           3414 Calgary Trail South, #400
                                           Edmonton, Alberta T6J 6RS
                                           Canada

                                           4380 Wellington Road South
                                           London Ontario N6E 2Z6
                                           Canada

                                           1320 Elliee Avenue, #3
                                           Winnipeg, Manitoba R36 0E9
                                           Canada

Discovery Zone (Puerto Rico),Inc.

                            FEIN:          36-3892589

          Chief Executive Office:          565 Taxter Road, Fifth Floor
                                           Elmsford, New York 10523



                                       20

<PAGE>


            Place(s) of Business:          506 Truncado Street
                                           Hatillo, Puerto Rico 00659

                                           Munoz Marin Av. & Highway 30
                                           Caguas, Puerto Rico 00725

                                           9410 Los Romeros Ave.
                                           San Juan, Puerto Rico 00927


    Discovery Zone Licensing, Inc.

                             FEIN:         91-1878248

           Chief Executive Office:         565 Taxter Road, Fifth Floor
                                           Elmsford, New York 10523

             Place(s) of Business:


                                       21