EXHIBIT
                                      10.70


                              Fitness Club and Spa
                           Management and Pre-Opening
                           Service Agreement between
                        Terramark Brickell II, Ltd. And
                         the Registrant effective as of
                                January 1, 2003





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<PAGE>




                              FITNESS CLUB AND SPA

                  MANAGEMENT AND PRE-OPENING SERVICES AGREEMENT


                                     between


                           TERREMARK BRICKELL II LTD.

                                           as Owner,

                                       and

                          THE SPORTS CLUB COMPANY INC.

                                          as Operator,



                                    PREMISES:

                                Millennium Tower,
                                   located at
                            1435-1441 Brickell Avenue
                          Miami, FloridaJanuary 1, 2003







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<PAGE>









                              FITNESS CLUB AND SPA
                              --------------------
                  MANAGEMENT AND PRE-OPENING SERVICES AGREEMENT
                  ---------------------------------------------


     THIS FITNESS CLUB AND SPA MANAGEMENT  AND  PRE-OPENING  SERVICES  AGREEMENT
(the "Agreement") is made and effective as of the 1st day of January,  2003 (the
"Effective Date") by and between  TERREMARK  BRICKELL II LTD., a Florida limited
partnership ("Owner"), and THE SPORTS CLUB COMPANY, INC., a Delaware corporation
("Operator").

                               STATEMENT OF FACTS

     A. Owner intends to subject all of the real  property  located at 1431 1441
Brickell Avenue in Miami, Florida (as more particularly described and identified
in the Declaration  (as hereinafter  defined),  the  "Premises"),  to the terms,
conditions,  provisions  and covenants set forth in a Declaration  of Covenants,
Restrictions and Easements for Millennium Tower in more  particularly  described
on Exhibit B, with such  revisions,  deletions  or additions as Owner shall deem
necessary,  appropriate or desirable in its sole  discretion (as the same may be
amended,  revised and/or restated from time to time, the  "Declaration"),  which
Declaration  shall be  recorded  with the office of the County  Clerk in and for
Dade County, Florida.

     B.  Owner is,  and after  submission  of the  Premises  to the terms of the
Declaration  shall  continue to be, the fee owner of the Hotel Lot (as such term
is defined in the Declaration), which Hotel Lot is being developed by Owner as a
world class hotel (the "Hotel") and will be managed,  upon  completion,  by Four
Seasons Hotels Limited  ("Hotel  Manager") on behalf of Owner pursuant to and in
accordance with that certain Hotel Management  Agreement dated December 26, 2000
(as the same may be amended,  revised or restated the "HMA") made by and between
Owner and Hotel Manager.

     C.  Owner is,  and after  submission  of the  Premises  to the terms of the
Declaration  shall continue to be, the fee owner of the Spa Lot (as such term is
defined in the Declaration)  which shall consist of approximately  44,000 square
feet, exclusive of mechanical rooms, stairs and core elements (the "Club Lot").

     D. Owner intends to construct,  develop,  improve,  build out,  furnish and
equip the entire Club Lot (x) in part, as a full-service, luxury spa (the "Spa")
and (y) in part, as a first class  fitness/health  club facility,  together with
associated  salon,   juice  bar,  retail  and  sports   club/fitness   amenities
(collectively, the "Fitness Facility"; and together with the Spa, being referred
to herein, collectively, as the "Club").

     E. Although Hotel Manager will not be directly  involved with the operation
or management  of the Club and Operator  will not be directly  involved with the
operation  of the Hotel,  Operator  and Owner  acknowledge  and agree that it is
essential to the proper  functioning of the Club and the Hotel that Operator and
Hotel  Manager  coordinate  operations  of  the  Club  and  the  Hotel  and  the
residential  and  other  components  of the  Premises  in  order  to  create  an
appropriate  guest  experience  for (x) hotel guests,  residential  unit owners,
tenants of the  residential,  office and retail  components  of the Premises and
members of the Club ("Club



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<PAGE>



Members") at the Club, and (y) for hotel guests,  residential unit owners,  Club
Members and patrons of the Club at certain facilities of the Hotel.

     F.  Based on  Operator's  extensive  experience  in opening  and  operating
various first class health club facilities, salons, retail establishments, juice
bars and sports clubs under the name "Sports Club/LA(TM)", Owner desires to have
Operator,  as  an  independent  contractor,  manage  and  operate  the  Club  in
accordance with, and subject to, the terms and conditions of this Agreement.

     G.  Operator  desires  to manage  and  operate  the Club for  Owner,  as an
independent  contractor,  in  accordance  with,  and  subject  to, the terms and
conditions of this Agreement.

     NOW,  THEREFORE,  in  consideration of the mutual promises herein contained
and other good and valuable consideration,  the receipt and legal sufficiency of
which are hereby acknowledged, Owner and Operator hereby agree as follows:

                              TERMS AND CONDITIONS

                                   Article I.
                          Engagement of Operator; Term
                          ----------------------------

     1.1 Engagement of Operator

          (a)  Engagement of Operator.  Owner hereby  appoints,  authorizes  and
     engages  Operator,  as an independent  contractor,  to act as the exclusive
     operator and manager of the Club during the Term (as  hereinafter  defined)
     with  exclusive  responsibility  for,  and  control  over,  the  operation,
     management,  supervision  and  direction  of the Club (and its  staff) as a
     luxury spa and first  class  health/fitness  club,  which  appointment  and
     authorization  is  subject  only to the  terms,  conditions,  restrictions,
     limitations, and approval rights set forth in this Agreement.

          (b) Authority of Operator.  Subject to  compliance  (except where such
     compliance is specifically  excused  hereunder) with the Minimum  Standard,
     the Operating Criteria,  the Membership  Marketing Plan and each applicable
     Annual Plan and Approved  Budget (as such terms are  hereinafter  defined),
     the  Operator  is hereby  authorized,  directed  and  required  to take all
     actions  necessary  to  operate  the Club in  accordance  with the  Minimum
     Standard, including, without limitation, the following actions:

               (i)  Determine,  in  a  manner  consistent  with  the  Membership
          Marketing  Plan, all terms for admittance and charges for  membership,
          guests,  commercial space and other amenities and services provided at
          or with  respect  to the Club  and  establish  entertainment  policies
          (including  pricing)  with  respect  to the  Club  and  implement  the
          Membership Marketing Plan;

               (ii) Determine all credit  policies with respect to the operation
          of the Club,  including  entering  into policies and  agreements  with
          credit card organizations;



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<PAGE>



               (iii)  Determine all labor  policies,  including  wage and salary
          rates and  terms,  fringe  benefits,  pension,  retirement,  bonus and
          employee benefit plans,  collective  bargaining  agreements (provided,
          however,  that  no  collective  bargaining   agreements,   pension  or
          retirement  plans  concerning all or some of the employees of the Club
          shall be executed  unless and until Owner has  approved of same in its
          reasonable discretion,  after full disclosure of all material terms to
          Owner) and hiring or  discharge of all  employees  with respect to the
          Club,  subject to Owner's right to approve the general  manager of the
          Club;

               (iv)  Arrange in  Operator's  name (or in the name of a Permitted
          Assignee  (as  such  term  is   hereinafter   defined))  for  utility,
          telephone,  vermin  extermination,  trash removal and other  necessary
          services for the Operation of the Club;

               (v) Establish all  advertising,  public relations and promotional
          policies  with respect to the Club,  including  all paid  advertising,
          press releases and conferences and complimentary  policies;  provided,
          however,  that if, and to the extent,  any such  materials or policies
          constitute  a  material  or   substantial   variance   from,   or  are
          inconsistent in any material  respect with, the applicable  Membership
          Marketing Plan, or involve the use of the name or trademarks of either
          Owner or Hotel Operator,  then, in each such case, Operator shall give
          Owner at least ten (10) business days prior notice of its intention to
          implement   such  policy  or  distribute  or  publish  such  materials
          (including a copy thereof) and Owner's approval thereof which approval
          (except with respect to Hotel  Operator's  name or trademark) will not
          be  unreasonably  withheld  and shall be deemed to have been  given if
          Owner fails to respond  within the ten (10) business  days,  provided,
          that  Operator has advised  Owner in writing  that Owner's  failure to
          timely respond to Operator's request for Owner's approval shall result
          in Owner being  deemed to have given its  approval  thereto  (provided
          further that Owner shall have ten (10)  business days from such notice
          before Owner's approval shall be deemed to have been given);

               (vi)  Purchase  on  behalf  and  for the  account  of  Owner  all
          inventories   and  all   necessary  or  desirable   additions  to  and
          replacements  of supplies and such other  services and  merchandise as
          are necessary for the proper operation of the Club;

               (vii)  Enter  into  licenses,  concession  agreements  and  other
          undertakings  in the name of Operator (or in the name of any Permitted
          Assignee) as Operator shall from time to time consider appropriate for
          the operation of the Club,  provided that all such agreements shall be
          expressly  subject  and  subordinate  to this  Agreement  and shall be
          terminable,   at  the  option  of  Owner,  immediately  following  the
          termination  of  this   Agreement,   unless  Operator  has  previously
          exercised  its  option to lease the Club Lot,  in which  case any such
          agreements  may continue in force until such time as the lease expires
          or is terminated;

               (viii)  After  Owner's  reasonable  approval,  except in cases of
          expenditures  of less  than  twenty  thousand  dollars  ($20,000)  per
          occurrence  or less  than  fifty  thousand  dollars  ($50,000)  in the
          aggregate for any Fiscal Year, hire such persons or  organizations  as
          Operator  may  deem  necessary  to  provide  advice  with  respect  to
          Operator's performance hereunder, including attorneys, accountants and
          other professionals and specialists such as interior design, lighting,
          fixtures, acoustics, etc., after prior written notice to Owner;

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<PAGE>

               (ix) To the extent  authorized in the applicable  Annual Plan and
          consistent  with  the  Applicable  Budget,  or  otherwise,  in case of
          emergency  (i.e.  in order to  prevent  imminent  damage to persons or
          property,  but,  in such  cases,  only with the prior  written or oral
          consent of Owner if the cost of same is reasonably  expected to exceed
          $20,000),  cause all needed repairs and  maintenance to be made to the
          Club and cause all such other  things to be done in and about the Club
          as shall be necessary to comply with all  requirements of governmental
          authority,  boards of fire  underwriters  and other bodies  exercising
          similar  functions (and Operator shall send Owner a copy of any notice
          received ordering compliance with any such requirement);

               (x)  Invoice  or  bill  Club  Members  for all  initiation  fees,
          periodic dues and other Club-related  charges,  collect all initiation
          fees,  membership dues and all other accounts  receivable  relating to
          the  operation  of the Club,  including  any amounts due for  services
          rendered  or  merchandise  sold at the Club,  other than  those  fees,
          charges, dues and accounts receivable which Operator deems appropriate
          to write off in the ordinary course of business in a manner consistent
          with the Operating Criteria (as such term is hereinafter  defined) and
          the Minimum Standard,  provided that Owner's consent shall be required
          as to any writeoffs which, when aggregated with all other writeoffs in
          a given Fiscal  Year,  exceed  $15,000 in such Fiscal Year;  provided,
          however,   for  purposes   hereof,   "writeoffs"   shall  not  include
          adjustments  to the books  and  records  of the Club  made to  reflect
          reversals  of fees and dues which have been  accrued  but not  earned.
          Operator shall install and maintain an accurate and efficient  billing
          and  accounting  system for receipts,  which shall be  compatible  and
          coordinated with the Hotel's POS system. In connection with Operator's
          collection of dues and other accounts  receivable  only,  Operator may
          take any actions,  including,  without  limitation the  termination or
          deactivation   of  Club   Memberships   and/or  the   commencement  of
          appropriate  legal  actions  or  proceedings,   which  are  reasonably
          necessary  to effect  such  collections,  provided,  that in  deciding
          whether or not to commence any such collection actions, Operator shall
          act in a manner  consistent with the Minimum  Standard;  and provided,
          further,  that no such  action  may be  brought  in the  Owner's  name
          without the prior written consent of Owner.

               (xi) In addition  to the  collection  actions  referred to above,
          institute  and defend such other actions or  proceedings  at law or in
          equity in the name of Operator or the Club, utilizing counsel selected
          by Operator,  which Operator  (acting in a manner  consistent with the
          Minimum  Standard)  shall  deem  reasonably  necessary  or  proper  in
          connection  with the  routine  operation  of the Club,  including  the
          defense  of any legal  actions  brought  against  the Club  and/or the
          institution of  dispossessory,  eviction and trespass suits  provided,
          that,  with  respect  to any  litigation  where  Owner  or the Club is
          potentially  subject  to any  liability  in excess of  $10,000,  then,
          unless such action is  adequately  defended  and covered by  insurance
          maintained  by the Club,  Owner  reserves the right to (x) approve the
          counsel  designated by Operator,  (y) participate in and be kept fully
          informed of all significant  developments  related to such actions and
          (z) approve,  in its  reasonable  discretion,  any  settlement of such
          action,  any  confession of judgment or the  interposition  of any new
          claims or defenses in such action; and

               (xii)  Subject to Owner's  approval  rights  with  respect to the
          general  manager of the Club (Owner  agreeing to approve or disapprove
          any  candidate  for such  position  within ten (10)  business  days of
          Operator's request for such approval,  provided that Owner is given an
          opportunity  to interview such  candidate) and subject  further to the
          applicable

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<PAGE>

          Approved  Budget,  Operator  shall also have the sole right to select,
          appoint and  supervise,  in its sole but  reasonable  discretion,  the
          general  manager  and  such  other  personnel  as  Operator  may  deem
          necessary  or  desirable  for the proper  operation,  maintenance  and
          security of the Club. The general  manager and all other  personnel at
          the Club shall be employees of the  Operator  and,  subject to Owner's
          approval  rights with  respect to the general  manager of the Club and
          subject further to the applicable  Approved  Budget,  the terms of the
          hiring  and  firing  thereof  shall  be at  the  sole  but  reasonable
          discretion  of  Operator.  Owner shall have no right to  supervise  or
          direct any such employees.

               Operator  hereby  accepts  such  appointment,  authorization  and
               engagement   and  covenants   and  agrees  to  use   commercially
               reasonable  efforts to  maintain,  manage and  operate  the Club,
               during the Term,  as a luxury spa and first class  health/fitness
               club,  and,  in all  respects,  in  accordance  with the  Minimum
               Standard and the terms and conditions set forth herein.

               (c) Owner's  Responsibility:  Subject to the  provisions  of this
          Agreement  and the  applicable  Annual  Plan and  Approved  Budget and
          Section  4.1(b) of this  Agreement,  Owner shall provide the necessary
          funds  and in all  other  reasonable  respects  allow  the  Club to be
          developed,   constructed,   furnished,   equipped  operated,  managed,
          supervised,  directed,  serviced  and marketed by Operator as a luxury
          spa and first class health/fitness club in accordance with the Minimum
          Standard  (as  hereinafter  defined),  and shall  fulfill  in a timely
          manner all of its obligations under this Agreement.

               (d) Sublease or Submanagement of the Salon Component. Anything to
          the  contrary  set  forth  in  Section  1.1  notwithstanding,   unless
          otherwise   directed  by  Owner  in  writing,   Operator   shall  make
          commercially reasonable efforts to sublease the salon component of the
          Club (the "Salon") or hire an independent submanager for the Salon. If
          Operator presents Owner with a suitable  submanager or sublessee (i.e.
          one having (i) as demonstrated  through financial  statements prepared
          by a firm of certified public accountants  reasonably  satisfactory to
          Owner,  the financial  wherewithal to meet its  obligations  under the
          sublease or sub-management agreement and (ii) at least three (3) years
          experience managing and/or operating luxury salons meeting the Minimum
          Standard),  Owner  will not  unreasonably  withhold  approval  of said
          submanager or sublessee.  Objective  criteria for the minimum standard
          of operation of the Salon shall be included in the Operating  Criteria
          that have been approved by Owner, but shall in no event be of a lesser
          standard than the standard currently being maintained in those Salon's
          being operated by Operator in those certain other mixed use facilities
          developed  by  Owner's   affiliates  and  located  in  San  Francisco,
          California,  Boston, Massachusetts and Washington, D.C. (collectively,
          the "Other  Millennium  Partners  Projects").  Any lease,  sublease or
          sub-management  agreement  relating  to the Salon shall be subject and
          subordinate  in all respects to this Agreement and  co-terminous  with
          this Agreement  (unless  Operator shall have previously  exercised its
          option  to  lease  the  Club  Lot,   in  which   case  such  lease  or
          sub-management  agreement  shall be  co-terminus  with the  lease) and
          shall automatically terminate upon the termination hereof.

               (e)  Minimum  Standard.  Subject  to the  provisions  of  Section
          4.1(b), at all times during the Term of this Agreement, Operator shall
          operate the Club, and all components  thereof other than the Spa, in a
          manner consistent with the standard maintained at The Sports

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          Club/LA facilities  located in the Other Millennium  Partners Projects
          as of the date of this  Agreement  (the "General Club  Standard").  In
          addition,  subject to the provisions of Section 4.1(b), Operator shall
          maintain the Spa in compliance with each of the qualitative  criteria,
          aesthetic   components,   services   standards  and  other   standards
          identified on Schedule  1.1(e) hereof (the parties  agreeing that each
          of such  standards  are  intended  to be on a par with the  equivalent
          standards  maintained  at the spa in the  Mandarin  Hotel,  in  Miami,
          Florida as of the date of this  Agreement)  (the "Spa  Standard") (the
          General Club  Standard and the Spa Standard  hereinafter  collectively
          referred to as the "Minimum  Standard").  For the  avoidance of doubt,
          Owner and Operator acknowledge and agree that Operator's obligation to
          operate the Club in compliance  with the Minimum  Standard and Owner's
          obligation  to approve  budgets or otherwise  provide funds in amounts
          sufficient to permit Operator to comply with the Minimum Standard will
          not  require  additions  to or  improvements  upon  the  FF&E  package
          originally   installed   in  the  Club,   unless  such   additions  or
          improvements  are agreed to by Owner  acting in its sole and  absolute
          discretion   (and  without  regard  to  any   obligation   under  this
          Agreement), as part of the budget approval process. By way of example,
          if the Sports  Club/LA  facilities  at the Other  Millennium  Partners
          Projects  each add a boxing  studio,  Owner shall not be  obligated to
          fund  the  provision  of same,  unless  Owner  acting  in its sole and
          absolute discretion, agrees to do so.

     1.2 Term and  Extension.  The term of this  Agreement  (the  "Term")  shall
commence on the Effective Date and shall end, unless sooner terminated as herein
provided,  on the day immediately  preceding the fifth (5th)  anniversary of the
first day of the month following the date when, as publicly announced,  the Club
shall be formally  opened to the public for the regular conduct of business (the
"Opening  Date").  Owner and  Operator  agree that the Opening  Date shall be no
later than the day (the "Outside  Opening Date") which is thirty (30) days after
Owner notifies  Operator in writing (a "Substantial  Completion  Notice") of the
"substantial  completion  of the Club" (as  defined in Section  1.4);  provided,
however, that, if the Opening Date is delayed beyond the Outside Date due solely
to  unanticipated  delays caused by Owner or its agents,  then, at the option of
Operator  (which option shall be  exercised,  by a written  notice  delivered to
Owner within ten (10)  business days of  Operator's  receipt of the  Substantial
Completion Notice), the Outside Opening Date shall be adjourned by the number of
days of  unanticipated  delay in the  opening  of the Club  which  are  directly
attributable to unanticipated delays caused by Owner or its agents.

     1.3   Post-Term Lease Option and Right of First Consideration.

          (a) Lease Option.  Provided that (i) this Agreement has not previously
     been  terminated in accordance  with its terms or applicable  law, and (ii)
     Operator  is  not  in  default  hereunder,  beyond  the  expiration  of any
     applicable  grace,  notice or cure periods as of either (x) the date of its
     purported  exercise of its option to lease the Club Lot or (y) the last day
     of the Term,  then Operator may elect to lease the Club Lot for a term (the
     "Lease Term")  commencing on the day next following the end of the Term and
     ending on the tenth  (10th)  anniversary  of such day,  along with four (4)
     extension options of five (5) years each, upon the terms and conditions set
     forth in that certain  Agreement of Lease annexed  hereto as Exhibit C (the
     "Lease  Agreement")  by executing and delivering to Owner five (5) executed
     copies of the Lease Agreement  together with the security  deposit required
     under the Lease  Agreement and first and last month's  rent.  Such election
     shall be made by  Operator,  if at all,  in  writing  at least one  hundred
     eighty (180) days prior to the  expiration  of the Term but no earlier than
     one year prior to

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     the end of the Term, as to which dates,  TIME SHALL BE OF THE ESSENCE.  The
     provisions of this Section 1.3 are expressly  subject to the  provisions of
     Section 1.5.

          (b) Right of First  Consideration.  If Operator fails to duly exercise
     its option to lease the Club Lot,  within the time  allotted  under Section
     1.3(a)  of this  Agreement,  then  Owner  may  either  (x)  cause the Hotel
     Operator to manage and/or  operate the Club, as part of the Hotel,  on such
     terms as may be agreed upon by Hotel  Operator  and Owner,  in Owner's sole
     and  absolute  discretion,  (y) lease  the Club Lot to a third  party at an
     annual rent of  $1,600,000  and on the other  terms  (with such  immaterial
     deviations  thereto  as may be agreed  to by Owner)  set forth in the Lease
     Agreement (the "Minimum Lease Terms") or (z) subject to Operator's  limited
     right of first  consideration  described  below (the  "First  Consideration
     Right"),  lease the Club Lot to a third  party  for an annual  rent of less
     than  $1,600,000  (or  otherwise on terms less  favorable to Owner than the
     Minimum Lease Terms),  which First  Consideration Right shall be subject to
     and  exercisable  only in strict  accordance  with the  provisions  of this
     Section 1.3(b).

     If, at any time within one (1) year after the  expiration  of the Term (the
"Option  Period"),  Owner desires to lease the Club Lot (on terms less favorable
to Owner than the Minimum Lease  Terms),  then Owner shall deliver a notice (the
"Offer  Notice") to Operator in  accordance  with the notice  provisions of this
Agreement  which Offer Notice shall set forth and  constitute  an offer to lease
the Club Lot to Operator for the fixed base rent and any additional  rent and on
the other  terms  set  forth in the Offer  Notice  (which  shall  include,  at a
minimum,  the minimum term, the security deposit,  any additional rent, any rent
concessions and construction or fit-out  allowances and any other material terms
which deviate from the Minimum Lease  Terms),  and in accordance  with the terms
and provisions of this Section 1.3(b) (collectively,  the "Offer Terms"). In the
event Operator desires to lease the Club Lot on the Offer Terms,  then Operator,
within 30 days of Owner's  sending of the Offer Notice (the "Election  Period"),
shall  send to Owner,  in the manner  provided  above,  a notice  (an  "Election
Notice") setting forth  Operator's  agreement to lease the Club Lot on the Offer
Terms.

     Following  Operator's delivery of the Election Notice, the parties agree to
make good faith  efforts to expedite the  negotiation  and  execution of a final
lease  agreement  (which  shall be in the form of the  lease  agreement  annexed
hereto,  revised only to the extent necessary to incorporate the Offer Terms; as
so  revised,  the  "Revised  Lease")  within a  reasonable  period of time.  The
foregoing notwithstanding, if Owner and Operator have not agreed to the terms of
the  Revised  Lease on or before  the  forty-fifth  (45th) day after the date on
which the Election  Notice was sent by Operator,  then the parties shall execute
the Lease  Agreement  (to which the  parties  shall  annex the Offer Terms as an
Exhibit)  together  with a rider  thereto  stating  that the  terms of the Lease
Agreement shall be deemed revised,  modified and amended to the degree necessary
to incorporate the Offer Terms (as so modified,  the  "Supplemented  Lease") and
that, in the event of any  discrepancy,  inconsistency  or conflict  between the
terms of the Lease  Agreement  and the Offer  Terms,  then the Offer Terms shall
control and bind the parties.  If the  Operator  does not deliver to the Owner a
signed copy of the  Revised  Lease or the  Supplemented  Lease,  as  applicable,
together with any monies  required  thereunder to be paid prior to  commencement
(e.g.,  security deposit and prepaid base rent) within such 45 day period,  then
Operator  shall be deemed to have  failed to  timely  send an  Election  Notice,
provided,  that Owner previously advised Operator,  in writing,  that Operator's
failure to execute the Revised Lease or the

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Supplemented  Lease and remit the  necessary  monies  within  such 45 day period
shall  result in  Operator  being  deemed to have  failed to timely  deliver  an
Election Notice.

     If Operator  does not deliver to Owner an Election  Notice (or in the event
that  Operator  is deemed to have  failed to timely do so) during  the  Election
Period,  TIME BEING OF THE ESSENCE with regard to any such delivery,  then Owner
may immediately and at any time thereafter lease the Club Lot to any third party
on the terms set forth in the Offer Sheet or on terms  which are more  favorable
to the Owner (as determined by Owner, in its reasonable discretion) and Operator
shall  be  deemed  to have  waived  and  affirmatively  relinquished  the  First
Consideration Right and any and all rights in and to the Club and the Club Lot.

     Anything to the contrary set forth in this Section 1.3(b)  notwithstanding,
if, Owner  delivers an Offer Notice to Operator and Operator does not deliver an
Election  Notice to Owner and,  subsequently,  during the Option  Period,  Owner
desires to lease the Club Lot on terms  which are less  favorable  to Owner than
the Offer Terms,  Owner shall  deliver to Operator a  supplemental  Offer Notice
specifying revised Offer Terms and Operator may thereafter,  during the Election
Period (commencing with the sending of the supplemental Offer Notice), elect, in
accordance with this Section 1.3(b),  to lease the Club Lot on the revised Offer
Terms and as otherwise provided in this Section 1.3(b).

     Anything to the contrary set forth in this Agreement  notwithstanding,  any
agreement with the Hotel Operator to manage and/or operate the Club shall not be
subject  to the  First  Consideration  Right  nor to the  terms,  conditions  or
requirements of this Section  1.3(b).  Operator and Owner agree and declare that
the  Right  of  First  Consideration  is  personal  to  Operator  and may not be
transferred,  assigned, pledged or conveyed, either voluntarily, by operation of
law or otherwise  (including by will), to any other person or entity.  Owner and
Operator  acknowledge and agree that Operators First Consideration  Rights shall
expire and  terminate on the date which is one year after the  expiration of the
Term or, if earlier, the termination of this Agreement.

          1.4  Substantial  Completion.  For  purposes  of Section  1.2  hereof,
     Owner's written notice to Operator of "substantial  completion of the Club"
     shall  include  written  certification  by  the  Owner's  architect  of the
     substantial  completion of the improvements  comprising the Club,  together
     with a copy of the  permanent or  temporary  certificate  of occupancy  (or
     equivalent  certification by the appropriate building authorities) covering
     the Club.  The  parties  further  agree to  execute a  confirmatory  letter
     establishing the exact Opening Date hereunder, based upon Section 1.2.

          1.5 Relation of the Parties.  Owner and Operator  acknowledge  that in
     performing  its duties  hereunder and managing  and/or  operating the Club,
     Operator  shall  act  only as the  appointed  representative  of  Owner  in
     accordance with the terms hereof. Nothing herein shall constitute or create
     any other  relationship,  including  without  limitation,  a partnership or
     joint venture.  Anything to the contrary set forth herein  notwithstanding,
     Owner and Operator  hereby  acknowledge  and agree that this Agreement does
     not grant, convey or demise to Operator, directly, indirectly, by operation
     of law or otherwise, any lease, license,  sublease, use or occupancy rights
     or any other  possessory  interest in and to any portion of the Club Lot or
     any other  portion of the Premises  and,  except if, when and to the extent
     (x) Operator  duly  exercises  its option to lease the Club Lot pursuant to
     and in accordance with the provisions of Section 1.3

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     hereof,  and (y) the annexed Lease  Agreement  becomes  effective,  nothing
     herein or in the Lease  Agreement  annexed hereto shall be deemed to grant,
     transfer or assign to Operator any tenancy,  license or other  occupancy or
     use rights other than those  necessary for it to perform its obligations as
     operator  and manager of the Club on behalf of Owner.  Neither  party shall
     represent that its  relationship to the other is other than as provided for
     in Section 1.1 and this Section 1.5.

          1.6   Operator's   Representations.   Operator   makes  the  following
     representations  to  Owner,  all of  which  shall  survive  the  execution,
     delivery, performance or termination of this Agreement:

               (a) Operator is duly  organized,  validly  existing,  and in good
          standing  under  the laws of the state of its  incorporation,  and has
          complied,  and shall continue to comply,  with all applicable  laws in
          order to conduct its business in the  jurisdiction  or state where the
          Club is located;

               (b)  Operator  has all power and  authority  required to execute,
          deliver,  and  perform  its  obligations  under  this  Agreement,  and
          Operator has, or will have when necessary,  sufficient staff and other
          resources,  each of whom is sufficiently experienced and qualified, to
          carry out Operator's duties hereunder in accordance with the standards
          set forth herein;

               (c)  The  execution,   delivery  and  performance  of  Operator's
          obligation  under  this  Agreement  have been duly  authorized  by all
          necessary   action  on  the  part  of  Operator,   its  directors  and
          stockholders;

               (d)  No  consents,  approvals,  releases,  waivers,  resolutions,
          certificates  or notices to or of any other persons or persons,  other
          than those previously procured by Operator, are necessary in order for
          Operator  to  execute  this  Agreement  and  perform  its  obligations
          hereunder;

               (e) Operator is not subject to any agreement,  judgment, judicial
          order, contract or other enforceable  instrument or ruling which would
          have a material,  adverse  impact on  Operator's  ability to lawfully,
          timely and efficiently perform its obligations hereunder; and

               (f) Operator has, or will have (x) on or before the Opening Date,
          all licenses and permits which are necessary to commence the operation
          of all of the  components of the Club and, (y) at all times during the
          Term of this Agreement,  all licenses and permits which,  from time to
          time,  are  necessary  for  Operator to legally  and validly  execute,
          deliver and perform its  obligations  under this  Agreement,  it being
          agreed that (i) Owner  shall  provide its  reasonable  cooperation  to
          Operator and shall execute any  applications  reasonably  requested by
          Operator  which  must be  signed  by the Owner of the Club in order to
          facilitate  the  procurement  of such  licenses  and  permits and (ii)
          Operator shall not be obligated to procure or maintain any licenses or
          permits  if,  but  only  to  the  extent  that,  the   procurement  or
          maintenance of same has been  prevented by (A) the Owner's  failure to
          satisfy   its   obligations   under   clause  (i)  above  or  (B)  any
          unanticipated  conditions at the Club,  which exist due to no fault of
          the Operator; and.

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               1.7 Fiscal  Year.  As used herein,  the term "Fiscal  Year" shall
          mean a period of twelve (12)  consecutive  calendar months included in
          the Term and ending on December  31st,  except  that the first  Fiscal
          Year  hereunder  shall  commence on the Opening  Date and shall end on
          December  31st of the  calendar  year in which the Opening Date falls.
          Any costs,  fees or  obligations  arising in a Fiscal  Year during the
          Term which is not comprised of twelve (12)  consecutive  months (i.e.,
          the first Fiscal Year if  commencing on any day other than January 1),
          shall be  prorated  based upon the number of days in such  Fiscal Year
          (based  on a 360  day  year).  In the  event  that  there  shall  be a
          termination  of the Term on a date other than December  31st, the last
          Fiscal Year hereunder shall end on such date of termination.

                                  Article II.
                   Construction of Club; Installation of FF&E
                   ------------------------------------------

          2.1 Construction and Costs.  Notwithstanding any contrary provision of
     this  Agreement,  except  as set  forth  in  Section  2.2,  Owner  shall be
     responsible, at its sole cost and expense, for construction of a luxury spa
     and  first  class  health/fitness  club  in  accordance,  in  all  material
     respects,  with the  specifications  annexed  hereto as Exhibit D-1 (as the
     same  may be  hereafter  modified  and/or  supplemented  the  "Construction
     Specifications").   The  Construction   Specifications   include,   without
     limitation, the construction of the shell building (to the extent necessary
     to operate the Club),  all related  building  components  and "soft  costs"
     necessary to complete the Club, but exclude all  furnishings,  fixtures and
     equipment set forth on the FF&E  Specifications  (as hereinafter  defined).
     The  construction  of the Club shall be performed in  accordance  with that
     certain Construction Management Agreement dated as of December 19, 2000, as
     amended  (the  "CMA")  between  Owner and Bovis Lend  Lease  ("Construction
     Manager").  Owner shall cause the Club to be  constructed  by  Construction
     Manager  in a good and  workmanlike  manner,  using  new and  high  quality
     materials,   and  in  accordance,   in  all  material  respects,  with  the
     Construction Specifications, and in all respects being sufficient to permit
     the Operator to meet the Minimum Standard.

          2.2 Provision and Installation of FF&E. In addition to its obligations
     under Section 2.1 hereof,  Owner shall also be  responsible  for paying all
     the costs associated with  furnishing,  fixturing and equipping the Club in
     accordance with the FF&E Specifications set forth on Exhibit D-2 hereof (as
     the same may be modified and/or  supplemented,  the "FF&E  Specifications";
     and, together with the Construction Specifications being referred to herein
     collectively as the "Construction and FF&E Specifications"),  including all
     furniture,  fixtures and  equipment  required for the operation of a luxury
     spa  facility  and first class  health and fitness  club  ("FF&E")  and all
     operating supplies and equipment required to meet the Minimum Standard (the
     "OS&E").  Anything  to the  contrary  set forth in the  preceding  sentence
     notwithstanding,  Owner  reserves  the right,  in its sole  discretion,  to
     acquire any of the FF&E by lease,  installment  purchase or other financing
     arrangement it may choose and may cause any periodic payments to be made as
     part of the Club's operating expenses. Subject to Owner's obligation to pay
     for same,  Operator and Owner shall be jointly  responsible  for selecting,
     purchasing  and procuring all FF&E and all OS&E (as  hereinafter  defined),
     and for implementing, supervising and managing the installation of all FF&E
     in accordance with the FF&E  Specifications  (which joint  responsibilities
     are described more fully in Exhibit D-2 attached  hereto).  Operator shall,
     at Owner's cost and expense, but subject to the applicable Approved Budget,
     implement,  supervise and manage the installation of the OS&E in accordance

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<PAGE>

     with the FF&E Specifications.  All operating supplies and equipment,  which
     installation shall be performed in a good and workmanlike manner and as may
     otherwise  be required to fit-out  and  operate a luxury spa  facility  and
     first class  fitness club  meeting the Minimum  Standard.  Operator  hereby
     acknowledges  that it has  reviewed  the FF&E  Specifications  and that the
     installation of the FF&E and OS&E identified  therein will be sufficient to
     permit the Operator to meet the Minimum Standard.

                                  Article III.
                         Operator's Pre-Opening Services
                         -------------------------------

          3.1 Technical and Operating Assistance.  From the Effective Date until
     the  later of (x) the  Opening  Date and (y) the date on which all FF&E and
     OS&E  have  been  installed  in  the  Club  in  accordance  with  the  FF&E
     Specifications  (as  determined by Owner,  in its  reasonable  discretion),
     Operator  shall  perform the services  required  under  Section 2.2 of this
     Agreement and all other services reasonably requested by Owner which relate
     to (x) the  design,  furnishing,  and all  other  activities  and  services
     related to the  preparation of the Club for opening in accordance  with the
     Minimum  Standard and (y) the  pre-opening  marketing  and promotion of the
     Club and the sale of memberships  in the Club (each,  a "Club  Membership")
     including,  without limitation,  the following services (collectively,  the
     "Pre-Opening Services"):

               (a)  Provide  technical  support  and  consulting  services,   as
          requested by Owner, relating to (i) the design,  layout,  development,
          equipping,  furnishing,  set up,  construction  and pre-opening of the
          Club; (ii) the preparation, modification,  supplementation and further
          development  of  the  Construction  and  FF&E  Specifications;   (iii)
          development and implementation of a critical path of construction with
          respect to the  installation  of FF&E and all  operating  supplies and
          equipment  necessary  to  operate  the Club (the  "OS&E")  in order to
          achieve a standard of utility, services, amenities, quality and luxury
          which  shall  meet or exceed the  Minimum  Standard,  (iv)  preparing,
          updating, revising and reviewing with Owner, as and when requested, an
          outline  of the  responsibilities  of  all  specialist  engineers  and
          designers,  such as those  involved  with the design and layout of the
          Spa, Salon,  juice bar and the area in which the exercise equipment is
          located;   (v)   assisting   Owner  in  the  selection  of  designers,
          contractors and engineers,  including,  without limitation,  providing
          assistance in defining the scope of services  required and negotiating
          the fees to be paid to such  professionals;  (vi) assisting Owner with
          the preparation of a Club  organization  chart outlining,  among other
          things,  the identity of all  individuals  involved in the development
          and construction of the Club and their responsibilities; (vii) meeting
          with Owner and all  designers,  architects  and  engineers in order to
          develop,  review and revise the  Operating  Criteria  (as  hereinafter
          defined), the operating pro forma and supporting rationale, the design
          standards schedule,  the Pre-Opening Budget, and the responsibilities,
          sources of  direction,  budget  control  and  reporting  functions  of
          specialist  designers;  and (viii)  attending all meetings,  either in
          person or by telephone,  as reasonably requested by Owner to assist in
          the development and  finalization  of the schematic  design  drawings,
          which meetings shall in no event exceed one per month;

               (b) Operator has already  prepared,  and Owner has approved,  the
          budget for the period  commencing on the Effective Date and continuing
          through the Opening Date (the "Pre-Opening  Budget"),  a copy of which
          is attached hereto as Exhibit "E";

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<PAGE>

               (c) Operator  has already  prepared  and  delivered  to Owner,  a
          proposed pro-forma  operating  statement for the first five (5) fiscal
          years of the Club,  a copy of which is attached  hereto as Exhibit "F"
          and Owner  shall  approve  or  provide  comments  to same on or before
          September 1, 2003;

               (d) Provide Owner with (i) information  regarding the cost of the
          FF&E and OS&E  generally  used in  spa/fitness  club  operations  of a
          quality commensurate with the Minimum Standard and (ii) the benefit of
          its procurement  services in connection with the sourcing and purchase
          of the FF&E and OS&E at Operator's procurement costs;

               (e) Procure,  at Owner's expense (as an operating expense and, to
          the extent  permitted by Applicable  Law (as herein  defined),  in the
          names of both  Owner and  Operator),  all  permits  and  licenses  and
          concession  agreements  necessary to operate the Club for the purposes
          described in Article IV below, including,  without limitation, any and
          all health and  operating  permits from the  appropriate  governmental
          authorities, excluding the permits for construction, building and life
          safety  systems to be  obtained by Owner  (such  permits and  licenses
          being defined collectively as the "Operating Permits");

               (f)  Secure,   at  Owner's  expense  and  at  Owner's   election,
          agreements  for  the  provision  of all  requisite  utility  services,
          including without  limitation,  electricity,  hot and cold water, gas,
          heat and air-conditioning, refuse removal and telephone service;

               (g)  Market  and  sell  Club  Memberships   pursuant  to  and  in
          accordance with the approved Membership Marketing Plan;

               (h) In conjunction with Owner, issue all necessary  directives to
          the Owner's architect, Construction Manager and such other contractors
          and designers as shall be engaged by  Construction  Manager,  Owner or
          Operator in connection with the implementation of the Construction and
          FF&E   Specifications   (with  Owner's   express   understanding   and
          acknowledgement  that  Operator is not  licensed in any of these areas
          and will comment based solely upon its practical  experience);  review
          and  comment  on all  drawings  and  specifications  submitted  by the
          various architects,  specialist  contractors and/or designers,  review
          and  comment  upon  all  mechanical   and  electrical   documents  and
          specifications  and provide  assistance when requested for contractors
          and designers to design the optimal energy  management  system for the
          energy  efficiency  of the Club  (again,  based upon  Owner's  express
          understanding  and  acknowledgement  that Operator's  comments will be
          based solely on its practical experience in these areas);  provide all
          necessary  technical  information for specialist systems for the Club,
          including (without  limitation) computer systems to be incorporated in
          the FF&E Specifications;

               (i)  Coordinate  all work to be performed by, or at the direction
          of, Operator, in connection with the installation of the FF&E and OS&E
          with the continuing work being  performed by  Construction  Manager in
          all portions of the  Premises,  including  the portion of the Premises
          comprising the Club to ensure that the Club, as contracted, furnished,
          fixtured  and equipped  will be able to meet the Minimum  Standard and
          use its  commercially  reasonable  efforts to avoid conflict among the
          persons  engaged in building out and equipping the Club (including the
          Construction   Manager)  and  all  persons   engaged  by  Operator  in
          connection with its performance of the Pre-Opening Services and/or the
          installation of the OS&E and/or FF&E;

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<PAGE>

          recommend  and  assist  Owner in  implementing  a  detailed  system of
          inspection  of all  deficiencies  identified  pursuant to Section 3.4,
          below,  attend design and construction  meetings as required to assist
          in  the  resolution  of  problems,  to  expedite  construction  and to
          co-ordinate  same with the timetable for the  installation of FF&E and
          OS&E (with the express understanding that any meetings required by the
          Owner other than those identified,  or for which provision is made, in
          the Pre-Opening Budget shall be attended by Operator,  with all travel
          and related expenses to be paid for or reimbursed to Operator by Owner
          outside of the agreed upon budget);

               (j) Prepare and submit to Owner,  on a monthly  basis, a complete
          report of costs and  expenditures  for the  marketing,  operating  and
          staffing of the Club commencing with the first month following Owner's
          approval of the Pre-Opening Plan and Budget;

               (k) Assist Owner  regarding  sourcing and  purchasing of all FF&E
          and OS&E  required to be  installed  at the Club,  and  verifying  all
          quantities of furnishings stated by the interior designers;  verifying
          that the cost of all FF&E and OS&E fits within the Pre-Opening Budget;
          sourcing  and  obtaining  competitive  bids for  FF&E  and OS&E  where
          appropriate; and coordinating the preparation or the design of, or the
          selection of, uniforms, menus, collateral, exercise-related equipment,
          spa products and treatments;

               (l) Following  substantial  completion of the fit-out of the Club
          and the  installation  of the FF&E and OS&E,  with respect to FF&E and
          OS&E,  assist  Owner to: (i) inspect all areas and  components  of the
          club; (ii) compare same to the Construction  and FF&E  Specifications;
          (iii) prepare deficiency lists (e.g., punch lists);  (iv) identify and
          direct the  rectification of all  deficiencies;  (v) carry out a final
          inspection of the Club on completion of the rectification of all known
          deficiencies;  (vi) purchase  replacements for damaged or stolen items
          of FF&E or OS&E; (vii) prepare a final purchasing  report for FF&E and
          OS&E,   including   (without   limitation)  a  reconciliation  to  the
          Pre-Opening  Budget;  and (viii) prepare a set of drawings,  a list of
          local service companies, a set of purchase orders and a summary of all
          guarantees  received in connection  with  furnishing and equipping the
          Club; and

               (m)  Develop  (in  conjunction  with  Owner)  standards  for  the
          operation  and  maintenance  of the Club (the  "Operating  Criteria"),
          including,  without limitation, rules governing the use of the Club by
          its members and guests  (including  spa patrons and hotel  guests) and
          work rules for Club employees.

     3.2  Pre-Opening  Budget  Approval.  Owner has  received  and  approved the
Pre-Opening  Budget,  a copy of which is attached hereto as Exhibit E. Owner and
Operator must agree in writing to any additions,  deletions or  modifications to
the Pre-Opening Budget.

     3.3 Outside Delivery Dates for Certain Pre-Opening Services.

          (a) Anything to the contrary  set forth  herein  notwithstanding,  the
     following  items have been,  or will be,  submitted by Operator for Owner's
     approval, by the respective dates specified below:

               (i) Operator has submitted and Owner has approved the Pre-Opening
          Budget,  covering all  estimated  costs and expenses to be incurred by
          Owner and/or the

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          Club prior to the Opening Date in connection with the  installation of
          the  FF&E  and  OS&E,  the  hiring  and  training  of  employees,  the
          development  of  operating   procedures  and  all  other   pre-opening
          activities,  together with a  Sale/Marketing  Plan for the pre-opening
          period;

               (ii) By July 1,  2003,  Operator  shall  submit  and Owner  shall
          approve a business  and  marketing  plan,  covering  the  period  from
          October 1, 2003  through  September  30,  2004,  for the  post-opening
          operation of the Club and the marketing  and sale of Club  Memberships
          (a "Membership Marketing Plan");

               (iii) On or before May 1, 2003, a timeline and critical  path for
          the  Pre-Opening  Services  and  related  activities   concerning  the
          preparation of the Club for opening;

               (iv) On or before  May 1,  2003,  a  description  of  anticipated
          synergies;

               (v) On or before May 1,  2003,  Operator  will  submit a five (5)
          year pro-forma operating statement;

               (vi) At least 90 days  prior to the  scheduled  Opening  Date,  a
          proposed draft of the Operating Criteria; and

               (vii) At least 90 days prior to the  scheduled  Opening  Date, an
          Annual  Plan (as  defined in Section  4.4 below) for the first  Fiscal
          Year of operations.

          (b) Owner and Operator hereby covenant and agree to act reasonably and
     in good faith in  negotiating a Membership  Marketing  Plan, an Annual Plan
     for the first full Fiscal  Year and an  Approved  Budget for the first full
     Fiscal Year.  However,  if, despite the  reasonable,  good faith efforts of
     Owner  and  Operator,  the  parties  are  unable  to agree on a  Membership
     Marketing Plan, an Annual Plan for the first Fiscal Year and/or an Approved
     Budget for the First  Fiscal  Year on or before  July 1, 2003,  then either
     Operator  or Owner  may  terminate  this  Agreement  on at  least  ten (10)
     business  days notice to the other at any time prior to the approval of the
     same.

     3.4 Deficiencies.

     At any time on or before the tenth (10th) day  following  the Opening Date,
Operator may prepare and deliver to Owner a listing (a  "Punchlist") of all work
not  completed  in  substantial   accordance  with  the  Construction  and  FF&E
Specifications (the "Punchlist  Items"),  which Punchlist shall be prepared with
sufficient  detail so as to enable Owner to appreciate the alleged  defective or
incomplete  nature  of each  Punchlist  Item,  it being  agreed  that  each such
Punchlist  Item  shall  be  subject  to  approval  by  Owner  in its  reasonable
discretion. All such Punchlist Items shall be completed or rectified by Owner as
soon as possible  following the Opening Date,  but in no event longer than three
months after the date on which  Operator  shall have  notified  Owner of same in
accordance with this Section 3.4);  provided that, if such punchlist work cannot
reasonably be completed or rectified within such three-month period, Owner shall
commence such actions  within such period and  thereafter  diligently  prosecute
such work to  completion.  Operator shall  cooperate in all reasonable  respects
with Owner in

                                       67
<PAGE>

connection with the correction of the Punchlist Items. Subject to Section 4.1(b)
hereof,  the  obligation  of Owner to  complete  such  punchlist  items shall be
limited  to,  and the cost of such  punchlist  work shall be funded  from,:  (x)
monies specifically allocated to punchlist work in either the Pre-Opening Budget
or the  Approved  Budget for the first  Fiscal  Year,  in which case such monies
shall be  disbursed  from the Club  Operating  Account or, in the event that the
Club Operating  Account has insufficient  monies,  from Owner, and (y) available
monies in the CapEx Reserve,  it being  acknowledged and agreed that Owner shall
not be obligated to fund any other  monies in order to complete  such  punchlist
work.

                                  Article IV.
            Operator's Rights and Obligations and Duties During Term
            --------------------------------------------------------

     4.1 Operating Standard.

               (a) The Club shall consist of the following components: (a) first
          class fitness facilities, (b) the Spa, (c) a retail component, (d) the
          Salon and (e) a juice  bar.  Operator  shall  manage and  operate  all
          components of the Club (x) in compliance  with the  applicable  Annual
          Plan, the applicable  Approved  Budget,  the Minimum  Standard and the
          Operating  Criteria (it being agreed that the Operating Criteria shall
          be prepared by Operator and reasonably  approved by Owner prior to the
          Opening  Date and  thereafter  supplemented  and amended  from time to
          time,  at  Owner's  request  or with  Owner's  approval,  as  shall be
          necessary to cause the Club to meet the Minimum  Standard),  (y) in an
          efficient and cost effective manner in order to maximize profitability
          and (z) in a  manner  consistent  with  the  reasonable,  prudent  and
          professional  management  standards  of a luxury  spa and first  class
          health/fitness club operated as part of a five star, world class hotel
          and, in  addition,  shall,  at all times,  employ that level of skill,
          competence   and   diligence   as  is  used  by   operators  of  other
          health/fitness  clubs meeting the Minimum  Standard.  Without limiting
          the foregoing, Operator shall, on behalf of Owner, implement, or cause
          to be implemented, the decisions of Owner with respect to the Club and
          shall conduct the ordinary and usual  business of the Club as provided
          in this Agreement and the Operating Criteria. Anything to the contrary
          set forth herein notwithstanding, Owner expressly reserves unto itself
          and  Operator  acknowledges  and  agrees  that it shall have no right,
          power or authority to (a) convey or otherwise, transfer, pledge, lease
          or  encumber  the  Club,  the Club  Lot or any  other  portion  of the
          Premises,  (b) pledge the credit of Owner,  or incur any  monetary  or
          other  obligation or execute any promissory  note,  mortgage,  deed of
          trust  or  security  agreement  or  other  contract,  lease  or  other
          agreement  in the  name  of or on  behalf  of  Owner,  other  than  as
          expressly  permitted  under this  Agreement,  (c) make any  structural
          alterations,  replacements or changes to the Club or any other portion
          of the Premises or, except to the extent  identified in the applicable
          Annual Plan and Approved  Budget,  make any  installations  therein or
          additions  thereto,  (d)  commence,  terminate,  defend or settle  any
          lawsuits in the name of Owner or (e) incur any expense  chargeable  to
          the Club or the Owner other than expenses  included in the  applicable
          Approved Budget, except to the extent specifically authorized by Owner
          in writing.

               (b)  Anything  herein to the contrary  notwithstanding,  if Owner
          fails to (i) correct  any  Punchlist  Item(s)  which it is required to
          correct  pursuant to Section 3.4 hereof;  (ii)  approve any item(s) in
          any Proposed  Annual Budget or certain line items  therein  reasonably
          proposed by Operator; (iii) increase the Cap Ex Ceiling in response to
          a  reasonable  request  therefore  received  from  Operator;  or  (iv)
          maintain sufficient funds in the Club Operating

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<PAGE>

          Account to  satisfy  all  payments  obligations  and debts  reasonably
          anticipated  for a one (1) month  operating  period (any of the events
          described  in  subsections  (i) through  (iv)  hereinafter  a "Funding
          Failure"),  and, if, Operator  notifies Owner, in a writing  delivered
          subsequent to any such Funding Failure, that such Funding Failure will
          result in Operator being unable to meet the Minimum Standard, then, to
          the extent that, such Funding Failure causes the Operator to be unable
          to meet the  Minimum  Standard,  Operator  shall be  excused  from its
          obligation to meet the Minimum Standard.  Additionally,  to the extent
          that any Funding Failure prevents  Operator from operating the Club in
          a manner  consistent  with the average  standard  being  maintained by
          Operator, or its affiliates, at its Other Millennium Partners Projects
          at that time (hereinafter,  the "Moveable  Standard"),  then, Operator
          may terminate this Agreement after providing the Owner with sixty (60)
          days notice of such Funding Failure,  unless Owner,  within such sixty
          (60) day period,  corrects such Punchlist Items or funds to the Club's
          Operating  Account  the  amount(s)  necessary  to  cure  such  Funding
          Failure, as applicable.

               (c) Customer  Satisfaction.  During the Term, Operator shall take
          reasonable  actions  to  ensure  that the Club  Members  and the hotel
          guests are  satisfied  with  their  experience  at the Club.  Operator
          acknowledges that Hotel guests who choose to use the Club during their
          stay at the Hotel,  may be asked by the Hotel Manager,  on the Hotel's
          guest  comment  card,  to evaluate the Club and  Operator  (the "Hotel
          Evaluations"). Operator shall send written questionnaires (on the form
          then being used at the Sports  Club/LA  facilities  being  operated at
          other  Millennium  Partners  projects  or on another  form  reasonably
          approved by Owner) to all Club Members,  no less  frequently than once
          per  calendar  year,  asking  them to  evaluate  the  Club  and  their
          experience at the Club (the "Sports Club Evaluations"). The results of
          the Sports Club  Evaluations  shall be promptly  delivered to Owner by
          Operator, as soon as they become available, together with a comparison
          of same against the annual evaluations,  if any, received from members
          and  guests of the Sports  Club/LA  facilities  operated  at the Other
          Millennium  Partners Projects.  Additionally,  no less frequently than
          quarterly,  Operator  shall compile and deliver to Owner  consolidated
          quarterly reports reflecting any complaints  received by Operator from
          Club Members  (including  the number of times each such  complaint was
          received) and describing any responses thereto made by Operator.

     4.2 Purchasing  Standards.  All purchases  relating to the operation of the
Club shall be paid for by Owner but made or  arranged  by  Operator  at the best
negotiated prices reasonably available (consistent with the Minimum Standard and
Operating Criteria),  taking advantage of Operator's  procurement services,  all
available  discounts,   rebates,  bulk  purchases  (including,  where  feasible,
combined  bulk  purchases  with  other  Sports  Club/LA  facilities),  and other
commercially reasonable methods of negotiating the best combination of price and
quality,  all of which shall inure to the sole benefit of the Club,  without any
consideration  being paid to Operator or its Affiliates in connection  therewith
other than as reimbursement for actually  incurred,  out of pocket  distribution
costs. Subject to Section 4.12 hereof,  Operator shall be entitled to enter into
agreements,  purchase  orders or contracts  with vendors and  suppliers  for the
provision of goods and services for the Club; provided,  however, that the terms
of any  transaction  are in compliance  with the Annual Plan and all  applicable
approved  budgets and in substantial  conformity with industry  standards for an
arms-length  agreement in the State of Florida.  Operator shall order and manage
stock  levels for all retail  products  and  operating  supplies.  Additionally,
Operator  shall make available to Owner and the Club, on an equal basis as these
materials are made  available to  Operator's  other clubs,  retail  products and
service

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supplies from the Operator's  distribution  center at distributor cost (plus any
actually incurred, out-of-pocket expenses associated therewith which are charged
to Operator's other clubs) without mark-up for profit.

     4.3 Management of Leased or Submanaged Spa or Salon Components.  If the Spa
or Salon is leased to a third party, or is to be submanaged by a third party, in
accordance  with Section  1.1(d) hereof or otherwise  with the consent of Owner,
then  Operator  shall (a)  negotiate  the  terms of the  lease or  submanagement
agreement on behalf of, and subject to the approval of, Owner,  (ii) collect all
rents,  license fees, net receipts and all other monies and other  consideration
which are  payable  to the Club,  the Owner or  Operator  under the terms of the
sublease or  submanagement  agreement as applicable (it being  acknowledged  and
agreed that all such  monies  shall be included as part of and deemed to be part
of Gross  Revenues  of the Club and all monies  paid to or on behalf of any such
person by Owner or  Operator  shall be  treated  as and  deemed to be  operating
expenses of the Club) and (iii) cause such lessee or submanager,  as applicable,
to abide by and  fulfill all of its  obligations  under the lease  agreement  or
submanagement   agreement  as   applicable.   Although   Operator   will  engage
commercially  reasonable efforts to locate a lessee who will agree to assume the
cost for millwork and FF&E, Owner  understands  that Operator  cannot,  and does
not, guarantee it will be able to locate such a subtenant.

     4.4 Annual Plan and Annual Budget.

          (a) Operator shall prepare and submit to Owner for its approval (x) at
     least ninety (90) days before the Opening Date, a Proposed  Annual Plan (as
     hereinafter  defined) for the initial abbreviated Fiscal Year and the first
     full Fiscal Year and (y) at least ninety (90) days before the  beginning of
     each Fiscal Year after the first Fiscal  Year,  a proposed  annual plan for
     the operation of the Club for the immediately  following Fiscal Year (each,
     a "Proposed  Annual Plan" and, to the extent  approved by Owner, an "Annual
     Plan") which Proposed Annual Plan shall include a budget of all anticipated
     operating expenses of the Club, including,  without limitation, all planned
     capital expenses (including repairs,  maintenance,  FF&E,  replacements and
     capital  improvements  which are capitalized  under United States generally
     accepted accounting  principles,  consistently  applied ("GAAP")) ("Capital
     Expenditures")  for the operation of the Club for the following Fiscal Year
     (each, a "Proposed  Budget";  and, once approved by the Owner in accordance
     herewith,  an "Approved  Budget").  With  respect to Capital  Expenditures,
     anything to the contrary set forth in this Agreement notwithstanding, Owner
     and Operator hereby agree that, unless otherwise  approved by Owner, (x) no
     Annual  Budget  shall  provide for Capital  Expenditures  which  exceed one
     (1.0%) percent of estimated  Gross Revenues during the first Fiscal Year of
     the Term, two (2.0%) percent of estimated  Gross Revenues during the second
     Fiscal Year of the Term,  three (3.0%) percent of estimated  Gross Revenues
     during  the  third  Fiscal  Year  of the  Term or four  (4.0%)  percent  of
     estimated  Gross Revenues  during all  subsequent  Fiscal Years of the Term
     (each such annual  limitation being referred to herein as a "CapEx Ceiling"
     and each such  applicable  percentage of Gross Revenues  being  hereinafter
     referred  to as the "CapEx  Percentage")  and,  subject  to Section  4.1(b)
     hereof,  Owner shall have no  obligation  to fund Capital  Expenditures  in
     excess of the applicable CapEx Ceiling.

          Each Annual Plan shall also include:

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<PAGE>


               (i) An updated  Membership  Marketing  Plan,  including,  without
          limitation,  all of the  information,  plans,  programs,  projections,
          statements,  policies,  prices and other data set forth in the initial
          Membership Marketing Plan approved by Owner;

               (ii) An  updated  five (5)  year  pro-forma  operating  statement
          covering the period  commencing  on the first day of the coming fiscal
          year and ending on the fifth (5th) anniversary thereof;

               (iii) A budget of all expenses of operating the Club, itemized in
          such  detail  as  shall  be  acceptable  to  Owner  in its  reasonable
          discretion  and an annual  forecast  of  operations  for the Club as a
          whole and for each of the  fitness  club,  Salon,  Spa,  juice bar and
          retail components separately, in substantially the form annexed hereto
          as  Exhibit  G,  with  such  additions  and  revisions  as  Owner  may
          reasonably request;

               (iv) A  projected  balance  sheet and profit  and loss  statement
          showing Operator's  reasonable  estimate (on a monthly basis) of Gross
          Revenues (as defined in Section 6.5), operating expenses,  sources and
          uses of funds  during the Fiscal  Year for which such  Annual  Plan is
          submitted;.

               (v) A compensation plan for employees  performing services at the
          Club, proposed wage and benefit guidelines  (including  bonuses),  the
          number  and  categories  of  employees  who  will  be  needed  for the
          operation  of the Club,  including  a general  manager  and  assistant
          managers, and all other retail and administrative personnel (including
          all  supervisory  and training  expenses)  and other  employee-related
          costs (which plan shall not be subject to Owner's  approval,  provided
          same conforms to the applicable Approved Budget).

          (b) Within thirty (30) days after Owner's receipt of a Proposed Annual
     Plan and Proposed  Budget,  Owner shall notify  Operator of its approval or
     disapproval  thereof.  If Owner does not approve a Proposed Budget,  or any
     line item within a Proposed Budget,  within thirty (30) days after delivery
     of the same to Owner, then such Proposed Budget, or such line item or items
     not specifically  approved by Owner, shall be deemed disapproved.  If Owner
     shall disapprove a Proposed Annual Plan, any Proposed Budget or any portion
     of either thereof,  then Owner shall specify with particularity the reasons
     for its  disapproval  and Operator shall,  after  consultation  with Owner,
     submit to Owner a new Proposed Annual Plan,  Proposed Budget or appropriate
     portion  thereof as the case may be, within ten (10) days after the date of
     Owner's  disapproval of the same. The foregoing procedure shall be followed
     until the Proposed  Annual Plan and Proposed Budget for such Fiscal Year is
     fully approved by Owner, except that Owner shall have ten (10) days (rather
     than thirty (30) days) to respond with particularity to each resubmittal by
     Operator.

          (c) Until such time as an Annual  Plan and  Approved  Budget have been
     approved in their  entirety,  and  pending  resolution  of any  differences
     between Owner and Operator,  Operator  shall operate the Club in accordance
     with the Annual Plan and  Approved  Budget in effect  during the  preceding
     Fiscal Year.

          (d)  Notwithstanding  any contrary provision of this Agreement,  Owner
     shall be required to approve any items in the  Proposed  Annual Plan and/or
     Proposed Budget for

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<PAGE>

     any Fiscal Year which are: (i)  necessary to prevent an imminent  threat to
     life,  health,  safety or property of the Club, the Hotel or the respective
     guests or employees  thereof;  (ii) required to comply with Applicable Law,
     (iii)  required  to permit  payment of  Operator's  Fees and  Expenses  (as
     defined in Article 6 below);  (iv)  related to  increases in costs for real
     estate taxes,  condominium common charges,  insurance premiums,  utilities,
     employee  payroll  taxes or  employee  health  care  premiums,  repairs and
     maintenance,  towels and linens,  laundry  costs and  parking;  and (v) any
     variable  operating  expenses that exceed the amounts budgeted therefor due
     to revenues in excess of those  anticipated  in the Annual Plan  (including
     but not limited to ancillary payroll, commissions and bonuses which are the
     result  of  unanticipated  sales),  but  only  to the  extent  such  excess
     operating  expenses  are  the  result  of  revenues  exceeding  the  levels
     estimated  in the Annual  Plan (such items  described  in  subsections  (i)
     through   (v)   being   referred   to   herein,   collectively,    as   the
     "Non-Discretionary Club Expenses").  If Operator reasonably determines that
     Owner has  disapproved  any expenditure  that is a  Non-Discretionary  Club
     Expense then Operator  shall  specifically  identify such required items in
     writing.  If Owner  does not  agree  within  thirty  days to  include  such
     expenditures  in the  approved  Annual Plan and/or  Approved  Budget,  then
     Operator  shall have the right to submit the  matter  (i.e.  whether or not
     such expenses constitute Non-Discretionary Club Expenses) to arbitration as
     provided  in Article  XI and any such  determination,  as to such  disputed
     expenditures  only,  shall be final and binding on both Owner and Operator.
     Except with respect to  Non-Discretionary  Club Expenses and subject to the
     terms and  provisions  of  Section  4.1(b)  hereof,  Owner may  approve  or
     disapprove of any Proposed Budget,  Proposed Annual Plan, or any portion(s)
     thereof,  in its sole and  absolute  discretion,  and no  dispute  or issue
     relating to the approval by Owner of any  Proposed  Annual Plan or Proposed
     Budget  (other  than a dispute  with  respect to whether  certain  proposed
     expenses  are  Non-Discretionary  Club  Expenses)  shall be  arbitrable  or
     submitted to  arbitration  by either Owner or Operator,  provided,  however
     that Operator shall have the right to raise any such matters in any action,
     proceeding or claim  otherwise  brought  between  Owner and  Operator.  The
     parties  agree to  negotiate  reasonably  and in good faith to arrive at an
     Approved Budget for each Fiscal Year.

          (e) Owner and Operator both acknowledge  that,  although the estimates
     of revenues and expenses  contained in each Annual Plan and Approved Budget
     represent  Operator's  best estimate of the same for the applicable  Fiscal
     Year,  such  estimates can vary for reasons beyond the control of Operator,
     including, without limitation: (i) the volume of business and the levels of
     Club Memberships;  (ii) increases in utility rates,  insurance premiums and
     taxes; and (iii)  unanticipated  and  extraordinary  repair and maintenance
     expenses.  Nevertheless,  subject  to  variances  resulting  from the items
     described  in  the   immediately   preceding   sentence  and/or  any  other
     Non-Discretionary Club Expenses, Operator shall use all diligent efforts to
     achieve the forecast  results in each Annual Plan.  If at any time Operator
     estimates  that it (a) has or will be  required  to  exceed  the  operating
     expenses  budgeted for in an Approved Budget by more than five (5%) percent
     or (b) will not achieve the revenues  estimated in an Annual Plan,  by more
     than five (5%)  percent,  then  Operator  shall  promptly  notify Owner and
     consult  with Owner with respect to  strategies  to better  conform  actual
     results to the Annual Plan. Operator will periodically update its forecasts
     and provide copies of such updates to Owner for discussion with Owner,  but
     no such updates shall be considered  amendments to the then approved Annual
     Plan or the applicable Approved Budget.  Operator shall not incur any costs
     or make  any  expenditures,  in any  Fiscal  Year,  which  will  cause  the
     operating  expenses for such Fiscal Year in the applicable  Approved Budget
     to be exceeded by more than 10% without the prior written

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     consent  of Owner  (except to the extent  necessary  to address  unforeseen
     Non-Discretionary Club Expenses).

               Subject  to  Section  4.1(b)  hereof,  with  respect  to  Capital
          Expenditures as set forth in an Approved  Budget,  Operator shall have
          no right to require Owner, and Owner shall not be obligated,  to incur
          any such expenses (other than  Non-Discretionary Club Expenses) except
          pursuant  to and in  accordance  with such  Approved  Budget and CapEx
          Ceiling.

     4.5 Laundry.
         -------

     The Club will not have its own laundry facility. Operator will contract out
the laundry to a third party vendor or to Hotel Manager. Owner expects, but does
not ensure,  that if Hotel  Manager is engaged to provide  laundering  services,
then the per pound rate will be at the actual cost that is incurred by the Hotel
Manager.

     4.6 Coordination with Hotel.

     Operator  will  cooperate,  assist and  facilitate  in all aspects with the
coordination  of the  operations  of the  Club  with  the  Hotel  and all  other
components of the Premises.  At Owner's request, the on-site manager of the Club
shall meet with  representatives  of the Hotel  Manager  to discuss  any and all
matters  relating to the  coordination of the services  offered by the Hotel and
the Club and the overall enhancement of the experience for hotel guests and Club
Members.  Owner shall make reasonable  efforts to obtain Hotel's  cooperation in
this regard.

     4.7 Pool Deck.
         ---------

     Access to the  swimming/bathing  pools  located  within  the Hotel Lot (but
specifically  excluding  the  pool  and  pool  deck  which  is  reserved  in the
Declaration for the exclusive use of the Residential Unit Owners,  as defined in
the declaration), and all appurtenant and ancillary facilities comprising a part
of the Hotel (collectively, the "Hotel Pool Areas") will be limited to Executive
Members of the Club and Spa Patrons who shall pay a daily fee per person,  in an
amount to be agreed upon between Hotel  Operator,  Owner and Operator,  for each
and every day on which such persons  access the Hotel Pool Areas.  No other Club
Members or other  persons  shall be  entitled  to access  the Hotel Pool  Areas,
except with the prior written consent of the Hotel  Operator.  At the request of
either party,  Owner and Operator  shall  endeavor to negotiate,  in good faith,
with Hotel  Manager with respect to one or more  proposed  modifications  to the
foregoing pool access policy (including,  without  limitation,  access for other
Club Members,  a lump sum or other revised  access fee  arrangement or any other
matter which is necessitated or indicated by past use of the Hotel Pool Areas by
Executive Members and/or requests of other Club Members for access to Hotel Pool
Areas) which  modifications,  if any,  will in all events,  be acceptable to the
Hotel  Operator,  Owner and  Operator,  it being  agreed  that,  subject  to the
reasonable approval of Owner, the Hotel Manager and Operator may barter services
and/or access at their respective  facilities in exchange for services or access
at the other's facility.

     4.8 Club Access for Hotel Guests, Residents and Office/Retail Tenants.
         -----------------------------------------------------------------

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<PAGE>

          (a) Hotel  Guests.  Guests of the Hotel  shall have full access to the
     Club, provided that a fee/access agreement satisfactory to Operator,  Owner
     and Hotel  Operator is agreed to and executed by all such  parties.  At the
     request of either party, Owner and Operator shall endeavor to negotiate, in
     good faith,  with Hotel  Manager  with  respect to  reaching  an  agreement
     providing  for the payment by the Hotel  Manager to the Club of a per guest
     fee (which  shall not be greater  than 75% of the lowest daily rate charged
     to guests of other  hotels in the area) or a fixed sum  annually for access
     by all Hotel  Guests (and any person  other than a  residential  unit owner
     that  occupies a  condo/hotel  unit,  as a "hotel  guest")  to the  Fitness
     component of the Club in an amount to be agreed upon by Owner, Operator and
     Hotel Operator, it being agreed that, subject to the reasonable approval of
     Owner, the Hotel Operator and Operator may barter services and/or access at
     their  respective  facilities  in  exchange  for  services or access at the
     other's facility.  All Hotel guests,  employees of office/retail tenants of
     the Premises and owners/tenants of the residential condominium units at the
     Premises shall have access, at no charge, to the Spa and Salon (which shall
     not include access to any other Club facilities);  provided,  however, that
     any  services,  merchandise,  personal  training or massages  and all other
     items which are  separately  paid for by Club  Members in addition to their
     regular membership dues shall be paid for by Hotel Guests at the same rates
     as are then charged to standard Club Members.

          (b)  Residents.  The  owners  of  (x)  residential  condominium  units
     ("Residential  Units") and (y) condo hotel condominium units  ("Condo/Hotel
     Units") at the Premises shall receive, on a complimentary  basis,  standard
     Club  Memberships  for two  individuals  incident to the  purchase of their
     Residential  Unit or Condo/Hotel  Unit. In consideration of the issuance of
     such Club  Memberships,  Owner  shall pay to the Club,  on the day which is
     thirteen months after the Opening Date, an aggregate, one-time amount equal
     to $75,000. In addition to such aggregate, one-time sum to be paid by Owner
     to the Operator, Owner shall cause the Residential Condominium Association,
     on behalf of all owners of Residential  Units or Condo/Hotel  Units, to pay
     to the Club a fixed annual amount equal to $70,000 (payable in twelve equal
     monthly  installments)  which annual amount shall be adjusted annually,  by
     the percentage change in the Consumer Price Index - All Urban Consumers for
     the  Miami-Dade  area  from  the  date  hereof  to the  date  in  question.
     Additional  standard Club  Memberships per residential unit (in addition to
     the  two  complimentary   standard   memberships  per  unit),   subject  to
     availability,  will receive a 25% discount off the monthly  membership fee,
     with initiation fees to be determined by and between Owner and Operator, by
     negotiations  to be conducted in good faith by both parties,  but which, in
     any event, shall not exceed 50% of the standard cost for same, as set forth
     in the applicable Membership Marketing Plan.

          (c) Office & Retail.  Tenants of the office and retail  components  of
     the Premises will receive a 50% discount off the then applicable initiation
     fee  for  standard  Club  Memberships  (as  set  forth  in  the  applicable
     Membership Marketing Plan) for all of their respective full time employees,
     subject to availability.  Owner and Operator will, in good faith, work with
     the leasing agent on  negotiating  a discount off the regular  monthly dues
     payable by such  employees,  consistent  with the Club's  normal  corporate
     pricing practices,  provided,  that, in any event, the terms offered to the
     employees  of the  tenants  of the  office  and  retail  components  of the
     Premises will be of a "most favored" nature (i.e.,  equal to or better than
     the terms  offered to any other pool of  members  or  corporate  sponsor of
     group memberships).

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<PAGE>

          4.9 Parking.  During the Term of this  Agreement,  Owner shall provide
     short term daily  self-parking  for each Club  Member  requesting  same (it
     being  agreed that Owner  shall not be  required  to provide  more than 200
     spaces  at any one time) at (x) a fixed  cost  equal to $1.50 for the first
     three (3) hours that each  vehicle is parked  within  the  Premises  on any
     given day (which  sum shall be  increased,  annually,  after the first full
     year, by a percentage  equal to any positive  change in CPI (as hereinafter
     defined)  during the prior  year) and (y) at market  rates,  as  reasonable
     determined by the operator of the parking  garage,  for (x) all vehicles in
     excess of 200 at any one time and (y) all additional  hours after the first
     three (3) hours per vehicle on any one day (the "Initial  Parking  Rates").
     The  Initial  Parking  Rates  (not  including  any CPI  increase)  shall be
     effective  for the first fiscal year of the Club,  following  which (A) the
     Initial  Parking  Rates  shall be  subject  to  annual  review by Owner and
     Operator  tied to fair market  pricing and (B) anything to the contrary set
     forth in this  Section  4.9  notwithstanding,  if the  parking  facility is
     operating at a loss due,  wholly or in part,  to the  complimentary  and/or
     reduced fee parking and valet services being provided to Club Members under
     this Section 4.9,  then, at the request of Owner,  the parties  hereto will
     implement a revised  parking fee  structure  based on the standard  parking
     rates  charged by the  operator of the parking  facility at the Premises to
     the  general  public,  provided,  however  that  for the  sole  purpose  of
     determining  the Incentive  Fee, if any, which is payable to Operator under
     this  Agreement,  Net  Operating  Income  shall be deemed  increased by any
     amounts paid by the Club to Owner for parking  which are in excess of $1.50
     for the first  three  hours of parking  during  the first full year  (which
     $1.50 threshold shall, for purposes of this sentence,  be subject to annual
     increase by a percentage equal to the positive change in the Consumer Price
     Index - All Urban Consumers,  for the Miami/Dade area ("CPI") from the date
     hereof to the date in question).  Throughout  the initial five year term of
     this Agreement, up to four hundred (400) Executive Members of the Club will
     get  complimentary  self  parking  and free valet for up to three (3) hours
     while they are using the Club's  facilities,  with all additional hours and
     all  Executive  Members in excess of four  hundred  (400) being  charged at
     market rates.  The parking facility at the Premises will be operated by the
     owner of the parking component or a third-party  operator pursuant to rules
     and  regulations  that will be subject  to change  from time to time by the
     owner of the parking component, provided that no such changes may interfere
     with  Operator's  rights under this  Agreement.  All parking  revenues will
     belong  to the  owner of the  parking  facility  and will not be  deemed or
     treated as revenue of the Club for any purpose hereunder.


          4.10 Club  Employees.  Operator,  in  compliance  with the  applicable
     Annual Plan and Approved Budget, shall hire, promote, train, discharge, and
     supervise the work of the staff of the Club,  including the general manager
     and  assistant  managers  and  shall  use  reasonable  care in the  hiring,
     training,  supervision  and  discharge  of  all  employees.   Additionally,
     Operator shall be permitted, subject to compliance with the Annual Plan and
     Approved  Budget,  to  hire  independent  contractors  to  perform  certain
     services  within  the Club.  All such  personnel,  except  any  independent
     contractor,  shall be employees of Operator and, subject to the immediately
     following  sentence,  Owner  shall be liable for all  wages,  compensation,
     fringe and statutory benefits,  and all other employee  obligations for the
     employees of the Club and any independent  contractors hired by Operator in
     connection  with the Club.  The total  aggregate  compensation,  including,
     without  limitation,  benefits  and annual  bonuses  paid or payable to the
     employees  so  assigned  and all  amounts  to be  paid  to any  independent
     contractor  hired  by  Operator,  to the  extent  in  compliance  with  the
     applicable  Annual Plan and  Approved  Budget  shall be funded by

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<PAGE>

     Owner and paid out of the Club  Operating  Account as  provided  in Section
     4.4(d),  to the extent such  expenses are  consistent  with the  applicable
     Approved Budget and any such payments shall constitute  operating  expenses
     of the Club. The term "benefits"  shall include,  without  limitation,  the
     cost of pension or profit sharing plans,  workers'  compensation  benefits,
     group life and accident and health  insurance  or  equivalent  benefits and
     similar benefits  available to such employees by virtue of their employment
     at the Club.  Notwithstanding anything to the contrary set forth above, the
     on-site  manager of the Club shall be  approved  by Owner,  which  approval
     shall not be unreasonably withheld.  Owner agrees not to solicit,  directly
     or  indirectly,  the  general  manager of the Club for a period of one year
     after termination of this Agreement,  unless the termination results from a
     default by Operator  hereunder.  Operator  agrees to use  reasonable,  good
     faith efforts to coordinate the training of its employees with the training
     of Hotel Operator's  employees and to cause its human resources director to
     continually communicate with the human resources director of Hotel Operator
     so that both the Operator and Hotel Operator can take all reasonable  steps
     which may be  necessary  to  afford  guest of both the Hotel and the Club a
     seamless, consistent experience in terms of quality and services provided.

          4.11 Repairs and  Maintenance;  Utilities.  Subject to Section  4.1(b)
     hereof and in substantial  accordance  with the applicable  approved Annual
     Plan,  the  Approved  Budget and the  Operating  Criteria,  Operator  shall
     arrange for the cleaning,  repair and  maintenance  of the Club as and when
     necessary but no less  frequently  than daily and at all times necessary to
     ensure  compliance  with the  Minimum  Standard  and shall  arrange for all
     electricity,   gas,  water,  phone  services,   cable/satellite  television
     services,  interior window cleaning,  vermin extermination,  waste removal,
     janitorial  services,  landscape and the replenishment of all OS&E as shall
     be necessary to meet the Minimum Standard. Subject to Section 4.1(b) hereof
     and  compliance  with the  applicable  Approved  Budget,  Operator shall be
     authorized  to sign any invoices  pertaining to such  cleaning,  repair and
     maintenance  services rendered at the Club and shall pay such invoices on a
     timely  basis using  funds in the Club  Operating  Account as an  operating
     expense of the Club.

          4.12 Contracts and Service  Agreements.  Operator is hereby authorized
     to sign,  in its  capacity as manager of the Club,  without  Owner's  prior
     written consent,  only those  instruments which are executed as part of the
     ordinary day-to-day  operation and management of the Club,  consistent with
     the Operating  Criteria and which (a) do not require the expenditure by the
     Club or Owner of an  amount  in  excess  of  $40,000  over the term of such
     agreement or contract, (b) do not have a term in excess of one (1) year and
     (c) relate to (i) the  purchasing  of OS&E,  at costs which are  consistent
     with the then  applicable  Annual  Plan and  Annual  Budget,  (ii)  routine
     maintenance,  upkeep,  operation and repair of the FF&E in accordance  with
     the  applicable  Approved  Budget or (iii) the  marketing  and sale of Club
     Memberships on terms set forth in the approved  Membership  Marketing Plan.
     Operator shall not enter into any service contract,  agreement for services
     or other agreement  requiring a monetary  commitment on behalf of the Club,
     unless same is contemplated in the Operating  Criteria and is in compliance
     with the Approved Budget. Additionally,  all contracts for repairs, capital
     improvements, goods, and services exceeding $40,000 shall require the prior
     written approval of Owner and, shall be awarded on the basis of competitive
     bidding, solicited in the following manner:

                    (1) A minimum of three (3)  written  bids shall be  obtained
               for each.

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<PAGE>

                    (2) Each bid will be  solicited in a uniform  format  (using
               Operator's  standard  forms) so that uniformity will exist in the
               bid quotes.

                    (3)  Operator  may  accept  the  lowest  bid  without  prior
               approval  from  Owner;   otherwise,   Owner's  consent  shall  be
               required,  provided,  however,  that if Owner  does  not  respond
               within seven (7) business days, the bid will be deemed  approved,
               provided, that Operator has advised Owner in writing that Owner's
               failure  to timely  respond to  Operator's  request  for  Owner's
               approval  shall  result in Owner  being  deemed to have given its
               approval  thereto  (provided  further that Owner shall have seven
               (7) business days from such notice before Owner's  approval shall
               be deemed to have been given).

                    (4) Operator may request that Owner waive these  competitive
               bidding  requirements,   and  Owner's  direction  in  any  single
               instance  shall not be deemed to be its consent in any subsequent
               instance.

     Operator  shall not hold itself out as having the  authority to approve any
contract or agreement  without the prior  written  approval of Owner,  except as
provided herein.

     4.13  Contracts  with  Operator's  Affiliates.   Operator  may  enter  into
contracts and agreements  with Operator's  Affiliates (as  hereinafter  defined)
only (a) with full prior  written  disclosure to Owner and Owner's prior written
consent  and (b) if such  contracts  and  agreements  are  consistent  with  the
approved  Annual Budget and otherwise  contain  terms that are  competitive  and
consistent  with the  terms  of,  and are no less  favorable  to the Club  than,
contracts  or  agreements  that may have been  negotiated  on an  "arm's-length"
basis.  For  purposes  of this  Agreement,  the term  "Affiliate"  means (x) any
corporation,  partnership, venture or other entity which controls, is controlled
by, or is under common control with Operator or in which Operator has a legal or
beneficial ownership interest and/or (y) the directors,  officers,  employees of
Operator  or any  entity  controlled  by any such  persons  or in which any such
persons has a legal or beneficial ownership interest.

     4.14  Compliance  with  Law.  Operator  shall use  commercially  reasonable
efforts to comply (as an operating expense of the Club except to the extent that
compliance  is  required  due to  Operator's  gross  negligence  or  intentional
misconduct  or  illegal  acts)  with  all  statutes,  ordinances,  laws,  rules,
regulations,  orders and  determinations  by any  governmental  authority having
jurisdiction  thereover ("Applicable Laws") affecting or applicable to the Club,
Operator  or  Operator's  management,  operation  or  use of the  Club  and,  in
connection with the operation of the Club, shall timely make, as applicable, all
registrations  and filings and obtain all permits,  certificates  and  approvals
necessary to manage and operate the Club in the manner required hereunder and in
compliance with all Applicable Laws.

     4.15 Compliance with Loan  Agreements.  Owner having  delivered to Operator
full  and  complete  copies  of  all  relevant   documents  (the  "Current  Loan
Documents")  prior to the  execution of this  Agreement,  Operator  shall at all
times during the Term comply with all of the terms, covenants and conditions set
forth in the  documents  which  evidence  and secure that  certain  $215,000,000
construction  loan  (the  "Fleet  Loan")  made by  Fleet  National  Bank,  N.A.,
Westdeustsche  Immobilienbank  and Ocean Bank  (collectively,  the  "Lender") to
Owner,  and/or  any other  mortgage  loan that may  hereafter  be  secured  by a
mortgage or deed of trust

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<PAGE>


encumbering  the Premises or the Club,  provided  that, as to all loan documents
other than the Current Loan  Documents,  Owner shall submit to Operator full and
complete copies of all relevant  documents,  it being agreed that Operator shall
not be obligated to comply with the  provisions of any documents  other than the
Current Loan  Documents,  where such  compliance  would result in the imposition
upon Operator of restrictions or the incurrence by Operator of obligations which
are in any material respect greater than the  restrictions or obligations  under
the Current Loan Documents,  unless  Operators agrees to do so in its reasonable
discretion.

     4.16  Operating  Hours.  Subject to  routine  maintenance  (which  shall be
performed,  whenever possible, during hours when the Club is regularly closed to
the public) and Force Majeure Events (as  hereinafter  defined),  Operator shall
keep all facilities at the Club fully  operational and open for business no less
than 362 days per year and on all such days the Club  shall be open at all times
between the  ***[hours  of ___ A.M. to ___  P.M.]***,  it being  agreed that the
three (3) days in each calendar year on which Operator is permitted to close the
Club shall be Christmas Day,  Thanksgiving  Day, New Year's Day. As used herein,
"Force Majeure Events" shall mean, to the extent not within Operator's  control,
acts of God or the public enemy,  expropriation  or  confiscation of facilities,
acts of declared or  undeclared  war,  public  disorder  and  demonstrations  or
protests,  rebellion,  sabotage,  revolution,   earthquake,  pestilence,  riots,
strikes or lockouts or labor disputes, embargo, emergency acts, or the inability
of a party to obtain  necessary  materials or equipment due to  unanticipated or
extraordinary   events,  future  laws,  rules  or  regulations  of  governmental
authorities,  to the  extent  any of the same  actually  and  reasonably  delays
Operator's performance hereunder.

     4.17 Non-Compete.

     Neither Operator nor any Affiliate thereof shall own, manage, license, rent
or operate a sports  club,  spa,  health/fitness  club,  salon,  gym, or similar
enterprise  in the  Counties of Dade,  Florida or Broward,  Florida or otherwise
within ten (10) miles of the Premises, during the Term of this Agreement and for
a period of three (3) years  after  expiration  or earlier  termination  of this
Agreement,  it being  agreed  that  this  non-compete  covenant  shall not apply
following the termination of this Agreement by Operator,  where such termination
results from Owner's default  hereunder or is effectuated in accordance with the
provisions  of Section  4.1(b)  hereof.  Owner  shall have the right to specific
performance  and other  injunctive  relief in the event of any violations of the
provisions of this Section 4.17 in addition to any other  remedies  available at
law or under this  Agreement.  The  foregoing  notwithstanding,  if and when the
Lease Agreement is in effect, then, if and to the extent any non-compete, radius
or exclusivity  clauses contained therein shall conflict with,  contradict or be
inconsistent  with the  provision  hereof,  then  the  provisions  of the  Lease
Agreement shall control and bind the parties.

     4.18  Membership  Programs.  Operator  shall  develop  market,  promote and
administer  the  membership  programs  for all Club  Memberships  including  all
corporate   programs,   travel   packages  and  other   promotions  and  special
solicitations  and shall  invoice and collect  all related  initiation  fees and
monthly dues, in a manner consistent with the Membership Marketing Plan approved
by Owner.

     4.19  Noncompliance  with Minimum  Standard.  Notwithstanding  any contrary
provision of this  Agreement,  Operator  shall be excused from its obligation to
operate the Club in

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conformity  with the Minimum  Standard  whenever,  but only to the extent  that,
Operator  shall be  prevented  from  compliance  with such  standard  by Owner's
Default or a Force Majeure Event.

     4.20  Club  Operating  Account.  At the end of each day  during  the  Term,
Operator shall deliver or deposit,  as applicable,  to a segregated account (the
"Club  Operating   Account")  opened  and  maintained  in  a  federally  insured
depository within the City of Miami, State of Florida which shall be approved by
Owner,  all cash,  checks,  money  orders and other  receipts  derived  from the
operation of the Club. All  signatories  on the Club Operating  Account shall be
approved by Owner in writing,  which  approval  may be withheld in Owner's  sole
discretion.  All of Operator's  employees handling receipts of the Club shall be
bonded in a manner and in an amount reasonably acceptable to Owner. The costs of
such bonding shall be borne by Operator and shall not be an operating expense of
the Club.

     4.21 Payment of  Expenses.  Operator,  using  monies  available in the Club
Operating Account (including any monies which Owner is required to fund into the
Club  Operating  Account  pursuant to the terms of this  Agreement),  shall make
timely and full  payment of all  operating  expenses  of the Club,  reimbursable
costs of Operator (payable pursuant to Section 6.4 below), and all other amounts
due and owing to  Operator,  vendors,  suppliers  or other  parties  entitled to
payment under the terms of this  Agreement,  provided that,  except as otherwise
provided herein,  all such expenditures  shall be consistent with the applicable
Approved Budget.  All disbursements of funds pertaining to the Club,  whether by
check or other  withdrawal  from the Club Operating  Account or from petty cash,
shall  be  substantiated  by  appropriate  records  and in  accordance  with the
accounting  procedures  set forth  herein or in the  Operating  Criteria.  After
payment of monthly  operating  expenses of the Club and before any Net  Receipts
(as hereinafter defined) are disbursed to Owner, Operator shall fund the Monthly
CapEx Amount (as such term is defined  below) to the Cap Ex Reserve  Account (as
such term is defined below).

     4.22  Payment  of  Property  Obligations.  Subject to the  availability  of
necessary  funds in the Club  Operating  Account,  as  required  to be funded by
Owner,  Operator  shall make  timely  payment,  on behalf of Owner,  of all real
estate  taxes,  water and  sewer  rents,  condominium  common  charges,  special
assessments, payment of insurance premiums relating to the Club and the interest
of Owner  therein,  and all  obligations  of Owner pursuant to any agreements to
which Owner is, or may in the future be, a party or bound (all of the  foregoing
obligations  shall  hereinafter  be  collectively  referred to as the  "Property
Obligations"),  prior  to the  time  that  any  penalty  shall  attach  for  the
non-payment hereof.

     4.23 Payment of Net Receipts to Owner.  Within fifteen (15) days of the end
of each calendar  month during the Term,  Operator  shall  disburse to Owner all
sums remaining in the Club Operating  Account after payment of (a) all operating
expenses of the Club which are then due and payable or which are  expected to be
due and payable within the next thirty (30) days, (b) the funding of any monthly
CapEx  Ceiling and (c) the payment of any Fees and Expenses then due and payable
to Operator hereunder (the "Net Receipts").

     4.24 Accounting and Payroll Services. Operator shall provide all accounting
and financial  reporting  services for the Club's  operation in accordance  with
GAAP. Operator's accounting personnel,  on a daily basis, shall gather, generate
and  compile  all  records of daily  receipts  (including  cash and credit  card
receipts), revenues and expenses for the Club together

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<PAGE>

with  such  additional  information  as is  necessary  in order  for  Operator's
accounting personnel to prepare the Monthly Statements and the Annual Statements
for the Club as  provided  herein  below.  In  addition,  Operator's  accounting
personnel shall provide  payroll and benefits  processing for all Club employees
(and  independent  contractors),  maintain  payroll  records,  make all  related
governmental   and  statutory  tax  reporting  and  filings,   and  provide  all
bookkeeping and clerical  services  incident to the operation and maintenance of
the Club.

     4.25  Monthly  Statements.  On or before the  twentieth  (20th) day of each
calendar month during the Term,  Operator's accounting personnel shall render to
Owner unaudited financial  statements for the Club  (collectively,  the "Monthly
Statements")  in the  form  and  containing  all of the  statements,  notes  and
information  set forth in the form of the  monthly  reportss  annexed  hereto as
Exhibit H or such other form as Owner may hereafter approve,  together with such
additional or alternative  statements and or financial  information  which Owner
may reasonably request.  In addition to the Monthly  Statements,  Operator shall
provide daily sales reporting and periodic labor and productivity reporting with
each payroll.

     4.26 Weekly Flash Report. At the end of each week during the Term, Operator
shall  deliver to Owner,  by facsimile  or e-mail,  a weekly flash report in the
form annexed hereto as Exhibit I and containing all of the information set forth
therein,  together  with  such  additional  information  as  may  reasonably  be
requested by the Owner.

     4.27 Annual Statements.  In addition to the Monthly Statements,  as soon as
practicable  after the end of each  Fiscal Year and in any event  within  ninety
(90) days thereafter,  Operator's accounting personnel shall render to Owner the
financial information prepared for each set of Monthly Statements compiled on an
annual basis, together with such additional  information as Owner may reasonably
request  (which shall be unaudited);  setting forth in each case  comparisons to
the applicable Annual Plan and actual results from the prior Fiscal Year, all in
reasonable  detail  (collectively,   the  "Annual  Statements").  In  connection
therewith,  Owner shall promptly forward to Operator's  accounting personnel any
data in Owner's  possession or within Owner's control  necessary for Operator to
prepare and file all  necessary  reports  and  returns  related to the Club with
respect to withholding taxes, social security taxes, income taxes,  unemployment
insurance, disability insurance under the Fair Labor Standards Act and any other
similar filing required under Applicable Law.

     4.28 Books and Records.  Copies of all books and records  pertaining to the
Club shall be available during normal business hours and upon reasonable  notice
during  the Term and for a period of five (5)  years  after  the  expiration  or
earlier termination of this Agreement,  for inspection,  transcription and audit
by Owner or its representatives.  If such inspection or audit shall disclose any
error in the reporting of Gross Revenues or Net Operating  Income (as defined in
Section 6.5) in any Fiscal Year, then the party  benefiting from the error shall
pay to the other parties the funds  necessary to correct the error plus interest
at the Default Rate (as defined in Article  VII). If the error exceeds five (5%)
percent of the actual Gross Revenue and/or Net Operating  Income for such Fiscal
Year Owner may recover the cost of the audit and of any proceeding  commenced by
Owner to establish such deficiency. If the error is less than 5%, or if there is
no  error,  then  Owner  shall  pay the  cost of the  audit  and any  proceeding
commenced by either party to establish the amount or lack of any deficiency.

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<PAGE>

          4.29 Insurance.

          (a) Owner shall,  at all times prior to the Opening Date,  procure and
     maintain, or cause to be procured and maintained,  with companies which are
     licensed to insure risks in the City of Miami, State of Florida, and having
     a rating in the most current edition of Best's Insurance  Reports of A-/VII
     or better (i) public  liability  insurance in respect of the Club  insuring
     both Owner and Operator  against claims or loss arising in connection  with
     the construction,  furnishing and equipping of the Club and the Pre-Opening
     activities of Operator hereunder,  and (ii) adequate property insurance for
     the full  insurable  value of the Club against all risk of direct  physical
     damage, including but not limited to fire and extended coverage,  hurricane
     coverage (but only to the extent available at reasonable rates), boiler and
     machinery,  and  such  other  risks  and  perils  for  which  insurance  is
     customarily  provided for world class five star hotels of similar character
     during the period of construction  and  completion.  Operator shall procure
     and maintain,  or cause to be procured and maintained,  similarly qualified
     Workers' Compensation or similar insurance, at Owner's cost.

          (b) Owner shall,  at all times during the Term,  procure and maintain,
     or cause to be procured and maintained,  the following  insurance,  in form
     and  amounts,   and  with  responsible  and  properly  licensed   companies
     satisfying  the  requirements  set  forth  in  subsection  (a),  above,  as
     reasonably  approved by Operator  (which  amounts shall in no event be less
     than the amounts  required  under any  mortgage,  deed of trust or security
     agreement affecting or applicable to the Club):

     Property and casualty  insurance  against all risk of direct physical loss,
including  but not limited to, fire and  extended  coverage  including  business
interruption,   hurricane   coverage  (but  only  to  the  extent  available  at
commercially  reasonable rates), boiler and machinery coverage including use and
occupancy,  and such other risks and perils with  respect to which  insurance is
customarily carried by operators of luxury Club facilities or health clubs;

     Such other insurance as Operator or Owner shall deem  reasonably  necessary
for protection against claims, liabilities and losses arising from the operation
of the Club.

          (c) Operator shall at all times during the Term, procure and maintain,
     or cause to be procured or maintained, the following insurance,  respecting
     the Club in form and amounts,  and with  responsible and properly  licensed
     companies satisfying the requirements set forth in subsection (a) above, as
     approved by Owner (which amounts shall in no event be less than the amounts
     required under any mortgage,  deed of trust or security agreement affecting
     or applicable  to the Club):  (i)  Statutory  personnel-related  insurance,
     including without limitation, workers' compensation,  unemployment, health,
     employers  liability and a broad form "all states"  endorsement  or similar
     insurance  as may be required by  applicable  law,  (ii) crime and fidelity
     insurance  against  dishonest  acts by employees and others  working at the
     Club;  (iii)  professional  liability  insurance  insuring the Club and its
     employees and independent  contractors against claims arising from services
     and/or the sale/use of retail product and professional  supplies;  and (iv)
     general liability insurance,  on an occurrence form basis, for injury to or
     death of persons and damage to or loss of property.

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<PAGE>

          (d) All policies  evidencing  the  insurance  required by  subsections
     4.29(a)  and (b) shall name Owner as the  principal  insured and shall name
     Operator, its directors, officers, employees and agents and (if required by
     Owner) any  mortgagee of the Club as  additional  insureds  thereunder.  In
     addition,  all such policies  shall be endorsed to cause them to be primary
     to any other valid and collectible insurance available to Operator.

          (e) All insurance  policies required to be carried hereunder shall, to
     the extent  obtainable,  have attached thereto an endorsement that the same
     shall not be cancelled  or changed  without at least thirty (30) days prior
     written notice to all named insureds and additional insureds.

          (f) For the purpose of evidencing  compliance  with the  provisions of
     this Section 4.29, each of Operator and Owner shall furnish and maintain on
     a current basis  certificates  of insurance  evidencing  the coverage,  and
     furnish  at the  request  of  the  other  party,  certified  copies  of all
     insurance  policies  required to be  maintained  by Owner or  Operator,  as
     applicable, pursuant to this Section 4.29.

          (g) The insurance  policies required by this Section 4.30 will provide
     that the  insurer's  right of  subrogation  shall be waived in favor of the
     party not providing the insurance.

                                   Article V.
                         Owner's Obligations and Duties
                         -------------------------------

     5.1 Funding of Club Operating  Account.  As otherwise herein provided,  (a)
Owner shall be  obligated  to maintain a minimum  balance in the Club  Operating
Account sufficient to finance the operations of the Club and satisfy all payment
obligations  and debts  reasonably  anticipated  for a one (1)  month  operating
period and (b) Owner shall be obligated to deposit,  within five (5) days of its
receipt of a written request therefore from Operator,  additional funds into the
Club  Operating  Account if the balance of the Club  Operating  Account  becomes
inadequate to meet expenses of the Club, it being  acknowledged and agreed that,
except  with  respect to  Non-Discretionary  Club  Expenses  and  subject to the
provisions of Section  4.1(b),  Owner shall have no obligation,  after the first
full year of operations,  to fund any amounts on account of expenses which, when
added to all  other  operating  expenses  of the  Club,  results  in the  annual
operating  expenses of the Club exceeding,  by more than ten (10%) percent,  the
total  of all  budgeted  expenses  for the Club as set  forth in the  applicable
Approved Budget for the then current fiscal year of the Club.  Without  limiting
the  foregoing,  unless  excused  by Owner in  writing,  it shall be an Event of
Default by Operator under this Agreement if any such expenses, when added to all
other operating expenses of the Club, result in the annual operating expenses of
the Club  exceeding,  by more than ten (10%) percent,  the total of all budgeted
expenses  for the Club as set forth in the  applicable  Approved  Budget for the
then current fiscal year of the Club.  Notwithstanding  the foregoing,  Operator
shall have no liability under this Section 5.1 to fund or otherwise pay any Club
expenses in excess of the Approved Budget.

     5.2 Funding of Reserves.  Subject to the  provisions of Section 4.4 hereof,
after payment of all other operating  expenses of the Club and before paying any
Net Receipts to Owner,  Operator shall, on a monthly basis,  fund an amount (the
"Monthly  CapEx  Amount")

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equal to the lesser of (x) one twelfth of the CapEx Ceiling for such Fiscal Year
and (y) an amount  equal to (A) the  applicable  CapEx  Ceiling  divided  by (B)
twelve  multiplied by (C) the number of months elapsed in such Fiscal Year minus
(D) the amount of funds then on account in the CapEx Reserve.  At all times, the
CapEx  Reserve  and all  interest  or other  returns  thereon  shall be the sole
property  of Owner,  and Owner  shall have the right,  in its sole and  absolute
discretion, to withdraw monies from the CapEx Reserve to satisfy the obligations
of Owner to fund any  operating  expenses  of the Club,  including  any  Capital
Expenditures,  or for any other purpose whatsoever whether or not related to the
Club.  Operator shall maintain the CapEx Reserve funds in a special,  segregated
account called  Terremark  Brickell II, Ltd - Fitness Club CapEx Reserve Account
in a bank  selected  by Owner (the  "CapEx  Reserve  Account").  Operator  shall
provide  Owner with the  account  numbers,  account  name,  signature  cards and
deposit  account  agreement  for such account and only the Owner's  officers and
such of the  officers  of  Operator  as shall be  approved  by  Owner,  shall be
permitted  signatories  thereon.  Anything  to the  contrary  set  forth  herein
notwithstanding,  no monies  may be  withdrawn  from the CapEx  Reserve  Account
without the signature of an officer of the Owner.

     5.3  Signage.  Owner will  furnish and  install,  at Owner's  sole cost and
expense,  a sign on the exterior of the building (at a location and elevation to
be specified by Owner), which sign shall be of a size and color and contain only
such content as shall be consistent with the existing signs on Operator's  other
clubs..  No additional or replacement signs or any modifications to any approved
sign shall be permitted without Owner's and Operator's consent.

     5.4  Club  and  Hotel  Interface.  Operator  shall  provide  an  electronic
interface from the Club's point of sale ("POS") system and related  applications
(scheduling  and gift  certificates)  to the Hotel's POS system for posting room
and group charges,  including any upgrades  required in the future.  Owner shall
also provide (i) during the term of the Hotel Management Agreement, a PBX system
for  integrated  phone use between the Hotel  (reception,  guest rooms and house
telephones) and the Club and the individual  residential units and office/retail
units forming a part of the premises,  and (ii) external and dedicated telephone
lines for outside calls.  Operator shall take all actions necessary to integrate
the POS system  with the  Hotel's  point of sale  system.  Any  upgrades  to, or
maintenance of, any portion of the systems or equipment  provided by Owner under
this Article V shall be paid for as an operating expense of the Club.

                                  Article VI.
                     Operator's Compensation and Other Fees
                     --------------------------------------

     As full and complete  compensation  to Operator  for the services  provided
hereunder,  Owner shall pay to Operator (x) the below described fees, and (y) to
the  extent  any such  expenditures  are  made,  actual  out-of-pocket  expenses
incurred  by  Operator  on  Owner's  behalf,  in  accordance  with the terms and
conditions hereof (collectively, the "Fees and Expenses"):

     6.1 Base Management Fee. For each Fiscal Year,  Operator shall receive,  in
respect  of  its  management  services  hereunder,  an  annual  fee  (the  "Base
Management  Fee") equal to six (6.0%) percent of Gross Revenues (as such term is
hereafter defined), which shall be

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paid, on a monthly  installment  basis, by Operator  withdrawing  funds from the
Club  Operating  Account on the tenth (10th) day  following  Owner's  receipt of
Operator's Monthly Statements, in an amount equal to six (6.0%) percent of Gross
Revenues for the immediately  preceding calendar month. If, for any Fiscal Year,
the aggregate  amount of the monthly  installments  disbursed to Operator as the
Base  Management  Fee shall be more or less than the annual Base  Management Fee
payable  for such  Fiscal  Year  based  upon the  final  determination  of Gross
Revenues  for such Fiscal Year as reflected  in the Annual  Statements  for such
Fiscal  Year,  then,  by way of year end  adjustment,  within sixty (60) days of
Owner's receipt of Operator's Annual Statement,  Operator shall pay to Owner the
amount of any such  overpayment,  or Owner shall pay to  Operator,  or authorize
Operator to withdraw  from the Club  Operating  Account,  the amount of any such
underpayment.

     6.2  Incentive  Fee.  For each Fiscal Year for which there is positive  Net
Operating  Income,  Operator shall receive,  in addition to the Base  Management
Fee, an "Incentive Fee" equal to forty percent (40%) of Net Operating Income for
such Fiscal Year.  The Incentive Fee shall be paid annually by Owner to Operator
within thirty (30) days following Owner's receipt of Operator's Annual Statement
for the  applicable  Fiscal Year,  by wire  transfer to  Operator's  bank, in an
amount equal to forty percent  (40%) of Net  Operating  Income for the preceding
Fiscal Year.

     6.3 Pre-Opening  Services Fee. As compensation for the Pre-Opening Services
to be rendered by Operator during the development,  construction and pre-opening
phases of the Club,  Owner  shall pay to  Operator a  nonrefundable  fee of Five
Thousand  Dollars  ($5,000) for each month  beginning  January 1, 2003 until the
Opening Date (which  amount shall be prorated for any partial  months)  provided
that in no event  shall the  aggregate  amount of such fees  exceed  forty  five
thousand  ($45,000) Dollars (the "Pre-Opening  Services Fee"). For the avoidance
of doubt, Operator acknowledges and agrees that it shall continue to provide the
Pre-Opening  Services at all times after it has received the entire  Pre-opening
Services Fee, unless it is otherwise entitled to terminate this Agreement.

     6.4  Operator  Reimbursement.  Operator  shall be  reimbursed  by Owner for
out-of-pocket  expenses it incurs  resulting from (i) items approved by Owner as
part  of the  applicable  Annual  Plan or  Approved  Budget,  (ii)  commercially
reasonable, actual out-of-pocket expenses incurred by Operator on Owner's behalf
pursuant  to  the  terms  of  this  Agreement,  including,  without  limitation,
purchases  of OS&E,  provided  that  all such  expenses  shall  be  incurred  in
accordance  with the  applicable  Approved  Budget or as  otherwise  required by
Operator,  and (iii) reasonable  out-of-pocket  expenses incurred by Operator in
connection with site visits by Operator's Vice President of Operations, Director
of Human Resources, Regional Manager and Regional Comptroller only. In the event
this Agreement is terminated, for any reason whatsoever, prior to the opening of
the Club, Owner agrees to reimburse  Operator for the  above-described  expenses
and for all  expenses  incurred in  connection  with moving its current  General
Manager to Florida.

     6.5 Definitions. For the purposes of this Agreement:

     "Gross  Revenues"  shall mean,  for any period,  any and all gross receipts
(including  cash  and  credit  card  receipts)  received  by  Operator  from the
operation of the Club and

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deposited into the Club Operating Account,  including,  without limitation,  all
initiation fees for Club Memberships,  monthly or annual dues received from Club
Members, monies received in lieu of membership dues as described in Section 4.8,
daily  use  fees,  all fees and  other  monies  paid  under  any  sublicense  or
submanagement  agreement  covering the Salon, gift certificates  redeemed at the
Club,  receipts  from sales of  merchandise,  provision of  services,  permitted
concessions and vending machines,  and business interruption  insurance proceeds
and other  insurance  proceeds  intended  to cover the  insured  for lost  Gross
Revenues,  determined in  accordance  with GAAP,  but  excluding the  following:
capital event proceeds,  financing  proceeds,  sales of gift certificates (until
the gift  certificate  is redeemed at the Club for goods  and/or  services or it
expires), salon/spa goods sold through mail-order, gratuities or service charges
added to guests' bills or statements which are paid over to employees;  federal,
state and local excise, sales, use or rent taxes collected directly from patrons
or  guests  as part of or as an  addition  to the  sales  price of any  goods or
services;  and  discounts,  allowances,  and refunds or credits to Club Members,
patrons or guests (including Hotel Guests).

     "Net  Operating  Income"  shall  mean  Gross  Revenues,  less all costs and
expenses incurred to manage and operate the Club,  including without limitation,
the following (all calculated in accordance with GAAP and consistently applied):

               An assumed  annual rent  payment of  $1,600,000  per year,  which
               shall be deemed to have been paid in equal  monthly  installments
               of  $133,333.33 on the final day of each month during each Fiscal
               Year;

               Payroll and all related fringe and statutory benefits;

               Insurance premiums;

               Costs of goods sold (for  retail  products)  and cost of supplies
               (for services);

               Monthly CapEx Amounts;

               Direct advertising and promotion;

     Direct operating  expenses,  including  repair and maintenance,  utilities,
telephone and fax,  postage and Federal  Express,  laundry and uniforms,  office
supplies/printing,  professional  fees and services,  travel and  entertainment,
training, credit card fees, cash overages/shortages,  and miscellaneous expenses
for the Club;

     Base Management Fee, and Operator's reimbursable expenses; and

     Direct  general  and  administrative  costs  associated  with  the  Club as
described under the express provisions of this Agreement, including national and
technical   training,   recruiting,    regional   supervision   and   management
(pre-opening, grand opening and throughout the Term), and Owner support services
such as payroll,  benefits and accounting,  as well as out-of-pocket expenses of
Operator and its  Affiliates  incurred for the account of or in connection  with
the Club operation,  including reasonable travel expenses of employees, officers
and other representatives and consultants of Operator and its Affiliates.

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<PAGE>

     The following items will not be a deduction for purposes of calculating Net
Operating  Income:  Incentive Fees;  real property taxes;  common charges or CAM
payable under the  Declaration;  depreciation and  amortization;  any general or
administrative  expenses of Owner or any of its affiliates and any  self-parking
costs in excess of $1.50 subject to CPI  adjustment  as described  more fully in
Section 4.9, above.

                                  Article VII.
                                Default Interest
                                ----------------

     If either party shall, after being given fifteen (15) business days written
notice,  fail to pay,  when due, to the other  party any sum  payable  hereunder
(including,  without  limitation,  pursuant  to Section  10.3  below),  then the
defaulting party shall be liable to the non-defaulting  party for the payment of
such sum together with interest  thereon at the rate of (i) a per annum floating
rate equal to Citibank  N.A.'s Prime Rate,  as publicly  announced  from time to
time,  plus three (3%)  percent per annum,  or (ii) the maximum rate of interest
allowed  by law,  whichever  shall be less,  from the date  when  such sum shall
become due to the date of actual payment (the "Default Rate").

                                 Article VIII.
                      Marketing and Initial Membership Fees
                      -------------------------------------

     8.1 Advertising.  In accordance with each Annual Plan,  Approved Budget and
Membership Marketing Plan, Operator shall prepare,  arrange and contract for all
advertising,  publicity and promotional activities for the Club, it being agreed
that any substantial  variations from the forms and type of advertising approved
in the  applicable  Membership  Marketing  Plan  (other  than  those  which  are
necessary to render the materials  consistent  with the then current  Membership
Marketing  Plan or current  state of facts)  shall be approved by Owner prior to
the  dissemination  thereof.  Failure to approve or  disapprove  within ten (10)
business  days shall be deemed an approval by Owner,  provided that Operator has
notified Owner in writing that Owner's  failure to timely respond will be deemed
to be Owner's approval thereof  (provided further that Owner shall have ten (10)
business days from such notice before  Owner's  approval shall be deemed to have
been given).  At Owner's  request,  Operator  shall  cooperate with Owner in all
respects,  at no out-of-pocket  expense to Operator, in all advertising programs
for the Hotel,  the Residential and Condo/Hotel  Units and the office and retail
components of the Premises.

     8.2 Prebooking and Marketing. Owner and Operator each covenant to cooperate
in good faith with each other and with the Hotel  Manager to  cross-promote  and
market the services offered at the Club, the Hotel, the parking facility and all
other components of the Premises.

     8.3 Membership Fees. Except to the extent otherwise provided in Section 4.9
hereof, the initial membership fees and all annual/monthly membership dues shall
be no less than the amounts set forth in the Membership  Marketing Plan approved
by Owner,  except for  discounts  granted by  Operator  in the normal  course of
business and in a manner and of a magnitude set forth in the  applicable  Annual
Plan.

     8.4 Trademarks.

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<PAGE>


          (a) Owner acknowledges that Operator and/or its affiliates is the sole
     and  exclusive  owner of the  Operator's  and its  affiliates'  trade name,
     trademark, service mark, logo, company depiction or identifying symbol (the
     "Sports Club  Marks") and that Owner has no right,  title or interest in or
     to the Sports Club Marks or any right,  license or  permission  to use same
     for any purpose  without the express written consent of Operator except the
     right to use the Sports Club Marks pursuant to the terms and conditions set
     forth in this  Agreement.  Operator  agrees to respond to each  request for
     permission  to  use  a  Sports  Club  Mark  (which  consent  shall  not  be
     unreasonably  withheld)  within  ten (10) days of its  receipt of a written
     request  together with a copy of the proposed  materials which will include
     the Sports Club  Marks.  Any  unauthorized  use by Owner of the Sports Club
     Marks shall (x) entitle  Operator to exercise  any and all of its  remedies
     under this  Agreement or applicable law for such  infringement  and (y) if,
     and to the  extent  that such  unauthorized  use is  intentional,  willful,
     grossly negligent or unreasonably repetitive, be a default hereunder.

          (b) Operator acknowledges that Hotel Manager is the sole and exclusive
     owner, and Owner is the licensee, of Hotel Manager's trade name, trademark,
     service mark, logo, company depiction or identifying symbol  (collectively,
     the "Hotel Marks") and that Operator has no right,  title or interest in or
     to the Hotel Marks or any right,  license or permission to use same for any
     purpose without the express written consent of Hotel Operator. Owner agrees
     to use  reasonable  efforts  to cause the Hotel  Manager to respond to each
     request  for  permission  to use a Hotel  Mark  within ten (10) days of its
     receipt of a written request together with a copy of the proposed materials
     which will include the Hotel Marks.  Any use of the Hotel Marks by Operator
     which is not previously  authorized,  in writing, by Hotel Operator,  shall
     entitle Hotel Operator (or Owner,  but only as agent or indemnitor of Hotel
     Operator) to exercise any and all of its remedies under  applicable law for
     such  infringement.  Operator  hereby  agrees to  indemnify  and hold Owner
     harmless  from and  against  any and all claims,  liability,  actions,  law
     suits,  costs,  expenses and/or damages which may be incurred by Owner as a
     result of such unauthorized use, including, without limitation, any damages
     awarded  to  Hotel  Operator  as  against  Owner  resulting  from  any such
     unauthorized use.

          (c) Operator  acknowledges  that Owner and/or its  affiliates  are the
     sole and  exclusive  owner,  of Owner's  and its  affiliates'  trade  name,
     trademark,  service mark,  logo,  company  depiction or identifying  symbol
     (collectively,  the  "Millennium  Marks") and that  Operator  has no right,
     title or interest in or to the  Millennium  Marks or any right,  license or
     permission to use same for any purpose  without the express written consent
     of Owner.  Owner agrees to respond to each request for  permission to use a
     Millennium Mark (which consent may not be unreasonably withheld) within ten
     (10) days of its receipt of a written  request  together with a copy of the
     proposed   materials   which  will  include  the  Millennium   Marks.   Any
     unauthorized  use by  Operator  of the  Millennium  Marks shall (x) entitle
     Owner to  exercise  any and all of its  remedies  under this  Agreement  or
     applicable  law for such  infringement  and (y) if, and to the extent  that
     such  unauthorized  use  is  intentional,  willful,  grossly  negligent  or
     unreasonably repetitive, be a default hereunder.

     8.5  Notification  of  Infringement.  Owner and Operator  shall notify each
other  promptly  of any  adoption,  use or  registration  that may come to their
attention of any trademark, service mark, trade name, trading style or corporate
name or  other  designation  which  would  appear  to  infringe  or  impair  the
applicable party's respective rights in the Sports Club Marks, the

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Millennium  Marks and/or the Hotel Marks, as the case may be. Owner and Operator
agree to  cooperate  with each other and their  respective  attorneys  and other
authorized  representatives in any investigation or legal proceeding (other than
any dispute  between the parties in which case this section  shall not be deemed
to impose any  obligations or  requirements  in excess of what is required under
applicable rules governing the arbitration or judicial  proceeding,  as the case
may be) which any party may deem  desirable  to protect its rights in the Sports
Club Marks, the Millennium Marks and/or the Hotel Marks; provided,  however, the
party  attempting  to  protect  its  Marks  shall be  responsible  for all costs
associated  therewith.  Unless authorized by the applicable party in writing, no
party  shall make any claim or  protest  or  institute  or  prosecute  any legal
proceeding  involving  the Sports Club Marks,  the  Millennium  Marks and/or the
Hotel Marks of the other party before any  official,  board,  or  administrative
body.  Owner and  Operator  shall  notify each other  promptly in writing of any
protest,  claim of infringement,  or legal proceeding instituted against a party
involving the Sports Club Marks,  the  Millennium  Marks and/or the Hotel Marks,
and  agrees  that the party to whom such mark  belongs  shall  have the right to
control and direct the defense or  settlement of such legal  proceeding,  and to
retain any damages or settlement paid in respect thereof.

     8.6  Remedy  for  Infringement.  Owner  and  Operator  recognize  that  any
disagreement arising out of or relating to the Sports Club Marks, the Millennium
Marks  and/or the Hotel Marks,  whether  arising  during the Term or  subsequent
thereto,  may give rise to  irreparable  injury to the party who owns such Mark,
which such injury is  inadequately  compensable  in damages.  Accordingly,  each
party may obtain  injunctive  relief against the breach or threatened  breach of
any of the obligations or  undertakings  set forth in Sections 8.3, 8.4 and 8.5,
in  addition to any other  remedies  which may be  available  to it at law or in
equity,  and each party  hereby  consents  to the  obtaining  of such  relief or
remedies in any court of competent jurisdiction.  Notwithstanding the foregoing,
Owner and Operator shall also be fully  entitled to seek any relief  pursuant to
Section 10 below.

     8.7 Termination.  At no time after the expiration or sooner  termination of
this  Agreement  shall the Club be  described  as a Sports  Club/LA or shall any
party make or permit any representation  that the Club is a Sports Club/LA or is
in any way  affiliated  with  Operator or its  Affiliates.  Notwithstanding  the
foregoing,  printed  material  using  the  Sports  Club  Marks  which  has  been
distributed  in good  faith  during  the Term need not be  recalled,  except for
materials in the guest rooms and other  locations  within the Hotel (which shall
be recalled),  provided that, upon Operator's  request,  Owner shall cause to be
distributed  material adequately  informing affected parties that the Club is no
longer a Sports Club/LA;  and provided  further,  upon the expiration of six (6)
months  following any such  expiration or  termination,  all material  using any
Sports Club Marks shall be destroyed.

                                   Article IX.
                                  Point of Sale
                                  -------------

     9.1 Software. Owner acknowledges that Operator's POS (as defined in Section
5.4,  above)  to be used at the Club  during  the Term  shall  include,  without
limitation,  any and all  computer  programs  developed  by  Operator  or  whose
development  is contracted for by Operator,  and all data files and  information
resulting  from use of such  programs  (the  "Software")  which shall be, in all
respects, the functional equivalent of the POS and Software

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<PAGE>

installed  and used at the Sports  Club/LA being  operated  adjacent to the Four
Seasons  Hotel,  San  Francisco,  CA. The  Software is and shall be the sole and
exclusive  property of Operator,  including  all  applicable  rights to patents,
copyrights,  trademarks  and trade secrets  inherent in and  appurtenant  to the
Software.  Subject to the  provisions  hereof,  Operator  hereby grants to Owner
during the Term, a nonexclusive,  nonassignable and  nontransferable  license to
use the Software in connection  with the sale of Club  services.  Operator shall
take all actions  necessary to  integrate  its POS system with the point of sale
system of the Hotel.

     9.2 Hardware.  In connection with the  implementation  of the POS, Operator
shall assist Owner in procuring the hardware  necessary for operation of the POS
(the  "Hardware").  The Hardware  shall be  purchased by Owner,  at Owner's sole
cost,  and shall  remain  the  property  of Owner upon the  termination  of this
Agreement;  provided,  however,  Owner shall  allow  Operator to remove from the
Hardware any Software, which shall remain the exclusive property of Operator, as
provided in Section 9.1 above.

     9.3  Operator's  Removal  of  the  POS.  Upon  the  expiration  or  earlier
termination of this Agreement for any reason  whatsoever,  Operator shall remove
and take  possession  of all Operator  proprietary  Software  and  documentation
relating  thereto and all copies of any of the foregoing.  Owner shall cooperate
in good faith with Operator to fully effect the  foregoing;  provided,  however,
that Operator shall permit Owner to possess a computer-readable  electronic copy
of all of the Club's data files so that the Club  facility may  continue  normal
operations after such expiration or termination.

     9.4 No Copies.  Except for backup copies expressly permitted by Operator in
each  instance,  Owner shall not make copies of any of the  Software  during the
Term or upon the  expiration or earlier  termination  of this  Agreement.  Owner
shall not sell, transfer,  publish, disclose,  display, use for its own account,
or  otherwise  make  available  to any person,  firm or entity any source  code,
object code or documentation relating to the Software.

                                   Article X.
                            Termination of Agreement
                            ------------------------

     10.1 Events of Default.  The following shall constitute "Events of Default"
hereunder following the expiration of the referenced cure period, if any:

          (a) The failure of either party (the "Defaulting Party") to pay to the
     other  party  (the  "Non-Defaulting  Party")  any sum which may  become due
     hereunder within fifteen (15) days after receipt by the Defaulting Party of
     a notice from the Non-Defaulting Party specifying such failure;

          (b) Subject to the occurrence of any Force Majeure events, the failure
     by Operator to continuously  operate the Club, and the failure by the Owner
     to fulfill any  necessary  obligations  hereunder to enable the Operator to
     continuously  operate the Club, in accordance with the Minimum  Standard on
     all days on which  the  Club is  required  to be open  under  Section  4.16
     hereof;

          (c) The occurrence of any Insolvency  Default (as such term is defined
     in Section 10.5 hereof);


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<PAGE>

          (d) Any fraud or intentional misconduct on behalf of Operator or Owner
     or any misrepresentation, whether by affirmative statement or omission of a
     fact necessary to make the representation not materially misleading, in any
     of the material representations made by Operator or Owner hereunder;

          (e) Any other event or  occurrence  which is designated as an Event of
     Default pursuant to another provision of this Agreement;

          (f) Any failure by Operator to meet the Minimum Standard,  unless such
     failure is cured to the reasonable satisfaction of Owner, within sixty (60)
     days of Owner's delivery to Operator of notice of such failure; or

          (g) The failure by the  Defaulting  Party to perform,  keep or fulfill
     any  of  the  material  terms,  covenants,  undertakings,   obligations  or
     conditions set forth in this Agreement  other than those referred to in the
     foregoing  subsection  (a), and,  except with respect to these defaults for
     which  a  different  notice  or  cure  period  is  specified  herein,   the
     continuance  of such failure for a period of thirty (30) days after receipt
     by the Defaulting  Party of written notice thereof from the  Non-Defaulting
     Party specifying such failure; or, in the event such failure is of a nature
     that it cannot,  with due  diligence  and in good  faith,  be cured  within
     thirty (30) days and such  Defaulting  Party fails to proceed  promptly and
     with due  diligence  and in good faith to cure the same and  thereafter  to
     prosecute  the curing of such failure with due  diligence and in good faith
     and in any event shall  fully cure the same within  ninety (90) days of the
     occurrence of the event in question (it being  intended that, in connection
     with a failure not  susceptible  of being cured with  diligence and in good
     faith within  thirty (30) days,  the time of such  Defaulting  Party within
     which to cure the same shall be extended for such period,  not in excess of
     any  aggregate  period of ninety  (90) days,  as may be  necessary  for the
     curing thereof with due diligence and in good faith).

     10.2 Rights of  Non-Defaulting  Party.  If an Event of Default shall occur,
the Non-Defaulting Party may give to the Defaulting Party notice of intention to
terminate the Term, which  termination  shall be effective thirty (30) days from
the date of such notice  (except  with respect to a Default by Owner for failing
to  pay  necessary   funds  into  the  Club  Operating   Account  or  Operator's
misappropriation  of Net Receipts to Owner, in which case the termination  shall
be  effective  fifteen(15)  days after the date of such  notice)  and,  upon the
expiration  of such period,  the Term shall expire  unless such default has been
cured within such 30-day period (or 15-day period, as the case may be), in which
case such notice shall be of no force and effect and such Event of Default shall
be deemed  rectified.  However,  if either party commits an Insolvency  Default,
then this Agreement  shall  terminate  automatically  upon the happening of such
event. Such termination shall be without prejudice to any right to damages which
the Non-Defaulting  Party may have against the Defaulting Party under Applicable
Law.

     10.3 Remedying Defaults. Notwithstanding anything to the contrary contained
in this  Agreement,  Owner  shall be  entitled to remedy any default of Operator
under this Agreement with thirty (30) days actual notice to Operator, or without
notice in the event of any emergency,  without prejudice to any rights Owner may
possess  under  this  Agreement,  and Owner  shall be repaid by  Operator,  upon
demand,  for the  reasonable  cost of  remedying  such  default,  together  with
interest on such cost at the Default Rate, from the date of incurring such

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<PAGE>

cost until paid.  The parties hereto  acknowledge  and agree that Operator shall
have no  obligation  to reimburse  Owner for the cost of any actions  undertaken
under this Section 10.3, unless such actions were undertaken by Owner to cure an
actual  default  by  Operator  hereunder,  or if a  court  of law or  arbitrator
determines that no such default existed.

     10.4 Payments Upon Termination, Accounting.

          (a) Upon termination of this Agreement pursuant to Sections 10.1, 10.2
     or 10.4, or the natural  termination of this  Agreement,  Operator shall be
     entitled (in  addition to any rights or remedies  available to it at law or
     in equity) to all sums, charges and fees which Operator has then earned and
     is entitled to receive under this Agreement (including, without limitation,
     Sections 6.1 and 6.2,  above),  together with costs and  expenses,  if any,
     reimbursable  to it  pursuant  to  Section  6.4,  or  for  which  it may be
     responsible   arising  out  of  anything  done  within  the  scope  of  its
     responsibilities  under this Agreement to the date of  termination,  all as
     disclosed in the  accounting  described  in the  succeeding  sentence  (the
     "Operator  Reimbursements").  Operator shall prepare and deliver to Owner a
     reasonably  detailed  accounting  of the amount of all such sums,  charges,
     fees,  costs and expenses for the period ending on the date of termination.
     The  accounting  described in the preceding  sentence shall be delivered to
     Owner as soon as reasonably practicable thereafter (and in any event within
     90 days  following  the  termination  date),  reflecting  such amounts that
     cannot  be  readily   ascertained  on  the  termination  date  (the  "Final
     Accounting").  On the  termination  date,  any funds in the Club  Operating
     Account and any  separate  reserve  accounts  shall be  disbursed to Owner;
     provided,  however,  Operator  shall be  permitted to retain up to $500,000
     (the "Retained Funds") of funds in the Club Operating Account to be applied
     against Operator  Reimbursements set forth in the Final Accounting.  Within
     five (5) business days  following  the delivery of the Final  Accounting to
     Owner,  Owner shall pay (or authorize the release of any necessary Retained
     Funds) to  Operator  any  Operator  Reimbursements  reflected  in the Final
     Accounting  and not yet paid to Operator.  Any Retained  Funds in excess of
     the  Operator  Reimbursements  set forth in the Final  Accounting  shall be
     disbursed  to Owner  on the  date  the  Final  Accounting  is  provided  by
     Operator,  and in any  event,  no  later  than  the  ninetieth  (90th)  day
     following  termination.  In the event of any dispute  regarding the amounts
     set forth in the Final  Accounting,  (i) Owner  shall pay to  Operator  the
     undisputed amount of the Operator  Reimbursements (or authorize the release
     of Retained Funds in such amount), and the balance of the Retained Funds in
     excess of the  disputed  amounts,  if any,  shall be disbursed to Owner and
     (ii) any remaining Retained Funds shall be held by Operator until such time
     as the dispute  regarding  such amounts is resolved  pursuant to Article XI
     hereof.

          (b) Operator  shall  promptly  turn over to Owner all  correspondence,
     files,  books, and records (including,  without limitation,  all membership
     records)  in  respect  of the  Club  which  are in  Operator's  possession,
     provided that all such materials shall remain  available to Operator at all
     reasonable times for inspection,  audit and  transcription  for a period of
     seven (7) years from the date of termination. Finally, unless the Agreement
     is  terminated  by  Operator as a result of a default  hereunder  by Owner,
     Operator shall also reasonably  cooperate with the transition from Operator
     to any successor manager or operator of the Club, provided that Owner agree
     to additionally  compensate  Operator for such cooperation.  All FF&E, OS&E
     and  improvements  relating to the Club,  or the operation  thereof,  shall
     remain at the Club as the property of Owner.

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          (c) The parties agree that upon the effective date of any  termination
     of  this  Agreement,  (i)  Operator  shall  have  no  continuing  right  or
     obligation to manage,  operate or control the Club, or any portion thereof,
     and shall cease  acting in its capacity as manager or operator of the club;
     (ii) Operator  shall no longer have any authority to act on behalf of Owner
     or the Club and shall advise all persons contacting Operator with regard to
     the Club that  Operator  no longer  operates  or manages  the Club and will
     refer all such persons to the Owner;  (iii) Owner shall have no  continuing
     right whatsoever to use or invoke  Operator's name or any Sports Club Marks
     (except to the extent otherwise  explicitly set forth herein) in connection
     with the Club and shall  immediately  cease and desist doing so; (iv) Owner
     and  Operator  shall  advise all persons who  inquire  that  Operator is no
     longer  affiliated in any way with the Club;  (v) Owner shall cause any and
     all signage  bearing or depicting any Sports Club Marks which is affixed to
     any portion of the Club Lot to be removed as soon as practicable at Owner's
     sole cost and expense;  and (vi) Owner shall  immediately  cease from using
     and  return  to  Operator  all other  intellectual  property  belonging  to
     Operator (including but not limited to software programs, training manuals,
     protocols,  marketing  materials and anything with Operator's logo affixed,
     but  excluding   non-proprietary   books,   records   (including,   without
     limitation,  all membership  records) and data relating to the operation of
     and results at the Club).

     10.5 Insolvency  Default.  An "Insolvency  Default" by a party hereto shall
occur whenever:

          (a) Such party shall file a voluntary  petition in bankruptcy or shall
     be adjudicated bankrupt or insolvent,  or shall file any petition or answer
     seeking  any  reorganization,   arrangement,   composition,   readjustment,
     liquidation,  dissolution or similar relief for itself under the present or
     any future federal bankruptcy act or any other present or future applicable
     federal,  state or other statute or law relative to bankruptcy,  insolvency
     or other  relief for  debtors,  or shall seek or consent to or acquiesce in
     the appointment of any trustee, receiver, conservator or liquidator of such
     party or of all or a substantial part of its properties (for the purpose of
     this Section 10.5,  "acquiescence" shall include,  without limitation,  the
     failure  to file a  petition  or motion to vacate or  discharge  any order,
     judgment or decree providing for such  appointment  within thirty (30) days
     after any such appointment);

          (b) A court of competent  jurisdiction shall enter an order,  judgment
     or decree  approving  a  petition  filed  against  such party  seeking  any
     reorganization,   arrangement,  composition,   readjustment,   liquidation,
     dissolution  or similar  relief against such party under the present or any
     future  federal  bankruptcy  law or any other present or future  applicable
     federal,  state or other statute or law relating to bankruptcy,  insolvency
     or other  relief for  debtors,  and such order,  judgment  or decree  shall
     remain unvacated and unstayed for an aggregate of ninety (90) days (whether
     or not  consecutive)  from  the  date of  entry  thereof,  or any  trustee,
     receiver,  conservator  or  liquidator  of  such  party  or of  all  or any
     substantial  part of such party's  property shall be appointed  without the
     consent or  acquiescence  of such party and such  appointment  shall remain
     unvacated  and unstayed for an aggregate of sixty (60) days (whether or not
     consecutive);

          (c) Such party shall admit in writing its  inability  to pay its debts
     as they mature;

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<PAGE>

          (d)  Such  party  shall  give  notice  to  any  governmental  body  of
     insolvency or pending  insolvency,  or suspension or pending  suspension of
     operations;

          (e) Such party shall make an  assignment  for the benefit of creditors
     or  take  any  other  similar  action  for the  protection  or  benefit  of
     creditors; or

          (f) The dissolution or liquidation of such party.

                                  Article XI.
                       Dispute Resolution and Arbitration
                       ----------------------------------

     11.1 Unless  otherwise  specifically  provided for in this  Agreement,  all
disputes,  controversies,  claims or disagreements arising out of or relating to
this Agreement (singularly,  a "Dispute" and collectively,  "Disputes") shall be
resolved in the following manner:

     11.2 The parties shall seek to resolve all Disputes by  negotiation in good
faith for a period of thirty (30) days after either party shall determine that a
Dispute exists and notifies the other party thereof.

     11.3 If the parties are unable to resolve the Dispute  through  negotiation
within such 20-day period, the Dispute shall be settled by arbitration conducted
in accordance with the following subparagraphs of this Article XI.

     11.4 Any  Dispute  submitted  to  arbitration  shall be resolved by binding
arbitration  pursuant to the laws of the State of Florida and to the extent they
do not conflict,  the Commercial  Arbitration Rules of the American  Arbitration
Association  as in effect on the date hereof (the "AAA Rules") or the provisions
of this Agreement,  it being the intention of the parties that the provisions of
this Agreement  shall, to the extent permitted by law, control over all contrary
provisions of law or the AAA Rules.  The arbitration  shall take place in Miami,
Florida. Judgment upon the decision entered by the arbitrators may be entered in
any court having jurisdiction.  In the event of a failure, refusal, or inability
of any  arbitrator  to act, his  successor  shall be appointed by him, or, if he
fails to do so within ten (10) business days, by the remaining two  arbitrators,
or, if they  fail to do so  within an  additional  five (5)  business  days,  as
provided by the AAA Rules.  The  arbitrators  shall  attempt to decide the issue
within ten (10)  business  days of the end of the  hearing , but must decide the
issue within  fifteen (15) business days. The  arbitrators  shall  determine the
proportion of the expenses of the arbitration that each party shall bear; in all
other  respects  the  parties  shall  bear all of  their  own  costs,  including
attorneys' fees and expenses of witnesses.  The arbitrators shall have the right
to consult  experts  and  competent  authorities  with  factual  information  or
knowledge concerning the Dispute and the fees of such authorities shall be borne
by the unsuccessful party.

     11.5 In connection with any arbitration proceeding pursuant to this Article
XI, the parties shall choose the arbitrators as follows:

          (a) The arbitration shall be conducted by three (3) arbitrators, which
     arbitrators  shall be selected  in  accordance  with the AAA Rules,  and at
     least  one (1) of whom (but no more  than two (2) of whom)  shall  have had
     experience in the management and/or operation of

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<PAGE>

     health/fitness  clubs, or as a consultant in connection with the management
     and/or operation of health/fitness clubs. The decision of a majority of the
     arbitrators shall be binding on the parties.

          (b) Notwithstanding Section 11.4 above, if the Dispute at issue is for
     a liquidated  amount not in excess of $200,000  (subject to CPI  Adjustment
     from the Opening Date),  then the arbitration shall be conducted by one (1)
     arbitrator in accordance  with AAA Rules for  Expedited  Procedures,  which
     arbitrator  (i)  shall be  selected  in  accordance  with the AAA Rules for
     Expedited Procedures,  and (ii) shall have had experience in the management
     and/or  operation of hotels,  or as a  consultant  in  connection  with the
     management and/or operation of hotels.

          (c) As used in this Agreement,  the term  "arbitrator"  shall mean the
     one (1) member arbitration panel or the three (3) member arbitration panel,
     as applicable, described herein.

          (d) In connection  with any  arbitration  proceeding  pursuant to this
     Article XI, the arbitrators shall each have the following qualifications:

               (i)  Experience in the matter to be arbitrated  (e.g.,  operating
          and managing luxury spas and first class  health/fitness clubs similar
          in quality and services offered to the Club).

               (ii) The  arbitrators  shall be neutral  and  independent  of the
          parties to this Agreement,  their Affiliates and their consultants and
          advisors.

               (iii) No  arbitrator  shall have been  employed or engaged by, or
          received any compensation  from, a party hereto, its Affiliates or its
          consultants or advisors.

               (iv) No  arbitrator  shall  be  affiliated  with  either  party's
          auditors.

               (v)  No  arbitrator  shall  have  a  conflict  of  interest  with
          (including,  without limitation,  any bias towards or against) a party
          hereto or its affiliates or its then current consultants or advisors.

          (e) In order to ensure the neutrality of the arbitrators,  the parties
     agree that neither they nor their  Affiliates will offer  employment or any
     other  compensation  to any of the  arbitrators for a period of twelve (12)
     months following completion of the arbitration.

          (f)  The  decision  of  the  arbitrators  shall  be  accompanied  by a
     statement of the reasons upon which the decision is based.. The arbitrators
     shall not have the power or  authority  to modify  this  Agreement,  unless
     expressly  granted to them,  in  writing,  by the Owner and  Operator.  The
     decision may not include,  and the parties specifically waive, any award of
     attorneys fees.  Accordingly,  each party shall bear its own attorneys fees
     incurred in connection with any arbitration proceeding.

          (g) The arbitrators may  consolidate  proceedings  with respect to any
     Dispute under this Agreement with  proceedings  with respect to any related
     controversy,  provided  that any  parties to such  controversy  who are not
     parties to this Agreement consent to such consolidation.

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<PAGE>

          (h) The parties will  cooperate in the exchange of documents  relevant
     to any Dispute. Deposition or interrogatory discovery may be conducted only
     by  agreement  of  the  parties  or  if  ordered  by  the  arbitrators.  In
     considering a request for such deposition or interrogatory  discovery,  the
     arbitrators  shall take into  account that the parties are seeking to avoid
     protracted   discovery  in  connection  with  any  arbitration   proceeding
     hereunder.

          (i) Notwithstanding anything herein contained in this Article XI, both
     the Owner and Operator shall be entitled to (a) commence legal  proceedings
     seeking  such  mandatory,  declaratory  or  injunctive  relief  as  may  be
     necessary  to define or  protect  the rights and  enforce  the  obligations
     contained herein pending the settlement of a Dispute in accordance with the
     arbitration  proceedings  set  forth in this  Article  XI;  or (b) join any
     arbitration  proceeding  arising  out of  this  Agreement  with  any  other
     arbitration proceeding arising out of this Agreement.

          (j) If the subject of the dispute  concerns the funding of operations,
     Owner must  continue  to  provide  sufficient  cash to operate  the club in
     accordance with this Agreement pending the outcome of the dispute.

          (k) Nothing in this  Article XI shall be deemed to limit the rights of
     a secured  party or mortgagee to pursue any  remedies,  enforce any rights,
     seek any relief or  commence  any legal  proceedings  in any court or other
     tribunal to which it may be entitled pursuant to any financing agreement or
     mortgage, or any documents executed in connection therewith, or pursuant to
     Applicable Law.

          (l) If a party  determines that a Dispute  presents such party with an
     extraordinary  situation  that  requires it to seek  emergency  provisional
     relief prior to the  appointment  of the arbitrator who will determine such
     Dispute,  it may seek  such  emergency  provisional  relief  from any court
     having  jurisdiction;  provided,  however,  that (i) in order to obtain any
     such  relief,  the  court  shall  determine  that  such  party  has met any
     applicable  standards imposed by the law applicable to the relief requested
     with  respect to such party's  rights to such relief;  and (ii) such relief
     may only be sought and obtained on the condition  that any order entered by
     the court will expire ten (10) days after the appointment of the arbitrator
     unless the party that sought the order renews its application for emergency
     provisional relief to the arbitrator within such ten (10) day period, which
     arbitrator  shall  then  make de novo  any  findings  of fact  that  may be
     required in ruling on such renewed application.

                                  Article XII.

                            Casualty and Condemnation
                            -------------------------

     If the Club, or any portion  thereof,  shall be damaged or destroyed at any
time or times after the Effective Date by fire or any other casualty,  or if any
portion  of the Club is taken by eminent  domain or  condemnation,  then  Owner,
shall use due diligence and dispatch, to repair,  rebuild or replace the same so
that after such restoration the Club shall be substantially the same as prior to
such  damage,  destruction  or  condemnation  (such  repairing,   rebuilding  or
replacing  being  herein  called  "Restoration"),  and all proceeds of insurance
shall be made  available  to Owner  for this  purpose.  All  insurance  proceeds
realized in connection with a casualty and all

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<PAGE>

condemnation awards paid or payable in connation with any condemnation of all or
any part of the Club shall  belong to and be the  property of Owner and Operator
shall have no right, title or interest therein and no right to make any separate
claim in connection therewith . The foregoing notwithstanding,  Owner shall have
no obligation to effect a restoration  if (x) sufficient  insurance  proceeds or
condemnation  awards  are not made  available  to Owner for such  purpose by the
insurance carrier and/or all mortgagees, (y) the repair or restoration cannot be
reasonably  accomplished  within  six (6) months of the  occurrence  of any such
taking or casualty or (z) at least 20% of the building of which the Club forms a
part is condemned or damaged,  in which case Owner shall have the right,  in its
sole discretion,  to terminate this Agreement.  Additionally,  in the event that
Owner  elects not to promptly  undertake  the  Restoration,  then  Operator  may
terminate  this  Agreement on at least thirty (30) days notice to Owner,  unless
Owner,  within such thirty (30) day  period,  agrees to promptly  undertake  and
diligently prosecute such Restoration.

                                 Article XIII.
                             Transfer or Assignment

     13.1 Assignment.  Except as provided below, Operator shall not voluntarily,
involuntarily,  by  operation  of  law or  otherwise,  assign,  convey,  pledge,
delegate,  submanage,  hypothecate or otherwise  transfer all or any part of its
rights or obligations  under this Agreement  without the approval of Owner which
approval may be withheld in Owner's  sole  discretion.  Operator  shall have the
right to assign its rights and  obligations  under this  Agreement,  without the
consent of Owner,  to any "Permitted  Assignee" in connection  with a "Permitted
Transaction."  In the event of an  assignment,  Operator  shall  continue  to be
liable under this Agreement to the same extent as though such assignment had not
been made. In the event Operator sells a controlling  interest,  such sale shall
constitute an assignment of Operator's  interest  requiring Owner's approval.  A
"controlling  interest"  refers to the  ability to  control  the  management  or
operation  of such  entity in fact  arising by  contract,  equity  ownership  or
otherwise.  Owner may assign its rights under this  Agreement  to any  successor
owner of the Club Lot, without any notice to or consent to the Operator.

     13.2 Permitted Transaction.  For purposes hereof, a "Permitted Transaction"
shall mean any  transaction,  regardless of its form, in which (a) the permitted
assignee expressly assumes,  in writing,  all of the liabilities and obligations
of the Operator hereunder for all the rest and remainder of the Term hereof; and
(b) upon such transfer or assignment,  the permitted  assignee shall continue to
have the right to manage and operate,  under the Sports  Club/LA trade name, not
less than seventy  percent (70%) of the number of the Sports Club/LA  facilities
then  owned  and/or  managed  and  operated  as of the date of the  transfer  or
assignment  in the  United  States of  America.  In  addition  to the  foregoing
requirements,  for purposes hereof, a "Permitted Assignee" shall mean any wholly
owned subsidiary of the Operator or any person or entity acquiring a controlling
interest in the Operator,  or the  Operator's  assets,  including the rights and
obligations of the Operator under this  Agreement.  Anything to the contrary set
forth herein  notwithstanding,  Operator may,  without the consent of, but on at
least ten (10) business days prior notice to, Owner, assign its rights,  duties,
obligations and interests under this Agreement to any wholly owned subsidiary of
Operator,  in which case all contracts,  agreements and instruments  relating to
the Club may be entered into by such wholly owned affiliate, provided, that such
wholly owned  affiliate  shall assume,  in writing,  all of the  liabilities and
obligations of the Operator hereunder for all the rest and remainder of the Term
hereof and provided, further,

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<PAGE>

that,  any such  assignment  and  assumption  notwithstanding,  The Sports  Club
Company, Inc. shall remain fully and primarily liable for the performance of all
of the Operator's obligations under this Agreement.

     13.3  Invalid  Assignment.   Any  assignment  or  transfer,   or  purported
assignment or transfer,  which is  consummated  by Operator in violation of this
Article XIII shall,  at the option of Owner,  be void and of no force or effect.
Additionally,  if  (x)  Operator  effectuates  or  attempts  to  effectuate  any
assignment or transfer without first satisfying all conditions precedent to such
transfer or assignment  pursuant to this Article XIII and (y) either Operator or
the  purported  transferee  refuses to confirm,  acknowledge  or  recognize,  in
writing,  that the purported assignment or transfer is ineffective and a nullity
with respect to this Agreement and Owner, or if the transferee refuses to vacate
the Club or to cease  controlling the management  and/or  operation of the Club,
then any such refusal or failure shall be a material default hereunder entitling
Owner to terminate  this  Agreement  unless such default is cured within fifteen
(15) business days of Owner's  delivery of a notice of  termination to Operator,
following  which  neither  party  shall have any  further  liability  under this
Agreement  except for the  payment of money due at the time of such  termination
and all other  obligations  which  specifically  survive the termination of this
Agreement.

                                  Article XIV.
                                 Indemnification
                                 ---------------

     14.1  Indemnification of Owner.  Operator shall indemnify,  defend and hold
Owner and its Affiliates,  officers,  directors,  partners,  members,  trustees,
employees and agents  (individually,  an "Owner Indemnitee")  harmless for, from
and against any damages, liability, cost, claim or expense, including attorneys'
fees  (collectively,  "Claims"),  attributable  to the negligence  (unless fully
covered  and  defended  by an insurer  under a valid  insurance  policy),  gross
negligence,  fraud, misapplication of monies, breach of obligations hereunder or
willful misconduct of Operator or any affiliates,  officers, directors, members,
partners,  employees  (including  employees  of the Club),  agents,  servants or
others under the control of Operator.

     14.2  Indemnification of Operator.  Owner shall indemnify,  defend and hold
Operator and its Affiliates,  officers, directors,  partners, members, trustees,
employees and agents (individually,  a "Operator Indemnitee") harmless for, from
and against any and all Claims  attributable  to the  negligence  (unless  fully
covered  and  defended  by an insurer  under a valid  insurance  policy),  gross
negligence,  fraud, misapplication of monies, breach of obligations hereunder or
willful  misconduct of Owner or any affiliates,  officers,  directors,  members,
partners,  employees  (including  employees  working at the  Premises ), agents,
servants or others under the control of Owner.

                                  Article XV.
                     Confidential Information and Publicity
                     --------------------------------------

     15.1 Disclosure of Information.  Owner and Operator  acknowledge  that each
may receive certain material which is not publicly known concerning the business
and affairs of the other  (including  without  limitation  not only the terms of
this Agreement,  but numerous  manuals,  outlines,  charts,  designs,  and other
materials prepared by Operator or otherwise

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<PAGE>

reflecting  Operator's  expertise in the many areas that are the subject of this
agreement;  collectively  "Confidential  Information")  in connection  with this
Agreement,  and agree  that  each of them has a  proprietary  interest  in their
respective Confidential Information. All disclosures of Confidential Information
to  a  party  under  this   Agreement,   including   its   affiliates,   agents,
representatives,  lenders, accountants, attorneys and employees shall be held in
strict confidence by such party, its affiliates,  agents and employees, and such
party may disclose the Confidential Information only to those of its affiliates,
agents, representatives,  lenders, accountants,  attorneys and employees to whom
it is  necessary  in order to  properly  carry out their  duties  hereunder,  as
required by legal process or in order to comply with the disclosure  obligations
of a publicly-held company. Neither party shall use the Confidential Information
of the other after  termination  or expiration of this  Agreement and each party
shall return to the other all copies of the other's Confidential  Information as
soon as reasonably practicable after the date of such termination or expiration.

     15.2 Approval of Form. The  dissemination  of  information  with respect to
this  Agreement  or the  transactions  contemplated  hereby  including,  without
limitation, press releases,  advertising materials and other disclosures,  shall
be subject to the prior written approval of Operator and Owner,  which shall not
be unreasonably withheld or delayed by either party.

                                  Article XVI.
                                     Notices
                                     -------

Any and all notices,  consents,  directives,  or other  communications by either
party  intended  for  the  other  must be in  writing  and  sent  by  nationally
recognized  overnight carrier or by registered or certified mail, return receipt
requested,  to Owner, at c/o Millennium Partners,  1995 Broadway, 3rd Floor, New
York, New York 10023,  Attention:  Chief Financial Officer, with a copy to Paul,
Hastings,  Janofsky & Walker LLP, 75 East 55th Street, New York, New York 10022,
Attention:  Eric  R.  Landau,  Esq.  and to  Operator,  at  11100  Santa  Monica
Boulevard,  Suite 300, Los Angeles, Ca. 90025, Attention:  Phil Swain, President
and Chief Operating Officer;  Jill Rosenthal,  Corporate Counsel; with a copy to
Resch Polster Alpert & Berger LLP, 10390 Santa Monica  Boulevard,  Fourth Floor,
Los Angeles,  Ca. 90025,  Attention Nick  Ramniceanu,  unless either party shall
have  designated  different  addresses  by serving  written  notice of change of
address on the other party by registered or certified mail.

                                 Article XVII.
                                Entire Agreement
                                ----------------

     This Agreement (together with any Schedules and Exhibits hereto,  which are
incorporated  herein by this  reference)  constitutes  the entire  agreement and
understanding  of the parties  hereto with respect to the subject  matter hereof
and supersedes all  negotiations,  discussions  and agreements  previously  made
between  the  parties  relating  to its  subject  matter.  There  are  no  other
understandings  or agreements  between  them,  other than as expressly set forth
herein.

                                 Article XVIII.
                                   Non-Waiver
                                   ----------

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<PAGE>


     No delay or  failure  by either  party to  exercise  any right  under  this
Agreement,  and no partial or single exercise of that right,  shall constitute a
waiver of that or any other right, unless otherwise expressly provided herein.

                                  Article XIX.
                                    Survival
                                    --------

     Notwithstanding the termination of the Term or Operator's management of the
Club in accordance with this Agreement, all terms, provisions and obligations of
either party contained herein, which in order to give them effect and accomplish
their intent and purpose need to survive such termination  (i.e.,  Section 4.17,
Section 8.6,  Article  X,Article XIV, and Article XV) shall survive and continue
until  they have been fully  satisfied  or  performed.  Except to the extent set
forth above all other terms, provisions and obligations,  shall be automatically
deemed terminated and of no further force or effect following the termination of
this Agreement.

                                  Article XX.
            Lender Approvals, Subordination and Estoppel Certificates
            ---------------------------------------------------------

     20.1 Lender Approvals.

          (a) The  Premises  are subject to and  encumbered  by the terms of the
     documents evidencing and securing the Fleet Loan. This Agreement and all of
     the terms herein are subject to Lender's  approval of same. Owner shall use
     commercially   reasonable  efforts  to  obtain  Lender's  consent  to  this
     Agreement;  however, if despite such efforts,  Lender refuses to consent to
     this  Agreement,  this  Agreement  shall be terminated  upon notice of such
     refusal to Operator and neither party shall have any further rights, duties
     or  obligations  hereunder  except to the  extent  such  rights,  duties or
     obligations survive the termination hereof, and Owner shall pay to Operator
     that portion of the Pre-Opening Services Fee and/or Fees and Expenses which
     are due and  payable  through  the  date of  such  termination,  and  shall
     reimburse Operator for all out of pocket expenses incurred through the date
     of such termination.

          (b) Operator's rights, entitlements and interests under this Agreement
     and, if executed,  the Lease shall be subject and  subordinate to the Fleet
     Loan and to all other third party financing encumbering the Club and/or the
     Premises and/or Owner's interests therein.  The foregoing  subordination of
     this  Agreement  and  Operator's  rights as  manager  or the Club  shall be
     self-operative  and no further  instrument  shall be required to effect any
     such subordination;  however,  Operator, from time to time, within ten (10)
     days of a  written  request  made by  Owner,  shall  execute  an  agreement
     confirming  such  subordination.  Owner,  upon written request of Operator,
     shall  use  commercially  reasonably  efforts  to  obtain a  subordination,
     non-disturbance  and  attornment  agreement  (each,  an "SNDA") in favor of
     Operator  from each such lender on the  lender's  then  standard  form (but
     which shall provide that any mortgagee or other  successor to the interests
     of Owner under this  Agreement  shall be  obligated  to pay to Operator all
     arrears in Management Fees, Incentive Fees and expense  reimbursements as a
     condition  precedent  to Operator  attorning to such  successor),  it being
     acknowledged  and agreed by Operator that in the event that any such lender
     succeeds  to the  interests  of Owner  under this  Agreement,  by virtue of
     foreclosure,  deed in lieu or otherwise, then Operator shall attorn to such
     successor  and  such  successor  (i)  shall  not be  liable  for any act or
     omission of Owner under this

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     Agreement, nor for any pre-existing defaults by Owner under this Agreement,
     (ii) shall not be subject to any offset, abatement, defense or counterclaim
     accruing  prior to such sale or  conveyance  to lender,  (iii) shall not be
     bound by any  prepayment of monies due and/or payable to Owner which may be
     offset  against future net revenue of the Club and (iv) shall be liable for
     the performance of the other obligations of Owner under this Agreement only
     during the period such lender shall own the Club.

          (c) At the request of the Lender and/or any other future  mortgagee of
     the Club  and/or  in  connection  with  any  proposed  mortgage  financing,
     Operator shall,  from time to time, amend or modify this Agreement,  to the
     extent requested by Owner or any mortgagee provided that such amendment (i)
     does not  materially  diminish or reduce any rights or remedies of Operator
     hereunder  and (ii) does not impose  obligations  upon  Operator  which are
     materially more burdensome than the obligations hereunder.

          (d) At any time and from time to time, on at least ten (10) days prior
     written notice, Operator or Owner, upon request to the other, shall execute
     an estoppel  certificate  in form  acceptable to Owner or Operator,  as the
     case  may be,  and/or  Lender  and  containing  such  statements  as may be
     reasonably requested.

                                  Article XXI.
                                    Headings
                                    --------

     Headings in this Agreement are for  convenience  only and shall not be used
to interpret or construe its provisions.

                                  Article XXII.
                                  Governing Law
                                  -------------

     This  Agreement  shall be construed in accordance  with and governed by the
laws of Florida.

                                 Article XXIII.
                                  Counterparts
                                  ------------

     This Agreement may be executed in two or more  counterparts,  each of which
shall be deemed an original but all of which together  shall  constitute one and
the same instrument.

                                  Article XXIV.
                                 Binding Effect
                                 --------------

     Subject to Article XIII, the provisions of this Agreement  shall be binding
upon and inure to the benefit of both of the parties and their  respective legal
representatives, successors, and permitted assignees.

                                   Article XXV.
                                  Miscellaneous
                                  -------------

                                      100
<PAGE>


     25.1 It is expressly agreed that TIME IS OF THE ESSENCE WITH RESPECT TO THE
PARTIES' OBLIGATIONS UNDER THIS AGREEMENT.

     25.2 (a) No  person or  entity  other  than  Operator  (including,  without
limitation,  no disclosed or undisclosed,  direct or indirect,  partner, member,
shareholder,  officer, director, employee, agent or principal in or of Operator)
shall be personally liable for the performance of any of Operator's obligations,
or for the satisfaction of any of Operator's liabilities, under this Agreement.

          (b)  No  person  or  entity  other  than  Owner  (including,   without
     limitation,  no disclosed  or  undisclosed,  direct or  indirect,  partner,
     member, shareholder,  officer, director, employee, agent or principal in or
     of Owner) shall be personally  liable for the performance of any of Owner's
     obligations,  or for the satisfaction of any of Owner's liabilities,  under
     this Agreement.

     25.3 If any term or provision of this Agreement or the application  thereof
to any  person or  circumstance  shall to any extent be held by a court or other
governmental authority of competent jurisdiction to be invalid or unenforceable,
the remaining terms and provisions of this Agreement, or the application of such
terms or provisions to the person or circumstances  other than those as to which
it is held invalid or  unenforceable,  shall not be affected  thereby,  and each
term and  provision  of this  Agreement  shall be valid and be  enforced  to the
fullest extent permitted by law.




                                      101
<PAGE>





     IN WITNESS  WHEREOF the parties  hereto have caused this  instrument  to be
executed on the day and year first above written.

                                   OWNER:

                                   TERREMARK BRICKELL II LTD,
                                   a Florida limited partnership
                                   By:      Terremark Brickell II, Inc.,
                                            its general partner
                                             By: /s/ Pamela Malkani
                                                 -------------------------
                                                 Name: Pamela Malkani
                                                 Title: Vice President
                                   OPERATOR:

                                   THE SPORTS CLUB COMPANY, INC.,
                                   a Delaware corporation
                                             By: /s/ Phil Swain
                                                 -------------------------
                                                 Name: Phil Swain
                                                 Title: President and COO



                                      102
<PAGE>



                                      10.71

                           First Supplement to Fitness
                            Club and Spa Management
                            and Pre-Opening Services
                           Agreement effective as of
                                January 1, 2003




                                      103
<PAGE>




               FIRST SUPPLEMENT TO FITNESS CLUB AND SPA MANAGEMENT
                       AND PRE-OPENING SERVICES AGREEMENT


     This First Supplement (this  "Supplement") to that certain Fitness Club and
Spa Management and Pre-Opening  Services Agreement between Terremark Brickell II
Ltd. ("Owner") and The Sports Club Company, Inc. (the "Operator"),  effective as
of January 1, 2003,  (the  "Original  Agreement")  is also  entered into between
Owner and Operator  effective as of January 1, 2003 and concurrently  with their
entering into the Original Agreement.

     Now, therefore, for good and valuable consideration, the mutual receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereby  agree as
follows:

          1.  Construction.  Capitalized  terms not  otherwise  defined  in this
     Supplement shall have the meaning given them in the Original Agreement.  In
     the  event  of any  conflict  between  the  terms  and  conditions  of this
     Supplement and those of the Original Agreement, the terms and conditions of
     this Supplement shall control. This Supplement shall be construed neutrally
     so as to  give  fair  effect  to its  meaning  and  without  regard  to any
     presumption  as to whom the drafter of this  Supplement  may have been. All
     references  in  the  Original  Agreement  and  in  this  Supplement  to the
     `Agreement'  shall  be  to  the  Original  Agreement  as  amended  by  this
     Supplement.  Except as modified hereby,  all of the terms and conditions of
     the Original Agreement shall remain in full force and effect.

          2. Lease Agreement. All references to the `Lease Agreement' are hereby
     deleted from the Original  Agreement  and those  Sections of the  Agreement
     which reference the `Lease Agreement' shall be deemed modified  accordingly
     to be consistent  with such deletion.  During the Term,  Owner and Operator
     shall endeavor to negotiate a lease  agreement  which shall commence on the
     stated  expiration of the Term and shall,  at a minimum,  include the terms
     described on Exhibit A attached  hereto.  If the Term shall terminate prior
     to the stated expiration thereof, the obligation set forth in the preceding
     sentence shall terminate.

          3. First  Consideration  Right.  Notwithstanding  the  deletion of all
     references to the Lease  Agreement  from the Original  Agreement,  Operator
     shall  continue  to have the First  Consideration  Right as provided in the
     Original  Agreement,  which shall apply to any proposed  lease,  management
     agreement  or sale of the Club assets  (excluding  a sale of Club assets in
     conjunction  with a sale of the Club  Lot) in  respect  of the Club or Club
     Lot,  regardless  of what the terms and  conditions  thereof may be, except
     that the First Consideration Right shall not apply to any proposed lease or
     management agreement, with, or sale of Club assets to, the Hotel Operator.

          4. Hotel Operator Interference. If the Hotel Operator takes any action
     that  Operator  reasonably  believes  is likely to have a material  adverse
     effect upon the operations of the Club, then Operator, without limitation ,
     shall be entitled to terminate the  Agreement  upon 90 days notice to Owner
     if such action has not been cured, to Operator's  reasonable  satisfaction,
     within 15 days notice by Operator to Owner  describing  such action and its
     anticipated adverse effect on the operations of the Club.

                                      104
<PAGE>

          5. Additional  Pre-Opening Services Fee. Operator shall be entitled to
     an additional  Pre-Opening Services Fee for the period of time from October
     1, 2003  through the Opening  Date at the rate of $20,000 per month  (which
     amount shall be prorated for any partial month).

          6. Base Management Fee. The Base Management Fee shall be calculated on
     a cash, not GAAP or accrual, basis.

          7. Incentive Fee. The Incentive Fee shall be calculated on a cash, not
     GAAP or accrual, basis. Assessments or other costs of any kind allocable to
     the Club Lot under the  Declaration or any similar  document shall not be a
     deduction for purposes of calculating Net Operating  Income.  Net Operating
     Income  shall  only be  reduced,  at the time of  deposit,  by the  amounts
     actually deposited, from time to time, into the Cap Ex Reserve Account, and
     it shall be increased,  at the time of  withdrawal,  by any sums  withdrawn
     from such  account and not  applied to the payment of capital  expenditures
     for the Club.

          8. Spa Operating Standard. Operator shall maintain and operate the Spa
     to the same standard that Operator currently maintains and operates the spa
     components  of its other health club  facilities.  The parties  acknowledge
     that it is their intent that the Spa be maintained and operated in a manner
     which  exceeds  the  standard  described  in the  preceding  sentence,  but
     Operator's failure to exceed such standard shall not constitute a breach of
     the Agreement.  All  references to the Spa Standard and Schedule  1.1(e) in
     the Original Agreement are hereby deleted from the Original Agreement.

          9. Plans and Budgets.  Owner  acknowledges and agrees that (i) any and
     all plans  and  budgets  under the  Agreement  shall  represent  Operator's
     commercially  reasonable  estimates  only,  (ii) Operator does not guaranty
     that the results set forth in any such plans or budgets  shall  actually be
     achieved, and (iii) Operator shall not be in breach of the Agreement solely
     by reason of any such results not being achieved.

          10.  Owner's  Funding  Obligations.  Owner shall have no obligation to
     maintain  sufficient funds in the Club Operating  Account except (i) if and
     to the extent already required to do so by the express terms and conditions
     of the  Original  Agreement,  and (ii) (a) to pay, as and when due Operator
     under the  Agreement,  all Fees as defined in Article VI of the  Agreement;
     (b) all employee related costs of Operator  incurred in connection with the
     Club  provided  they  are   consistent   with  the  Annual  Plan,  (c)  all
     installation, maintenance and upgrade costs incurred, from time to time, in
     connection  with the hardware and software  associated with the integration
     of the Club's operations with the operations of the Hotel provided they are
     consistent  with the Annual Plan,  and (d) any other  expenses  incurred by
     Operator  in its own name,  rather  than in  Owner's  name,  if such  other
     expenses,  when  added to all other  operating  expenses  of the Club,  are
     within  110% of the  amount  set forth for such  expenses  in the  Approved
     Budget.

          11.  Responsibility for Club Operations.  All obligations with respect
     to the Club and its operations are to be entered into by Operator on behalf
     of  Owner,  as the  agent of Owner  and at  Owner's  expense.  If  Operator
     nonetheless  is required or elects,  as may be  permitted  by the  Original
     Agreement,  instead  to enter  into  any  obligation  in its own name  (for
     example,  but  without  limitation,   obligations  relating  to  utilities,
     advertising,  insurance, employees and Club memberships),  then Owner shall
     indemnify,  defend and hold Operator  harmless from and against any and all
     claims,  costs,  damages,  liabilities  and  losses  arising  out  of or in
     connection with any

                                      105
<PAGE>

     failure by Owner, from time to time, to pay any such obligation as and when
     due.  Operator shall have no obligation to fund any obligations or expenses
     relating to the Club or its operations.

          12.  Suspension  of Use for  Non-Payment.  Operator  may, from time to
     time, suspend usage of the Club by, as applicable, all Hotel guests and all
     owners of the Residential  Units and  Condo/Hotel  units if, as applicable,
     the Hotel Operator,  the Owner or the Residential  Condominium  Association
     has not paid to Operator,  as and when due, any sum owing for such usage of
     the Club by such parties; it being agreed, however, that Operator shall not
     be  entitled  to suspend any such usage  unless  Operator  shall have first
     given notice of such  non-payment to Owner and such  non-payment  shall not
     have been cured, in full, within 15 days thereafter.

          13. Covenant Not to Compete.  The covenant not to compete set forth in
     paragraph 4.17 of the Original  Agreement shall not apply to the activities
     of any  current or former  non-executive  level  employee of  Operator.  If
     Operator or any affiliate  thereof shall enter into an agreement to acquire
     any interest that would violate such covenant not to compete as a result of
     Operator's  acquisition of another  entity or Operator's  acquisition of or
     other  involvement with a portfolio of existing  facilities,  then Operator
     may (i) terminate  those portions of such  transaction  which would violate
     the  covenant  not to  compete  and/or  (ii)  request  Owner to waive  such
     covenant  not to compete in respect of those  portions  of the  transaction
     which  violate  the same  (which  such waiver may be granted or withheld in
     Owner's sole and absolute  discretion) and upon such termination or waiver,
     as the case may be,  Operator shall be in compliance  with the covenant not
     to compete in respect of the applicable  portions of any such  transaction.
     If Operator or any  affiliate  would  violate  either such  covenant not to
     compete  or  Article  XIII of the  Agreement  as a  result  of a  Permitted
     Transfer to a successor operator, a combination with another entity, a sale
     of  substantially  all of the stock or assets of  Operator,  or a sale of a
     controlling  interest in  Operator,  then (i) Owner shall have the right to
     terminate the Agreement by giving written notice to Operator  within ninety
     (90) days  following  Operator's  notice to Owner of the occurrence of such
     transaction, such termination to be effective on the termination date to be
     set forth in Owner's  notice and (ii) Operator shall not be deemed to be in
     violation  of such  covenant  if Owner  does not give any such  termination
     notice.

          14.  Default.  Paragraph  10.1(b) of the Original  Agreement is hereby
     amended and restated,  in its entirety, as follows: "(b) Subject to (i) the
     occurrence  of any  Force  Majeure  events,  (ii) the  failure  by Owner to
     fulfill any obligations  hereunder  necessary to  continuously  operate the
     Club and (iii) permitted remodeling activities,  the failure by Operator to
     continuously  operate the Club on all days on which the Club is required to
     be opened under  Section  4.16 hereof,  unless such failure is cured to the
     reasonable  satisfaction  of Owner  within 5 days of  Owner's  delivery  to
     Operator  of notice of such  failure;  it being  further  agreed that Owner
     shall not be required to give more than one such notice in any  consecutive
     12 month period; "

          15. Owner's Loan Documents.  Paragraph 4.15 of the Original  Agreement
     (entitled  "Compliance  with Loan  Agreements")  is hereby  deleted  in its
     entirety.

          16.  Counterparts.  This  Supplement  may be  executed  in two or more
     counterparts,  each of which shall be deemed an  original  but all of which
     together shall constitute one and the same instrument.

                                      106
<PAGE>

     In witness whereof,  the parties have caused this Supplement to be executed
on the day and year first above written.

                               OWNER:

                               TERREMARK BRICKELL II, LTD.,
                               a Florida limited partnership

                               By:      Terremark Brickell II, Inc.,
                                        its general partner


                                        By:    /s/ Pamela Malkani
                                           --------------------------------
                                        Name:     Pamela Malkani
                                                ---------------------------
                                        Title:    Vice President
                                                ---------------------------

                               OPERATOR:

                               THE SPORTS CLUB COMPANY, INC.,
                               a Delaware corporation



                                        By:    /s/ Philip Swain
                                           --------------------------------
                                        Name:     Phil Swain
                                               ----------------------------

                                        Title:    President and COO
                                               ----------------------------








                                      107
<PAGE>



                                     EXHIBIT
                                      10.77

                             Indemnity and Guaranty
                          Agreement entered into as of
                             December 1, 2003 among
                         the Registrant, Irvine Sports
                          Club, Inc., Rex A. Licklider
                              and D. Michael Talla



                                      108
<PAGE>



                             INDEMNITY AND GUARANTY
                             ----------------------


     THIS  INDEMNITY  AND  GUARANTY  is made and  entered  into  this 1st day of
December,  2003,  by THE SPORTS  CLUB  COMPANY,  INC.,  a  Delaware  corporation
("Guarantor")   and  IRVINE   SPORTS  CLUB,   INC.,  a  California   corporation
("Borrower")  for the benefit of REX A.  LICKLIDER and D. MICHAEL TALLA as their
interests may appear (the "Beneficiaries").


                                    RECITALS
                                    --------


     A. Borrower borrowed the sum of Twenty Million Dollars  ($20,000,000)  from
Orange County's  Credit Union  ("Lender") in a borrowing (the "Loan") secured by
real and  personal  property of Borrower  and  personal  property of  Guarantor,
pursuant to the terms of which,  among other  things,  Beneficiaries  guaranteed
performance  of all  obligations of Borrower to Lender as described in Section 2
of the Beneficiaries' Guaranty in favor of Lender ("Beneficiaries'  Guaranty") a
copy of which is attached hereto as Exhibit A (the "Guaranteed Obligations").

     B.  As a  condition  to  the  making  of the  Loan,  Lender  required  that
Beneficiaries personally guarantee performance of all obligations of Borrower to
Lender undertaken in connection with the Loan.

     C.  Guarantor is the parent  corporation  of  Borrower,  owning one hundred
percent (100%) of the equity securities of Borrower.

     D. The proceeds of the Loan were for the direct benefit of Guarantor.

     E. As a  condition  to giving the  Beneficiaries'  Guaranty,  Beneficiaries
required this Indemnity and Guaranty.  Prior to delivery by Beneficiaries of the
Beneficiaries' Guaranty, Guarantor agreed to give this Indemnity and Guaranty.


                             INDEMNITY AND GUARANTY
                             ----------------------


     NOW,   THEREFORE,   as  an   inducement  to   Beneficiaries   to  make  the
Beneficiaries'  Guaranty  in favor of  Lender  and for other  good and  valuable
consideration,   the  receipt  and  legal   sufficiency   of  which  are  hereby
acknowledged, Guarantor and Borrower agree as follows:

                                   ARTICLE I
                   NATURE AND SCOPE OF INDEMNITY AND GUARANTY
                   ------------------------------------------

     Section 1.1  Guaranty  of  Obligations.  Guarantor  hereby  absolutely  and
unconditionally guarantees to Beneficiaries the prompt and unconditional payment
and  full  and  prompt  performance  when  due by  Borrower  of  the  Guaranteed
Obligations. It is expressly understood and agreed that this is an unconditional
guaranty and that the obligations of Guarantor hereunder

                                      109
<PAGE>

are and shall be  absolute  and  irrevocable  under  any and all  circumstances,
without   regard  to  the  validity,   regularity  or   enforceability   of  the
Beneficiaries' Guaranty.

     Section 1.2 Nature of Guaranty.  This Guaranty is an irrevocable,  absolute
guarantee  of payment  and,  to the  extent of the  Guaranteed  Obligations,  of
performance,  and is not merely a guarantee of collection. This Guaranty may not
be revoked by Guarantor and shall  continue to be effective  with respect to any
Guaranteed  Obligations  of  Borrower  arising  or created  after any  attempted
revocation  by  Guarantor.  The fact  that at any time or from  time to time the
Guaranteed Obligations of Borrower may be increased or reduced shall not release
or discharge the  obligation of Guarantor to  Beneficiaries  with respect to the
Guaranteed   Obligations   of  Borrower.   This  Guaranty  may  be  enforced  by
Beneficiaries  or either of them.  This  Guaranty is an unsecured  obligation of
Guarantor.

     Section 1.3  Indemnification.  Guarantor  hereby  indemnifies and agrees to
defend  and save  Beneficiaries  (and each of them) safe and  harmless  from and
against  any  liability,  loss,  cost,  damage or  expense,  including,  without
limitation,  attorneys' fees and costs of litigation, arising in any way from or
under the Beneficiaries'  Guaranty.  Obligations of Guarantor hereunder shall be
in addition to and not in lieu of Guarantor's obligations under other provisions
of this Indemnity and Guaranty.

     Section 1.4 Payment by Guarantor. Upon any claim being made by Lender under
or by  reason of the  Beneficiaries'  Guaranty  against  any  Beneficiary,  such
Beneficiary or Beneficiaries  may, at his or their option,  proceed directly and
at once,  without  notice,  against  Guarantor  to collect  and recover the full
amount of the liability  hereunder or any portion  thereof,  without  proceeding
against Borrower or any other person.

     Section 1.5 Guaranteed  Obligations of Borrower Not Reduced by Offset.  The
Guaranteed  Obligations  and the  liabilities  and  obligations  of Guarantor to
Beneficiaries hereunder shall not be reduced,  discharged or released because or
by reason of any existing or future offset, claim or defense of Borrower, or any
other  party,  against  Lender,  any  Beneficiary,  or  against  payment  of the
Guaranteed  Obligations,  whether  such  offset,  claim  or  defense  arises  in
connection  with the  Guaranteed  Obligations  of Borrower (or the  transactions
creating  the  Guaranteed  Obligations  of  Borrower)  or  otherwise;  provided,
however,  that  Beneficiaries  shall  be  entitled  only to  amounts  for  which
Beneficiaries are liable from time to time under Beneficiaries' Guaranty.

     Section 1.6 Payment of Expenses.  Guarantor  agrees  that,  with or without
notice or  demand,  Guarantor  will  reimburse  Beneficiaries  for all  expenses
(including  counsel  fees)  incurred by  Beneficiaries  in  connection  with the
collection  of the  Guaranteed  Obligations  or any portion  thereof or with the
enforcement of this Indemnity and Guaranty.

                                      110
<PAGE>






                                   ARTICLE II
                               BENEFICIARIES' FEES
                               -------------------

     Section  2.1 Fees.  In  consideration  of each  Beneficiary  executing  the
Beneficiaries' Guaranty in connection with the Loan, Guarantor shall pay to each
Beneficiary  a fee (the  "Guaranty  Fee")  equal to three  percent  (3%) of such
Beneficiaries' pro rata portion of the average outstanding  principal balance of
the Loan for each Loan Period (as hereinafter  defined), or partial Loan Period,
during  which the Loan is in effect.  The  Guaranty Fee shall be payable to each
Guarantor  within  thirty  (30)  days of the end of each Loan  Period  until the
earlier  of  (i)  the   Lender's   release  of  the   Beneficiaries   under  the
Beneficiaries'  Guaranty (the "Beneficiaries'  Release"),  and (ii) the date (A)
the  Borrower's  obligations  under the Loan are  terminated and (B) all amounts
borrowed by the Borrower under the Loan (including  accrued  interest) have been
repaid  (such  date  being  referred  to as  the  "Loan  Termination").  If  the
Beneficiaries'  Release or Loan Termination occurs at any time prior to the last
date of a Loan  Period,  the Fees for such partial Loan Period shall be paid not
more than thirty (30) days after the applicable event.  Each three-month  period
ending on September 30,  December 31, March 31 and June 30,  commencing with the
period ending on September 30, 2003 is referred to herein as a "Loan Period," it
being understood that the first Loan Period is, in fact, one hundred eight (108)
days. The pro rata portion for each  Beneficiary  shall mean fifty percent (50%)
of the total amount in question.

     Section 2.2 Payment.  At the  Guarantor's  option,  the Fees may be paid in
cash,  restricted  shares of the Guarantor's  Common Stock,  $.01 par value (the
"Common Stock"), or a combination  thereof.  The Guarantor shall accrue the Fees
for each Loan Period during which any portion of the Loan is outstanding. If the
Guarantor  elects to pay, in whole or in part,  in Common  Stock,  within thirty
(30) days  following  the end of each Loan Period  during  which the Loan is (or
was) outstanding, the Guarantor shall calculate, and shall notify Beneficiaries,
of that number of shares of Common Stock issuable to each Beneficiary in respect
of the Fees payable to such Beneficiary for such Loan Period (the "Fee Shares").
In the event Guarantor elects to pay any portion of the fees in Common Stock, to
the extent  the  federal  and state  income  tax  payable by either  Beneficiary
attributable  to such  payment  exceeds  any cash  paid by  Guarantor  (the "Tax
Deficiency"),  either  Beneficiary  or both  Beneficiaries  may require such Tax
Deficiency  (as  adjusted  for the  reduction  in the number of shares of Common
Stock) to be paid in cash in lieu of Common Stock.  For purposes of  calculating
such Tax Deficiency, Beneficiaries shall be presumed to pay taxes at the maximum
marginal  rates and to give effect to a deduction for state income  taxes.  Such
election by Beneficiaries  shall be made by notice given to Guarantor within ten
(10) days following  Guarantor's  notice of its election to  Beneficiaries.  All
payments of cash, or delivery of Common Stock, shall be made within fifteen (15)
days following  Beneficiaries'  notice,  or, if Beneficiary does not give such a
notice,  within twenty (20) days following  Guarantor's  notice, or if Guarantor
does not give such a notice,  within thirty (30) days  following the end of such
Loan Period.  For purposes of calculating  the number of Fee Shares  issuable to
each  Beneficiary in respect of his portion of the Fees, the value of the Common
Stock  shall be the  average  closing  price  for the most  recent  thirty  (30)
calendar days prior to the end of the appropriate Loan Period as reported on the
American  Stock  Exchange.  The Fee  Shares  will not be  registered  under  the
Securities  Act of 1933,  as amended  (the  "Securities  Act"),  or under  state
securities  (or Blue Sky) laws, but will be issued to each Guarantor in reliance
on the non-public offering exemptions under Section 4(2) of the Securities

                                      111
<PAGE>

Act and Regulation D promulgated  thereunder.  As a condition to the issuance of
the Fee Shares for any Loan Period,  each Beneficiary  shall execute and deliver
to Guarantor an investment  representation  agreement. In calculating the number
of  Fee  Shares  issuable  to  each  Beneficiary,   fractional  shares  will  be
disregarded,  and the number of such  Shares  will be  rounded  down to the next
lowest whole number. The Guarantor shall ensure the availability of a sufficient
number of shares of Common Stock to enable it to fulfill its  obligations  under
this Agreement.



                                  ARTICLE III
                                OTHER AGREEMENTS
                                ----------------

     Section 3.1 Deferment of Rights.  Any indebtedness of Guarantor to Borrower
now or hereafter existing, whether in connection with the Loan or otherwise (the
"Subordinated  Obligations"),   shall  be,  and  such  indebtedness  is,  hereby
deferred, postponed and subordinated to the prior payment in full of all amounts
owed  hereunder  until  payment  in full of the Loan;  provided,  however,  that
payment may be made if such payment is applied to payment of the Loan.  Borrower
agrees not to accept any payment or  satisfaction of any kind of indebtedness of
Guarantor  to  Borrower  unless such  indebtedness  is applied to payment of the
Loan.  Borrower  shall not be  entitled  to enforce  or  receive  payment of any
Subordinated  Obligations  until all of the Loan  obligations have been paid and
performed in full,  unless payment of such indebtedness is applied to payment of
the Loan, and any such sums received in violation of this Indemnity and Guaranty
shall be received by Borrower in trust for Beneficiaries.

     Section  3.2  Events  and   Circumstances   Not  Reducing  or   Discharging
Guarantor's  Obligations.  Guarantor  hereby  consents and agrees to each of the
following  and agrees that  Guarantor's  obligations  under this  Indemnity  and
Guaranty shall not be released,  diminished,  impaired or adversely  affected by
any of the following,  and waives any common law, equitable,  statutory or other
rights (including,  without limitation,  rights to notice) which Guarantor might
otherwise have as a result of or in connection with any of the following:

     (a)  Modifications.  Any  modification of all or any part of the Guaranteed
Obligations  or any  document,  instrument,  contract or  understanding  between
Borrower  and  Lender,  or any  other  parties,  pertaining  to  the  Guaranteed
Obligations  or any failure of  Beneficiaries  to notify  Guarantor  of any such
action.

     (b) Adjustment. Any adjustment,  indulgence, forbearance or compromise that
might be granted or given by Lender to Borrower or Guarantor.

     (c)  Condition  of  Borrower  or  Guarantor.  The  insolvency,  bankruptcy,
arrangement,  adjustment, composition,  liquidation,  disability, dissolution or
lack of power of  Borrower,  Guarantor or any other party at any time liable for
the payment of all or part of the Guaranteed Obligations,  or any dissolution of
Borrower  or  Guarantor,  or any sale,  lease or  transfer  of any or all of the
assets of Borrower or Guarantor,  or any changes in the shareholders of Borrower
or Guarantor,  or any reorganization of Borrower or Guarantor.  Guarantor hereby
assumes full  responsibility for due diligence,  as well as for keeping informed
of all matters which may affect

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<PAGE>

Borrower's ability to pay and perform its obligations to Lender.  Except for any
fiduciary duties Beneficiaries may have by reason of their positions as officers
or  directors,   Beneficiaries  have  no  duty  to  disclose  to  Guarantor  any
information  which  they  or  either  of them  may  have  or may  receive  about
Borrower's financial condition or business operations,  the condition or uses of
Borrower's assets, or any other  circumstances  bearing on Borrower's ability to
perform.

     (d)  Invalidity  of Guaranteed  Obligations  of Borrower.  The  invalidity,
illegality or unenforceability of all or any part of the Guaranteed Obligations,
or any  document  or  agreement  executed  in  connection  with  the  Guaranteed
Obligations,  for any reason whatsoever,  including,  without limitation, any of
the following:  (a) the Guaranteed Obligations,  or any part thereof, exceed the
amount  permitted by law, (b) the act of creating the Guaranteed  Obligations or
any part thereof is ultra vires, (c) the officers or  representatives  executing
Loan documents or otherwise creating the Guaranteed  Obligations acted in excess
of their  authority,  (d) the Guaranteed  Obligations  violate  applicable usury
laws,  (e) Borrower has valid  defenses,  claims or offsets  (whether at law, in
equity or by  agreement)  which  render  the  Guaranteed  Obligations  wholly or
partially  uncollectible,  (f) the  creation,  performance  or  repayment of the
Guaranteed  Obligations  (or the  execution,  delivery  and  performance  of any
document  or  instrument  representing  part of the  Guaranteed  Obligations  or
executed in connection with the Guaranteed  Obligations,  or given to secure the
repayment  of  the  Guaranteed   Obligations)  is  illegal,   uncollectible   or
unenforceable,  or (g) any of the Loan documents are irregular or not genuine or
authentic,  it being agreed that Guarantor shall remain liable hereon regardless
of whether  Borrower or any other  person be found not liable on the  Guaranteed
Obligations  or any  part  thereof  for  any  reason;  provided,  however,  that
Beneficiaries  shall be  entitled  only to amounts for which  Beneficiaries  are
liable from time to time under Beneficiaries' Guaranty.

     (e) Release of Collateral. Any release, surrender, exchange, subordination,
deterioration,   waste,  loss  or  impairment  (including,  without  limitation,
negligent, willful, unreasonable or unjustifiable impairment) of any collateral,
property or security,  at any time existing in  connection  with, or assuring or
securing payment of, all or any part of the Guaranteed Obligations.

     (f)  Unenforceability.  The fact that any  collateral,  security,  security
interest or lien  contemplated  or  intended to be given,  created or granted as
security for the repayment of the Guaranteed  Obligations,  or any part thereof,
shall not be properly  perfected or created,  or shall prove to be unenforceable
or subordinate to any other security  interest or lien, it being  recognized and
agreed by  Guarantor  that  Guarantor is not entering  into this  Indemnity  and
Guaranty in reliance on, or in  contemplation  of the benefits of, the validity,
enforceability, collectibility or value of any of the security or collateral for
the Guaranteed Obligations.

     (g) Other Actions Taken or Omitted. Any other action taken or omitted to be
taken with respect to the Loan, the Guaranteed  Obligations,  or the security or
collateral therefor, whether or not such action or omission prejudices Guarantor
or increases the  likelihood  that Borrower will be unable to pay the Guaranteed
Obligations pursuant to the terms thereof.


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<PAGE>


                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------



     To induce Beneficiaries to enter into the Beneficiaries' Guaranty, Borrower
and Guarantor  represent and warrant to  Beneficiaries  as follows:

     Section 4.1 Legality.  The execution,  delivery and performance by Borrower
and  Guarantor  of this  Indemnity  and  Guaranty  and the  consummation  of the
transactions contemplated hereunder do not, and will not, contravene or conflict
with any law,  statute or  regulation  whatsoever  to which  either  Borrower or
Guarantor  is subject or  constitute a default (or an event which with notice or
lapse of time or both would constitute a default) under, or result in the breach
of, any  indenture,  mortgage,  deed of trust,  charge,  lien,  or any contract,
agreement or other  instrument to which either  Borrower or Guarantor is a party
or which may be applicable to either of them.  This  Indemnity and Guaranty is a
legal and binding  obligation  of,  respectively,  Borrower and Guarantor and is
enforceable  in  accordance  with its terms,  except as  limited by  bankruptcy,
insolvency or other laws of general  application  relating to the enforcement of
creditors' rights and by general principals of equity.

     Section 4.2  Litigation.  Except as otherwise  disclosed to  Beneficiaries,
there are no  proceedings  pending  or, so far as Borrower  or  Guarantor  know,
threatened before any court or administrative agency which, if decided adversely
to  Borrower or  Guarantor,  would  materially  adversely  affect the  financial
condition of Borrower or  Guarantor or the  authority of either of them to enter
into, or the validity or enforceability of, this Indemnity and Guaranty.

                                    ARTICLE V
                                     WAIVERS
                                     -------



     Section 5.1 Waivers.

     (a) Guarantor hereby waives notice of the acceptance  hereof,  presentment,
demand  for  payment,  protest,  notice  of  protest,  or any and all  notice of
nonpayment,  nonperformance  or  nonobservance,  or other  proof,  or  notice or
demand, whereby to charge Guarantor therefor.

     (b)  Guarantor  further  agrees  that the  validity of this  Indemnity  and
Guaranty  and  the  obligations  of  Guarantor  hereunder  shall  in no  way  be
terminated, affected or impaired (a) by reason of the assertion by Lender of any
rights  or  remedies  which  it may  have  under  or with  respect  to the  Loan
documents,  or (b) by reason of any failure to file or record any instruments or
to take or perfect  any  security  intended to be  provided  thereby,  or (c) by
reason of the  release or  exchange  of any  property  constituting  security or
collateral  for the Loan, or (d) by reason of Lender's  failure to exercise,  or
delay in exercising,  any such right or remedy or any right or remedy Lender may
have, or (e) by reason of the  commencement  of a case under the Bankruptcy Code
by or against any person obligated under the Loan documents, or (f) by reason of
any  payment  made on or by reason  of the Loan,  whether  made by  Borrower  or
Guarantor or any other person,  which is required to be refunded pursuant to any
bankruptcy or insolvency law; it

                                      114
<PAGE>

being  understood  that no payment so refunded shall have the effect of reducing
the liability of Guarantor  hereunder.  It is further  understood that Guarantor
shall remain liable  hereunder if Borrower shall have taken  advantage of, or be
subject to the protection  of, any provision in the Bankruptcy  Code, the effect
of which is to prevent or delay Lender from taking any remedial  action  against
Borrower,  including  the exercise of any option  Lender has to declare the Loan
due and payable.

     (c) Guarantor  hereby waives:  (i) all statutes of limitations as a defense
to any action or proceeding  brought against Guarantor by Beneficiaries,  to the
fullest  extent  permitted by law; (ii) any right  Guarantor may have to require
Beneficiaries  to proceed  against  Borrower,  proceed  against  or exhaust  any
security  for the Loan  provided  to Lender  by  Borrower  or any  other  person
(including  Guarantor),  or pursue any other remedy in  Beneficiaries'  power to
pursue; (iii) any defense based on any claim that Guarantor's obligations exceed
or are more burdensome than those of Borrower; (iv) any defense based on (A) any
legal  disability  of  Borrower,  (B)  any  release,  discharge,   modification,
impairment  or limitation of the liability of Borrower to Lender from any cause,
whether  consented  to by  Lender or  arising  by  operation  of law or from any
bankruptcy or other voluntary or involuntary proceeding, in or out of court, for
the adjustment of  debtor-creditor  relationships (an "Insolvency  Proceeding"),
and (C) any  rejection or  disaffirmance  of the Loan, or any part of it, or any
security held for it, in any such Insolvency  Proceeding;  (v) any defense based
on any action taken or omitted by Lender in any Insolvency  Proceeding involving
Borrower,  including  any  election  to have  Lender's  claim  allowed  as being
secured,  partially  secured or unsecured,  any extension of credit by Lender to
Borrower in any Insolvency  Proceeding,  and the taking and holding by Lender of
any security for any such extension of credit;  (vi) all  presentments,  demands
for  performance,  notices of  nonperformance,  protests,  notices  of  protest,
notices of dishonor, notices of acceptance of this Indemnity and Guaranty and of
the existence,  creation,  or incurring of new or additional  indebtedness,  and
demands  and  notices of every kind except for any demand or notice by Lender to
Guarantor  expressly provided for herein;  (vii) any defense based on or arising
out of any defense that Borrower may have to the payment or  performance  of the
Debt and other Loan  obligations  or any part of them;  and  (viii) any  defense
based on or arising out of any action of Lender described herein.

     (d) Waivers of subrogation and other rights and defenses.

               (i) Regardless of whether Guarantor may have made any payments to
          Beneficiaries,  Guarantor hereby waives (A) all rights of subrogation,
          indemnification,   contribution   and  any  other  rights  to  collect
          reimbursement  from  Borrower  or any other party for any sums paid to
          Beneficiaries,  whether  contractual  or arising by  operation  of law
          (including the Bankruptcy Code or any successor or similar statute) or
          otherwise, (B) all rights to enforce any remedy that Beneficiaries may
          have  against  Borrower,  and (C) all  rights  to  participate  in any
          security now or later to be held by Lender for the Loan. The foregoing
          waivers shall be effective until the Loan  obligations  have been paid
          and performed in full, or Beneficiaries are otherwise  absolved of any
          further obligations under Beneficiaries' Guaranty.

               (ii)  Guarantor  understands  and  acknowledges  that  if  Lender
          forecloses  judicially  or  nonjudicially  against  any real  property
          security for the Loan,  that  foreclosure  could impair or destroy any
          ability that Beneficiaries or Guarantor may have to seek

                                      115
<PAGE>


          reimbursement, contribution or indemnification from Borrower or others
          based on any right Guarantor or Beneficiaries may have of subrogation,
          reimbursement, contribution or indemnification for any amounts paid by
          Guarantor  under this  Guaranty.  Guarantor  further  understands  and
          acknowledges  that in the  absence  of this  Section,  such  potential
          impairment or destruction of Guarantor's  rights,  if any, may entitle
          Guarantor to assert a defense to this  Indemnity and Guaranty based on
          Section 580d of the California Code of Civil  Procedure.  By executing
          this  Indemnity  and  Guaranty,   Guarantor  freely,  irrevocably  and
          unconditionally  (A) waives and  relinquishes  that defense and agrees
          that  Guarantor will be fully liable under this Indemnity and Guaranty
          even though Lender may foreclose  judicially or nonjudicially  against
          any real  property  security for the Loan,  (B) agrees that  Guarantor
          will not  assert  that  defense  in any  action  or  proceeding  which
          Beneficiaries may commence to enforce this Indemnity and Guaranty, (C)
          acknowledges  and  agrees  that the  rights  and  defenses  waived  by
          Guarantor  under this  Indemnity  and  Guaranty  include  any right or
          defense that Guarantor may have or be entitled to assert based upon or
          arising out of any one or more of Sections 580a,  580b, 580d or 726 of
          the California  Code of Civil  Procedure or Sections 2787,  2848, 2855
          and 2856 of the California Civil Code, and (D) acknowledges and agrees
          that  Beneficiaries  are  relying on this waiver in  guaranteeing  the
          Loan,  and that this  waiver is a material  part of the  consideration
          which Beneficiaries are receiving for guaranteeing the Loan.

               (iii) As provided in Civil Code Section 2856, Guarantor makes the
          following waivers of specific rights afforded under California law:

                    "The  Guarantor  waives  all rights  and  defenses  that the
               Guarantor  may have because the debtor's  debt is secured by real
               property. This means, among other things:

                    (1) The  creditor  may collect  from the  Guarantor  without
               first  foreclosing  on any real or personal  property  collateral
               pledged by the debtor.

                    (2)  If  the  creditor   forecloses  on  any  real  property
               collateral pledged by the debtor:

                         (A) The amount of the debt may be  reduced  only by the
                    price for which that  collateral is sold at the  foreclosure
                    sale,  even if the  collateral  is worth  more than the sale
                    price.

                         (B) The creditor may collect from the Guarantor even if
                    the   creditor,   by   foreclosing   on  the  real  property
                    collateral,  has  destroyed any right the Guarantor may have
                    to collect from the debtor.

                    This  is an  unconditional  and  irrevocable  wavier  of any
                    rights and  defenses  the  Guarantor  may have  because  the
                    debtor's debt is secured by real property.  These rights and
                    defenses include, but

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<PAGE>

                    are not limited to, any rights or defenses  based on Section
                    580a, 580b, 580d, or 726 of the Code of Civil Procedure."

     (iv) In addition,  Guarantor  waives all rights and defenses arising out of
an election of remedies by Lender,  even though that election of remedies,  such
as  a  nonjudicial  foreclosure  with  respect  to  security  for  a  guaranteed
obligation,  has destroyed  Guarantor's  rights of subrogation and reimbursement
against  Borrower by the  operation  of Section 580d of the  California  Code of
Civil Procedure or otherwise.

          (A) Guarantor hereby waives any right or defense it may have at law or
     equity,  including  California Code of Civil  Procedure  Section 580a, to a
     fair market  value  hearing or action to  determine a  deficiency  judgment
     after a foreclosure.

          (B) No provision  or waiver in this  Indemnity  and Guaranty  shall be
     construed  as limiting  the  generality  of any other  provision  or waiver
     contained  in this  Indemnity  and  Guaranty.  It is the  intention  of the
     parties  that  Guarantor  shall  not  be  deemed  to  be  a  "creditor"  or
     "creditors" (as defined in Section 101 of the Bankruptcy  Code) of Borrower
     by reason of the  existence of this  Indemnity  and  Guaranty.  If Borrower
     becomes a debtor in any  proceeding  under the Bankruptcy  Code,  Guarantor
     hereby waives any such right as a "creditor" under the Bankruptcy Code.





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<PAGE>






                                   ARTICLE VI
                                  MISCELLANEOUS
                                  -------------



     Section 6.1 No Waiver. No failure to exercise,  and no delay in exercising,
on the part of  Beneficiaries,  any right  hereunder  shall  operate as a waiver
thereof,  nor shall any single or partial exercise thereof preclude any other or
further  exercise  thereof or the  exercise  of any other  right.  The rights of
Beneficiaries  hereunder  shall be in addition to all other  rights  provided by
law. No  modification or waiver of any provision of this Indemnity and Guaranty,
nor consent to departure therefrom, shall be effective unless in writing, and no
such  consent or waiver  shall  extend  beyond the  particular  case and purpose
involved. No notice or demand given in any case shall constitute a waiver of the
right to take other action in the same,  similar or other instances without such
notice or demand.

     Section 6.2 Applicable  Law. This Indemnity and Guaranty shall be deemed to
be a contract  entered into pursuant to the laws of the State of California  and
shall in all respects be governed, construed, applied and enforced in accordance
with applicable federal law and the laws of such state,  without reference to or
giving effect to any choice of law doctrine.

     Section  6.3  Notices.  All  acceptances,   approvals,  consents,  demands,
notices,  requests, waivers and other communications required or permitted to be
given under this  Indemnity  and Guaranty  must be in writing and (a)  delivered
personally by a process server providing a sworn declaration evidencing the date
of service,  the individual  served, and the address where the service was made;
(b) sent by certified  mail,  return  receipt  requested;  or (c) delivered by a
nationally  recognized  overnight delivery service that provides evidence of the
date of delivery, with all charges prepaid (for next morning delivery if sent by
overnight delivery  service),  addressed to the appropriate party at its address
listed below:

                  If to Beneficiaries:      Rex A. Licklider
                                            c/o The Sports Club Company, Inc.
                                            11100 Santa Monica Boulevard
                                            Suite 300
                                            Los Angeles, California 90025


                                            D. Michael Talla
                                            c/o The Sports Club Company, Inc.
                                            11100 Santa Monica Boulevard
                                            Suite 300
                                            Los Angeles, California 90025

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<PAGE>

                                            With a copy to:

                                            R. Joseph De Briyn, Esq.
                                            Musick, Peeler & Garrett LLP
                                            624 South Grand Avenue
                                            Suite 2000
                                            Los Angeles, California 90017

                  If to Guarantor:          The Sports Club Company, Inc.
                                            11100 Santa Monica Boulevard
                                            Suite 300
                                            Los Angeles, California 90025
                                            Attention:  Chief Financial Officer

                                            With a copy to:

                                            Ronald K. Fujikawa, Esq.
                                            Greenberg Glusker Fields Claman
                                            Machtinger & Kinsella LLP
                                            1900 Avenue of the Stars
                                            Suite 2100
                                            Los Angeles, California 90067

                  If to Borrower:           Irvine Sports Club, Inc.
                                            11100 Santa Monica Boulevard
                                            Suite 300
                                            Los Angeles, California 90025
                                            Attention:  Chief Financial Officer

                                            With a copy to:

                                            Ronald K. Fujikawa, Esq.
                                            Greenberg Glusker Fields Claman
                                            Machtinger & Kinsella LLP
                                            1900 Avenue of the Stars
                                            Suite 2100
                                            Los Angeles, California 90067

     Section 6.4 Entire Agreement. All prior understandings, representations and
agreements  with  respect to this  Indemnity  and  Guaranty are merged into this
Indemnity and Guaranty which alone fully and completely  expresses the agreement
of the parties.

     Section 6.5 No Oral  Amendment.  This  Indemnity  and  Guaranty  may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or  failure  to act on the part of any party  hereto,  but only by an
agreement  in  writing  signed  by the party  against  whom  enforcement  of any
modification,  amendment, waiver, extension, change, discharge or termination is
sought.

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<PAGE>

     Section   6.6   Successors   and   Assigns.   Each   reference   herein  to
"Beneficiaries"  shall be deemed to  include  their  respective  successors  and
assigns, to whose favor the provisions of this Indemnity and Guaranty shall also
inure.  Each  reference  herein to  "Guarantor"  shall be deemed to include  the
successors  and  assigns  of  Guarantor,  all of  whom  shall  be  bound  by the
provisions  of this  Indemnity  and Guaranty.  The term  "Guarantor"  shall also
include  any  new   successor   entity   formed  as  a  result  of  any  merger,
reorganization,  sale or transfer of Guarantor or any interest in Guarantor, and
Guarantor and its constituents shall not thereby be released from any obligation
or liability hereunder. The term "Borrower" as used herein shall include any new
or successor  entity formed as a result of any merger,  reorganization,  sale or
transfer of Borrower or any interest in Borrower.

     Section 6.7 Headings. The article,  section and subsection headings are for
convenience of reference only and shall in no way affect the  interpretation  of
this Indemnity and Guaranty.

     IN WITNESS  WHEREOF,  Guarantor has executed this Indemnity and Guaranty as
of the date first above set forth.

                                            GUARANTOR:

                                            THE SPORTS CLUB COMPANY, INC.


                                           By:  /s/ Timothy O'Brien
                                                -------------------------------
                                               Name: Timothy O'Brien
                                               Its: Chief Financial Officer





                                           By:  /s/ Lois J. Barberio
                                                -------------------------------
                                                Name:        Lois J. Barberio
                                                Its:         Secretary



                                            BORROWER:


                                            IRVINE SPORTS CLUB, INC.


                                           By:  /s/ Timothy O'Brien
                                                -------------------------------
                                              Name: Timothy O'Brien
                                              Its:  Chief Financial Officer






                                           By:  /s/ Lois J. Barberio
                                                -------------------------------
                                              Name:  Lois J. Barberio
                                              Its:   Secretary



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<PAGE>





                                     EXHIBIT
                                      10.79

                             Supplemental Indenture
                          dated as of February 4, 2004
                          between the Registrant, the
                           Subsidiary Guarantors and
                               U.S. Bank National
                                   Association



                                      121
<PAGE>



                             SUPPLEMENTAL INDENTURE

     This  Supplemental  Indenture  (the  "Supplemental  Indenture") is made and
entered into as of this 4th day of February,  2004, by and among The Sports Club
Company, Inc., a Delaware corporation (the "Company"), the Subsidiary Guarantors
(as defined in the Indenture  [defined  below]),  and U.S.  Bank Trust  National
Association,  a national  banking  association,  now known as U.S. Bank National
Association, as trustee (the "Trustee"), with reference to the following:

     A. The Company, the Subsidiary Guarantors and the Trustee are parties to an
Indenture  dated as of April 1, 1999 (the  "Indenture"),  pursuant  to which the
Company issued $100,000,000 principal amount of its 11 3/8% Senior Secured Notes
due 2006 (the  "Notes").  The Notes are held by a number of  Holders;  the three
largest  groups of  Holders  are (i) the  following  funds  managed,  advised or
sub-advised  by  affiliates  of the TCW  Group,  Inc.:  TCW LINC  III CBO  Ltd.;
Crescent/MACH I Partners,  L.P.;  AIMCO CDO, Series 2000-A;  TCW GEMV,  Limited;
Plaza II Emerging Market CBO Limited;  TCW Shared Opportunity Fund II, L.P.; TCW
Shared  Opportunity  Fund II B LLC; and TCW Shared  Opportunity  Fund III,  L.P.
(collectively the "TCW Funds"),  (ii)  Massachusetts  Mutual ("Mass Mutual") and
(iii) funds  managed by MW Post  Advisory  Group,  LLC ("Post  Group");  the TCW
Funds, Mass Mutual and Post Group collectively own approximately  $69,000,000 of
the aggregate principal amount of outstanding Notes.

     B. The  Company's  Board of  Directors  approved  the creation of a special
committee   (the  "Special   Committee")  to   investigate   various   strategic
alternatives,  including the  possibility  of a "going  private"  transaction in
which  certain of the  Company's  principal  shareholders  and a private  equity
group, Palisade Concentrated Equity Partnership L.P.  ("Palisade"),  intended to
participate  (the  "Prior  Transaction").  In order  to  permit  such  principal
shareholders and Palisade to discuss among  themselves the structure,  terms and
conditions of the Prior Transaction,  the Subsidiary Guarantors, the Company and
the Trustee executed a Supplemental Indenture (the "First Supplement") to modify
the Change of Control  provisions of the  Indenture  (as defined  therein) for a
period of 180 days.  The term of the First  Supplement  expired on September 24,
2003.

     C. The principal  shareholders and Palisade abandoned the Prior Transaction
and have instead commenced  negotiations on the terms and conditions under which
Palisade,  on the one  hand,  and  Rex A.  Licklider,  Millennium  Entertainment
Partners,  L.P., and its affiliates and Kayne Anderson  Capital Advisors and its
affiliates (the "Insider  Stockholders"),  on the other,  would invest up to $37
million  in the  Company  and  receive in  consideration  thereof a new class of
convertible preferred stock, following which the Company would remain subject to
the reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Proposed Transaction").

     D. In order to permit the Insider Stockholders, Palisade and the Company to
engage in  negotiations  concerning,  and  execute  and deliver a term sheet and
definitive  documentation  governing,  the Proposed Transaction without arguably
violating the Change of Control provisions of the Indenture,  the Company wishes
to amend the Indenture to modify the

                                      122
<PAGE>

Change of Control  provisions for a period of one hundred eighty (180) days from
and after the date of this Supplemental Indenture, and the Trustee is willing to
amend the Indenture to allow for such modification and amendment, subject to the
terms and conditions set forth in this Supplemental Indenture.

     E. Pursuant to Section 9.2 of the  Indenture,  the Trustee,  the Subsidiary
Guarantors  and  the  Company  have  the  right  to  execute  and  deliver  this
Supplemental Indenture to amend the Indenture as described in Recital D above if
such  amendment is approved or consented to by Holders of at least a majority of
the principal amount of the Notes  outstanding,  and the TCW Funds,  Mass Mutual
and Post Group (who collectively hold  approximately 69% of the principal amount
of outstanding Notes) are willing to consent to this Supplemental Indenture.

A G R E E M E N T

     In consideration  of the recitals,  and the mutual covenants and agreements
hereinafter set forth,  the Company,  the Subsidiary  Guarantors and the Trustee
mutually  covenant  and agree for the  benefit  of the  Holders  of the Notes as
follows:

     1.  Recitals;  Definitions.  The  terms  and  conditions  set  forth in the
Recitals shall be deemed a part of this  Supplemental  Indenture as if set forth
in a numbered  paragraph hereof.  Unless otherwise  defined herein,  capitalized
words or terms appearing in this Supplemental  Indenture shall have the meanings
given to them in the Indenture.

     2. Term. The term of this Supplemental Indenture shall commence on the date
hereof and shall terminate and expire as of 5:00 p.m.,  P.S.T., on July 31, 2004
(the "Term").  Upon the  expiration of the Term,  except for its  application to
events which occurred during the Term, this  Supplemental  Indenture shall be of
no further force or effect,  and the terms and provisions of the Indenture shall
continue to apply as if this Supplemental Indenture were never effective.

     3. Modification of Change of Control Provision.

     (a) Subject to the terms of subsection  (b) hereof,  the  following  events
which may occur  during  the Term  shall not be deemed to be a Change of Control
under the Indenture:  (i) any discussions,  understandings  or agreements by and
among the Insider Stockholders,  or any of them, relating to or in contemplation
of a Proposed  Transaction,  whether or not such discussions,  understandings or
agreements involve other Persons or whether such Insider Stockholders (including
any such other  Persons)  file, or are required to file,  with the  Commission a
Schedule 13D or 14D in connection therewith, (ii) the preparation and submission
to the  Company  of a term  sheet,  letter of intent or other  written  proposal
setting  forth the terms and  conditions  under which one or more of the Insider
Stockholders (or any Affiliates thereof) are prepared to consummate the Proposed
Transaction,  or (iii) the  negotiation,  execution and delivery of a definitive
stock purchase  agreement and related  agreements and instruments by one or more
of the  Insider  Stockholders  or  their  Affiliates  relating  to the  Proposed
Transaction;  provided that this Section 3(a) shall not be effective if any such
definitive stock purchase agreement or related agreement or instrument  contains
any provision that would result in an adverse  consequence to the Company in the
event the Proposed Transaction is not consummated due to the failure of the

                                      123
<PAGE>

Holders of the Notes to waive or modify the Change of Control  provisions of the
Indenture with respect to such transaction.

     (b) Anything in subsection (a) to the contrary notwithstanding,  the Change
of  Control  provisions  of the  Indenture  shall  not be deemed to be waived or
modified with respect to the  consummation  of the Proposed  Transaction  or any
aspect  thereof.  Without  limiting  the  generality  of the  foregoing  and for
purposes  of  clarification,  in the  event  the  consummation  of the  Proposed
Transaction  or any aspect  thereof  constitutes  a Change of Control  under the
Indenture,  all of the  provisions  of the  Indenture  shall  apply  as if  this
Supplemental  Indenture was not  effective,  including the  obligation to make a
Change of Control Offer pursuant to Section 4.14 of the Indenture.

     4. No Other  Changes.  Except as expressly  set forth in this  Supplemental
Indenture, the terms of the Indenture shall continue in full force and effect in
accordance with its terms.

     5. Miscellaneous. This Supplemental Indenture (together with the Indenture,
as previously  amended and  supplemented)  represents  the entire  agreement and
understanding  between the  parties  hereto  with  respect to this  Supplemental
Indenture  and  supersedes  all  prior  and  contemporaneous  written  and  oral
negotiations,  discussions and agreements; shall be binding on, and inure to the
benefit  of, the parties  hereto and their  respective  successors,  assigns and
legal representatives;  and may be executed in counterparts, each of which shall
be  deemed  an  original  but all of  which  shall  constitute  one and the same
agreement.

     IN WITNESS  WHEREOF,  the parties  hereto have executed  this  Supplemental
Indenture on the date first written above.

                                                 Company:
                                                 -------

                                                 THE SPORTS CLUB COMPANY, INC.


                             By: /s/ Timothy O'Brien
                                                        ------------------------
                              Name: Timothy O'Brien
                                                        ------------------------
                         Title: Chief Financial Officer
                                                        ------------------------


                                                 Trustee:
                                                 -------

                                                 U.S. BANK NATIONAL ASSOCIATION


                          By: /s/ Benjamin J. Krueger
                                                         -----------------------
                            Name: Benjamin J. Krueger
                                                         -----------------------
                              Title: Trust Officer
                                                         -----------------------


                                      124
<PAGE>

Subsidiary Guarantors:
---------------------

SCC DEVELOPMENT COMPANY                     LA/IRVINE SPORTS CLUBS, LTD.


                                     By:  Sports Club, Inc. of California, its
                                          General partner
By:  /s/ Timothy O'Brien
     ------------------------------
Name:  Timothy O'Brien
Title: Chief Financial Officer       By: /s/ Timothy O'Brien
                                         -------------------------------
                                     Name:    Timothy O'Brien
                                     Title:   Chief Financial Officer
SCC NEVADA, INC.

                                     PONTIUS REALTY, INC.
By:  /s/ Timothy O'Brien
     ------------------------------
Name:    Timothy O'Brien
Title:   Chief Financial Officer      By: /s/ Timothy O'Brien
                                          ------------------------------
                                      Name:    Timothy O'Brien
                                      Title:   Chief Financial Officer
HFA SERVICES, INC.


By:   /s/ Timothy O'Brien             SCC SPORTS CLUB, INC.
      ------------------------------
Name:     Timothy O'Brien
Title:    Chief Financial Officer
                                      By:  /s/ Timothy O'Brien
                                           -----------------------------
                                      Name:    Timothy O'Brien
IRVINE SPORTS CLUB, INC.              Title:   Chief Financial Officer


By:  /s/ Timothy O'Brien
     -------------------------------
Name:    Timothy O'Brien
Title:   Chief Financial Officer



                                      125
<PAGE>




SEPULVEDA REALTY AND                   TVE, INC.
DEVELOPMENT COMPANY, INC.


By:  /s/ Timothy O'Brien                By: /s/ Timothy O'Brien
     -------------------------------        -----------------------------
Name:    Timothy O'Brien                Name:   Timothy O'Brien
Title:   Chief Financial Officer        Title:  Chief Financial Officer

SF SPORTS CLUB, INC.                    SCC CALIFORNIA, INC.


By: /s/ Timothy O'Brien                  By: /s/ Timothy O'Brien
    --------------------------------         -----------------------------
Name:    Timothy O'Brien                 Name:   Timothy O'Brien
Title:   Chief Financial Officer         Title:  Chief Financial Officer


SCC REALTY COMPANY                       THE SPORTS CONNECTION HOLDING
                                         COMPANY

By:  /s/ Timothy O'Brien                 By: /s/ Timothy O'Brien
     ---------------------------------       -----------------------------
Name:    Timothy O'Brien                 Name:   Timothy O'Brien
Title:   Chief Financial Officer         Title:  Chief Financial Officer


SPORTS CLUB, INC. OF CALIFORNIA          THE SPORTSMED COMPANY, INC.


By: /s/ Timothy O'Brien                  By: /s/ Timothy O'Brien
    ---------------------------------        ------------------------------
Name:   Timothy O'Brien                  Name:   Timothy O'Brien
Title:  Chief Financial Officer          Title:  Chief Financial Officer


TALLA NEW YORK, INC.                     WASHINGTON D.C. SPORTS CLUB, INC.


By: /s/ Timothy O'Brien                  By: /s/ Timothy O'Brien
    ---------------------------------        ------------------------------
Name:   Timothy O'Brien                  Name:   Timothy O'Brien
Title:  Chief Financial Officer          Title:  Chief Financial Officer


                                          NY SPORTS CLUB, INC.


                                          By: /s/ Timothy O'Brien
                                              -----------------------------
                                          Name:      Timothy O'Brien
                                          Title:     Chief Financial Officer



                                      126
<PAGE>



                                     EXHIBIT
                                      21.1

                               Subsidiaries of the
                                   Registrant



                                      127
<PAGE>

                            THE SPORTS CLUB COMPANY
                            (a Delaware Corporation)
                                  Subsidiaries
<TABLE>
<CAPTION>

Subsidiary                                   Form    State   Parent                        Ownership
----------                                   ----    -----   ------                        ---------
<S>                                       <C>         <C>  <C>                             <C>
TVE, Inc.                                 Corporation  CA  The Sports Club Company, Inc.    100.000%
SCC Development Company                   Corporation  CA  The Sports Club Company, Inc.    100.000%
The Sports Connection Holding Company     Corporation  CA  The Sports Club Company, Inc.    100.000%
SCC California, Inc.                      Corporation  CA  The Sports Club Company, Inc.    100.000%
Sports Club, Inc. of California           Corporation  CA  The Sports Club Company, Inc.    100.000%
Pontius Realty, Inc.                      Corporation  CA  The Sports Club Company, Inc.    100.000%
Irvine Sports Club, Inc.                  Corporation  CA  The Sports Club Company, Inc.    100.000%
The SportsMed Company, Inc.               Corporation  CA  The Sports Club Company, Inc.    100.000%
L.A./Irvine Sports Clubs, Ltd.            Partnership  CA  Sports Club, Inc. of California   50.100%
Talla New York, Inc.                      Corporation  NY  Sports Club, Inc. of California  100.000%
Reebok-Sports Club/NY                     Partnership  NY  Talla New York, Inc.              60.000%
El Segundo-TDC, Ltd.                      Partnership  CA  SCC California, Inc.              17.185%
                                                           Pontius Realty, Inc.               0.754%
                                                           Sports Club, Inc. of California    9.890%
                                                           The Sports Club Company, Inc.      9.890%
SCC Sports Club, Inc.                     Corporation  TX  The Sports Club Company, Inc.    100.000%
SCC Nevada, Inc.                          Corporation  NV  The Sports Club Company, Inc.    100.000%
SF Sports Club, Inc.                      Corporation  DA  The Sports Club Company, Inc.    100.000%
Washington D.C. Sports Club, Inc.         Corporation  DA  The Sports Club Company, Inc.    100.000%
HFA Services, Inc.                        Corporation  CA  The SportsMed Company, Inc.      100.000%
SCC Realty Company                        Corporation  CA  The Sports Club Company, Inc.    100.000%
Sepulveda Realty and Development Co., Inc.Corporation  CA  The Sports Club Company, Inc.    100.000%
NY Sports Club, Inc.                      Corporation  DA  The Sports Club Company, Inc.    100.000%
</TABLE>

                                      128
<PAGE>


                                     EXHIBIT
                                      23.1

                               Consent of KPMG LLP



                                      129
<PAGE>






            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors
The Sports Club Company, Inc.:

We consent to the incorporation by reference in the registration  statement (No.
333-26421) on Form S-8 and the  registration  statement (No.  333-38459) on Form
S-3 of The Sports Club Company,  Inc. of our report dated May 24, 2004, relating
to the  consolidated  balance  sheets of The Sports  Club  Company,  Inc.  as of
December  31,  2003  and  2002,  and  the  related  consolidated  statements  of
operations,  stockholders'  equity,  and cash flows for each of the years in the
three-year period ended December 31, 2003, and the related  financial  statement
schedule,  which report appears in the December 31, 2003,  annual report on Form
10-K of The Sports Club Company, Inc.

Our report  includes an  explanatory  paragraph that states that the Company has
suffered  recurring  net  losses,  has a  working  capital  deficiency,  and has
negative cash flows from operating activities that raise substantial doubt about
its ability to continue as a going  concern.  The  financial  statements  do not
include any adjustments that might result from the outcome of this  uncertainty.
Our report also  refers to a  restatement  of the  Company's  2002  consolidated
financial  statements  and to a change in the method of accounting  for goodwill
and other intangible assets on January 1, 2002.


/s/  KPMG LLP



Los Angeles, California
June 16, 2004



                                      130
<PAGE>



                                     EXHIBIT
                                      31.1

                                CERTIFICATION OF
                                  REX LICKLIDER



                                      131
<PAGE>






                                 CERTIFICATIONS


I, Rex A. Licklider,  Chief Executive  Officer of The Sports Club Company,  Inc.
certify that:

     1.   I have  reviewed  this  annual  report on Form 10-K of The Sports Club
          Company, Inc.;

     2.   Based on my  knowledge,  this  report  does  not  contain  any  untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this report,  fairly  present in all material
          respects the financial condition, results of operations and cash flows
          of the  registrant  as of,  and for,  the  periods  presented  in this
          report;

     4.   The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for the
          registrant and have:

          (a)  Designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including  its  consolidated  subsidiaries,  is made
               known to us by others within those entities,  particularly during
               the period in which this report is being prepared;

          (b)  Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls  and   procedures  and  presented  in  this  report  our
               conclusions  about the  effectiveness of the disclosure  controls
               and  procedures  (as of the  end of the  period  covered  by this
               report based on such evaluation); and

          (c)  Disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's most recent fiscal quarter (the registrant's  fourth
               fiscal  quarter  in  the  case  of an  annual  report)  that  has
               materially  affected,  or  is  reasonably  likely  to  materially
               affect,   the   registrant's   internal  control  over  financial
               reporting; and;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors  (or  persons  performing  the  equivalent  functions):

                                      132
<PAGE>

          (a)  All  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal controls over financial reporting
               which are reasonably  likely to adversely affect the registrant's
               ability  to  record,  process,  summarize  and  report  financial
               financial information; and

          (b)  Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls over financial reporting.


Dated, June 21, 2004

/s/ Rex A. Licklider
--------------------------------------
Rex A. Licklider
Chief Executive Officer





                                      133
<PAGE>



                                     EXHIBIT
                                      31.2

                                CERTIFICATION OF
                                 TIMOTHY O'BRIEN


                                      134
<PAGE>


                                 CERTIFICATIONS


I, Timothy  O'Brien,  Chief Financial  Officer of The Sports Club Company,  Inc.
certify that:

          1.   I have  reviewed  this  annual  report on Form 10-K of The Sports
               Club Company, Inc.;

          2.   Based on my  knowledge,  this  report does not contain any untrue
               statement  of a material  fact or omit to state a  material  fact
               necessary  to  make  the   statements   made,  in  light  of  the
               circumstances   under  which  such   statements  were  made,  not
               misleading  with  respect  to the period  covered by this  annual
               report;

          3.   Based  on my  knowledge,  the  financial  statements,  and  other
               financial  information included in this report, fairly present in
               all  material  respects  the  financial  condition,   results  of
               operations  and cash flows of the  registrant as of, and for, the
               periods presented in this report;

          4.   The registrant's  other certifying  officer and I are responsible
               for   establishing  and  maintaining   disclosure   controls  and
               procedures  (as  defined  in  Exchange  Act Rules  13a-15(e)  and
               15d-15(e)) for the registrant and have:

               (a)  Designed such disclosure controls and procedures,  or caused
                    such disclosure controls and procedures to be designed under
                    our  supervision,   to  ensure  that  material   information
                    relating  to  the  registrant,  including  its  consolidated
                    subsidiaries,  is made  known to us by others  within  those
                    entities,  particularly  during  the  period  in which  this
                    report is being prepared;

               (b)  Evaluated the  effectiveness of the registrant's  disclosure
                    controls  and  procedures  and  presented in this report our
                    conclusions   about  the  effectiveness  of  the  disclosure
                    controls and procedures (as of the end of the period covered
                    by this report based on such evaluation); and

               (c)  Disclosed  in this  report  any  change in the  registrant's
                    internal  control over  financial  reporting  that  occurred
                    during the  registrant's  most recent  fiscal  quarter  (the
                    registrant's  fourth fiscal quarter in the case of an annual
                    report)  that  has  materially  affected,  or is  reasonably
                    likely  to  materially  affect,  the  registrant's  internal
                    control over financial reporting; and;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

                                      135
<PAGE>


                    (a)  All significant deficiencies and material weaknesses in
                         the  design or  operation  of  internal  controls  over
                         financial  reporting  which  are  reasonably  likely to
                         adversely  affect the  registrant's  ability to record,
                         process,   summarize  and  report  financial  financial
                         information; and

                    (b)  Any  fraud,  whether  or not  material,  that  involves
                         management  or other  employees  who have a significant
                         role  in  the  registrant's   internal   controls  over
                         financial reporting.

Dated, June 21, 2004

/s/ Timothy O'Brien
--------------------------------------
Timothy O'Brien
Chief Financial Officer




                                      136
<PAGE>



                                     EXHIBIT
                                      32.1

                                  CERTIFICATION
                                  PURSUANT TO
                             18 U.S.C. SECTION 1350,
                               AS ADOPTED PURSUANT
                                       TO
                               SECTION 906 OF THE
                             SARBANES-OXLEY ACT OF
                                      2002



                                      137
<PAGE>





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In  connection  with the annual  report of The Sports Club  Company,  Inc.  (the
"Company") on Form 10-K for the period  ending  December 31, 2003 filed with the
Securities and Exchange Commission on the date hereof (the "Report"),  I, Rex A.
Licklider,  Chief  Executive  Officer of the  Company,  certify,  pursuant to 18
U.S.C. (Section Mark) 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act
of 2002, that to my knowledge:

                    i.   The Report  fully  complies  with the  requirements  of
                         section 13(a) or 15(d) of the  Securities  Exchange Act
                         of 1934; and

                    ii.  The   information   contained  in  the  Report   fairly
                         represents,  in all material  respects,  the  financial
                         condition and result of operations of the Company.


/s/ Rex A. Licklider
------------------------------------------
The Sports Club Company, Inc.
Chief Executive Officer
June 21, 2004





                                      138
<PAGE>



                                     EXHIBIT
                                      32.2

                                  CERTIFICATION
                                  PURSUANT TO
                             18 U.S.C. SECTION 1350,
                               AS ADOPTED PURSUANT
                                       TO
                               SECTION 906 OF THE
                             SARBANES-OXLEY ACT OF
                                      2002


                                      139
<PAGE>





                           CERTIFICATION PURSUANT TO
                            18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In  connection  with the annual  report of The Sports Club  Company,  Inc.  (the
"Company") on Form 10-K for the period  ending  December 31, 2003 filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Timothy
O'Brien, Chief Financial Officer of the Company,  certify, pursuant to 18 U.S.C.
(Section  Mark) 1350, as adopted  pursuant to 906 of the  Sarbanes-Oxley  Act of
2002, that to my knowledge:

                    (1)  The Report  fully  complies  with the  requirements  of
                         section 13(a) or 15(d) of the  Securities  Exchange Act
                         of 1934; and

                    (1)  The   information   contained  in  the  Report   fairly
                         represents,  in all material  respects,  the  financial
                         condition and result of operations of the Company.


/s/ Timothy O'Brien
------------------------------------------
The Sports Club Company, Inc.
Chief Financial Officer
June 21, 2004



                                      140
<PAGE>