<PAGE>

                                                                    Exhibit 10.1
                                                                    ------------

                                 LIMITED WAIVER
                                 --------------

          This Limited Waiver (the "Limited Waiver") is entered into as of July
25, 2001 by and among:

     Cybex International, Inc., a New York corporation, having a place of
     business at 10 Trotter Drive, Medway, Massachusetts 02053 (the "Borrower");

     Cybex Financial Corp., Eagle Performance Systems, Inc., General Medical
     Equipment, Ltd., Lumex Bed Systems, Inc., Cybex Fitness Gerate Vertriebs
     GmBH, and Tectrix Fitness Equipment, Inc.  (individually, a "Guarantor" and
     collectively, the "Guarantors");

     The Lenders party to the Credit Agreement (defined below) (hereinafter
     collectively, the "Lenders")

     First Union National Bank, as Administrative Agent for the Lenders
     (hereinafter, in such capacity, the "Administrative Agent"), having a
     principal place of business at One First Union Center, 301 South College
     Street, TW-5, Charlotte, North Carolina 28288-0537;

in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

                                  WITNESSETH:
                                  ----------

1.   Background.  On May 21, 1998, the Administrative Agent, the Lenders, the
     ----------
     Borrower and the Guarantors, among others, entered into a Credit Agreement,
     pursuant to which the Lenders established, subject to the terms therein
     contained, revolving credit, letter of credit and term loan facilities in
     favor of the Borrower. The Credit Agreement was thereafter modified
     pursuant to the terms of various amendments thereto (the Credit Agreement
     as so amended shall hereinafter be referred to as the "Credit Agreement").

     The Borrower's Obligations to the Administrative Agent and the Lenders are
     secured by perfected (x) security interests in and to all of the Borrower's
     personal property, including, without limitation, all of the Borrower's
     accounts, chattel paper, inventory, equipment, fixtures, general
     intangibles, instruments, investment property, copyrights, trademarks, and
     patents, and (y) mortgage interests in certain of the Borrower's real
     estate, (all of the foregoing, collectively, the "Collateral").  In
     addition, the Guarantors have unconditionally guarantied the payment and
     performance of the Borrower's Obligations (the "Guaranties") and to secure
     their respective guaranties have granted the Administrative Agent for the
     benefit of the Lenders perfected security interests in and to all of their
     personal property, including, without limitation, all of their accounts,
     chattel paper, inventory, equipment, fixtures, general intangibles,
     instruments, investment property, copyrights, trademarks, and patents (the
     "Guarantors' Collateral").
<PAGE>

     Various Events of Default have arisen under the Credit Agreement, and on
     April 12, 2001 the Borrower, the Guarantors, the Lenders and the
     Administrative Agent entered into a Limited Waiver and Amendment No. 4 (the
     "Existing Waiver").  Various additional Events of Default have arisen or
     will arise under the Existing Waiver by virtue of the Borrower's failure to
     make certain principal payments with respect to the Term Loan which were
     due and payable on May 31, June 30, and July 31, 2001 (the "Payment
     Events") and the failure (if any) of the Borrower to fulfill the financial
     performance covenants contained therein as of June 30, 2001 (the "Covenant
     Events" and, together with the Payment Events, the "Existing Termination
     Events").  The Lenders and the Administrative Agent are willing to grant a
     limited and temporary waiver of those Existing Termination Events, on the
     terms and conditions set forth herein.

2.   Definitions. All capitalized terms used herein and not otherwise defined
     -----------
     shall have the same meaning herein as in the Credit Agreement and in the
     Existing Waiver, as applicable.

3.   Waiver of Claims
     ----------------

     a.   The Borrower and the Guarantors each acknowledge and agree that they
          do not have any offsets, defenses, or counterclaims against the
          Administrative Agent, the Issuing Lender, or the Lenders with respect
          to the Credit Agreement, the Guaranties, any other Credit Documents,
          or otherwise. To the extent that any such offsets, defenses or
          counterclaims may exist, the Borrower and each Guarantor hereby WAIVES
                                                                          ------
          and RELEASES the Administrative Agent, the Issuing Lender, the Lenders
              --------
          and their respective officers, representatives, counsel, trustees, and
          directors from any and all actions, causes of action, claims, demands,
          damages, and liabilities of whatever kind or nature, in law or in
          equity, now known or unknown, suspected or unsuspected. The Borrower
          and each Guarantor shall execute and deliver to the Administrative
          Agent, the Issuing Lender and each Lender such releases as the
          Administrative Agent, the Issuing Lender or any Lender may request to
          confirm the foregoing.

     b.   The Borrower and each Guarantor hereby ratifies and confirms that the
          Obligations (as modified hereby) are, and will continue to be, secured
          by the Collateral and the Guarantor Collateral.

4.   Limited Waiver. (a) The Administrative Agent and the Lenders hereby waive
     --------------
     the Payment Events, provided that each Payment Event will be immediately
     reinstated if the May, June, and July principal payments are not paid as
     follows:

                                       2
<PAGE>

          i.   The principal payment on the Term Loan due and payable on May 31,
               2001 shall be paid on the date the parties execute and deliver
               this Limited Waiver; and

          ii.  The principal payments on the Term Loan due and payable on June
               30, 2001 and July 31, 2001 shall be paid on August 16, 2001.

     (b)  The Administrative Agent and the Lenders hereby waive the Covenant
     Events through May 1, 2002. The waiver provided herein is a one-time waiver
     of the Covenant Events and is not a continuing waiver or a waiver of any
     other provisions of the Credit Agreement and other Credit Documents.

     (c)  Nothing contained herein shall (i) obligate the Administrative Agent
     or the Lenders to extend the limited waiver provided herein beyond August
     16, 2001 or May 1, 2002, as applicable (in that regard, at the close of
     business on August 16, 2001 or May 1, 2002, as applicable, the Payment
     Events (unless the principal payments required above have been made) and
     the Covenant Events will be immediately reinstated and the Administrative
     Agent and the Lenders may exercise any or all of their rights and remedies
     on account thereof), or (ii) limit any other rights of the Administrative
     Agent, the Issuing Lender, or the Lenders upon the occurrence of any other
     Event of Default (the Administrative Agent, the Issuing Lender and the
     Lenders reserving the right to take such action, at such times, on account
     thereof as they deem appropriate).

5.   Sale-Leaseback Transaction.   On or before August 10, 2001, the Borrower
     --------------------------
     shall have consummated a sale-leaseback transaction with respect to the
     Borrower's real property in Owatonna, Minnesota and in Medway,
     Massachusetts on terms and conditions satisfactory to the Lenders and the
     Borrower shall have agreed to the application of the proceeds realized
     therefrom to the Obligations as the Lenders may direct. The failure of the
     Borrower to have consummated such a transaction and to have agreed to the
     manner of application of such proceeds by such date shall constitute an
     additional Event of Default, upon which the waiver granted herein shall, at
     the option of the Lenders, immediately terminate and the Administrative
     Agent and the Lenders may immediately exercise their rights and remedies.

6.   Conditions to Effectiveness. This Limited Waiver shall not be effective
     ---------------------------
     until each of the following conditions precedent have been fulfilled to the
     satisfaction of the Administrative Agent and the Lenders:

     a.   This Limited Waiver shall have been duly executed and delivered by the
          respective parties hereto and shall be in form and substance
          satisfactory to the Administrative Agent and each of the Lenders.

     b.   All action on the part of the Borrower and each Guarantor necessary
          for the valid execution, delivery and performance by the Borrower and
          each Guarantor of this

                                       3
<PAGE>

          Limited Waiver shall have been duly and effectively taken and evidence
          thereof satisfactory to the Administrative Agent and the Lenders shall
          have been provided to the Administrative Agent and each of the
          Lenders.

     c.   The Borrower shall have paid to the Administrative Agent and Lenders
          all expenses (including reasonable attorneys fees) and other amounts
          then due and owing pursuant to the Credit Documents for which invoices
          have been presented as of the date of execution hereof.

     d.   Except for the Existing Defaults and the Existing Termination Events,
          no Default or Event of Default shall have occurred and be continuing.

     e.   The Borrower and the Guarantors shall have provided such additional
          instruments and documents to the Administrative Agent and the Lenders
          as the Administrative Agent and the Administrative Agent's counsel may
          have reasonably requested.

     f.   The principal payment on the Term Loan originally due and payable on
          May 31, 2001 shall have been paid in full.

7.   General.
     -------

     a.   This Limited Waiver shall be binding upon the Borrower and the
          Guarantors and their respective successors and assigns and shall enure
          to the benefit of the Administrative Agent, the Lenders, and their
          respective successors and assigns.

     b.   Any determination that any provision of this Limited Waiver or any
          application thereof is invalid, illegal, or unenforceable in any
          respect in any instance shall not affect the validity, legality, or
          enforceability of such provision in any other instance, or the
          validity, legality, or enforceability of any other provision of this
          Limited Waiver.

     c.   No delay or omission by the Administrative Agent or any Lender in
          exercising or enforcing any of its rights and remedies shall operate
          as, or constitute, a waiver thereof. No waiver by the Administrative
          Agent or any Lender of any of its rights and remedies on any one
          occasion shall be deemed a waiver on any subsequent occasion, nor
          shall it be deemed a continuing waiver.

     d.   This Limited Waiver incorporates all discussions and negotiations
          among the Borrower, the Guarantors, the Administrative Agent and the
          Lenders, either express or implied, concerning the matters included
          herein, any custom, usage, or course of dealings to the contrary
          notwithstanding. No such discussions, negotiations, custom, usage, or
          course of dealings shall limit, modify, or otherwise affect the
          provisions hereof. No modification, amendment, or waiver of any
          provision of this Limited Waiver or of any provision of any other
          agreement between the Borrower, the Guarantors, the Administrative
          Agent or any Lender

                                       4
<PAGE>

          shall be effective unless executed in writing by the party to be
          charged with such modification, amendment and waiver.

     e.   Except as modified hereby, all terms and conditions of the Credit
          Agreement, the Existing Waiver, and the other Credit Documents remain
          in full force and effect and the Borrower and Guarantors shall
          continue to comply therewith.

     f.   This Limited Waiver shall be deemed to constitute a "Credit Document"
          for all purposes under the Credit Agreement.

     g.   The Borrower and each Guarantor shall execute such instruments and
          documents as the Administrative Agent and the Lenders may from time to
          time request in connection with the Credit Agreement and the other
          Credit Documents, this Agreement and the arrangements contemplated
          hereby.

                                       5
<PAGE>

     It is intended that this Limited Waiver take effect as a sealed instrument.

                                     CYBEX INTERNATIONAL, INC.

                                     By /s/ John Aglialoro
                                       -------------------------------

                                     Print Name: John Aglialoro
                                                ----------------------

                                     Title:     CEO
                                           ---------------------------


                                     EAGLE PERFORMANCE SYSTEMS, INC.

                                     By /s/ John Aglialoro
                                       -------------------------------

                                     Print Name:   John Aglialoro
                                                ----------------------

                                     Title:      CEO
                                           ---------------------------


                                     GENERAL MEDICAL EQUIPMENT, LTD.

                                     By /s/ John Aglialoro
                                       -------------------------------

                                     Print Name:  John Aglialoro
                                                ----------------------

                                     Title:      CEO
                                           ---------------------------


                                     LUMEX BED SYSTEMS, INC.

                                     By /s/ John Aglialoro
                                       -------------------------------

                                     Print Name: John Aglialoro
                                                ----------------------

                                     Title:      CEO
                                           --------------------------

                                       6
<PAGE>

                                     CYBEX FITNESS GERATE VERTRIEBS, GMBH

                                     By /s/ John Aglialoro
                                       -----------------------------

                                     Print Name: John Aglialoro
                                                --------------------

                                     Title:       CEO
                                          --------------------------


                                     TECTRIX FITNESS EQUIPMENT, INC.

                                     By /s/ John Aglialoro
                                       -----------------------------

                                     Print Name:  John Aglialoro
                                                --------------------

                                     Title:       CEO
                                           ------------------------



AGREED AND ACCEPTED BY

FIRST UNION NATIONAL BANK

By: /s/ Ron R. Ferguson
   ---------------------------------

Print Name:    Ron R. Ferguson
           -------------------------

Title:       Senior Vice President
      ------------------------------

FLEET NATIONAL BANK

By: /s/ Kevin M. Behan
   ---------------------------------

Print Name:    Kevin M. Behan
           -------------------------

Title:       Vice President
      ------------------------------

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