EXHIBIT 10.2

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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

        5.01   Borrowers Existence.....................................................54

        5.02   Subsidiaries Existence..................................................54

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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

        9.03   Lenders Obligations Several.............................................88

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

        10.09   Lenders Indemnity.....................................................100

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

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

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

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

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

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

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



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`SCHEDULES

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

EXHIBITS

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



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

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

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

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

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

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

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



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





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| | Eurodollar Base Rate                     | 
| | ---------------------------------------- | 
| |                                          | 
| | 1.00  Eurocurrency Reserve Requirements | 





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

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



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

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

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

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

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



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

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

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

2.03   [Reserved].

2.04   [Reserved].

2.05   [Reserved].

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

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

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

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



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

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

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

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

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





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

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

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

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

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





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

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

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

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

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

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



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

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

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

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



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

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

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

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

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





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

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

2.16   Taxes.

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





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



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

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

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



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

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

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

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



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



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

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

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

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



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

2.19   Letters of Credit.

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





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(b)   Issuance of Letters of Credit.





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(c)  Participations, Drawings and Reimbursements.





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(d)   Repayment of Participations.



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





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





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

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



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3.01   Security.

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

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



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

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

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

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

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



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

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

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

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

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

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



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

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

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

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

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

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



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

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

(k)  [Reserved];

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

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

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

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



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

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

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

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



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

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

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

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

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

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

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





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

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

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

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

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

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



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

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

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



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

Borrower represents and warrants to each Lender that:

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

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



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

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

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

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

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

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



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

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

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

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

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

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

5.14   ERISA. Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and any other
applicable federal or state law, and except as listed on Schedule 5.14 no event
or condition is occurring nor is there any present intent to cause any such
event or condition to occur with respect to any Plan or Multiemployer Plan with
respect to which Borrower would be under an obligation to furnish a report to
Lenders in accordance with Section 6.02(d) hereof and which, taking all such
events or conditions arising within the last twelve-month period, in the
aggregate would result in liability to Borrower or an ERISA Affiliate in excess
of One Million Dollars ($1,000,000). For purposes of this



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

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

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

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

5.18   Environmental Matters.  As of the Closing Date:

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



---

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

(b)   to the best knowledge of Borrower, after reasonable inquiry, (i)
none of the real property owned in fee, or the assets or operations of Borrower
and the Subsidiaries related thereto is the subject of federal or state
investigation mandating any remedial action, involving expenditures, which is
needed to respond to a release of any Hazardous Materials into the environment,
(ii) there are no underground storage tanks present on or under the Properties
owned in fee, and (iii) there are no pending or threatened: (A) actions or
proceedings from any governmental agency or any other person or entity regarding
the disposal of Hazardous Materials, or regarding any Hazardous Materials Laws
or evaluation, or (B) liens or governmental actions, notices of violations,
notices of noncompliance or other proceedings of any kind relating to any of the
Hazardous Materials Laws with respect to the Properties; and

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

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

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

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



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

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

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

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



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

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

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

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





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---

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





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

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

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

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

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



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





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

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



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

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

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





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

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

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

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

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



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

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

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



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

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

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





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

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





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

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

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



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

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





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

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

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



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

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

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

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





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

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





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



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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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



---

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

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

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

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

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

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



---

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

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

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

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

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

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

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

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



---

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

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

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

THEN:





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

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

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

and shall be addressed to Agent at:

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

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



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

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

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

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

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

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



---

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

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



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

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

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

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

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

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

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



---

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

9.06   Costs and Expenses. Borrower agrees:



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

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



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

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

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



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

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

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

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

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



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

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

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

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

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

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

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



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

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

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

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



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

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

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

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



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

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

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

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



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

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

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





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

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

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



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

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

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

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



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

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

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



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

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

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



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

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

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



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



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

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

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



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

`BALLY TOTAL FITNESS HOLDING CORPORATION


                                    By:   __________________________________________
                                          Name:
                                          Title:`



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`JPMORGAN CHASE BANK, as Agent and as a Lender


                                    By:   __________________________________________
                                          Name:
                                          Title:`