exv10w1



 








Exhibit 10.1




CONFIDENTIAL SETTLEMENT AGREEMENT AND GENERAL RELEASE




     This Confidential Settlement Agreement and General Release is made and entered into on this
10th day of August 2006 (the “Effective Date”), by and between Paul A. Toback, on behalf of
himself, his heirs, executors, administrators, successors and/or assigns (hereinafter collectively
referred to as “TOBACK”), and Bally Total Fitness Holding Corporation, on behalf of itself, its
subsidiaries, affiliates, predecessors, insurers, attorneys, successors, assigns; and their
directors, officers, employees, and agents (hereinafter collectively referred to as the “COMPANY”
or “BALLY”).



     WHEREAS, TOBACK was continuously employed by the COMPANY since September, 1997, and most
recently under the title of President and Chief Executive Officer of BALLY between January 1, 2003
and the Effective Date; and



     WHEREAS, TOBACK and the COMPANY entered into an Employment Agreement dated as of August 24,
2004, as amended (“Employment Agreement,” attached hereto as Exhibit A); and



     WHEREAS, TOBACK’S employment with the COMPANY will be involuntarily terminated without Cause
(as defined in the Employment Agreement) on August 11, 2006 (the “Termination Date”); and



     NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, it is
agreed as follows:



Payments and Benefits to be Provided to TOBACK




     1. The COMPANY shall provide to TOBACK the payments and benefits described in the Term Sheet
attached hereto as Exhibit B, which is hereby expressly incorporated by reference herein
and made part hereof. All such payments and benefits and other items of taxable income shall be
subject to applicable wage withholding of income and employment taxes and shall be reported on IRS
Form W-2.



Release to the COMPANY




     2. In exchange for the consideration provided pursuant to this Agreement, TOBACK hereby
releases the COMPANY and any and all of its predecessors, successors, parents, affiliates and
subsidiaries, and its or their present and former officers, directors, agent, employees, and
shareholders, and the various benefit plans, committees, trustees, fiduciaries, and trusts from any
and all claims or causes of action he may have or claim to have against the COMPANY including, but
not limited to, any claims arising out of or relating in any way to his



 









 







employment with the COMPANY and/or the termination of that employment and the Employment
Agreement, except to the extent expressly provided herein. The claims released include, but are
not limited to: (a) all statutory claims including claims arising under the Illinois Revised
Statutes, the Illinois Human Rights Act, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act (“ADEA”) as amended by the Older Worker’s Benefit Protection Act,
the Americans with Disabilities Act, the Rehabilitation Act, the Employee Retirement Income
Security Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, the
Sarbanes-Oxley Act of 2002, and the Family and Medical Leave Act; (b) all claims arising under the
United States or Illinois Constitutions, or any Executive Order, or derived from or based upon any
federal or state regulations; (c) all common law claims including claims for wrongful discharge,
violation of public policy, breach of an express or implied contract, breach of an implied covenant
of good faith and fair dealing, negligent or intentional infliction of emotional distress,
defamation, conspiracy, tortious interference with contract or prospective economic advantage,
promissory estoppel, equitable estoppel, fraud, misrepresentations, detrimental reliance,
retaliation, and negligence; (d) all claims for any compensation including back wages, front pay,
bonuses or awards, commissions, fringe benefits, car allowance, car expenses, disability benefits,
severance benefits, reinstatements, retroactive seniority, pension benefits, profit-sharing,
contributions to 401(k) plans, or any other form of economic loss; (e) all claims for personal
injury, including physical injury, mental anguish, emotional distress, pain and suffering,
embarrassment, humiliation, damage to name or reputation, interest, liquidated damages, and
punitive damages; and (f) all claims for costs and attorneys’ fees.



     Notwithstanding the foregoing, nothing in this Section 2 is intended, nor shall be construed,
to release any future claims arising after the date of execution of this Agreement or to limit any
existing right or vested benefits which TOBACK may possess in accordance with the terms of any of
the COMPANY’S welfare benefit plans or pension or profit sharing/401(k) plans in which TOBACK is a
participant or TOBACK’S right to obtain the benefits, payments and entitlements set forth in
Exhibit B.



     TOBACK further represents that he will not knowingly provide information concerning the
COMPANY or his employment at the COMPANY to any person involved in any threatened or actual claims
against the COMPANY. Further, except concerning any Securities and Exchange Commission or
Department of Justice proceeding, TOBACK will not testify in any proceedings or participate in any
manner in proceedings against the COMPANY absent a lawful subpoena and will not testify concerning
the terms of this Agreement, including the



 









 







negotiations leading up to this Agreement, absent a court order compelling such testimony. TOBACK
further agrees to notify the COMPANY, through BALLY’S General Counsel, that he is served with any
subpoena relating to his employment at the COMPANY.


No Other Charges or Complaints



     3. The Board of Directors of BALLY (the “Board”) hereby represents and covenants as set forth
in the second paragraph of Item 6 of Exhibit B.



Indemnification




     4. TOBACK shall be indemnified as provided in Item 8 of Exhibit B.



Non-Disparagement




     5. TOBACK agrees not to make any statements to, or engage in any conduct in the presence of:
(i) any media (broadcast, print or internet); (ii) any current or former employees of the COMPANY;
or (iii) any current, former or prospective Company customer, business associate, vendor,
consultant, financial institution, accountant, investor, shareholder, bondholder, investment banker
or any other person or entity, if such statement or conduct may reasonably be expected to have the
effect of disparaging the COMPANY or its current or former directors, officers or employees.
Notwithstanding the foregoing, nothing in this Section 5 shall prohibit TOBACK from making truthful
statements when required by order of a court or other governmental body having jurisdiction.



     6. The COMPANY further agrees that neither the COMPANY, via any press release or other
intentionally published comments by any representative of the COMPANY, nor any executive officer or
director, shall make any statement or engage in any conduct in the presence of any third party, if
such conduct may reasonably be expected to have the effect of disparaging TOBACK. Notwithstanding
the foregoing, nothing in this Section 6 shall prohibit the COMPANY from making any truthful
statements when required by order of a court or other governmental body having jurisdiction.



Non-Admission of Liability




     7. This Agreement shall not constitute and shall not be considered an admission or
acknowledgment of any wrongdoing or liability by TOBACK and/or the COMPANY, the same being
expressly denied.



 









 





No Other Consideration




     8. TOBACK acknowledges and agrees that the payments, benefits and entitlements set forth
herein and in Exhibit B are greater than those to which he would otherwise have been
entitled and TOBACK and the COMPANY agree that the only consideration they have received for
executing this Agreement is the consideration set forth herein and in Exhibit B hereto;
that no promise, inducement, threat, agreement or understanding of any kind or description has been
made with them or to them or their attorneys to cause them to enter into this Agreement other than
as expressly set forth herein; and that they neither are entitled to nor will seek any further or
additional consideration.



Breach and/or Enforcement of Agreement




     9. Any disputes relating to enforcement and/or breach of this Agreement shall be resolved
through binding arbitration held in Chicago, Illinois, in accordance with the rules of the American
Arbitration Association, and Toback’s attorneys fees and litigation costs shall be paid by the
Company in accordance with Item 10 of Exhibit B.



Cooperation




     10. TOBACK will assist and cooperate with the COMPANY in accordance with Item 12 of
Exhibit B.



Voluntary Agreement




     11. The parties have carefully read and fully understand all the provisions of this Agreement.
The parties are voluntarily executing this Agreement. The parties acknowledge that they have had
the opportunity to obtain the advice of counsel, that they have done so to the extent desired, and
that they have had sufficient time to consider the Agreement and its ramifications without coercion
or intimidation before executing it.



 









 





Entire Agreement




     12. This Agreement contains the entire understanding of the parties and shall supersede all
other oral or written agreements or understandings between the parties, including but not limited
to, the Employment Agreement, with the exception of the restrictive covenants set forth in Section
5 of the Employment Agreement, the terms of which are expressly incorporated herein by reference
and made part hereof. This Agreement shall not be modified, altered or changed except upon the
express written consent of the parties hereto. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respect heirs, legatees, executors, representatives,
conservators, attorneys, successors, and assigns. Each of the parties to this Agreement represents
and warrants that the party’s own execution and performance of this Agreement does not violate any
agreement, court order or other covenant or restriction binding upon that party.



Non-Assignment




     13. Each of the parties to this Agreement warrants that such party has not assigned, conveyed
or transferred any claim, right or cause of action of any kind that the party has or may have in
connection with, relating to or arising out of any fact, allegation or matter which was or could
have been raised or settled in this Agreement.



Construction




     14. Each party to this Agreement has cooperated in the preparation of this Agreement. Hence,
this Agreement shall not be construed against any party on the basis that the party was the
draftsperson.



Effectuation




     15. Each of the parties to this Agreement agrees to execute any and all additional documents
necessary to effectuate the intent and purpose of this Agreement.



Choice of Law




     16. This Agreement shall be interpreted in accordance with the laws of the State of Illinois.



Severability




     17. If any provision of this agreement is held to be illegal, void, or unenforceable, such
provision shall be of no force or effect. However, the illegality or unenforceability of such
provision shall have no effect upon, and shall not impair the legality or enforceability of, any
other provision of this Agreement. Notwithstanding the foregoing, (a) TOBACK agrees that he shall
not at any time attempt to challenge the enforceability of the release, as set forth in Section 2
of this Agreement, (b) the COMPANY agrees that it shall not at any time attempt to challenge



 









 







the enforceability of the covenant, as set forth in Section 3 of this Agreement, or, (c) with
respect to either of TOBACK or the COMPANY, any other portion of this Agreement. The waiver by any
party of a breach or violation of this Agreement shall not operate as, or be construed to be, a
waiver of any subsequent or continuing breach thereof.



Return of Company Property




     18. By executing this General Release, TOBACK agrees that all COMPANY property in his
possession or control will be returned to the COMPANY on or prior to the Termination Date. Such
property shall include, without limitation, all documents, internal memoranda and records of any
nature relating to his employment at the COMPANY (other than documents relating to compensation and
employee benefits based on his employment at the COMPANY), together with all copies thereof, and
all COMPANY office equipment and keys, which relate in any way to the COMPANY’S business or
operation, but not his cell phone number and all personal items.



Compliance With Older Workers’ Benefit Protection Act




     19. TOBACK shall have twenty-one (21) days in which to review this Agreement and have it
reviewed by an attorney, it being understood that, at his option, TOBACK shall have the right to
execute the Agreement prior to that date. It is also understood and agreed that, with respect to
all claims other than claims arising under the ADEA, TOBACK shall be bound by the Agreement as of
the date of execution of the Agreement. With respect to claims arising under the ADEA, TOBACK
shall be bound by the Agreement if not revoked within seven (7) days after execution of the
Agreement. TOBACK further acknowledges and agrees that if he does revoke this Agreement pursuant
to the preceding sentence, he shall be required to repay the COMPANY the amounts described in the
first paragraph of Item 6 of Exhibit B. TOBACK understands and agrees that he is being
provided with consideration greater than that to which he is entitled, and it is further understood
and agreed that, by this Agreement, neither TOBACK nor the COMPANY is waiving any rights that may
arise after entering into this Agreement. TOBACK also has been advised of his right to consult
with legal counsel prior to executing a copy of this Agreement.



     TOBACK AND THE COMPANY REPRESENT THAT THEY HAVE CAREFULLY READ AND FULLY UNDERSTAND ALL OF THE
PROVISIONS OF THIS AGREEMENT, THAT THEY HAVE HAD SUFFICIENT OPPORTUNITY TO REVIEW AND DISCUSS THIS
AGREEMENT WITH AN ATTORNEY; THAT THEY HAVE BEEN GIVEN A REASONABLE PERIOD OF TIME WITHIN WHICH TO
CONSIDER THE AGREEMENT BEFORE SIGNING IT; AND THAT THEY ARE VOLUNTARILY SIGNING THE AGREEMENT WITHOUT ANY
DURESS OR COERCION.










 



     IN WITNESS WHEREOF, the parties have executed this Confidential Settlement Agreement and
General Release on the date first above written.



	 	 	 	 	 
	s/ Paul A. Toback

	 	Date:
	 	August 10, 2006
	 

	 	 	 	 
	PAUL A. TOBACK
	 	 	 	 






	 	 	 	 	 
	BALLY TOTAL FITNESS HOLDING CORPORATION
	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	s/ Marc D. Bassewitz

	 	Date:
	 	August 10, 2006
	 

	 	 	 	 
	By: MARC D. BASSEWITZ
	 	 	 	 







 









 








EXHIBIT A




PAUL A. TOBACK EMPLOYMENT AGREEMENT




Bally Total Fitness Holding Corporation

Chief Executive Officer Employment Agreement




     THIS EMPLOYMENT AGREEMENT (the “Agreement”) made in Chicago, Illinois, dated as of August 24,
2004 (the “Effective Date”), by and between Bally Total Fitness Holding Corporation, a Delaware
Corporation with its headquarters at 8700 West Bryn Mawr Avenue, Chicago, Illinois, 60631-3707
(hereinafter called the “Company” or “Bally”), and Paul A. Toback (hereinafter called the
“Executive”).



     WHEREAS, since January 1, 2003, the Executive has been employed by the Company as its
President and Chief Executive Officer pursuant to an employment agreement with the Executive dated
as of January 1, 2003 (the “Initial Agreement”); and



     WHEREAS, the Company desires to be assured of the Executive’s experience, skills, knowledge,
and background for the benefit of the Company, and the efficient achievement of the long-term
strategy of the Company, and is therefore willing to extend the term of the Executive’s employment
upon the terms and conditions, and in consideration of the compensation and additional benefits,
provided herein.



     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements of
the parties herein contained, the parties hereto agree that the Initial Agreement is hereby amended
and restated in its entirety to provide as follows (it being understood that this Agreement
supersedes the Initial Agreement in whole and is the controlling agreement between the parties):




	1.	 	Definitions. For purposes of this Agreement, the following capitalized terms shall have the indicated meanings:






	 	(a)	 	“Annual Bonus” shall mean the Executive’s Annual Bonus, as defined in Section 4(b) of this Agreement.
	 
	 	(b)	 	“Bally” shall mean the Company.
	 
	 	(c)	 	“Base Salary” shall mean the Executive’s Base Salary, as defined in Section 4(a) of this Agreement.
	 
	 	(d)	 	“Benefit” shall mean a Benefit, as defined in Section 8(a) of this Agreement.
	 
	 	(e)	 	“Board” shall mean the Board of Directors of the Company.
	 
	 	(f)	 	“Business Relocation Beyond a Reasonable Commuting Distance” shall mean a change in the Executive’s
principal work location to a location that (i) is more than twenty (20) highway miles from the
Executive’s principal work location immediately prior to the Change in Control, and (ii) increases
the Executive’s commuting distance in highway mileage.
	 
	 	(g)	 	“Cause” shall mean the Executive’s:






	 	(i)	 	Conviction of a crime, including by a plea of guilty or nolo contendere, involving
theft, fraud, perjury, or moral turpitude;
	 
	 	(ii)	 	Intentional or grossly negligent disclosure of confidential or trade secret
information of the Company to anyone not entitled to such information;
	 
	 	(iii)	 	Omission or dereliction of any statutory or common law duty of loyalty to the Company;




 









 






	 	(iv)	 	Failure to cure a material violation of the Company’s Code of Conduct or any other
written Company policy within thirty (30) days following the Company’s written notice
to the Executive of such material violation and the steps required by the Executive
to effect such cure; or
	 
	 	(v)	 	Repeated failure to carry out the material components of the Executive’s duties
despite specific written notice to do so by the Board.






	 	(h)	 	“Change In Control” shall mean the happening of any of the following events:






	 	(i)	 	An acquisition by any individual, entity, or group (within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act) (an
“Entity”) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of either (A) the
then-outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”), or (B) the combined voting
power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities”); excluding, however, the
following: (1) any acquisition directly from the Company, other than
an acquisition by virtue of the exercise of a conversion privilege
unless the security being so converted was itself acquired directly
from the Company, (2) any acquisition by the Company, (3) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled
by, or under common control with, the Company, or (4) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B), and (C) of subsection (iii) of this
Section 1(h);
	 
	 	(ii)	 	A change in the composition of the Board such that the individuals
who, as of the Effective Date, constitute the Board (such Board
shall be hereinafter referred to as the “Incumbent Board”) cease for
any reason to constitute at least a majority of the Board;
provided, however, that for purposes of this definition, any individual
who becomes a member of the Board subsequent to the Effective Date,
whose election, or nomination for election, by the Company’s
stockholders was approved by a vote of at least a majority of those
individuals who are members of the Board and who were also members
of the Incumbent Board (or deemed to be such pursuant to this
provision), shall be considered as though such individual were a
member of the Incumbent Board; and provided further, however,
that any such individual whose initial assumption of office occurs
as a result of or in connection with either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of
an Entity other than the Board shall not be so considered as a
member of the Incumbent Board;




 









 






	 	(iii)	 	The approval by the stockholders of the Company of a merger,
reorganization, consolidation, or sale or other disposition of all
or substantially all of the assets of the Company (each, a
“Corporate Transaction”) or, if consummation of such Corporate
Transaction is subject, at the time of such approval by
stockholders, to the consent of any government or governmental
agency, the obtaining of such consent (either explicitly or
implicitly by consummation, followed by the consummation of the
Corporate Transaction); excluding, however, such a Corporate
Transaction pursuant to which (A) all or substantially all of the
individuals and entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly,
more than sixty percent (60%) of, respectively, the outstanding
shares of common stock, and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without
limitation, a corporation or other person which as a result of such
transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries
(a “Parent Company”) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Entity (other than the
Company, any employee benefit plan (or related trust) of the
Company, such corporation resulting from such Corporate Transaction,
or, if reference was made to equity ownership of any Parent Company
for purposes of determining whether clause (A) above is satisfied in
connection with the applicable Corporate Transaction, such Parent
Company) will beneficially own, directly or indirectly, twenty
percent (20%) or more of, respectively, the outstanding shares of
common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the
election of directors unless such ownership resulted solely from
ownership of securities of the Company prior to the Corporate
Transaction, and (C) individuals who were members of the Incumbent
Board will immediately after the consummation of the Corporate
Transaction constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction (or, if reference was made to equity ownership of any
Parent Company for purposes of determining whether clause (A) above
is satisfied in connection with the applicable Corporate
Transaction, of the Parent Company); or
	 
	 	(iv)	 	The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.






	 	(i)	 	“COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
	 
	 	(j)	 	“Code” shall mean the Internal Revenue Code of 1986, as amended.
	 
	 	(k)	 	“Company” shall mean Bally Total Fitness Holding Corporation, a Delaware corporation.
	 
	 	(l)	 	“Competitive Activity” shall mean a Competitive Activity, as defined in Section 5(a)(i) of this Agreement.
	 
	 	(m)	 	“Effective Date” shall mean January 1, 2004.
	 
	 	(n)	 	“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
	 
	 	(o)	 	“Excise Tax” shall mean the Excise Tax, as defined in Section 8(a) of this Agreement.
	 
	 	(p)	 	“Excise Tax Adjustment Payment” shall mean the Excise Tax Adjustment Payment, as defined in Section 8(a)
of this Agreement.
	 
	 	(q)	 	“Executive” shall mean Paul A. Toback.




 









 






	 	(r)	 	“Expiration Date” shall mean the Expiration Date, as defined in Section 3 of this Agreement.
	 
	 	(s)	 	“Extension Date” shall mean the Extension Date, as defined in Section 3 of this Agreement.
	 
	 	(t)	 	“Firm” shall mean the Firm, as defined in Section 8(b) of this Agreement.
	 
	 	(u)	 	“Good Reason” shall mean the occurrence of any of the following events without the Executive’s express
written consent:






	 	(i)	 	A material reduction in authority or responsibility of the executive;
	 
	 	(ii)	 	A reduction in compensation; or
	 
	 	(iii)	 	A business relocation beyond a reasonable commuting distance.
	 
	 	 	 	Whether a Reduction in Authority or Responsibility of the Executive
is material shall be determined in accordance with the criteria set
forth below in the definition of Reduction in Authority or
Responsibility; provided, however, that (A) changes in reporting
relationships; or (B) a reduction in the Executive’s business unit’s
budget or a reduction in the Executive’s business unit’s head count,
by themselves, shall not constitute Good Reason.






	 	(v)	 	“Income Tax Gross-Up Payment” shall mean the Income Tax Gross-Up Payment, as defined in Section 4(d) of this Agreement.
	 
	 	(w)	 	“Income Taxes” shall mean the Income Taxes, as defined in Section 4(d) of this Agreement.
	 
	 	(x)	 	“Indemnitees” shall mean the Indemnitees, as defined in Section 6(h) of this Agreement.
	 
	 	(y)	 	“Initial Agreement” shall mean the employment agreement between the Company and the Executive dated as of January 1, 2003.
	 
	 	(z)	 	“IRS” shall mean the Internal Revenue Service.
	 
	 	(aa)	 	“Long-Term Disability” shall mean the Executive’s mental or physical condition which would render the Executive eligible
to receive disability benefits under the Basic Bally Long-Term Disability Plan and Bally Executive Medical Plan or any
successor to such plans.
	 
	 	(bb)	 	“LTIP” shall mean the LTIP, as defined in Section 4(c) of this Agreement.
	 
	 	(cc)	 	“Products” shall mean the Products, as defined in Section 20 of this Agreement.
	 
	 	(dd)	 	“Reduction in Authority or Responsibility” shall mean, during the Term of Employment, (i) the assignment to the Executive,
within six (6) months before or any time after a Change in Control, of any duties that are materially inconsistent in any
respect with the Executive’s position (which may include status, offices, titles, and reporting requirements), authority,
duties, or responsibilities as in effect immediately prior to such assignment, or (ii) any other action by the Company
which results in a diminution in such position, authority, duties, or responsibilities, excluding for this purpose (A) an
isolated, insubstantial, and inadvertent action taken in good faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive, or (B) any temporary Reduction in Authority or Responsibility while the
Executive is absent from active service on any approved disability, or other approved leave of absence.
	 
	 	 	 	By way of example, a reduction under this subsection 1(dd) shall include, but not be limited to:





 









 






	 	(A)	 	The removal of any division, business or operating unit, or other
business organization from the direct managerial responsibility of the
Executive, or material reduction in the size or scope of
responsibility or operating budget of any division, business,
operating unit, or other business organization for which the Executive
has direct managerial responsibility; or
	 
	 	(B)	 	A reduction in the Executive’s authority to legally bind the Company
without first obtaining any additional authority or approval.
	 

	 	 	 	It is intended by this definition that a Change in Control by itself, absent a Reduction in
Authority or Responsibility as described above, will not constitute Good Reason.






	 	(ee)	 	“Reduction in Compensation” shall mean a reduction in the Executive’s “Total Annual
Compensation” (defined as the sum of the Executive’s annual Base Salary rate and Target
Annual Bonus) for any calendar or fiscal year, as applicable, to an amount that is less than
the Executive’s Total Annual Compensation in effect immediately prior to such reduction.
	 
	 	(ff)	 	“Related Company” shall mean any subsidiary or affiliate of the Company.
	 
	 	(gg)	 	“Target Annual Bonus” shall mean the Executive’s Target Annual Bonus, as defined in Section
4(b) of this Agreement.
	 
	 	(hh)	 	“Term of Employment” shall mean the Executive’s Term of Employment, as defined in Section 3
of this Agreement.
	 
	 	(ii)	 	“Termination Date” shall mean the Termination Date, as defined in Section 3 of this Agreement.
	 
	 	(jj)	 	“Works” shall mean the Works, as defined in Section 20 of this Agreement.






	2.	 	Employment and Duties.






	 	(a)	 	Position. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to serve the Company, during the Term of
Employment under the title of Chief Executive Officer and President of
Bally, who shall have such authority, duties, and responsibilities as
are commensurate with such position on the terms and conditions
hereinafter set forth, and who shall directly report to the Board.
	 
	 	(b)	 	Performance of Duties. The Executive shall devote his full working
attention and energies to the performance of his duties as Chief
Executive Officer and President or as may otherwise be directed by the
Board, and agrees to use his reasonable best efforts to perform his
duties faithfully and efficiently.
	 
	 	(c)	 	Related Companies. The Executive agrees to serve, as requested, as
an officer or director of any Related Company, and shall receive no
additional compensation for such service.





 









 






	3.	 	Term of Employment. The Company shall employ the Executive for a
period of time beginning on the Effective Date and ending on his
Termination Date as hereby described in Section 3 of this Agreement
(the “Term of Employment”). Unless the Executive’s employment is
sooner terminated, as provided in Section 6 of this Agreement, the
Term of Employment shall end on December 31, 2007 (“Termination
Date”). Provided, however, that on January 1, 2008, and on each
anniversary of January 1, 2008 thereafter until the Term of Employment
ends (each such January 1 is hereinafter referred to as the “Extension
Date”), the Term of Employment shall be automatically extended for
twelve (12) additional months unless, at least ninety (90) days prior
to any such Extension Date, either party gives written notice to the
other that the Term of Employment shall not be so extended, in which
case the Executive’s employment with the Company shall terminate on
the day immediately preceding the relevant Extension Date (the
“Expiration Date”). The day immediately preceding the relevant
extension date (the “Expiration Date”) shall now become the
“Termination Date”.
	 
	4.	 	Executive’s Compensation and Benefits. As remuneration to the
Executive for his services to the Company hereunder, the Company shall
compensate the Executive as follows during the Term of Employment:






	 	(a)	 	Base Salary. The Executive’s annual base salary (“Base Salary”)
shall be $575,000 commencing as of the Effective Date and, except as
it may be modified in accordance with this Section 4, continuing
throughout the Term of Employment. The Base Salary shall be payable in
conformity with the Company’s then-current payroll practices, as
modified from time to time. The Base Salary as of the Effective Date
may not be decreased during the Term of Employment and will be
reviewed annually during the Term of Employment in accordance with
Bally’s usual salary review process for executive officers. Effective
as of the date of any increase in the Executive’s Base Salary, the
Base Salary as so increased shall be considered the new Base Salary
for all purposes of this Agreement.
	 
	 	(b)	 	Annual Incentive. For each calendar year during the Term of
Employment, the Executive shall be eligible to receive an annual cash
bonus (“Annual Bonus”), based upon the attainment of such performance
criteria as may be reasonably established by the Board. The
Executive’s target Annual Bonus (“Target Annual Bonus”) for each full
calendar year shall be seventy percent (70%) of his annual Base Salary
(prorated for the calendar year in which the Term of Employment ends
prior to December 31). During the Term of Employment, the performance
goals to be achieved, and the extent to which those goals have been
achieved for purposes of calculating the amount of the actual payment
as a percentage of target (which percentage may be more or less than
one hundred percent (100%) of target), will be determined by the
Board.
	 
	 	(c)	 	Long-Term Incentive. The Executive shall be eligible to
participate in the Bally Total Fitness 1996 Long-Term Incentive Plan
(“LTIP”) and any and all successor or replacement plans, as may be
determined by the Board or duly authorized Committee of the Board.
	 
	 	(d)	 	Restricted Shares Tax Gross-Up. If at any time the vesting of any
restricted shares of Company stock awarded to the Executive under the
LTIP subjects the Executive to any Federal, state, or local income
taxes or FICA taxes (collectively, “Income Taxes”), then the Executive
shall be entitled to an additional lump-sum cash payment from the
Company (the “Income Tax Gross-Up Payment”), subject to mandatory
withholding, in an amount equal to the Income Taxes and the Income
Taxes attributable to the Income Tax Gross-Up Payment. For purposes of
calculating an Income Tax Gross-Up Payment to the Executive in any
year, it shall be assumed that the Executive is subject to Income
Taxes at the highest marginal Federal and applicable state and local
income tax rates, respectively, for the year in which the Income Tax
Gross-Up Payment is paid. Also, the Income Tax Gross-Up Payment to the
Executive shall reflect the Federal tax benefits attributable to the
deduction of applicable state and local income taxes.
	 
	 	(e)	 	Supplemental Retirement Plan. The Company shall use its reasonable
best efforts to develop and adopt a supplemental retirement plan for
the benefit of the Executive, which may include such other senior
executive officers of the Company as the Board determines is
appropriate, and which may provide for benefit accruals retroactive to
the Effective Date of this Agreement. The benefits, terms, and
conditions of such plan shall be in the sole discretion of the
Company.
	 
	 	(f)	 	Car Allowance. The Executive shall be entitled to receive a
monthly payment of $1,666.66 as a car allowance.




 









 






	 	(g)	 	Financial Counseling Services. The Executive shall be entitled to
receive reimbursement of up to $7,500 per year for financial
counseling services from a qualified financial counselor, including
the preparation of personal income tax returns, plus a tax adjustment
payment equal to the amount, calculated in accordance with the
Company’s practice for senior executives, to cover the Income Taxes
estimated to be incurred by the Executive by reason of any imputed
income for financial counseling services and the tax adjustment
payment provided for in this Section 4(g). Reimbursement for such
financial counseling services shall be made to the Executive upon
presentation of appropriate invoices from the qualified financial
counselor.
	 
	 	(h)	 	Home Security Services. The Executive shall be entitled to receive
reimbursement of up to $2,000 per year for expenses incurred for the
provision of personal security services for the Executive and his
immediate family. Reimbursement for such personal security services
shall be made to the Executive upon presentation of appropriate
invoices.
	 
	 	(i)	 	Life Insurance. The Company shall obtain at its expense life
insurance coverage on the life of the Executive for each calendar year
during the Term of Employment, providing a death benefit to the
Executive’s designated beneficiary or beneficiaries in an amount equal
to three (3) times the sum of the Executive’s annual Base Salary rate
in effect as of the last day of the immediately preceding calendar
year plus the amount of the Executive’s Annual Bonus paid in such
preceding calendar year.
	 
	 	(j)	 	Vacation. The Executive shall be entitled to no less than four (4)
weeks of paid vacation each calendar year (prorated for the calendar
year in which the Term of Employment ends prior to December 31), and
such personal days and paid holidays as are generally available to
other similarly situated executive employees of the Company.
	 
	 	(k)	 	Deferral Account. The Executive shall be entitled to participate
in the Company’s executive deferred compensation program in accordance
with its terms. The benefits, terms, and conditions of such program
shall be in the sole discretion of the Company.
	 
	 	(l)	 	Expenses. The Executive shall be entitled to receive prompt
reimbursement for all reasonable and necessary expenses incurred by
the Executive in the connection with the performance of his duties
hereunder, in accordance with Company policies for similarly situated
senior executives.






	5.	 	Restrictive Covenants.






	 	(a)	 	Noncompetition. The following noncompetition provisions shall apply:





 









 






	 	(i)	 	The Executive shall not, at any time during his employment with the
Company or the twelve (12) month period commencing on the day
immediately following the date (the “Termination Date”) on which his
employment with the Company terminates for any reason, without the
consent of the Board, directly or indirectly engage in any activity
that the Board, in the exercise of its reasonable business judgment,
determines is competitive with or adverse to the Company’s business
or welfare, whether alone, as a partner of any partnership or joint
venture, or as an officer, director, employee, independent
contractor, consultant, or investor (a “Competitive Activity”). In
furtherance of the immediately foregoing sentence, the Executive
shall promptly notify the Board (or its representative) in advance
in writing (which shall include a description of the activity) of
his intention to engage in any activity which could reasonably be
deemed to be subject to this noncompetition provision, and the Board
shall respond to the Executive in writing within 10 calendar days
indicating its approval or objections to the Executive’s engagement
in the activity, provided, however, that if the Board (or its
representative) does not respond to or request additional
information from the Executive within such ten (10) day period, the
Board’s approval shall be deemed to be granted. If the Executive
fails to notify the Board of his intended activity in advance, the
Board shall retain all its rights of objections. Notwithstanding the
preceding provisions of this Paragraph, this Section 5(a)(i) shall
not be construed as preventing the Executive from investing his
personal assets in any business that competes with the Company, in
such form or manner as will not require any services on the part of
the Executive in the operation of the affairs of the business in
which such investments are made, but only if the Executive does not
own or control five percent (5%) or more of any class of the
outstanding stock, or of any profits interest or capital interest
(as applicable), of such business.
	 
	 	(ii)	 	The payments, benefits, and other entitlements under this Agreement
are being made in consideration of, among other things, the
obligations of this Section 5 and, in particular, compliance with
Section 5(a) of this Agreement; provided, however, that all such
payments, benefits, or other entitlements under the Agreement are
subject to and conditioned upon the Executive’s entering into the
Release and Agreement referred to in Section 6(h) of this Agreement.
	 
	 	(iii)	 	During the twenty-four (24) month period commencing on the day
immediately following the Termination Date, the Executive shall not
(A) influence or attempt to influence any person, firm, association,
partnership, corporation, or other entity that is a contracting
party with the Company to terminate any written agreement with the
Company, except to the extent the Executive is acting on behalf of
the Company in good faith, or (B) hire or attempt to hire for
employment any person who is employed by the Company, or attempt to
influence any such person to terminate employment with the Company,
except to the extent the Executive is acting on behalf of the
Company in good faith; provided, however, that nothing herein
shall prohibit the Executive from generally advertising for
personnel not specifically targeting any executive or other
personnel of the Company.
	 
	 	(iv)	 	During the Term of Employment and for the twenty-four (24) month
period immediately thereafter, the Executive shall not publicly
criticize or disparage the Company, any Related Company, or any
director, officer, executive, or agent of the Company or any Related
Company, except as may be required by law.
	 
	 	(v)	 	During the Term of Employment and for the twenty-four (24) month
period immediately thereafter, the Company shall not issue any
defamatory statements about the Executive.





 









 






	 	(b)	 	Confidentiality. The Executive agrees that he will not, at any
time during his Term of Employment or thereafter, disclose or use any
trade secret, proprietary, or confidential information of the Company
or any Related Company (other than any such information that is in the
public domain other than through the fault of the Executive), except
as may be required in the course of his employment by the Company, as
may be otherwise allowed with the written permission of the Company
or, as applicable, such Related Company, or as may be required by law;
provided, however, that, if the Executive is required by any
subpoena, court order, regulation, or law to disclose such
information, he shall promptly notify the Company and cooperate with
the Company in seeking a protective order.
	 
	 	 	 	The Executive agrees that on or prior to the Termination Date,
regardless of whether his employment is terminating at the initiative
of the Executive or the Company, and regardless of the reasons
therefor, he will deliver to the Company, and not keep or deliver to
anyone else, any and all physical matter, including any and all notes,
files, memoranda, papers, and other documents, containing information
regarding the conduct of the business of the Company or any Related
Company, except that the Executive may retain such physical matter
that does not contain any trade secret, proprietary, or confidential
information as may be allowed with the written permission of the
Company’s General Counsel.
	 
	 	(c)	 	Breach.






	 	(i)	 	Any material breach by the Executive of the provisions of Sections
5(a) or (b) of this Agreement shall relieve the Company of all
obligations to make any further payments to the Executive pursuant to
Sections 4 and 6 of this Agreement (including under all Company
equity award grants pursuant to Section 4 of this Agreement) or
otherwise under any incentive or equity awards made by the Company,
and shall entitle the Company to repayment from the Executive, upon
demand, under any previously paid equity award grants pursuant to
Section 4 of this Agreement; provided, however, that no
forfeiture, cancellation, or repayment shall take place with respect
to any payments, benefits, or entitlements under this Agreement or
any other award agreement, plan, or practice, unless the Company
shall have first given the Executive written notice of its intent to
so forfeit, cancel, or require repayment and the Executive has not,
within thirty (30) days after such notice has been given, ceased such
impermissible Competitive Activity; and provided further,
however, that such prior notice
procedure shall not be required with respect
to (A) a Competitive Activity or violation of Sections 5(b) of this
Agreement which the Executive initiated after the Company had
informed the Executive in writing that it believed such Competitive
Activity violated this Agreement or Bally’s noncompetition
guidelines, or (B) any Competitive Activity regarding products or
services which are part of a line of business which the Executive
knew or should have known represented more than five percent (5%) of
the Company’s consolidated gross revenues for its most recent
completed fiscal year at the time the Executive’s employment is
terminated.
	 
	 	(ii)	 	The Executive acknowledges that the restrictions contained in this
Section 5 are reasonable and necessary to protect the legitimate
interests of the Company and that any breach by the Executive of any
portion of this Section 5 will result in irreparable injury to the
Company. The Executive agrees that the Company’s remedies at law
would be inadequate in the event of a breach or threatened breach of
this Section 5 and, accordingly, that the Company shall be entitled,
in addition to its rights at law, to temporary, preliminary, and
permanent injunctive relief and other equitable relief, without the
need to post a bond.






	6.	 	Termination Provisions.






	 	(a)	 	Benefits upon Involuntary Termination Other than for Cause; Benefits
upon Involuntary Termination Other than Within Two Years Following
Change in Control. In the event that the Executive’s employment
is involuntarily terminated by the Company, and such termination is
other than for Cause and other than within two (2) years following a
Change in Control, the Executive shall be entitled to:




 









 












	 	(i)	 	An immediate lump sum payment equal to the greater of (A) all
amounts of Base Salary that would otherwise be payable for the
remainder of the then-current Term of Employment and that remain
unpaid, or (B) two (2) times the Executive’s then-current annual
Base Salary;
	 
	 	(ii)	 	If such termination occurs prior to the payment of the Executive’s
Annual Bonus payable with respect to the immediately preceding
calendar year, immediate payment of the full amount of the
Executive’s Annual Bonus for such year;
	 
	 	(iii)	 	Immediate payment of an amount equal to two (2) times the
Executive’s Target Annual Bonus for the then-current calendar year;
	 
	 	(iv)	 	Immediate payment for any unused, earned vacation days (but not for
any unearned vacation days) for the calendar year in which his
employment is terminated and for any approved and unexpired
carryover days (not to exceed the number of carryover days as
approved by the Company) from the prior year;
	 
	 	(v)	 	Immediate vesting of, and continuation of the ability of the
Executive to exercise through the LTIP’s exercise period (as if the
Executive remained an active employee of the Company), all awards
granted to the Executive under the LTIP prior to his Termination
Date, subject to the terms and conditions of the LTIP; and
	 
	 	(vi)	 	Company-provided continuation of medical coverage (on either an
insured or a self-insured basis, in the sole discretion of the
Company) for the Executive and his eligible dependents (as
determined under the terms of the Company’s medical expense plan),
on substantially the same terms of such coverage that are in
existence immediately prior to the Executive’s termination of
employment (subject to commercial availability of such coverage),
for a period equal to the period of the Executive’s employment with
the Company; provided, however, that such coverage shall run
concurrently with any coverage available to the Executive and his
eligible dependents under COBRA; and provided further, however,
that the Executive shall immediately notify the Company if he
becomes covered under Medicare or another employer’s group health
plan, at which time the Company’s provision of medical coverage for
the Executive and his eligible dependents will cease.






	 	(b)	 	Death or Long-Term Disability. If, at any time after the Effective
Date, the Executive’s employment terminates before the Expiration Date
as a result of the Executive’s death or Long-Term Disability, the
Executive or his estate (as applicable) shall be entitled to:






	 	(i)	 	Immediate payment of any unpaid Base Salary through the date of his
death or Long-Term Disability;
	 
	 	(ii)	 	If such termination occurs prior to the payment of the Executive’s
Annual Bonus payable with respect to the immediately preceding
calendar year, immediate payment of the full amount of the
Executive’s Annual Bonus for such preceding year;
	 
	 	(iii)	 	Immediate payment for any unused, earned vacation days (but not for
any unearned vacation days) for the calendar year in which his
employment is terminated and for any approved and unexpired
carryover days (not to exceed the number of carryover days as
approved by the Company) from the prior year; and
	 
	 	(iv)	 	Immediate vesting of, and continuation of the ability of the
Executive or Executive’s beneficiaries (as applicable) to exercise
(as if the Executive remained an active employee of the Company),
all awards granted to the Executive under the LTIP prior to his
Termination Date, subject to the terms and conditions of the LTIP.




 









 












	 	(c)	 	Termination for Cause. In the event the Executive’s employment is
terminated for Cause at any time after the Effective Date, the
Executive shall not receive any payments, benefits, or other amounts
provided by this Agreement (but shall still be subject to the
restrictive covenants set forth in Section 5 of this Agreement). The
Executive may, however, be eligible for certain benefits under the
Company’s tax-qualified pension and other employee benefit plans. The
Executive’s employment may not be terminated for Cause prior to
advance written notice to the Executive containing reasonable detail
of the activity, facts, or circumstances constituting Cause for
termination, the actions that the Executive must take to cease such
activity or cure such facts and circumstances, and a reasonable amount
of time (not to exceed thirty (30) days) for the Executive to
effectuate such cure.
	 
	 	(d)	 	Voluntary Resignation Without Good Reason. In the event the
Executive voluntarily resigns without Good Reason on or after July 1,
2005, the Executive shall be entitled to receive an immediate lump sum
payment equal to no less than sixty percent (60%) of the sum of his
(a) then-current annual Base Salary, and (b) Target Annual Bonus for
the then-current calendar year and may upon approval by the Board,
receive payment greater than 60% of the above-mentioned Base Salary
and Target Annual Bonus amounts; provided, however, that such payment
shall be contingent upon the Executive giving the Board at least
ninety (90) days’ advance written notice of his resignation date. In
the event the Executive voluntarily resigns without Good Reason before
July 1, 2005, the Executive shall not be entitled to any benefits
under this Section 6(d).
	 
	 	(e)	 	Termination for Good Reason, or Involuntary Termination (Other than
for Cause) Within Two Years Following a Change in Control. If (A)
the Executive’s employment is involuntarily terminated by the Company
other than for Cause within two (2) years following a Change in
Control, or (B) the Executive terminates his employment for Good
Reason, the Executive shall be entitled to:






	 	(i)	 	A severance payment that is a lump sum cash payment equal to three
hundred percent (300%) of the sum of (A) the Executive’s highest
annual Base Salary rate in effect on or after the day immediately
preceding the date of the Change in Control, plus (B) the
Executive’s Target Annual Bonus for the year in which the Change in
Control occurs (or, if the Change in Control occurs prior to the
date in a calendar year on which the Executive’s Target Annual Bonus
is determined, for the preceding calendar year);
	 
	 	(ii)	 	If such termination occurs prior to the payment of the Executive’s
Annual Bonus payable with respect to the immediately preceding
calendar year, immediate payment of the full amount of the
Executive’s Annual Bonus for such preceding year;
	 
	 	(iii)	 	Immediate payment for any unused, earned vacation days (but not for
any unearned vacation days) for the calendar year in which his
employment is terminated and for any approved and unexpired
carryover days (not to exceed the number of carryover days as
approved by the Company) from the prior year;
	 
	 	(iv)	 	Immediate vesting of, and continuation of the ability of the
Executive or Executive’s beneficiaries (as applicable) to exercise
(as if the Executive remained an active employee of the Company),
all awards granted to the Executive under the LTIP prior to such
Termination Date, subject to the terms and conditions of the LTIP;




 









 






	 	(v)	 	Company-provided continuation of medical coverage (on either an
insured or a self-insured basis, in the sole discretion of the
Company) for the Executive and his eligible dependents (as
determined under the terms of the Company’s medical expense plan),
on substantially the same terms of such coverage that are in
existence immediately prior to the Executive’s termination of
employment (subject to commercial availability of such coverage),
for a period equal to the period of the Executive’s employment with
the Company; provided, however, that such coverage shall run
concurrently with any coverage available to the Executive and his
eligible dependents under COBRA; and provided further, however,
that the Executive shall immediately notify the Company if he
becomes covered under Medicare or another employer’s group health
plan, at which time the Company’s provision of medical coverage for
the Executive and his eligible dependents will cease; and
	 
	 	(vi)	 	The services of a Company-paid and Company-approved outplacement or
career transition consultant in accordance with the Company’s
current practices for senior executives in effect as of the
Termination Date; provided, however, that commencement of such
transition counseling services, if desired, must begin prior to the
first anniversary of the Termination Date.






	 	(f)	 	Payments and Benefits upon Termination at Expiration Date. If the
Executive’s employment with the Company terminates, other than by the
Company for Cause, on the Expiration Date, the Executive shall be
entitled to:






	 	(i)	 	One (1) times the Executive’s then-current annual Base Salary;
	 
	 	(ii)	 	If such termination occurs prior to the payment of the Executive’s
Annual Bonus payable with respect to the calendar year in which such
Expiration Date occurs, immediate payment of the full amount of the
Executive’s Annual Bonus for such year;
	 
	 	(iii)	 	Immediate payment of an amount equal to one (1) times the
Executive’s Target Annual Bonus for such calendar year;
	 
	 	(iv)	 	Immediate payment for any unused, earned vacation days (but not for
any unearned vacation days) for the calendar year in which his
employment is terminated and for any approved and unexpired
carryover days (not to exceed the number of carryover days as
approved by the Company) from the prior year; and
	 
	 	(v)	 	Company-provided continuation of medical coverage (on either an
insured or a self-insured basis, in the sole discretion of the
Company) for the Executive and his eligible dependents (as
determined under the terms of the Company’s medical expense plan),
on substantially the same terms of such coverage that are in
existence immediately prior to the Executive’s termination of
employment (subject to commercial availability of such coverage),
for a period of three (3) years; provided, however, that such
coverage shall run concurrently with any coverage available to the
Executive and his eligible dependents under COBRA; and provided
further, however, that the Executive shall immediately notify the
Company if he becomes covered under Medicare or another employer’s
group health plan, at which time the Company’s provision of medical
coverage for the Executive and his eligible dependents will cease.






	 	(g)	 	Notification Requirements for Termination for Good Reason.






	 	(i)	 	In the event the Executive determines that Good Reason exists to
terminate his employment with the
Company, the Executive shall
notify the Company in writing of the specific event, within sixty
(60) days after the occurrence of such event, and such notice shall
also include the date on which the Executive will terminate
employment with the Company, which date shall be no earlier than
fifteen (15) days after the date of such notice. The date set forth
in the notice for termination, or such earlier or later date as the
Executive and the Company shall mutually agree in writing, shall be
the Executive’s Termination Date.




 









 






	 	(ii)	 	Within seven (7) days after the Company’s receipt of such written
notice, the Company shall notify the Executive that it agrees or
disagrees with the Executive’s determination that the event
specified in the Executive’s notice constitutes Good Reason.
Notwithstanding any other provision of this Agreement, the Company’s
determination whether it agrees or disagrees with the Executive’s
determination that the event specified in the Executive’s notice
constitutes Good Reason shall be reasonable, based on all the
relevant facts and circumstances. The arbitrator in any arbitration
proceeding initiated pursuant to Section 10 of this Agreement, in
which the existence of Good Reason is an issue, shall be expressly
empowered and directed to review, de novo, the facts and
circumstances claimed by the Executive to constitute Good Reason.
	 
	 	(iii)	 	In the event the Company notifies the Executive that it agrees with
the Executive’s determination that the event specified in the
Executive’s notice constitutes Good Reason, the Executive shall
terminate employment with the Company on his Termination Date.
	 
	 	(iv)	 	In the event the Company notifies the Executive that it disagrees
with the Executive’s determination that the event specified in the
Executive’s notice constitutes Good Reason, the Executive may
terminate his employment on the date specified in the notice (or
such later date as the Executive and the Company may mutually agree
in writing) or may elect to continue his employment by so notifying
the Company in writing. In either event, the Executive shall be
entitled to pursue the arbitration procedures set out in Section 10
of this Agreement without first filing a claim. If the Executive’s
claim, or arbitration, is ultimately concluded in the Executive’s
favor, the Executive shall retain the right to receive the payments
and benefits under this Agreement.






	 	(h)	 	Conditional Payments. Any payments or benefits made pursuant to
this Section 6 will be subject to (i) the provisions, restrictions,
and limitations of Section 5 of this Agreement, but not otherwise
subject to offset or mitigation, (ii) the Executive’s signing
(following his termination of employment), and the Company’s receipt
of, a Release and Agreement releasing the Company, Related Companies,
and their respective directors, officers, employees and agents
(“Indemnitees”) from any and all claims and liabilities, and promising
never to sue any of the Indemnitees (such Release and Agreement shall
be in such form as is then currently in use for departing Company
senior executives), and (iii) the Company’s receipt of the Executive’s
resignation from all offices, directorships, and fiduciary positions
with the Company, its Related Companies, and their respective employee
benefit plans.






	7.	 	Legal Fees. In the event that it shall be necessary or desirable
for the Executive to retain legal counsel or incur other costs and
expenses in connection with enforcement of his rights following a
Change in Control, or other matters directly related to the
Executive’s termination from employment with the Company following a
Change in Control, the Company shall reimburse the Executive for his
reasonable attorneys’ fees and costs and expenses if a final decision
in connection with a material issue of the litigation (or arbitration)
is issued in the Executive’s favor by an arbitrator or a court of
competent jurisdiction.




 









 






	8.	 	Excise Tax.






	 	(a)	 	Excise Tax Adjustment Payment Calculation. If any element of
compensation or benefit provided to the Executive under the terms of
this Agreement following a Change in Control, or under any other plan,
program, policy, or other arrangement (“Benefit”), either alone or in
combination with other elements of compensation and benefits paid or
provided to such Executive, constitutes an “excess parachute payment”,
as that term is defined in Code Section 280G and the regulations
thereunder, and subjects such Executive to the excise tax pursuant to
Code Section 4999, and any interest and penalties thereon
(collectively, the “Excise Tax”), then such Executive shall be
entitled to an additional lump-sum cash payment from the Company (the
“Excise Tax Adjustment Payment”), subject to mandatory withholding, in
an amount equal to the Excise Taxes (including the Excise Tax
attributable to the Excise Tax Adjustment Payment related to the
Benefit) plus any Income Taxes and any interest and penalties thereon
attributable to the Excise Tax Adjustment Payment. For purposes of
calculating an Excise Tax Adjustment Payment to the Executive in any
year, it shall be assumed that the Executive is subject to Income
Taxes at the highest marginal Federal and applicable state and local
income tax rates, respectively, for the year in which the Excise Tax
Adjustment Payment is paid. Also, the Excise Tax Adjustment Payment to
the Executive shall reflect the Federal tax benefits attributable to
the deduction of applicable state and local income taxes.
	 
	 	(b)	 	Independent Firm. Subject to the provisions of Section 8(c) of
this Agreement, all determinations required to be made under this
Section 8, including whether and when an Excise Tax Adjustment Payment
is required and the amount of such Excise Tax Adjustment Payment and
the assumptions utilized in arriving at such determinations, shall be
made by an independent accounting or consulting firm chosen by the
Company (the “Firm”). The Firm shall provide detailed supporting
calculations to the Company and to the Executive within thirty (30)
business days after the receipt of notice from the Company or the
Executive that there has been a Benefit provided to which these Excise
Tax provisions apply (or such earlier time as requested by the
Company). Any Excise Tax Adjustment Payment shall be paid by the
Company to the Executive within fifteen (15) business days after the
Company’s receipt of the Firm’s determination.






	 	(i)	 	If it is established pursuant to a final determination of a court or
an IRS proceeding, or in the opinion of independent counsel agreed
upon by the Company and the Executive, that the Excise Tax payable by
the Executive on the Benefit is less than the amount initially taken
into account under Section 8(a) for purposes of calculating the Excise
Tax Adjustment Payment related to such Benefit, the Firm shall
recalculate the Excise Tax Adjustment Payment to reflect the actual
Excise Tax related to such Benefit. Within thirty (30) business days
following the Executive’s receipt of notice of the results of such
recalculation from the Firm and/or the Company, the Executive shall
repay to the Company the excess of the initial Excise Tax Adjustment
Payment over the recalculated Excise Tax Adjustment Payment.
	 
	 	(ii)	 	If it is established pursuant to a final determination of a court or
an IRS proceeding, or in the opinion of an independent counsel agreed
upon by the Company and the Executive, that the Excise Tax payable by
the Executive on the Benefit is more than the amount initially taken
into account under subsection (b)(i) above for purposes of calculating
the Excise Tax Adjustment Payment, the Firm shall recalculate the
Excise Tax Adjustment Payment to reflect the actual Excise Tax. Within
fifteen (15) business days following the Company’s receipt of notice
of the results of such recalculation from the Firm, the Company shall
pay to the Executive the excess of the recalculated Excise Tax
Adjustment Payment over the initial Excise Tax Adjustment Payment.
	 
	 	(iii)	 	All fees and expenses of the Firm shall be borne solely by the Company.






	 	(c)	 	Notice. The Executive shall notify the Company in writing of any
written claim by the IRS that, if successful, would require the
payment by the Company of an Excise Tax Adjustment Payment or the
recalculation of an Excise Tax Adjustment Payment. The notification
shall apprise the Company of the nature of such claim, including (i) a
copy of the written claim from the IRS, (ii) the identification of the
element of compensation and/or benefit that is the subject of such IRS
claim, and (iii) the date on which such claim is requested to be paid.
Such notification shall be given as soon as practicable, but no later
than ten (10) business days after the Executive actually receives
notice in writing of such claim. The failure of the Executive to
properly notify the Company of the IRS claim (or to provide any
required information with respect thereto) shall not affect any rights
granted to the Executive under this Section 8, except to the extent
that the Company is materially prejudiced in the challenge to such
claim as a direct result of such failure.
	 
	 	(d)	 	Payment. Within ten (10) business days following receipt of such
written notification by the Executive of such IRS claim, the Company
shall pay to the Executive an Excise Tax Adjustment Payment, or the
excess of a recalculated Excise Tax Adjustment Payment over the
initial Excise Tax Adjustment Payment, as applicable, related to the
element of compensation and/or benefit which is the subject of the IRS
claim. Within ten (10) business days following such payment to the
Executive, the Executive shall provide to the Company written evidence
that he or she has paid the claim to the IRS (the United States
Treasury).




 









 






	 	(e)	 	Contest. If the Company notifies the Executive in writing, within
sixty (60) business days following receipt from the Executive of
notification of the IRS claim, that it desires to contest such claim,
the Executive shall:






	 	(i)	 	Give the Company any information reasonably requested by the Company relating to such claim;
	 
	 	(ii)	 	Take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time including, without limitation, accepting legal
representation with respect to such claim by an attorney selected by the Company and
reasonably acceptable to the Executive;
	 
	 	(iii)	 	Cooperate with the Company in good faith in order to effectively contest such claim; and
	 
	 	(iv)	 	Permit the Company to participate in any proceedings relating to such claim if the Company
elects not to assume and control the defense of such claim;






	 	 	 	provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold harmless the Executive, on an
after-tax basis, for any Excise Tax and Income Taxes (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 8, the Company shall have the right, at its sole option, to
assume the control of all proceedings in connection with such contest, in which
case it may pursue or forego any and all administrative appeals, proceedings,
hearings, and conferences with the taxing authority in respect of such claim,
and may direct the Executive to sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; and provided further, however, that any extension of the statute
of limitations relating to payment of tax for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company’s rights to assume
the control of the contest shall be limited to issues with respect to which an
Excise Tax Adjustment Payment would be payable hereunder, and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the IRS or any other taxing authority. To the extent that the contest
to the IRS claim is successful, the Excise Tax Adjustment Payment related to
the element of compensation and/or benefit that was the subject of the claim
shall be recalculated in accordance with the provisions of Section 8(a).






	9.	 	Wage Withholding and Reporting. All taxable payments,
reimbursements, benefits, and other amounts payable or provided by the
Company pursuant to this Agreement shall be subject to applicable wage
withholding of Income Taxes and FUTA (unemployment taxes), and shall
be reported on IRS Form W-2.




 









 






	10.	 	Dispute Resolution. At the option of the Executive or the
Company, any dispute, controversy, or question arising under, out of,
or relating to this Agreement or the breach thereof, other than that
for injunctive relief under Sections 5(c) and 18, shall be referred
for decision by arbitration in the State of Illinois by a neutral
arbitrator selected by the parties hereto. The proceeding shall be
governed by the Rules of the American Arbitration Association then in
effect or such rules last in effect (in the event such Association is
no longer in existence). If the parties are unable to agree upon such
a neutral arbitrator within thirty (30) days after either party has
given the other written notice of the desire to submit the dispute,
controversy, or question for decision as aforesaid, then either party
may apply to the American Arbitration Association for an appointment
of a neutral arbitrator, or if such Association is not then in
existence or does not act in the matter within thirty (30) days after
application, either party may apply to the Presiding Judge of the
Superior Court of any county in Illinois for an appointment of a
neutral arbitrator to hear the parties and settle the dispute,
controversy, or questions, and such Judge is hereby authorized to make
such appointment. In the event that either party exercises the right
to submit a dispute arising hereunder to arbitration, the decision of
the neutral arbitrator shall be final, conclusive, and binding on all
interested persons, and no action at law or equity shall be instituted
or, if instituted, further prosecuted by either party other than to
enforce the award of the neutral arbitrator. The award of the neutral
arbitrator may be entered in any court that has jurisdiction. In the
event that the Executive is successful in pursuing any material claims
or disputes arising out of this Agreement, the Company shall pay all
of the Executive’s attorneys’ fees and costs reasonably incurred,
including the compensation and expenses of any arbitrator. In any
other case, the Executive and the Company shall each bear all their
own respective costs and attorneys fees, except the Company shall in
all events pay the costs of any arbitrator appointed hereunder.
	 
	11.	 	Termination Provisions.






	 	(a)	 	Executive. This Agreement is a personal contract, and the rights
and interests of Executive hereunder may not be sold, transferred,
assigned, pledged, or hypothecated by him, but shall be binding upon
and inure to the benefit of his heirs, administrators, and executors.
	 
	 	(b)	 	Company. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns; provided,
however, that the Company may not assign this Agreement except in
connection with an assignment or disposition of all or substantially
all of the assets or stock of the Company or the division, subsidiary,
or business unit for which the Executive is providing services under
this Agreement, or by law as a result of a merger or consolidation. In
the event of such assignment, a failure by the successor to
specifically assume in writing the obligations and liabilities of the
Company hereunder, and to deliver notice of such assumption to the
Executive, shall be deemed a material breach of this Agreement by the
Company.






	12.	 	Other Benefit Plans. The Company reserves the right to
discontinue or modify its compensation, incentive, benefit, and
perquisite plans, programs, and practices at any time and from time to
time. Moreover, the brief summaries contained herein are subject to
the terms of such plans, programs, and practices. For purposes of any
and all employee benefit plans, the definition of compensation is as
stated in such plans. The amounts paid under this Agreement upon a
termination of employment are in lieu of and inclusive of any amounts
payable under any other plan, program, or practice of the Company with
regard to termination of employment.
	 
	13.	 	Entire Agreement; Amendments. This Agreement represents the
entire agreement between Executive and the Company in respect of the
subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations, or
warranties, whether oral or written, by any officer, executive, or
representative of any party hereto, including, but not limited to, the
Initial Agreement. No amendments or modifications to this Agreement
may be made except in writing signed by the Company (as authorized by
the Board) and the Executive.
	 
	14.	 	Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of the Executive’s
employment to the extent necessary to the intended preservation of
such rights and obligations.




 









 






	15.	 	Notices. Any notice and all other communications provided for in
this Agreement given to a party shall be in writing and shall be
deemed to have been duly given when delivered in person or two (2)
days after being placed in the United States mails by certified or
registered mail, postage prepaid, return receipt requested, duly
addressed to the party concerned at the address indicated below or to
such changed address as such party may subsequently furnish to the
other in writing in accordance herewith, except that notices of change
of address shall be effective only upon receipt:





	 	 	 	 
	 	If to the Company:

	 	Bally Total Fitness Holding Corporation
	 

	 	 	8700 West Bryn Mawr Avenue
	 

	 	 	Chicago, IL 60631
	 

	 	 	Attn: Senior Vice President, Chief Administrative Officer
	 
	 	 
	 	If to the Executive:

	 	Mr. Paul A Toback
	 

	 	 	(Home Address)







	16.	 	Severability. The unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall
be held invalid or unenforceable in part, the remaining portion of
such provision, together with all other provisions of this Agreement,
shall remain valid and enforceable and continue in full force and
effect to the fullest extent consistent with law. In furtherance and
not in limitation of the foregoing, should the duration or
geographical extent of, or business activities covered by, any
provision of this Agreement be in excess of that which is valid and
enforceable under applicable law, then such provision shall be
construed to cover only that duration, extent, or activities which may
be validly enforced.
	 
	17.	 	Headings. Headings to Sections hereof are for convenience of
reference only and shall not be construed to alter or affect the
meaning of any provision of this Agreement.
	 
	18.	 	Injunctive Relief. If there is a breach or threatened breach of
the provisions of this Agreement, the non-breaching party shall be
entitled to an injunction restraining the breaching party from such
breach. Nothing herein shall be construed as prohibiting either party
from pursuing any other remedies for a breach or threatened breach of
this Agreement.
	 
	19.	 	No Assignment or Attachment. Except as required by law, no right
to receive payments under this Agreement shall be subject to
anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge, or hypothecation, or to execution, attachment, levy,
or similar process or assignment by operation of law, and any attempt,
voluntary or involuntary, to effect any such action shall be null,
void, and of no effect; provided, however, that nothing in this
Section 19 shall preclude the assumption of such rights by executors,
administrators, or other legal representatives of the Executive or his
estate and their assigning any rights hereunder to the person or
persons entitled thereto.
	 
	20.	 	Work For Hire Acknowledgment; Assignment. The Executive
acknowledges that all of the Executive’s work on and contributions to
the Company’s products (the “Products”), including, without
limitation, any and all patterns, designs, and other expressions in
any tangible medium (collectively, the “Works”) are within the scope
of the Executive’s employment and are a part of the services, duties,
and responsibilities of the Executive. All of the Executive’s work on
and contributions to the Works will be rendered and made by the
Executive for, at the instigation of, and under the overall direction
of, the Company, and all of the Executive’s said work and
contributions, as well as the Works, are and at all times shall be
regarded as “work made for hire” as that term is used in the United
States copyright laws. Without curtailing or limiting this
acknowledgment, the Executive hereby assigns, grants, and delivers
exclusively to the Company, as to work on and contribution to the
Products pursuant hereto, all rights, titles, and renewals. The
Executive will execute and deliver to the Company, or its successors
and assigns, such other and further assignments, instruments, and
documents as it from time to time reasonably may request for the
purpose of establishing, evidencing, and enforcing or defending its
complete, exclusive, perpetual, and worldwide ownership of all rights,
titles, and interests of every kind and nature whatsoever, including
all copyrights, in and to the Works. The Executive hereby constitutes
and appoints the Company as its agent and attorney-in-fact, with full
power of substitution, to execute and deliver said assignments,
instruments, or documents as the Executive may fail or refuse to
execute and deliver, this power and agency being coupled with an
interest and being irrevocable.
	 
	21.	 	Governing Law. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the
State of Illinois without consideration of conflict of law principles.
	 
	22.	 	Termination of Initial Agreement. From and after the Effective
Date, this Agreement shall supersede any other employment agreement,
severance agreement and change of control agreement between the
parties.




 









 











     IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day
and year first above written.



	 	 	 
	Executive:

	 	/s/ Paul A. Toback
	 

	 	 
	 

	 	Paul A. Toback, Chief Executive Officer
	 
	 	 
	Date:

	 	August 24, 2004
	 

	 	 
	 
	 	 
	Attest:

	 	/s/ Cary A. Gaan
	 

	 	 
	 
	 	 
	Date:

	 	August 24, 2004
	 

	 	 
	 
	 	 
	Company:
	 	 
	 
	 	 
	By:

	 	/s/ John W. Rogers, Jr.
	 

	 	 
	 

	 	John W. Rogers, Jr., Chairperson, Compensation Committee
	 
	 	 
	Date:

	 	August 23, 2004
	 

	 	 
	 
	 	 
	Attest:

	 	/s/ Cary A. Gaan
	 

	 	 
	 
	 	 
	Date:

	 	August 24, 2004
	 

	 	 
	 
	 	 
	By:

	 	/s/ Harold Morgan
	 

	 	 
	 

	 	Harold Morgan, SVP, Chief Administrative Officer
	 
	 	 
	Date:

	 	August 24, 2004
	 

	 	 
	 
	 	 
	Attest:

	 	/s/ Cary A. Gaan
	 

	 	 
	 
	 	 
	Date:

	 	August 24, 2004
	 

	 	 






 









 








EXHIBIT B




TERMS OF INVOLUNTARY SEPARATION BETWEEN




PAUL A. TOBACK AND BALLY TOTAL FITNESS HOLDING CORPORATION




	 	 	 	 	 
	TERMS OF INVOLUNTARY SEPARATION
	 	 	 	 	 
	BETWEEN PAUL A. TOBACK AND BALLY TOTAL FITNESS HOLDING CORPORATION
	 
	 	 	 	 
	1.

	 	Effective Date
	 	August 11, 2006
	 
	 	 	 	 
	2.

	 	Resignation:
	 	Upon the Effective Date, Toback will resign from all offices and all
subsidiary boards of directors on which he serves, and any
trusteeship under any employee benefit plan.
	 
	 	 	 	 
	 

	 	 	 	Toback will resign as an officer and as a member of the Board of
Directors of Bally upon receipt of the Cash Severance payment and
the release of restrictions on the restricted stock and receipt of
the tax gross-up payment; provided, Toback will resign upon the
Effective Date if he directs Bally to make payment of his Cash
Severance at a later date pursuant to Item 3(y), below.
	 
	 	 	 	 
	3.

	 	Cash Severance
	 	Lump sum in the amount of $3,832,500.
	 
	 	 	 	 
	 

	 	 	 	Payable via check on the later of (x) immediately upon Toback’s
execution of these Terms of Involuntary Separation and (y) such
earliest date, upon the advice of Toback’s counsel, as is required
to avoid a penalty tax and interest charges under Section 409A of
the Internal Revenue Code.
	 
	 	 	 	 
	4.

	 	Medical Benefits
	 	For a period of time following the Effective Date equal to the
period of time of Toback’s employment with Bally (approximately 9
years), continuation of coverage under the Bally medical plan, at
the level in which Toback and his eligible dependents currently
participate, on substantially the same terms of such coverage that
are in existence immediately prior to Toback’s termination of
employment (subject to commercial availability).
	 
	 	 	 	 
	 

	 	 	 	Medical benefits will cease upon Toback’s coverage under a
subsequent employer’s medical plan providing comparable benefits, on
a benefit-by-benefit basis, or entitlement to Medicare.
	 
	 	 	 	 
	5.

	 	Equity
	 	Immediate vesting and release of all restrictions on 135,000 share
restricted stock award.
	 
	 	 	 	 
	 

	 	 	 	Payment of a full tax gross-up on all income recognized upon vesting
of such restricted stock award, which will be based on the closing
price of Bally stock on the on the date preceding the Effective
Date.
	 
	 	 	 	 
	 

	 	 	 	Immediate vesting and payment of all other outstanding equity and
other long-term incentive awards on the Effective Date.
	 
	 	 	 	 
	 

	 	 	 	All vested stock options are exercisable for the unexpired period of
the stated option term.
	 
	 	 	 	 
	6.

	 	Release of Claims
	 	As a condition of all payments, benefits and equity vesting, Toback
will provide Bally a complete release of all claims reasonably
acceptable to






 









 






	 	 	 	 	 
	TERMS OF INVOLUNTARY SEPARATION
	 	 	 	 	 
	BETWEEN PAUL A. TOBACK AND BALLY TOTAL FITNESS HOLDING CORPORATION

	 	 	 	 	 
	 

	 	 	 	Toback within 21 days of being furnished with that
release and not revoke such release. If Toback fails to execute such
release or revokes the release timely thereafter, he shall refund
all payments received that are conditioned by such release under
these Terms of Involuntary Separation.
	 
	 	 	 	 
	 

	 	 	 	As a condition of Toback’s release of claims and his agreement to
the Terms of Involuntary Separation, Bally will provide Toback with
the following representation and covenant:
	 
	 	 	 	 
	 

	 	 	 	The Board of Directors of Bally (the “Board”) represents that as of
the Effective Date it has no knowledge of any grounds on which to
file any complaint, charge or lawsuit against Toback in any court of
competent jurisdiction or administrative agency, and that it has not
filed any complaint, charge or lawsuit against Toback with any court
of competent jurisdiction or administrative agency. The Board
covenants that it will not at any time on or after the Effective
Date file any complaint, charge or lawsuit against Toback in any
court of competent jurisdiction or administrative agency in
connection with any known claims based on any event preceding the
execution of these Terms of Involuntary Termination, including any
claim related to Toback’s employment, service as a member of the
Board, or the termination of his employment, or service as a member
of the Board; provided, the foregoing covenant shall not apply to
any complaint, charge or lawsuit, brought in good faith by the
Board, based on a known claim of fraud or criminal activity by
Toback in connection with his employment or service as a member of
the Board (provided, any such claim based on fraud or criminal
activity shall not limit Toback’s rights of indemnification to the
extent otherwise provided under these Terms of Involuntary
Separation).

	 
	 	 	 	 
	 

	 	 	 	The existing shareholder derivative suits Said v. Bally Total
Fitness, et al. and Schachter v. Bally Total Fitness, et al. are
expressly carved out from the foregoing representation and covenant.
	 
	 	 	 	 
	 

	 	 	 	Bally will further provide Toback an affirmation of his full
indemnification rights under the bylaws and certificate of
incorporation of the Company and his right to be covered under D&O
insurance to the same extent as sitting directors.
	 
	 	 	 	 
	7.

	 	Accrued Obligations
	 	Unpaid base salary and accrued and unused vacation through the
Effective Date payable immediately upon the Effective Date.
	 	 	 	

	 
	 	 	 	
Unreimbursed business expenses incurred through the Effective Date
payable within 10 days following submission of adequate
substantiation under the applicable expense reimbursement policy.
	 	 	 	

	 
	 	 	 	All accrued and vested benefits under applicable employee benefit
plans in which Toback participates payable in accordance with the
terms of the applicable plan.
	 
	 	 	 	 
	8.

	 	Indemnification
	 	Bally reaffirms that Toback will be indemnified to the maximum
extent permitted under the Bally by-laws and certificate of
incorporation, as in effect on the date hereof, and applicable law.
	 
	 	 	 	 
	 

	 	 	 	Bally reaffirms that Toback will remain covered, post-Effective
Date, under Bally’s policy of directors and officers liability
insurance to the same extent as sitting members of the Board of
Directors, and any such
	 
	 	 	 	 





 









 






	 	 	 	 	 
	TERMS OF INVOLUNTARY SEPARATION
	 	 	 	 	 
	BETWEEN PAUL A. TOBACK AND BALLY TOTAL FITNESS HOLDING CORPORATION

	 	 	 	 	 
	 

	 	 	 	coverage will continue for so long as Toback
may be subject to liability, in connection with any acts or
omissions occurring during his employment, under any statute of
limitations, laches or administrative law.
	 
	 	 	 	 
	9.

	 	Nondisparagement
	 	Toback will not disparage Bally at any time after the Effective Date.
	 	 	 	

	 
	 	 	 	Bally will not disparage Toback at any time after the Effective
Date. For such purpose, “Bally” means only (i) Bally via any press
release or other intentionally published comments by any
representative of Bally and (ii) any executive officer or member of
the Board of Directors of Bally.
	 
	 	 	 	 
	10.

	 	Professional Fees
	 	Bally will pay all attorneys fees and litigation costs incurred by
Toback in connection with any dispute to enforce these Terms of
Involuntary Separation, provided that Toback prevails on a material
issue in dispute.
	 
	 	 	 	 
	11.

	 	280G/Excise Tax
	 	Bally reaffirms its obligation to provide Toback a tax gross-up
pursuant to Section 8 of his Employment Agreement, dated August 24,
2004, if any amounts payable under these Terms of Involuntary
Separation, or otherwise, are subject to excise tax under Section
4999 of the Internal Revenue Code.
	 
	 	 	 	 
	12.

	 	Cooperation
	 	Toback will be available, to the extent it does not unreasonably
interfere with his other full-time business endeavors, to assist
Bally in connection with any threatened or actual litigation and in
the transition of his duties and responsibilities for Bally. Bally
will pay Toback for all reasonable and documented expenses incurred
(including attorneys fees) in connection with such assistance.
	 
	 	 	 	 
	13.

	 	Restrictive Covenants
	 	Toback reaffirms the effectiveness of all restrictive covenants
under Section 5 of the Employment Agreement.