Document:

EXHIBIT 10.1 - 03/24/2005 FORM 8-K

EXHIBIT 10.1

Bally Total
Fitness Holding Corporation

Employment
Agreement

           
THIS EMPLOYMENT AGREEMENT (the “Agreement”) made in Chicago, Illinois,
dated as of March 28, 2005 (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 Carl J.
Landeck (hereinafter called the “Executive”). 

           
WHEREAS, the Company desires to obtain the Executive’s experience,
skills, knowledge, and background for the benefit of the Company and the
efficient achievement of its long-term strategy, and is therefore willing to
employ the Executive upon the terms and conditions, and in consideration of the
compensation and other benefits, provided herein; and 

           
WHEREAS, the Executive is willing to serve the Company under such terms
and conditions; 

           
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements of the parties herein contained, the parties hereto
agree as follows: 

	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)	“CEO”
shall mean the Chief Executive Officer of the Company.

	 	(i)	“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 (i);

	 	(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

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	 	 	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

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	 	 	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.

	 	(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 March 28, 2005.

	 	(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 Carl J. Landeck.

	 	(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;

	 	(ii)	A Reduction in
Compensation; or

	 	(iii)	A Business
Relocation Beyond a Reasonable Commuting Distance.

	 	A Reduction in
Authority or Responsibility shall be determined in accordance with the criteria
set forth in the definition of such term below; provided, however,
that (A) changes in reporting relationships (so long as Executive still directly
reports to the Chairman or Chief Executive Officer) or (B) a reduction in the

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	 	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 any Federal, state, or local income taxes or FICA
taxes.

	 	(x)	“Indemnitees”
shall mean the Indemnitees, as defined in Section 6(h) of this Agreement.

	 	(y)	“IRS”
shall mean the Internal Revenue Service.

	 	(z)	“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.

	 	(aa)	“LTIP”
shall mean the LTIP, as defined in Section 4(c) of this Agreement.

	 	(bb)	“Products”
shall mean the Products, as defined in Section 19 of this Agreement.

	 	(cc)	“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 (cc) 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

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	 	(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.

	 	(dd)	“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.

	 	(ee)	“Related
Company” shall mean any subsidiary or affiliate of the Company.

	 	(ff)	“Target
Annual Bonus” shall mean the Executive’s Target Annual Bonus, as
defined in Section 4(b) of this Agreement.

	 	(gg)	“Term
of Employment” shall mean the Executive’s Term of Employment, as
defined in Section 3 of this Agreement.

	 	(hh)	“Termination
Date” shall mean the Termination Date, as defined in Section 3 of this
Agreement.

	 	(ii)	“Works”
shall mean the Works, as defined in Section 19 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
Senior Vice President and Chief Financial Officer 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 Chief Executive Officer.

	 	(b)	Performance
of Duties. The Executive shall devote his full working attention and
energies to the performance of his duties as Senior Vice President and Chief
Financial Officer or as may otherwise be directed by the Chief Executive
Officer, 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 this Section 3 (the “Term of Employment”). Unless the
Executive’s employment is

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	 	sooner
terminated, as provided in Section 6 of this Agreement, the Term of Employment
shall end on March 31, 2008 (“Termination Date”); provided,
however, that on April 1, 2008, and on each anniversary of April 1, 2008
thereafter until the Term of Employment ends (each such April 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 then 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
$400,000 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 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 fifty
percent (50%) 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 Chief Executive
Officer.

	 	(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 following a Change in Control the
vesting of any restricted shares of Company stock awarded to the Executive under

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	 	 	 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. The
Income Tax Gross-Up Payment shall equal the amount of Income Taxes payable only
with respect to the first twelve dollars ($12.00) of compensation recognized by
the Executive for each such share of stock, plus the Income Taxes attributable
to such 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
$1,250 as a car allowance.

	 	(g)	Financial
Counseling Services. The Executive shall be entitled to receive
reimbursement of up to $6,000 per calendar 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 calendar 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 

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	 	 	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 the Company’s
business 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 subsection (a)(i), this subsection (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

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	 	 	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, 

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	 	 	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 Chief Executive Officer. 

	 	(c)	Breach.

	 	(i)	Any material
breach by the Executive of the provisions of Sections 5(a) or 5(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, of 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 activity; and provided further, however, that such
prior notice procedure shall not be required with respect to (A) a Competitive
Activity or violation of Section 5(b) of this Agreement which the Executive
initiated after the Company had informed the Executive in writing that it
believed such action 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, 

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	 	 	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) 1.5 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 1.5 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 of eighteen (18) months;
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 

-12-

	 	 	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 on or 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 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) other than as required under applicable law. The 

-13-

	 	 	Executive may,
however, be eligible for certain benefits under the Company’s tax-qualified
pension and other employee benefit plans.

	 	(e)	Termination
for Good Reason, or Involuntary Termination (Other than for Cause) Within Two
Years Following a Change in Control. If the Executive’s employment is
involuntarily terminated by the Company other than for Cause within two (2)
years following a Change in Control, or 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 two hundred percent (200%) 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 of eighteen (18) months;
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 

-14-

	 	 	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 then-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 eighteen (18) months;
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 

-15-

	 	 	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 

-16-

	 	 	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 the Executive, constitutes an
“excess parachute payment”, as that term is defined in Code Section
280G and the regulations thereunder, and subjects the Executive to the excise
tax pursuant to Code Section 4999, and any interest and penalties thereon
(collectively, the “Excise Tax”), then the 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 

-17-

	 	 	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 

-18-

	 	 	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 

-19-

	 	 	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),
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 

-20-

	 	 	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. Executive shall be eligible to participate in plans
available to Senior Executives of the Company. Subject to the terms of this
agreement, 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. Amounts payable under any other plan, program, or
practice of the Company with regard to termination of employment shall not
duplicate amounts paid under this Agreement upon a termination of
employment.

	13.	Entire
Agreement; Amendments. This Agreement represents the entire agreement
between the 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. 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 60631-3507

Attn: Senior Vice President, Chief Administrative Officer

	 	If to the Executive:	Carl J. Landeck

[Home Address]

-21-

	 	With a copy to:	McMoran, O’Connor & Bramley, P.C.

Cantone Office Center

766 Shrewsbury Avenue, E-401

Tinton Falls, NJ 07724

Attention: Bruce McMoran, Esq.

	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.	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 18 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.

	19.	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, 

-22-

	 	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.

	20.	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.

	21.	Supersession.
From and after the Effective Date, this Agreement shall supersede any other
employment or severance agreement between the parties.

-23-

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement effective as of the Effective
Date. 

	Executive:	
	 

	 	Carl J. Landeck	 

	Date:	
	 

	Attest:	
	 

	Date:	
	 

Company:

	By:	
	 

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

	Date:	
	 

	Attest:	
	 

	Date:	
	 

	By:	
	 

	 	Harold Morgan, SVP, Chief Administrative Officer	 

	Date:	
	 

	Attest:	
	 

	Date:	
	 

-24-Exhibit 10.6
                         MID-WISCONSIN FINANCIAL SERVICES, INC.
                                1999 STOCK OPTION PLAN

  Section 1.  PURPOSE.  The Plan has been adopted to (a) enable the Company to
attract and retain superior employees by providing incentive opportunities with
respect to future services that are competitive with those of other similar
companies, (b) further identify the interests of participating employees with
those of the Company's other shareholders through compensation based on the
performance of the Company's common stock, (c) attract and retain qualified
employees, and (d) promote the long-term financial interests of the Company and
its shareholders.

  Section 2.  CERTAIN DEFINITIONS.  As used in this Plan, and in addition to
any terms elsewhere defined in this Plan, the following terms, when
capitalized, shall have the meanings set forth in this Section 2.

  Section 2.1.  "BOARD" means the Board of Directors of the Company.

  Section 2.2.  "CAUSE" means any one or more of the following on the part of
the participant: (a) the commission of an act which results in a payment of a
claim filed by the Company or a Subsidiary under a blanket banker fidelity bond
policy as from time to time and at any time maintained; (b) an intentional
failure to perform assigned duties;  (c) willful misconduct in the course of
the participant's employment; (d) breach of a fiduciary duty involving personal
profit or acts or omissions of personal dishonesty, including, but not limited
to, commission of any crime of theft, embezzlement, misapplication of funds,
unauthorized issuance of obligations, or false entries; (e) any intentional,
reckless, or negligent act or omission to act which results in the violation by
the participant of any policy established by the Company or a Subsidiary which
is designed to insure compliance with applicable banking, securities,
employment discrimination or other laws or which causes or results in the
Company's or a Subsidiary's violation of such laws, except any act done by the
participant in good faith, as determined in the reasonable discretion of the
Board, or which results in a violation of such policies or law which is, in the
reasonable sole discretion of such Board, immaterial; or (f) any of the
foregoing which results in material loss to the Company or any of its
Subsidiaries.  Except to the extent of the discretion granted to the Board in
clause (e), the Committee shall have the sole discretion to determine whether
"Cause" exists, and the Committee's determination shall be final.

  Section 2.3.  "CHANGE IN CONTROL" has the meaning set forth in Section 9.2.

  Section 2.4.  "CODE" means the Internal Revenue Code of 1986, as amended.
The reference to any specific section of the Code shall include any successor
section or sections.

  Section 2.5.  "COMMITTEE" means, subject to the provisions of Section 4, the
Stock Option Committee of the Board.

  Section 2.6.  "COMMON STOCK" means the common stock, $.10 par value per
share, of the Company.
<PAGE>

  Section 2.7.  "COMPANY" means Mid-Wisconsin Financial Services, Inc., a
Wisconsin corporation.

  Section 2.8.  "DISABILITY" means (a) a physical or mental condition which
qualifies as a total and permanent disability under the terms of any plan or
policy maintained by the Company or a Subsidiary and for which the Optionee is
eligible to receive benefits under such plan or policy, or (b) if the Optionee
does not participate in a disability plan, or is not covered by a disability
policy, of the Company or a Subsidiary, "Disability" means the permanent and
total inability of a participant by reason of mental or physical infirmity, or
both, to perform the work customarily assigned to him or her, if a medical
doctor selected or approved by the Board, and knowledgeable in the field of
such infirmity, advises the Committee either that it is not possible to
determine when such Disability will terminate or that it appears probable that
such Disability will be permanent during the remainder of said participant's
lifetime.

  Section 2.9.  "EFFECTIVE DATE" means December 31, 1999.

  Section 2.10.  "EMPLOYED," and any variation thereof such as "employment,"
means, as appropriate, employed by or employment with any of the Company or any
present or future Subsidiary.

  Section 2.11.  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

  Section 2.12.  "FAIR MARKET VALUE" of a share of the Common Stock as of any
date means the price per Share on the immediately preceding date as determined
in accordance with the following:

        (a)  EXCHANGE.  If the principal market for the Common Stock is a
      national securities exchange, "Fair Market Value" means the average of
      the highest and lowest reported sale prices of the Common Stock on the
      New York Stock Exchange composite transaction tape if the Common Stock is
      then listed for trading on such exchange, otherwise, the average of the
      highest and lowest reported sales prices of the Common Stock in any
      transaction reported on the principal exchange on which the Common Stock
      is then listed for trading.

        (b)  OVER-THE-COUNTER.  If the principal market for the Common Stock is
      an over-the-counter market, "Fair Market Value" means the average of the
      highest bid and lowest ask prices of the Common Stock reported in The
      Nasdaq National Market, or The Nasdaq Small Cap Market, or if the Common
      Stock is not then listed for trading in either of such markets, the
      average of the highest bid and lowest ask prices of the Common Stock
      reported on the OTC Bulletin Board, or, if prices for the Common Stock
      are not quoted on the OTC Bulletin Board, the average of the highest bid
      and lowest ask prices reported on any other bona fide over-the-counter
      stock market selected in good faith by the Committee.
<PAGE>

        (c)  OTHER DETERMINATION.  If subparagraphs (a) and (b) are not
      applicable, "Fair Market Value" shall mean such amount as may be
      determined by the Committee by whatever means or method as the Committee,
      in the good faith exercise of its discretion, shall at such time deem
      appropriate.

        (d)  DATE.  If the date on which "Fair Market Value" is to be
      determined is not a business day, or, if there shall be no reported
      transactions for such date, such determination shall be made on the next
      preceding business day for which transactions were reported.

  Section 2.13.  "INCENTIVE STOCK OPTION" means an Option granted pursuant to
the terms of the Plan which is intended by the Committee to meet the
requirements of an "incentive stock option" within the meaning of Section 422
of the Code, or any successor section or sections; provided, however, that to
the extent an Incentive Stock Option is exercised after the expiration of any
limitation on the time of exercise applicable under Section 422 of the Code, or
such Option does not meet the qualifications of an "incentive stock option"
within the meaning of such Section 422, such Option shall thereafter be a Non-
Qualified Option.

  Section 2.14.  "NON-QUALIFIED OPTION" means an Option granted pursuant to the
terms of the Plan which the Committee intends shall not meet the requirements
of an "incentive stock option" within the meaning of Section 422 of the Code,
or any successor section or sections, and any Option intended to be an
Incentive Stock Option which does not satisfy the terms, or is not exercised in
accordance with the requirements of, Section 422 of the Code.

  Section 2.15.  "OPTION" means an option to purchase Shares awarded pursuant
to the provisions of Section 6.

  Section 2.16.  "OPTION AGREEMENT" means the written document which evidences
an award of Options, whether or not such document requires the signature of the
Optionee.

  Section 2.17.  "OPTIONEE" means an eligible employee, as determined in
accordance with Section 5, who has been granted an Option.

  Section 2.18.  "OPTION PRICE" means, with respect to each Option, the price
per Share at which such Option may be exercised and the Shares subject to such
Option purchased.

  Section 2.19.  "PLAN" means the Mid-Wisconsin Financial Services, Inc. 1999
Stock Option Plan as set forth herein or as hereafter amended.

  Section 2.20.  "RETIREMENT DATE" means a participant's Termination of
Employment at or after the normal or early retirement date of such participant
under the terms of any retirement or pension plan sponsored by the Company
which is qualified under the provisions of the Code.

  Section 2.21.  "SHARE" means a share of Common Stock.
<PAGE>

  Section 2.22.  "SUBSIDIARY" means any corporation, partnership, or other
entity in which the Company owns, directly or indirectly, at least a 50%
interest in the voting rights or profits.

  Section 2.23.  "TERMINATION OF EMPLOYMENT" means the termination of the
participant's employment with, or performance of services for, the Company and
any of its Subsidiaries.  A participant employed by, or performing services
for, a Subsidiary shall also be deemed to incur a Termination of Employment if
the Subsidiary ceases to be such a Subsidiary and the participant does not
immediately thereafter become an employee of the Company or another Subsidiary.
Temporary absences from employment because of illness, vacation, or leave of
absence and transfers among the Company and its Subsidiaries shall not be
considered Terminations of Employment.  For purposes of the Plan, a
participant's employment shall be deemed to have terminated at the close of
business on the day preceding the first date on which he or she is no longer
for any reason whatsoever employed by the Company or any of its Subsidiaries.

  Section 3.  NUMBER OF SHARES AVAILABLE FOR OPTIONS.

  Section 3.1  SHARES SUBJECT.  The aggregate number of Shares which may be
delivered under Options awarded pursuant to the Plan shall be equal to the sum
of (a) 200,000 and (b) any Shares available for future awards under all prior
stock option plans of the Company (the "Prior Plans") as of the Effective Date,
including any Shares with respect to which options awarded under any Prior
Plans are hereafter forfeited, expire, or are canceled without delivery of
Shares.

  Section 3.2  UNDELIVERED SHARES.  To the extent any Shares subject to an
Option are not delivered to an Optionee (or the estate or other transferee of
such Optionee) because the Option is forfeited, expires, or otherwise becomes
unexercisable, or the Shares are not delivered because the Shares are used to
satisfy the applicable tax withholding obligation of the Optionee, such Shares
shall be deemed not to have been delivered for purposes of determining the
maximum number of Shares available for delivery under the Plan.

  Section 3.3  EXERCISE USING SHARES.  If the Option Price of any Option
awarded under the Plan or any Prior Plan is satisfied by tendering Shares to
the Company (by actual delivery or attestation), only the number of Shares
issued to the Optionee (or the estate or other transferee of such Optionee),
net of the Shares tendered, shall be deemed delivered for purposes of
determining the maximum number of Shares available for delivery under the Plan.

  Section 3.4  STOCK DIVIDENDS, ETC.  If the Company shall, after the Effective
Date, change the Common Stock into a greater or lesser number of Shares through
a stock dividend, stock split-up or combination of Shares, then (a) the number
of Shares then subject to the Plan as provided for in Section 3.1, but which
are not then subject to any outstanding Option, (b) the number of Shares
subject to each then outstanding Option (to the extent not previously
exercised), and (c) the price per Share payable upon exercise of each then
outstanding Option, shall all be proportionately increased or decreased as of
the record date for such stock dividend, stock split-up or combination of
Shares in order to give effect thereto.  Notwithstanding any such proportionate
increase or decrease, no fraction of a Share shall be issued upon the exercise
of an Option and the Shares subject to an Option shall be rounded to the
nearest whole Share.
<PAGE>

  Section 3.5  OTHER CHANGES.  If, after the Effective Date, there shall be any
change in the Common Stock or other change in the capitalization of the Company
other than through a stock dividend, stock split-up or combination of Shares,
including, but not limited to, a change which results from a merger,
consolidation, spin-off, or other distribution of stock or property of the
Company, any reorganization (whether or not such reorganization is within the
meaning of Section 368 of the Code), or any partial or complete liquidation of
the Company, then if, and only if, the Committee shall determine that such
change equitably requires an adjustment in (a) the number or kind of shares of
stock then reserved for issuance under Section 3.1, (b) the number or kind of
shares of stock then subject to an Option, (c) the Option Price with respect to
an Option, or (d) any other limitation on the Option which may be granted to
any participant, to the extent such adjustment does not cause any Option to
fail to satisfy the requirements for exemption from the limitations on
deductibility imposed by Section 162(m) of the Code that is set forth in
Section 162(m)(4)(c) of the Code if such Option would have satisfied such
requirements immediately prior to such adjustment and if such Option, if then
exercised, would, when added to the Optionee's estimated compensation from the
Company and all Subsidiaries for such year, exceed the deductibility limits of
Section 162(m) of the Code, such adjustment as the Committee shall determine is
equitable and as shall be approved by the Board shall be made and shall be
effective and binding for all purposes of such Option and the Plan.  If any
member of the Board shall, at the time of such approval, be an Optionee, he
shall not participate in action in connection with such adjustment.

  Section 4.  ADMINISTRATION OF THE PLAN.

  Section 4.1  COMMITTEE.  The Plan shall be administered by the Committee.
The Committee shall, subject to the terms of the Plan, have the authority to,
in its sole discretion, (a) select eligible employees to receive an award of
one or more Options and to participate in the Plan, (b) determine the number of
Shares subject to each award and the Option Price associated therewith, (c)
establish terms and conditions concerning the time of, and conditions precedent
to, the exercisability of each Option (including, without limitation,
conditions with respect to the passage of time, performance of the Company, or
a Subsidiary, or the Optionee, restrictions on competitive employment or
satisfaction of Company policies, and any other conditions which the Committee
deems reasonably related to the satisfaction of the purposes of the Plan), (d)
determine the form of each Option Agreement and all terms and conditions
thereof with respect to each award, (e) interpret the Plan and the application
thereof and establish such rules and regulations as it deems necessary or
desirable for the administration of the Plan, (f) modify or cancel any award or
Option or take such action to cause the vesting or exercisability of any or all
outstanding Options to become exercisable in part or in full for any reason at
any time, subject to the limitation of Section 9.1, and (g) exercise such other
authority as is reasonably related to the administration of and/or the
fulfillment of the purpose of the Plan.  All actions, interpretations, rules,
regulations and conditions taken or established by the Committee shall be
final, binding and conclusive upon the Company, each Subsidiary, and all
Optionees.
<PAGE>

  Section 4.2  MEMBERSHIP OF THE COMMITTEE.

        (a)  MEMBERSHIP QUALIFICATIONS.  Except as provided in this Section
      4.2, at all times the Committee shall consist of not less than three
      members designated by the Board from among those of its members who are
      not officers or employees of the Company or a Subsidiary and each of whom
      is (a) a "non-employee director" within the meaning of Rule 16b-3 under
      the Exchange Act (a "Non-Employee Director") and (b) an "outside
      director" within the meaning of Section 162(m) of the Code (an "Outside
      Director"); provided, however, that in addition to the Board's general
      authority to amend the Plan as provided for in Section 10.1, the Board
      shall have the specific authority to modify or eliminate the foregoing
      qualifications or adopt such other qualifications as are reasonably
      intended to result in (x) the award of Options, and transactions with
      respect to the award or exercise of such Options, satisfying an exemption
      from Section 16(b) of the Exchange Act, or any successor thereto, and (y)
      compensation recognized by Optionees qualifying as a deductible expense
      of the Company under the "performance-based compensation" exception to
      compensation deduction limits which would otherwise be imposed on the
      Company under Section 162(m) of the Code.

        (b)  APPOINTMENT OF OTHER MEMBERS.  In the event that one or more
      members of the Committee shall fail to meet the qualifications set forth
      in Section 4.2(a), the Board shall remove such member or members and
      appoint a successor or successors who satisfy such qualifications.  The
      Board shall act in a reasonably prompt manner to fill any vacancy on the
      Committee from among such of its members who are both Non-Employee
      Directors and Outside Directors.

        (c)  VALIDITY OF GRANTS.  Notwithstanding the qualifications for
      members of the Committee established in Section 4.2(a), any award of
      Options made by the Committee in good faith and without the knowledge
      that one or more of its members did not satisfy such qualifications,
      shall be valid and enforceable by the Optionee even though the members of
      the Committee did not, at the time of such award, satisfy such
      qualifications.

  Section 4.3  ACTIONS BY THE COMMITTEE.  A majority of the members of the
Committee shall constitute a quorum.  In the absence of specific rules to the
contrary, action by the Committee shall require the consent of a majority of
the members of the Committee, expressed either orally at a meeting of the
Committee or in writing in the absence of a meeting.

  Section 4.4  ACTIONS BY THE BOARD.  Any authority granted to the Committee
may also be exercised by the full Board, except to the extent that the grant or
exercise of such authority would cause any Option or transaction to become
subject to (or lose an exemption under) the short-swing profit recovery
provisions of Section 16 of the Exchange Act or cause an Option not to qualify
for, or to cease to qualify for, the exemption as "performance-based
compensation" under Section 162 of the Code, and the regulations promulgated
thereunder. To the extent that any permitted action taken by the Board
conflicts with action taken by the Committee, the Board action shall control.
<PAGE>

  Section 4.5  LIMITATION ON LIABILITY AND INDEMNIFICATION OF BOARD.  No member
of the Board, no executive officer or other employee of the Company, and no
other agent or representative of the Company shall be liable for any act,
omission, interpretation, construction, or determination made in connection
with the Plan in good faith, and all such persons shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage, or expense (including attorneys fees) arising therefrom to the full
extent permitted by law, except as otherwise may be provided in the Company's
articles of incorporation and/or by-laws, and under any directors' and
officers' liability insurance that may be in effect from time to time.

  Section 5.  PERSONS ELIGIBLE TO BECOME OPTIONEES.  Persons who are (a)
employees of the Company and any Subsidiary, (b) prospective employees who have
accepted offers of employment from the Company or a Subsidiary, or (c)
directors of the Company and its Subsidiaries shall be eligible to be selected,
in the sole discretion of the Committee, to participate in, and receive an
award of one or more Options pursuant to, the Plan; provided, however, that
only employees of the Company or a Subsidiary shall be eligible to receive an
Incentive Stock Option Award.

  Section 6.  AWARDING OF OPTIONS.

  Section 6.1  OPTIONEES.  Subject to the limitations of Section 5, Options
shall be awarded to such eligible employees and directors of the Company and
its Subsidiaries as the Committee may, from time to time and at any time,
select.  Membership of an employee or a director in a class shall not, without
specific Committee action, entitle such employee or director to receive an
Option award.

  Section 6.2  OPTION AGREEMENT.  Each Option shall be evidenced by an Option
Agreement, the terms of which may differ from other Option Agreements.  Each
Option Agreement shall be signed on behalf of the Company and, if so provided
by the Committee, the Optionee, and shall set forth with respect to the Option
or Options awarded therein, the name of the Optionee, the date awarded, the
Option Price, whether the Option is an Incentive Stock Option or a Non-
Qualified Stock Option, the number of Shares subject to the Option, and such
other terms and conditions consistent with the Plan as determined by the
Committee.  The Committee may at the time of award or at any time thereafter
impose such additional terms and conditions on the exercise of such Option as
it deems necessary or desirable for such Option, or the exercise thereof, to be
exempt under Section 16(b) of the Exchange Act, and the regulations promulgated
thereunder, and to qualify as "performance-based compensation" under Section
162 of the Code, and the regulations promulgated thereunder.  Each Option
Agreement shall incorporate by reference all terms, conditions and limitations
set forth in the Plan.

  Section 6.3  TERMS AND CONDITIONS OF THE OPTIONS.  In addition to any other
terms, conditions, and limitations specified in the Plan, each Option awarded
hereunder shall, as to each Optionee, satisfy the following requirements:

        (a)  DATE OF AWARD.  Options must be awarded on or before December 14,
      2009.

        (b)  EXPIRATION.  No Incentive Stock Option shall be exercisable after
      the expiration of ten years from the date such Option is awarded.  No
      Non-Qualified Stock Option shall be exercisable after the expiration of
      twenty years from the date such Option is awarded.
<PAGE>

        (c)  PRICE.  The Option Price as to any Share subject to an Option may
      not be less than the Fair Market Value of the Share on the date the
      Option is awarded.

        (d)  LIMITATIONS ON TRANSFERABILITY.  No Incentive Stock Option shall
      be transferable by the Optionee other than by will or the laws of descent
      and distribution, nor can it be exercised by anyone other than the
      Optionee during the Optionee's lifetime.  Except as otherwise provided in
      an Option Agreement or other action taken by the Committee, each of which
      conform to the provisions of Section 6.4, no Non-Qualified Option shall
      be transferable by the Optionee other than by will or the laws of descent
      and distribution, nor can it be exercised by anyone other than the
      Optionee during the Optionee's lifetime.  Except as provided in Section
      6.4, no Option may be sold, transferred, assigned, pledged, hypothecated,
      encumbered, or otherwise disposed of (whether by operation of law or
      otherwise), or be subject to execution, attachment, or similar process.
      Upon any attempt to so sell, transfer (other than in accordance with
      Section 6.4), assign, pledge, hypothecate, encumber, or otherwise dispose
      of any such award, such award and all rights thereunder shall immediately
      become null and void.

        (e)  EXERCISE.  Except as otherwise permitted by the Committee, or as
      provided in Section 6.5, Options must be exercised in accordance with the
      following time limitations:

              (i)  Termination by Death.  If an Optionee incurs a Termination
            of Employment by reason of death, any Option held by such Optionee
            may thereafter be exercised, to the extent then exercisable, for a
            period of one year from the date of such death or until the
            expiration of the stated term of such Option, whichever period is
            shorter.

              (ii)  Termination by Reason of Disability.  If an Optionee incurs
            a Termination of Employment by reason of Disability, any Option
            held by such Optionee may thereafter be exercised by the Optionee
            (or the estate of the Optionee in the event of death), to the
            extent it was exercisable at the time of such Termination of
            Employment, for a period of one year.

              (iii)  Termination by Reason of Retirement.  If an Optionee
            incurs a Termination of Employment by reason of Retirement, any
            Option held by such Optionee may thereafter be exercised by the
            Optionee (or the estate of the Optionee in the event of death), to
            the extent it was exercisable at the time of such Termination of
            Employment by reason of Retirement, for a period of two years.

              (iv)  Other Termination.  If an Optionee incurs a Termination of
            Employment for any reason other than death, Disability, or
            Retirement, any Option held by such Optionee shall terminate.
<PAGE>

              (v)  Notwithstanding any other provision of this Plan to the
            contrary, in the event an Optionee incurs a Termination of
            Employment other than for Cause during the 24-month period
            following a Change in Control, any Option held by such Optionee may
            thereafter be exercised by the Optionee, to the extent it was
            exercisable at the time of termination, for (x) the longer of (i)
            one year from such date of termination or (ii) such other period as
            may be provided in the Plan for such Termination of Employment, or
            (y) until expiration of the stated term of such Stock Option,
            whichever period is shorter.  If an Incentive Stock Option is
            exercised after the expiration of the post-termination exercise
            periods that apply for purposes of Section 422 of the Code, such
            Stock Option will thereafter be treated as a Non-Qualified Stock
            Option.

      If an Incentive Stock Option is exercised after the expiration of the
      exercise periods that apply for purposes of Section 422 of the Code, such
      Option will thereafter be treated as a Non-Qualified Stock Option.

        (f)  MINIMUM HOLDING PERIOD.  No Option may be exercised before the
      date which is six months after the later of (i) the date on which the
      Plan is approved by the shareholders of the Company, or (ii) the date on
      which such Option was awarded.

        (g)  ADDITIONAL RESTRICTIONS RELATING TO INCENTIVE STOCK OPTIONS.  To
      the extent that the aggregate Fair Market Value (determined as of the
      time the Option is awarded) of the Shares for which Incentive Stock
      Options are exercisable for the first time by an individual during any
      calendar year (under the Plan, any Prior Plans, or any other plan of the
      Company or a Subsidiary) exceeds $100,000 (or such other individual limit
      as may be in effect under the Code on the date of award), such Options
      shall not be Incentive Stock Options.  No Incentive Stock Option shall be
      awarded to an employee who, at the time such Option is awarded, owns
      stock possessing more than 10% of the total combined voting power of all
      classes of stock of the Company or any Subsidiary within the meaning of
      Section 422(b)(6) of the Code unless (i) at the time the Option is
      awarded, the Option Price is at least 110% of the Fair Market Value of
      the Shares subject to the Option, and (ii) such Option by its terms is
      not exercisable after the expiration of five years from the date such
      Option is awarded.

        (h)  LIMITATION ON OPTION AWARDS.  No Optionee may be awarded Options
      under the Plan in any calendar year with respect to more than 5,000
      Shares.
<PAGE>

  Section 6.4  TRANSFERABILITY OF NON-QUALIFIED OPTIONS.  The Committee may, in
its discretion, under the terms of the Option Agreement with respect to, or at
any time on or after the date of the initial award of, a Non-Qualified Option,
permit transfer of such Non-Qualified Option by the Optionee to (a) the spouse,
children or grandchildren of the Optionee ("Immediate Family"), (b) a trust for
the exclusive benefit of the Optionee or the Optionee's Immediate Family, (c) a
partnership in which the Optionee or the Optionee's Immediate Family are the
only partners, or (d) to a former spouse of the Optionee pursuant to a domestic
relations order within the meaning of Rule 16a-12, as promulgated under Section
16 of the Exchange Act; provided, however, that (x) there may be no
consideration for any such transfer unless the payment of such consideration to
the Optionee is specifically authorized by the Committee, (y) the Option
Agreement, or any amendment thereof approved by the Committee, must expressly
provide for transferability of the Option evidenced in such agreement in a
manner consistent with this Section 6.4, and (z) once transferred pursuant to
the preceding provisions of this Section 6.4, no subsequent transfer of such
Options shall be permitted except a transfer by will or the laws of descent and
distribution.  In authorizing all or any portion of an Option to be
transferred, the Committee may impose any conditions on exercise, prescribe a
holding period for the Shares acquired upon such exercise, and/or impose any
other conditions or limitations it deems desirable or necessary in order to
carry out the purposes and requirements of the Plan.  Following transfer, the
terms and conditions of the Plan and the Option Agreement relating to such
Option shall continue to be applicable in all respects to the Optionee who made
such transfer and each transferred Option shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer as
if such Option had not been transferred, including, but not limited to, the
terms and conditions with respect to the lapse and termination of such Option.
For purposes of Section 7, the transferee of an Option, where applicable, shall
be deemed an "Optionee."  None of the Company, the Committee, or any Optionee
shall have any obligation to inform any transferee of the termination or lapse
of any Option for any reason.  Notwithstanding any other provision of the Plan,
following the termination of Employment of an Optionee, a transferred Non-
Qualified Option shall be exercisable by the transferee only to the extent, and
for the periods specified in Section 6.3(e) as if such Option had not been
transferred.

  Section 6.5  TERMINATION OR LAPSE OF OPTIONS.  Each Option shall terminate or
lapse upon the first to occur of (a) the expiration date or any date as of
which the Option is deemed to be forfeited as set forth in the applicable
Option Agreement, (b) the applicable date set forth in Section 6.3(b), or (c)
the date which is the day next following the last day such Option could be
exercised under Section 6.3(e).

  Section 7.  EXERCISE AND PAYMENT OF OPTION PRICE.

  Section 7.1  EXERCISE OF OPTIONS.  Options shall be exercised as to all or a

portion of the Shares subject to the Option by written notice to the Company
setting forth the exact number of Shares as to which the Option is being
exercised and including with such notice payment of the Option Price (plus the
minimum required tax withholding).  The date of exercise shall be the date such
written notice and payment have been delivered (in cash or in such other manner
as provided in Section 7.2) to the Secretary of the Company either in person or
by depositing said notice and payment in the United States mail, postage pre-
paid and addressed to such officer at the Company's home office.
Notwithstanding the fact that an Option has been transferred pursuant to
Section 6.4, the Optionee with respect to such transferred Option shall remain
liable for any required tax withholding.

  Section 7.2  PAYMENT FOR SHARES.  Payment of the Option Price (plus required
tax withholding) may be made (a) by tendering cash (in the form of a check or
otherwise) in such amount; (b) with the consent of the Committee, and if
authorized in the Option Agreement, by tendering, by either actual delivery of
Shares owned by the Optionee or by attestation, Shares with a Fair Market Value
on the date of exercise equal to such amount; (c) with the consent of the
Committee, by instructing the Committee to withhold a number of Shares having a
Fair Market Value on the date of exercise equal to the aggregate exercise price
of such Option; (d) by delivering a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the Company
the sale or loan proceeds equal to such amount; or (e) any combination of (a),
(b), (c) and (d); provided, however, that any Shares delivered in payment of
the Option Price pursuant to (b) shall have been purchased on the open market
and held by the Optionee for at least six months at the time of exercise of the
Option.   Notwithstanding the fact that an Option has been transferred pursuant
to Section 6.4, the Optionee with respect to such transferred Option shall
remain liable for any required tax withholding.
<PAGE>

  Section 7.3  TAX WITHHOLDING.  The delivery of Shares under the Plan is
subject to withholding of all applicable taxes, and the Committee may condition
the delivery of any Shares or other benefits on satisfaction of applicable
withholding obligations.  The Committee, in its discretion, and subject to such
requirements as the Committee may impose prior to the occurrence of such
withholding, may permit withholding obligations to be satisfied through cash
payment by the Optionee or other person exercising an Option, through the
surrender of Shares which the Optionee or other person already owns, or through
the surrender of Shares to which the Optionee or other person is otherwise
entitled under the Plan.

  Section 7.4  ISSUANCE OF SHARES.  No Shares shall be issued until full
payment therefor has been made.  An Optionee shall have all of the rights of a
shareholder of the Company holding the Common Stock that is subject to such
Option (including, if applicable, the right to vote the Shares and the right to
receive dividends), when the Optionee has given written notice of exercise, has
paid in full for such Shares and, if requested, has given the representation
described in Section 12.

  Section 8.  DIRECTOR STOCK OPTIONS.  In addition to any Options which may be
granted to a director pursuant to the provisions of Section 6.1 the Committee
may also grant Options to directors of the Company and/or its Subsidiaries
which satisfy the following requirements:

        (a)  AUTOMATIC GRANTS.  Each such director who is not otherwise an
      employee of the Company or any of its Subsidiaries, shall, on the first
      day after his or her first election as a director, and thereafter on the
      day after each annual meeting of shareholders of the Company during such
      director's term, automatically be granted Non-Qualified Options in an
      amount specified by the Committee to purchase Common Stock having an
      exercise price of 100% of the Fair Market Value of the Common Stock on
      the date of grant of such Non-Qualified Stock Option.

        (b)  LIMITATIONS ON AUTOMATIC GRANTS.  An automatic director Option
      shall be granted hereunder only if as of each date of grant the director
      (i) is not otherwise an employee of the Company or any of its
      Subsidiaries, (ii) has not been an employee of the Company or any of its
      Subsidiaries for any part of the preceding fiscal year, and (iii) has
      served on the Board continuously since the commencement of his term.

        (c)  RIGHTS OF OPTIONEE.  Each holder of a Stock Option granted
      pursuant to this Section 8 shall also have the rights specified in
      Section 9.

        (d)  INSUFFICIENT SHARES.  In the event that the number of shares of
      Common Stock available for future grant under the Plan is insufficient to
      make all automatic grants required to be made on such date, then all non-
      employee directors entitled to a grant on such date shall share ratably
      in the number of Options on shares available for grant under the Plan.
<PAGE>

        (e)  TERMS AND CONDITIONS OF DIRECTOR OF OPTIONS.  Except as expressly
      provided in this 8, any Non-Qualified Option granted hereunder shall be
      subject to the terms and conditions of the Plan as if the grant were made
      pursuant to Section 6 hereof.

  Section 9.  CHANGE IN CONTROL.

  Section 9.1  ADJUSTMENT OF OPTIONS.

        (a)  VESTING AND CASH PAYMENT.  In the event of a Change of Control,

              (i)  all Options outstanding on the date on which such Change in
            Control has occurred (the "Change in Control Date") shall, to the
            extent not then exercisable or vested, immediately become
            exercisable in full, and

              (ii)  each Optionee may elect (the Optionee's "Election Right")
            with respect to each Option held by such Optionee on the Change in
            Control Date to surrender such Option for an immediate lump sum
            cash payment in an amount equal to the product of (A) the number of
            Shares then subject to the Option as to which the election is being
            exercised multiplied by (B) the excess, if any, of (1) the greater
            of (a) the Change in Control Price or (b) the highest Fair Market
            Value of a Share on any day in the 60-day period ending on the
            Change in Control Date, over (2) the Option Price of such Option.
            For purposes of this Section 9.1(a), the "Change in Control Price"
            shall mean, if the Change in Control is the result of a tender or
            exchange offer or a Corporate Transaction (as defined in Section
            9.2(c)), the highest price per Share paid in such tender or
            exchange offer or Corporate Transaction, and, to the extent that
            the consideration paid in any such transaction consists all or in
            part of securities or other noncash consideration, the value of
            such securities or other noncash consideration shall be determined
            in the sole discretion of the Committee.

        (b)  ELECTION.  The exercise of an Election Right must be in writing,
      specify the  Option or Options and the number of Shares as to which the
      election is being exercised, and be delivered to the Secretary of the
      Company either in person or by depositing said notice and payment in the
      United States mail, postage pre-paid and addressed to such officer at the
      Company's home office on or before the 60th day following the Change in
      Control Date.

        (c)  PAYMENT DATE.  All payments due an Optionee pursuant to the
      provisions of this Section 9.1 shall be made by the Company on or before
      the 5th business day following the date on which the Optionee's election
      has been delivered to the Company pursuant to Section 9.1(b).
<PAGE>

        (d)  POOLING CONSIDERATIONS.  Notwithstanding any other provision of
      this Section 9.1, if the grant or the exercise of an Optionee's Election
      Right or payment of cash provided for in this Section 9.1 would make a
      Change in Control transaction ineligible for pooling-of-interests
      accounting treatment under APB No. 16, that, but for the nature of such
      grant or exercise of Election Rights or payment of cash, would otherwise
      be eligible for such pooling-of-interests accounting treatment, the
      Committee shall have the right and authority to substitute for the cash
      payments to be made to the Optionee pursuant to Section 9.1(a), Common
      Stock with a Fair Market Value, determined as of the date of delivery of
      such Shares, equal to the cash that would otherwise be payable to such
      Optionee in connection with the exercise of an Optionee's Election Right
      hereunder or, to the extent necessary to preserve such pooling-of-
      interests accounting treatment, to otherwise modify, eliminate, or
      terminate such Election Right.

  Section 9.2  DEFINITION OF "CHANGE OF CONTROL."  For purposes of the Plan, a
"Change of Control" means the happening of any of the following events:

        (a)  The acquisition by any individual, entity or group (within the
      meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person")
      of beneficial ownership (within the meaning of Rule 13d-3 promulgated
      under the Exchange Act) of 25% or more of either (i) the then outstanding
      shares of common stock of the Company (the "Outstanding Company Common
      Stock") or (ii) 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"); provided,
      however, that for purposes of this paragraph (a), the following
      acquisitions shall not constitute a Change in Control: (A) 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, (B) any
      acquisition by the Company, (C) any acquisition by any employee benefit
      plan (or related trust) sponsored or maintained by the Company or any
      entity controlled by the Company, and (D) any acquisition pursuant to a
      transaction which complies with clauses (i), (ii), and (iii) of paragraph
      (c) of this Section 9.2; or

        (b)  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, for
      purposes of the Plan, that any individual who becomes a member of the
      Board subsequent to the Effective Date whose election, or nomination for
      election by the Company's shareholders, 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 proviso) shall be deemed to be and shall be considered
      as though such individual were a member of the Incumbent Board, but
      provided, further, that any such individual whose initial assumption of
      office occurs as a result of 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 a Person other
      than the Board shall not be so deemed or considered as a member of the
      Incumbent Board; or
<PAGE>

        (c)  Consummation of a reorganization, merger or consolidation, or sale
      or other disposition of all or substantially all of the assets of the
      Company or the acquisition of the assets or securities of any other
      entity (a "Corporate Transaction"); excluding, however, such a Corporate
      Transaction pursuant to which (i) 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 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 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) (the "Resulting 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, (ii) no Person (other than
      the Company, any employee benefit plan (or related trust) of the Company)
      will beneficially own, directly or indirectly, 25% or more of,
      respectively, the outstanding shares of common stock of the Resulting
      Company or the combined voting power of the then outstanding voting
      securities of such Resulting Company entitled to vote generally in the
      election of directors except to the extent that such ownership existed
      with respect to the Company prior to the Corporate Transaction, and (iii)
      individuals who were members of the Incumbent Board will constitute at
      least a majority of the members of the board of directors of the
      Resulting Company; or

        (d)  The approval by the shareholders of the Company of a complete
      liquidation or dissolution of the Company.

  Section 10.  AMENDMENT AND TERMINATION OF PLAN.

  Section 10.1  AMENDMENT OF PLAN.  The Board may amend the Plan from time to
time and at any time; provided, however, that (a) except as specifically
provide herein, no amendment shall, in the absence of written consent to the
change by an affected Optionee, adversely affect such Optionee's rights under
any Option which has been awarded prior to the amendment except to the extent
such amendment is, in the sole opinion of the Committee, required to comply
with any stock exchange rules, accounting rules, or laws applicable to the
Company or the Plan, (b) no amendment with respect to the maximum number of
Shares which may be issued pursuant to Options under the Plan or to any
individual in any calendar year made be made unless approved by a majority of
the Shares entitled to vote at a meeting of the shareholders if such amendment
would, in the absence of such approval and in the sole opinion of the
Committee, have an adverse effect on the Company under applicable tax or
securities laws or accounting rules, and (c) no amendment shall be made without
the approval of the Company's shareholders to the extent such approval is
required by applicable law or stock exchange rules.
<PAGE>

  Section 10.2  TERMINATION OF PLAN.  The Plan shall terminate on the first to
occur of (a) December 31, 2009 or (b) the date specified by the Board as the
effective date of Plan termination; provided, however, that the termination of
the Plan shall not limit or otherwise affect any Options outstanding on the
date of termination.

  Section 11.  EFFECTIVE DATE.  Notwithstanding any provision of this Plan to
the contrary, the Plan shall not be effective, and any Options awarded under
the Plan shall be null and void, unless the adoption of the Plan is approved at
the annual meeting of the Company's shareholders next following the Effective
Date by the majority of the shares entitled to vote at such meeting.

  Section 12.  INVESTMENT INTENT.  The Committee may require each person
purchasing or receiving Shares pursuant to an Option to represent to and agree
with the Company in writing that such person is acquiring the Shares without a
view to the distribution thereof.  The certificates for such Shares may include
any legend which the Committee deems appropriate to reflect any restrictions on
transfer.

  Section 13.  AVAILABILITY OF INFORMATION.  If the Shares subject to an
Optionee's Option are not registered or to be registered under the Securities
Act of 1933 as amended, the Company shall furnish each Optionee with (a) a copy
of the Plan and the Company's most recent annual report to its shareholders at
the time the Option Agreement is delivered to the Optionee and (b) a copy of
each subsequent annual report and proxy statement, on or about the same date as
such report shall be made available to shareholders of the Company.  The
Company will furnish, upon written request addressed to the Secretary of the
Company, but at no charge to the Optionee or any duly authorized representative
of the Optionee, copies of all reports filed by the Company with the Securities
and Exchange Commission, including, but not limited to, the Company's annual
reports on Form 10-K, its quarterly reports on Form 10-Q, and its proxy
statements.  Notwithstanding the foregoing provisions of this Section 13, the
Company shall not be required to furnish any such report or statement if a copy
of such report is otherwise provided to the Optionee in connection with another
plan maintained by the Company or such Optionee's status as a shareholder of
the Company.

  Section 14.  LIMITATION OF RIGHTS.

        (a)  CONDITIONS OF EMPLOYMENT.  The Plan shall not constitute a
      contract of employment, and participation in or eligibility for
      participation in the Plan shall not confer upon any employee the right to
      be continued as an employee of the Company or any present or future
      Subsidiary and the Company and each Subsidiary, hereby expressly reserves
      the right to terminate the employment of any employee, with or without
      cause, as if the Plan and any Options awarded pursuant to it were not in
      effect.

        (b)  COMPANY ASSETS.  Neither an Optionee nor any other person shall,
      by reason of receiving an award of an Option under the Plan acquire any
      right, title, or interest in any assets of the Company or any Subsidiary
      by reason of such Option or the Plan.  To the extent an Optionee or any
      other person shall acquire a right to receive payments from the Company
      pursuant to an Option Agreement or the Plan, such right shall be no
      greater than the right of any unsecured general creditor of the Company.
<PAGE>

        (c)  ISSUANCE OF SHARES.  Notwithstanding any other provision of the
      Plan or agreements made pursuant thereto, the Company shall not be
      required to issue or deliver any certificate or certificates for Shares
      under the Plan prior to fulfillment of all of the following conditions:

              (i)  Listing or approval for listing upon notice of issuance, of
            such Shares on the exchange or over-the-counter market as may at
            the time be the principal market for the Common Stock;

              (ii)  Any registration or other qualification of the Shares under
            any state or federal law or regulation, or the maintaining in
            effect of any such registration or other qualification which the
            Committee shall, in its absolute discretion upon the advice of
            counsel, deem necessary or advisable; and

              (iii)  Obtaining any other consent, approval, or permit from any
            state or federal governmental agency which the Committee shall, in
            its absolute discretion after receiving the advice of counsel,
            determine to be necessary or advisable.

  Section 15.  COMPLIANCE WITH APPLICABLE LAWS.  If at any time the Company
shall be advised by its counsel that the exercise of any Option or the delivery
of Shares upon the exercise of an Option is required to be approved, listed,
registered or qualified under any securities law, that certain actions must be
taken under the rules of any stock exchange or over-the-counter market, that
such exercise or delivery must be accompanied or preceded by a prospectus or
similar circular meeting the requirements of any applicable law, or that some
other action is required to be taken by the Company in compliance with
applicable law, the Company will use reasonable efforts to take all actions
required within a reasonable time, but exercise of the Options or delivery by
the Company of certificates for Shares may be deferred until the Company shall
be in compliance with all such requirements.

  Section 16.  GOVERNING LAW.  The Plan, each Option awarded hereunder and the
related Option Agreement, and all determinations made and actions taken
pursuant thereto, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the internal laws of the State of
Wisconsin and construed in accordance therewith without giving effect to the
principles of conflicts of laws applied by any state.

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