Document:

EXHIBIT 10.5
                                  AMENDMENT TO
                              EMPLOYMENT AGREEMENT

     This  Amendment  ("Amendment")  is  made  and  effective  on July 23, 2003.

     WHEREAS,  effective  June 21, 2003, ICO, Inc., a Texas corporation, and its
subsidiaries  and  affiliates  ("Employer"),  and  Christopher  N.  O'Sullivan
("Employee")  entered  in  to  an  Employment  Agreement  ("Agreement");  and

     WHEREAS,  the  parties  desire to amend the Agreement, as set forth herein.

     NOW,  THEREFORE,  Employer  and  Employee  agree  as  follows:

1.   Article  2.9  of  the  Agreement  is  hereby  deleted.

2.   All  terms  and  conditions  in  the Agreement that are not amended by this
     Amendment  continue  to  be  in  full  force  and  effect.

     IN WITNESS WHEREOF, Employer and Employee have duly executed this Amendment
in  multiple  originals,  to  be  effective  on  the  date  set  forth  above.

          EMPLOYER:

          ICO, Inc.

          BY:  /s/  Jon  C.  Biro
          -----------------------------------------
          Jon  C.  Biro
          Chief  Financial  Officer  and  Treasurer

         EMPLOYEE:

          /s/  Christopher  N.  O'Sullivan
          -----------------------------------------
          Christopher  N.  O'SullivanExhibit 10(h)

Exhibit 10(h)

SUMMARY OF OLD NATIONAL BANCORP

OUTSIDE DIRECTOR COMPENSATION

Set forth below is a summary that reflects the compensation payable to all outside directors of Old National Bancorp.

Effective April 2003

	
Type of Pay
	
Value
	
Frequency
	
Paid
	
Total

	
	
	
	
	
	

	
Retainers
	
	
	
	
	

	
	
	
	
	
	

	
All Board Members

Committee Chairs
	
$12,000

2,500
	
	
Semi-annual

Annual
	
May/November

May
	
$24,000

2,500

	

	
	
	
	
	
	

	
Committee Meetings
	
	
	
	
	

	
	
	
	
	
	

	
Audit

All others
	
1,500

1,000
	
	
Per meeting

Per meeting
	
Quarterly

Quarterly
	
Varies

Varies

	

	
	
	
	
	
	

	
Equity Compensation
	
	
	
	
	

	
	
	
	
	
	

	
Common stock grant
	
$ 5,000
	
	
Semi-annual
	
May/November
	
$10,000

	
	
	
	
	
	

	
Other Terms

1.  The value of each common stock grant may be increased accordingly for any stock splits or stock dividends.  

2.  A maximum of 150,000 shares of common stock is available for issuance under the outside director compensation program, subject to adjustment for stock splits or stock dividends. 

3.  The outside director compensation program has a term of ten years from the effective date of the program.

4.  No director may acquire under the outside director compensation program more than 1% of the shares of Old National Bancorp common stock outstanding at the effective date of this program.  The outside director compensation program, together with all other plans of Old National Bancorp (other than plans for which shareholder approval is not required by the New York Stock Exchange), shall not authorize the issuance of more than 5% of the shares of Old National Bancorp common stock outstanding at the effective date of this program.EXHIBIT 4.1 - 06/30/2003 FORM 10-Q

EXHIBIT 4.1

BALLY TOTAL FITNESS HOLDING CORPORATION,

as Issuer

THE GUARANTORS PARTY HERETO,

as Guarantors

and

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

INDENTURE

Dated as of July 2, 2003

10-1/2% SENIOR NOTES DUE 2011

                                                                                      Page

TABLE OF CONTENTS

                                          ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..................................1

Section 1.1.      Definitions............................................................1
Section 1.2.      Other Definitions.....................................................22
Section 1.3.      Compliance Certificates and Opinions..................................24
Section 1.4.      Form of Documents Delivered to Trustee................................24
Section 1.5.      Acts of Holders.......................................................25
Section 1.6.      Notices, etc., to Trustee and the Company.............................26
Section 1.7.      Notice to Holders; Waiver.............................................26
Section 1.8.      Conflict with Trust Indenture Act.....................................27
Section 1.9.      Effect of Headings and Table of Contents..............................27
Section 1.10.     Successors and Assigns................................................27
Section 1.11.     Separability Clause...................................................27
Section 1.12.     Benefits of Indenture.................................................27
Section 1.13.     Governing Law.........................................................27
Section 1.14.     Legal Holidays........................................................28
Section 1.15.     Schedules.............................................................28
Section 1.16.     Counterparts..........................................................28
Section 1.17.     No Recourse against Others............................................28

                                          ARTICLE II
SECURITY FORMS..........................................................................28

Section 2.1.      Forms Generally.......................................................28
Section 2.2.      Form of Face of Notes.................................................29
Section 2.3.      Form of Reverse of Notes..............................................43
Section 2.4.      Form of Guarantee.....................................................51

                                         ARTICLE III
THE NOTES...............................................................................52

Section 3.1.      Title and Terms.......................................................52
Section 3.2.      Denominations.........................................................53
Section 3.3.      Execution, Authentication, Delivery and Dating........................53
Section 3.4.      Temporary Notes.......................................................54
Section 3.5.      Registration, Registration of Transfer and Exchange...................54
Section 3.6.      Book-Entry Provisions for Global Notes................................56
Section 3.7.      Special Transfer Provisions...........................................57
Section 3.8.      Mutilated, Destroyed, Lost and Stolen Notes...........................61
Section 3.9.      Payment of Interest; Interest Rights Preserved........................61
Section 3.10.     CUSIP Numbers.........................................................62
Section 3.11.     Persons Deemed Owners.................................................63

- ii -

                                                                                      Page

Section 3.12.     Cancellation..........................................................63
Section 3.13.     Computation of Interest...............................................63

                                          ARTICLE IV
DEFEASANCE AND COVENANT DEFEASANCE......................................................63

Section 4.1.      Company's Option to Effect Defeasance or Covenant Defeasance..........63
Section 4.2.      Defeasance and Discharge..............................................63
Section 4.3.      Covenant Defeasance...................................................64
Section 4.4.      Conditions to Defeasance or Covenant Defeasance.......................64
Section 4.5.      Deposited Money and U.S. Government Obligations to Be Held in Trust;
                  Other Miscellaneous Provisions........................................67
Section 4.6.      Reinstatement.........................................................67

                                          ARTICLE V
REMEDIES................................................................................68

Section 5.1.      Events of Default.....................................................68
Section 5.2.      Acceleration of Maturity; Rescission and Annulment....................69
Section 5.3.      Collection of Indebtedness and Suits for Enforcement by Trustee.......70
Section 5.4.      Trustee May File Proofs of Claim......................................71
Section 5.5.      Trustee May Enforce Claims without Possession of Notes................71
Section 5.6.      Application of Money Collected........................................72
Section 5.7.      Limitation on Suits...................................................72
Section 5.8.      Unconditional Right of Holders to Receive Principal, Premium and
                  Interest..............................................................73
Section 5.9.      Restoration of Rights and Remedies....................................73
Section 5.10.     Rights and Remedies Cumulative........................................73
Section 5.11.     Delay or Omission Not Waiver..........................................73
Section 5.12.     Control by Holders....................................................73
Section 5.13.     Waiver of Past Defaults...............................................74
Section 5.14.     Undertaking for Costs.................................................74
Section 5.15.     Waiver of Stay, Extension or Usury Laws...............................74
Section 5.16.     Remedies Subject to Applicable Law....................................75

                                          ARTICLE VI
THE TRUSTEE.............................................................................75

Section 6.1.      Duties of Trustee.....................................................75
Section 6.2.      Notice of Defaults....................................................76
Section 6.3.      Certain Rights of Trustee.............................................76
Section 6.4.      Trustee Not Responsible for Recitals, Dispositions of Notes or
                  Application of Proceeds Thereof.......................................78
Section 6.5.      Trustee and Agents May Hold Notes; Collections; etc...................78
Section 6.6.      Money Held in Trust...................................................78
Section 6.7.      Compensation and Indemnification of Trustee and Its Prior Claim.......78
Section 6.8.      Conflicting Interests.................................................79
Section 6.9.      Trustee Eligibility...................................................79

- iii -

                                                                                      Page

Section 6.10.     Resignation and Removal; Appointment of Successor Trustee.............80
Section 6.11.     Acceptance of Appointment by Successor................................81
Section 6.12.     Merger, Conversion, Consolidation or Succession to Business...........82
Section 6.13.     Preferential Collection of Claims Against Company.....................82

                                         ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.......................................82

Section 7.1.      Company to Furnish Trustee Names and Addresses of Holders.............82
Section 7.2.      Disclosure of Names and Addresses of Holders..........................83
Section 7.3.      Reports by Trustee....................................................83
Section 7.4.      Reports by Company....................................................83

                                         ARTICLE VIII
MERGER, CONSOLIDATION OR SALE OF ASSETS.................................................84

Section 8.1.      Company May Merge, Consolidate, etc., Only on Certain Terms...........84
Section 8.2.      Successor Substituted.................................................85

                                          ARTICLE IX
SUPPLEMENTAL INDENTURES.................................................................86

Section 9.1.      Supplemental Indentures and Agreements without Consent of Holders.....86
Section 9.2.      Supplemental Indentures and Agreements with Consent of Holders........86
Section 9.3.      Execution of Supplemental Indentures and Agreements...................88
Section 9.4.      Effect of Supplemental Indentures.....................................88
Section 9.5.      Conformity with Trust Indenture Act...................................88
Section 9.6.      Reference in Notes to Supplemental Indentures.........................88
Section 9.7.      Notice of Supplemental Indentures.....................................88

                                          ARTICLE X
COVENANTS...............................................................................89

Section 10.1.     Payment of Principal, Premium and Interest............................89
Section 10.2.     Maintenance of Office or Agency.......................................89
Section 10.3.     Money for Note Payments to Be Held in Trust...........................89
Section 10.4.     Corporate Existence...................................................90
Section 10.5.     Payment of Taxes and Other Claims.....................................91
Section 10.6.     Maintenance of Properties.............................................91
Section 10.7.     Insurance.............................................................91
Section 10.8.     Incurrence of Indebtedness............................................92
Section 10.9.     Restricted Payments...................................................92
Section 10.10.    Transactions with Affiliates..........................................96
Section 10.11.    Liens.................................................................96
Section 10.12.    Asset Sales...........................................................97
Section 10.13.    Purchase of Notes upon a Change of Control............................99
Section 10.14.    Preferred Stock of Subsidiaries......................................102
Section 10.15.    Dividend and Other Payment Restrictions Affecting Subsidiaries.......102

- iv -

                                                                                      Page

Section 10.16.    Unrestricted Subsidiaries............................................102
Section 10.17.    Reports..............................................................103
Section 10.18.    Additional Subsidiary Guarantees.....................................103
Section 10.19.    Statement by Officers as to Default..................................104
Section 10.20.    Waiver of Certain Covenants..........................................104

                                          ARTICLE XI
REDEMPTION OF NOTES....................................................................105

Section 11.1.     Rights of Redemption.................................................105
Section 11.2.     Applicability of Article.............................................105
Section 11.3.     Election to Redeem; Notice to Trustee................................105
Section 11.4.     Selection by Trustee of Notes to Be Redeemed.........................105
Section 11.5.     Notice of Redemption.................................................106
Section 11.6.     Deposit of Redemption Price..........................................107
Section 11.7.     Notes Payable on Redemption Date.....................................107
Section 11.8.     Notes Redeemed or Purchased in Part..................................107

                                         ARTICLE XII
SATISFACTION AND DISCHARGE.............................................................108

Section 12.1.     Satisfaction and Discharge of Indenture..............................108
Section 12.2.     Application of Trust Money...........................................109

                                         ARTICLE XIII
GUARANTEE..............................................................................109

Section 13.1.     Unconditional Guarantee..............................................109
Section 13.2.     Severability.........................................................110
Section 13.3.     Limitation of Guarantor's Liability..................................110
Section 13.4.     Release of Guarantor.................................................110
Section 13.5.     Contribution.........................................................111
Section 13.6.     Waiver of Subrogation................................................111
Section 13.7.     Execution of Guarantee...............................................112
Section 13.8.     Waiver of Stay, Extension or Usury Laws..............................112

- v -

        
INDENTURE dated as of July 2, 2003 between BALLY TOTAL FITNESS HOLDING
CORPORATION, a Delaware corporation (as more fully defined below, the
“Company”), the Guarantors (as more fully defined below, the
“Guarantors”) listed on Schedule A hereto and U.S. BANK
NATIONAL ASSOCIATION, a national banking association, as trustee (the
“Trustee”). 

RECITALS

        
The Company has duly authorized the creation of an issue of 10-1/2% Senior Notes
due 2011 (the “Notes”) of substantially the tenor and amount
hereinafter set forth and each of the Guarantors has duly authorized the
Guarantee (as more fully defined below) of the Notes, and to provide therefor,
the Company and the Guarantors have duly authorized the execution and delivery
of this Indenture, the Notes and the Guarantees; 

        
Upon the effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement (as defined herein), this Indenture will be subject to,
and shall be governed by, the provisions of the Trust Indenture Act (as defined
herein) that are required to be part of and to govern indentures qualified under
the Trust Indenture Act; and 

        
All acts and things necessary have been done to make (i) the Notes, when duly
issued and executed by the Company and authenticated and delivered hereunder,
the valid obligations of the Company, (ii) the Guarantees, when duly issued and
executed by the Guarantors and delivered hereunder, the valid obligations of the
Guarantors and (iii) this Indenture a valid agreement of the Company and each
Guarantor in accordance with the terms of this Indenture. 

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

        
For and in consideration of the premises and the purchase of the Notes by the
Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows: 

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

        
Section 1.1       Definitions.

        
For all purposes of this Indenture, except as otherwise expressly provided or
unless the context otherwise requires: 

        
(a)       the terms defined in this Article have
the meanings assigned to them in this Article, and include the plural as well as
the singular;

        
(b)       all other terms used herein which are
defined in the Trust Indenture Act, either directly or by reference therein,
have the meanings assigned to them therein;

        
(c)       all accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with GAAP;

        
(d)       the words “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other subdivision;

        
(e)       all references to $, US$, dollars or
United States dollars shall refer to the lawful currency of the United States of
America;

        
(f)       all references herein to particular
Sections or Articles refer to this Indenture unless otherwise so indicated; and

        
(g)       the word “or” is not exclusive and the
word “including” means including without limitation.

        
The following terms shall have the meanings set forth in this Section.

        
“Acquired Debt” means Indebtedness of a Person: (i) existing at
the time that Person becomes a Subsidiary or merges with or into or consolidates
with the Company or any Subsidiary, or (ii) assumed in connection with the
acquisition of assets from that Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition, as the case may be. Acquired Indebtedness shall
be deemed to be incurred on the date of the related acquisition of assets from
any Person or the date the acquired Person becomes a Subsidiary, as the case may
be. 

        
“Additional Notes” means 10-1/2% Senior Notes due 2011 issued
after the Issue Date pursuant to Article II and in compliance with
Section 10.8. 

        
“Adjusted Consolidated Interest Expense” of any Person means,
without duplication, for any period, as applied to any Person, the sum of: (a)
the interest expense of such Person and its Consolidated Subsidiaries (exclusive
of deferred financing fees and any premiums or penalties paid in connection with
redeeming or retiring any Indebtedness prior to its stated maturity) for such
period, on a Consolidated basis, including without limitation, (i) amortization
of debt discount, (ii) the net cost under interest rate contracts (including
amortization of discounts), (iii) the interest portion of any deferred payment
obligation, and (iv) accrued interest, plus (b) the interest component of the
Capital Lease Obligations paid, accrued and/or scheduled to be paid, or accrued
by such Person during such period, plus (c) all capitalized interest of such
Person and its Consolidated Subsidiaries, in each case as determined in
accordance with GAAP consistently applied. 

        
“Affiliate” means, with respect to any specified Person: (i)
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person; (ii) any other
Person that owns, directly or indirectly, 10% or more of such specified
Person’s Capital Stock or beneficial equity interest in such Person (if
such Person is a real estate investment trust), or any officer or director of
any such specified Person or other Person or, with respect to any natural
Person, any person having a relationship with such Person by blood, marriage or
adoption not more remote than first cousin; or (iii) any other Person 10% or
more of the Voting Stock of which is beneficially owned or held directly or
indirectly by such specified Person. For the purposes of this definition,
“control” when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly  

- 2 -

or indirectly, whether
through ownership of voting securities, by contract or otherwise; and the terms
“controlling” and “controlled” have meanings correlative to
the foregoing.

        
“Asset Sale” means any sale, issuance, conveyance, transfer,
lease or other disposition (including, without limitation, by way of merger,
consolidation or Sale and Leaseback Transaction) (collectively, a
“transfer”), directly or indirectly, in one or a series of related
transactions, of: (i) any Capital Stock of any Subsidiary; (ii) all or
substantially all of the properties and assets of any division or line of
business of the Company or its Subsidiaries; or (iii) any other properties or
assets of the Company or any Subsidiary, other than in the ordinary course of
business. For the purposes of this definition, the term “Asset Sale”
shall not include any transfer of properties and assets: (A) that is governed by
the provisions of Article VIII, (B) that is between or among the Company
and its Subsidiaries in accordance with the terms of the Indenture, (C) that is
of obsolete equipment or other obsolete assets in the ordinary course of
business, (D) that constitutes a Restricted Payment that is permitted by the
provisions of Section 10.9, including the making of a Permitted
Investment (other than pursuant to clause (v) of the definition of
“Permitted Investment”), (E) the Fair Market Value of which in the
aggregate does not exceed $1,000,000 in any transaction or series of related
transactions, or (F) sales of accounts receivable and other transactions among
the Company and its Subsidiaries pursuant to the Securitization Facility.

        
“Average Life to Stated Maturity” means, as of the date of
determination with respect to any Indebtedness, the quotient obtained by
dividing: (i) the sum of the products of (a) the number of years from the date
of determination to the date or dates of each successive scheduled principal
payment of such Indebtedness multiplied by (b) the amount of each such principal
payment; by (ii) the sum of all such principal payments. 

        
“Bankruptcy Law” means Title 11, United States Bankruptcy Code
of 1978, as amended, or any similar United States federal or state law relating
to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization
or relief of debtors or any amendment to, succession to or change in any such
law. 

        
“Banks” means the lenders under the Senior Credit Facility.

        
“Board of Directors” means either the board of directors of the
Company or any duly authorized committee of such board. 

        
“Board Resolution” means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee. 

        
“Book-Entry Note” means any Note bearing the legend specified
in Section 2.2 evidencing all or part of a series of Notes, authenticated
and delivered to the Depository for such series or its nominee, and registered
in the name of such Depository or nominee. 

        
“Business Day” means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the City of New
York or the city in which the principal office of the Trustee is located are
authorized or obligated by law or executive order to close. 

- 3 -

        
“Capital Lease Obligation” of any Person means any obligation
of such Person and its Subsidiaries on a Consolidated basis under any capital
lease of real or personal property which, in accordance with GAAP, has been
recorded as a capitalized lease obligation. 

        
“Capital Stock” means: (i) in the case of a corporation,
corporate stock; (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents, however
designated, of corporate stock; (iii) in the case of a partnership or limited
liability company, partnership or membership interests, whether general or
limited; and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person. 

        
“Cash Equivalents” means: (i) Temporary Cash Investments; (ii)
securities received by the Company or any Subsidiary from the transferee in an
Asset Sale that are promptly converted by the Company or such Subsidiary into
cash; (iii) the assumption of Indebtedness or other obligations or liabilities
of the Company or any Subsidiary in connection with an Asset Sale and from which
the Company or such Subsidiary is released; and (iv) in connection with an Asset
Sale to a Person where the assets sold, issued, conveyed, transferred, leased or
otherwise disposed of are included in a business which will be a party to the
Franchise Program, the net present value of payments by such Person pursuant to
the Franchise Program as calculated and certified by the chief financial officer
of the Company. 

        
“Change of Control” means the occurrence of any of the
following events: (i) any “person” or “group” (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have beneficial ownership
of all shares that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than a majority of the total outstanding Voting Stock of the
Company; (ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with any
new directors whose election to the Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of 66-2/3% of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved), cease for any reason to constitute a majority of such Board of
Directors then in office; (iii) the Company consolidates with or merges with or
into any Person or conveys, transfers or leases all or substantially all of its
assets to any Person, or any corporation consolidates with or merges into or
with the Company in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is changed into or exchanged for cash,
securities or other property, other than (A) any such transaction where the
outstanding Voting Stock of the Company is not changed or exchanged at all
(except to the extent necessary to reflect a change in the jurisdiction of
incorporation of the Company), (B) or where the outstanding Voting Stock of the
Company is changed into or exchanged for (x) Voting Stock of the surviving
corporation which is not Redeemable Capital Stock, or (y) cash, securities and
other property (other than Capital Stock of the surviving corporation) in an
amount which could be paid by the Company as a Restricted Payment as described
in Section 10.9 (and such amount shall be treated as a Restricted Payment
subject to the provisions in the Indenture described in Section 10.9),
and (C) where no “person” or “group” owns immediately after
such transaction, directly or indirectly, more than a majority of the total
outstanding Voting Stock of the surviving  

- 4 -

corporation; or (iv) the
Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the provisions
described in Article VIII.

        
“Company” means Bally Total Fitness Holding Corporation, a
corporation incorporated under the laws of Delaware, until a successor Person
shall have become such pursuant to the applicable provisions of the Indenture,
and thereafter “Company” shall mean such successor Person. 

        
“Company Request” or “Company Order” means a
written request or order signed in the name of the Company by (i) any of its
Chairman of the Board, its Vice Chairman, its President or a Vice President
(regardless of Vice Presidential designation) or Treasurer, and (ii) any one of
its Assistant Treasurers, its Secretary or any Assistant Secretary, and
delivered to the Trustee, provided, however, that such request or order may be
signed by any two of the officers or directors listed in clause (i) above in
lieu of being signed by one of such officers or directors and one officer
pursuant to clause (ii) above. 

        
“Consolidated Fixed Charge Coverage Ratio” of any Person means,
for any period, the ratio of EBITDA to the sum of Adjusted Consolidated Interest
Expense for such period and cash dividends paid on any Preferred Stock of such
Person during such period; provided that: (i) in making such computation, the
Adjusted Consolidated Interest Expense attributable to interest on any
Indebtedness shall be computed on a pro forma basis, and (A) where such
Indebtedness was outstanding during the period and bore a floating interest
rate, interest shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period, and (B) where
such Indebtedness was not outstanding during the period for which the
computation is being made but which bears, at the option of the Company, a fixed
or floating rate of interest, shall be computed by applying at the option of the
Company, either the fixed or floating rates and (ii) in making such computation,
the Adjusted Consolidated Interest Expense of such Person attributable to
interest on any Indebtedness under a revolving credit facility computed on a pro
forma basis shall be computed based upon the average daily balance of such
Indebtedness during the applicable period. 

        
“Consolidated Income Tax Expense” of any Person means, for any
period, the provision for federal, state, local and foreign income taxes of such
Person and its Consolidated Subsidiaries for such period as determined in
accordance with GAAP. 

        
“Consolidated Net Income (Loss)” of any Person means, for any
period, the Consolidated net income (or loss) of such Person and its
Subsidiaries for such period on a Consolidated basis as determined in accordance
with GAAP, adjusted, to the extent included in calculating such net income (or
loss), by excluding, without duplication, (i) all extraordinary gains or losses
(exclusive of all fees and expenses relating thereto), (ii) the portion of net
income (or loss) of such Person and its Subsidiaries on a Consolidated basis
allocable to minority interests in unconsolidated Persons to the extent that
cash dividends or distributions have not actually been received by such Person
or one of its Subsidiaries, (iii) net income (or loss) of any Person combined
with such Person or any of its Subsidiaries on a “pooling of
interests” basis attributable to any period prior to the date of
combination, (iv) any gain or loss, net of taxes, realized upon the termination
of any employee pension benefit plan, (v) net gains (or losses)  

- 5 -

(except for all fees and
expenses relating thereto) in respect of dispositions of assets other than in
the ordinary course of business, (vi) the net income of any Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (vii) any gain arising from the acquisition of
any securities, or the extinguishment, under GAAP, of any Indebtedness of such
Person, (viii) transaction costs charged in connection with the Refinancing, or
(ix) amortization of intangible assets of such Person and its Subsidiaries on a
consolidated basis under GAAP.

        
“Consolidated Non-Cash Charges” of any Person means, for any
period, the aggregate depreciation, amortization and other non-cash charges of
such Person and its Subsidiaries on a Consolidated basis for such period, as
determined in accordance with GAAP (excluding any non-cash charge which requires
an accrual or reserve for cash charges for any future period). 

        
“Consolidation” means, with respect to any Person, the
consolidation of the accounts of such Person and each of its Subsidiaries if and
to the extent the accounts of such Person and each of its Subsidiaries would
normally be consolidated with those of such Person, all in accordance with GAAP.
The term “Consolidated” shall have a similar meaning. 

        
“Corporate Trust Office” means the office of the Trustee or an
affiliate or agent thereof at which at any particular time the corporate trust
business for the purposes of this Indenture shall be principally administered,
which office at the date of execution of this Indenture is located at 180 East
5th Street, St. Paul, Minnesota 55101, Attention: Corporate Finance. 

        
“Credit Card Program Guarantee” means the obligation of the
Company to remit funds in excess of the sum of: (a) $25,000,000 plus (b) a
reserve (of up to 25% of the amount owed to the Company by a member which
becomes an obligation due to the credit card issuer by such member) with respect
to the Company’s credit card program pursuant to the Company’s Credit
Card Program Agreement dated December 21, 1995, as such agreement, in whole or
in part, may be amended, renewed, extended, substituted, refinanced,
restructured, replaced, supplemented, or otherwise modified from time to time
(including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing). 

        
“Default” means any event which is, or after notice or passage
of any time or both would be, an Event of Default. 

        
“Depository” means, with respect to the Notes issued in the
form of one or more Book-Entry Notes, The Depository Trust Company
(“DTC”), its nominees and successors, or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act. 

        
“Disinterested Director” means, with respect to any transaction
or series of related transactions, a member of the Board of Directors who does
not have any material direct or indirect financial interest in or with respect
to such transaction or series of related transactions. 

- 6 -

        
“Domestic Subsidiary” means a Subsidiary incorporated or
otherwise organized and existing under the laws of the United States and any
state thereof. 

        
“EBITDA” means the sum of Consolidated Net Income, Adjusted
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-Cash Charges deducted in computing Consolidated Net Income, in each case,
for such period, of the Company and its Subsidiaries on a Consolidated basis,
all determined in accordance with GAAP consistently applied. 

        
“Event of Default” has the meaning specified in Article
V. 

        
“Exchange Act” means the United States Notes Exchange Act of
1934, as amended, or any successor statute. 

        
“Exchange Offer” means the exchange offer by the Company to be
effected pursuant to the Registration Rights Agreement. 

        
“Exchange Offer Registration Statement” means the registration
statement under the Securities Act contemplated by the Registration Rights
Agreement. 

        
“Fair Market Value” means, with respect to any asset or
property, the sale value that would be obtained in an arm’s-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy. Fair Market Value
shall be determined by the Board of Directors acting in good faith and shall be
evidenced by a Board Resolution. 

        
“Franchise Program” means the program under which the Company
and/or its Subsidiaries grant franchises to third parties which require
franchisees, among other things, to pay fees to the Company and/or its
Subsidiaries, and which, among other things, grants to the franchisee the right
to receive training from the Company or its Subsidiaries or sell memberships to
use facilities of the franchisee and the Company or its Subsidiaries. The
Franchise Program may include the conversion of facilities owned by the Company
or its Subsidiaries to franchise facilities and includes such a program as it
may be amended, renewed, extended, substituted, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successive renewal, extension, substitution, restructuring,
replacement, supplementation or other modification of the foregoing).

        
“Generally Accepted Accounting Principles” or
“GAAP” means generally accepted accounting principles in the
United States, consistently applied, which are in effect on the Issue Date.

        
“Global Notes” means one or more securities evidencing all or a
part of the Notes to be issued as Book-Entry Notes issued to the Depository in
accordance with this Indenture. 

        
“Guaranteed Debt” of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of
“Indebtedness” contained in this Section guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to pay or purchase such
Indebtedness or to advance or  

- 7 -

supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such Indebtedness against loss, (iii) to supply funds to, or in
any other manner invest in, the debtor (including any agreement to pay for
property or services without requiring that such property be received or such
services be rendered), (iv) to maintain working capital or equity capital of the
debtor, or otherwise to maintain the net worth, solvency or other financial
condition of the debtor, or (v) otherwise to assure a creditor against loss;
provided that the term “guarantee” shall not include endorsements for
collection or deposit, in either case in the ordinary course of business or
guarantees of operating leases.

        
“Guarantor” means: (1) each of the Guarantors listed on
Schedule A hereto; and (2) each of the Company’s Subsidiaries that
in the future executes a supplemental indenture in which such Subsidiary agrees
to be bound by the terms of this Indenture as a Guarantor; provided that
any Person constituting a Guarantor as described above shall cease to constitute
a Guarantor when its respective Guarantee is released in accordance with the
terms of this Indenture. 

        
“Holder” means a Person in whose name a Note is registered in
the Note Register. 

        
“Indebtedness” means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit issued under
letter of credit facilities, acceptance facilities or other similar facilities
and in connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, now or hereafter outstanding,
(ii) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of business, (iv) all obligations under Interest Rate Agreements of such Person,
(v) all Capital Lease Obligations of such Person, (vi) all Indebtedness referred
to in clauses (i) through (v) above of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness, (vii) all
Guaranteed Debt of such Person, (viii) all Redeemable Capital Stock issued by
such Person valued at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends, (ix) the Credit Card Program
Guarantee, and (x) any amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any liability which constitutes
Indebtedness of the types referred to in clauses (i) through (ix) above. For
purposes hereof, the “maximum fixed repurchase price” of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required  

- 8 -

to be determined pursuant
to the Indenture, and if such price is based upon, or measured by, the Fair
Market Value of such Redeemable Capital Stock, such Fair Market Value to be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.

        
“Indenture” means this instrument as originally executed
(including all exhibits and schedules thereto) and as it may from time to time
be supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof. 

        
“Indenture Obligations” means the obligations of the Company
and any other obligor on the Indenture or under the Notes to pay principal of,
premium, if any, and interest when due and payable, and all other amounts due or
to become due under or in connection with the Indenture, the Notes and the
performance of all other obligations to the Trustee and the holders under the
Indenture and the Notes, according to the terms thereof. 

        
“Initial Purchasers” means Deutsche Bank Securities Inc., J.P.
Morgan Securities Inc., CIBC World Markets Corp., ABN AMRO Incorporated, Banc
One Capital Markets, Inc., U.S. Bancorp Piper Jaffray and Wells Fargo Securities
LLC.

        
“Initial Notes” has the meaning stated in the first recital of
this Indenture. 

        
“Interest Payment Date” means the Stated Maturity of a regular
installment of interest on the Notes. 

        
“Interest Rate Agreements” means one or more of the following
agreements which shall be entered into by one or more financial institutions:
interest rate protection agreements (including, without limitation, interest
rate swaps, caps, floors, collars and similar agreements) and/or other types of
interest rate hedging agreements from time to time. 

        
“Investment” means, with respect to any Person, directly or
indirectly, any advance, loan (including guarantees), or other extension of
credit or capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase, acquisition or ownership (other than ownership
obtained without making, or becoming liable, directly or indirectly, contingent
or otherwise, for the making of, any advance, loan (or the forgiveness thereof),
payment, extension of credit or capital contribution in connection therewith),
by such Person of any Capital Stock, bonds, notes, debentures or other
securities issued or owned by any other Person and all other items that would be
classified as investments on a balance sheet prepared in accordance with GAAP.

        
“Issue Date” means the date on which the Notes are originally
issued under this Indenture. 

        
“Lien” means any mortgage or deed of trust, charge, pledge,
lien (statutory or otherwise), privilege, security interest, assignment,
deposit, arrangement, easement, hypothecation, claim, preference, priority or
other encumbrance upon or with respect to any property of any kind (including
any conditional sale, capital lease or other title retention agreement, any
leases in the nature thereof, and any agreement to give any security interest),
real or personal, movable or immovable, now owned or hereafter acquired.

- 9 -

        
“Maturity” means, when used with respect to any Note, the date
on which the principal of such Note becomes due and payable as therein provided
or as provided in the Indenture, whether at Stated Maturity, the Offer Date, the
Change of Control Purchase Date or the redemption date and whether by
declaration of acceleration, Offer in respect of Excess Proceeds, Change of
Control Offer in respect of a Change of Control, call for redemption or
otherwise. 

        
“Moody’s” means Moody’s Investors Service, Inc. or any
successor rating agency.

        
“Net Cash Proceeds” means (a) with respect to any Asset Sale by
any Person, the proceeds thereof (without duplication in respect of all Asset
Sales) in the form of cash or Temporary Cash Investments including payments in
respect of deferred payment obligations when received in the form of, or stock
or other assets when disposed of for, cash or Temporary Cash Investments (except
to the extent that such obligations are financed or sold with recourse to the
Company or any Subsidiary) net of (i) brokerage commissions and other reasonable
fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a
result of such Asset Sale, (iii) payments made to retire Indebtedness where
payment of such Indebtedness is secured by the assets or properties the subject
of such Asset Sale, (iv) amounts required to be paid to any Person (other than
the Company or any Subsidiary) owning a beneficial interest in the assets
subject to the Asset Sale and (v) appropriate amounts to be provided by the
Company or any Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an Officers’ Certificate delivered to the Trustee, and (b)
with respect to any issuance or sale of Capital Stock or options, warrants or
rights to purchase Capital Stock, or debt securities or Capital Stock that have
been converted into or exchanged for Capital Stock as referred to in Section
10.9, the proceeds of such issuance or sale in the form of cash or Temporary
Cash Investments including payments in respect of deferred payment obligations
when received in the form of, or stock or other assets when disposed of for,
cash or Temporary Cash Investments (except to the extent that such obligations
are financed or sold with recourse to the Company or any Subsidiary), net of
attorneys’ fees, accountants’ fees and brokerage, consultation,
underwriting and other fees and expenses actually incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof.

        
“Non-Guarantor Subsidiary” means H&T Receivables Funding,
Bally ARA Corporation, Lincoln Indemnity Company and any other Wholly Owned
Subsidiary of the Company whose sole activity is engaging in receivables
financing transactions or real estate financing transactions and which
Subsidiaries incur no Indebtedness other than Indebtedness directly related to
such receivables or real estate financing transactions. 

        
“Non-U.S. Person” means a Person that is not a "U.S. person" as
defined in Regulation S under the Securities Act. 

        
“Notes” has the meaning specified in the first recital of this
Indenture. 

- 10 -

        
“Obligations” means any and all obligations with respect to the
payment of (a) any principal of or interest (including interest accruing on or
after the commencement of any insolvency, bankruptcy or liquidation proceeding,
whether or not a claim for post-filing interest is allowed in such proceeding)
or premium on any Indebtedness, including any reimbursement obligation in
respect of any letter of credit, (b) any fees, indemnification obligations,
damages, expense reimbursement obligations or other liabilities payable under
the documentation governing any Indebtedness and (c) any obligation to post cash
collateral in respect of letters of credit and any other obligations.

        
“Officers’ Certificate” means a certificate signed by any
of (i) the Chairman of the Board, Vice Chairman, President or a Vice President
(regardless of Vice Presidential designation) or Treasurer, and (ii) by any one
of its Assistant Treasurers, its Secretary or any Assistant Secretary, of the
Company, and delivered to the Trustee, provided, however, that such certificate
may be signed by any two of the officers or directors listed in clause (i) above
in lieu of being signed by one of such officers or directors and one officer
pursuant to clause (ii) above. 

        
“Opinion of Counsel” means a written opinion of qualified legal
counsel, who may be counsel for the Company or the Trustee, and who shall be
reasonably acceptable to the Trustee, including but not limited to an Opinion of
Independent Counsel. 

        
“Opinion of Independent Counsel” means a written opinion by
qualified legal counsel who is not an employee or consultant of the Company and
who shall be reasonably acceptable to the Trustee. 

        
“Outstanding” when used with respect to Notes means, as of the
date of determination, all Notes theretofore authenticated and delivered under
this Indenture, except: 

        
(a)       Notes theretofore canceled by the
Trustee or delivered to the Trustee for cancellation;

        
(b)       Notes, or portions thereof, for whose
payment or redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company shall act as
its own Paying Agent) for the Holders of such Notes; provided, that if such
Notes are to be redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor reasonably satisfactory to the Trustee
has been made;

        
(c)       Notes, except to the extent provided in
Sections 4.2 and 4.3, with respect to which the Company has
effected defeasance or covenant defeasance as provided in Article IV;
and

        
(d)       Notes in exchange for or in lieu of
which other Notes have been authenticated and delivered pursuant to this
Indenture, other than any such Notes in respect of which there shall have been
presented to the Trustee and Company proof reasonably satisfactory to each of
them that such Notes are held by a bona fide purchaser in whose hands the Notes
are valid obligations of the Company; provided, however, that in determining
whether the Holders of the requisite principal amount of Outstanding 

- 11 -

Notes have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Company or any other obligor on the Notes or any
Affiliate of the Company or such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes which the Trustee knows to be so owned
shall be so disregarded. Notes so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the reasonable
satisfaction of the Trustee the pledgee’s right so as to act with respect to
such Notes and that the pledgee is not the Company or any other obligor on the
Notes or any Affiliate of the Company or such other obligor.

        
“Paying Agent” means any Person authorized by the Company to
pay the principal of, premium, if any, or interest on any Notes on behalf of the
Company. 

        
“Permitted Indebtedness” means: 

        
(i)       Indebtedness under the Senior Credit
Facility and the Securitization Facility in an aggregate principal amount not to
exceed, whichever amount is greater, (a) $275.0 million or (b) $115.0 million
plus 80% of the net book value of the consolidated accounts receivable of the
Company and its Subsidiaries, calculated in accordance with GAAP, in each case
minus any permanent reductions of the amounts outstanding under the Senior
Credit Facility or the Securitization Facility as a result of repayments of such
Indebtedness pursuant to Section 10.12;

        
(ii)       Indebtedness of the Company (a)
represented by the Notes, or (b) that is incurred, in any amount, and in whole
or in part, to (1) redeem all of the Notes outstanding as described herein, or
(2) effect a complete defeasance or a covenant defeasance thereof as described
herein; provided, in either case, that any Indebtedness incurred under this
subclause (b) is actually applied in accordance with the applicable redemption
or defeasance provision of the Indenture;

        
(iii)       Indebtedness of the Company
outstanding on the Issue Date;

        
(iv)       Indebtedness of the Company owing to a
Subsidiary; provided that any Indebtedness of the Company owing to a Subsidiary
is made pursuant to an intercompany note and is expressly subordinated in right
of payment to the payment and performance of the Company’s obligations
under the Notes, and, upon an Event of Default, such Indebtedness shall not be
due and payable until such Event of Default is cured, waived or rescinded;
provided, further, that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or transfer to a
Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the
Company not permitted by this clause (iv);

        
(v)       obligations of the Company entered into
in the ordinary course of business pursuant to Interest Rate Agreements designed
to protect the Company against fluctuations in interest rates in respect of
Indebtedness of the Company as long as such 

- 12 -

obligations do not exceed
the aggregate principal amount of such Indebtedness then outstanding to which
the Interest Rate Agreements apply;

        
(vi)       Indebtedness of the Company represented
by Capital Lease Obligations or Purchase Money Obligations or other Indebtedness
incurred or assumed in connection with the acquisition, improvement or
development of real or personal, movable or immovable, property in each case
incurred for the purpose of financing or refinancing all or any part of the
purchase price or cost of construction or improvement of property used in the
business of the Company and any refinancings of such Indebtedness made in
accordance with subclauses (a), (b) and (c) of clause (x) below, in an aggregate
principal amount pursuant to this clause (vi) not to exceed $50,000,000
outstanding at any time; and provided that the principal amount of any
Indebtedness permitted under this clause (vi) did not in each case at the time
of incurrence exceed the cost of the acquired or constructed asset or
improvement so financed;

        
(vii)       Indebtedness of the Company in respect
of performance bonds, surety bonds and replevin bonds provided by the Company in
the ordinary course of business;

        
(viii)       other Indebtedness of the Company
that does not exceed $50,000,000 in the aggregate at any one time
outstanding;

        
(ix)       Indebtedness arising from the honoring
by a bank or other financial institution of a check, draft or other financial
instrument drawn against insufficient funds in the ordinary course of business,
provided that such Indebtedness is extinguished within four Business Days of its
incurrence;

        
(x)       any renewals, extensions, substitutions,
refundings, refinancings or replacements (collectively, a “refinancing”)
of any Indebtedness described in clauses (iii) and (iv) of this definition of
“Permitted Indebtedness”, including any successive refinancings (a) so
long as the borrower under such refinancing is the Company or, if not the
Company, the same as the borrower of the Indebtedness being refinanced, (b) the
aggregate principal amount of Indebtedness represented thereby as of the Issue
Date is not increased by such refinancing by an amount greater than the lesser
of (I) the stated amount of any premium or other payment required to be paid in
connection with such a refinancing pursuant to the terms of the Indebtedness
being refinanced or (II) the amount of premium or other payment actually paid at
such time to refinance the Indebtedness, plus, in either case, the amount of
expenses of the Company incurred in connection with such refinancing, and (c)
(A) in the case of any refinancing of Indebtedness that is Subordinated
Indebtedness, such new Indebtedness is made subordinated to the Notes at least
to the same extent as the Indebtedness being refinanced and (B) in the case of
Senior Debt or Subordinated Indebtedness, as the case may be, such refinancing
does not reduce the Average Life to Stated Maturity or the Stated Maturity of
such Indebtedness; and

        
(xi)       Indebtedness of the Company used to
make any Permitted Payment set forth in clause (v) of the definition of
“Permitted Payments”; provided, that the Senior Leverage Ratio for the most
recently ended four full fiscal quarters for which financial statements are
available immediately preceding the date on which the additional

- 13 -

Indebtedness is
incurred, taken as one period, does not exceed 2.75 to 1, determined on a pro
forma basis (including a pro forma application of the net proceeds
therefrom).

        
“Permitted Investment” means: (i) Investments in any Subsidiary
or any Person which, as a result of such Investment, (a) becomes a Subsidiary or
(b) is merged or consolidated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or any
Subsidiary; (ii) Indebtedness of the Company described under clause (iv) of the
definition of “Permitted Indebtedness”; (iii) Investments in any of
the Notes and Investments represented by guarantees that are otherwise permitted
by the Indenture; (iv) Temporary Cash Investments; (v) Investments acquired by
the Company or any Subsidiary in connection with an Asset Sale permitted under
Section 10.12 to the extent such Investments are non-cash proceeds as
permitted under such covenant; (vi) Investments in existence on the Issue Date;
(vii) Investments in the aggregate amount of $5,000,000 to purchase Capital
Stock of any Subsidiary; (viii) any advance, loan (including guarantees) or
other extension of credit to any Person who purchases or acquires assets of the
Company or any Subsidiaries which are to be included in a business which will be
or is a party to the Franchise Program, limited to the purchase or acquisition
price of such assets; and (ix) any other Investments in joint ventures,
partnerships, real estate investment trusts or other Persons reasonably related
or complementary to the business of the Company on the date hereof in an
aggregate amount not greater than $25,000,000 at any one time outstanding. In
connection with any assets or property contributed or transferred to any Person
as an Investment, such property and assets shall be equal to the Fair Market
Value (as determined by the Board of Directors) at the time of Investment. 

        
“Permitted Liens” means the following types of Liens:

        
(i)       Liens for taxes, assessments,
governmental charges or levies either (a) not yet delinquent, or (b) the
validity of which is being contested in good faith in an appropriate manner
diligently pursued and as to which adequate reserves for the unpaid amount shall
have been set aside in conformity with GAAP;

        
(ii)       materialmen’s, mechanics’,
landlord’s, workmen’s, repairmen’s, employees’ or other like
liens arising in the ordinary course of business to secure obligations not yet
delinquent or being contested in good faith and as to which adequate reserves
for the unpaid amount shall have been set aside in conformity with GAAP or as to
which adequate bonds or insurance shall have been obtained;

        
(iii)       deposits or pledges to secure the
payment of, or to secure the Company’s or any Subsidiaries’
obligations with respect to letters of credit that secure the payment of
workers’ compensation, unemployment insurance, social security or other
retirements benefits or obligations (exclusive of liens arising under ERISA) or
to secure the performance of bids, trade contracts, leases, public or statutory
obligations, surety or appeal bonds, and other obligations of a like nature
incurred in the ordinary course of business;

        
(iv)       judgment Liens not giving rise to an
Event of Default;

- 14 -

        
(v)       easements, rights-of-way, zoning
restrictions and other similar charges or encumbrances in respect of real
property not interfering in any material respect with the ordinary conduct of
the business of the Company or of any of its Subsidiaries;

        
(vi)       any interest or title of a lessor under
any Capitalized Lease Obligation; provided that such Liens do not extend to any
property or asset which is not leased property subject to such Capitalized Lease
Obligation;

        
(vii)       Liens securing reimbursement
obligations with respect to commercial letters of credit which encumber
documents and other property relating to such letters of credit and products and
proceeds thereof;

        
(viii)       Liens encumbering deposits made to
secure obligations arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Subsidiaries, including rights of
offset and setoff;

        
(ix)       Liens securing Interest Rate Agreements
which Interest Rate Agreements relate to Indebtedness that is otherwise
permitted under this Indenture;

        
(x)       Liens securing Acquired Debt incurred in
accordance with Section 10.8; provided that: (a) such Liens secured such
Acquired Debt at the time of and prior to the incurrence of such Acquired Debt
by the Company or a Subsidiary and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Debt by the Company or a
Subsidiary; and (b) such Liens do not extend to or cover any property or assets
of the Company or any of its Subsidiaries other than the property or assets that
secured the Acquired Debt prior to the time such Indebtedness became Acquired
Debt of the Company or a Subsidiary and are no more favorable to the lienholders
than those securing the Acquired Debt prior to the incurrence of such Acquired
Debt by the Company or a Subsidiary;

        
(xi)       leases, subleases, licenses and
sublicenses granted to others that do not materially interfere with the ordinary
course of business of the Company and its Subsidiaries;

        
(xii)       banker’s Liens, rights of setoff
and similar Liens with respect to cash and Cash Equivalents on deposit in one or
more bank accounts in the ordinary course of business;

        
(xiii)       Liens arising from filing Uniform
Commercial Code financing statements regarding leases;

        
(xiv)       Liens related to credit card
processing agreements and cash management obligations in the ordinary course of
business, including any guarantees thereof by the Company or any
Subsidiary;

        
(xv)       non-monetary Liens which do not have an
adverse effect on the value or use of the property subject to such
Liens;

- 15 -

        
(xvi)       Liens securing Indebtedness permitted
by Section 10.8 that is incurred in connection with a Person becoming a
Subsidiary or in connection with the acquisition of assets that constitute a
business; provided, that the amount of such Indebtedness to be secured by this
clause (xvi) shall, at the time such Indebtedness is incurred, not exceed an
amount equal to 1.5 times the EBITDA of such Person or acquired business for the
mostly recently ended four fiscal quarters for which internal financial
statements of such Person or acquired business are available; and

        
(xvii)       additional Liens not to exceed
$10,000,000 at any one time.

        
“Permitted Subsidiary Indebtedness” means:

        
(i)       Indebtedness of a Subsidiary owing to
the Company or another Subsidiary; provided that such Indebtedness is made
pursuant to an intercompany note, and, upon an Event of Default, all amounts
owing pursuant to such Indebtedness are immediately due and payable; and
provided, further, that (a) any disposition, pledge or transfer of any such
Indebtedness to a Person (other than the Company or a Subsidiary) shall be an
incurrence of such Indebtedness by the obligor not within the definition of
“Permitted Subsidiary Indebtedness” pursuant to this clause (i), and
(b) any transaction pursuant to which any Subsidiary ceases to be a Subsidiary
shall be deemed to be the incurrence of Indebtedness by such Subsidiary that is
not within the definition of "Permitted Subsidiary Indebtedness" pursuant to
this clause (i);

        
(ii)       Indebtedness of a Subsidiary
represented by Indebtedness which would be permitted by clause (i), (iii), (v),
(vi), (vii), (viii), (ix) or (x) of the definition of “Permitted
Indebtedness” if incurred by the Company and guarantees of Obligations owed
under the Senior Credit Facility;

        
(iii)       Acquired Debt of a Subsidiary that
would be permitted to be incurred by the Company if such Acquired Debt were
being incurred by the Company;

        
(iv)       Indebtedness of a Subsidiary under the
Securitization Facility;

        
(v)       Guarantees of the Notes and guarantees
of Senior Debt of the Company; and

        
(vi)       guarantees of Indebtedness of
Affiliates provided that the Investment in such Affiliate complies with the
limitations set forth in Section 10.9 or constitutes a Permitted
Investment.

        
“Person” means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof. 

        
“Predecessor Note” of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 3.8 in exchange for a mutilated

- 16 -

Note or in lieu of a lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed, or stolen Note. 

        
“Preferred Stock” means, with respect to any Person, any
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over the Capital Stock of any other class in such Person. 

        
“Prospectus” means the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including any such
prospectus supplement with respect to the terms of the offering of any portion
of the Notes covered by a Shelf Registration Statement, and by all other
amendments and supplements to a prospectus, including post-effective amendments,
and in each case including all material incorporated by reference therein.

        
“Public Equity Offering” means any underwritten public offering
of Capital Stock (other than Redeemable Capital Stock) pursuant to a
registration statement that has been declared effective by the SEC (other than a
registration statement on Form S-8 or any successor form or otherwise relating
to equity securities issuable under any employee benefit plan of the Company).

        
“Purchase Money Obligation” means any Indebtedness secured by a
Lien on assets related to the business of the Company and its Subsidiaries and
any additions and accessions thereto, which are purchased at any time after the
Notes are issued; provided that (i) the security agreement or conditional sales
or other title retention contract pursuant to which the Lien on such assets is
created (collectively a “Purchase Money Security Agreement”)
shall be entered into within 270 days after the purchase or substantial
completion of the construction of such assets and shall at all times be confined
solely to the assets so purchased or acquired, any additions and accessions
thereto and any proceeds therefrom, (ii) at no time shall the aggregate
principal amount of the outstanding Indebtedness secured thereby, be increased,
except in connection with the purchase of additions and accession thereto and
except in respect of fees and other obligations in respect of such Indebtedness,
and (iii) (A) the aggregate outstanding principal amount of Indebtedness secured
thereby (determined on a per asset basis in the case of any additions and
accessions) shall not at the time such Purchase Money Security Agreement is
entered into exceed 100% of the purchase price to the Company and its
Subsidiaries of the assets subject thereto, or (B) the Indebtedness secured
thereby shall be with recourse solely to the assets so purchased or acquired,
any additions and accessions thereto and any proceeds therefrom. 

        
“QIB” or “Qualified Institutional Buyer” means
a qualified institution buyer under Rule 144A of the Securities Act. 

        
“Qualified Capital Stock” of any Person means any and all
Capital Stock of such Person other than Redeemable Capital Stock. 

        
“Redeemable Capital Stock” means any Capital Stock that, either
by its terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of any event or passage of
time would be, required to be redeemed prior to any Stated   

- 17 -

Maturity of the
principal of the Notes or is redeemable at the option of the holder thereof at
any time prior to any such Stated Maturity, or is convertible
into or exchangeable for debt securities at any time prior to any such Stated
Maturity at the option of the holder thereof.

        
“Redemption Date” when used with respect to any Note to be
redeemed pursuant to any provision in this Indenture means the date fixed for
such redemption by or pursuant to this Indenture. 

        
“Redemption Price” when used with respect to any Note to be
redeemed pursuant to any provision in this Indenture means the price at which it
is to be redeemed pursuant to this Indenture. 

        
“Refinancing” means (i) the offering and sale of the
Company’s 9-7/8% Senior Subordinated Notes due 2007 (the “Series B
Securities”) issued pursuant to the Indenture dated October 7, 1997
(the “B Indenture”) between the Company and the U.S. Bank Trust
National Association, as trustee, providing for the issuance of the Series B
Securities in the aggregate principal amount of $225,000,000, (ii) the
modification of the third amended and restated Credit Agreement, dated as of
June 26, 1995, among the Company, the Banks and The Chase Manhattan Bank, as
agent, and (iii) the consummation of the tender offer by the Company for its
Senior Subordinated Notes due 2003 outstanding prior to the date of the B
Indenture. 

        
“Registration Rights Agreement” means the Registration Rights
Agreement, dated as of the date hereof, among the Company and the Initial
Purchasers. 

        
“Registration Statement” means any registration statement of
the Company which covers any of the Notes pursuant to the provisions of the
Registration Rights Agreement, and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein. 

        
“Regular Record Date” for the interest payable on any Interest
Payment Date means January 1 or July 1, as the case may be (whether or not a
Business Day), immediately preceding such Interest Payment Date. 

        
“Responsible Officer” when used with respect to the Trustee
means any officer assigned to the Corporate Trust Office of the Trustee or any
agent of the Trustee appointed hereunder, including the chairman or vice
chairman of the board of directors or the executive committee of the board of
directors, the president, any vice president, any assistant vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers or
any other officer appointed hereunder to whom any corporate trust matter is
referred because of his or her knowledge of and familiarity with the particular
subject. 

        
“Rule 144A” means Rule 144A promulgated under the Securities
Act or any successor rule. 

        
“S&P” means Standard and Poor’s Corporation or any
successor rating agency. 

- 18 -

        
“Sale and Leaseback Transaction” means any transaction or
series of related transactions pursuant to which the Company or a Subsidiary
sells or transfers any property or asset in connection with the leasing, or the
resale against installment payments, of such property or asset to the seller or
transferor. 

        
“SEC” means the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act, or
if, at any time after the execution of this Indenture, the SEC is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time. 

        
“Securities Act” means the United States Securities Act of
1933, as amended, or any successor statute. 

        
“Securitization Facility” means the asset-backed securities
issued by the H&T Master Trust on December 13, 1996 in the aggregate
principal amount not to exceed the greater of (a) $160,000,000 or (b) 80% of the
net book value of the consolidated accounts receivable of the Company and its
Subsidiaries calculated in accordance with GAAP, as such facility in whole or in
part, may be amended, renewed, extended, substituted, refinanced, restructured,
replaced (including, without limitation, with bank financing secured by
receivables), supplemented or otherwise modified from time to time (including,
without limitation, any successive amendments, renewals, extensions,
substitutions, refinancing, restructurings, replacements, supplementations or
other modifications of the foregoing). 

        
“Senior Credit Facility” means the amended and restated Credit
Agreement dated as of July 2, 2003 among the Company, the Banks and
JPMorgan Chase Bank, as agent, including any guarantees, instruments and
collateral security documents delivered in connection therewith and any
amendments, renewals, extensions, substitutions, refinancings, restructurings,
replacements, supplements or other modifications thereto, in whole or in part
(including, without limitation, any successive amendments, renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplements or other
modifications of the foregoing), whether or not with the same lenders.

        
“Senior Debt” means all Indebtedness of the Company and its
Subsidiaries on a Consolidated basis which is not Subordinated Indebtedness,
including without limitation the Notes and the Guarantees, Indebtedness arising
under the Senior Credit Facility and guarantees thereof and Indebtedness arising
under the Securitization Facility. 

        
“Senior Leverage Ratio” means with respect to the Company and
its Subsidiaries on a Consolidated basis for the most recently ended four full
fiscal quarters twelve month period for which financial statements are
available, the ratio of (a) Senior Debt of the Company and its Subsidiaries on a
Consolidated basis on the last day of such period to (b) EBITDA for such period.

        
“Senior Secured Debt” means Senior Debt that is secured by a
Lien permitted by Section 10.11. 

        
“Series A Notes” means the Company’s 10-1/2% Senior Notes
due 2011. 

- 19 -

        
“Series B Notes” means notes issued by the Company hereunder
containing terms identical to the Series A Notes (except (i) that interest
thereon shall accrue from the last date on which interest was paid on the Series
A Notes or, if no such interest has been paid, from the date of original
issuance, (ii) that the legend or legends relating to transferability and other
related matters set forth on the Series A Notes shall be removed or
appropriately altered and (iii) as otherwise set forth herein), to be offered to
Holders of Series A Notes in exchange for Series B Notes pursuant to the
Exchange Offer or any exchange offer specified in any registration rights
agreement relating to the Additional Notes or to be offered in connection with
any issuance of Additional Notes pursuant to a registration statement filed
pursuant to the Securities Act. 

        
“Series D Subordinated Notes” means the Company’s Series D
Senior Subordinated Notes due 2007 issued in original principal amount equal to
$300,000,000. 

        
“Shelf Registration Statement” means a “shelf”
registration statement of the Company pursuant to the Registration Rights
Agreement, which covers all of the Registrable Notes (as defined in the
Registration Rights Agreement) on an appropriate form under Rule 415 under the
Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein. 

        
“Significant Subsidiary” means any Subsidiary that would be a
“Significant Subsidiary” of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC. 

        
“Special Record Date” for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.9. 

        
“Stated Maturity” when used with respect to any Indebtedness or
any installment of interest thereon means the dates specified in such
Indebtedness as the fixed date on which the principal of such Indebtedness or
such installment of interest, as the case may be, is due and payable.

        
“Subordinated Indebtedness” means Indebtedness of the Company
which is by its terms expressly subordinated in right of payment to the Notes.

        
“Subordinated Notes” means the Series D Subordinated Notes and
the Company’s 9-7/8% Series B Senior Subordinated Notes due 2007.

        
“Subsidiary” means any Person, a majority of the equity
ownership or the Voting Stock of which is at the time owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries; provided that any Unrestricted
Subsidiary shall not be deemed a Subsidiary under the Indenture. 

        
“Temporary Cash Investments” means (i) any evidence of
Indebtedness, maturing not more than one year after the date of acquisition,
issued by the United States of America, or an instrumentality or agency thereof,
and guaranteed fully as to principal, premium, if any, and interest by the
United States of America, (ii) any certificate of deposit (or, with respect to
non-

- 20 -

U.S. banking institutions,
similar instruments) maturing not more than one year after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that is a member of the Federal Reserve System or a commercial banking
institution organized and located in a country recognized by the United States
of America, in each case, that has combined capital and surplus and undivided
profits of not less than $500,000,000 (or the foreign currency equivalent
thereof), whose debt has a rating, at the time as of which any investment
therein is made, of “P-1” (or higher) according to Moody’s or any
successor rating agency or “A-1” (or higher) according to S&P or
any successor rating agency, (iii) commercial paper, maturing not more than one
year after the date of acquisition, issued by a corporation (other than an
Affiliate or Subsidiary of the Company) organized and existing under the laws of
the United States of America with a rating, at the time as of which any
investment therein is made, of “P-1” (or higher) according to
Moody’s or “A-1” (or higher) according to S&P, (iv) any money
market deposit accounts or demand deposit accounts issued or offered by a
domestic commercial bank or a commercial banking institution organized and
located in a country recognized by the United States of America, in each case
having capital and surplus in excess of $500,000,000 (or the foreign currency
equivalent thereof); provided that the short-term debt of such commercial bank
has a rating, at the time of investment, of “P-1” (or higher)
according to Moody’s or “A-1” (or higher) according to S&P,
and (v) any other Investments, that at any one time do not exceed $100,000 in
the aggregate, issued or offered by any domestic commercial bank or any
commercial banking institution organized and located in a country recognized by
the United States of America. 

        
“Trust Indenture Act” means the Trust Indenture Act of 1939, as
amended, or any successor statute. References to sections of the Trust Indenture
Act include successor statute sections dealing with the same subject.

        
“Trustee” means the Person named as the “Trustee” in
the first paragraph of this Indenture, until a successor Trustee shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter “Trustee” shall mean such successor Trustee. 

        
“Unrestricted Subsidiary” means (i) BTFCC, Inc., (ii) BSPS LLC,
(iii) BTF Canada Corporation, (iv) BTF Cincinnati Corporation, (v) BTF Europe
Corporation, (vi) BTFF Corporation, (vii) BTF Indianapolis Corporation, (viii)
BTF Minneapolis Corporation, (ix) BTF PA Corporation, (x) BTF PA LLC, (xi)
Efit.Com Incorporated, (xii) Bally Real Estate I, LLC; (xiii) any subsidiary of
the Company that at the time of determination shall be an Unrestricted
Subsidiary (as designated by the Board of Directors, as provided below), and
(xiv) any subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any subsidiary of the Company (including any newly acquired or newly
formed subsidiary) to be an Unrestricted Subsidiary if all of the following
conditions apply: (a) neither the Company nor any of its Subsidiaries provides
credit support for Indebtedness of such Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (b) such
Unrestricted Subsidiary is not liable, directly or indirectly, with respect to
any Indebtedness other than Unrestricted Subsidiary Indebtedness or the Senior
Credit Facility, (c) any Investment by the Company in such Unrestricted
Subsidiary made as a result of designating such subsidiary an Unrestricted
Subsidiary shall not violate the provisions described under Section 10.16
and such Unrestricted Subsidiary is not party to any agreement, contract,
arrangement or understanding at such time with the Company or any other
subsidiary of the Company unless the terms of any  

- 21 -

such agreement, contract,
arrangement or understanding are no less favorable to the Company or such other
subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Company or, in the event such condition is not satisfied,
the value of such agreement, contract, arrangement or understanding to such
Unrestricted Subsidiary shall be deemed an Investment, and (d) such Unrestricted
Subsidiary does not own any Capital Stock in any subsidiary of the Company which
is not simultaneously being designated an Unrestricted Subsidiary. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a Board Resolution giving effect to such designation and
an Officers’ Certificate certifying that such designation complies with the
foregoing conditions and any Investment by the Company in such Unrestricted
Subsidiary shall be deemed a Restricted Payment on the date of designation in an
amount equal to the greater of (1) the net book value of such Investment or (2)
the Fair Market Value of such Investment as determined in good faith by the
Board of Directors. The Board of Directors may designate any Unrestricted
Subsidiary as a Subsidiary; provided (i) that if such Unrestricted Subsidiary
has any Indebtedness, that immediately after giving effect to such designation,
the Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness or Permitted Subsidiary Indebtedness) pursuant to the restrictions
under Section 10.8, and (ii) that all Indebtedness of such Subsidiary
shall be deemed to be incurred on the date such Unrestricted Subsidiary becomes
a Subsidiary.

        
“Unrestricted Subsidiary Indebtedness” of any Unrestricted
Subsidiary means Indebtedness of such Unrestricted Subsidiary (a) as to which
neither the Company nor any Subsidiary is directly or indirectly liable (by
virtue of the Company or any such Subsidiary being the primary obligor on,
guarantor of, or otherwise liable in any respect to, such Indebtedness), and (b)
which, upon the occurrence of a default with respect thereto, does not result
in, or permit any holder of any Indebtedness of the Company or any Subsidiary to
declare, a default on such Indebtedness of the Company or any Subsidiary or
cause the payment thereof to be accelerated or payable prior to its Stated
Maturity. 

        
“Voting Stock” means Capital Stock of the class or classes
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of a corporation (irrespective of whether or not at the
time Capital Stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency). 

        
“Wholly Owned Subsidiary” means a Subsidiary all the Capital
Stock of which (other than qualifying shares, if any) is owned by the Company or
another Wholly Owned Subsidiary. 

        
Section 1.2.       Other Definitions.

                                                                                DEFINED IN
       TERM                                                                      SECTION  

       "Act"                                                                           1.5

       "Adjusted Net Assets"                                                          13.5

       "Agent Members"                                                                 3.6

       "Change of Control Offer"                                                     10.13

- 22 -

                                                                                DEFINED IN
       TERM                                                                      SECTION  

       "Change of Control Purchase Date"                                             10.13

       "Change of Control Purchase Notice"                                           10.13

       "Change of Control Purchase Price"                                            10.13

       "covenant defeasance"                                                           4.3

       "Defaulted Interest"                                                            3.9

       "defeasance"                                                                    4.2

       "Defeasance Redemption Date"                                                    4.4

       "Defeased Notes"                                                                4.1

       "Excess Proceeds"                                                             10.12

       "Funding Guarantor"                                                            13.5

       "Global Notes"                                                                  2.1

       "Guarantee"                                                                    13.1

       "incur"                                                                        10.8

       "Non-Global Purchasers"                                                         2.1

       "Note Amount"                                                                 10.12

       "Note Register"                                                                 3.5

       "Note Registrar"                                                                3.5

       "Offer"                                                                       10.12

       "Offer Date"                                                                  10.12

       "Offered Price"                                                               10.12

       "Offshore Global Note"                                                          2.1

       "Offshore Notes Exchange Date"                                                  2.1

       "Permanent Offshore Physical Notes"                                             2.1

       "Permitted Payment"                                                            10.9

       "Physical Notes"                                                                3.6

       "Private Placement Legend"                                                      2.2

       "refinancing"                                                                  10.9

       "Regulation S"                                                                  2.1

       "Required Filing Date"                                                        10.17

       "Restricted Payment"                                                           10.9

       "Senior Debt Amount"                                                          10.12

- 23 -

                                                                                DEFINED IN
       TERM                                                                      SECTION  

       "Senior Debt Offer"                                                           10.12

       "Special Payment Date"                                                          3.9

       "Surviving Entity"                                                              8.1

       "U.S. Global Note"                                                              2.1

       "U.S. Government Obligations"                                                   4.4

       "U.S. Physical Notes"                                                           2.1

        
Section 1.3.       Compliance Certificates and
Opinions.

        
Upon any application or request by the Company to the Trustee to take any action
under any provision of this Indenture, the Company and each other obligor on the
Notes shall furnish to the Trustee an Officers’ Certificate in a form and
substance reasonably acceptable to the Trustee stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance which constitutes a condition precedent) relating to the proposed
action have been complied with and an Opinion of Counsel in a form and substance
reasonably acceptable to the Trustee stating that in the opinion of such counsel
all such conditions precedent, if any, have been complied with, except that, in
the case of any such application or request as to which the furnishing of any
certificates and/or opinions is specifically required by any provision of this
Indenture, relating to such particular application or request, no additional
certificate or opinion need be furnished. 

        
Every certificate or Opinion of Counsel with respect to compliance with a
condition or covenant provided for in this Indenture shall include: 

        
(a)       a statement to the effect that each
individual or firm signing such certificate or opinion has read such covenant or
condition and the definitions herein relating thereto; 

        
(b)       a brief statement as to the nature and
scope of the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based; 

        
(c)       a statement to the effect that, in the
opinion of each such individual or such firm, he has made such examination or
investigation as is necessary to enable him or them to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and 

        
(d)       a statement as to whether, in the
opinion of each such individual or such firm, such condition or covenant has
been complied with. 

        
Section 1.4.       Form of Documents Delivered to Trustee. 

        
In any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such matters
be certified by, or 

- 24 -

covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
such matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.

        
Any certificate or opinion of an officer of the Company or other obligor on the
Notes may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any certificate or opinion of such an officer or
of counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company or other obligor on the Notes with respect to such factual matters and
which contains a statement to the effect that the information with respect to
such factual matters is in the possession of the Company or other obligor on the
Notes, unless such officer or counsel knows, or in the exercise of reasonable
care should know, that the certificate or opinion or representations with
respect to such matters are erroneous. Opinions of Counsel required to be
delivered to the Trustee may have qualifications customary for opinions of the
type required, and counsel delivering such Opinions of Counsel may rely on
certificates of the Company or government or other officials customary for
opinions of the type required, including certificates certifying as to matters
of fact, including that various financial covenants have been complied with.

        
Any certificate or opinion of an officer of the Company or other obligor on the
Notes may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of, or representations by, an accountant or firm of
accountants in the employ of the Company, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the accounting matters upon which his
certificate or opinion may be based are erroneous. Any certificate or opinion of
any independent firm of public accountants filed with the Trustee shall contain
a statement that such firm is independent with respect to the Company.

        
Where any Person is required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument. 

        
Section 1.5.       Acts of Holders.

        
(a)       Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the “Act”
of the Holders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for 

- 25 -

any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.

        
(b)       The ownership of Notes shall be proved
by the Note Register.

        
(c)       Any request, demand, authorization,
direction, notice, consent, waiver or other Act by the Holder of any Note shall
bind every future Holder of the same Note or the Holder of every Note issued
upon the transfer thereof or in exchange therefor or in lieu thereof, in respect
of anything done, suffered or omitted to be done by the Trustee, any Paying
Agent or the Company or any other obligor on the Notes in reliance thereon,
whether or not notation of such action is made upon such Note.

        
(d)       The fact and date of the execution by
any Person of any such instrument or writing may be proved by the affidavit of a
witness of such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee deems
sufficient.

        
Section 1.6.       Notices, etc., to Trustee
and the Company.

        
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with: (a) the Trustee by any Holder or by
the Company or any other obligor on the Notes shall be sufficient for every
purpose hereunder if made, given, furnished or filed, in writing, by first-class
mail postage prepaid (return receipt requested) or delivered in person or by
recognized overnight courier to or with the Trustee at its Corporate Trust
Office, Attention: Corporate Trust Administration or at any other address
furnished in writing prior thereto to the Holders, the Company or any other
obligor on the Notes by the Trustee; or (b) the Company shall be sufficient for
every purpose (except as provided in Section 5.1(c)) hereunder if made,
given, furnished or filed, in writing, by first-class mail postage prepaid
(return receipt requested) or delivered in person or by recognized overnight
courier, to or with the Company addressed to it at 8700 West Bryn Mawr Avenue,
Chicago, Illinois 60633, Attention: Chief Financial Officer, or at any other
address previously furnished in writing to the Trustee by the Company.

        
Section 1.7.       Notice to Holders; Waiver.

        
Where this Indenture provides for notice to Holders of any event, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each Holder affected by such
event, at such Holder’s address as it appears in the Note Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to Holders is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency of such notice
with respect to other Holders. Any notice when mailed to a Holder in the
aforesaid manner shall be conclusively deemed to have been received 

- 26 -

by such
Holder whether or not actually received by such Holder. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.

        
In case by reason of the suspension of regular mail service or by reason of any
other cause, it shall be impracticable to mail notice of any event as required
by any provision of this Indenture, then any method of giving such notice as
shall be reasonably satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice. 

        
Section 1.8.       Conflict with Trust Indenture Act.

        
If and to the extent that any provision hereof limits, qualifies or conflicts
with any provision of the Trust Indenture Act or another provision which is
required or deemed to be included in this Indenture by any of the provisions of
the Trust Indenture Act, the provision or requirement of the Trust Indenture Act
shall control. If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, such
provision of the Trust Indenture Act shall be deemed to apply to this Indenture
as so modified or to be excluded, as the case may be. 

        
Section 1.9.       Effect of Headings and Table of Contents.

        
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof. 

        
Section 1.10.       Successors and Assigns.

        
All covenants and agreements in this Indenture by the Company, the Guarantors
and any other obligor on the Notes or Guarantees shall bind their successors and
assigns, whether so expressed or not. 

        
Section 1.11.       Separability Clause.

        
In case any provision in this Indenture or in the Notes or Guarantees shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

        
Section 1.12.       Benefits of Indenture.

        
Nothing in this Indenture or in the Notes or Guarantees, express or implied,
shall give to any Person (other than the parties hereto and their successors
hereunder, any Paying Agent and the Holders) any benefit or any legal or
equitable right, remedy or claim under this Indenture. 

        
Section 1.13.       Governing Law.

        
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE  

- 27 -

STATE OF NEW YORK
(WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF).

        
Section 1.14.       Legal Holidays.

        
In any case where any Interest Payment Date, Redemption Date, Maturity or Stated
Maturity of any Note shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Notes) payment of interest or
principal or premium, if any, need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date, or at Maturity or the Stated
Maturity, and no interest shall accrue with respect to such payment for the
period from and after such Interest Payment Date, Redemption Date, Maturity or
Stated Maturity, as the case may be, to the next succeeding Business Day.

        
Section 1.15.       Schedules.

        
All schedules attached hereto are by this reference made a part with the same
effect as if herein set forth in full. 

        
Section 1.16.       Counterparts.

        
This Indenture may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument. 

        
Section 1.17.       No Recourse against Others.

        
A director, officer, employee or stockholder, as such, of the Company or a
Guarantor shall not have any liability for any obligations of the Company or
such Guarantor under the Notes, the Guarantees or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting any of the Notes waives and releases all such
liability. Such waiver may not be effective to waive liabilities under federal
securities laws and it is the view of the SEC that such a waiver is against
public policy. 

ARTICLE II

SECURITY FORMS

        
Section 2.1.       Forms Generally.

        
The Notes, the Guarantees and the Trustee’s certificate of authentication
thereon shall be in substantially the forms set forth in this Article II,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted hereby and may have such letters, numbers or other
marks of identification and such legends or endorsements placed thereon as may
be required to comply with the rules of any securities exchange, any
organizational document or governing instrument or applicable law or as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note. 

- 28 -

        
The definitive Notes shall be printed, lithographed or engraved or produced by
any combination of these methods or may be produced in any other manner
permitted by the rules of any securities exchange on which the Notes may be
listed, all as determined by the officers executing such Notes, as evidenced by
their execution of such Notes. 

        
Initial Notes shall be issued initially in the form of one or more permanent
global Notes substantially in the form set forth in Section 2.2 (the
“U.S. Global Note”) deposited with the Trustee, as custodian
for the Depository, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the U.S.
Global Note may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for the Depository or its nominee,
as hereinafter provided. 

        
Initial Notes held by QIBs who elect to take physical delivery of their
certificates instead of holding their interest through the U.S. Global Note
(collectively, the “Non-Global Purchasers”), will be in
registered form without interest coupons (the “U.S. Physical
Notes”). Upon the transfer of U.S. Physical Notes, which were initially
issued to a Non-Global Purchaser, to a QIB, such U.S. Physical Notes will,
unless the transferee requests otherwise or the U.S. Global Note has previously
been exchanged in whole for U.S. Physical Notes, be exchanged for an interest in
the U.S. Global Note. 

        
Initial Notes offered and sold in reliance on Regulation S under the Securities
Act (“Regulation S”) shall be issued initially in the form of a
global note certificate substantially in the form set forth in Section
2.2 (the “Offshore Global Note” and, together with the U.S.
Global Note, the “Global Notes”). The Offshore Global Note will
be deposited with the Trustee, as custodian for the Depository, and will be
registered in the name of the Depository until the later of the completion of
the distribution of the Initial Notes and the termination of the
“restricted period” (as defined in Regulation S) with respect to the
offer and sale of the Initial Notes (the “Offshore Notes Exchange
Date”). Prior to the Offshore Notes Exchange Date, transfers of
beneficial interests in the Offshore Global Note can only be effected through
the Depository in accordance with the requirements of Section 3.7 hereof.
At any time following the Offshore Notes Exchange Date (but in no event before
such date), upon receipt by the Trustee and the Company of a certificate
substantially in the form of Exhibit A hereto, the Company shall execute,
and the Trustee shall authenticate and deliver, one or more permanent
certificated Notes in registered form substantially in the form set forth in
Section 2.2 (the “Permanent Offshore Physical Notes”),
in exchange for the surrender of a Holder’s beneficial ownership interest
in the Offshore Global Notes of like tenor and amount. 

        
Section 2.2.       Form of Face of Notes.

        
(a)       The form of the face of any Series A
Note authenticated and delivered hereunder shall be substantially as
follows:

        
Unless and until (i) an Initial Note is sold under an effective Registration
Statement or (ii) an Initial Note is exchanged for a Series B Note in connection
with an effective Registration Statement, in each case pursuant to the
Registration Rights Agreement, then (A) the U.S. Global Note and each U.S.
Physical Note shall bear the legend set forth below (the “Private
Placement Legend”) on the face thereof and (B) the Offshore Global Note
and each Permanent Offshore 

- 29 -

Physical Note shall bear
the Private Placement Legend on the face thereof until at least 41 days after
the Issue Date.

THIS SECURITY HAS NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT
AS SET FORTH BELOW BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT
OR (C) IT IS AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a) (1), (2), (3), OR
(7) UNDER THE SECURITIES ACT) (AN “ACCREDITED INVESTOR”) (2) AGREES
THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY THEREOF OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER DEALER) TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT
IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AS USED HEREIN, THE 

- 30 -

TERMS “OFFSHORE
TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE
THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

        
[Each Global Note, whether or not an Initial Note, shall also bear the following
legend on the face thereof:] 

THIS NOTE IS A GLOBAL
NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A
SUCCESSOR DEPOSITORY. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.5, 3.6 AND 3.7 OF THE INDENTURE. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 

- 31 -

BALLY TOTAL FITNESS HOLDING CORPORATION
10-1/2% SERIES A SENIOR NOTES DUE 2011

                                                                      CUSIP NO. __________

No. ________________                                                  $___________________

        
Bally Total Fitness Holding Corporation, a Delaware corporation (herein called
the “Company,” which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to or registered assigns, the principal sum of ______ United States dollars on
July 15, 2011, at the office or agency of the Company referred to below,
and to pay interest thereon from July 2, 2003, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semiannually on January 15 and July 15 in each year, commencing January 15, 2004
at the rate of 10-1/2% per annum, subject to adjustments as described in the
second following paragraph, in United States dollars, until the principal hereof
is paid or duly provided for. Interest shall be computed on the basis of a
360-day year comprised of twelve 30-day months. 

        
The Holder of this Series A Note is entitled to the benefits of the Registration
Rights Agreement (the “Registration Rights Agreement”) among the
Company and the Initial Purchasers, dated July 2, 2003, pursuant to which,
subject to the terms and conditions thereof, the Company is obligated to
consummate the Exchange Offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for the Company’s 10-1/2% Series B
Senior Notes due 2011 (herein called the “Series B Notes”) in like
principal amount as provided therein. The Series A Notes and the Series B Notes
are together referred to as the “Notes.” The Series A Notes rank pari
passu in right of payment with the Series B Notes. 

        
In the event that (a) the Exchange Offer Registration Statement is not filed
with the SEC on or prior to the 90th day following the date of original issue of
the Series A Notes, (b) the Exchange Offer Registration Statement has not been
declared effective on or prior to the 150th day following the date of original
issue of the Series A Notes, or (c) the Exchange Offer is not consummated on or
prior to the 180th day following the date of original issue of the Series A
Notes or a Shelf Registration Statement is not declared effective on or prior to
the 150th day following the date of original issue of the Series A Notes (or, if
a Shelf Registration Statement is required to be filed because of the request of
the Initial Purchasers, 60 days following the request by the Initial Purchasers)
(each such event referred to in clauses (a) through (c) above, a
“Registration Default”), the interest rate borne by the Series A Notes
(except in the case of clause (c), in which case only the Series A Notes which
have not been exchanged in the Exchange Offer) shall be increased by an amount
equal to one-quarter of one percent (0.25%) per annum upon the occurrence of any
Registration Default, which rate (as increased as aforesaid) will increase by an
additional one quarter of one percent (0.25%) each 90-day period that such
additional interest continues to accrue under any such circumstance, with an
aggregate maximum increase in the interest rate equal to one percent (1.0%) per
annum. Following the cure of all Registration Defaults the accrual of additional
interest will cease and the interest rate will revert to the original rate.

- 32 -

        
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Person
in whose name this Note (or any Predecessor Note) is registered at the close of
business on the Regular Record Date for such interest, which shall be the
January 1 or July 1 (whether or not a Business Day), as the case may be,
immediately preceding such Interest Payment Date. Any such interest not so
punctually paid, or duly provided for, and interest on such defaulted interest
at the interest rate borne by the Series A Notes, to the extent lawful, shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Note (or any Predecessor Note)
is registered at the close of business on a Special Record Date for the payment
of such defaulted interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Notes not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Notes may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. 

        
Payment of the principal of, premium, if any, and interest on, this Note, and
exchange or transfer of the Note, will be made at the office or agency of the
Company in The City of New York maintained for that purpose (which initially
will be the Corporate Trust Office of the Trustee), or at such other office or
agency as may be maintained for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest may be
made at the option of the Company by check mailed to the address of the Person
entitled thereto as such address shall appear on the Note Register. 

        
Reference is hereby made to the further provisions of this Note set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place. 

        
Unless the certificate of authentication hereon has been duly executed by the
Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Note shall not be entitled to any benefit under the Indenture, or
be valid or obligatory for any purpose. 

- 33 -

        
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by the manual or facsimile signature of its authorized officers and its
corporate seal to be affixed or reproduced hereon. 

                                               BALLY TOTAL FITNESS HOLDING
                                               CORPORATION

                                               By: _______________________________________

                                               Title: ____________________________________

Attest:

Authorized Officer

- 34 -

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

        
This is one of the 10-1/2% Series A Senior Notes due 2011 referred to in the
within-mentioned Indenture. 

                                U.S. BANK NATIONAL ASSOCIATION,
                                  as Trustee

                                By:  _____________________________________________________
                                     Authorized Signer

Dated:  July 2, 2003

- 35 -

OPTION OF HOLDER TO ELECT PURCHASE

        
If you wish to have this Note purchased by the Company pursuant to Section
10.12 or Section 10.13, as applicable, of the Indenture, check the
Box: [ ]. 

        
If you wish to have a portion of this Note purchased by the Company pursuant to
Section 10.12 or Section 10.13 as applicable, of the Indenture,
state the amount (in original principal amount): $_________________ 

Date:_________________              Your Signature:____________________________

(Sign exactly as your name
appears on the other side of this Note)

Signature Guarantee:_______________________________

[Signatures must be
guaranteed by an “eligible guarantor institution” meeting the
requirements of the Notes Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program
(“STAMP”) or such other “signature guarantee program” as may
be determined by the Notes Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Exchange Act.] 

- 36 -

        
(b)       The form of the face of any Series B
Notes authenticated and delivered hereunder shall be substantially as
follows:

        
[Each Global Note, whether or not an Initial Note, shall also bear the following
legend on the face thereof:] 

        THIS NOTE IS A GLOBAL
NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A
SUCCESSOR DEPOSITORY. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.5, 3.6 AND 3.7 OF THE INDENTURE. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 

- 37 -

BALLY TOTAL FITNESS HOLDING CORPORATION

10-1/2% SERIES B SENIOR NOTES DUE 2011

                                                                      CUSIP NO. __________

No. _______________                                                   $___________________

        
Bally Total Fitness Holding Corporation, a Delaware corporation (herein called
the “Company,” which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to _____________ or registered assigns, the principal sum of __________ United
States dollars on July 15, 2011, at the office or agency of the Company
referred to below, and to pay interest thereon from July 2, 2003, or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, semiannually on January 15 and July 15 in each year, commencing
January 15, 2004 at the rate of 10-1/2% per annum, in United States dollars,
until the principal hereof is paid or duly provided for; provided that to the
extent interest has not been paid or duly provided for with respect to the
Series A Note exchanged for this Series B Note, interest on this Series B Note
shall accrue from the most recent Interest Payment Date to which interest on the
Series A Note which was exchanged for this Series B Note has been paid or duly
provided for. Interest shall be computed on the basis of a 360-day year
comprised of twelve 30-day months. 

        
This Series B Note was issued pursuant to the Exchange Offer pursuant to which
the Company’s 10-1/2% Series A Senior Notes due 2011 (herein called the
“Series A Notes”) in like principal amount were exchanged for the
Series B Notes. The Series B Notes rank pari passu in right of payment with the
Series A Notes. 

        
In addition, for any period in which the Series A Note exchanged for this Series
B Note was outstanding, in the event that (a) the Exchange Offer Registration
Statement was not filed with the SEC on or prior to the 90th day following the
date of original issue of the Series A Note, (b) the Exchange Offer Registration
Statement was not declared effective on or prior to the 150th day following the
date of original issue of the Series A Note, or (c) the Exchange Offer was not
consummated on or prior to the 180th day following the date of original issue of
the Series A Note or a Shelf Registration Statement was not declared effective
on or prior to the 150th day following the date of original issue of the Series
A Note (or, if a Shelf Registration Statement was required to be filed because
of the request of the Initial Purchasers, 60 days following a request by the
Initial Purchasers) (each such event referred to in clauses (a) through (c)
above, a “Registration Default”), the interest rate borne by the
Series A Notes (except in the case of clause (c), in which case only the Series
A Notes which have not been exchanged in the Exchange Offer) was increased by
one-quarter of one percent (0.25%) per annum upon the occurrence of the
Registration Default, which rate (as increased as aforesaid) will increase by an
additional one-quarter of one percent (0.25%) each 90-day period that such
additional interest continues to accrue under any such circumstance, with an
aggregate maximum increase in the interest rate equal to one percent (1.0%) per
annum. Following the cure of all Registration Defaults the accrual of additional
interest will cease and the interest rate will revert to the original rate;
provided that, to the extent interest at such increased interest rate has been
paid or duly provided for with respect to the Series A Note, interest at such
increased interest rate, if any,  

- 38 -

on this Series B Note shall
accrue from the most recent Interest Payment Date to which such interest on the
Series A Note has been paid or duly provided for; provided, however, that, if
after any such reduction in interest rate, a different event specified in clause
(a), (b) or (c) above occurs, the interest rate shall again be increased
pursuant to the foregoing provisions.

        
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Person
in whose name this Note (or any Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest, which shall be the
January 1 or July 1 (whether or not a Business Day), as the case may be,
immediately preceding such Interest Payment Date. Any such interest not so
punctually paid, or duly provided for, and interest on such defaulted interest
at the interest rate borne by the Series B Notes, to the extent lawful, shall
forthwith cease to be payable to the Holder on such Regular Record Date, and may
either be paid to the Person in whose name this Note (or any Predecessor Notes)
is registered at the close of business on a Special Record Date for the payment
of such defaulted interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Notes not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Notes may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. 

        
Payment of the principal of, premium, if any, and interest on, this Note, and
exchange or transfer of the Note, will be made at the office or agency of the
Company in The City of New York maintained for such purpose (which initially
will be the Corporate Trust Office of the Trustee), or at such other office or
agency as may be maintained for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest may be
made at the option of the Company by check mailed to the address of the Person
entitled thereto as such address shall appear on the Note Register. 

        
Reference is hereby made to the further provisions of this Note set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place. 

        
Unless the certificate of authentication hereon has been duly executed by the
Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Note shall not be entitled to any benefit under the Indenture, or
be valid or obligatory for any purpose. 

- 39 -

        
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by the manual or facsimile signature of its authorized officers and its
corporate seal to be affixed or reproduced hereon. 

                                        BALLY TOTAL FITNESS HOLDING
                                        CORPORATION

                                        By:_______________________________________________

                                        Title:____________________________________________

Attest:

Authorized Officer

- 40 -

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

        
This is one of the 10-1/2% Series B Senior Notes due 2011 referred to in the
within-mentioned Indenture. 

                                    U.S. BANK NATIONAL ASSOCIATION,
                                      as Trustee

                                    By:  _____________________________________________________
                                         Authorized Signer

Dated:  July 2, 2003

- 41 -

OPTION OF HOLDER TO ELECT PURCHASE

        
If you wish to have this Note purchased by the Company pursuant to Section
10.12 or Section 10.13, as applicable, of the Indenture, check the
Box: [ ] 

        
If you wish to have a portion of this Note purchased by the Company pursuant to
Section 10.12 or Section 10.13 as applicable, of the Indenture,
state the amount (in original principal amount): $___________ 

Date:_________________                      Your Signature:__________________________

(Sign exactly as your name
appears on the other side of this Note)

Signature Guarantee:________________________________

        
[Signatures must be guaranteed by an “eligible guarantor institution”
meeting the requirements of the Notes Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
(“STAMP”) or such other “signature guarantee program” as may
be determined by the Notes Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Exchange Act.] 

- 42 -

        
Section 2.3.       Form of Reverse of
Notes.

        
(a)       The form of the reverse of the Series A
Notes shall be substantially as follows:

BALLY TOTAL FITNESS HOLDING CORPORATION
10-1/2% SERIES A SENIOR NOTES DUE 2011

        
This Note is one of a duly authorized issue of Notes of the Company designated
as its 10-1/2% Series A Senior Notes due 2011 (herein called the
“Notes”), limited (except as otherwise provided in the Indenture
referred to below) in aggregate principal amount limited to $200,000,000, issued
under and subject to the terms of an indenture (herein called the
“Indenture”) dated as of July 2, 2003, between the Company, the
Guarantors party thereto and U.S. Bank National Association, as trustee (herein
called the “Trustee,” which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties, obligations and immunities thereunder of the Company, the
Guarantors, the Trustee and the Holders of the Notes, and of the terms upon
which the Notes are, and are to be, authenticated and delivered. 

        
The Indenture contains provisions for defeasance at any time of (a) the entire
Indebtedness on the Notes and (b) certain restrictive covenants and related
defaults and Events of Default, in each case upon compliance with certain
conditions set forth therein. 

        
The Notes are subject to redemption at any time on or after July 15, 2007,
at the option of the Company, in whole or in part, on not less than 30 nor more
than 60 days’ prior notice to the Holders by first-class mail, in amounts
of $1,000 or an integral multiple thereof, at the following redemption prices
(expressed as percentages of the principal amount), if redeemed during the
12-month period beginning on July 15, of the years indicated below:

                                                      REDEMPTION
        YEAR                                            PRICE

        2007                                           105.250%
        2008                                           102.625%
        2009 and thereafter                            100.000%

of the principal amount, in
each case, together with accrued and unpaid interest, if any, to the Redemption
Date (subject to the rights of Holders of record on relevant Regular Record
Dates or Special Record Dates to receive interest due on an Interest Payment
Date). 

        
If less than all of the Notes and the Series B Notes are to be redeemed, the
Trustee shall select the Notes and Series B Notes or portions thereof to be
redeemed pro rata, by lot or by any other method the Trustee shall deem fair and
reasonable Upon the occurrence of a Change of Control, each Holder may require
the Company to purchase such Holder’s Notes in whole or in part in integral
multiples of $1,000, at a purchase price in cash in an amount equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of purchase,  

- 43 -

pursuant to a Change of
Control Offer in accordance with the procedures set forth in the
Indenture.

        
In addition, at any time on or prior to July 15, 2006, the Company may, at
its option, use the net proceeds of one or more Public Equity Offerings to
redeem up to an aggregate of 35% of the aggregate principal amount of Notes
originally issued (whether on or after the Issue Date) under the Indenture at a
redemption price equal to 110.50% of the aggregate principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the Redemption Date;
provided that at least 65% of the aggregate principal amount of Notes and Series
B Notes originally issued under the Indenture remains outstanding immediately
after the occurrence of such redemption. In order to effect the foregoing
redemption, the Company must mail a notice of redemption no later than 60 days
after the related Public Equity Offering and must consummate such redemption
within 90 days of the closing of the Public Equity Offering. 

        
Under certain circumstances, in the event the Net Cash Proceeds received by the
Company from any Asset Sale (which proceeds are not used to permanently repay
any Senior Secured Debt or invested in properties or other assets that replace
the properties and assets that were the subject of the Asset Sale or which will
be used in the businesses of the Company or its Subsidiaries existing on the
date of the Indenture or in businesses reasonably related or complementary
thereto) exceeds a specified amount, the Company will be required to set aside
such proceeds in a separate account pending an offer by the Company to apply
such proceeds to the repayment of the Notes and certain unsecured Senior Debt.

        
In the case of any redemption or repurchase of Notes in accordance with the
Indenture, interest installments whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holders of such Notes of record as of the
close of business on the relevant Regular Record Date or Special Record Date
referred to on the face hereof. Notes (or portions thereof) for whose redemption
and payment provision is made in accordance with the Indenture shall cease to
bear interest from and after the Redemption Date. 

        
In the event of redemption or repurchase of this Note in accordance with the
Indenture in part only, a new Note or Notes for the unredeemed portion hereof
shall be issued in the name of the Holder hereof upon the cancellation hereof.

        
If an Event of Default shall occur and be continuing, the principal amount of
all the Notes may be declared due and payable in the manner and with the effect
provided in the Indenture. The Notes are not entitled to the benefit of any
sinking fund. 

        
The Indenture permits, with certain exceptions (including certain amendments
permitted without the consent of any Holders) as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the Holders under the Indenture and the Notes at any time by the
Company and the Trustee with the consent of the Holders of a specified
percentage in aggregate principal amount of the Notes at the time Outstanding.
The Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes and Series B Notes at the
time Outstanding, on behalf of the Holders of all the Notes and Series B Notes,
to waive compliance by the Company with certain provisions of the Indenture and
the Notes and certain past Defaults  

- 44 -

under the Indenture and their consequences.
Any such consent or waiver by or on behalf of the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent or wavier is
made upon this Note.

        
No reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Company or any other
obligor on the Notes (in the event such other obligor is obligated to make
payments in respect of the Notes), which is absolute and unconditional, to pay
the principal of, premium, if any, and interest on, this Note at the times,
place, and rate, and in the coin or currency, herein prescribed. 

        
If this Series A Note is in certificated form, then as provided in the Indenture
and subject to certain limitations therein set forth, the transfer of this Note
is registrable on the Note Register of the Company, upon surrender of this Note
for registration of transfer at the office or agency of the Company maintained
for such purpose in The City of New York or at such other office or agency of
the Company as may be maintained for such purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Note Registrar duly executed by, the Holder hereof or its
attorney duly authorized in writing, and thereupon one or more new Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees. 

        
If this Series A Note is in certificated form, then as provided in the Indenture
and subject to certain limitations therein set forth, the Holder, provided it is
a Qualified Institutional Buyer, may exchange this Series A Note for a
Book-Entry Note by instructing the Trustee (by completing the Transferee
Certificate in the form of Appendix I) to arrange for such Series A Note
to be represented by a beneficial interest in a Global Note in accordance with
the customary procedures of the Depository unless the Company has elected not to
issue a Global Note. 

        
If this Series A Note is a Global Note, it is exchangeable for a Series A Note
in certificated form as provided in the Indenture and in accordance with the
rules and procedures of the Trustee and the Depository. In addition,
certificated securities shall be transferred to all beneficial holders in
exchange for their beneficial interests in a Global Note if (x) the Depository
notifies the Company that it is unwilling or unable to continue as depository
for a Global Note and a successor Depository is not appointed by the Company
within 90 days or (y) there shall have occurred and be continuing an Event of
Default and the Note Registrar has received a request from the Depository. Upon
any such issuance, the Trustee is required to register such certificated Series
A Notes in the name of, and cause the same to be delivered to, such Person or
Persons (or the nominee of any thereof). All such certificated Series A Notes
would be required to include the Private Placement Legend. 

        
Series A Notes in certificated form are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Series A Notes are exchangeable for a like aggregate principal amount of
Notes of a differing authorized denomination, as requested by the Holder
surrendering the same. 

- 45 -

        
Payment on each Note is guaranteed, jointly and severally, by the Guarantors
pursuant to Article XIII of the Indenture. 

        
At any time when the Company is not subject to Sections 13 or 15(d) of the
Exchange Act, upon the written request of a Holder of a Series A Note, the
Company will promptly furnish or cause to be furnished such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto) to such Holder or to a prospective purchaser of such Series A
Note who such Holder informs the Company is reasonably believed to be a
“Qualified Institutional Buyer” within the meaning of Rule 144A under
the Securities Act, as the case may be, in order to permit compliance by such
Holder with Rule 144A under the Securities Act. 

        
No service charge shall be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. 

        
Prior to due presentment of this Note for registration of transfer, the Company,
the Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this Note is registered as the owner hereof for all purposes, whether
or not this Note is overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary. 

        
THIS NOTE AND THE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF). 

        
All terms used in this Note which are defined in the Indenture and not otherwise
defined herein shall have the meanings assigned to them in the Indenture.

        
[The Transferee Certificate, in the form of Appendix I hereto, will be
attached to the Series A Note.] 

- 46 -

        
(b)       The form of the reverse of the Series B
Notes shall be substantially as follows: 

BALLY TOTAL FITNESS HOLDING CORPORATION

10-1/2% SERIES B NOTES DUE 2011

        
This Note is one of a duly authorized issue of Notes of the Company designated
as its 10-1/2% Series B Senior Notes due 2011 (herein called the
“Notes”), limited (except as otherwise provided in the Indenture
referred to below) in aggregate principal amount limited to $200,000,000, issued
under and subject to the terms of an indenture (herein called the
“Indenture”) dated as of July 2, 2003, among the Company, the
Guarantors party thereto and U.S. Bank National Association, as trustee (herein
called the “Trustee,” which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties, obligations and immunities thereunder of the Company, the
Guarantors, the Trustee and the Holders of the Notes, and of the terms upon
which the Notes are, and are to be, authenticated and delivered. 

        
The Indenture contains provisions for defeasance at any time of (a) the entire
Indebtedness on the Notes and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance with certain
conditions set forth therein. 

        
The Notes are subject to redemption at any time on or after July 15, 2007,
at the option of the Company, in whole or in part, on not less than 30 nor more
than 60 days’ prior notice to the Holders by first-class mail, in amounts
of $1,000 or an integral multiple thereof, at the following redemption prices
(expressed as percentages of the principal amount), if redeemed during the
12-month period beginning July 15 of the years indicated below: 

                                                      REDEMPTION
        YEAR                                            PRICE

        2007                                           105.250%
        2008                                           102.625%
        2009 and thereafter                            100.000%

of the principal amount, in
each case, together with accrued and unpaid interest, if any, to the Redemption
Date (subject to the rights of Holders of record on relevant Regular Record
Dates or Special Record Dates to receive interest due on an Interest Payment
Date). 

        
If less than all of the Notes or Series A Notes are to be redeemed, the Trustee
shall select the Notes and Series A Notes or portions thereof to be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.

        
Upon the occurrence of a Change of Control, each Holder may require the Company
to purchase such Holder’s Notes in whole or in part in integral multiples
of $1,000, at a purchase price in cash in an amount equal to 101% of the
principal amount thereof, plus accrued and  

- 47 -

unpaid interest, if any, to
the date of purchase, pursuant to a Change of Control Offer and in accordance
with the procedures set forth in the Indenture.

        
In addition, at any time on or prior to July 15, 2006, the Company may, at
its option, use the net proceeds of one or more Public Equity Offerings to
redeem up to an aggregate of 35% of the aggregate principal amount of Notes
originally issued (whether on or after the Issue Date) under the Indenture at a
redemption price equal to 110.50% of the aggregate principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the Redemption Date;
provided that at least 65% of the aggregate principal amount of Notes and Series
A Notes originally issued under the Indenture remains outstanding immediately
after the occurrence of such redemption. In order to effect the foregoing
redemption, the Company must mail a notice of redemption no later than 60 days
after the related Public Equity Offering and must consummate such redemption
within 90 days of the closing of the Public Equity Offering. 

        
Under certain circumstances, in the event the Net Cash Proceeds received by the
Company from any Asset Sale (which proceeds are not used to permanently repay
any Senior Secured Debt or invested in properties or other assets that replace
the properties and assets that were the subject of the Asset Sale or which will
be used in the businesses of the Company or its Subsidiaries existing on the
date of the Indenture or in businesses reasonably related or complementary
thereto) exceeds a specified amount, the Company will be required to set aside
such proceeds in a separate account pending an offer by the Company to apply
such proceeds to the repayment of the Notes and certain unsecured Senior Debt.

        
In the case of any redemption or repurchase of Notes in accordance with the
Indenture, interest installments whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holders of such Notes of record as of the
close of business on the relevant Regular Record Date or Special Record Date
referred to on the face hereof. Notes (or portions thereof) for whose redemption
and payment provision is made in accordance with the Indenture shall cease to
bear interest from and after the Redemption Date. 

        
In the event of redemption or repurchase of this Note in accordance with the
Indenture in part only, a new Note or Notes for the unredeemed portion hereof
shall be issued in the name of the Holder hereof upon the cancellation hereof.

        
If an Event of Default shall occur and be continuing, the principal amount of
all the Notes may be declared due and payable in the manner and with the effect
provided in the Indenture. The Notes are not entitled to the benefit of any
sinking fund. 

        
The Indenture permits, with certain exceptions (including certain amendments
permitted without the consent of any Holders) as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the Holders under the Indenture and the Notes at any time by the
Company and the Trustee with the consent of the Holders of a specified
percentage in aggregate principal amount of the Notes at the time Outstanding.
The Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes and Series A Notes at the
time Outstanding, on behalf of the Holders of all the Notes and Series A Notes,
to waive compliance by the Company with certain provisions of the Indenture and
the Notes and certain past Defaults 

- 48 -

under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. 

        
No reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Company or any other
obligor on the Note (in the event such other obligor is obligated to make
payments in respect of the Notes), which is absolute and unconditional, to pay
the principal of, and premium, if any, and interest on, this Note at the times,
place, and rate, and in the coin or currency, herein prescribed. 

        
If this Series B Note is in certificated form, then as provided in the Indenture
and subject to certain limitations therein set forth, the transfer of this
Series B Note is registrable on the Note Register of the Company, upon surrender
of this Series B Note for registration of transfer at the office or agency of
the Company maintained for such purpose in The City of New York or at such other
office or agency of the Company as may be maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Note Registrar duly executed by, the Holder
hereof or its attorney duly authorized in writing, and thereupon one or more new
Series B Notes, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees. 

        
If this Series B Note is a U.S. Global Note, it is exchangeable for a Series B
Note in certificated form as provided in the Indenture and in accordance with
the rules and procedures of the Trustee and the Depository. In addition,
certificated securities shall be transferred to all beneficial holders in
exchange for their beneficial interests in the U.S. Global Note if (x) the
Depository notifies the Company that it is unwilling or unable to continue as
depository for the U.S. Global Note and a successor Depository is not appointed
by the Company within 90 days or (y) there shall have occurred and be continuing
an Event of Default and the Note Registrar has received a request from the
Depository. Upon any such issuance, the Trustee is required to register such
certificated Series B Notes in the name of, and cause the same to be delivered
to, such Person or Persons (or the nominee of any thereof). 

        
Series B Notes in certificated form are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Series B Notes are exchangeable for a like aggregate principal amount of
Notes of a differing authorized denomination, as requested by the Holder
surrendering the same. 

        
Payment on each Note is guaranteed, jointly and severally, by the Guarantors
pursuant to Article XIII of the Indenture. 

        
No service charge shall be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. 

- 49 -

        
Prior to due presentment of this Note for registration of transfer, the Company,
the Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this Note is registered as the owner hereof for all purposes, whether
or not this Note is overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary. 

        
THIS NOTE AND THE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF). 

        
All terms used in this Note which are defined in the Indenture and not otherwise
defined herein shall have the meanings assigned to them in the Indenture.

        
[The Transferee Certificate, in the form of Appendix II hereto, will be
attached to the Series B Note.] 

- 50 -

        
Section 2.4.       Form of Guarantee.

        
The form of the Guarantee shall be substantially as follows: 

                
For value received, the undersigned hereby unconditionally guarantees, as
principal obligor and not only as surety, to the Holder of this Note the cash
payments in United States dollars of principal of, premium, if any, and interest
on this Note (and including Additional Interest payable thereon) in the amounts
and at the times when due and interest on the overdue principal, premium, if
any, and interest, if any, of this Note, if lawful, and the payment or
performance of all other obligations of the Company under the Indenture (as
defined below) or the Note, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note,
Article XIII of the Indenture and this Guarantee. This Guarantee will
become effective in accordance with Article XIII of the Indenture and its
terms shall be evidenced therein. The validity and enforceability of this
Guarantee shall not be affected by the fact that it is not affixed to any
particular Note. Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Indenture dated as of July 2, 2003, among
Bally Total Fitness Holding Corporation, as Issuer (the “Company”),
each of the Guarantors named therein and U.S. Bank National Association, as
trustee (the “Trustee”) (as amended or supplemented, the
“Indenture”). 

                
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY. Each Guarantor hereby agrees to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Guarantee. 

                
This Guarantee is subject to release upon the terms set forth in the Indenture.

                                               EACH OF THE GUARANTORS LISTED
                                               ON SCHEDULE A HERETO

                                               By:________________________________________
                                               Name:______________________________________
                                               Title:_____________________________________

- 51 -

ARTICLE III

THE NOTES

        
Section 3.1.       Title and Terms.

        
The aggregate principal amount of Notes which may be authenticated and delivered
under this Indenture is limited to (i) $200,000,000 in principal amount of Notes
and (ii) subject to Section 10.8, Additional Notes, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Sections 3.3, 3.4, 3.5, 3.6, 3.7,
3.8, 9.6, 10.12, 10.13 or 11.8. Any Additional Notes shall be part of
the same issue as the Notes being issued on the Issue Date and will vote on all
matters as one class with the Notes being issued on the Issue Date, including,
without limitation, waivers, amendments, redemptions, Change of Control Offers
and Offers. For the purposes of this Indenture, except for Section 10.8,
references to the Notes include Additional Notes, if any. 

        
The Notes shall be known and designated as the “10-1/2% Senior Notes due
2011” of the Company. The Stated Maturity of the Notes shall be
July 15, 2011, and the Notes shall each bear interest at the rate of
10-1/2% per annum, as such interest rate may be adjusted as set forth in the
Notes, from July 2, 2003, or from the most recent Interest Payment Date to
which interest has been paid, payable semiannually on January 15 and July 15 in
each year, commencing January 15, 2004, until the principal thereof is paid or
duly provided for. Interest on any overdue principal, interest (to the extent
lawful) or premium, if any, shall be payable on demand. 

        
The principal of, premium, if any, and interest on, the Notes shall be payable
and the Notes will be exchangeable and transferable at an office or agency of
the Company in The City of New York maintained for such purposes (which
initially will be the Corporate Trust Office of the Trustee) or at such other
office or agency as may be maintained for such purpose; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
addresses of the Person entitled thereto as such addresses shall appear on the
Note Register. 

        
For all purposes hereunder, the Series A Notes and the Series B Notes will be
treated as one class and are together referred to as the “Notes.” The
Series A Notes rank pari passu in right of payment with the Series B Notes.

        
The Notes shall be subject to repurchase by the Company pursuant to an Offer as
provided in Section 10.12. 

        
Holders shall have the right to require the Company to purchase their Notes, in
whole or in part, in the event of a Change of Control pursuant to Section
10.13. 

        
The Notes shall not be entitled to the benefits of any sinking fund. 

        
The Notes shall be redeemable as provided in Article XI and in the Notes.

        
Payment on each Note is guaranteed, jointly and severally, by the Guarantors
pursuant to Article XIII of the Indenture. 

- 52 -

        
At the election of the Company, the entire Indebtedness on the Notes or certain
of the Company’s obligations and covenants and certain Events of Default
thereunder may be defeased as provided in Article IV. 

        
Section 3.2.       Denominations.

        
The Notes shall be issuable only in fully registered form without coupons and
only in denominations of $1,000 and any integral multiple thereof. 

        
Section 3.3.       Execution, Authentication,
Delivery and Dating. 

        
The Notes shall be executed on behalf of the Company by one of its Chairman of
the Board, its President, its Chief Executive Officer, its Chief Financial
Officer or one of its Vice Presidents and attested by its Secretary or one of
its Assistant Secretaries. The signatures of any of these officers on the Notes
may be manual or facsimile. Each Guarantor shall execute a Guarantee in the
manner set forth in Section 13.7. 

        
Notes bearing the manual or facsimile signatures of individuals who were at any
time the proper officers of the Company shall bind the Company, notwithstanding
that such individuals or any of them have ceased to hold such offices prior to
the authentication and delivery of such Notes or did not hold such offices at
the date of such Notes. 

        
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Notes executed by the Company to the Trustee
for authentication, together with a Company Order for the authentication and
delivery of such Notes; and the Trustee in accordance with such Company Order
shall authenticate and make available for delivery such Notes as provided in
this Indenture and not otherwise. 

        
Each Note shall be dated the date of its authentication. 

        
No Note shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Note a certificate of
authentication substantially in the form provided for herein duly executed by
the Trustee by manual signature of one of its duly authorized signatories, and
such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder and
is entitled to the benefits of this Indenture. 

        
In case the Company or any of its Subsidiaries, pursuant to Article VIII,
shall, in a single transaction or through a series of related transactions, be
consolidated or merged with or into any other Person or shall sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of its
properties and assets to any Person, and the successor Person resulting from
such consolidation or surviving such merger, or into which the Company shall
have been merged, or the successor Person which shall have participated in the
sale, assignment, conveyance, transfer, lease or other disposition as aforesaid,
shall have executed an indenture supplemental hereto with the Trustee pursuant
to Article VIII, any of the Notes authenticated or delivered prior to such
consolidation, merger, sale, assignment, conveyance, transfer, lease or other
disposition may, from time to time, at the request of the successor Person, be
exchanged for other Notes executed in the name of the successor Person with such
changes in phraseology  

- 53 -

and form as may be
appropriate, but otherwise in substance of like tenor as the Notes surrendered
for such exchange and of like principal amount; and the Trustee, upon Company
Request of the successor Person, shall authenticate and deliver Notes as
specified in such request for the purpose of such exchange. If Notes shall at
any time be authenticated and delivered in any new name of a successor Person
pursuant to this Section 3.3 in exchange or substitution for or upon
registration of transfer of any Notes, such successor Person, at the option of
the Holders but without expense to them, shall provide for the exchange of all
Notes at the time Outstanding for Notes authenticated and delivered in such new
name.

        
The Trustee may appoint an authenticating agent acceptable to the Company to
authenticate Notes on behalf of the Trustee. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Notes whenever the Trustee
may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as any Note Registrar or Paying Agent to deal with the Company and its
Affiliates. 

        
If an officer whose signature is on a Note no longer holds that office at the
time the Trustee authenticates such Note, such Note shall be valid nevertheless.

        
Section 3.4.       Temporary Notes.

        
Pending the preparation of definitive Notes, the Company may execute, and upon
Company Order the Trustee shall authenticate and make available for delivery,
temporary Notes which are printed, lithographed, typewritten or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Notes in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Notes may determine, as conclusively evidenced by their execution
of such Notes. 

        
If temporary Notes are issued, the Company will cause definitive Notes to be
prepared without unreasonable delay. After the preparation of definitive Notes,
the temporary Notes shall be exchangeable for definitive Notes upon surrender of
the temporary Notes at the office or agency of the Company designated for such
purpose pursuant to Section 10.2, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Company shall
execute and the Trustee shall authenticate and make available for delivery in
exchange therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.

        
Section 3.5.       Registration, Registration
of Transfer and Exchange. 

        
The Company shall cause the Trustee to keep, so long as it is the Note
Registrar, at the Corporate Trust Office of the Trustee, or such other office as
the Trustee may designate, a register (the register maintained in such office or
in any other office or agency designated pursuant to Section 10.2 being
herein sometimes referred to as the “Note Register”) in which,
subject to such reasonable regulations as the Note Registrar may prescribe, the
Company shall provide for the registration of Notes and of transfers of Notes.
The Trustee shall initially be the 

- 54 -

“Note Registrar”
for the purpose of registering Notes and transfers of Notes as herein provided.
The Company may change the Note Registrar or appoint one or more co-Note
Registrars without notice. 

        
Upon surrender for registration of transfer of any Note at the office or agency
of the Company designated pursuant to Section 10.2, the Company shall
execute, and the Trustee shall authenticate and make available for delivery, in
the name of the designated transferee or transferees, one or more new Notes of
the same series of any authorized denomination or denominations, of a like
aggregate principal amount. 

        
Furthermore, any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book-entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in a
Note shall be required to be reflected in a book entry. 

        
At the option of the Holder, Notes may be exchanged for other Notes of any
authorized denomination or denominations, of a like aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, Notes of the same
series which the Holder making the exchange is entitled to receive; provided
that no exchange of Series A Notes for Series B Notes shall occur until an
Exchange Offer Registration Statement shall have been declared effective by the
SEC and that the Series A Notes exchanged for the Series B Notes shall be
canceled. 

        
All Notes issued upon any registration of transfer or exchange of Notes shall be
the valid obligations of the Company, evidencing the same Indebtedness, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange. 

        
Every Note presented or surrendered for registration of transfer, or for
exchange, repurchase or redemption, shall (if so required by the Company or the
Trustee) be duly endorsed, or be accompanied by a written instrument of transfer
in form satisfactory to the Company and the Note Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing. 

        
No service charge shall be made to a Holder for any registration of transfer,
exchange or redemption of Notes, except for any tax or other governmental charge
that may be imposed in connection therewith, other than exchanges pursuant to
Sections 3.3, 3.4, 3.5, 9.6, 10.12, 10.13 or 11.8 not involving
any transfer. 

        
The Company shall not be required (a) to issue, register the transfer of or
exchange any Note during a period beginning at the opening of business 15 days
before the mailing of a notice of redemption of the Notes selected for
redemption under Section 11.4 and ending at the close of business on the
day of such mailing or (b) to register the transfer of or exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
Notes being redeemed in part. 

        
Every Note shall be subject to the restrictions on transfer provided in the
legend required to be set forth on the face of each Note pursuant to Section
2.2, and the restrictions set forth in 

- 55 -

this Section 3.5,
and the Holder of each Note, by such Holder’s acceptance thereof (or
interest therein), agrees to be bound by such restrictions on transfer.

        
The restrictions imposed by this Section 3.5 upon the transferability of
any particular Note shall cease and terminate on (a) the later of July 2, 2005
or two years after the last date on which the Company or any Affiliate of the
Company was the owner of such Note (or any predecessor of such Note) or (b) (if
earlier) if and when such Note has been sold pursuant to an effective
registration statement under the Securities Act or transferred pursuant to Rule
144 or Rule 904 under the Securities Act (or any successor provision), unless
the Holder thereof is an affiliate of the Company, within the meaning of Rule
144 (or such successor provisions). Any Note as to which such restrictions on
transfer shall have expired in accordance with their terms or shall have
terminated may, upon surrender of such Note for exchange to the Note Registrar
in accordance with the provision of this Section 3.5 (accompanied, in the
event that such restrictions on transfer have terminated pursuant to Rule 144 or
Rule 904 (or any successor provision), by an Opinion of Counsel satisfactory to
the Company and the Trustee, to the effect that the transfer of such Note has
been made in compliance with Rule 144 or Rule 904 (or any such successor
provision)), be exchanged for a new Note, of like tenor and aggregate principal
amount, which shall not bear the Private Placement Legend. The Company shall
inform the Trustee of the effective date of any Registration Statement
registering the Notes under the Securities Act no later than two Business Days
after such effective date. 

        
Except as provided in the preceding paragraph, any Note authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
any U.S. Global Note or Offshore Global Note, whether pursuant to this
Section 3.5 or Sections 3.4, 3.8, 9.6 or 11.8 or otherwise,
shall also be a U.S. Global Note or Offshore Global Note, as the case may be,
and shall bear the legend specified in
Section 2.2. 

        
Section 3.6.       Book-Entry Provisions for
Global Notes. 

        
(a)       The Global Notes initially shall (i) be
registered in the name of the Depository, (ii) be deposited with, or on behalf
of, the Depository or with the Trustee as custodian for the Depository and (iii)
bear legends as set forth in Section 2.2.

        
Members of, or participants in, the Depository (“Agent
Members”) shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository or the Trustee as its
custodian, or under the Global Note, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository, or shall impair, as
between the Depository and its Agent Members, the operation of customary
practices governing the exercise of the rights of a holder of any Note.

        
(b)       Transfer of a Global Note shall be
limited to transfers of such Global Note in whole, but not in part, to the
Depository, its successors or their respective nominees. Interests of beneficial
owners in a Global Note may be transferred in accordance with the rules and
procedures of the Depository and the provisions of Section 3.7.
Beneficial owners may obtain

- 56 -

U.S. Physical Notes in
exchange for their beneficial interests in the U.S. Global Note upon request in
accordance with the Depository’s and the Note Registrar’s procedures.
In addition, at any time following the Offshore Notes Exchange Date, upon
receipt by the Trustee and the Company of a certificate substantially in the
form of Exhibit A hereto, the Company shall execute, and the Trustee
shall authenticate and deliver to beneficial owners, in exchange for their
beneficial interest in the Offshore Global Note, Permanent Offshore Physical
Notes (together with the U.S. Physical Notes, the “Physical
Notes”). In connection with the execution, authentication and delivery
of either of such Physical Notes, the Note Registrar shall reflect on its books
and records a decrease in the principal amount of the relevant Global Note equal
to the principal amount of such Physical Notes and the Company shall execute and
the Trustee shall authenticate and deliver one or more Physical Notes having an
equal aggregate principal amount.

        
In addition, Physical Notes shall be issued to all beneficial owners in exchange
for their beneficial interests in a Global Note if (i) the Depository notifies
the Company that it is unwilling or unable to continue as a Depository for a
Global Note and a successor Depository is not appointed by the Company within 90
days of such notice or (ii) an Event of Default has occurred and is continuing
and the Note Registrar has received a request from the Depository. 

        
(c)       In connection with any transfer of a
portion of the beneficial interest in a Global Note pursuant to subsection (b)
of this Section to beneficial owners who are required to hold Physical Notes,
the Note Registrar shall reflect on its books and records the date and a
decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver one or more Physical Notes of like tenor and amount.

        
(d)       In connection with the transfer of an
entire Global Note to beneficial owners pursuant to subsection (b) of this
Section, such Global Note shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depository, in exchange
for its beneficial interest in the U.S. Global Note or Offshore Global Note, as
the case may be, an equal aggregate principal amount of U.S. Physical Notes or
Permanent Offshore Physical Notes, as the case may be, of authorized
denominations.

        
(e)       Any Physical Note delivered in exchange
for an interest in Global Notes pursuant to subsection (c) or subsection (d) of
this Section shall, except as otherwise provided by paragraph (a)(i)(x) and
paragraph (f) of Section 3.7, bear the Private Placement Legend.

        
(f)       The registered holder of a Global Note
may grant proxies and otherwise authorize any person, including Agent Members
and Persons that may hold interests through Agent Members, to take any action
which a Holder is entitled to take under this Indenture or the Notes.

        
Section 3.7.         Special Transfer Provisions.

        
Unless and until (i) an Initial Note is sold under an effective Registration
Statement, or (ii) an Initial Note is exchanged for a Series B Note in
connection with the Exchange Offer, in each case pursuant to the Registration
Rights Agreement, the following provisions shall apply: 

- 57 -

        
(a)       Transfers to non-QIB institutional
“accredited investors” (as defined in Rule 501(a) (1), (2), (3) and
(7) under the Securities Act). The following provisions shall apply with respect
to the registration of any proposed transfer of an Initial Note to an
institutional “accredited investor” (as defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act) which is not a QIB
(excluding Non-U.S. Persons):

        
(i)       The Note Registrar shall register the
transfer of any Initial Note whether or not such Initial Note bears the Private
Placement Legend, if (x) the requested transfer is at least two years after the
Issue Date of the Initial Notes or (y) the proposed transferee has delivered to
the Note Registrar a certificate substantially in the form of Exhibit B
hereto.

        
(ii)       If the proposed transferor is an Agent
Member holding a beneficial interest in a Global Note, upon receipt by the Note
Registrar of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depository’s and the Note
Registrar’s procedures therefor, the Note Registrar shall reflect on its
books and records the date and a decrease in the principal amount of the
applicable Global Note in an amount equal to the principal amount of the
beneficial interest in the Global Note transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more U.S.
Physical Notes of like tenor and amount.

        
(b)       Transfers to QIBs. The following
provisions shall apply with respect to the registration of any proposed transfer
of an Initial Note to a QIB (excluding Non-U.S. Persons):

        
(i)       If the Note to be transferred consists
of Physical Notes, the Note Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box provided
for on the form of Initial Note stating, or has otherwise advised the Company
and the Note Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to the transferee who has signed the
certification provided for on the form of Initial Note, stating, or has
otherwise advised the Company and the Note Registrar in writing, that it is
purchasing the Initial Note for its own account or an account with respect to
which it exercises sole investment discretion and that it, or the person on
whose behalf it is acting with respect to any such account, is a QIB and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as it
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.

        
(ii)       If the proposed transferee is an Agent
Member, and the Initial Note to be transferred consists of Physical Notes which
after transfer are to be evidenced by an interest in the U.S. Global Note, upon
receipt by the Note Registrar of instructions given in accordance with the
Depository’s and the Note Registrar’s procedures therefor, the Note
Registrar shall reflect on its books and records the date and an increase in the
principal amount of the U.S. Global Note in an amount equal to the principal
amount of the Physical Notes to be transferred, and the Trustee shall cancel the
Physical Note so transferred.

- 58 -

        
(iii)       If the Note to be transferred consists
of an interest in the U.S. Global Note, and the proposed transferee is a Agent
Member, the Note Registrar shall reflect such transfer on its books and
records.

        
(c)       Transfers by Non-U.S. Persons on or
Prior to August 11, 2003. The following provisions shall apply with respect to
registration of any proposed transfer of an Initial Note by a Non-U.S. Person on
or prior to August 11, 2003:

        
(i)       If the proposed transferee is (x) a
Non-U.S. Person and the proposed transferor has delivered to the Note Registrar
a certificate substantially in the form of Exhibit C hereto or (y) a QIB
and the proposed transferor has advised the Company and the Note Registrar in
writing, that the sale has been made in compliance with the provisions of Rule
144A to a transferee who has advised the Company and the Note Registrar in
writing, that it is purchasing the Initial Note for its own account or an
account with respect to which it exercises sole investment discretion and that
it, or the person on whose behalf it is acting with respect to any such account,
is a QIB and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
it has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A, upon instructions given in accordance with the
Depository’s procedures, the Note Registrar shall register the transfer of
any Initial Note by reflecting on its books and records a decrease in the
principal amount at maturity of the Offshore Global Note in an amount equal to
the beneficial interest in such Global Note so transferred.

        
(ii)       If the proposed transferee is a Agent
Member, upon receipt by the Note Registrar of instructions given in accordance
with the Depository’s and the Note Registrar’s procedures therefor,
the Note Registrar shall reflect on its books and records the date and an
increase in the principal amount at maturity of the U.S. Global Note in an
amount equal to the principal amount of the beneficial interest in the Offshore
Global Note to be transferred, and the Trustee shall decrease the principal
amount at maturity of the Offshore Global Note represented by the beneficial
interest therein so transferred.

        
(d)       Transfers by Non-U.S. Persons after
August 11, 2003. The following provisions shall apply with respect to any
transfer of an Initial Note by a Non-U.S. Person after August 11,
2003:

        
(i)       If the Initial Note to be transferred is
a Permanent Offshore Physical Note, the Note Registrar shall register such
transfer.

        
(ii)       If the proposed transferee is an Agent
Member, upon receipt by the Note Registrar of instructions given in accordance
with the Depository’s and the Note Registrar’s procedures therefor,
the Note Registrar shall reflect on its books and records the date and an
increase in the principal amount of the U.S. Global Note in an amount equal to
the principal amount of the Permanent Offshore Physical Note to be transferred,
and the Trustee shall cancel the Permanent Offshore Physical Note so
transferred.

- 59 -

        
(e)       Transfers to Non-U.S. Persons at Any
Time. The following provisions shall apply with respect to any transfer of an
Initial Note to a Non-U.S. Person:

        
(i)       On or prior to August 11, 2003, and
subject to (ii) below, the Note Registrar shall register any proposed transfer
of an Initial Note to a Non-U.S. Person upon receipt of a certificate
substantially in the form of Exhibit C hereto from the proposed
transferor, by reflecting on its books and records an increase in the principal
amount at maturity of the Offshore Global Note in an amount equal to the
principal amount of the Notes transferred.

        
(ii)       If the proposed transferor is an Agent
Member holding a beneficial interest in the U.S. Global Note, upon receipt by
the Note Registrar of (x) the document, if any, required by paragraph (i), and
(y) instructions in accordance with the Depository's and the Note
Registrar’s procedures thereof, the Note Registrar shall reflect on its
books and records the date and a decrease in the principal amount of the U.S.
Global Note in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Note transferred, and an increase in the same amount
to the principal amount at maturity of the Offshore Global Note.

        
(iii)       After August 11, 2003, and subject to
paragraph (iv) below, the Note Registrar shall register any proposed transfer to
any Non-U.S. Person (x) if the Initial Note to be transferred is a Permanent
Offshore Physical Note, or (y) if the Initial Note to be transferred is a U.S.
Physical Note or an interest in the U.S. Global Note, upon receipt of a
certificate substantially in the form of Exhibit C from the proposed
transferor and (z) in the case of any of clause (x) or (y), the Company shall
execute, and the Trustee shall authenticate and deliver, one or more Permanent
Offshore Physical Notes of like tenor and amount.

        
(iv)       If the proposed transferor is an Agent
Member holding a beneficial interest in the U.S. Global Note, upon receipt by
the Note Registrar of (x) the document, if any, required by paragraph (iii), and
(y) instructions in accordance with the Depository’s and the Note
Registrar’s procedures therefor, the Note Registrar shall reflect on its
books and records the date and a decrease in the principal amount of the U.S.
Global Note in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Note to be transferred and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more Permanent
Offshore Physical Notes of like tenor and amount.

        
(f)       Private Placement Legend. Upon the
registration of transfer, exchange or replacement of Notes not bearing the
Private Placement Legend, the Note Registrar shall deliver Notes that do not
bear the Private Placement Legend. Upon the registration of transfer, exchange
or replacement of Notes bearing the Private Placement Legend, the Note Registrar
shall deliver only Notes that bear the Private Placement Legend unless either
(i) the circumstances contemplated by paragraphs (a)(i)(x), (d)(i) or (e)(iii)
of this Section 3.7 exist or (ii) there is delivered to the Note
Registrar an Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act.

- 60 -

        
(g)       General. By its acceptance of any Note
bearing the Private Placement Legend, each Holder of such a Note acknowledges
the restrictions on transfer of such Note set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture.

        
The Note Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 3.6 or this Section
3.7. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Note Registrar. 

        
Section 3.8.       Mutilated, Destroyed, Lost
and Stolen Notes.

        
If (a) any mutilated Note is surrendered to the Trustee, or (b) the Company and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, and there is delivered to the Company, any other obligor on
the Notes and the Trustee, such security or indemnity, in each case, as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company, any other obligor on the Notes or the Trustee that such Note has
been acquired by a bona fide purchaser, the Company shall execute and upon a
Company Request the Trustee shall authenticate and make available for delivery,
in exchange for any such mutilated Note or in lieu of any such destroyed, lost
or stolen Note, a replacement Note of like tenor and principal amount, bearing a
number not contemporaneously outstanding. 

        
In case any such mutilated, destroyed, lost or stolen Note has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a replacement Note, pay such Note. 

        
Upon the issuance of any replacement Notes under this Section, the Company may
require the payment of a sum sufficient to pay all documentary, stamp or similar
issue or transfer taxes or other governmental charges that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith. 

        
Every replacement Note issued pursuant to this Section in lieu of any destroyed,
lost or stolen Note shall constitute an original additional contractual
obligation of the Company and any other obligor on the Notes, whether or not the
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder. 

        
The provisions of this Section are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Notes. 

        
Section 3.9.        Payment of Interest;
Interest Rights Preserved.

        
Interest on any Note which is payable, and is punctually paid or duly provided
for, on the Stated Maturity of such interest shall be paid to the Person in
whose name the Note (or any Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest payment. 

- 61 -

        
Any interest on any Note which is payable, but is not punctually paid or duly
provided for, on the Stated Maturity of such interest, and interest on such
defaulted interest at the then applicable interest rate borne by the Notes, to
the extent lawful (such defaulted interest and interest thereon herein
collectively called “Defaulted Interest”), shall forthwith
cease to be payable to the Holder on the Regular Record Date, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in Subsection (a) or (b) below: 

        
(a)       The Company may elect to make payment of
any Defaulted Interest to the Persons in whose names the Notes (or an relevant
Predecessor Notes) are registered at the close of business on a Special Record
Date for the Payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the amount
of Defaulted Interest proposed to be paid on each Note and the date (not less
than 30 days after such notice) of the proposed payment (the “Special
Payment Date”), and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the Special Payment Date, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as provided in this Subsection. Thereupon the Trustee shall
fix a Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
Special Payment Date and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify the
Company in writing of such Special Record Date. In the name and at the expense
of the Company, the Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at its address as it appears in the
Note Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record Date
and Special Payment Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Notes are registered on such
Special Record Date and shall no longer be payable pursuant to the following
Subsection (b).

        
(b)       The Company may make payment of any
Defaulted Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be listed, and
upon such notice as may be required by such exchange, if, after written notice
given by the Company to the Trustee of the proposed payment pursuant to this
Subsection, such payment shall be deemed practicable by the Trustee.

        
Subject to the foregoing provisions of this Section 3.9, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note. 

        
Section 3.10.       CUSIP Numbers.

        
The Company in issuing the Notes may use “CUSIP” numbers (if then
generally in use), and the Company, or the Trustee on behalf of the Company,
shall use CUSIP numbers in notices of redemption or exchange as a convenience to
Holders; provided, however, that any such notice shall state that no
representation is made as to the correctness of such numbers either as printed

- 62 -

on the Notes or as
contained in any notice of redemption or exchange and that reliance may be
placed only on the other identification numbers printed on the Notes; and
provided further, however, that failure to use CUSIP numbers in any notice of
redemption or exchange shall not affect the validity or sufficiency of such
notice.

        
Section 3.11.       Persons Deemed Owners.

        
Prior to due presentment of a Note for registration of transfer, the Company,
the Trustee and any agent of the Company or the Trustee may treat the Person in
whose name any Note is registered as the owner of such Note for the purpose of
receiving payment of principal of, premium, if any and (subject to Section
3.9) interest on, such Note and for all other purposes whatsoever, whether
or not such Note is overdue, and none of the Company, the Trustee nor any agent
of the Company or the Trustee shall be affected by notice to the contrary.

        
Section 3.12.       Cancellation.

        
All Notes surrendered for payment, purchase, redemption, registration of
transfer or exchange shall be delivered to the Trustee and, if not already
canceled, shall be promptly canceled by it. The Company may at any time deliver
to the Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly canceled by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section 3.12, except as expressly permitted by this Indenture. If
requested by the Company, all canceled Notes held by the Trustee shall be
returned to the Company. The Trustee shall provide the Company a list of all
Notes that have been canceled from time to time as requested by the Company.

        
Section 3.13.       Computation of Interest.

        
Interest on the Notes shall be computed on the basis of a 360-day year comprised
of twelve 30-day months. 

ARTICLE IV

DEFEASANCE AND COVENANT DEFEASANCE

        
Section 4.1.       Company’s Option to Effect
Defeasance or Covenant Defeasance.

        
The Company may, at its option by Board Resolution, at any time, with respect to
the Notes, elect to have either Section 4.2 or Section 4.3 be
applied to all of the Outstanding Notes (the “Defeased Notes”),
upon compliance with the conditions set forth below in this Article IV.

        
Section 4.2.       Defeasance and Discharge.

        
Upon the Company’s exercise under Section 4.1 of the option
applicable to this Section 4.2, the Company and any other obligor on the
Notes, if any, shall be deemed to have been discharged from its obligations with
respect to the Defeased Notes on the date the conditions set forth in Section
4.4 below are satisfied (hereinafter, “defeasance”). For
this purpose, such  

- 63 -

defeasance means that the
Company and any other obligor on the Notes shall be deemed to have paid and
discharged the entire Indebtedness represented by the Defeased Notes, which
shall thereafter be deemed to be “Outstanding” only for the purposes
of Section 4.5 and the other Sections of this Indenture referred to in
(a) and (b) below, and to have satisfied all its other obligations under such
Notes and this Indenture insofar as such Notes are concerned (and the Trustee,
at the expense of the Company and upon Company Request, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of Defeased Notes to receive, solely from the trust fund described in
Section 4.4 and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on, such Notes, when
such payments are due, (b) the Company’s obligations with respect to such
Defeased Notes under Sections 3.4, 3.5, 3.8, 10.2 and 10.3, (c)
the rights, powers, trusts, duties and immunities of the Trustee hereunder,
including, without limitation, the Trustee’s rights under Section
6.7, and (d) this Article IV. Subject to compliance with this
Article IV, the Company may exercise its option under this Section
4.2 notwithstanding the prior exercise of its option under Section
4.3 with respect to the Notes.

        
Section 4.3.       Covenant Defeasance.

        
Upon the Company’s exercise under Section 4.1 of the option
applicable to this Section 4.3, the Company and any other obligor on the
Notes shall be released from its obligations under any covenant or provision
contained or referred to in Sections 10.4 through 10.19,
inclusive, and the provisions of Article VIII with respect to the
Defeased Notes on and after the date the conditions set forth in Section
4.4 below are satisfied (hereinafter, “covenant defeasance”),
and the Defeased Notes shall thereafter be deemed to be not
“Outstanding” for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed
“Outstanding” for all other purposes hereunder. For this purpose, such
covenant defeasance means that, with respect to the Defeased Notes, the Company
and any other obligor on the Notes may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section or Article, whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Sections 5.1(c), (d), (e) or (f), but, except as
specified in this Indenture, the remainder of this Indenture and such Defeased
Notes shall be unaffected thereby. In the event covenant defeasance occurs, the
Events of Default specified in Sections 5.1(e) and (f) will no
longer constitute Events of Default with respect to the Notes. 

        
Section 4.4.       Conditions to Defeasance or
Covenant Defeasance.

        
The following shall be the conditions to application of either Section
4.2 or Section 4.3 to the Notes to be defeased: 

        
(1)       The Company shall irrevocably have
deposited or caused to be deposited with the Trustee as trust funds in trust for
the purpose of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such Notes, (a)
United States dollars in an amount, (b) U.S. Government Obligations which
through the 

- 64 -

scheduled payment of
principal and interest in respect thereof in accordance with their terms and
with no further reinvestment will provide, not later than one day before the due
date of any payment, money in an amount, or (c) a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants or a nationally recognized investment banking
firm expressed in a written certification thereof delivered to the Trustee, to
pay and discharge, and which shall be applied by the Trustee to pay and
discharge, the principal of, premium, if any, and interest on, the Notes to be
defeased, on the Stated Maturity of such principal or interest (or on any date
after July 15, 2007 (such date being referred to as the “Defeasance
Redemption Date”) if at or prior to electing to exercise either its
option applicable to Section 4.2 or its option applicable to Section
4.3, the Company has delivered to the Trustee an irrevocable notice to
redeem all of the Outstanding Notes on the Defeasance Redemption Date). For this
purpose, “U.S. Government Obligations” means securities that
are (i) direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged or (ii) obligations of a
Person controlled or supervised by and acting as an agency or instrumentality of
the United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act), as custodian with respect
to any such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt;

        
(2)       In the case of an election under
Section 4.2, the Company shall have delivered to the Trustee an Opinion
of Independent Counsel in the United States stating that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Independent Counsel in the United States shall confirm that, the
Holders of the Outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not
occurred;

        
(3)       In the case of an election under
Section 4.3, the Company shall have delivered to the Trustee an Opinion
of Independent Counsel in the United States to the effect that the Holders of
the Outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such covenant defeasance had not
occurred;

        
(4)       No Default or Event of Default (other
than a Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit) shall have occurred and be continuing on the date of
such deposit or insofar as Section 5.1(g) or (h) is concerned, at
any time during the 

- 65 -

period ending on the 91st
day after the date of deposit (it being understood that this condition shall not
be deemed satisfied until the expiration of such period);

        
(5)       Such defeasance or covenant defeasance
shall not cause the Trustee for the Notes to have a conflicting interest for
purposes of the Trust Indenture Act with respect to any other securities of the
Company;

        
(6)       Such defeasance or covenant defeasance
shall not result in a breach or violation of, or constitute a default under, (A)
this Indenture or (B) any other agreement or instrument to which the Company or
any Significant Subsidiary is a party or by which the Company or any Significant
Subsidiary is bound, if such breach, violation, or default thereof would have a
material adverse effect on the Company and its Subsidiaries taken as a
whole;

        
(7)       Such defeasance or covenant defeasance
shall not result in the trust arising from such deposit constituting an
investment company within the meaning of the Investment Company Act of 1940, as
amended, unless such trust shall be registered under such Act or exempt from
registration thereunder;

        
(8)       The Company shall have delivered to the
Trustee an Opinion of Independent Counsel in the United States to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to avoidance under Section 547 of the United States Bankruptcy Code (or
any successor provision thereto) and related judicial decisions;

        
(9)       The Company shall have delivered to the
Trustee an Officers’ Certificate stating that the deposit was not made by
the Company with the intent of preferring the holders of the Notes over the
other creditors of the Company with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others;

        
(10)       No event or condition shall exist that
would prevent the Company from making payments of the principal of, premium, if
any, and interest on the Notes on the date of such deposit or at any time ending
on the 91st day after the date of such deposit; and

        
(11)       The Company shall have delivered to the
Trustee an Officers’ Certificate and an Opinion of Independent Counsel,
each stating that all conditions precedent provided for relating to either the
defeasance under Section 4.2 or the covenant defeasance under Section
4.3 (as the case may be) have been complied with.

        
Opinions of Counsel or Opinions of Independent Counsel required to be delivered
under this Section shall be in form and substance reasonably satisfactory to the
Trustee and may have qualifications customary for opinions of the type required
and counsel delivering such opinions may rely on certificates of the Company or
government or other officials customary for opinions of the type required, which
certificates shall be limited as to matters of fact, including that various
financial covenants have been complied with. 

- 66 -

        
Section 4.5.       Deposited Money and U.S.
Government Obligations to Be Held in 

                                 
Trust; Other Miscellaneous Provisions.

        
Subject to the provisions of the last paragraph of Section 10.3, all
United States dollars and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 4.4 in respect of
the Defeased Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (excluding the Company or any of its
Affiliates acting as Paying Agent), as the Trustee may determine, to the Holders
of such Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law. 

        
The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 4.4 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is imposed,
assessed or for the account of the Holders of the Defeased Notes. 

        
Anything in this Article IV to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
United States dollars or U.S. Government Obligations held by it as provided in
Section 4.4 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect defeasance or covenant defeasance.

        
Section 4.6.       Reinstatement.

        
If the Trustee or Paying Agent is unable to apply any United States dollars or
U.S. Government Obligations in accordance with Section 4.2 or 4.3,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company’s obligations under this Indenture and the
Notes shall be revived and reinstated, with present and prospective effect, as
though no deposit had occurred pursuant to Section 4.2 or 4.3, as
the case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such United States dollars or U.S. Government Obligations in
accordance with Section 4.2 or 4.3, as the case may be; provided,
however, that if the Company makes any payment to the Trustee or Paying Agent of
principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Trustee or Paying Agent shall promptly pay
any such amount to the Holders of the Notes and the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
United States dollars and U.S. Government Obligations held by the Trustee or
Paying Agent. 

- 67 -

ARTICLE V

REMEDIES

        
Section 5.1.       Events of Default.

        
“Event of Default,” wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body): 

        
(a)       there shall be a default in the payment
of any interest on any Note when it becomes due and payable, and such default
shall continue for a period of 30 days; 

        
(b)       there shall be a default in the payment
of the principal of (or premium, if any, on) any Note at its Maturity (upon
acceleration, optional or mandatory redemption, required repurchase or
otherwise); 

        
(c)       there shall be a default in the
performance, or breach, of any covenant or agreement of the Company under this
Indenture (other than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with in clauses (a), (b) or (d) of this
Section 5.1) and such default or breach shall continue for a period of 30
days after written notice has been given, by certified mail, (x) to the Company
by the Trustee or (y) to the Company and the Trustee by the Holders of at least
25% in aggregate principal amount of the Outstanding Notes, which notice shall
specify that it is a “notice of default” and shall demand that such a
default be remedied; 

        
(d)       (i) there shall be a default in the
performance or breach of the provisions of Article VIII; (ii) the Company
shall have failed to make or consummate an Offer required in accordance with the
provisions of Section 10.12; or (iii) the Company shall have failed to
make or consummate a Change of Control Offer required in accordance with the
provisions of Section 10.13; 

        
(e)       one or more defaults shall have occurred
under any of the agreements, indentures or instruments under which the Company
or any Subsidiary then has outstanding Indebtedness in excess of $10,000,000,
individually or in the aggregate, and either (a) such default results from the
failure to pay principal of or premium, if any, or interest on such Indebtedness
when due or (b) such default or defaults have resulted in the acceleration of
the maturity of such Indebtedness; 

        
(f)       one or more judgments, orders or decrees
for the payment of money in excess of $10,000,000 either individually or in the
aggregate, shall be rendered against the Company or any Subsidiary or any of
their respective properties and shall not be discharged and either (a) any
creditor shall have commenced an enforcement proceeding upon such judgment,
order or decree or (b) there shall have been a period of 60 consecutive days
during which a stay of enforcement of such judgment, order or decree, by reason
of an appeal or otherwise, shall not be in effect; provided that the amount of
such money judgment, order or decree shall be calculated net of any  

- 68 -

insurance coverage that the
Company has determined in good faith is available in whole or in part with
respect to such money judgment, order or decree;

        
(g)       there shall have been the entry by a
court of competent jurisdiction of (i) a decree or order for relief in respect
of the Company or any Significant Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or (ii) a decree or order
adjudging the Company or any Significant Subsidiary bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company or any Significant Subsidiary under any applicable federal or
state law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or any Significant
Subsidiary or of any substantial part of their respective properties, or
ordering the winding up or liquidation of their respective affairs, and any such
decree or order for relief shall continue to be in effect, or any such other
decree or order shall be unstayed and in effect for a period of 60 consecutive
days; 

        
(h)       (1) the Company or any Significant
Subsidiary commences a voluntary case or proceeding under any applicable
Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or
insolvent, (2) the Company or any Significant Subsidiary consents to the entry
of a decree or order for relief in respect of the Company or such Significant
Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy
Law or to the commencement of any bankruptcy or insolvency case or proceeding
against it, (3) the Company or any Significant Subsidiary files a petition or
answer or consent seeking reorganization or relief under any applicable federal
or state law, (4) the Company or any Significant Subsidiary (A) consents to the
filing of such petition or the appointment of, or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or such Significant Subsidiary or of any substantial
part of their respective properties, (B) makes an assignment for the benefit of
creditors or (C) admits in writing its inability to pay its debts generally as
they become due, or (5) the Company or any Significant Subsidiary takes any
corporate action in furtherance of any such actions in this paragraph (h); or

        
(i)       any Guarantee of a Significant
Subsidiary ceases to be in full force and effect or any Guarantee of a
Significant Subsidiary is declared to be null and void and unenforceable or any
Guarantee of a Significant Subsidiary is found to be invalid or any Guarantor
that is a Significant Subsidiary denies its liability in writing under its
Guarantee (in each case other than by reason of release of a Guarantor in
accordance with the terms of this Indenture). 

        
Section 5.2.       Acceleration of Maturity;
Rescission and Annulment. 

        
If an Event of Default (other than an Event of Default specified in Sections
5.1(g) and (h) with respect to the Company) shall occur and be
continuing with respect to this Indenture, the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Notes then Outstanding may,
and the Trustee at the request of such Holders shall, declare all unpaid
principal of, premium, if any, and accrued interest on all Notes to be due and
payable, by a notice in writing to the Company (and to the Trustee if given by
the Holders of the Notes) and upon any such declaration, such principal,
premium, if any, and interest shall become due and payable immediately. If an
Event of Default specified in clause (g) or (h) of Section 5.1 occurs
with respect to the Company and is continuing, then all the Notes shall ipso
facto become and be due  

- 69 -

and payable immediately in
an amount equal to the principal amount of the Notes, together with accrued and
unpaid interest, if any, to the date the Notes become due and payable, without
any declaration or other act on the part of the Trustee or any Holder.
Thereupon, the Trustee may, at its discretion, proceed to protect and enforce
the rights of the Holders of the Notes by appropriate judiciary
proceedings.

        
After such declaration of acceleration with respect to the Notes, but before a
judgment or decree for payment of the money due has been obtained by the Trustee
as hereinafter in this Article provided, the Holders of a majority in aggregate
principal amount of the Notes Outstanding, by written notice to the Company and
the Trustee, may rescind and annul such declaration and its consequences if:

        
(a)       the Company has paid or deposited with
the Trustee a sum sufficient to pay 

        
(i)       all sums paid or advanced by the Trustee
under this Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, 

        
(ii)       all overdue interest on all Outstanding
Notes, 

        
(iii)       the principal of and premium, if any,
on any Outstanding Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the Notes,
and 

        
(iv)       to the extent that payment of such
interest is lawful, interest upon overdue interest at the rate borne by the
Notes; and 

        
(b)       all Events of Default, other than the
nonpayment of principal of the Notes which have become due solely by such
declaration of acceleration, have been cured or waived as provided in Section
5.13. No such rescission shall affect any subsequent Default or impair any
right consequent thereon. 

        
Section 5.3.       Collection of Indebtedness
and Suits for Enforcement by Trustee. 

        
The Company covenants that if (a) default is made in the payment of any interest
on any Note when such interest becomes due and payable and such default
continues for a period of 30 days, or (b) default is made in the payment of the
principal of, premium, if any, on any Note at the Stated Maturity thereof, the
Company will, upon demand of the Trustee, pay to it, for the benefit of the
holders of such Notes, the whole amount then due and payable on such Notes for
principal and premium, if any, and interest, with interest upon the overdue
principal and premium, if any, and, to the extent that payment of such interest
shall be legally enforceable, upon overdue installments of interest, at the rate
borne by the Notes; and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel. 

        
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection 

- 70 -

of the sums so due and
unpaid and may prosecute such proceeding to judgment or final decree, and may
enforce the same against the Company or any other obligor on the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor on the Notes,
wherever situated.

        
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture by such appropriate private or judicial proceedings
as the Trustee shall deem most effectual to protect and enforce such rights,
subject however to Section 5.12. No recovery of any such judgment upon
any property of the Company shall affect or impair any rights, powers or
remedies of the Trustee or the Holders. 

        
Section 5.4.       Trustee May File Proofs of Claim. 

        
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor on the Notes or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Notes shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Trustee shall have made any demand on the Company for the payment
of overdue principal or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise, (a) to file and prove a claim for
the whole amount of principal, and premium, if any, and interest owing and
unpaid in respect of the Notes and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and (b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or similar
official in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.7. 

        
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding. 

        
Section 5.5.       Trustee May Enforce Claims
without Possession of Notes. 

        
All rights of action and claims under this Indenture, the Notes or the
Guarantees may be prosecuted and enforced by the Trustee without the possession
of any of the Notes or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
 

- 71 -

disbursements and advances
of the Trustee, its agents and counsel, be for the ratable benefit of the
Holders of the Notes in respect of which such judgment has been
recovered.

        
Section 5.6.       Application of Money Collected. 

        
Any money collected by the Trustee pursuant to this Article or otherwise on
behalf of the Holders or the Trustee pursuant to this Article or through any
proceeding or any arrangement or restructuring in anticipation or in lieu of any
proceeding contemplated by this Article shall be applied, subject to applicable
law, in the following order, at the date or dates fixed by the Trustee and, in
case of the distribution of such money on account of principal, premium, if any,
or interest, upon presentation of the Notes and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:

        
FIRST: To the payment of all amounts due the Trustee under Section 6.7;

        
SECOND: To the payment of the amounts then due and unpaid upon the Notes for
principal, premium, if any, and interest, in respect of which or for the benefit
of which such money has been collected, ratably, without preference or priority
of any kind, according to the amounts due and payable on such Notes for
principal, premium, if any, and interest; and 

        
THIRD: The balance, if any, to the Person or Persons entitled thereto, including
the Company and the Guarantors, provided that all sums due and owing to the
Holders and the Trustee have been paid in full as required by this Indenture.

        
Section 5.7.       Limitation on Suits.

        
No Holder of any Notes shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture or the Notes, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:

        
(a)       such Holder has previously given written
notice to the Trustee of a continuing Event of Default; 

        
(b)       the Holders of not less than 25% in
principal amount of the Outstanding Notes shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as trustee hereunder; 

        
(c)       such Holder or Holders have offered to
the Trustee an indemnity satisfactory to the Trustee against the costs, expenses
and liabilities to be incurred in compliance with such request; 

        
(d)       the Trustee for 30 days after its
receipt of such notice, request and offer (and if requested, provision) of
indemnity has failed to institute any such proceeding; and 

        
(e)       no direction inconsistent with such
written request has been given to the Trustee during such 30-day period by the
Holders of a majority in principal amount of the Outstanding Notes; it being
understood and intended that no one or more Holders shall have any right in any 

- 72 -

manner whatever by virtue
of, or by availing of, any provision of this Indenture to affect, disturb or
prejudice the rights of any other Holders, or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right under this
Indenture, except in the manner provided in this Indenture and for the equal and
ratable benefit of all the Holders.

        
Section 5.8.       Unconditional Right of
Holders to Receive Principal, Premium and Interest. 

        
Notwithstanding any other provision in this Indenture, the Holder of any Note
shall have the right based on the terms stated herein, which is absolute and
unconditional, to receive payment of the principal of, premium, if any, and
(subject to Section 3.9) interest on such Note on the respective Stated
Maturities expressed in such Note (or, in the case of redemption or repurchase,
on the Redemption Date or the repurchase date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder. 

        
Section 5.9.       Restoration of Rights and Remedies. 

        
If the Trustee or any Holder has instituted any proceeding to enforce any right
or remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case the Company, any other obligor on the
Notes, the Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted. 

        
Section 5.10.       Rights and Remedies Cumulative. 

        
Except as provided in Section 3.8, no right or remedy herein conferred
upon or reserved to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy. 

        
Section 5.11.       Delay or Omission Not Waiver. 

        
No delay or omission of the Trustee or of any Holder of any Note to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.

        
Section 5.12.       Control by Holders.

        
The Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee, or
exercising any trust or power conferred on the  

- 73 -

Trustee, provided that (a)
such direction shall not be in conflict with any rule of law or with this
Indenture (including, without limitation, Section 5.7) or expose the
Trustee to personal liability, or be unduly prejudicial to Holders not joining
therein; and (b) subject to the provisions of Section 315 of the Trust Indenture
Act, the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction.

        
Section 5.13.       Waiver of Past Defaults. 

        
The Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes may on behalf of the Holders of all Outstanding Notes waive
any past Default hereunder and its consequences, except a Default 

        
(a)       in the payment of the principal of,
premium, if any, or interest on any Note; or 

        
(b)       in respect of a covenant or a provision
hereof which under this Indenture cannot be modified or amended without the
consent of the Holder of each Note Outstanding affected by such modification or
amendment. 

        
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon. 

        
Section 5.14.       Undertaking for Costs.

        
All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys’
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant, but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Notes, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of, premium, if any, or interest on, any Note on or after the
respective Stated Maturities expressed in such Note (or, in the case of
redemption, on or after the Redemption Date). 

        
Section 5.15.       Waiver of Stay, Extension
or Usury Laws. 

        
Each of the Company and any other obligor on the Notes covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company from paying all
or any portion of the principal of, premium, if any, or interest on the Notes
contemplated herein or in the Notes or which may affect the covenants or the
performance of this Indenture; and each of the Company and any other obligor on
the Notes (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any  

- 74 -

such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.

        
Section 5.16.       Remedies Subject to
Applicable Law. 

        
All rights, remedies and powers provided by this Article V may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Indenture are
intended to be subject to all applicable mandatory provisions of law which may
be controlling and to be limited to the extent necessary so that they will not
render this Indenture invalid, unenforceable or not entitled to be recorded,
registered or filed under the provisions of any applicable law. 

ARTICLE VI

THE TRUSTEE

        
Section 6.1.       Duties of Trustee.

        
Subject to the provisions of Trust Indenture Act Sections 315(a) through 315(d):

        
(a)       if a Default or an Event of Default has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in its exercise thereof as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs; 

        
(b)       except during the continuance of a
Default or an Event of Default: 

        
(1)       the Trustee need perform only those
duties as are specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture that are adverse to the Trustee;
and 

        
(2)       in the absence of bad faith or willful
misconduct on its part, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture; 

        
(c)       the Trustee may not be relieved from
liability for its own negligent action, its own negligent failure to act, or its
own willful misconduct, except that: 

        
(1)       this Subsection (c) does not limit the
effect of Subsection (b) of this Section 6.1; 

        
(2)       the Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent facts; and

- 75 -

        
(3)       the Trustee shall not be liable with
respect to any action it takes or omits to take in good faith, in accordance
with a direction of the Holders of a majority in principal amount of Outstanding
Notes relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power confirmed
upon the Trustee under this Indenture; 

        
(d)       no provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it; 

        
(e)       whether or not therein expressly so
provided, every provision of this Indenture that in any way relates to the
Trustee is subject to Subsections (a), (b), (c) and (d) of this
Section 6.1; and 

        
(f)       the Trustee shall not be liable for
interest on any money or assets received by it except as the Trustee may agree
with the Company. Assets held in trust by the Trustee need not be segregated
from other assets except to the extent required by law. 

        
Section 6.2.       Notice of Defaults.

        
Within 90 days after a Responsible Officer of the Trustee receives notice of the
occurrence of any Default, the Trustee shall transmit by mail to all Holders and
any other Persons entitled to receive reports pursuant to Section 313(c) of the
Trust Indenture Act, as their names and addresses appear in the Note Register,
notice of such Default hereunder known to the Trustee, unless such Default shall
have been cured or waived; provided, however, that, except in the case of a
Default in the payment of the principal of, premium, if any, or interest on any
Note, the Trustee shall be protected in withholding such notice if and so long
as a trust committee of Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders. 

        
Section 6.3.       Certain Rights of Trustee. 

        
Subject to the provisions of Section 6.1 hereof and Trust Indenture Act
Sections 315(a) through 315(d): 

        
(a)       the Trustee may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of Indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties; 

        
(b)       any request or direction of the Company
mentioned herein shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors may be sufficiently evidenced
by a Board Resolution; 

        
(c)       the Trustee may consult with counsel of
its selection and any advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in  

- 76 -

respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon in
accordance with such advice or Opinion of Counsel;

        
(d)       the Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities which
might be incurred therein or thereby in compliance with such request or
direction; 

        
(e)       the Trustee shall not be liable for any
action taken or omitted by it in good faith and believed by it to be authorized
or within the discretion, rights or powers conferred upon it by this Indenture
other than any liabilities arising out of the negligence, bad faith or willful
misconduct of the Trustee; 

        
(f)       the Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, approval, appraisal, bond, debenture, note, coupon, security or
other paper or document unless requested in writing to do so by the Holders of
not less than a majority in aggregate principal amount of the Notes then
Outstanding; provided that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of this
Indenture, the Trustee may require reasonable indemnity against such expenses or
liabilities as a condition to proceeding; the reasonable expenses of every such
investigation so requested by the Holders of not less than 25% in aggregate
principal amount of the Notes Outstanding shall be paid by the Company or, if
paid by the Trustee or any predecessor Trustee, shall be repaid by the Company
upon demand; provided, further, the Trustee in its discretion may make such
further inquiry or investigation into such facts or matters as it may deem fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney; 

        
(g)       whenever in the administration of this
Indenture the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers’ Certificate; and

        
(h)       the Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with due
care by it hereunder. 

        
(i)       notwithstanding anything to the contrary
herein, the Trustee shall have no duties to review any Officers’ Certificates,
Board Resolutions, Opinions of Counsel, financials or other documents furnished
to it by the Company for purposes of determining compliance with any provisions
of this Indenture. 

- 77 -

        
(j)       the Trustee shall have no duty to
inquire as to the performance of the Company’s covenants in Article X. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to
Sections 5.1(a), 5.1(b) and 10.1 or (ii) any Default or
Event of Default to which the Trustee shall have received written notification
or obtained actual knowledge. 

        
Section 6.4.       Trustee Not Responsible for
Recitals, Dispositions of Notes or

                                 
Application of Proceeds Thereof.

        
The recitals contained herein and in the Notes, except the Trustee’s
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Notes, except that the Trustee represents that it is duly authorized to
execute and deliver this Indenture, authenticate the Notes and perform its
obligations hereunder and that the statements made by it in any Statement of
Eligibility and Qualification on Form T-1 supplied to the Company are true and
accurate subject to the qualifications set forth therein. The Trustee shall not
be accountable for the use or application by the Company of Notes or the
proceeds thereof nor shall the Trustee be responsible for any statement in any
registration statement for the Notes under the Securities Act or responsible for
the determination as to which beneficial owners are entitled to receive notices
hereunder. 

        
Section 6.5.       Trustee and Agents May Hold
Notes; Collections; etc. 

        
The Trustee, any Paying Agent, Note Registrar or any other agent of the Company,
in its individual or any other capacity, may become the owner or pledgee of
Notes, with the same rights it would have if it were not the Trustee, Paying
Agent, Note Registrar or such other agent and, subject to Sections 6.8
and 6.13 hereof and Trust Indenture Act Sections 310 and 311, may
otherwise deal with the Company and receive, collect, hold and retain
collections from the Company with the same rights it would have if it were not
the Trustee, Paying Agent, Note Registrar or such other agent. 

        
Section 6.6.       Money Held in Trust.

        
All moneys received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated from other funds except to the extent required by
mandatory provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article IV, the Trustee shall, upon request by the
Company, invest all moneys received by the Trustee, until used or applied as
herein provided, in Temporary Cash Investments in accordance with the directions
of the Company. The Trustee shall be under no liability to the Company for
interest on any money received by it hereunder except as otherwise agreed in
writing with the Company. 

        
Section 6.7.       Compensation and
Indemnification of Trustee and Its Prior Claim. 

        
The Company covenants and agrees to pay to the Trustee from time to time, and
the Trustee shall be entitled to, such compensation as the parties shall agree
in writing from time to time for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) and the Company  

- 78 -

covenants and agrees to pay
or reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on behalf
of the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all agents and other persons not regularly in its employ) except
any such expense, disbursement or advance as may arise from its negligence, bad
faith or willful misconduct. The Company also covenants and agrees to indemnify
the Trustee and each predecessor Trustee for, and to hold it harmless against,
any claim, loss, liability, tax, assessment or other governmental charge (other
than taxes applicable to the Trustee’s compensation hereunder) or expense
incurred without negligence, bad faith or willful misconduct on its part,
arising out of or in connection with the acceptance or administration of this
Indenture or the trusts hereunder and its duties hereunder, including
enforcement of this Section 6.7 and also including any liability which
the Trustee may incur as a result of failure to withhold, pay or report any tax,
assessment or other governmental charge, and the costs and expenses of defending
itself against or investigating any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The
obligations of the Company under this Section 6.7 to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for reasonable expenses, disbursements and
advances shall constitute an additional obligation hereunder and shall survive
the satisfaction and discharge of this Indenture and the resignation or removal
of the Trustee and each predecessor Trustee.

        
Section 6.8.       Conflicting Interests.

        
The Trustee shall comply with the provisions of Section 310(b) of the Trust
Indenture Act. 

        
Section 6.9.       Trustee Eligibility.

        
There shall at all times be a Trustee hereunder which shall be eligible to act
as trustee under Trust Indenture Act Section 310(a)(1) and (5) and which shall
have a combined capital and surplus of at least $100,000,000 or is a member of a
bank holding company with a combined capital and surplus of at least
$100,000,000, to the extent there is an institution eligible and willing to
serve. If the Trustee does not have a Corporate Trust Office in The City of New
York, the Trustee may appoint an agent in The City of New York reasonably
acceptable to the Company to conduct any activities which the Trustee may be
required under this Indenture to conduct in The City of New York. If such
Trustee publishes reports of condition at least annually, pursuant to law or to
the requirements of federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section
6.9, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.9, the Trustee shall
resign immediately in the manner and with the effect hereinafter specified in
this Article. 

- 79 -

        
Section 6.10.       Resignation and Removal;
Appointment of Successor Trustee. 

        
(a)       No resignation or removal of the Trustee
and no appointment of a successor trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor trustee under
Section 6.11. 

        
(b)       The Trustee, or any trustee or trustees
hereafter appointed, may at any time, upon 30 days prior or written notice,
resign by giving written notice thereof to the Company. Upon receiving such
notice or resignation, the Company shall promptly appoint a successor trustee by
written instrument executed by authority of the Board of Directors, a copy of
which shall be delivered to the resigning Trustee and a copy to the successor
trustee. If an instrument of acceptance by a successor trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may, or any Holder who has been a bona fide
Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper, appoint and prescribe a successor trustee.

        
(c)       The Trustee may be removed at any time
for any cause or for no cause by an Act of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Notes, delivered to
the Trustee and to the Company. 

        
(d)       If at any time: 

        
(1)       the Trustee shall fail to comply with
the provisions of Trust Indenture Act Section 310(b) after written request
therefor by the Company or by any Holder who has been a bona fide Holder of a
Note for at least six months, 

        
(2)       the Trustee shall cease to be eligible
under Section 6.9 and shall fail to resign after written request therefor
by the Company or by any Holder who has been a bona fide Holder of a Note for at
least six months, or 

        
(3)       the Trustee shall become incapable of
acting or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, 

 then, in any case, (i) the
Company by a Board Resolution may remove the Trustee, or (ii) subject to
Section 5.14, the Holder of any Note who has been a bona fide Holder of a
Note for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe, remove the
Trustee and appoint a successor trustee. 

        
(e)       If the Trustee shall resign, be removed
or become incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall promptly
appoint a successor trustee and shall comply with the applicable requirements of
Section 6.11. If, within 60 days after such resignation, removal or
incapability, or the occurrence  

- 80 -

of such vacancy, the
Company has not appointed a successor Trustee, a successor trustee shall be
appointed by the Act of the Holders of a majority in principal amount of the
Outstanding Notes delivered to the Company and the retiring Trustee. Such
successor trustee so appointed shall forthwith upon its acceptance of such
appointment become the successor trustee and supersede the successor trustee
appointed by the Company. If no successor trustee shall have been so appointed
by the Company or the Holders of the Notes and accepted appointment in the
manner hereinafter provided, the Trustee or the Holder of any Note who has been
a bona fide Holder for at least six months may, subject to Section 5.14,
on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor trustee.

        
(f)       The Company shall give notice of each
resignation and each removal of the Trustee and each appointment of a successor
trustee by mailing written notice of such event by first-class mail, postage
prepaid, to the Holders of Notes as their names and addresses appear in the Note
Register. Each notice shall include the name of the successor trustee and the
address of its Corporate Trust Office or agent hereunder. 

        
Section 6.11.       Acceptance of Appointment
by Successor. 

        
Every successor trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee as if originally named as Trustee hereunder; but,
nevertheless, on the written request of the Company or the successor trustee,
upon payment of its charges pursuant to Section 6.7 then unpaid, such
retiring Trustee shall pay over to the successor trustee all moneys at the time
held by it hereunder and shall execute and deliver an instrument transferring to
such successor trustee all such rights, powers, duties and obligations. Upon
request of any such successor trustee, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor trustee all such rights and powers. 

        
No successor trustee with respect to the Notes shall accept appointment as
provided in this Section 6.11 unless at the time of such acceptance such
successor trustee shall be eligible to act as trustee under the provisions of
Trust Indenture Act Section 310(a) and this Article VI and shall have a
combined capital and surplus of at least $100,000,000 and have a Corporate Trust
Office or an agent selected in accordance with Section 6.9. 

        
Upon acceptance of appointment by any successor trustee as provided in this
Section 6.11, the Company shall give notice thereof to the Holders of the
Notes, by mailing such notice to such Holders at their addresses as they shall
appear on the Note Register. If the acceptance of appointment is substantially
contemporaneous with the appointment, then the notice called for by the
preceding sentence may be combined with the notice called for by Section
6.10. If the Company fails to give such notice within 10 days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be given at the expense of the Company. 

- 81 -

        
Section 6.12.       Merger, Conversion,
Consolidation or Succession to Business. 

        
Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee (including the trust created by this Indenture) shall be the successor
of the Trustee hereunder, provided that such corporation shall be eligible under
Trust Indenture Act Section 310(a) and this Article VI and shall have a
combined capital and surplus of at least $100,000,000 and have a Corporate Trust
Office or an agent selected in accordance with Section 6.9, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. 

        
In case at the time such successor to the Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor Trustee and deliver such Notes so
authenticated; and, in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor
trustee; and in all such cases such certificate shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate
of the Trustee shall have; provided that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Notes in the name
of any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation. 

        
Section 6.13.       Preferential Collection of
Claims Against Company. 

        
If and when the Trustee shall be or become a creditor of the Company (or other
obligor on the Notes), the Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of claims against the Company (or
any such other obligor). A Trustee who has resigned or been removed shall be
subject to Trust Indenture Act Section 311(a) to the extent indicated therein.

ARTICLE VII

HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY

        
Section 7.1.       Company to Furnish Trustee
Names and Addresses of Holders. 

        
The Company will furnish or cause to be furnished to the Trustee: 

        
(a)       semiannually, not more than 15 days
after each Regular Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Regular
Record Date; and 

        
(b)       at such other times as the Trustee may
reasonably request in writing, within 30 days after receipt by the Company of
any such request, a list of similar form and content to that in Subsection (a)
hereof as of a date not more than 15 days prior to the time such list is
furnished; 

- 82 -

        
Section 7.2.       Disclosure of Names and
Addresses of Holders. 

        
Holders may communicate pursuant to Trust Indenture Act Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes,
and the Trustee shall comply with Trust Indenture Act Section 312(b). The
Company, the Trustee, the Registrar and any other Person shall have the
protection of Trust Indenture Act Section 312(c). Further, every Holder of
Notes, by receiving and holding the same, agrees with the Company and the
Trustee that neither the Company nor the Trustee nor any agent of either of them
shall be held accountable by reason of the disclosure of any information as to
the names and addresses of the Holders in accordance with Trust Indenture Act
Section 312, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under Trust Indenture Action Section 312.

        
Section 7.3.       Reports by Trustee.

        
(a)       Within 60 days after May 15 of each year
commencing with the first May 15 after the issuance of Notes, the Trustee, if so
required under the Trust Indenture Act shall transmit by mail to all Holders in
the manner and to the extent provided in Trust Indenture Act Section 313(c), a
brief report dated as of such May 15 in accordance with and with respect to the
matters required by Trust Indenture Act Section 313(a), provided that if no
event described in Trust Indenture Act Section 313(a) has occurred within the
twelve-month period preceding the reporting date, no such report need be
transmitted. The Trustee shall also transmit by mail to the Holders, in the
manner and to the extent provided in Trust Indenture Act Section 313(c), a brief
report in accordance with and with respect to the matters required by Trust
Indenture Act Sections 313(a) and 313(b)(2). 

        
(b)       A copy of each report transmitted to
Holders pursuant to this Section 7.3 shall, at the time of such
transmission, be mailed to the Company and filed with each stock exchange, if
any, upon which the Notes are listed and also with the SEC. The Company will
notify the Trustee promptly if the Notes are listed on any stock exchange.

        
Section 7.4.       Reports by Company.

        
The Company shall: 

        
(a)       file with the Trustee, in accordance
with Section 10.17 hereof, and in any event within 15 days after the
Company is required to file the same with the SEC, copies of the annual reports
and of the information, documents and other reports (or copies of such portions
of any of the foregoing as the SEC may from time to time by rules and
regulations prescribe) which the Company is required to file with the SEC
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company
is not required to file information, documents or reports pursuant to either of
said Sections, then it shall (i) deliver to the Trustee annual audited financial
statements of the Company and its Subsidiaries, prepared on a consolidated basis
in conformity with GAAP, within 120 days after the end of each fiscal year of
the Company, and (ii) file with the Trustee and, to the extent permitted by law,
the SEC, in accordance with rules and regulations prescribed from time to time
by the SEC, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the  

- 83 -

Exchange Act in respect of
a security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;

        
(b)       file with the Trustee and the SEC, in
accordance with the rules and regulations prescribed from time to time by the
SEC, such additional information, documents and reports with respect to
compliance by the Company with the conditions and covenants for this Indenture
as are required from time to time by such rules and regulations (including such
information, documents and reports referred to in Trust Indenture Act Section
314(a)); and 

        
(c)       within 15 days after the filing thereof
with the Trustee, transmit by mail to all Holders in the manner and to the
extent provided in Trust Indenture Act Section 313(c), such summaries of any
information, documents and reports required to be filed by the Company pursuant
to Section 10.17 hereunder and subsections (a) and (b) of this Section as
is required and not prohibited by rules and regulations prescribed from time to
time by the SEC. At the Company’s request and at the Company’s expense, the
Trustee shall deliver such documents to the Holders. 

ARTICLE VIII

MERGER, CONSOLIDATION OR SALE OF ASSETS

        
Section 8.1.       Company May Merge,
Consolidate, etc., Only on Certain Terms. 

        
The Company will not, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets to any Person or group of affiliated Persons, or
permit any of its Subsidiaries to enter into any such transaction or series of
related transactions if such transaction or series of related transactions, in
the aggregate, would result in a sale, assignment, conveyance, transfer, lease
or disposition of all or substantially all of the properties and assets of the
Company and its Subsidiaries on a Consolidated basis to any other Person or
group of affiliated Persons, unless at the time and after giving effect thereto:

        
(i)       either (a) the Company will be the
continuing corporation or (b) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of the Company and its
Subsidiaries on a Consolidated basis (the “Surviving Entity”)
will be a corporation duly organized and validly existing under the laws of the
United States of America, any state thereof or the District of Columbia and such
Surviving Entity expressly assumes, by a supplemental indenture, in a form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and hereunder, as the case may be, and the Notes and this Indenture will remain
in full force and effect as so supplemented; 

        
(ii)       immediately before and immediately
after giving effect to such transaction on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or any of its
Subsidiaries which becomes the  

- 84 -

obligation of the Company
or any of its Subsidiaries as a result of such transaction as having been
incurred at the time of such transaction), no Default or Event of Default will
have occurred and be continuing;

        
(iii)       immediately before and immediately
after giving effect to such transaction on a pro forma basis (on the assumption
that the transaction occurred on the first day of the four-quarter period for
which financial results are available ending immediately prior to the
consummation of such transaction with the appropriate adjustments with respect
to the transaction being included in such pro forma calculation), the Company
(or the Surviving Entity if the Company is not the continuing obligor hereunder)
could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness
or Permitted Subsidiary Indebtedness) pursuant to the Fixed Charge Coverage
Ratio test under Section 10.8; and 

        
(iv)       at the time of the transaction the
Company or the Surviving Entity will have delivered, or caused to be delivered,
to the Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officer’s Certificate and an Opinion of Counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, conveyance, transfer, lease
or other transaction and the supplemental indenture in respect thereof comply
with this Indenture and that all conditions precedent herein provided for
relating to such transaction have been complied with; 

provided, however, that
the foregoing prohibition shall not prohibit any merger between or among
Subsidiaries or between a Subsidiary and the Company, provided the Company is
the Surviving Entity. 

        
Section 8.2.       Successor Substituted.

        
Upon any consolidation or merger, or any sale, assignment, conveyance, transfer,
lease or disposition of all or substantially all of the properties and assets of
the Company in accordance with Section 8.1, the successor Person formed
by such consolidation or into which the Company is merged or the successor
Person to which such sale, assignment, conveyance, transfer, lease or
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture, with the same effect
as if such successor had been named as the Company herein. When a successor
assumes all the obligations of its predecessor under this Indenture or the
Notes, the predecessor shall be released from such assumed obligations and
covenants under this Indenture and the Notes, as the case may be; provided that
in the case of a transfer by lease, the predecessor shall not be released from
the payment of principal and interest on the Notes. 

- 85 -

ARTICLE IX

SUPPLEMENTAL INDENTURES

        
Section 9.1.       Supplemental Indentures and
Agreements without Consent of Holders. 

        
Without the consent of any Holders, the Company, the Guarantors and the Trustee,
at any time and from time to time, may enter into one or more indentures
supplemental hereto in form and substance satisfactory to the Trustee, for any
of the following purposes: 

        
(a)       to evidence the succession of another
Person to the Company or any other obligor on the Notes, and the assumption by
any such successor of the covenants of the Company or obligor herein and in the
Notes in accordance with Article VIII; 

        
(b)       to add to the covenants of the Company
or any other obligor on the Notes for the benefit of the Holders, or to
surrender any right or power conferred on the Company or any other obligor on
the Notes, as applicable, herein or in the Notes; 

        
(c)       to cure any ambiguity, or to correct or
supplement any provision herein or in any supplemental indenture or the Notes
which may be defective or inconsistent with any other provision herein or in the
Notes or to make any other provisions with respect to matters or questions
arising under this Indenture or the Notes; provided that, in each case, such
provisions shall not adversely affect the interest of the Holders; 

        
(d)       to comply with the requirements of the
SEC in order to effect or maintain the qualification of this Indenture under the
Trust Indenture Act, as contemplated by Section 9.5 or otherwise; 

        
(e)       to evidence and provide the acceptance
of the appointment of a successor trustee hereunder; or 

        
(f)       to mortgage, pledge, hypothecate or
grant a security interest in favor of the Trustee for the benefit of the Holders
as additional security for the payment and performance of the Company’s
Indenture Obligations, in any property, or assets, including any of which are
required to be mortgaged, pledged or hypothecated, or in which a security
interest is required to be granted to the Trustee pursuant to this Indenture or
otherwise. 

        
Section 9.2.       Supplemental Indentures and
Agreements with Consent of Holders. 

        
Except as permitted by Section 9.1, with the consent of the Holders of at
least a majority in aggregate principal amount of the Outstanding Notes, by Act
of said Holders delivered to the Company and the Trustee, the Company when
authorized by Board Resolutions, and the Trustee may (i) enter into an indenture
or indentures supplemental hereto in form and substance satisfactory to the
Trustee, for the purpose of adding any provisions to or amending, modifying or
changing in any manner or eliminating any of the provisions of this Indenture or
the Notes (including, but not limited to, for the purpose of modifying in any
manner the rights of the Holders under this Indenture or the Notes) or (ii)
waive compliance with any provision in this Indenture or the Notes (other than
waivers of past Defaults covered by Section 5.13 and waivers  

- 86 -

of covenants which are
covered by Section 10.20); provided, however, that no such supplemental
indenture, agreement or instrument shall, without the consent of the Holder of
each Outstanding Note affected thereby:

        
(a)       change the Stated Maturity of the
principal of, or any installment of interest on, or change to an earlier date
any redemption date of, or waive a default in the payment of the principal or
interest on, any such Note or reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption thereof, or change
the coin or currency in which the principal of any Note or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date); 

        
(b)       amend, change or modify the obligation
of the Company to make and consummate an Offer with respect to any Asset Sale or
Asset Sales in accordance with Section 10.12 or the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control in accordance with Section 10.13, including, in each
case, amending, changing or modifying any definitions relating thereto;

        
(c)       reduce the percentage in principal
amount of the Outstanding Notes, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is required for
any waiver or compliance with certain provisions of this Indenture; 

        
(d)       modify any of the provisions of this
Section 9.2 or Section 5.13 or Section 10.20, except to
increase the percentage of such Outstanding Notes required for any such actions
or to provide that certain other provisions of this Indenture cannot be modified
or waived without the consent of the Holder of each such Note affected thereby;

        
(e)       except as otherwise permitted under
Article VIII, consent to the assignment or transfer by the Company of any
of its rights and obligations hereunder; 

        
(f)       amend or modify any of the ranking
provisions of the Indenture in any manner adverse to the Holders of the Notes;
or 

        
(g)       release any Guarantor that is a
Significant Subsidiary from any of its obligations under its Guarantee or this
Indenture otherwise than in accordance with the terms of this Indenture.

        
Upon the written request of the Company accompanied by a copy of Board
Resolutions authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Holders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture. 

        
It shall not be necessary for any Act of Holders under this Section 9.2
to approve the particular form of any proposed supplemental indenture but it
shall be sufficient if such Act shall approve the substance thereof. 

- 87 -

        
Section 9.3.       Execution of Supplemental
Indentures and Agreements. 

        
In executing, or accepting the additional trusts created by, any supplemental
indenture, agreement, instrument or waiver permitted by this Article IX
or the modifications thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Trust Indenture Act
Sections 315(a) through 315(d) and Section 6.3 hereof) shall be fully
protected in relying upon, an Opinion of Counsel and an Officers’
Certificate stating that the execution of such supplemental indenture, agreement
or instrument is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture, agreement
or instrument which affects the Trustee’s own rights, duties or immunities
under this Indenture or otherwise. 

        
Section 9.4.       Effect of Supplemental
Indentures. 

        
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby 

        
Section 9.5.       Conformity with Trust
Indenture Act. 

        
Every supplemental indenture executed pursuant to this Article IX shall
conform to the requirements of the Trust Indenture Act as then in effect.

        
Section 9.6.       Reference in Notes to
Supplemental Indentures. 

        
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and shall if required by the
Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the Board
of Directors, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes. 

        
Section 9.7.       Notice of Supplemental
Indentures. 

        
Promptly after the execution by the Company and the Trustee of any supplemental
indenture pursuant to the provisions of Section 9.2, the Company shall
give notice thereof to the Holders of each Outstanding Note affected, in the
manner provided for in Section 1.7, setting forth in general terms the
substance of such supplemental indenture. Any failure of the Company to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture. 

- 88 -

ARTICLE X

COVENANTS

        
Section 10.1.       Payment of Principal,
Premium and Interest. 

        
The Company shall duly and punctually pay the principal of, premium, if any, and
interest on the Notes in accordance with the terms of the Notes and this
Indenture. 

        
Section 10.2.       Maintenance of Office or
Agency. 

        
The Company shall maintain an office or agency where Notes may be presented or
surrendered for payment. The Company also will maintain in The City of New York
an office or agency where Notes may be surrendered for registration of transfer,
redemption or exchange and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The office of the
Trustee, at its Corporate Trust Office, will be such office or agency of the
Company, unless the Company shall designate and maintain some other office or
agency for one or more of such purposes. The Company will give prompt written
notice to the Trustee of the location and any change in the location of any such
offices or agencies. If at any time the Company shall fail to maintain any such
required offices or agencies or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the office of the Trustee and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands. 

        
The Company may from time to time designate one or more other offices or
agencies (in or outside of The City of New York) where the Notes may be
presented or surrendered for any or all such purposes, and may from time to time
rescind such designation. The Company will give prompt written notice to the
Trustee of any such designation or rescission and any change in the location of
any such office or agency. 

        
The Trustee shall initially act as Paying Agent for the Notes. 

        
Section 10.3.       Money for Note Payments to
Be Held in Trust. 

        
If the Company or any of its Affiliates shall at any time act as Paying Agent,
it will, on or before each due date of the principal of, premium, if any, or
interest on any of the Notes, segregate and hold in trust for the benefit of the
Holders entitled thereto a sum sufficient to pay the principal, premium, if any,
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act. 

        
If the Company or any of its Affiliates is not acting as Paying Agent, the
Company will, on or before each due date of the principal of, premium, if any,
or interest on any of the Notes, deposit with a Paying Agent a sum in same day
funds sufficient to pay the principal, premium, if any, or interest so becoming
due, such sum to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of such action or any
failure to so act. 

- 89 -

        
If the Company is not acting as Paying Agent, the Company will cause each Paying
Agent other than the Trustee to execute and deliver to the Trustee an instrument
in which such Paying Agent shall agree with the Trustee, subject to the
provisions of this Section, that such Paying Agent will: 

        
(a)       hold all sums held by it for the payment
of the principal of, premium, if any, or interest on the Notes in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided; 

        
(b)       give the Trustee notice of any Default
by the Company (or any other obligor upon the Notes) in the making of any
payment of principal, premium, if any, or interest on the Notes; 

        
(c)       at any time during the continuance of
any such Default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent; and 

        
(d)       acknowledge, accept and agree to comply
in all aspects with the provisions of this Indenture relating to the duties,
rights and disabilities of such Paying Agent. 

        
The Company may at any time, for the purpose of obtaining the satisfaction and
discharge of this Indenture or for any other purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.

        
Any money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal
and premium, if any, or interest has become due and payable shall promptly be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Note shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the company cause to
be published once, in the NEW YORK TIMES and THE WALL STREET JOURNAL (national
edition), and mail to each such Holder, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification, publication and mailing, any unclaimed
balance of such money then remaining will promptly be repaid to the Company.

        
Section 10.4.       Corporate Existence.

        
Subject to Article VIII, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence and related rights and franchises (charter and statutory) of the
Company and each Subsidiary; provided, however, that the Company shall not be
required to preserve any such right or franchise or the corporate existence of
any such Subsidiary if the Board of Directors shall determine that the
preservation  

- 90 -

thereof is no longer
necessary or desirable in the conduct of the business of the Company and its
Subsidiaries as a whole; and provided, further, however, that the foregoing
shall not prohibit a sale, transfer or conveyance of a Subsidiary or any of its
assets in compliance with the terms of this Indenture.

        
Section 10.5.       Payment of Taxes and Other Claims. 

        
The Company shall pay or discharge or cause to be paid or discharged, on or
before the date the same shall become due and payable, (a) all taxes,
assessments and governmental charges levied or imposed upon the Company or any
of its Subsidiaries shown to be due on any return of the Company or any of its
Subsidiaries or otherwise assessed or upon the income, profits or property of
the Company or any of its Subsidiaries if failure to pay or discharge the same
could reasonably be expected to have a material adverse effect on the ability of
the Company to perform its obligations hereunder and (b) all lawful claims for
labor, materials and supplies, which, if unpaid, would by law become a Lien upon
the property of the Company or any of its Subsidiaries, except for any Lien
permitted to be incurred under Section 10.11, if failure to pay or
discharge the same could reasonably be expected to have a material adverse
effect on the ability of the Company to perform its obligations hereunder;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings properly instituted and diligently conducted and in
respect of which appropriate reserves (in the good faith judgment of management
of the Company) are being maintained in accordance with GAAP. 

        
Section 10.6.       Maintenance of Properties. 

        
The Company shall cause all material properties owned by the Company or any of
its Subsidiaries or used or held for use in the conduct of its business or the
business of any of its Subsidiaries to be maintained and kept in good condition,
repair and working order (ordinary wear and tear excepted) and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the reasonable
judgment of the Company may be consistent with sound business practice and
necessary so that the business carried on in connection therewith may be
properly conducted at all times; provided, however, that nothing in this Section
shall prevent the Company from discontinuing the maintenance of any of such
properties if such discontinuance is, in the reasonable judgment of the Company,
desirable in the conduct of its business or the business of any of its
Subsidiaries; and provided, further, however, that the foregoing shall not
prohibit a sale, transfer or conveyance of a Subsidiary or any of its properties
or assets in compliance with the terms of this Indenture. 

        
Section 10.7.       Insurance. 

        
The Company shall at all times keep all of its and its Subsidiaries’
properties which are of an insurable nature insured with insurers, believed by
the Company in good faith to be financially sound and responsible, against loss
or damage to the extent that property of similar character is usually so insured
by corporations similarly situated and owning like properties in the same
general geographic areas in which the Company and its Subsidiaries operate,
except  

- 91 -

where the failure to do so
could not reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or prospects of
the Company and its Subsidiaries, taken as a whole.

        
Section 10.8.       Incurrence of Indebtedness. 

        
The Company will not create, issue, incur, assume, guarantee or otherwise in any
manner become directly or indirectly liable for the payment of or otherwise
suffer to exist (collectively, “incur”), any Indebtedness
(including any Acquired Debt), other than Permitted Indebtedness, unless such
Indebtedness is incurred by the Company and the Company’s Consolidated
Fixed Charge Coverage Ratio for the four full fiscal quarters for which
financial results are available immediately preceding the date of incurrence of
such Indebtedness, taken as one period (and after giving pro forma effect to:
(i) the incurrence of such Indebtedness and (if applicable) the application of
the net proceeds therefrom, including to refinance other Indebtedness, as if
such Indebtedness was incurred, and the application of such proceeds occurred,
at the beginning of such four-quarter period; (ii) the incurrence, repayment or
retirement of any other Indebtedness by the Company since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or retired at
the beginning of such four-quarter period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
shall be computed based upon the average daily balance of such Indebtedness
during such four-quarter period); (iii) in the case of Acquired Debt, the
related acquisition; and (iv) any acquisition or disposition by the Company and
its Subsidiaries of any company or any business or any assets out of the
ordinary course of business, or any related repayment of Indebtedness, in each
case since the first day of such four-quarter period, assuming such acquisition
or disposition and any such related payments had been consummated on the first
day of such four-quarter period), would be at least 2.0:1. The Company will not
permit any of its Subsidiaries to incur any Indebtedness (other than Permitted
Subsidiary Indebtedness). 

        
Section 10.9.       Restricted Payments.

        
(a)       Except for Permitted Investments, the
Company will not, and will not permit any Subsidiary to, directly or indirectly:

        
(i)       declare or pay any dividend on, or make
any other payment or distribution to holders of, any shares of the
Company’s Capital Stock (other than dividends or distributions payable
solely in shares of its Qualified Capital Stock or in options, warrants or other
rights to acquire shares of such Qualified Capital Stock); 

        
(ii)       purchase, redeem or otherwise acquire
or retire for value, directly or indirectly, the Company’s Capital Stock or
any Capital Stock of any Affiliate of the Company (other than Capital Stock of
any Wholly Owned Subsidiary of the Company); 

        
(iii)       prior to any scheduled principal
payment, sinking fund payment or maturity of any Subordinated Indebtedness, make
any principal payment on, or repurchase, redeem, defease, retire or otherwise
acquire for value, such Subordinated Indebtedness (other than any such
Indebtedness owed to the Company or a Wholly Owned Subsidiary); 

- 92 -

        
(iv)       declare or pay any dividend or
distribution on any Capital Stock of any Subsidiary to any Person (other than to
the Company or any of its Wholly Owned Subsidiaries) or purchase, redeem or
otherwise acquire or retire for value any Capital Stock of any Subsidiary held
by any person (other than the Company or any of its Wholly Owned Subsidiaries);

        
(v)       incur, create, or assume, any guarantee
of Indebtedness of any Affiliate of the Company (other than a Wholly Owned
Subsidiary of the Company); or 

        
(vi)       make any Investment in any Person

(any of the foregoing
actions described in clauses (i) through (vi), other than any such action that
is a Permitted Payment (as defined below), collectively, a “Restricted
Payment”) (the amount of any such Restricted Payment, if other than
cash, being determined by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution); unless (1) immediately before
and immediately after giving effect to such proposed Restricted Payment on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing and such Restricted Payment shall not be an event which is, or after
notice or lapse of time or both, would be, an “event of default” under
the terms of any Indebtedness of the Company or its Subsidiaries; (2)
immediately before and immediately after giving effect to such Restricted
Payment on a pro forma basis, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness or Permitted Subsidiary
Indebtedness) under the provisions of Section 10.8; and (3) after giving
effect to the proposed Restricted Payment, the aggregate amount of all such
Restricted Payments declared or made after October 7, 1997 plus the Permitted
Payments made under clause (b)(vii), do not exceed $5,000,000 plus the sum of:

        
(A)       50% of the aggregate Consolidated Net
Income of the Company accrued on a cumulative basis during the period beginning
on January 1, 1998 and ending on the last day of the Company’s last fiscal
quarter ending prior to the date of the Restricted Payment (or, if such
aggregate cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss); plus 

        
(B)       the aggregate Net Cash Proceeds received
after October 7, 1997 by the Company either (x) as capital contributions in the
form of common equity to the Company or (y) from the issuance or sale (other
than to any of its Subsidiaries) of Qualified Capital Stock of the Company or
any options, warrants or rights to purchase such Qualified Capital Stock of the
Company (except, in each case, to the extent such proceeds are used to purchase,
redeem or otherwise retire Capital Stock or Subordinated Indebtedness as set
forth in clause (ii) or (iii) of paragraph (b) below); in each case, other than
Net Cash Proceeds received from the issuance or sale of Qualified Capital Stock
or options, warrants or rights to purchase Qualified Capital Stock in, or
otherwise received in connection with, the Refinancing; plus 

        
(C)       the aggregate Net Cash Proceeds received
after October 7, 1997 by the Company (other than from any of its Subsidiaries)
upon the exercise of any options, warrants or rights to purchase Qualified
Capital Stock of the Company; plus 

- 93 -

        
(D)       the aggregate Net Cash Proceeds received
after October 7, 1997 by the Company from the conversion or exchange, if any, of
debt securities or Redeemable Capital Stock of the Company or its Subsidiaries
into or for Qualified Capital Stock of the Company plus, to the extent such debt
securities or Redeemable Capital Stock were issued after October 7, 1997, the
aggregate of Net Cash Proceeds from their original issuance; plus 

        
(E)       in the case of the disposition or
repayment of any Investment constituting a Restricted Payment made after October
7, 1997, an amount equal to the lesser of the return of capital with respect to
such Investment and the initial amount of such Investment, in either case, less
the cost of the disposition of such Investment. 

        
(b)       Notwithstanding the foregoing, so long
as there is no Default or Event of Default continuing, the foregoing provisions
shall not prohibit the following actions (each of clauses (i) through (vii)
being referred to as a “Permitted Payment”): 

        
(i)       the payment of any dividend within 60
days after the date of declaration thereof if at the date of declaration thereof
such other dividend (A) would be permitted by the provisions of paragraph (a) of
this Section and (B) shall be deemed to have been paid on such date of
declaration for purposes of the calculation required by paragraph (a) of this
Section; 

        
(ii)       the repurchase, redemption, or other
acquisition or retirement for value of any shares of any class of Capital Stock
of the Company in exchange for (including any such exchange pursuant to the
exercise of a conversion right or privilege in connection with which cash is
paid in lieu of the issuance of fractional shares or scrip), or out of the Net
Cash Proceeds of a substantially concurrent issue and sale for cash (other than
to a Subsidiary) of, other shares of Qualified Capital Stock of the Company;
provided that the Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are, to the extent so used, excluded from clause (3)(B)
of paragraph (a) of this Section; 

        
(iii)       the repurchase, redemption,
defeasance, retirement or acquisition for value or payment of principal of any
Subordinated Indebtedness or Redeemable Capital Stock in exchange for, or in an
amount not in excess of the Net Cash Proceeds of, a substantially concurrent
issuance and sale for cash (other than to any Subsidiary) of any Qualified
Capital Stock of the Company, provided that the Net Cash Proceeds from the
issuance of such shares of Qualified Capital Stock are, to the extent so used,
excluded from clause (3)(B) of paragraph (a) of this Section; 

        
(iv)       the repurchase, redemption, defeasance,
retirement, refinancing, acquisition for value or payment of principal of any
Subordinated Indebtedness (other than Redeemable Capital Stock) (a
“refinancing”) through the substantially concurrent issuance of new
Subordinated Indebtedness of the Company, provided that any such new
Subordinated Indebtedness (1) shall be in a principal amount that does not
exceed the principal amount so refinanced (or, if such Subordinated Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, then such lesser amount as
of the date of determination), plus the 

- 94 -

lesser of (I) the stated amount of any
premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced, or (II)
the amount of premium or other payment actually paid at such time to refinance
the Indebtedness, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing; (2) has an Average Life to Stated
Maturity greater than the remaining Average Life to Stated Maturity of the
Notes; (3) has a Stated Maturity for its final scheduled principal payment later
than the Stated Maturity for the final scheduled principal payment of the Notes;
and (4) is expressly subordinated in right of payment to the Notes at least to
the same extent as the Subordinated Indebtedness to be refinanced; 

        
(v)       the repurchase, redemption, defeasance,
retirement, refinancing, acquisition for value or payment of principal of the
Subordinated Notes (a “refinancing”) through the substantially
concurrent issuance of new Senior Debt of the Company, provided that (1) any
such new Senior Debt shall be in a principal amount that does not exceed the
principal amount of Subordinated Notes so refinanced (or, if such Senior Debt
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, then such lesser amount as
of the date of determination), plus the lesser of (I) the stated amount of any
premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Subordinated Notes being refinanced, or
(II) the amount of premium or other payment actually paid at such time to
refinance such Subordinated Notes, plus, in either case, the amount of expenses
of the Company incurred in connection with such refinancing; and (2) the
incurrence of such new Senior Debt shall be permitted by clause (xi) of the
definition of “Permitted Indebtedness”; 

        
(vi)       the repurchase, redemption, defeasance,
retirement, refinancing, acquisition for value or payment of any Redeemable
Capital Stock through the substantially concurrent issuance of new Redeemable
Capital Stock of the Company, provided that any such new Redeemable Capital
Stock (1) shall have an aggregate liquidation preference that does not exceed
the aggregate liquidation preference of the amount so refinanced; (2) has an
Average Life to Stated Maturity greater than the remaining Average Life to
Stated Maturity of the Notes; and (3) has a Stated Maturity later than the
Stated Maturity for the final scheduled principal payment of the Notes; and

        
(vii)       the repurchase of shares of, or
options or warrants to purchase shares of, common stock of the Company or any of
its Subsidiaries from employees, former employees, directors or former directors
of the Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors), pursuant to the
terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or sell,
shares of such common stock in an aggregate amount not to exceed $500,000 in any
calendar year or an aggregate of $2,500,000 from and after the Issue Date.

- 95 -

        
Section 10.10.       Transactions with Affiliates. 

        
The Company will not, and will not permit any of its Subsidiaries to, directly
or indirectly, enter into any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of assets,
property or services) with or for the benefit of any Affiliate of the Company
(other than the Company or a Subsidiary) unless such transaction or series of
related transactions is entered into in good faith and (a) such transaction or
series of related transactions is on terms that are no less favorable to the
Company or such Subsidiary, as the case may be, than those that would be
available in a comparable transaction in arm’s-length dealings with an
unrelated third party, (b) with respect to any transaction or series of related
transactions involving aggregate value in excess of $1,000,000, the Company
delivers an Officers’ Certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause (a) above,
and (c) with respect to any transaction or series of related transactions
involving aggregate value in excess of $10,000,000, either (A) such transaction
or series of related transactions has been approved by a majority of the
Disinterested Directors of the Company, or in the event there is only one
Disinterested Director, by such Disinterested Director, or (B) the Company
delivers to the Trustee a written opinion of an investment banking firm of
national standing or other recognized independent expert with experience
appraising the terms and conditions of the type of transaction or series of
related transactions for which an opinion is required stating that the
transactions or series of related transactions are fair to the Company or such
Subsidiary from a financial point of view; provided, however, that clauses (a)
through (c) above shall not apply to (i) any transaction with an employee or
director of the Company or any of its Subsidiaries entered into in the ordinary
course of business (including compensation and employee benefit arrangements
with any officer, director or employee of the Company or any Subsidiary,
including under any stock option or stock incentive plans), (ii) transactions
between or among the Company and/or its Subsidiaries, (iii) Restricted Payments
made in accordance with Section 10.9 or Permitted Payments, (iv) any
transactions related to the Securitization Facility, and (v) management
agreements or similar agreements between (A) the Company or any Subsidiary and
(B) Affiliates in which the Company or any Subsidiary has made an Investment.

        
Section 10.11.       Liens. 

        
The Company will not, and will not permit any Subsidiary to, directly or
indirectly, create, incur, assume or permit or suffer any Liens upon any
property or assets of the Company or any of its Subsidiaries whether owned on
the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless: 

        
(1)       in the case of Liens securing
Subordinated Indebtedness, the Notes or the Guarantee of such Guarantor, as the
case may be, are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Liens; and 

        
(2)       in all other cases, the Notes or the
Guarantees, as the case may be, are secured on an equal and ratable basis,

except for Permitted Liens and: 

- 96 -

        
(a)       Liens existing as of the Issue Date to
the extent and in the manner such Liens are in effect on the Issue Date;

        
(b)       (x) Liens securing Indebtedness
permitted by clauses (i) and (vi) of the definition of “Permitted
Indebtedness” and (y) Liens securing Indebtedness constituting Indebtedness
referred to by the cross-reference to clause (i) of the definition of
“Permitted Indebtedness” contained in clause (ii) of the definition of
“Permitted Subsidiary Indebtedness” (including guarantees of
Obligations owed under the Senior Credit Facility) and, in each case, related
Obligations; 

        
(c)       Liens securing the Notes and Guarantees;

        
(d)       Liens of the Company or a Subsidiary on
assets of any Subsidiary and Liens on the assets of the Company in favor of a
Subsidiary that is a Guarantor; 

        
(e)       Liens securing Indebtedness that is
incurred to refinance any Indebtedness that has been secured by a Lien permitted
under this Indenture and that has been incurred in accordance with the
provisions of the Indenture; provided, however, that such Liens: 

        
(x)       are no less favorable to the Holders of
Notes in any material respect, than the Liens in respect of the Indebtedness
being refinanced; and 

        
(y)       do not extend to or cover any property
or assets of the Company or any of its Subsidiaries not securing the
Indebtedness so refinanced, except in the case of Liens securing Purchase Money
Obligations, then the Liens permitted by this clause (e) may extend to or cover
a similar property or asset that was subject to the Lien at the time such
Purchase Money Obligation was originally incurred; and 

        
(f)       Liens in favor of the Company.

        
Section 10.12.       Asset Sales.

        
(a)       The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, consummate an Asset
Sale unless (i) at least 75% of the consideration from such Asset Sale is
received in cash or Cash Equivalents, and (ii) the Company or such Subsidiary
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the shares or assets subject to such Asset Sale (as determined
by the Board of Directors and evidenced in a Board Resolution). 

        
(b)       Within 360 days of the Asset Sale, the
Company may at its option apply the Net Cash Proceeds (1) to repay Indebtedness
under the Senior Credit Facility or any other Senior Secured Debt (and, in each
case, effect a corresponding permanent reduction in the availability under such
Senior Credit Facility or to the outstanding amount of such Senior Secured Debt)
or to repay unsecured Senior Debt that has provisions requiring the Company to
make an offer to purchase upon an Asset Sale; provided, however, that if Bally
repays such unsecured Senior Debt it must make a ratable offer to all Holders of
Notes as provided in paragraph (c) below; (2) to acquire properties and assets
that (as determined by the Board of Directors) replace the  

- 97 -

properties and assets that
were the subject of the Asset Sale; or (3) to acquire properties and assets that
will be used in the businesses of the Company or its Subsidiaries existing on
the Issue Date or in businesses reasonably related or complementary. The amount
of such Net Cash Proceeds not applied or invested as set forth in this paragraph
shall constitute “Excess Proceeds.”

        
(c)       When the aggregate amount of Excess
Proceeds exceeds $15,000,000, the Company will apply the Excess Proceeds to the
repayment of the Notes and any other unsecured Senior Debt outstanding with
provisions requiring the Company to make an offer to purchase or to purchase or
redeem such unsecured Senior Debt with the proceeds from any Asset Sale as
follows: (A) the Company will make an offer to purchase (an “Offer”)
from all Holders of the Notes in accordance with the procedures set forth in
this Indenture in the maximum principal amount (expressed as a multiple of
$1,000) of Notes that may be purchased out of an amount (the “Notes
Amount”) equal to the product of such Excess Proceeds multiplied by a
fraction, the numerator of which is the outstanding principal amount of the
Notes, and the denominator of which is the sum of the outstanding principal
amount of the Notes and such unsecured Senior Debt outstanding with provisions
requiring the Company to make an offer to purchase or to purchase or redeem such
unsecured Senior Debt with the proceeds from any Asset Sale (subject to
proration in the event such amount is less than the aggregate Offered Price (as
defined herein) of all Notes tendered), and (B) to the extent required by such
unsecured Senior Debt outstanding with provisions requiring the Company to make
an offer to purchase or to purchase or redeem such unsecured Senior Debt with
the proceeds from any Asset Sale to permanently reduce the principal amount of
such unsecured Senior Debt, the Company will make an offer to purchase or
otherwise repurchase or redeem unsecured Senior Debt (a “Senior Debt
Offer”) in an amount (the “Senior Debt Amount”) equal
to the excess of the Excess Proceeds over the Notes Amount; provided that in no
event will the Company be required to make a Senior Debt Offer in a Senior Debt
Amount exceeding the principal amount of such unsecured Senior Debt plus the
amount of any premium required to be paid to repurchase such unsecured Senior
Debt. The offer price for the Notes will be payable in cash in an amount equal
to 100% of the principal amount of the Notes plus accrued and unpaid interest,
if any, to the date (the “Offer Date”) such Offer is
consummated (the “Offered Price”), in accordance with the procedures
set forth in this Indenture. To the extent that the aggregate Offered Price of
the Notes tendered pursuant to the Offer is less than the Notes Amount relating
thereto or the aggregate amount of unsecured Senior Debt that is purchased in a
Senior Debt Offer is less than the Senior Debt Amount, the Company may use any
remaining Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and such unsecured Senior
Debt surrendered by holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon the
completion of the purchase of all the Notes tendered pursuant to an Offer and
the completion of Senior Debt Offer, the amount of Excess Proceeds, if any,
shall be reset at zero. 

        
(d)       If the Company becomes obligated to make
an Offer pursuant to clause (c) above, the Notes and the unsecured Senior Debt
that has provisions requiring the Company to make an offer to purchase upon an
Asset Sale shall be purchased by the Company, at the option of the holders
thereof, in whole or in part in integral multiples of $1,000, on a date that is
not earlier than 30 days and not later than 60 days from the date the notice of
such Offer is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act. 

- 98 -

        
(e)       The Company will comply with the
applicable tender offer rules, including Rule 14e-l under the Exchange Act, and
any other applicable securities laws or regulations in connection with an Offer.

        
Section 10.13.       Purchase of Notes upon a
Change of Control. 

        
(a)       If a Change of Control shall occur at
any time, then each Holder shall have the right to require that the Company
purchase such Holder's Notes in whole or in part in integral multiples of $1,000
at a purchase price (the “Change of Control Purchase Price”) in
cash in an amount equal to 101% of the principal amount of such Notes, plus
accrued and unpaid interest, if any, to the date of purchase (the
“Change of Control Purchase Date”), pursuant to the offer
described below in this Section 10.13 (the “Change of Control
Offer”) and in accordance with the other procedures set forth in
subsections (b), (c), (d) and (e) of this
Section 10.13. 

        
(b)       Within 30 days following any Change of
Control, the Company shall notify the Trustee thereof and give written notice (a
“Change of Control Purchase Notice”) of such Change of Control
to each Holder by first-class mail, postage prepaid, at his address appearing in
the Note Register, stating among other things: 

        
(1)       that a Change of Control has occurred,
the date of such event, and that such Holder has the right to require the
Company to repurchase such Holder’s Notes at the Change of Control Purchase
Price; 

        
(2)       the circumstances and relevant facts
regarding such Change of Control (including but not limited to, if applicable,
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control); 

        
(3)       (i) the most recently filed Annual
Report on Form 10-K (including audited consolidated financial statements) of the
Company, the most recent subsequently filed Quarterly Report on Form 10-Q, as
applicable, and any Current Report on Form 8-K of the Company filed subsequent
to such Quarterly Report (or in the event the Company is not required to prepare
any of the foregoing Forms, the comparable information required to be prepared
by the Company pursuant to Section 10.17), (ii) a description of material
developments, if any, in the Company’s business subsequent to the date of the
latest of such reports and (iii) such other information, if any, concerning the
business of the Company which the Company in good faith believes will enable
such Holders to make an informed investment decision regarding the Change of
Control Offer; 

        
(4)       that the Change of Control Offer is
being made pursuant to this Section 10.13 and that all Notes properly tendered
pursuant to the Change of Control Offer will be accepted for payment at the
Change of Control Purchase Price; 

        
(5)       the Change of Control Purchase Date,
which shall be a Business Day no earlier than 30 days nor later than 60 days
from the date such notice is mailed, or such later date as is necessary to
comply with requirements under the Exchange Act; 

        
(6)       the Change of Control Purchase Price;

- 99 -

        
(7)       the names and addresses of the Paying
Agent and the offices or agencies referred to in Section 10.2; 

        
(8)       that Notes must be surrendered not later
than one Business Day prior to the Change of Control Purchase Date to the Paying
Agent at the office of the Paying Agent or to an office or agency referred to in
Section 10.2 to collect payment; 

        
(9)       that the Change of Control Purchase
Price for any Note which has been properly tendered and not withdrawn will be
paid promptly following the Change of Control Offer Purchase Date; 

        
(10)       the procedures that a Holder must
follow to accept a Change of Control Offer or to withdraw such acceptance;

        
(11)       that any Note not tendered will
continue to accrue interest; and 

        
(12)       that, unless the Company defaults in
the payment of the Change of Control Purchase Price, any Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Purchase Date. 

        
(c)       Upon receipt by the Company of the
proper tender of Notes, the Holder of the Note in respect of which such proper
tender was made shall (unless the tender of such Note is properly withdrawn)
thereafter be entitled to receive solely the Change of Control Purchase Price
with respect to such Note. Upon surrender of any such Note for purchase in
accordance with the foregoing provisions, such Note shall be paid by the Company
at the Change of Control Purchase Price; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Change of Control Purchase
Date shall be payable to the Holders of such Notes, or one or more Predecessor
Notes, registered as such on the relevant Regular Record Dates according to the
terms and the provisions of Section 3.9. Holders electing to have Notes
purchased will be required to surrender such Notes to the Paying Agent at the
address specified in the Change of Control Purchase Notice at least one Business
Day prior to the Change of Control Purchase Date. Any Note that is to be
purchased only in part shall be surrendered to a Paying Agent at the office of
such Paying Agent (with, if the Company, the Note Registrar or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Note Registrar or the Trustee, as the case
may be, duly executed by, the Holder thereof or such Holder’s attorneys duly
authorized in writing), and the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Note, without service charge, one
or more new Notes of any authorized denomination as requested by such Holder in
an aggregate principal amount equal to, and in exchange for, the portion of the
principal amount of the Note so surrendered that is not purchased. 

        
(d)       The Company shall (i) not later than the
Change of Control Purchase Date, accept for payment Notes or portions thereof
tendered pursuant to the Change of Control Offer, (ii) not later than 10:00 a.m.
(New York time) on the Change of Control Purchase Date, deposit with the Trustee
or with a Paying Agent an amount of money in same day funds (or New York
Clearing House funds if such deposit is made prior to the Change of Control
Purchase Date) sufficient to pay the aggregate Change of Control Purchase Price
of all the Notes or portions thereof which  

- 100 -

are to be purchased as of the Change
of Control Purchase Date and (iii) not later than 10:00 a.m. (New York time) on
the Change of Control Purchase Date, deliver to the Paying Agent an Officers’
Certificate stating the Notes or portions thereof accepted for payment by the
Company. The Paying Agent shall promptly mail or deliver to Holders of Notes so
accepted payment in an amount equal to the Change of Control Purchase Price of
the Notes purchased from each such Holder, and the Company shall execute and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted shall be promptly mailed or delivered by
the Paying Agent at the Company’s expense to the Holder thereof. The Company
will publicly announce the results of the Change of Control Offer on the Change
of Control Purchase Date. For purposes of this Section 10.13, the Company
shall choose a Paying Agent which shall not be the Company.

        
(e)       A tender made in response to a Change of
Control Purchase Notice may be withdrawn if the Company receives, not later than
one Business Day prior to the Change of Control Purchase Date, a telegram,
telex, facsimile transmission or letter, specifying, as applicable: 

        
(1)       the name of the Holder; 

        
(2)       the certificate number of the Note in
respect of which such notice of withdrawal is being submitted; 

        
(3)       the principal amount of the Note (which
shall be $1,000 or an integral multiple thereof) delivered for purchase by the
Holder as to which such notice of withdrawal is being submitted; 

        
(4)       a statement that such Holder is
withdrawing his election to have such principal amount of such Note purchased;
and 

        
(5)       the principal amount, if any, of such
Note (which shall be $1,000 or an integral multiple thereof) that remains
subject to the original Change of Control Purchase Notice and that has been or
will be delivered for purchase by the Company. 

        
(f)       Subject to applicable escheat laws, the
Trustee and the Paying Agent shall return to the Company any cash that remains
unclaimed, together with interest or dividends, if any, thereon, held by them
for the payment of the Change of Control Purchase Price; provided, however,
that, (x) to the extent that the aggregate amount of cash deposited by the
Company pursuant to clause (ii) of paragraph (d) above exceeds the aggregate
Change of Control Purchase Price of the Notes or portions thereof to be
purchased, then the Trustee shall hold such excess for the Company and (y)
unless otherwise directed by the Company in writing, promptly after the Business
Day following the Change of Control Purchase Date the Trustee shall return any
such excess to the Company together with interest, if any, thereon. 

        
(g)       The Company shall comply, to the extent
applicable, with the applicable tender offer rules, including Rule 14e-1 under
the Exchange Act, and any other applicable securities laws or regulations in
connection with a Change of Control Offer. 

- 101 -

        
Section 10.14.       Preferred Stock of Subsidiaries. 

        
The Company will not permit (a) any Subsidiary of the Company to issue any
Preferred Stock, except for (i) Preferred Stock issued to the Company or a
Wholly Owned Subsidiary and (ii) Preferred Stock issued by a Person prior to the
time (A) such Person becomes a Subsidiary, (B) such Person merges with or into a
Subsidiary or (C) a Subsidiary merges with or into such Person; provided that
such Preferred Stock referred to in clause (ii) above was not issued or incurred
by such Person in anticipation of the type of transaction contemplated by
subclause (A), (B) or (C), or (b) any Person (other than the Company, or a
Wholly Owned Subsidiary) to acquire Preferred Stock of any Subsidiary from the
Company or any Subsidiary, except, in the case of clause (a) or (b), upon the
acquisition of all the outstanding Preferred Stock of such Subsidiary in
accordance with the terms hereof. 

        
Section 10.15.       Dividend and Other Payment
Restrictions Affecting Subsidiaries. 

        
The Company will not, and will not permit any of its Subsidiaries to, directly
or indirectly, create or suffer to exist any consensual encumbrance or
restriction on the ability of any Subsidiary to (i) pay dividends or make any
other distribution on its Capital Stock, (ii) pay any Indebtedness owed to the
Company or any other Subsidiary, (iii) make any Investment in the Company or any
other Subsidiary or (iv) transfer any of its properties or assets to the Company
or any other Subsidiary, except for: (a) any encumbrance or restriction pursuant
to any agreement in effect on the Issue Date; (b) any encumbrance or
restriction, with respect to a Subsidiary that is not a Subsidiary of the
Company on the Issue Date, in existence at the time such Person becomes a
Subsidiary of the Company and not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary; (c) customary
non-assignment or subletting provisions of any lease, license or other contract;
(d) any restriction entered into in the ordinary course of business contained in
any lease of any Subsidiary or any security agreement or mortgage securing
Indebtedness of any Subsidiary to the extent such restriction restricts the
transfer of property subject to such security agreement, mortgage or lease; (e)
any restriction contained in an agreement pursuant to which Permitted Subsidiary
Indebtedness is incurred; and (f) any encumbrance or restriction existing under
any agreement that amends, substitutes, restructures, supplements, extends,
renews, refinances or replaces or otherwise modifies the agreements containing
the encumbrances or restrictions in the foregoing clauses (a), (b), (c), (d) or
(e), or in this clause (f); provided that the terms and conditions of any such
encumbrances or restrictions are no more restrictive in any material respect
than those under or pursuant to the agreement evidencing the Indebtedness so
amended, substituted, restructured, supplemented, extended, renewed, refinanced,
replaced or modified. 

        
Section 10.16.       Unrestricted Subsidiaries. 

        
The Company will not make, and will not permit its Subsidiaries to make, an
Investment in Unrestricted Subsidiaries unless, at the time thereof, (a) the
aggregate amount of such Investments would not exceed the amount of Restricted
Payments then permitted to be made pursuant to the provisions of Section
10.9 or (b) such Investment is a Permitted Investment. Except for Permitted
Investments, any Investment in Unrestricted Subsidiaries permitted to be made
pursuant to this covenant (i) must be permitted to be made pursuant to the
provisions of  

- 102 -

Section 10.9 and
will be treated as a Restricted Payment in calculating the amount of Restricted
Payments made by the Company, and (ii) may be made in cash or
property.

        
Section 10.17.       Reports. 

        
Whether or not the Company is subject to Section 13(a) or 15(d) of the Exchange
Act, the Company will, to the extent permitted under the Exchange Act, file with
the SEC the annual reports, quarterly reports and other documents which the
Company would have been required to file with the SEC pursuant to Sections 13(a)
or 15(d) of the Exchange Act if the Company were so subject, such documents to
be filed with the SEC on or prior to the date (a “Required Filing
Date”) by which the Company would have been required so to file such
documents if the Company were so subject. The Company will also in any event (x)
within 15 days of each Required Filing Date occurring after the issuance of the
Notes (i) transmit by mail to all Holders, as their names and addresses appear
in the Note Register, without cost to such holders and (ii) file with the
Trustee copies of the annual reports, quarterly reports and other documents
which the Company would have been required to file with the SEC pursuant to
Sections 13(a) or 15(d) of the Exchange Act if the Company were subject to
either of such Sections and (y) if filing such documents by the Company with the
SEC is not permitted under the Exchange Act, promptly upon written request and
payment of the reasonable cost of duplication and delivery, supply copies of
such documents to any prospective Holder at the Company’s cost. So long as
any of the Notes remain Outstanding, the Company will make available to any
prospective purchaser of Notes or beneficial owner of Notes in connection with
any sale thereof the information required by Rule 144A(d)(4) under the
Securities Act, until such time as the Company has either exchanged the Notes
for securities identical in all material respects which have been registered
under the Securities Act or until such time as the Holders thereof have disposed
of such Notes pursuant to an effective registration statement under the
Securities Act. 

        
Section 10.18.       Additional Subsidiary Guarantees. 

        
If the Company or any Subsidiary transfers or causes to be transferred, in one
transaction or a series of related transactions, any property to any Domestic
Subsidiary that is not a Guarantor having total assets (after giving effect to
such transfer) with a book value in excess of $500,000, or if the Company or any
of its Subsidiaries shall organize, acquire or otherwise invest in another
Domestic Subsidiary having total assets with a book value in excess of $500,000,
then such Domestic Subsidiary shall: 

	execute and deliver to the
Trustee a supplemental indenture in form reasonably satisfactory to the Trustee
pursuant to which such Subsidiary shall unconditionally guarantee all of the
Company’s obligations under the Notes and this Indenture on the terms set forth
in this Indenture; and 

	deliver to the Trustee an
Opinion of Counsel that such supplemental indenture has been duly authorized,
executed and delivered by such Subsidiary and constitutes a legal, valid,
binding and enforceable obligation of such Subsidiary. 

Thereafter, such Subsidiary
shall be a Guarantor for all purposes of this Indenture; provided,
however, that (i) if such Subsidiary is a Non-Guarantor Subsidiary, it
shall not be required to be a 

- 103 -

Guarantor hereunder and (ii) to the extent that a
Subsidiary is subject to any instrument governing Acquired Debt, as in effect at
the time of acquisition thereof, that prohibits such Subsidiary from issuing a
Guarantee, such Subsidiary shall not be required to execute such a supplemental
indenture until it is permitted to issue such Guarantee pursuant to the terms of
such Acquired Debt; provided, further, however, that notwithstanding the
above proviso, if any such Subsidiary, other than a Non-Guarantor Subsidiary,
incurs Indebtedness under or guarantees the Senior Credit Facility, then such
Subsidiary or Non-Guarantor Subsidiary will guarantee the Notes as well.

        
Section 10.19.       Statement by Officers as
to Default. 

        
(a)       The Company will deliver to the Trustee,
on or before a date not more than 120 days after the end of each fiscal year of
the Company ending after the date hereof, a written statement signed by two
executive officers of the Company, one of whom shall be the principal executive
officer, principal financial officer or principal accounting officer of the
Company, as to compliance herewith, including whether or not, after a review of
the activities of the Company during such year and of the Company’s performance
under this Indenture, to the best knowledge, based on such review, of the
signers thereof, the Company has fulfilled all of its respective obligations and
is in compliance with all conditions and covenants under this Indenture
throughout such year and, if there has been a Default specifying each Default
and the nature and status thereof and any actions being taken by the Company
with respect thereto. 

        
(b)       When any Default or Event of Default has
occurred and is continuing, or if the Trustee or any Holder or the trustee for
or the holder of any other evidence of Indebtedness of the Company or any
Subsidiary gives any notice or takes any other action with respect to a claimed
default the Company shall deliver to the Trustee by registered or certified mail
or facsimile transmission followed by hard copy of an Officers’ Certificate
specifying such Default, Event of Default, notice or other action, the status
thereof and what actions the Company is taking or proposes to take with respect
thereto, within ten Business Days of becoming aware of its occurrence. 

        
Section 10.20.       Waiver of Certain Covenants. 

        
The Company may omit in any particular instance to comply with any covenant or
condition set forth in Sections 10.6 through 10.11 and Sections
10.14 through 10.20, if, before or after the time for such
compliance, the Holders of not less than a majority in aggregate principal
amount of the Notes at the time Outstanding shall, by Act of such Holders, waive
such compliance in such instance with such covenant or provision, but no such
waiver shall extend to or affect such covenant or condition except to the extent
so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect. 

- 104 -

ARTICLE XI

REDEMPTION OF NOTES

        
Section 11.1.        Rights of Redemption. 

        
(a)       The Notes are subject to redemption at
any time on or after July 15, 2007, at the option of the Company, in whole or in
part, subject to the conditions, and at the Redemption Prices, specified in the
form of Note, together with accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on relevant Regular
Record Dates and Special Record Dates to receive interest due on relevant
Interest Payment Dates and Special Payment Dates). 

        
(b)       In addition, at any time on or prior to
July 15, 2006, the Company may, at its option, use the net proceeds of one or
more Public Equity Offerings to redeem up to an aggregate of 35% of the
aggregate principal amount of Notes originally issued (whether on or after the
Issue Date) under this Indenture at a redemption price equal to 110.50% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the Redemption Date; provided that at least 65% of the aggregate
principal amount of Notes originally issued under the Indenture remains
outstanding immediately after the occurrence of such redemption. In order to
effect the foregoing redemption, the Company must mail a notice of redemption no
later than 60 days after the related Public Equity Offering and must consummate
such redemption within 90 days of the closing of the Public Equity Offering.

        
Section 11.2.       Applicability of Article. 

        
Redemption of Notes at the election of the Company or otherwise, as permitted or
required by any provision of this Indenture, shall be made in accordance with
such provision and this Article XI. 

        
Section 11.3.        Election to Redeem; Notice to Trustee. 

        
The election of the Company to redeem any Notes pursuant to Section 11.1
shall be evidenced by a Company Order and an Officers’ Certificate. In case
of any redemption at the election of the Company, the Company shall, not less
than 45 nor more than 60 days prior to the Redemption Date fixed by the Company
(unless a shorter notice period shall be satisfactory to the Trustee), notify
the Trustee in writing of such Redemption Date and of the principal amount of
Notes to be redeemed. 

        
Section 11.4.        Selection by Trustee of Notes to Be Redeemed. 

        
If less than all the Notes are to be redeemed, the particular Notes or portions
thereof to be redeemed shall be selected not more than 45 days prior to the
Redemption Date. The Trustee shall select the Notes or portions thereof to be
redeemed pro rata, by lot or by any other method the Trustee shall deem fair and
reasonable. The amounts to be redeemed shall be equal to $1,000 or any integral
multiple thereof. 

- 105 -

        
If requested by the Company, the Trustee shall promptly notify the Company and
the Note Registrar in writing of the Notes selected for redemption and, in the
case of any Notes selected for partial redemption, the principal amount thereof
to be redeemed. 

        
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to redemption of Notes shall relate, in the case of any Note
redeemed or to be redeemed only in part, to the portion of the principal amount
of such Note which has been or is to be redeemed. 

        
Section 11.5.        Notice of Redemption. 

        
Notice of redemption shall be given by first-class mail, postage prepaid, mailed
not less than 30 days nor more than 60 days prior to the Redemption Date, to
each Holder of Notes to be redeemed, at its address appearing in the Note
Register. 

        
All notices of redemption shall state: 

        
(a)       the Redemption Date; 

        
(b)       the Redemption Price; 

        
(c)       if less than all Outstanding Notes are
to be redeemed, the identification of the particular Notes to be redeemed;

        
(d)       in the case of a Note to be redeemed in
part, the principal amount of such Note to be redeemed and that after the
Redemption Date upon surrender of such Note, new Note or Notes in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;

        
(e)       that Notes called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price; 

        
(f)       that on the Redemption Date the
Redemption Price will become due and payable upon each such Note or portion
thereof to be redeemed, and that (unless the Company shall default in payment of
the Redemption Price) interest thereon shall cease to accrue on and after said
date; 

        
(g)       the names and addresses of the Paying
Agent and the offices or agencies referred to in Section 10.2 where such Notes
are to be surrendered for payment of the Redemption Price; 

        
(h)       the CUSIP number, if any, relating to
such Notes; and 

        
(i)       the procedures that a Holder must follow
to surrender the Notes to be redeemed. 

        
Notice of redemption of Notes to be redeemed at the election of the Company
shall be given by the Company or, at the Company’s written request, by the
Trustee in the name and at the expense of the Company. If the Company elects to
give notice of redemption, it shall provide the Trustee with a certificate
stating that such notice has been given in compliance with the requirements of
this Section 11.5. 

- 106 -

        
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the Holder receives such notice. In
any case, failure to give such notice by mail or any defect in the notice to the
Holder of any Note designated for redemption as a whole or in part shall not
affect the validity of the proceedings for the redemption of any other Note.

        
Section 11.6.        Deposit of Redemption Price. 

        
On or prior to 10:00 a.m., New York time, on any Redemption Date, the Company
shall deposit with the Trustee or with a Paying Agent (or, if the Company or any
of its Affiliates is acting as Paying Agent, segregate and hold in trust as
provided in Section 10.3) an amount of money in same day funds sufficient
to pay the Redemption Price of, and (except if the Redemption Date shall be an
Interest Payment Date or Special Payment Date) accrued interest on, all the
Notes or portions thereof which are to be redeemed on that date. The Paying
Agent shall promptly mail or deliver to Holders of Notes so redeemed payment in
an amount equal to the Redemption Price of the Notes purchased from each such
Holder. All money, if any, earned on funds held in trust by the Trustee or any
Paying Agent shall be remitted to the Company. For purposes of this Section
11.6, the Company shall choose a Paying Agent which shall not be the
Company. 

        
Section 11.7.        Notes Payable on Redemption Date. 

        
Notice of redemption having been given as aforesaid, the Notes so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified and from and after such date (unless the Company shall default
in the payment of the Redemption Price and accrued interest) such Notes shall
cease to bear interest. Holders will be required to surrender the Notes to be
redeemed to the Paying Agent at the address specified in the notice of
redemption at least one Business Day prior to the Redemption Date. Upon
surrender of any such Note for redemption in accordance with said notice, such
Note shall be paid by the Company at the Redemption Price together with accrued
interest to the Redemption Date; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Notes, or one or more Predecessor Notes,
registered as such on the relevant Regular Record Dates and Special Record Dates
according to the terms and the provisions of
Section 3.9. 

        
If any Note called for redemption shall not be so paid upon surrender thereof
for redemption, the principal and premium, if any, shall, until paid, bear
interest from the Redemption Date at the rate borne by such Note. 

        
Section 11.8.        Notes Redeemed or Purchased in Part. 

        
Any Note which is to be redeemed or purchased only in part shall be surrendered
to the Paying Agent at the office or agency maintained for such purpose pursuant
to Section 10.2 (with, if the Company, the Note Registrar or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company, the Note Registrar or the Trustee, as the case may
be, duly executed by, the Holder thereof or such Holder’s attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the 

- 107 -

Holder of such Note without service charge, a
new Note or Notes, of any authorized denomination as requested by such Holder in
aggregate principal amount equal to, and in exchange for, the unredeemed portion
of the principal of the Note so surrendered that is not redeemed or purchased.

ARTICLE XII

SATISFACTION AND DISCHARGE

        
Section 12.1.        Satisfaction and Discharge of Indenture. 

        
This Indenture shall be discharged and shall cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of Notes
as expressly provided for herein) as to all Outstanding Notes hereunder, and the
Trustee, upon Company Request and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when 

        
(a)           either 

        
(1)       all the Notes theretofore authenticated
and delivered (other than (i) lost, stolen or destroyed Notes which have been
replaced or paid as provided in Section 3.8 or (ii) all Notes for whose
payment United States dollars have theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust as provided in Section 10.3) have been
delivered to the Trustee for cancellation; or 

        
(2)       all such Notes not theretofore delivered
to the Trustee for cancellation (i) have become due and payable, (ii) will
become due and payable at their Stated Maturity within one year or (iii) are to
be called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company; and the Company has irrevocably deposited or
caused to be deposited with the Trustee as trust funds in trust an amount in
United States dollars sufficient to pay and discharge the entire Indebtedness on
the Notes not theretofore delivered to the Trustee for cancellation, including
the principal of, premium, if any, and accrued interest on, such Notes at such
Maturity, Stated Maturity or Redemption Date; 

        
(b)       the Company has paid or caused to be
paid all other sums payable hereunder by the Company; and 

        
(c)       the Company has delivered to the Trustee
an Officers’ Certificate and an Opinion of Independent Counsel, in form and
substance reasonably satisfactory to the Trustee, each stating that (i) all
conditions precedent herein relating to the satisfaction and discharge hereof
have been complied with and (ii) such satisfaction and discharge will not result
in a breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound.

- 108 -

        
Notwithstanding the satisfaction and discharge hereof, the obligations of the
Company to the Trustee under Section 6.6 and, if United States dollars
shall have been deposited with the Trustee pursuant to subclause (2) of
subsection (a) of this Section 12.1, the obligations of the Trustee under
Section 12.2 and the last paragraph of Section 10.3 shall survive.

        
Section 12.2.        Application of Trust Money. 

        
Subject to the provisions of the last paragraph of Section 10.3, all
United States dollars deposited with the Trustee pursuant to Section 12.1
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal of,
premium, if any, and interest on, the Notes for whose payment such United States
dollars have been deposited with the Trustee. 

ARTICLE XIII

GUARANTEE

        
Section 13.1.        Unconditional Guarantee. 

        
Each Guarantor hereby unconditionally guarantees (such guarantee to be referred
herein as a “Guarantee”), on a senior unsecured basis jointly
and severally, to each Holder of a Note authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, the Notes or the
obligations of the Company hereunder or thereunder, that: (i) the principal of
and interest on the Notes will be promptly paid in full when due, subject to any
applicable grace period, whether at maturity, by acceleration or otherwise and
interest on the overdue principal, if any, and interest on any interest, to the
extent lawful, of the Notes and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (ii) in case
of any extension of time of payment or renewal of any Notes or of any such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, subject to any grace
period, whether at stated maturity, by acceleration or otherwise, subject,
however, in the case of clauses (i) and (ii) above, to the limitations set forth
in Section 13.3. Each Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, and action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a Guarantor.
Each Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice and
all demands whatsoever and covenants that this Guarantee will not be discharged
except by complete performance of the obligations contained in the Notes, this
Indenture and in this Guarantee. If any Holder or the Trustee is required by any
court or otherwise to return to the Company, any Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the Company
or any Guarantor, any amount paid by the Company or any Guarantor to  

- 109 -

the Trustee or such Holder,
this Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect. Each Guarantor further agrees that, as between each
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand
(x) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article V for purposes of this Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any acceleration of
such obligations as provided in Article V, such obligations (whether or
not due and payable) shall forthwith become due and payable by each Guarantor
for purposes of this Guarantee.

        
Section 13.2.        Severability. 

        
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. 

        
Section 13.3.        Limitation of Guarantor’s Liability. 

        
Each Guarantor and by its acceptance hereof each Holder hereby confirms that it
is the intention of all such parties that the guarantee by such Guarantor
pursuant to its Guarantee shall not constitute a fraudulent transfer or
conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under its Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities (including all of its obligations under or with
respect to the Senior Credit Facility and all Interest Rate Agreements) of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to Section 13.5, result in the
obligations of such Guarantor under the Guarantee not constituting such
fraudulent transfer or conveyance. 

        
Section 13.4.        Release of Guarantor. 

        
(a)       The Guarantee of a Guarantor will be
automatically and unconditionally released without any action on the part of the
Trustee or the Holders of the Notes: (1) in connection with any sale or other
disposition of all or substantially all of the assets of that Guarantor
(including, without limitation, by way of merger or consolidation), if the
Company applies the Net Cash Proceeds of that sale or other disposition in
accordance with the applicable provisions of this Indenture; (2) in connection
with any sale of all of the Capital Stock of that Guarantor, if the Company
applies the Net Cash Proceeds of that sale in accordance with the applicable
provisions of this Indenture; (3) if the Company designates that Guarantor as an
Unrestricted Subsidiary in accordance with the applicable provisions of this
Indenture; or (4) upon the payment in full of the Notes. 

        
In addition, concurrently with any defeasance or covenant defeasance pursuant to
Article IV, the Guarantors shall be released from all of their
obligations under their respective applicable Guarantees. 

- 110 -

        
(b)       The Trustee shall deliver an appropriate
instrument evidencing such release upon receipt of a request by the Company
accompanied by an Officers’ Certificate and Opinion of Counsel certifying as to
the compliance with this Section 13.4. 

        
Section 13.5.        Contribution. 

        
In order to provide for just and equitable contribution among the Guarantors,
the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a “Funding Guarantor”)
under its Guarantee, such Funding Guarantor shall be entitled to a contribution
from all other Guarantors in a pro rata amount based on the Adjusted Net Assets
(as defined below) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Company’s obligations with respect to the Notes or any other
Guarantor’s obligations with respect to its Guarantee. “Adjusted
Net Assets” of such Guarantor at any date shall mean the lesser of the
amount by which (x) the fair value of the property of such Guarantor exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under its
Guarantee, of such Guarantor at such date and (y) the present fair salable value
of the assets of such Guarantor at such date exceeds the amount that will be
required to pay the probable liability of such Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date), excluding debt in respect of the Guarantee of such Guarantor, as
they become absolute and matured. 

        
Section 13.6.        Waiver of Subrogation. 

        
Until all obligations under the Guarantees are paid in full, each Guarantor
hereby irrevocably waives any claims or other rights which it may now or
hereafter acquire against the Company that arise from the existence, payment,
performance or enforcement of such Guarantor’s obligations under its
Guarantee and this Indenture, including, without limitation, any right of
subrogation, reimbursement, exoneration, indemnification, and any right to
participate in any claim or remedy of any Holder against the Company, whether or
not such claim, remedy or right arises in equity, or under contract, statute or
common law, including, without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and the Notes shall not have been paid in full, such amount shall have
been deemed to have been paid to such Guarantor for the benefit of, and held in
trust for the benefit of, the Holders, and shall, forthwith be paid to the
Trustee for the benefit of such Holders to be credited and applied upon the
Notes, whether matured or unmatured, in accordance with the terms of this
Indenture. Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and that
the waiver set forth in this Section 13.6 is knowingly made in
contemplation of such benefits. 

- 111 -

        
Section 13.7.        Execution of Guarantee. 

        
To evidence their guarantee to the Holders set forth in this Article
XIII, the Guarantors hereby agree to execute the Guarantee in substantially
the form set forth in Section 2.4, which shall be endorsed on each Note
ordered to be authenticated and delivered by the Trustee. Each Guarantor hereby
agrees that its Guarantee set forth in this Article XIII shall remain in
full force and effect notwithstanding the failure to endorse on each Note a
notation of such Guarantee. Each such Guarantee shall be signed on behalf of
each Guarantor by one of its duly authorized officers prior to the
authentication of the Note on which it is endorsed, and the delivery of such
Note by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of such Guarantee on behalf of such Guarantor. Such
signatures upon the Guarantee may be by manual or facsimile signature of such
officers and may be imprinted or otherwise reproduced on the Guarantee, and in
case any such officer who shall have signed the Guarantee shall cease to be such
officer before the Note on which such Guarantee is endorsed shall have been
authenticated and delivered by the Trustee or disposed of by the Company, such
Note nevertheless may be authenticated and delivered or disposed of as though
the Person who signed the Guarantee had not ceased to be such officer of the
Guarantor. 

        
Section 13.8.        Waiver of Stay, Extension or Usury Laws. 

        
Each Guarantor covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any state or extension law or any usury law or
other law that would prohibit or forgive each such Guarantor from performing its
Guarantee as contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or performance of this Indenture;
and (to the extent that it may lawfully do so) each such Guarantor hereby
expressly waives all benefits or advantage of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted. 

- 112 -

        
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, all as of the day and year first above written. 

                                               BALLY TOTAL FITNESS HOLDING
                                               CORPORATION

                                               By:________________________________________
                                                  Name:
                                                  Title:

                                               THE GUARANTORS

                                               Each Guarantor Listed on Schedule A
                                               Attached Hereto

                                               By:________________________________________
                                                  Name:
                                                  Title:

                                               U.S. BANK NATIONAL
                                               ASSOCIATION, as Trustee

                                               By:________________________________________
                                                  Name:
                                                  Title:

EXHIBIT A

FORM OF CERTIFICATE
TO BE DELIVERED UPON
TERMINATION OF RESTRICTED PERIOD

On or after August 11, 2003

[Trustee Name and Address]

Attention:

        Re:       Bally Total Fitness Holding  Corporation  (the “Company”)  10-1/2% Senior Notes

                    due 2011 (the “Notes”)

Ladies and Gentlemen:

        
This letter relates to U.S. $_________ principal amount of Notes represented by
the global note certificate (the “Offshore Global Note”). Pursuant to
Section 3.6 of the Indenture dated as of July 2, 2003 relating to
the Notes (the “Indenture”), we hereby certify that (1) we are the
beneficial owner of such principal amount of Notes represented by the Offshore
Global Note and (2) we are a person outside the United States to whom the Notes
could be transferred in accordance with Rule 904 of Regulation S promulgated
under the United States Securities Act of 1933, as amended. Accordingly, you are
hereby requested to issue a certificated Note representing the
undersigned’s interest in the principal amount of Notes represented by the
Global Note, all in the manner provided by the Indenture. 

        
You and the Company are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S. 

                                                   Very truly yours,

                                                   [Name of Holder]

                                                   By:_________________________
                                                        Authorized Signature

A-1

EXHIBIT B

FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS

________________,_______

Bally Total Fitness Holding Corporation

c/o [Trustee Name and Address]

Attention: Corporate Trust Division

        Re:       Bally Total Fitness Holding Corporation (the “Company”) 10-1/2% Senior Notes

                     due 2011 (the “Notes”)

Ladies and Gentlemen:

        
In connection with our proposed purchase of $__________ aggregate principal
amount of the Notes: 

        
1.       We understand that the Notes have not
been registered under the United States Securities Act of 1933, as amended (the
“Securities Act”), and may not be sold within the United States or to, or for
the benefit of, U.S. Persons except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing the Notes to offer, resell, pledge or otherwise transfer such Notes
prior to the date which is two years after the later of the date of original
issue and the last date on which the Company or any affiliate of the Company was
the owner of such Notes, or any predecessor thereto (the “Resale Restriction
Termination Date”) only (a) to the Company, (b) pursuant to a registration
statement which has been declared effective under the Securities Act, (c) for so
long as the Notes are eligible for resale pursuant to Rule 144A under the
Securities Act (“Rule 144A”), inside the United States to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a “QIB”) that
purchases for its own account or for the account of a QIB to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) outside the
United States pursuant to offers and sales to non-U.S. Persons in an Offshore
Transaction within the meaning of Regulation S under the Securities Act, (e)
inside the United States to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities
Act that is acquiring the Notes for its own account or for the account of such
an institutional “accredited investor” for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution thereof in
violation of the Securities Act or (f) pursuant to any other available exemption
from the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
and the property of such investor account or accounts be at all times within our
or their control and to compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes is
proposed to be made pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver a letter from the transferee
substantially in the form of this letter to the Trustee, which shall provide,
among other things, 

B-1

that the transferee is an
institutional “accredited investor” within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and that it is
acquiring such Notes for investment purposes and not for distribution in
violation of the Securities Act. We acknowledge that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Notes pursuant to clauses (d), (e) and (f)
above to require the delivery of an opinion of counsel, certifications and/or
other information satisfactory to the Company and the Trustee. As used herein,
the terms “United States”, “Offshore Transaction”, and
“U.S. Person” have the respective meanings given to them by Regulation
S under the Securities Act.

        
2.       We are an institutional “accredited
investor” (as defined in Rule 501 (a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) purchasing for our own account or for the account of such an
institutional “accredited investor,” and we are acquiring the Notes for
investment purposes and not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act or the securities laws
of any state of the United States or any other applicable jurisdiction, provided
that the disposition of our property and the property of any accounts for which
we are acting as fiduciary shall remain at all times within our and their
control; and we have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our investment in
the Notes, and we and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.

        
3.       We are acquiring the Notes purchased by
us for our own account or for one or more accounts as to each of which we
exercise sole investment discretion.

        
4.       We understand that the Trustee will not
be required to accept for registration of transfer any Notes acquired by us,
except upon presentation of evidence satisfactory to the Company and the Trustee
that the foregoing restrictions on transfer have been complied with. We further
understand that the Notes purchased by us will be in the form of definitive
physical certificates and that such certificates will bear a legend reflecting
the substance of this paragraph. We further agree to provide to any person
acquiring any of the Notes from us a notice advising such person that resales of
the Notes are restricted as stated herein and that certificates representing the
Notes will bear a legend to that effect.

        
5.       We acknowledge that you, the Company, the
Trustee and others will rely upon our acknowledgments, representations and
agreements set forth herein, and we agree to notify you promptly in writing if
any of our acknowledgments, representations or agreements herein cease to be
accurate and complete.

        
6.       We represent to you that we have full
power to make the foregoing acknowledgments, representations and agreements on
our own behalf and on behalf of any investor account for which we are acting as
a fiduciary or agent.

B-2

        
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
THEREOF). 

                                               Very truly yours,

                                               By: _______________________________________
                                                             (Name of Purchaser)

                                               Date: _____________________________________

B-3

        
Upon transfer, the Notes should be registered in the name of the new beneficial
owner as follows: 

Name: ____________________________________________________________________________________

Address:__________________________________________________________________________________

Taxpayer ID Number:_______________________________________________________________________

B-4

EXHIBIT C

FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S

________________,_______

[Trustee Name and Address]

Attention:

        Re:       Bally Total Fitness Holding  Corporation  (the “Company”)  10-1/2% Senior Notes

                     due 2011 (the “Notes”)

Ladies and Gentlemen:

        
In connection with our proposed sale of $____________ aggregate principal amount
of the Notes, we confirm that such sale has been effected pursuant to and in
accordance with Regulation S (“Regulation S”) under the United States
Securities Act of 1933, as amended, and, accordingly, we represent that:

        
(1)       the offer of the Notes was not made to a
person in the United States;

        
(2)       either (a) at the time the buy order was
originated, the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was outside the
United States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor any
person acting on our behalf knows that the transaction has been pre-arranged
with a buyer in the United States;

        
(3)       no directed selling efforts have been
made in the United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable; and

        
(4)       the transaction is not part of a plan or
scheme to evade the registration requirements of the United States Securities
Act of 1933, as amended.

        
In addition, if the sale is made during a restricted period and the provisions
of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we
confirm that such sale has been made in accordance with the applicable
provisions of Rule 903(c)(2) or Rule 904(c)(1), as the case may be. 

C-1

        
You and the Company are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S. 

                                                   Very truly yours,

                                                   [Name of Transferor]

                                                   By:_________________________
                                                        Authorized Signature

C-2

APPENDIX I

[FORM OF TRANSFER NOTICE]

        
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s)and transfer(s) unto

        
Insert Taxpayer Identification No.

        
(Please print or typewrite name and address including zip code of assignee) the
within Note and all rights thereunder, hereby irrevocably constituting and
appointing attorney to transfer such Note on the books of the Company with full
power of substitution in the premises. 

[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES FOR SERIES C SECURITIES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]

        
In connection with any transfer of this Note occurring prior to the date which
is the earlier of the date of an effective Registration Statement or
July 2, 2005, the undersigned confirms that without utilizing any general
solicitation or general advertising that: 

[CHECK ONE]

[       ]
(a)    this Note is being transferred in
compliance with the exemption from registration under the United States
Securities Act of 1993, as amended, provided by Rule 144A thereunder.

OR

[       ]
(b)    Note is being transferred other than in
accordance with (a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the Indenture. 

        
If none of the foregoing boxes is checked, the Trustee or other Note Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 3.7 of the Indenture shall
have been satisfied. 

Date: _____________________                 NOTICE:  The signature to this assignment must
                                            correspond  with the name as written  upon the
                                            face  of the  within-mentioned  instrument  in
                                            every  particular,  without  alteration or any
                                            change whatsoever.

I-1

        
Signature Guarantee:

        
[Signatures must be guaranteed by an “eligible guarantor institution”
meeting the requirements of the Notes Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
(“STAMP”) or such other “signature guarantee program” as may
be determined by the Notes Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Exchange Act.] 

TO BE COMPLETED BY
PURCHASER IF (a) ABOVE IS CHECKED.

        
The undersigned represents and warrants that it is purchasing this Note for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a “qualified institutional
buyer” within the meaning of Rule 144A (“Rule 144A”) under the
United States Securities Act of 1933, as amended, and is aware that the sale to
it is being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as the undersigned has requested pursuant
to Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon the undersigned’s foregoing
representations in order to claim the exemption from registration provided by
Rule 144A. 

Dated:                                   NOTICE: To be executed by an authorized signatory

I-2

APPENDIX II

FORM OF TRANSFEREE CERTIFICATE

        
I or we assign and transfer this Note to: 

        
Please insert social security or other identifying number of assignee Print or
type name, address and zip code of assignee and irrevocably appoint [Agent], to
transfer this Note on the books of the Company. The Agent may substitute another
to act for him. 

Dated ______________________________________       Signed ____________________________________

        
(Sign exactly as name appears on the other side of this Note) 

        
[Signatures must be guaranteed by an “eligible guarantor institution”
meeting the requirements of the Notes Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
(“STAMP”) or such other “signature guarantee program” as may
be determined by the Notes Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Exchange Act.] 

II-1

RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939
AND INDENTURE, DATED AS OF JULY __, 2003

        TRUST INDENTURE                                                        INDENTURE
          ACT SECTION                                                            SECTION
----------------------------------------------------------------------------------------

Section 310               (a)(1)                                                     6.9
                          (a)(2)                                                     6.9
                          (a)(5)                                                     6.9
                          (b)                                                  6.7, 6.10
Section 311               (a)                                                       6.13
                          (b)                                                       6.13
Section 312               (a)                                                        7.1
                          (b)                                                        7.2
                          (c)                                                        7.2
Section 313               (a)                                                        7.3
                          (b)                                                        7.3
                          (c)                                                        7.3
                          (d)                                                        7.3
Section 314               (a)(1)                                                     7.4
                          (a)(2)                                                     7.4
                          (a)(3)                                                     7.4
                          (a)(4)                                                   10.19
                          (c)(1)                                                     1.3
                          (c)(2)                                                     1.3
                          (e)                                                        1.3
Section 315               (a)                                                        6.1
                          (b)                                                        6.2
                          (c)                                                        6.1
                          (d)                                                   6.1, 6.3
                          (e)                                                       5.14
Section 316               (a)                         (last sentence)1.1 ("Outstanding")
                          (a)(1)(A)                                                 5.12
                          (a)(1)(B)                                                 5.13
                          (b)                                                        5.8
                          (c)                                                        1.5
Section 317               (a)(1)                                                     5.3
                          (a)(2)                                                     5.4
                          (b)                                                       10.3
Section 318               (a)                                                        1.8

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of
      this Indenture.

II-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}], [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}]]