Document:

EXHIBIT 4.2 - 06/30/2003 FORM 10-Q

EXHIBIT 4.2

FIRST SUPPLEMENTAL INDENTURE

                    
FIRST SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as
of July 22, 2003, among 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 under the Indenture referred to below (the
“Trustee”). 

W I T N E S S E T H

                    
WHEREAS, the Company and the Guarantors have heretofore executed and delivered
to the Trustee an indenture (the “Indenture”), dated as of July 2,
2003 providing for the issuance of an initial aggregate principal amount of
$200,000,000 of 10-1/2% Senior Notes due 2011 (the “Initial Notes”);

                    
WHEREAS, the Company and the Guarantors have authorized the issuance of (i) an
additional $35,000,000 aggregate principal amount of the Company’s Series A
10-1/2% Senior Notes due 2011 (the “Additional Series A Notes”);
(ii) an additional $35,000,000 aggregate principal amount of the
Company’s Series B 10-1/2% Senior Notes due 2011 to be issued in exchange
for the Additional Series A Notes if and when an Exchange Offer is consummated
(the “Additional Exchange Notes,” and together with the Additional
Series A Notes, the “Additional Notes”) and (iii) the related
guarantees by the Guarantors of the Additional Notes; 

                    
WHEREAS, the Company desires to issue the Additional Series A Notes in
accordance with Section 3.1 and Article X of the Indenture and the Additional
Exchange Notes in accordance with Section 3.1 of the Indenture, and the
Guarantors desire to guarantee the Additional Series A Notes and the Additional
Exchange Notes in accordance with Article XIII of the Indenture; 

                    
WHEREAS, pursuant to Section 9.3 of the Indenture, the Trustee is authorized to
execute and deliver this Supplemental Indenture. 

                    
NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
do hereby mutually covenant and agree as follows: 

                    
1.   CAPITALIZED TERMS. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Indenture. The term "Notes" shall have
the meaning set forth in the Indenture and shall include the Initial Notes, the
Additional Notes (as defined herein) and any other Additional Notes (as defined
in the Indenture) that may be issued under the Indenture.

                    
2.   ADDITIONAL NOTES.

          
(a)   Issuance of Additional Notes. $35,000,000 aggregate principal
amount of Additional Series A Notes shall be issued hereunder on the date
hereof. The Additional 

Series A Notes shall
constitute Additional Notes as that
term is defined and used in the Indenture.

          
(b)   Issuance of Exchange Notes. Upon the consummation of the
Exchange Offer with respect to the Additional Series A Notes, the Additional
Exchange Notes shall be issued pursuant to the Indenture solely in exchange for
Additional Series A Notes, which shall be cancelled upon delivery of the
Additional Exchange Notes to the Holders of the Additional Series A
Notes.

                    
3.   AGREEMENT TO GUARANTEE. Each Guarantor hereby unconditionally
Guarantees, on a senior unsecured basis jointly and severally, to each Holder of
an Additional Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, the Additional Notes and the obligations of the
Company hereunder to the same extent and in accordance with Article XIII of the
Indenture.

                    
4.   NEW YORK LAW TO GOVERN. THIS SUPPLEMENTAL INDENTURE, THE NOTES
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).

                    
5.   COUNTERPARTS. This Supplemental 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.

                    
6.   EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.

                    
7.   THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Company and the Guarantors.

(signature page follows)

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

Dated:  July 22, 2003

                                                   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:

                                          Schedule A
                                          Guarantors

        59th Street Gym, LLC
        708 Gym, LLC
        Ace LLC
        Bally Fitness Franchising, Inc.
        Bally Franchise RSC, Inc.
        Bally Franchising Holdings, Inc.
        Bally Total Fitness Clinics, Inc.
        Bally Total Fitness Corporation
        Bally Total Fitness International, Inc.
        Bally Total Fitness of Missouri, Inc.
        Bally Total Fitness of Toledo, Inc.
        BFIT Rehabilitation Services, Inc.
        BFIT Rehab of Boca Raton, Inc.
        BFIT Rehab of Kendall, Inc.
        BFIT Rehab of West Palm Beach, Inc.
        Connecticut Coast Fitness Centers, Inc.
        Connecticut Valley Fitness Centers, Inc.
        Crunch LA LLC
        Crunch World LLC
        Flambe LLC
        Greater Philly No. 1 Holding Company
        Greater Philly No. 2 Holding Company
        Health & Tennis Corporation of New York
        Holiday Health Clubs of the East Coast, Inc.
        Holiday Health & Fitness Centers of New York, Inc.
        Holiday Health Clubs and Fitness Centers, Inc.
        Holiday Health Clubs of the Southeast, Inc.
        Holiday/Southeast Holding Corp.
        Holiday Spa Health Clubs of California
        Holiday Universal, Inc.
        Crunch Fitness International, Inc.
        Jack La Lanne Fitness Centers, Inc.
        Jack La Lanne Holding Corp.
        Manhattan Sports Club, Inc.
        Mission Impossible, LLC
        New Fitness Holding Co., Inc.
        Nycon Holding Co., Inc.
        Physical Fitness Centers of Philadelphia, Inc.
        PowerFlex Corporation
        Providence Fitness Centers, Inc.
        Rhode Island Holding Company
        Scandinavian Health Spa, Inc.
        Scandinavian US Swim & Fitness, Inc.
        Soho Ho LLC
        Sportslife, Inc.
        Sportslife Gwinnett, Inc.
        Sportslife Roswell, Inc.
        Sportslife Stone Mountain, Inc.
        Sportslife Town Center II, Inc.
        Tidelands Holiday Health Clubs, Inc.
        U.S. Health, Inc.
        West Village Gym at the Archives LLCEXHIBIT 10.1 - 06/30/2003 FORM 10-Q

EXHIBIT 10.1

EXECUTION VERSION

AMENDMENT NO. 2 TO
SERIES 2001-1 SUPPLEMENT

        
This AMENDMENT NO. 2 dated as of July 2, 2003 (this
“Amendment”), is by and among H&T RECEIVABLE FUNDING
CORPORATION, as Transferor (the “Transferor”), BALLY TOTAL
FITNESS CORPORATION, as Servicer (the “Servicer”) and JP MORGAN
CHASE BANK (the “Trustee”). 

W I T N E S
S E T H

        
WHEREAS, the entities party hereto are parties to that certain Series
2001-1 Supplement to Pooling and Servicing Agreement, dated as of December 16,
1996 (the “Series 2001-1 Supplement”); and 

        
WHEREAS, the parties hereto desire to amend the Series 2001-1 Supplement.

        
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows: 

        
SECTION 1. Definitions. As used herein, capitalized terms used herein and
not otherwise defined are used as defined in (or by reference in) the Series
2001-1 Supplement or, if not defined therein, in the Certificate Purchase
Agreement (as defined in the Series 2001-1 Supplement). 

        
A.       Amendments to Series 2001-1 Supplement.
The Series 2001-1 Supplement is hereby amended as follows:

        
(a)       Section 2 of the Series 2001-1
Supplement is hereby amended by adding the following defined terms
thereto:

	 	        
“Excess Outstanding Certificate Amount” shall mean that portion
of the Outstanding Certificate Amount in excess of $100,000,000. 

	 	        
“Partial Amortization Period” shall mean the period beginning
on the Partial Amortization Commencement Date and ending on the date upon which
the Excess Outstanding Certificate Amount has been reduced to $0. 

	 	        
“Partial Amortization Period Commencement Date” shall mean the
first day of the October 2003 Monthly Period or such later date as agreed in
writing (with notice to the Trustee) by the Transferor, the Servicer and CIBC,
in its capacities as the Managing Agent for and Alternate Transferee in the CIBC
Ownership Group. 

	 	        
“Standard Amortization Period” shall mean the period beginning
on the Standard Amortization Period Commencement Date and ending on the earlier
of (a) the date on which funds sufficient for the payment in full of the Series
2001-1 Certificates have been 

	 	deposited in the
Distribution Account or (b) the Series Termination Date. For purposes of the
Agreement not specific to this Series Supplement, a Standard Amortization Period
commencing with the Pay-Out Commencement Date shall constitute a “Rapid
Amortization Period” for Series 2001-1. 

	 	        
“Standard Amortization Period Commencement Date” shall mean the
earlier of (a) the first day of the July 2005 Monthly Period and (b) the Pay-Out
Commencement Date. 

        
(b)       The definitions of “Amortization
Period,” “Amortization Period Commencement Date”,
“Commitment Amount” and “Revolving Period” as set forth in
Section 2 of the Series 2001-1 Supplement are hereby amended and restated
in their entirety to read as follows: 

	 	        
“Amortization Period” shall mean the Partial Amortization
Period or the Standard Amortization Period, as applicable (it being understood
that the effect of either the Partial Amortization Period or the Standard
Amortization Period shall be the same for all purposes hereunder until the end
of such Partial Amortization Period or Standard Amortization Period, as
applicable). 

	 	        
“Amortization Period Commencement Date” means the Partial
Amortization Period Commencement Date or the Standard Amortization Commencement
Date, as applicable. 

	 	        
“Commitment Amount” shall mean $155,000,000; provided,
however, that as of the first day of the October 2003 Monthly Period, the
Commitment Amount shall be $100,000,000. 

	 	        
“Revolving Period” shall mean the period from and including the
Closing Date to, but not including, the Amortization Period Commencement Date;
provided, however, that unless the Standard Amortization Period
Commencement Date has occurred, the Revolving Period shall resume on the day
after the date on which the Partial Amortization Period ends. 

        
B.       Absence of Pay-Out Events and
Unmatured Pay-Out Events. The Transferor and the Servicer hereby severally
represent and warrant that, on and as of the date hereof and on and as of the
Effective Date (as defined below), after giving effect to the amendments to the
Series 2001-1 Supplement as provided herein, no Pay-Out Event has occurred and
is continuing and no event has occurred and is continuing which, if such event
remains uncured, will, with the lapse of time, constitute a Pay-Out
Event.

        
C.       Date; Binding Effect; Ratification;
Covenant.

        
(a)       The effective date (the
“Effective Date”) of this Amendment shall be July 2, 2003
provided that each of the following has occurred:

	 	        
(i)       all parties hereto have executed and
delivered counterparts of this Amendment;

	 	        
(ii)       each of the following renewal documents
has other been executed and delivered by the parties thereto:

	 	        
(A)       an extension of the Commitment
Termination Date under the Certificate Purchase Agreement to June 30,
2004;

	 	        
(B)       an extension of the Commitment Expiry
Date under the Liquidity Agreement to June 30, 2004;

	 	        
(C)       an amendment to the definition of
“Program Fee Rate” as set forth in the Fee Letter to reflect the
amendment described in the commitment letter agreement, dated July 2, 2003, by
and among Canadian Imperial Bank of Commerce, the Transferor, BTFC and Lexington
Parker Capital Company, LLC; and

	 	        
(D)       receipt by CIBC of the renewal fee
described in the commitment renewal letter dated June 26, 2003, by and among
CIBC, the Transferor and BTFC;

	 	        
(iii)       the closing of the senior debt
offering described in the offering memorandum dated June 18, 2003, including the
payment in cash of all offered senior notes;

	 	        
(iv)       the payment in full by BTFC of all of
its obligations under the Senior Bank Agreement and the termination of the
Senior Bank Agreement; and

	 	        
(v)       the preparation, execution and delivery
of a new senior secured revolving credit agreement among BTFC and the financial
institutions party thereto containing a commitment of such financial
institutions to no earlier than March 2007 and for no less than $75,000,000 and
with terms acceptable to CIBC.

        
(b)       This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.

        
(c)       On and after the execution and delivery
hereof, (i) this Amendment shall be a part of the Series 2001-1 Supplement, and
(ii) each reference in the Series 2001-1 Supplement to “this Series 2001-1
Supplement” or “hereof”, “hereunder” or words of like
import, and each reference in any other document to the Series 2001-1 Supplement
shall mean and be a reference to the Series 2001-1 Supplement, as applicable, as
amended or modified hereby.

        
(d)       Except as expressly amended or modified
hereby, the Series 2001-1 Supplement shall remain in full force and effect and
is hereby ratified and confirmed by the parties hereto.

        
(e)        Within 30 days of the date hereof, the
Transferor shall enter into an amendment to the Interest Rate Cap to reflect the
amendments set forth herein, which such amendment shall be in form and substance
reasonably satisfactory to the Administrative Agent.

        
D.       Miscellaneous.

        
(a)       Without limiting the effect of other
provisions of the Series 2001-1 Supplement, Sections  23, 24 and
25 of the Series 2001-1 Supplement are hereby incorporated into this
Amendment by this reference, with the references in such sections to the Series
2001-1 

Supplement applying instead
with equal force to this Amendment for purposes of this Amendment.

        
(b)       No provision of this Amendment may be
modified, terminated or waived without the Managing Agent’s consent. The
Managing Agent shall be an express third-party beneficiary hereof.

        
(c)       The Managing Agent, on behalf of the
Owners in the CIBC Ownership Group, hereby certifies that the Owners in the CIBC
Ownership Group constitute 100% of the Invested Amount of the Series 2001-1
Certificates.

[Signatures Follow]

        
IN WITNESS WHEREOF, the parties have executed this Amendment by their
respective officers thereunto duly authorized as of the date first above
written. 

                                      H & T RECEIVABLE FUNDING CORPORATION, as
                                      Transferor

                                      By:            /s/ John W. Dwyer
                                            ___________________________________
                                      Name:          John W. Dwyer
                                      Title:         E.V.P., C.F.O.

                                      BALLY TOTAL FITNESS CORPORATION, as
                                      Servicer

                                      By:            /s/ John W. Dwyer
                                            ___________________________________
                                      Name:          John W. Dwyer
                                      Title:         E.V.P., C.F.O.

                                      JP MORGAN CHASE BANK, not in its individual
                                      capacity, but solely as Trustee

                                      By:            /s/ David Contino
                                            ___________________________________
                                      Name:          David Contino
                                      Title:         Trust Officer

The undersigned, as
Managing Agent on behalf of the Owners in the CIBC Ownership Group, hereby
consents to the execution and delivery of this Amendment. 

CANADIAN IMPERIAL BANK OF
COMMERCE, as Managing Agent for the
CIBC Ownership Group

By:            /s/ David Duncan
        ___________________________________________
Name:          David Duncan
Title:         Authorized Signatory

By:            /s/ Robert Castro
        ___________________________________________
Name:          Robert Castro
Title:         Authorized Signatory

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