Document:

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                                                                   EXHIBIT 10.24

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                                CREDIT AGREEMENT

                          Dated as of December 31, 2003

                                      among

                          LTFMF AZ REAL ESTATE, LLC and

                      THE OTHER BORROWERS SIGNATORY HERETO
                               FROM TIME TO TIME,

                                  as Borrowers,

                         LTFMF REAL ESTATE HOLDINGS, LLC

                               as a Credit Party,

                          THE LENDERS SIGNATORY HERETO
                               FROM TIME TO TIME,

                                   as Lenders,

                                       and

                      GENERAL ELECTRIC CAPITAL CORPORATION,

                               as Agent and Lender

  GECC CAPITAL MARKETS GROUP, INC., as Sole Lead Arranger and Syndication Agent

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                             Page
                                                                                                             ----
<S>                                                                                                          <C>
1.       AMOUNT AND TERMS OF CREDIT .......................................................................    2
1.1      Term Loans........................................................................................    2
1.2      Prepayments.......................................................................................    4
1.3      Use of Proceeds...................................................................................    6
1.4      Interest..........................................................................................    6
1.5      Fees..............................................................................................    7
1.6      Receipt of Payments...............................................................................    8
1.7      Application and Allocation of Payments............................................................    8
1.8      Loan Account and Accounting.......................................................................    8
1.9      Indemnity.........................................................................................    9
1.10     Access............................................................................................    9
1.11     Taxes.............................................................................................   10
1.12     Capital Adequacy; Increased Costs; Illegality.....................................................   11
1.13     Single Loan.......................................................................................   12
1.14     Joinder of Additional Borrowers...................................................................   12
1.15.    Joinder of Additional Lenders.....................................................................   13
2.       CONDITIONS PRECEDENT..............................................................................   14
2.1      Closing Conditions................................................................................   14
2.2      Conditions to Each Loan...........................................................................   15
3.       REPRESENTATIONS AND WARRANTIES....................................................................   16
3.1      Corporate Existence; Compliance with Law..........................................................   16
3.2      Executive Offices, Collateral Locations, FEIN.....................................................   17
3.3      Corporate Power, Authorization, Enforceable Obligations...........................................   17
3.4      Financial Statements and Projections..............................................................   18
3.5      Material Adverse Effect...........................................................................   18
3.6      Ownership of Property; Liens......................................................................   18
3.7      Labor Matters.....................................................................................   19
3.8      Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.........................   20
3.9      Government Regulation.............................................................................   20
3.10     Margin Regulations................................................................................   20
</TABLE>

                                       i
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<TABLE>
<S>                                                                                                           <C>
3.11     Taxes.............................................................................................   20
3.12     ERISA.............................................................................................   21
3.13     No Litigation.....................................................................................   22
3.14     Brokers...........................................................................................   22
3.15     Intellectual Property.............................................................................   22
3.16     Full Disclosure...................................................................................   23
3.17     Environmental Matters.............................................................................   23
3.18     Insurance.........................................................................................   24
3.19      Trade Relations..................................................................................   24
3.20     Agreements and Other Documents....................................................................   24
3.21     Solvency..........................................................................................   25
3.22     Status of Borrowers...............................................................................   25
4.       FINANCIAL STATEMENTS AND INFORMATION..............................................................   25
4.1      Reports and Notices...............................................................................   25
4.2      Communication with Accountants....................................................................   25
5.       AFFIRMATIVE COVENANTS.............................................................................   25
5.1      Maintenance of Existence and Conduct of Business..................................................   25
5.2      Payment of Charges................................................................................   26
5.3      Books and Records.................................................................................   26
5.4      Insurance; Damage to or Destruction of Collateral.................................................   26
5.5      Compliance with Laws..............................................................................   28
5.6      Supplemental Disclosure...........................................................................   28
5.7      Intellectual Property.............................................................................   29
5.8      Environmental Matters.............................................................................   29
5.9      Landlords' Agreements, Mortgagee Agreements, and Bailee Letters Purchases.........................   29
5.10     Real Estate Purchases.............................................................................   30
5.11     Further Assurances................................................................................   30
6.       NEGATIVE COVENANTS................................................................................   30
6.1      Mergers, Subsidiaries, Etc........................................................................   30
6.2      Investments; Loans and Advances...................................................................   31
6.3      Indebtedness......................................................................................   31
6.4      Employee Loans and Affiliate Transactions.........................................................   32
6.5      Capital Structure and Business....................................................................   32
6.6      Guaranteed Indebtedness...........................................................................   32
</TABLE>

                                       ii
<PAGE>
<TABLE>
<S>                                                                                                           <C>
6.7      Liens.............................................................................................   33
6.8      Sale of Stock and Assets..........................................................................   33
6.9      ERISA.............................................................................................   33
6.10     Financial Covenants...............................................................................   33
6.11     Hazardous Materials...............................................................................   33
6.12     Sale-Leasebacks...................................................................................   33
6.13     Cancellation of Indebtedness......................................................................   33
6.14     Restricted Payments...............................................................................   33
6.15     Change of Corporate Name or Location; Change of Fiscal Year.......................................   34
6.16     No Impairment of Intercompany Transfers...........................................................   34
6.17     No Speculative Transactions.......................................................................   34
6.18     Leases; Real Estate Purchases.....................................................................   34
6.19     Changes Relating to Subordinated Debt; or Facility Leases.........................................   34
7.       TERM..............................................................................................   34
7.1      Termination.......................................................................................   34
7.2      Survival of Obligations Upon Termination of Financing Arrangements................................   34
8.       EVENTS OF DEFAULT; RIGHTS AND REMEDIES............................................................   35
8.1      Events of Default.................................................................................   35
8.2      Remedies..........................................................................................   37
8.3      Waivers by Credit Parties.........................................................................   37
9.       ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT...............................................   38
9.1      Assignment and Participations.....................................................................   38
9.2      Appointment of Agent..............................................................................   40
9.3      Agent's Reliance, Etc.............................................................................   41
9.4      GE Capital and Affiliates.........................................................................   42
9.5      Lender Credit Decision............................................................................   42
9.6      Indemnification...................................................................................   42
9.7      Successor Agent...................................................................................   43
9.8      Setoff and Sharing of Payments....................................................................   43
9.9      Advances; Payments; Non-Funding Lenders; Information; Actions in Concert..........................   44
10.      SUCCESSORS AND ASSIGNS............................................................................   46
11.      MISCELLANEOUS.....................................................................................   46
11.1     Complete Agreement; Modification of Agreement.....................................................   46
11.2     Amendments and Waivers............................................................................   47
</TABLE>

                                       iii
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<TABLE>
<S>                                                                                                           <C>
11.3     Fees and Expenses.................................................................................   48
11.4     No Waiver.........................................................................................   50
11.5     Remedies..........................................................................................   50
11.6     Severability......................................................................................   50
11.7     Conflict of Terms.................................................................................   50
11.8     Confidentiality...................................................................................   50
11.9     Governing Law.....................................................................................   51
11.10    Notices...........................................................................................   52
11.11    Section Titles....................................................................................   52
11.12    Counterparts......................................................................................   52
11.13    Waiver Of Jury Trial..............................................................................   52
11.14    Press Releases and Related Matters................................................................   53
11.15    Reinstatement.....................................................................................   53
11.16    Advice of Counsel.................................................................................   53
11.17    No Strict Construction............................................................................   53
12.      CROSS-GUARANTY....................................................................................   53
12.1     Cross-Guaranty....................................................................................   53
12.2     Waivers by Borrowers..............................................................................   54
12.3     Benefit of Guaranty...............................................................................   54
12.4     Subordination of Subrogation, Etc.................................................................   54
12.5     Election of Remedies..............................................................................   55
12.6     Limitation........................................................................................   55
12.7     Contribution with Respect to Guaranty Obligations.................................................   55
12.8     Liability Cumulative..............................................................................   56
</TABLE>

                                       iv
<PAGE>

                               INDEX OF APPENDICES

<TABLE>
<S>                                                  <C>
Annex A (Recitals)                  -                Definitions
Annex B (Section 2)                 -                Closing Checklist and Facility Funding Checklist
Annex C (Section 4.1)               -                Financial Statements and Projections -- Reporting
Annex D (Section 6.10)              -                Financial Covenants
Annex E (Section 9.9(a))            -                Lenders' Wire Transfer Information
Annex F (Section 11.10)             -                Notice Addresses
Annex G (from Annex A -
   "Commitments")                   -                Commitments as of the Closing Date

Exhibit 1.1(b)                      -                Form of Notice of Borrowing
Exhibit 1.1(c)                      -                Form of Note
Exhibit 1.14(a)                     -                Form of Joinder Agreement
Exhibit 1.15                        -                Form of Acknowledgment Agreement
Exhibit 4.1                         -                Form of Compliance Certificate
Exhibit 9.1(a)                      -                Form of Assignment Agreement

Schedule 1.1(b)                     -                Agent's Representatives
Disclosure Schedule 3.1             -                Type of Entity; State of Organization
Disclosure Schedule 3.2             -                Executive Offices, Collateral Locations, FEIN
Disclosure Schedule 3.4(a)          -                Financial Statements
Disclosure Schedule ERROR! REFERENCE SOURCE NOT FOUND.        -        Projections
Disclosure Schedule 3.6             -                Real Estate and Leases
Disclosure Schedule 3.7             -                Labor Matters
Disclosure Schedule 3.8             -                Ventures, Subsidiaries and Affiliates; Outstanding Stock
Disclosure Schedule 3.11            -                Tax Matters
Disclosure Schedule 3.12            -                ERISA Plans
Disclosure Schedule 3.13            -                Litigation
Disclosure Schedule 3.15            -                Intellectual Property
Disclosure Schedule 3.17            -                Hazardous Materials
Disclosure Schedule 3.18            -                Insurance
Disclosure Schedule 3.20            -                Material Agreements
Disclosure Schedule 5.1             -                Corporate and Trade Names
Disclosure Schedule 6.3             -                Indebtedness
Disclosure Schedule 6.4(a)          -                Transactions with Affiliates
Disclosure Schedule 6.7             -                Existing Liens
</TABLE>

                                       v
<PAGE>

         This CREDIT AGREEMENT (as amended, supplemented, restated, or otherwise
modified from time to time, this "Agreement"), dated as of December 31, 2003, is
among LTFMF AZ REAL ESTATE, LLC, a Delaware limited liability company ("LTFAZ")
and the other borrowers signatory hereto from time to time (together with LTFAZ,
"Borrowers"); LTFMF REAL ESTATE HOLDINGS, LLC, a Delaware limited liability
company ("Holdings"); GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware
corporation ("GE Capital"), as Lender and as Agent for Lenders (together with
any successor in such capacity, "Agent"); and the other lenders signatory hereto
from time to time (together with GE Capital in its capacity as lender and their
successors and assigns, "Lenders").

                                    RECITALS

         WHEREAS, Borrowers have requested that Lenders extend term credit
facilities to Borrowers of up to $35,000,000 in the aggregate for the purpose of
refinancing a portion of Borrowers' costs to acquire land and construct
improvements for the Facilities and for other purposes permitted hereunder; and
for these purposes, Lenders are willing to make certain term loans to Borrowers
of up to such amount upon the terms and conditions set forth herein;

         WHEREAS, Borrowers have agreed to secure all of their obligations under
the Loan Documents by granting to Agent, for the benefit of Agent and Lenders,
security interests in and liens upon all of their existing and after-acquired
personal and real property, including Borrowers' interests in the Facilities and
the Facility Leases;

         WHEREAS, Holdings is willing to pledge to Agent, for the benefit of
Agent and Lenders, all of the Stock of Borrowers held by it and to grant to
Agent, for the benefit of Agent and Lenders, security interests in and liens
upon all of Holdings' existing and after-acquired personal and real property, in
each case to secure the obligations of Borrowers under the Loan Documents, and
Holdings is willing to guarantee the obligations of Borrowers under the Loan
Documents;

         WHEREAS, Life Time Fitness, Inc., a Minnesota corporation ("LTF") is
willing to pledge to Agent, for the benefit of Agent and Lenders, all of the
Stock of Holdings held by it to secure the obligations of Borrowers under the
Loan Documents; and

         WHEREAS, capitalized terms used in this Agreement, including the
Preamble and Recitals of this Agreement, shall have the meanings ascribed to
them in Annex A and, for purposes of this Agreement and the other Loan
Documents, the rules of construction set forth in Annex A shall govern. All
Annexes, Disclosure Schedules, Exhibits and other attachments hereto or
expressly identified to this Agreement (collectively, "Appendices") are
incorporated herein by reference and, taken together with this Agreement, shall
constitute but a single agreement. These Recitals shall be construed as part of
this Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree as follows:

                                       1
<PAGE>

1.       AMOUNT AND TERMS OF CREDIT

         1.1.     Term Loans.

                  (a)      Subject to the terms and conditions hereof, each
         Lender agrees to make available to Borrowers from time to time until
         the Commitment Termination Date its Pro Rata Share Available of up to
         five term loans (each, a "Term Loan"). Any Lender's Pro Rata Share
         Outstanding of all Term Loans shall not exceed such Lender's
         Commitment. The obligations of each Lender hereunder shall be several
         and not joint. Until the Commitment Termination Date, Borrowers may
         borrow under this Section 1.1(a) once for each Facility owned by any
         Borrower; provided that the amount of the Term Loan for any Facility
         shall not exceed Borrowing Availability and the following conditions
         have been satisfied or provided for in a manner satisfactory to Agent
         or waived in writing by Agent, as of the funding date of such Term
         Loan:

                           (i)      the Collateral Documents and other Loan
                  Documents related to such Term Loan shall have been duly
                  executed by and delivered to the applicable Borrower, each
                  other Credit Party signatory hereto, Agent and Lenders; and
                  Agent shall have received such documents, instruments,
                  agreements and legal opinions as Agent shall reasonably
                  request in connection with such Term Loan and such Facility,
                  including those listed in the Facility Funding Checklist, each
                  in form and substance reasonably satisfactory to Agent;

                           (ii)     Agent shall have received (A) satisfactory
                  evidence that the Credit Parties and LTF have obtained all
                  required consents and approvals of all Persons, including all
                  requisite Governmental Authorities, to the execution, delivery
                  and performance of the Loan Documents and Related Transactions
                  Documents related to such Facility and such Term Loan or (B)
                  officer's certificates in form and substance reasonably
                  satisfactory to Agent affirming that no such consents or
                  approvals are required;

                           (iii)    Agent shall have received satisfactory
                  evidence that such Facility's Initial Fixed Charge Ratio is
                  not less than 1.00 to 1.00 calculated as of the Term Loan
                  funding date and as of the last day of the Fiscal Month
                  including the Term Loan funding date, that such Facility's
                  membership level is not less than 3500 members as of the Term
                  Loan funding date, and that after giving effect to such Term
                  Loan the aggregate principal amount of the Term Loans would
                  not exceed the Maximum Amount;

                           (iv)     the Credit Parties shall have reimbursed
                  Agent for all reasonable fees, costs and expenses related to
                  such Term Loan presented as of the Term Loan funding date;

                           (v)      Agent shall have completed its business and
                  legal due diligence with respect to such Facility with results
                  reasonably satisfactory to Agent; and

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<PAGE>

                           (vi)     Agent shall have received satisfactory
                  evidence that the applicable Borrower is Solvent.

                  (b)      Each Term Loan advance made after the Closing Date
         shall be made on notice by Borrower Representative on behalf of the
         applicable Borrower to one of the representatives of Agent identified
         in Schedule 1.1(b) at the address specified therein. Any such notice
         must be given at least thirty days prior to the proposed funding date
         of the applicable Term Loan. Each such notice (a "Notice of Borrowing")
         must be given in writing (by telecopy or overnight courier)
         substantially in the form of Exhibit 1.1(b), and shall include the
         information required in such Exhibit and such other information as may
         be required by Agent.

                  (c)      Except as provided in Section 1.8, the applicable
         Borrower shall execute and deliver to each Lender a promissory note to
         evidence such Lender's Pro Rata Share Advanced with respect to any Term
         Loan advanced to such Borrower (the "Notes"). Each Note shall be
         substantially in the form of Exhibit 1.1(c), dated the funding date of
         the applicable Term Loan and in the original principal amount of the
         applicable Lender's Pro Rata Share Advanced. Each Note shall represent
         the primary obligation of the applicable Borrower (but shall also be
         guaranteed by all other Borrowers pursuant to Section 12) to pay the
         applicable Lender's Pro Rata Share Advanced of the unpaid principal
         amount of the applicable Term Loan, together with interest thereon as
         prescribed in Section 1.4.

                  (d)      The monthly installments for each Note shall be in
         equal amounts of principal and interest sufficient to amortize the
         outstanding balance of such Note over a fifteen-year period, as set
         forth in the amortization schedule of such Note. The monthly payment of
         principal and interest for each Term Loan shall be equal to the
         aggregate amount of monthly installments under the Notes related to
         such Term Loan. Each Term Loan shall be repaid in consecutive monthly
         installments made on the first Business Day of each month commencing on
         (i) the first full calendar month following the funding date of such
         Term Loan, if the funding date of such Term Loan occurred on or before
         the fifteenth calendar day of the month, and (ii) the second full
         calendar month following the funding date of such Term Loan, if the
         funding date of such Term occurred after the fifteenth calendar day of
         the month, and, in either case, continuing until the Maturity Date. On
         the Maturity Date, Borrowers shall completely repay the Term Loans,
         together with all accrued interest and other amounts due under this
         Agreement. No payment with respect to the Term Loans may be reborrowed.

                  (e)      Each payment of principal and interest with respect
         to any Term Loan shall be paid to Agent for the benefit of each Lender,
         in proportion to each Lender's Pro Rata Share Outstanding of such Term
         Loan and as set forth in the Notes related to such Term Loan.

                  (f)      Agent shall be entitled to rely upon and shall be
         fully protected in relying upon any Notice of Borrowing or similar
         notice believed by Agent to be genuine. Agent may assume that each
         Person executing and delivering any notice in accordance herewith

                                       3
<PAGE>

         was duly authorized, unless the responsible individual acting thereon
         for Agent has actual knowledge to the contrary. Each Borrower hereby
         designates Holdings as its representative and agent on its behalf for
         the purposes of issuing Notices of Borrowing, giving instructions with
         respect to the disbursement of the proceeds of the Term Loans, giving
         and receiving all other notices and consents under any Loan Document
         and taking all other actions (including in respect of compliance with
         covenants) on behalf of any Borrower or Borrowers under the Loan
         Documents. Borrower Representative hereby accepts such appointment.
         Agent and each Lender may regard any notice or other communication
         pursuant to any Loan Document from Borrower Representative as a notice
         or communication from all Borrowers and may give any notice or
         communication required or permitted to be given to any Borrower or
         Borrowers hereunder to Borrower Representative on behalf of such
         Borrower or Borrowers. Each Borrower agrees that each notice, election,
         representation and warranty, covenant, agreement and undertaking made
         on its behalf by Borrower Representative shall be deemed for all
         purposes to have been made by such Borrower and shall be binding upon
         and enforceable against such Borrower to the same extent as if the same
         had been made directly by such Borrower.

         1.2.     Prepayments.

                  (a)      Voluntary Prepayments. Borrowers may at any time on
         at least five days' prior written notice by Borrower Representative to
         Agent voluntarily prepay all or part of the Term Loans; provided that
         any such prepayments shall be in a minimum amount of $1,000,000 and
         integral multiples of $500,000 in excess of such amount. In addition,
         Borrowers may at any time on at least ten days' prior written notice by
         Borrower Representative to Agent terminate the Commitment prior to the
         Commitment Termination Date; provided that upon such termination, all
         Term Loans and other Obligations shall be immediately due and payable
         in full. Any such voluntary prepayment and any such termination of the
         Commitment prior to the Commitment Termination Date must be accompanied
         by the payment of the Fees required by Section 1.5(c), if any. Upon any
         such termination of the Commitment, each Borrower's right to request
         Term Loan advances shall simultaneously be terminated. Any partial
         prepayments of the Term Loans of any Borrower shall be applied to
         prepay the scheduled installments of such Borrower's Term Loans in
         inverse order of maturity.

                  (b)      Mandatory Prepayments.

                           (i)      Immediately upon receipt by any Borrower of
                  proceeds of any asset disposition or any sale of Stock of any
                  Subsidiary of such Borrower, Borrowers shall prepay the Term
                  Loans in an amount equal to all such proceeds, net of (A)
                  commissions and other reasonable and customary transaction
                  costs, fees and expenses properly attributable to such
                  transaction and payable by Borrowers in connection therewith
                  (in each case, paid to non-Affiliates), (B) transfer taxes,
                  (C) amounts payable to holders of senior Liens (to the extent
                  such Liens constitute Permitted Encumbrances), if any, and (D)
                  an appropriate reserve for income taxes in accordance with
                  GAAP in connection therewith. Any such prepayment shall be
                  applied first, to Fees and reimbursable expenses of Agent and

                                       4
<PAGE>

                  Lenders then due and payable pursuant to any of the Loan
                  Documents; second, to interest then due and payable on the
                  Term Loan related to such assets; third, to prepay the
                  scheduled principal installments of the Term Loan related to
                  such assets in inverse order of maturity, until such Term Loan
                  has been prepaid in full; fourth, to interest then due and
                  payable on such Borrower's Ratable Share of the other Term
                  Loans; fifth, to prepay the scheduled principal installments
                  of such Borrower's Ratable Share of the other Term Loans in
                  inverse order of maturity, until such Ratable Share has been
                  prepaid in full; sixth, to interest then due and payable on
                  the Ratable Shares of the Term Loans of each other Borrower,
                  pro rata; and seventh, to prepay the scheduled principal
                  installments of the Ratable Shares of the Term Loans of each
                  other Borrower, pro rata, in inverse order of maturity, until
                  such Ratable Shares have been prepaid in full.

                           (ii)     If any Borrower issues or sells debt
                  securities, no later than the Business Day following the date
                  of receipt of the proceeds thereof, the issuing Borrower shall
                  prepay the Term Loans in an amount equal to all such proceeds,
                  net of underwriting discounts and commissions and other
                  reasonable costs paid to non-Affiliates in connection
                  therewith. Any such prepayment shall be applied first, to Fees
                  and reimbursable expenses of Agent and Lenders then due and
                  payable pursuant to any of the Loan Documents; second, to
                  interest then due and payable on such Borrower's Ratable Share
                  of the Term Loans; third, to prepay the scheduled principal
                  installments of such Borrower's Ratable Share of the Term
                  Loans in inverse order of maturity, until such Ratable Share
                  has been prepaid in full; fourth, to interest then due and
                  payable on the Ratable Shares of the Term Loans of each other
                  Borrower, pro rata; and fifth, to prepay the scheduled
                  principal installments of the Ratable Shares of the Term Loans
                  of each other Borrower, pro rata, in inverse order of
                  maturity, until such Ratable Shares have been prepaid in full.

                           (iii)    If any Facility fails to achieve a Fixed
                  Charge Ratio of not less than 1.20 to 1.00 as of a date after
                  the funding date of the Term Loan related to such Facility but
                  not later than eighteen months after such funding date, then
                  the Deposits related to such Facility shall be used to prepay
                  such Term Loan. Any such prepayment shall be applied first, to
                  interest then due and payable on the Term Loan related to such
                  Facility and second, to prepay the scheduled principal
                  installments of the Term Loan related to such Facility in
                  inverse order of maturity, until such Term Loan has been
                  prepaid in full.

                  (c)      Application of Prepayments from Insurance and
         Condemnation Proceeds. Prepayments from insurance or condemnation
         proceeds in accordance with Section 5.4(c) and the Mortgages,
         respectively, shall be applied as follows: insurance proceeds from
         casualties or losses to any Facility shall be applied to scheduled
         installments of the Term Loan related to such Facility in inverse order
         of maturity, and insurance proceeds from casualties or losses to any
         other assets of any Borrower shall be applied to scheduled installments
         of such Borrower's Ratable Share of the Term Loans in inverse order of
         maturity, until such Ratable Share has been prepaid in full. If
         insurance or condemnation

                                       5
<PAGE>

         proceeds received by any Borrower exceed the outstanding principal
         balances of the Term Loans to that Borrower, together with accrued
         interest thereon to the date of application, and (i) if a Default or an
         Event of Default does not exist, such excess proceeds shall be paid to
         such Borrower or (ii) if a Default or an Event of Default has occurred
         and is continuing, the allocation and application of such excess
         proceeds shall be determined by Agent, subject to the approval of
         Requisite Lenders. The application of such proceeds in accordance with
         this Section 1.2(c) shall not be subject to the fee described in
         Section 1.5(c).

                  (d)      No Implied Consent. Nothing in this Section 1.2 shall
         be construed to constitute Agent's or any Lender's consent to any
         transaction that is not permitted by other provisions of this Agreement
         or the other Loan Documents.

                  (e)      No Reborrowing. No payment with respect to the Term
         Loans may be reborrowed.

         1.3.     Use of Proceeds. Borrowers shall utilize the proceeds of each
Term Loan solely for refinancing a portion of Borrowers' costs to acquire land
and construct improvements for the Facility related to such Term Loan (and to
pay any related transaction expenses), for the related Refinancings (including
any related transaction expenses), and for Borrowers' general corporate needs.

         1.4.     Interest.

                  (a)      Borrowers shall pay interest to Agent, for the
         ratable benefit of Lenders, in accordance with the Term Loans being
         made by each Lender, in arrears on each Payment Date, at the Interest
         Rate applicable to such Term Loan.

                  (b)      If any payment on any Term Loan becomes due and
         payable on a day other than a Business Day, the maturity thereof will
         be extended to the next succeeding Business Day.

                  (c)      All computations of Fees calculated on a per annum
         basis and interest shall be made by Agent on the basis of a 360-day
         year, in each case for the actual number of days occurring in the
         period for which such interest and Fees are payable. Each determination
         by Agent of an interest payment amount and Fees hereunder shall be
         final, binding and conclusive on Borrowers, absent manifest error.

                  (d)      So long as an Event of Default has occurred and is
         continuing under Section 8.1(a), (j) or (k) or after all of the
         Obligations become immediately due and payable under Section 8.2 or so
         long as any other Default or Event of Default has occurred and is
         continuing and at the election of Agent (or upon the written request of
         Requisite Lenders) confirmed by written notice from Agent to Borrower
         Representative, the Interest Rate shall be increased by 2% per annum
         above the Interest Rate otherwise applicable (the "Default Rate"), and
         all outstanding Obligations shall bear interest at the Default Rate.
         Interest at the Default Rate shall accrue from the initial date of such

                                       6
<PAGE>

         Default or Event of Default until that Default or Event of Default is
         cured or waived and shall be payable upon demand.

                  (e)      Notwithstanding anything to the contrary set forth in
         this Section 1.4, if a court of competent jurisdiction determines in a
         final order that the rate of interest payable hereunder exceeds the
         highest rate of interest permissible under law (the "Maximum Lawful
         Rate"), then so long as the Maximum Lawful Rate would be so exceeded,
         the rate of interest payable hereunder shall be equal to the Maximum
         Lawful Rate; provided, however, that if at any time thereafter the rate
         of interest payable hereunder is less than the Maximum Lawful Rate,
         Borrowers shall continue to pay interest hereunder at the Maximum
         Lawful Rate until such time as the total interest received by Agent, on
         behalf of Lenders, is equal to the total interest that would have been
         received had the interest rate payable hereunder been (but for the
         operation of this Section 1.4(e)) the interest rate payable since the
         Closing Date as otherwise provided in this Agreement. Thereafter,
         interest hereunder shall be paid at the rate of interest and in the
         manner provided in Section 1.4(a) through (d), unless and until the
         rate of interest again exceeds the Maximum Lawful Rate, and at that
         time this Section 1.4(e) shall again apply. In no event shall the total
         interest received by any Lender pursuant to the terms of this Agreement
         exceed the amount that such Lender could lawfully have received had the
         interest due hereunder been calculated for the full term hereof at the
         Maximum Lawful Rate. If the Maximum Lawful Rate is calculated pursuant
         to this Section 1.4(e), such interest shall be calculated at a daily
         rate equal to the Maximum Lawful Rate divided by the actual number of
         days in the year in which such calculation is made. Notwithstanding the
         provisions of this Section 1.4(e), if a court of competent jurisdiction
         shall finally determine that a Lender has received interest hereunder
         in excess of the Maximum Lawful Rate, Agent shall, to the extent
         permitted by applicable law, promptly apply such excess in the order
         specified in Section 1.7 and thereafter shall refund any excess to
         Borrowers or as a court of competent jurisdiction may otherwise order.

         1.5.     Fees.

                  (a)      Borrowers shall pay to GE Capital, individually, the
         Fees specified in that certain fee letter dated December 31, 2003
         between LTF and GE Capital (the "Fee Letter") at the times specified
         for payment therein.

                  (b)      As additional compensation for Lenders, Borrowers
         shall pay to Agent, for the ratable benefit of such Lenders, in
         arrears, on the first Business Day of each month prior to the
         Commitment Termination Date and on the Commitment Termination Date, a
         Fee for Borrowers' non-use of available funds (the "Unused Facility
         Fee"). The Unused Facility Fee shall be an amount equal to 0.50% per
         annum (calculated on the basis of a 360-day year for actual days
         elapsed) multiplied by the difference between (x) the Maximum Amount
         (as it may be increased or decreased from time to time in accordance
         with this Agreement) and (y) the average for the period of the
         aggregate daily principal balances of the Term Loans outstanding during
         the period for which such Unused Facility Fee is due.

                                       7
<PAGE>

                  (c)      If Borrowers pay after acceleration or prepay all or
         any portion of the Term Loans or, prior to the Commitment Termination
         Date, reduce or terminate the Commitment, whether voluntarily or
         involuntarily and whether before or after acceleration of the
         Obligations, or if any of the Commitments are otherwise terminated
         prior to the Commitment Termination Date, then Borrowers shall pay to
         Agent, for the benefit of Lenders, as liquidated damages and
         compensation for the costs of being prepared to make funds available
         hereunder, the following amounts:

                           (i)      if such payment or prepayment occurs prior
                  to the third anniversary of the Closing Date, the Prepayment
                  Premium plus the Make Whole Amount; and

                           (ii)     if such payment or prepayment occurs on or
                  after the third anniversary of the Closing Date, the Make
                  Whole Amount.

         Borrowers agree that the Prepayment Premium and the Make Whole Amount
         are reasonable calculations of Lenders' lost profits in view of the
         difficulties and impracticality of determining actual damages resulting
         from an early termination of the Commitments and repayment of the Term
         Loans.

         1.6.     Receipt of Payments. Borrowers shall make each payment under
this Agreement not later than 2:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees as of any date, all payments shall be deemed
received on the Business Day on which immediately available funds therefor are
received in the Collection Account prior to 2:00 p.m. (New York time). Payments
received after 2:00 p.m. (New York time) on any Business Day or on a day that is
not a Business Day shall be deemed received on the following Business Day.

         1.7.     Application and Allocation of Payments. So long as no Default
or Event of Default has occurred and is continuing, (i) payments matching
specific scheduled payments then due shall be applied to those scheduled
payments; (ii) voluntary prepayments shall be applied as determined by Borrower
Representative, subject to the provisions of Section 1.2(a); and (iii) mandatory
prepayments shall be applied as set forth in Section 1.2(b) and (c). All
payments and prepayments applied to a particular Term Loan shall be applied
ratably to the portion thereof held by each Lender as determined by its Pro Rata
Share Outstanding of such Term Loan. As to any other payment, and as to all
payments made when a Default or an Event of Default has occurred and is
continuing or following the Maturity Date, each Borrower hereby irrevocably
waives the right to direct the application of any and all payments received from
or on behalf of such Borrower, and each Borrower hereby irrevocably agrees that
Agent shall have the continuing exclusive right to apply any and all such
payments against the Obligations of Borrowers as Agent may deem advisable
notwithstanding any previous entry by Agent in the Loan Account or any other
books and records. In the absence of a specific determination by Agent with
respect thereto, payments shall be applied to amounts then due and payable in
the following order: first, to Fees and Agent's and Lenders' expenses
reimbursable hereunder; second, to interest on the Term Loans, ratably in
proportion to the interest accrued as to each Term Loan; third, to principal
payments on the Term Loans, ratably to the aggregate, combined

                                       8
<PAGE>

principal balance of the Term Loans; and fourth, to all other Obligations,
including expenses of Lenders to the extent reimbursable under Section 11.3.

         1.8.     Loan Account and Accounting. Agent shall maintain a loan
account (the "Loan Account") on its books to record: (a) all Term Loan advances,
(b) all payments made by Borrowers and (c) all other debits and credits as
provided in this Agreement with respect to the Term Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Agent's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement, shall be presumptive evidence of the amounts due and
owing to Agent and Lenders by each Borrower, absent manifest error; provided
that any failure to so record or any error in so recording shall not limit or
otherwise affect any Borrower's duty to pay the Obligations. Agent shall render
to Borrower Representative a monthly accounting of transactions with respect to
the Term Loans setting forth the balance of the Loan Account as to each Borrower
for the immediately preceding month. Unless Borrower Representative notifies
Agent in writing of any objection to any such accounting (specifically
describing the basis for such objection), within thirty days after the date
thereof, each and every such accounting shall (absent manifest error) be deemed
final, binding and conclusive on Borrowers in all respects as to all matters
reflected therein. Only those items expressly objected to in such notice shall
be deemed to be disputed by Borrowers. Notwithstanding any provision in this
Agreement to the contrary, any Lender may elect (which election may be revoked)
to dispense with the issuance of Notes to that Lender and may rely on the Loan
Account as evidence of the amount of Obligations from time to time owing to it.

         1.9.     Indemnity. Each Credit Party that is a signatory hereto shall
jointly and severally indemnify and hold harmless each of Agent, Lenders and
their respective Affiliates, and each such Person's respective officers,
directors, employees, attorneys, agents and representatives (each, an
"Indemnified Person"), from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses (including reasonable
attorneys' fees and disbursements and other costs of investigation or defense,
including those incurred upon any appeal) that may be instituted or asserted
against or incurred by any such Indemnified Person as the result of credit
having been extended, suspended or terminated under this Agreement and the other
Loan Documents and the administration of such credit, and in connection with or
arising out of the transactions contemplated hereunder and thereunder and any
actions or failures to act in connection therewith, including any and all
Environmental Liabilities and legal costs and expenses arising out of or
incurred in connection with disputes between or among any parties to any of the
Loan Documents (collectively, the "Indemnified Liabilities"); provided that no
Credit Party shall be liable for any indemnification to an Indemnified Person to
the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from that Indemnified Person's gross negligence or
willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY
OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR

                                       9
<PAGE>

TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION
CONTEMPLATED HEREUNDER OR THEREUNDER.

         1.10.    Access. During normal business hours, from time to time upon
three Business Day's prior notice as frequently as Agent determines to be
appropriate, each Credit Party shall (a) provide Agent and any of its officers,
employees and agents access to its properties, facilities, advisors and
employees (including officers) and to the Collateral, (b) permit Agent and any
of its officers, employees and agents to inspect, audit and make extracts from
any such Person's books and records, and (c) permit Agent and its officers,
employees and agents to inspect, review, evaluate and make test verifications of
the Collateral or any part thereof. If a Default or an Event of Default has
occurred and is continuing or if access is necessary to preserve or protect the
Collateral as determined by Agent, each Credit Party shall provide such access
to Agent and to each Lender at all times and without advance notice.
Furthermore, so long as an Event of Default has occurred and is continuing,
Borrowers shall provide Agent and each Lender with access to their lessees. Each
Credit Party shall make available to Agent and its counsel, as quickly as is
possible under the circumstances, originals or copies of all books and records
that Agent may reasonably request. Each Credit Party shall deliver any document
or instrument necessary for Agent, as it may from time to time reasonably
request, to obtain records from any service bureau or other Person that
maintains records for such Person and shall maintain duplicate records or
supporting documentation on media, including computer tapes and discs owned by
such Person.

         1.11.    Taxes.

                  (a)      Any and all payments by each Borrower hereunder
         (including any payments made pursuant to Section 12) or under the Notes
         shall be made, in accordance with this Section 1.11, free and clear of
         and without deduction for any and all present or future Taxes. If any
         Borrower shall be required by law to deduct any Taxes from or in
         respect of any sum payable hereunder (including any sum payable
         pursuant to Section 12) or under the Notes, (i) the sum payable shall
         be increased as much as shall be necessary so that after making all
         required deductions (including deductions applicable to additional sums
         payable under this Section 1.11) Agent or Lenders, as applicable,
         receive an amount equal to the sum they would have received had no such
         deductions been made, (ii) such Borrower shall make such deductions,
         and (iii) such Borrower shall pay the full amount deducted to the
         relevant taxing or other authority in accordance with applicable law.
         Within thirty days after the date of any payment of Taxes, Borrower
         Representative shall furnish to Agent the original or a certified copy
         of a receipt evidencing payment thereof. Agent and Lenders shall not be
         obligated to return or refund any amounts received pursuant to this
         Section 1.11.

                  (b)      Each Credit Party shall jointly and severally
         indemnify and, within ten days of demand therefor, pay Agent and each
         Lender for the full amount of Taxes from or in respect of any sum
         payable hereunder (including any Taxes imposed by any jurisdiction on
         amounts payable under this Section 1.11) paid by Agent or such Lender,
         as appropriate, and any liability (including penalties, interest and
         expenses) arising

                                       10
<PAGE>

         therefrom or with respect thereto, whether or not such Taxes were
         correctly or legally asserted.

                  (c)      Each Lender organized under the laws of a
         jurisdiction outside the United States (a "Foreign Lender") as to which
         payments to be made under this Agreement or under the Notes are exempt
         from United States withholding tax under an applicable statute or tax
         treaty shall provide to Borrower Representative and Agent a properly
         completed and executed IRS Form W-8ECI or Form W-8BEN or other
         applicable form, certificate or document prescribed by the IRS or the
         United States certifying as to such Foreign Lender's entitlement to
         such exemption (a "Certificate of Exemption"). Any foreign Person that
         seeks to become a Lender under this Agreement shall provide a
         Certificate of Exemption to Borrower Representative and Agent prior to
         becoming a Lender hereunder. No foreign Person may become a Lender
         hereunder if such Person fails to deliver a Certificate of Exemption in
         advance of becoming a Lender.

         1.12.    Capital Adequacy; Increased Costs; Illegality.

                  (a)      If any Lender shall determine that any law, treaty,
         governmental (or quasi-governmental) rule, regulation, guideline or
         order regarding capital adequacy, reserve requirements or similar
         requirements or compliance by any Lender with any request or directive
         regarding capital adequacy, reserve requirements or similar
         requirements (whether or not having the force of law), in each case,
         adopted after the Closing Date, from any central bank or other
         Governmental Authority increases or would have the effect of increasing
         the amount of capital, reserves or other funds required to be
         maintained by such Lender and thereby reducing the rate of return on
         such Lender's capital as a consequence of its obligations hereunder,
         then Borrowers shall from time to time upon demand by such Lender (with
         a copy of such demand to Agent) pay to Agent, for the account of such
         Lender, additional amounts sufficient to compensate such Lender for
         such reduction. A certificate as to the amount of that reduction and
         showing the basis of the computation thereof submitted by such Lender
         to Borrower Representative and to Agent shall be final, conclusive and
         binding for all purposes, absent manifest error.

                  (b)      Due to either (i) the introduction of or any change
         in any law or regulation (or any change in the interpretation thereof)
         or (ii) the compliance with any guideline or request from any central
         bank or other Governmental Authority (whether or not having the force
         of law), in each case adopted after the Closing Date, if there shall be
         any increase in the cost to any Lender of agreeing to make or making,
         funding or maintaining any Term Loan, then Borrowers shall from time to
         time, upon demand by such Lender (with a copy of such demand to Agent),
         pay to Agent for the account of such Lender additional amounts
         sufficient to compensate such Lender for such increased cost. A
         certificate as to the amount of such increased cost submitted by such
         Lender to Borrower Representative and to Agent shall be conclusive and
         binding on Borrowers for all purposes, absent manifest error. Each
         Lender agrees that, as promptly as practicable after it becomes aware
         of any circumstances referred to above which would result in any such
         increased cost and to the extent not inconsistent with such Lender's
         internal policies of general application, the affected Lender shall use
         reasonable commercial efforts to

                                       11
<PAGE>

         minimize costs and expenses incurred by it and payable to it by
         Borrowers pursuant to this Section 1.12(b).

                  (c)      Within fifteen days after receipt by Borrower
         Representative of written notice and demand from any Lender (an
         "Affected Lender") for payment of additional amounts or increased costs
         as provided in Section 1.11(a) and Section 1.12(a) and (b), Borrower
         Representative may, at its option, notify Agent and such Affected
         Lender of its intention to replace the Affected Lender. So long as a
         Default or an Event of Default has not occurred and is not continuing,
         Borrower Representative, with the consent of Agent and at Borrowers'
         expense, may obtain a replacement Lender (a "Replacement Lender") for
         the Affected Lender, which Replacement Lender must be reasonably
         satisfactory to Agent. If Borrowers obtain a Replacement Lender within
         ninety days following notice of their intention to do so, the Affected
         Lender must sell and assign its Term Loans and Commitments to such
         Replacement Lender for an amount equal to the principal balance of all
         Term Loans held by the Affected Lender and all accrued interest and
         Fees with respect thereto through the date of such sale; provided that
         Borrowers shall have reimbursed such Affected Lender for the additional
         amounts or increased costs that it is entitled to receive under this
         Agreement through the date of such sale and assignment; provided,
         further, that such replacement shall not be deemed a "prepayment" of
         the Term Loans held by the Affected Lender for purposes of Section
         1.5(c). Notwithstanding the foregoing, Borrowers shall not have the
         right to obtain a Replacement Lender if the Affected Lender rescinds
         its demand for increased costs or additional amounts within fifteen
         days following its receipt of Borrowers' notice of intention to replace
         such Affected Lender. Furthermore, if Borrowers give a notice of
         intention to replace and do not so replace such Affected Lender within
         ninety days thereafter, Borrowers' rights under this Section 1.12(c)
         shall terminate and Borrowers shall promptly pay all increased costs or
         additional amounts demanded by such Affected Lender pursuant to Section
         1.11(a) and Section 1.12(a) and (b).

         1.13.    Single Loan. All Term Loans to each Borrower and all of the
other Obligations of each Borrower arising under this Agreement and the other
Loan Documents shall constitute one general obligation of such Borrower secured,
until the Termination Date, by all of the Collateral.

         1.14.    Joinder of Additional Borrowers. Any Person who is required to
become a Borrower hereunder, pursuant to Section 6.1(b), must (a) become a party
to this Agreement, (b) assume all of the Obligations as a Borrower and (iii) be
bound by all the terms, conditions, representations and warranties under the
Loan Documents. Without limiting the foregoing, such Person promises to be
jointly and severally liable along with the other Borrowers for the repayment of
the Obligations. Further, such Person shall provide the following to Agent, each
in form and substance satisfactory to Agent in its sole discretion:

                  (a)      a joinder agreement in substantially the form of
         Exhibit 1.14(a) (a "Joinder Agreement");

                  (b)      updated Schedules to this Agreement and the
         Perfection Certificate;

                                       12
<PAGE>

                  (c)      a Power of Attorney (as defined in the Security
         Agreement executed by Borrowers in favor of Agent, for the benefit of
         Agent and Lenders) executed by such Person;

                  (d)      an amendment to the Holdings Pledge Agreement,
         pledging 100% of the outstanding Stock of such Person to Agent, on
         behalf of Agent and Lenders, to secure the Obligations, accompanied by
         share certificates representing all of the outstanding Stock being
         pledged pursuant to such amendment and stock powers for such share
         certificates executed in blank;

                  (e)      evidence that Agent (for the benefit of itself and
         Lenders) has a valid and perfected first-priority security interest in
         the Collateral attributable to such Person, including (i) such
         documents duly executed by such Person (including financing statements
         under the Code and other applicable documents under the laws of any
         jurisdiction with respect to the perfection of Liens) as Agent may
         request in order to perfect its security interest in the Collateral
         attributable to such Person and (ii) copies of Code search reports
         listing all effective financing statements that name such Person as
         debtor, together with copies of such financing statements, none of
         which shall cover the Collateral, except for those relating to the
         Prior Lender Obligations (which shall be terminated on the date such
         Person becomes a Borrower);

                  (f)      such Person's (i) charter or similar document and all
         amendments thereto, (ii) good standing certificate (including
         verification of tax status) in its state of organization and (iii) good
         standing certificates (including verification of tax status) and
         certificates of qualification to conduct business in each jurisdiction
         where its ownership or lease of property or the conduct of its business
         requires such qualification, each dated a recent date prior to the date
         such Person becomes a Borrower and certified by the applicable
         Secretary of State or other authorized Governmental Authority;

                  (g)      such Person's bylaws, operating agreement or similar
         document, together with all amendments thereto and resolutions of such
         Person's Board of Directors or other governing body, approving and
         authorizing the execution, delivery and performance of the Loan
         Documents to which Person is a party, the Related Transactions, and the
         assumption of the Obligations, each certified as of the date such
         Person becomes a Borrower by such Person's corporate secretary or an
         assistant secretary as being in full force and effect without any
         modification or amendment;

                  (h)      signature and incumbency certificates of the officers
         of such Person executing any of the Loan Documents, certified as being
         true, accurate, correct and complete as of the date such Person becomes
         a Borrower by such Person's corporate secretary, an assistant secretary
         or another officer of such Person who did not execute any of the other
         Loan Documents;

                  (i)      evidence that such Person is Solvent; and

                                       13
<PAGE>

                  (j)      such other certificates, documents, opinions,
         agreements and information as Agent or any Lender may reasonably
         request.

         1.15.    Joinder of Additional Lenders. Borrowers may request that the
aggregate Commitment be increased one time on or before April 30, 2004 to an
amount not exceeding $75,000,000. Agent will use reasonable efforts to cause
such increase by offering such increase to Lenders currently party hereto or
other Persons reasonably satisfactory to Agent and Borrowers (each, an
"Additional Lender"). Such increase in the Commitments shall be subject to the
satisfaction of the following conditions as of the date of such increase:

                  (a)      neither a Default nor an Event of Default shall have
         occurred or be continuing;

                  (b)      such increase shall be in an amount at least equal to
         $5,000,000;

                  (c)      after giving effect to such increase, the aggregate
         Commitment shall not exceed $75,000,000;

                  (d)      Agent shall have received an acknowledgement
         agreement executed by each Additional Lender, the Credit Parties, Agent
         and each existing Lender in the form of Exhibit 1.15 (the
         "Acknowledgement Agreement");

                  (e)      Borrowers shall have executed and delivered Notes to
         each Lender and each Additional Lender to replace the existing Notes
         for each outstanding Term Loan as of such date, in accordance with the
         Acknowledgement Agreement;

                  (f)      Borrowers shall have executed and delivered
         amendments to the Mortgages to provide each Additional Lender's name
         and address and to acknowledge each Additional Lender's rights in the
         Collateral secured thereby, if such amendments are required by
         applicable law;

                  (g)      Credit Parties or LTF shall have paid the Fees
         specified in the Fee Letter and required by Section 1.5 and shall have
         reimbursed Agent for all fees, costs and expenses presented as of the
         date of such increase and not previously paid or reimbursed; and

                  (h)      each Additional Lender shall have made the amount of
         such Additional Lender's Pro Rata Share Outstanding of existing Term
         Loans (as set forth in the Acknowledgment Agreement) available to Agent
         in same day funds by wire transfer to Agent's account as set forth in
         Annex E not later than 3:00 p.m. (New York time) on the date of such
         increase, to be disbursed by Agent to Lenders other than Additional
         Lenders in accordance with the Acknowledgment Agreement.

On and after the date of such increase, Additional Lenders shall be considered
"Lenders" hereunder and parties to this Agreement, for purposes of this
Agreement and each other Loan Document, and Annexes F and G shall be replaced in
their entireties by Annexes F and G to the Acknowledgment Agreement.

                                       14
<PAGE>

2.       CONDITIONS PRECEDENT

         2.1.     Closing Conditions. No Lender shall be obligated to make any
Term Loan on the Closing Date or to take, fulfill, or perform any other action
under this Agreement, until the following conditions have been satisfied or
provided for in a manner satisfactory to Agent or waived in writing by Agent and
Lenders:

                  (a)      Loan Documents. This Agreement or counterparts hereof
         shall have been duly executed by and delivered to LTFAZ, each other
         Credit Party signatory hereto, Agent and Lenders; and Agent shall have
         received such documents, instruments, agreements and legal opinions as
         Agent shall reasonably request in connection with the transactions
         contemplated by the Loan Documents and the Related Transactions,
         including those listed in the Closing Checklist, each in form and
         substance reasonably satisfactory to Agent.

                  (b)      Approvals. Agent shall have received (i) satisfactory
         evidence that the Credit Parties and LTF have obtained all required
         consents and approvals of all Persons, including all requisite
         Governmental Authorities, to the execution, delivery and performance of
         this Agreement and the other Loan Documents and the consummation of the
         Related Transactions or (ii) officer's certificates in form and
         substance reasonably satisfactory to Agent affirming that no such
         consents or approvals are required.

                  (c)      Payment of Fees. Credit Parties or LTF shall have
         paid the Fees required to be paid on the Closing Date in the respective
         amounts specified in Section 1.5 (including the Fees specified in the
         Fee Letter) and shall have reimbursed Agent for all fees, costs and
         expenses of closing presented as of the Closing Date.

                  (d)      Capital Structure; Other Indebtedness. The capital
         structure of each Credit Party and the terms and conditions of all
         Indebtedness of each Credit Party shall be acceptable to Agent in its
         sole discretion.

                  (e)      Due Diligence. Agent shall have completed its
         business and legal due diligence with results reasonably satisfactory
         to Agent.

                  (f)      Solvency. Agent shall have received satisfactory
         evidence that each Credit Party and LTF are Solvent.

         2.2.     Conditions to Each Loan. Except as otherwise expressly
provided herein, no Lender shall be obligated to make any Term Loan related to a
Facility on or after the Closing Date, if, as of the funding date of such Term
Loan:

                  (a)      any representation or warranty by any Credit Party or
         LTF contained herein or in any other Loan Document, as applicable, is
         untrue or incorrect as of such date, except to the extent that such
         representation or warranty expressly relates to an earlier date and
         except for changes therein expressly permitted or expressly
         contemplated by this Agreement, and Agent or Requisite Lenders have
         determined not to make such

                                       15
<PAGE>

         Term Loan as a result of the fact that such warranty or representation
         is untrue or incorrect;

                  (b)      any event or circumstance having a Material Adverse
         Effect has occurred since the date hereof as determined by the
         Requisite Lenders and Agent, and Requisite Lenders have determined not
         to make such Term Loan as a result of the fact that such event or
         circumstance has occurred;

                  (c)      any Default or Event of Default has occurred and is
         continuing or would result after giving effect to such Term Loan, and
         Agent or Requisite Lenders have determined or, if GE Capital has at
         least 66 2/3% of the Commitments of all Lenders, any Lender has
         determined not to make such Term Loan as a result of that Default or
         Event of Default;

                  (d)      after giving effect to such Term Loan, the
         outstanding principal amount of the Term Loans would exceed the Maximum
         Amount; or

                  (e)      the conditions to funding such Term Loan set forth in
         Section 1.1(a) have not been met.

The request and acceptance by any Borrower of the proceeds of any Term Loan
shall be deemed to constitute, as of the date thereof, (i) a representation and
warranty by Borrowers that the conditions in this Section 2.2 have been
satisfied, (ii) an affirmation by Borrowers of the representations and
warranties contained in the Loan Documents and Related Transactions Documents
delivered pursuant to the Facility Funding Checklist and (ii) a reaffirmation by
Borrowers of the cross-guaranty provisions set forth in Section 12 and of the
granting and continuance of Agent's Liens, on behalf of itself and Lenders,
pursuant to the Collateral Documents.

3.       REPRESENTATIONS AND WARRANTIES

         To induce Lenders to make the Term Loans, the Credit Parties executing
this Agreement, jointly and severally, make the following representations and
warranties to Agent and each Lender with respect to all Credit Parties, each and
all of which shall survive the execution and delivery of this Agreement.

         3.1.     Corporate Existence; Compliance with Law.

                  (a)      Each Credit Party:

                           (i)      is a corporation, limited liability company
                  or limited partnership duly organized, validly existing and in
                  good standing under the laws of its respective jurisdiction of
                  incorporation or organization set forth in Disclosure Schedule
                  3.1;

                           (ii)     is duly qualified to conduct business and is
                  in good standing in each other jurisdiction where its
                  ownership or lease of property or the conduct of

                                       16
<PAGE>

                  its business requires such qualification, except where the
                  failure to be so qualified would not result in exposure to
                  losses, damages or liabilities in excess of $100,000;

                           (iii)    has the requisite power and authority and
                  the legal right to own, pledge, mortgage or otherwise encumber
                  and operate its properties, to lease the property it operates
                  under lease and to conduct its business as now, heretofore and
                  proposed to be conducted;

                           (iv)     subject to specific representations
                  regarding Environmental Laws, has all material licenses,
                  permits, consents or approvals from or by, has made all
                  material filings with and has given all material notices to
                  all Governmental Authorities having jurisdiction to the extent
                  required for such ownership, operation and conduct; and

                           (v)      is in compliance with its charter and bylaws
                  or partnership or operating agreement, as applicable.

                  (b)      Subject to specific representations set forth herein
         regarding ERISA, Environmental Laws, tax laws and other laws, each
         Credit Party is and will remain in compliance with all applicable
         provisions of all laws and regulations, including all applicable Bank
         Secrecy Act ("BSA") laws, regulations and government guidances on BSA
         compliance and on the prevention and detection of money laundering
         violations. Without in any way limiting the foregoing, each Credit
         Party has taken and will take all necessary steps to ensure that no
         Person who owns a controlling interest in or otherwise controls such
         Credit Party is or shall be (i) listed on the Specially Designated
         Nationals and Blocked Person List maintained by the Office of Foreign
         Assets Control ("OFAC"), Department of the Treasury and/or any other
         similar lists maintained by OFAC pursuant to any authorizing statute,
         Executive Order or regulation or (ii) a person designated under Section
         1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any
         related enabling legislation or any other similar Executive Order.

         3.2.     Executive Offices; Collateral Locations; FEIN. As of the
Closing Date, the current location of each Credit Party's chief executive office
and the warehouses and premises at which any Collateral is located are set forth
in Disclosure Schedule 3.2, and none of such locations has changed within the
twelve months preceding the Closing Date. In addition, Disclosure Schedule 3.2
lists the federal employer identification number of each Credit Party.

         3.3.     Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by each Credit Party and LTF of the Loan
Documents and the Related Transactions Documents to which it is a party and the
creation of all Liens provided for therein:

                  (a)      are within such Person's power;

                  (b)      have been duly authorized by all necessary corporate,
         limited liability company or limited partnership action;

                                       17
<PAGE>

                  (c)      do not contravene any provision of such Person's
         charter, bylaws or partnership or operating agreement, as applicable;

                  (d)      do not violate any law or regulation, or any order or
         decree of any court or Governmental Authority;

                  (e)      do not conflict with or result in the breach or
         termination of, constitute a default under or accelerate or permit the
         acceleration of any performance required by any indenture, mortgage,
         deed of trust, lease, agreement or other instrument to which such
         Person is a party or by which such Person or any of its property is
         bound;

                  (f)      do not result in the creation or imposition of any
         Lien upon any of the property of such Person other than those in favor
         of Agent, on behalf of itself and Lenders, pursuant to the Loan
         Documents; and

                  (g)      do not require the consent or approval of any
         Governmental Authority or any other Person, except those referred to in
         Section 2.1(b), all of which will have been duly obtained, made or
         complied with prior to the Closing Date. Each of the Loan Documents
         shall be duly executed and delivered by each Credit Party that is a
         party thereto and each such Loan Document shall constitute a legal,
         valid and binding obligation of such Credit Party enforceable against
         it in accordance with its terms.

         3.4.     Financial Statements and Projections. Except for the
Projections, all Financial Statements concerning LTF, the Credit Parties and
their Subsidiaries that are referred to below have been prepared in accordance
with GAAP consistently applied throughout the periods covered (except as
disclosed therein and except, with respect to unaudited Financial Statements,
for the absence of footnotes and normal year-end audit adjustments) and present
fairly in all material respects the financial position of the Persons covered
thereby as at the dates thereof and the results of their operations and cash
flows for the periods then ended.

                  (a)      Financial Statements. The following Financial
         Statements attached hereto as Disclosure Schedule 3.4(a) have been
         delivered on the date hereof:

                           (i)      the audited consolidated and consolidating
                  balance sheets at December 31, 2001 and 2002 and the related
                  statements of income and cash flows of LTF and its
                  Subsidiaries for the Fiscal Years then ended, together with
                  the unqualified opinion of LTF's independent auditors rendered
                  with respect thereto;

                           (ii)     the unaudited balance sheets at October 31,
                  2003 and the related statements of income of LTF and its
                  Subsidiaries for the Fiscal Month then ended.

                  (b)      Projections. The Projections delivered on the date
         hereof and attached hereto as Disclosure Schedule 3.4(b) have been
         prepared by the Credit Parties and LTF in light of the past operations
         of their businesses and reflect projections for the period from
         November 1, 2003 through December 31, 2007 on a month-by-month basis.
         The Projections are based upon estimates and assumptions stated
         therein, all of which the Credit Parties believe to be reasonable and
         fair in light of current conditions and current

                                       18
<PAGE>

         facts known to the Credit Parties and, as of the Closing Date, reflect
         the Credit Parties' good faith and reasonable estimates of the future
         financial performance of the Credit Parties and LTF and of the other
         information projected therein for the period set forth therein.

         3.5.     Material Adverse Effect. Between December 31, 2002 and the
Closing Date, (a) no Credit Party has incurred any obligations, contingent or
noncontingent liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments that are not reflected in the Financial
Statements attached hereto as Disclosure Schedule 3.4(a) and that, alone or in
the aggregate, could reasonably be expected to have a Material Adverse Effect,
(b) no contract, lease or other agreement or instrument has been entered into by
any Credit Party or has become binding upon any Credit Party's assets and no law
or regulation applicable to any Credit Party has been adopted that has had or
could reasonably be expected to have a Material Adverse Effect, (c) no Credit
Party is in default and to the best of Borrowers' knowledge no third party is in
default under any material contract, lease or other agreement or instrument that
alone or in the aggregate could reasonably be expected to have a Material
Adverse Effect and that are not reflected in the Projections attached hereto as
Disclosure Schedule 3.4(b), and (d) no event has occurred, that alone or
together with other events, could reasonably be expected to have a Material
Adverse Effect.

         3.6.     Ownership of Property; Liens. As of the Closing Date, the real
estate listed in Disclosure Schedule 3.6 (the "Real Estate") constitutes all of
the real property owned by Borrowers. Each Borrower owns good and marketable fee
simple title to all of its Real Estate as described on Disclosure Schedule 3.6.
Disclosure Schedule 3.6 further describes any Real Estate with respect to which
any Borrower is a lessor, sublessor or assignor as of the Closing Date.
Borrowers do not lease, sublease or use any real property owned by any other
Person. Each Credit Party also has good and marketable title to, or valid
leasehold interests in, all of its personal property and assets, which are only
located on or in the Real Estate. As of the Closing Date, none of the properties
and assets of any Credit Party are subject to any Liens other than Permitted
Encumbrances, and there are no facts, circumstances or conditions known to any
Credit Party that may result in any Liens (including Liens arising under
Environmental Laws) on the Collateral other than Permitted Encumbrances. Each
Borrower has received all deeds, assignments, waivers, consents, nondisturbance
and attornment or similar agreements, bills of sale and other documents and has
duly effected all recordings, filings and other actions necessary to establish,
protect and perfect such Borrower's right, title and interest in and to all such
Real Estate and other properties and assets. Disclosure Schedule 3.6 also
describes any purchase options, rights of first refusal or other similar
contractual rights pertaining to any Real Estate. As of the Closing Date, no
portion of the Real Estate has suffered any material damage by fire or other
casualty loss that has not heretofore been repaired and restored in all material
respects to its original condition or otherwise remedied. As of the Closing
Date, all material permits required to have been issued or appropriate to enable
the Real Estate to be lawfully occupied and used for all of the purposes for
which it is currently occupied and used have been lawfully issued and are in
full force and effect.

         3.7.     Labor Matters. As of the Closing Date:

                                       19
<PAGE>

                  (a)      no strikes or other material labor disputes against
         any Credit Party are pending or, to any Credit Party's knowledge,
         threatened;

                  (b)      hours worked by and payment made to employees of each
         Credit Party comply with the Fair Labor Standards Act and each other
         federal, state, local or foreign law applicable to such matters;

                  (c)      all payments due from any Credit Party for employee
         health and welfare insurance have been paid or accrued as a liability
         on the books of such Credit Party;

                  (d)      except as set forth in Disclosure Schedule 3.7, no
         Credit Party is a party to or bound by any collective bargaining
         agreement, management agreement, consulting agreement, employment
         agreement, bonus, restricted stock, stock option, or stock appreciation
         plan or agreement or any similar plan, agreement or arrangement (and
         true and complete copies of any agreements described on Disclosure
         Schedule 3.7 have been delivered to Agent);

                  (e)      there is no organizing activity involving any Credit
         Party pending or, to any Credit Party's knowledge, threatened or
         proposed by any labor union or group of employees;

                  (f)      there are no representation proceedings pending or,
         to any Credit Party's knowledge, threatened with the National Labor
         Relations Board, and no labor organization or group of employees of any
         Credit Party has made a pending demand for recognition; and

                  (g)      except as set forth in Disclosure Schedule 3.7, there
         are no material complaints or charges against any Credit Party pending
         or, to the knowledge of any Credit Party, threatened to be filed with
         any Governmental Authority or arbitrator based on, arising out of, in
         connection with or otherwise relating to the employment or termination
         of employment by any Credit Party of any individual.

         3.8.     Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Disclosure Schedule 3.8, as of the Closing
Date, the Credit Parties do not have any Subsidiaries that are not Credit
Parties, are not engaged in any joint venture or partnership with any other
Person, and are not Affiliates of any other Person that is not a Credit Party.
All of the issued and outstanding Stock of each Credit Party are owned by each
of the Stockholders and in the amounts set forth in Disclosure Schedule 3.8.
Except as set forth in Disclosure Schedule 3.8, there are no outstanding rights
to purchase, options, warrants or similar rights or agreements pursuant to which
any Credit Party may be required to issue, sell, repurchase or redeem any of its
Stock or other equity securities or any Stock or other equity securities of its
Subsidiaries. All outstanding Indebtedness and Guaranteed Indebtedness of each
Credit Party as of the Closing Date (except for the Obligations) is described in
Section 6.3 (including Disclosure Schedule 6.3).

         3.9.     Government Regulation. No Credit Party is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for an "investment company," as

                                       20
<PAGE>

such terms are defined in the Investment Company Act of 1940. No Credit Party is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, or any other federal or state statute that restricts or
limits its ability to incur Indebtedness or to perform its obligations
hereunder. The making of the Term Loans by Lenders to Borrowers, the application
of the proceeds thereof and repayment thereof and the consummation of the
Related Transactions will not violate any provision of any such statute or any
rule, regulation or order issued by the Securities and Exchange Commission.

         3.10.    Margin Regulations. No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" as such terms are defined in Regulation U of the Federal Reserve Board as
now and from time to time hereafter in effect ("Margin Stock"). No Credit Party
owns any Margin Stock, and none of the proceeds of the Term Loans will be used,
directly or indirectly, for the purpose of purchasing or carrying any Margin
Stock, for the purpose of reducing or retiring any Indebtedness that was
originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Term Loans to be considered a "purpose
credit" within the meaning of Regulations T, U or X of the Federal Reserve
Board. No Credit Party will take or permit to be taken any action that might
cause any Loan Document to violate any regulation of the Federal Reserve Board.

         3.11.    Taxes. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Credit Party or, with respect to the Facilities, LTF have been filed with the
appropriate Governmental Authority and all Charges have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof (or any such fine, penalty, interest, late charge or loss
has been paid), excluding Charges or other amounts being contested in accordance
with Section 5.2(b). Proper and accurate amounts have been withheld by each
Credit Party from its respective employees for all periods in full and complete
compliance with all applicable federal, state, local and foreign laws and such
withholdings have been timely paid to the respective Governmental Authorities.
Disclosure Schedule 3.11 sets forth as of the Closing Date those taxable years
for which any Credit Party's tax returns are currently being audited by the IRS
or any other applicable Governmental Authority, and any assessments or
threatened assessments in connection with such audit or otherwise currently
outstanding. Except as described in Disclosure Schedule 3.11, no Credit Party
or, with respect to the Facilities, LTF has executed or filed with the IRS or
any other Governmental Authority any agreement or other document extending, or
having the effect of extending, the period for assessment or collection of any
Charges. None of the Credit Parties or their respective predecessors are liable
for any Charges (a) under any agreement (including any tax sharing agreement),
or (b) to each Credit Party's knowledge, as a transferee. As of the Closing
Date, no Credit Party has agreed or been requested to make any adjustment under
IRC Section 481(a), by reason of a change in accounting method or otherwise,
which would have a Material Adverse Effect.

         3.12.    ERISA.

                  (a)      Disclosure Schedule 3.12 lists (i) all ERISA
         Affiliates and (ii) all Plans and separately identifies all Pension
         Plans, including Title IV Plans, Multiemployer

                                       21
<PAGE>

         Plans, ESOPs and Welfare Plans, including all Retiree Welfare Plans.
         Copies of all such listed Plans, together with a copy of the latest
         IRS/DOL 5500-series form for each such Plan, have been delivered to
         Agent. Except with respect to Multiemployer Plans, each Qualified Plan
         has been determined by the IRS to qualify under Section 401 of the IRC,
         the trusts created thereunder have been determined to be exempt from
         tax under the provisions of Section 501 of the IRC, and nothing has
         occurred that would cause the loss of such qualification or tax-exempt
         status. Each Plan is in compliance with the applicable provisions of
         ERISA and the IRC, including the timely filing of all reports required
         under the IRC or ERISA, including the statement required by 29 C.F.R.
         Section 2520.104-23. Neither any Credit Party nor ERISA Affiliate has
         failed to make any contribution or pay any amount due as required by
         either Section 412 of the IRC or Section 302 of ERISA or the terms of
         any such Plan. Neither any Credit Party nor ERISA Affiliate has engaged
         in a "prohibited transaction," as defined in Section 406 of ERISA and
         Section 4975 of the IRC, in connection with any Plan that would subject
         any Credit Party to a material tax on prohibited transactions imposed
         by Section 502(i) of ERISA or Section 4975 of the IRC.

                  (b)      Except as set forth in Disclosure Schedule 3.12,

                           (i)      no Title IV Plan has any Unfunded Pension
                  Liability;

                           (ii)     no ERISA Event or event described in Section
                  4062(e) of ERISA with respect to any Title IV Plan has
                  occurred or is reasonably expected to occur;

                           (iii)    there are no pending, or to the knowledge of
                  any Credit Party, threatened claims (other than claims for
                  benefits in the normal course), sanctions, actions or
                  lawsuits, asserted or instituted against any Plan or any
                  Person as fiduciary or sponsor of any Plan;

                           (iv)     no Credit Party or ERISA Affiliate has
                  incurred or reasonably expects to incur any liability as a
                  result of a complete or partial withdrawal from a
                  Multiemployer Plan;

                           (v)      within the last five years, no Title IV Plan
                  of any Credit Party or ERISA Affiliate has been terminated,
                  whether or not in a "standard termination" as that term is
                  used in Section 4041(b)(1) of ERISA, nor has any Title IV Plan
                  of any Credit Party or any ERISA Affiliate (determined at any
                  time within the last five years) with Unfunded Pension
                  Liabilities been transferred outside of the "controlled group"
                  (within the meaning of Section 4001(a)(14) of ERISA) of any
                  Credit Party or ERISA Affiliate (determined at such time);

                           (vi)     except in the case of any ESOP, Stock of all
                  Credit Parties and their ERISA Affiliates makes up, in the
                  aggregate, no more than 10% of fair market value of the assets
                  of any Plan, measured on the basis of fair market value as of
                  the latest valuation date of any Plan; and

                                       22
<PAGE>

                           (vii)    no liability under any Title IV Plan has
                  been satisfied with the purchase of a contract from an
                  insurance company that is not rated AAA by the Standard &
                  Poor's Ratings Group or an equivalent rating by another
                  nationally-recognized rating agency.

         3.13.    No Litigation. No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any Credit
Party, threatened against any Credit Party before any Governmental Authority or
before any arbitrator or panel of arbitrators (collectively, "Litigation") (a)
that challenges any Credit Party's right or power to enter into or perform any
of its obligations under the Loan Documents to which it is a party or the
validity or enforceability of any Loan Document or any action taken thereunder
or (b) that has a reasonable risk of being determined adversely to any Credit
Party and that, if so determined, could reasonably be expected to have a
Material Adverse Effect. Except as set forth on Disclosure Schedule 3.13, as of
the Closing Date there is no Litigation pending or, to any Credit Party's
knowledge, threatened, that seeks damages in excess of $100,000 or injunctive
relief against any Credit Party or that alleges criminal misconduct of any
Credit Party.

         3.14.    Brokers. No broker or finder brought about the obtaining,
making or closing of the Term Loans or the Related Transactions, and no Credit
Party or Affiliate thereof has any obligation to any Person in respect of any
finder's or brokerage fees in connection therewith.

         3.15.    Intellectual Property. As of the Closing Date, each Credit
Party owns or has rights to use all Intellectual Property necessary to continue
to conduct its business as now or heretofore conducted by it or proposed to be
conducted by it, and each Patent, Trademark, Copyright and License is listed,
together with application or registration numbers, as applicable, in Disclosure
Schedule 3.15. Each Credit Party conducts its business and affairs without
infringement of or interference with any intellectual property of any other
Person in any material respect. Except as set forth in Disclosure Schedule 3.15,
no Credit Party is aware of any infringement claim by any other Person with
respect to any Intellectual Property.

         3.16.    Full Disclosure. No information contained in the Loan
Documents, the Projections, the Financial Statements, the Related Transactions
Documents or other written reports from time to time delivered hereunder or any
written statement furnished by or on behalf of any Credit Party or LTF to Agent
or any Lender pursuant to the terms of this Agreement contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
materially misleading in light of the circumstances under which they were made.
The Liens granted to Agent, on behalf of itself and Lenders, pursuant to the
Collateral Documents will at all times be fully-perfected first-priority Liens
in and to the Collateral described therein, subject, as to priority, only to
Permitted Encumbrances.

         3.17.    Environmental Matters.

                  (a)      Except as set forth in Disclosure Schedule 3.17, with
         respect to any Facility as of the funding date of such Facility:

                                       23
<PAGE>

                           (i)      the Real Estate is free of contamination
                  from any Hazardous Material except for such contamination that
                  would not adversely impact the value or marketability of such
                  Real Estate and that would not result in Environmental
                  Liabilities that could reasonably be expected to exceed
                  $50,000;

                           (ii)     no Credit Party and no Affiliate of any
                  Credit Party has caused or suffered to occur any Release of
                  Hazardous Materials on, at, in, under, above, to, from or
                  about the Real Estate that could reasonably be expected to
                  result in Environmental Liabilities;

                           (iii)    the Credit Parties and the Affiliates of the
                  Credit Parties are and have been in compliance with all
                  Environmental Laws, except for such noncompliance that would
                  not result in Environmental Liabilities that could reasonably
                  be expected to exceed $50,000;

                           (iv)     the Credit Parties and the Affiliates of the
                  Credit Parties have obtained, and are in compliance with, all
                  Environmental Permits required for the operations of their
                  respective businesses as presently conducted or as proposed to
                  be conducted, except where the failure to so obtain or comply
                  with such Environmental Permits would not result in
                  Environmental Liabilities that could reasonably be expected to
                  exceed $50,000, and all such Environmental Permits are valid,
                  uncontested and in good standing;

                           (v)      no Credit Party and no Affiliate of any
                  Credit Party is involved in operations or knows of any facts,
                  circumstances or conditions, including any Releases of
                  Hazardous Materials, that are likely to result in any
                  Environmental Liabilities that could reasonably be expected to
                  exceed $50,000, and no Credit Party has permitted any current
                  or former tenant or occupant of the Real Estate to engage in
                  any such operations;

                           (vi)     there is no Litigation arising under or
                  related to any Environmental Laws, Environmental Permits or
                  Hazardous Material that seeks damages, penalties, fines, costs
                  or expenses in excess of $50,000 or injunctive relief against,
                  or that alleges criminal misconduct by any Credit Party or any
                  Affiliate of a Credit Party;

                           (vii)    no notice has been received by any Credit
                  Party or any Affiliate of a Credit Party identifying it as a
                  "potentially responsible party" or requesting information
                  under CERCLA or analogous state statutes, and to the knowledge
                  of the Credit Parties, there are no facts, circumstances or
                  conditions that may result in any Credit Party or any
                  Affiliate of a Credit Party being identified as a "potentially
                  responsible party" under CERCLA or analogous state statutes;
                  and

                           (viii)   the Credit Parties have provided to Agent
                  copies of all existing environmental reports, reviews and
                  audits and all written information pertaining

                                       24
<PAGE>

                  to actual or potential Environmental Liabilities, in each case
                  relating to the Real Estate.

                  (b)      Each Credit Party hereby acknowledges and agrees that
         Agent (i) is not now, and has not ever been, in control of any of the
         Real Estate or any Credit Party's affairs and (ii) does not have the
         capacity through the provisions of the Loan Documents or otherwise to
         influence any Credit Party's or any Credit Party's Affiliate's conduct
         with respect to the ownership, operation or management of any of its
         Real Estate or compliance with Environmental Laws or Environmental
         Permits.

         3.18.    Insurance. Disclosure Schedule 3.18 lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party or, with respect to the Facilities, by LTF, as
well as a summary of the terms of each such policy.

         3.19.    Trade Relations. As of the Closing Date, there exists no
actual or, to the knowledge of any Credit Party, threatened termination or
cancellation of, or any material adverse modification or change in the business
relationship of any Credit Party with any supplier material to its operations.

         3.20.    Agreements and Other Documents. As of the Closing Date, each
Credit Party has provided to Agent or its counsel, on behalf of Lenders,
accurate and complete copies (or summaries) of all of the following agreements
or documents to which it is subject and each of which is listed in Disclosure
Schedule 3.20: (a) supply agreements and purchase agreements not terminable by
such Credit Party within sixty days following written notice issued by such
Credit Party and involving transactions in excess of $1,000,000 per annum; (b)
leases of Equipment having a remaining term of one year or longer and requiring
aggregate rental and other payments in excess of $500,000 per annum; (c)
licenses and permits held by the Credit Parties or, with respect to the
operation of the Facilities, by LTF, the absence of which could reasonably be
expected to have a Material Adverse Effect; (d) instruments and documents
evidencing any Indebtedness or Guaranteed Indebtedness of such Credit Party and
any Lien granted by such Credit Party with respect thereto; and (e) instruments
and agreements evidencing the issuance of any equity securities, warrants,
rights or options to purchase equity securities of such Credit Party.

         3.21.    Solvency. Both before and after giving effect to (a) the Term
Loans to be made on the Closing Date or such other date as Term Loans requested
hereunder are made, (b) the disbursement of the proceeds of such Term Loans
pursuant to the instructions of Borrower Representative; (c) the Refinancings
and the consummation of the other Related Transactions; and (d) the payment and
accrual of all transaction costs in connection with the foregoing, each Credit
Party is and will be Solvent.

         3.22.    Status of the Credit Parties. Prior to the Closing Date, the
Credit Parties will not have engaged in any business or incurred any
Indebtedness or any other liabilities (except in connection with their corporate
formation, the Loan Documents and the Related Transactions). Holdings does not
have and will not acquire any right, title or interest in Inventory, Equipment
or

                                       25
<PAGE>

Accounts. As of the Closing Date, the Credit Parties do not have any
Indebtedness other than the Obligations.

4.       FINANCIAL STATEMENTS AND INFORMATION

         4.1.     Reports and Notices. Each Credit Party hereby agrees that from
and after the Closing Date and until the Termination Date, it shall deliver to
Agent or to Agent and Lenders, as required, the Financial Statements, notices,
Projections and other information at the times, to the Persons and in the manner
set forth in Annex C.

         4.2.     Communication with Accountants. Each Credit Party authorizes
Agent and each Lender to communicate directly with such Credit Party's
independent certified public accountants after an Event of Default has occurred
and during the period such Event of Default is continuing and authorizes and, at
Agent's request, shall instruct those accountants and advisors to disclose and
make available to Agent and each Lender any and all Financial Statements and
other supporting financial documents, schedules and information relating to any
Credit Party (including copies of any issued management letters) with respect to
the business, financial condition and other affairs of any Credit Party after an
Event of Default has occurred and during the period such Event of Default is
continuing.

5.       AFFIRMATIVE COVENANTS

         Each Credit Party jointly and severally agrees as to all Credit Parties
that from and after the date hereof and until the Termination Date:

         5.1.     Maintenance of Existence and Conduct of Business. Each Credit
Party shall: do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its rights and franchises;
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; at all times maintain, preserve and protect all of its
assets and properties used or useful in the conduct of its business, and keep
the same in good repair, working order and condition in all material respects
(taking into consideration ordinary wear and tear) and from time to time make,
or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices; and transact business
only in such corporate and trade names as are set forth in Disclosure Schedule
5.1.

         5.2.     Payment of Charges.

                  (a)      Subject to Section 5.2(b), the Credit Parties shall
         pay and discharge or cause to be paid and discharged promptly all
         Charges payable by them that could reasonably be expected to exceed
         $100,000 in the aggregate, including (i) Charges imposed upon it, its
         income and profits, or any of its property (real, personal or mixed)
         and all Charges with respect to tax, social security and unemployment
         withholding with respect to its employees, (ii) lawful claims for
         labor, materials, supplies and services or otherwise, and (iii) all
         storage or rental charges payable to warehousemen or bailees, in each
         case, before any thereof shall become past due.

                                       26
<PAGE>

                  (b)      Each Credit Party may in good faith contest, by
         appropriate proceedings, the validity or amount of any Charges, Taxes
         or claims described in Section 5.2(a); provided that (i) adequate
         reserves with respect to such contest are maintained on the books of
         such Credit Party, in accordance with GAAP; (ii) no Lien shall be
         imposed to secure payment of such Charges (other than payments to
         warehousemen and/or bailees) that is superior to any of the Liens
         securing the Obligations and such contest is maintained and prosecuted
         continuously and with diligence and operates to suspend collection or
         enforcement of such Charges; (iii) none of the Collateral becomes
         subject to forfeiture or loss as a result of such contest; (iv) such
         Credit Party shall promptly pay or discharge such contested Charges,
         Taxes or claims and all additional charges, interest, penalties and
         expenses, if any, and shall deliver to Agent evidence reasonably
         acceptable to Agent of such compliance, payment or discharge, if such
         contest is terminated or discontinued adversely to such Credit Party or
         the conditions set forth in this Section 5.2(b) are no longer met; (v)
         such Credit Party shall promptly notify Agent of its intent to contest
         such Charges, Taxes or Claims, and (vi) the nonpayment or nondischarge
         thereof could not reasonably be expected to have or result in a
         Material Adverse Effect.

         5.3.     Books and Records. Each Credit Party shall keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements attached as Disclosure Schedule
3.4(a).

         5.4.     Insurance; Damage to or Destruction of Collateral.

                  (a)      The Credit Parties shall, at their sole cost and
         expense, maintain the policies of insurance described on Disclosure
         Schedule 3.18 as in effect on the date hereof or otherwise in form and
         amounts and with insurers reasonably acceptable to Agent. Such policies
         of insurance (or the loss payable and additional insured endorsements
         delivered to Agent) shall contain provisions pursuant to which the
         insurer agrees to provide thirty days' prior written notice to Agent in
         the event of any non-renewal, cancellation or amendment of any such
         insurance policy. If any Credit Party at any time or times hereafter
         shall fail to obtain or maintain any of the policies of insurance
         required above or to pay all premiums relating thereto, Agent may at
         any time or times thereafter obtain and maintain such policies of
         insurance and pay such premiums and take any other action with respect
         thereto that Agent deems advisable. Agent shall have no obligation to
         obtain insurance for any Credit Party or pay any premiums therefor. By
         doing so, Agent shall not be deemed to have waived any Default or Event
         of Default arising from any Credit Party's failure to maintain such
         insurance or pay any premiums therefor. All sums so disbursed,
         including reasonable attorneys' fees, court costs and other charges
         related thereto, shall be payable on demand by Borrowers to Agent and
         shall be additional Obligations hereunder secured by the Collateral.

                  (b)      Agent reserves the right at any time upon any change
         in any Credit Party's risk profile (including any change in the tenant
         or the risk profile of any tenant for any Facility or any change in any
         laws affecting the potential liability of a Credit Party) to require
         additional forms and limits of insurance to, in Agent's opinion,
         adequately protect

                                       27
<PAGE>

         both Agent's and Lenders' interests in all or any portion of the
         Collateral and to ensure that each Credit Party is protected by
         insurance in amounts and with coverage customary for its industry. If
         reasonably requested by Agent, each Credit Party shall deliver to Agent
         from time to time a report of a reputable insurance broker, reasonably
         satisfactory to Agent, with respect to its insurance policies.

                  (c)      Borrowers shall deliver to Agent, in form and
         substance reasonably satisfactory to Agent, endorsements to (i) all
         "All Risk" and business interruption insurance naming Agent, on behalf
         of itself and Lenders, as loss payee, and (ii) all general liability
         and other liability policies naming Agent, on behalf of itself and
         Lenders, as additional insured. Borrower Representative shall promptly
         notify Agent of any loss, damage, or destruction to the Collateral in
         the amount of $250,000 or more, whether or not covered by insurance.

                           (i)      Insurance Claims During an Event of Default.
                  Each Borrower irrevocably makes, constitutes and appoints
                  Agent (and all officers, employees or agents designated by
                  Agent), so long as any Event of Default has occurred and is
                  continuing, as such Borrower's true and lawful agent and
                  attorney-in-fact for the purpose of making, settling and
                  adjusting claims under such "All Risk" policies of insurance,
                  endorsing the name of such Borrower on any check or other item
                  of payment for the proceeds of such "All Risk" policies of
                  insurance and for making all determinations and decisions with
                  respect to such "All Risk" policies of insurance. Agent shall
                  have no duty to exercise any rights or powers granted to it
                  pursuant to the foregoing power-of-attorney. After deducting
                  from such proceeds the expenses incurred by Agent in the
                  collection or handling thereof, at its option, Agent may apply
                  or, upon the request of Requisite Lenders, Agent shall apply
                  such proceeds to the reduction of the Obligations, in
                  accordance with Section 1.2(c), or permit or require the
                  applicable Borrower to use such money, or any part thereof, to
                  replace, repair, restore or rebuild the Collateral in a
                  diligent and expeditious manner with materials and workmanship
                  of substantially the same quality as existed before the loss,
                  damage or destruction.

                           (ii)     Insurance Claims Exceeding $1,000,000 Absent
                  an Event of Default. If the anticipated insurance proceeds
                  exceed $1,000,000 and an Event of Default has not occurred and
                  is not continuing, the applicable Borrower shall obtain
                  Agent's written consent with respect to the making, settling
                  and adjusting of claims under such "All Risk" policies of
                  insurance. Agent may apply such proceeds to the reduction of
                  the Obligations, in accordance with Section 1.2(c), or permit
                  or require the applicable Borrower to use such money, or any
                  part thereof, to replace, repair, restore or rebuild the
                  Collateral in a diligent and expeditious manner with materials
                  and workmanship of substantially the same quality as existed
                  before the loss, damage or destruction; provided that if Agent
                  elects to apply the proceeds of insurance to the reduction of
                  the Obligations, Borrower shall not be required to replace,
                  repair, restore or rebuild the Collateral, notwithstanding any
                  contrary provision of the applicable Mortgage or the
                  applicable Facility Lease. In its discretion, Agent may hold
                  all insurance

                                       28
<PAGE>

                  proceeds that are to be made available to any Borrower to
                  replace, restore, repair or rebuild the Collateral as
                  additional Collateral for the Obligations and/or may impose
                  usual and customary construction disbursement restrictions on
                  disbursement of such funds to any Borrower; provided that if
                  Agent elects to hold such insurance proceeds as additional
                  Collateral, it shall have no obligation to segregate such
                  proceeds from any other funds of any Person and any interest
                  earned on such proceeds shall be for the account of Agent.

                           (iii)    Insurance Claims Up to $1,000,000 Absent an
                  Event of Default. If the anticipated insurance proceeds do not
                  exceed $1,000,000 and an Event of Default has not occurred and
                  is not continuing, the applicable Borrower may make, settle,
                  and adjust claims related thereto and may replace, restore,
                  repair or rebuild the Collateral; provided that if such
                  Borrower shall not have completed or entered into binding
                  agreements to complete such replacement, restoration, repair
                  or rebuilding within 180 days of the related casualty, such
                  Borrower shall pay the proceeds to Agent for application to
                  the Obligations, in accordance with Section 1.2(c).

Application of insurance proceeds in accordance with this Section 5.4(c) and
Section 1.2(c) shall reduce the balance of the applicable Term Loans to the
extent of such application, but shall not otherwise modify the Credit Parties'
Obligations hereunder.

         5.5.     Compliance with Laws. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including those relating to ERISA, labor matters and Environmental Laws and
Environmental Permits, except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

         5.6.     Supplemental Disclosure. From time to time as may be
reasonably requested by Agent (which request will not be made more frequently
than once each year absent the occurrence and continuance of a Default or an
Event of Default), the Credit Parties shall supplement each Disclosure Schedule
hereto, or any representation herein or in any other Loan Document, with respect
to any matter hereafter arising that, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or that is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall amend,
supplement or otherwise modify any Disclosure Schedule or representation or be
or be deemed a waiver of any Default or Event of Default resulting from the
matters disclosed therein, except as consented to by Agent and Requisite Lenders
in writing and (b) no supplement shall be required or permitted as to
representations and warranties that relate solely to the Closing Date.

                                       29
<PAGE>

         5.7.     Intellectual Property. Each Credit Party will conduct its
business and affairs without infringement of or interference with any
intellectual property of any other Person in any material respect.

         5.8.     Environmental Matters. Each Credit Party shall and shall cause
each Person within its control to (a) conduct its operations and keep and
maintain the Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are appropriate or
necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining to
the presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate; (c) notify Agent promptly after such Credit Party
becomes aware of any violation of Environmental Laws or Environmental Permits or
any Release on, at, in, under, above, to, from or about the Real Estate that is
reasonably likely to result in Environmental Liabilities in excess of $50,000;
and (d) promptly forward to Agent a copy of any order, notice, request for
information or any communication or report received by such Credit Party in
connection with any such violation or Release or any other matter relating to
any Environmental Laws or Environmental Permits that could reasonably be
expected to result in Environmental Liabilities in excess of $50,000, in each
case whether or not the Environmental Protection Agency or any Governmental
Authority has taken or threatened any action in connection with any such
violation, Release or other matter. If Agent at any time has a reasonable basis
to believe that there may be a violation of any Environmental Laws or
Environmental Permits by any Credit Party or any Environmental Liability arising
thereunder, or a Release of Hazardous Materials on, at, in, under, above, to,
from or about any of the Real Estate that, in each case, could reasonably be
expected to have a Material Adverse Effect, then upon Agent's written request,
each Credit Party shall (i) cause the performance of such environmental audits,
including subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrowers' expense, as Agent may from time to time
reasonably request, which shall be conducted by reputable environmental
consulting firms reasonably acceptable to Agent and shall be in form and
substance reasonably acceptable to Agent, and (ii) permit Agent or its
representatives to have access to all Real Estate for the purpose of conducting
such environmental audits and testing as Agent deems appropriate, including
subsurface sampling of soil and groundwater. Borrowers shall reimburse Agent for
the costs of such audits and tests and the same will constitute a part of the
Obligations secured by the Collateral.

         5.9.     Landlords' Agreements, Mortgagee Agreements and Bailee
Letters. Each Credit Party shall obtain a landlord's agreement, mortgagee
agreement or bailee letter, as applicable, from the lessor of each leased
property, mortgagee of owned property or bailee with respect to any warehouse,
processor or converter facility or other location where Collateral is stored or
located, which agreement or letter shall contain a waiver or subordination of
all Liens or claims that the landlord, mortgagee or bailee may assert against
the Collateral at that location, and shall otherwise be reasonably satisfactory
in form and substance to Agent. No real property or warehouse space shall be
leased by any Credit Party and no Inventory shall be shipped to a processor or
converter without the prior written consent of Agent or, unless and until a
reasonably satisfactory landlord agreement or bailee letter, as appropriate,
shall first have been

                                       30
<PAGE>

obtained with respect to such location. Each Credit Party shall timely and fully
pay and perform its obligations under all leases and other agreements with
respect to each leased location or public warehouse where any Collateral is or
may be located.

         5.10.    Real Estate Purchases. To the extent otherwise permitted
hereunder, if any Credit Party proposes to acquire a fee ownership interest in
Real Estate after the Closing Date, it shall first provide to Agent a mortgage
or deed of trust granting Agent a first-priority Lien on such Real Estate,
together with environmental audits, mortgage title insurance commitment, real
property survey, local counsel opinions and, if required by Agent, supplemental
casualty insurance and flood insurance, and such other documents, instruments or
agreements reasonably requested by Agent, in each case, in form and substance
reasonably satisfactory to Agent.

         5.11.    Further Assurances. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Agent, duly execute and deliver, or cause to
be duly executed and delivered, to Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper, in the
reasonable opinion of Agent, to carry out more effectively the provisions and
purposes of the Loan Documents.

6.       NEGATIVE COVENANTS

         Each Credit Party jointly and severally agrees as to all Credit Parties
that from and after the date hereof and until the Termination Date:

         6.1.     Mergers, Subsidiaries, Etc.

                  (a)      The Credit Parties shall not directly or indirectly,
         by operation of law or otherwise, (a) form or acquire any Subsidiary,
         or (b) merge with, consolidate with, acquire all or substantially all
         of the assets or Stock of, or otherwise combine with or acquire, any
         Person.

                  (b)      Notwithstanding the prohibition of Section 6.1(a),
         any Borrower may acquire a Facility and Holdings may form a
         wholly-owned domestic Subsidiary to acquire a Facility (each, a
         "Permitted Acquisition"), in each case subject to the following
         conditions:

                           (i)      in the case of a Permitted Acquisition by a
                  newly-formed Subsidiary, such Subsidiary shall become a
                  Borrower hereunder, pursuant to Section 1.14, and Holdings
                  shall pledge the Stock of such Subsidiary to Agent, for the
                  benefit of Agent and Lenders;

                           (ii)     Agent shall receive at least thirty days'
                  prior written notice of such proposed Permitted Acquisition,
                  including the legal description of the real property to be
                  acquired;

                           (iii)    no additional Indebtedness, Guaranteed
                  Indebtedness, contingent obligations or other liabilities
                  shall be incurred, assumed or otherwise reflected on

                                       31
<PAGE>

                  a consolidated balance sheet of the Credit Parties after
                  giving effect to such Permitted Acquisition, except the Term
                  Loan related to such Facility;

                           (iv)     the Facility acquired in such Permitted
                  Acquisition shall be free and clear of all Liens, other than
                  Permitted Encumbrances and a first-priority Lien granted to
                  Agent, for the benefit of itself and Lenders, in connection
                  with the Term Loan advance related to such Facility and
                  pursuant to any mortgage, deed of trust, or other Collateral
                  Documents required by Agent in its discretion; and

                           (v)      at the time of such Permitted Acquisition
                  and after giving effect thereto and to the Term Loan related
                  to such Facility, no Default or Event of Default has occurred
                  and is continuing.

         6.2.     Investments; Loans and Advances. Except as otherwise expressly
permitted by this Section 6, the Credit Parties shall not make or permit to
exist any investment in, or make, accrue or permit to exist loans or advances of
money to, any Person, through the direct or indirect lending of money, holding
of securities or otherwise, except that: (a) each Credit Party may maintain its
existing investments in its Subsidiaries as of the Closing Date and (b) so long
as no Default or Event of Default has occurred and is continuing, any Credit
Party may make investments, subject to Control Letters in favor Agent, for the
benefit of itself and Lenders, in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within one year from the date of acquisition thereof, (ii) commercial
paper maturing no more than one year from the date of creation thereof and
currently having the highest rating obtainable from either Standard & Poor's
Ratings Group or Moody's Investors Service, Inc., (iii) certificates of deposit
maturing no more than one year from the date of creation thereof issued by
commercial banks incorporated under the laws of the United States of America,
each having combined capital, surplus and undivided profits of not less than
$300,000,000 and having a senior unsecured rating of "A" or better by a
nationally-recognized rating agency (an "A Rated Bank"), (iv) time deposits
maturing no more than thirty days from the date of creation thereof with A Rated
Banks and (v) mutual funds that invest solely in one or more of the investments
described in clauses (i) through (iv) above.

         6.3.     Indebtedness.

                  (a)      The Credit Parties shall not create, incur, assume or
         permit to exist any Indebtedness, except (without duplication) (i)
         Indebtedness secured by purchase money security interests, (ii) the
         Term Loans and the other Obligations, (iii) unfunded pension fund and
         other employee benefit plan obligations and liabilities to the extent
         they are permitted to remain unfunded under applicable law, (iv)
         existing Indebtedness described in Disclosure Schedule 6.3 and
         refinancings thereof or amendments or modifications thereto that do not
         have the effect of increasing the principal amount thereof or changing
         the amortization thereof (other than to extend the same) and that are
         otherwise on terms and conditions no less favorable to any Credit
         Party, Agent or any Lender, as determined by Agent, than the terms of
         the Indebtedness being refinanced, amended or modified, and (v)
         Indebtedness specifically permitted under Section 6.1.

                                       32
<PAGE>

                  (b) The Credit Parties shall not directly or indirectly
         voluntarily purchase, redeem, defease or prepay any principal of,
         premium, if any, interest or other amount payable in respect of any
         Indebtedness, other than (i) the Obligations; (ii) Indebtedness secured
         by a Permitted Encumbrance if the asset securing such Indebtedness has
         been sold or otherwise disposed of in accordance with Section 6.8(b) or
         (c); (iii) existing Indebtedness described in Disclosure Schedule 6.3
         upon any refinancing thereof in accordance with Section 6.3(a); and
         (iv) as otherwise permitted in Section 6.14.

         6.4.     Employee Loans and Affiliate Transactions.

                  (a)      Except as otherwise expressly permitted in this
         Section 6, no Credit Party shall enter into or be a party to any
         transaction with any other Credit Party or any Affiliate thereof except
         in the ordinary course of and pursuant to the reasonable requirements
         of such Credit Party's business and upon fair and reasonable terms that
         are no less favorable to such Credit Party than would be obtained in a
         comparable arm's length transaction with a Person not an Affiliate of
         such Credit Party. In addition, if any such transaction or series of
         related transactions involves payments in excess of $50,000 in the
         aggregate, the terms of such transactions must be disclosed in advance
         to Agent and Lenders. All such transactions existing as of the date
         hereof are described in Disclosure Schedule 6.4(a).

                  (b)      The Credit Parties shall not enter into any lending
         or borrowing transaction with any employees of any Credit Party or of
         any Affiliate of any Credit Party.

         6.5.     Capital Structure and Business. No Credit Party shall (a) make
any changes in any of its business objectives, purposes or operations that could
in any way adversely affect the repayment of the Term Loans or any of the other
Obligations or could reasonably be expected to have or result in a Material
Adverse Effect, (b) make any change in its capital structure as described in
Disclosure Schedule 3.8, including the issuance or sale of any shares of Stock
or other securities convertible into Stock or any revision of the terms of its
outstanding Stock, or (c) amend its charter or bylaws in a manner that would
adversely affect Agent or Lenders or such Credit Party's duty or ability to
repay the Obligations. No Credit Party shall engage in any business other than
the businesses currently engaged in by it or businesses reasonably related
thereto.

         6.6.     Guaranteed Indebtedness. The Credit Parties shall not create,
incur, assume or permit to exist any Guaranteed Indebtedness except (a) by
endorsement of instruments or items of payment for deposit to the general
account of any Credit Party, and (b) for Guaranteed Indebtedness incurred for
the benefit of any Borrower if the primary obligation is expressly permitted by
this Agreement.

         6.7.     Liens. The Credit Parties shall not create, incur, assume or
permit to exist any Lien on or with respect to its Real Estate or any of its
other properties or assets (whether now owned or hereafter acquired) except for
(a) Permitted Encumbrances, (b) Liens in existence on the date hereof and
summarized on Disclosure Schedule 6.7 securing the Indebtedness described

                                       33
<PAGE>

on Disclosure Schedule 6.3 and permitted refinancings, extensions and renewals
thereof, including extensions or renewals of any such Liens; provided that the
principal amount of the Indebtedness so secured is not increased and the Lien
does not attach to any other property, and (c) the Facility Leases. In addition,
no Credit Party shall become a party to any agreement, note, indenture or
instrument, or take any other action, that would prohibit the creation of a Lien
on any of its properties or other assets in favor of Agent, on behalf of itself
and Lenders, as additional collateral for the Obligations, except operating
leases, Capital Leases or Licenses which prohibit Liens upon the assets that are
subject thereto.

         6.8.     Sale of Stock and Assets. No Credit Party shall sell,
transfer, convey, assign or otherwise dispose of any of its properties or other
assets, including the Stock of any of their Subsidiaries (whether in a public or
a private offering or otherwise).

         6.9.     ERISA. No Credit Party shall, or shall cause or permit any
ERISA Affiliate to, cause or permit to occur an event that could result in the
imposition of a Lien under Section 412 of the IRC or Sections 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected to have a Material Adverse Effect.

         6.10.    Financial Covenants. The Credit Parties shall not breach or
fail to comply with any of the Financial Covenants.

         6.11.    Hazardous Materials. No Credit Party shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any respect, or
form the basis for any Environmental Liabilities under, any Environmental Laws
or Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or Environmental Liabilities that could not reasonably be
expected to have a Material Adverse Effect.

         6.12.    Sale-Leasebacks. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.

         6.13.    Cancellation of Indebtedness. No Credit Party shall cancel any
claim or debt owing to it, except for reasonable consideration negotiated on an
arm's-length basis and in the ordinary course of its business.

         6.14.    Restricted Payments. No Credit Party shall make any Restricted
Payment, except (a) dividends and distributions by Subsidiaries of any Borrower
paid to such Borrower and (b) scheduled payments of interest with respect to
Subordinated Debt; provided that (i) no Default or Event of Default has occurred
and is continuing or would result after giving effect to any such Restricted
Payment and (ii) the timing of such Restricted Payment is set at dates that
permit the delivery of Financial Statements necessary to determine current
compliance with the Financial Covenants prior to each such payment.

         6.15.    Change of Corporate Name or Location; Change of Fiscal Year.
No Credit Party shall (a) change its corporate name or trade name or (b) change
its chief executive office, principal place of business, corporate offices or
warehouses or locations at which Collateral is

                                       34
<PAGE>

held or stored, or the location of its records concerning the Collateral, in
each case without at least thirty days' prior written notice to Agent and after
Agent's written acknowledgment that any reasonable action requested by Agent in
connection therewith, including to continue the perfection of any Liens in favor
of Agent, on behalf of itself and Lenders, in any Collateral has been completed
or taken; provided that any such new location shall be in the continental United
States. Without limiting the foregoing, no Credit Party shall change its name,
identity or corporate structure in any manner that might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-506 of the Code or any other then applicable provision
of the Code except upon prior written notice to Agent and Lenders and after
Agent's written acknowledgment that any reasonable action requested by Agent in
connection therewith, including to continue the perfection of any Liens in favor
of Agent, on behalf of itself and Lenders, in any Collateral has been completed
or taken. No Credit Party shall change its Fiscal Year.

         6.16.    No Impairment of Intercompany Transfers. No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) that could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of any Credit
Party to any Credit Party, or between Credit Parties.

         6.17.    No Speculative Transactions. No Credit Party shall engage in
any transaction involving commodity options, futures contracts or similar
transactions.

         6.18.    Leases; Real Estate Purchases. No Credit Party shall enter
into any operating lease for Equipment or Real Estate as lessee, or purchase a
fee simple ownership interest in Real Estate, except as permitted under Section
6.1 in connection with a Permitted Acquisition or with the prior written consent
of Agent.

         6.19.    Changes Relating to Subordinated Debt or Facility Leases. No
Credit Party shall change or amend the terms of any Subordinated Debt, any
agreement governing or related to such Subordinated Debt or any Facility Lease
without the prior written consent of Agent.

7.       TERM

         7.1.     Termination. The financing arrangements contemplated hereby
shall be in effect until the Maturity Date, and the Term Loans and all other
Obligations shall be automatically due and payable in full on such date.

         7.2.     Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided in the Loan Documents, no
termination or cancellation (regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of Agent
and Lenders relating to any unpaid portion of the Term Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated, or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the

                                       35
<PAGE>

Maturity Date. Except as otherwise expressly provided herein or in any other
Loan Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided that the
provisions of Section 11, the payment obligations under Sections 1.11 and 1.12
and the indemnities contained in the Loan Documents shall survive the
Termination Date.

8.       EVENTS OF DEFAULT; RIGHTS AND REMEDIES

         8.1.     Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:

                  (a)      Any Borrower (i) fails to make any payment of
         principal of, interest on or Fees owing in respect of the Term Loans or
         the other Obligations when due and payable, or (ii) fails to pay or
         reimburse Agent or Lenders for any expense reimbursable hereunder or
         under any Loan Document within ten days following Agent's demand for
         such reimbursement or payment of expenses.

                  (b)      LTF fails to make any payment or reimbursement under
         the Deposit Agreement or the Letter Agreement when due and payable.

                  (c)      Any Credit Party fails or neglects to perform, keep
         or observe any of the provisions of Sections 1.3, 5.4(a) and 6 or Annex
         D or LTF fails or neglects to perform, keep or observe any of the
         provisions of the Deposit Agreements.

                  (d)      Any Credit Party fails or neglects to perform, keep
         or observe any provision of Section 4 or any provision set forth in
         Annex C, and the same shall remain unremedied for two Business Days or
         more from the date such Person obtains actual knowledge or notification
         from Agent of such failure or neglect.

                  (e)      LTF fails or neglects to perform, keep or observe any
         of the provisions of Sections 2 and 3 of the Letter Agreement within
         ten days following Agent's demand for reimbursement or payment or any
         provision of Section 6 of the Letter Agreement and the same shall
         remain unremedied for five days or more.

                  (f)      Any Credit Party or LTF fails or neglects to perform,
         keep or observe any other provision of this Agreement or the other Loan
         Documents (other than any provision embodied in or covered by any other
         clause of this Section 8.1) and the same shall remain unremedied for
         thirty days or more from the date such Person obtains actual knowledge
         or notification from Agent of such failure or neglect.

                  (g)      A default or breach occurs under any other agreement,
         document or instrument to which any Credit Party is a party that is not
         cured within any applicable grace period therefor, and such default or
         breach (i) involves the failure to make any payment when due in respect
         of any Indebtedness or Guaranteed Indebtedness (other than the
         Obligations) of such Person, or (ii) causes, or permits any holder of
         such Indebtedness

                                       36
<PAGE>

         or Guaranteed Indebtedness or a trustee to cause any Indebtedness or
         Guaranteed Indebtedness or a portion thereof to become due prior to its
         stated maturity or prior to its regularly scheduled dates of payment,
         or cash collateral in respect thereof to be demanded, in each case,
         regardless of whether such default is waived, or such right is
         exercised, by such holder or trustee.

                  (h)      Any information contained in any Notice of Borrowing
         is untrue or incorrect in any respect, or any representation or
         warranty herein or in the other Loan Documents or in any written
         statement, report, financial statement or certificate made or delivered
         to Agent or any Lender by any Credit Party or LTF is untrue or
         incorrect in any material respect as of the date when made or deemed
         made.

                  (i)      Assets of any Credit Party with a fair market value
         of $250,000 or more are attached, seized, levied upon or subjected to a
         writ or distress warrant or come within the possession of any receiver,
         trustee, custodian or assignee for the benefit of creditors of such
         Person and such condition continues for thirty days or more.

                  (j)      A case or proceeding is commenced against any Credit
         Party or LTF seeking a decree or order in respect of such Person (i)
         under the Bankruptcy Code or any other applicable federal, state or
         foreign bankruptcy or other similar law, (ii) appointing a custodian,
         receiver, liquidator, assignee, trustee or sequestrator (or similar
         official) for such Person or for any substantial part of such Person's
         assets, or (iii) ordering the winding-up or liquidation of the affairs
         of such Person, and such case or proceeding shall remain undismissed or
         unstayed for sixty days or more or a decree or order granting the
         relief sought in such case or proceeding shall be entered by a court of
         competent jurisdiction.

                  (k)      Any Credit Party or LTF (i) files a petition seeking
         relief under the Bankruptcy Code or any other applicable federal, state
         or foreign bankruptcy or other similar law, (ii) consents to or fails
         to contest in a timely and appropriate manner the institution of
         proceedings thereunder or the filing of any such petition or the
         appointment of or taking possession by a custodian, receiver,
         liquidator, assignee, trustee or sequestrator (or similar official) for
         such Person or for any substantial part of such Person's assets, (iii)
         makes an assignment for the benefit of creditors, (iv) takes any action
         in furtherance of any of the foregoing; or (v) admits in writing its
         inability to, or is generally unable to, pay its debts as such debts
         become due.

                  (l)      A final judgment or judgments for the payment of
         money in excess of $250,000 in the aggregate at any time are
         outstanding against any Credit Party and the same are not, within
         thirty days after the entry thereof, discharged or execution thereof
         stayed or bonded pending appeal, or such judgments are not discharged
         prior to the expiration of any such stay.

                  (m)      Any material provision of any Loan Document for any
         reason ceases to be valid, binding and enforceable in accordance with
         its terms (or any Credit Party or LTF shall challenge the
         enforceability of any Loan Document or shall assert in writing, or

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<PAGE>

         engage in any action or inaction based on any such assertion, that any
         provision of any of the Loan Documents has ceased to be or otherwise is
         not valid, binding and enforceable in accordance with its terms), or
         any Lien created under any Loan Document ceases to be a valid and
         perfected first-priority Lien (except as otherwise permitted herein or
         therein) in any of the Collateral purported to be covered thereby.

                  (n)      Any Change of Control occurs.

                  (o)      Any event occurs, whether or not insured or
         insurable, as a result of which revenue-producing activities cease or
         are substantially curtailed at any Facility and such cessation or
         curtailment continues for more than thirty days.

                  (p)      Any "Event of Default" (as defined in the applicable
         Facility Lease) occurs and is continuing under a Facility Lease.

         8.2.     Remedies.

                  (a)      If any Default or Event of Default has occurred and
         is continuing, without notice to any Credit Party or any other Person,
         Agent may suspend (and at the written request of Requisite Lenders or,
         if GE Capital has at least 66 2/3% of the Commitments of all Lenders,
         at the written request of any Lender, Agent shall suspend) the Term
         Loan facility with respect to additional Term Loan advances, whereupon
         any additional Term Loan shall be made in Agent's sole discretion (or
         in the sole discretion of Requisite Lenders or any Lender, if such
         suspension occurred at their direction) so long as such Default or
         Event of Default is continuing. If any Default or Event of Default has
         occurred and is continuing, without notice to any Credit Party or any
         other Person (except as otherwise expressly provided herein), Agent may
         increase (and at the written request of Requisite Lenders shall
         increase) the rate of interest applicable to the Term Loans to the
         Default Rate.

                  (b)      If any Event of Default has occurred and is
         continuing, without notice to any Credit Party or any other Person,
         Agent may: (i) (and at the written request of Requisite Lenders or, if
         GE Capital has at least 66 2/3% of the Commitments of all Lenders, at
         the written request of any Lender, Agent shall) terminate the Term Loan
         facility with respect to further advances; (ii) (and at the written
         request of Requisite Lenders shall) declare all or any portion of the
         Obligations, including all or any portion of any Term Loan to be
         forthwith due and payable, without presentment, demand, protest or
         further notice of any kind, all of which are expressly waived by each
         Credit Party; or (iii) (and at the written request of Requisite Lenders
         shall) exercise any rights and remedies provided to Agent under the
         Loan Documents or at law or equity, including all remedies provided
         under the Code; provided that upon the occurrence of an Event of
         Default specified in Section 8.1(j) or (k), the Term Loan facility
         shall be immediately terminated and all of the Obligations, including
         the aggregate Term Loans, shall become immediately due and payable
         without declaration, notice or demand by any Person.

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<PAGE>

         8.3.     Waivers by Credit Parties. Except as otherwise provided in
this Agreement or by applicable law, each Credit Party waives (including for
purposes of Section 12) (a) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of acceleration,
protest, default, nonpayment, maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time held by Agent
on which any Credit Party may in any way be liable, and hereby ratifies and
confirms whatever Agent may do in this regard, (b) all rights to notice and a
hearing prior to Agent's taking possession or control of, or to Agent's replevy,
attachment or levy upon, the Collateral or any bond or security that might be
required by any court prior to allowing Agent to exercise any of its remedies,
and (c) the benefit of all valuation, appraisal, marshaling and exemption laws.

9.       ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT

         9.1.     Assignment and Participations.

                  (a)      Subject to the terms of this Section 9.1, at any time
         or times, any Lender may make an assignment to a Qualified Assignee of,
         or sell participations in, the Loan Documents, the Term Loans, and any
         Commitment or any portion thereof or interest therein, including any
         Lender's rights, title, interests, remedies, powers or duties
         thereunder. Any assignment by a Lender shall (i) require the consent of
         Agent (which consent shall not be unreasonably withheld or delayed with
         respect to a Qualified Assignee) and the execution of an assignment
         agreement (an "Assignment Agreement") in substantially the form of
         Exhibit 9.1(a) and otherwise in form and substance reasonably
         satisfactory to, and acknowledged by, Agent; (ii) be conditioned on
         such assignee Lender representing to the assigning Lender and Agent
         that it is purchasing the applicable Term Loans to be assigned to it
         for its own account, for investment purposes and not with a view to the
         distribution thereof; (iii) result, in the case of a partial assignment
         after giving effect to any such partial assignment, in the assignee
         Lender having Commitments and/or Term Loans in an amount at least equal
         to $5,000,000 and the assigning Lender having retained Commitments
         and/or Term Loans in an amount at least equal to $5,000,000; and (iv)
         include a payment to Agent of an assignment fee of $3500. In the case
         of an assignment by a Lender under this Section 9.1, the assignee shall
         have, to the extent of such assignment, the same rights, benefits and
         obligations as all other Lenders hereunder. The assigning Lender shall
         be relieved of its obligations hereunder with respect to its
         Commitments or assigned portion thereof, as applicable, from and after
         the date of such assignment. Each Borrower hereby acknowledges and
         agrees that any assignment shall give rise to a direct obligation of
         Borrowers to the assignee and that the assignee shall be considered to
         be a "Lender." In all instances, each Lender's liability to make Term
         Loans hereunder shall be several and not joint and shall be limited to
         such Lender's Pro Rata Share Available of the applicable Commitment. In
         the event Agent or any Lender assigns or otherwise transfers all or any
         part of the Obligations, Agent or any such Lender shall so notify
         Borrowers, and upon the request of Agent or such Lender, Borrowers
         shall execute new Notes in exchange for the Notes, if any, being
         assigned and, if required by applicable law, amendments to the
         Mortgages to provide assignee's name and address and to acknowledge
         assignee's rights in the

                                       39
<PAGE>

         Collateral secured thereby. Notwithstanding the foregoing provisions of
         this Section 9.1(a), any Lender may at any time pledge the Obligations
         held by it and such Lender's rights under this Agreement and the other
         Loan Documents to a Federal Reserve Bank, and any Lender that is an
         investment fund may assign the Obligations held by it and such Lender's
         rights under this Agreement and the other Loan Documents to another
         investment fund managed by the same investment advisor; provided that
         no such pledge to a Federal Reserve Bank shall release such Lender from
         such Lender's obligations hereunder or under any other Loan Document.

                  (b)      Any participation by a Lender of all or any part of
         its Commitments or its Pro Rata Share Outstanding shall be made with
         the understanding that all amounts payable by Borrowers hereunder shall
         be determined as if that Lender had not sold such participation and
         that the holder of any such participation shall not be entitled to
         require such Lender to take or omit to take any action hereunder except
         actions directly affecting (i) any reduction in the principal amount
         of, or interest rate or Fees payable with respect to, any Term Loan in
         which such holder participates, (ii) any extension of the scheduled
         amortization of the principal amount of any Term Loan in which such
         holder participates or the final maturity date thereof, and (iii) any
         release of all or substantially all of the Collateral (other than in
         accordance with the terms of this Agreement, the Collateral Documents
         or the other Loan Documents). Solely for purposes of Sections 1.9,
         1.11, 1.12 and 9.8, each Borrower acknowledges and agrees that a
         participation shall give rise to a direct obligation of Borrowers to
         the participant and the participant shall be considered to be a
         "Lender." Except as set forth in the preceding sentence, the Credit
         Parties shall not have any obligation or duty to any participant.
         Neither Agent nor any Lender (other than the Lender selling a
         participation) shall have any duty to any participant, and Agent and
         any Lender may continue to deal solely with the Lender selling a
         participation as if no such sale had occurred.

                  (c)      Except as expressly provided in this Section 9.1, no
         Lender, as between Borrowers and that Lender or Agent and that Lender,
         shall be relieved of any of its obligations hereunder as a result of
         any sale, assignment, transfer or negotiation of or granting of
         participation in all or any part of the Term Loans, the Notes or the
         other Obligations owed to such Lender.

                  (d)      Each Credit Party shall assist any Lender permitted
         to sell assignments or participations under this Section 9.1 as
         reasonably required to enable the assigning or selling Lender to effect
         any such assignment or participation, including the execution and
         delivery of any and all agreements, notes and other documents and
         instruments as shall be requested and, if requested by Agent, the
         preparation of informational materials for, and the participation of
         management in meetings with, potential assignees or participants. Each
         Credit Party shall certify the correctness, completeness and accuracy
         of all descriptions of the Credit Parties and their respective affairs
         contained in any selling materials provided by them and all other
         information provided by them and included in such materials, except
         that any Projections delivered by the Credit Parties shall only be
         certified by the Credit Parties as having been prepared by them in
         compliance with the representations contained in Section 3.4(b).

                                       40
<PAGE>

                  (e)      Any Lender may furnish any information concerning the
         Credit Parties in the possession of such Lender from time to time to
         assignees and participants (including prospective assignees and
         participants); provided that such Lender shall obtain from assignees or
         participants confidentiality covenants substantially equivalent to
         those contained in Section 11.8.

                  (f)      Notwithstanding anything to the contrary contained
         herein, any Lender (a "Granting Lender") may grant to a special purpose
         funding vehicle (an "SPC"), identified as such in writing by the
         Granting Lender to Agent and Borrowers, the option to provide to
         Borrowers all or any part of any Term Loans that such Granting Lender
         has made or would otherwise be obligated to make to Borrowers pursuant
         to this Agreement; provided that (i) nothing herein shall constitute a
         commitment by any SPC to make any Term Loan; and (ii) if an SPC elects
         not to exercise such option or otherwise fails to provide all or any
         part of such Term Loan, the Granting Lender shall be obligated to make
         such Term Loan pursuant to the terms hereof. The making of a Term Loan
         by an SPC hereunder shall utilize the Commitment of the Granting Lender
         to the same extent and as if such Term Loan were made by such Granting
         Lender. No SPC shall be liable for any indemnity or similar payment
         obligation under this Agreement (all liability for which shall remain
         with the Granting Lender). Any SPC (i) with notice to, but without the
         prior written consent of, Borrowers and Agent may assign all or a
         portion of its interests in any Term Loans to the Granting Lender or to
         any financial institutions (consented to by Agent) providing liquidity
         and/or credit support to or for the account of such SPC to support the
         funding or maintenance of the Term Loans and (ii) may disclose on a
         confidential basis any non-public information relating to its Term
         Loans to any rating agency, commercial paper dealer or provider of any
         surety, guarantee or credit or liquidity enhancement to such SPC. This
         Section 9.1(f) may not be amended without the prior written consent of
         each Granting Lender, all or any of whose Term Loans are being funded
         by an SPC at the time of such amendment. For the avoidance of doubt,
         the Granting Lender for all purposes, including the approval of any
         amendment or waiver of any provision of any Loan Document or the
         obligation to pay any amount otherwise payable by the Granting Lender
         under the Loan Documents, shall continue to be the Lender of record
         hereunder.

         9.2.     Appointment of Agent.

                  (a)      GE Capital is hereby appointed to act on behalf of
         all Lenders as Agent under this Agreement and the other Loan Documents.
         The provisions of this Section 9.2 are solely for the benefit of Agent
         and Lenders, and no Credit Party nor any other Person shall have any
         rights as a third party beneficiary of any of the provisions hereof. In
         performing its functions and duties under this Agreement and the other
         Loan Documents, Agent shall act solely as an agent of Lenders and does
         not assume and shall not be deemed to have assumed any obligation
         toward or relationship of agency or trust with or for any Credit Party
         or any other Person. Agent shall have no duties or responsibilities
         except for those expressly set forth in this Agreement and the other
         Loan Documents. The duties of Agent shall be mechanical and
         administrative in nature and Agent shall not have, or be deemed to have
         a fiduciary relationship in respect of any Lender, by reason of

                                       41
<PAGE>

         this Agreement, any other Loan Document or otherwise. Except as
         expressly set forth in this Agreement and the other Loan Documents,
         Agent shall not have any duty to disclose, and shall not be liable for
         failure to disclose, any information relating to any Credit Party or
         any of their respective Subsidiaries and Affiliates that is
         communicated to or obtained by Agent or any of its Affiliates in any
         capacity. Neither Agent nor any of its Affiliates nor any of their
         respective officers, directors, employees, agents or representatives
         shall be liable to any Lender for any action taken or omitted to be
         taken by it hereunder or under any other Loan Document or in connection
         herewith or therewith, except for damages caused by its or their own
         gross negligence or willful misconduct.

                  (b)      If Agent shall request instructions from Requisite
         Lenders, Supermajority Lenders or all affected Lenders with respect to
         any act or action (including failure to act) in connection with this
         Agreement or any other Loan Document, then Agent shall be entitled to
         refrain from such act or taking such action unless and until Agent
         shall have received instructions from Requisite Lenders, Supermajority
         Lenders or all affected Lenders, as the case may be, and Agent shall
         not incur liability to any Person by reason of so refraining. Agent
         shall be fully justified in failing or refusing to take any action
         hereunder or under any other Loan Document (a) if such action would, in
         the opinion of Agent, be contrary to law or the terms of this Agreement
         or any other Loan Document, (b) if such action would, in the opinion of
         Agent, expose Agent to Environmental Liabilities or (c) if Agent shall
         not first be indemnified to its satisfaction against any and all
         liability and expense which may be incurred by it by reason of taking
         or continuing to take any such action. Without limiting the foregoing,
         no Lender shall have any right of action whatsoever against Agent as a
         result of Agent acting or refraining from acting hereunder or under any
         other Loan Document in accordance with the instructions of Requisite
         Lenders, Supermajority Lenders or all affected Lenders, as applicable.

         9.3.     Agent's Reliance, Etc. Neither Agent nor any of its Affiliates
nor any of their respective directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents, except for damages
caused by its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Agent

                  (a)      may treat the payee of any Note as the holder thereof
         until Agent receives written notice of the assignment or transfer
         thereof signed by such payee and in form reasonably satisfactory to
         Agent;

                  (b)      may consult with legal counsel, independent public
         accountants and other experts selected by it and shall not be liable
         for any action taken or omitted to be taken by it in good faith in
         accordance with the advice of such counsel, accountants or experts;

                  (c)      makes no warranty or representation to any Lender and
         shall not be responsible to any Lender for any statements, warranties
         or representations made in or in connection with this Agreement or the
         other Loan Documents;

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<PAGE>

                  (d)      shall not have any duty to ascertain or to inquire as
         to the performance or observance of any of the terms, covenants or
         conditions of this Agreement or the other Loan Documents on the part of
         any Credit Party or LTF or to inspect the Collateral (including the
         books and records related thereto) of any Credit Party or LTF;

                  (e)      shall not be responsible to any Lender for the due
         execution, legality, validity, enforceability, genuineness, sufficiency
         or value of this Agreement or the other Loan Documents or any other
         instrument or document furnished pursuant hereto or thereto; and

                  (f)      shall not incur any liability under or in respect of
         this Agreement or the other Loan Documents by acting upon any notice,
         consent, certificate or other instrument or writing (which may be by
         telecopy, telegram, cable or telex) believed by it to be genuine and
         signed or sent by the proper party or parties.

         9.4.     GE Capital and Affiliates. With respect to its Commitments and
Pro Rata Share Outstanding of Term Loans hereunder, GE Capital shall have the
same rights and powers under this Agreement and the other Loan Documents as any
other Lender and may exercise the same as though it were not Agent; and the term
"Lender" or "Lenders" shall, unless otherwise expressly indicated, include GE
Capital in its individual capacity. GE Capital and its Affiliates may lend money
to, invest in and generally engage in any kind of business with any Credit
Party, any of their Affiliates and any Person who may do business with or own
securities of any Credit Party or any such Affiliate, all as if GE Capital were
not Agent and without any duty to account therefor to Lenders. GE Capital and
its Affiliates may accept fees and other consideration from any Credit Party and
LTF for services in connection with this Agreement or otherwise without having
to account for the same to Lenders. Each Lender acknowledges the potential
conflict of interest between GE Capital as a Lender holding disproportionate
interests in the Term Loans and GE Capital as Agent.

         9.5.     Lender Credit Decisions. Each Lender acknowledges that it has
made its own credit and financial analysis of the Credit Parties and LTF and its
own decision to enter into this Agreement, independently and without reliance
upon Agent or any other Lender and based on the Financial Statements referred to
in Section 3.4(a) and such other documents and information as it has deemed
appropriate. Each Lender also acknowledges that it will continue to make its own
credit decisions in taking or not taking action under this Agreement,
independently and without reliance upon Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Term Loans and
expressly consents to and waives any claim based upon such conflict of interest.

         9.6.     Indemnification. Lenders agree to indemnify Agent (to the
extent not reimbursed by the Credit Parties or LTF and without limiting the
obligations of the Credit Parties hereunder), ratably according to their
respective Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against Agent in any way relating to or arising out
of this Agreement or any other Loan

                                       43
<PAGE>

Document or any action taken or omitted to be taken by Agent in connection
therewith; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence or
willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and each other Loan Document, to the extent that Agent is not reimbursed for
such expenses by the Credit Parties or LTF.

         9.7.     Successor Agent. Agent may resign at any time by giving not
less than thirty days' prior written notice thereof to Lenders and Borrower
Representative. Upon any such resignation, the Requisite Lenders shall have the
right to appoint a successor Agent. If a successor Agent shall not have been so
appointed by the Requisite Lenders and shall not have accepted such appointment
within thirty days after the resigning Agent's notice of resignation, then the
resigning Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a Lender, if a Lender is willing to accept such appointment, or
otherwise shall be a commercial bank or financial institution or a subsidiary of
a commercial bank or financial institution if such commercial bank or financial
institution is organized under the laws of the United States of America or of
any state thereof and has a combined capital and surplus of at least
$300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, within thirty days after the date such notice of resignation was
given by the resigning Agent, such resignation shall become effective and the
Requisite Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Requisite Lenders appoint a successor Agent as
provided above. Any successor Agent appointed by Requisite Lenders hereunder
shall be subject to the approval of Borrower Representative, such approval not
to be unreasonably withheld or delayed; provided that such approval shall not be
required if a Default or an Event of Default has occurred and is continuing.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall succeed to and become vested with all the rights,
powers, privileges and duties of the resigning Agent. Upon the earlier of the
acceptance of any appointment as Agent hereunder by a successor Agent or the
effective date of the resigning Agent's resignation, the resigning Agent shall
be discharged from its duties and obligations under this Agreement and the other
Loan Documents, except that any indemnity rights or other rights in favor of
such resigning Agent shall continue. After any resigning Agent's resignation
hereunder, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was acting as Agent under
this Agreement and the other Loan Documents.

         9.8.     Setoff and Sharing of Payments. In addition to any rights now
or hereafter granted under applicable law and not by way of limitation of any
such rights, upon the occurrence and during the continuance of any Event of
Default and subject to Section 9.9(f), each Lender is hereby authorized at any
time or from time to time, without notice to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to offset and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of any Borrower and any other properties or assets at any time
held or owing by that Lender or that holder to or for the credit or for the
account of any Borrower against and on account of any of the

                                       44
<PAGE>

Obligations that are not paid when due. Any Lender exercising a right of setoff
or otherwise receiving any payment on account of the Obligations in excess of
its Pro Rata Share Outstanding thereof shall purchase for cash (and the other
Lenders or holders shall sell) such participations in each such other Lender's
or holder's Pro Rata Share Outstanding of the Obligations as would be necessary
to cause such Lender to share the amount so offset or otherwise received with
each other Lender or holder in accordance with their respective Pro Rata Shares
Outstanding of the Obligations (other than offset rights exercised by any Lender
with respect to Sections 1.9, 1.11 or 1.12). To the fullest extent permitted by
law, each Borrower agrees that (a) any Lender may exercise its right to offset
with respect to amounts in excess of its Pro Rata Share Outstanding of the
Obligations and may sell participations in such amounts so offset to other
Lenders and holders and (b) any Lender so purchasing a participation in the Term
Loans made or other Obligations held by other Lenders or holders may exercise
all rights of offset, bankers' lien, counterclaim or similar rights with respect
to such participation as fully as if such Lender or holder were a direct holder
of the Term Loans and the other Obligations in the amount of such participation.
Notwithstanding the foregoing, if all or any portion of the offset amount or
payment otherwise received is thereafter recovered from the Lender that has
exercised the right of offset, the purchase of participations by that Lender
shall be rescinded and the purchase price restored without interest.

         9.9.     Advances; Payments; Non-Funding Lenders; Information; Actions
in Concert.

                  (a)      Advances; Payments.

                           (i)      Agent shall notify Lenders promptly after
                  receipt of a Notice of Borrowing by telecopy, telephone or
                  other similar form of transmission, of each Lender's Pro Rata
                  Share Advanced of such Term Loan, which shall not exceed such
                  Lender's Pro Rata Share Available. Each Lender shall make the
                  amount of such Lender's Pro Rata Share Advanced of such Term
                  Loan available to Agent in same day funds by wire transfer to
                  Agent's account as set forth in Annex E not later than 3:00
                  p.m. (New York time) on the requested funding date. After
                  receipt of such wire transfers (or, in the Agent's sole
                  discretion, before receipt of such wire transfers), subject to
                  the terms hereof, Agent shall make the requested Term Loan to
                  the Borrower designated by Borrower Representative in the
                  Notice of Borrowing. All payments by each Lender shall be made
                  without setoff, counterclaim or deduction of any kind.

                           (ii)     On the second Business Day of each calendar
                  month or more frequently at Agent's election (each, a
                  "Settlement Date"), Agent shall advise each Lender by
                  telephone, telecopy or other similar form of transmission of
                  the amount of such Lender's Pro Rata Share Outstanding of
                  principal, interest and Fees paid for the benefit of Lenders
                  with respect to each applicable Term Loan. Provided that each
                  Lender has funded all payments or Term Loan advances required
                  to be made by it and has purchased all participations required
                  to be purchased by it under this Agreement and the other Loan
                  Documents as of such Settlement Date, Agent shall pay to each
                  Lender such Lender's Pro Rata Share Outstanding of principal,
                  interest and Fees paid by Borrowers since the previous

                                       45
<PAGE>

                  Settlement Date for the benefit of such Lender on the Term
                  Loans held by it. To the extent that any Lender (a
                  "Non-Funding Lender") has failed to fund all such payments and
                  Term Loan advances or failed to fund the purchase of all such
                  participations, Agent shall be entitled to set off the funding
                  short-fall against that Non-Funding Lender's Pro Rata Share
                  Outstanding of all payments received from Borrowers. Such
                  payments shall be made by wire transfer to such Lender's
                  account (as specified by such Lender in Annex E or the
                  applicable Assignment Agreement) on the Settlement Date.

                  (b)      Each Lender's Pro Rata Share Available. Agent may
         assume that each Lender will make its Pro Rata Share Available of each
         Term Loan available to Agent on each funding date. If such Lender's Pro
         Rata Share Advanced related thereto is not, in fact, paid to Agent by
         such Lender when due, Agent will be entitled to recover such amount on
         demand from such Lender without setoff, counterclaim or deduction of
         any kind. If any Lender fails to pay the amount of its Pro Rata Share
         Advanced forthwith upon Agent's demand, Agent shall promptly notify
         Borrower Representative and Borrowers shall immediately repay such
         amount to Agent. Nothing in this Section 9.9(b) or elsewhere in this
         Agreement or the other Loan Documents shall be deemed to require Agent
         to advance funds on behalf of any Lender or to relieve any Lender from
         its obligation to fulfill its Commitments hereunder or to prejudice any
         rights that Borrowers may have against any Lender as a result of any
         default by such Lender hereunder. To the extent that Agent advances
         funds to any Borrower on behalf of any Lender and is not reimbursed
         therefor on the same Business Day as such advance is made, Agent shall
         be entitled to retain for its account all interest accrued on such
         advance until reimbursed by the applicable Lender.

                  (c)      Return of Payments.

                           (i)      If Agent pays an amount to a Lender under
                  this Agreement with the belief or expectation that a related
                  payment has been or will be received by Agent from Borrowers
                  and such related payment is not received by Agent, then Agent
                  will be entitled to recover such amount from such Lender on
                  demand without setoff, counterclaim or deduction of any kind.

                           (ii)     If Agent determines at any time that any
                  amount received by Agent under this Agreement must be returned
                  to any Borrower or paid to any other Person pursuant to any
                  insolvency law or otherwise, then, notwithstanding any other
                  term or condition of this Agreement or any other Loan
                  Document, Agent will not be required to distribute any portion
                  thereof to any Lender. In addition, each Lender will repay to
                  Agent on demand any portion of such amount that Agent has
                  distributed to such Lender, together with interest at such
                  rate, if any, as Agent is required to pay to any Borrower or
                  such other Person, without setoff, counterclaim or deduction
                  of any kind.

                  (d)      Non-Funding Lenders. The failure of any Non-Funding
         Lender to make any Term Loan or any payment required by it hereunder on
         the date specified therefor

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<PAGE>

         shall not relieve any other Lender of its obligations to make such Term
         Loan or payment on such date, but neither any other Lender nor Agent
         shall be responsible for the failure of any Non-Funding Lender to make
         a Term Loan advance or any other payment required hereunder.
         Notwithstanding anything set forth herein to the contrary, a
         Non-Funding Lender shall not have any voting or consent rights under or
         with respect to any Loan Document or constitute a "Lender" or be
         included in the calculation of "Requisite Lenders" hereunder for any
         voting or consent rights under or with respect to any Loan Document. At
         Borrower Representative's request, Agent or a Person reasonably
         acceptable to Agent shall have the right with Agent's consent and in
         Agent's sole discretion (but shall have no obligation) to purchase from
         any Non-Funding Lender, and each Non-Funding Lender agrees that, at
         Agent's request, it shall sell and assign to Agent or such Person, all
         of the Commitments of that Non-Funding Lender for an amount equal to
         the principal balance of all Term Loans held by such Non-Funding Lender
         and all accrued interest and Fees with respect thereto through the date
         of sale, such purchase and sale to be consummated pursuant to an
         executed Assignment Agreement.

                  (e)      Dissemination of Information. Agent shall use
         reasonable efforts to provide Lenders with any notice of Default or
         Event of Default received by Agent from, or delivered by Agent to, any
         Credit Party, with notice of any Event of Default of which Agent has
         actually become aware and with notice of any action taken by Agent
         following any Event of Default; provided that Agent shall not be liable
         to any Lender for any failure to do so, except to the extent that such
         failure is attributable to Agent's gross negligence or willful
         misconduct. Lenders acknowledge that the Credit Parties and LTF are
         required to provide Financial Statements to Lenders in accordance with
         Annex C and the Letter Agreement, respectively, and agree that Agent
         shall have no duty to provide the same to Lenders.

                  (f)      Actions in Concert. Anything in this Agreement to the
         contrary notwithstanding, each Lender hereby agrees with each other
         Lender that no Lender shall take any action to protect or enforce its
         rights arising out of this Agreement or the Notes (including exercising
         any rights of setoff) without first obtaining the prior written consent
         of Agent and Requisite Lenders, it being the intent of Lenders that any
         such action to protect or enforce rights under this Agreement and the
         Notes shall be taken in concert and at the direction or with the
         consent of Agent or Requisite Lenders.

10.      SUCCESSORS AND ASSIGNS

         This Agreement and the other Loan Documents shall be binding on and
shall inure to the benefit of each Credit Party, Agent, Lenders and their
respective successors and assigns (including, in the case of any Credit Party, a
debtor-in-possession on behalf of such Credit Party), except as otherwise
provided herein or therein. No Credit Party may assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder or under
any of the other Loan Documents without the prior express written consent of
Agent and Lenders. Any such purported assignment, transfer, hypothecation or
other conveyance by any Credit Party without the prior express written consent
of Agent and Lenders shall be void. The terms and provisions of this Agreement
are for the purpose of defining the relative rights and obligations of

                                       47
<PAGE>

each Credit Party, Agent and Lenders with respect to the transactions
contemplated hereby and no Person shall be a third party beneficiary of any of
the terms and provisions of this Agreement or any of the other Loan Documents.

11.      MISCELLANEOUS

         11.1.    Complete Agreement; Modification of Agreement. The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except as
set forth in Section 11.2. Any letter of interest, commitment letter, or fee
letter (other than the Fee Letter) between any Credit Party and Agent or any
Lender or any of their respective Affiliates, predating this Agreement and
relating to a financing of substantially similar form, purpose or effect, shall
be superseded by this Agreement.

         11.2.    Amendments and Waivers.

                  (a)      Except for actions expressly permitted to be taken by
         Agent, no amendment, modification, termination or waiver of any
         provision of this Agreement or any other Loan Document, or any consent
         to any departure by any Credit Party or any other Person therefrom, in
         any event shall be effective unless the same shall be in writing and
         signed by the Credit Party and/or LTF signatory hereto or thereto, by
         Agent and by Requisite Lenders, Supermajority Lenders or all affected
         Lenders, as applicable. Except as set forth in Section 11.2(b) and (c)
         below, all such amendments, modifications, terminations or waivers
         requiring the consent of any Lenders shall require the prior written
         consent of Requisite Lenders.

                  (b)      No amendment, modification, termination or waiver of
         or consent with respect to any provision of this Agreement that
         increases the Borrowing Availability for any Facility shall be
         effective unless the same shall be in writing and signed by Agent,
         Supermajority Lenders and Borrowers. No amendment, modification,
         termination or waiver of or consent with respect to any provision of
         this Agreement that waives compliance with the conditions precedent set
         forth in Section 2.2 to the making of any Term Loan shall be effective
         unless the same shall be in writing and signed by Agent, Requisite
         Lenders and Borrowers.

                  (c)      No amendment, modification, termination or waiver,
         unless in writing and signed by Agent and each Lender directly affected
         thereby shall: (i) increase the principal amount of any Lender's
         Commitment (which action shall be deemed to directly affect all
         Lenders); (ii) reduce the principal of, rate of interest on or Fees
         payable with respect to any Term Loan of any affected Lender; (iii)
         extend any scheduled payment date (other than payment dates of
         mandatory prepayments under Section 1.2(b)) or final maturity date of
         the principal amount of any Term Loan of any affected Lender; (iv)
         waive, forgive, defer, extend or postpone any payment of interest or
         Fees as to any affected Lender; (v) release all or substantially all of
         the Collateral or substitute any lien on and security interest in any
         Facility for a lien on and security interest in any other Facility,
         except as otherwise permitted herein or in the other Loan Documents
         (which action shall

                                       48
<PAGE>

         be deemed to directly affect all Lenders); (vi) change the percentage
         of the Commitments or of the aggregate unpaid principal amount of the
         Term Loans that shall be required for Lenders or any of them to take
         any action hereunder; and (vii) amend or waive this Section 11.2 or the
         definitions of the terms "Requisite Lenders" or "Supermajority Lenders"
         insofar as such definitions affect the substance of this Section 11.2.
         Furthermore, no amendment, modification, termination or waiver
         affecting the rights or duties of Agent under this Agreement or any
         other Loan Document shall be effective unless in writing and signed by
         Agent, in addition to Lenders required hereinabove to take such action.
         Each amendment, modification, termination or waiver shall be effective
         only in the specific instance and for the specific purpose for which it
         was given. No amendment, modification, termination or waiver shall be
         required for Agent to take additional Collateral pursuant to any Loan
         Document. No amendment, modification, termination or waiver of any
         provision of any Note shall be effective without the written
         concurrence of the holder of that Note. No notice to or demand on any
         Credit Party or LTF in any case shall entitle such Person or any other
         Person to any other or further notice or demand in similar or other
         circumstances. Any amendment, modification, termination, waiver or
         consent effected in accordance with this Section 11.2 shall be binding
         upon each holder of the Notes at the time outstanding and each future
         holder of the Notes.

                  (d)      In connection with any proposed amendment,
         modification, waiver or termination (a "Proposed Change"):

                           (i)      requiring the consent of all affected
                  Lenders, if the consent of Requisite Lenders is obtained, but
                  the consent of other Lenders whose consent is required is not
                  obtained;

                           (ii)     requiring the consent of Supermajority
                  Lenders, if the consent of Requisite Lenders is obtained, but
                  the consent of Supermajority Lenders is not obtained; or

                           (iii)    requiring the consent of Requisite Lenders,
                  if the consent of Lenders holding 51% or more of the aggregate
                  Commitments of all Lenders is obtained, but the consent of
                  Requisite Lenders is not obtained,

         then, so long as Agent is not a Lender whose consent is not obtained as
         described above in this Section 11.2(d) (a "Non-Consenting Lender"), at
         Borrower Representative's request, Agent or a Person reasonably
         acceptable to Agent shall have the right with Agent's consent and in
         Agent's sole discretion (but shall have no obligation) to purchase from
         such Non-Consenting Lenders, and such Non-Consenting Lenders agree that
         they shall, upon Agent's request, sell and assign to Agent or such
         Person, all of the Commitments of such Non-Consenting Lenders for an
         amount equal to the principal balance of all Term Loans held by the
         Non-Consenting Lenders and all accrued interest and Fees with respect
         thereto through the date of sale, such purchase and sale to be
         consummated pursuant to an executed Assignment Agreement.

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<PAGE>

                  (e)      Upon payment in full in cash and performance of all
         of the Obligations (other than indemnification Obligations),
         termination of the Commitments and a release of all claims against
         Agent and Lenders, and so long as no suits, actions, proceedings or
         claims are pending or threatened against any Indemnified Person
         asserting any damages, losses or liabilities that are Indemnified
         Liabilities, Agent shall deliver to Borrowers termination statements,
         mortgage releases and other documents necessary or appropriate to
         evidence the termination of the Liens securing payment of the
         Obligations.

         11.3.    Fees and Expenses. Credit Parties shall reimburse Agent and,
with respect to Section 11.3(d), (e) and (f) below, all Lenders for all
reasonable fees, costs and expenses (including fees and expenses of all of its
counsel, advisors, consultants, auditors, environmental and management
consultants and appraisers) incurred in connection with:

                  (a)      the negotiation and preparation of the Loan
         Documents;

                  (b)      the forwarding to Borrowers or any other Person on
         behalf of Borrowers by Agent of the proceeds of any Term Loan
         (including a wire transfer fee of $25 per wire transfer);

                  (c)      any amendment, modification or waiver of, consent
         with respect to or termination of any Loan Document or Related
         Transactions Document or advice in connection with the syndication and
         administration of the Term Loans made pursuant hereto or its rights
         hereunder or thereunder;

                  (d)      any litigation, contest, dispute, suit, proceeding or
         action (whether instituted by Agent, any Lender, any Borrower or any
         other Person and whether as a party, witness or otherwise) in any way
         relating to the Collateral, any of the Loan Documents or any other
         agreement to be executed or delivered in connection herewith or
         therewith, including any litigation, contest, dispute, suit, case,
         proceeding or action, and any appeal or review thereof, in connection
         with a case commenced by or against any or all Borrowers or any other
         Person that may be obligated to Agent by virtue of the Loan Documents;
         including any such litigation, contest, dispute, suit, proceeding or
         action arising in connection with any work-out or restructuring of the
         Term Loans during the pendency of one or more Events of Default;
         provided that in the case of reimbursement of counsel for Lenders other
         than Agent, such reimbursement shall be limited to one counsel for all
         such Lenders; provided further, that no Person shall be entitled to
         reimbursement under this Section 11.3(d) in respect of any litigation,
         contest, dispute, suit, proceeding or action to the extent any of the
         foregoing results from such Person's gross negligence or willful
         misconduct or, so long as a Default or an Event of Default has not
         occurred and is not continuing, from disputes between or among Agent
         and any Lender;

                  (e)      any attempt to enforce any remedies of Agent against
         any or all of the Credit Parties or any other Person that may be
         obligated to Agent or any Lender by virtue of any of the Loan
         Documents, including any such attempt to enforce any such remedies in
         the course of any work-out or restructuring of the Term Loans during
         the pendency of

                                       50
<PAGE>

         one or more Events of Default; provided, that in the case of
         reimbursement of counsel for Lenders other than Agent, such
         reimbursement shall be limited to one counsel for all such Lenders;

                  (f)      any workout or restructuring of the Term Loans during
         the pendency of one or more Events of Default; and

                  (g)      from and after an Event of Default, efforts to (i)
         monitor the Term Loans or any of the other Obligations, (ii) evaluate,
         observe or assess any of the Credit Parties, LTF, or their respective
         affairs, and (iii) verify, protect, evaluate, assess, appraise,
         collect, sell, liquidate or otherwise dispose of any of the Collateral;

including, in each case, all reasonable attorneys' and other professional and
service providers' fees arising from such services and other advice, assistance
or other representation, including those in connection with any appellate
proceedings, and all reasonable expenses, costs, charges and other fees incurred
by such counsel and others in connection with or relating to any of the events
or actions described in this Section 11.3, all of which shall be payable, on
demand, by Borrowers to Agent. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees may include: fees, costs and expenses of
accountants, environmental advisors, appraisers, investment bankers, management
and other consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services.

         11.4.    No Waiver. Agent's or any Lender's failure, at any time or
times, to require strict performance by the Credit Parties or any other Person
of any provision of this Agreement or any other Loan Document shall not waive,
affect or diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance herewith or therewith. Any suspension or waiver of an
Event of Default shall not suspend, waive or affect any other Event of Default
whether the same is prior or subsequent thereto and whether the same or of a
different type. Subject to the provisions of Section 11.2, none of the
undertakings, agreements, warranties, covenants and representations of any
Credit Party contained in this Agreement or any of the other Loan Documents and
no Default or Event of Default by any Credit Party shall be deemed to have been
suspended or waived by Agent or any Lender, unless such waiver or suspension is
by an instrument in writing signed by an officer of or other authorized employee
of Agent and the applicable required Lenders, and directed to Borrowers
specifying such suspension or waiver.

         11.5.    Remedies. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
that Agent or any Lender may have under any other agreement, including the other
Loan Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.

         11.6.    Severability. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement or any other Loan Document shall be

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<PAGE>

prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Agreement or such other Loan Document.

         11.7.    Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement conflicts with any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.

         11.8.    Confidentiality. Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender
applies to maintaining the confidentiality of its own confidential information)
to maintain as confidential all confidential information provided to them by the
Credit Parties or LTF and designated as confidential for a period of two years
following receipt thereof, except that Agent and any Lender may disclose such
information (a) to Persons employed or engaged by Agent or such Lender in
evaluating, approving, structuring or administering the Term Loans and the
Commitments; (b) to any bona fide assignee or participant or potential assignee
or participant that has agreed to comply with the covenant contained in this
Section 11.8 (and any such bona fide assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any Governmental Authority or reasonably believed by Agent or such Lender to
be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advice of Agent's or such Lender's counsel, is required
by law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any litigation to which Agent or such
Lender is a party; or (f) that ceases to be confidential through no fault of
Agent or any Lender. Notwithstanding the foregoing, there is no restriction
(either express or implied) on any disclosure or dissemination of the federal
tax structure or the federal tax treatment of the Term Loans and related
Obligations. Further, each Credit Party, each Lender and Agent acknowledges that
it has no proprietary rights to any federal tax matter or federal income tax
idea or to any element of the federal tax structure of the Term Loans and
related Obligations.

         11.9.    Governing Law. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY
OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK
COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS
PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR TO ANY MATTER ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT; PROVIDED THAT
AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A

                                       52
<PAGE>

COURT LOCATED OUTSIDE OF NEW YORK COUNTY; PROVIDED FURTHER, THAT NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY
MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR
SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY
BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE
ADDRESS SET FORTH IN ANNEX F OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF
OR THREE DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

         11.10. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any Person by any
party hereto, or whenever any of the parties desires to give or serve upon any
Person any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and shall be deemed to have been validly served, given or delivered:
(a) upon the earlier of actual receipt and three Business Days after deposit in
the United States Mail, registered or certified mail, return receipt requested,
with proper postage prepaid; (b) upon transmission, when sent by telecopy or
other similar facsimile transmission (with such telecopy or facsimile promptly
confirmed by delivery of a copy by personal delivery or United States Mail as
otherwise provided in this Section 11.10); (c) one Business Day after deposit
with a reputable overnight courier with all charges prepaid; or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
in Annex F or to such other address (or facsimile number) as may be substituted
by notice given as herein provided. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such notice. Failure
or delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person (other than Borrower
Representative or Agent) designated in Annex F to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.

         11.11. Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.

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<PAGE>

         11.12. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.

         11.13. Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS RELATED THERETO.

         11.14. Press Releases and Related Matters. Each Credit Party agrees
that neither it nor its Affiliates will in the future issue any press releases
or other public disclosure using the name of GE Capital or its Affiliates or
referring to this Agreement, the other Loan Documents or the Related
Transactions Documents without at least two Business Days' prior notice to GE
Capital and without the prior written consent of GE Capital unless (and only to
the extent that) such Credit Party or Affiliate is required to do so under law
and then, in any event, such Credit Party or Affiliate will consult with GE
Capital before issuing such press release or other public disclosure. Each
Credit Party consents to the publication by Agent or any Lender of a tombstone
or similar advertising material relating to the financing transactions
contemplated by this Agreement. Agent reserves the right to provide to industry
trade organizations information necessary and customary for inclusion in league
table measurements.

         11.15. Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Borrower for liquidation or reorganization, should any Borrower become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Borrower's assets and shall continue to be effective or to be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, pursuant to applicable law, is rescinded or reduced in amount or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

         11.16. Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13 with its counsel.

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<PAGE>

         11.17. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.

12.      CROSS-GUARANTY

         12.1. Cross-Guaranty. Each Borrower hereby agrees that such Borrower is
jointly and severally liable for, and hereby absolutely and unconditionally
guarantees to Agent and Lenders and their respective successors and assigns, the
full and prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance of all Obligations owed or hereafter owing to Agent
and Lenders by each other Borrower. Each Borrower agrees that its guaranty
obligation hereunder is a continuing guaranty of payment and performance and not
of collection, that its obligations under this Section 12 shall not be
discharged until payment and performance, in full, of the Obligations has
occurred and that its obligations under this Section 12 shall be absolute and
unconditional, irrespective of, and unaffected by, the following:

                  (a)      the genuineness, validity, regularity, enforceability
         or any future amendment of or change in this Agreement, any other Loan
         Document or any other agreement, document or instrument to which any
         Borrower is or may become a party;

                  (b)      the absence of any action to enforce this Agreement
         (including this Section 12) or any other Loan Document or the waiver or
         consent by Agent and Lenders with respect to any of the provisions
         thereof;

                  (c)      the existence, value or condition of, or failure to
         perfect its Lien against, any security for the Obligations or any
         action, or the absence of any action, by Agent and Lenders in respect
         thereof (including the release of any such security);

                  (d)      the insolvency of any Credit Party; or

                  (e)      any other action or circumstances that might
         otherwise constitute a legal or equitable discharge or defense of a
         surety or guarantor.

Each Borrower shall be regarded, and shall be in the same position, as principal
debtor with respect to the Obligations guaranteed hereunder.

         12.2. Waivers by Borrowers. Each Borrower expressly waives all rights
it may have now or in the future under any statute, at common law, at law or in
equity or otherwise to compel Agent or Lenders to marshall assets or to proceed
in respect of the Obligations guaranteed hereunder against any other Credit
Party, any other Person or against any security for the payment and performance
of the Obligations before proceeding against, or as a condition to proceeding
against, such Borrower. It is agreed among each Borrower, Agent and Lenders that
the foregoing waivers are of the essence of the transaction contemplated by this
Agreement and the other Loan Documents and that, but for the provisions of this
Section 12 and such waivers, Agent and Lenders would decline to enter into this
Agreement.

                                       55
<PAGE>

         12.3. Benefit of Guaranty. Each Borrower agrees that the provisions of
this Section 12 are for the benefit of Agent and Lenders and their respective
successors, transferees, endorsees and assigns, and nothing in this Agreement
shall impair, as between any other Borrower and Agent or Lenders, the
obligations of such other Borrower under the Loan Documents.

         12.4. Subordination of Subrogation, Etc. Notwithstanding anything to
the contrary in this Agreement or in any other Loan Document, and except as set
forth in Section 12.7, each Borrower hereby expressly and irrevocably
subordinates to payment of the Obligations any and all rights at law or in
equity to subrogation, reimbursement, exoneration, contribution, indemnification
or set off and any and all defenses available to a surety, guarantor or
accommodation co-obligor until the Obligations are indefeasibly paid in full in
cash. Each Borrower acknowledges and agrees that this subordination is intended
to benefit Agent and Lenders and shall not limit or otherwise affect such
Borrower's liability hereunder or the enforceability of this Section 12 and that
Agent, Lenders and their respective successors and assigns are intended
third-party beneficiaries of the waivers and agreements set forth in this
Section 12.4.

         12.5. Election of Remedies. If Agent or any Lender may, under
applicable law, proceed to realize its benefits under any of the Loan Documents
giving Agent or such Lender a Lien upon any Collateral, whether owned by any
Borrower or by any other Person, either by judicial foreclosure or by
non-judicial sale or enforcement, Agent or any Lender may, at its sole option,
determine which of its remedies or rights it may pursue without affecting any of
its rights and remedies under this Section 12. If, in the exercise of any of its
rights and remedies, Agent or any Lender shall forfeit any of its rights or
remedies, including its right to enter a deficiency judgment against any
Borrower or any other Person, whether because of any applicable laws pertaining
to "election of remedies" or the like, each Borrower hereby consents to such
action by Agent or such Lender and waives any claim based upon such action, even
if such action by Agent or such Lender shall result in a full or partial loss of
any rights of subrogation that each Borrower might otherwise have had but for
such action by Agent or such Lender. Any election of remedies that results in
the denial or impairment of the right of Agent or any Lender to seek a
deficiency judgment against any Borrower shall not impair any other Borrower's
obligation to pay the full amount of the Obligations. In the event Agent or any
Lender shall bid at any foreclosure or trustee's sale or at any private sale
permitted by law or the Loan Documents, Agent or such Lender may bid all or less
than the amount of the Obligations and the amount of such bid need not be paid
by Agent or such Lender, but shall be credited against the Obligations. The
amount of the successful bid at any such sale, whether Agent, Lender or any
other party is the successful bidder, shall be conclusively deemed to be the
fair market value of the Collateral and the difference between such bid amount
and the remaining balance of the Obligations shall be conclusively deemed to be
the amount of the Obligations guaranteed under this Section 12, notwithstanding
that any present or future law or court decision or ruling may have the effect
of reducing the amount of any deficiency claim to which Agent or any Lender
might otherwise be entitled but for such bidding at any such sale.

         12.6. Limitation. Notwithstanding any provision herein contained to the
contrary, each Borrower's liability under this Section 12 (which liability is in
any event in addition to amounts for which such Borrower is primarily liable
under Section 1) shall be limited to an amount not to

                                       56
<PAGE>

exceed, as of any date of determination, the amount that could be claimed by
Agent and Lenders from such Borrower under this Section 12 without rendering
such claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law after taking
into account, among other things, such Borrower's right of contribution and
indemnification from each other Borrower under Section 12.7.

         12.7.    Contribution with Respect to Guaranty Obligations.

                  (a)      To the extent that any Borrower shall make a payment
         under this Section 12 of all or any of the Obligations (other than Term
         Loans made to that Borrower for which it is primarily liable) (a
         "Guarantor Payment") that, taking into account all other Guarantor
         Payments then previously or concurrently made by any other Borrower,
         exceeds the amount that such Borrower would otherwise have paid if each
         Borrower had paid the aggregate Obligations satisfied by such Guarantor
         Payment in the same proportion that such Borrower's Allocable Amount
         (as determined immediately prior to such Guarantor Payment) bore to the
         aggregate Allocable Amounts of each Borrower as determined immediately
         prior to the making of such Guarantor Payment, then, following
         indefeasible payment in full in cash of the Obligations and termination
         of the Commitments, such Borrower shall be entitled to receive
         contribution and indemnification payments from, and be reimbursed by,
         each other Borrower for the amount of such excess, pro rata based upon
         their respective Allocable Amounts in effect immediately prior to such
         Guarantor Payment.

                  (b)      This Section 12.7 is intended only to define the
         relative rights of Borrowers and nothing set forth in this Section 12.7
         is intended to or shall impair the obligations of Borrowers, jointly
         and severally, to pay any amounts as and when the same shall become due
         and payable in accordance with the terms of this Agreement, including
         Section 12.1. Nothing contained in this Section 12.7 shall limit the
         liability of any Borrower to pay the Term Loans made directly or
         indirectly to such Borrower and accrued interest, Fees and expenses
         with respect thereto for which such Borrower shall be primarily liable.

                  (c)      The parties hereto acknowledge that the rights of
         contribution and indemnification hereunder shall constitute assets of
         Borrowers to which such contribution and indemnification are owing.

                  (d)      The rights of the indemnifying Borrowers against
         other Credit Parties under this Section 12.7 shall be exercisable upon
         the full and indefeasible payment of the Obligations and the
         termination of the Commitments.

         12.8. Liability Cumulative. The liability of Borrowers under this
Section 12 is in addition to and shall be cumulative with all liabilities of
each Borrower to Agent and Lenders under this Agreement and the other Loan
Documents to which such Borrower is a party or in respect of any Obligations or
obligation of the other Borrowers, without any limitation as to

                                       57
<PAGE>

amount, unless the instrument or agreement evidencing or creating such other
liability specifically provides to the contrary.

                         [Remainder of page left blank.]

                                       58
<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.

                                            BORROWERS

                                            LTFMF AZ REAL ESTATE, LLC,
                                            a Delaware limited liability company

                                            ____________________________________
                                            Eric J. Buss, Secretary

<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed by the
following Person in its capacity as a Credit Party and not as a Borrower as of
the date first written above.

                                            LTFMF REAL ESTATE HOLDINGS, LLC,
                                            a Delaware limited liability company

                                            ____________________________________
                                            Eric J. Buss, Secretary

<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.

                                            GENERAL ELECTRIC CAPITAL
                                            CORPORATION,
                                            as Agent and Lender

                                            By:_________________________________
                                            Name:_______________________________
                                                  Duly Authorized Signatory

<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.

                                            MARATHON STRUCTURED FINANCE
                                            FUND, LTD.,
                                            as Lender

                                            By:_________________________________
                                                     David Arzi
                                                     Duly Authorized Signatory

<PAGE>

                               ANNEX A (RECITALS)
                                       TO
                                CREDIT AGREEMENT

1.       DEFINITIONS

         Capitalized terms used in this Agreement and the other Loan Documents
shall have (unless otherwise provided elsewhere in the Loan Documents) the
following respective meanings, and all references to Sections, Exhibits,
Schedules or Annexes in the following definitions shall refer to Sections,
Exhibits, Schedules or Annexes of or to the Agreement.

                  "Account Debtor" means any Person who may become obligated to
any Credit Party under, with respect to, or on account of, an Account.

                  "Accounting Changes" has the meaning ascribed thereto in
Annex D.

                  "Accounts" means all "accounts," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, including (a) all
accounts receivable, other receivables, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments), whether arising out of goods sold or services
rendered by it or from any other transaction (including any such obligations
that may be characterized as an account or contract right under the Code), (b)
all of such Person's rights in, to and under all purchase orders or receipts for
goods or services, (c) all of such Person's rights to any goods represented by
any of the foregoing (including unpaid sellers' rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned, reclaimed or
repossessed goods), (d) all monies due or to become due to such Person, under
all purchase orders and contracts for the sale of goods or the performance of
services or both by such Person or in connection with any other transaction
(whether or not yet earned by performance on the part of such Person), including
the right to receive the proceeds of said purchase orders and contracts, (e) all
health care insurance receivables and (f) all collateral security and guaranties
of any kind, given by any Account Debtor or any other Person with respect to any
of the foregoing.

                  "Acknowledgement Agreement" has the meaning ascribed to it in
Section 1.15(d).

                  "Additional Lender" has the meaning ascribed to it in Section
1.15.

                  "Affected Lender" has the meaning ascribed to it in Section
1.12(c).

                  "Affiliate" means, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary
voting power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person, (c) each
of such Person's officers, directors, joint venturers and partners and (d) in
the case of Credit Parties, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of any Credit Party. For the
purposes of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its

                                      A-1
<PAGE>

management or policies, whether through the ownership of voting securities, by
contract or otherwise; provided, however, that the term "Affiliate" shall
specifically exclude Agent and each Lender.

                  "Agent" has the meaning ascribed to it in the Preamble of this
Agreement.

                  "Agreement" has the meaning ascribed to it in the Preamble of
this Agreement.

                  "Allocable Amount" means, with respect to any Borrower and as
of any date of determination, the maximum amount of the claim that could then be
recovered from such Borrower under Section 12 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law.

                  "Applicable Percentage" means (a) 3.0%, in the case of a
prepayment or payment after acceleration on or prior to the first anniversary of
the Closing Date, (b) 2.0%, in the case of a prepayment or payment after
acceleration after the first anniversary of the Closing Date but on or prior to
the second anniversary of the Closing Date, and (c) 1.0%, in the case of a
prepayment or payment after acceleration after the second anniversary of the
Closing Date but on or prior to the third anniversary of the Closing Date.

                  "Appendices" has the meaning ascribed to it in the Recitals to
this Agreement.

                  "A Rated Bank" has the meaning ascribed to it in Section 6.2.

                  "Assignment Agreement" has the meaning ascribed to it in
Section 9.1(a).

                  "Assignments of Leases" means each Assignment of Rents and
Leases of even date herewith executed by each Borrower that is a signatory
hereto in favor of Agent, on behalf of itself and Lenders, and any assignments
of rents and leases executed after the Closing Date by any Credit Party in favor
of Agent, on behalf of itself and Lenders (as required by any Loan Document), in
each case, as amended, supplemented, restated, or otherwise modified from time
to time.

                  "Bankruptcy Code" means Title 11 of the United States Code, as
amended from time to time, and any successor statute thereto.

                  "Borrower Representative" means Holdings in its capacity as
Borrower Representative pursuant to Section 1.1(f).

                  "Borrowers" has the meaning ascribed to it in the Preamble of
this Agreement.

                  "Borrowing Availability" means, for each Facility, (a) the
lesser of (i) the Commitment of all Lenders as of that date less the aggregate
principal amount of Term Loans advanced prior to such date and (ii) 65% of
Borrowers' total cost to acquire and improve the real property for such
Facility.

                                      A-2
<PAGE>

                  "BSA" has the meaning ascribed to it in Section 3.1(b).

                  "Business Day" means any day that is not a Saturday, a Sunday
or a day on which banks are required or permitted to be closed in the State of
New York.

                  "Capital Expenditures" means, with respect to any Facility,
all expenditures (by the expenditure of cash or the incurrence of Indebtedness)
by LTF in connection with such Facility during any measuring period for any
fixed assets or improvements or for replacements, substitutions or additions
thereto, in each case that that have a useful life of more than one year and
that are required to be capitalized under GAAP.

                  "Capital Lease" means, with respect to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee that,
in accordance with GAAP, would be required to be classified and accounted for as
a capital lease on a balance sheet of such Person.

                  "Capital Lease Obligation" means, with respect to any Capital
Lease of any Person, the amount of the obligation of the lessee thereunder that,
in accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease.

                  "CERCLA" has the meaning ascribed to it in the definition of
Environmental Laws included in Annex A.

                  "Certificate of Exemption" has the meaning ascribed to it in
Section 1.11(c).

                  "Change of Control" means any event, transaction or occurrence
as a result of which (a) LTF ceases to own and control all of the economic and
voting rights associated with all of the outstanding capital Stock of Holdings
or (b) Holdings ceases to own and control all of the economic and voting rights
associated with all of the outstanding capital Stock of each Borrower.

                  "Charges" means all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including taxes owed to the PBGC at
the time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party, (d) any
Credit Party's ownership or use of any properties or other assets, or (e) any
other aspect of any Credit Party's business.

                  "Chattel Paper" means any "chattel paper," as such term is
defined in the Code, including electronic chattel paper, now owned or hereafter
acquired by any Credit Party, wherever located.

                  "Closing Date" means December 31, 2003.

                  "Closing Checklist" means the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with

                                      A-3
<PAGE>

this Agreement, the other Loan Documents and the transactions contemplated
thereunder, in substantially the form of Section 1 of Annex B.

                  "Code" means the Uniform Commercial Code as the same may, from
time to time, be enacted and in effect in the State of New York; provided, that
in the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, Agent's or
any Lender's Lien on any Collateral is governed by the Uniform Commercial Code
as enacted and in effect in a jurisdiction other than the State of New York, the
term "Code" shall mean the Uniform Commercial Code as enacted and in effect in
such other jurisdiction solely for purposes of the provisions thereof relating
to such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions.

                  "Collateral" means the property covered by the Collateral
Documents and any other property, real or personal, tangible or intangible, now
existing or hereafter acquired, that may at any time be or become subject to a
security interest or Lien in favor of Agent, on behalf of itself and Lenders, to
secure the Obligations.

                  "Collateral Documents" means the Security Agreements, the
Pledge Agreements, the Mortgages, the Assignments of Leases, the Guaranty
Agreement and all similar agreements entered into by any Person guaranteeing
payment of or granting a Lien upon property as security for payment of the
Obligations, in each case as amended, supplemented, restated, or otherwise
modified from time to time.

                  "Collection Account" means that certain account of Agent,
account number 502-328-54 in the name of Agent at Bankers Trust Company in New
York, New York ABA No. 021 001 033, or such other account as may be specified in
writing by Agent as the "Collection Account."

                  "Commitment" means, (a) as to any Lender, the aggregate
commitment of such Lender to make Term Loans as set forth on Annex G or in the
most recent Assignment Agreement executed by such Lender and, (b) as to all
Lenders, the aggregate commitment of all Lenders to make Term Loans, which
aggregate commitment shall be $35,000,000 on the Closing Date, as such amount
may be adjusted, if at all, from time to time in accordance with this Agreement.

                  "Commitment Termination Date" means the earliest of (a)
December 31, 2004, (b) the date of termination of Lenders' obligations to make
Term Loans or permit existing Term Loans to remain outstanding pursuant to
Section 8.2(b) and (c) the date of indefeasible prepayment in full by Borrowers
of the Term Loans and the permanent reduction of all Commitments to $0.

                  "Compliance Certificate" has the meaning ascribed to it in
Annex C.

                  "Control Letter" means a letter agreement between Agent and
(i) the issuer of uncertificated securities with respect to uncertificated
securities in the name of any Credit Party or (ii) a securities intermediary
with respect to securities, whether certificated or uncertificated, securities
entitlements and other financial assets held in a securities account in the name
of any

                                      A-4
<PAGE>

Credit Party whereby, among other things, the issuer or securities intermediary
disclaims any security interest in the applicable financial assets, acknowledges
the Lien of Agent, on behalf of itself and Lenders, on such financial assets and
agrees to follow the instructions or entitlement orders of Agent without further
consent by the affected Credit Party.

                  "Copyright License" means any and all rights now owned or
hereafter acquired by any Credit Party under any written agreement granting any
right to use any Copyright or Copyright registration.

                  "Copyrights" means all of the following now owned or hereafter
adopted or acquired by any Credit Party: (a) all copyrights and general
intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any similar office or agency of the United
States, any state or territory thereof, or any other country or any political
subdivision thereof, and (b) all reissues, extensions or renewals thereof.

                  "Credit Parties" means Holdings, each Borrower and each
Subsidiary of Holdings or Borrower, if any.

                  "Default" means any event that, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.

                  "Default Rate" has the meaning ascribed to it in Section
1.4(d).

                  "Deposit Agreement" means, with respect to each Facility, the
Deposit Agreement executed by LTF in favor Agent, on behalf of itself and
Lenders, pursuant to which LTF agrees to pay Deposits to Agent, for the benefit
of Agent and Lenders, to secure the Obligations related to such Facility.

                  "Deposits" means, with respect to any Facility for any Fiscal
Month, the deposits related to such Fiscal Month and paid by LTF to Agent in the
subsequent Fiscal Month, in accordance with the Deposit Agreement.

                  "Disclosure Schedules" means the Schedules prepared by
Borrowers and denominated as Disclosure Schedules 1.3 through 6.7 in the Index
of Appendices to this Agreement.

                  "Documents" means all "documents," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located.

                  "Dollars" or "$" means lawful currency of the United States of
America.

                  "EBITDA" means, with respect to any Facility for any
applicable period, LTF's net income or loss after taxes for such period
(excluding any after-tax gains or losses on the sale of assets other than the
sale of Inventory in the ordinary course of business and excluding other
after-tax extraordinary gains or losses); plus interest expense, income and
franchise tax expense,

                                      A-5
<PAGE>

depreciation, amortization and lease payments related to the applicable Facility
Lease, in each case, to the extent deducted in determining LTF's net income for
such Facility for such period in accordance with GAAP.

                  "Environmental Indemnity Agreements" means each Environmental
Indemnity Agreement executed by LTF, Holdings, and any Borrower in favor of
Agent, for the benefit of Agent and Lenders, with respect to the Facilities, all
in form and substance reasonably satisfactory to Agent.

                  "Environmental Laws" means all applicable federal, state,
local and foreign laws, statutes, ordinances, codes, rules, standards and
regulations, now or hereafter in effect, and any applicable judicial or
administrative interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing liability or
standards of conduct for or relating to the regulation and protection of human
health, safety, the environment and natural resources (including ambient air,
surface water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation). Environmental Laws include the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(42 U.S.C. Sections 9601 et seq.) ("CERCLA"); the Hazardous Materials
Transportation Authorization Act of 1994 (49 U.S.C. Sections 5101 et seq.); the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sections 136 et
seq.); the Solid Waste Disposal Act (42 U.S.C. Sections  6901 et seq.); the
Toxic Substance Control Act (15 U.S.C. Sections 2601 et seq.); the Clean Air Act
(42 U.S.C. Sections 7401 et seq.); the Federal Water Pollution Control Act (33
U.S.C. Sections 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C.
Sections 651 et seq.); the Safe Drinking Water Act (42 U.S.C. Sections  300(f)
et seq.), any and all regulations promulgated thereunder, all analogous state,
local and foreign counterparts or equivalents and any transfer of ownership
notification or approval statutes.

                  "Environmental Liabilities" means, with respect to any Person,
all liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws or Environmental Permits or in connection
with any Release or presence of a Hazardous Material whether on, at, in, under,
from, about or in the vicinity of any real or personal property.

                  "Environmental Permits" means all permits, licenses,
authorizations, certificates, approvals or registrations required by any
Governmental Authority under any Environmental Laws.

                  "Equipment" means all "equipment," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located
and, in any event, including all such Person's machinery and equipment,
including processing equipment, conveyors,

                                      A-6
<PAGE>

machine tools, data processing and computer equipment, including embedded
software and peripheral equipment and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures not forming a
part of real property, together with all additions and accessions thereto,
replacements therefor, all parts therefor, all substitutes for any of the
foregoing, fuel therefor, and all manuals, drawings, instructions, warranties
and rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.

                  "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any regulations promulgated thereunder.

                  "ERISA Affiliate" means, with respect to any Credit Party, any
trade or business (whether or not incorporated) that, together with such Credit
Party, are treated as a single employer within the meaning of Sections 414(b),
(c), (m) or (o) of the IRC.

                  "ERISA Event" means, with respect to any Credit Party or any
ERISA Affiliate of a Credit Party, (a) any event described in Section 4043(c) of
ERISA with respect to a Title IV Plan; (b) the withdrawal of any Credit Party or
any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during
a plan year in which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any Credit Party
or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice
of intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by
any Credit Party or any ERISA Affiliate to make when due required contributions
to a Multiemployer Plan or Title IV Plan unless such failure is cured within
thirty days; (g) any other event or condition that might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or for the imposition of liability under Section 4069 or Section 4212(c) of
ERISA; (h) the termination of a Multiemployer Plan under Section 4041A of ERISA
or the reorganization or insolvency of a Multiemployer Plan under Section 4241
or Section 4245 of ERISA; (i) the loss of a Qualified Plan's qualification or
tax exempt status; or (j) the termination of a Plan described in Section 4064 of
ERISA.

                  "ESOP" means a Plan that is intended to satisfy the
requirements of Section 4975(e)(7) of the IRC.

                  "Event of Default" has the meaning ascribed to it in Section
8.1.

                  "Facility" means the land, buildings, improvements and other
real property interests in LTF prototypical fitness facilities to be located in
Tempe, Arizona; Gilbert, Arizona; Plano, Texas; Willowbrook, Texas; and Garland,
Texas or such other locations, in each case as agreed to by Agent and Lenders.

                                      A-7
<PAGE>

                  "Facility Funding Checklist" means the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with this Agreement, the other Loan
Documents and the transactions contemplated thereunder with respect to any
Facility and the Term Loan related thereto, in Section 2 of Annex B.

                  "Facility Lease" means, with respect to any Facility, the
lease agreement by and between a Borrower and LTF, pursuant to which LTF leases
such Facility from the applicable Borrower on a triple net basis for a term
expiring at least fifteen years after the Closing Date and for a lease amount at
least equal to such Facility's Fixed Charges, which lease shall be
non-cancellable and cross-defaulted against all other Facility Leases.

                  "Fair Labor Standards Act" means the Fair Labor Standards Act,
29 U.S.C. Section 201 et seq.

                  "Federal Reserve Board" means the Board of Governors of the
Federal Reserve System.

                  "Fee Letter" has the meaning ascribed to it in Section 1.5(a).

                  "Fees" means any and all fees payable to Agent or any Lender
pursuant to this Agreement or any other Loan Document.

                  "Financial Covenants" means the financial covenants set forth
in Annex D.

                  "Financial Statements" means the consolidated and
consolidating income statements, statements of cash flows and balance sheets of
the Credit Parties, LTF, and their respective Subsidiaries, as applicable,
delivered in accordance with Sections 3.4 and 4 and Annex C.

                  "Fiscal Month" means any of the monthly accounting periods of
the Credit Parties and LTF.

                  "Fiscal Year" means any of the annual accounting periods of
the Credit Parties and LTF ending on December 31 of each year.

                  "Fixed Charge Ratio" means, with respect to any Facility, the
ratio of EBITDA minus non-financed Capital Expenditures to Fixed Charges;
calculated at the end of each Fiscal Month (a) on a cumulative basis from the
first full month prior to funding the Term Loan related to such Facility until a
cumulative twelve months of scheduled principal payments on such Term Loan have
been made and (b) thereafter, based on the last twelve-month period then ended.

                  "Fixed Charges" means, with respect to any Facility for any
fiscal period, the sum of (a) the aggregate of all Interest Expense, (b)
scheduled payments of principal with respect to Indebtedness of the Borrower
that owns such Facility, including the related Term Loan, (c) income and
franchise tax expense determined in accordance with GAAP, and (d) payments with
respect to LTF's Capital Lease Obligations, in each case attributable to such
Facility for such

                                      A-8
<PAGE>

fiscal period and without duplication and, (e) to the extent such fiscal period
includes the Initial Calculation Period (or any portion thereof), interest and
principal attributable to the Term Loan related to such Facility and Capital
Lease Obligations attributable to such Facility, giving pro forma effect to such
Term Loan and the LTF Capital Leases related to such Facility.

                  "Foreign Lender" has the meaning ascribed to it in Section
1.11(c).

                  "Funded Debt" means, with respect to any Person, without
duplication, all Indebtedness for borrowed money evidenced by notes, bonds,
debentures, or similar evidences of Indebtedness that by its terms matures more
than one year from, or is directly or indirectly renewable or extendible at such
Person's option under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of more than one year from the
date of creation thereof, and specifically including Capital Lease Obligations,
current maturities of long-term debt, revolving credit and short-term debt
extendible beyond one year at the option of the debtor, and also including, in
the case of Borrowers, the Obligations and, without duplication, Guaranteed
Indebtedness consisting of guaranties of Funded Debt of other Persons.

                  "GAAP" means generally accepted accounting principles in the
United States of America consistently applied, as such term is further defined
in Annex D.

                  "GE Capital" has the meaning ascribed to it in the Preamble of
this Agreement.

                  "Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

                  "Granting Lender" has the meaning ascribed to it in Section
9.1(f).

                  "Guaranteed Indebtedness" means as to any Person, any
obligation of such Person guaranteeing, providing comfort or otherwise
supporting any Indebtedness, lease, dividend, or other obligation (the "Primary
Obligation") of any other Person (the "Primary Obligor") in any manner,
including any obligation or arrangement of such Person to (a) purchase or
repurchase any Primary Obligation, (b) advance or supply funds (i) for the
purchase or payment of any Primary Obligation or (ii) to maintain working
capital or equity capital of the Primary Obligor or otherwise to maintain the
net worth or solvency or any balance sheet condition of the Primary Obligor, (c)
purchase property, securities or services primarily for the purpose of assuring
the owner of any Primary Obligation of the ability of the Primary Obligor to
make payment of the Primary Obligation, (d) protect the beneficiary of such
arrangement from loss (other than product warranties given in the ordinary
course of business) or (e) indemnify the owner of any Primary Obligation against
loss in respect thereof. The amount of any Guaranteed Indebtedness at any time
shall be deemed to be an amount equal to the lesser at such time of (x) the
stated or determinable amount of the Primary Obligation in respect of which such
Guaranteed Indebtedness is incurred and (y) the maximum amount for which such
Person may be liable pursuant to the terms of the instrument embodying such
Guaranteed Indebtedness, or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in respect thereof.

                                      A-9
<PAGE>

                  "Guarantor Payment" has the meaning ascribed to it in Section
12.7.

                  "Guaranty Agreement" means the Guaranty of even date herewith
executed by Holdings in favor of Agent, on behalf of itself and Lenders,
guaranteeing the Obligations of Borrowers to Agent and Lenders.

                  "Hazardous Material" means any substance, material or waste
that is regulated by, or forms the basis of liability now or hereafter under any
Environmental Laws, including any material or substance that is (a) defined as a
"solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's),
or any radioactive substance.

                  "Holdings" has the meaning ascribed to it in the Preamble of
this Agreement.

                  "Holdings Pledge Agreement" means the Pledge Agreement of even
date herewith executed by Holdings in favor of Agent, on behalf of itself and
Lenders, pledging all Stock of its Subsidiaries.

                  "Indebtedness" means, with respect to any Person, without
duplication, (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property, payment for which is deferred six months or
more, but excluding obligations to trade creditors incurred in the ordinary
course of business that are unsecured and not overdue by more than six months
unless being contested in good faith, (b) all reimbursement and other
obligations with respect to letters of credit, bankers' acceptances and surety
bonds, whether or not matured, (c) all obligations evidenced by notes, bonds,
debentures or similar instruments, (d) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though 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), (e) all Capital Lease Obligations and the present
value (discounted at the Interest Rate in effect on the Closing Date) of future
rental payments under all synthetic leases, (f) all obligations of such Person
under commodity purchase or option agreements or other commodity price hedging
arrangements, in each case whether contingent or matured, (g) all obligations of
such Person under any foreign exchange contract, currency swap agreement,
interest rate swap, cap or collar agreement or other similar agreement or
arrangement designed to alter the risks of that Person arising from fluctuations
in currency values or interest rates, in each case whether contingent or
matured, (h) all Indebtedness referred to above 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 in property or other assets (including accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness, and (i) the
Obligations.

                  "Indemnified Liabilities" has the meaning ascribed to it in
Section 1.9.

                  "Indemnified Person" has the meaning ascribed to in Section
1.9.

                                      A-10
<PAGE>

                  "Index Rate" means the highest per annum rate of interest
published by the Federal Reserve Board in the most current Federal Reserve
statistical release H.15 (519) entitled "Selected Interest Rates" as the 5-year
rate for U.S. Government Treasury Securities.

                  "Initial Calculation Period" means, with respect to any
Facility, the period from the first day of the Fiscal Month prior to the
applicable Term Loan funding date through (a) the last day of the Fiscal Month
including such funding date, if the funding date occurred on or before the
fifteenth calendar day of the month, or (b) the last day of the first full
Fiscal Month following such funding date, if the funding date occurred after the
fifteenth calendar day of the month.

                  "Initial Fixed Charge Ratio" means, with respect to any
Facility, the ratio of EBITDA plus Deposits minus non-financed Capital
Expenditures to Initial Fixed Charges, calculated at the end of each Fiscal
Month, (a) on a cumulative basis from the first full month prior to funding the
Term Loan related to such Facility until a cumulative twelve months scheduled
principal payments on such Term Loan have been made and (b) thereafter, based on
the last twelve-month period then ended.

                  "Initial Fixed Charges" means, with respect to any Facility
for any fiscal period, the sum of (a) the aggregate of all Interest Expense and
(b) scheduled payments of principal, in each case with respect to the Term Loan
related to such Facility for such fiscal period, and (c) to the extent such
fiscal period includes the Initial Calculation Period (or any portion thereof),
interest and principal attributable to the Term Loan related to such Facility,
giving pro forma effect to such Term Loan.

                  "Instruments" means all "instruments," as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party, wherever
located, and, in any event, including all certificated securities, all
certificates of deposit, and all notes and other evidences of indebtedness,
other than instruments that constitute or are a part of a group of writings that
constitute Chattel Paper.

                  "Intellectual Property" means any and all Licenses, Patents,
Copyrights, Trademarks and the goodwill associated with such Trademarks.

                  "Interest Expense" means, with respect to any Facility for any
fiscal period, interest expense (whether cash or non-cash) attributable to such
Facility determined in accordance with GAAP for the relevant period ended on
such date, including such Facility's share of interest expense with respect to
any Funded Debt of the Borrower who owns such Facility and interest expense for
the relevant period that has been capitalized on the balance sheet of such
Borrower.

                  "Interest Rate" means a per annum rate equal to 4.5% plus the
Index Rate as of the funding date of the applicable Term Loan.

                  "Inventory" means all "inventory," as such term is defined in
the Code, now owned or hereafter acquired by any Borrower, wherever located, and
in any event including inventory, merchandise, goods and other personal property
that are held by or on behalf of any

                                      A-11
<PAGE>

Borrower for sale or lease or are furnished or are to be furnished under a
contract of service or that constitute raw materials, work in process, finished
goods, returned goods or materials or supplies of any kind, nature or
description used or consumed or to be used or consumed in such Borrower's
business or in the processing, production, packaging, promotion, delivery or
shipping of the same, including other supplies and embedded software.

                  "IRC" means the Internal Revenue Code of 1986 and all
regulations promulgated thereunder.

                  "IRS" means the Internal Revenue Service.

                  "Joinder Agreement" has the meaning ascribed to it in Section
1.14(a).

                  "Lenders" has the meaning ascribed to it in the Preamble of
this Agreement.

                  "Letter Agreement" means the Letter Agreement, dated as of the
date hereof, between LTF and Agent, for the benefit of Agent and Lenders.

                  "License" means any Copyright License, Patent License,
Trademark License or other similar license of rights or interests now held or
hereafter acquired by any Credit Party.

                  "Lien" means any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of or agreement to give any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction).

                  "Litigation" has the meaning ascribed to it in Section 3.13.

                  "Loan Account" has the meaning ascribed to it in Section 1.8.

                  "Loan Documents" means this Agreement, the Notes, the
Collateral Documents, the Letter Agreement, the Environmental Indemnity
Agreements, the Deposit Agreements, the Joinder Agreements and all other
agreements, instruments, documents and certificates identified in the Closing
Checklist or the Facility Funding Checklist executed and delivered to, or in
favor of, Agent or any Lenders and including all other pledges, powers of
attorney, consents, assignments, contracts, notices, and all other written
matter whether heretofore, now or hereafter executed by or on behalf of any
Credit Party or any other Person and delivered to Agent or any Lender in
connection with this Agreement or the transactions contemplated thereby. Any
reference in this Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to
this Agreement or such Loan Document as the same may be in effect at any and all
times such reference becomes operative.

                  "LTF" has the meaning ascribed to it in the Recitals of this
Agreement.

                                      A-12
<PAGE>

                  "LTFAZ" has the meaning ascribed to it in the Preamble of this
Agreement.

                  "LTF Pledge Agreement" means the Pledge Agreement of even date
herewith executed by LTF in favor of Agent, on behalf of itself and Lenders,
pledging all Stock of Holdings.

                   "Make Whole Amount" means, as of any date of prepayment or
payment after acceleration, an amount equal to the greater of (a) the aggregate
present value of the remaining installments of the Term Loans, discounted to
such date at the Reinvestment Rate, less the aggregate present value of the
remaining installments of the Term Loans, discounted to such date at the
Interest Rates applicable to each such Term Loan, and (b) zero.

                  "Margin Stock" has the meaning ascribed to in Section 3.10.

                  "Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or financial or other condition
of the Credit Parties, taken as a whole, or LTF, (b) any Borrower's ability to
pay any of the Term Loans or any of the other Obligations in accordance with the
terms of this Agreement, (c) the Collateral or Agent's Liens, on behalf of
itself and Lenders, on the Collateral or the priority of such Liens, or (d)
Agent's or any Lender's rights and remedies under this Agreement and the other
Loan Documents.

                  "Maturity Date" means the earliest of (a) December 31, 2011
and (b) the date of termination of Lenders' obligations to permit existing Term
Loans to remain outstanding pursuant to Section 8.2(b).

                  "Maximum Amount" means, as of any date of determination, an
amount equal to the Commitment of all Lenders as of such date.

                  "Maximum Lawful Rate" has the meaning ascribed to it in
Section 1.4(e).

                  "Mortgages" means each of the mortgages, deeds of trust or
other real estate security documents executed by any Borrower in favor of Agent,
for the benefit of Agent and Lenders, with respect to the Real Estate, all in
form and substance reasonably satisfactory to Agent.

                  "Multiemployer Plan" means a "multiemployer plan," as defined
in Section 4001(a)(3) of ERISA, and to which any Credit Party or any ERISA
Affiliate is making, is obligated to make or has made or been obligated to make
contributions on behalf of participants who are or were employed by any of them.

                  "Non-Consenting Lender" has the meaning ascribed to it in
Section 11.2(d).

                  "Non-Funding Lender" has the meaning ascribed to it in Section
9.9(a)(ii).

                  "Note" has the meaning ascribed to it in Section 1.1(c).

                  "Notice of Borrowing" has the meaning ascribed to it in
Section 1.1(a).

                                      A-13
<PAGE>

                  "Obligations" means all loans, advances, debts, liabilities
and obligations for the performance of covenants, tasks or duties or for payment
of monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Agent or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, arising under this Agreement or any of
the other Loan Documents. This term includes all principal, interest (including
all interest that accrues after the commencement of any case or proceeding by or
against any Credit Party in bankruptcy, whether or not allowed in such case or
proceeding), Fees, Charges, expenses, attorneys' fees and any other sum
chargeable to any Credit Party under this Agreement or any other Loan Document.

                  "OFAC" has the meaning ascribed to it in Section 3.1(b).

                  "Patent License" means rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right with respect
to any invention on which a Patent is in existence.

                  "Patents" means all of the following in which any Credit Party
now holds or hereafter acquires any interest: (a) all letters patent of the
United States or of any other country, all registrations and recordings thereof
and all applications for letters patent of the United States or of any other
country, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country or any
political subdivision thereof and (b) all reissues, continuations,
continuations-in-part or extensions thereof.

                  "Payment Date" means, as to any Term Loan, the first Business
Day of each month to occur while such Term Loan is outstanding, the Maturity
Date and the Termination Date; provided that if the funding date of such Term
Loan occurred after the fifteenth calendar day of the month, the first Business
Day of the first full calendar month following the funding date shall not be a
"Payment Date."

                  "Pay-off Letter" means, with respect to any Refinancing, a
letter reasonably satisfactory to Agent confirming that the Prior Lender
Obligations will be repaid in full from the proceeds of the related Term Loan
and all Liens upon any of the property of Borrowers in favor of the applicable
Prior Lender shall be terminated by such Prior Lender immediately upon such
payment.

                  "PBGC" means the Pension Benefit Guaranty Corporation.

                  "Pension Plan" means a Plan described in Section 3(2) of
ERISA.

                  "Perfection Certificate" means the Perfection Certificate,
dated as of the date hereof, executed by Borrowers in favor of Agent, for the
benefit of Agent and Lenders, together with all schedules thereto, as amended,
supplemented, restated, or otherwise modified from time to time.

                  "Permitted Acquisition" has the meaning ascribed to it in
Section 6.1(b).

                                      A-14
<PAGE>

                  "Permitted Encumbrances" means the following encumbrances: (a)
Liens for taxes or assessments or other governmental Charges not yet due and
payable or which are being contested in accordance with Section 5.2(b); (b)
pledges or deposits of money securing statutory obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation (excluding Liens under ERISA); (c) pledges or deposits of
money securing bids, tenders or contracts made in the ordinary course of
business; (d) inchoate and unperfected workers', mechanics' or similar liens
arising in the ordinary course of business and securing liabilities in an
outstanding aggregate amount not in excess of $100,000 at any time; (f) deposits
securing, or in lieu of, surety, appeal or customs bonds in proceedings to which
any Credit Party is a party; (g) any attachment or judgment lien not
constituting an Event of Default under Section 8.1(l); (h) zoning restrictions,
easements, licenses, or other restrictions on the use of any Real Estate or
other minor irregularities in title (including leasehold title) thereto, so long
as the same do not materially impair the use, value, or marketability of such
Real Estate; (i) presently existing or hereafter created Liens in favor of
Agent, on behalf of itself and Lenders; and (j) Liens expressly permitted under
Section 6.7(b).

                  "Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
other entity or government (whether federal, state, county, city, municipal,
local, foreign or otherwise, including any instrumentality, division, agency,
body or department thereof).

                  "Plan" means, at any time, an "employee benefit plan," as
defined in Section 3(3) of ERISA, that any Credit Party or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to or has
maintained, contributed to or had an obligation to contribute to at any time
within the past seven years on behalf of participants who are or were employed
by any Credit Party or any ERISA Affiliate.

                  "Pledge Agreements" means, collectively, the LTF Pledge
Agreement, the Holdings Pledge Agreement, and any pledge agreements executed
after the Closing Date by any Credit Party in favor of Agent, on behalf of
itself and Lenders (as required by any Loan Document), in each case, as amended,
supplemented, restated, or otherwise modified from time to time.

                  "Prepayment Premium" means an amount equal to the Applicable
Percentage multiplied by the sum of (i) the principal amount of the Term Loans
paid after acceleration or prepaid and (ii) the amount of the reduction of the
Commitment.

                  "Primary Obligation" has the meaning ascribed to it in the
definition of Guaranteed Indebtedness included in Annex A.

                  "Primary Obligor" has the meaning ascribed to it in the
definition of Guaranteed Indebtedness included in Annex A.

                                      A-15
<PAGE>

                  "Prior Lender" means, with respect to any Facility, the lender
that provided construction financing for such Facility and held a security
interest in or Lien on the Facility prior to the Term Loan advance related to
such Facility.

                  "Prior Lender Obligations" means, with respect to any
Facility, the payment and performance obligations of any Person to a Prior
Lender under the loan documents evidencing the construction loan related to such
Facility and the Prior Lender's security interest in or Lien on the Facility.

                  "Pro Forma" means the unaudited consolidated and consolidating
balance sheet of LTF and the Credit Parties as of the last Fiscal Month for
which monthly financial statements were required by Annex C prior to the funding
date of any Facility, after giving pro forma effect to the Related Transactions.

                  "Projections" means LTF's and the Credit Parties' forecasted
consolidated and consolidating: (a) balance sheets; (b) income statements; (c)
cash flow statements; and (d) capitalization statements, all prepared on a
Subsidiary-by-Subsidiary or Facility-by-Facility basis, if applicable, and
otherwise consistent with the historical Financial Statements of LTF and its
Subsidiaries, together with appropriate supporting details and a statement of
underlying assumptions.

                  "Proposed Change" has the meaning ascribed to it in Section
11.2(d).

                  "Pro Rata Share" means, with respect to any Lender, (a) prior
to the Commitment Termination Date, the percentage obtained by dividing (i) the
Commitment of such Lender by (ii) the aggregate Commitments of all Lenders and
(b) on and after the Commitment Termination Date, the Pro Rata Share Outstanding
of all Term Loans.

                  "Pro Rata Share Advanced" means, with respect to any Lender,
the percentage obtained by dividing (i) the principal amount of the applicable
Term Loan advanced or to be advanced by such Lender by (ii) the principal amount
of such Term Loan.

                   "Pro Rata Share Available" means, with respect to any Lender,
the percentage obtained by dividing (i) the difference between the Commitment of
such Lender and the aggregate principal amount of the Term Loans held by such
Lender by (ii) the difference between the Maximum Amount and the aggregate
principal amount of the Term Loans held by all Lenders.

                  "Pro Rata Share Outstanding" means, with respect to any
Lender, (a) as to any Term Loan, the percentage obtained by dividing (i) the
outstanding principal amount of such Term Loan held by such Lender by (ii) the
outstanding principal amount of such Term Loan, and (b) as to all Term Loans
outstanding, the percentage obtained by dividing (i) the aggregate outstanding
principal amount of the Term Loans held by such Lender by (ii) the aggregate
outstanding principal amount of the Term Loans held by all Lenders.

                  "Qualified Plan" means a Pension Plan that is intended to be
tax-qualified under Section 401(a) of the IRC.

                                      A-16
<PAGE>

                  "Qualified Assignee" means (a) any Lender, any Affiliate of
any Lender and, with respect to any Lender that is an investment fund that
invests in commercial loans, any other investment fund that invests in
commercial loans and that is managed or advised by the same investment advisor
as such Lender or by an Affiliate of such investment advisor, and (b) any
commercial bank, savings and loan association or savings bank or any other
entity which is an "accredited investor" (as defined in Regulation D under the
Securities Act of 1933) which extends credit or buys loans as one of its
businesses, including insurance companies, mutual funds, lease financing
companies and commercial finance companies, in each case, which has a rating of
BBB or higher from Standard & Poor's Ratings Group and a rating of Baa2 or
higher from Moody's Investors Service, Inc. at the date that it becomes a Lender
and which, through its applicable lending office, is capable of lending to
Borrowers without the imposition of any withholding or similar taxes; provided
that no Person determined by Agent, in its discretion, to be acting in the
capacity of a vulture fund or distressed debt purchaser shall be a Qualified
Assignee, and no Person or Affiliate of such Person (other than a Person that is
already a Lender) holding Stock issued by any Credit Party or LTF shall be a
Qualified Assignee.

                  "Ratable Share" means, with respect to any Borrower, the
aggregate principal amount of the Term Loans advanced to such Borrower and
evidenced by the Notes executed by such Borrower.

                  "Real Estate" has the meaning ascribed to it in Section 3.6.

                  "Refinancing" means, with respect to any Facility, the
repayment in full by Borrowers of the Prior Lender Obligations related to such
Facility on the funding date of the Term Loan related to such Facility.

                  "Reinvestment Rate" means, as of any date of prepayment or
payment after acceleration, a per annum rate equal to the sum of 0.50% and the
Yield of United States Treasury Notes with a maturity equal to the number of
months from such date to the Maturity Date. If no maturity exactly corresponds
to the number of months from such date to the Maturity Date, the Yield of the
United States Treasury Notes shall be interpolated on a straight-line basis,
utilizing the yields for the two maturities that most closely correspond to the
remaining term, as determined by Agent in its sole discretion, which
determination shall be final, binding and conclusive absent manifest error.

                  "Related Transactions" means, with respect to any Facility,
the Term Loan related to such Facility, the acquisition of the Facility by a
Borrower, the Refinancing, the execution of the Facility Lease, the payment of
all fees, costs and expenses associated with all of the foregoing and the
execution and delivery of the Related Transactions Documents.

                  "Related Transactions Documents" means, with respect to any
Facility, the related Loan Documents, the Deed evidencing the acquisition of
such Facility by a Borrower, the Facility Lease, the Pay-off Letter and all
other agreements or instruments executed in connection with the Related
Transactions.

                                      A-17
<PAGE>

                  "Release" means any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape, injection,
deposit, disposal, discharge, dispersal, dumping, leaching or migration of
Hazardous Material in the indoor or outdoor environment, including the movement
of Hazardous Material through or in the air, soil, surface water, ground water
or property.

                  "Replacement Lender" has the meaning ascribed to it in Section
1.12(c).

                  "Requisite Lenders" means, (a) prior to the Commitment
Termination Date, Lenders having more than 66 2/3% of the Commitments of all
Lenders and, (b) on and after the Commitment Termination Date, Lenders having
more than 66 2/3% of the aggregate outstanding amount of all Term Loans.

                  "Restricted Payment" means, with respect to any Credit Party,
(a) the declaration or payment of any dividend or the incurrence of any
liability to make any other payment or distribution of cash or other property or
assets in respect of Stock; (b) any payment on account of the purchase,
redemption, defeasance, sinking fund or other retirement of such Person's Stock
or any other payment or distribution made in respect thereof, either directly or
indirectly; (c) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to, any Subordinated Debt; (d) any payment made to
redeem, purchase, repurchase or retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire Stock of such Person
now or hereafter outstanding; (e) any payment of a claim for the rescission of
the purchase or sale of, or for material damages arising from the purchase or
sale of, any shares of such Person's Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission; (f) any payment, loan, contribution, or other transfer of
funds or other property to any Stockholder of such Person; and (g) any payment
of management fees (or other fees of a similar nature) by such Person to any
Stockholder of such Person or its Affiliates.

                  "Retiree Welfare Plan" means, at any time, a Welfare Plan that
provides for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of employment,
other than continuation coverage provided pursuant to Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant.

                  "Security Agreements" means the Security Agreements of even
date herewith executed by each Borrower that is a signatory hereto and Holdings
in favor of Agent, on behalf of itself and Lenders, and any other security
agreements executed after the Closing Date by any Credit Party (as required by
any Loan Document), in each case, as amended, supplemented, restated, or
otherwise modified from time to time.

                  "Settlement Date" has the meaning ascribed to it in Section
9.9(a)(ii).

                  "Solvent" means, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities,

                                      A-18
<PAGE>

including contingent liabilities, of such Person; (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured; (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature; and (d) such Person is not engaged in
a business or transaction, and is not about to engage in a business or
transaction, for which such Person's property would constitute an unreasonably
small capital. The amount of contingent liabilities (such as litigation,
guaranties and pension plan liabilities) at any time shall be computed as the
amount that, in light of all the facts and circumstances existing at the time,
represents the amount that can reasonably be expected to become an actual or
matured liability.

                  "SPC" has the meaning ascribed to it in Section 9.1(f).

                  "Stock" means all shares, options, warrants, general or
limited partnership interests, membership interests or other equivalents
(regardless of how designated) of or in a corporation, partnership, limited
liability company or equivalent entity, whether voting or nonvoting, including
common stock, preferred stock or any other "equity security" (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934).

                  "Stockholder" means, with respect to any Person, each holder
of Stock of such Person.

                  "Subordinated Debt" means any Indebtedness of any Credit Party
subordinated to the Obligations in a manner and form satisfactory to Agent and
Lenders in their sole discretion, as to right and time of payment and as to any
other rights and remedies thereunder.

                  "Subsidiary" means, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or otherwise, and (b) any partnership or limited liability
company in which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50% or of which any such Person is
a general partner or may exercise the powers of a general partner. Unless the
context otherwise requires, each reference to a Subsidiary shall be a reference
to a Subsidiary of a Borrower.

                  "Supermajority Lenders" means Lenders having (a) 80% or more
of the Commitments of all Lenders or, (b) after the Commitment Termination Date,
80% or more of the aggregate outstanding principal amount of Term Loans.

                                      A-19
<PAGE>

                  "Taxes" means taxes, levies, imposts, deductions, Charges or
withholdings and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of Agent or a Lender by the jurisdictions under
the laws of which Agent and Lenders are organized or conduct business or any
political subdivision thereof.

                  "Termination Date" means the date on which (a) the Term Loans
have been indefeasibly repaid in full, (b) all other Obligations have been
completely discharged and (c) Borrowers shall have no further right to borrow
any monies under this Agreement.

                  "Term Loan" has the meaning ascribed to it in Section 1.1(a).

                  "Title IV Plan" means a Pension Plan (other than a
Multiemployer Plan) that is covered by Title IV of ERISA and that any Credit
Party or ERISA Affiliate maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of them.

                  "Trademark License" means rights under any written agreement
now owned or hereafter acquired by any Credit Party granting any right to use
any Trademark.

                  "Trademarks" means all of the following now owned or hereafter
existing or adopted or acquired by any Credit Party: (a) all trademarks, trade
names, corporate names, business names, trade styles, service marks, logos,
other source or business identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general intangibles of like
nature (whether registered or unregistered), all registrations and recordings
thereof, and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof; (b) all
reissues, extensions or renewals thereof; and (c) all goodwill associated with
or symbolized by any of the foregoing.

                  "Unfunded Pension Liability" means, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions for funding purposes in effect
under such Title IV Plan, and (b) for a period of five years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.

                  "Unused Facility Fee" has the meaning ascribed to it in
Section 1.5(b).

                  "Welfare Plan" means a Plan described in Section 3(i) of
ERISA.

         2.       RULES OF CONSTRUCTION

                  Rules of construction with respect to accounting terms used in
the Loan Documents shall be as set forth in Annex D. All other undefined terms
contained in any Loan Document shall,

                                      A-20
<PAGE>

unless the context indicates otherwise, have the meanings provided for by the
Code as in effect in the State of New York to the extent the same are used or
defined therein. Unless otherwise specified, references in this Agreement or any
of the Appendices to a Section, subsection or clause refer to such Section,
subsection or clause as contained in this Agreement. The words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole, including all Annexes, Exhibits and Schedules, as the same
may from time to time be amended, restated, modified or supplemented, and not to
any particular section, subsection or clause contained in this Agreement or any
such Annex, Exhibit or Schedule.

         Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation"; the
word "or" is not exclusive; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Loan Documents) or, in the case of governmental Persons, Persons succeeding to
the relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of the same and any successor
statutes and regulations. Whenever any provision in any Loan Document refers to
the knowledge (or an analogous phrase) of any Person, such words are intended to
signify that such Person has actual knowledge or awareness of a particular fact
or circumstance or that such Person, if it had exercised reasonable diligence,
would have known or been aware of such fact or circumstance.

                                      A-21
<PAGE>

                               ANNEX B (SECTION 2)
                                       TO
                                CREDIT AGREEMENT

1.       CLOSING CHECKLIST

         In addition to, and not in limitation of, the conditions described in
Section 2.1, pursuant to Section 2.1(a), the following items must be received by
Agent in form and substance satisfactory to Agent on or prior to the Closing
Date:

         A.       Appendices. All Appendices to the Agreement.

         B.       Security Agreements. Duly executed originals of the Security
Agreements dated as of the Closing Date and all instruments, documents and
agreements executed pursuant thereto.

         C.       Insurance. Satisfactory evidence that the insurance policies
required by Section 5.4 are in full force and effect, together with appropriate
evidence showing loss payable and/or additional insured clauses or endorsements,
as requested by Agent, in favor of Agent, on behalf of itself and Lenders.

         D.       Security Interests and Code Filings. Evidence that Agent (for
the benefit of itself and Lenders) has a valid and perfected first-priority
security interest in the Collateral, including (i) such documents duly executed
by each Credit Party and LTF, as applicable, (including financing statements
under the Code and other applicable documents under the laws of any jurisdiction
with respect to the perfection of Liens) as Agent may request in order to
perfect its security interests in the Collateral and (ii) copies of Code search
reports listing all effective financing statements that name any Borrower as
debtor, together with copies of such financing statements, none of which shall
cover the Collateral, except for those relating to the Prior Lender Obligations
(all of which shall be terminated on the Closing Date).

         E.       Charter and Good Standing. For each Credit Party, such
Person's (a) charter or similar document and all amendments thereto, (b) good
standing certificate (including verification of tax status) in its state of
organization and (c) good standing certificates (including verification of tax
status) and certificates of qualification to conduct business in each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, each dated a recent date prior to the
Closing Date and certified by the applicable Secretary of State or other
authorized Governmental Authority. For LTF, its (a) charter or similar document
and all amendments thereto, (b) good standing certificate (including
verification of tax status) in its state of organization and (c) good standing
certificates (including verification of tax status) and certificates of
qualification to conduct business in Arizona and Texas, each dated a recent date
prior to the Closing Date and certified by the applicable Secretary of State or
other authorized Governmental Authority.

         F.       Bylaws and Resolutions. For each Credit Party and LTF, (a)
such Person's bylaws, operating agreement or similar document, together with all
amendments thereto and (b) resolutions of such Person's Board of Directors or
other governing body, approving and authorizing the execution, delivery and
performance of the Loan Documents to which such

                                      B-1
<PAGE>

Person is a party and the Related Transactions, each certified as of the Closing
Date by such Person's corporate secretary or an assistant secretary as being in
full force and effect without any modification or amendment.

         G.       Incumbency Certificates. For each Credit Party and LTF,
signature and incumbency certificates of the officers of each such Person
executing any of the Loan Documents, certified as being true, accurate, correct
and complete as of the Closing Date by such Person's corporate secretary, an
assistant secretary or another officer of such Person who did not execute any of
the other Loan Documents.

         H.       Opinions of Counsel. Duly executed originals of opinions of
Eric Buss, General Counsel of LTF, and Faegre & Benson, LLP, counsel for the
Credit Parties and LTF, together with any local counsel opinions reasonably
requested by Agent, dated the Closing Date and accompanied by a letter addressed
to such counsel from the Credit Parties and LTF, authorizing and directing such
counsel to address its opinion to Agent, on behalf of Lenders, and to include in
such opinion an express statement to the effect that Agent and Lenders are
authorized to rely on such opinion.

         I.       Letter Agreement. Duly executed original of the Letter
Agreement.

         J.       Pledge Agreements. Duly executed originals of the Pledge
Agreements accompanied by share certificates representing all of the outstanding
Stock being pledged pursuant to such Pledge Agreement, stock powers for such
share certificates executed in blank and, with respect to any pledged limited
liability company interest, evidence that such limited liability company opted
in to Article 8 of the Code.

         K.       Holdings Guaranty. Duly executed original of the Guaranty
Agreement.

         L.       Accountants' Letters. A letter from the Credit Parties and LTF
to their independent auditors or independent certified public accountants,
authorizing such Persons to communicate with Agent and Lenders in accordance
with Section 4.2.

         M.       Fee Letter. Duly executed originals of the Fee Letter.

         N.       Officer's Certificate. Duly executed originals of a
certificate of the Chief Financial Officer or other similar officer of each
Credit Party and LTF, dated the Closing Date, stating that since December 31,
2002 (a) no event or condition has occurred or is existing which could
reasonably be expected to have a Material Adverse Effect; (b) there has been no
material adverse change in the industry in which such Person operates; (c) no
Litigation has been commenced which, if successful, would have a Material
Adverse Effect or could challenge any of the transactions contemplated by the
Loan Documents or the Related Transactions Documents; (d) there have been no
Restricted Payments made by any Borrower; and (e) there has been no material
increase in liabilities, liquidated or contingent, and no material decrease in
assets of such Person or any of its Subsidiaries.

         O.       Audited Financials; Financial Condition.

                                      B-2
<PAGE>

                  1.       The Financial Statements, Projections and other
         materials set forth in Section 3.4, certified by Borrower
         Representative's Chief Financial Officer.

                  2.       A certificate of the Chief Executive Officer and/or
         the Chief Financial Officer of each Borrower, based on the Projections,
         to the effect that (a) the Projections are based upon estimates and
         assumptions stated therein, all of which such Borrower believes to be
         reasonable and fair in light of current conditions and current facts
         known to such Borrower and, as of the Closing Date, reflect such
         Borrower's good faith and reasonable estimates of its future financial
         performance and of the other information projected therein for the
         period set forth therein, and (b) containing such other statements with
         respect to the solvency of such Borrower and matters related thereto as
         Agent shall request.

         P.       Other Documents. Such other certificates, documents and
agreements respecting any Credit Party as Agent, in its sole discretion, may
request

2.       FACILITY FUNDING CHECKLIST

         In addition to, and not in limitation of, the conditions described in
Section 2.2, pursuant to Section 1.1(a)(i), the following items must be received
by Agent in form and substance satisfactory to Agent on or prior to the funding
date of each Term Loan:

         A.       Notice of Borrowing. Duly executed originals of a Notice of
Borrowing.

         B.       Notes. Duly executed originals of the Notes for each
applicable Lender, dated the funding date.

         C.       Payoff Letter; Termination Statements. Copies of the duly
executed Pay-off Letter related to the applicable Facility, together with (a)
UCC-3 or other appropriate termination statements releasing all Liens of the
applicable Prior Lender upon personal property related to such Facility
(including any fixture filings related to the Real Estate), and (b) documents
evidencing the release of all Liens of the applicable Prior Lender upon any of
the Real Estate (including the applicable Facility).

         D.       Consents. Prior to the funding date of the first Term Loan
advanced by Lenders, a copy of a duly executed consent by the required parties
to that certain Second Amended and Restated Credit Agreement, dated as of July
19,2001, by and among LTF, Antares Capital Corporation, BNP Paribas, and the
other financial institutions party thereto (as amended, supplemented, restated
or otherwise modified from time to time) to the execution of the Loan Documents,
the creation of the Credit Parties, and the consummation of the Related
Transactions and the transactions contemplated by this Agreement; and a copy of
that certain Written Action of the Holders of the Series C Convertible Preferred
Stock and Series D Convertible Preferred Stock of Life Time Fitness, Inc., with
respect to the creation of the Credit Parties and the transactions contemplated
by this Agreement.

         E.       Letter of Direction; Use of Proceeds. A description of
Borrowers' sources and uses of funds as of the funding date, including the Term
Loan to be advanced on that date, and

                                      B-3
<PAGE>

duly executed originals of a letter of direction from Borrower Representative
addressed to Agent, on behalf of itself and Lenders, with respect to the
disbursement of the proceeds of the Term Loan.

         F.       Insurance. Satisfactory evidence that the insurance policies
required by Section 5.4 with respect to the applicable Facility are in full
force and effect, together with appropriate evidence showing loss payable and/or
additional insured clauses or endorsements, as requested by Agent, in favor of
Agent, on behalf of itself and Lenders.

         G.       Charter and Good Standing. For the applicable Borrower, a good
standing certificate (including verification of tax status) and certificate of
qualification to conduct business in the jurisdiction where the Facility is
located, dated a recent date prior to the funding date and certified by the
applicable Secretary of State or other authorized Governmental Authority. For
LTF, a good standing certificate (including verification of tax status) and
certificate of qualification to conduct business in the jurisdiction where the
Facility is located, dated a recent date prior to the funding date and certified
by the applicable Secretary of State or other authorized Governmental Authority.

         H.       Resolutions. For each Credit Party and LTF, resolutions of
such Person's Board of Directors or other governing body, approving and
authorizing the execution, delivery and performance of the Loan Documents to
which such Person is a party and the Related Transactions, each with respect to
the applicable Facility, certified as of the funding date by such Person's
corporate secretary or an assistant secretary as being in full force and effect
without any modification or amendment.

         I.       Opinions of Counsel. Duly executed originals of opinions of
Eric Buss, General Counsel of LTF, and Faegre & Benson, LLP, counsel for the
Credit Parties and LTF, together with any local counsel opinions reasonably
requested by Agent, dated the funding date and accompanied by a letter addressed
to such counsel from the Credit Parties and LTF, authorizing and directing such
counsel to address its opinion to Agent, on behalf of Lenders, and to include in
such opinion an express statement to the effect that Agent and Lenders are
authorized to rely on such opinion.

         J.       Officer's Certificate. Duly executed originals of a
certificate of the Chief Financial Officer or other similar officer of each
Credit Party and LTF, dated the funding date, stating that, since the Closing
Date, (a) no event or condition has occurred or is existing which could
reasonably be expected to have a Material Adverse Effect; (b) there has been no
material adverse change in the industry in which such Person operates; (c) no
Litigation has been commenced which, if successful, would have a Material
Adverse Effect or could challenge any of the transactions contemplated by the
Loan Documents or the Related Transactions Documents; (d) there have been no
Restricted Payments made by any Borrower; (e) there has been no material
increase in liabilities, liquidated or contingent, and no material decrease in
assets of such Person or any of its Subsidiaries; and (f) the representations
and warranties of such Person contained in any Loan Document are true and
correct as of the funding date, except to the extent that such representations
and warranties expressly relate to earlier dates and except for changes therein
expressly permitted or expressly contemplated by this Agreement.

                                      B-4
<PAGE>

         K.       Mortgage and Assignment of Leases. Mortgage and Assignment of
Leases covering all of the Real Estate and the Facility Lease related to the
applicable Facility, together with (a) a title insurance policy (including
Mechanics' Lien coverage), current as-built survey, zoning letters and a
certificate of occupancy; (b) evidence that counterparts of the Mortgage have
been recorded in all places to the extent necessary or desirable, in the
judgment of Agent, to create a valid and enforceable first-priority Lien
(subject to Permitted Encumbrances) on the Real Estate related to the applicable
Facility in favor of Agent, for the benefit of itself and Lenders (or in favor
of such other trustee as may be required or desired under local law); and (c) an
opinion of counsel in the state in which the applicable Facility is located from
counsel reasonably satisfactory to Agent.

         L.       Environmental Reports and Indemnity.

                  1.       A Phase I Environmental Site Assessment Report,
         consistent with American Society for Testing and Materials (ASTM)
         Standard E 1527-94 and applicable state requirements, on the applicable
         Facility, dated no more than six months prior to the funding date,
         prepared by environmental engineers reasonably satisfactory to Agent.

                  2.       Such environmental review and audit reports,
         including Phase II reports, with respect to the applicable Facility as
         Agent shall have requested.

                  3.       Letters executed by the environmental firms preparing
         such environmental reports, authorizing Agent and Lenders to rely on
         such reports.

                  4.       Duly executed original of an Environmental Agreement
         for such Real Estate, dated the funding date.

         M.       Appraisal. An appraisal of each parcel of Real Estate related
to the applicable Facility.

         N.       Deposit Agreement. Duly executed originals of the Deposit
Agreement for such Facility, dated the funding date.

         O.       Cross-Guaranty. Duly executed originals of an acknowledgment
by each other Borrower, dated the funding date, acknowledging the Term Loan as
an Obligation guaranteed by each of them pursuant to Section 12 and reaffirming
the obligation of each of them under Section 12.

         P.       Guaranty. Duly executed original of an acknowledgment by
Holdings, dated the funding date, acknowledging the Term Loan as an Obligation
guaranteed by Holdings pursuant to the Guaranty Agreement and reaffirming the
obligation of Holdings under the Guaranty Agreement.

         Q.       Financial Condition. A certificate of the Chief Executive
Officer and/or the Chief Financial Officer of each Borrower, based on the Pro
Forma and Projections, to the effect that (a) such Borrower will be Solvent upon
the consummation of the Related Transaction for applicable Facility; (b) the Pro
Forma attached to such certificate fairly presents the financial condition of

                                      B-5
<PAGE>

such Borrower as of the date thereof after giving effect to the transactions
contemplated by the Loan Documents and the Related Transactions Documents with
respect to the Facility and was prepared by the Credit Parties and LTF giving
pro forma effect to the Related Transactions in accordance with GAAP, with only
such adjustments thereto as would be required in accordance with GAAP; and (c)
containing such other statements with respect to the solvency of such Borrower
and matters related thereto as Agent shall request.

         R.       Other Documents. Such other certificates, documents and
agreements respecting any Credit Party or any Affiliate of a Credit Party as
Agent, in its sole discretion, may request.

                                      B-6
<PAGE>

                              ANNEX C (SECTION 4.1)
                                       TO
                                CREDIT AGREEMENT

                FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING

         The Credit Parties and LTF shall deliver or cause to be delivered to
Agent or to Agent and Lenders, as indicated, the following:

1.       Monthly Financials. To Agent and Lenders, within thirty days after the
         end of each Fiscal Month, financial information regarding the
         Facilities and LTF and its Subsidiaries, certified by the Chief
         Financial Officer of LTF, consisting of consolidated and consolidating
         (a) unaudited balance sheets as of the close of such Fiscal Month and
         the related statements of income for that portion of the Fiscal Year
         ending as of the close of such Fiscal Month and (b) unaudited
         statements of income for such Fiscal Month, setting forth in
         comparative form the figures for the corresponding period in the prior
         year and the figures contained in the Projections for such Fiscal Year,
         all prepared in accordance with GAAP (subject to normal year-end
         adjustments). Such financial information shall be accompanied by (i) a
         statement in reasonable detail (each, a "Compliance Certificate")
         showing the calculations used in determining compliance with the
         applicable Financial Covenant for each Facility, in substantially the
         form of Exhibit 4.1 and (ii) the certification of the Chief Financial
         Officer of LTF that (A) such financial information presents fairly in
         accordance with GAAP (subject to normal year-end adjustments) the
         financial position and results of operations of the Facilities, LTF and
         its Subsidiaries, on a consolidated and consolidating basis, in each
         case as at the end of such Fiscal Month and for that portion of the
         Fiscal Year then ended and (B) any other information presented is true,
         correct and complete in all material respects and that there was no
         Default or Event of Default in existence as of such time or, if a
         Default or an Event of Default has occurred and is continuing,
         describing the nature thereof and all efforts undertaken to cure such
         Default or Event of Default.

2.       Operating Plan. To Agent and Lenders, as soon as available, but not
         later than thirty days after the end of each Fiscal Year, an annual
         operating plan for the Facilities, LTF and its Subsidiaries, on a
         consolidated and consolidating basis, approved by the Board of
         Directors of LTF for the following Fiscal Year, which (i) includes a
         statement of all of the material assumptions on which such plan is
         based, (ii) includes monthly balance sheets and income statements for
         the following year in form and substance consistent with, on the same
         basis as, and in similar detail as the Projections delivered in
         accordance with Section 3.4.

3.       Annual Audited Financials. To Agent and Lenders, within ninety days
         after the end of each Fiscal Year, audited Financial Statements for
         LTF, the Credit Parties and their Subsidiaries on a consolidated and
         (unaudited) consolidating basis, consisting of balance sheets and
         statements of income and retained earnings and cash flows, setting
         forth in comparative form in each case the figures for the previous
         Fiscal Year, which Financial Statements shall be prepared in accordance
         with GAAP and include an unqualified audit

                                       C-1
<PAGE>

         opinion by an independent certified public accounting firm of national
         standing or otherwise acceptable to Agent. Such Financial Statements
         shall be accompanied by (a) a statement in reasonable detail showing
         the calculations used in determining compliance with each of the
         Financial Covenants, (b) a letter addressed to Agent, on behalf of
         itself and Lenders, in form and substance reasonably satisfactory to
         Agent and subject to standard qualifications required by
         nationally-recognized accounting firms, signed by such accounting firm,
         acknowledging that Agent and Lenders are entitled to rely upon such
         accounting firm's opinion included in such audited Financial
         Statements, (c) the annual letters to such accountants in connection
         with their audit examination detailing contingent liabilities and
         material litigation matters, and (d) the certification of the Chief
         Executive Officer or Chief Financial Officer of LTF that all such
         Financial Statements present fairly in accordance with GAAP the
         financial position, results of operations and statements of cash flows
         of LTF, the Credit Parties and their Subsidiaries on a consolidated and
         consolidating basis, as at the end of such Fiscal Year and for the
         period then ended, and that there was no Default or Event of Default in
         existence as of such time or, if a Default or an Event of Default has
         occurred and is continuing, describing the nature thereof and all
         efforts undertaken to cure such Default or Event of Default.

4.       Management Letters. To Agent and Lenders, within five Business Days
         after receipt thereof by any Credit Party or LTF, copies of all
         management letters, exception reports or similar letters or reports
         received by such Person from its independent certified public
         accountants.

5.       Default Notices. To Agent and Lenders, as soon as practicable, and in
         any event within five Business Days after an executive officer of any
         Credit Party or LTF has actual knowledge of the existence of any
         Default, Event of Default or other event that has had a Material
         Adverse Effect, telephonic or telecopied notice specifying the nature
         of such Default or Event of Default or other event, including the
         anticipated effect thereof, which notice, if given telephonically,
         shall be promptly confirmed in writing on the next Business Day.

6.       SEC Filings and Press Releases. To Agent and Lenders, promptly upon
         their becoming available, copies of: (i) all Financial Statements,
         reports, notices and proxy statements made publicly available by any
         Credit Party or LTF to its security holders; (ii) all regular and
         periodic reports and all registration statements and prospectuses, if
         any, filed by any Credit Party or LTF with any securities exchange or
         with the Securities and Exchange Commission or any governmental or
         private regulatory authority; and (iii) all press releases and other
         statements made available by any Credit Party or LTF to the public
         concerning material changes or developments in the business of any such
         Person.

7.       Subordinated Debt and Equity Notices. To Agent, as soon as practicable,
         copies of all material written notices given or received by any Credit
         Party or LTF with respect to any Subordinated Debt or Stock of such
         Person, and, within two Business Days after any Credit Party or LTF
         obtains knowledge of any matured or unmatured event of default with
         respect to any Subordinated Debt, notice of such event of default.

                                       C-2
<PAGE>

8.       Supplemental Schedules. To Agent, supplemental disclosures, if any,
         required by Section 5.6.

9.       Litigation. To Agent in writing, promptly upon learning thereof, notice
         of any Litigation that (a) seeks damages in excess of $100,000, (ii)
         seeks injunctive relief, (iii) is asserted or instituted against any
         Plan, its fiduciaries or its assets or against any Credit Party or
         ERISA Affiliate in connection with any Plan, (iv) alleges criminal
         misconduct by any Credit Party or LTF or (v) alleges the violation of
         any law regarding, or seeks remedies in connection with, any
         Environmental Liabilities.

10.      Insurance Notices. To Agent, disclosure of losses or casualties
         required by Section 5.4.

11.      Other Documents. To Agent and Lenders, such other financial and other
         information respecting any Credit Party's or LTF's business or
         financial condition as Agent or any Lender shall from time to time
         reasonably request.

                                       C-3
<PAGE>

                             ANNEX D (SECTION 6.10)
                                       TO
                                CREDIT AGREEMENT

                               FINANCIAL COVENANTS

The Credit Parties shall not breach or fail to comply with any of the following
Financial Covenants, each of which shall be calculated in accordance with GAAP
consistently applied:

1.       INITIAL FIXED CHARGE RATIO. For the first eighteen full Fiscal Months
         following funding of any Term Loan or until Agent shall receive
         evidence satisfactory to Agent, in its sole discretion, that the
         related Facility's Fixed Charge Ratio is not less than 1.20 to 1.00,
         each Facility shall have an Initial Fixed Charge Ratio of not less than
         1.00 to 1.00.

2.       FIXED CHARGE RATIO. After the first eighteen full Fiscal Months
         following funding of any Term Loan or sooner if Agent shall have
         received evidence satisfactory to Agent, in its sole discretion, that
         the related Facility's Fixed Charge Ratio is not less than 1.20 to
         1.00, each Facility shall have a Fixed Charge Ratio of not less than
         1.20 to 1.00.

         Unless otherwise specifically provided herein, any accounting term used
in this Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any Accounting Changes occur and such
changes result in a change in the calculation of the Financial Covenants,
standards or terms used in any Loan Document, then the Credit Parties, Agent and
Lenders agree to enter into negotiations in order to amend such provisions of
the Loan Documents so as to equitably reflect such Accounting Changes with the
desired result that the criteria for evaluating the Credit Parties', LTF's and
the Facilities' financial conditions shall be the same after such Accounting
Changes as if such Accounting Changes had not been made; provided, however, that
the agreement of Requisite Lenders to any required amendments of such provisions
shall be sufficient to bind all Lenders. "Accounting Changes" means (i) changes
in accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants (or any successor thereto or
any agency with similar functions), (ii) changes in accounting principles
concurred in by any Credit Party's or LTF's certified public accountants; (iii)
purchase accounting adjustments under A.P.B. 16 or 17 and EITF 88-16, and the
application of the accounting principles set forth in FASB 109, including the
establishment of reserves pursuant thereto and any subsequent reversal (in whole
or in part) of such reserves; and (iv) the reversal of any reserves established
as a result of purchase accounting adjustments. All such adjustments resulting
from expenditures made subsequent to the Closing Date (including capitalization
of costs and expenses or payment of pre-Closing Date liabilities) shall be
treated as expenses in the period the expenditures are made and deducted as part
of the calculation of EBITDA in such period. If Agent, Borrowers and Requisite
Lenders agree upon the required amendments, then after appropriate amendments
have been executed and the underlying Accounting Change with

                                       D-1
<PAGE>

respect thereto has been implemented, any reference to GAAP contained in the
Loan Documents shall, only to the extent of such Accounting Change, refer to
GAAP, consistently applied after giving effect to the implementation of such
Accounting Change. If Agent, Borrowers and Requisite Lenders cannot agree upon
the required amendments within thirty days following the date of implementation
of any Accounting Change, then all Financial Statements delivered and all
calculations of the Financial Covenants and other standards and terms in
accordance with the Loan Documents shall be prepared, delivered and made without
regard to the underlying Accounting Change. For purposes of Section 8.1, a
breach of a Financial Covenant contained in this Annex D shall be deemed to have
occurred as of any date of determination by Agent or as of the last day of any
specified measurement period, regardless of when the Financial Statements
reflecting such breach are delivered to Agent.

                                       D-2
<PAGE>

                            ANNEX E (SECTION 9.9(a))
                                       TO
                                CREDIT AGREEMENT

                            WIRE TRANSFER INFORMATION

         Name:              General Electric Capital Corporation
         Bank:              Bankers Trust
                            One Banker's Trust Plaza
                            New York, New York 10006
         ABA #:             021001033
         Account #:         50270797
         Account Name:      CFI Incoming Cash
         Reference:         Operations / Life Time Fitness

                                      E-1
<PAGE>

                             ANNEX F (SECTION 11.10)
                                       TO
                                CREDIT AGREEMENT

                                NOTICE ADDRESSES

1.       IF TO AGENT OR GE CAPITAL, AT

         General Electric Capital Corporation
         401 Merritt Seven, Suite 23
         Norwalk, Connecticut 06856
         Attention: Jeff Fitts, Account Manager
         Telecopier No.: (203) 229-1992
         Telephone No.:  (203) 229-1920
         E-Mail: jeff.fitts@ge.com

         with copies to:

         General Electric Capital Corporation
         Capital Funding, Inc.
         500 W. Monroe, 29th Floor
         Chicago, Illinois 60661
         Attention:  Mike O' Malley
         Telecopier No.: (312) 441-7519
         Telephone No.:  (312) 441-7856
         E-mail: mike.o'malley@ge.com

         and

         Husch & Eppenberger, LLC
         1200 Main Street, Suite 1700
         Kansas City, Missouri 64105
         Attention: Christopher J. Rockers, Esq.
         Telecopier No.: (816) 421-0596
         Telephone No.:  (816) 283-4608
         E-Mail: christopher.rockers@husch.com

2.       If to any Borrower or to Holdings, to Borrower Representative, at

         LTFMF Real Estate Holdings, LLC
         6442 City West Parkway
         Eden Prairie, Minnesota 55344
         Attention: Eric J. Buss, General Counsel
         Telecopier No.: (952) 947-0099
         Telephone No.:  (952) 947-0000
         E-Mail: ebuss@lifetimefitness.com

                                       F-1
<PAGE>

         with copies to:

         Faegre & Benson, LLP
         2200 Wells Fargo Center
         90 South Seventh Street
         Minneapolis, Minnesota 55402
         Attention:  Scott Anderegg
         Telecopier No.: (612) 766-1600
         Telephone No.:  (612) 766-8716
         E-mail: sanderegg@faegre.com

3.       If to LTF, at

         Life Time Fitness, Inc.
         6442 City West Parkway
         Eden Prairie, Minnesota 55344
         Attention: Eric J. Buss, General Counsel
         Telecopier No.: (952) 947-0099
         Telephone No.:  (952) 947-0000
         E-Mail: ebuss@lifetimefitness.com

         with copies to:

         Faegre & Benson, LLP
         2200 Wells Fargo Center
         90 South Seventh Street
         Minneapolis, Minnesota 55402
         Attention:  Scott Anderegg
         Telecopier No.:  (612) 766-1600
         Telephone No.:  (612) 766-8716
         E-mail:  sanderegg@faegre.com

4.       If to Marathon Structured Finance Fund, Ltd. at

         Marathon Structured Finance Fund, Ltd.
         461 Fifth Avenue
         New York, New York 10017
         Attention: David Arzi
         Telecopier No.: (212) 381-4499
         Telephone No.:  (212) 381-4402
         E-Mail: darzi@marathonfund.com

                                       F-2
<PAGE>

         with copies to:

         Jenkens & Gilchrist Parker Chapin LLP
         The Chrysler Building
         405 Lexington Avenue
         New York, New York 10174
         Attention: Michael A. Karpen, Esq.
         Telecopier No.: (212) 704-6288
         Telephone No.:  (212) 704-6149
         E-Mail: mkarpen@jenkens.com

                                      F-3
<PAGE>

                     ANNEX G (FROM ANNEX A - "COMMITMENTS")
                                       TO
                                CREDIT AGREEMENT

                                   COMMITMENTS

<TABLE>
<CAPTION>
COMMITMENT                    LENDER
----------                    ------
<S>                           <C>
$25,000,000                   GE Capital
$10,000,000                   Marathon Structured Finance
                              Fund, Ltd.

$35,000,000                   TOTAL
</TABLE>

                                      G-1<PAGE>

                                                                   EXHIBIT 10.25

================================================================================

                        ---------------------------------

                                    FCA, LTD.

                        ---------------------------------

                            STOCK PURCHASE AGREEMENT

                        ---------------------------------

                                   MAY 7, 1996

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                             PAGE
                                                                                             ----
<S>                                                                                          <C>
1. Authorization of Securities.........................................................        1

2. Sale and Purchase of Securities.....................................................        1

3. Closing.............................................................................        1

4. Restriction on Transfer of Securities...............................................        2
         4.1 Restrictions..............................................................        2
         4.2 Legend....................................................................        2
         4.3 Removal of Legend.........................................................        2
         4.4 Register of Securities....................................................        2

5. Representations and Warranties by Company...........................................        3
         5.1 Organization, Standing, etc...............................................        3
         5.2 Qualification.............................................................        3
         5.3 Financial Statements......................................................        3
         5.4 Tax Returns and Audits....................................................        4
         5.5 Changes, Dividends, etc...................................................        4
         5.6 Title to Properties and Encumbrances......................................        4
         5.7 Litigation; Governmental Proceedings......................................        5
         5.8 Compliance with Applicable Laws and Other Instruments.....................        5
         5.9 Preferred Shares and Conversion Stock.....................................        5
         5.10 Securities Laws..........................................................        6
         5.11 Patents and Other Intangible Rights......................................        6
         5.12 Capital Stock............................................................        6
         5.13 Outstanding Debt.........................................................        7
         5.14 Schedule of Assets and Contracts.........................................        7
         5.15 Corporate Acts and Proceedings...........................................        8
         5.16 Purchase Commitments and Outstanding Bids................................        9
         5.17 Insurance Coverage.......................................................        9
         5.18 No Brokers or Finders....................................................        9
         5.19 Conflicts of Interest....................................................        9
         5.20 Licenses.................................................................        9
         5.21 Registration Rights......................................................       10
         5.22 Retirement Plans.........................................................       10
         5.23 Environmental and Safety Laws............................................       10
         5.24 Employees................................................................       11
         5.25 Absence of Restrictive Agreements........................................       11
         5.26 Small Business Concern...................................................       11
         5.27 Application of Proceeds..................................................       12
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                           <C>
         5.28 Disclosure...............................................................       12

6. Representations and Warranties of Purchasers........................................       12
         6.1 Investment Intent.........................................................       12
         6.2 Location of Principal Office and Qualification as Accredited Investor.....       13
         6.3 Acts and Proceedings......................................................       13
         6.4 No Brokers or Finders.....................................................       13

7. Conditions of Each Purchaser's Obligation...........................................       13
         7.1 No Errors, etc............................................................       13
         7.2 Compliance with Agreement.................................................       14
         7.3 Certificate of Officers...................................................       14
         7.4 Opinion of Company's Counsel..............................................       14
         7.5 No Event of Default.......................................................       16
         7.6 Qualification Under State Securities Laws.................................       16
         7.7 Proceedings and Documents.................................................       16
         7.8 Co-Sale Agreements........................................................       16
         7.9 Key Person Insurance......................................................       16
         7.10 Execution of SBA Form 480................................................       16
         7.11 Execution of SBA Form 652-D..............................................       17
         7.12 Akradi Employment Agreement..............................................       17
         7.13 Affidavit of Ownership and Agreement of Indemnity........................       17

8. Affirmative Covenants...............................................................       17
         8.1 Corporate Existence.......................................................       17
         8.2 Books of Account and Reserves.............................................       17
         8.3 Furnishing of Financial Statements and Information........................       17
         8.4 Inspection................................................................       19
         8.5 Preparation and Approval of Budgets.......................................       19
         8.6 Payment of Taxes and Maintenance of Properties............................       20
         8.7 Insurance.................................................................       20
         8.8 Payment of Indebtedness and Discharge of Obligations......................       21
         8.9 Directors' and Shareholders' Meetings.....................................       21
         8.10 Application of Proceeds..................................................       21
         8.11 Retirement Plans.........................................................       21
         8.12 Filing of Reports........................................................       22
         8.13 Patents and Other Intangible Rights......................................       22
         8.14 Insurance on Life of Bahram Akradi.......................................       22
         8.15 Rule 144A................................................................       22
         8.16 Compliance...............................................................       23
         8.17 Right of First Refusal...................................................       23
         8.18 Conversion Stock Fully Paid; Reservation of Shares.......................       24
         8.19 Recission Offer..........................................................       24

9. Negative Covenants..................................................................       24
</TABLE>

                                      -ii-
<PAGE>

<TABLE>
<S>                                                                                           <C>
         9.1 Dividends on or Redemption of Junior Stock................................       24
         9.2 Future Registration Rights................................................       24
         9.3 Other Matters Requiring Prior Approval of Purchasers......................       25

10. Registration of Stock..............................................................       25
         10.1 Required Registration....................................................       25
         10.2 Incidental Registration..................................................       27
         10.3 Registration Procedures..................................................       27
         10.4 Expenses.................................................................       29
         10.5 Indemnification..........................................................       29

11. Default............................................................................       31
         11.1 Events of Default........................................................       31
         11.2 Remedies Upon Events of Default..........................................       32
         11.3 Notice of Defaults.......................................................       33
         11.4 Suits for Enforcement....................................................       33
         11.5 Remedies Cumulative......................................................       33
         11.6 Remedies not Waived......................................................       33

12. Termination of Certain Covenants...................................................       33

13. Definitions........................................................................       33
         13.1 "Additional Shares of Common Stock"......................................       34
         13.2 "Common Stock"...........................................................       34
         13.3 "Conversion Price".......................................................       34
         13.4 "Convertible Securities".................................................       34
         13.5 "Indebtedness for Borrowed Money"........................................       34
         13.6 "Junior Stock"...........................................................       34
         13.7 "Permitted Liens"........................................................       34
         13.8 "Purchased Stock"........................................................       34
         13.9 "Senior Indebtedness"....................................................       35
         13.10 "Subsidiary"............................................................       35

14. Consents; Waivers and Amendments...................................................       35

15. Voting Agreement...................................................................       35

16. Changes, Waivers, etc..............................................................       35

17. Payment of Fees and Expenses of Purchasers.........................................       36

18. Understanding Among Purchasers.....................................................       36

19. Notices............................................................................       36

20. Survival of Representations and Warranties, etc....................................       36
</TABLE>

                                     -iii-
<PAGE>

<TABLE>
<S>                                                                                          <C>
21. Parties in Interest................................................................       37

22. Headings...........................................................................       37

23. Choice of Law......................................................................       37

24. Counterparts.......................................................................       37

Schedule A.............................................................................      A-1
</TABLE>

Exhibit 1 --  Amended Capital Stock Provisions
Exhibit 2 --  Exception Schedule
Exhibit 3 --  Financial Statements
Exhibit 4 --  Schedule of Assets and Contracts
Exhibit 5 --  Form of Co-Sale Agreement
Exhibit 6 --  Akradi Employment Agreement

                                      -iv-
<PAGE>

                                    FCA, LTD.

                            STOCK PURCHASE AGREEMENT

                                                                     May 7, 1996

To Each of the Persons Named in
   Schedule A to this Agreement
  (the "Purchasers")

Ladies and Gentlemen:

         In consideration of the agreement of the Purchasers to purchase the
Preferred Shares (as hereinafter defined), as provided for herein, the
undersigned FCA, Ltd., a Minnesota corporation (the "Company"), hereby agrees
with each of the Purchasers as follows:

         1.       Authorization of Securities. The Company proposes to
authorize, issue and sell an aggregate of up to 958,487 shares of series A
convertible preferred stock of the Company (the "Series A Preferred Stock"), to
be issued pursuant to and be entitled to the benefits of a Certificate of
Designation of Rights and Preferences (the "Certificate") containing the terms
set forth in Exhibit 1 hereto. The term Preferred Shares as used herein shall
mean the shares of Series A Preferred Stock set forth in Schedule A hereto and
all preferred shares of the Company issued in exchange or substitution therefor.

         2.       Sale and Purchase of Securities. Subject to the terms and
conditions hereof, the Company agrees to sell to each Purchaser, and each
Purchaser agrees to purchase from the Company, the number of Preferred Shares
set forth opposite such Purchaser's name in Schedule A hereto, at the purchase
price set forth opposite such Purchaser's name in Schedule A hereto.

         3.       Closing. The closing of the sale to, and purchase by, the
Purchasers of the Preferred Shares (the "Closing") shall occur at the offices of
Faegre & Benson LLP, 2200 Norwest Center, 90 South Seventh Street, Minneapolis,
Minnesota, at the hour of 9:00 A.M., Minneapolis time, on May 8, 1996 or on such
other day or at such other time or place as the Purchasers and the Company shall
agree upon (the "Closing Date").

         At the Closing, the Company will deliver to the Purchasers certificates
representing the Preferred Shares being purchased by the Purchasers, registered
in their respective names as stated in Schedule A hereto (or in the names of
their respective nominees as may be specified to the Company at least 48 hours
prior to the Closing Date), against delivery to the Company of the amounts set
forth after their respective names in Schedule A hereto by wire transfer or
certified check in payment of the total purchase price of the Preferred Shares
being purchased by the Purchasers.

<PAGE>

         4.       Restriction on Transfer of Securities.

                  4.1      Restrictions. The Preferred Shares and the shares of
Common Stock into which the Preferred Shares are convertible and all shares of
Common Stock of the Company issued in exchange or substitution therefor (the
"Conversion Stock") are "restricted securities" as defined under the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder and may be transferred only pursuant to (a) a
registration statement covering the sale of such securities that has been
declared effective under the Securities Act, (b) Rule 144 (or any similar rule
then in effect) adopted under the Securities Act, if such rule is available, and
(c) subject to the conditions elsewhere specified in this Section 4, any other
legally available means of transfer.

                  4.2(a)   Legend. Each certificate representing Preferred
Shares shall be endorsed with the following legend:

                           "The securities evidenced hereby may not be
                  transferred without (i) the opinion of counsel
                  satisfactory to the Company that such transfer may be
                  lawfully made without registration under the Federal
                  Securities Act of 1933 and all applicable state
                  securities laws or (ii) such registration."

Upon the conversion of any Preferred Shares, unless the Company receives an
opinion of counsel from the holder of such a security satisfactory to the
Company to the effect that a sale, transfer, assignment, pledge or distribution
of the Conversion Stock issuable upon such conversion may be made without
registration, or unless such Conversion Stock is being disposed of pursuant to
registration under the Securities Act and any applicable state act, the same
legend shall be endorsed on the certificate evidencing such Conversion Stock.

         (b)      Stop Transfer Order. A stop transfer order shall be placed
with the Company's transfer agent preventing transfer of any of the securities
referred to in paragraph (a) above pending compliance with the conditions set
forth in any such legend (except as otherwise provided in paragraph (a) above).

                  4.3      Removal of Legend. Any legend endorsed on a
certificate or instrument evidencing a security pursuant to Section 4.2 hereof
shall be removed, and the Company shall issue a certificate or instrument
without such legend to the holder of such security, (a) if such security is
being disposed of pursuant to registration statement covering the sale of such
security that has been declared effective under the Securities Act and any
applicable state acts or pursuant to Rule 144 or any similar rule then in
effect, or (b) if such holder provides the Company with an opinion of counsel
satisfactory to the Company to the effect that a sale, transfer, assignment,
offer, pledge or distribution for value of such security may be made without
registration and that such legend is not required to satisfy the applicable
exemption from registration.

                  4.4      Register of Securities. The Company or its duly
appointed agent shall maintain a separate register for the Preferred Shares in
which it shall register the issuance and transfer of all Preferred Shares. All
transfers of Preferred Shares shall be recorded on the register

                                      -2-
<PAGE>

maintained by the Company or its agent, and the Company shall be entitled to
regard the registered holder of such securities as the actual owner of the
securities so registered until the Company or its agent is required to record a
transfer of such securities on its register. The Company or its agent shall be
required to record any such transfer when it receives (a) the security to be
transferred duly and properly endorsed by the registered holder thereof or by
its attorney duly authorized in writing, and (b) the opinion of counsel referred
to in Sections 4.2 and 4.3 hereof or evidence of compliance with the
registration provisions referred to in those Sections.

         5.       Representations and Warranties by Company. Except as disclosed
in Exhibit 2 hereto, the Company represents and warrants to the Purchasers that:

                  5.1      Organization, Standing, etc. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Minnesota, and has the requisite corporate power and authority
to own its properties and to carry on its business in all material respects as
it is now being conducted. The Company has the requisite corporate power and
authority to issue the Preferred Shares and the Conversion Stock, and to
otherwise perform its obligations under this Agreement. The copies of the
Articles of Incorporation and Bylaws of the Company delivered to the Purchasers
or their agents prior to the execution of this Agreement are true and complete
copies of the duly and legally adopted Articles of Incorporation and Bylaws of
the Company in effect as of the date of this Agreement. The Company does not
have any direct or indirect equity interest in any other firm, corporation,
partnership, joint venture association or other business organization except as
set forth in Exhibit 2 hereto. If any Subsidiary (as hereinafter defined) is
listed on Exhibit 2 hereto, the representations and warranties set forth in this
Section 5 are being hereby restated with respect to such Subsidiary.

                  5.2      Qualification. The Company is duly qualified or
licensed as a foreign corporation in good standing in each jurisdiction wherein
the nature of its activities or of its properties owned or leased makes such
qualification or licensing necessary and failure to be so qualified or licensed
would have a material adverse impact on its business.

                  5.3      Financial Statements. Attached hereto as Exhibit 3
are (a) a balance sheet at December 31, 1995, together with the related
statements of operations, shareholders' equity and cash flow for the fiscal year
then ended, and the report thereon of McGladrey & Pullen, LLP, certified public
accountants, and (b) an unaudited balance sheet at March 31, 1996 (the "Balance
Sheet Date"), and the related statements of operations and cash flow for the
three months then ended, prepared by the Company. Such financial statements (i)
are in accordance with the books and records of the Company, (ii) present fairly
the financial condition of the Company at December 31, 1995 and at the Balance
Sheet Date and the results of its operations for the periods therein specified,
and (iii) have, in all material respects, been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior accounting periods. Specifically, but not by way of limitation, the
balance sheets or notes thereto disclose all of the debts, liabilities and
obligations of any nature (whether absolute, accrued or contingent and whether
due or to become due) of the Company at December 31, 1995 or at the Balance
Sheet Date, as applicable, which, individually or in the aggregate, are material
and which in accordance with generally accepted accounting principles would be
required to be disclosed in such balance sheets, and the omission of which
would, in the aggregate, have a material adverse impact on the

                                      -3-
<PAGE>

Company. The balance sheets include appropriate reserves for all taxes and other
liabilities accrued at each such date but not yet payable.

                  5.4      Tax Returns and Audits. All required federal, state
and local tax returns or appropriate extension requests of the Company have been
filed, and all federal, state and local taxes required to be paid with respect
to such returns have been paid or due provision for the payment thereof has been
made. The Company is not delinquent in the payment of any such tax or in the
payment of any assessment or governmental charge. The Company has not received
notice of any tax deficiency proposed or assessed against it, and has not
executed any waiver of any statute of limitations on the assessment or
collection of any tax. None of the Company's tax returns has been audited by
governmental authorities in a manner to bring such audits to the Company's
attention. The Company does not have any tax liabilities except those reflected
in Exhibit 3 hereto and those incurred in the ordinary course of business since
the Balance Sheet Date.

                  5.5      Changes, Dividends, etc. Except for the transactions
contemplated by this Agreement, since the Balance Sheet Date the Company has
not: (a) incurred any debts, obligations or liabilities, absolute, accrued or
contingent and whether due or to become due, except current liabilities incurred
in the ordinary course of business, which (individually or in the aggregate)
will not materially and adversely affect the business, properties or prospects
of the Company; (b) paid any obligation or liability other than, or discharged
or satisfied any liens or encumbrances other than those securing, current
liabilities, in each case in the ordinary course of business; (c) declared or
made any payment or distribution to its shareholders as such, or purchased or
redeemed any of its shares of capital stock or other securities, or obligated
itself to do so; (d) mortgaged, pledged or subjected to lien, charge, security
interest or other encumbrance any of its assets, tangible or intangible, except
in the ordinary course of business; (e) sold, transferred or leased any of its
assets except in the ordinary course of business; (f) cancelled or compromised
any debt or claim, or waived or released any right of material value; (g)
suffered any physical damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the properties, business or
prospects of the Company; (h) entered into any transaction other than in the
ordinary course of business; (i) encountered any labor difficulties or labor
union organizing activities; (j) issued or sold any shares of capital stock or
other securities or granted any options, warrants or other purchase rights with
respect thereto other than as contemplated by this Agreement; (k) made any
acquisition or disposition of any material assets or become involved in any
other material transaction, other than for fair value in the ordinary course of
business; (l) increased the compensation payable, or to become payable, to any
of its directors or employees, or made any bonus payment or similar arrangement
with any directors or employees or increased the scope or nature of any fringe
benefits provided for its employees or directors; or (m) agreed to do any of the
foregoing other than pursuant hereto. There has been no material adverse change
in the financial condition, operations, results of operations or business of the
Company since the Balance Sheet Date.

                  5.6      Title to Properties and Encumbrances. The Company has
good and marketable title to all its owned properties and assets, including
without limitation the properties and assets reflected in Exhibit 3 hereto and
the properties and assets used in the conduct of its business, except for
property disposed of in the ordinary course of business since the Balance Sheet

                                      -4-
<PAGE>

Date, which properties and assets are not subject to any mortgage, pledge,
lease, lien, charge, security interest, encumbrance or restriction, except (a)
those which are shown and described in Exhibit 3 hereto or the notes thereto,
and (b) Permitted Liens (as hereinafter defined). The plant, offices and
equipment owned and leased by the Company have been kept in good condition and
repair in the ordinary course of business.

                  5.7      Litigation; Governmental Proceedings. There are no
legal actions, suits, arbitrations or other legal, administrative or
governmental proceedings or investigations pending or, to the knowledge of the
Company, threatened against the Company, its properties, assets or business, and
the Company is not aware of any facts which are likely to result in or form the
basis for any such action, suit or other proceeding. The Company is not in
default with respect to any judgment, order or decree of any court or any
governmental agency or instrumentality. The Company has not been threatened with
any action or proceeding under any building or zoning ordinance, law or
regulation.

                  5.8      Compliance with Applicable Laws and Other
Instruments. The business and operations of the Company have been and are being
conducted in accordance with all applicable laws, rules and regulations of all
governmental authorities except where noncompliance with such laws, rules and
regulations would not have a material adverse effect on the business, financial
condition or results of operations of the Company. Neither the execution nor
delivery of, nor the performance of or compliance with, this Agreement nor the
consummation of the transactions contemplated hereby will conflict with, or,
with or without the giving of notice or passage of time, result in any breach
of, or constitute a default under, or result in the imposition of any lien or
encumbrance upon any asset or property of the Company pursuant to, any
applicable law, administrative regulation or judgment, order or decree of any
court or governmental body, any agreement or other instrument to which the
Company is a party or by which it or any of its properties, assets or rights is
bound or affected, and will not violate the Articles of Incorporation or Bylaws
of the Company. The Company is not in violation of its Articles of Incorporation
or its Bylaws, nor in violation of, or in default under, any lien, indenture,
mortgage, lease, agreement, instrument, commitment or arrangement where such
violation or default would have a material adverse effect on the business,
financial condition or results of operation of the Company.

                  5.9      Preferred Shares and Conversion Stock. The Preferred
Shares, when issued and paid for pursuant to the terms of this Agreement, will
be duly authorized, validly issued and outstanding, fully paid, nonassessable
and free and clear of all pledges, liens, encumbrances and restrictions, except
as set forth in Section 4 hereof, and the shares of Conversion Stock issuable
upon conversion of the Preferred Shares have been reserved for issuance based
upon the initial Conversion Price (as hereinafter defined) of the Preferred
Shares, and when issued upon conversion will be duly authorized, validly issued
and outstanding, fully paid, nonassessable and free and clear of all pledges,
liens, encumbrances and restrictions, except as set forth in Section 4 hereof
and except for pledges, liens, encumbrances and restrictions created by the
Purchasers. The certificates representing the Preferred Shares to be delivered
by the Company hereunder, and the certificates representing the Conversion Stock
to be delivered upon the conversion of the Preferred Shares, will be genuine,
and the Company has no knowledge of any fact which would impair the validity
thereof.

                                      -5-
<PAGE>

                  5.10     Securities Laws. Based in part upon the
representations and warranties contained in Section 6 hereof, no consent,
authorization, approval, permit or order of or filing with any governmental or
regulatory authority is required under current laws and regulations in
connection with the execution and delivery of this Agreement or the offer,
issuance, sale or delivery of the Preferred Shares or the offer of the
Conversion Stock other than the qualification thereof, if required, under
applicable state securities laws, which qualification has been or will be
effected as a condition of these sales. The Company has not, directly or through
an agent, offered the Preferred Shares or the Conversion Stock, or any similar
securities for sale to, or solicited any offers to acquire such securities from,
persons other than the Purchasers and other accredited investors. Under the
circumstances contemplated hereby, the offer, issuance, sale and delivery of the
Preferred Shares and the offer of the Conversion Stock will not under current
laws and regulations require compliance with the prospectus delivery or
registration requirements of the Securities Act.

                  5.11     Patents and Other Intangible Rights. The Company (a)
owns or has the exclusive right to use, free and clear of all material liens,
claims and restrictions, all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to the foregoing, used in the
conduct of its business as now conducted, (b) is not obligated or under any
liability whatsoever to make any payments of a material nature by way of
royalties, fees or otherwise to any owner of, licensor of, or other claimant to,
any patent, trademark, trade name, copyright or other intangible asset, with
respect to the use thereof or in connection with the conduct of its business or
otherwise, (c) owns or has the unrestricted right to use all trade secrets,
including know-how, inventions, designs, processes, computer programs and
technical data necessary to the development, operation and sale of all products
and services sold or proposed to be sold by it, free and clear of any rights,
liens or claims of others, and (d) is not using any confidential information or
trade secrets of others. To the Company's knowledge, the Company is not
infringing upon or otherwise acting adversely to any known right or claimed
right of any person under or with respect to any patents, trademarks, service
marks, trade names, copyrights, licenses or rights with respect to the
foregoing.

                  5.12     Capital Stock. The authorized capital stock of the
Company consists of 50,000,000 common shares, of which 2,202,000 shares are
issued and outstanding and 10,000,000 shares of preferred stock, none of which
are issued and outstanding. All of the outstanding shares of capital stock of
the Company were duly authorized and validly issued and are fully paid and
nonassessable. There are no outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, Convertible Securities (as hereinafter defined)
or other agreements or arrangements of any character or nature whatever, except
as otherwise disclosed in Exhibit 2 hereto or as contemplated by this Agreement,
under which the Company is or may be obligated to issue capital stock or other
securities of any kind representing an ownership interest or contingent
ownership interest in the Company. Neither the offer nor the issuance or sale of
the Preferred Shares or the Conversion Stock constitutes an event under any
anti-dilution provisions of any securities issued or issuable by the Company or
any agreements with respect to the issuance of securities by the Company, which
will either increase the number of shares issuable pursuant to such provisions
or decrease the consideration per share to be received by the Company pursuant
to such provisions. No holder of any security of the Company is entitled to any
preemptive or similar rights to purchase securities from the Company except as
otherwise contemplated by this

                                      -6-
<PAGE>

Agreement. All outstanding securities of the Company have been issued in full
compliance with an exemption or exemptions from the registration and prospectus
delivery requirements of the Securities Act and from the registration and
qualification requirements of all applicable state securities laws.

                  5.13     Outstanding Debt. The Company has no Indebtedness for
Borrowed Money (as hereinafter defined) except as otherwise set forth in Exhibit
3 hereto or the notes thereto. The Company is not in default in the payment of
the principal of or interest or premium on any such Indebtedness for Borrowed
Money, and no event has occurred or is continuing under the provisions of any
instrument, document or agreement evidencing or relating to any such
Indebtedness for Borrowed Money which with the lapse of time or the giving of
notice, or both, would constitute an event of default thereunder.

                  5.14     Schedule of Assets and Contracts. Attached hereto as
Exhibit 4 is a Schedule of Assets and Contracts containing:

                  (a)      Annex A: a listing of all real properties
         owned by the Company;

                  (b)      Annex B: a listing of each indenture, lease,
         sublease, license or other instrument under which the Company
         claims or holds a leasehold interest in real property;

                  (c)      Annex C: a listing of all written and oral
         contracts, agreements, subcontracts, purchase orders,
         commitments and arrangements involving payments remaining to
         or from the Company in excess of $100,000 and other agreements
         material to the Company's business to which the Company is a
         party or by which it is bound, under which full performance
         (including payment) has not been rendered by any party
         thereto;

                  (d)      Annex D: a listing of all collective
         bargaining agreements, employment agreements, consulting
         agreements, noncompetition agreements, nondisclosure
         agreements, executive compensation plans, profit sharing
         plans, bonus plans, deferred compensation agreements, employee
         pension retirement plans and employee benefit stock option or
         stock purchase plans and other employee benefit plans, entered
         into or adopted by the Company;

                  (e)      Annex E: a listing of all deeds of trust,
         mortgages, security agreements, pledge agreements and other
         agreements or arrangements whereby any of the assets or
         properties of the Company are subject to any lien,
         encumbrance, security interest or charge;

                  (f)      Annex F: a listing of all leases of personal
         property involving payment remaining to or from the Company in
         excess of $100,000;

                                      -7-
<PAGE>

                  (g)      Annex G: a listing of all bank accounts (or
         accounts with other financial institutions) maintained by the
         Company, together with the persons authorized to make
         withdrawals from such accounts;

                  (h)      Annex H: the name of each employee of the
         Company whose annual compensation is in excess of $50,000 and
         the remuneration currently payable to each such employee;

                  (i)      Annex I: the name of each shareholder of the
         Company and the number of shares owned by such shareholder;

                  (j)      Annex J: a listing of all insurance policies
         in force and referred to in Section 5.17 hereof; and

                  (k)      Annex K: a listing of all patents, royalty
         and license agreements, trademarks, trade names, service marks
         and copyrights (including applications therefor) relating to
         Company products.

         Prior to the Closing Date, the Company shall provide or otherwise make
available to legal counsel for the Purchasers a true and complete copy of each
document referred to above which such counsel requests to examine.

         The Company has substantially performed all obligations required to be
performed by it to date and is not in default in any respect under any of the
contracts, agreements, leases, documents, commitments or other arrangements to
which it is a party or by which it is otherwise bound except where such default
would not have a material adverse effect on the business, financial condition or
results of operation of the Company. All instruments referred to above are in
effect and enforceable against the Company according to their respective terms
(except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement of
creditors' rights generally, and except for judicial limitations on the
enforcement of the remedy of specific performance and other equitable remedies),
and there is not under any of such instruments any existing material default or
event of default or event, in each case on the part of the Company, which, with
notice or lapse of time or both, would constitute an event of default
thereunder. To the Company's knowledge, all parties having material contractual
arrangements with the Company are in substantial compliance therewith and the
Company is not aware of any material default in any respect thereunder. All
plans or arrangements listed pursuant to clause (d) above are fully funded to
the extent that such funding is required by generally accepted accounting
principles.

                  5.15     Corporate Acts and Proceedings. This Agreement has
been duly authorized by all necessary corporate action on behalf of the Company,
and has been duly executed and delivered by authorized officers of the Company.
All corporate action necessary to the authorization, creation, issuance and
delivery of the Preferred Shares and the Conversion Stock has been taken on the
part of the Company, or will be taken by the Company on or prior to the Closing
Date. This Agreement is a valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as the enforceability
thereof may be limited by

                                      -8-
<PAGE>

bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights generally, and except for
judicial limitations on the enforcement of the remedy of specific enforcement
and other equitable remedies.

                  5.16     Purchase Commitments and Outstanding Bids. No
purchase commitment of the Company is in excess of normal, ordinary and usual
requirements of its business, or was, to the Company's knowledge, made at any
price in excess of the then current market price, or contains, to the Company's
knowledge, terms and conditions more onerous than those usual and customary in
the industry. There is no outstanding material bid, sales proposal, contract or
unfilled order of the Company which (a) will, or could if accepted, require the
Company to supply goods or services at a cost to the Company in excess of the
revenues to be received therefrom, or (b) quotes prices which do not include a
mark-up over reasonably estimated costs consistent with past mark-ups on similar
business or market conditions current at the time.

                  5.17     Insurance Coverage. There are in full force policies
of insurance issued by insurers of recognized responsibility insuring the
Company, its properties and business against such losses and risks, and in such
amounts, as in the Company's best judgment, after advice from its insurance
broker, are acceptable for the nature and extent of its business and the
Company's resources.

                  5.18     No Brokers or Finders. No person, firm or corporation
has or will have, as a result of any act or omission of the Company, any right,
interest or valid claim against or upon the Company or any Purchaser for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, in connection with the transactions contemplated by this Agreement.
The Company will indemnify and hold each Purchaser harmless against any and all
liability with respect to any such commission, fee or other compensation which
may be payable or determined to be payable in connection with the transactions
contemplated by this Agreement.

                  5.19     Conflicts of Interest. No officer or director of the
Company or any affiliate (as such term is defined in Rule 405 under the
Securities Act) of any such person or, to the Company's knowledge, no
shareholder or any affiliate of any such person, has any direct or indirect
interest (a) in any entity which does business with the Company, or (b) in any
property, asset or right which is used by the Company in the conduct of its
business, or (c) in any contractual relationship with the Company other than as
an employee. For the purpose of this Section 5.19, there shall be disregarded
any interest which arises solely from the ownership of less than a 1% equity
interest in a corporation whose stock is regularly traded on any national
securities exchange or in the over-the-counter market.

                  5.20     Licenses. The Company possesses from the appropriate
agency, commission, board and government body and authority, whether state,
local or federal, all licenses, permits, authorizations, approvals, franchises
and rights which (a) are necessary for it to engage in the business currently
conducted by it, and (b) if not possessed by the Company would have a material
adverse effect on the business, financial condition or results of operations of
the Company. The Company has no knowledge that would lead it to believe that it
will not be able to obtain all licenses, permits, authorizations, approvals,
franchises and rights that may be required for any business the Company proposes
to conduct.

                                      -9-
<PAGE>

                  5.21     Registration Rights. Other than under this Agreement,
the Company has not agreed to register any of its authorized or outstanding
securities under the Securities Act.

                  5.22     Retirement Plans. The Company does not have any
retirement plan in which any employees of the Company participate that is
subject to any provisions of the Employee Retirement Income Security Act of
1974, as amended, and of the regulations adopted pursuant thereto ("ERISA").

                  5.23     Environmental and Safety Laws.

                  (a)      For purposes of this Agreement,

                                    (i)      "Environmental Law" means the
                  Comprehensive Environmental Response, Compensation and
                  Liability Act, 42 U.S.C. Section 9601 et seq., the Resource
                  Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.,
                  the Federal Water Pollution Control Act, 33 U.S.C. Section
                  1201 et seq., the Clean Water Act, 33 U.S.C. Section 1321 et
                  seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., and
                  any other federal, state, local or other governmental statute,
                  regulation, law or ordinance dealing with the protection of
                  human health, natural resources or the environment;

                                    (ii)     "Hazardous Substance" means any
                  pollutant, contaminant, hazardous substance or waste, solid
                  waste, petroleum or any fraction thereof, or any other
                  chemical, substance or material listed or identified in or
                  regulated by any Environmental Law;

                                    (iii)    "RCRA Hazardous Waste" means a
                  hazardous waste, as that term is defined in and pursuant to
                  the Resource Conservation and Recovery Act, 42 U.S.C. Section
                  6901 et seq.; and

                                    (iv)     "Real Estate" means the real
                  property owned or leased by the Company at any time.

                  (b)      No Hazardous Substances have ever been buried,
         spilled, leaked, discharged, emitted, generated, stored, used or
         released, and no Hazardous Substances are now present, in, on, or under
         the Real Estate except for immaterial quantities stored or used by the
         Company in the ordinary course of its business and in accordance with
         all applicable Environmental Laws.

                  (c)      The Real Estate is not being used, and the Real
         Estate has never been used, in connection with the business of
         manufacturing, storing or transporting Hazardous Substances, and no
         RCRA Hazardous Wastes have been treated, stored or disposed of on the
         Real Estate.

                                      -10-
<PAGE>

                  (d)      There are not now and never have been any underground
         or aboveground storage tanks or other containment facilities of any
         kind on the Real Estate which contain or ever did contain any Hazardous
         Substances.

                  (e)      The Real Estate is not and never has been listed on
         the National Priorities List, the Comprehensive Environmental Response,
         Compensation and Liability Information System or any similar federal,
         state or local list, schedule, log, inventory or database.

                  (f)      The Company has delivered to Buyer true and complete
         copies of all reports, authorizations, permits, licenses, disclosures
         and other documents in its possession, custody or control describing or
         relating in any way to the Real Estate which describe, mention or
         discuss the status thereof with respect to any Environmental Law.

                  (g)      To the best knowledge of the Company, there are not
         and there never have been any requests, notices, investigations,
         claims, demands, actions, suits or other legal or administrative
         proceedings relating in any way to the Company or the Real Estate,
         alleging liability under, violation of or noncompliance with, any
         Environmental Law or any license, permit or other authorization issued
         pursuant thereto. No such matter is threatened or impending, nor does
         there exist any substantial basis therefor.

                  (h)      The Company operates, and at all times has operated,
         the business in accordance with all applicable Environmental Laws, and
         all licenses, permits and other authorizations required pursuant to any
         Environmental Law and necessary for the lawful and efficient operation
         of the business are in the Company's possession and are in full force
         and effect. To the knowledge of the Company, there is no threat that
         any such permit, license or other authorization will be withdrawn,
         terminated, not renewed, or otherwise materially limited or changed.

                  5.24     Employees. To the best of the Company's knowledge, no
officer of the Company or employee of the Company whose annual compensation is
in excess of $100,000 has any plans to terminate his or her employment with the
Company. The Company has complied in all material respects with all laws
relating to the employment of labor, including provisions relating to wages,
hours, equal opportunity, collective bargaining and payment of Social Security
and other taxes, and the Company has not encountered any material labor
difficulties. The Company does not know of any worker's compensation
liabilities, except those reflected in Exhibit 3 hereto.

                  5.25     Absence of Restrictive Agreements. To the best of the
Company's knowledge, no employee of the Company is subject to any secrecy or
non-competition agreement or any agreement or restriction of any kind that would
impede in any way the ability of such employee to carry out fully all activities
of such employee in furtherance of the business of the Company. To the best of
the Company's knowledge, no employer or former employer of any employee of the
Company has any claim of any kind whatsoever in respect of any of the rights
described in Section 5.11 hereof.

                  5.26     Small Business Concern. The Company is a "small
business concern" within the meaning of the Small Business Investment Act of
1958, as amended, and the

                                      -11-
<PAGE>

regulations thereunder, including Title 13, Code of Federal Regulations, Section
121.802 (the "SBIA"). The information set forth in the Small Business
Administration Forms 480, 652 and Section A of Form 1031 regarding the Company
is accurate and complete. Copies of such forms shall have been completed and
executed by the Company and delivered to each Purchaser that is a licensed small
business investment company (an "SBIC") at the Closing Date. The Company does
not presently engage in, and it shall not hereafter engage in, any activities,
and shall not use directly or indirectly the proceeds from the sale of the
Preferred Shares for any purpose for which an SBIC is prohibited from providing
funds by the SBIA.

                  5.27     Application of Proceeds. The proceeds from the
issuance and sale of Preferred Shares pursuant to this Agreement will be used to
fund working capital and other general corporate purposes. No portion of such
proceeds (i) will be used to provide capital to a corporation licensed under the
SBIA, (ii) will be used outside the United States (except (x) to acquire abroad
materials and industrial property rights for a domestic operation or (y) for
transfer to a controlled foreign subsidiary, so long as at least 51% of the
assets and activities of the Company will remain within the United States), or
(iii) will be used for any purpose contrary to the public interest (including
but not limited to activities which are in violation of law) or inconsistent
with free competitive enterprise, in each case, within the meaning of 13 CFR
Section 107.901. The Company's primary business activity does not involve,
directly or indirectly, providing funds to others, the purchase or discounting
of debt obligations, factoring or long-term leasing of equipment with no
provision for maintenance or repair, and the Company is not classified under
Major Group 65 (Real Estate) of the SIC Manual.

                  5.28     Disclosure. The Company has not knowingly withheld
from the Purchasers any material facts relating to the assets, business,
operations, financial condition or prospects of the Company. No representation
or warranty in this Agreement or in any certificate or schedule furnished or to
be furnished to any Purchaser pursuant hereto contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact required to be stated herein or therein or necessary to make the statements
herein or therein not misleading.

         6.       Representations and Warranties of Purchasers. Each of the
Purchasers severally represents and warrants for itself that:

                  6.1      Investment Intent. The Preferred Shares being
acquired by such Purchaser hereunder are being purchased, and the Conversion
Stock acquired by such Purchaser upon conversion of such Preferred Shares will
be acquired, for such Purchaser's own account and not with the view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Securities Act. Such Purchaser understands that the Preferred
Shares and the Conversion Stock have not been registered under the Securities
Act or any applicable state laws by reason of their issuance or contemplated
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and such state laws, and that the reliance of
the Company and others upon this exemption is predicated in part upon this
representation and warranty. Such Purchaser further understands that the
Preferred Shares and Conversion Stock may not be transferred or resold without
(a) registration under the Securities Act and any applicable state securities
laws, or (b) an exemption from the requirements of the Securities Act and
applicable state securities laws.

                                      -12-
<PAGE>

         Such Purchaser understands that an exemption from such registration is
not presently available pursuant to Rule 144 promulgated under the Securities
Act by the Securities and Exchange Commission (the "Commission") and that in any
event such Purchaser may not sell any securities pursuant to Rule 144 prior to
the expiration of a two-year period after such Purchaser has acquired the
securities. Such Purchaser understands that any sales pursuant to Rule 144 may
only be made in full compliance with the provisions of Rule 144.

                  6.2      Location of Principal Office and Qualification as
Accredited Investor. The state in which such Purchaser's principal office (or
domicile, if such Purchaser is an individual) is located is set forth in such
Purchaser's address in Schedule A hereto. Such Purchaser qualifies as an
accredited investor within the meaning of Rule 501 under the Securities Act for
the reasons specified on such Purchaser's Certification attached to this
Agreement. Such Purchaser has such knowledge and experience in financial and
business matters that such Purchaser is capable of evaluating the merits and
risks of the investment to be made hereunder by such Purchaser. Such Purchaser
has and has had access to all of the Company's material books and records and
access to the Company's executive officers has been provided to such Purchaser
or to such Purchaser's qualified agents.

                  6.3      Acts and Proceedings. This Agreement has been duly
authorized by all necessary action on the part of such Purchaser, has been duly
executed and delivered by such Purchaser, and is a valid and binding agreement
upon the part of such Purchaser enforceable against such Purchaser in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization, or other similar laws
affecting enforcement of creditors' rights generally, and except for judicial
limitations on the enforcement of the remedy of specific enforcement and other
equitable remedies.

                  6.4      No Brokers or Finders. No person, firm or corporation
has or will have, as a result of any act or omission by such Purchaser, any
right, interest or valid claim against the Company for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, in
connection with the transactions contemplated by this Agreement. Such Purchaser
will indemnify and hold the Company harmless against any and all liability with
respect to any such commission, fee or other compensation which may be payable
or determined to be payable as a result of the actions of such Purchaser in
connection with the transactions contemplated by this Agreement.

         7.       Conditions of Each Purchaser's Obligation. The obligation to
purchase and pay for the Preferred Shares which each Purchaser has agreed to
purchase on the Closing Date is subject to the fulfillment prior to or on the
Closing Date of the following conditions. In the event that any such condition
is not satisfied to the satisfaction of each Purchaser, then no Purchaser shall
be obligated to proceed with the purchase of such Preferred Shares.

                  7.1      No Errors, etc. The representations and warranties of
the Company under this Agreement shall be true in all material respects as of
the Closing Date with the same effect as though made on and as of the Closing
Date.

                                      -13-
<PAGE>

                  7.2      Compliance with Agreement. The Company shall have
performed and complied with all agreements or conditions required by this
Agreement to be performed and complied with by it prior to or as of the Closing
Date.

                  7.3      Certificate of Officers. The Company shall have
delivered to the Purchasers a certificate, dated the Closing Date, executed by
the President and the senior financial officer of the Company and certifying to
the satisfaction of the conditions specified in Sections 7.1, 7.2 and 7.5
hereof.

                  7.4      Opinion of Company's Counsel. The Company shall have
delivered to each of the Purchasers an opinion or opinions of Dorsey & Whitney
LLP, special counsel for the Company, dated the Closing Date, to the effect
that:

                  (a)      The Company is duly incorporated, validly existing
         and in good standing under the laws of the State of Minnesota with the
         corporate power to enter into this Agreement, to issue and sell the
         Preferred Shares and the Conversion Stock as contemplated by this
         Agreement, and to carry out the provisions of this Agreement and to
         conduct any lawful business activity; and has not failed to qualify to
         do business as a foreign corporation in good standing in any state or
         jurisdiction wherein the nature of its activities or of its properties
         owned or leased makes such qualification necessary and failure to be so
         qualified would have a material adverse effect upon the Company.

                  (b)      This Agreement has been duly authorized by all
         requisite corporate action, executed and delivered by the Company, and
         is a valid and binding agreement of the Company enforceable in
         accordance with its terms, except as the enforceability thereof may be
         limited by bankruptcy, insolvency, moratorium, reorganization or
         similar laws affecting the enforcement of creditors' rights generally,
         and except for judicial limitations on the enforcement of the remedy of
         specific performance and other equitable remedies.

                  (c)      The Certificate has been duly adopted by all
         necessary corporate action, and has been duly filed with the Secretary
         of State of the State of Minnesota (no other or additional filing or
         recording being necessary in order to create the Series A Preferred
         Stock).

                  (d)      The Preferred Shares are entitled to the rights,
         preferences and provisions of the Certificate.

                  (e)      The Preferred Shares are duly authorized, validly
         issued, fully paid and nonassessable, and the certificates for the
         Preferred Shares are in valid and sufficient form.

                  (f)      The shares initially issuable upon conversion of the
         Series A Preferred Stock have been duly authorized and reserved for
         issuance and when issued upon such conversion in accordance with the
         terms and conditions of the

                                      -14-
<PAGE>

         Preferred Shares will be duly authorized, validly issued, fully paid
         and nonassessable.

                  (g)      The Company is authorized by its Articles of
         Incorporation to issue 60,000,000 shares of capital stock, of which
         50,000,000 shares have been designated Common Stock, 958,487 shares of
         which have been designated Series A Preferred Stock and 9,041,513
         shares of which are undesignated as to rights and preferences. The
         outstanding shares of capital stock of the Company have been duly
         authorized and validly issued and are fully paid and nonassessable.
         Based upon a review of the minute book of the Company and the
         contracts, agreements, leases, documents, commitments and arrangements
         disclosed in Exhibit 4 to this Agreement, there are no outstanding
         securities convertible into common shares of the Company or outstanding
         options, warrants or other rights to acquire securities of the Company,
         other than (a) the Preferred Shares, and (b) options and warrants
         disclosed in Exhibit 2 to this Agreement. None of the contracts,
         agreements, leases, documents, commitments or arrangements disclosed in
         Exhibit 4 to this Agreement grant or create any right with respect to
         the registration of any securities of the Company under the Securities
         Act or create any obligation on the part of the Company to purchase or
         redeem any outstanding shares of capital stock of the Company.

                  (h)      Based upon a review of the minute book of the Company
         and the contracts, agreements, leases, documents, commitments and
         arrangements disclosed in Exhibit 4 to this Agreement, no security
         holder of the Company is entitled to preemptive or similar rights to
         subscribe for or to purchase any shares of capital stock of the Company
         except as otherwise contemplated by this Agreement, nor will any
         security holder of the Company be entitled to any such rights as a
         result of the execution or delivery of this Agreement or the issuance
         of the Preferred Shares or the Conversion Stock other than as
         contemplated by this Agreement.

                  (i)      Assuming the accuracy of the representations of the
         Purchasers set forth in Section 6 hereof, the Company has obtained the
         approval or consent of all governmental agencies or bodies required to
         be obtained by it for the valid offer, issuance and sale of the
         Preferred Shares and the offer of the Conversion Stock to the
         Purchasers through conversion by them of the Preferred Shares. The
         Company is not in violation of any term, provision or condition of its
         Articles of Incorporation or Bylaws, or in violation of any contract,
         agreement, lease, document, commitment or arrangement listed in Exhibit
         4 to this Agreement or any judgment, decree or order known to such
         counsel or to the best of such counsel's knowledge any statute, rule or
         regulation; and the execution, delivery and performance of this
         Agreement, the offer, issuance and sale of the Preferred Shares and the
         Conversion Stock, and the consummation of the transactions contemplated
         by this Agreement will not result in any breach or violation of the
         terms or provisions of, or constitute a default under, the Articles of
         Incorporation or the Bylaws of the Company or a violation of any
         contract, agreement, lease, document, commitment or arrangement listed
         in Exhibit 4 to this Agreement or any judgment,

                                      -15-
<PAGE>

         decree or order known to such counsel or to the best of such counsel's
         knowledge any statute, rule or regulation.

                  (j)      Assuming the accuracy of the representations of the
         Purchasers set forth in Section 6 hereof, the offer, sale, issuance and
         delivery of the Preferred Shares and the offer of the Conversion Stock
         to the Purchasers through conversion by them of the Preferred Shares
         under the circumstances contemplated by the Certificate and this
         Agreement are exempt from the registration and prospectus delivery
         requirements of the Securities Act, and all registrations,
         qualifications, permits and approvals required under applicable state
         securities laws for the lawful offer, sale, issuance and delivery of
         the Preferred Shares and the Conversion Stock have been obtained.

                  (k)      Other than as disclosed on Exhibit 2 to this
         Agreement, such counsel have no knowledge of any litigation, proceeding
         or governmental investigation pending or threatened against the
         Company, its key management employees, properties or business which, if
         determined adversely to the Company, would have a material adverse
         effect upon the financial condition, operations, results of operations
         or business of the Company.

                  7.5      No Event of Default. There shall exist at the time of
Closing no condition or event which would constitute an Event of Default (as
hereinafter defined) or which, after notice or lapse of time or both, would
constitute an Event of Default.

                  7.6      Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws for the lawful execution and delivery of this Agreement
and the offer, sale, issuance and delivery of the Preferred Shares and the offer
of the Conversion Stock shall have been obtained.

                  7.7      Proceedings and Documents. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction shall be satisfactory in
form and substance to the Purchasers and their special counsel.

                  7.8      Co-Sale Agreements. Each of Bahram Akradi, John
Driscoll and Wheelock Whitney shall have entered into a Co-Sale Agreement with
the Purchasers substantially in the form of Exhibit 5 hereto.

                  7.9      Key Person Insurance. The Company shall have a
binding commitment to obtain key person life insurance on the life of Bahram
Akradi, and shall furnish each of the Purchasers with reasonable evidence
thereof.

                  7.10     Execution of SBA Form 480. Each of the Purchasers
that is an SBIC and the Company shall have executed the Size Status Declaration
on SBA Form 480 referred to in Section 5.28 hereof, and each of such Purchasers
shall have received an executed copy of such Form for its records.

                                      -16-
<PAGE>

                  7.11     Execution of SBA Form 652-D. Each of the Purchasers
that is an SBIC shall have received from the Company its duly executed
certification, dated the Closing Date, on SBA Form 652-D, that the Company will
not illegally discriminate in its operations, employment practices or
facilities.

                  7.12     Akradi Employment Agreement. The Company and Bahram
Akradi shall have entered into an Employment Agreement substantially in the form
of Exhibit 6 hereto.

                  7.13     Affidavit of Ownership and Agreement of Indemnity.
The Company shall have received an affidavit of ownership and agreement of
indemnity from T. Jay Salmen regarding the number of outstanding shares of
capital stock of the Company owned by him on the date of such affidavit.

         8.       Affirmative Covenants. Subject to the provisions of Section 12
hereof, the Company covenants and agrees that:

                  8.1      Corporate Existence. The Company will maintain, and
will cause each Subsidiary (as hereinafter defined) to maintain, its corporate
existence in good standing and comply with all applicable laws and regulations
of the United States or of any state or states thereof or of any political
subdivision thereof and of any governmental authority where failure to so comply
would have a material adverse impact on the Company or its business or
operations.

                  8.2      Books of Account and Reserves. The Company will, and
will cause each of its Subsidiaries to, keep books of record and account in
which full, true and correct entries are made of all of its and their respective
dealings, business and affairs, in accordance with generally accepted accounting
principles. The Company will employ certified public accountants selected by the
Board of Directors of the Company who are "independent" within the meaning of
the accounting regulations of the Commission and who are, if other than
McGladrey & Pullen, LLP, one of the so-called "Big Six" accounting firms, and
have annual audits made by such independent public accountants in the course of
which such accountants shall make such examinations, in accordance with
generally accepted auditing standards, as will enable them to give such reports
or opinions with respect to the financial statements of the Company and its
Subsidiaries as will satisfy the requirements of the Commission in effect at
such time with respect to certificates and opinions of accountants.

                  8.3      Furnishing of Financial Statements and Information.
The Company will deliver to each Purchaser:

                  (a)      as soon as practicable, but in any event
         within 45 days after the close of each month, unaudited
         consolidated balance sheets of the Company and its
         Subsidiaries as of the end of such month, together with the
         related consolidated statements of operations and cash flow
         for such month, setting forth the budgeted figures for such
         month prepared and submitted in connection with the Company's
         annual plan as required under Section 8.5 hereof and in
         comparative form figures for the corresponding month of the
         previous fiscal year, all in reasonable detail and

                                      -17-
<PAGE>

         certified by an authorized accounting officer of the Company,
         subject to year-end adjustments;

                  (b)      as soon as practicable, but in any event
         within 120 days after the end of each fiscal year, a
         consolidated balance sheet of the Company and its
         Subsidiaries, as of the end of such fiscal year, together with
         the related consolidated statements of operations,
         shareholders' equity and cash flow for such fiscal year,
         setting forth in comparative form figures for the previous
         fiscal year, all in reasonable detail and duly certified by
         the Company's independent public accountants, which
         accountants shall have given the Company an opinion,
         unqualified as to the scope of the audit, regarding such
         statements;

                  (c)      concurrently with the delivery of any
         financial statements referred to in paragraphs (a) and (b) of
         this Section 8.3, current schedules of Indebtedness for
         Borrowed Money and Senior Indebtedness, as these terms are
         hereinafter defined, together with a certificate of the
         President and the principal accounting officer of the Company
         to the effect that such schedules are accurate and correct and
         that there exists no condition or event which constitutes an
         event of default with respect to any indebtedness of the
         Company, or, if any such condition or event exists, specify
         the nature and period of existence thereof and what action the
         Company is taking or proposes to take with respect thereto;

                  (d)      concurrently with the delivery in each year
         of the financial statements referred to in paragraph (b) of
         this Section 8.3, a statement and report signed by the
         independent public accountants who certified such financial
         statements to the effect that they have read this Agreement
         and that in the course of the audit upon which their
         certificate was based they became aware of no condition or
         event which constituted an Event of Default or which, after
         notice or lapse of time or both, would constitute an Event of
         Default or if such accountants did become aware of any such
         condition or event, specifying the nature and period of
         existence thereof;

                  (e)      as soon as reasonably practical after the
         written request of any Purchaser that is an SBIC, confirm the
         use of the proceeds as described in Section 5.27 hereof;

                  (f)      promptly furnish to each Purchaser that is
         an SBIC all information necessary in order for such Purchaser
         to prepare and file SBA Form 468 and other information
         requested or required by any governmental authority asserting
         jurisdiction over such Purchaser, such information to be
         provided within 20 days of such Purchaser's request, but in no
         event shall such Purchaser request any information that has
         previously been disclosed pursuant to the reporting
         requirements set for herein;

                  (g)      promptly after the submission thereof to the
         Company, copies of all reports and recommendations submitted
         by independent public accountants in

                                      -18-
<PAGE>

         connection with any annual or interim audit of the accounts of
         the Company or any of its Subsidiaries made by such
         accountants;

                  (h)      promptly upon transmission thereof, copies
         of all reports, proxy statements and other communications
         furnished to shareholders of the Company;

                  (i)      with reasonable promptness, such other
         financial data relating to the business, affairs and financial
         condition of the Company and any Subsidiaries as is available
         to the Company and as from time to time the Purchasers may
         reasonably request;

                  (j)      at least 20 days prior to the earlier of (i)
         the execution of any agreement relating to any merger or
         consolidation of the Company or any of its Subsidiaries with
         another corporation, or a plan of exchange involving the
         outstanding capital stock of the Company or any of its
         Subsidiaries, or the sale, transfer or other disposition of
         all or substantially all of the property, assets or business
         of the Company or any of its Subsidiaries to another
         corporation, or (ii) the holding of any meeting of the
         shareholders of the Company for the purpose of approving such
         action, provide written notice of the terms and conditions of
         such proposed merger, consolidation, plan of exchange, sale,
         transfer or other disposition; and

                  (k)      within 15 days after the Company learns in
         writing of the commencement or threatened commencement of any
         material suit, legal or equitable, or of any material
         administrative, arbitration or other proceeding against the
         Company, any of its Subsidiaries or their respective
         businesses, assets or properties, written notice of the nature
         and extent of such suit or proceeding.

                  8.4      Inspection. The Company will permit each Purchaser
and any of its partners, officers or employees, or any outside representatives
designated by such Purchaser and reasonably satisfactory to the Company, to
visit and inspect at such Purchaser's expense any of the properties of the
Company or its Subsidiaries, including their books and records (and to make
photocopies thereof or make extracts therefrom), and to discuss their affairs,
finances, and accounts with their officers, lawyers and accountants, except with
respect to trade secrets and similar confidential information, which need not be
disclosed, all to such reasonable extent and at such reasonable times and
intervals as such Purchaser may reasonably request. Except as otherwise required
by laws or regulations applicable to a Purchaser, the Purchasers shall maintain,
and shall require their representatives to maintain, all information obtained
pursuant to Section 8.3 hereof, this Section 8.4 and Section 8.5 hereof on a
confidential basis.

                  8.5      Preparation and Approval of Budgets. At least one
month prior to the beginning of each fiscal year of the Company, the Company
shall prepare and submit to its Board of Directors, for its review and approval,
an annual plan for such year, which shall include monthly capital and operating
expense budgets, cash flow statements and profit and loss projections itemized
in such detail as the Board of Directors may reasonably request. Each annual
plan shall be modified as often as is necessary in the judgment of the Board of
Directors to reflect changes

                                      -19-
<PAGE>

required as a result of operating results and other events that occur, or may be
reasonably expected to occur, during the year covered by the annual plan, and
copies of each such modification shall be submitted to the Board of Directors.
The Company will, simultaneously with the submission thereof to the Board of
Directors, deliver a copy of each such annual plan and modification thereof to
each Purchaser.

                  8.6      Payment of Taxes and Maintenance of Properties. The
Company will, and will cause each Subsidiary to:

                  (a)      pay and discharge promptly, or cause to be
         paid and discharged promptly when due and payable, all taxes,
         assessments and governmental charges or levies imposed upon it
         or upon its income or upon any of its properties, as well as
         all material claims of any kind (including claims for labor,
         material and supplies) which, if unpaid, might by law become a
         lien or charge upon its property; provided, however, that
         neither the Company nor any Subsidiary shall be required to
         pay any such tax, assessment, charge, levy or claim if the
         amount, applicability or validity thereof shall currently be
         contested in good faith by appropriate proceedings and if the
         Company or such Subsidiary as the case may be shall have set
         aside on its books reserves (segregated to the extent required
         by generally accepted accounting principles) deemed adequate
         by it with respect thereto; and

                  (b)      maintain and keep, or cause to be maintained
         and kept, its properties in good repair, working order and
         condition, and from time to time make, or cause to be made,
         all repairs and renewals and replacements which in the opinion
         of the Company are necessary and proper so that the business
         carried on in connection therewith may be properly and
         advantageously conducted at all times; the Company will
         maintain or cause to be maintained back-up copies of all
         valuable papers and software.

                  8.7      Insurance. The Company will, and will cause each
Subsidiary to, obtain and maintain in force such property damage, public
liability, business interruption, worker's compensation, indemnity bonds and
other types of insurance as the Company's executive officers, after consultation
with an accredited insurance broker, shall determine to be necessary or
appropriate to protect the Company from the insurable hazards or risks
associated with the conduct of the Company's business. The Company's executive
officers shall periodically report to the Board of Directors on the status of
such insurance coverage.

         All insurance shall be maintained in at least such amounts and to such
extent as shall be determined to be reasonable by the Board of Directors; and
all such insurance shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company or any Subsidiary may effect worker's compensation or similar insurance
in respect of operations in any state or other jurisdiction either through an
insurance fund operated by such state or other jurisdiction or by causing to be
maintained a system or systems of self-insurance which is in accord with
applicable laws.

                                      -20-
<PAGE>

                  8.8      Payment of Indebtedness and Discharge of Obligations.
The Company will, and will cause each Subsidiary to, pay or cause to be paid the
principal of and interest and premium, if any, on all Indebtedness for Borrowed
Money heretofore or hereafter incurred or assumed by it when and as the same
shall become due and payable, unless such Indebtedness for Borrowed Money is
renewed or extended. The Company will, and will cause each Subsidiary to,
faithfully observe, perform and discharge all of the material covenants,
conditions and obligations which are imposed on it by any and all indentures and
other agreements securing or evidencing such Indebtedness for Borrowed Money or
pursuant to which such Indebtedness for Borrowed Money is issued, and will not
permit the continuance of any act or omission which is or under the provisions
thereof may be declared to be a material default thereunder, unless such default
is waived pursuant to the provisions thereof. Neither the Company nor any
Subsidiary shall be required to make any payment or to take any other action by
reason of this Section 8.8 at any time while it shall be currently contesting in
good faith by appropriate proceedings its obligations to make such payment or to
take such action provided that the Company or such Subsidiary, as the case may
be, shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting principles) deemed adequate by it with
respect thereto.

                  8.9      Directors' and Shareholders' Meetings. The holders of
the Preferred Shares shall have the right to elect directors of the Company as
set forth in the Certificate.

         The Company shall reimburse such holders of Preferred Shares for the
reasonable out-of-pocket expenses incurred by them or the directors elected by
them pursuant to the Certificate in connection with the attending of meetings by
their director designees or carrying out any other duties by such director
designees that may be specified by the Board of Directors; shall pay such
director designees the same directors' fees paid to the other non-employee
directors of the Company (it being understood that the Company's stock option
plan may provide for stock option grants to only those non-employee directors
who, together with their affiliates, do not own more than one percent of
outstanding capital stock of the Company); and shall maintain as part of its
Articles of Incorporation or Bylaws a provision for the indemnification of its
directors to the full extent permitted by law.

         The Company agrees, as a general practice, to hold a meeting of its
Board of Directors at least once every two months, and during each year to hold
its annual meeting of shareholders on or approximately on the date provided in
its Bylaws.

                  8.10     Application of Proceeds. Unless otherwise approved by
the Purchasers, the net proceeds received by the Company from the sale of the
Preferred Shares shall be used substantially for working capital purposes.
Pending use of the proceeds in the business, they shall be deposited in a bank
or banks having deposits of $150,000,000 or more, invested in money market
mutual funds having assets of $500,000,000 or more, or invested in securities
issued or guaranteed by the United States Government.

                  8.11     Retirement Plans. The Company will cause each
retirement plan of the Company or any of its Subsidiaries in which any employees
of the Company or of any of its Subsidiaries participate that is subject to the
provisions of ERISA and the documents and instruments governing each such plan
to be conformed to when necessary, and to be administered

                                      -21-
<PAGE>

in a manner consistent with, those provisions of ERISA which may, from time to
time, become effective and operative with respect to such plans; if requested by
the Purchasers in writing from time to time, furnish to the Purchasers a copy of
any annual report with respect to each such plan that the Company files with the
Secretary of Labor pursuant to ERISA; and at such time as such insurance shall
be available at rates deemed commercially reasonable by the Company, maintain
insurance against the contingent liability against the net worth of the Company
imposed in respect of each such plan by the provisions of ERISA.

                  8.12     Filing of Reports. The Company will, from and after
such time as it has securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended, or has securities registered
pursuant to the Securities Act, and until such time as the Purchasers are
eligible to sell their Preferred Shares pursuant to Rule 144(k) (or any
successor rule) or until such earlier time as the Purchasers have sold such
Preferred Shares, make timely filing of such reports as are required to be filed
by it with the Commission so that Rule 144 under the Securities Act or any
successor provision thereto will be available to the Purchasers.

                  8.13     Patents and Other Intangible Rights. The Company will
apply for, or obtain assignments of, or licenses to use, all patents,
trademarks, trademark rights, trade names, trade name rights and copyrights
which in the opinion of a prudent and experienced businessman operating in the
industry in which the Company is operating are desirable or necessary for the
conduct and protection of the business of the Company.

                  8.14     Insurance on Life of Bahram Akradi. The Company will
maintain life insurance under a policy or policies issued by insurers of
recognized standing in the amount of $5,000,000 on the life of Bahram Akradi, to
the extent Mr. Akradi is insurable and so long as he is an employee of the
Company. Such policy or policies shall name the Company as the beneficiary
thereunder, and shall be in addition to any policy or policies maintained by the
Company to fund potential stock repurchase obligations of the Company.

                  8.15     Rule 144A. The Company agrees that, upon the request
of any holder of Preferred Shares or Conversion Stock, or any prospective
purchaser of Preferred Shares or Conversion Stock, the Company shall promptly
provide (but in any case within 15 days of a request) to such holder or
potential purchaser the following information: (a) a brief statement of the
nature of the business of the Company and its Subsidiaries and the products and
services they offer; (b) the Company's most recent consolidated balance sheets
and profit and loss and retained earnings statements, and similar financial
statements for such part of the two preceding fiscal years prior to such request
as the Company has been in operation (such financial information shall be
audited, to the extent reasonably available); and (c) such other information
about the Company, its Subsidiaries and their business, financial condition and
results of operations as the requesting person shall request in order to comply
with Rule 144A promulgated under the Securities Act and the antifraud provisions
of the federal and state securities laws.

         The Company hereby represents and warrants to any such requesting
person that the information provided by the Company pursuant to this Section
8.15 will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.

                                      -22-
<PAGE>

                  8.16     Compliance. So long as any Purchaser that is an SBIC
holds any Preferred Shares (i) without the prior written consent of such
Purchaser, the Company shall not use the proceeds from the sale of the Preferred
Shares issued and sold pursuant to this Agreement for any purpose other than as
set forth in Section 8.10 above, (ii) the Company shall not use the proceeds
from the sale of the Preferred Shares issued and sold pursuant to this Agreement
for any prohibited purposes outlined in the second sentence of Section 5.27,
(iii) the Company shall not change its business activity in any manner which, by
reason of such change in business activity, would cause the Company to fall
within a different SIC Code and thereby render the Company ineligible as a
"small business concern" under the SBIA and (iv) the Company shall at all times
comply with the non-discrimination requirements of 13 CFR Parts 112, 113 and
117. The Company shall at all times permit any Purchaser that is an SBIC and, if
necessary, a representative of the Small Business Administration, access to the
Company's records and the Company shall provide such information as such
Purchaser that is an SBIC may request in order to verify compliance with this
Section 8.16 including, without limitation, an officer's certificate indicating
such compliance. The Company hereby acknowledges that (A) any diversion of the
proceeds from their intended use as specified in Section 5.27, Section 8.10 and
this Section 8.16, (B) the Company's becoming ineligible as a "small business
concern" by reason of a change in the Company's business activity within one
year from the Closing Date or (C) failure to provide the information specified
in Section 8.3(e) and 8.3(f), shall entitle any Purchaser that is an SBIC, upon
demand, and in addition to any other remedies that may exist, to immediate
rescission of this Agreement and repayment in full of the funds invested
hereunder as contemplated by 13 CFR Section 107.305 and 13 CFR Section 107.706.

                  8.17     Right of First Refusal. If the Company should decide
to issue and sell additional shares of any capital stock of the Company or any
warrants, securities convertible into capital stock of the Company or other
rights to subscribe for or to purchase any capital stock of the Company, other
than (a) shares of Common Stock sold to the public pursuant to a registration
statement filed under the Securities Act, if such offering is underwritten on a
firm commitment basis, (b) shares of Common Stock awarded or issued upon the
exercise of options granted pursuant to employee and consultant benefit plans
adopted by the Company, and the grant of such options themselves, provided that
the aggregate number of shares thus awarded and issued and issuable pursuant to
the exercise of all such options shall not be in excess of 910,000
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes hereafter effected), and (c)
shares of Common Stock issued upon conversion of the Preferred Shares (all such
capital stock, warrants, securities convertible into capital stock and other
rights, other than securities referred to in (a), (b) and (c) above, being
hereinafter sometimes collectively referred to as "Additional Securities"), the
Company shall first offer to sell to each of the Purchasers, upon the same terms
and conditions as the Company is proposing to issue and sell such Additional
Securities to others, such Purchaser's pro rata share (as defined below) of such
Additional Securities. Such offer shall be made by written notice given to each
such Purchaser and specifying therein the amount of the Additional Securities
being offered, the purchase price and other terms of such offer. Such Purchaser
shall have a period of 45 days from and after the date of such notice within
which to accept such offer. If a Purchaser elects to accept such offer in whole
or in part, such Purchaser shall so accept by written notice to the Company
given within such 45-day period. If a Purchaser fails to accept such offer in
whole or in part within such 45-day period, any of such Additional Securities
not purchased by such Purchaser pursuant to such offer

                                      -23-
<PAGE>

may be offered for sale to others by the Company for a period of 120 days from
the last day of such 45-day period, but only on terms and conditions no more
favorable to the third party purchasers than those set forth in the initial
offer to such Purchaser, free and clear of the restrictions imposed by this
Article 8.17.

         For purposes of the previous paragraph, a Purchaser's "pro rata share"
is the number of shares of Additional Securities (rounded to the nearest whole
share) as is equal to the product of (a)(i) the number of shares of Common Stock
issued, or issuable upon the exercise or conversion of rights, options or other
convertible securities without the payment of any additional cash consideration
or with the payment of a nominal cash consideration, as the case may be
(collectively, "Fully Paid Securities"), to such Purchaser immediately prior to
the issuance of the Additional Securities being offered divided by (ii) the
total number of Fully Paid Securities issued or issuable by the Company
immediately prior to the issuance of the Additional Securities, multiplied by
(b) the entire offering of Additional Securities.

                  8.18     Conversion Stock Fully Paid; Reservation of Shares.
The Company covenants and agrees that all Conversion Stock that may be issued
upon conversion of the Preferred Shares will, upon issuance in accordance with
the terms of the Certificate, be fully paid and nonassessable, and that the
issuance thereof shall not give rise to any preemptive rights on the part of any
person. The Company further covenants and agrees that the Company will at all
times have authorized and reserved a sufficient number of shares of its Common
Stock for the purpose of issue upon the conversion of the Preferred Shares.

                  8.19     Recission Offer. The Company covenants and agrees
that within 120 days after the Closing Date it will make recission offers in
compliance with federal and state securities laws to all shareholders of the
Company who may have purchased securities of the Company in transactions which
were not exempt from the registration requirements of the Securities Act and
applicable state securities laws.

         9.       Negative Covenants. Subject to the provisions of Section 12
hereof, the Company will be limited and restricted as follows:

                  9.1      Dividends on or Redemption of Junior Stock. Without
the prior approval of the Purchasers, the Company will not declare or pay any
dividend or make any other distribution on any shares of Junior Stock (as
hereinafter defined), other than those payable solely in shares of Junior Stock,
or purchase, redeem or otherwise acquire for any consideration (other than in
exchange for or out of the net cash proceeds of the contemporaneous issue or
sale of other shares of Junior Stock or debt securities convertible into other
shares of Junior Stock), or set aside a sinking fund or other fund for the
redemption or repurchase of any shares of Junior Stock or any warrants, rights
or options to purchase shares of Junior Stock.

                  9.2      Future Registration Rights. Except for any
registration expressly permitted by Section 10 hereof, the Company will not,
without the prior approval of the Purchasers, agree with the holders of any
securities issued or to be issued by the Company to register such securities
under the Securities Act nor will it grant any incidental registration rights.

                                      -24-
<PAGE>

                  9.3      Other Matters Requiring Prior Approval of Purchasers.
The Company will not without the prior approval of the Purchasers:

                  (a)      guarantee, endorse or otherwise be or become
         contingently liable, or permit any Subsidiary to guarantee, endorse or
         otherwise become contingently liable, in connection with the
         obligations, securities or dividends of any person, firm, association
         or corporation, other than the Company or any of its Subsidiaries,
         except that the Company and any Subsidiary may endorse negotiable
         instruments for collection in the ordinary course of business; or

                  (b)      make or permit any Subsidiary to make loans or
         advances to any person (including without limitation to any officer,
         director or shareholder of the Company or any Subsidiary), firm,
         association or corporation, except loans and advances to the Company
         and its wholly-owned Subsidiaries and advances to suppliers and
         employees made in the ordinary course of business (provided that the
         outstanding balance of loans and advances to employees of the Company
         or any Subsidiary shall not at any time exceed $100,000 in the
         aggregate or $20,000 for any one individual); or

                  (c)      purchase or invest, or permit any Subsidiary to
         purchase or invest, in the stock or obligations of any other person,
         firm or corporation, other than a wholly-owned Subsidiary; or

                  (d)      pay, or permit any Subsidiary to pay, compensation,
         whether by way of salaries, bonuses, participations in pension or
         profit sharing plans, fees under management contracts or for
         professional services or fringe benefits to any officer in excess of
         amounts fixed by the Board of Directors of the Company prior to any
         payment to such officer; or

                  (e)      issue (A) any additional capital stock of the Company
         of any class other than Common Stock, or securities convertible into
         any such class or (B) any options, warrants or other rights to purchase
         capital stock of the Company of any class other than Common Stock, or
         securities convertible into shares of any such class; or

                  (f)      make any material change in the nature of its
         business as carried on at the date of this Agreement.

         10.      Registration of Stock.

                  10.1     Required Registration. If, at any time after twelve
months after the closing of the first public offering by the Company of shares
of Common Stock pursuant to a registration statement filed under the Securities
Act and until such time as all holders of the Purchased Stock are able to sell
all of the Purchased Stock owned by such holders pursuant to Rule 144(k) under
the Act (or any successor rule), the Company shall receive a written request
therefor from any record holder or holders of an aggregate of at least a
majority of the shares of Purchased Stock not

                                      -25-
<PAGE>

theretofore registered under the Securities Act and sold, the Company shall
prepare and file a registration statement under the Securities Act covering the
shares of Purchased Stock which are the subject of such request and shall use
its best efforts to cause such registration statement to become effective. In
addition, upon the receipt of such request, the Company shall promptly give
written notice to all other record holders of shares of Purchased Stock not
theretofore registered under the Securities Act and sold that such registration
is to be effected. The Company shall include in such registration statement such
shares of Purchased Stock for which it has received written requests to register
by such other record holders within 30 days after the date of the Company's
written notice to such other record holders. The Company shall be obligated to
prepare, file and cause to become effective only two registration statements
(other than on Form S-3 or any successor form promulgated by the Commission
("Form S-3")) pursuant to this Section 10.1, and to pay the expenses associated
with such registration statements; notwithstanding the foregoing, the record
holder or holders of an aggregate of at least a majority of the shares of
Purchased Stock not theretofore registered under the Securities Act and sold may
require, pursuant to this Section 10.1, the Company to file, and to pay the
expenses associated with, any number of registration statements on Form S-3 (or
any successor form), if such form is then available for use by the Company and
such record holder or holders. In the event that the holders of a majority of
the Purchased Stock for which registration has been requested pursuant to this
Section 10.1 determine for any reason not to proceed with a registration at any
time before a registration statement has been declared effective by the
Commission, and such registration statement, if theretofore filed with the
Commission, is withdrawn with respect to the Purchased Stock covered thereby,
and the holders of such Purchased Stock agree to bear their own expenses
incurred in connection therewith and to reimburse the Company for the expenses
incurred by it attributable to the registration of such Purchased Stock, then
the holders of such Purchased Stock shall not be deemed to have exercised their
right to require the Company to register Purchased Stock pursuant to this
Section 10.1.

         Notwithstanding the foregoing, the Company may delay initiating the
preparation and filing of a registration statement on Form S-3 pursuant to the
preceding paragraph for a period not to exceed 90 days if in the good faith
judgment of the Company's principal investment banker such delay is necessary in
order not to affect in a significant and adverse manner equity financing efforts
then being undertaken by the Company.

         If, at the time any written request for registration is received by the
Company pursuant to this Section 10.1, the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for cash of any of
its securities by it or any of its security holders, such written request shall
be deemed to have been given pursuant to Section 10.2 hereof rather than this
Section 10.1, and the rights of the holders of Purchased Stock covered by such
written request shall be governed by Section 10.2 hereof.

         Without the written consent of the holders of a majority of the
Purchased Stock for which registration has been requested pursuant to this
Section 10.1, neither the Company nor any other holder of securities of the
Company may include securities in such registration if in the good faith
judgment of the managing underwriter of such public offering the inclusion of
such securities

                                      -26-
<PAGE>

would interfere with the successful marketing of the Purchased Stock or require
the exclusion of any portion of the Purchased Stock to be registered.

                  10.2     Incidental Registration. Each time the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders
(other than registration statements on forms that do not permit the inclusion of
shares by the Company's security holders), the Company will give written notice
of its determination to all record holders of Purchased Stock not theretofore
registered under the Securities Act and sold. Upon the written request of a
record holder of any shares of Purchased Stock given within 30 days after the
date of any such notice from the Company, the Company will, except as herein
provided, cause all such shares of Purchased Stock, the record holders of which
have so requested registration thereof, to be included in such registration
statement, all to the extent requisite to permit the sale or other disposition
by the prospective seller or sellers of the Purchased Stock to be so registered;
provided, however, that nothing herein shall prevent the Company from, at any
time, abandoning or delaying any such registration initiated by it; provided
further, however, that if the Company determines not to proceed with a
registration after the registration statement has been filed with the Commission
and the Company's decision not to proceed is primarily based upon the
anticipated public offering price of the securities to be sold by the Company,
the Company shall promptly complete the registration for the benefit of those
selling security holders who wish to proceed with a public offering of their
securities and who bear all expenses in excess of $25,000 incurred by the
Company as the result of such registration after the Company has decided not to
proceed. If any registration pursuant to this Section 10.2 shall be underwritten
in whole or in part, the Company may require that the Purchased Stock requested
for inclusion pursuant to this Section 10.2 be included in the underwriting on
the same terms and conditions as the securities otherwise being sold through the
underwriters. If in the good faith judgment of the managing underwriter of such
public offering the inclusion of all of the Purchased Stock originally covered
by a request for registration would reduce the number of shares to be offered by
the Company or interfere with the successful marketing of the shares of stock
offered by the Company, the number of shares of Purchased Stock otherwise to be
included in the underwritten public offering may be reduced pro rata (by number
of shares) among the holders thereof requesting such registration. Those shares
of Purchased Stock which are thus excluded from the underwritten public offering
shall be withheld from the market by the holders thereof for a period, not to
exceed 90 days, which the managing underwriter reasonably determines is
necessary in order to effect the underwritten public offering.

                  10.3     Registration Procedures. If and whenever the Company
is required by the provisions of Section 10.1 or 10.2 hereof to effect the
registration of shares of Purchased Stock under the Securities Act, the Company
will:

                  (a)      prepare and file with the Commission a
         registration statement with respect to such securities, and
         use its best efforts to cause such registration statement to
         become and remain effective for such period as may be
         reasonably necessary to effect the sale of such securities,
         not to exceed nine months;

                                      -27-
<PAGE>

                  (b)      prepare and file with the Commission such
         amendments to such registration statement and supplements to
         the prospectus contained therein as may be necessary to keep
         such registration statement effective for such period as may
         be reasonably necessary to effect the sale of such securities,
         not to exceed nine months;

                  (c)      furnish to the security holders
         participating in such registration and to the underwriters of
         the securities being registered such reasonable number of
         copies of the registration statement, preliminary prospectus,
         final prospectus and such other documents as such underwriters
         may reasonably request in order to facilitate the public
         offering of such securities;

                  (d)      use its best efforts to register or qualify
         the securities covered by such registration statement under
         such state securities or blue sky laws of such jurisdictions
         as such participating holders may reasonably request in
         writing within 20 days following the original filing of such
         registration statement, except that the Company shall not for
         any purpose be required to execute a general consent to
         service of process or to qualify to do business as a foreign
         corporation in any jurisdiction wherein it is not so
         qualified;

                  (e)      notify the security holders participating in
         such registration, promptly after it shall receive notice
         thereof, of the time when such registration statement has
         become effective or a supplement to any prospectus forming a
         part of such registration statement has been filed;

                  (f)      notify such holders promptly of any request
         by the Commission for the amending or supplementing of such
         registration statement or prospectus or for additional
         information;

                  (g)      prepare and file with the Commission,
         promptly upon the request of any such holders, any amendments
         or supplements to such registration statement or prospectus
         which, in the opinion of counsel for such holders (and
         concurred in by counsel for the Company), is required under
         the Securities Act or the rules and regulations thereunder in
         connection with the distribution of the Purchased Stock by
         such holder;

                  (h)      prepare and promptly file with the
         Commission and promptly notify such holders of the filing of
         such amendment or supplement to such registration statement or
         prospectus as may be necessary to correct any statements or
         omissions if, at the time when a prospectus relating to such
         securities is required to be delivered under the Securities
         Act, any event shall have occurred as the result of which any
         such prospectus or any other prospectus as then in effect
         would include an untrue statement of a material fact or omit
         to state any material fact necessary to make the statements
         therein, in the light of the circumstances in which they were
         made, not misleading;

                                      -28-
<PAGE>

                  (i)      advise such holders, promptly after it shall
         receive notice or obtain knowledge thereof, of the issuance of
         any stop order by the Commission suspending the effectiveness
         of such registration statement or the initiation or
         threatening of any proceeding for that purpose and promptly
         use its best efforts to prevent the issuance of any stop order
         or to obtain its withdrawal if such stop order should be
         issued; and

                  (j)      at the request of any such holder, furnish:
         (i) an opinion, dated as of the closing date, of the counsel
         representing the Company for the purposes of such
         registration, addressed to the underwriters, if any, and to
         the holder or holders making such request, covering such
         matters as such underwriters and holder or holders may
         reasonably request; and (ii) letters dated as of the effective
         date of the registration statement and as of the closing date,
         from the independent certified public accountants of the
         Company, addressed to the underwriters, if any, and to the
         holder or holders making such request, covering such matters
         as such underwriters and holder or holders may reasonably
         request.

                  10.4     Expenses. With respect to each registration,
including registrations pursuant to Form S-3 (or any successor form), requested
pursuant to Section 10.1 hereof (except as otherwise provided in such Section
with respect to registrations voluntarily terminated at the request of the
requesting security holders) and with respect to each inclusion of shares of
Purchased Stock in a registration statement pursuant to Section 10.2 hereof
(except as otherwise provided in Section 10.2 with respect to registrations
initiated by the Company but with respect to which the Company has determined
not to proceed), the Company shall bear the following fees, costs and expenses:
all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, fees and disbursements
of counsel for the underwriter or underwriters of such securities (if the
Company and/or selling security holders are required to bear such fees and
disbursements), all internal Company expenses, all legal fees and disbursements
and other expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified, and the premiums and other costs of policies of insurance against
liability (if any) arising out of such public offering. Fees and disbursements
of counsel and accountants for the selling security holders, underwriting
discounts and commissions and transfer taxes relating to the shares of Purchased
Stock included in the offering by the selling security holders, and any other
expenses incurred by the selling security holders not expressly included above,
shall be borne by the selling security holders.

                  10.5     Indemnification. In the event that any Purchased
Stock is included in a registration statement under Section 10.1 or 10.2 hereof:

                  (a)      The Company will indemnify and hold harmless
         each holder of shares of Purchased Stock which are included in
         a registration statement pursuant to the provisions of this
         Section 10, its directors and officers, and any underwriter
         (as defined in the Securities Act) for such holder and each
         person, if any, who controls such holder or such underwriter
         within the meaning of the Securities Act, from and against,
         and will reimburse such holder and each such underwriter and
         controlling

                                      -29-
<PAGE>

         person with respect to, any and all loss, damage, liability,
         cost and expense to which such holder or any such underwriter
         or controlling person may become subject under the Securities
         Act or otherwise, insofar as such losses, damages,
         liabilities, costs or expenses are caused by any untrue
         statement or alleged untrue statement of any material fact
         contained in such registration statement, any prospectus
         contained therein or any amendment or supplement thereto, or
         arise out of or are based upon the omission or alleged
         omission to state therein a material fact required to be
         stated therein or necessary to make the statements therein, in
         light of the circumstances in which they were made, not
         misleading; provided, however, that the Company will not be
         liable in any such case to the extent that any such loss,
         damage, liability, cost or expense arises out of or is based
         upon an untrue statement or alleged untrue statement or
         omission or alleged omission so made in conformity with
         information furnished by such holder, such underwriter or such
         controlling person in writing specifically for use in the
         preparation thereof.

                  (b)      Each holder of shares of Purchased Stock
         which are included in a registration pursuant to the
         provisions of this Section 10 will indemnify and hold harmless
         the Company, its directors and officers, any underwriter and
         each person, if any, who controls the Company or such
         underwriter from and against, and will reimburse the Company,
         its directors and officers, any underwriter and each person,
         if any, who controls the Company or such underwriter with
         respect to, any and all loss, damage, liability, cost or
         expense to which the Company or any underwriter and each
         person, if any, who controls the Company or such underwriter
         may become subject under the Securities Act or otherwise,
         insofar as such losses, damages, liabilities, costs or
         expenses are caused by any untrue or alleged untrue statement
         of any material fact contained in such registration statement,
         any prospectus contained therein or any amendment or
         supplement thereto, or arise out of or are based upon the
         omission or the alleged omission to state therein a material
         fact required to be stated therein or necessary to make the
         statements therein, in light of the circumstances in which
         they were made, not misleading, in each case to the extent,
         but only to the extent, that such untrue statement or alleged
         untrue statement or omission or alleged omission was so made
         in reliance upon and in strict conformity with written
         information furnished by such holder specifically for use in
         the preparation thereof.

                  (c)      Promptly after receipt by an indemnified
         party pursuant to the provisions of paragraph (a) or (b) of
         this Section 10.5 of notice of the commencement of any action
         involving the subject matter of the foregoing indemnity
         provisions such indemnified party will, if a claim thereof is
         to be made against the indemnifying party pursuant to the
         provisions of said paragraph (a) or (b), promptly notify the
         indemnifying party of the commencement thereof; but the
         omission to so notify the indemnifying party will not relieve
         it from any liability which it may have to any indemnified
         party otherwise than hereunder. In case such action is brought
         against any indemnified party and it notifies the indemnifying
         party of the commencement thereof, the indemnifying party
         shall have the right to participate in, and, to the extent
         that it may wish, jointly with any other

                                      -30-
<PAGE>

         indemnifying party similarly notified, to assume the defense
         thereof, with counsel satisfactory to such indemnified party,
         provided, however, if the defendants in any action include
         both the indemnified party and the indemnifying party and the
         indemnified party shall have reasonably concluded that there
         may be legal defenses available to it and/or other indemnified
         parties which are different from or additional to those
         available to the indemnifying party, or if there is a conflict
         of interest which would prevent counsel for the indemnifying
         party from also representing the indemnified party, the
         indemnified party or parties shall have the right to select
         separate counsel to participate in the defense of such action
         on behalf of such indemnified party or parties. After notice
         from the indemnifying party to such indemnified party of its
         election so to assume the defense thereof, the indemnifying
         party will not be liable to such indemnified party pursuant to
         the provisions of said paragraph (a) or (b) for any legal or
         other expense subsequently incurred by such indemnified party
         in connection with the defense thereof other than reasonable
         costs of investigation, unless (i) the indemnified party shall
         have employed counsel in accordance with the proviso of the
         preceding sentence, (ii) the indemnifying party shall not have
         employed counsel satisfactory to the indemnified party to
         represent the indemnified party within a reasonable time after
         the notice of the commencement of the action, or (iii) the
         indemnifying party has authorized the employment of counsel
         for the indemnified party at the expense of the indemnifying
         party.

         11.      Default.

                  11.1     Events of Default. Each of the following events shall
be an event of default (an "Event of Default") for purposes of this Agreement:

                  (a)      if the Company or any Subsidiary becomes
         insolvent or bankrupt, or admits in writing its inability to
         pay its debts as they mature, or makes an assignment for the
         benefit of creditors, or ceases doing business as a going
         concern, or the Company or any Subsidiary applies for or
         consents to the appointment of a trustee or receiver for the
         Company or any Subsidiary, or for the major part of the
         property of either; or

                  (b)      if a trustee or receiver is appointed for
         the Company or any Subsidiary or for the major part of the
         property of either and the order of such appointment is not
         discharged, vacated or stayed within 30 days after such
         appointment; or

                  (c)      if any judgment, writ or warrant of
         attachment or of any similar process in an amount in excess of
         $50,000 shall be entered or filed against the Company or any
         Subsidiary or against any of the property or assets of either
         and remains unpaid, unvacated, unbonded or unstayed for a
         period of 30 days; or

                  (d)      if an order for relief shall be entered in
         any Federal bankruptcy proceeding in which the Company or any
         Subsidiary is the debtor; or if bankruptcy,

                                      -31-
<PAGE>

         reorganization, arrangement, insolvency, or liquidation
         proceedings, or other proceedings for relief under any
         bankruptcy or similar law or laws for the relief of debtors,
         are instituted by or against the Company or any Subsidiary
         and, if instituted against the Company or any Subsidiary, are
         consented to or, if contested by the Company or the
         Subsidiary, are not dismissed by the adverse parties or by an
         order, decree or judgment within 30 days after such
         institution; or

                  (e)      if the Company or any Subsidiary shall
         default in any material respect in the due and punctual
         performance of any covenant or agreement in any note, bond,
         indenture, loan agreement, note agreement, mortgage, security
         agreement or other instrument evidencing or related to
         Indebtedness for Borrowed Money, and such default shall
         continue for more than the period of notice and/or grace, if
         any, therein specified and shall not have been waived; or

                  (f)      (i) if any representation or warranty made
         by or on behalf of the Company in this Agreement or in any
         certificate or schedule furnished or to be furnished pursuant
         hereto shall prove to have been untrue or incorrect in any
         material respect as of the date of this Agreement or as of the
         Closing Date, or (ii) if any report, certificate, financial
         statement or financial schedule or other instrument prepared
         or purported to be prepared by the Company or any officer of
         the Company furnished or delivered under or pursuant to this
         Agreement after the Closing Date shall prove to be untrue or
         incorrect in any material respect as of the date it was made,
         furnished or delivered; or

                  (g)      if default shall be made in the Company's
         obligation to redeem the Preferred Shares, as required by the
         Certificate, whether or not funds are legally available
         therefor; or

                  (h)      if default shall be made in the due and
         punctual performance or observance of any other term contained
         in this Agreement, and such default shall have continued for a
         period of 15 days after written notice thereof to the Company
         by the holder of any Preferred Shares.

                  11.2     Remedies Upon Events of Default. Upon the occurrence
of an Event of Default of the type specified in (i) paragraphs (a), (b), (d) or
(g) of Section 11.1, and (ii) paragraph (f) of Section 11.1 if the
representation or warranty at issue was made with reckless disregard for the
truth or falsity thereof, and so long as such Event of Default continues
unremedied, then, unless such Event of Default shall have been waived by the
holders of sixty percent of the Preferred Shares then outstanding, the holders
of sixty percent of the Preferred Shares then outstanding may require the
Company immediately to redeem all Preferred Shares then outstanding as provided
in Section 4(b) of the Certificate, and thereupon the Company shall be obligated
to redeem all Preferred Shares then outstanding. Upon the occurrence of any
Event of Default hereunder, unless such Event of Default shall have been waived
by the holders of sixty percent of the Preferred Shares then outstanding, the
holders of sixty percent of the Preferred Shares then outstanding shall be
entitled to designate a majority of the Board of Directors of the Company as
provided in Section 2(c) of the Certificate.

                                      -32-
<PAGE>

                  11.3     Notice of Defaults. When, to its knowledge, any Event
of Default has occurred or exists, the Company agrees to give written notice
within three business days of such Event of Default to the holders of all
outstanding Preferred Shares. If the holder of any Preferred Shares shall give
any notice or take any other actions in respect of a claimed Event of Default,
the Company will forthwith give written notice thereof to all other holders of
Preferred Shares at the time outstanding, describing such notice or action and
the nature of the claimed Event of Default.

                  11.4     Suits for Enforcement. In case any one or more Events
of Default shall have occurred and be continuing, unless such Events of Default
shall have been waived in the manner provided in Section 11.2 hereof, the
holders of sixty percent of the Preferred Shares may proceed to protect and
enforce their rights under Section 11 by suit in equity or action at law. It is
agreed that in the event of such action such holders of Preferred Shares shall
be entitled to receive all reasonable fees, costs and expenses incurred,
including without limitation such reasonable fees and expenses of attorneys
(whether or not litigation is commenced) and reasonable fees, costs and expenses
of appeals.

                  11.5     Remedies Cumulative. No right, power or remedy
conferred upon any holder of Preferred Shares shall be exclusive, and each such
right, power or remedy shall be cumulative and in addition to every other right,
power or remedy, whether conferred hereby or by any such security or now or
hereafter available at law or in equity or by statute or otherwise.

                  11.6     Remedies not Waived. No course of dealing between the
Company and any Purchaser or the holder of any Preferred Shares, and no delay in
exercising any right, power or remedy conferred hereby or by any such security
or now or hereafter existing at law or in equity or by statute or otherwise,
shall operate as a waiver of or otherwise prejudice any such right, power or
remedy; provided, however, that this Section 11.6 shall not be construed or
applied so as to negate the provisions and intent of any statute which is
otherwise applicable.

         12.      Termination of Certain Covenants. The obligations of the
Company under Sections 8 and 9 hereof, other than its obligations under Section
8.12 hereof, shall, notwithstanding any provisions hereof apparently to the
contrary, terminate and shall be of no further force or effect from and after
the date on which the Company completes a public offering of shares of Common
Stock under circumstances that would result in the mandatory conversion of the
Preferred Shares into Conversion Stock as set forth in the Certificate.

         13.      Definitions. Unless the context otherwise requires, the terms
defined in this Section 13 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. All accounting terms defined below shall,
except as otherwise expressly provided, be determined by reference to the
Company's books of account and in conformity with generally accepted accounting
principles as applied to such books of account in the opinion of the independent
certified public accountants selected by the Board of Directors of the Company
as required under the provisions of Section 8.2 hereof.

                                      -33-
<PAGE>

                  13.1     "Additional Shares of Common Stock" shall mean all
shares of Common Stock of the Company issued by the Company on or after the
Closing Date, except the Conversion Stock.

                  13.2     "Common Stock" shall mean the Company's authorized
common shares, any additional common shares which may be authorized in the
future by the Company, and any stock into which such common shares may hereafter
be changed, and shall also include stock of the Company of any other class which
is not preferred as to dividends or as to distributions of assets on
liquidation, dissolution or winding up of the Company over any other class of
stock of the Company, and which is not subject to redemption.

                  13.3     "Conversion Price" shall mean such price at which the
Preferred Shares are convertible into Common Stock pursuant to the Certificate.

                  13.4     "Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are at any time directly
or indirectly convertible into or exchangeable for Additional Shares of Common
Stock.

                  13.5     "Indebtedness for Borrowed Money" shall include only
indebtedness of the Company and its Subsidiaries incurred as the result of a
direct borrowing of money and shall not include any other indebtedness
including, but not limited to, indebtedness incurred with respect to trade
accounts.

                  13.6     "Junior Stock" shall mean Common Stock and all other
shares of stock of any other class of the Company at any time created and issued
ranking junior to the Preferred Shares with respect to the right to receive
dividends and/or the right to the distribution of assets upon liquidation,
dissolution or winding up of the Company.

                  13.7     "Permitted Liens" shall mean (a) liens for taxes and
assessments or governmental charges or levies not at the time due or in respect
of which the validity thereof shall currently be contested in good faith by
appropriate proceedings; and (b) liens in respect of pledges or deposits under
worker's compensation laws or similar legislation, carriers', warehousemen's,
mechanics', laborers' and materialmen's, landlord's and statutory and similar
liens, if the obligations secured by such liens are not then delinquent or are
being contested in good faith, and liens and encumbrances incidental to the
conduct of the business of the Company or any Subsidiary which were not incurred
in connection with the borrowing of money or the obtaining of advances or
credits and which do not in the aggregate materially detract from the value of
its property or materially impair the use thereof in the operation of its
business.

                  13.8     "Purchased Stock" shall mean the Preferred Shares,
the Conversion Stock and the stock or other securities of the Company issued in
a stock split or reclassification of, or a stock dividend or other distribution
on or in substitution or exchange for, or otherwise in connection with, any of
the foregoing securities, or in a merger or consolidation involving the Company
or a sale of all or substantially all of the Company's assets. Nothing in this
Section 13.8 shall be deemed to require the Company to register any Preferred
Shares, it being understood that

                                      -34-
<PAGE>

the registration rights granted by Section 10 hereof relate only to shares of
Common Stock and securities issued in substitution or exchange therefor.

                  13.9     "Senior Indebtedness" shall mean (a) the principal of
all Indebtedness for Borrowed Money of the Company and its Subsidiaries to
banks, insurance companies or other financial institutions, (b) the present
value of net minimum lease payments of all leases under which the Company or any
of its Subsidiaries is the lessee and which are required to be capitalized under
generally accepted accounting principles, (c) the principal of all indebtedness
of the Company or any of its Subsidiaries under installment purchase agreements,
and (d) the principal of all indebtedness of the Company or any of its
Subsidiaries to the owners of any real property leased by the Company for
leasehold improvements financed by such owners.

                  13.10    "Subsidiary" shall mean any corporation, association
or other business entity more than a majority (by number of votes) of the voting
stock of which is owned or controlled, directly or indirectly, by the Company or
by one or more of its Subsidiaries or both.

         14.      Consents; Waivers and Amendments. Except as otherwise
specifically provided herein, in each case in which approval of the Purchasers
is required by the terms of this Agreement, such requirement shall be satisfied
by a vote or the written consent of Purchasers owning at least sixty percent of
the Purchased Stock then owned by the Purchasers (for purposes of this Section
14, the holders of Preferred Shares shall have a number of votes equal to the
number of shares of Common Stock into which the Preferred Shares are then
convertible). With the written consent of Purchasers owning at least sixty
percent of the Purchased Stock then owned by the Purchasers, the obligations of
the Company under this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), and with the
same approval the Company may enter into a supplementary agreement for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of any supplemental agreement or
modifying in any manner the rights and obligations of the holders of the
Purchased Stock and of the Company; provided, however, that no such waiver or
supplemental agreement shall (a) amend the terms of the Preferred Shares as set
forth in the Certificate (any such amendment to the terms of the Preferred
Shares shall require the vote of the holders of the Preferred Shares called for
by the Certificate), or (b) reduce the aforesaid percentage of Purchased Stock,
the holders of which are required to consent to any waiver or supplemental
agreement, without the consent of all of the record holders of shares whose
rights would be affected by such reduction. Written notice of any such waiver,
consent or agreement of amendment, modification or supplement shall be given to
the record holders of the Purchased Stock who have not previously consented
thereto in writing.

         15.      Voting Agreement. Each of the Purchasers individually agrees
to vote all shares of Purchased Stock owned by such Purchaser in favor of the
election of Bahram Akradi to the Board of Directors of the Company so long as he
is Chief Executive Officer of the Company, including the circumstances described
in Section 2(c) of the Certificate. The parties intend that Bahram Akradi be a
third party beneficiary of the provisions contained in this Section 15.

         16.      Changes, Waivers, etc. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by a statement in writing signed by the

                                      -35-
<PAGE>

party against which enforcement of the change, waiver, discharge or termination
is sought, except to the extent provided in Section 14 hereof.

         17.      Payment of Fees and Expenses of Purchasers. Upon the
consummation of the sale of Preferred Shares anticipated by this Agreement or
upon failure by the Company to consummate such sales, the Company will pay the
reasonable out-of-pocket expenses incurred by the Purchasers in connection with
the transactions herein contemplated up to $14,000, including without limitation
the reasonable fees and out-of-pocket expenses of Faegre & Benson LLP for their
services as special counsel to the Purchasers in connection with the
transactions herein contemplated. The Company will also pay (a) all fees and
expenses incurred by the Purchasers with respect to any amendments or waivers
requested by the Company (whether or not the same become effective) under or in
respect of this Agreement or the agreements contemplated hereby, and (b) all
fees and expenses incurred by the Purchasers with respect to the enforcement of
the rights granted under this Agreement or the agreements contemplated hereby.

         18.      Understanding Among Purchasers. The determination by each of
the Purchasers to purchase Preferred Shares pursuant to this Agreement has been
made by such Purchaser independently of the other Purchasers, and independently
of any statements or opinions as to the advisability of such purchase or as to
the properties, business, prospects or condition (financial or otherwise) of the
Company which may have been made or given by the other Purchasers or by any
agent or employee of the other Purchasers. In addition, it is acknowledged by
each of the Purchasers that the other Purchasers have not acted as such
Purchaser's agent in connection with making its investment hereunder and that
the other Purchasers will not be acting as such Purchaser's agent in connection
with monitoring such Purchaser's investment hereunder.

         19.      Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
(i) hand delivered, (ii) mailed first-class postage prepaid, registered or
certified mail, (iii) delivered by overnight delivery service of recognized
reputation, or (iv) delivered by telefacsimile,

                  (a)      if to any holder of any Purchased Stock,
         addressed to such holder at its address as shown on the books
         of the Company, or at such other address as such holder may
         specify by written notice to the Company, or

                  (b)      if to the Company, addressed to the Company,
         6442 City West Parkway, Eden Prairie, Minnesota 55344,
         attention President, (612-947-0077) or to such other address
         as the Company may specify by written notice to the
         Purchasers,

and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given (w) upon delivery,
if delivered personally, (x) five days after deposit, if sent by mail, (y) the
day after delivery to an overnight delivery service, or (z) upon receipt of
electronic confirmation of receipt, if delivered by telefacsimile.

         20.      Survival of Representations and Warranties, etc. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by the Purchasers
or on their behalf, and the sale and purchase of the Preferred

                                      -36-
<PAGE>

Shares and payment therefor. All statements contained in any certificate or
schedule delivered by or on behalf of the Company pursuant hereto (other than
legal opinions) shall constitute representations and warranties by the Company
hereunder.

         21.      Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not, and, in particular, shall be binding upon, inure to the
benefit of and be enforceable by and against the holder or holders at the time
of any of the Purchased Stock, provided that if such holder or holders is not a
Purchaser, such holder or holders acquired such Purchased Stock in compliance
with Section 4 of this Agreement.

         22.      Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.

         23.      Choice of Law. It is the intention of the parties that the
laws of Minnesota, other than the choice of law provisions thereof, shall govern
the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties.

         24.      Counterparts. This Agreement may be executed concurrently in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

                                      -37-
<PAGE>

         If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract among you and
the undersigned.

                                          Very truly yours,

                                          FCA, LTD.

                                          By___________________________________
                                            Its________________________________

The foregoing Agreement is hereby
accepted as of the date first above written.

NORWEST EQUITY PARTNERS V,
A MINNESOTA LIMITED PARTNERSHIP

By:  ITASCA PARTNERS V
     Its: General Partner

By_____________________________________
     Its_______________________________

<PAGE>

PIPER JAFFRAY INVESTORS--FUND XI

By:  THE PIPER FUND--FUND XI,
     Its: Managing Partner

By___________________________________________________
     _______________________________________________
      Managing Director of Piper Jaffray Inc.,
      as Managing Partner of
      The Piper Fund--Fund XI

<PAGE>

By ________________________________
   Ann Tillotson

<PAGE>

By ________________________________
   Brent Rystrom

<PAGE>

                             PURCHASER CERTIFICATION

         The undersigned, in connection with the Stock Purchase Agreement dated
May 7, 1996 among FCA, Ltd. (the "Company") and certain Purchasers listed in
Schedule A thereto, hereby makes each of the representations contained in
Section 6 of such Stock Purchase Agreement. The undersigned further represents
either (a) that he/she/it qualifies as an "accredited investor", as that term is
used in Regulation D promulgated under the Securities Act of 1933 (the "Act"),
because (check one):

(1) _____         it is a bank as defined in Section 3(a)(2) of the Act, or a
                  savings and loan association or other institution as defined
                  in Section 3(a)(5) of the Act, whether acting in its
                  individual or fiduciary capacity; a broker or dealer
                  registered pursuant to Section 15 of the Securities Exchange
                  Act of 1934; an insurance company as defined in Section 2(13)
                  of the Act; an investment company registered under the
                  Investment Company Act of 1940 or a business development
                  company as defined in Section 2(a)(48) of that act; a Small
                  Business Investment Company licensed by the U.S. Small
                  Business Administration under Section 301(c) or (d) of the
                  Small Business Investment Act of 1958; a plan established and
                  maintained by a state, its political subdivisions, or any
                  instrumentality of a state or its subdivisions, for the
                  benefit of its employees, if such plan has total assets in
                  excess of $5,000,000; an employee benefit plan within the
                  meaning of Title I of the Employee Retirement Income Security
                  Act of 1974, if the investment decision is made by a plan
                  fiduciary, as defined in Section 3(21) of such act, which is
                  either a bank, savings and loan association, insurance company
                  or registered investment adviser, or if the employee benefit
                  plan has total assets in excess of $5,000,000 or, if a
                  self-directed plan, with investment decisions made solely by
                  persons that are accredited investors;

(2) _____         it is a private business development company as defined in
                  Section 202(a)(22) of the Investment Advisers Act of 1940;

(3) _____         it is an organization described in Section 501(c)(3) of the
                  Internal Revenue Code, a corporation, Massachusetts or similar
                  business trust, or partnership, not formed for the specific
                  purpose of acquiring the securities offered, with total assets
                  in excess of $5,000,000;

(4) _____         he or she is a director or executive officer of the Company;

(5) _____         he or she is an individual who has an individual net worth, or
                  joint net worth with his or her spouse, in excess of
                  $1,000,000;

(6) _____         he or she is an individual who had an income in excess of
                  $200,000 in each of the two most recent years or joint income
                  with his or her spouse in excess of $300,000 in each of those
                  years and who reasonably expects an income in excess of the
                  same level in the current year;

(7) _____         it is a trust with total assets in excess of $5,000,000, not
                  formed for the specific purpose of acquiring the securities
                  offered, whose purchase is directed by a sophisticated person
                  as described in Rule 506(b)(2)(ii) under the Act; or

(8) _____         it is an entity, all of whose equity owners are accredited
                  investors.

                                         _______________________________________

                                         _______________________________________

<PAGE>

<TABLE>
<CAPTION>
                                            Number of
                                         Preferred Shares         Aggregate
Names and Addresses of Purchasers        to be Purchased       Purchase Price
---------------------------------        ----------------      --------------
<S>                                      <C>                   <C>
Norwest Equity Partners V                    905,660           $ 5,999,997.60
2800 Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN  55402-3988

Piper Jaffray Investors--Fund XI              45,283                  300,000
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN  55402

Ann Tillotson                                  3,772                24,989.50

Brent Rystrom                                  3,772                24,989.50
                                             -------           --------------
                                             958,487           $ 6,349,976.60
                                             =======           ==============
</TABLE>

<PAGE>

              LIFE TIME FITNESS, INC. (FORMERLY KNOWN AS FCA, LTD.)

                     FIRST AMENDMENT AND WAIVER RELATING TO
                            STOCK PURCHASE AGREEMENT
                                DATED MAY 7, 1996

                                                                December 9, 1998

To Each of the Persons (the "Purchasers")
   Named in Schedule A to the Stock
   Purchase Agreement dated May 7, 1996

Ladies and Gentlemen:

         Each of you is named as a Purchaser in the Stock Purchase Agreement
dated May 7, 1996 among FCA, Ltd. (now known as LIFE TIME FITNESS, Inc.), a
Minnesota corporation (the "Company"), and the Purchasers named therein (the
"1996 Agreement"), relating to the sale by the Company to such Purchasers of
shares of series A convertible preferred stock (the "Series A Preferred Stock").

         The Company has entered into a Stock Purchase Agreement dated December
8, 1998 (the "1998 Agreement") relating to the sale by the Company to the
Purchasers named therein of 1,000,000 shares of series B convertible preferred
stock (the "Series B Preferred Stock") and Warrants to purchase 142,857 shares
of Common Stock of the Company (the "1998 Warrants"). Section 7A.12 of the 1998
Agreement provides that it is a condition to closing the transaction
contemplated by the 1998 Agreement that the 1996 Agreement be amended and the
rights of first refusal of the Purchasers under the 1996 Agreement be waived as
provided below.

         The shares of Common Stock into which the Series A Preferred Stock is
convertible are hereinafter sometimes referred to as the "Conversion Stock"; the
shares of Common Stock into which the Series B Preferred Stock is convertible
are hereinafter sometimes referred to as the "Series B Conversion Stock"; the
shares of Common Stock issuable upon exercise of the 1998 Warrants are
hereinafter sometimes referred to as the "1998 Warrant Stock"; and the shares of
Series A Preferred Stock and Series B Preferred Stock are hereinafter
collectively referred to as the "Preferred Stock".

         All defined terms used herein which are not otherwise defined herein
shall have the meanings set forth in the 1996 Agreement.

<PAGE>

         1.       Amendments to the 1996 Agreement. In connection with and as an
inducement to the closing of the transactions contemplated by the 1998
Agreement, each of you by executing this amendment and waiver (the "Amendment")
hereby consents to the following amendments to the 1996 Agreement, such
amendments to be effective from and after the Closing referred to in the 1998
Agreement:

         A.       The term "Certificate", wherever used in the 1996 Agreement,
shall be amended to mean the Statement of Designation of Rights, Preferences and
Limitations of Series A Convertible Preferred Stock as amended and restated in
connection with the issuance of the Series B Preferred Stock and the 1998
Agreement.

         B.       Section 8.2 of the 1996 Agreement is hereby amended in its
entirety as follows:

         8.2      Books of Account and Reserves. The Company will, and will
cause each of its Subsidiaries to, keep books of record and account in which
full, true and correct entries are made of all of its and their respective
dealings, business and affairs, in accordance with generally accepted accounting
principles. The Company will employ certified public accountants selected by the
Board of Directors of the Company who are "independent" within the meaning of
the accounting regulations of the Commission and who are one of the so-called
"Big Five" accounting firms, and have annual audits made by such independent
public accountants in the course of which such accountants shall make such
examinations, in accordance with generally accepted auditing standards, as will
enable them to give such reports or opinions with respect to the financial
statements of the Company and its Subsidiaries as will satisfy the requirements
of the Commission in effect at such time with respect to certificates and
opinions of accountants.

         C.       Section 8.15 of the 1996 Agreement is hereby amended in its
entirety as follows:

         8.15     Rule 144A. The Company agrees that, upon the request of any
holder of Preferred Shares, Conversion Stock, Warrants or Warrant Stock, or any
prospective purchaser of Preferred Shares, Conversion Stock, Warrants or Warrant
Stock, the Company shall promptly provide (but in any case within 15 days of a
request) to such holder or potential purchaser the following information: (a) a
brief statement of the nature of the business of the Company and its
Subsidiaries and the products and services they offer; (b) the Company's most
recent consolidated balance sheets and statement of operations and statement of
shareholders' equity and similar financial statements for such part of the two
preceding fiscal years prior to such request as the Company has been in
operation (such financial information shall be audited, to the extent reasonably
available); and (c) such other information about the Company, its Subsidiaries
and their business, financial condition and results of operations as the
requesting person shall request in order to comply with Rule 144A promulgated
under the Securities Act and the antifraud provisions of the federal and state
securities laws.

         The Company hereby represents and warrants to any such requesting
person that the information provided by the Company pursuant to this Section
8.15 will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.

                                       2
<PAGE>

         D.       Section 8.16 of the 1996 Agreement is hereby amended in its
entirety as follows:

         8.16     Compliance. So long as any Purchaser that is an SBIC holds any
Preferred Shares (i) without the prior written consent of such Purchaser, the
Company shall not use the proceeds from the sale of the Preferred Shares and the
Warrants issued and sold pursuant to this Agreement for any purpose other than
as set forth in Section 8.10 above, (ii) the Company shall not use the proceeds
from the sale of the Preferred Shares and the Warrants issued and sold pursuant
to this Agreement for any prohibited purposes outlined in the second sentence of
Section 5.27, (iii) the Company shall not change its business activity in any
manner which, by reason of such change in business activity, would cause the
Company to fall within a different SIC Code and thereby render the Company
ineligible as a "small business concern" under the SBIA and (iv) the Company
shall at all times comply with the non-discrimination requirements of 13 CFR
Parts 112, 113 and 117. The Company shall at all times permit any Purchaser that
is an SBIC and, if necessary, a representative of the Small Business
Administration, access to the Company's records and the Company shall provide
such information as such Purchaser that is an SBIC may request in order to
verify compliance with this Section 8.16 including, without limitation, an
officer's certificate indicating such compliance. The Company hereby
acknowledges that (A) any diversion of the proceeds from their intended use as
specified in Section 5.27, Section 8.10 and this Section 8.16, (B) the Company's
becoming ineligible as a "small business concern" by reason of a change in the
Company's business activity within one year from the Closing Date or (C) failure
to provide the information specified in Section 8.3(e) and 8.3(f), shall entitle
any Purchaser that is an SBIC, upon demand, and in addition to any other
remedies that may exist, to immediate rescission of this Agreement and repayment
in full of the funds invested hereunder as contemplated by 13 CFR Section
107.760 and 13 CFR Section 107.800.

         E.       Section 8.17 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "8.17    Right of First Refusal. If the Company should decide to issue
and sell additional shares of any capital stock of the Company or any warrants,
securities convertible into capital stock of the Company or other rights to
subscribe for or to purchase any capital stock of the Company, other than (a)
shares of Common Stock sold to the public pursuant to a registration statement
filed under the Securities Act, if such offering is underwritten on a firm
commitment basis, (b) shares of Common Stock awarded or issued upon the exercise
of options granted pursuant to employee and consultant benefit plans adopted by
the Company, and the grant of such options themselves, provided that the
aggregate number of shares thus awarded and issued and issuable pursuant to the
exercise of all such options shall not be in excess of 883,000 (appropriately
adjusted to reflect stock splits, stock dividends, reorganizations,
consolidations and similar changes hereafter effected), (c) shares of Common
Stock issued upon conversion of the Preferred Stock or exercise of the 1998
Warrants, (d) dividends payable in Common Stock, and (e) warrants issued in
connection with bona fide financing transactions (including, without limitation,
equipment financing arrangements and bank lines of credit) with conventional
institutional lenders entered into in the ordinary course of their business and
shares of Common Stock issued upon exercise of such warrants (provided that the
aggregate number of shares thus issued on exercise and covered by unexercised
warrants shall not be in excess of 150,000 (appropriately adjusted to reflect
stock splits, stock dividends,

                                       3
<PAGE>

reorganizations, consolidations and similar changes hereafter effected)) (all
such capital stock, warrants, securities convertible into capital stock and
other rights, other than securities referred to in (a), (b), (c), (d) and (e)
above, being hereinafter sometimes collectively referred to as "Additional
Securities"), the Company shall first offer to sell to each of the Purchasers,
upon the same terms and conditions as the Company is proposing to issue and sell
such Additional Securities to others, such Purchaser's pro rata share (as
defined below) of such Additional Securities. Such offer shall be made by
written notice given to each such Purchaser and specifying therein the amount of
the Additional Securities being offered, the purchase price and other terms of
such offer. Such Purchaser shall have a period of 45 days from and after the
effective date of such notice within which to accept such offer. If a Purchaser
elects to accept such offer in whole or in part, such Purchaser shall so accept
by written notice to the Company given within such 45-day period. If a Purchaser
fails to accept such offer in whole or in part within such 45-day period, any of
such Additional Securities not purchased by such Purchaser pursuant to such
offer may be offered for sale to others by the Company for a period of 120 days
from the last day of such 45-day period, but only on terms and conditions no
more favorable to the third party purchasers than those set forth in the initial
offer to such Purchaser, free and clear of the restrictions imposed by this
Article 8.17.

         For purposes of the previous paragraph, a Purchaser's "pro rata share"
is the number of shares of Additional Securities (rounded to the nearest whole
share) as is equal to the product of (a)(i) the number of shares of Common Stock
issued, or issuable upon the exercise or conversion of rights, options or other
convertible securities without the payment of any additional cash consideration
or with the payment of a nominal cash consideration, as the case may be
(collectively, "Fully Paid Securities"), to such Purchaser immediately prior to
the issuance of the Additional Securities being offered divided by (ii) the
total number of Fully Paid Securities issued or issuable by the Company
immediately prior to the issuance of the Additional Securities, multiplied by
(b) the entire offering of Additional Securities.

         F.       Section 8.19 of the 1996 Agreement is hereby deleted in its
entirety from the 1996 Agreement.

         G.       Section 9.2 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "9.2     Future Registration Rights. Except for any registration
expressly permitted by Section 10 hereof and the 1998 Agreement, the Company
will not, without the prior approval of the Purchasers, agree with the holders
of any securities issued or to be issued by the Company to register such
securities under the Securities Act nor will it grant any incidental
registration rights."

         H.       Subparagraph (e) of Section 9.3 of the 1996 Agreement is
hereby amended in its entirety as follows:

                                       4
<PAGE>

                  (e)      except for securities excepted from the definition of
         Additional Securities by clauses (a), (b), (c), (d) and (e) of the
         first paragraph of Section 8.17 hereof, issue (A) any additional
         capital stock of the Company of any class other than Common Stock, or
         securities convertible into any such class or (B) any options, warrants
         or other rights to purchase capital stock of the Company of any class
         other than Common Stock, or securities convertible into shares of any
         such class; or

         I.       Section 10.2 of the 1996 Agreement is hereby amended and
restated in its entirety as follows:

         10.2     Incidental Registration. Each time the Company shall determine
         to proceed with the actual preparation and filing of a registration
         statement under the Securities Act in connection with the proposed
         offer and sale for cash of any of its securities by it or any of its
         security holders (other than registration statements on forms that do
         not permit the inclusion of shares by the Company's security holders),
         the Company will give written notice of its determination to all record
         holders of Purchased Stock not theretofore registered under the
         Securities Act and sold. Upon the written request of a record holder of
         any shares of Purchased Stock given within 30 days after the date of
         any such notice from the Company, the Company will, except as herein
         provided, cause all such shares of Purchased Stock, the record holders
         of which have so requested registration thereof, to be included in such
         registration statement, all to the extent requisite to permit the sale
         or other disposition by the prospective seller or sellers of the
         Purchased Stock to be so registered; provided, however, that nothing
         herein shall prevent the Company from, at any time, abandoning or
         delaying any such registration initiated by it; provided further,
         however, that if the Company determines not to proceed with a
         registration after the registration statement has been filed with the
         Commission and the Company's decision not to proceed is primarily based
         upon the anticipated public offering price of the securities to be sold
         by the Company, the Company shall promptly complete the registration
         for the benefit of those selling security holders who wish to proceed
         with a public offering of their securities and who bear all expenses in
         excess of $25,000 incurred by the Company as the result of such
         registration after the Company has decided not to proceed.
         Notwithstanding the foregoing, the Company shall not be in default of
         its obligation to include the Purchased Stock in a registration if such
         registration is being made at the request of the holders of Series B
         Preferred Stock, Series B Conversion Stock, the 1998 Warrants and the
         1998 Warrant Stock pursuant to the 1998 Agreement, and the Purchased
         Stock is excluded from such registration pursuant to the terms of the
         1998 Agreement. If any registration pursuant to this Section 10.2 shall
         be underwritten in whole or in part, the Company may require that the
         Purchased Stock requested for inclusion pursuant to this Section 10.2
         be included in the underwriting on the same terms and conditions as the
         securities otherwise being sold through the underwriters. If in the
         good faith judgment of the managing underwriter of such public offering
         the inclusion of all of the Purchased Stock originally covered by a
         request for registration and all other Securities originally covered by
         a request for registration pursuant to the 1998 Agreement would reduce
         the number of shares to be offered by the Company or interfere with the
         successful marketing of the shares of stock offered by the Company, the
         number of shares of Purchased Stock and such other

                                       5
<PAGE>

         Securities otherwise to be included in the underwritten public offering
         may be reduced pro rata (by number of shares) among the holders thereof
         requesting such registration. Those shares of Purchased Stock which are
         thus excluded from the underwritten public offering shall be withheld
         from the market by the holders thereof for a period, not to exceed 90
         days, which the managing underwriter reasonably determines is necessary
         in order to effect the underwritten public offering.

         J.       Subparagraphs (a), (f), (g) and (h) of Section 11.1 of the
1996 Agreement are hereby amended in their entirety as follows:

                  "(a)     if the Company or any Subsidiary becomes insolvent or
         bankrupt, or admits in writing its inability to pay its debts as they
         mature, or makes an assignment for the benefit of creditors, or ceases
         doing business as a going concern (except that a Subsidiary may cease
         to do business if approved in advance by the Board of Directors of the
         Company), or the Company or any Subsidiary applies for or consents to
         the appointment of a trustee or receiver for the Company or any
         Subsidiary, or for the major part of the property of either; or

                                      ****

                  "(f)     (i) if any representation or warranty made by or on
         behalf of the Company in this Agreement or in any certificate or
         schedule furnished pursuant hereto shall prove to have been untrue or
         incorrect in any material respect as of the date of this Agreement or
         as of the Closing Date, (ii) if any representation or warranty made by
         or on behalf of the Company in the 1998 Agreement or in any certificate
         or schedule furnished pursuant to any term thereof shall prove to be
         untrue or incorrect in any material respect as of the date of the 1998
         Agreement or the Closing Date thereunder, (iii) if any report,
         certificate, financial statement or financial schedule or other
         instrument prepared by the Company or any officer of the Company
         furnished or delivered under or pursuant to this Agreement after the
         Closing Date hereunder shall prove to be untrue or incorrect in any
         material respect as of the date it was made, furnished or delivered, or
         (iv) if any report, certificate, financial statement or financial
         schedule or other instrument prepared by the Company or any officer of
         the Company furnished or delivered under or pursuant to the 1998
         Agreement after the Closing Date thereunder shall prove to be untrue or
         incorrect in any material respect as of the date it was made, furnished
         or delivered; or

                  (g)      if default shall be made in the Company's obligation
         to redeem the Preferred Stock, as required by the applicable
         Certificate of Designation, whether or not funds are legally available
         therefor; or

                  (h)      if default shall be made in the due and punctual
         performance or observance of any other term contained in this Agreement
         or the 1998 Agreement, and such default shall have continued for a
         period of 15 days after written notice thereof to the Company by the
         holder of any Preferred Stock."

                                       6
<PAGE>

         K.       Section 11.2 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "11.2    Remedies Upon Events of Default. Upon the occurrence of an
Event of Default of the type specified in (i) paragraphs (a), (b), (d) or (g) of
Section 11.1, and (ii) paragraph (f) of Section 11.1 if the representation or
warranty at issue was made with reckless disregard for the truth or falsity
thereof, and so long as such Event of Default continues unremedied, then, unless
such Event of Default shall have been waived by the holders of sixty percent of
the Preferred Stock then outstanding, the holders of sixty percent of the
Preferred Stock then outstanding may require the Company immediately to redeem
all Preferred Stock then outstanding as provided in Section 4(b) of the
Certificate or the Statement of Designation of Rights, Preferences and
Limitations of Series B Convertible Preferred Stock (the "Series B
Certificate"), as the case may be, and thereupon the Company shall be obligated
to redeem all Preferred Stock then outstanding. Upon the occurrence of any Event
of Default hereunder, unless such Event of Default shall have been waived by the
holders of sixty percent of the Preferred Stock then outstanding, the holders of
sixty percent of the Preferred Stock then outstanding shall be entitled to
designate a majority of the Board of Directors of the Company as provided in
Section 2(c) of the Certificate or the Series B Certificate, as the case may
be."

         L.       Section 12 of the 1996 Agreement is hereby amended in its
entirety as follows:

         12.      Termination of Certain Covenants. The obligations of the
Company under Sections 8 and 9 hereof and the obligations of the Purchasers
under Section 15 hereof, other than its obligations under Section 8.12 hereof,
shall, notwithstanding any provisions hereof apparently to the contrary,
terminate and shall be of no further force or effect from and after the date on
which the Company completes a public offering of shares of Common Stock under
circumstances that would result in the mandatory conversion of the Preferred
Shares into Conversion Stock as set forth in the Certificate.

         M.       Section 13.1 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "13.1    "Additional Shares of Common Stock" shall mean all shares of
Common Stock of the Company issued by the Company on or after the Closing Date,
except the Conversion Stock, the 1998 Warrant Stock and the Series B Conversion
Stock."

         N.       Section 13.17 is hereby added to the 1996 Agreement as
follows:

         "13.17   "Securities" shall mean the Preferred Shares, the Conversion
Stock, the 1998 Warrants, the 1998 Warrant Stock, the Series B Preferred Stock
and the Series B Conversion Stock, and any stock or other securities of the
Company issued in a stock split or reclassification of, or a stock dividend or
other distribution on or in substitution or exchange for, or otherwise in
connection with, any of the foregoing securities, or in a merger or
consolidation involving the Company or a sale of all or substantially all of the
Company's assets."

         O.       Section 14 of the 1996 Agreement shall be amended in its
entirety as follows:

         "14.     Consents; Waivers and Amendments. Except as otherwise
specifically provided herein, in each case in which approval of the Purchasers
is required by the terms of this Agreement, such requirement shall be satisfied
by a vote or the written consent of Purchasers under this

                                       7
<PAGE>

Agreement and the 1998 Agreement owning at least sixty percent of the Securities
then owned by such Purchasers (for purposes of this Section 14, the holders of
Preferred Stock shall have a number of votes equal to the number of shares of
Common Stock into which the Preferred Stock is then convertible, and the holders
of the 1998 Warrants shall have a number of votes equal to the number of shares
of Common Stock purchasable upon exercise of the 1998 Warrants). With the
written consent of the Purchasers owning at least sixty percent of the
Securities then owned by Purchasers, the obligations of the Company under this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), and with the same approval the Company may
enter into a supplementary agreement for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of any supplemental agreement or modifying in any manner the rights and
obligations of the holders of the Securities and of the Company; provided,
however, that no such waiver or supplemental agreement shall (a) amend the terms
of the Preferred Shares as set forth in the Certificate (any such amendment to
the terms of the Preferred Shares shall require the vote of the holders of the
shares of Preferred Shares called for by the Certificate), or (b) reduce the
aforesaid percentage of Securities, the holders of which are required to consent
to any waiver or supplemental agreement, without the consent of all of the
record holders of Securities whose rights would be affected by such reduction,
or (c) amend the basic terms of any 1998 Warrant, the holder of which does not
consent thereto. Written notice of any such waiver, consent or agreement of
amendment, modification or supplement shall be given to the record holders of
the Securities who have not previously consented thereto in writing."

         P.       Subparagraph (b) of Section 19 is hereby amended in its
entirety as follows:

                  (b)      if to the Company, addressed to the Company, 6442
         City West Parkway, Eden Prairie, Minnesota 55344, attention Chief
         Financial Officer, (612-947-0077) or to such other address as the
         Company may specify by written notice to the Purchasers.

         2.       Waiver of Right of First Refusal. In connection with the
closing of the transactions contemplated by the 1998 Agreement, each of you by
executing this Amendment hereby waives the Company, compliance with the
requirements of, and any and all of your rights under, Section 8.17 of the 1996
Agreement with respect to, and only with respect to, the issuance and sale of
the shares of Series B Preferred Stock, the Series B Conversion Stock, the 1998
Warrants and the 1998 Warrant Stock.

         3.       Effect of Amendment. Except as amended hereby, the 1996
Agreement shall continue in full force and effect in accordance with its terms.

                            [SIGNATURE PAGES FOLLOW]

                                       8
<PAGE>

         If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract among you and
the undersigned.

                                   Very truly yours,

                                   LIFE TIME FITNESS, INC. (formerly FCA, Ltd.)

                                   By_____________________________________
                                     Its__________________________________

The foregoing Agreement is hereby accepted
as of the date first above written.

NORWEST EQUITY PARTNERS V, LP
 A MINNESOTA LIMITED PARTNERSHIP

By: ITASCA PARTNERS V, LLP
  Its: General Partner

By_____________________________________
  Its__________________________________

                     [AMENDMENT TO STOCK PURCHASE AGREEMENT]

<PAGE>

PIPER JAFFRAY INVESTORS-FUND XI, L.P.

By: THE PIPER FUND-FUND XI, L.P.
  Its: Managing Partner

By____________________________________________________
  Managing Director of Piper Jaffray Inc., as
   Managing Partner of the Piper Fund-Fund XI, L.P.

                     [AMENDMENT TO STOCK PURCHASE AGREEMENT]

<PAGE>

____________________________________
Ann Tillotson

                     [AMENDMENT TO STOCK PURCHASE AGREEMENT]

<PAGE>

____________________________________
Brent Rystrom

                     [AMENDMENT TO STOCK PURCHASE AGREEMENT]

<PAGE>

              LIFE TIME FITNESS, INC. (FORMERLY KNOWN AS FCA, LTD.)

                     SECOND AMENDMENT AND WAIVER RELATING TO
                            STOCK PURCHASE AGREEMENT
                                DATED MAY 7, 1996

                                                                 August 16, 2000

To Each of the Persons (the "Purchasers")
   Named in Schedule A to the Stock
   Purchase Agreement dated May 7, 1996

Ladies and Gentlemen:

         Each of you is named as a Purchaser in the Stock Purchase Agreement
dated May 7, 1996 and amended by the First Amendment and Waiver relating to
Stock Purchase Agreement dated May 7, 1996 (the "First Amendment") among FCA,
Ltd. (now known as LIFE TIME FITNESS, Inc.), a Minnesota corporation (the
"Company"), and the Purchasers named therein (the "1996 Agreement"), relating to
the sale by the Company to such Purchasers of shares of series A convertible
preferred stock (the "Series A Preferred Stock").

         The Company is a party to a Stock Purchase Agreement dated December 8,
1998 (the "1998 Agreement") relating to the sale by the Company to the
Purchasers named therein of 1,000,000 shares of series B convertible preferred
stock (the "Series B Preferred Stock") and warrants to purchase shares of common
stock of the Company (the "1998 Warrants"). The Company has entered into a Stock
Purchase Agreement dated August 16, 2000 (the "2000 Agreement") relating to the
sale by the Company to the Purchasers named therein of 4,500,000 shares of
series C convertible preferred stock (the "Series C Preferred Stock"). Section
7A.12 of the 2000 Agreement provides that it is a condition to closing the
transaction contemplated by the 2000 Agreement that the 1996 Agreement be
amended and the rights of first refusal of the Purchasers under the 1996
Agreement be waived as provided below.

         The shares of Common Stock into which the Series A Preferred Stock is
convertible are hereinafter sometimes referred to as the "Conversion Stock"; the
shares of Common Stock into which the Series B Preferred Stock is convertible
are hereinafter sometimes referred to as the "Series B Conversion Stock"; the
shares of Common Stock into which the Series C Preferred Stock is convertible
are hereinafter sometimes referred to as the "Series C Conversion Stock"; the
shares of Common Stock issuable upon exercise of the 1998 Warrants are
hereinafter sometimes referred to as the "1998 Warrant Stock"; and the shares of
Series A Preferred Stock, Series B Preferred Stock (as such term is defined in
the 2000 Agreement) and Series C Preferred Stock are hereinafter collectively
referred to as the "Preferred Stock".

<PAGE>

         All defined terms used herein which are not otherwise defined herein
shall have the meanings set forth in the 1996 Agreement.

         1.       Amendments to the 1996 Agreement. In connection with and as an
inducement to the closing of the transactions contemplated by the 2000
Agreement, each of you by executing this amendment and waiver (the "Amendment")
hereby consents to the following amendments to the 1996 Agreement, such
amendments to be effective from and after the Closing referred to in the 2000
Agreement:

         A.       The term "Certificate", wherever used in the 1996 Agreement,
shall be amended to mean the Statement of Designation of Rights, Preferences and
Limitations of Series A Convertible Preferred Stock as amended and restated in
connection with the issuance of the Series C Preferred Stock and the 2000
Agreement.

         B.       Section 5.23(b) of the 1996 Agreement is hereby amended in its
entirety as follows:

         "(b) To the Company's knowledge, no Hazardous Substances have ever been
buried, spilled, leaked, discharged, emitted, generated, stored, used or
released, and no Hazardous Substances are now present, in, on, or under the Real
Estate except for immaterial quantities stored or used by the Company in the
ordinary course of its business and in accordance with all applicable
Environmental Laws."

         C.       Section 5.23(c) of the 1996 Agreement is hereby amended in its
entirety as follows:

         "(c) To the Company's knowledge, the Real Estate is not being used, and
the Real Estate has never been used, in connection with the business of
manufacturing, storing or transporting Hazardous Substances, and no RCRA
Hazardous Wastes have been treated, stored or disposed of on the Real Estate."

         D.       Section 5.23(d) of the 1996 Agreement is hereby amended in its
entirety as follows:

         "(d) To the Company's knowledge, there are not now and never have been
any underground or aboveground storage tanks or other containment facilities of
any kind on the Real Estate which contain or ever did contain any Hazardous
Substances."

         E.       Section 5.23(f) of the 1996 Agreement is hereby amended in its
entirety as follows:

         "(f) The Company has delivered to the Purchasers true and complete
copies of all material reports, authorizations, permits, licenses, disclosures
and other documents in its possession, custody or control describing or relating
in any way to the Real Estate which describe, mention or discuss the status
thereof with respect to any Environmental Law."

         F.       Section 8.9 of the 1996 Agreement is hereby amended in its
entirety as follows:

                                       2
<PAGE>

         "8.9     Directors' and Shareholders' Meetings. The holders of the
Preferred Shares shall have the right to elect directors of the Company as set
forth in the Certificate.

         The Company shall reimburse such holders of Preferred Shares for the
reasonable out-of-pocket expenses incurred by them or the directors elected by
them pursuant to the Certificate in connection with the attending of meetings by
their director designees or carrying out any other duties by such director
designees that may be specified by the Board of Directors; shall pay such
director designees the same directors' fees paid to the other investor-designee
non-employee directors (other than Lois E. Quam) of the Company (it being
understood that the Company's stock option plan may provide for stock option
grants to only those non-employee directors who, together with their affiliates,
do not own more than one percent of outstanding capital stock of the Company);
and shall maintain as part of its Articles of Incorporation or Bylaws a
provision for the indemnification of its directors to the full extent permitted
by law.

         The Company agrees, as a general practice, to hold a meeting of its
Board of Directors at least once every three months, and during each year to
hold its annual meeting of shareholders on or approximately on the date provided
in its Bylaws."

         G.       Section 8.17 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "8.17    Right of First Refusal. If the Company should decide to issue
and sell additional shares of any capital stock of the Company or any warrants,
securities convertible into capital stock of the Company or other rights to
subscribe for or to purchase any capital stock of the Company, other than (a)
shares of Common Stock sold to the public pursuant to a registration statement
filed under the Securities Act, if such offering is underwritten on a firm
commitment basis, (b) shares of Common Stock awarded or issued upon the exercise
of options granted pursuant to employee and consultant benefit plans adopted by
the Company, and the grant of such options themselves, provided that the
aggregate number of shares thus awarded and issued and issuable pursuant to the
exercise of all such options shall not be in excess of 1,242,000 (appropriately
adjusted to reflect stock splits, stock dividends, reorganizations,
consolidations and similar changes hereafter effected), (c) shares of Preferred
Stock, (d) shares of Common Stock issued upon conversion of the Preferred Stock
or exercise of the 1998 Warrants, (e) dividends payable in Common Stock, and (f)
warrants issued in connection with bona fide financing transactions (including,
without limitation, equipment financing arrangements and bank lines of credit)
with conventional institutional lenders entered into in the ordinary course of
their business and shares of Common Stock issued upon exercise of such warrants
(provided that the aggregate number of shares thus issued on exercise and
covered by unexercised warrants shall not be in excess of 600,000 (appropriately
adjusted to reflect stock splits, stock dividends, reorganizations,
consolidations and similar changes hereafter effected)) (all such capital stock,
warrants, securities convertible into capital stock and other rights, other than
securities referred to in (a), (b), (c), (d), (e) and (f) above, being
hereinafter sometimes

                                       3
<PAGE>

collectively referred to as "Additional Securities"), the Company shall first
offer to sell to each of the Purchasers, upon the same terms and conditions as
the Company is proposing to issue and sell such Additional Securities to others,
such Purchaser's pro rata share (as defined below) of such Additional
Securities. Such offer shall be made by written notice given to each such
Purchaser and specifying therein the amount of the Additional Securities being
offered, the purchase price and other terms of such offer. Such Purchaser shall
have a period of 45 days from and after the effective date of such notice within
which to accept such offer. If a Purchaser elects to accept such offer in whole
or in part, such Purchaser shall so accept by written notice to the Company
given within such 45-day period. If a Purchaser fails to accept such offer in
whole or in part within such 45-day period, any of such Additional Securities
not purchased by such Purchaser pursuant to such offer may be offered for sale
to others by the Company for a period of 120 days from the last day of such
45-day period, but only on terms and conditions no more favorable to the third
party purchasers than those set forth in the initial offer to such Purchaser,
free and clear of the restrictions imposed by this Article 8.17.

         For purposes of the previous paragraph, a Purchaser's "pro rata share"
is the number of shares of Additional Securities (rounded to the nearest whole
share) as is equal to the product of (a)(i) the number of shares of Common Stock
issued, or issuable upon the exercise or conversion of rights, options or other
convertible securities without the payment of any additional cash consideration
or with the payment of a nominal cash consideration, as the case may be
(collectively, "Fully Paid Securities"), to such Purchaser immediately prior to
the issuance of the Additional Securities being offered divided by (ii) the
total number of Fully Paid Securities issued or issuable by the Company
immediately prior to the issuance of the Additional Securities, multiplied by
(b) the entire offering of Additional Securities."

         H.       Section 9.2 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "9.2     Future Registration Rights. Except for any registration
expressly permitted by Section 10 hereof, the 1998 Agreement and the 2000
Agreement, the Company will not, without the prior approval of the Purchasers,
agree with the holders of any securities issued or to be issued by the Company
to register such securities under the Securities Act nor will it grant any
incidental registration rights."

         I.       Subparagraph (e) of Section 9.3 of the 1996 Agreement is
hereby amended in its entirety as follows:

         (e) except for securities excepted from the definition of Additional
             Securities by clauses (a), (b), (c), (d), (e) and (f) of the first
             paragraph of Section 8.17 hereof, issue (A) any additional capital
             stock of the Company of any class other than Common Stock, or
             securities convertible into any such class or (B) any options,
             warrants or other rights to purchase capital stock of the Company
             of any class other than Common Stock, or securities convertible
             into shares of any such class; or

                                       4
<PAGE>

         J.       Subparagraph (b) of Section 9.3 of the 1996 Agreement is
hereby amended in its entirety as follows:

         (b) make or permit any Subsidiary to make loans or advances to any
             person (including without limitation to any officer, director or
             shareholder of the Company or any Subsidiary), firm, association or
             corporation, except loans and advances to the Company and its
             wholly-owned Subsidiaries and advances to suppliers and employees
             made in the ordinary course of business (provided that the
             outstanding balance of loans and advances to employees of the
             Company or any Subsidiary shall not at any time exceed $250,000 in
             the aggregate or $50,000 for any one individual); or

         K.       Section 10.2 of the 1996 Agreement is hereby amended and
restated in its entirety as follows:

         10.2     Incidental Registration. Each time the Company shall determine
                  to proceed with the actual preparation and filing of a
                  registration statement under the Securities Act in connection
                  with the proposed offer and sale for cash of any of its
                  securities by it or any of its security holders (other than
                  registration statements on forms that do not permit the
                  inclusion of shares by the Company's security holders), the
                  Company will give written notice of its determination to all
                  record holders of Purchased Stock not theretofore registered
                  under the Securities Act and sold. Upon the written request of
                  a record holder of any shares of Purchased Stock given within
                  30 days after the date of any such notice from the Company,
                  the Company will, except as herein provided, cause all such
                  shares of Purchased Stock, the record holders of which have so
                  requested registration thereof, to be included in such
                  registration statement, all to the extent requisite to permit
                  the sale or other disposition by the prospective seller or
                  sellers of the Purchased Stock to be so registered; provided,
                  however, that nothing herein shall prevent the Company from,
                  at any time, abandoning or delaying any such registration
                  initiated by it; provided further, however, that if the
                  Company determines not to proceed with a registration after
                  the registration statement has been filed with the Commission
                  and the Company's decision not to proceed is primarily based
                  upon the anticipated public offering price of the securities
                  to be sold by the Company, the Company shall promptly complete
                  the registration for the benefit of those selling security
                  holders who wish to proceed with a public offering of their
                  securities and who bear all expenses in excess of $25,000
                  incurred by the Company as the result of such registration
                  after the Company has decided not to proceed. Notwithstanding
                  the foregoing, the Company shall not be in default of its
                  obligation to include the Purchased Stock in a registration if
                  such registration is being made at the request of the holders
                  of Series B Preferred Stock, Series B Conversion Stock, the
                  1998 Warrants and the 1998 Warrant Stock pursuant to the 1998
                  Agreement, Series C Preferred Stock and the Series C
                  Conversion Stock pursuant to the 2000 Agreement

                                       5
<PAGE>
             and the Purchased Stock is excluded from such registration pursuant
             to the terms of the 1998 Agreement or the 2000 Agreement. If any
             registration pursuant to this Section 10.2 shall be underwritten in
             whole or in part, the Company may require that the Purchased Stock
             requested for inclusion pursuant to this Section 10.2 be included
             in the underwriting on the same terms and conditions as the
             securities otherwise being sold through the underwriters. If in the
             good faith judgment of the managing underwriter of such public
             offering the inclusion of all of the Purchased Stock originally
             covered by a request for registration and all other Securities
             originally covered by a request for registration pursuant to the
             1998 Agreement or the 2000 Agreement would reduce the number of
             shares to be offered by the Company or interfere with the
             successful marketing of the shares of stock offered by the Company,
             the number of shares of Purchased Stock and such other Securities
             otherwise to be included in the underwritten public offering may be
             reduced pro rata (by number of shares) among the holders thereof
             requesting such registration. Those shares of Purchased Stock which
             are thus excluded from the underwritten public offering shall be
             withheld from the market by the holders thereof for a period, not
             to exceed 90 days, which the managing underwriter reasonably
             determines is necessary in order to effect the underwritten public
             offering.

         L.       Subparagraph (g) of Section 11.1 of the 1996 Agreement is
hereby amended in its entirety as follows:

         (f) if default shall be made in the Company's obligation to redeem the
             Preferred Stock (as hereinafter defined), as required by the
             applicable Certificate of Designation, whether or not funds are
             legally available therefor, provided, however, that it shall not be
             an Event of Default if the Company's failure to so redeem the
             Preferred Stock results from the failure of the holders of
             Preferred Stock entitled to vote on or consent to such redemption
             to give their consent to the redemption and the Company otherwise
             has funds legally available to redeem the Preferred Stock; or

         M.       Section 11.2 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "11.2    Remedies Upon Events of Default. Upon the occurrence of an
Event of Default of the type specified in (i) paragraphs (a), (b), (d) or (g) of
Section 11.1, and (ii) paragraph (f) of Section 11.1 if the representation or
warranty at issue was made with reckless disregard for the truth or falsity
thereof, and so long as such Event of Default continues unremedied, then, unless
such Event of Default shall have been waived by the holders of sixty percent of
the Series A Preferred Stock and Series B Preferred Stock then

                                       6
<PAGE>

outstanding, the holders of at least sixty percent of the Series A Preferred
Stock and the Series B Preferred Stock then outstanding may require the Company
immediately to redeem all shares of Series A Preferred Stock and Series B
Preferred Stock then outstanding as provided in Section 4(b) of the Certificate
and the Amendment and Restatement of the Statement of Designation of Rights,
Preferences and Limitations of Series B Convertible Preferred Stock (the "Series
B Certificate"), as the case may be, and thereupon the Company shall be
obligated to redeem all shares of Series A Preferred Stock and Series B
Preferred Stock then outstanding. Upon the occurrence of any Event of Default
hereunder, unless such Event of Default shall have been waived by the holders of
at least sixty percent of the Series A Preferred Stock and Series B Preferred
Stock then outstanding and a majority of the Series C Preferred Stock then
outstanding, the holders of the Preferred Stock then outstanding shall be
entitled to designate a majority of the Board of Directors of the Company as
provided in Section 2(c) of the Certificate, the Series B Certificate or the
Series C Certificate, as the case may be."

         N.       Section 13.1 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "13.1    "Additional Shares of Common Stock" shall mean all shares of
Common Stock of the Company issued by the Company on or after the Closing Date,
except the Conversion Stock, the 1998 Warrant Stock, the Series B Conversion
Stock and the Series C Conversion Stock."

         O.       Section 13.17 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "13.17   "Securities" shall mean the Preferred Shares, the Conversion
Stock, the 1998 Warrants, the 1998 Warrant Stock, the Series B Preferred Stock,
the Series B Conversion Stock, the Series C Preferred Stock, the Series C
Conversion Stock, and any stock or other securities of the Company issued in a
stock split or reclassification of, or a stock dividend or other distribution on
or in substitution or exchange for, or otherwise in connection with, any of the
foregoing securities, or in a merger or consolidation involving the Company or a
sale of all or substantially all of the Company's assets."

         2.       Waiver of Right of First Refusal. In connection with the
closing of the transactions contemplated by the 2000 Agreement, each of you by
executing this Amendment hereby waives the Company's compliance with the
requirements of, and any and all of your rights under, Section 8.17 of the 1996
Agreement with respect to the issuance and sale of the shares of Series C
Preferred Stock and the Series C Conversion Stock.

         3.       Consent to the 2000 Agreement. By executing this Amendment,
each of you hereby consents to the transactions contemplated by the 2000
Agreement.

         4.       Consent to Grant of Registration Rights. In connection with
the closing of the transactions contemplated by the 2000 Agreement, each of you
by executing this Amendment hereby consents to the grant of the registration
rights in Section 10 of the 2000 Agreement pursuant to your right to approve of
the grant of such registration rights pursuant to Section 9.2 of the 1996
Agreement.

                                       7
<PAGE>

         5.       Consent to Employee Loans. Each of you by executing this
Amendment hereby consents to the loans made to employees of the Company listed
on Exhibit A to this Amendment.

         6.       Effect of Amendment. Except as amended hereby and by the First
Amendment, the 1996 Agreement shall continue in full force and effect in
accordance with its terms. In the event of any discrepancy between this
Amendment and the First Amendment, this Amendment shall be controlling.

                            [SIGNATURE PAGES FOLLOW]

                                       8
<PAGE>

         If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract among you and
the undersigned.

                               Very truly yours,

                               LIFE TIME FITNESS, INC. (formerly FCA, Ltd.)

                               By________________________________________
                                    Its__________________________________

                          [AMENDMENT TO 1996 AGREEMENT]

                                       9
<PAGE>

The foregoing Agreement is hereby accepted
as of the date first above written.

NORWEST EQUITY PARTNERS V, LP
  A MINNESOTA LIMITED PARTNERSHIP

By: ITASCA PARTNERS V, LLP
    Its: General Partner

By________________________________________
    Its___________________________________

                          [AMENDMENT TO 1996 AGREEMENT]

                                       10
<PAGE>

PIPER JAFFRAY INVESTORS-FUND XI, L.P.

By: THE PIPER FUND-FUND XI, L.P.
    Its: Managing Partner

By_______________________________________________________
    Managing Director of Piper Jaffray Inc., as
      Managing Partner of the Piper Fund-Fund XI, L.P.

                          [AMENDMENT TO 1996 AGREEMENT]

                                       11
<PAGE>

_____________________________
Ann Tillotson

                          [AMENDMENT TO 1996 AGREEMENT]

                                       12
<PAGE>

_________________________________
Brent and Julie Rystrom Jt Ten

                          [AMENDMENT TO 1996 AGREEMENT]

                                       13
<PAGE>

              LIFE TIME FITNESS, INC. (FORMERLY KNOWN AS FCA, LTD.)

                     THIRD AMENDMENT AND WAIVER RELATING TO
                            STOCK PURCHASE AGREEMENT
                                DATED MAY 7, 1996

                                                                   July 19, 2000

To Each of the Persons (the "Purchasers")
   Named in Schedule A to the Stock
   Purchase Agreement dated May 7, 1996

Ladies and Gentlemen:

         Each of you is named as a Purchaser in the Stock Purchase Agreement
dated May 7, 1996 and amended by the First Amendment and Waiver relating to
Stock Purchase Agreement dated May 7, 1996 (the "First Amendment") and by the
Second Amendment and Waiver relating to Stock Purchase Agreement dated May 7,
1996 (the "Second Amendment") among FCA, Ltd. (now known as LIFE TIME FITNESS,
Inc.), a Minnesota corporation (the "Company"), and the Purchasers named therein
(the "1996 Agreement"), relating to the sale by the Company to such Purchasers
of shares of series A convertible preferred stock (the "Series A Preferred
Stock").

         The Company is a party to a Stock Purchase Agreement dated December 8,
1998 (the "1998 Agreement") relating to the sale by the Company to the
Purchasers named therein of 1,000,000 shares of series B convertible preferred
stock (the "Series B Preferred Stock") and warrants to purchase shares of common
stock of the Company (the "1998 Warrants"). The Company is a party to a Stock
Purchase Agreement dated August 16, 2000, as amended by the First Amendment and
Waiver relating to Stock Purchase Agreement dated August 16, 2000 (the "2000
Agreement") relating to the sale by the Company to the Purchasers named therein
of 4,500,000 shares of series C convertible preferred stock (the "Series C
Preferred Stock"). The Company has entered into a Stock Purchase Agreement dated
July 19, 2001 (the "2001 Agreement") relating to the sale by the Company to the
Purchasers named therein of up to 2,000,000 shares of series D convertible
preferred stock (the "Series D Preferred Stock"). Section 7A.12 of the 2001
Agreement provides that it is a condition to closing the transaction
contemplated by the 2001 Agreement that the 1996 Agreement be amended and the
rights of first refusal of the Purchasers under the 1996 Agreement be waived as
provided below.

         The shares of Common Stock into which the Series A Preferred Stock is
convertible are hereinafter sometimes referred to as the "Conversion Stock"; the
shares of Common Stock into which the Series B Preferred Stock is convertible
are hereinafter sometimes referred to as the "Series B Conversion Stock"; the
shares of Common Stock into which the Series C Preferred Stock is convertible
are hereinafter sometimes referred to as the "Series C Conversion Stock"; the
shares of Common Stock into which the Series

<PAGE>

D Preferred Stock is convertible are hereinafter sometimes referred to as the
"Series D Conversion Stock"; the shares of Common Stock issuable upon exercise
of the 1998 Warrants are hereinafter sometimes referred to as the "1998 Warrant
Stock"; and the shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock are hereinafter
collectively referred to as the "Preferred Stock".

         All defined terms used herein which are not otherwise defined herein
shall have the meanings set forth in the 1996 Agreement.

         1.       Amendments to the 1996 Agreement. In connection with and as an
inducement to the closing of the transactions contemplated by the 2000
Agreement, each of you by executing this amendment and waiver (the "Amendment")
hereby consents to the following amendments to the 1996 Agreement, such
amendments to be effective from and after the Closing referred to in the 2001
Agreement:

         A.       The term "Certificate", wherever used in the 1996 Agreement,
shall be amended to mean the Amendment and Restatement of the Statement of
Designation of Rights, Preferences and Limitations of Series A Convertible
Preferred Stock as amended and restated in connection with the issuance of the
Series D Preferred Stock and the 2001 Agreement.

         B.       Section 9.2 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "9.2     Future Registration Rights. Except for any registration
expressly permitted by Section 10 hereof, the 1998 Agreement, the 2000 Agreement
and the 2001 Agreement, the Company will not, without the prior approval of the
Purchasers, agree with the holders of any securities issued or to be issued by
the Company to register such securities under the Securities Act nor will it
grant any incidental registration rights."

         C.       Section 10.2 of the 1996 Agreement is hereby amended and
restated in its entirety as follows:

         10.2     Incidental Registration. Each time the Company shall determine
                  to proceed with the actual preparation and filing of a
                  registration statement under the Securities Act in connection
                  with the proposed offer and sale for cash of any of its
                  securities by it or any of its security holders (other than
                  registration statements on forms that do not permit the
                  inclusion of shares by the Company's security holders), the
                  Company will give written notice of its determination to all
                  record holders of Purchased Stock not theretofore registered
                  under the Securities Act and sold. Upon the written request of
                  a record holder of any shares of Purchased Stock given within
                  30 days after the date of any such notice from the Company,
                  the Company will, except as herein provided, cause all such
                  shares of Purchased Stock, the record holders of which have so
                  requested registration thereof, to be included in such
                  registration statement, all to the extent requisite to permit

                                       2
<PAGE>
                  the sale or other disposition by the prospective seller or
                  sellers of the Purchased Stock to be so registered; provided,
                  however, that nothing herein shall prevent the Company from,
                  at any time, abandoning or delaying any such registration
                  initiated by it; provided further, however, that if the
                  Company determines not to proceed with a registration after
                  the registration statement has been filed with the Commission
                  and the Company's decision not to proceed is primarily based
                  upon the anticipated public offering price of the securities
                  to be sold by the Company, the Company shall promptly complete
                  the registration for the benefit of those selling security
                  holders who wish to proceed with a public offering of their
                  securities and who bear all expenses in excess of $25,000
                  incurred by the Company as the result of such registration
                  after the Company has decided not to proceed. Notwithstanding
                  the foregoing, the Company shall not be in default of its
                  obligation to include the Purchased Stock in a registration if
                  such registration is being made at the request of the holders
                  of Series B Preferred Stock, Series B Conversion Stock, the
                  1998 Warrants and the 1998 Warrant Stock pursuant to the 1998
                  Agreement, Series C Preferred Stock and the Series C
                  Conversion Stock pursuant to the 2000 Agreement, Series D
                  Preferred Stock and the Series D Conversion Stock pursuant to
                  the 2001 Agreement and the Purchased Stock is excluded from
                  such registration pursuant to the terms of the 1998 Agreement,
                  the 2000 Agreement or the 2001 Agreement. If any registration
                  pursuant to this Section 10.2 shall be underwritten in whole
                  or in part, the Company may require that the Purchased Stock
                  requested for inclusion pursuant to this Section 10.2 be
                  included in the underwriting on the same terms and conditions
                  as the securities otherwise being sold through the
                  underwriters. If in the good faith judgment of the managing
                  underwriter of such public offering the inclusion of all of
                  the Purchased Stock originally covered by a request for
                  registration and all other Securities originally covered by a
                  request for registration pursuant to the 1998 Agreement, the
                  2000 Agreement or the 2001 Agreement would reduce the number
                  of shares to be offered by the Company or interfere with the
                  successful marketing of the shares of stock offered by the
                  Company, the number of shares of Purchased Stock and such
                  other Securities otherwise to be included in the underwritten
                  public offering may be reduced pro rata (by number of shares)
                  among the holders thereof requesting such registration. Those
                  shares of Purchased Stock which are thus excluded from the
                  underwritten public offering shall be withheld from the market
                  by the holders thereof for a period, not to exceed 90 days,
                  which the managing underwriter reasonably determines is
                  necessary in order to effect the underwritten public offering.

         D.       Section 11.2 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "11.2    Remedies Upon Events of Default. Upon the occurrence of an
Event of Default of the type specified in (i) paragraphs (a), (b), (d) or (g) of
Section 11.1, and (ii)

                                       3
<PAGE>

paragraph (f) of Section 11.1 if the representation or warranty at issue was
made with reckless disregard for the truth or falsity thereof, and so long as
such Event of Default continues unremedied, then, unless such Event of Default
shall have been waived by the holders of sixty percent of the Series A Preferred
Stock and Series B Preferred Stock then outstanding, the holders of at least
sixty percent of the Series A Preferred Stock and the Series B Preferred Stock
then outstanding may require the Company immediately to redeem all shares of
Series A Preferred Stock and Series B Preferred Stock then outstanding as
provided in Section 4(b) of the Certificate and the Amendment and Restatement of
the Statement of Designation of Rights, Preferences and Limitations of Series B
Convertible Preferred Stock (the "Series B Certificate"), as the case may be,
and thereupon the Company shall be obligated to redeem all shares of Series A
Preferred Stock and Series B Preferred Stock then outstanding. Upon the
occurrence of any Event of Default hereunder, unless such Event of Default shall
have been waived by the holders of at least sixty percent of the Series A
Preferred Stock and Series B Preferred Stock then outstanding and a majority of
the Series C Preferred Stock and Series D Preferred Stock then outstanding,
voting together as a class, the holders of the Preferred Stock then outstanding
shall be entitled to designate a majority of the Board of Directors of the
Company as provided in Section 2(c) of the Certificate, the Series B
Certificate, the Amendment and Restatement of the Statement of Designation of
Rights, Preferences and Limitations of Series C Convertible Preferred Stock , or
the Statement of Designation of Rights, Preferences and Limitations of Series D
Convertible Preferred Stock , as the case may be."

         E.       Section 13.1 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "13.1    "Additional Shares of Common Stock" shall mean all shares of
Common Stock of the Company issued by the Company on or after the Closing Date,
except the Conversion Stock, the 1998 Warrant Stock, the Series B Conversion
Stock, the Series C Conversion Stock and the Series D Conversion Stock."

         F.       Section 13.17 of the 1996 Agreement is hereby amended in its
entirety as follows:

         "13.17   "Securities" shall mean the Preferred Shares, the Conversion
Stock, the 1998 Warrants, the 1998 Warrant Stock, the Series B Preferred Stock,
the Series B Conversion Stock, the Series C Preferred Stock, the Series C
Conversion Stock, the Series D Preferred Stock, the Series D Conversion Stock,
and any stock or other securities of the Company issued in a stock split or
reclassification of, or a stock dividend or other distribution on or in
substitution or exchange for, or otherwise in connection with, any of the
foregoing securities, or in a merger or consolidation involving the Company or a
sale of all or substantially all of the Company's assets."

         2.       Waiver of Right of First Refusal. In connection with the
closing of the transactions contemplated by the 2001 Agreement, each of you by
executing this Amendment hereby waives the Company's compliance with the
requirements of, and any and all of your rights under, Section 8.17 of the 1996
Agreement with respect to the

                                       4
<PAGE>

issuance and sale of the shares of Series D Preferred Stock and the Series D
Conversion Stock.

         3.       Consent to the 2001 Agreement. By executing this Amendment,
each of you hereby consents to the transactions contemplated by the 2001
Agreement.

         4.       Consent to Grant of Registration Rights. In connection with
the closing of the transactions contemplated by the 2001 Agreement, each of you
by executing this Amendment hereby consents to the grant of the registration
rights in Section 10 of the 2001 Agreement pursuant to your right to approve of
the grant of such registration rights pursuant to Section 9.2 of the 1996
Agreement.

         5.       Effect of Amendment. Except as amended hereby, by the First
Amendment and by the Second Amendment, the 1996 Agreement shall continue in full
force and effect in accordance with its terms. In the event of any discrepancy
between this Amendment, the First Amendment and the Second Amendment, this
Amendment shall be controlling.

                            [SIGNATURE PAGES FOLLOW]

                                       5
<PAGE>

         If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract among you and
the undersigned.

                                 Very truly yours,

                                 LIFE TIME FITNESS, INC. (formerly FCA, Ltd.)

                                 By________________________________________
                                   Its_____________________________________

                         [AMENDMENT TO 1996 AGREEMENT]

<PAGE>

The foregoing Agreement is hereby accepted
as of the date first above written.

NORWEST EQUITY PARTNERS V, LP
  A MINNESOTA LIMITED PARTNERSHIP

By: ITASCA PARTNERS V, LLP
  Its: General Partner

By________________________________________
  Its_____________________________________

                          [AMENDMENT TO 1996 AGREEMENT]

<PAGE>

PIPER JAFFRAY INVESTORS-FUND XI, L.P.

By: THE PIPER FUND-FUND XI, L.P.
 Its: Managing Partner

By____________________________________________________
   Managing Director of Piper Jaffray Inc., as
    Managing Partner of the Piper Fund-Fund XI, L.P.

                          [AMENDMENT TO 1996 AGREEMENT]

<PAGE>

_________________________________
Ann Tillotson

                          [AMENDMENT TO 1996 AGREEMENT]

<PAGE>

_________________________________
Brent Rystrom

                          [AMENDMENT TO 1996 AGREEMENT]

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