BALLY TOTAL FITNESS HOLDING CORP, DEF 14A, 1998-05-12

BALLY TOTAL FITNESS HOLDING CORP
DEF 14A, 1998-05-12
MEMBERSHIP SPORTS & RECREATION CLUBS

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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS
PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>

BALLY TOTAL FITNESS HOLDING CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies: .......

(2) Aggregate number of securities to which transaction applies: ..........

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............

(4) Proposed maximum aggregate value of transaction: ......................

(5) Total fee paid: .......................................................

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid: ...............................................

(2) Form, Schedule or Registration Statement No.: .........................

(3) Filing Party: .........................................................

(4) Date Filed: ...........................................................

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BALLY LOGO

BALLY TOTAL FITNESS HOLDING CORPORATION
8700 WEST BRYN MAWR AVENUE
CHICAGO, ILLINOIS 60631

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1998

To Our Stockholders:

The Annual Meeting of Stockholders of Bally Total Fitness Holding
Corporation (the "Company") will be held at 9:00 a.m. (local time) on June 11,
1998 at the Company's fitness center located at 25 Broadway (intersection of
Broadway and Greenwich Street), New York, New York 10004 (the "Annual Meeting")
to consider and act upon the following matters which are more fully described in
the accompanying Proxy Statement:

1. The election of two Class II directors for three-year terms
expiring in 2001; and

2. Such other business as may properly come before the Annual Meeting
or any adjournment thereof.

Stockholders of record as of the close of business on April 24, 1998 will
be entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. The transfer books will not be closed.

The Board of Directors of the Company desires to have the maximum
stockholder representation at the Annual Meeting and respectfully requests that
you execute, date and return promptly the enclosed proxy card in the
postage-paid envelope provided. In order to attend the Annual Meeting, you must
bring the enclosed entrance pass with you. No one will be admitted without the
entrance pass.

By Order of the Board of Directors,

Cary A. Gaan, Secretary

Chicago, Illinois
May 12, 1998

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

YOUR VOTE IS IMPORTANT!

PLEASE EXECUTE, DATE AND RETURN PROMPTLY THE ENCLOSED
PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.

- --------------------------------------------------------------------------------
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BALLY LOGO

BALLY TOTAL FITNESS HOLDING CORPORATION
8700 WEST BRYN MAWR AVENUE
CHICAGO, ILLINOIS 60631

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1998

To Our Stockholders:

This Proxy Statement is furnished to stockholders of Bally Total Fitness
Holding Corporation (the "Company") for use at the Annual Meeting of
Stockholders to be held at 9:00 a.m. (local time) on June 11, 1998 at the
Company's fitness center located at 25 Broadway (intersection of Broadway and
Greenwich Street), New York, New York 10004 (the "Annual Meeting") or at any
postponement or adjournment thereof for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. The approximate date on
which this Proxy Statement and the enclosed proxy card are first being sent to
stockholders is May 12, 1998.

The proxy is solicited on behalf of the Board of Directors of the Company.
Any stockholder giving a proxy has the right to revoke it at any time prior to
its exercise at the Annual Meeting, either by delivering notice in writing to
the Secretary of the Company or by appearing and voting in person at the Annual
Meeting. Unless a contrary choice is indicated, all duly executed proxies
received by the Company will be voted:

1. For the election of the two Class II director nominees for
three-year terms expiring in 2001; and

2. In the discretion of the proxy holder with respect to such other
business as may properly come before the Annual Meeting or any
adjournment thereof.

At the Annual Meeting, the results of stockholder voting will be tabulated
by LaSalle National Bank, the independent inspector of elections appointed by
the Company for the Annual Meeting.

VOTING SECURITIES

Stockholders of record as of the close of business on April 24, 1998 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting and
any postponement or adjournment thereof. On the Record Date, there were
20,602,096 shares of the Company's common stock, par value $.01 per share (the
"Common Stock") outstanding. Each share of Common Stock is entitled to one vote
on all matters to properly come before the Annual Meeting. Shares of Common
Stock cannot be voted at the Annual Meeting unless the holder is present in
person or represented by proxy. The presence, in person or by proxy, of a
majority of stockholders is necessary to constitute a quorum at the Annual
Meeting. The affirmative vote of holders of a majority of the shares of Common
Stock represented in person or by proxy at the Annual Meeting is required to
elect the two nominees for director.
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ELECTION OF DIRECTORS AND SECURITY OWNERSHIP

At the Annual Meeting, two Class II directors are to be elected to serve
for three-year terms expiring in 2001 or until their successors have been duly
elected and qualified. Set forth below are the names of, and certain information
with respect to, the persons nominated by the Board of Directors for election as
Class II directors. It is intended that all duly executed proxies in the
accompanying form will be voted for the election of such nominees (or such
substitute nominees as provided below), unless such authorization has been
withheld.

Authority granted to the persons named in the proxy to vote for nominees is
limited to the two nominees proposed by the Board of Directors and named below,
and proxies cannot be voted for a greater number of persons than the number of
nominees named. The Board of Directors is not aware that any of the nominees
will be unavailable for service at the date of the Annual Meeting. If, for any
reason, any of the nominees shall become unavailable for election, an event
which is not presently anticipated, discretionary authority may be exercised by
the persons named in the proxy to vote for substitute nominees proposed by the
Board of Directors.

Information with respect to the nominees for election as director and the
continuing directors, as well as information regarding security ownership of
named executive officers and certain other beneficial owners, furnished in part
by each such person or company, is as follows:

NOMINEES

CLASS II
TERM EXPIRING IN 2001

James F. Mc Anally, M.D., 48 1995 5,334 *
Private practitioner who specializes in
hypertension and kidney disease. Dr. Mc Anally is
also the Medical Director of Nephrology Services
at Elizabeth General Medical Center in Elizabeth,
New Jersey and the Chief of Nephrology at St.
Elizabeth's Hospital in Elizabeth, New Jersey.
</TABLE>

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CONTINUING DIRECTORS
CLASS III
TERM EXPIRING IN 1999

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY OWNED AS PERCENT
NAME, AGE, PRINCIPAL OCCUPATION HAS SERVED AS OF APRIL 30, 1998 OF CLASS
AND ADDITIONAL INFORMATION DIRECTOR SINCE (1)(2) (1)(2)
- --------------------------------------------------- -------------- --------------------- --------
<S> <C> <C> <C>
Arthur M. Goldberg, 56 1990 2,591,179 11.2%
Chairman of the Board of Directors of the
Company. Mr. Goldberg also serves as Executive
Vice President, President -- Gaming Operations
and a director of Hilton Hotels Corporation (an
operator of full-service hotels and
hotel-casinos), and Chairman of the Board of
Directors, President and Chief Executive Officer
of Di Giorgio Corporation (a food distributor).
Mr. Goldberg is also a director of First Union
Corporation (a financial services company) and
Managing Partner of Arveron Investments L.P. (an
investment partnership).

J. Kenneth Looloian, 75 1995 5,834 *
Executive Vice President of Di Giorgio
Corporation. Mr. Looloian is also a director of
Continucare Corporation.
</TABLE>

CLASS I
TERM EXPIRING IN 2000

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY OWNED AS PERCENT
NAME, AGE, PRINCIPAL OCCUPATION HAS SERVED AS OF APRIL 30, 1998 OF CLASS
AND ADDITIONAL INFORMATION DIRECTOR SINCE (1)(2) (1)(2)
- --------------------------------------------------- -------------- --------------------- --------
<S> <C> <C> <C>
Aubrey C. Lewis, 63 1995 4,129 *
Vice President of Woolworth Corporation (a global
retailer). Mr. Lewis is also a director of the
United States Naval Academy Foundation, the
University of Notre Dame, the Port Authority of
New York and New Jersey, the New Jersey State
Chamber of Commerce and the Y.M.C.A. of Chinatown
in New York City.

Liza M. Walsh, 39 1995 4,334 *
Partner at the law firm of Connell, Foley &
Geiser, concentrating in commercial litigation.
Ms. Walsh is also an Arbitrator for the United
States District Court for the District of New
Jersey.
</TABLE>

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NAMED EXECUTIVE OFFICERS AND CERTAIN OTHER BENEFICIAL OWNERS

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY OWNED AS PERCENT
OF APRIL 30, 1998 OF CLASS
NAME (1)(2) (1)(2)
- ------------------------------------------------------------ --------------------- --------
<S> <C> <C>
John W. Dwyer 93,254 *
Executive Vice President, Chief Financial Officer and
Treasurer
Cary A. Gaan 83,604 *
Senior Vice President, Secretary and General Counsel
Harold Morgan 87,755 *
Senior Vice President, Human Resources
John H. Wildman 107,500 *
Senior Vice President, Sales and Marketing
All directors and executive officers as a 3,985,874 16.6%
group (12 persons)
FMR Corporation(3) 1,450,900 7.0%
82 Devonshire Street
Boston, Massachusetts 02109
Janus Capital Corporation(3) 1,334,935 6.4%
100 Fillmore Street
Denver, Colorado 80206
Kingdon Capital Management Corporation(3) 1,082,200 5.2%
152 West 57th Street
New York, New York 10019
</TABLE>

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

* Less than 1%

(1) Includes, in certain instances, shares of Common Stock held in the name of
the director's or executive officer's spouse, minor children, or relatives
sharing the director's or executive officer's home and, in the case of Mr.
Goldberg, shares held by Nugget Partners, L.P., a New Jersey limited
partnership, whose sole general partner is Mr. Goldberg, the reporting of
which is required by applicable rules of the Securities and Exchange
Commission (the "Commission"), but as to which shares of Common Stock the
director or executive officer may have disclaimed beneficial ownership.

(2) Includes the following numbers of shares of Common Stock that the following
persons have or had, within 60 days after April 30, 1998, the right to
acquire upon the exercise of warrants and stock options: Mr. Hillman,
785,701; Dr. Mc Anally, 3,334; Mr. Goldberg, 2,207,104; Mr. Looloian, 3,334;
Mr. Lewis, 3,334; Ms. Walsh, 3,334; Mr. Dwyer, 23,334; Mr. Gaan, 23,334; Mr.
Morgan, 23,334; Mr. Wildman, 30,000; and all directors and executive
officers, including the foregoing, as a group, 3,116,143.

(3) Represents a beneficial owner of more than 5% of the Common Stock based upon
such owner's reported ownership of Common Stock in filings made with the
Commission pursuant to Sections 13(d) and 13(g) of the Securities Exchange
Act of 1934, as amended. Information with respect to each beneficial owner
is generally as of the date of the most recent filing by the beneficial
owner with the Commission.

4
<PAGE> 7

INFORMATION RELATING TO THE BOARD OF DIRECTORS
AND CERTAIN COMMITTEES OF THE BOARD

The Board of Directors held five meetings during 1997. Each director
attended at least 75% of the aggregate number of meetings of the Board of
Directors and all committees on which the director served during 1997.

The Board of Directors has established an Executive Committee, an Audit
Committee, a Compensation Committee and a Nominating Committee. The general
functions of such committees, the identity of each committee member and the
number of committee meetings held by each committee during 1997 are set forth
below.

EXECUTIVE COMMITTEE

The current members of the Executive Committee are Mr. Goldberg (Chairman),
Mr. Hillman and Mr. Looloian. The Executive Committee is granted all the powers
and rights necessary to exercise the full authority of the Board of Directors in
the management of the business and affairs of the Company when necessary between
meetings of the Board of Directors. The Executive Committee did not hold any
meetings during 1997.

AUDIT COMMITTEE

The current members of the Audit Committee are Mr. Looloian (Chairman), Mr.
Lewis and Dr. Mc Anally. The general functions of the Audit Committee include
(i) selecting the independent auditors (or recommending such action to the Board
of Directors), (ii) evaluating the performance of the independent auditors and
their fees for services, (iii) reviewing the scope of the annual audit with the
independent auditors and the results of the audit with management and the
independent auditors, (iv) consulting with management, the internal auditors and
the independent auditors as to the systems of internal accounting controls, and
(v) reviewing the nonaudit services performed by the independent auditors and
considering the effect, if any, on their independence. The Audit Committee held
four meetings during 1997.

COMPENSATION COMMITTEE

The current members of the Compensation Committee are Ms. Walsh (Chairman),
Mr. Lewis and Dr. Mc Anally. The Compensation Committee is authorized and
directed to (i) review and approve the compensation and benefits of the
Company's executive officers, (ii) review and approve the annual salary plans,
(iii) review management organization and development, (iv) review and advise
management regarding the benefits, including bonuses, and other terms and
conditions of employment of other employees, (v) administer the Company's 1997
Bonus Plan, the Company's 1996 Long-Term Incentive Plan, the Company's 1996
Non-Employee Directors' Stock Option Plan and any other plans that may be
established, and (vi) review and recommend for the approval of the Board of
Directors the compensation of directors. The Compensation Committee held three
meetings during 1997.

NOMINATING COMMITTEE

The current members of the Nominating Committee are Mr. Goldberg
(Chairman), Mr. Hillman and Mr. Lewis. The general functions of the Nominating
Committee include recommending to the Board of Directors nominees for election
as directors, consideration of the performance of incumbent directors in
determining whether to nominate them for reelection and making recommendations
with respect to the organization and size of the Board of Directors and its
committees. The Nominating Committee did not hold any meetings during 1997.

The Nominating Committee will consider nominees recommended by
stockholders. Such a recommendation will be considered if submitted in writing
addressed to the Company care of "Chairman, Nominating Committee," accompanied
by a description of the proposed nominee's qualifications and other relevant
biographical information, and a written indication of the consent of the
proposed nominee. Candidates for

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nomination as director are considered on the basis of their broad business,
financial and public service experience, and should not represent any particular
constituency, but rather the stockholders generally. The nominees should be
highly regarded for capability and integrity within their fields or professions.
In addition, the activities or associations of the nominees should not
constitute conflicts of interest or legal impediments that might preclude
service as a director. Moreover, nominees must be able, and must have expressed
a willingness, to devote the time required to serve effectively as a director
and as a member of one or more committees of the Board of Directors.

COMPENSATION OF DIRECTORS

Members of the Board of Directors who are also employees of the Company do
not receive any additional compensation for service on the Board of Directors or
any committees of the Board of Directors. Members of the Board of Directors who
are not employees of the Company presently receive an annual retainer of $27,500
plus a $1,000 stipend for each Board of Directors meeting attended. Non-employee
directors presently receive additional stipends for service on committees of the
Board of Directors of $500 per year for committee members and $1,000 per year
for committee chairmen. Also, pursuant to the Company's 1996 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"), each non-employee director
of the Company is granted an option to purchase 5,000 shares of Common Stock
upon the commencement of service on the Board of Directors, with another option
to purchase 5,000 shares of Common Stock granted on the second anniversary
thereof. Options under the Directors' Plan are generally granted with an
exercise price equal to the fair market value of the Common Stock at the date of
grant. Option grants under the Directors' Plan become exercisable in three equal
annual installments commencing one year from the date of grant and have a
10-year term. Under the Directors' Plan, each of the non-employee directors of
the Company was granted options to purchase 5,000 shares of Common Stock in both
January 1996 and January 1998.

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<PAGE> 9

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth, for each of the years indicated, the
compensation paid by the Company to its Chief Executive Officer during 1997, and
the four other most highly compensated executive officers of the Company as of
December 31, 1997 (collectively, the "Named Executive Officers"). During these
years, the Named Executive Officers were compensated in accordance with the
plans and policies of the Company. All references to securities in the following
table relate to awards of options to purchase Common Stock.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------ -------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPENSATION STOCK AWARDS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) OPTIONS(#) ($)
- ---------------------------------------- ---- --------- -------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lee S. Hillman (3) 1997 375,000 125,000(4) 3,499,700(5) -- 125,000 19,704(6)
President and Chief 1996 34,000 -- -- 721,875 150,000 --
Executive Officer 1995 -- -- -- -- -- --

John W. Dwyer (7) 1997 225,000 75,000(4) 1,407,381(5) -- 45,000 12,204(6)
Executive Vice President, Chief 1996 170,600 -- -- 288,750 35,000 --
Financial Officer and Treasurer 1995 -- -- -- -- -- --

Cary A. Gaan 1997 225,000 45,000(4) 1,407,381(5) -- 15,000 954(6)
Senior Vice President, 1996 225,000 40,000 -- 288,750 35,000 12,091
Secretary and General Counsel 1995 225,000 70,000 -- -- -- 40,263

Harold Morgan (8) 1997 175,000 40,000(4) 1,407,381(5) -- 15,000 9,502(6)
Senior Vice President, 1996 158,100 -- -- 288,750 35,000 --
Human Resources 1995 -- -- -- -- -- --

John H. Wildman 1997 200,000 70,000(9) 1,407,381(5) -- 15,000 --
Senior Vice President, 1996 200,000 40,000 -- 288,750 45,000 --
Sales and Marketing 1995 175,000 70,400 -- -- -- --
</TABLE>

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

(1) Certain incidental personal benefits to executive officers of the Company
may result from expenses incurred by the Company in the interest of
attracting and retaining qualified personnel. These incidental personal
benefits made available to the Named Executive Officers during 1997 are not
described herein because the incremental cost to the Company of such
benefits is below the Commission disclosure threshold.

(2) The number of shares of restricted stock awarded to Messrs. Hillman, Dwyer,
Gaan, Morgan and Wildman during 1996 was 150,000, 60,000, 60,000, 60,000 and
60,000, respectively. The value of such shares was determined by the closing
price of the Common Stock at the date of grant. Restrictions on these shares
generally lapsed based upon the market price of the Common Stock reaching
certain targeted stock prices unless less than half of such shares awarded
vested within two years after the date of grant, at which time a number of
shares would vest so that the total number of vested shares equaled 50% of
the original grants. In addition, a recipient of these restricted stock
awards receives a cash payment from the Company upon the lapse of
restrictions in an amount sufficient to insure that the recipient receives
the Common Stock net of all taxes imposed upon the recipient because of the
receipt of such Common Stock and cash payment.

(3) Mr. Hillman served as Executive Vice President and Treasurer of the Company
through October 7, 1996, when he became President and Chief Executive
Officer of the Company. For serving in such capacities, Mr. Hillman received
(i) an annual base salary of $22,500 through December 18, 1996 pursuant to
his former employment agreement with the Company and (ii) an annual base
salary of $375,000 from December 19, 1996 through December 31, 1997 pursuant
to an employment arrangement with the Company. In addition, Mr. Hillman
served as Executive Vice President, Chief Financial Officer and Treasurer of
Bally Entertainment Corporation ("Entertainment") until December 18, 1996,
when Entertainment merged with and into Hilton Hotels Corporation. For
serving in such capacities, Mr. Hillman received compensation from
Entertainment and was awarded non-qualified options to purchase shares of
Entertainment common stock during 1996 and 1995. The compensation paid to
Mr. Hillman by Entertainment for the years covered was for services rendered
to Entertainment and all of its subsidiaries. The Company was a wholly owned
subsidiary of Entertainment until Entertainment spun off the Company (the
"Spin-off") to its stockholders on January 9, 1996.

(4) Represents 50% of the maximum bonus for 1997 for the Named Executive Officer
under the Company's 1997 Bonus Plan, which was paid in March 1998. The
remaining 50% is to be paid by March 15, 1999, subject to certain forfeiture
provisions. See "1997 Bonus Plan."

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<PAGE> 10

(5) Represents amount paid by the Company to the Named Executive Officer for the
tax gross-up upon the final vesting in August 1997 of the restricted stock
awards described in Note (2) above.

(6) Represents amounts matched by the Company in connection with the Named
Executive Officer's participation in the Company's savings plans.

(7) Mr. Dwyer also served as Vice President and Corporate Controller of
Entertainment until December 18, 1996. For serving in such capacities, Mr.
Dwyer received compensation from Entertainment and was awarded non-qualified
options to purchase shares of Entertainment common stock during 1996 and
1995. Pursuant to the Transitional Services Agreement with Entertainment,
75% of Mr. Dwyer's salary was allocated to the Company through December 18,
1996, at which time the Company began paying all of Mr. Dwyer's salary.

(8) Mr. Morgan also served as Vice President, Human Resources of Entertainment
until December 18, 1996. For serving in such capacities, Mr. Morgan received
compensation from Entertainment and was awarded non-qualified options to
purchase shares of Entertainment common stock during 1996 and 1995. Pursuant
to the Transitional Services Agreement with Entertainment, 90% of Mr.
Morgan's salary was allocated to the Company through December 18, 1996, at
which time the Company began paying all of Mr. Morgan's salary.

(9) Represents a $40,000 bonus earned in and paid to Mr. Wildman in 1997 and 50%
($30,000) of the maximum bonus for 1997 for Mr. Wildman under the Company's
1997 Bonus Plan, which was paid in March 1998. The remaining 50% is to be
paid by March 15, 1999, subject to certain forfeiture provisions. See "1997
Bonus Plan."

EMPLOYMENT AGREEMENTS

Mr. Hillman and the Company entered into an employment agreement effective
as of January 1, 1998. The agreement is for a three-year term through December
31, 2000 and provides for a base salary of $450,000, participation in Company
bonus plans and a bonus payable at the discretion of the Company. In the event a
change in control of the Company occurs and Mr. Hillman is asked to leave the
employ of the Company or, absent cause, Mr. Hillman elects to terminate his
employment because he has been constructively terminated, Mr. Hillman will be
entitled to receive a lump sum payment equal to 36 months base salary and two
times the average of bonuses (other than for 1996), if any, paid to Mr. Hillman
by the Company for the three prior years, and assignment of insurance policies
and health protection plans provided by the Company. In addition, if any of
these payments precipitate an excise tax, Mr. Hillman is entitled to be paid the
amount of those excise taxes plus a tax gross-up payment with respect to the
excise tax payment. If a change in control of the Company had occurred on April
30, 1998 and Mr. Hillman was subsequently asked to leave the employ of the
Company or, absent cause, constructively terminated, Mr. Hillman would be
entitled to a payment of $1,850,000 under his employment agreement.
Additionally, if a change in control of the Company had occurred on April 30,
1998, Mr. Hillman could elect, at his option, to terminate his employment
agreement and receive a lump sum of six months salary ($225,000). The employment
agreement also provides that Mr. Hillman receive a demand registration right
requiring the Company to file a shelf registration statement under the
Securities Act of 1933, as amended, registering the 735,701 shares of Common
Stock underlying the warrant held by Mr. Hillman.

Mr. Dwyer, the Company and Entertainment entered into an employment
agreement effective as of January 1, 1996 for an initial term of three years,
after which the agreement will continue from year to year unless terminated by
any party in his or its sole discretion on 90 days' notice given prior to the
expiration of the term. Effective December 19, 1996, Entertainment's obligations
under this employment agreement terminated. The agreement provides for an annual
base salary of $225,000 and a bonus payable at the discretion of the Company.

Mr. Gaan and the Company entered into an employment agreement effective as
of March 20, 1997 for an initial term of three years, after which the agreement
will continue from year to year unless terminated by either party in its
discretion on six months' notice given prior to the expiration of the term. The
agreement provides for a base salary of $225,000 per year and a bonus payable at
the discretion of the Company. In the event of a change in control of the
Company and Mr. Gaan were asked to leave the Company or, absent cause, Mr. Gaan
elects to terminate his employment because he has been constructively
terminated, Mr. Gaan will be paid a lump sum equal to 24 months base salary or
an amount equal to his base salary for the balance of the three-year term,
whichever is greater, and the greater of the average of the bonuses, if any,
paid by the Company to Mr. Gaan for the three prior years and the bonus, if any,
for the prior year. If a change in control

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<PAGE> 11

of the Company had occurred on April 30, 1998 and Mr. Gaan was subsequently
asked to leave the employ of the Company, Mr. Gaan would be entitled to a
payment of $540,000 under his employment agreement.

Mr. Morgan, the Company and Entertainment entered into an employment
agreement effective as of January 1, 1996 for an initial term of three years,
after which the agreement will continue from year to year unless terminated by
any party in his or its sole discretion on 60 days' notice given prior to the
expiration of the term. Effective December 19, 1996, Entertainment's obligations
under this employment agreement terminated. The agreement provides for an annual
base salary of $175,000 and a bonus payable at the discretion of the Company.

Mr. Wildman and the Company entered into an employment agreement effective
as of October 7, 1996 for an initial term of two years, after which the
agreement will continue from year to year unless terminated by either party in
his or its sole discretion on 60 days' notice given prior to the expiration of
the term. The agreement provides for an annual base salary of $200,000 and a
bonus payable at the discretion of the Company, which shall not be less than
$40,000. In the event of a change in control of the Company and the successor in
control, without cause, terminates the agreement, Mr. Wildman will be paid a
lump sum equal to 12 months base salary or an amount equal to his base salary
for the balance of the two-year term, whichever is greater, and the greater of
the average of the bonuses, if any, paid by the Company to Mr. Wildman for the
two prior years and the bonus, if any, for the prior year. For purposes of the
agreement, if Mr. Wildman is constructively terminated by the successor in
control, the successor in control shall be deemed to have terminated Mr. Wildman
without cause. If a change in control of the Company had occurred on April 30,
1998 and Mr. Wildman was subsequently asked to leave the employ of the Company,
Mr. Wildman would be entitled to a payment of $300,000 under his employment
agreement.

MANAGEMENT RETIREMENT SAVINGS PLAN

The Board of Directors has adopted the Bally Total Fitness Holding
Corporation Management Retirement Savings Plan (the "Retirement Plan"). The
Retirement Plan is a deferred compensation plan designed to permit a select
group of management or highly compensated employees to enhance the security of
themselves and their beneficiaries following retirement or other termination of
their employment. The Retirement Plan is intended to be an unfunded "employee
pension benefit plan" under the Employee Retirement Income Security Act of 1974,
as amended, and is maintained by the Company. The Retirement Plan is not
intended to be qualified under the Internal Revenue Code of 1986, as amended
(the "Code"). The Board of Directors, in its sole discretion, designates those
members of management or highly compensated employees who are eligible to
participate in the Retirement Plan.

The amount of compensation that may be deferred is presently limited
pursuant to a schedule based upon the age of the participant at the beginning of
or during the compensation year. For participants who are less than 50 years of
age, a maximum of 25% of compensation may be deferred; for those who are 50 to
54 years of age, a maximum of 50% of compensation may be deferred; for those who
are 55 to 59 years of age, a maximum of 75% of compensation may be deferred; and
for those participants who are 60 years of age or older, a maximum of 100% of
compensation may be deferred. During 1997, the Company provides a matching
contribution of 50% of the first 10% of eligible compensation the participant
defers and 0% thereafter. Matching contributions are credited to a participant's
matching account and become vested as follows: after one but less than two Years
of Deferral (as defined) they become 33 1/3% vested, after two but less than
three Years of Deferral they become 66 2/3% vested, and after more than three
Years of Deferral they become fully vested. For this purpose, a "Year of
Deferral" is credited with respect to a matching contribution for each completed
calendar year commencing after the calendar year for which the matching
contribution was made. A participant who separates from service will receive his
benefits under the Retirement Plan in a lump sum. As soon as possible (but not
later than five business days) after a change in control of the Company (as
defined), all of the participants' accounts will become 100% vested.

For 1997, the Company will contribute $387,332 to the accounts of all
participants in the Retirement Plan, of which $48,411 is allocated to the
accounts of all executive officers of the Company as a group. Named

9
<PAGE> 12

Executive Officers receiving allocations are as follows: Mr. Hillman $18,750,
Mr. Dwyer $11,250, and Mr. Morgan $8,548.

1997 BONUS PLAN

In February 1997, the Compensation Committee of the Board of Directors
adopted the Bally Total Fitness Holding Corporation 1997 Bonus Plan (the "Bonus
Plan"). The purpose of the Bonus Plan is to provide an additional performance
incentive for certain senior executive and area management of the Company for
1997, 1998 and 1999 (the "Plan Years"). The Compensation Committee, based upon
the recommendation of the Company's management, determines those employees who
participate in the Bonus Plan.

Two pools of participants are designated, with Pool One limited to the
Company's senior executive management and Pool Two limited to the Company's
senior area management. The bonuses for each of the pools of participants are
based on increases in the Company's earnings for a Plan Year before interest,
taxes, depreciation and amortization ("EBITDA") from the immediately preceding
year (without giving effect, for Plan Year 1997, to the restatement of the
Company's 1996 consolidated financial statements). Pool One and Pool Two receive
allocations of 10% and 6% of the EBITDA increases for a Plan Year, respectively.
Each participant in a pool has a determined participation percentage of the
amount allocated to the respective pool, which is based upon the participant's
responsibilities and contributions for the Plan Year. The participation
percentages are designated by the Compensation Committee and are awarded in a
manner such that the sum of the participation percentages relating to each pool
will not exceed 100% of that pool. Each participant's share of the bonus amount
for a Plan Year will equal the individual's participation percentage for the
Plan Year multiplied by the amount allocated to the respective pool for such
Plan Year. The bonus amounts are payable by March 15th of the calendar year
following the Plan Year as follows: Plan Year 1997 bonus -- 50% of the bonus for
1997 to be paid by March 15, 1998; Plan Year 1998 bonus -- 50% of the bonus for
1997 and 50% of the bonus for 1998 to be paid by March 15, 1999; and Plan Year
1999 bonus -- 50% of the bonus for 1998 and 100% of the bonus for 1999 to be
paid by March 15, 2000; provided, however, if the Company's EBITDA for the year
following a Plan Year does not equal or exceed the EBITDA for that Plan Year,
any unpaid bonus relating to that Plan Year (the 50% to be paid in the second
year following the Plan Year) is limited by a Carryover Maximum (as defined),
and any excess of the unpaid bonus over the Carryover Maximum shall be
forfeited. To the extent that the Company's federal income tax deduction for
remuneration to a participant is limited by Section 162(m) of the Code, payments
under the Bonus Plan are deferred (with interest) until Section 162(m) no longer
limits the deduction.

The determination of the participants and their participation percentages
by the Compensation Committee remains in effect until participation ceases. A
person ceases to be a participant immediately upon termination of employment
with the Company for any reason whatsoever. A person who ceases to be a
participant forfeits entitlement to future payments hereunder, other than
amounts deferred because of the Section 162(m) limitation.

10
<PAGE> 13

STOCK OPTION AND SAR GRANTS

The following table sets forth certain information regarding options to
purchase Common Stock granted to the Named Executive Officers during 1997.

OPTION/SAR(1) GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(3)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED(#)(2) FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
- ---------------------------------- ------------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lee S. Hillman 125,000 17.1 17.5625 11/21/07 1,380,620 3,498,763

John W. Dwyer 20,000 2.7 12.00 8/6/07 150,935 382,498
25,000 3.4 17.5625 11/21/07 276,124 699,753

Cary A. Gaan 15,000 2.1 17.5625 11/21/07 165,674 419,852

Harold Morgan 15,000 2.1 17.5625 11/21/07 165,674 419,852

John H. Wildman 15,000 2.1 17.5625 11/21/07 165,674 419,852
</TABLE>

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

(1) There have been no SARs granted by the Company to date.

(2) One-third of the options granted may be exercised on the first anniversary
of the date of grant, two-thirds after two years from the date of grant and
100% after three years from the date of grant. Each grant was made on the
date which is ten years prior to the date of expiration set forth in the
table.

(3) The potential realizable values represent future opportunity and have not
been reduced to present value in 1997 dollars. The dollar amounts included
in these columns are the result of calculations at assumed rates set by the
Commission for illustration purposes. These rates are not intended to be a
forecast of the Common Stock price and are not necessarily indicative of
the values that may be realized by the Named Executive Officer. The
potential realizable values are based on arbitrarily assumed annualized
rates of stock price appreciation of 5% and 10% over the full ten-year term
of the options. For example, in order for an individual named above who
received options with an exercise price of $17.5625 per share to realize
the potential values set forth in the 5% and 10% columns in the table
above, the price per share of the Common Stock would have to be
approximately $28.61 and $45.55, respectively.

11
<PAGE> 14

STOCK OPTION AND SAR EXERCISES

The following table sets forth certain information concerning exercises of
stock options during 1997 by each of the Named Executive Officers and their
stock options outstanding as of December 31, 1997.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES(1)

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL AT FISCAL
YEAR-END(#) YEAR-END($)(2)
SHARES ---------------- ----------------
ACQUIRED ON VALUE EXERCISABLE(E)/ EXERCISABLE(E)/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE(U) UNEXERCISABLE(U)
- --------------------------------------- ----------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Lee S. Hillman -- -- 50,000(E) 837,500(E)
225,000(U) 2,214,063(U)

John W. Dwyer -- -- 11,667(E) 207,089(E)
68,333(U) 719,473(U)

Cary A. Gaan -- -- 11,667(E) 207,089(E)
38,333(U) 478,848(U)

Harold Morgan -- -- 11,667(E) 207,089(E)
38,333(U) 478,848(U)

John H. Wildman -- -- 15,000(E) 266,250(E)
45,000(U) 597,188(U)
</TABLE>

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

(1) There have been no SARs granted by the Company to date.

(2) Value is based on the closing price of a share of Common Stock as of
December 31, 1997 ($21.875) minus the exercise price.

12
<PAGE> 15

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The Company was a wholly owned subsidiary of Entertainment until the
Spin-off in January 1996. Prior to the Spin-off and the formation of the
Compensation Committee, the Company had entered into compensation arrangements
with a number of its key executives. Following the Spin-off and considering the
Company's situation at that time (historical losses and a need to improve cash
flows), the Compensation Committee determined that compensation should be tied
to increasing stockholder value and improving the Company's cash flows.
Consequently, the Compensation Committee has made significant grants of stock
awards and adopted the Bonus Plan, pursuant to which bonuses are granted based
on improvements in the Company's cash flow. Most of the bonus compensation paid
to key executives for 1997 was pursuant to the Bonus Plan. Allocation among the
key executives of the amounts available under the Bonus Plan, including
allocation to Lee S. Hillman, President and Chief Executive Officer of the
Company, was based on the Compensation Committee's subjective evaluation of each
executive's contribution to the Company during 1997. The prime factors
considered were contribution toward accomplishing the Company's strategic plan,
including improvement in the Company's financial position through the completion
of an equity offering and debt restructurings, and contribution toward the
Company's new initiatives and cost-cutting programs. The Compensation Committee
felt that Mr. Hillman's contributions in these areas were substantial and, with
the contributions of other key executives, were reflected in the price of the
Common Stock.

It was the Compensation Committee's view upon the Spin-off, and it remains
the view of the Compensation Committee today, that the use of stock options and
other stock awards aligns the interests of the Company's officers and other key
employees with those of the Company's stockholders. The objective of these
awards is to provide incentive to management to advance the long-term interests
of the Company and its stockholders. Stock options and other stock awards
produce value to management as the price of the Common Stock appreciates,
thereby directly linking the interests of management with those of the Company's
stockholders.

The Compensation Committee believes that the cumulative total return to the
Company's stockholders since January 9, 1996 (the date the Spin-off was
completed), which is set forth in the performance graph that follows, supports
the success of the Company's approach to compensation.

Compensation Committee,

Liza M. Walsh, Chairman
Aubrey C. Lewis
James F. Mc Anally, M.D.

13
<PAGE> 16

PERFORMANCE GRAPH

Comparison of Cumulative Total Return
from January 9, 1996 to April 30, 1998*
Bally Total Fitness Holding Corporation, S&P 500 Index and
Russell 2000 Consumer Discretionary and Services Index

<TABLE>
<CAPTION>
Measurement Dates Bally S&P 500 Russell 2000
<S> <C> <C> <C>
1/9/96 $100 $100 $100
12/31/96 165 124 117
12/31/97 455 165 142
4/30/98 639 190 164
</TABLE>

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

* Assumes $100 invested in Bally Total Fitness Holding Corporation Common Stock,
the S&P 500 Index and the Russell 2000 Consumer Discretionary and Services
Index on January 9, 1996, the date the Spin-off was completed. Total return
for the S&P 500 Index and the Russell 2000 Consumer Discretionary and Services
Index assumes reinvestment of dividends; there were no dividends declared on
Bally Total Fitness Holding Corporation Common Stock.

14
<PAGE> 17

TRANSACTIONS WITH MANAGEMENT

A partnership in which Mr. Goldberg is a 20% limited partner purchased a
facility in February 1993 from the Federal Deposit Insurance Corporation and
sold the facility in March 1998. The Company leases this facility for one of its
fitness centers. The rent did not change as a result of these transfers pursuant
to the lease for this facility. Rent is approximately $808,000 per year and is
subject to 15% increases at five- and ten-year intervals. The proportionate
share of the 1997 rent for Mr. Goldberg was approximately $162,000. The Company
believes that the terms of this lease are at least as favorable to the Company
as those which could be obtained from unrelated parties. During 1997, the
Company paid approximately $815,000 for goods and services from a company which
employed a relative of Mr. Hillman. Based on the Company's receipt of
competitive bids for similar items, the Company believes that the terms of these
arrangements are at least as favorable to the Company as those which could be
obtained from unrelated parties.

AUDITORS

The Board of Directors, upon the recommendation of the Audit Committee, has
approved the selection of Ernst & Young LLP as the Company's independent
auditors for 1998. Representatives of Ernst & Young LLP will be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.

OTHER BUSINESS

In addition to the matters described above, there will be a brief
presentation by the President and Chief Executive Officer and a general
discussion period during which stockholders will have an opportunity to ask
questions.

Management knows of no other business to be presented for action at the
Annual Meeting. If other matters properly come before the Annual Meeting or any
adjournment thereof, the persons named as proxies will vote upon them in
accordance with their best judgment.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Company is required to identify any director, executive officer,
beneficial owner of more than ten percent of the Common Stock or any other
person subject to Section 16 of the Exchange Act that failed to file on a timely
basis, as disclosed in their forms, reports required by Section 16(a) of the
Exchange Act. Based on a review of forms submitted to the Company, the Company
believes that during 1997 all such filing requirements were complied with by its
directors and executive officers except for late filings of Form 4's for Mr.
Morgan and Mr. Wildman for shares of Common Stock acquired in August 1997, and
David M. Tolmie for shares of Common Stock sold in September 1997. Mr. Tolmie
served as Senior Vice President, New Business Development of the Company through
September 12, 1997, when he resigned as an officer and employee of the Company.

EXPENSE OF SOLICITATION

The cost of this solicitation will be borne by the Company. In addition to
the use of the mail, proxy solicitation may be made by telephone, telegraph and
personal interviews by regular employees of the Company. The Company has
retained MacKenzie Partners, Inc., 156 Fifth Avenue, New York, New York 10010,
to assist in the soliciting of proxies and will pay that firm a fee of $6,500,
plus out-of-pocket expenses for such services. The Company will also reimburse
brokerage houses and others for forwarding proxy materials to beneficial owners
of Common Stock.

15
<PAGE> 18

STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING

The Company expects to hold its next Annual Meeting of Stockholders before
June 30, 1999. Accordingly, stockholder proposals for inclusion in the proxy
materials relating to the next Annual Meeting must be received by the Company at
its principal executive offices on or before February 1, 1999. Stockholder
proposals should be directed to Cary A. Gaan, Secretary, Bally Total Fitness
Holding Corporation, 8700 West Bryn Mawr Avenue, Chicago, Illinois 60631.

ANNUAL REPORT

A copy of the Company's 1997 Annual Report, which contains the consolidated
financial statements of the Company, accompanies this Proxy Statement. The
Company will provide without charge to any stockholder as of the Record Date who
so requests in writing copies of its Form 10-K and Form 10-K/A and, if
specifically requested, the exhibits thereto. Requests for such copies should be
directed to Cary A. Gaan, Secretary, Bally Total Fitness Holding Corporation,
8700 West Bryn Mawr Avenue, Chicago, Illinois 60631.

By Order of the Board of Directors,

Cary A. Gaan, Secretary

Chicago, Illinois
May 12, 1998

PLEASE EXECUTE, DATE AND RETURN PROMPTLY
THE ENCLOSED PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.

16
<PAGE> 19

[BALLY LOGO]

BALLY TOTAL FITNESS HOLDING CORPORATION
8700 WEST BRYN MAWR AVENUE
CHICAGO, ILLINOIS 60631
<PAGE> 20

PROXY PROXY

BALLY TOTAL FITNESS HOLDING CORPORATION
8700 West Bryn Mawr Avenue, Chicago, Illinois 60631

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Lee S. Hillman and Cary A. Gaan, or either of
them, proxies of the undersigned with full power of substitution, to vote all
shares of the undersigned at the Annual Meeting of Stockholders of Bally Total
Fitness Holding Corporation (the "Company") to be held at 9:00 a.m. (local time)
on June 11, 1998 at the Company's fitness center located at 25 Broadway
(intersection of Broadway and Greenwich Street), New York, New York 10004 (the
"Annual Meeting") or at any postponement or adjournment thereof.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NUMBER (1).

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL NUMBER (1). SEE REVERSE SIDE.

(Comments/Change of Address)

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

------------------------------
(If you have written in the
above space, please mark the
corresponding box on the
reverse side)

................................................................................

* FOLD AND DETACH HERE *

ENTRANCE PASS -- 1998 ANNUAL MEETING OF STOCKHOLDERS

THIS IS AN ENTRANCE PASS FOR THE 1998 ANNUAL MEETING
OF STOCKHOLDERS OF BALLY TOTAL FITNESS HOLDING CORPORATION.
IN ORDER TO ATTEND THE ANNUAL MEETING, YOU MUST BRING THIS PASS WITH YOU.
----

<PAGE> 21
<TABLE>
<CAPTION>
BALLY TOTAL FITNESS HOLDING CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /

FOR WITHHELD FOR ALL
ALL ALL EXCEPT
<S> <C> <C> <C> <C>
1. Election of the following Class II director / / / / / / 2. In their discretion on all other matters
nominees for three-year terms expiring in 2001: as may properly come before the Annual
Lee S. Hillman Meeting.
James F. Mc Anally, M.D.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL
THE ABOVE NOMINEES.

-------------------------------------------------
Nominee Exception

Comments/ Date:
Change ------------------------------------ , 1998
of
Address / /
-------------------------------------------
Signature(s)

-------------------------------------------
Signature(s)

Note: Please sign as name
appears hereon. Joint owners
should each sign. When signing
as attorney, executor,
administrator, trustee, or
guardian, please give full
title as such.

...................................................................................................................................

* FOLD AND DETACH HERE *

PLEASE VOTE, SIGN EXACTLY AS NAME APPEARS ABOVE, DATE, AND RETURN PROMPTLY
THIS PROXY FORM IN THE POSTAGE-PAID ENVELOPE PROVIDED.

</TABLE>