Bally Total Fitness Seeks Shareholder Support Based on Its Success in Improving Operating Results

In a letter to shareholders, Bally Total Fitness (NYSE:BFT), thenation's leader in health and fitness, asked investors to support theCompany's current management team, its turnaround strategy, and itsslate of directors for election at the January 26 shareholdersmeeting, which is being contested by two hedge funds. "The Company'sresults show that our turnaround is working and we are enhancing valuefor shareholders," said Paul Toback, Chairman and CEO of Bally.

"After attempting for several months to reach a settlement withPardus and Liberation, it has become clear to Bally's Board ofDirectors and management that the sole agenda of these two hedge fundsis to disrupt the Board's strategic process in favor of their ownnarrow interests, rather than putting forth a plan that would delivervalue for all shareholders," Toback said.

Bally's Board of Directors has retained two highly qualifiedadvisors -- J.P. Morgan Securities Inc. and The Blackstone Group -- torun a fair and transparent strategic process to address the Company'scapital structure issues. In order to keep the process beyondreproach, Bally's management has made it clear it has no intention ofputting together a proposal to purchase the Company and has committednot to align itself with any bidder in the process until a winningbidder has been chosen.

The letter is provided below in its entirety:-0-

January 6, 2006

DEAR SHAREHOLDER:

Bally Total Fitness recently mailed you its proxy statement forthe Company's January 26, 2006 shareholder meeting. We urge you tovote your proxy in support of Bally's Board of Directors andmanagement team, which has made significant progress in turning aroundand transforming the Company's business. We also will provide someinsights into what we believe are the questionable motives underlyingother proxy proposals that we believe are designed to advance theinterests of a narrow group of shareholders rather than benefiting theCompany or the majority of shareholders.

When new management began running Bally three years ago, weestablished three important goals:

-- Turn around the Company's sagging operational performance,

-- Restore confidence in the integrity of the financial statements, and

-- Address the Company's debt-heavy capital structure we inherited.

As our recent restatements clearly demonstrate, we have madesignificant progress on all three of these critical goals and havemade Bally better operationally, stronger financially, and morecredible with auditors, regulators and investors. In addition, withthe recently announced strategic process being led by J.P. MorganSecurities Inc. and The Blackstone Group, we are also addressing thelast major near-term issue facing Bally.

We have structured this letter as a series of questions andanswers to help frame the issues and inform your thinking about how tocast your vote with regard to your Bally shares.

Q: What is the track record of Bally's current management team?

A: Management has made tremendous progress in turning Ballyaround, significantly growing operating income and correcting anextraordinary number of past accounting issues. The Company's recentlyreported results clearly tell the story of this team's success. Almostall financial measures have dramatically improved in the last threeyears. Costs are down, revenues are up, and Bally is returning toprofitability and is positioned for strong future performance.

A comparison of Bally's performance across key metrics from theperiods 2000 through the first nine months of 2005 shows compellingimprovement across the board after the Company's management changed inDecember 2002. (Note: Data is presented in thousands, except permember data and fitness centers.)

A Dramatic Improvement in Results

PREVIOUS MANAGEMENT NEW MANAGEMENT
---------------------------------------------------------
Performance 2000 2001 2002 2003 2004 2005
Data (Re- (Re- (Re- (Re- 9 months
stated) stated) stated) stated) only
----------------------------------------------------------
Net
revenues $735,560 $810,088 $937,847 $1,002,871 $1,047,988 $807,489
Operating
income
(loss)
before
impairment
charges(1) (20,776) 1,824 (13,989) 35,231 53,393 61,697
New members 891 908 935 965 1,165 951
End of
period
members 3,556 3,541 3,542 3,616 3,645 3,676
Average
monthly
membership
revenue
recognized
per member 15.67 16.70 18.71 19.11 19.17 19.70
Fitness
centers 384 405 410 417 416 412


(1) The Company believes that this non-GAAP financial metric provides
a better understanding of the Company's current financial
performance and the Company's prospects for the future.
Specifically, the Company believes the non-GAAP results provide
useful information to both management and investors by excluding
non-cash impairment charges, which may not be indicative of core
operating results. A reconciliation of Operating Income (Loss)
Before Impairment Charges to Operating Income (Loss) is included
at the end of this letter.

Q: Why is the Company pursuing a strategic alternatives processwith J.P. Morgan Securities Inc. and The Blackstone Group, and is thisBoard the best group to lead that process?

A: In addition to executing our business plan, in order tostrengthen operations, it is imperative that we address the challengeour current capital structure poses. To that end, the Board hasretained two highly qualified advisors to run a fair, open andtransparent process.

-- This Board is committed to an independent and value-creating strategic alternatives process led by our independent directors.

-- We have engaged J.P. Morgan Securities Inc. and The Blackstone Group to assist us in exploring a range of alternatives to enhance value for all of our shareholders. These alternatives may include a recapitalization, the sale of securities or assets of the Company, or the sale or merger of the Company with another entity or strategic partner.

-- Bally management has no intention of putting together a proposal to purchase the Company and has committed not to align itself with any bidder in the process until a winning bidder has been chosen.

Q: Why did management recently sell some of its holdings in Ballystock and why now?

A: Because the Company had been in a quiet period resulting fromnot filing financial statements since May 2004, some members ofmanagement decided to sell certain holdings of previously restrictedCompany stock in connection with personal tax planning ordiversification needs.

-- Management believes wholeheartedly in Bally's future, and the Company's Directors and Officers as a group continue to collectively beneficially own approximately 4.7% of Bally stock.

-- In the middle of 2005, Liberation caused most senior management's restricted stock to vest when it acquired more than 10% of the Company's stock.

-- That action created a tax liability for all but two of Bally's executives for the 2005 tax year that in many cases was a six-figure liability.

-- In addition, due to the 18-month quiet period associated with restating Bally's financials, the two weeks between December 1 and December 16, 2005 was the only window since May 2004 and until May 2006 during which members of senior management could trade Bally stock.

-- Many of Bally's senior executives have most of their net worth in Bally stock and have needed to diversify their holdings for some time.

Q: Who are Pardus and Liberation? How could two new hedge fundswith no track record in turning around companies possibly create morevalue for Bally shareholders than the new Board and management teamthat are fixing Bally on behalf of shareholders? What are Pardus' andLiberation's plans for operating the business or conducting thestrategic process?

A: Pardus and Liberation are both hedge funds with no publiclyannounced plan of their own to manage Bally or sell or refinance theCompany. Pardus and Liberation have agitated and attempted todiscredit Bally's management and Board. We believe they want tocontrol the Company and the strategic process without paying a controlpremium to all shareholders.

-- Pardus wants effective control without paying a fair premium to Bally shareholders and without a fair and transparent bidding process for such control.

-- Pardus asked the Company to waive certain legal requirements under Delaware law so that they could acquire as much as 30% of the Company's stock.

-- Liberation began acquiring shares in the Company after new Bally management terminated Emanuel Pearlman's longstanding consulting role with the Company, during which he was a well-paid advisor to the Company while Lee Hillman, Bally's former CEO and Pearlman's close friend, was CEO.

-- From 1992 to 2003, Mr. Pearlman received at least $3.4 million from Bally, an average of $283,000 per year, in consulting and investment advisory fees for transactions he promoted for the Company and its affiliates, which often proved to be ill conceived.

-- Pardus, a new hedge fund formed in 2005 by Karim Samii, a vulture investor primarily in debt securities of bankrupt or troubled companies, began acquiring Bally stock in July 2005. In return for its newly purchased 14% stake in the Company, Pardus demanded 5 of Bally's 9 board seats -- not for truly independent representatives, but for a Pardus advisory committee representative, a former business associate of the Pardus principals and Don Kornstein, Mr. Pearlman's longtime associate.

-- Pardus has indicated that they would like to lead a private recapitalization of the Company, and we believe their efforts in this contest are intended to mostly benefit Pardus.

-- Principals of Pardus have met with management several times and each time threatened that if they didn't get what they "demanded" they would "go to war" with the Company and its Board and management.

Q: Why won't the Company settle this dispute with Liberation andPardus since it is distracting and costly?

A. The Company has been attempting to settle for months andalready agreed to take two of the Pardus directors with no conditions.Pardus and Liberation have rejected every one of the Company's offersand continue to insist on settlement terms that we believe aredesigned to disrupt the strategic process.

-- The proposals made by Bally's directors and management, some of which have been made public, are more than fair and reasonable. We have already agreed to nominate two of the directors Pardus proposed without any conditions. That represents more than 20% of the Board, which seems more than appropriate given that Pardus owns just slightly more than 14% of the Company's stock.

-- Bally has offered Pardus and Liberation additional concessions privately to settle this costly dispute, but they have refused all overtures, instead often increasing their demands or adding new ones.

-- Pardus publicly asked the Board to appoint a special committee to control the strategic process which the Pardus representatives would control while at the same time Pardus expressed an interest in participating in a strategic transaction that would need approval from that very committee.

-- Liberation, in particular, wants to immediately fire Bally's CEO despite the improvement in the Company's results and while it is in the midst of a strategic process to refinance and possibly sell the Company, during which time uncertainties as to management stability could only hurt the process.

Q: Are Pardus and Liberation working together in a concertedeffort to disrupt our strategic alternatives process?

A: You should consider the facts and reach your own conclusion:

-- Liberation made repeated threats to replace Bally's Board members with its own candidates but decided not to run any directors after Pardus announced it would nominate a slate. Liberation just put forth a proposal to fire Bally's CEO and solicit the authority to vote for the Pardus slate.

-- Pardus is promoting a slate with three directors, which includes one of Mr. Pearlman's old friends and colleagues, Don Kornstein.

-- Mr. Kornstein has known Mr. Pearlman for 17 years. In Mr. Kornstein's capacity as CEO, President and a Director of Jackpot Enterprises, Inc., Mr. Kornstein retained Mr. Pearlman to act as a financial advisor.

-- Mr. Pearlman nominated Mr. Kornstein, along with Mr. Hillman, to be on his insurgent board slate for InterTAN, Inc. in 2003.

-- When finally confronted with imminent depositions and other discovery ordered by the Delaware federal courts in litigation brought by Bally, Liberation amended its proxy materials to admit that it had suggested Mr. Kornstein to Pardus for the Pardus slate.

-- In 2002, Bally's CEO Lee Hillman proposed to the Bally Board that the Company be sold to HealthSouth just months before HealthSouth's accounting fraud became public and its stock was delisted and its CEO fired. The transaction would have had management's stock options purchased by HealthSouth for cash, while other Bally shareholders were to receive HealthSouth stock. Interestingly, a key financial advisor to Hillman on that proposed transaction was Mr. Pearlman.

-- When the Bally Board refused Mr. Hillman's request to sell the Company to HealthSouth (two of Bally's current directors were directors at that time), Mr. Hillman attempted to put two of his friends on Bally's board of directors -- Mr. Pearlman and Mr. Kornstein. The Board refused to add either candidate to the Board.

Q: Whom should Bally shareholders vote for and why?

A: We believe shareholders should vote Bally's WHITE proxy cardfor Bally's nominees. Because we have made concessions withoutconditions and agreed to nominate two of Pardus' candidates in anattempt to avoid a contest, the current contest is really only aboutwho is elected to the remaining spot: Eric Langshur, the independentdirector who led the Audit Committee effort to restate financials, orDon Kornstein, a loyalist of Mr. Pearlman, the friend of Bally'sformer discredited CEO. We also believe you should give us yoursupport to reject the Liberation proposals, which, if enacted, couldendanger the positive momentum at Bally and also could disrupt ortorpedo the strategic process already under way.

We think it all comes down to this--do you want your Company tocontinue implementing a well-conceived turnaround plan that isproducing results and is based on deep knowledge of the Bally businessand the health and fitness industry? Or do you want to support adissident former employee who has been closely associated with afailed strategy that has since been repudiated, working with a groupthat has no knowledge of the Company's business and no clear plan totake Bally forward? We think the answer is clear: Vote FOR Bally'snominees to continue progress under a plan that is working.

We strongly recommend that you vote FOR the Bally nominees bysigning, dating and returning the WHITE proxy card. We strongly urgeyou not to sign any green proxy card that may be sent to you by PardusCapital Management or a Gold proxy card that may be sent to you byLiberation Investments. If you have previously returned a green orgold proxy card, you can automatically revoke it by signing, datingand returning the enclosed WHITE proxy card in the accompanyingenvelope. We appreciate your continued support, and if you needassistance or have any questions, please call MacKenzie Partnerstoll-free at 800-322-2885 or collect at 212-929-5500.

Sincerely,

PAUL A. TOBACK

Chairman and CEO

Bally Total Fitness Holding Corporation

Reconciliation of Operating Income (Loss) Before Impairment
Charges to Operating Income (Loss):

Performance 2000 2001 2002 2003 2004 2005
Data (Re- (Re- (Re- (Re- 9 months
stated) stated) stated) stated)
----------------------------------------------------------------------
Operating
income
(loss)
before
impairment
charges $(20,776) $1,824 $(13,989) $35,231 $53,393 $61,697
----------------------------------------------------------------------
Impairment of
goodwill and
other
intangibles 7,396 1,801 1,619 54,505 405 --
----------------------------------------------------------------------
Asset
Impairment
Charges 33,039 26,281 18,258 19,605 14,772 --
----------------------------------------------------------------------
Operating
income
(loss) (61,211) (26,258) (33,866) (38,879) 38,216 61,697
----------------------------------------------------------------------

About Bally Total Fitness

Bally Total Fitness is the largest and only nationwide commercialoperator of fitness centers in the U.S., with nearly 440 facilitieslocated in 29 states, Mexico, Canada, Korea, China and the Caribbeanunder the Bally Total Fitness(R), Crunch Fitness(SM), GorillaSports(SM), Pinnacle Fitness(R), Bally Sports Clubs(R) and SportsClubs of Canada(R) brands. Bally offers a unique platform fordistribution of a wide range of products and services targeted toactive, fitness-conscious adult consumers.

Forward-looking statements in this release including, withoutlimitation, statements relating to the Company's plans, strategies,objectives, expectations, intentions, and adequacy of resources, aremade pursuant to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995. These forward-looking statementsinvolve known and unknown risks, uncertainties, and other factors thatmay cause the actual results, performance or achievements of theCompany to be materially different from any future results,performance or achievements expressed or implied by suchforward-looking statements.