CONFIDENTIAL SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE
This Confidential Settlement Agreement and Mutual General Release is made and entered into on
this 13th day of June 2007 (the “Effective Date”), by and between Xxxxx X. XxXxxxxx, on behalf of
himself, his heirs, executors, administrators, successors and/or assigns (hereinafter collectively
referred to as “MCDONALD”), and Bally Total Fitness Holding Corporation, on behalf of itself, its
subsidiaries, affiliates, predecessors, insurers, attorneys, successors, assigns, and their
directors, officers, employees, and agents (hereinafter collectively referred to as the “COMPANY”
or “BALLY”).
WHEREAS, MCDONALD has been employed by the COMPANY under the title of Senior Vice President
and Chief Marketing Officer of BALLY since May 2, 2005; and
WHEREAS, MCDONALD and the COMPANY entered into an Employment Agreement dated May 2, 2005 (the
“Employment Agreement”) (attached hereto as Exhibit A); and
WHEREAS, the COMPANY seeks to terminate MCDONALD’s employment, and the COMPANY and MCDONALD
have agreed that MCDONALD’S employment with the COMPANY shall terminate on June 29, 2007 (the
“Termination Date”);
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, it is
agreed as follows:
Employment Status
1. MCDONALD shall cease to be required to work from the COMPANY’s offices on the date hereof,
but, through the Termination Date, shall remain (i) an employee of the COMPANY and available for
telephone calls, meetings and all transitional issues and (ii) compensated on the COMPANY’s regular
payroll.
Payments and Benefits to MCDONALD
2. The COMPANY shall pay MCDONALD two payments equal to $262,500 each, in severance, less
required deductions for state and federal withholding. The first payment shall be paid on the date
hereof and the second payment shall be paid on the Termination Date provided this Agreement is not
revoked in accordance with the provisions of Paragraph 31 below.
3. Upon execution of this Agreement, MCDONALD shall immediately vest in 55,000 shares of
restricted stock previously granted to him on November 29, 2005. Notwithstanding any provision to
the contrary in any other agreement governing such shares of restricted stock, MCDONALD may only
sell shares of the restricted stock which have become vested with the permission of Xxxx Xxxxxxxxx,
the COMPANY’s Senior Vice President, Secretary and General Counsel, which permission shall not be
unreasonably withheld.
4. The COMPANY shall provide a monthly payment, on the first payroll date of each month but
not beginning until the first payroll date next following the expiration of the revocation period
of the release (as described in Paragraph 31 below), equal to the premium cost that the COMPANY
would incur during that month to maintain medical coverage for MCDONALD and his eligible
dependents, on substantially the same terms as the coverage that existed immediately prior to
MCDONALD’s Termination Date, as the same may be changed from time to time for employees generally,
for a period of 18 months or until the date on which MCDONALD is eligible for coverage under a plan
maintained by a new employer (including self-employment but excluding where MCDONALD would be
required to pay for or bear the full cost of the coverage), whichever is sooner, less the amount
that MCDONALD would be required to contribute for medical coverage, if any, if MCDONALD were an
active employee of
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the COMPANY. MCDONALD shall notify the COMPANY within five (5) business days of the date
MCDONALD is eligible to receive benefits under the medical plan of a new employer (including
self-employment). The COBRA health care continuation coverage period under section 4980B of the
Internal Revenue Code of 1986, as amended (the “Code”), shall run concurrently with the foregoing
eighteen-month period.
5. On each date on which a payment is made under Paragraph 4 above, the COMPANY will pay
MCDONALD an additional tax gross-up amount equal to the federal, state and local income and payroll
taxes that MCDONALD incurs on the amount paid under Paragraph 4 and on the amount paid under this
Paragraph 5, on that date. This gross up payment will be made with respect to each payment under
Paragraph 4, and will cease when payments under Paragraph 4 cease.
6. The COMPANY shall reimburse MCDONALD for the cost to store his household goods currently in
storage for a period not to exceed six (6) months following the Termination Date. In addition,
Bally shall reimburse MCDONALD for the cost of having such household goods moved to a new location.
Reimbursement payments shall be made to MCDONALD within two (2) weeks of the receipt of written
documentation supporting the charge.
7. All reimbursements and in kind benefits, if any, provided under this Agreement shall be
made or provided in accordance with the requirements of section 409A of the Code, including, where
applicable, the requirement that (i) the amount of expenses eligible for reimbursement, or in kind
benefits provided, during a fiscal year may not affect the expenses eligible for reimbursement, or
in kind benefits to be provided, in any other fiscal year, (ii) the reimbursement of an eligible
expense will be made on or before the last day of the fiscal year
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following the year in which the expense is incurred, and (iii) the right to reimbursement or
in kind benefits is not subject to liquidation or exchange for another benefit.
8. The COMPANY shall provide life insurance coverage to MCDONALD to the same extent and under
the same terms as provided in Section 4(i) of the Employment Agreement for a period of eighteen
(18) months following the Termination Date.
9. Contemporaneous with the execution hereof, the COMPANY shall pay MCDONALD the sum of
$9,000.00 for his attorneys’ fees incurred in connection with the review, negotiation and
preparation of this Agreement.
Release to the COMPANY
10. In exchange for the consideration provided pursuant to this Agreement, and expressly
excluding their obligations under this Agreement, MCDONALD and the COMPANY each hereby release the
other from any and all claims or causes of action arising out of or relating in any way to
MCDONALD’S employment with the COMPANY and/or the termination of that employment. The claims
released include, but are not limited to: (a) the Illinois Revised Statutes, the Illinois Human
Rights Act, Illinois Public Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination
in Employment Act, the Americans with Disabilities Act, the Rehabilitation Act, the Employee
Retirement Income Security Act, the Uniformed Services Employment and Reemployment Rights Act of
1994, the Xxxxxxxx-Xxxxx Act of 2002, and the Family and Medical Leave Act; (b) all claims arising
under the United States or Illinois Constitutions, or any Executive Order, or derived from or based
upon any federal or state regulations; (c) all common law claims including claims for wrongful
discharge, violation of public policy, breach of an express or implied contract, breach of an
implied covenant of good faith and fair dealing, negligent or intentional infliction of emotional
distress, defamation,
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conspiracy, tortuous interference with contract or prospective economic advantage, promissory
estoppel, equitable estoppel, fraud, misrepresentations, detrimental reliance, retaliation, and
negligence; (d) all claims for any compensation including back wages, front pay, bonuses or awards,
commissions, fringe benefits, car allowance, car expenses, disability benefits, severance benefits,
reinstatements, retroactive seniority, pension benefits, profit-sharing, contributions to 401(k)
plans, or any other form of economic loss; (e) all claims for personal injury, including physical
injury, mental anguish, emotional distress, pain and suffering, embarrassment, humiliation, damage
to name or reputation, interest, liquidated damages, and punitive damages; and (f) all claims for
costs and attorneys’ fees.
Notwithstanding the foregoing, nothing in this Paragraph 8 is intended, nor shall be
construed, to release any future claims arising after the date of execution of this Agreement or to
limit any existing right or vested benefits which MCDONALD may possess in accordance with the terms
of any of the COMPANY’s welfare benefit plans or pension plans in which MCDONALD is a participant.
MCDONALD further represents that he will not provide information concerning the COMPANY or his
employment at the COMPANY to any person involved in any threatened or actual claims against the
COMPANY except pursuant to a lawful subpoena. Further, except concerning any Securities and
Exchange Commission or Department of Justice proceeding, MCDONALD will not testify in any
proceedings or participate in any manner in proceedings against the COMPANY absent a lawful
subpoena and will not testify concerning the terms of this Agreement, including the negotiations
leading up to this Agreement, absent a lawful subpoena or a court order compelling such testimony,
or permission from the Company (which shall not be unreasonably withheld). MCDONALD further agrees
to notify the COMPANY,
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through Bally’s Senior Vice President, Secretary and General Counsel, that he is served with any
subpoena relating to his employment at the COMPANY.
Restrictive Covenants
11. MCDONALD reaffirms that the restrictive covenants contained in Section 5 of the Employment
Agreement are incorporated in this Agreement and shall continue to apply to MCDONALD after the
Termination Date in accordance with the terms of the Employment Agreement.
No Other Charges or Complaints
12. The COMPANY represents that as of the Effective Date it has no knowledge of any grounds on
which to file any complaint, charge or lawsuit against MCDONALD with any government agency or any
court, and that it has not filed any complaint, charge or lawsuit against MCDONALD with any
government agency or any court. The COMPANY further represents that it will not do so at any time
hereafter in connection with any known claims based on any event preceding the execution of this
Agreement, including any claim related to MCDONALD’s employment, termination or association with
the COMPANY.
Indemnification
13. The Company agrees to indemnify MCDONALD to the same extent as MCDONALD is currently
eligible to be indemnified under the bylaws and charter of the COMPANY, as in effect on the date
hereof and without regard to any subsequent changes. Copies of the relevant provisions of the
by-laws and charter of the COMPANY as in effect on the date hereof are attached hereto as Exhibit
A.
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Non-Disparagement
14. MCDONALD agrees not to make any statements to, or engage in any conduct in the presence
of: (i) any media (broadcast, print or internet); (ii) any current or former employees of the
COMPANY; or (iii) any current, former or prospective COMPANY customer, business associate, vendor,
consultant, financial institution, accountant, investor, shareholder, bondholder, investment banker
or any other person or entity, if such statement or conduct may reasonably be expected to have the
effect of disparaging the COMPANY or its current or former directors, officers or employees.
Notwithstanding the foregoing, nothing in this Paragraph shall prohibit MCDONALD from making
truthful statements when required by subpoena or order of a court or other governmental body having
jurisdiction.
15. The COMPANY further agrees that no officer or director shall make any statement or engage
in any conduct in the presence of any third party, if such conduct may reasonably be expected to
have the effect of disparaging MCDONALD. Notwithstanding the foregoing, nothing in this Paragraph
shall prohibit the COMPANY from making any truthful statements when required by order of a court or
other governmental body having jurisdiction.
Non-Admission of Liability
16. This Settlement Agreement and General Release shall not constitute and shall not be
considered an admission or acknowledgment of any wrongdoing or liability by MCDONALD and/or the
COMPANY, the same being expressly denied.
Non Disclosure
17. Unless the COMPANY publicly discloses the terms of this Agreement, MCDONALD agrees that
the existence, terms and content of this General Release and Settlement Agreement shall be and
remain confidential and shall not be disclosed to any other
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person, corporation or organization, except: (i) members of MCDONALD’s immediate family, and
MCDONALD’s accountant(s), financial advisor(s) and attorney(s) (all of whom shall be directed to
refrain from disclosing the existence, terms and content of this Agreement); (ii) the Internal
Revenue Service and/or applicable state agency, and any applicable courts or administrative
agencies as necessary in connection with tax returns, tax audits or other requests for information
from such agencies; or (iii) as required by law or the rules and regulations of the Securities and
Exchange Commission in connection with that agency’s inquiries into actions by the COMPANY or
MCDONALD other than as permitted by this Paragraph 17. MCDONALD shall be liable for any breach to
the extent of any damages proven and/or sustained by BALLY, and BALLY further shall be entitled to
injunctive relief based on any breach of this provision, it being understood and agreed that the
COMPANY may seek to proceed to expedited arbitration based on an alleged breach of this provision.
No Other Consideration
18. MCDONALD and the COMPANY agree that the only consideration they have received for
executing this Agreement is the consideration set forth herein; that no promise, inducement,
threat, agreement or understanding of any kind or description has been made with them or to them or
their attorneys to cause them to enter into this Agreement other than as expressly set forth
herein; and that they neither are entitled to nor will seek any further or additional
consideration.
Breach and/or Enforcement of Agreement
19. Any disputes relating to enforcement and/or breach of this Agreement shall be resolved
through binding arbitration held in Chicago, Illinois, in accordance with the rules of the
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American Arbitration Association and the prevailing party shall be entitled to costs and
reasonable attorneys’ fees based on the action.
Cooperation
20. MCDONALD will assist and cooperate with the COMPANY in connection with the defense or
prosecution of any claims made against or by the COMPANY or in connection with any ongoing or
future investigation or dispute or claim of any kind involving the COMPANY, including any
proceeding before any arbitral, administrative, judicial, legislative, or other body or agency,
including testifying in any proceeding to the extent that the COMPANY believes that MCDONALD’S
testimony is relevant to the proceeding. MCDONALD will also perform all acts and execute and
deliver any documents that may be reasonably necessary to carry out the provisions of this
Paragraph. In seeking MCDONALD’S cooperation and assistance, the COMPANY will reasonably
accommodate his other personal and business obligations and responsibilities. In addition, subject
to the COMPANY’S prior authorization not to be unreasonably withheld, the COMPANY will reimburse
MCDONALD for reasonable out-of-pocket expenses he incurs while fulfilling his responsibilities
under this Paragraph 20, including any costs associated with legal representation.
Voluntary Agreement
21. The parties have carefully read and fully understand all the provisions of this Agreement.
The parties are voluntarily executing this Agreement. The parties acknowledge that they have had
the opportunity to obtain the advice of counsel, that they have done so to the extent desired, and
that they have had sufficient time to consider the Agreement and its ramifications without coercion
or intimidation before executing it.
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Entire Agreement
22. This Agreement contains the entire understanding of the parties and shall supersede all
other oral or written agreements or understandings between the parties, including but not limited
to, the Employment Agreement, with the exception of Section 5 of the Employment Agreement, the
terms of which are incorporated herein. This Agreement shall not be modified, altered or changed
except upon the express written consent of the parties hereto. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respect heirs, legatees,
representatives, successors, and assigns. No party may assign this Agreement or any of the rights
or obligations hereunder, in whole or in part, without the written consent of the parties.
Non-Assignment
23. Each of the parties to this Agreement warrants that such party has not assigned, conveyed
or transferred any claim, right or cause of action of any kind that the party has or may have in
connection with, relating to or arising out of any fact, allegation or matter which was or could
have been raised or settled in this Agreement.
Construction
24. Each party to this Agreement has cooperated in the preparation of this Agreement. Hence,
this Agreement shall not be construed against any party on the basis that the party was the
draftsperson.
Effectuation
25. Each of the parties to this Agreement agrees to execute any and all additional documents
necessary to effectuate the intent and purpose of this Agreement.
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Binding Agreement
26. This Agreement shall be binding upon and inure to the benefit of each of the parties to
this Agreement and the heirs, executors, conservators, attorneys, administrators, successors and
assigns of each of such parties. Each of the parties to this Agreement represents and warrants
that the party’s own execution and performance of this Agreement does not violate any agreement,
court order or other covenant or restriction binding upon that party.
Choice of Law
27. This Agreement shall be interpreted in accordance with the laws of the State of Illinois.
Severability
28. If any provision of this agreement is held to be illegal, void, or unenforceable, such
provision shall be of no force or effect. However, the illegality or unenforceability of such
provision shall have no effect upon, and shall not impair the legality or enforceability of, any
other provision of this Agreement. Notwithstanding the foregoing, MCDONALD agrees that he shall
not at any time attempt to challenge the enforceability of the release, as set forth in Paragraph
10 of this Agreement, or any other portion of this Agreement. The waiver by any party of a breach
or violation of this Agreement shall not operate as, or be construed to be, a waiver of any
subsequent or continuing breach thereof.
Reinstatement of Employment Agreement
29. In the event that (a) MCDONALD is required to return any payment or benefit received
hereunder to or for the benefit of the COMPANY pursuant to any judgment or settlement in any
proceeding in which the COMPANY is a debtor under Title 11 of the United States Code (“Bankruptcy
Proceedings”), or (b) this Agreement is rejected in any Bankruptcy
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Proceedings, then, at MCDONALD’S option, the Employment Agreement shall be reinstated and
MCDONALD shall be entitled to all benefits and to assert all claims that would otherwise exist
under that Agreement.
Compliance with Section 409A
30. It is intended that any amounts payable under this Agreement will be exempt from section
409A of the Code and treasury regulations relating thereto, under the short-term deferral exception
and the separation pay exception.
Compliance With Older Workers’ Benefit Protection Act
31. MCDONALD shall have twenty-one (21) days in which to review this Agreement and have it
reviewed by an attorney, it being understood that, at his option, MCDONALD shall have the right to
execute the Agreement prior to that date. It is also understood and agreed that MCDONALD shall be
bound by the Agreement if not revoked within seven (7) days after execution of the Agreement.
MCDONALD understands and agrees that, by this Agreement, neither MCDONALD nor the COMPANY is
waiving any rights that may arise after entering into this Agreement. MCDONALD also has been
advised of his right to consult with legal counsel prior to executing a copy of this Agreement. In
the event MCDONALD revokes this Agreement, he agrees to repay the Company any amounts advanced
under Paragraphs 2, 4, 5, and 6 above and to forfeit the shares otherwise vested under Paragraph 3
above.
MCDONALD AND THE COMPANY REPRESENT THAT THEY HAVE CAREFULLY READ AND FULLY UNDERSTAND ALL OF
THE PROVISIONS OF THIS AGREEMENT, THAT THEY HAVE HAD SUFFICIENT OPPORTUNITY TO REVIEW AND DISCUSS
THIS AGREEMENT WITH AN ATTORNEY; THAT THEY HAVE BEEN GIVEN A REASONABLE PERIOD OF TIME WITHIN WHICH
TO CONSIDER THE AGREEMENT
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BEFORE SIGNING IT; AND THAT THEY ARE VOLUNTARILY SIGNING THE AGREEMENT WITHOUT ANY DURESS OR
COERCION.
IN WITNESS WHEREOF, the parties have executed this Confidential Settlement Agreement and
General Release on the date shown below.
/s/ Xxxxx X. XxXxxxxx
|
Date: 6/14/07 | |
XXXXX X. XXXXXXXX
|
||
| BALLY TOTAL FITNESS HOLDING CORPORATION | ||
/s/ Xxxxxx Xxxxxx
|
Date: 6/14/07 | |
By: Xxxxxx Xxxxxx, Xx. VP, XXX
|
||
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