EXHIBIT 10.3
SENIOR VICE PRESIDENT
EMPLOYMENT AGREEMENT
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THE EMPLOYMENT AGREEMENT made and entered into as of the first day of
January 1998, among Bally Total Fitness Holding Corporation, a Delaware
corporation ("BTFHC") and Xxxxxx Xxxxxx ("Employee").
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements herein contained, the parties agree as follows:
1. Employment.
(a) BTFHC hereby employs Employee in the capacity of Senior Vice
President. BTFHC may employ Employee in such other capacities of equal status
and responsibility as the Chief Executive Officer of BTFHC, or his designated
representative, shall reasonably determine, and Employee hereby accepts such
employment upon the terms and conditions herein set forth.
(b) During the term of his employment, Employee will devote his best
efforts to his employment and perform such duties consistent with his status as
a Senior Vice President and in such capacities as the Chief Executive Officer of
BTFHC shall reasonably assign to him. Employee will devote his entire working
time and attention to the business and related interests of, and will be loyal
to, BTFHC, and Employee agrees to render service on behalf of BTFHC and its
subsidiaries or affiliates.
(c) Employee shall not, without prior written consent of BTFHC, directly
or indirectly, during the term of this Employment Agreement:
(i) Other than in the performance of duties naturally inherent to
BTFHC's business and in furtherance thereof, render services of a
business, professional or commercial nature to any other person or firm,
whether for compensation or otherwise, but this shall not be construed as
preventing the Employee from investing his assets in such form or manner
as will not require any services on the part of the Employee in the
operation of the affairs of the companies in which such investments are
made and which are not in violation of subparagraph (ii) below or from
engaging in boards of directors (subject to the approval of BTFHC's Chief
Executive Officer) or charitable activities so long as such activities do
not interfere with the performance of Employee's duties hereunder;
(ii) Engage in any activity competitive with or adverse to BTFHC's
business or welfare, whether alone, as a partner, or as an officer,
director, employee or shareholder of any other corporation, or otherwise,
directly or indirectly, except that the ownership of not more than one
percent (1%) of the stock of any publicly traded corporation shall not be
deemed violative of this subparagraph (ii);
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(iii) Be engaged by any entity which conducts business with or acts
as consultant or advisor to BTFHC, whether alone, as a partner, or as an
officer, director, employee or shareholder, or otherwise, directly or
indirectly, except that ownership of not more than one percent (1%) of the
stock of any publicly traded corporation shall not be deemed violative of
this subparagraph (iii).
2. Term. The term of this Employment Agreement shall begin on the
effective date stated above ("commencement date") and shall continue for three
(3) years through December 31, 2000, unless terminated by either party pursuant
to paragraphs 7 or 8.
3. Compensation.
(a) In consideration of the services to be rendered by the Employee
hereunder, BTFHC agrees to pay to the Employee, and the Employee agrees to
accept, as compensation, the sum of One Hundred Eighty-Five Thousand Dollars and
No/100 Cents Dollars ($185,000.00) (the "Base Salary") for each twelve month
period following the effective date of this Employment Agreement, which shall be
paid on the regularly recurring pay periods established by BTFHC. The Base
Salary shall be subject to periodic review for consideration of increase by
BTFHC.
(b) It is further understood by the parties that, pursuant to the
policies of BTFHC, discretionary bonus payments may be made in addition to the
Base Salary above provided.
4. Vacation and Other Benefits. Employee shall be entitled to a
reasonable vacation each year of his employment with BTFHC as well as other
employment benefits, including hospitalization, life insurance, death and
retirement plans, an automobile allowance or the use of an automobile, and the
like, afforded to senior executives of BTFHC of comparable status and tenure and
consistent with that afforded under BTFHC's policies.
5. Expenses. BTFHC shall pay all reasonable expenses incurred by
Employee in the performance of his responsibilities and duties for BTFHC.
Employee shall submit to BTFHC periodic statements of all expenses so incurred.
Subject to such audits BTFHC may deem necessary, BTFHC shall reimburse Employee
the full amount of any such expenses advanced by Employee promptly in the
ordinary course.
6. Covenants and Confidential Information.
(a) Employee agrees that for the applicable period specified below, he
will not, directly or indirectly, do any of the following:
(i) Be engaged as a partner, officer, director, employee,
shareholder or consultant by any entity which is engaged in the operation
of health or fitness clubs within five (5) miles of any facility which (on
the date Employee ceases to be employed hereunder) is owned, managed or
under development to be owned or managed by BTFHC, its subsidiaries,
affiliates and/or its successors and assigns, or is owned by a franchisee
of BTFHC, its subsidiaries, affiliates and/or its successor and assigns
("Facility"); provided, however, that the ownership
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of not more than one percent (1%) of the stock in a publicly-traded
corporation shall not be deemed violative of this subparagraph 6(a)(i);
(ii) Induce any person who is an employee, officer, or agent of
BTFHC, to terminate said relationship or employ, assist in employing or
otherwise associate in business with any present, former or future
employee or officer of BTFHC;
(iii) Disclose, divulge, discuss, copy or otherwise use or suffer
to be used in any manner, in competition with, or contrary to the
interests of BTFHC, the customer lists, inventions, ideas, discoveries,
manufacturing methods, product research or engineering data or other trade
secrets of BTFHC, it being acknowledged by Employee that all such
information regarding the business of BTFHC compiled or obtained by, or
furnished to, Employee while he shall have been employed by or associated
with BTFHC is confidential information and the exclusive property of
BTFHC.
(b) The provisions of subparagraphs 6(a)(i), 6(a)(ii) and 6(a)(iii) shall
be operative during the Term hereof and as hereafter provided in this
subparagraph 6(b).
(i) In the event of a "Change in Control" (as defined in
subparagraph 9(c)), the provisions of subparagraphs 6(a)(i) and 6(a)(ii)
shall be operative only so long as the Employee remains an employee of
BTFHC.
(ii) In all events, including a Change in Control or in the event
Employee is terminated for illness or incapacity (as provided in
subparagraph 7(a)) or for "Cause" (as defined in subparagraph 8(a)), the
provisions of subparagraph 6(a)(iii) shall be operative until such time as
the information becomes public knowledge other than through the act of
Employee.
(iii) In the event Employee is terminated for Cause or for illness
or incapacity (as provided in subparagraph 7(a)), the provisions of
subparagraphs 6(a)(i) and 6(a)(ii) shall be operative during the Term of
this Agreement and for one (1) additional year.
(c) Employee expressly agrees and understands that the remedy at law for
any breach by him of this paragraph 6 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that BTFHC shall be entitled to
immediate injunctive relief and if the court so permits, may obtain a temporary
order restraining any threatened or further breach. Nothing contained in this
paragraph 6 shall be deemed to limit BTFHC's remedies at law or in equity for
any breach by Employee of the provisions of this paragraph 6 which may be
pursued or availed of by BTFHC. Any covenant on Employee's part contained
hereinabove, which may not be specifically enforceable, shall nevertheless, if
breached, give rise to a cause of action for monetary damages.
(d) Employee has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred upon BTFHC under
this paragraph 6, and hereby acknowledges and agrees that the same are
reasonable in time and territory, are designed to eliminate competition which
otherwise would be unfair to BTFHC, do not stifle the inherent skill and
experience of
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Employee, would not operate as a bar to Employee's sole means of support, are
fully required to protect the legitimate interests of BTFHC and do not confer a
benefit upon BTFHC disproportionate to the detriment to Employee.
(e) For the purposes of this paragraph 6, the term "BTFHC" shall be
deemed to include BTFHC and its subsidiaries and affiliates and the successors
and assigns of it and its subsidiaries and affiliates, involved in the operation
or management of a fitness center.
(f) The covenants contained in this paragraph 6 shall be construed to
extend to separate counties and adjacent counties, if applicable, of the states
of the United States in which BTFHC and its subsidiaries, affiliates and its and
their successors and assigns has a fitness center, and to the extent that any
such covenant shall be illegal and/or unenforceable with respect to any one of
said counties, said covenants shall not be affected thereby with respect to each
other county, such covenants with respect to each county being construed as
severable and independent.
7. Illness, Incapacity or Death During Employment.
(a) If the Employee is unable to perform his services by reason of
illness or incapacity resulting in a failure to discharge his duties under this
Employment Agreement for six (6) or more consecutive months or for 180 days in
any 365-day period, then upon three (3) days notice, BTFHC may terminate the
employment of Employee under this Employment Agreement and Employee, upon such
termination, shall be (i) paid his Base Salary on a pro-rata basis to the date
of termination through the three (3) day notice period; plus (ii) any previously
declared but unpaid bonuses; plus (iii) reimbursement of all expenses reasonably
incurred by Employee in performing his responsibilities and duties for BTFHC
through and including such three (3) day notice period; plus (iv) any other
payment or benefit which Employee is then entitled to receive under any
employment benefit plan, retirement plan or similar arrangement then maintained
by BTFHC, in the amount and to the extent determined under the terms and
conditions of any such plan.
In the event of such termination, the Employee shall have the right, at
his option, to the assignment of any and all insurance policies or health
protection plans if said policies and plans permit assignment out of the group
to the Employee.
(b) In the event that BTFHC elects to terminate this Employment Agreement
pursuant to Section 7(a) by reason of illness or incapacity, then Employee shall
be entitled to the long-term disability (LTD) benefits provided to senior
officers by BTFHC but in any event at no less than sixty percent (60%) of Base
Salary as of the date of termination, without reference to set-off or caps
existing in any LTD plan.
(c) In the event of Employee's death, all obligations of BTFHC under this
Employment Agreement shall terminate other than the payment of that portion of
his Base Salary on a pro-rata basis accrued to the date of death, any previously
declared but unpaid bonuses, plus reimbursement of all expenses reasonably
incurred by Employee in performing his responsibilities and duties for BTFHC
prior to and including such date.
8. Termination.
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(a) The employment of Employee under this Employment Agreement, and the
term hereof, may be terminated by BTFHC for cause at any time. For purposes
hereof, the term "cause" means:
(i) Employee's fraud or dishonesty;
(ii) Employee's willful misconduct or gross negligence in the
performance of his duties hereunder, including willful failure to perform
such duties as may properly be assigned him hereunder; or
(iii) Employee's material breach of any material provision of this
Employment Agreement.
(b) Any termination shall not be in limitation of any other right or
remedy BTFHC or Employee may have under this Employment Agreement or otherwise.
9. Optional Termination Upon Change of Control.
(a) In the event that there is a "Change in Control" (as defined in this
paragraph 9) of BTFHC and the successor in control, without cause, terminates
this Employment Agreement, Employee shall be paid, subject to the limits set
forth in paragraph 10 a lump sum equal to twenty-four (24) months of his then
Base Salary or an amount equal to his then Base Salary for the balance of the
three year term, whichever is greater, and the greater of the average of twice
the bonuses paid to Employee by BTFHC for 1997 or the bonus, if any, for any
year after 1997 but prior to the Change in Control. If the successor in control
changes Employee's title or substantially changes his duties or functions from
those which he previously performed hereunder or requires Employee to perform
the majority of his duties at a location outside of the metropolitan area of
Chicago, Illinois, the successor in control shall be deemed to have
constructively terminated Employee's services without cause and Employee shall
be entitled to payment set forth in the first sentence of this paragraph.
In the event that there is a Change in Control (as defined in this
paragraph 9) of BTFHC, Employee may, at his option, terminate this Employment
Agreement at any time thereafter upon thirty (30) days written notice to BTFHC.
If Employee exercises this right to terminate, he shall be paid the following
amounts: (i) a lump sum amount equal to one-half (1/2) of his annual Base Salary
as in effect at the time of exercise (or, if greater, at the time of the Change
in Control); plus, (ii) his Base Salary on a pro-rata basis through and
including the date of his employment termination; plus (iii) any previously
declared but unpaid bonuses; plus (iv) reimbursement of all expenses reasonably
incurred by Employee in performing his responsibilities and duties for BTFHC
through and including the date of his employment termination; plus (v) any other
payment or benefit which Employee is then entitled to receive under any
employment benefit plan, retirement plan or similar arrangement then maintained
by BTFHC, in the amount and to the extent determined under the terms and
conditions of any such plan. All such payments shall be made no later than
thirty (30) days after the last day of Employee's employment. In addition,
Employee shall have the right, at his election, to the assignment of any and all
insurance policies and/or health protection plans if said policies and plans
permit assignment to Employee.
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A "Change in Control" shall, except as provided below, mean a change in
control of BTFHC of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 (as in effect on the effective date of this Employment
Agreement, the "Exchange Act"), whether or not BTFHC is then subject to such
reporting requirement; provided that, without limitation, such a Change in
Control shall be deemed to have occurred if:
(i) any "person" (as defined in subsections 13(d) and 14(d) of
the Exchange Act), other than a person with which Xxxxxx X. Xxxxxxxx is
affiliated or of which he is a part, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), of securities of BTFHC
representing twenty percent (20%) or more of the combined voting power of
BTFHC's then outstanding securities;
(ii) during any period of two (2) consecutive years or less (not
including any period prior to the effective date of this Employment
Agreement) there shall cease to be a majority of the Board of Directors of
BTFHC comprised of Continuing Directors (as defined below); or
(iii) the stockholders of BTFHC approve (1) a merger or
consolidation of BTFHC with any other corporation, other than a merger or
consolidation that would result in the voting securities of BTFHC
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of BTFHC or such surviving entity outstanding immediately after
such merger or consolidation, or (2) a plan of complete liquidation of
BTFHC or an agreement for the sale or disposition by BTFHC of all or
substantially all of its assets.
Notwithstanding anything else contained herein to the contrary, the
acquisition of BTFHC securities from BTFHC which issuance was approved by the
Continuing Directors (as defined below) shall not, either on its own or in
connection with any other acquisition of BTFHC securities prior thereto, be
deemed to be a Change in Control for purposes of this Agreement.
The term "Continuing Directors" shall mean individuals who constitute the
Board of Directors of BTFHC as of the effective date of this Employment
Agreement and any new director(s) whose election by such Board or nomination for
election by BTFHC's stockholders was approved by a vote of at least two-thirds
of the directors then in office who either were directors as of the effective
date of this Employment Agreement or whose election or nomination for election
was previously so approved.
10. Limit on Payments. Notwithstanding anything in this Agreement to the
contrary, in the event of a Change in Control, the total compensation to
Employee under this Agreement and any other agreements between the Employee and
Company or its subsidiaries relating to a Change in Control shall not exceed an
amount equal to (i) an amount equal to 2.99 times the Employee's "annualized
includible compensation for the base period" (as defined in Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), over (ii) the present
value of any and all "payments in the nature of compensation" (within the
meaning of Section 280G of the Code and any proposed,
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temporary or final Treasury Regulations promulgated thereunder) to the Employee
under this Agreement or any other agreement or arrangement between the Company
and the Employee treated as "parachute payment(s)" under Section 280G of the
Code and any proposed, temporary or final Treasury Regulations promulgated
thereunder, such that no payment to the Employee pursuant to this Agreement or
any other agreement between the Employee and the Company or its subsidiaries
will constitute an "excess parachute payment" within the meaning of Section 280G
of the Code. All determinations under this paragraph 10 shall be made by the
Company based on the advice or counsel of its tax professional and shall be
binding and conclusive on the Company and the Employee.
11. Severable. Provisions. The provisions of this Employment Agreement
are severable, and if any one or more provisions may be determined to be illegal
or otherwise unenforceable, in whole or in part, the remaining provisions, and
any partially unenforceable provision to the extent enforceable in any
jurisdiction, shall nevertheless be binding and enforceable.
12. Binding Agreement. The rights and obligations of BTFHC under this
Employment Agreement shall inure to the benefit of and shall be binding upon the
respective successors and assigns of BTFHC.
13. Attorneys' Fees. In the event Employee is required to commence an
arbitration action to enforce the provisions of this Employment Agreement and
Employee prevails in such action, BTFHC shall pay Employee's reasonable costs
and expenses, including reasonable attorneys' fees, incurred in such arbitration
and in any subsequent legal action brought to enforce the arbitration decision.
14. Notices. Any notice to be given to BTFHC under the terms of this
Employment Agreement shall be addressed to BTFHC at the address of its principal
places of business, and any notice to be given to Employee shall be addressed to
him at his home address last shown on the records of BTFHC, or at such other
address as the parties may hereafter designate in writing to the other. Any such
notice shall have been duly given when enclosed in a properly sealed envelope
addressed as aforesaid, postage prepaid, registered or certified, return receipt
requested, and depos ited in a post office or branch post office regularly
maintained by the United States Government.
15. Waiver. Either party's failure to enforce any provision or provisions
of this Employment Agreement shall not in any way be construed as a waiver of
any such provision or provisions as to any future violations thereof, nor
prevent that party thereafter from enforcing each and every other provision of
this Employment Agreement. The rights granted the parties herein are cumulative
and the waiver by a party of any single remedy shall not constitute a waiver of
such party's right to assert all other legal remedies available to him or it
under the circumstances.
16. Governing Law. This Employment Agreement shall be governed by and
construed and interpreted according to the internal laws of the State of
Illinois without reference to principles of conflict of laws.
17. Miscellaneous. Captions and headings used herein are for
convenience only and are not a part of this Employment Agreement and shall not
be used in construing it. This Employment Agreement constitutes the entire
agreement between BTFHC and Employee with respect to the
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subject matter hereof and may not be modified or terminated orally. No
modification, termination or attempted waiver of this Employment Agreement shall
be valid unless in writing and signed by the party against whom the same is
sought to be enforced.
18. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association then
pertaining in Chicago, Illinois and judgment upon the award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. The arbitrator or arbitrators shall be deemed to possess the powers to
issue mandatory orders and restraining orders in connection with such
arbitration; provided, however, that nothing in this paragraph 18 shall be
construed so as to deny BTFHC's right and power to seek and obtain injunctive
relief in a court of equity for any breach or threatened breach of Employee of
any of his covenants contained in subparagraph 6(a) hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly elected as of the day and year first above written.
BALLY TOTAL FITNESS HOLDING
CORPORATION
ATTEST: /s/ Xxxxxxx Xxxxxxx /s/ Xxxx X. Xxxxx
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Xxxx Xxxxx "BTFHC"
/s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx "Employee"
Approved by the Compensation Committee of Bally Total Fitness Holding
Corporation on ____________________, 1998.
/s/ Xxxx X. Xxxxx
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Xxxx Xxxxx
Chairman, Compensation Committee - Bally
Total Fitness Holding Corporation
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