TOWN SPORTS INTERNATIONAL, LLC 5 PENN PLAZA NEW YORK, NY 10001 March 19, 2010
Exhibit 10.2
TOWN SPORTS INTERNATIONAL, LLC
0 XXXX XXXXX
XXX XXXX, XX 00000
0 XXXX XXXXX
XXX XXXX, XX 00000
March 19, 2010
Xx. Xxxxxxxxx X. Xxxxxxxxxxxxx
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Dear Alex:
This letter agreement (the “Agreement”) confirms the terms that Town Sports International, LLC
(the “Company”) is offering you in connection with your departure from the employ of the Company
and its affiliates and from all officer, director and other positions that you currently hold with
the Company and its affiliates, including Town Sports International Holdings, Inc. (“TSI
Holdings”).
1. Departure Date.
(a) The employment relationship between you and the Company and its subsidiaries and
affiliates, as applicable, ended on March 16, 2010 (the “Departure Date”). You also hereby resign
as a director of TSI Holdings, the Company or of any affiliate thereof.
(b) Promptly following the Departure Date, you will be paid for any accrued, but not taken,
vacation days (10 days) in accordance with the Company’s prevailing payroll practices. Information
regarding the Company’s 401(k) Plan and your ability to continue your health insurance coverage
under the Company’s group health plan pursuant to the federal “COBRA” law (and New York mini-COBRA)
will be sent to you separately by the applicable plan administrators following the Departure Date.
2. Separation Benefits. In return for your agreement (without revocation) to, and
compliance with, your commitments and obligations set forth in this Agreement, and subject to the
terms of this Agreement:
(a) The Company will continue to pay you your base salary of $505,870, which is the rate in
effect on the Departure Date) for a period commencing on the Departure Date and ending on March 15,
2011 (the “Severance Period”), payable in accordance with the Company’s prevailing payroll
practices (provided, however, that the last paycheck shall be paid to you on or before March 15,
2011); provided, however, that such payments will commence within 30 days after the expiration of
the revocation period (without revocation) and such first payment will include those payments that
would have previously been paid if these severance payments had begun on the first payroll date
following the Departure Date.
(b) If you timely elect to continue your health coverage through COBRA, the Company will pay
that portion of the premium that it would have paid had you been an active
employee at the same level of coverage through Severance Period, and will pay up to $5,000 for that
portion of the premium that would have been paid by you through the end of the Severance Period or,
in each case, if earlier, until you become eligible for comparable coverage.
(c) Each of you and the members of your immediate family will receive, for their respective
lifetimes, a Premium Passport Membership (or its equivalent) at no cost, and be entitled to receive
Personal Training sessions at employee rates (provided that such memberships and such treatment
shall cease in the event you (or such immediate family member) commence employment or a consulting
role with a competitor or in the event of your breach of this Agreement). The aforementioned
memberships are subject to all of the Company’s membership rules, regulations and policies
currently in effect and as may be amended from time to time.
(d) The Company will pay up to $5,000 for your legal fees incurred in connection with the
negotiation of this Agreement upon presentment of an invoice.
(e) Thirty days following the effective date of this Agreement (without revocation), the
Company will pay you $30,000, to be used by you to assist you in your job search, including
outplacement service, office supplies and travel expenses.
(f) All payments described herein will be subject to deduction for all required income and
payroll taxes.
3. Release.
(a) In consideration of the obligations contained in Section 2 of this Agreement, you
(for yourself, your heirs, legal representatives, executors or administrators (collectively, your
“Representatives”)) hereby release and forever discharge the Company, TSI Holdings, their
respective subsidiaries and affiliates and each of their respective officers, employees, directors
and agents (collectively, the “Released Parties”) from any and all claims and rights which you may
have against them, and you hereby specifically release, waive and forever hold them harmless from
and against any and all such claims, liability, causes of action, compensation, benefits, damages,
attorney fees, costs or expenses, of whatever nature or kind and whether known or unknown, fixed or
contingent, and by reason of any matter, cause, charge, claim, right or action whatsoever, which
have arisen at any time up to and including the date of execution of this Agreement, including, but
not limited to, those arising during or in any manner out of your employment with the Company or
the termination of such employment or anything else that may have happened up to and including the
day you sign this Agreement. The rights, claims, causes of action, and liabilities that you are
releasing and waiving include, but are not limited to, those that concern, relate to, or might
arise out of the following: salary, overtime, bonuses, equity and severance arrangements, benefit
plans; commissions; breach of express or implied contract or promise; harassment, intentional
injury or intentional tort, fraud, misrepresentation, battery, assault, defamation, breach of
fiduciary duty, tort or public policy claims, whistleblower claims, negligence (including negligent
hiring, retention and/or supervision), wrongful or retaliatory discharge, infliction of emotional
injury, or any other facts or claims; retirement or any other benefits; the Equal Pay Act (29
U.S.C. §206(d), et seq.); the Age Discrimination in Employment Act (ADEA) (29 U.S.C. §621, et
seq.); Title VII of the Civil Rights Act of 1964 (42 U.S.C. §2000e, et seq.); ERISA (the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
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§1001, et seq.) other than any vested ERISA benefit; COBRA (the Consolidated Omnibus Budget
Reconciliation Act of 1986, 29 X.X.X. §00000, et seq.); the federal and NY WARN Act; the American
with Disabilities Act (42 X.X.X. §00000, et seq.); the National Labor Relations Act and the Labor
Management Relations Act, 29 U.S.C. §141 et seq.; the Family and Medical Leave Act (29 X.X.X.
§0000, et seq.); the United States Constitution; the Civil Rights Act of 1991; the Civil Rights
Acts of 1866 or 1871 (42 U.S.C. §§1981,1983,1985, et seq.); retaliation under any federal, state,
or local law; any claims for costs or attorney fees; the fair employment practices (FEP) laws and
employment-related laws of any federal, state, or local jurisdiction (including the New York State
Human Rights Law, New York Administrative Code), and any other federal, state, city, county or
other common law, law, or ordinance, including but not limited to those where you work and/or
reside. You are not releasing any rights or claims that arise following the effective date of this
Agreement.
(b) Notwithstanding the foregoing, the release set forth in Section 3 (a), will not apply to
(i) the obligations of the Company under this Agreement, (ii) your vested benefits under the
Company’s 401(k) plan, (iii) the Company’s obligations under the Option Plans (as defined and set
forth below in Section 4), and any related option agreement or vested benefit(s) to which you are
legally entitled, (iv) your rights as a stockholder of TSI Holdings, or (v) your rights as a holder
of TSI Holdings’ 11% senior discount notes. You further agree that the payments and benefits
described in this Agreement will be in full satisfaction of any and all claims for payments or
benefits, whether express or implied, that you may have against the Company, TSI Holdings or any of
their respective subsidiaries or affiliates arising out of your employment relationship, your
service as an employee, officer or director of the Company, TSI Holdings or any of their respective
subsidiaries or affiliates and your resignation therefrom. You hereby acknowledge and confirm that
you are providing the release and discharge set forth in this Section 3 only in exchange for
consideration in addition to anything of value to which you are already entitled.
(c) You represent and agree that you have not filed any lawsuits against any Released Party,
or filed or caused to be filed any charges or complaints against any Released Party with any
municipal, state or federal agency charged with the enforcement of any law. Pursuant to and as a
part of your release and discharge of the Released Parties, you agree, except for your right, if
any, to bring a proceeding pursuant to the Older Workers Benefit Protection Act to challenge the
validity of the release of claims pursuant to the Age Discrimination in Employment Act contained in
Section 3 of this Release, and consistent with the EEOC Enforcement Guidance On Non-Waivable
Employee Rights Under EEOC-Enforced Statutes dated April 11,1997, and otherwise to the maximum
extent permitted by applicable law, not to xxx or file a charge or complaint against any Released
Party in any forum or assist or otherwise participate willingly or voluntarily in any claim, suit,
action, investigation or other proceeding of any kind which relates to any matter that involves any
Released Party, and that occurred up to and including the date of your execution of this Agreement,
unless as required to do so by court order, subpoena or other directive by a court, administrative
agency or legislative body, other than to enforce this Agreement. With respect to the claims you
are waiving herein, you are waiving any right to receive money or any other relief in any action
instituted on your behalf by any other person, entity or government agency.
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(d) You expressly understand and acknowledge that it is possible that unknown losses or claims
exist or that present losses may have been underestimated in amount or severity, and that you
explicitly took that into account in determining the amount of consideration to be paid for the
giving of this Release, and a portion of said consideration and the mutual covenants contained
herein, having been agreed between the parties with the knowledge of the possibility of such
unknown claims, were given in exchange for a full satisfaction and discharge of all such claims.
(e) Nothing in this release will affect the Company and TSI Holdings’ obligation to indemnify,
defend and hold you harmless to the fullest extent allowable by applicable law and their respective
charter and by-laws with respect to your acts or omissions in your capacity as an officer or
director of the Company, TSI Holdings and their respective subsidiaries and affiliates. The Company
will continue to maintain directors’ and officers’ liability insurance with respect to actions or
omissions by you as an officer of TSI Holdings, the Company (or any of its subsidiaries) in the
same manner that it maintains such insurance for other officers and directors.
4. Equity. Your options to purchase TSI Holdings common stock granted pursuant to TSI
Holdings’ stock option incentive plans (the “Option Plans”), to the extent vested as of the
Departure Date, will remain outstanding for the post-termination exercise period specified in the
applicable Option Plan and any applicable agreement (which is 90 days from the Departure Date).
Such vested options will expire at the conclusion of such post-termination exercise period to the
extent not previously exercised. That portion of the stock options that remain unvested as of the
Departure Date as well as any unvested shares of TSI Holdings restricted common stock will be
forfeited on the Departure Date without any payment.
5. No Other Compensation or Benefits. Except as otherwise specifically provided herein, you
will not be entitled to any compensation or benefits or to participate in any past, present or
future employee benefit programs or arrangements of the Company, TSI Holdings or any of their
respective subsidiaries or affiliates on or after the Departure Date.
6. Return of Company Property. No later than five (5) days after the date of this
Agreement, you hereby covenant and agree that you will deliver to the Company all Company property
and equipment in your possession or control, including, but not limited to, any and all records,
manuals, customer lists, notebooks, computers, computer programs and files, Company credit cards,
papers, electronically stored information and documents kept or made by you in connection with your
employment and you will not retain any copies thereof, except that you may retain the Company’s
laptop (after the Company’s IT department has deleted all Company information) and blackberry, and
the Company will assist in transferring your mobile telephone number to your personal telephone.
You also represent that you have left intact all electronic Company documents or files, including
those that you developed or helped develop. You are required to return all such property whether or
not you sign this Agreement.
7. Nondisclosure of Confidential Information.
(a) You acknowledge and agree that in the course of your employment with the Company, you
have acquired certain confidential company information which you knew or understood was
confidential or proprietary to the Company and which, as used in this
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Agreement, means: information belonging to or possessed by the Company which is not available in
the public domain or not released by some third-party through no fault of yours, including, without
limitation (i) information received from the customers, suppliers, vendors, employees or agents of
the Company under confidential conditions; (ii) customer and prospect lists, and details of
agreements and communications with customers and prospects; (iii) sales plans and projections,
product pricing information, acquisition, expansion, marketing, financial and other business
information and existing and future products and business plans of the Company; (iv) the Company’s
confidential accounting, tax, or financial information, results, procedures and methods; (v)
information relating to existing claims, charges and litigations; (vi) sales proposals,
demonstrations systems, sales material; and (vii) employee information (including, but not limited
to, personnel, payroll, compensation and benefit data and plans), including all such information
recorded in manuals, memoranda, projections, reports, minutes, plans, drawings, sketches, designs,
formula books, data, specifications, software programs and records, whether or not legended or
otherwise identified by the Company as confidential information, as well as such information that
is the subject of meetings and discussions and not recorded. You understand that such confidential
company information has been disclosed to you for the Company’s use only. You understand and agree
that you (i) will not disclose or communicate confidential information to any person or persons;
and (ii) will not make use of confidential information on your own behalf, or on behalf of any
other person or persons. You will give immediate notice to the Company if you are ordered by a
court or otherwise compelled by law to reveal any confidential information to any third party.
(b) In view of the nature of your employment and the nature of the confidential information to
which you have had access to, you acknowledge and agree that any unauthorized disclosure to any
person or persons of confidential information, or other violation or threatened violation of this
Agreement (including, without limitation, Sections 8(a) or 8(b)) will cause irreparable damage to
the Company and that, therefore, the Company will, in addition to any other available remedy, be
entitled to an injunction prohibiting you from any further disclosure, attempted disclosure,
violation or threatened violation of this Agreement and the Company will be entitled to recover the
reasonable attorneys fees and costs incurred in enforcing its rights.
(c) The obligations described in this Section 7 are in addition to, and in no way limit, your
obligations regarding the protection of confidential information as described in Executive
Severance Agreement between you and the Company (the “Executive Severance Agreement”) or in any
option or other equity award agreement between you and the Company, which provisions are
incorporated by reference herein. In the event of a conflict between the provisions of this Section
7 and the obligations described in the Executive Severance Agreement or such award agreement, the
provisions that are more restrictive upon you will govern.
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8. Non-Solicitation and Non-Competition Obligations.
(a) Non-Solicitation. You agree that from the date hereof through the one year
anniversary of the Departure Date (the “Restricted Period”), you will not, directly or indirectly:
(i) solicit or recruit for employment, offer employment to, or hire, on a temporary, permanent or
contract basis, anyone who was employed by the Company during the last six months of your
employment (a “Covered Employee”); or (ii) encourage or persuade any Covered Employee to leave the
Company.
(b) Non-Competition. During the Restricted Period, you will not, directly or
indirectly, own, manage, control, participate in, consult with, render services for, or in any
manner engage in, any business competing directly or indirectly with the business as conducted by
the Company or any of its Affiliates at the Departure Date or with any other business that is the
logical extension of the Company’s and its Affiliates’ business at the Departure Date (including,
without limitation, personal training and massage services) within any metropolitan area in which
the Company or any of its Affiliates engages or has definitive plans to engage in such business;
provided, however, that you will not be precluded from purchasing or holding publicly traded
securities of any entity so long as you hold less than 2% of the outstanding units of any such
class of securities and have no active participation in the business of such entity. For purposes
of this Section 8(b), the term “Affiliate” will have the meaning ascribed to such term in the 2006
Stock Incentive Plan.
(c) The obligations described in this Section 8 are in addition to, and in no way limit, your
obligations regarding noncompetition and non-solicitation as described in the Executive Severance
Agreement or in any option or other equity award agreement with the Company, which provisions are
incorporated by reference herein. In the event of a conflict between the provisions of this Section
8 and the obligations described in the Executive Severance Agreement or such award agreement, the
provisions that are more restrictive upon you will govern.
9. Non-Disparagement; Cooperation.
(a) You understand and agree that as a condition for payment to you of the consideration
herein described, you, on your behalf and on behalf of your Representatives, will not (and your
Representatives will not) at any time engage in any form of conduct, or make any statements or
representations that disparage or otherwise impair the reputation, goodwill, or commercial
interests of the Company, its management, stockholders, subsidiaries, parent, and/or other
affiliates. The Company agrees that its Senior Officers (as hereinafter defined) shall not, except
as may be required by law, make any oral or written negative, disparaging or adverse statements,
suggestions or representations of or concerning you. As used in this Section 9(a), the term “Senior
Officer” means the President and Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Senior Vice President — Human Resources and Senior Vice President — General Counsel.
(b) From and after the Departure Date, you will (i) cooperate in all reasonable respects with
the Company and its affiliates and their respective directors, officers, attorneys and experts in
connection with the conduct of any dispute, action, proceeding, investigation or litigation
involving the Company or any of its affiliates, including, without limitation, any such
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dispute, action, proceeding, investigation or litigation in which you are called to testify and
(ii) promptly respond to all requests by the Company and its affiliates relating to information
concerning the Company which may be in your possession. The Company will, as a condition to your
obligations under this Section 9(b), reimburse you for any reasonable out of pocket expenses and
costs incurred as a result of such cooperation (including all reasonable, out-of-pocket attorney
fees), provided that such expenses have been approved in writing in advance by an executive officer
of the Company.
(c) You hereby consent to the disclosure of information about you that TSI Holdings is
required to disclose in its Annual Report on Form 10-K, its Proxy Statement and in any other
report(s) required to be filed with the Securities and Exchange Commission under the Securities Act
of 1933, the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder.
10. Waiver of Rights. No delay or omission by the Company in exercising any right under
this Agreement will operate as a waiver of that or any other right. A waiver or consent given by
the Company on any one occasion will be effective only in that instance and will not be construed
as a bar or waiver of any right on any other occasion.
11. Applicable Law. This Agreement will be interpreted and construed by the laws of the
State of New York, without regard to conflict of laws provisions. You hereby irrevocably submit to
and acknowledge and recognize the jurisdiction of the courts of the State of New York, or, if
appropriate, a federal court within New York (which courts, together with all applicable appellate
courts, for purposes of this agreement, are the only courts of competent jurisdiction), over any
suit, action or other proceeding arising out of, under or in connection with this Agreement or the
subject matter hereof.
12. Entire Agreement/Severability. This Agreement constitutes the sole and complete
understanding and agreement between the parties with respect to the matters set forth herein, and
there are no other agreements or understandings, whether written or oral and whether made
contemporaneously or otherwise (other than any confidentiality and/or non-competition provisions
and related covenants set forth in the Executive Severance Agreement and any agreement granting you
options under the Company’s Options Plans that you executed during your employment with the Company
the terms of which will survive execution of this Agreement). For the avoidance of doubt, nothing
contained herein shall have any effect on your rights and obligations under the Registration Rights
Agreement dated February 4, 2004, as amended. No term, condition, covenant, representation or
acknowledgment contained in this Agreement may be amended unless in writing signed by both parties.
If any section of this Agreement is determined to be void, voidable or unenforceable, it will have
no effect on the remainder of the Agreement which will remain in full force and effect.
13. Acceptance. You will have twenty-one (21) days from the date set forth above to
consider the terms of this Agreement. In order to receive the benefits and payments provided for by
Section 2 of this Agreement, you must execute this Agreement, have your signature notarized and
return the executed Agreement to the Company, addressed to the Company, Attention: General Counsel,
at the address specified in Section 20 so that it is received any time on or
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before the expiration of the twenty-one (21) day period. After executing the Agreement, you will
have seven (7) days (the “Revocation Period”) to revoke it by indicating your desire to do so in
writing addressed to and received by the General Counsel at the address set forth in Section 20 no
later than the seventh (7th) day following the date you executed the Agreement. In the
event you do not accept this Agreement or in the event you revoke this Agreement during the
Revocation Period, the obligations of the Company to make the payments and provide the benefits set
forth herein will automatically be deemed null and void. No payments or benefits will be paid or
provided under Section 2 of this Agreement, until you have signed this Agreement, had your
signature notarized and the Revocation Period has expired without a revocation by you.
14. Voluntary Assent. By your signature on this Agreement, you affirm and acknowledge that:
(a) you have read this Agreement, and understand all of its terms, including the full and
final release of claims set forth in Section 3;
(b) you have voluntarily entered into this Agreement and that you have not relied upon any
representation or statement, written or oral, not set forth in this Agreement;
(c) the only consideration for signing this Agreement is as set forth herein and that the
consideration received for executing this Agreement is greater than that to which you may otherwise
be entitled;
(d) you have been given the opportunity and you have been advised by the Company to have this
Agreement reviewed by your attorney and/or tax advisor; and
(e) you have been given up to twenty-one (21) days to consider this Agreement and that you
understand that you have seven (7) days after executing it to revoke it in writing, and that, to be
effective, such written revocation must be received by the Company within the seven (7) day
Revocation Period.
15. No Admission. Nothing contained in this Agreement, or the fact of its submission to
you, will constitute or be construed as an admission of liability or wrongdoing by either party.
16. Counterparts. The Agreement may be executed in two (2) signature counterparts, each of
which will constitute an original, but all of which taken together will constitute but one and the
same instrument.
17. Section 409A. It is intended that the payments provided for herein are intended to
comply with, or be exempt from, the terms of Section 409A (“Section 409 A”) of the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder. In the event, however, that
any such payments are determined to be subject to Section 409A, then the Company may make such
adjustments as are reasonably required to comply with such section, including delaying any such
payments that would have been required to be paid to you pursuant to this Agreement during the
first six months following the Departure Date until the end of such
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six-month period in accordance with the requirements of Section 409A. Each installment payment
under this Agreement shall be considered as a separate payment for purposes of Section 409A. The
termination of your employment on March 16, 2010 is intended to be a “separation of service” for
purposes of Section 409A. In addition, any expense reimbursement under this Agreement will be made
on or before the last day of the taxable year following the taxable year in which such expense was
incurred by you, and no such reimbursement or the amount of expenses eligible for reimbursement in
any taxable year will in any way affect the expenses eligible for reimbursement in any other
taxable year. Notwithstanding any of the preceding, the Company makes no representations regarding
the tax treatment of any payments hereunder, and you will be responsible for any and all applicable
taxes.
18. Breach of Agreement. In the event of any breach by you of any provision of this
Agreement (including, without limitation, Section 7, 8 or 9 (and including the agreements
referenced and incorporated therein), which breach, if susceptible to cure, is not so cured within
10 business days of the Company providing notice to you, in addition to any other remedy available
to it, the Company will cease to have any obligation to make payments or provide benefits to you
under this Agreement, and any continued exercisability of your options will cease. You agree that
in the event you bring a claim covered by this release in which you seek damages against the
Company or in the event you seek to recover against any of such entities in any claim brought by a
governmental agency on your behalf, this Agreement shall serve as a complete defense to such
claims. In the event of any breach by the Company, you will provide the Company with notice of such
breach, and, if such breach is susceptible to cure, the Company will have 10 business days to cure
such breach. Each party will be entitled to recover the reasonable attorneys’ fees and costs
incurred in enforcing its rights in enforcing this Agreement or other obligations set forth herein,
to the extent permitted by law.
19. Third Party Beneficiaries. You acknowledge and agree that TSI Holdings and all its
direct and indirect subsidiaries (other than the Company) are third party beneficiaries of this
letter agreement. Without limiting the foregoing sentence, TSI Holdings and such subsidiaries may
enforce this letter agreement against you. This Agreement may be assigned by the Company to a
person or entity which is an affiliate, and will be assigned to any successor in interest to
substantially all of the business operations of the Company. Upon such assignment, the rights and
obligations of the Company hereunder will become the rights and obligations of such affiliate or
successor person or entity. This Agreement will be binding upon the successors, and assigns of the
Company. If you shall die, all amounts then payable to you hereunder shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or, if there be no such
devisee, legatee or designee, to Executive’s estate.
20. Notices. Any notices required or made pursuant to this Agreement will be in writing and
will be deemed to have been given when delivered or mailed by United States certified mail, return
receipt requested, postage prepaid, as follows: if to you, to the address in the Company’s payroll
records; if to the Company, at 0 Xxxx Xxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000, Attn:
General Counsel, or to such other address as either party may furnish to the other in writing in
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accordance with this Section 20. Notices of change of address will be effective only upon receipt.
[Signatures continue on following page]
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| Acknowledged and accepted by: TOWN SPORTS INTERNATIONAL, LLC |
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| By: | /s/ Xxxxx Xxxxxxx | |||
| Name: | Xxxxx Xxxxxxx | |||
| Title: | Senior Vice President-Human Resources | |||
| /s/ Xxxxxxxxx X. Xxxxxxxxxxxxx | ||||
| Xxxxxxxxx X. Xxxxxxxxxxxxx | ||||
On the 19th day of March in the year 2010, before me, the undersigned,
personally appeared XXXXXXXXX X. XXXXXXXXXXXXX, personally known to me or proved to me on the basis
of satisfactory evidence to be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his signature on the
instrument, the individual, or the person upon behalf of which the individual acted, executed the
instrument.
| /s/ XXXXXX X XXXXXXX | ||||
| Notary Public |
||||
| XXXXXX X XXXXXXX NOTARY PUBLIC STATE OF NEW YORK NEW YORK COUNTY LIC. #021-440807545 COMM. EXP. 6/15/13 |
||||
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