September 20, 2016
Town Sports International, LLC
5 Penn Plaza, 4th Floor
New York, NY 10001
|Re:||Town SportsOffer Letter|
Town Sports International Holdings, Inc. (TSI Holdings) and Town Sports International, LLC (the Company or TSI) a subsidiary of TSI Holdings, is pleased to extend this offer of employment to you for the position of Chief Executive Officer (CEO) and confirming that while you will no longer be designated as the Companys Executive Chairman of TSI Holdings, you will remain as the Companys Chairman of the Board. This letter agreement (this Agreement) set forth the terms of your continued employment.
1. Position. As CEO, you will report directly to the TSIs Board of Directors, and will perform the duties and services assigned to you by the Company and traditionally carried out by the Companys CEO. You shall also serve as an officer of any affiliate of the Company as designated by the Company. You shall devote a majority of your time and attention to the affairs of the Company and to your duties on the Companys behalf. Your employment will be subject to all Company policies, procedures and practices as may currently exist or as may be modified or implemented in the future, including our Code of Ethics and Business Conduct and Employee Handbook. In addition, by accepting employment with the Company, you agree to enter into, and comply with, the Companys Confidentiality and Non-solicitation Agreement (the Confidentiality Agreement) and to arbitrate any disputes arising out of your employment as set forth in the Companys Dispute Resolution Program. These documents will be provided to you as part of your hire package and you will be required to sign them prior to beginning your employment with the Company.
3. Compensation. For all services to be performed hereunder, your annual base salary will be $690,000, payable in accordance with the Companys standard payroll practices and subject to all applicable tax withholdings. Base salary is inclusive of any fees and committee fees (other than Stock Grants) you are otherwise entitled to in your role as a Member of the Board or Committee thereof. Wages are currently paid every other week, on Friday. Your performance will be reviewed each year in accordance with Company policy and practice. Future salary increases will be based on individual and Company performance, and subject to the discretion of the Board of Directors (the Board) or designated committee.
4. Bonus. Beginning in calendar year 2016, you will be eligible to participate in the TSI Holdings 2006 Annual Performance Bonus Plan with a target bonus to be set at one-hundred percent (100%) of your annual base salary. For purposes of your 2016 Bonus, only your annual salary shall be deemed to be $600,000.00. Payment of a bonus is based upon Company performance against certain targets as outlined or approved by the Board, and can be increased (up to 200%) or decreased (down to 0%) based on the actual Company results and your individual performance toward specific goals (e.g. EBITDA) to be established by the Board or designated committee. Actual incentive payments will usually be paid in the first quarter of the following year, after appropriate approval from the Board of Directors or designated committee.
5. Employee Benefits. You will be eligible to participate in all employee benefit programs as are generally available to other executives of the Company in accordance with the terms and conditions of the applicable benefits plans, programs, policies and/or practices.
You will be eligible to join the Companys benefit program on the first of the month following 60 days of employment.
You will be eligible to join the Companys 401(k) program on the first of the month following your one (1) year anniversary with the Company. In the event that changes are made to any of the benefit plans, such changes will apply to you as they apply to other employees of the Company.
You will be eligible for vacation, holidays and time off in accordance to the Companys paid time off policy (PTO) consistent with all other executives. Please be aware that TSIs PTO policy does not allow carryover of unused PTO from year to year, other than as required by federal, state or local law, and is not paid out upon termination of employment.
You will be reimbursed for all normal business expenses in accordance with Company policy.
On your Start Date, you will be granted 200,000 shares of restricted common stock of TSI Holdings (the Restricted Stock), pursuant to the Companys Restricted Stock Agreement which has been previously approved by the Board of TSI Holdings. The grant hereunder is in addition to any grants of Company Stock or Options previously granted while you maintained the position of Executive Chairman.
7. Intentionally Omitted.
8. Intentionally omitted.
9. Non-Compete and Non-solicitation.
a. As an inducement to the Company to enter into this Agreement, you agree that (i) during your period of employment with the Company, and (ii) during the twelve (12)-month period following the end of your employment for any reason (the Non-compete Period), you shall 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 during your period of employment with the Company or at the time of the termination of your employment or with any other business that is the logical extension of the Companys business during your period of employment with the Company or at the time of termination of your employment, within any metropolitan area in which the Company engages or has definitive plans to engage in such business as of the date of this Agreement; provided, however, that you shall not be precluded from purchasing or holding publicly traded securities of any entity so long as you shall 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. You agree that the following entities are nonexclusive examples of competitive businesses and performing services for them would violate this section: Crunch, 24 Hour, Equinox, NY Health and Racquet Club, LA Fitness, Planet Fitness, Lifetime and Bally.
b. As an inducement to the Company to enter into this Agreement you agree that during the Non-compete Period, you shall not directly or indirectly (i) induce or attempt to induce any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any employee thereof, (ii) hire any person who was an employee of the Company at any time during your employment except for such employees who have been terminated for at least three (3) months, or (iii) induce or attempt to induce any customer, supplier, licensee, franchisor or other business relation of the Company to cease doing business with such Company, or in any way interfere with the relationship between any such customer, supplier, licensee, franchisor or business relation, on the one hand, and the Company, on the other hand.
c. The provisions of this Section shall survive any expiration or termination of this Agreement.
d. You acknowledge and agree that the restrictions imposed upon you by the terms, conditions and provisions of this Section are reasonably necessary to protect the legitimate business interests of the Company (which for the avoidance of doubt includes its subsidiaries and affiliates), and that any violation of any of the restrictions will result in immediate and irreparable injury to the Company for which monetary damages will not be an adequate remedy. You further acknowledge and agree that if any such restriction is violated, the Company will be entitled to immediate relief enjoining such violation (including, without limitation, temporary and permanent injunctions, a decree for specific performance, and an equitable accounting of earnings, profits, and other benefits arising from such violation) in any court having jurisdiction over such claim, without the necessity of showing any actual damage or posting any bond or furnishing any other security, and that the specific enforcement of the provisions of this Section will not diminish your ability to earn a livelihood or create or impose any undue hardship on you. You also agree that any request for such relief by the Company shall be in addition to, and without prejudice to, any claim for monetary damages that the Company may elect to assert. You further acknowledge and agree that if any provision of this Section is found by a court of competent jurisdiction to be unenforceable or unreasonable as written, you authorize and request said court to revise the unenforceable or unreasonable provision in a manner that shall result in the provision being enforceable while remaining as similar as legally possible to the purpose and intent of the original. You further acknowledge and agree that any period of time during which you are in violation of the covenants set forth in this Section shall be added to the restricted period.
10. Section 409A. If you are a specified employee within the meaning of Treasury Regulation Section 1.409A-l(i) as of the date of the termination of your employment, you shall not be entitled to any payment or benefit that constitutes deferred compensation under 409A pursuant to this Agreement until the earlier of (i) the date which is six (6) months after your termination of employment for any reason other than death or (ii) the date of your death. The provisions of this paragraph shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (the Code). Any amounts otherwise payable to you upon or in the six (6) month period following your termination of employment that are not so paid by reason of this Section shall be paid (without interest) as soon as practicable (and in all events within thirty (30) days) after the date that is six (6) months after the date of your termination (or, if earlier, as soon as practicable, and in all events within thirty (30) days, after the date of your death). It is intended that any amounts payable under this Agreement shall comply with or be exempt from and avoid the imputation of any tax, penalty or interest under Section 409A of the Code. This Agreement shall be construed and interpreted consistent with that intent. In no event whatsoever will the Company be liable for any additional tax, interest or penalties that may be imposed on you under Section 409A of the Code or any damages for failing to comply with Section 409A of the Code. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Section 409A of the Code upon or following a termination of employment until such termination is also a separation from service within the meaning of Section 409A of the Code and for purposes of any such provision of this Agreement, references to a termination of employment and like terms shall mean separation from service. If under this Agreement an amount is paid in two or more installments, for purposes of Section 409A of the Code, each installment shall be treated as a separate and distinct payment.
11. Employment at Will. In accepting this offer, you understand and agree that your employment with the Company shall be at-will, which means that either you or the Company are free to terminate your employment at any time, for any reason or no reason, with or without notice. You further understand and acknowledge that there is no written or oral contract providing you with any definite or specific term of employment. You further understand and agree that, due to your at-will status, the Company may, at any time, modify the terms of your employment, including, but not limited to, your job title, job responsibilities, compensation and benefits, subject to the terms herein.
12. Truthful Representations. You acknowledge and confirm that all of the representations you have made and all of the information that you have provided to the Company on any employment application, resume or any other document, or orally during the interview process, concerning, among other things, your prior employment history, education, experience and other qualifications, are true and correct. You understand and agree that any falsifications, misrepresentations, or omissions with respect to any of the representations and information that you have made or provided to the Company may be grounds for the withdrawal of this offer of employment or, if hired, the termination of your employment.
13. Other Conditions and Obligations. By signing this agreement, you represent that you are not subject to any currently-effective employment contract, or any other contractual or other binding obligation, including without limitation, any obligation relating to non-competition, confidentiality, trade secrets, proprietary information or works for hire, that would restrict your employment or employment activities with or on behalf of the Company. In your work for the Company, you will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality. You agree you will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom you have any obligation of confidentiality.
You further acknowledge that this letter constitutes the sole and complete understanding between you and the Company with respect to this offer of employment and your prospective employment, and you hereby acknowledge that there are no other agreements, understandings or representations, whether written or oral and whether made contemporaneously or otherwise, with respect to this offer of employment.
You further understand and acknowledge that your employment with the Company is contingent upon:
|||Your completion of Section 1 of the Form I-9 on or before the end of your first (1st) day of employment and your presentation of your original documentation verifying your work eligibility and identification on or before the third (3rd) day of your employment.|
14. Taxes. All payments hereunder are subject to applicable tax withholdings.
We all look forward to your continued involvement with our Executive team. Please do not hesitate to contact me if you have any questions.
Please indicate your acceptance of this offer of employment by signing this Offer Letter and returning the signed letter to me at the above address.
Very truly yours,
TOWN SPORTS INTERNATIONAL
|By:||/s/ Carolyn Spatafora|
I have read and understand all of the terms of this letter and I accept and agree to all of the terms set forth therein.
|ACCEPTED AND AGREED TO:|
|/s/ Patrick Walsh|