EXECUTIVE EMPLOYMENT
AGREEMENT
This
[AMENDED AND RESTATED] EXECUTIVE EMPLOYMENT AGREEMENT (the
“Agreement”) is entered into on
, 200___ (the “Effective Date”), by and between Life
Time Fitness, Inc. (the “Company”), and
(“Executive”).
The
Company is a recognized leader in the health and fitness industry,
including the design and operation of health and fitness centers,
the creation, promotion and sale of nutritional products, the
production of athletic events and the publication of a healthy way
of life magazine. The Company has enjoyed considerable growth and
success in the industry because of its innovative, confidential and
proprietary management and marketing methods and plans. [To assure
protection of the Company’s goodwill and confidential and
proprietary information, management and marketing plans, the
Company and Executive previously entered into an Executive
Employment Agreement dated May ___, 2004 (the “Prior
Agreement”).]
The
Company also desires to assure Executive’s continuing
services to the Company including, but not limited to, under
circumstances in which there is a possible threatened or actual
Change of Control of the Company. The Company believes it is
imperative to diminish the inevitable distraction of the Executive
by virtue of the personal uncertainties and risks created by a
potential severance of employment and to encourage the
Executive’s full attention and dedication to the Company
currently and in the event of any threatened or impending Change of
Control, and to provide the Executive with compensation and
benefits arrangements upon a severance of employment which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. [The parties entered into the Prior Agreement with
the intent to accomplish these objectives.]
[The
Company and Executive agree that it is in their mutual best
interest to amend, modify, and restate the Prior Agreement to
comply with, or be exempt from, the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), so as to avoid additional taxes and
penalties under Code Section 409A(a)(1).]
In
consideration of the foregoing, and in order to accomplish all of
the above objectives, the Company and Executive agree as
follows:
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a)
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“Base Salary” shall mean
the Executive’s regular annual salary (before payment of any
bonuses or incentive pay and before any salary deferral), commonly
referred to as the “Guaranteed” component of an
executive’s salary.
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b)
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“Change of Control”
shall mean the earliest of the following dates:
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(i)
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A
change in the composition of the Board such that the individuals
who, as of the Effective Date, constitute the Board of Directors of
the Company (such Board shall be hereinafter referred to as the
“Incumbent Board”) cease for any reason to constitute
at least 50% of the Board; provided,
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however, for purposes of this
definition, that any individual who becomes a member of the Board
subsequent to the Effective Date, whose election, or nomination for
election by the Company’s shareholders, was approved by a
vote of at least a majority of those individuals who are members of
the Board and who were also members of the Incumbent Board (or
deemed to be such pursuant to this proviso) shall be considered as
though such individual were a member of the Incumbent Board; but,
provided, further, that any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board shall not
be so considered as a member of the Incumbent Board;
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(ii)
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An
acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
“Person”), of beneficial ownership (within the meaning
of Rule 13d-3 under the Exchange Act) which, together with
other acquisitions by such Person, results in the aggregate
beneficial ownership by such Person of 30% or more of either
(x) the then outstanding shares of Common Stock of the Company
(the “Outstanding Company Common Stock”) or
(y) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting
Securities”); provided, however, that the following
acquisitions will not result in a Change of Control
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(a)
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an
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, or
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(b)
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an
acquisition by any entity pursuant to a transaction that complies
with the exemption in clause (iii) below;
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(iii)
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Consummation of a merger or
consolidation of the Company with any other corporation or other
entity, a statutory share exchange involving the capital stock of
the Company, or a sale or other disposition (in one transaction or
a series of transactions) of all or substantially all of the assets
of the Company (except in connection with the sale-leaseback of the
Company’s real estate), other than a merger, consolidation,
statutory share exchange, or disposition of all or substantially
all assets that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into or exchanged for voting securities of the surviving or
acquiring entity or its direct or indirect parent entity)
beneficial ownership, directly or indirectly, of more than 50% of
the combined voting power of the voting securities of the Company
or such surviving or acquiring entity (including, without
limitation, such beneficial ownership of an entity that as a result
of such transaction beneficially owns 100% of the
outstanding
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shares of
common stock and the combined voting power of the then outstanding
voting securities (or comparable equity securities) or all or
substantially all of the Company’s assets either directly or
indirectly) outstanding immediately after such merger,
consolidation, statutory share exchange or disposition of all or
substantially all assets in substantially the same proportions (as
compared to other holders of the Outstanding Company Common Stock
and Outstanding Company Voting Securities prior to the transaction)
as their respective ownership, immediately prior to such
transaction; or
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(iv)
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Consummation or, if earlier,
shareholder approval, of a definitive agreement or plan to
liquidate or dissolve the Company.
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c)
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“Change of Control Date”
shall mean the first date on which a Change of Control
occurs.
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d)
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“Change of Control
Period” shall mean the period commencing on the Change of
Control Date and ending on the first anniversary of such
date.
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e)
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“Cause” shall mean if
the Company determines in good faith that Executive has:
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(i)
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engaged in willful and deliberate
acts of dishonesty, fraud or unlawful behavior against or at the
expense of the Company, which adversely affects the business
affairs of the Company;
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(ii)
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been convicted of, or pleaded nolo
contendere, to any felony;
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(iii)
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engaged in gross negligence or
willful misconduct in the performance of Executive’s duties
as an employee of Company, where such acts adversely affect the
business affairs of the Company in a material way;
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(iv)
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refused to substantially perform all
of Executive’s duties and responsibilities, or persistently
neglects Executive’s duties or experiences chronic unapproved
absenteeism;
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(v)
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demonstrates an inability to perform
Executive’s duties at a level commensurate with
Executive’s position and is unable to meet the conditions of
a Company Performance Improvement Plan designed for Executive
created in connection with this item, within a period of
60 days from creation of such Performance Improvement Plan;
or
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(vi)
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breached any material term(s) or
material condition(s) of this Agreement.
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Notwithstanding anything to the
contrary contained herein, the events described in clauses
(iv) and (v) shall not constitute “Cause” for
purposes of this Agreement unless the Company gives Executive
written notice delineating the claimed event or circumstance and
setting forth the Company’s intention to terminate
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Executive’s employment if such claimed
event or circumstance is not duly remedied within twenty-one
(21) business days following such notice from the Company, and
Executive fails to remedy such event or circumstance within such
twenty-one (21) day period.
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f)
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“Disability” shall mean
the inability of Executive to perform on a full-time basis the
duties and responsibilities of Executive’s employment with
the Company by reason of Executive’s illness or other
physical or mental impairment or condition, as determined by a
physician mutually acceptable to Executive and the Company, if such
inability continues for an uninterrupted period of 90 days or
more during any 365-day period. A period of inability shall be
“uninterrupted” unless and until Executive returns to
full-time work from the above-referenced leave for a continuous
period of at least 180 days, excluding vacation days or sick
days taken for reasons unrelated to the illness or other physical
or mental impairment or condition necessitating the
above-referenced leave.
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g)
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“Good Reason” shall mean
without Executive’s express written consent, any of the
following conditions shall occur, provided that none of the
following conditions shall constitute Good Reason unless Executive
first gives written notice to the Company within 90 days of
the first occurrence of the condition, delineating the claimed
breach and setting forth Executive’s intention to terminate
Executive’s employment if such breach is not duly remedied
within 30 business days, and the Company fails to cure the
condition within such 30-day period:
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(i)
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the
Company has breached any material term(s) or material condition(s)
of this Agreement, which breach was not caused by
Executive;
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(ii)
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the
Company relocates its executive offices outside of a seventy-five
(75) mile radius of its current location, and the relocation
results in a material change to the geographic location at which
Executive performs services;
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(iii)
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the
Company has reduced Executive’s Target Salary by twenty-five
percent (25%) or more, or materially reduced Executive’s
duties and responsibilities (including but not limited to
reasonable discretion in the management of Executive’s
department); or
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(iv)
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the
Company has assigned duties and responsibilities to Executive that
are materially inconsistent with Executive’s position and
experience, such that there occurs a material reduction in
Executive’s duties, responsibilities or authority.
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h)
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“Notice of Termination”
means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to
the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated, and
(iii) if the Termination Date is other than the date of
receipt of such
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notice, specifies the Termination
Date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Executive or the Company
to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive’s or the Company’s right
hereunder.
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i)
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“Target Salary” shall
mean the sum of Executive’s Base Salary and the annual target
payout under any commission or annual cash-base incentive plan that
the Executive is eligible to receive based upon the attainment of
pre-established performance targets. For purposes of Sections 3(a)
and 3(c) below, in the event Executive’s employment is
terminated by Executive for Good Reason pursuant to Section
1(g)(iii), “Target Salary as of the Termination Date”
shall mean Executive’s Target Salary immediately prior to the
reduction in Executive’s Target Salary that gave rise to Good
Reason under Section 1(g)(iii).
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j)
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“Termination Date” shall
mean (i) if the Executive’s employment is terminated by
the Company for Cause, or by the Executive for Good Reason, the
date of receipt of the Notice of Termination (as defined in
Section 2 below) or any later date specified therein, as the
case may be, (ii) if the Executive’s employment is
terminated by the Company other than for Cause or Disability, the
Termination Date shall be the date on which the Company notifies
the Executive of such termination, and (iii) if the
Executive’s employment is terminated by reason of death or
Disability, the Termination Date shall be the date of death of the
Executive or the first date Disability is determined, as the case
may be. For purposes of Sections 3(a) and 3(c) of this Agreement,
with respect to the timing of payments thereunder, Termination Date
shall mean the date of Executive’s separation from service
with the Company within the meaning of
Section 409A(a)(2)(A)(i) of the Code.
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2. Notice of
Termination.
Any termination
of Executive’s employment by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto.
3. Payments
upon Termination of Employment.
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a)
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If
Executive’s employment with the Company is terminated by the
Company for any reason other than for Cause, death or Disability,
or by Executive for Good Reason such that the Termination Date
occurs within two years of the first occurrence of the condition
giving rise to Good Reason, and provided that such termination of
employment does not occur during the Change of Control Period, then
the Company shall provide to Executive the following, subject to
the conditions of Section 3(e) below:
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(i)
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Target Salary
Continuation . The Company will pay to Executive
an amount equal to one half of Executive’s Target Salary as
of the Termination Date, but not to exceed a maximum amount of two
times the lesser of: (x) the Code § 401(a)(17)
compensation limit for the year in which the Termination Date
occurs; or (y) the sum of Executive’s annualized
compensation based upon the annual rate of pay for services
provided to the Company for the calendar year prior to the calendar
year in which the Termination Date occurs (adjusted for any
increase during that year that was expected to continue
indefinitely) (the “Target Salary Continuation
Amount”). Such Target Salary Continuation Amount shall be
paid to Executive in equal installments in accordance with the
Company’s regular payroll schedule, commencing on the first
regular payroll date of the Company that occurs following the
Termination Date and continuing for six months. The Company and
Executive intend the payments under this Section 3(a)(i) to
constitute a “separation pay plan due to involuntary
separation from service” pursuant to Treas. Reg.
§ 1.409A-1(b)(9)(iii). [Notwithstanding anything in this
Section 3(a)(i) to the contrary, if the Termination Date
occurs on or before December 31, [**insert calendar year in
which Executive’s employment commences], then the maximum
limitations of (x) and (y) above shall not apply, and any
amounts that remain payable to Executive as of March 15,
[**insert calendar year after the calendar year in which
Executive’s employment commences], shall be payable in a lump
sum on March 15, [**insert calendar year after the
calendar year in which Executive’s employment commences],
with the intention that the payments under this
Section 3(a)(i) shall in such instance constitute a short-term
deferral under Treas. Reg. § 1.409A-1(b)(4).]
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(ii)
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Supplemental Target Salary
Continuation . The Company will pay to Executive
an additional amount equal to Executive’s Target Salary as of
the Termination Date (the “Supplemental Target S
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