Exhibit 10.38
EXECUTIVE SEVERANCE AGREEMENT
Executive Severance Agreement, dated
as of
, 2008 (this “ Agreement ”), between Town Sports
International, LLC (the “ Company ”) and
(the “ Executive ”).
WHEREAS , the Compensation
Committee of the Board of Directors of Town Sports International
Holdings, Inc., the parent of the Company (the “
Holdings ”) has authorized this offer of Severance
Payments in the event of a Qualifying Termination of employment due
to a Change in Control of Holdings or the Company;
WHEREAS , the Severance
Payments in this Agreement are offered in exchange for the
commitments of the Executive as set forth herein.
WHEREAS , by signing and
returning this Agreement, the Executive acknowledges and agrees to
comply with the provisions of this Agreement and acknowledges that
the execution of a Separation and Release Agreement is a
requirement for receiving the Severance Payments under this
Agreement.
NOW, THEREFORE , in
consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound
hereby, the parties hereby agree as follows:
1.
Definitions . As used herein, the terms identified below
shall have the meanings indicated:
(a) “Cause”
means the Company’s termination of the Executive’s
employment with the Company as a result of:
(i) Executive’s willful failure to perform any material
portion of his duties; (ii) the commission of any fraud,
misappropriation or misconduct by Executive that causes
demonstrable injury, monetarily or otherwise, to the Company or an
affiliate; (iii) the conviction of, or pleading guilty or no
contest to, a felony involving moral turpitude; (iv) an act
resulting or intended to result, directly or indirectly, in
material gain or personal enrichment to the Executive at the
expense of the Company or an affiliate; (v) any material
breach of Executive’s fiduciary duties to the Company or an
affiliate as an employee or officer; (vi) a material violation
of the Town Sports International Code of Ethics and Business
Conduct, as amended from time to time, and such material policies
and procedures of the Company; (vii) any material breach of
the terms of any agreement between Executive and the Company or any
affiliate, including any of the restrictive covenants imposed
pursuant to the Holdings’ stock option and similar incentive
plans and the related stock option agreement issued thereunder, if
such breach is reasonably likely to result in a material injury to
the Company or an affiliate.
(b) “Change in
Control” means:
(i) The
acquisition by any “person” or “group” (as
such terms are used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “ Exchange Act
”) (other than BRS, the BRS Investors and their respective
Permitted Transferees (each as defined in the Credit Agreement), of
beneficial ownership (within the meaning of Rules 13d-3 and
13d-5 promulgated under the Exchange Act) of 35% or more of either
(A) the then
outstanding shares of common stock of Holdings (the “
Outstanding Holdings Common Stock ”), or (B) the
combined voting power of the then outstanding voting securities of
Holdings entitled to vote generally in the election of directors
(the “ Outstanding Holdings Voting Securities
”);
(ii) Individuals
who, as of the date of this Agreement, constitute the Board (the
“ Incumbent Board ”) cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by
Holdings’ stockholders, was approved or recommended by a vote
of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this purpose,
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;
(iii) Consummation
of a reorganization, merger or consolidation involving Holdings (a
“ Business Combination ”), in each case, unless,
following such Business Combination, all or substantially all of
the Persons who were the beneficial owners, respectively, of the
Outstanding Holdings Common Stock and Outstanding Holdings Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 65% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the Person resulting from such Business Combination
(including, without limitation, a Person which as a result of such
transaction owns Holdings or all or substantially all of
Holdings’ assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the
Outstanding Holdings Common Stock and Outstanding Holdings Voting
Securities, as the case may be;
(iv) Sale
or other disposition of all or substantially all the assets of
Holdings or the Company; or
(v) Approval
by the stockholders of Holdings or approval by the member(s) of the
Company of a complete liquidation, winding up or dissolution of
Holdings or the Company, as the case may be.
(b) “Code”
means the Internal Revenue Code of 1986, as amended, and the
regulations and other guidance promulgated by the Treasury
Department and the Internal Revenue Service thereunder.
(c) “Constructive
Termination” means the Executive’s voluntary
termination of employment with the Company as a result of
(i) a material diminution in the Executive’s authority,
duties, or responsibilities, or a change in the Executive’s
supervisory reporting relationship within the Company, except as
part of, and consistent with, an organizational change; (ii) a
change, caused by the Company, in geographic location of greater
than 50 miles of
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the
location at which the Executive primarily performs services for the
Company; or (iii) a material reduction in the
Executive’s base pay or incentive cash compensation.
(d) “ Credit
Agreement ” means the Credit Agreement among Holdings,
the Company, the Various Lenders party thereto, and Deutsche Bank
Trust Company Americas, dated February 27, 2007, as in effect
as of the date of this Agreement.
(e)
“Disability” means any medically determinable
physical or mental impairment resulting in the Executive’s
inability to perform the duties of his or her position or any
substantially similar position, where such impairment is expected
to result in death or is expected to last for a continuous period
of not less than six (6) months.
(f) “ Person
” means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, governmental
entity or other entity.
(g) “Severance
Payments” means the aggregate gross amount of severance
payments determined in accordance with Sections 2 and 3 of
this Agreement to be paid to the Executive who is entitled to
receive such severance benefits under this Agreement.
(h) “Termination
Date” means the date on which the Executive has a
termination of employment from the Company.
2.
Eligibility . The Executive shall be eligible for Severance
Payments under this Agreement following a Qualifying Termination as
follows:
(a) Qualifying
Termination . The Company will pay Severance Payments under
Section 3 of this Agreement on account of either of these
events occurring within a period of six (6) months following
the date of a Change in Control:
(i) involuntary
termination of the Executive’s employment by the Company that
is not for Cause, or
(ii) voluntary
separation of the Executive as a result of a Constructive
Termination.
(b) Non-Qualifying
Termination . Notwithstanding Section 2(a) of this Agreement,
nothing in this Agreement shall be construed to require the Company
to pay severance benefits to the Executive if the Executive
terminates Employment with the Company as the result of:
(i) voluntary
separation (a separation, including retirement, initiated by the
Executive), other than a voluntary separation pursuant to
Section 2(a)(ii);
(ii) retirement,
whether early retirement, retirement at normal retirement age or
retirement following normal retirement age;
(iii) the
Company having terminated such Executive’s employment for
Cause;
(iv) death;
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(v) Disability;
or
(vi) a
separation or termination for any reason more than six
(6) months following the date of a Change in Control.
(c) Separation Release
Agreement . The eligibility for receipt of benefits under this
Agreement as described in Section 3 herein is expressly
conditioned upon the following: (i) the Executive’s
signing of a release in which the Executive releases and/or waives
any and all claims the Executive may have against the Company and
(ii) the release becoming effective.
3.
Amount and Payment of Severance . Unless otherwise provided
herein, the Executive shall receive the following severance
payments:
(i) An
amount equal to the sum of one (1) times the Executive’s
annual base salary as of the Executive’s Termination Date
payable in a twelve (12) equal monthly installments (such
twelve-month period, the “ Severance Period ”),
less all applicable withholding taxes, beginning thirty
(30) days following the Termination Date or as soon as
administratively practicable thereafter; provided however, that the
Severance Period shall immediately terminate, and no further
amounts shall be due pursuant to this Section 3(i) in the event
Executive has materially breached any of the terms and conditions
of this Agreement, including Section 4 hereunder.
(ii) An
amount equivalent to Executive’s pro-rata annual bonus (based
on the number of days in fiscal year through the Termination Date)
with respect to the
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