Exhibit 10.1

            January 10, 2014

Daniel Gallagher

c/o Town Sports International, LLC

5 Penn Plaza

New York, NY 10001

Dear Dan:

As we have discussed, Town Sports International, LLC (the “Company”) is pleased
to offer you a promotion into the position of President and Chief Operating
Officer effective as of Monday, January 13, 2014.

1. Position. In this new position, you will continue to report to the Chief
Executive Officer. You will also continue to act in the role of Chief Financial
Officer until that position has been filled and, once filled, you will assist in
the orderly and smooth transition of those job responsibilities.

2. Compensation and Bonus. Your annual base salary will be $385,000, payable in
accordance with the Company’s standard payroll practices and subject to all
applicable tax withholdings. Future salary increases will be based on
demonstrated job performance. Under the Company’s current performance bonus
plan, you will have a bonus target of fifty percent (50%) of your annual base
salary.

3. Restricted Stock. Subject to the further approval of the Compensation
Committee of the Board of Directors, at such time as the annual award of shares
of restricted common stock is made to other senior executives of Town Sports
International Holdings, Inc. (“TSI Holdings”) (or any successor entity), but in
no event later than March 14, 2014, you will be awarded 27,500 shares of
restricted stock of TSI Holdings, which award shall vest twenty-five
(25%) percent per year, commencing on the first anniversary of the award date.
The award will subject to the terms and conditions of the TSI Holdings 2006
Stock Incentive Plan, as amended, and the related award agreement.

4. Severance. In the event that your employment is terminated by the Company
without Cause (as hereinafter defined), subject to the execution (without
revocation) of the Company’s standard release agreement within the time
prescribed therein (no later than 60 days from the date of termination) and your
continued compliance with the covenants contained in any and all restricted
stock agreements entered into between you and TSI Holdings (including, without
limitation, Section 12 thereof), you shall continue to receive your base salary
(at the rate in effect at the time of termination) for a period of one (1) year
from the date of termination (the “Severance Period”). Such payments will
commence as soon as practical after the effectiveness of the release and the
first payment shall include the payments that you would have received if the
release were effective on the date of termination. The payments will be made
consistent with the Company’s prevailing payroll practices and will be less all
applicable withholding taxes. 

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During the Severance Period, up until you are eligible for coverage under
another employer-sponsored plan, (i) if you elect to continue your health
insurance coverage through COBRA, the Company will reimburse you for the COBRA
coverage, in full, for your health and dental premium; and (ii) the Company will
continue your disability insurance coverage and will pay 100% of the expense
related thereto, including the applicable tax gross-up. You agree to promptly
notify the Company in writing in the event that you are eligible for health or
disability coverage under another employer-sponsored plan.

As used above, “Cause” means the Company’s termination of your employment as a
result of: (i) repeated refusal to comply with the lawful direction of the Chief
Executive Officer (which is not cured within 30 days of written notice from the
Company describing such refusal to comply); (ii) the commission of any fraud,
misappropriation or misconduct by you that causes, or is reasonably likely to
cause, 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 you at the expense of the
Company or an affiliate; (v) any material breach of your fiduciary duties to the
Company or an affiliate as an employee or officer; (vi) a material violation of
the Company’s Code of Ethics and Business Conduct, as amended from time to time,
or other policies and procedures of the Company; (vii) any breach of the terms
of any non-compete, non-solicitation or confidentiality provision contained in
any agreement between you and the Company or any affiliate. 

Any severance provided pursuant to this provision shall be in lieu of any
severance or other payment under your Executive Severance Agreement, as amended,
or restricted stock or option agreements and not duplicative. In the event of a
breach of the restrictive covenants to which you are bound, in addition to any
other remedy available to the Company, the Company will cease payment of the
severance amounts set forth in this Section 4 and may recoup any severance
payments previously paid to you.

In the event your employment terminates for any reason other than by the Company
without Cause, you shall not be eligible for the severance amounts in Section 4
and you shall only be entitled to payment of base salary through the date of
termination, reimbursement of business expenses incurred through the date of
termination in accordance with the Company’s policy and any other rights
pursuant to applicable law.

5. Employment at Will. In accepting this new position, you understand and agree
that your employment with the Company shall remain 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. Notwithstanding the foregoing,
in the event of a termination without Cause (as set forth above), you will be
paid the severance amounts as set forth in Section 4 above. 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.

6. 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

 

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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.

7. Disputes. In the event that either party commences a litigation, arbitration,
or an administrative action related to this Agreement against the other, the
prevailing party shall be entitled to recover from the non-prevailing party all
reasonable costs, expenses and fees, including reasonable attorney’s fees,
through all appeals in prosecuting or defending such action. For purposes
hereof, the “prevailing party” shall be the party who receives substantially the
relief sought as determined by the trier of fact.

 

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Please indicate your acceptance of this offer by signing this Letter and
returning the signed letter to me at the above address.

 

Very truly yours, TOWN SPORTS INTERNATIONAL, LLC By:  

/s/ Robert Giardina

 

Name: Robert Giardina

Title: Chief Executive Officer

ACKNOWLEDGEMENT:

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/ Daniel Gallagher

Daniel Gallagher Date: January 10, 2014

 

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