Exhibit 10.2
[Non-Qualified Stock Option - Employee]
NON-QUALIFIED STOCK OPTION AGREEMENT
PURSUANT TO THE
TOWN SPORTS INTERNATIONAL HOLDINGS, INC.
2006 STOCK INCENTIVE PLAN
     THIS AGREEMENT, dated as of                     , 200___(this “Agreement”),
between Town Sports International Holdings, Inc. (the “Company”) and
                     (the “Participant”).
Preliminary Statement
     The Compensation Committee of the Board of Directors of the Company (the
“Committee”) has authorized this grant of a non-qualified stock option (the
“Option”) on                     , 200___(the “Grant Date”) to purchase the
number of shares of the Company’s common stock, par value $0.001 per share (the
“Common Stock”), set forth below to the Participant, as an Eligible Employee of
the Company or an Affiliate of the Company. Unless otherwise indicated, any
capitalized term used but not defined herein shall have the meaning ascribed to
such term in the Town Sports International Holdings, Inc. 2006 Stock Incentive
Plan (as the same may be amended from time to time, the “Plan”). A copy of the
Plan as in effect on the date hereof has been delivered to the Participant. By
signing and returning this Agreement, the Participant acknowledges having
received and read a copy of the Plan as in effect on the date hereof and agrees
to comply with the Plan, this Agreement and all applicable laws and regulations.
     Accordingly, the parties hereto agree as follows:
     1. Tax Matters. No part of the Option granted hereby is intended to qualify
as an “incentive stock option” under Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”).
     2. Grant of Option. Subject in all respects to the Plan and the terms and
conditions set forth herein and therein, the Participant is hereby granted an
Option to purchase from the Company                                 shares of
Common Stock (the “Option Shares”), at a price per share of $___ (the “Option
Price”), which may not be less than Fair Market Value on the Grant Date.
     3. Vesting and Exercise.
     (a) Except as set forth below, the Option shall vest and become exercisable
in installments as provided below, which shall be cumulative. To the extent that
the Option has become vested and exercisable as provided below, the Option
thereafter may be exercised by the Participant, in whole or in part, at any time
or from time to time prior to the expiration or earlier termination of the
Option as provided herein and in accordance with Section 6.3(d) of the Plan,
including, without limitation, the filing of such written form of exercise
notice, if any, as may be required by the Committee or the Company and the
payment in full of the Option Price multiplied by the number of Option Shares
underlying the portion of the Option exercised. Upon expiration of the Option,
the Option shall be canceled and no longer exercisable. The following

 

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table indicates each date upon which the Participant shall be vested and
entitled to exercise the Option with respect to the percentage of the Option
Shares indicated beside such date, provided that the Participant has not had a
Termination of Employment any time prior to such date (each of the dates set
forth below being herein called a “Vesting Date”):

          Percentage of     Option Shares Vesting Date   Vested
First Anniversary of Grant Date
  25%
Second Anniversary of Grant Date
  50%
Third Anniversary of Grant Date
  75%
Fourth Anniversary of Grant Date
  100%

     (b) There shall be no proportionate or partial vesting in the periods prior
to each Vesting Date and all vesting shall occur only on the appropriate Vesting
Date, provided that the Participant has not had a Termination of Employment at
any time prior to such Vesting Date.
     (c) The Option will become fully vested on a Change in Control.
     (d) In consideration for the grant of the Option and in addition to any
other remedies available to the Company, the Participant acknowledges and agrees
that the Option is subject to the provisions in the Plan regarding any
Detrimental Activity. If the Participant engages in any Detrimental Activity
prior to the exercise of the Option, then the Option shall terminate and expire
as of the date the Participant engaged in such Detrimental Activity. As a
condition of the exercise of the Option, the Participant shall be required to
certify (or be deemed to have certified) at the time of exercise in a manner
acceptable to the Company that the Participant is in compliance with the terms
and conditions of the Plan and that the Participant has not engaged in, and does
not intend to engage in, any Detrimental Activity. If the Participant engages in
any Detrimental Activity, then the Company shall be entitled to recover from the
Participant, and the Participant shall pay over to the Company, an amount equal
to any gain realized as a result of the exercise (whether at the time of
exercise or thereafter).
     4. Option Term. The term of each Option shall be 10 years after the Grant
Date and the Option shall expire at 5:00 p.m. (New York City time) on the 10th
anniversary of the Grant Date, subject to earlier termination in the event of
the Participant’s Termination of Employment as specified in Section 5.
     5. Termination. Subject to Section 4 and the terms of the Plan, the Option,
to the extent vested at the time of the Participant’s Termination of Employment,
shall remain exercisable as provided in Section 11.1(a) of the Plan. Any portion
of the Option that is not vested as of the date of the Participant’s Termination
of Employment for any reason shall terminate and expire as of the date of such
Termination of Employment.
     6. Restriction on Transfer of Option. No part of the Option shall be
subject to Transfer other than by will or by the laws of descent and
distribution. During the

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lifetime of the Participant, the Option may be exercised only by the Participant
or the Participant’s guardian or legal representative. The Option shall not be
subject to levy by reason of any execution, attachment or similar process. Upon
any attempt to Transfer the Option or in the event of any levy upon the Option
by reason of any execution, attachment or similar process contrary to the
provisions hereof, the Option shall immediately and automatically become null
and void.
     7. Non-Compete; Nonsolicitation.
     (a) (i) As an inducement to the Company to enter into this Agreement and
grant the Option, the Participant agrees that (A) during the Participant’s
period of employment with the Company or any of its Affiliates, and (B) if the
Participant resigns or the Participant’s employment is terminated by the Company
or any of its Affiliates for any reason, during the period which the Company or
any of its Affiliates is paying the Participant severance compensation (which
shall be at a rate and an amount equal to the Participant’s base salary received
by the Participant immediately prior to the Participant’s Termination of
Employment), such period not to exceed one year (the “Noncompete Period”), the
Participant 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
or any of its Affiliates during the Participant’s period of employment with the
Company or any of its Affiliates or at the time of the Participant’s Termination
of Employment or with any other business that is the logical extension of the
Company’s and its Affiliates’ business during the Participant’s period of
employment with the Company or any of its Affiliates or at the time of the
Participant’s Termination of Employment, 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 (1) the Participant shall not be
precluded from purchasing or holding publicly traded securities of any entity so
long as the Participant shall hold less than 2% of the outstanding units of any
such class of securities and has no active participation in the business of such
entity, and (2) the Company shall have notified the Participant of its agreement
to provide (or cause to be provided) such severance compensation (x) in the
event of resignation, within five days following the date of the Participant’s
Termination of Employment, or (y) in the event of termination, on or before the
date of the Participant’s Termination of Employment. Notwithstanding anything
contained herein to the contrary, the Participant’s agreement set forth in
clause (B) above shall not apply if the date of the Participant’s Termination of
Employment occurs after the fifth anniversary of the Grant Date.
          (ii) During the Noncompete Period, the Participant shall not directly
or indirectly (i) induce or attempt to induce any employee of the Company or any
of its Affiliates to leave the employ of the Company or any of its Affiliates,
or in any way interfere with the relationship between the Company or any of its
Affiliates and any employee thereof, (ii) hire any person who was an employee of
the Company or any of its Affiliates at any time during the Participant’s
employment period except for such employees who have been terminated for at
least six months, or (iii) induce or attempt to induce any customer, supplier,
licensee, franchisor or other business relation of the Company or any of its
Affiliates to cease doing business with such member, 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 or any of its Affiliates,
on the other hand.

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          (iii) The provisions of this Section 7(a) shall survive any expiration
or termination of this Agreement or the Option.
          (iv) If it is determined by a court of competent jurisdiction that any
of the provisions of this Section 7(a) is excessive in duration or scope or
otherwise is unenforceable, then such provision may be modified or supplemented
by the court to render it enforceable to the maximum extent permitted by law.
     (b) The Participant acknowledges that the Participant may have access to
certain confidential, non-public and proprietary information (the “Confidential
Information”), concerning the Company and its Affiliates and their respective
officers, directors, stockholders, employees, agents and representatives and
agrees that: (i) unless pursuant to prior written consent by the Company, the
Participant shall not disclose any Confidential Information to any Person for
any purpose whatsoever unless compelled by court order of subpoena; (ii) the
Participant shall treat as confidential all Confidential Information and shall
take reasonable precautions to prevent unauthorized access to the Confidential
Information; (iii) the Participant shall not use the Confidential Information in
any way detrimental to the Company or any of its Affiliates and shall use the
Confidential Information for the exclusive purpose of effecting the
Participant’s duties of employment with the Company or any of its Affiliates;
and (iv) the Participant agrees that the Confidential Information obtained
during the Participant’s employment with the Company shall remain the exclusive
property of the Company and its Affiliates, and the Participant shall promptly
return to the Company all material which incorporates, or is derived from, all
such Confidential Information upon termination of the Participant’s employment
with the Company or any of its Affiliates. The Participant shall be responsible
for any breach of the terms of this Section 7(b) by any holder of the Option
Shares. It is hereby agreed that Confidential Information does not include
information generally available and known to the public other than through the
disclosure thereof by or through the Participant or obtained from a source not
bound by a confidentiality agreement with the Company or any of its Affiliates.
     (c) The Participant hereby agrees that all inventions, innovations or
improvements in the method of conducting the business (including improvements,
ideas and discoveries, whether patentable or not) of the Company or any of its
Affiliates, whether prior to the date hereof or thereafter, in each case
conceived or made by the Participant in the course of the Participant’s
employment with the Company or any of its Affiliates, belong to the Company and
its Affiliates, except for such inventions, innovations and improvements that
have become part of the public domain other than through the disclosure thereof
by or through the Participant and are not entitled to statutory or common law
protection. The Participant will promptly disclose such inventions, innovation
or improvements to the Company and perform all actions reasonably requested by
the Company to establish and confirm such ownership by the Company or any of its
Affiliates.
     8. Rights as a Stockholder. The Participant shall have no rights as a
stockholder with respect to any Option Shares unless and until the Participant
has become the holder of record of the Option Shares. No adjustments shall be
made to the Option, the Option Shares or the Option Price for dividends in cash
or other property, distributions or other rights in respect of any Option
Shares, except as otherwise may be specifically provided for in the Plan.

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No shares of Common Stock shall be issued unless and until payment therefor has
been made or provided and the conditions set forth in Section 15.6 of the Plan
are satisfied.
     9. Provisions of Plan Control. This Agreement is subject to all the terms,
conditions and provisions of the Plan, including, without limitation, the
amendment provisions thereof, and to such rules, regulations and interpretations
relating to the Plan as may be adopted by the Committee and as may be in effect
from time to time. The Plan is incorporated herein by reference. If and to the
extent that this Agreement conflicts or is inconsistent with the terms,
conditions and provisions of the Plan, the Plan shall control, and this
Agreement shall be deemed to be modified accordingly. This Agreement contains
the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersedes any prior agreements and understandings
(whether written or oral) between the Company and the Participant with respect
to the subject matter hereof.
     10. Notices. Any notice or communication given hereunder (each a “Notice”)
shall be in writing and shall be sent by personal delivery, by courier or by
United States mail (registered or certified mail, postage prepaid and return
receipt requested), to the appropriate party at the address set forth below:
     If to the Company, to:
Town Sports International Holdings, Inc.
888 Seventh Avenue
New York, New York 10106
Attention: Richard Pyle
     with a copy to:
Town Sports International Holdings, Inc.
888 Seventh Avenue (25th Floor)
New York, New York 10106
Attention: Robert Herbst, General Counsel
     If to the Participant, to the address for the Participant on file with the
Company
; or such other address or to the attention of such other person as a party
shall have specified by prior Notice to the other party. Each Notice will be
deemed given and effective upon actual receipt (or refusal of receipt).
     11. No Obligation to Continue Employment. This Agreement is not an
agreement of employment. This Agreement does not guarantee that the Company or
its Affiliates will employ, retain or continue to, employ or retain the
Participant during the entire, or any portion of the, term of this Agreement,
including but not limited to any period during which any Option is outstanding,
nor does it modify in any respect the Company’s or its Affiliates’ right to
terminate or modify the Participant’s employment or compensation.

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     12. Waiver of Jury Trial. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT IT
MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY HERETO.
     13. Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by, and construed in
accordance with, the domestic laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
     14. Counterparts. This Agreement may be executed with counterpart signature
pages or in separate counterparts each of which shall be an original and all of
which taken together shall constitute one and the same agreement.
[Remainder of Page Left Blank]

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     IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.

                          TOWN SPORTS INTERNATIONAL             HOLDINGS, INC.  
 
 
               
 
      By:        
 
         
 
Name:    
 
          Title:    
 
               
PARTICIPANT
               
 
                                 
[Name]
               

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