EX-10.1



 







SECOND AMENDMENT AND CONSENT




     SECOND AMENDMENT AND CONSENT (this “Amendment”), dated as of May 18, 2006, among TOWN SPORTS
INTERNATIONAL HOLDINGS, INC. (“Holdco”), TOWN SPORTS INTERNATIONAL, INC. (the “Borrower”), the
financial institutions party to the Credit Agreement referred to below (the “Lenders”), and
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent (in such capacity, the
“Administrative Agent”). All capitalized terms used herein and not otherwise defined herein shall
have the respective meanings provided such terms in the Credit Agreement referred to below.



W I T N E S S E T H:




     WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to a Credit
Agreement, dated as of April 16, 2003 (as amended, modified and/or supplemented to, but not
including, the date hereof, the “Credit Agreement”);



     WHEREAS, Holdco and the Administrative Agent are parties to the Holdco Guaranty, dated as of
February 4, 2004 (the “Holdco Guaranty”);



     WHEREAS, the parties hereto wish to further amend and otherwise modify certain provisions of
the Credit Agreement and to consent to certain transactions under the Credit Agreement and the
Holdco Guaranty, in each case as provided herein; and



     WHEREAS, subject to the terms and conditions of this Amendment, the parties hereto agree as
follows;



     NOW, THEREFORE, it is agreed:



     1. Section 8.02(b) of the Credit Agreement is hereby amended by deleting the text “120th”
appearing therein and inserting the text “150th” in lieu thereof.



     2. Section 9.02 of the Credit Agreement is hereby amended by (i) deleting the word “and”
appearing at the end of clause (xi) thereof, (ii) deleting the period appearing at the end of
clause (xii) thereof and inserting “; and” in lieu thereof and (iii) inserting the following new
clause (xiii) at the end thereof:



          “(xiii) the Borrower may merge with and into a Wholly-Owned Domestic Subsidiary of the
Borrower that is a newly-formed limited liability company and that was formed solely for the
purpose of converting the Borrower into a limited liability company organized under the laws of the
State of Delaware or the State of New York so long as (i) the Borrower continues to be a direct
Wholly-Owned Domestic Subsidiary of Holdco and the direct and indirect parent company of all of its
existing Subsidiaries prior to such merger, (ii) such newly-formed limited liability company shall
have no assets or liabilities (except for any de minimis amounts arising from the formation
thereof) immediately prior to such merger, (iii) immediately after giving effect to such merger,
the only liabilities and assets (except for any de minimis amounts arising from the
formation thereof) of the surviving entity shall be those of the Borrower immediately prior to such
merger, (iv) no Default or Event of Default then exists or




 









 







would result therefrom, (v) the surviving entity expressly acknowledges and agrees that all
Obligations of the Borrower under the Credit Documents are Obligations of such surviving entity
pursuant to an agreement in form and substance reasonably satisfactory to the Administrative Agent,
(vi) the name of the surviving entity shall be “Town Sports International, LLC” or such other name
as shall have been previously notified to the Administrative Agent, (vii) all actions have been
taken that are necessary or, in the reasonable opinion of the Administrative Agent desirable, to
maintain the perfection and priority of the Liens created by the respective Security Documents in
the assets of the Borrower and (viii) at least 10 days’ prior written notice thereof (or such
shorter period as is acceptable to the Administrative Agent) is given by the Borrower to the
Administrative Agent.”




     3. Section 9.03(vi) of the Credit Agreement is hereby amended by deleting the amount
“$250,000” appearing therein and inserting the amount “$1,000,000” in lieu thereof.



     4. Section 9.06 of the Credit Agreement is hereby amended by (i) deleting the word “and”
appearing at the end of clause (vi) thereof, (ii) deleting the period appearing at the end of
clause (vii) thereof and inserting “; and” in lieu thereof and (iii) inserting the following new
clause (viii) at the end thereof:



          “(viii) the execution, delivery and performance by the Borrower (including, without
limitation, the making of certain payments to Mark N. Smith) of (and/or the acceptance of) the
following agreements, instruments and other documents: (A) Amendment No. 1 to the Stockholders
Agreement dated as of March 23, 2006; (B) Amendment No. 1 to Registration Rights Agreement dated as
of March 23, 2006; (C) Letter of Resignation of Mark Smith dated as of March 23, 2006; (D)
Separation Agreement and General Release dated as of March 23, 2006 relating to Mark Smith; (E)
Equity Rights Letter dated as of March 23, 2006 relating to Mark Smith; and (F) Common Stock Option
Agreement dated as of April 4, 2006 relating to Mark Smith.”




     5. The definition of “Borrower” appearing in Section 11.01 of the Credit Agreement is hereby
amended by inserting the following new text at the end thereof:



          “, and shall include the surviving entity of the merger referred to in Section 9.02(xiii)”.




     6. The definition of “Change of Control” appearing in Section 11.01 of the Credit Agreement is
hereby amended by deleting clause (ii) of said definition in its entirety and inserting the
following clause (ii) in lieu thereof :



     “(ii) from and after the date on which a Qualified IPO occurs, (x) any “Person” or “Group” (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act as in effect on the Second
Amendment Effective Date), other than BRS, the BRS Investors and their Permissible Transferees, (A)
is or shall become the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act as in effect on the Second Amendment Effective Date), directly or indirectly, of 35%
or more on a fully diluted basis of the Voting Equity Interests of Holdco or (B) shall have
obtained the power (whether or not exercised) to elect a



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majority of Holdco’s directors or (y) the board of directors of Holdco shall cease to consist of a
majority of Continuing Directors,”.



     7. Section 11.01 of the Credit Agreement is hereby further amended by inserting the following
new definitions in the appropriate alphabetical order:




     “Continuing Directors” shall mean the directors of Holdco on the Second Amendment
Effective Date and each other director of Holdco if such director’s nomination for election
to the board of directors of Holdco is recommended by a majority of the then Continuing
Directors.




     “Equity Interests” of any Person shall mean any and all shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or interest in (however
designated) equity of such Person, including any common stock, any preferred stock, any
limited or general partnership interest and any limited liability company membership
interest.




     “Second Amendment” shall mean the Second Amendment to this Agreement, dated as of May
18, 2006.




     “Second Amendment Effective Date” shall have the meaning provided in the Second
Amendment.




     “Voting Equity Interests” shall mean, as to any Person, any class or classes of
outstanding Equity Interests of such Person pursuant to which the holders thereof have the
general voting power under ordinary circumstances to elect at least a majority of the board
of directors of such Person.



     8. Notwithstanding anything to the contrary contained in the Credit Agreement or in the Holdco
Guaranty, at the time of a Qualified IPO or within the 90-day period thereafter (or, in the case of
clause (iv) below, no later than the time of such Qualified IPO), the Lenders hereby consent to:




     (i) the use by Holdco of the net cash proceeds received by Holdco from such
Qualified IPO to tender for, or otherwise purchase or redeem, Holdco Notes in an
aggregate amount not to exceed 35% of the original principal amount at maturity of
the Holdco Notes (at a price equal to 111% of the Accreted Value (as defined in the
Holdco Note Documents) at the date of redemption or tender and other amounts with
respect thereto), and with the balance of such net cash proceeds not so used to be
contributed as a common equity contribution to the Borrower;




     (ii) the use by the Borrower of the cash proceeds received pursuant to clause
(i) above to tender for, or otherwise purchase or redeem, Senior Notes;




     (iii) concurrently with the transaction described in clause (ii) above and the
use of all such cash proceeds with respect thereto, the use by the Borrower of



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cash on hand to tender for, or otherwise purchase or redeem, additional Senior
Notes, so long as after giving effect to any such tender, purchase or redemption
(and the payment of all principal, premium, accrued interest and other amounts with
respect thereto), the Borrower and its Subsidiaries shall have at least $15,000,000
of unrestricted cash on hand and no Loans shall be outstanding on the date of any
such tender, purchase or redemption; and




     (iv) the amendments of, and the waivers with respect to, certain provisions of
the Senior Note Documents as described in the Offer To Purchase and Consent
Solicitation Statement dated as of May 4, 2006 (as the same may be supplemented or
amended from time to time with the consent of the Administrative Agent, which
consent shall not be unreasonably withheld or delayed).



     9. Notwithstanding anything to the contrary contained in the Credit Agreement or in the Holdco
Guaranty, the Holdco Tax Sharing Agreement may be amended, modified or supplemented or a new or
additional tax sharing agreement, tax allocation agreement or similar agreement may be entered
into, in each case with the prior written consent of the Administrative Agent.



     10. The Lenders hereby waive any Default or Event of Default that may have arisen solely under
Section 9.06 of the Credit Agreement as a result of the Borrower entering into the agreements
described in Section 4 of this Amendment prior to the Second Amendment Effective Date (as defined
in Section 7 of this Amendment).



     11. This Amendment shall become effective on the date (the “Second Amendment Effective Date”)
when Holdco, the Borrower and the Required Lenders shall have signed a counterpart hereof (whether
the same or different counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Administrative Agent at the Notice Office.



     12. In order to induce the Lenders to enter into this Amendment, the Borrower hereby
represents and warrants that (i) no Default or Event of Default exists on the Second Amendment
Effective Date, both before and after giving effect to this Amendment (except as waived pursuant to
Section 10 of this Amendment), and (ii) on the Second Amendment Effective Date, both before and
after giving effect to this Amendment, all representations and warranties contained in the Credit
Agreement and in the other Credit Documents are true and correct in all material respects (it being
understood and agreed that any representation or warranty which by its terms is made as of a
specified date shall be required to be true and correct in all material respects only as of such
specified date).



     13. This Amendment may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which counterparts when executed and delivered shall be an
original, but all of which shall together constitute one and the same instrument. A complete set
of counterparts shall be delivered to the Borrower and the Administrative Agent.



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     14. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.



     15. From and after the Second Amendment Effective Date, all references in the Credit Agreement
and each of the other Credit Documents to the Credit Agreement and the Holdco Guaranty shall be
deemed to be references to the Credit Agreement and the Holdco Guaranty as modified hereby.



     16. This Amendment is limited as specified and shall not constitute a modification, acceptance
or waiver of any other provision of the Credit Agreement, the Holdco Guaranty or any other Credit
Document.



*     *     *




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     IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to
be duly executed and delivered as of the date first above written.



	 	 	 	 	 
	 	TOWN SPORTS INTERNATIONAL, INC.

 	 
	 	By:  	/s/ Richard Pyle
 	 
	 	 	Name:  	Richard Pyle 	 
	 	 	Title:  	CFO 	 
	 



	 	 	 	 	 
	 	TOWN SPORTS INTERNATIONAL HOLDINGS, INC.

 	 
	 	By:  	/s/ Richard Pyle
 	 
	 	 	Name:  	Richard Pyle 	 
	 	 	Title:  	CFO 	 
	 




 









 





	 	 	 	 	 
	 	DEUTSCHE BANK TRUST COMPANY

AMERICAS, Individually and as Administrative Agent

 	 
	 	By:  	/s/ Carin Keegan
 	 
	 	 	Name:  	Carin Keegan 	 
	 	 	Title:  	Vice President 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	                                            /s/ Lana Gifas
 	 
	 	 	Name:  	Lana Gifas 	 
	 	 	Title:  	Vice President 	 
	 




 









 





	 	 	 	 	 
	 	BNP PARIBAS

 	 
	 	By:  	/s/ Charles Romano
 	 
	 	 	Name:  	Charles Romano 	 
	 	 	Title:  	Vice President 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	                   /s/ Ola Anderssen
 	 
	 	 	Name:  	Ola Anderssen 	 
	 	 	Title:  	Director 	 
	 



	 	 	 	 	 
	 	CIT LENDING SERVICES CORPORATION

 	 
	 	By:  	/s/ David Manheim
 	 
	 	 	Name:  	David Manheim 	 
	 	 	Title:  	Vice President 	 
	 



	 	 	 	 	 
	 	MERRILL LYNCH CAPITAL , a division
of
 	 
	 	
MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.

 	 
	 	By:  	/s/ Francois Delangle
 	 
	 	 	Name:  	Francois Delangle 	 
	 	 	Title:  	Vice President