Document:

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

 - 3 -

 

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.

*     *     *

 - 5 -

 

     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 PresidentEX-10.1

 

Exhibit 10.1

AMENDED EMPLOYMENT AGREEMENT made as of the 17th day of May 2006 by and between ARROW ELECTRONIC
EMEASA INC., a Delaware Corporation with its principal office at 50, Marcus Drive, Melville, New
York, 11747 (the “Company”) and GERMANO FANELLI, residing at 14, Via F.lli Bressan, 20126 Milan,
Italy (the “Executive”)

WHEREAS an employment agreement was entered into by and between the Company and the Executive on
the 1st day of January 2004 and is still effective between the parties (the “Employment
Agreement”); and

WHEREAS the Company and the Executive wish to amend the Employment Agreement to reflect certain
changes which they have agreed upon in relation to some of the terms and conditions reflected in
the Employment Agreement; and

WHEREAS the Executive wishes to accept the Employment offered by the Company as amended by this
amended employment agreement (the “Amended Employment Agreement”) in order to render services to
the Company on the terms set forth in, and in accordance with the provisions of, this Amended
Employment Agreement.

NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the
parties agree as follows:

1. New Employment Period and Executive’s position

The Company and the Executive agree that the Employment Period, as defined in the Employment
Agreement, will come to an end, other than for the reasons set out in letters (a), (b) and (c),
of Section 3 of the Employment Agreement, on June 30, 2008 (the “New Employment Period”) on the
understanding, however, that the Executive will discharge his duties during the New Employment
Period in the manner and in the capacity described below.

	(i)	 	until December 31, 2006, on a full-time basis, holding the position as President of
EMEASA; and

	(ii)	 	between January 1 and December 31, 2007, as either President or Chairman of EMEASA,
as determined by the Company, on a part-time basis, by devoting up to an average of three
days out of five working days per week as required by the Company (for the avoidance of
doubt, (i) the Executive will be able to spread over a period of thirty days his
part-time involvement, in his sole discretion, provided that, by so doing, he will be
able to discharge his duties to the reasonable satisfaction of the Company and (ii) the
extent of the Executives activities and involvement in the business during this period
and the January 1 through June 30, 2008 period, and whether or not the Executive has an
office at the Company’s

4

 

	 	 	facilities during such periods, shall be determined by the Company in its sole
discretion); and

	(iii)	 	from January 1 through June 30, 2008 as Chairman of EMEASA , on the same part-time
basis as set out in (ii) above.

The Company and the Executive recognize that it is essential that for all relevant purposes the
Executive shall continue to be employed as a subordinate executive employee by any designated
company belonging to the Arrow Group of Companies, during the New Employment Period, in order not
to jeopardize in any manner the Executive’s pension benefits.

2. Compensation

     a) Monetary Remuneration and Benefits. During the New Employment Period, the Company
shall pay to the Executive for all services rendered by him in any capacity the compensation and
benefits specified in the term sheet attached hereto as Exhibit A (the “New Term Sheet”), as
amended in respect of the term sheet attached as Exhibit A to the Employment Agreement.

3. Non-Competition; Trade Secrets

	3.1	 	Section 7.b (iv) of the Employment Agreement is hereby amended to read as follows: “If the
Company decides to exercise its right pursuant to this paragraph 7(b) to require the Executive
to extend his non-competition obligation beyond termination of his work relationship with the
Company, the Company agrees to pay the Executive, in consideration thereof and contingent on
his adherence to the terms of such obligations set forth herein, an amount equal to 80% of the
sum of: (i) his annual base salary, (ii) his average annual bonus, including his Net Special
Bonus, for the past three years of employment (or if less than three years, such lesser number
of years) for each year of such non-competition obligation (as adjusted for any period less
than one year) payable in equal monthly installments during such term of non-competition".

	3.2	 	Section 7.e of the Employment Agreement is amended to read as follows: “Disclosure. The
Executive will promptly furnish in writing to the Company, its subsidiaries or affiliates, any
information reasonably requested by the Company (including any third party confirmations) with
respect to any activity or interest that the Executive may have in any business which is at
the time of the investment, or thereafter becomes, a customer or supplier of the Company or
any of the Company’s subsidiaries or affiliates or which, at the time of the investment, or
thereafter, competes with the business of the Company or any of the Company’s subsidiaries
or affiliates.

5

 

4. Surviving terms and conditions of the Employment Agreement

The Company and the Executive agree that the Employment Agreement and any and all of its terms and
provisions including those contained in the relevant Exhibits, shall survive the execution of this
Amended Employment Agreement with the only exception of the Term Sheet which is replaced by the New
Term Sheet and of those provisions of the Employment Agreement that have been expressly amended by
this Amended Employment Agreement or that have become inconsistent following the execution of this
Amended Employment Agreement as well as with the exception of those provisions which have already
been fully implemented by the Company and/or by the Executive on or before the date of execution of
this Amended Employment Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement together with Exhibit A (the “New Term
Sheet”), Exhibit B (Revised Profit Sharing Bonus Plan) and Exhibit B.1 (Germano Fanelli Profit
Sharing Plan) which form an integral and binding part of this Agreement, as of the day and year
first above written.

	 	 	 	 	 	 	 
	 	 	ARROW ELECTRONICS EMEASA, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	THE EXECUTIVE
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Germano Fanelli

6

 

Germano Fanelli

Term Sheet

Exhibit A

Position: President, Arrow Electronics EMEASA

Effective Date: January 1, 2006

Annual Compensation:

(all amounts, unless otherwise expressly stated, gross of personal income withholding taxes and in

Euros)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2006	 	 	2007	 	 	2008	 	 	Total	 
	 	 	 	 	 	 	 	 	(six months)	 	 	 	 
	Base salary
	 	 	393,250	 	 	 	432,575	 	 	 	216,287.50	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	50% of actual target bonus paid in 2007	 	 	 	 
	Target bonus (100%)
	 	 	211,750	 	 	 	232,925	 	 	 	 	 	 	 	 	 
	Total gross
	 	 	605,000	 	 	 	665,500	 	 	 	 	 	 	 	 	 
	Net Special Bonus
	 	 	351,000	*	 	 	386,100	**	 	 	193,050	***	 	 	 	 

* Net Special Bonus of Euro 351,000 payable (net of any tax and/or social security withholdings or
dues) in four equal installments falling due on March 31, 2006; June 30, 2006; September 30, 2006
and November 30, 2006. For the avoidance of doubt it is agreed that this Net Special Bonus is by
way of implementation of the severance payment of equal amount provided for in Exhibit A to the
Employment Agreement under the heading “Severance Plans”.

** Payable (net of any tax and/or social security withholdings or dues) in four equal installments
falling due, respectively, on March 31, 2007; June 30, 2007; September 30, 2007 and November 30,
2007.

*** Payable (net of any tax and/or social security withholdings or dues) in two equal installments,
on Mach 31, 2008 and May 31, 2008, respectively.

Employment Terms: You will continue to be employed as a Dirigente employee of the Italian branch
office of Arrow Electronic EMEASA. In addition, you will retain Board Member (Consigliere di
Amministrazione) status in Arrow Holding South Europe (“AHSE”).

Base Salary and Annual Incentive: Your annual cash compensation in the proposed plan is set forth
above. Your actual annual bonus will be determined annually under the MICP Program and may range
from 0-200% of target depending on results.

7

 

Executive Equity Programs: During 2006 and 2007, you will participate in the Company’s current
Stock-Option Program and Performance Share Program or any replacement of such Programs in the
future. At the end of the New Employment Period, for the purposes of any stock-option program you
will be treated as a retired executive.

8

 

Germano Fanelli

Arrow Electronics EMEA & South America

Revised Profit Sharing Bonus Plan

Term Sheet

Exhibit B

The Plan is designed to reward the sustainable, long term growth in Europe over the three or more
years Germano Fanelli has managed and will manage the Region as provided for by the Employment
Agreement and by the Amended Employment Agreement, as applicable. The Plan is also intended to
reward Germano Fanelli for having identified and developed a suitable successor.

     Metrics Used:

	 	•	 	Operating Income: Baseline: Euro 117,000,000.00 (Euro 117M). Primary measure
to establish the profit sharing pool. . Germano Fanelli will earn 5% (five per cent) of
excess average operating income for the four year period 2004 — 2007 over this baseline.
	 
	 	•	 	EBIT: Baseline 5% (five per cent). For every 20 basis points deviation in
average EBIT for the four year period 2004 — 2007 from the baseline, either up or down, a
1.0% enhancement or reduction will be applied to the Plan Distribution paid in 2006, 2007,
2008. In all cases the maximum enhancement or reduction to the Plan Distribution from the
EBIT performance will be 15.0%.
	 
	 	•	 	Return on Working Capital: Baseline 19%. For every 40 basis points deviation in
average ROWC for the four year period 2004 — 2007 from the baseline, either up or down, a
1.0% enhancement or reduction will be applied to the Plan Distribution payable in 2006,
2007 and 2008. In all cases the maximum enhancement or reduction to the Plan Distribution
from the ROWC performance will be 15.0%

     Exclusions:

     The Plan will exclude any of the following items deemed by the Company to have a material effect:

	 	1.	 	Financial impact from changes in interest, tax, and currency rates
	 
	 	2.	 	Financial impact from changes in reserves on Arrow Europe financial
statements
	 
	 	3.	 	Financial impact attributable to changes in capitalization structure
	 
	 	4.	 	Financial impacts attributed specifically to an acquisition or
divestiture, with the only exception of: (i) profits or losses deriving from the
Disway (Distar + Holz) acquisition which will be taken into account in their
entirety and, (ii) losses amounting to Euro 4,400,000 (Euro 4,4M) due to additional
wage taxes paid in central Europe in financial year 2005 which will be entirely
disregarded.

9

 

	 	5.	 	Financial impact brought on by changes in accounting methodologies or
changes in the methodologies used to calculate corporate allocations and expenses
for 2007 from those employed in the 2006 budget
	 
	 	6.	 	Other changes approved at a Arrow Corporate or global level of similar
nature and impact

Maximum Benefit:

Total maximum payout under the Plan is Euro 5,000,000 (Euro 5M). (Refer to page attached as
Exhibit B.1 for additional detail.)

Minimum Benefit:

Minimum payout under this Plan is as follows:

	(i)	 	Euro 334,000.00 for 2004 and 2005 to be paid as an advance payment in two equal
installments of Euro 167,000.00 each, payable on June 30, 2006 and November 30, 2006,
respectively.
	 
	(ii)	 	Euro 251,000.00 for 2006 to be paid as follows: Euro 126,000.00 on or before June 30,
2007 and Euro 125,000.00 on or before September 30, 2007, respectively.
	 
	(iii)	 	Euro 251,000.00 for 2007 (or such greater amount as will become due based on the
applicable formula for the determination of the long-term bonus) to be paid on or before
May 31, 2008.

For the avoidance of doubt it is agreed that:

	 	1.	 	In case of voluntary termination by the Executive as a result of a change in
the Executive’s reporting line or the departure from Arrow Electronic’s, Inc. of
William Mitchell and Dan Duval as provided in Paragraph 1(b)(ii) of the Employment
Agreement, the Executive will be entitled to receive the minimum pay out of Euro
836,000.00 prorated to the actual length of his employment up to the effective date
of termination.
	 
	 	2.	 	In case of termination of the employment by the Company without cause,
Germano Fanelli will be entitled to receive the greater of (i) the minimum of Euro
836,000.00 pay out in its entirety or (ii) if the termination becomes effective
after December 31, 2006, the Profit Sharing Bonus calculated in accordance with the
Profit Sharing Plan taking into account the difference between the Base Line and
the average of 2004, 2005 and 2006. This will apply also in the case of termination
of the employment due to the disability of the Executive if it first arises after
December 31, 2006.
	 
	 	3.	 	The Executive shall not be entitled to any payment under this Plan in respect of 2008.

10

 

Exhibit B.1

Germano Fanelli

     Profit Sharing Plan

Term Sheet

	 	 	 
	Operating Income — Europe

“Baseline”

Euro 117,000,000

(Euro 117M)
	 	Assuming no adjustments for EBIT and ROWC,

for each Euro 20,000,000 (Euro 20M) of

Incremental average of Operating Income over

“Baseline” during the 2004, 2005, 2006 and 2007

financial years

Pay out = Euro 1 million
	 
	Minimum Payout	 	Maximum Payout
	 
	 
	Euro 836,000.00	 	Assuming no adjustments for EBIT and ROWC, if

the 2004, 2005, 2006 and 2007 financial years

Average Operating Profit is

3 Euro 217,000,000 (Euro 217M)

Total Payment = Euro 5,000,000 (5M)

11

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