Document:

Exhibit 10.5

 

 

 

EQUINOX HOLDINGS, INC.

 

 

STOCKHOLDERS AGREEMENT

 

 

Dated as of December 15, 2000

 

 

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE I

  	
  GOVERNANCE AND MANAGEMENT OF THE COMPANY

  	
   

  
	
  Section 1.1.

  	
  Board of Directors.

  	
   

  
	
  Section
  1.2.

  	
  Governance.

  	
   

  
	
  Section 1.3.

  	
  Expenses

  	
   

  
	
  Section
  1.4.

  	
  Chairperson

  	
   

  
	
  Section 1.5.

  	
  Committees of the Board.

  	
   

  
	
  Section 1.6.

  	
  Non-Voting Observers.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  TRANSFER RESTRICTIONS AND RIGHTS

  	
   

  
	
  Section 2.1.

  	
  Restrictions on Transfer.

  	
   

  
	
  Section 2.2.

  	
  Subsequent Dispositions

  	
   

  
	
  Section 2.3.

  	
  Rights of First Offer and First Refusal.

  	
   

  
	
  Section
  2.4.

  	
  Tag-Along
  Rights

  	
   

  
	
  Section 2.5.

  	
  Drag-Along Rights.

  	
   

  
	
  Section
  2.6.

  	
  Certain
  Rights

  	
   

  
	
  Section 2.7.

  	
  Certain Remedies

  	
   

  
	
  Section 2.8.

  	
  Assignment of the Purchaser’s Rights

  	
   

  
	
  Section 2.9.

  	
  Certain Purchase and Sale Rights.

  	
   

  
	
  Section 2.10.

  	
  Purchase of Rollover Options and Rollover
  Exercise Shares.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
  DEFINITIONS

  	
   

  
	
  Section
  3.1.

  	
  Certain
  Terms

  	
   

  
	
  Section
  3.2.

  	
  Construction

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
  MISCELLANEOUS

  	
   

  
	
  Section
  4.1.

  	
  Termination

  	
   

  
	
  Section 4.2.

  	
  Post-Closing Termination

  	
   

  
	
  Section 4.3.

  	
  Effect of Termination

  	
   

  
	
  Section
  4.4.

  	
  Notices

  	
   

  
	
  Section 4.5.

  	
  Governing Law, etc.

  	
   

  
	
  Section
  4.6.

  	
  Binding
  Effect

  	
   

  
	
  Section
  4.7.

  	
  Assignment

  	
   

  
	
  Section 4.8.

  	
  No Third Party Beneficiaries

  	
   

  
	
  Section 4.9.

  	
  Amendment; Waivers, Etc

  	
   

  
	
  Section
  4.10.

  	
  Entire
  Agreement

  	
   

  
	
  Section
  4.11.

  	
  Severability

  	
   

  
	
  Section 4.12.

  	
  Headings

  	
   

  
	
  Section
  4.13.

  	
  Counterparts

  	
   

  

 

i

 

	
  Section 4.14.

  	
  Subsequent Stockholders

  	
   

  
	
  Section 4.15.

  	
  Release.

  	
   

  
	
  Section 4.16.

  	
  Action by Co-Investment Fund

  	
   

  
	
  Section 4.17.

  	
  Actions by Preferred Stockholders

  	
   

  

 

ii

 

STOCKHOLDERS AGREEMENT

 

STOCKHOLDERS
AGREEMENT, dated as of December 15, 2000, among Equinox Holdings, Inc., a
Delaware corporation (the “Company”), NCP-EH, L.P., a Delaware limited
partnership (“NCP-EH”), NCP Co-Investment Fund, L.P., a Delaware limited
partnership (the “Co-Investment Fund”, and together with NCP-EH, the “Purchaser”);
each of the stockholders listed on Schedule I hereto (each, a “Rollover
Stockholder” and collectively, the “Rollover Stockholders”); each of
the rollover optionholders listed on Schedule II hereto (each, a “Rollover
Optionholder” and collectively, the “Rollover Optionholders”);
Albion Alliance Mezzanine Fund, L.P., a Delaware limited partnership (“Albion
I”), Albion Alliance Mezzanine Fund II, L.P., a Delaware limited
partnership (“Albion II”), Deutsche Bank Securities Inc. (“DB”),
Exeter Capital Partners IV, L.P. (“Exeter Capital”), Exeter Equity
Partners, L.P. (“Exeter Equity”), Bill and Melinda Gates Foundation (“Gates”),
Arrow Investment Partners (“Arrow”, and together with DB, Exeter
Capital, Exeter Equity, Gates, Albion I and Albion II and each of their
respective successors and permitted assigns, solely in their capacity as
holders of Warrants or Warrant Shares, the “Sub-Debt Warrantholders”);
and each other person who is, or becomes, a party to this Agreement pursuant to
Section 4.14 hereof (collectively, with the Purchaser, the Sub-Debt
Warrantholders, the Rollover Stockholders and the Rollover Optionholders, the “Stockholders”);
North Castle Partners II, L.P., a Delaware limited partnership (“NCP
Partnership”), Friends of North Castle Fund, L.P., a Delaware limited
partnership (“Friends”). 
Capitalized terms used in this Agreement have the meanings indicated in
Article III.

 

W  I  T  N  E  S
S  E  T  H:

 

WHEREAS,
pursuant to the Amended and Restated Stock Purchase Agreement and Plan of
Merger, dated as of October 16, 2000, as amended on December 14, 2000
(the “Recapitalization Agreement”), among the Company, NCP-EH
Recapitalization Corp., a Delaware corporation, NCP-EH, and the Rollover
Stockholders, the NCP-EH has agreed to purchase shares of Common Stock of the
Company;

 

WHEREAS,
this Agreement is a condition precedent to the obligations of NCP-EH under the
Recapitalization Agreement;

 

WHEREAS,
NCP-EH has assigned to the Co-Investment Fund 1.17% of, among other things,
NCP-EH’s right to acquire Purchased Shares (as defined in the Recapitalization
Agreement);

 

WHEREAS,
as of the date hereof and after giving effect to transactions contemplated by
the Recapitalization Agreement, the Rollover Stockholders and the Purchaser own
all of the issued and outstanding capital stock of the Company;

 

 

WHEREAS,
each Rollover Stockholder acknowledges that the Purchaser’s investment in the
Company is based in substantial part on the commitment of such Rollover
Stockholder to the Company and accordingly agrees to grant to the Company and
the Purchaser certain rights to purchase a portion of such Rollover
Stockholder’s shares of Common Stock under certain circumstances;

 

WHEREAS,
pursuant to the Senior Subordinated Note and Warrant Purchase Agreement, dated
as of December 15, 2000 (the “Senior Subordinated Loan Agreement”),
between the Company and the Sub-Debt Warrantholders, the Company has issued to
the Sub-Debt Warrantholders warrants (the “Warrants”) to purchase an
aggregate of 783,020 shares of Common Stock (as such number may be adjusted
pursuant to the terms thereof);

 

WHEREAS,
pursuant to the Recapitalization Agreement, each Rollover Option converted into
options to purchase shares of Common Stock of the Company (as constituted after
giving effect to the transactions contemplated by the Recapitalization
Agreement), and each Rollover Optionholder hereby acknowledges that the
Purchaser’s investment in the Company is based in substantial part on the
commitment of such Rollover Optionholder to the Company and accordingly agrees
to grant to the Company and the Purchaser certain rights to purchase all or any
portion of such Rollover Optionholder’s options or shares acquired on exercise
of such options under certain circumstances;

 

WHEREAS,
the Rollover Stockholders, Rollover Optionholders, the Purchaser and the
Sub-Debt Warrantholders wish to set forth certain understandings and agreements
regarding the capitalization and management of the Company and their respective
ownership of Covered Securities of the Company;

 

NOW,
THEREFORE, in consideration of the mutual promises, covenants, representations
and warranties made herein and of the mutual benefits to be derived herefrom,
the parties hereto agree as follows:

 

ARTICLE I

GOVERNANCE AND MANAGEMENT OF THE COMPANY

 

Section 1.1.                                   Board of Directors.

 

(a)                                  The
Board of Directors will initially consist of eight members:  (i) seven individuals, including
one Management Director, nominated by the Purchaser, and (ii) so
long as the Rollover Stockholders collectively own five percent (5%) of the
Available Common Stock, Donato Errico. 
Subject to the provisions of this Agreement, each Stockholder entitled
to vote shall take all necessary actions to effect the provisions of this
Section 1.1(a).

 

2

 

(b)                                 Any
director nominated pursuant to Section 1.1(a) may be removed at any time,
with or without cause, by the party that nominated such director (but only by
such party), and each Stockholder entitled to vote thereon shall take all such
actions as may be required to effect such removal, including voting its shares
for such removal.  At any time a vacancy
shall be created on the Board as a result of the death, disability, retirement,
resignation or removal, with or without cause, of a director nominated pursuant
to Section 1.1(a), then the party that nominated such director shall have
the right to nominate a replacement for such director, and each Stockholder
entitled to vote thereon shall take all necessary actions to elect such
replacement.

 

Section 1.2.                                   Governance.

 

(a)                                  Except
as required by applicable Law, all actions requiring the approval of the Board
of Directors shall be approved by a majority of the directors present at any
duly convened Board of Directors meeting or by unanimous written consent of the
directors without a meeting, in each case in accordance with the provisions of
the Delaware General Corporation Law and the By-Laws of the Company.

 

(b)                                 A
quorum for meetings of the Board of Directors shall consist of a majority of
the then existing number of Directors.

 

(c)                                  The
following actions shall be approved and taken only upon the affirmative vote of
at least six directors of the Company:

 

(i)                                     any
amendment to (i) the Certificate of Incorporation or By-Laws of the
Company or any Subsidiary, (ii) any stockholders agreement to which
the Company is a party, or (iii) any registration rights agreement
pertaining to any securities of the Company or any Subsidiary;

 

(ii)                                  establishment
or modification of the business plans and budgets for the Company and its
Subsidiaries, including proposed capital expenditures, and the making of any
expenditures or the incurring of any other financial obligations in excess of
$500,000 in the aggregate in any one fiscal year;

 

(iii)                               opening
by the Company or any Subsidiary of any new facility that is not contemplated
in any business plan or budget approved by the Company’s Board of Directors in
the manner contemplated by this Section 1.2;

 

(iv)                              appointment
or removal of the Chief Executive Officer, Chief Operating Officer or Chief
Financial Officer of the Company and execution by the Company of any employment
agreements or amendments thereto with any such officers or any other action
otherwise setting the level of compensation for such individuals;

 

3

 

(v)                                 adoption
of any stock option, bonus or other compensation or benefit plan;

 

(vi)                              issuance,
sale, grant, repurchase or redemption by the Company or any Subsidiary of any
equity securities of the Company or any Subsidiary, or of any options, warrants
or other rights to acquire equity securities or securities convertible into, or
exchangeable for such equity securities, other than the issuance and sale of
$1,000,000 of the Company’s 10% Cumulative Preferred Stock to the NCP
Partnership and certain of its Affiliates;

 

(vii)                           incurrence
of any indebtedness for borrowed money (including financing leases or similar
sale/leaseback transactions) or guaranteeing of any obligation of others by the
Company or any Subsidiary in an amount in excess of $5 million;

 

(viii)                        any
merger, consolidation or business combination involving the Company or any
Subsidiary (other than mergers of wholly-owned Subsidiaries);

 

(ix)                                any
sale or other disposition of all or substantially all of the assets of the
Company or any Subsidiary; or of assets of the Company and/or any Subsidiary in
a transaction or series of related transactions involving more than $1 million;

 

(x)                                   the
determination to pursue a public debt or equity offering or a private placement
of debt or equity securities under Rule 144A of the Securities Act of 1933 or
otherwise;

 

(xi)                                selection
of underwriters and placement agents for any public or private offering of the
Company’s securities;

 

(xii)                             any
purchase or other acquisition of assets, or any transaction, contract or
arrangement pursuant to which the Company or any Subsidiary may become
obligated for, or any series of transactions related to any of the foregoing,
involving amounts in excess of $100,000;

 

(xiii)                          entry
into or commitment with respect to any joint venture or equity investment by
the Company or any Subsidiary in any entity (other than in any wholly-owned
Subsidiary of the Company);

 

(xiv)                         appointment
or removal of the auditor or principal legal counsel of the Company, provided, that Ernst & Young LLP and
Debevoise & Plimpton shall serve as the initially appointed auditor and
principal legal counsel, respectively;

 

4

 

(xv)                            declaration
or payment of dividends or distributions by the Company or any Subsidiary
(other than dividends or distributions paid by any direct or indirect
wholly-owned Subsidiary of the Company to its immediate parent company);

 

(xvi)                         liquidation,
dissolution, recapitalization or reorganization of the Company or any
Subsidiary, the adoption of a plan with respect to any of the foregoing or
voluntary election by the Company or any Subsidiary to commence bankruptcy or
insolvency proceedings under applicable laws;

 

(xvii)                      any change
in any fiscal year, taxable year, accounting policies or method of tax
accounting of the Company or any Subsidiary;

 

(xviii)                   settlement or
commencement of any litigation involving an amount in excess of $100,000;

 

(xix)                           any
agreement or transaction between the Company and any Affiliates, including,
without limitation, Bell Development Corporation, Eclipse Development, Inc.,
Childs, NCP and NCP Partnership and any Affiliates of Childs, NCP or the NCP
Partnership, including any of the portfolio companies held or managed by such
entities, other than the Consulting Agreement between the Company, NCP and
Childs dated as of the date hereof, but including any termination of such
Consulting Agreement.

 

(xx)                              any
material change in the Company’s or any Subsidiary’s principal line of
business;

 

(xxi)                           commitment
by the Company or any Subsidiary to take any of the actions described under
sub-paragraphs (i) through (xx) above;

 

(xxii)                        any change
in the number of directors constituting the Board of Directors; and

 

(xxiii)                     creation and
membership of any committees in addition to the Audit and Compensation
Committee.

 

Section 1.3.                                   Expenses.  The Company will cause each non-employee director
of the Board of Directors to be reimbursed for all reasonable out-of-pocket
costs and expenses incurred by him or her in connection with serving as a
director.  In consideration of the fees
to be paid to NCP and Childs pursuant to the Consulting Agreement, NCP and
Childs shall cause any of their respective employees who shall be elected to
serve on the Board of Directors to waive any fees (but not out-of-pocket costs
and expenses) to which such person would otherwise be entitled as a director
for so long as such person is an employee of NCP or Childs.  Any Rollover Stockholder who shall be

 

5

 

elected to serve on the Board of Directors shall waive any fees (but
not out-of-pocket costs and expenses) to which he or she would otherwise be
entitled as a director.

 

Section 1.4.                                   Chairperson.  The Chairperson of the Board of Directors
shall be selected by the directors from one of the Purchaser’s nominees.

 

Section 1.5.                                   Committees of the Board.

 

(a)                                  Committees.
 The By-Laws of the Company shall
provide for a Compensation Committee and an Audit Committee.  Each Committee shall consist of two
Directors.

 

(b)                                 Composition.  The members of the Compensation Committee
and the Audit Committee shall be nominated from the Purchaser’s nominees.  Subject to the provisions of this Agreement,
each Stockholder shall instruct the directors it has nominated to vote to take
all necessary actions to effect the provisions of this Section 1.5(b).

 

(c)                                  Powers.  The Compensation Committee and the Audit
Committee shall have such powers and responsibilities as the Board may from
time to time authorize.  Copies of the
minutes of the meetings of the Compensation Committee and the Audit Committee
will be presented to the Board of Directors at the next regularly scheduled
meeting of the Board of Directors following each such committee meeting.

 

Section 1.6.                                   Non-Voting Observers.

 

(a)                                  In
the event any of the Subordinated Notes are outstanding, or Albion holds at
least 20% of the Warrants or Warrant Shares that it was originally issued (all
calculated on an as exercised basis, giving effect to any stock splits, stock
combinations and the like, but excluding the effects of any involuntary
transfers, including those required by the drag-along rights of another party,
or any adjustments to the number of Warrants or Warrant Shares made in
connection with a merger or reorganization) and an initial Public Offering has
not been consummated, the Company shall permit one representative (the
“Representative”) of Albion to attend as an observer all meetings of its Board
of Directors, provided that in
the case of telephonic meetings conducted in accordance with the Company’s
by-laws and applicable law, the Representative shall be given the opportunity
to participate in such telephonic meetings (the “Board Visitation Right”).

 

(b)                                 The
Company shall give written notice of every meeting of its Board of Directors to
the Representative at the same time and in the same manner as notice is given
to the directors of the Company.  The
Representative shall be entitled to receive all written materials and other
information given to the directors of the Company in connection with such
meetings or otherwise at the same time such materials and

 

6

 

information are given to the directors.  If requested by the Board of Directors, the Representative shall
enter into a confidentiality agreement with respect to any materials received
and discussions participated in by such Representative on such terms as may be
reasonably requested by the Board of Directors.  The Company shall bear the reasonable costs of the Representative
incurred in connection with attendance of or participation in such meetings.

 

ARTICLE II

TRANSFER RESTRICTIONS AND RIGHTS

 

Section 2.1.                                   Restrictions on Transfer.

 

(a)                                  Until
the first to occur of an initial Public Offering and the second anniversary of
the Closing Date, no Stockholder other than the Purchaser or a Sub-Debt
Warrantholder may sell, transfer, pledge, encumber or otherwise dispose of any
Covered Security to any Person except as follows:

 

(i)                                     to
any Family Member of such Stockholder, provided
that such Family Member (A) becomes a party to this Agreement and (B) delivers
to the Company and the Purchaser (1) written evidence, reasonably
satisfactory to the Company, or if reasonably requested by the Company, an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to the Company and the Purchaser, in each case to the effect that the transfer
is not a Prohibited Transfer, and (2) a certificate of the
transferor and the transferee, to the effect that the transferee is a Family
Member of the transferor;

 

(ii)                                  to
the Company, the Purchaser or any Affiliate or designee of the Purchaser
(pursuant to Section 2.3 or otherwise);

 

(iii)                               pursuant
to Section 2.2, Section 2.4, Section 2.5 or Section 2.9;

 

(iv)                              pursuant
to Sections 3.1, 3.2 and 3.3 of the Registration Rights Agreement;

 

(v)                                 in
the case of any Stockholder of the Company holding shares of Common Stock on
the date hereof, with the consent of the Company, (A) not to be
unreasonably withheld in the event the proposed transferee engages in any
business conducted at the time of the transfer by NCP Partnership or Childs,
and otherwise, (B) not to be withheld unless (x) the
proposed transferee engages in any business conducted at the time of the
transfer by the Company or its Subsidiaries or by any of the operating
companies then owned or controlled, directly or indirectly, by NCP Partnership
or Childs or any of their respective Affiliates, or (y) ownership of
Common Stock by the proposed transferee could in

 

7

 

the reasonable judgment
of the Purchaser based on past commercial relationships of the proposed
transferee (which will be set forth in writing and delivered to the
transferring Stockholders), unreasonably interfere with the conduct of the
business of the Company or have an adverse effect on the Purchaser’s investment
in the Company; or

 

(b)                                 Until
the first to occur of an initial Public Offering and the second anniversary of
the Closing Date, no Sub-Debt Warrantholder may sell, transfer, pledge,
encumber or otherwise dispose of any Covered Security to any Person, except for
any transfer (x) by a Sub-Debt Warrantholder to the Company, the
Purchaser or any Affiliate of the Purchaser or of such Sub-Debt Warrantholder,
(y) of Warrants by a Sub-Debt Warrantholder in connection with a
transfer of indebtedness issued by the Company to such Sub-Debt Warrantholder
pursuant to the Senior Subordinated Loan Agreement, or (z) pursuant
to Section 2.2, 2.4 or 2.5 of this Agreement or pursuant to
Section 3.1, 3.2 or 3.3 of the Registration Rights Agreement.

 

(c)                                  The
Purchaser and, from and after the second anniversary of the Closing Date but
before an initial Public Offering, any other Stockholder, may sell, transfer,
pledge, encumber or otherwise dispose of any Covered Securities to any Person, provided that such transfer is in
compliance with (i) in the case of any Stockholder (other than the
Purchaser or any of their respective Affiliates that are parties to this
Agreement and other than any Sub-Debt Warrantholder that is transferring
Warrants in connection with a transfer of indebtedness issued by the Company to
such Sub-Debt Warrantholder pursuant to the Senior Subordinated Loan
Agreement), the right of first offer or first refusal provided in
Section 2.3, and (ii) in the case of the  Purchaser, Section 2.4 (if applicable).

 

(d)                                 Notwithstanding
any provision in this Agreement to the contrary, any sale, transfer, pledge,
encumbrance or other disposition (collectively, a “transfer”) of a
Covered Security permitted under Sections 2.1(a), (b) and (c) and 2.2 of
this Agreement shall be void and of no effect unless (i) it is in
compliance with applicable Law and the terms of such securities and (ii) 
in each such case the transferee (x) becomes a party to this
Agreement and (y) delivers written evidence, reasonably
satisfactory to the Company or, if reasonably requested by the Company an
opinion of counsel to the Company and the Purchaser, which opinion and counsel
shall be reasonably satisfactory to the Company and the Purchaser, in each case
to the effect that the transfer is not a Prohibited Transfer, and (iii) in
the case of a transfer by any Stockholder other than the Purchaser, that such
sale, transfer, pledge, encumbrance or other disposition would not cause the
Rollover Stockholders to hold, in the aggregate, an amount of Available Common
Stock that is less than the Recapitalization Threshold.

 

8

 

(e)                                  Each
Stockholder shall give the Company and the Purchaser at least 15 days prior
notice of any proposed Permitted Transfer and prompt notice of any completed
transfer of any Covered Security.

 

(f)                                    Notwithstanding
the foregoing provisions of this Section 2.1, no Stockholder may sell,
transfer, pledge, encumber or otherwise dispose of any Escrowed Shares.

 

(g)                                 Notwithstanding
the foregoing provisions of Section 2.1, no Rollover Optionholder or
Subsequent Management Stockholder may sell, transfer, pledge, assign or
otherwise alienate or hypothecate, other than by will or by the laws of descent
and distribution, any Rollover Options or Exercise Shares; provided that a Rollover Optionholder or
Subsequent Management Stockholder who is an Employee may transfer Rollover
Options or Exercise Shares (x) pursuant to Section 2.10 and (y) for
no consideration to a Permitted Transferee so long as such Permitted Transferee
(A) becomes a party to this Agreement and any other agreement
between the Rollover Optionholder or Subsequent Management Stockholder, as the
case may be, and the Company, and (B) delivers to the Company and
the Purchaser (1) written evidence, reasonably satisfactory to the
Company, or if reasonably requested by the Company, an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to the Company and
the Purchaser, in each case to the effect that the transfer is not a Prohibited
Transfer, and (2) a certificate of the transferor and the
transferee, to the effect that the transferee is a Permitted Transferee of the
transferor.  Each Rollover Optionholder
or Subsequent Management Stockholder, as the case may be, shall give the
Company and the Purchaser at least 30 days prior written notice of any proposed
transfer and prompt written notice of any completed transfer of any Rollover
Option or Exercise Shares, in each case pursuant to this
Section 2.1(g).  Notwithstanding
the foregoing provisions of this Section 2.1(g), in the event that an Exit
Event (as defined in the Recapitalization Agreement) has been consummated, the
provisions of this Section 2.1(g) shall terminate and cease to have
further effect.

 

Section 2.2.                                   Subsequent Dispositions.  Following an initial Public Offering, any
Stockholder may sell, transfer, pledge, encumber or otherwise dispose of
Covered Securities (except for the Escrowed Shares) to any Person, provided that such sale, transfer, pledge,
encumbrance or other disposition shall comply with the requirements of
Section 2.1(d) and, provided
further that, except with respect to a transfer of the type described in
Section 2.1(a)(i), 2.1(a)(ii) or 2.1(a)(iv), the transferor must deliver
to the Company and the Purchaser an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to the Company and the Purchaser, to
the effect that such transfer is not required to be registered under the
Securities Act.

 

9

 

Section 2.3.                                   Rights of First Offer and First
Refusal.

 

(a)                                  Right
of First Offer.  Prior to the
earlier of an initial Public Offering and the second anniversary of the Closing
Date, if a Stockholder other than the Purchaser (a “Selling Holder”)
desires to make a Permitted Transfer pursuant to Section 2.1(a)(v) of all
or any part of the Covered Securities (except for the Escrowed Shares) owned by
such Selling Holder, such Selling Holder shall give notice (the “Notice of
Offer”) in writing to the Board of Directors and to the Purchaser (i) designating
the number of Covered Securities that such Selling Holder proposes to sell (the
“Offered Shares”), and (ii) specifying the price (the “Offer
Price”) and terms (the “Offer Terms”) upon which such Selling Holder
desires to sell the same.  During the 15
Business Day period following receipt of such notice by the Company and the
Purchaser (the “Refusal Period”), such Selling Holder shall not be
permitted to sell the Offered Shares. 
During the first seven Business Days of the Refusal Period, the Company
shall have the right to purchase from the Selling Holder at the Offer Price and
on the Offer Terms all, but not less than all, of the Offered Shares.  If the Company shall not have exercised such
right after seven Business Days, the Purchaser or any Affiliate or designee of
the Purchaser, including any pooled investment vehicle organized by the
managing member of the NCP Partnership or Childs or any of their respective
Affiliates, shall have the same right of first offer for the remainder of the
Refusal Period.  The rights provided
hereunder shall be exercised by written notice to the Selling Holder and the
Company or the Purchaser, as the case may be, given at any time during the
Refusal Period.  If such right is
exercised, the Company, the Purchaser (or its Affiliate or designee) or Childs
(or their respective Affiliates), as the case may be, shall deliver to the
Selling Holder payment of the Offer Price in accordance with the Offer Terms,
against delivery of appropriately endorsed certificates or other instruments
representing the Offered Shares, provided
that the Company, the Purchaser and Childs (and their respective Affiliates)
shall not be required to consummate such purchase fewer than 30 Business Days
from the date of acceptance of the offer. 
If the Company, the Purchaser and Childs (and their respective
Affiliates) fail to exercise their right of first offer for the Offered Shares
during the Refusal Period or fail to consummate the purchase in accordance with
the foregoing sentence, the Selling Holder shall have the right to sell the
Offered Shares at a price and on terms no less favorable to the Selling Holder
than the Offer Price and the Offer Terms, respectively, in accordance with the
terms of Section 2.1(a)(v) for a period of 60 days following the end of
the Refusal Period, at which point the Selling Holder must give a new Notice of
Offer.

 

(b)                                 Right
of First Refusal.  Subject to
Section 2.1(c), following the second anniversary of the Closing Date, provided that an initial Public Offering
shall not have occurred,  if a Selling
Holder desires to make a Permitted Transfer pursuant to Section 2.1(c)
following an offer (which offer must be in writing, be irrevocable by its terms
for at least 15 Business Days and be a bona fide offer) from any
prospective purchaser to purchase all or any part of the Covered Securities
(except for the Escrowed Shares) owned by such Selling Holder, such Selling
Holder shall give a Notice of Offer

 

10

 

in writing to the
Board of Directors and to the Purchaser (i) designating the number
of Offered Shares, (ii) specifying the Offer Price and the Offer
Terms, and (iii) naming the prospective purchaser thereof (the “Potential
Purchaser”).  Such Selling Holder shall
not be permitted to accept such offer, but may submit a new Notice of Offer in
respect of any revised offer in accordance with and subject to this
Section 2.3(b).  During the first
seven Business Days of the Refusal Period, the Company shall have the right to
purchase from the Selling Holder at the Offer Price and on the Offer Terms all,
but not less than all, of the Offered Shares. 
If the Company shall not have exercised such right after seven Business
Days, the Purchaser or any Affiliate or designee of the Purchaser, including
any pooled investment vehicle organized by the managing member of the NCP
Partnership or Childs or any of their respective Affiliates shall have the same
right of first refusal for the remainder of the Refusal Period.  The rights provided hereunder shall be
exercised by written notice to the Selling Holder and the Company or the
Purchaser, as the case may be, given at any time during the Refusal
Period.  If such right is exercised, the
Company, the Purchaser or Childs (or any of their respective Affiliates), as
the case may be, shall deliver to the Selling Holder payment of the Offer Price
in accordance with the Offer Terms, against delivery of appropriately endorsed
certificates or other instruments representing the Offered Shares, provided that the Company, the Purchaser
and Childs (and their respective Affiliates) shall not be required to
consummate such purchase fewer than 30 Business Days from the date of
acceptance of the offer.  If the
Company, the Purchaser and Childs (and their respective Affiliates or
designees) fail to exercise their right of first refusal for the Offered Shares
during the Refusal Period or fail to consummate the purchase in accordance with
the foregoing sentence, the Selling Holder may sell to the Potential Purchaser
the Offered Shares at the Offer Price and on the Offer Terms in accordance with
the terms of Sections 2.1(c), for a period of 60 days following the end of
the Refusal Period, at which point the Selling Holder must give a new Notice of
Offer.

 

Section 2.4.                                   Tag-Along Rights.  If the Purchaser desires to make a Permitted Transfer pursuant to
Section 2.1(c) prior to a Public Offering, which transfer is (i) individually
or in the aggregate, taken together with all prior Permitted Transfers made by
the Purchaser, in excess of 10% of the maximum amount of Covered Securities
ever owned in the aggregate by the Purchaser and its Affiliates (the “Tag-Along
Minimum”), and (ii) to a Person other than an Affiliate of the
NCP Partnership or Childs (other than the Company or any of its Subsidiaries)
following an offer (which offer must be in writing, be irrevocable by its terms
for at least 15 Business Days and be a bona fide offer) from any prospective
purchaser to purchase all or any part of the Covered Securities owned by the
Purchaser, the Purchaser shall give a Notice of Offer in writing to the Board
of Directors and the other Stockholders (i) designating the number
of Offered Shares, (ii) naming the Potential Purchaser and (iii) specifying
the Offer Price and Offer Terms.  During
the 15 Business Day period following receipt of such notice by the Company and
the other Stockholders, the other Stockholders shall have the right (a “Tag-Along
Right”), exercised by delivery of a written notice to the Purchaser and the

 

11

 

Company, to
participate in such sale to the Potential Purchaser (which right to participate
in such sale, in the case of any Warrants held by any Sub-Debt Warrantholders,
shall be for the sale of the Warrants Shares issuable upon exercise of such
Warrants, which, at the request of the Purchaser, shall be exercised
immediately prior to the consummation of such Permitted Transfer), at the Offer
Price and on the Offer Terms on a pro
rata basis determined by
multiplying the number of Offered Shares by the quotient obtained by dividing (A) the
number of Covered Securities (excluding Surviving Corporation Stock Options and
Escrow Shares) then held by each Stockholder so electing to sell (each such
Person, an “Accepting Stockholder”) by (B) the aggregate
number of Covered Securities (excluding Surviving Corporation Stock Options and
Escrowed Shares) then held by all of the Accepting Stockholders and the
Purchaser.  If the Tag-Along Right shall
not have been exercised prior to the expiration of the 15-Business Day period,
then at any time during the 90 days following the expiration of the 15-Business
Day period, subject to extension for not more than an additional 60 days to the
extent reasonably required to comply with applicable Laws in connection with
such sale, the Purchaser may sell the Offered Shares to the Potential Purchaser
at the Offer Price and on the Offer Terms. 
Upon receipt of a Notice of Offer, the Company will provide the
Purchaser with a current list of holders of Covered Securities and their
addresses.

 

Section 2.5.                                   Drag-Along Rights.

 

(a)                                  Drag-Along
Notice.  If the Purchaser intends to
effect a sale (a “Drag-Along Sale”) of all or substantially all of its
shares of Common Stock to a non-Affiliate third party (a “Drag-Along Buyer”)
prior to an initial Public Offering and elects to exercise its rights under
this Section 2.5, the Purchaser shall deliver written notice (a “Drag-Along
Notice”) to the Company and the other Stockholders, which notice shall (i) (w) state
that the Purchaser wishes to exercise its rights under this Section 2.5
with respect to such transfer, (x) state the name and address of
the Drag-Along Buyer, (y) state the per share amount and form of
consideration the Purchaser proposes to receive for its shares of Common Stock
and (z) be accompanied by copies of drafts of purchase and sale
documentation setting forth the terms and conditions of payment of such
consideration and all other material terms and conditions of such transfer (the
“Drag-Along Purchase Agreement”), (ii) contain an offer (the
“Drag-Along Offer”) by the Drag-Along Buyer to purchase from the other
Stockholders a percentage of their Covered Securities (excluding Surviving
Corporation Stock Options and Escrowed Shares) (which right to participate in
such sale, in the case of any Warrants held by any Sub-Debt Warrantholders,
shall be for the sale of Warrant Shares issuable upon exercise of such
Warrants, which, at the request of the Purchaser, shall be exercised immediately
prior to the time such Warrant Shares are to be delivered to the Purchaser
pursuant to Section 2.5(b)), equal to the percentage of the shares of
Common Stock owned by the Purchaser that are to be sold to the Drag-Along Buyer
(such percentage, the “Applicable Percentage”), on and subject to the
same terms and conditions and (iii) state the anticipated time and
place of the closing of such transfer (a “Drag-Along Closing”), which
(subject to such terms and conditions) shall

 

12

 

occur not fewer
than 15 days nor more than 90 days after the date such Drag-Along Notice is
delivered, provided that if such
Drag-Along Closing shall not occur prior to the expiration of such 90-day
period, the Purchaser shall be entitled to deliver another Drag-Along Notice
with respect to such Drag-Along Offer. 
Upon request of the Purchaser, the Company shall provide the Purchaser
with a current list of the names and addresses of the other Stockholders.

 

(b)                                 Conditions
to Drag-Along.  Upon delivery of a
Drag-Along Notice, each of the other Stockholders shall transfer the Applicable
Percentage of its Covered Securities (excluding Surviving Corporation Stock
Options and Escrowed Shares) pursuant to the Drag-Along Offer, as such offer
may be modified from time to time, provided
that the Purchaser transfers the Covered Securities (excluding Surviving
Corporation Stock Options and Escrowed Shares) to the Drag-Along Buyer at the
Drag-Along Closing and that held by the Purchaser and the other Stockholders
are sold to the Drag-Along Buyer on and subject to the same terms and
conditions.  Within five Business Days
prior to the closing contemplated by the Drag-Along Notice, each of the other
Stockholders shall (i) deliver to the Purchaser certificates
representing such Stockholder’s Covered Securities (including Warrant Shares,
as applicable), duly endorsed for transfer or accompanied by duly executed
stock powers, (ii) execute and deliver a purchase and sale
agreement substantially in the form of the Drag-Along Purchase Agreement (provided that such Stockholder shall be
required only to make representations, warranties, covenants and indemnities as
to itself and to the title of the Covered Securities and shall be liable
severally, and not jointly, for any liability thereunder) and otherwise in
accordance with the terms of this Section 2.5, and (iii) waive any
appraisal, dissenter’s or similar rights that such Stockholder may have in
connection with such transaction, and to take such actions as the Purchaser may
reasonably deem necessary or appropriate to effect the sale and transfer of the
Covered Securities (including Warrant Shares, as applicable) to the Drag-Along
Buyer, upon receipt of the purchase price therefor set forth in the Drag-Along
Notice at the Drag-Along Closing, free and clear of all Liens, options and
voting agreements of whatever nature, together with all other documents
delivered with such Notice and required to be executed in connection with the
sale thereof pursuant to the Drag-Along Offer. 
The Purchaser shall hold such shares and other documents in trust for
such other Stockholder for release against payment to such Stockholder of such
Stockholder’s net proceeds in accordance with the contemplated
transaction.  If, within 10 days
after delivery to the Purchaser, the Purchaser has not completed the sale of
the shares of Common Stock to the Drag-Along Buyer and another Drag-Along
Notice with respect to such Drag-Along Offer has not been sent to the other
Stockholders, the Purchaser shall return to each other Stockholder all
certificates representing the shares and all other documents that such other
Stockholder delivered in connection with such sale; provided that, if, within 10 days after delivery to the
other Stockholders of any such subsequent Drag-Along Notice with respect to
such Drag-Along Offer, the Purchaser has not completed the sale of the shares
of Common Stock to the Drag-Along Buyer, the Purchaser shall return to

 

13

 

each other
Stockholder all certificates representing the shares and all other documents
that such other Stockholder delivered in connection with such sale.  Promptly after the Drag-Along Closing, the
Purchaser shall furnish such other evidence of the completion and time of
completion of such sale and the terms thereof as may reasonably be requested by
any of the other Stockholders.

 

Section 2.6.                                   Certain Rights

 

(a)                                  Right
to Participate.  Prior to an initial
Public Offering, the Company agrees that it will not sell or issue: (a) any
shares of capital stock of the Company, (b) securities convertible into
or exercisable or exchangeable for capital stock of the Company or (c)
options, warrants or rights carrying any rights to purchase capital stock of
the Company, unless the Company first submits a written notice to each Sub-Debt
Warrantholder identifying the terms of the proposed sale (including price,
number or aggregate principal amount of securities and all other material
terms), and offers to each Sub-Debt Warrantholder the opportunity to purchase
its Pro Rata Allotment (as hereinafter redefined) of the securities on terms
and conditions, including price, not less favorable than those on which the
Company proposes to sell such securities to a third party or parties.  The Company’s offer pursuant to this
Section 2.6(a) shall remain open and irrevocable for a period of thirty
(30) days following receipt by the Sub-Debt Warrantholders of such written
notice.

 

(b)                                 Investor
Acceptance.  Each Sub-Debt
Warrantholder may elect to purchase the securities so offered by giving written
notice thereof to the Company within such 30-day period, including in such
written notice the maximum number of shares of capital stock or other
securities of the Company that such Sub-Debt Warrantholder wishes to purchase,
including the number of such shares it would purchase if one or more other
Sub-Debt Warrantholders do not elect to purchase their respective Pro Rata
Allotments.

 

(c)                                  Calculation
of Pro Rata Allotment.  For purposes
of this Section, “Pro Rata Allotment” of such securities shall be based on the
ratio which the aggregate number of Warrant Shares and Common Stock issuable
upon exercise of the then outstanding Warrants, in each case owned by such
Sub-Debt Warrantholders bears to all of the issued and outstanding Covered
Securities as of the date of such written offer.

 

(d)                                 Sale
to Third Party.  Any securities so
offered that are not purchased by the Sub-Debt Warrantholders pursuant to the
offer set forth in Section 2.6(a) above, may be sold by the Company, but
only on terms and conditions not more favorable than those set forth in the
notice to such Sub-Debt Warrantholders, at any time within ninety (90) calendar
days following the termination of the above-referenced 30-day period.

 

14

 

(e)                                  Exceptions
to Pre-emptive Rights. 
Notwithstanding the foregoing, the right to purchase granted under this
Section 2.6 shall be inapplicable with respect to: (i) the issuance
or sale of shares of Common Stock (as appropriately adjusted for any stock
split, combination, reorganization, recapitalization, reclassification, stock
distribution, stock dividend or similar event) issued or issuable in connection
with, or upon the exercise of, options or other awards granted or to be granted
to employees, officers or directors of the Company pursuant to the Plan,
including shares of Common stock issued in replacement of shares of such Common
Stock, to the extent permitted under the Plan; (ii) securities issued as a
result of any stock split, stock dividend, reclassification or reorganization
or similar event with respect to Shares; (iii) the issuance or sale of any
securities contemplated in Section 2.6(a) (A) to any seller that is not an
Affiliate of the Company in consideration for the acquisition of another
business enterprise or the assets of another business enterprise in the
fitness, health or spa industry, (B) in connection with the sale of any
investment by a strategic investor, or (C) the sale of any units or
other hybrid securities to any purchaser that is not an Affiliate of the
Company in exchange for aggregate consideration of at least equal to their fair
market value and (iv) the issuance or sale of shares of Common Stock upon
conversion of any convertible securities of the Company or the exercise of
options not issued in violation of Section 2.6.

 

(f)                                    Assignment
of Rights.  Each Sub-Debt
Warrantholder shall have the right to assign and transfer such Sub-Debt
Warrantholder’s right to accept any particular offer under Section 2.6 hereof
(separate and apart from its Covered Securities) to any private investment
vehicle formed after the date such Sub-Debt Warrantholder was formed that is
under common control with, and has a similar investment purpose as, such
Sub-Debt Warrantholder, and any such transferee shall be deemed within the
definition of a “Sub-Debt Warrantholder” for purposes of this Section 2.6 and
shall become a party to this Agreement by executing Schedule III hereto.

 

Section 2.7.                                   Certain Remedies.  Each Stockholder acknowledges that the other Stockholders and the
Company would be irreparably damaged in the event of a breach or a threatened
breach by such Stockholder of any of its obligations under this Article II
and each Stockholder agrees that, in the event of a breach or a threatened
breach by such  Stockholder of any such
obligation, the other Stockholders and the Company shall, in addition to any
other rights and remedies available to it in respect of such breach, be
entitled to an injunction from a court of competent jurisdiction (without any
requirement to post bond) granting it specific performance by such Stockholder
of its obligations under this Article II. 
In the event that any Stockholder or the Company shall file suit to enforce
the covenants contained in this Article II (or obtain any other remedy in
respect of any breach thereof), the prevailing party in the suit shall be
entitled to recover, in addition to all other damages to which it may be
entitled, the costs incurred by such party in conducting the suit, including
reasonable attorney’s fees and expenses.

 

15

 

Section 2.8.                                   Assignment of the Purchaser’s Rights.  The Purchaser may at its option designate
any Affiliate of the Purchaser to exercise any of its rights under this Article
II, provided that no such
assignment shall relieve the Purchaser of any of its obligations hereunder.

 

Section 2.9.                                   Certain Purchase and Sale Rights.

 

(a)                                  Immediately
after the distribution of any Escrowed Shares pursuant to Section 2.11(i)
of the Recapitalization Agreement, the Purchaser shall purchase from the
Rollover Stockholders, and the Rollover Stockholders shall sell to the
Purchaser, the Released Shares owned by the Stockholders at a per share price
equal to the Value Per Share.

 

(b)                                 The
closing of the purchase and sale of the Released Shares shall take place
immediately after the distribution of Escrowed Shares pursuant to the
determination of the Final 2000 Adjusted EBITDA.  At such closing, each Rollover Stockholder shall deliver to the
Purchaser, in exchange for the payment in immediately available funds by the
Purchaser of the purchase price in respect of each Released Share owned by such
Rollover Stockholder, the certificate or certificates representing the Released
Shares free and clear of all liens.

 

(c)                                  “Released
Shares” means the maximum number of Escrowed Shares distributed to the
Rollover Stockholders after the distribution of Escrowed Shares pursuant to the
Final 2000 Adjusted EBITDA according to Section 2.11(i) of the
Recapitalization Agreement that can be purchased without causing the Rollover
Stockholders to hold, in the aggregate, an amount of Available Common Stock
that is less than the Recapitalization Threshold.

 

Section 2.10.                             Purchase of Rollover Options and
Rollover Exercise Shares.

 

(a)                                  If
a Rollover Optionholder’s active employment with the Company or any Subsidiary
thereof that employs the Rollover Optionholder is, or has been, terminated for
any reason or, in the case of Paul Boardman, his employment with Eclipse
Development Corporation (“Eclipse”) is terminated or the Company’s
business relationship with Eclipse is terminated, in each case, for any reason,
the Company shall have the option to purchase all or any portion of the
Rollover Options or the Rollover Exercise Shares then held by the Rollover
Optionholder (or, in the case of his or her death, his or her estate) and shall
have 90 days from the date of such termination (such 90-day period, the “First
Option Period”) during which to give notice in writing to the Rollover
Optionholder (or his estate) of its election to exercise or not to exercise
such option, in whole or in part.  The
Company hereby undertakes to use reasonable efforts to act as promptly as
practicable following such termination to make such election.  If the

 

16

 

Company fails to
give notice that it intends to exercise such option within the First Option
Period or the Company gives notice that it does not intend to exercise such
option or that it intends to exercise such option with respect to only a
portion of the Rollover Options or the Rollover Exercise Shares, as the case
may be, then NCP-EH shall have the right to purchase any or all of the Rollover
Options or the Rollover Exercise Shares, as the case may be, then held by the
Rollover Optionholder (or his or her estate) that will not be purchased by the
Company, and shall have until the expiration of the earlier of (x) 90 days
following the end of the First Option Period or (y) 90 days
from the date of receipt by NCP-EH of written notice from the Company
indicating whether it will exercise its option to purchase any of the Rollover
Options or the Rollover Exercise Shares, as the case may be (such 90-day period
being hereinafter referred to as the “Second Option Period”), to give
notice in writing to the Rollover Optionholder (or his or her estate) of
NCP-EH’s exercise of its option, in whole or in part.  If the options of the Company and NCP-EH to purchase the Rollover
Options or the Rollover Exercise Shares, as the case may be, pursuant to this
Section 2.10(a) are not exercised with respect to all of the Rollover
Options or the Rollover Exercise Shares, as the case may be, as provided herein
(other than as a result of Section 2.10(e) hereof), the Rollover
Optionholder (or his or her estate) shall be entitled to retain the Rollover
Options or the Rollover Exercise Shares, as the case may be, as to which the
right is not exercised, subject to (as applicable) all of the provisions of
this Agreement, the Equinox Holdings, Inc. 1998 Stock Option Plan (the “Old
Option Plan”) (except clauses (ii) and (iii) of Section 7(b) thereof) and
any other agreement between the Rollover Optionholder and the Company with
respect to the Rollover Options or the Rollover Exercise Shares, as the case
may be (except for the provisions relating to termination of employment
therein), which shall be of no force and effect for this purpose.  All purchases pursuant to this Section 2.10(a)
by the Company shall be for a purchase price and in the manner prescribed by
Section 2.10(d) hereof.

 

(b)                                 Notice
of Termination.  The Company or the
Subsidiary thereof that employs the Rollover Optionholder (excluding, for
purposes of this Section 2.10(b), Paul Boardman) shall give written notice
of any termination of the Rollover Optionholder’s active employment with each
of the Company and any Subsidiary thereof that employs the Rollover
Optionholder to NCP-EH, except that if such termination (if other than as a
result of death) is by the Rollover Optionholder, the Rollover Optionholder
shall give written notice of such termination to the Company and the Company
shall give written notice of such termination to NCP-EH.  In the event that the Company’s relationship
with Eclipse is terminated for any reason, the Company shall give written
notice to NCP-EH.

 

(c)                                  Exit
Event.  In the event that an initial
Public Offering has been consummated, the Company and NCP-EH shall not have any
rights to purchase the Rollover Options pursuant to this Section 2.10 and
this Section 2.10 shall not apply in connection with an initial Public
Offering.

 

17

 

(d)                                 Determination
of the Purchase Price; Manner of Payment.

 

(i)                                     Purchase
Price.  For the purposes of any
purchase of the Rollover Options pursuant to Section 2.10(a), and subject
to Section 2.10(e), the purchase price per share of Common Stock covered
by the Rollover Options to be paid to the Rollover Optionholder (or his or her
estate) for each share covered by the Rollover Options (the “Purchase Price”)
shall be equal to the excess, if any, of (w) fair market value (the
“Fair Market Value”) of such share of Common Stock as of the effective
date of the termination, that gives rise to the right of the Company to
repurchase such Rollover Options (such date of termination, the “Determination
Date”), over (x) the exercise price per share of Common Stock
covered by the Rollover Options; provided
that if the Rollover Optionholder’s employment is terminated by the Company or
any Subsidiary thereof for Cause or in the case of Paul Boardman, his
employment with Eclipse is terminated for Cause or the Company terminates its
business relationship with Eclipse for Cause, the Purchase Price for each such
share covered by the Rollover Options shall be equal to the excess, if any, of
(y) the lesser of (A) the Fair Market Value of such share of
Common Stock as of the Determination Date, and (B) the Value Per Share,
over (z) the exercise price per share of Common Stock covered by
the Rollover Options.  For the purposes
of any purchase of the Rollover Exercise Shares pursuant to
Section 2.10(a), and subject to Section 2.10(e), the Purchase Price
per share of Common Stock to be paid to the Rollover Optionholder (or his or
her estate) for each Rollover Exercise Share (the “Purchase Price”)
shall equal the Fair Market Value of such Rollover Exercise Share as of the
Determination Date; provided that
if the Rollover Optionholder’s employment or such business relationship is
terminated by the Company or any Subsidiary thereof for Cause, or, in the case
of Paul Boardman, his employment with Eclipse is terminated for Cause or the
Company terminates its business relationship with Eclipse for Cause, the Purchase
Price for such Rollover Exercise Share shall equal the lesser of (A) the
Fair Market Value of such Rollover Exercise Share as of the effective date of
termination of Purchaser’s employment and (B) the Value Per Share.  Whenever determination of the Fair Market
Value of a share of Common Stock is required by this Section 2.10, such
Fair Market Value shall be such amount as is determined in good faith by the
Board.  In making a determination of
Fair Market Value, the Board shall give due consideration to such factors as it
deems appropriate, including, without limitation, the earnings and certain
other financial and operating information of the Company and its Subsidiaries
in recent periods, the potential value of the Company and its Subsidiaries as a
whole, the future prospects of the Company and its Subsidiaries and the
industries in which they compete, the history and management of the Company and
its Subsidiaries, the general condition of the securities markets, the fair
market value of securities of companies engaged in businesses similar to those
of the Company and its Subsidiaries. 
The determination of Fair Market Value will not give effect to any

 

18

 

restrictions on transfer of the Common Stock or the
fact that such Common Stock would represent a minority interest in the
Company.  The Fair Market Value as
determined in good faith by the Board and in the absence of fraud shall be
binding and conclusive upon all parties hereto.

 

(ii)                                  Closing
of Purchase; Payment of Purchase Price. 
Subject to Section 2.10(e), the closing of a purchase pursuant to
Section 2.10(a) shall take place at the principal office of the Company on
the tenth business day following the receipt by the Rollover Optionholder (or
his or her estate) of the notice of the Company and/or NCP-EH of its exercise
of its option to purchase any of the Rollover Options or the Rollover Exercise
Shares, as the case may be, pursuant to Section 2.10(a).  At the closing, (x) the Company
and/or NCP-EH, as the case may be, shall pay to the Rollover Optionholder (or
his or her estate) an amount equal to the Purchase Price and (y) the
Rollover Optionholder (or his or her estate) shall deliver to the Company such
certificates or other instruments representing the Rollover Options or the
Rollover Exercise Shares, as the case may be, so purchased, appropriately
endorsed by the Rollover Optionholder (or his or her estate), as the Company
may reasonably require.

 

(e)                                  Certain
Restrictions on Purchases of Rollover Options.

 

(i)                                     Financing
Agreements, etc.  Notwithstanding
any other provision of this Section 2.10, the Company shall not be
obligated or permitted to pay the purchase price for any Rollover Options or
Rollover Exercise Shares, as the case may be, that the Company may elect to
purchase from the Rollover Optionholder pursuant to Section 2.10(a) if (x) the
payment of such purchase price would result in a violation of the terms or
provisions of, or a default or an event of default under, any financing or security
agreement or document entered into by the Company or any of its Subsidiaries on
the date hereof, any refunding thereof, or in connection with the operations of
the Company or the Subsidiaries from time to time (such agreements and
documents, as each may be amended, modified or supplemented from time to time,
are referred to herein as the “Financing Agreements”), in each case as
the same may be amended, modified or supplemented from time to time, (y) the
payment of such purchase price would violate any of the terms or provisions of
the Certificate of Incorporation of the Company or (z) the Company
has no funds legally available therefor under the General Corporation Law of
the State of Delaware.

 

(ii)                                  Delay
of Purchase.  In the event that the
payment of the purchase price for any Rollover Options or the Rollover Exercise
Shares, as the case may be, by the Company otherwise permitted under
Section 2.10(a) is prevented solely by the terms of
Section 2.10(e)(i), (x) the payment of such purchase price
will be postponed and will be made without the application of further
conditions or

 

19

 

impediments (other than as set forth in
Section 2.10(a) hereof or in this Section 2.10(e)) at the first
opportunity thereafter when the Company has funds legally available therefor
and when the payment of such purchase price will not result in any default,
event of default or violation under any of the Financing Agreements or in a
violation of any term or provision of the Certificate of Incorporation of the
Company and (y) the Rollover Optionholder’s right to receive
payment of such purchase price shall rank against other similar rights with
respect to shares of Common Stock or options in respect thereof according to
priority in time of the effective date of the event giving rise to any such
right, provided that any such
right as to which a common date determines priority shall be of equal priority
and shall share pro rata in any purchase payments made pursuant to
clause (x) above.

 

(iii)                               Purchase
Price Adjustment.  In the event that
a repurchase of Rollover Options or Rollover Exercise Shares, as the case may
be, from the Rollover Optionholder is delayed pursuant to this
Section 2.10(e), the purchase price per share of Common Stock covered by
the Rollover Options or Rollover Exercise Shares, as the case may be, when the
repurchase of such Rollover Options or Rollover Exercise Shares, as the case
may be, eventually takes place as contemplated by Section 2.10(e)(ii)
shall equal the sum of (x) the Purchase Price determined in
accordance with Section 2.10(d) hereof at the time that the repurchase of
such Rollover Options or Rollover Exercise Shares, as the case may be, would
have occurred but for the operation of this Section 2.10(e), plus (y) an
amount equal to interest on such Purchase Price for the period from the date on
which the completion of the repurchase would have taken place but for the
operation of this Section 2.10(e) to the date on which such repurchase
actually takes place (the “Delay Period”) at a rate equal to the average
annual cost to the Company of its and its Subsidiaries bank indebtedness
obligations outstanding during the Delay Period or, if there are no such
obligations outstanding, one percentage point greater than the average prime
rate charged during such period by a nationally recognized bank designated by
the Company.

 

ARTICLE III

DEFINITIONS

 

Section 3.1.                                   Certain Terms. 
Whenever used in this Agreement (including in the Schedules), the
following terms shall have the respective meanings given to them below or in
the Sections indicated below:

 

Accepting Stockholder:  as defined in Section 2.4.

 

20

 

Affiliate:  of a Person means a Person that directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first Person, and with respect to a natural person shall
include any child, stepchild, grandchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, and shall include adoptive relationships.  “Control” (including the terms “controlled
by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
policies of a Person, whether through the ownership of voting securities, by
contract or credit arrangement, as trustee or executor, or otherwise.

 

Agreement: 
this Stockholders Agreement, including the Schedules hereto.

 

Ancillary Agreement:  as
defined in the Recapitalization Agreement.

 

Applicable Percentage:  as defined in Section 2.5(a).

 

Available Common Stock:  the
Common Stock outstanding immediately after the Closing (excluding the Escrowed
Shares), outstanding Common Stock released from Escrow, Common Stock
outstanding upon the exercise of any Rollover Option and  Common Stock issued or issuable upon
exercise of the Warrants.

 

Board of Directors:  the
board of directors of the
Company.

 

Business Day:  a day other than a Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or
required to close.

 

Cause:  as defined in the Old Option Plan or option agreement evidencing
the grant of Rollover Options, provided
that in the event that the Rollover Optionholder is employed under an effective
employment agreement (whether with the Company or Eclipse) on the date such
Rollover Optionholder’s employment thereunder is terminated and such employment
agreement contains a different definition of Cause, the definition of Cause
contained in such employment agreement shall be substituted for the definition
set forth above for purposes of this Agreement, provided further that, in the
event of a termination of the Company’s business relationship with Eclipse if
there is an effective separation agreement between the Company and Eclipse on
the date such relationship is terminated, the definition of “Cause” contained
in such separation agreement shall be substituted for the definition set forth
above for purposes of this Agreement.

 

Certificate of Designation:  the
Certificate of Designation of the 10% Cumulative Preferred Stock of the
Company, dated December 15, 2000.

 

21

 

Childs:  J.W. Childs Equity Partners II, L.P., a Delaware limited
partnership.

 

Closing:  the closing of the merger of NCP-EH Recapitalization Corp. with
and into the Company and the issuance by the Company to the Purchaser of newly
issued shares of the Company, as set forth in the Merger and Recapitalization
Agreement.

 

Closing Date:  the
date the Closing occurs.

 

Collaborative Group:  as
defined in the speech, a transcript of which is attached hereto as Annex I, as
such term may be redefined or modified by subsequent pronouncements by the SEC
or its staff.

 

Common Stock:  the
common stock, par value $.01 per share, of the Company.

 

Company:  as
defined in the introduction of
this Agreement.

 

Consulting Agreement:  the Consulting Agreement, dated as of the
date hereof, among the Company, J.W. Childs Associates, L.P., J.W. Childs
Advisors, L.P., and NCP in connection with the Closing under the
Recapitalization Agreement.

 

Covered Security:  all of the shares of Common Stock, preferred
stock or other equity interest in the Company, and any other security, option,
warrant or other right that does or may allow the holder thereof to receive
Common Stock or preferred stock or other equity interest, owned from time to
time by any of the Stockholders.

 

Delay Period:                         as defined in
Section 2.10(e)(iii).

 

Determination Date:  as defined in Section 2.10(d)(i).

 

Dividend Payment Date: as defined in
the Certificate of Designation.

 

Drag-Along Buyer:  as
defined in Section 2.5(a).

 

Drag-Along Closing:  as
defined in Section 2.5(a).

 

Drag-Along Notice:  as
defined in Section 2.5(a).

 

Drag-Along Offer:  as
defined in Section 2.5(a).

 

Drag-Along Purchase
Agreement:  as defined in Section 2.5(a).

 

22

 

Drag-Along Sale:  as
defined in Section 2.5(a).

 

Eclipse:  as defined in Section 2.10(a).

 

Employee:  any
officer or other key employee of, or consultant (who is a natural person) to
the Company or any Subsidiary.

 

Escrowed Shares:  as
defined in the Recapitalization
Agreement, provided that once such
shares are released from escrow in accordance with the terms of the Stock
Escrow Agreement, such shares shall no longer be “Escrowed Shares” for purposes
of this Agreement.

 

Exchange Act:  the
Securities Exchange Act of 1934,
as amended.

 

Exercise Shares: 
Common Stock received upon exercise of any options granted pursuant to
the Plan.

 

Exit Event:  as
defined in the Recapitalization Agreement.

 

Fair Market Value:  as defined in Section 2.10(d)(i).

 

Family Member:  with respect to any Stockholder, (i) a
spouse or any lineal ancestor or descendant, (ii) a brother or
sister, (iii) a trust or trusts of which such family members are
the sole beneficiaries or charitable remainder trusts in which such family
members have an interest, (iv) a partnership or limited liability
company in which such family members are the only partners or members, as the
case may be, or (v) any Person (other than a natural person) Controlled
by such Stockholder.

 

Financing Agreements:  as defined in Section 2.10(e)(i).

 

First Option Period:  as defined in Section 2.10(a).

 

Governmental Approvals:  any consent, approval, authorization,
waiver, permit, concession, franchise, agreement, license, exemption or order
of declaration or filing with or report or notice to any Governmental Authority.

 

Governmental Authority:  any nation or government, any state or other
political subdivision thereof, any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, any court, tribunal or arbitrator, and any
self-regulatory organization.

 

Law:  all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including the common law), codes, rules, regulations,
ordinances or orders

 

23

 

of any Governmental Authority, (b) Governmental
Approvals and (c) orders, decisions, injunctions, judgments, awards
and decrees of or agreements with any governmental authority.

 

Lien:  any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, lease, sublease, license, occupancy agreement,
adverse claim or interest, easement, covenant, encroachment, burden, title
defect, title retention agreement, voting trust agreement, interest, equity, option,
lien, right of first refusal, charge or other restrictions or limitations of
any nature whatsoever, including but not limited to such as may arise under any
contracts.

 

Liquidation Preference:  as defined in the Certificate of
Designation.

 

Management Director:  an executive officer or other employee of the Company,
nominated to the Board by the Purchaser.

 

NCP: 
North Castle Partners,
L.L.C.

 

NCP Partnership:  North Castle Partners II, L.P.

 

Notice of Offer:  as
defined in Section 2.3(a).

 

Offer Price:  as
defined in Section 2.3(a).

 

Offer Terms:  as
defined in Section 2.3(a).

 

Offered Securities:  as defined in Section 2.6.

 

Offered Shares:  as defined in Section 2.3(a).

 

Old Option Plan:  as
defined in Section 2.10(a).

 

Permitted Transfer: 
with respect to any
Stockholder other than the Purchaser, a Sub-Debt Warrantholder, a Rollover
Optionholder or Subsequent Management Stockholder, any transaction permitted
pursuant to Section 2.1(a), (c) and (d); with respect to Purchaser, any
transaction permitted pursuant to Section 2.1(c) and (d); with respect to
a Rollover Optionholder or Subsequent Management Stockholder, any transaction
permitted pursuant to Section 2.1(g); and with respect to a Sub-Debt
Warrantholder, any transaction permitted pursuant to Section 2.1(b), (c)
and (d).

 

Permitted Transferee:  with respect to any Rollover Optionholder or
Subsequent Management Stockholder, a child, grandchild, parent, grandparent,
spouse, sibling, a trust in which such persons
have more than fifty percent of the

 

24

 

beneficial interest, a foundation in which such
persons (or the Rollover Optionholder or Subsequent Management Stockholder, as
the case may be) control the management of assets, and any other entity in which
such persons (or the Rollover Optionholder or Subsequent Management
Stockholder, as the case may be) own more than fifty percent of the voting
interests.

 

Person:  any natural person, firm, partnership, association, corporation,
limited liability or other company, trust, business trust, governmental
authority or other entity.

 

Plan:  means the Equinox Holdings, Inc. 2000 Stock Incentive Plan.

 

Potential Purchaser:  as
defined in Section 2.3(b).

 

Preferred Stock:  as
defined in the Certificate of Designation.

 

Preferred Stockholders:  the
holders, from time to time, of the Company’s 10% Cumulative Preferred Stock,
par value $0.01 per share.

 

Prohibited Transfer:  any transfer of a Covered Security to a
Person which (a) may not be effected without registering the
securities involved under the Securities Act of 1933, as amended, (b) would
result in the assets of the Company constituting Plan Assets as such term is
defined in the Department of Labor regulations promulgated under ERISA, (c) would
cause the Company to be, be controlled by or under common control with an
“investment company” for purposes of the Investment Company Act of 1940, as
amended, (d) would require any securities of the Company to be
registered under the Securities and Exchange Act of 1934, as amended or (e) is
in violation of this Agreement.

 

Public Offering:  any underwritten sale of Common Stock to the
public pursuant to an effective registration statement under the Securities Act
where following such sale the Common Stock is registered under
Section 12(b) of the Exchange Act.

 

Purchase Price:  as defined in Section 2.10(d)(i).

 

Purchaser:  as
defined in the introduction to
this Agreement.

 

Recapitalization Agreement:  as defined in the recitals to this Agreement.

 

Recapitalization Threshold:  7%
of the Available Common Stock, provided
that such percentage shall be calculated using a fraction, the numerator of
which shall be the aggregate number of shares of Available Common Stock held by
the Rollover Stockholders and persons outside the Collaborative Group

 

25

 

and, provided
further that if Ernst & Young (or such other accounting firm of
national standing as may be designated by the Purchaser from time to time)
advises the Purchaser in good faith, based on changes in law, regulation or
pronouncements of the Securities and Exchange Commission or its staff or the
American Institute of Certified Public Accountants after the date hereof, that
such percentage (i) may be lowered without jeopardizing the
applicability of recapitalization accounting to the transactions contemplated
by the Recapitalization Agreement or (ii) should be raised to avoid
jeopardizing the applicability of recapitalization accounting to the
transactions contemplated by the Recapitalization Agreement, such lower or
higher percentage as determined by Ernst & Young or such other accountant.

 

Refusal Period:  as
defined in Section 2.3(a).

 

Representatives:  as to any Person, its accountants, counsel,
consultants, officers, directors, employees, agents and other advisors and
representatives.

 

Rollover Exercise Shares:  shares of Common Stock acquired on exercise
of Rollover Options.

 

Rollover Optionholder:  as defined in the introduction to this
Agreement.

 

Rollover Options:  the
Surviving Corporation Stock
Options issued pursuant to the Recapitalization Agreement.

 

Rollover Stockholder:  as defined in the introduction of this Agreement.

 

Second Option Period:  as defined in Section 2.10(a).

 

Securities Act:  the
Securities Act of 1933, as amended.

 

Selling Holder:  as defined in Section 2.3(a).

 

Senior Subordinated Loan
Agreement:  as defined in the introduction to this Agreement.

 

Stockholder:  as
defined in the introduction to
this Agreement.

 

Stockholders’ Representative:  as defined in the Recapitalization Agreement.

 

Sub-Debt Purchase Agreement:

 

26

 

Sub-Debt Warrantholders:  as
defined in the introduction to
this Agreement.

 

Subordinated Debt:

 

Subsequent Management Stockholder:  each Person who is, or becomes, a party to
this Agreement pursuant to Section 4.14 hereof upon exercise of any option
granted to such Person pursuant to the Plan.

 

Subsidiaries:  each corporation or other Person in which a
Person owns or controls, directly or indirectly, capital stock or other equity
interests representing more than 50% of the outstanding voting stock or other
equity interests.

 

Surviving Corporation Stock Option:  as defined in the Recapitalization
Agreement.

 

Tag-Along Right:  as defined in Section 2.4.

 

Value Per Share:  as
defined in the Recapitalization Agreement.

 

Warrant Shares: 
shares of Common Stock issued and outstanding upon exercise of a
Warrant.

 

Warrants:  as
defined in the introduction of
this Agreement.

 

Section 3.2.                                   Construction. 
Any reference in this Agreement to a statute shall be to such statute,
as amended from time to time, and to the rules and regulations promulgated
thereunder.

 

ARTICLE IV

MISCELLANEOUS

 

Section 4.1.                                   Termination. 
This Agreement may be terminated at any time prior to the Closing Date
if the Recapitalization Agreement is terminated pursuant to Article VIII
thereof.

 

Section 4.2.                                   Post-Closing Termination.  Articles I and II and Section 4.14 of
this Agreement, except for Sections 2.1(d) and 2.2 hereof, shall terminate
on an initial Public Offering.

 

Section 4.3.                                   Effect of Termination.  In the event of the termination of this
Agreement or certain provisions hereof, as the case may be, pursuant to the
provisions of Section 4.1 or 4.2, this Agreement or such provisions, as
the case may be,

 

27

 

shall have no
further effect, without any further liability to any Person in respect hereof
or of the transactions contemplated hereby on the part of any party hereto, or
any of its directors, officers, Representatives, stockholders or Affiliates,
except for any liability resulting from such party’s breach of this Agreement.

 

Section 4.4.                                   Notices.  All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage
prepaid, (c) sent by next-day or overnight mail or delivery or (d) sent
by telecopy or telegram, as follows:

 

	
   

  	
  (a)

  	
  if to the
  Purchaser:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NCP-EH,
  L.P.

  
	
   

  	
   

  	
  c/o
  North Castle Partners, L.L.C.

  
	
   

  	
   

  	
  60
  Arch Street

  
	
   

  	
   

  	
  Greenwich,
  Connecticut  06830

  
	
   

  	
   

  	
  Fax:  (203) 618-1860

  
	
   

  	
   

  	
  Telephone: 
  (203) 862-3200

  
	
   

  	
   

  	
  Attention: 
  Peter J. Shabecoff

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o J.W. Childs Associates, L.P.

  
	
   

  	
   

  	
  One Federal Street

  
	
   

  	
   

  	
  Boston, MA 
  02110

  
	
   

  	
   

  	
  Telephone: 
  (617) 753-1100

  
	
   

  	
   

  	
  Attention: 
  Glenn A. Hopkins

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with
  a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Debevoise
  & Plimpton

  
	
   

  	
   

  	
  875
  Third Avenue

  
	
   

  	
   

  	
  New
  York, New York  10022

  
	
   

  	
   

  	
  Fax:  (212) 909-6836

  
	
   

  	
   

  	
  Telephone:  (212) 909-6000

  
	
   

  	
   

  	
  Attention:  Franci J. Blassberg, Esq.

  

 

28

 

	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Kaye,
  Scholer, Fierman, Hays & Handler, LLP

  
	
   

  	
   

  	
  425
  Park Avenue

  
	
   

  	
   

  	
  New
  York, New York  10022

  
	
   

  	
   

  	
  Fax:  (212) 836-8689

  
	
   

  	
   

  	
  Telephone:  (212) 836-8000

  
	
   

  	
   

  	
  Attention:  Stephen C. Koval, Esq.

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  if to the
  Company:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Equinox
  Holdings, Inc.

  
	
   

  	
   

  	
  895
  Broadway

  
	
   

  	
   

  	
  New
  York, NY  10003

  
	
   

  	
   

  	
  Telephone: 
  (212) 254-0437

  
	
   

  	
   

  	
  Attention: 
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with
  a copy to the Purchaser at the address listed above; and

  
	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  if
  to the Rollover Stockholders or the Rollover Optionholders, as set forth in
  Schedule I or II, respectively

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with
  a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cleary,
  Gottlieb, Steen & Hamilton

  
	
   

  	
   

  	
  One
  Liberty Plaza

  
	
   

  	
   

  	
  New
  York, NY  10006

  
	
   

  	
   

  	
  Telephone:  (212) 225-2000

  
	
   

  	
   

  	
  Attention:  Paul J. Shim, Esq.

  
	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  if to the
  Sub-Debt Warrantholders:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Albion
  Alliance LLC

  
	
   

  	
   

  	
  1345
  Avenue of the Americas, 37th Floor

  
	
   

  	
   

  	
  New
  York, NY  10105

  
	
   

  	
   

  	
  Fax:  (212) 969-6659

  
	
   

  	
   

  	
  Attention:  Andrew H. Steuerman

  

 

29

 

	
   

  	
   

  	
  with
  a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Goodwin,
  Procter & Hoar LLP

  
	
   

  	
   

  	
  Exchange
  Place

  
	
   

  	
   

  	
  53
  State Street

  
	
   

  	
   

  	
  Boston,
  MA  02109

  
	
   

  	
   

  	
  Fax:  (617) 523-1231

  
	
   

  	
   

  	
  Attention:  Kevin M. Dennis, Esq.

  

 

or, in each case, at such other address as may be
specified in writing to the other parties hereto.

 

All
such notices, requests, demands, waivers and other communications shall be
deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the
seventh business day after the mailing thereof, (y) if by next-day
or overnight mail or delivery, on the day delivered, (z) if by
telecopy or telegram, on the next day following the day on which such telecopy
or telegram was sent, provided
that a copy is also sent by certified or registered mail.

 

Section 4.5.                                   Governing
Law, etc.

 

(a)                                  This
Agreement shall be governed in all respects, including as to validity, interpretation
and effect, by the internal laws of the state of New York, without giving
effect to the conflict of laws rules thereof to the extent that any such rules
would require or permit the application of the laws of any other jurisdiction,
except to the extent that the corporate law of the State of incorporation of
the Company specifically and mandatorily applies.  Each party hereto hereby irrevocably submits to the jurisdiction
of the courts of the State of New York and the Federal courts of the United
States of America located in the State, City and County of New York solely in
respect of the interpretation and enforcement of the provisions of this
Agreement and of the documents referred to in this Agreement, and in respect of
the transactions contemplated hereby and thereby.  Each party hereto irrevocably agrees that all claims in respect
of the interpretation and enforcement of the provisions of this Agreement and
of the documents referred to in this Agreement, and in respect of the
transactions contemplated hereby and thereby, or with respect to any such
action or proceeding, shall be heard and determined in such a New York State or
Federal court, and that such jurisdiction of such courts with respect thereto
shall be exclusive, except solely to the extent that all such courts shall
lawfully decline to exercise such jurisdiction.  Each party hereto hereby waives, and agree not to assert, as a
defense in any action, suit or proceeding for the interpretation or enforcement
hereof or of any such document or in respect of any such transaction, that it
is not subject to such jurisdiction. 
Each party hereto hereby waives, and agrees not to assert, to the
maximum extent permitted by law, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof or of any such document or in

 

30

 

respect of any
such transaction, that such action, suit or proceeding may not be brought or is
not maintainable in such courts or that the venue thereof may not be
appropriate or that this Agreement or any such document may not be enforced in
or by such courts.  Each party hereto
hereby consents to and grants any such court jurisdiction over the person of
such party and over the subject matter of any such dispute and agrees that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 4.4 or in such other manner
as may be permitted by law, shall be valid and sufficient service thereof.

 

(b)                                 Each party acknowledges and agrees that any
controversy which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives any right such party may have to a trial
by jury in respect of any litigation directly or indirectly arising out of or
relating to this Agreement, or the breach, termination or validity of this
Agreement, or the transactions contemplated by this Agreement.  Each party certifies and acknowledges that (a) no
Representative of any other party has represented, expressly or otherwise, that
such other party would not, in the event of litigation, seek to enforce the
foregoing waiver, (b) each such party understands and has
considered the implications of this waiver, (c) each such party
makes this waiver voluntarily, and (d) each such party has been
induced to enter into this Agreement by, among other things, the mutual waivers
and certifications in this Section 4.5(b).

 

Section 4.6.                                   Binding Effect.  This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, successors and permitted
assigns.

 

Section 4.7.                                   Assignment.  Except as provided in Section 2.6(f), this
Agreement shall not be assignable or otherwise transferable by any party hereto
without the prior written consent of the other parties hereto, and any
purported assignment or other transfer without such consent shall be void and
unenforceable; provided that the
Purchaser may assign this Agreement or any of its rights and obligations
hereunder (including, without limitation, its rights under Articles I and II)
to any Affiliate of the Purchaser or any other Person, or to any lender to the
Purchaser, or any Subsidiary or Affiliate thereof as security for obligations
to such lender, provided  further, that no assignment to any such
lender shall in any way affect the Purchaser’s or any such assignee’s
obligations or liabilities under this Agreement.

 

Section 4.8.                                   No Third Party Beneficiaries.  Nothing in this Agreement shall confer any
rights upon any person or entity other than the parties hereto and their
respective heirs, successors and permitted assigns.

 

31

 

Section 4.9.                                   Amendment;
Waivers, Etc.  No
amendment, modification or discharge of this Agreement, and no waiver
hereunder, shall be valid or binding unless set forth in writing and duly
executed, by the holder or holders of a majority of the Available Common Stock,
provided, however, that this Agreement
may not be amended, modified or supplemented in a manner that discriminates
against any group of Stockholders without the written consent of a majority of
such group determined by number of shares. 
Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the rights
of the party granting such waiver in any other respect or at any other
time.  Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights
or privileges hereunder.  The rights and
remedies herein provided are cumulative and none is exclusive of any other, or
of any rights or remedies that any party may otherwise have at law or in
equity.

 

Section 4.10.                             Entire
Agreement.  This
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.

 

Section 4.11.                             Severability.  If any provision, including any phrase,
sentence, clause, section or subsection, of this Agreement is invalid,
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering such provision in question invalid, inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision herein contained invalid, inoperative, or unenforceable to any extent
whatsoever.

 

Section 4.12.                             Headings.  The headings contained in this Agreement are
for purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.

 

Section 4.13.                             Counterparts.
 This Agreement may be executed in
several counterparts, each of which shall be deemed an original and all of
which shall together constitute one and the same instrument.

 

Section 4.14.                             Subsequent Stockholders.  Each of the parties hereto agrees that any
Person who after the date of this Agreement acquires any shares of Common
Stock, preferred stock or other equity interest in the Company, and any other
security, option, warrant or other right that does or may allow the holder
thereof to receive Common Stock or preferred stock or other equity interest (or
any interest therein) shall become a party to this Agreement by executing
Schedule III hereto.  The Company
shall maintain a register of all parties to this Agreement which shall be
available for review by

 

32

 

any party
hereto.  As contemplated by Section
2.1(d), any transfer of Covered Securities (or any interest therein) to a
transferee required hereby to become a party to this Agreement shall be of no
effect and shall be void ab initio
unless such transferee becomes a party to this Agreement as provided in the first
sentence of this Section 4.14.

 

Section 4.15.                             Release.

 

(a)                                  Each
of the undersigned Stockholders hereby releases, remises, acquits and
discharges the Company and its Affiliates, and their respective officers,
directors, shareholders, agents, employees, consultants, independent
contractors, attorneys, advisors, successors and assigns, jointly and
severally, from any and all claims, known or unknown, and however denominated,
which such Stockholder, its successors or assigns has or may have against any such
releasees and any and all liability such releasees may have to such
Stockholder, in each case based on any or all facts, events or circumstances
existing prior to the Closing Date, arising from any disclosure of information on or prior to the
Closing Date or any failure to disclose information on or prior to the Closing
Date to any of the Stockholders with respect to the business, operations,
assets, financial condition, prospects, properties or results of operations of
the Company or any of the Subsidiaries
or any information relating to the transactions contemplated by the
Recapitalization Agreement, including, without limitation, the terms thereof or
any tax consequences to any Stockholder or any other person arising therefrom.  This release is for any relief, no matter
how denominated, including, but not limited to injunctive relief, compensatory
damages, punitive damages or rescissory damages.  Each of the undersigned Stockholders further agrees that he, she
or it will not file or permit to be filed, either individually or as a group,
or on his, her or its behalf, any such claim. 
This release shall not apply to the obligations set forth in this
Agreement, the Senior Subordinated Loan Agreement, the Recapitalization
Agreement and the Ancillary Agreements. 
Notwithstanding the foregoing, nothing in this Section shall affect
the obligations of the Company and its subsidiaries to Affiliates of the
Rollover Stockholders pursuant to lease agreements and guaranties in effect on
the date hereof.

 

(b)                                 Each
of the Company and the Purchaser hereby releases, remises, acquits and
discharges the undersigned Stockholders from any and all claims, known or
unknown and however denominated, which it, its successors or assigns have or
may have against any such Stockholders and any and all liability such
Stockholders may have to it arising on or prior to the Closing Date, provided that this release shall not apply
to any such liabilities (x) arising out of this Agreement or the
Recapitalization Agreement (including, without limitation, under the
indemnification provisions of the Recapitalization Agreement) or any Ancillary
Agreement, or (y) arising as a result of fraud, and provided  further,
that this release shall not apply to any liabilities to the Purchaser to the
extent that such liabilities arose because the release contained in
Section 4.15(a) was determined by a court or arbitrator of competent
jurisdiction to be unenforceable or otherwise invalid.  This release is for any relief, no matter
how

 

33

 

denominated,
including, but not limited to injunctive relief, compensatory damages or
punitive damages.  Each of the Company
and the Purchaser further agrees that it will not file or permit to be filed,
any such claim.

 

Section 4.16.                             Action by Co-Investment Fund.  The Co-Investment Fund will not take any
action under this Agreement unless such action is consistent with the actions
of NCP-EH, and the Co-Investment Fund will act in concert with respect to all
actions taken by NCP-EH hereunder, including, without limitation, approving
amendments to this Agreement.

 

Section 4.17.                             Actions by Preferred Stockholders.

 

(a)                                  The
Preferred Stockholders (solely in their capacity as Preferred Stockholders)
hereby agree to vote their shares of Preferred Stock, to the extent they are
entitled or permitted to vote under the laws of the State of Delaware or
otherwise, in favor of any Exit Event or Drag-Along Sale, provided that the Preferred Stockholders
receive on or prior to the date of consummation of such Exit Event or
Drag-Along Sale (whether or not as part of such Exit Event or Drag-Along Sale)
an amount in cash per share of Preferred Stock at least equal to the
Liquidation Preference per share provided therefor in the Certificate of Designation
(including an amount in cash equal to a prorated dividend for the period from
the Dividend Payment Date immediately prior to the date of payment to the
Preferred Stockholders to such date of payment).

 

(b)                                 Notwithstanding
any rights contained in the Certificate of Designation for the Preferred Stock
to the contrary, the Preferred Stockholders (solely in their capacity as
Preferred Stockholders) shall not vote their shares of Preferred Stock against
(i) any amendment to the Certificate of Incorporation to the extent such
amendment would authorize any class of Parity or Senior Securities (as defined
in the Certificate of Designation), or (ii) the issuance by the Company of any
Parity or Senior Securities, provided
in each case that the Board has approved such amendment or issuance in
accordance with the terms of this Agreement.

 

[The remainder of this page intentionally blank]

 

34

 

IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.

 

	
   

  	
  NCP-EH, L.P.

  	
   

  
	
   

  	
  By:

  	
  NCP-EH GP,
  L.L.C.,

  	
   

  
	
   

  	
   

  	
  its General
  Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/  Adam Saltzman

  	
   

  
	
   

  	
   

  	
  Name:  Adam Saltzman

  	
   

  
	
   

  	
   

  	
  Title:  Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NCP
  CO-INVESTMENT FUND, L.P.

  
	
   

  	
  By:

  	
  NCP
  Co-Investment GP, L.L.C.,

  	
   

  
	
   

  	
   

  	
  its General
  Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/  Peter J. Shabecoff

  	
   

  
	
   

  	
   

  	
  Name:  Peter J. Shabecoff

  	
   

  
	
   

  	
   

  	
  Title:  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EQUINOX
  HOLDINGS, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Adam Saltzman

  	
   

  
	
   

  	
   

  	
  Name:  Adam Saltzman

  
	
   

  	
   

  	
  Title:  Vice President

  
								

 

35

 

	
   

  	
  ALBION ALLIANCE
  MEZZANINE

  FUND, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Albion Alliance
  LLC,

  	
   

  
	
   

  	
   

  	
  its General
  Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/  Andrew H. Steuerman

  	
   

  
	
   

  	
   

  	
  Name:  Andrew H. Steuerman

  	
   

  
	
   

  	
   

  	
  Title:  Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ALBION ALLIANCE
  MEZZANINE

  FUND II, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   AA MEZZ II
  GP, LLC,

  	
   

  
	
   

  	
   

  	
  its General
  Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   Albion
  Alliance LLC,

  	
   

  
	
   

  	
   

  	
  its Sole Member

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Andrew H. Steuerman

  	
   

  
	
   

  	
   

  	
  Name:  Andrew H. Steuerman

  	
   

  
	
   

  	
   

  	
  Title:  Senior Vice President

  	
   

  
								

 

36

 

	
   

  	
  DEUTSCHE BANK SECURITIES INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/  Edwin E. Roland, Jr.

  	
   

  
	
   

  	
   

  	
  Name:  Edwin E. Roland, Jr.

  	
   

  
	
   

  	
   

  	
  Title:  Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/  David J. Flannery

  	
   

  
	
   

  	
   

  	
  Name:  David J. Flannery

  	
   

  
	
   

  	
   

  	
  Title:  Managing Director

  	
   

  
					

 

37

 

	
   

  	
  EXETER CAPITAL PARTNERS IV, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Exeter IV Advisors, L.P., its

  	
   

  
	
   

  	
   

  	
  General Partner

  	
   

  
	
   

  	
  By:

  	
  Exeter IV Advisors, Inc., its

  	
   

  
	
   

  	
   

  	
  General Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/  Authorized Signatory

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXETER EQUITY PARTNERS, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Exeter Equity Advisors, L.P., its

  	
   

  
	
   

  	
   

  	
  General Partner

  	
   

  
	
   

  	
  By:

  	
  Exeter Equity Advisors, Inc., its

  	
   

  
	
   

  	
   

  	
  General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
    

  	
  By:

  	
   /s/  Authorized
  Signatory

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

38

 

	
   

  	
  BILL AND MELINDA GATES

  FOUNDATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/  Robert Sydow

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert Sydow

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Authorized Agent

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARROW INVESTMENT PARTNERS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Robert Sydow

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert Sydow

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Authorized Agent

  	
   

  
						

 

39

 

	
   

  	
  DONATO ERRICO, JR.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/  Donato Errico, Jr. 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  VITO ERRICO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/  Vito Errico

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LAVINIA ERRICO (JR.)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/  Lavinia Errico

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DONATO ERRICO, SR.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/  Donato Errico

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LAVINIA ERRICO (SR.)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/  Lavinia Errico

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HARVEY SPEVAK

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/  Harvey Spevak

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RAKESH AHUJA

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/  Rakesh Ahuja 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TERRI BIALSKY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/  Terri Bialsky

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FRANCES ERRICO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/  Frances Errico

  	
   

  
				

 

40

 

	
  Acknowledged, accepted and agreed,

  	
   

  	
   

  
	
  solely with respect to Section 4.17 hereof

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  NORTH CASTLE PARTNERS II, L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  NCP G.P. II, L.P., its general partner

  	
    

  	
   

  
	
   

  	
  By:

  	
  North Castle G.P. II, L.L.C.,

  	
   

  	
   

  
	
   

  	
  its general partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/  Benjamin James

  	
   

  	
   

  
	
   

  	
  Name:  Benjamin James

  	
   

  	
   

  
	
   

  	
  Title:    Member

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acknowledged, accepted and agreed,

  	
   

  	
   

  
	
  solely with respect to Section 4.17 hereof

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  FRIENDS OF NORTHCASTLE FUND, L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  NCP CO-INVESTMENT FUND GP, L.L.C.

  	
   

  
	
   

  	
  its general partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/  Peter J. Shabecoff

  	
   

  	
   

  
	
   

  	
  Name:  Peter J. Shabecoff

  	
   

  	
   

  
	
   

  	
  Title:    Managing Director

  	
   

  	
   

  
												

 

41

 

Schedule I to the

Stockholders Agreement

 

 

ROLLOVER STOCKHOLDERS

AND THEIR NOTICE ADDRESSES

 

	
  Name

  	
   

  	
  Address

  
	
  Donato Errico, Jr.

  	
   

  	
  111 West 67th Street, Apt. 29E  

  New York, NY 10023

  
	
   

  	
   

  	
   

  
	
  Vito Errico

  	
   

  	
  520 East 82nd Street 
  

  New York, NY 10021

  
	
   

  	
   

  	
   

  
	
  Lavinia Errico (Jr.)

  	
   

  	
  1385 York Avenue  

  New York, NY 10021

  
	
   

  	
   

  	
   

  
	
  Donato Errico, Sr.

  	
   

  	
  301 Beech Street  

  Hackensack, NJ 07601

  
	
   

  	
   

  	
   

  
	
  Lavinia Errico (Sr.)

  	
   

  	
  301 Beech Street  

  Hackensack, NJ 07601

  
	
   

  	
   

  	
   

  
	
  Harvey Spevak

  	
   

  	
  315 West 102nd Street, Apt. 4A  

  New York, NY 10025

  
	
   

  	
   

  	
   

  
	
  Rakesh Ahuja

  	
   

  	
  61-45 98th Street, Apt. 10G  

  Rego Park, NY 11374

  
	
   

  	
   

  	
   

  
	
  Terri Bialsky

  	
   

  	
  420 East 79th Street, Apt. 8D  

  New York, NY 10021

  
	
   

  	
   

  	
   

  
	
  Frances Errico

  	
   

  	
  127 West 79th Street, Apt. 6D  

  New York, NY 10024

  

 

 

Schedule II to the

Stockholders Agreement

 

 

ROLLOVER OPTIONHOLDERS

AND THEIR NOTICE ADDRESSES

 

	
  Name

  	
   

  	
  Address

  
	
  Paul Boardman

  	
   

  	
  106 Park Avenue  

  Bronxville, NY

  
	
   

  	
   

  	
   

  
	
  Catherine Cassidy

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Harvey Spevak

  	
   

  	
  315 W. 102nd st.

  Apt. 4A  

  New York, NY 10025

  
	
   

  	
   

  	
   

  
	
  Ken Fleischer

  	
   

  	
  557 General Knox Road  

  King of Prussia, PA 19406

  

 

 

Schedule III to the

Stockholders Agreement

 

 

SUBSEQUENT STOCKHOLDERS

 

	
   

  	
   

  	
  Notice Address: 

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice Address: 

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice Address: 

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice Address: 

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 

FIRST AMENDMENT TO
STOCKHOLDERS AGREEMENT

 

FIRST AMENDMENT TO STOCKHOLDERS AGREEMENT, dated as of
February 21, 2003 (this “Amendment”), among Equinox Holdings, Inc., a
Delaware corporation (the “Company”) Equinox Holdings, L.P. (f/n/a
NCP-EH, L.P.) (“Equinox LP”) and NCP Co-Investment Fund, L.P. (“NCP
Co-Investment LP”).  Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
attributed to them in the Stockholders Agreement.

 

W  I
T  N  E  S  S  E  T  H:

 

WHEREAS, the Company, the Stockholders, NCP
Partnership and Friends are parties to that certain Stockholders Agreement,
dated December 15, 2000 (the “Stockholders Agreement”);

 

WHEREAS, the Company, Equinox LP and NCP Co-Investment
LP desire that the Stockholders Agreement be amended as set forth herein;

 

WHEREAS, pursuant to Section 4.9 thereof, the
Stockholders Agreement may be amended upon written consent of holders of a
majority of the Available Common Stock; and

 

WHEREAS, the Board of Directors of the Company has
increased the number of members of the Board of Directors from eight (8) to ten
(10).

 

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

 

A.                                   Amendments
to Subsection 1.1(a).  Subsection
1.1(a) of the Stockholders Agreement is hereby amended by deleting such section
in its entirety and substituting in place thereof the following:

 

“The Board of Directors will consist of ten
members:  (i) nine
individuals, including one Management Director, nominated by the Purchaser, and
(ii) so long as the Rollover Stockholders collectively own five
percent (5%) of the Available Common Stock, Donato Errico.  Subject to the provisions of this Agreement,
each Stockholder entitled to vote shall take all necessary actions to effect
the provisions of this Section 1.1(a).”

 

B.                                     Consent
to Agreement.  The Company, Equinox
LP and NCP Co-Investment LP hereby consent in writing to this Amendment.  The Company, Equinox LP and NCP
Co-Investment LP hereby represent and warrant to the Sub-Debt

 

 

Warrantholders, Rollover
Stockholders and the Rollover Optionholders that such written consent is
sufficient to satisfy the requirements of Section 4.9 of the Stockholders
Agreement.

 

C.                                     Applicable
Law and Jurisdiction.  This
Amendment has been executed and delivered in New York, New York, and the rights
and obligations of the parties hereto shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of New York.

 

D.                                    Counterparts.  This Amendment may be executed by the
parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

 

E.                                      Continuing
Effect.  Except as expressly amended
hereby, the Stockholders Agreement as amended by this Amendment shall continue
to be and shall remain in full force and effect in accordance with its terms.  This Amendment shall not constitute an
amendment or waiver of any provision of the Stockholders Agreement not
expressly referred to herein.  Any
reference to the “Stockholders Agreement” in the Limited Partnership Agreement
of Equinox Holdings, L.P. (f/k/a NCP-EH, L.P), as amended or supplemented, or
any related documents shall be deemed to be a reference to the Stockholders
Agreement as amended by this Amendment.

 

 

[END OF TEXT]

 

2

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

 

 

	
   

  	
  EQUINOX HOLDING,
  L.P.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  NCP-EH GP,
  L.L.C.,

  	
   

  
	
   

  	
   

  	
  its General
  Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/  Adam Saltzman

  	
   

  
	
   

  	
   

  	
  Name:  Adam Saltzman

  
	
   

  	
   

  	
  Title:  Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  JWC-EH, LLC,

  	
   

  
	
   

  	
   

  	
  its General
  Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/  Marc Tricoli

  	
   

  
	
   

  	
   

  	
   

  	
  Name:  Marc Tricoli

  
	
   

  	
   

  	
   

  	
  Title:  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NCP
  CO-INVESTMENT FUND, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  NCP
  Co-Investment GP, L.L.C.,

  
	
   

  	
   

  	
  its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/  Peter J. Shabecoff

  	
   

  
	
   

  	
   

  	
   

  	
  Name:  Peter J. Shabecoff

  
	
   

  	
   

  	
   

  	
  Title:  Managing Director

  
								

 

1

 

	
   

  	
  EQUINOX
  HOLDINGS, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/  Adam Saltzman

  	
   

  
	
   

  	
   

  	
  Name:  Adam Saltzman

  
	
   

  	
   

  	
  Title:  Vice President

  
					

 

2Exhibit 10.6

 

EMPLOYMENT
AGREEMENT

 

This
EMPLOYMENT AGREEMENT is entered into as of this 15th day of
December, 2000, by and between Equinox Holdings, Inc., a Delaware
corporation (the “Company”)
and Harvey Spevak (“Executive”).

 

W I T
N E S S E T H :

 

WHEREAS,
Executive has served as the President and Chief Executive Officer of the
Company pursuant to an Employment Agreement dated as of December 11, 1998,
as amended February 1, 2000, and has been subject to the terms and
conditions of a Non-Disclosure and Non-Competition Agreement, dated as of
December 11, 1998 (collectively, the “Prior
Employment Agreements”);

 

WHEREAS,
NCP-EH, L.P., a Delaware limited partnership, NCP-EH Recapitalization Corp., a
Delaware corporation, the Company and certain stockholders of the Company have
entered into Stock Purchase Agreement and Agreement and Plan of Merger, dated
as of October 16, 2000, as amended (the “Recapitalization Agreement”);

 

WHEREAS,
the Company desires that following the “Closing
Date” (as defined in the Recapitalization Agreement), Executive
continue his employment with the Company, and Executive desires to continue
such employment, upon the terms set forth in this Agreement.

 

NOW,
THEREFORE, in consideration of the premises and the mutual covenants and promises
contained herein and for other good and valuable consideration, the Company and
Executive hereby agree as follows:

 

Section 1.                                          Agreement
to Employ; No Conflicts

 

Upon
the terms and subject to the conditions of this Agreement, the Company hereby
employs Executive, and Executive hereby accepts continued employment with the
Company.  Executive represents that (a) he
is entering into this Agreement voluntarily and that his employment hereunder
and compliance with the terms and conditions hereof will not conflict with or
result in the breach by him of any agreement to which he is a party or by
which he may be bound, (b) he has not, and in connection with his
employment with the Company will not, violate any non-solicitation or other
similar covenant or agreement by which he is or may be bound, and (c) in
connection with his employment with the Company he will not use any
confidential or proprietary

 

 

information he may have obtained in connection with
employment with any prior employer (other than the Company prior to the Closing
Date).

 

Section 2.                                          Term;
Position and Responsibilities

 

(a)  Term of
Employment.  Unless Executive’s
employment shall sooner terminate pursuant to Section 7, the Company shall
employ Executive for a term commencing on the Closing Date (the “Commencement Date”) and ending on the
third anniversary thereof (the “Initial
Term”).  Effective upon
the expiration of the Initial Term and of each Additional Term (as defined
below), Executive’s employment hereunder shall be deemed to be automatically
extended, upon the same terms and conditions, for an additional period of one
year (each, an “Additional Term”),
in each such case, commencing upon the expiration of the Initial Term or
the then current Additional Term, as the case may be, unless, at
least 60 days prior to the expiration of the Initial Term or
such Additional Term, either party hereto shall have notified the other party
hereto in writing that such extension shall not take effect.  The period during which Executive is
employed pursuant to this Agreement, including any extension thereof in
accordance with the preceding sentence, shall be referred to as the “Employment Period.”

 

(b)  Position
and Responsibilities.  During the
Employment Period, the Company will use its reasonable best efforts to cause
Executive to be appointed or elected to the Board of Directors of the Company
(the “Board”) which efforts
shall include without limitation nominating Executive to the Board, and
Executive shall serve as Chief Executive Officer of the Company and shall have
such duties and responsibilities as are customarily assigned to individuals
serving in such positions and such other duties consistent with Executive’s
titles and positions of Chief Executive Officer and as a director as the Board
shall specify from time to time. 
Executive shall devote all of his skill, knowledge and working time to
the conscientious performance of the duties and responsibilities of such
positions, except for vacation time as set forth in Section 6(c), absence
for sickness or similar disability, and time spent in connection with his
personal affairs or performing services for any charitable, religious or
community organizations, so long as such time spent does not materially
interfere with the performance of Executive’s duties hereunder.

 

Section 3.                                          Base
Salary

 

As
compensation for the services to be performed by Executive during the
Employment Period, the Company shall pay Executive a base salary at an
annualized rate of $300,000, payable in installments on the Company’s regular
payroll dates (but no less frequently than monthly).  The Board shall review Executive’s base salary annually during
the period of his employment hereunder and, in its sole discretion, may
increase

 

2

 

(but not decrease) such base salary from time to
time.  The annual base salary
payable to Executive under this Section 3, as the same may be increased
from time to time, shall hereinafter be referred to as the “Base Salary.”

 

Section 4.                                          Bonus
Arrangements

 

(a)  Cash
Bonus.  During the Employment
Period, Executive shall have an annual cash incentive bonus opportunity (as
described in the following sentence) (the “Incentive
Bonus”), which shall be payable (as described in the following
sentence) if the Company achieves the performance objectives (based on the
Company’s adjusted EBITDA) established from time to time by the Board or a
committee thereof for the applicable period (the “Bonus Targets”). 
If the Company’s performance for the applicable period (a) is
less than 85% of the Bonus Targets, Executive shall not receive any payments
pursuant to this Section 4(a); (b) equals 85% of the Bonus
Targets, Executive shall be paid an Incentive Bonus equal to $25,000; (c) exceeds
85% but is less than or equal to 100% of the Bonus Targets, Executive shall be
paid $25,000 plus $10,000 for each one percent (1%) of the Bonus targets
achieved in excess of 85%, subject to a maximum Incentive Bonus payable
pursuant to this clause (c) of $175,000 for performance equal to 100% of
the Bonus Targets; or (d) exceeds 100% of the Bonus Targets,
Executive shall be paid $25,000 for each one percent (1%) of the Bonus
Targets achieved in excess of 100%.  The
Incentive Bonus calculated pursuant to this Section 4 (a) shall be
paid to Executive as soon as reasonably practicable but in no event later than
April 10th after the year for which such Incentive Bonus is due.

 

(b)  Options.  Executive shall be granted options to
purchase shares of common stock, par value, $.01 per share, of the Company (the
“Common Stock”) that
represent not less than 3.5% of the fully diluted shares of Common Stock
outstanding (calculated in accordance with Section 4.1 of the Plan (as defined
below) (the “Options”) as
of the Commencement Date.  The Options
shall be issued pursuant to, and in accordance with, the Equinox Holdings, Inc.
2000 Stock Incentive Plan (the “Plan”),
which will be evidenced by one or more stock option agreements to be entered
into by Executive and the Company, pursuant to the Plan.  The Options shall vest in accordance with
the Plan, subject to Executive’s continued employment with the Company through
the applicable vesting date.

 

Section 5.                                          Employee
Benefits

 

During
the Employment Period, Executive shall be entitled to participate in all  profit sharing, life, medical, dental,
disability and other welfare benefit plans maintained by the Company which are
made available to senior executives of the Company.

 

3

 

Section 6.                                          Perquisites
and Expenses

 

(a)  General.  During the Employment Period, Executive
shall be entitled to participate in all perquisite programs maintained by the
Company for its senior executives, on a basis that is commensurate with
Executive’s position and duties with Company hereunder, in accordance with the
terms thereof, as the same may be amended and in effect from time to time.

 

(b)  Business
Travel, Lodging, etc.  The Company
shall reimburse Executive for reasonable travel, lodging, meal and other
reasonable expenses incurred by him in connection with his performance of
services hereunder upon submission of evidence, satisfactory to the Company, of
the incurrence and purpose of each such expense and otherwise in accordance
with the Company’s business travel and expense reimbursement policy applicable
to its senior executives as in effect from time to time.

 

(c)  Vacation.  During the Employment Period, Executive
shall be entitled to four weeks of paid vacation on an annualized basis,
without carryover accumulation.

 

Section 7.                                          Termination
of Employment

 

(a)  Termination
Due to Death or Disability.  In the
event that Executive’s employment hereunder terminates due to his death or is
terminated by the Company due to Executive’s Disability (as defined below), no
termination benefits shall be payable to or in respect of Executive except as
provided in Section 7(f)(ii).  For
purposes of this Agreement, “Disability”
shall mean a physical or mental disability that prevents or is reasonably
expected to prevent the performance by Executive of his duties hereunder for
a continuous period of 90 days or longer or for 180 days or more
in any 12-month period.  The
determination of Executive’s Disability shall (i) be made by an
independent physician who is reasonably acceptable to the Company and Executive
(or his representative), (ii) be final and binding on the parties
hereto and (iii) be made taking into account such competent medical
evidence as shall be presented to such independent physician by Executive
and/or the Company or by any physician or group of physicians or other
competent medical experts employed by Executive and/or the Company to advise
such independent physician.

 

(b)  Termination
by the Company for Cause.  Executive
may be terminated for Cause (as defined below) by the Company, provided that if the basis for the
Company’s so terminating Executive is described by clauses (i) or (iv) of
the definition of Cause, below, Executive shall have been given prior written
notice of any proposed termination of his employment for Cause, which notice
specifies in reasonable detail the circumstances claimed to provide the basis
for such termination, and Executive shall not have corrected such
circumstances, in a manner reasonably satisfactory to the Board,

 

4

 

within
20 days of receipt of such written notice. “Cause” shall mean (i) the willful failure of
Executive substantially to perform the duties specified in Section 2(b)
(other than any such failure due to Executive’s physical or mental illness), (ii) Executive’s
engaging in willful and serious misconduct that has caused or is reasonably
expected to result in material injury to the Company or any of its Affiliates,
(iii) Executive’s conviction of, or entering a plea of guilty
or nolo  contendere to, a crime that constitutes
a felony, or (iv) the willful and material breach by Executive
of any of his obligations hereunder or under any other written agreement or
written covenant with the Company or any of its Affiliates.

 

(c)  Termination
by Company Without Cause. 
Executive’s employment hereunder may be terminated by the Company for
any reason.  A termination “Without Cause” shall mean
a termination of Executive’s employment by the Company other than due to
Disability as described in Section 7(a) or for Cause as described in
Section 7(b).

 

(d)  Termination
by Executive.  Except in the case of
a termination for Good Reason (as defined below), Executive may terminate his
employment for any other reason upon 60 days prior written notice
delivered to the Company. 
A termination of employment by Executive for “Good Reason” shall mean
a termination by Executive of his employment with the Company, by written
notice to the Company specifying in reasonable detail the circumstances claimed
to provide the basis for such termination, within 60 days following the
occurrence (or, in the case of clause (i) of this definition of Good
Reason, 60 days following the last occurrence), without Executive’s
consent, of any of the following events and the failure of the Company to
correct the circumstances set forth in Executive’s notice of termination within
20 days of receipt of such notice: (i) the assignment to
Executive of duties and responsibilities which, in the aggregate during the
twelve month period prior to the date notice is given by Executive to the
Company specifying the basis for such termination, are significantly different
from, and that result in a substantial diminution of, the duties and
responsibilities that he has or is to assume on the Commencement Date pursuant
to Section 2(b), (ii) the failure of the Company to obtain the
assumption of this Agreement by any Successor to the Company as contemplated by
Section 13(a), (iii) a reduction in the rate of Executive’s
Base Salary or Incentive Bonus, (iv) a material breach of this
Agreement by the Company; (v) the Company requiring Executive to be
based anywhere other than the New York metropolitan area, except for travel
reasonably required by the Company; or (vi) if the Company gives
written notice to Executive pursuant to Section 2(a) that it does not
desire to renew this Agreement upon expiration of the then current term.  Executive agrees that a corporate
reorganization by the Company and/or its Affiliates pursuant to which the
Company ceases to exist shall not constitute Good Reason hereunder so long as
there is no substantial diminution or significant change in the nature of
Executive’s duties or responsibilities as described in Section 2(b).

 

5

 

(e)  Notice of
Termination.  Any termination of
Executive’s employment by Company pursuant to Section 7(a), 7(b)
or 7(c), or by Executive pursuant to Section 7(d), shall be
communicated by a written Notice of Termination addressed to the other
parties to this Agreement.  A ”Notice of Termination” shall mean
a notice stating that Executive’s employment with Company has been or will
be terminated, the effective date of such termination, the specific provisions
of this Section 7 under which such termination is being effected, and
which provides in reasonable detail the circumstances claimed to provide the
basis for such termination.

 

(f)  Payments
Upon Certain Terminations.

 

(i)  In the
event of a termination of Executive’s employment by Company Without Cause
or a termination by Executive of his employment for Good Reason in either
such case during the Employment Period (any such termination, a “Qualifying Termination”), Company shall
pay to Executive (or, following his death, to Executive’s beneficiaries): (x)
his full Base Salary through the Date of Termination, (y) his
Incentive Bonus for the Company’s fiscal year ending prior to the Date of
Termination if, on or prior to the Date of Termination, Executive has not been
paid such Incentive Bonus for such prior fiscal year plus a pro rata bonus calculated in accordance
with clause (z) of Section 7(f)(ii) hereof, payable in accordance
with the provisions of such clause, provided
that the conditions of such clause have been satisfied, and (z) as
liquidated damages in respect of claims based on provisions of this Agreement,
and provided Executive executes and delivers a general release of all claims in
form and substance reasonably satisfactory to the Company and Executive, his
Base Salary for 18 months, which shall be payable in installments on Company’s
regular payroll dates (the “Severance
Period”).

 

If Executive’s employment shall terminate and he is
entitled to receive continued payments of his Base Salary under clause (z)
of this Section 7(f)(i), the Company shall continue to provide to
Executive during the Severance Period the life, medical, dental, accidental
death and dismemberment and prescription drug benefits, if any, referred to in
Section 5 (the “Continued Benefits”).

 

(ii)  If
Executive’s employment shall terminate due to his death or Disability or if the
Company shall terminate Executive’s employment for Cause or Executive shall
terminate his employment without Good Reason in any such case during the
Employment Period, the Company shall pay Executive (or, in the event of his
death, his beneficiaries), (x) his full Base Salary through the
Date of Termination, plus, if Executive’s employment shall terminate due
to his death or Disability, or Executive shall terminate his employment without
Good Reason in any such case during the Employment Period, (y) his
Incentive Bonus for the Company’s fiscal year ending prior to the Date of
Termination if, on or prior to the Date of Termination, Executive has not been
paid such

 

6

 

Incentive Bonus
for such prior fiscal year, plus, if Executive’s employment shall
terminate due to his death or Disability in either case during the Employment
Period, (z) if the Company and Executive have achieved the
performance objectives (pro rated on the basis of the fraction described in
clause (2) of this Section 7(f)(ii)(z)) established under the
Company’s annual incentive compensation plan for the fiscal year that
includes the Date of Termination, an amount, payable in one lump sum as soon as
reasonably practicable but in no event later than April 10th after
the year for which such Incentive Bonus is due, equal to the product of (1) the
amount of incentive compensation that would have been payable to Executive for
such fiscal year under the annual incentive compensation plan had he remained
employed for the entire fiscal year, multiplied by (2) a fraction,
the numerator of which is equal to the number of days in such fiscal year
that precede the Date of Termination and the denominator of which is equal
to 365.

 

(iii) 
Executive shall be entitled to receive all amounts payable and benefits
accrued under any otherwise applicable plan, policy, program or practice of the
Company (including, but not limited to, its vacation policies) in which
Executive was a participant during his employment with Company in accordance
with the terms thereof; provided
that Executive shall not be entitled to receive any payments or benefits under
any such plan, policy, program or practice providing any severance, bonus or
incentive compensation (excluding any payments or benefits in respect of
options granted under the Equinox Holdings, Inc. 1998 Stock
Option Plan or the Equinox Holdings, Inc. 2000 Stock Incentive
Plan) and the provisions of this Section 7(f) shall supersede the
provisions of any such plan, policy, program or practice.

 

(g)  Date of
Termination.  As used in this
Agreement, the term “Date of Termination”
shall mean (i) if Executive’s employment is terminated by his
death, the date of his death, (ii) under any other circumstances,
the later of (A) the date of termination specified in the Notice of
Termination, (B) the date any applicable correction period ends and
(C) the expiration of any required notice period; provided that in the case of Executive’s
termination of employment by the Company Without Cause or by Executive without
Good Reason, such date is at least 30 days after the date on which Notice
of Termination is given as contemplated by Section 7(e).

 

(h)  Resignation
upon Termination.  Effective as of
any Date of Termination under this Section 7 or otherwise as of the date
of Executive’s termination of employment with Company, Executive shall resign,
in writing, from all positions then held by him with the Company and its
Affiliates.

 

(i)  Cessation
of Professional Activity.  Upon
delivery of a Notice of Termination by any party, the Company may relieve
Executive of his responsibilities described in Section 2(b) and require
Executive to immediately cease all professional activity on behalf of the
Company.

 

7

 

(j)  No Duty
to Mitigate.  Executive shall not be
required to mitigate the amounts payable by the Company pursuant to
Section 7(f) hereof by seeking other employment or otherwise, and such
payments shall not be subject offset.

 

Section 8.                                          Restrictive
Covenants

 

(a)  Unauthorized
Disclosure.  From the date hereof,
and during any period of employment with the Company or its Affiliates and the
five-year period following any termination thereof, without the prior written
consent of the Board or its authorized representative, except to the extent
required by an order of a court having jurisdiction or under subpoena from
an appropriate government agency, in which event, Executive shall use his
reasonable best efforts to consult with the Board prior to responding to any
such order or subpoena, and except as required in the performance of his duties
hereunder, Executive shall not disclose any confidential or proprietary trade
secrets, customer lists, drawings, designs, information regarding product
development, marketing plans, sales plans, manufacturing plans, management
organization information (including but not limited to data and other
information relating to members of the Board, the Company or any of its Affiliates
or to management, the Company or any of its Affiliates), operating policies or
manuals, business plans, financial records, packaging design or other
financial, commercial, business or technical information (a) relating
to the Company or any of its Affiliates or (b) that the Company or
any of its Affiliates may receive belonging to suppliers, customers or others
who do business with the Company or any of its Affiliates (collectively, “Confidential Information”) to any third
person unless such Confidential Information has been previously disclosed to
the public or is in the public domain (in each case, other than by reason of
Executive’s breach of this Section 8(a)).

 

(b)  Non-Disparagement.  During the period commencing on the date
hereof and ending eighteen months after the termination of Executive’s
employment with the Company (the “Restriction
Period”), Executive will not directly or indirectly (i)
engage in any conduct or make any statement, whether in commercial or
noncommercial speech, disparaging or criticizing in any way the Company, any
Subsidiary, North Castle Partners, L.L.C. (“North Castle”), J.W. Childs & Associates, L.P. (“Childs”), any Affiliate of any of
these, or any products or services offered by any of these, or (ii)
engage in any other conduct or make any other statement, in each case, which
could be reasonably expected to impair the goodwill of the Company, any
Subsidiary, North Castle, Childs, or any Affiliate of any of these, the
reputation of Company products or the marketing of Company products except to
the extent required by law and then only after consultation with North Castle
and Childs to the extent possible, or in connection with any dispute between
Executive and any of the foregoing entities. 
During the Restriction Period, the Company, any Subsidiary,
North Castle, Childs and any Affiliate of any of these will not
directly or indirectly (i) engage in any conduct or make any statement,
whether in commercial or non-commercial speech, disparaging or criticizing in
any way

 

8

 

Executive, or (ii)
engage in any other conduct or make any other statement, in each case, which
could reasonably be expected to impair the business reputation of Executive
except to the extent provided by law and then only after consultation with
Executive to the extent possible, in connection with any dispute between the
Company, any Subsidiary, North Castle, Childs or any Affiliate of these,
and Executive, or in connection with any conduct or statement which is
reasonably required to manage the Company and is internal to or amongst the
Company, any Subsidiary, North Castle, Childs, any Affiliate of any
of these, or any other Person which holds an ownership interest in any of the
foregoing.

 

(c)  Non-Competition.  Executive covenants and agrees that during
the Restricted Period, the Executive shall not, directly or indirectly, own any
interest in, operate, join, control or participate as a partner, director,
principal, officer, or agent of, enter into the employment of, act as a
consultant to, or perform any services for any entity which has material
operations which compete with any health or fitness club or spa business in any
jurisdiction in which the Company or its Immediate Affiliates is engaged, or in
which any of the foregoing has documented plans to become engaged of which
Executive has knowledge at the time of Executive’s termination of
employment.  Notwithstanding anything
herein to the contrary, this Section 8(c) shall not prevent the Executive
from acquiring as an investment securities representing not more than five
percent (5%) of the outstanding voting securities of any publicly-held
corporation.

 

(d)  Non-Solicitation
of Employees.  During the
Restriction Period, Executive shall not, directly or indirectly, for his own
account or for the account of any other Person in any jurisdiction in which the
Company or any of its Affiliates has commenced or has made plans to commence
operations at the time of Executive’s employment, (i) solicit for
employment, employ or otherwise interfere with the relationship of the Company
or any of its Affiliates with any natural person throughout the world who,
during the six-month period prior to such solicitation, employment, or
interference, is or was employed by or otherwise engaged to perform services
for the Company or any of its Immediate Affiliates or an Affiliate of the
Company to whom Executive was introduced to by virtue of his relationship with
the Company or any of its Immediate Affiliates other than any such solicitation
or employment on behalf of the Company or any of its Affiliates during
Executive’s employment with the Company, or (ii) induce any
employee of the Company or any of its Affiliates who is a member of
management to engage in any activity which Executive is prohibited from
engaging in under any of paragraphs of this Section 8 or to terminate his
or her employment with the Company.

 

(e)  Non-Solicitation
of Customers.  During the
Restriction Period, Executive shall not, directly or indirectly, for his own
account or for the account of any other Person, in any jurisdiction in which
the Company or any of its Affiliates has commenced or made plans to commence
operations, solicit or otherwise attempt to establish any

 

9

 

business
relationship of a nature that is competitive with the business or relationship
of the Company or any of its Affiliates with any Person throughout the world
which, during the six-month period prior to any such solicitation is or was a customer,
client or distributor of the Company or any of its Immediate Affiliates or an
Affiliate of the Company to whom Executive was introduced to by virtue of his
relationship with the Company or any of its Immediate Affiliates, other than
any such solicitation on behalf of the Company or any of its Affiliates during
Executive’s employment with the Company.

 

(f)  Return
of Documents.  In the event of the
termination of Executive’s employment for any reason, Executive shall deliver
to the Company all of (a) the property of each of the Company and
its Affiliates and (b) the documents and data of any nature and in
whatever medium of each of the Company and its Affiliates, and he shall not
take with him any such property, documents or data or any reproduction thereof,
or any documents containing or pertaining to any Confidential Information.

 

Section 9.                                          Injunctive
Relief with Respect to Covenants; Certain Acknowledgments

 

(a)  Executive
acknowledges and agrees that the covenants, obligations and agreements of
Executive contained in Section 8 relate to special, unique and
extraordinary matters and that a violation of any of the terms of such
covenants, obligations or agreements will cause the Company irreparable injury
for which adequate remedies are not available at law.  Therefore, Executive agrees that the Company shall be entitled to
an injunction, restraining order or such other equitable relief (without the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain Executive from committing any violation of
such covenants, obligations or agreements. 
These injunctive remedies are cumulative and in addition to any other
rights and remedies the Company may have.

 

(b)  Executive
acknowledges and agrees that Executive has had and will have a prominent
role in the management of the business, and the development of the goodwill, of
the Company and its Affiliates and will establish and develop relations and
contacts with the principal customers and suppliers of the Company and its
Affiliates in the United States of America and the rest of the world, all of
which constitute valuable goodwill of, and could be used by Executive to
compete unfairly with, the Company and its Affiliates and that (i) in
the course of his employment with the Company, Executive will obtain
confidential and proprietary information and trade secrets concerning the
business and operations of the Company and its Affiliates in the United States
of America and the rest of the world that could be used to compete unfairly
with the Company and its Affiliates; (ii) the covenants and
restrictions contained in Section 8 are intended to protect the legitimate
interests of the Company and its Affiliates in their respective

 

10

 

goodwill, trade
secrets and other confidential and proprietary information; and (iii) Executive
desires to be bound by such covenants and restrictions.

 

Section 10.                                   Assumption
of Agreement

 

The
Company shall require any Successor thereto, by written agreement in form and
substance reasonably satisfactory to Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place.  Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession shall be
a breach of this Agreement and shall entitle Executive to terminate his
employment with the Company for Good Reason as described in Section 7(d), provided that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.

 

Section 11.                                   Entire
Agreement

 

This
Agreement and the agreements referenced to in Section 4(b) constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof.  All prior correspondence and
proposals (including but not limited to summaries of proposed terms) and all
prior promises, representations, understandings, arrangements and agreements
relating to such subject matter (including but not limited to those made to or
with Executive by any other Person including but not limited to the Prior
Employment Agreements) are merged herein and superseded hereby.

 

Section 12.                                   Indemnification

 

The
Company hereby agrees that it shall indemnify and hold harmless Executive to
the fullest extent permitted by law from and against any and all liabilities,
costs, claims and expenses, including all costs and expenses incurred in
defense of litigation (including attorneys’ fees), arising out of the
employment of Executive hereunder, except to the extent that any such
liabilities, costs, claims and expenses is found in a final judgment by a court
of competent jurisdiction to have resulted from, arising out of or based upon
the gross negligence or willful misconduct of Executive.  Costs and expenses incurred by Executive in
defense of such litigation (including attorneys’ fees) shall be paid by Company
in advance of the final disposition of such litigation upon receipt by Company
of (a) a written request for payment, (b) appropriate
documentation evidencing the incurrence, amount and nature of the costs and
expenses for which payment is being sought, and (c) an undertaking
adequate under applicable law made by or on behalf of Executive to repay the
amounts so paid if it shall ultimately be determined that Executive is not
entitled to be indemnified by the Company under this Agreement, including but
not limited to as a result of such exception.  The Company and Executive will consult in

 

11

 

good faith with respect to the conduct of any such
litigation, and Executive’s counsel shall be selected with the consent of the
Company.  The Company shall maintain an
appropriate level of director’s and officer’s liability insurance during the
Employment Period and during the Restricted Period.

 

Section 13.                                   Miscellaneous

 

(a)  Binding
Effect; Assignment.  This Agreement
shall be binding on and inure to the benefit of the Company, and its respective
Successors and permitted assigns.  This
Agreement shall also be binding on and inure to the benefit of Executive and
his heirs, executors, administrators and legal representatives.  This Agreement shall not be assignable by
any party hereto without the prior written consent of the other parties hereto,
except as provided pursuant to this Section 13(a).  The Company may effect such an assignment
without prior written approval of Executive upon the transfer of all or
substantially all of its business and/or assets (by whatever means), provided that the Successor to the Company
shall expressly assume and agree to perform this Agreement in accordance with
the provisions of Section 10.

 

(b)  Governing
Law, etc.

 

(i)  This agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of New York without giving effect to the conflict of
laws rules thereof to the extent that the application of the law of another
jurisdiction would be required thereby. 
Each party hereby irrevocably submits to the jurisdiction of the courts
of the State of New York and the federal courts of the United States of America
located in the County of New York solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred
to in this Agreement, and in respect of the transactions contemplated hereby
and thereby.  Each party hereby waives
and agrees not to assert, as a defense in any action, suit or proceeding for
the interpretation and enforcement hereof, or any such document or in respect
of any such transaction, that such action, suit or proceeding may not be
brought or is not maintainable in such courts or that the venue thereof may not
be appropriate or that this Agreement or any such document may not be enforced
in or by such courts.  Each party hereby
consents to and grants any such court jurisdiction over the person of such parties
and over the subject matter of any such dispute and agree that the mailing of
process or other papers in connection with any such action or proceeding in the
manner provided in Section 13(g) or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.

 

12

 

(ii)  Each party acknowledges and agrees that any
controversy which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore each party hereby irrevocably
and unconditionally waives any right such party may have to a trial by jury in
respect or any litigation directly or indirectly arising out of or relating to
this Agreement, or the breach, termination or validity of this Agreement, or
the transactions contemplated by this Agreement.  Each party certifies and acknowledges that (i) no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver, (ii) each such party understands
and has considered the implications of this waiver, (iii) each such
party makes this waiver voluntarily, and (iv) each such party has
been induced to enter into this agreement by, among other things, the mutual waivers
and certifications in this Section 13(b).

 

(c)  Taxes.  The Company shall have the power to
withhold, or require Executive to remit to the Company promptly upon
notification of the amount due, an amount sufficient to satisfy the statutory
minimum amount of all Federal, state, local and foreign withholding tax
requirements with respect to any payment of cash, or issuance or delivery of
any other property hereunder, and the Company may defer any such payment of
cash or issuance or delivery of such other property  until such requirements are satisfied.

 

(d)  Amendments.  No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by the Board or a Person authorized thereby and is agreed to in
writing by Executive and, in the case of any such modification, waiver or
discharge affecting the rights or obligations of the Company, is approved by
the Board or a Person authorized thereby. 
No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.  No waiver of any
provision of this Agreement shall be implied from any course of dealing between
or among the parties hereto or from any failure by any party hereto to assert
its rights hereunder on any occasion or series of occasions.

 

(e)  Condition
Precedent.  This Agreement shall be
of no force and effect if the Closing pursuant to the Recapitalization
Agreement does not occur and shall automatically expire if the Recapitalization
Agreement is terminated.

 

(f)  Severability.  In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.

 

13

 

(g)  Blue
Pencil.  If any court of competent
jurisdiction shall at any time deem the Restrictive Period too lengthy, the
other provisions of Section 8 shall nevertheless stand and the Restrictive
Period herein shall be deemed to be the longest period permissible by law under
the circumstances.  The court shall
reduce the time period to permissible duration or size.

 

(h)  Notices.  Any notice or other communication required
or permitted to be delivered under this Agreement shall be (i) in
writing, (ii) delivered personally, by courier service or by
certified or registered mail, first-class postage prepaid and return receipt
requested, (iii) deemed to have been received on the date of
delivery or, if so mailed, on the third business day after the mailing thereof,
and (iv) addressed as follows (or to such other address as the
party entitled to notice shall hereafter designate in accordance with the terms
hereof):

 

	
   

  	
  (A)

  	
  If to the
  Company, to it at:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Equinox
  Holdings, Inc.

  
	
   

  	
   

  	
  c/o North Castle
  Partners, L.L.C.

  
	
   

  	
   

  	
  60 Arch Street,
  Suite 1A

  
	
   

  	
   

  	
  Greenwich, CT
  06830

  
	
   

  	
   

  	
  Tel:  (203) 618-1700

  
	
   

  	
   

  	
  Fax:  (203) 618-1860

  
	
   

  	
   

  	
  Attention:  Chairman of the Board of Directors

  
	
   

  	
   

  	
   

  
	
   

  	
  (B)

  	
  if to Executive,
  to him at his residential address as currently on file with the Company, with
  a copy to

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cleary, Gottlieb, Steen & Hamilton

  
	
   

  	
   

  	
  One Liberty Plaza

  
	
   

  	
   

  	
  New York, New York 10006

  
	
   

  	
   

  	
  Attention:  Paul Shim, Esq.

  

 

Copies of any notices or other communications given under this
Agreement shall also be given to:

 

	
   

  	
   

  	
  North Castle
  Partners, L.L.C.

  
	
   

  	
   

  	
  60 Arch Street,
  Suite 1A

  
	
   

  	
   

  	
  Greenwich, CT
  06830

  
	
   

  	
   

  	
  Tel:  (203) 618-1700

  
	
   

  	
   

  	
  Fax:  (203) 618-1860

  
	
   

  	
   

  	
  Attention:  Adam Saltzman

  
	
   

  	
   

  	
   

  
	
   

  	
  and to:

  

 

14

 

	
   

  	
   

  	
  Debevoise & Plimpton

  
	
   

  	
   

  	
  875 Third Avenue

  
	
   

  	
   

  	
  New York, New York 10022

  
	
   

  	
   

  	
  Tel: (212) 909-6000

  
	
   

  	
   

  	
  Fax: (212) 909-6836

  
	
   

  	
   

  	
  Attention:  Franci J. Blassberg, Esq.

  
	
   

  	
   

  	
   

  
	
   

  	
  and to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  J.W. Childs Equity Partners II, L.P.

  
	
   

  	
   

  	
  c/o J.W. Childs Associates L.P.

  
	
   

  	
   

  	
  One Federal Street

  
	
   

  	
   

  	
  Boston, Massachusetts  02110

  
	
   

  	
   

  	
  Attention:  Glenn A. Hopkins

  
	
   

  	
   

  	
   

  
	
   

  	
  and to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Kaye, Scholer,
  Fierman, Hays and Handler LLP

  
	
   

  	
   

  	
  425 Park Avenue

  
	
   

  	
   

  	
  New York, New
  York  10022

  
	
   

  	
   

  	
  Attention:  Stephen C. Koval, Esq.

  

 

(i)  Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.

 

(j)  Headings.  The section and other headings
contained in this Agreement are for the convenience of the parties only and are
not intended to be a part hereof or to affect the meaning or
interpretation hereof.

 

(k)  Certain
Definitions.

 

“Affiliate”:  with respect to any Person, means any other Person that,
directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with the first Person, including but
not limited to a Subsidiary of the first Person, a Person of which
the first Person is a Subsidiary, or another Subsidiary of a Person
of which the first Person is also a Subsidiary.

 

“Code”: 
the Internal Revenue Code of 1986, as amended.

 

“Control”:  with respect to any Person, means the possession, directly or
indirectly, severally or jointly, of the power to direct or cause the direction
of the

 

15

 

management policies of such Person, whether through
the ownership of voting securities, by contract or credit arrangement, as
trustee or executor, or otherwise.

 

“Immediate Affiliate”:  NCP-EH and any Person which NCP-EH, directly
or indirectly, Controls.

 

“Person”:  any natural person, firm, partnership, limited liability company,
association, corporation, company, trust, business trust, governmental
authority or other entity.

 

“Subsidiary”:  with respect to any Person, each corporation or other Person in
which the first Person owns or Controls, directly or indirectly, capital stock
or other ownership interests representing 50% or more of the combined
voting power of the outstanding voting stock or other ownership interests of such
corporation or other Person.

 

“Successor”:  of a Person means a Person that succeeds to the first
Person’s assets and liabilities by merger, liquidation, dissolution or
otherwise by operation of law, or a Person to which all or substantially
all the assets and/or business of the first Person are transferred.

 

[the remainder of this
page has been intentionally left blank.]

 

16

 

IN WITNESS WHEREOF, the Company has duly executed this Agreement by its
authorized representative, and Executive has hereunto set his hand, in each
case effective as of the date first above written.

 

	
   

  	
  EQUINOX HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/  Adam
  Saltzman

  	
   

  
	
   

  	
   

  	
  Name:  Adam
  Saltzman

  
	
   

  	
   

  	
  Title:  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/  Harvey
  Spevak

  	
   

  
	
   

  	
  Harvey Spevak

  
					

 

17

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