Document:

exv10w1

 

	 	 	 	 	 

Exhibit 10.1

FORM OF INDEMNIFICATION AGREEMENT

     This Indemnification Agreement (“Agreement”) is made as of September    , 2006 by and between
Bally Total Fitness Holding Corporation, a Delaware corporation (the “Company”), and
                     (“Indemnitee”).

RECITALS

     WHEREAS, Indemnitee is a director of the Company;

     WHEREAS, highly competent persons such as Indemnitee have become more reluctant to serve
publicly-held corporations as directors unless they are provided with adequate protection through
insurance or adequate indemnification against risks of claims and actions against them arising out
of their service to and activities on behalf of the corporation;

     WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to
attract and retain qualified individuals such as Indemnitee, the Company will attempt to maintain
on an ongoing basis, at its sole expense, liability insurance to protect persons serving the
Company and its subsidiaries from certain liabilities. In addition, the Restated Certificate of
Incorporation (the “Certificate of Incorporation”) and the Amended and Restated Bylaws (the
“Bylaws”) of the Company require indemnification of and advancement of expenses to the directors of
the Company. Indemnitee may also be entitled to indemnification pursuant to the General
Corporation Law of the State of Delaware (“DGCL”). The Certificate of Incorporation, Bylaws and
the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive,
and thereby contemplate that contracts may be entered into between the Company and members of the
board of directors with respect to indemnification and advancement of expenses;

     WHEREAS, the Indemnitee has been serving and continues to serve as a director of the Company
in part in reliance on the aforesaid provisions of the Certificate of Incorporation and the Bylaws.

     WHEREAS, the uncertainties relating to such insurance and to indemnification have increased
the difficulty of attracting and retaining such persons;

     WHEREAS, the Board has determined that the increased difficulty in attracting and retaining
such persons is detrimental to the best interests of the Company’s stockholders and that the
Company should act to assure such persons that there will be increased certainty of such protection
in the future;

     WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate
itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the Company free from
undue concern that they will not be so indemnified or provided with advancement of expenses;

     WHEREAS, this Agreement is a supplement to and in furtherance of the Certificate of
Incorporation, the Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a
substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder or pursuant to
the DGCL; and

     WHEREAS, Indemnitee does not regard the protection available under the Certificate of
Incorporation, the Bylaws and insurance as adequate in the present circumstances.

     NOW, THEREFORE, in consideration of the premises and the covenants contained herein and of
other valuable consideration the Company duly acknowledges, the Company and Indemnitee do hereby
covenant and agree as follows:

 

 

     Section 1. Definitions. In addition to terms defined elsewhere herein, the following
terms have the following meanings when used in this Agreement:

          (a) “Change in Control” shall be deemed to have occurred if, before, on or after the date
hereof, (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an employee benefit plan of the
Company or a corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company, is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the total voting power represented by the
Company’s then-outstanding Voting Securities, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company’s stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the Board then in office, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the Voting Securities of
the Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the sale or disposition
by the Company of (in one transaction or a series of transactions) all or substantially all the
Company’s assets.

          (b) “Corporate Status” describes the status of a person who is or was a director, officer,
employee, trustee, agent or fiduciary of the Company or of any other corporation, limited liability
company, partnership or joint venture, trust, employee benefit plan or other entity or enterprise
which such person is or was serving at the request of the Company.

          (c) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

          (d) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, and all other reasonable
disbursements or expenses of the types customarily incurred in connection with prosecuting,
defending, investigating, preparing to prosecute, defend or investigate, being or preparing to be a
witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i) Expenses
incurred in connection with any appeal resulting from any Proceeding, including without limitation
the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other
appeal bond or its equivalent, and (ii) for purposes of Section 10(b) of this Agreement only,
Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of
Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not
include amounts paid in settlement by Indemnitee or the amount of judgments or fines against
Indemnitee.

          (e) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in
matters of corporation law and neither presently is, nor in the past five years has been, retained
to represent: (i) the Company or Indemnitee (other than with respect to matters concerning the
Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements),
or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.
For the avoidance of doubt, it is acknowledged and agreed that any person who previously served as
“Independent Counsel” with respect to this Agreement or with respect to any other similar
indemnification agreement for directors of the Company shall not, solely as a result of such
service, be disqualified from service as “Independent Counsel” under this Agreement.
Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who,
under the applicable standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s
rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the
Independent Counsel referred to above and to fully indemnify such counsel against any and all
expenses (including reasonable attorneys’ fees), claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.

 

 

          (f) The term “Proceeding” shall include any actual, threatened, asserted, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry,
administrative hearing or any other actual, threatened, asserted, pending or completed proceeding,
whether brought in the right of the Company or otherwise, whether of a civil, criminal,
administrative or investigative nature and whether occurring before, on or after the date of this
Agreement, in which Indemnitee was, is or will be involved as a party or otherwise by reason of the
fact that Indemnitee is or was a director of the Company, by reason of any action taken by him or
of a failure by him to act, or of any action or failure to act on his part while acting as director
of the Company, or by reason of the fact that he is or was serving at the request of the Company as
a director, officer, employee, trustee, agent or fiduciary of another corporation, limited
liability company, partnership or joint venture, trust, employee benefit plan or other entity or
enterprise, in each case whether or not serving in such capacity at the time any liability or
expense is incurred for which indemnification, reimbursement, or advancement of expenses can be
provided under this Agreement.

          (g) “Reviewing Director” means a director of the Company who (i) is not and was not a party to
the Proceeding in respect of which indemnification is sought by Indemnitee and (ii) is not
affiliated with, by employment, investment or otherwise, or is or was not placed on the Board or
nominated to the Board by, or as a result of any agreement with, any plaintiff in, party to or
member of a class (other than directors solely by virtue of their owning shares or “persons” (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act) that are the “beneficial owners”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing less than 5% of the total voting power represented by the Company’s Voting
Securities) benefiting from the Proceeding. For all purposes of this Agreement, the
responsibilities of the Reviewing Directors may be performed by a single Reviewing Director if
there is only one such Reviewing Director.

          (h) “Voting Securities” means any securities which vote generally in the election of
directors.

          (i) Reference to “other enterprise” shall include employee benefit plans; references to
“fines” shall include any excise tax assessed with respect to any employee benefit plan; references
to “serving at the request of the Company” shall include any service as a director, officer,
employee, trustee, agent or fiduciary of the Company which position imposes duties on, or involves
services by, such director, officer, employee, trustee, agent or fiduciary with respect to an
employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and
in a manner he reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in manner “not opposed to
the best interests of the Company” as referred to in this Agreement.

     Section 2. Indemnity in Third Party Proceedings. The Company shall indemnify
Indemnitee in accordance with the provisions of this Section 2 if Indemnitee was, is, becomes or is
threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or
in the right of the Company to procure a judgment in its favor. Pursuant to this Section 2,
Indemnitee shall be indemnified to the fullest extent permitted by applicable law, against all
Expenses, judgments, fines and amounts paid in settlement actually incurred by Indemnitee or on his
behalf in connection with such Proceeding or any claim, issue or matter therein.

     Section 3. Indemnity in Proceedings by or in the Right of the Company. The Company
shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee was,
is, becomes or is threatened to be made, a party to or a participant in any Proceeding by or in the
right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee
shall be indemnified to the fullest extent permitted by applicable law, against all Expenses
actually incurred by him or on his behalf in connection with such Proceeding or any claim, issue or
matter therein.

     Section 4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful.
Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by
applicable law, and to the extent that Indemnitee is a party to (or a participant in) and is
successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or
matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses
actually incurred by him in connection therewith. For the avoidance of doubt, it is acknowledged
and agreed that, if Indemnitee is not wholly successful in such Proceeding but is successful, on
the merits or otherwise, as to one or more but less than all claims, issues or matters in such
Proceeding, the Company

 

 

shall indemnify Indemnitee against all Expenses actually incurred by him or on his behalf in
connection with each successfully resolved claim, issue or matter. If the Indemnitee is not wholly
successful in such Proceeding, the Company also shall indemnify Indemnitee against all Expenses
actually incurred in connection with a claim, issue or matter related to any claim, issue or matter
on which the Indemnitee was successful. For purposes of this Section 4 and without limitation, the
termination of any claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

     Section 5. Indemnification For Expenses of a Witness. Notwithstanding any other
provision of this Agreement, to the fullest extent permitted by applicable law and to the extent
that Indemnitee was, is, becomes or is threatened to be made, by reason of his Corporate Status, a
witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all
Expenses actually incurred by him or on his behalf in connection therewith.

     Section 6. Exclusions. Notwithstanding any provision in this Agreement, the Company
shall not be obligated under this Agreement to make any indemnity in connection with any claim made
against Indemnitee:

          (a) for which payment has actually been made to or on behalf of Indemnitee under any insurance
policy or other indemnity provision, except with respect to any excess beyond the amount paid under
any insurance policy or other indemnity provision; or

          (b) for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by
Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act, or
similar provisions of state statutory law or common law, or (ii) any reimbursement of the Company
by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any
profits realized by the Indemnitee from the sale of securities of the Company, as required in each
case under the Exchange Act; or

          (c) except as provided in Sections 8 and 10 of this Agreement, in connection with any
Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or
any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers,
employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any
Proceeding) prior to its initiation, or (ii) the Company provides the indemnification, in its sole
discretion, pursuant to the powers vested in the Company under applicable law.

     Section 7. Advances of Expenses. In accordance with the pre-existing requirement of
Article VII of the Bylaws, to the fullest extent permitted by applicable law and notwithstanding
any provision of this Agreement to the contrary, the Company shall advance the expenses incurred by
Indemnitee in connection with any Proceeding, and such advancement shall be made as promptly as
practicable (and in any event within 30 days) after the receipt by the Company of a statement or
statements requesting such advances from time to time, whether prior to or after final disposition
of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without
regard to Indemnitee’s ability to repay the expenses and without regard to Indemnitee’s ultimate
entitlement to indemnification under the other provisions of this Agreement. Indemnitee’s right to
advances shall not be subject to any prior determination by any party that the Indemnitee has
satisfied any applicable standard of conduct for indemnification. Advances shall include any and
all Expenses incurred pursuing an action to enforce this right of advancement, including Expenses
incurred preparing and forwarding statements to the Company to support the advances claimed. The
Indemnitee shall qualify for advances upon the execution and delivery to the Company of this
Agreement which shall constitute an undertaking providing that the Indemnitee undertakes to repay
the advance to the extent that it is ultimately determined that Indemnitee is not entitled to be
indemnified by the Company. This Section 7 shall not apply to any claim for which indemnity is
excluded pursuant to Section 6 of this Agreement.

     Section 8. Procedure for Notification and Defense of Claim.

          (a) Indemnitee shall notify the Company in writing of any Proceeding with respect to which
Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as
reasonably practicable following the receipt by Indemnitee of written notice thereof. The written
notification to the Company shall include a description of the nature of the Proceeding and the
facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such documentation and
information as is reasonably available to Indemnitee and is reasonably necessary to

 

 

determine whether and to what extent Indemnitee is entitled to indemnification following the final
disposition of such Proceeding. The omission by Indemnitee to notify the Company hereunder will
not relieve the Company from any liability or obligation, including advancement of Expenses, which
it may have to Indemnitee under this Agreement, and any delay in so notifying the Company shall not
constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company
shall, promptly upon receipt of such a request for indemnification, advise the Board in writing
that Indemnitee has requested indemnification.

          (b) If the Company shall be obligated to pay the Expenses of any Proceeding against the
Indemnitee, the Company shall be entitled to assume and control the defense of such Proceeding
(with counsel consented to by the Indemnitee, which consent shall not be unreasonably withheld)
upon the delivery to the Indemnitee of written notice of its election so to do. After delivery of
such notice, consent to such counsel by the Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of
counsel subsequently incurred by the Indemnitee with respect to the same Proceeding, provided that
if (i) the employment of separate counsel by the Indemnitee has been previously authorized by the
Company, (ii) the Indemnitee or counsel selected by the Company shall have concluded in good faith
that there is an actual or potential conflict of interest between the Company and the Indemnitee or
among indemnitees jointly represented in the conduct of any such defense, (iii) the named parties
in the Proceeding (including any impleaded parties) include both the Company and Indemnitee and
Indemnitee concludes in good faith that there may be one or more legal defenses available to him
that are different from or in addition to those available to the Company, (iv) any such
representation by such counsel would be precluded under the applicable standards of professional
conduct then prevailing, (v) the Proceeding seeks to impose or reasonably could be expected to
result in an injunction or other non-monetary remedy against Indemnitee individually, (vi) the
Proceeding seeks to impose or reasonably could be expected to result in a criminal sanction against
Indemnitee, (vii) the Proceeding is brought by or on behalf of any governmental authority with
respect to the individual conduct of the Indemnitee (as opposed to Indemnitee’s and other
directors’ actions generally) or (viii) the Company shall not, in fact, have employed counsel, to
which Indemnitee has consented as aforesaid, to assume the defense of such Proceeding, then the
Indemnitee shall be entitled to retain separate counsel and the reasonable fees and expenses of
Indemnitee’s counsel shall be at the expense of the Company. Notwithstanding the foregoing, (x)
the Indemnitee shall have the right to employ counsel in any such Proceeding at the Indemnitee’s
expense and (y) the Company will be entitled to participate in the Proceeding at its own expense.
The Company will not, without the prior written consent of the Indemnitee, effect any settlement of
any claim made against Indemnitee in any Proceeding to which Indemnitee is a party unless such
settlement solely involves the payment of money and includes a complete and unconditional release
of the Indemnitee from all liability with respect to such claim; provided, that the foregoing shall
not restrict in any way the Company’s ability to effect any settlement of any Proceeding as relates
to, or any claim made in any Proceeding against, the Company or any party to such Proceeding other
than Indemnitee.

     Section 9. Procedure Upon Application for Indemnification.

          (a) Upon written request by Indemnitee for indemnification pursuant to Section 8(a) of this
Agreement, a determination, if required by applicable law, with respect to Indemnitee’s entitlement
thereto shall be made in the specific case: (i) if a Change in Control shall have occurred, by
Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to
Indemnitee; or (ii) if a Change in Control shall not have occurred: (A) by a majority vote of the
Reviewing Directors, even though less than a quorum of the Board, (B) by a committee of Reviewing
Directors designated by a majority vote of the Reviewing Directors, even though less than a quorum
of the Board or (C) if there are no such Reviewing Directors or, if such Reviewing Directors so
direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after such determination.
Indemnitee shall cooperate with the person, persons or entity making such determination with
respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons
or entity upon reasonable advance request any documentation or information which is not privileged
or otherwise protected from disclosure and which is reasonably available to Indemnitee and
reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and
expenses and disbursements) incurred by Indemnitee in so cooperating with the person, persons or
entity making such determination shall be borne by the Company (irrespective of the determination
as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to
hold Indemnitee harmless therefrom.

 

 

          (b) In the event the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 9(a) of this Agreement, the Independent Counsel shall be
selected as provided in this Section 9(b). If a Change in Control shall not have occurred, the
Independent Counsel shall be selected by a majority vote of the Reviewing Directors, even though
less than a quorum of the Board, or, if there are no such Reviewing Directors, by a majority of the
entire Board, and the Company shall give written notice to Indemnitee advising him of the identity
of the Independent Counsel so selected. If a Change in Control shall have occurred, the
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such
selection be made by the Reviewing Directors or the entire Board, as applicable, in which event the
preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising
it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within 10 days after such written notice of selection shall have
been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to
such selection; provided, however, that such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined
in Section 1 of this Agreement, and the objection shall set forth with particularity the factual
basis of such assertion. Absent a proper and timely objection, the person so selected shall act as
Independent Counsel. If such written objection is so made and substantiated, the Independent
Counsel so selected may not serve as Independent Counsel unless and until such objection is
withdrawn or a court has determined that such objection is without merit. If, within 20 days after
the later of submission by Indemnitee of a written request for indemnification pursuant to Section
9(a) of this Agreement and the final disposition of the Proceeding, no Independent Counsel shall
have been selected and not objected to, either the Company or Indemnitee may petition a court of
competent jurisdiction for resolution of any objection which shall have been made by the Company or
Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the court or by such other person as the court shall
designate, and the person with respect to whom all objections are so resolved or the person so
appointed shall act as Independent Counsel under Section 9(a) of this Agreement. Upon the due
commencement of any judicial proceeding or arbitration pursuant to Section 10(a) of this Agreement,
Independent Counsel shall be discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).

          (c) In connection with any determination by Reviewing Directors or a committee thereof, or
Independent Counsel, as the case may be, as to whether Indemnitee is entitled to be indemnified
hereunder such party shall presume that the Indemnitee has satisfied the applicable standard of
conduct and is entitled to indemnification, and the burden of proof shall be on the Company to
establish, by a preponderance of the evidence, that Indemnitee is not so entitled.

     Section 10. Remedies of Indemnitee.

          (a) Subject to Section 10(c) of this Agreement, in the event that (i) advancement of Expenses
is not timely made pursuant to Section 7 of this Agreement, (ii) payment of indemnification is not
made pursuant to Section 4 or 5 of this Agreement within ten (10) days after receipt by the Company
of a written request therefor, (iii) payment of indemnification pursuant to Section 2, 3 or 9 of
this Agreement is not made within ten (10) days after a determination has been made that Indemnitee
is entitled to indemnification, (iv) a determination is made pursuant to Section 9(a) of this
Agreement that Indemnitee is not entitled to indemnification pursuant to this Agreement, or (v) in
the event that the Company or any other person takes or threatens to take any action to declare
this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding
designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be
provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of
his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at
his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence
such proceeding seeking an adjudication or an award in arbitration within 180 days following the
date on which Indemnitee first has the right to commence such proceeding pursuant to this Section
10(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding
brought by Indemnitee to enforce his rights under Section 4 of this Agreement. The Company shall
not oppose Indemnitee’s right to seek any such adjudication or award in arbitration and, if
Indemnitee has commenced or thereafter commences such adjudication or award in arbitration, any
determination made by Reviewing Directors or a committee thereof or Independent Counsel, as the
case may be, that Indemnitee would not be permitted to be indemnified under applicable law shall
not be binding.

 

 

          (b) The Company shall be precluded from asserting in any judicial proceeding or arbitration
commenced pursuant to this Section 10 that the procedures of this Agreement are not valid, binding
and enforceable and shall stipulate in any such court or before any such arbitrator that the
Company is bound by all the provisions of this Agreement. It is the intent of the Company that the
Indemnitee not be required to incur legal fees or other Expenses associated with the
interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or
otherwise because the cost and expense thereof would substantially detract from the benefits
intended to be extended to the Indemnitee hereunder. The Company shall indemnify Indemnitee
against any and all Expenses and, if requested by Indemnitee, shall as promptly as practicable (and
in any event within 30 days) after receipt by the Company of a written request therefore advance
such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action
permitted by this Agreement and brought by Indemnitee for indemnification or advancement of
Expenses from the Company or to interpret, defend or enforce any rights the Indemnitee may have
under this Agreement and/or under any directors’ and officers’ liability insurance policies
maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled
to such indemnification, advancement of Expenses or insurance recovery, as the case may be;
provided, however, that Indemnitee shall reimburse the Company for advancement of Expenses by the
Company in connection with any adjudication sought by Indemnitee pursuant to clause (iv) of Section
10(a) of this Agreement if it is ultimately determined that Indemnitee is not entitled to
indemnification pursuant to this Agreement with respect to any of the claims that are the subject
of such adjudication.

          (c) Notwithstanding anything in this Agreement to the contrary, no determination as to
entitlement to indemnification under this Agreement shall be required to be made prior to the final
disposition of the Proceeding; provided that such determination shall be made as soon as
practicable, but in no event later than 60 days, after the final disposition of the Proceeding.

     Section 11. No Presumptions. For purposes of this Agreement, the termination of any
claim, action, suit or Proceeding, by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that Indemnitee did not meet any particular standard of conduct or have any particular
belief or that a court has determined that indemnification is not permitted by applicable law. In
addition, the failure of Reviewing Directors or a committee thereof or Independent Counsel, as the
case may be, to have made a determination as to whether Indemnitee has met any particular standard
of conduct or had any particular belief, prior to the commencement of any proceedings by Indemnitee
to secure a determination that Indemnitee should be indemnified under applicable law shall not be a
defense to Indemnitee’s claim or create a presumption that Indemnitee has not met any particular
standard of conduct or did not have any particular belief.

     Section 12. Reliance as Safe Harbor. For purposes of this Agreement, Indemnitee shall
be deemed to have acted in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful, if Indemnitee’s
actions or omissions to act are taken in good faith reliance upon the records of the Company,
including its financial statements, or upon information, opinions, reports or statements furnished
to Indemnitee by the officers or employees of the Company in the course of their duties, or by
committees of the Board, or by any other person (including legal counsel, accountants and financial
advisors) as to matters Indemnitee reasonably believes are within such other person’s professional
or expert competence and who has been selected with reasonable care by or on behalf of the Company.
In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or
employee of the Company shall not be imputed to Indemnitee for purposes of determining the right to
indemnity hereunder.

     Section 13. Liability Insurance. To the extent the Company maintains an insurance
policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be
covered as a current or former director of the Company by such policy or policies, to the extent
available on commercially reasonable terms and in accordance with its or their terms, to the
maximum extent of the coverage maintained for any current or former director or officer of the
Company.

     Section 14. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee,
who shall execute all papers

 

 

reasonably required and shall do everything that may be reasonably necessary to secure such
rights, including the execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.

     Section 15. Severability. If any provision or provisions of this Agreement shall be
held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality
and enforceability of the remaining provisions of this Agreement (including without limitation,
each portion of any Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any
way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by
law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform
to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to
the fullest extent possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested thereby.

     Section 16. Enforcement.

          (a) The Company expressly confirms and agrees that it has entered into this Agreement and
assumed the obligations imposed on it hereby in order to induce Indemnitee to continue to serve as
a director of the Company, and the Company acknowledges that Indemnitee is relying upon this
Agreement in continuing to serve as a director of the Company.

          (b) This Agreement constitutes the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and understandings, oral, written and
implied, between the parties hereto with respect to the subject matter hereof; provided, however,
that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the
Bylaws and applicable law, and shall not be deemed a substitute therefor, nor to diminish or
abrogate any rights of Indemnitee thereunder. To the extent that a change in applicable law
(whether by statute or judicial decision) permits greater indemnification by agreement than would
be afforded currently under the Certificate of Incorporation, the Bylaws or this Agreement, it is
the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits
so afforded by such change.

     Section 17. Modification and Waiver. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of any other
provisions of this Agreement nor shall any waiver constitute a continuing waiver.

     Section 18. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in
writing upon being served with any summons, citation, subpoena, complaint, indictment, information
or other document relating to any Proceeding or matter which may be subject to indemnification or
advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company
shall not relieve the Company of any obligation which it may have to the Indemnitee under this
Agreement or otherwise.

     Section 19. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given (a) if delivered by
hand and receipted for by the party to whom said notice or other communication shall have been
directed, on the date of such delivery, (b) if mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it is so mailed, (c) if mailed by
reputable overnight courier and receipted for by the party to whom said notice or other
communication shall have been directed, on the next business day after the date on which it is so
mailed or (d) if sent by facsimile transmission, with receipt of confirmation that such
transmission has been received, on the date such confirmation is received:

          If to Indemnitee, at the address indicated on the signature page of this Agreement, or such
other address as Indemnitee shall provide to the Company.

If to the Company to:

Bally Total Fitness Holding Corporation

8700 West Bryn Mawr Avenue

 

 

Chicago, Illinois 60631

Attention: Secretary of Bally Total Fitness Holding Corporation

     Section 20. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original but all of which
together shall constitute one and the same Agreement. Only one such counterpart signed by the
party against whom enforceability is sought needs to be produced to evidence the existence of this
Agreement.

     Section 21. Specific Performance, Etc. The parties recognize that if any provision
of this Agreement is violated by the Company, Indemnitee may be without an adequate remedy at law.
Accordingly, in the event of any such violation, Indemnitee shall be entitled, if Indemnitee so
elects, to institute proceedings, either in law or at equity, to obtain damages, to enforce
specific performance, to enjoin such violation, or to obtain any relief or any combination of the
foregoing as Indemnitee may elect to pursue.

     Section 22. Binding Effect, Etc. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective successors (including
any direct or indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company), assigns, spouses, heirs, executors
and personal and legal representatives. This Agreement shall continue in effect regardless of
whether Indemnitee continues to serve as an officer and/or director of the Company or of any other
entity or enterprise at the Company’s request.

     Section 23. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to contracts made and to
be performed in such state without giving effect to the principles of conflicts of laws.

     Section 24. Miscellaneous. Use of the masculine pronoun shall be deemed to include
usage of the feminine pronoun where appropriate. The headings of the sections and paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction or interpretation thereof.

[Signature page follows.]

 

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year
first above written.

	 	 	 	 	 
	 	Bally Total Fitness Holding Corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	[Name of Indemnitee]

 	 
	 	 	 
	 	Name:  	 
	 	Address:EX-10.1  EMPLOYMENT LETTER AGREEMENT

 

Exhibit 10.1

CHICO’S FAS, INC.

 

11215 Metro Parkway

Fort Myers, Florida 33966

(239) 274-4145

Fax: (239) 274-4284

 

Scott A. Edmonds

President

Chief Executive Officer

July 18,
2006 {REVISED July 25, 2006}

Ms. Michelle Delahunty-Cloutier

70 Watch Hill

East Greenwich, RI 02818

Dear Michelle:

Chico’s is very pleased to offer you a chance to join our organization.
We believe that you can make a tremendous impact on our organization and
look forward to the chance to work with you. Please let this letter serve
as an offer to join Chico’s FAS, Inc. and your acceptance of that offer.
The following will outline the specifics:

	 	 	 
	Title:
	 	Executive Vice President/General Merchandising Manager Chico’s

	 	 	 

	Reporting to:
	 	Pat Murphy-Kerstein — Executive Vice President / Chief Merchandising Officer

	 	 	 

	Base Salary:
	 	$575,000.00 annually

	 	 	 

	Start Date:
	 	Approximately 9/15/06

	 	 	 

	Incentive Bonus:
	 	Range: 0-120% of base salary earned during the semi annual bonus
period, which is contingent upon the achievement of corporate EPS targets
and performance of the Chico’s brand. Company performance below levels
established at the beginning of each season will result in no bonus payout.
Achievement of results beyond the “Plan” level may pay up to 145% of base
salary actually earned during the period. Incentive bonus
guaranteed at 60% of base salary earned during fall season 2006
bonus period and guaranteed at 60% of base salary earned during the
spring 2007 bonus period. Our two semi-annual bonus periods are February
thru July and August thru January. Payouts normally occur at or around the
time of our earnings release in early March, and early September.

	 	 	 

	Sign on Bonus:
	 	$125,000, less applicable taxes, to be paid to you within 30 days of
reporting to work at Chico’s. You agree to repay this entire amount
within 60 days if you voluntarily leave Chico’s within 12 months of your
start date.

	 	 	 

	Car Allowance:
	 	$18,000.00 annually ($692.31 per bi-weekly payroll period)

 

 

	 	 	 
	Stock Options:
	 	A
one-time grant on start date of 50,000 non-qualified stock options
at Fair Market Value on date of hire. These options will
vest over a 3-year period with one-third vesting each year
on the anniversary of your hire date.

	 	 	 

	Restricted Stock:
	 	A
one-time grant on start date of 15,000 shares of restricted stock
with three-year vesting. These shares will vest over a
three-year period with one-third vesting on each of the
first, second, and third anniversaries of your hire date.

	 	 	 

	Equity Compensation Value:
	 	Total
value of options and Restricted Stock = $920,000

Black-Scholes value of 50,000 options is approximately $575,000
based on $23 stock price and 50% Black-Scholes valuation.
Value of the Restricted Stock is approximately $345,000
based upon a $23 stock price.

	 	 	 

	Severance:
	 	If we terminate your employment without cause, we will continue to
pay you your base salary for a period of twelve-months
following the date of termination. In general terms, cause
shall mean any action or inaction by you that causes the
company substantial harm. If, however, Chico’s adopts a
severance plan applicable to all officers, you agree that
any such plan will supersede the provisions of this
paragraph.

	 	 	 

	Change of Control:
	 	If
there is a greater than 50% change in Company ownership or
greater than 50% turnover in the Company’s Board of
Directors in any 12-month period, that results in your
good faith determination that you can no longer adequately
perform your duties as a senior officer, resulting in your
voluntarily terminating your employment, then you will be
entitled to a lump sum payment of your annual salary. If,
however, Chico’s adopts a severance plan applicable to
all officers that covers a change of control, you agree
that any such plan will supersede the provisions of this
paragraph.

	 	 	 

	Change of Management:
	 	If
Scott Edmonds ceases to be employed by Chico’s, for any reason,
within the first year of your employment, that results in
your good faith determination that you can no longer
adequately perform your duties as a senior officer,
resulting in your voluntarily terminating your employment,
then you will be entitled to a lump sum payment of your
annual salary; provided, however, that your rights under
this paragraph must be exercised within 90 days of Mr.
Edmonds leaving and you must provide Chico’s with at least
90 days written notice of your intention to voluntarily
terminate your employment. If you exercise your rights
under this paragraph, you agree to execute a Non-

Chico’s
FAS, Inc. • 11215 Metro Parkway • Fort Myers, Florida 33912 • (239) 277-6200

 

 

	 	 	 
	 	 	Competition and Non-Solicitation
Agreement substantially in the form of the Agreement
attached to this letter.

	 	 	 

	Time Off:
	 	You will be eligible for up to four weeks of vacation per calendar year
starting in 2007, as well as three personal, one floating
holiday, and up to six sick days per year. Vacation for
2006 will be pro-rated based on start date.

	 	 	 

	Annual Review:
	 	Merit reviews and equity grants for officers are considered at the end
of the fiscal year, approximately February of each year.

You will also be eligible to participate in Chico’s FAS, Inc. comprehensive
benefits program outlined below:

	 	 	 
	Group Insurance Plan:
	 	Medical/Dental/Vision

Chico’s will reimburse you for COBRA premiums on medical
insurance with your old company until you are eligible for
the Chico’s medical insurance. If you elect not to enroll
in the Chico’s program when eligible, COBRA payments will
cease.

	 	 	 

	 	 	Eligibility Date: first day of the month after 60
days of employment

	 	 	 

	Life Insurance:
	 	Chico’s provides term insurance equal to lX your base salary; in
addition Chico’s provides accidental death and
dismemberment insurance equal to lX your base salary.
Supplemental insurance is available for purchase.

	 	 	 

	 	 	Eligibility Date: first day of the month after 60
days of employment

	 	 	 

	40l(k) Plan:
	 	Eligible deferral of 1-50% of your compensation (subject to an IRS
maximum), with a match of 50% of the first 6% of
compensation you defer. You will be able to roll over
existing qualified funds immediately.

	 	 	 

	 	 	Eligibility Date: first quarter after 12 months of employment

	 	 	 

	Deferred

Compensation Plan:
	 	As an officer of Chico’s, you will be immediately eligible to participate
in the Chico’s Deferred Compensation Plan. You will have
the opportunity to defer pre-tax compensation (less
applicable FICA/Medicare tax withholding). You may defer
up to 80% of your

Chico’s FAS, inc. • 11215 Metro Parkway • Fort Myers, Florida 33912 • (239) 277-6200

 

 

	 	 	 
	 	 	base salary payable during 2006, up to 100% of your
semi-annual bonus paid for the second half of 2006,
payable in March 2007, and up to 100% of your semi annual
bonus paid for the first half of 2007, payable in
September, 2007.

	 	 	 

	Stock Purchase

Plan:
	 	Opportunity to purchase Chico’s stock directly from the company for a
discount, two times a year, in March and September.

	 	 	 

	 	 	Eligibility Date: September, 2007

Relocation:

In order to ensure a successful relocation, Chico’s FAS, Inc. will provide the
following relocation assistance:

	 	•	 	Packing of household goods
	 
	 	•	 	Movement and insurance of household goods from East
Greenwich, RI to Fort Myers, FL

	 
	 	•	 	Temporary storage of household goods up to six months (if necessary)
	 
	 	•	 	Temporary housing up to six months (if necessary)
	 
	 	•	 	Movement of vehicle(s) from East Greenwich, RI to Fort Myers, FL
	 
	 	•	 	Transportation for your final relocation trip from East Greenwich, RI to Fort Myers, FL
	 
	 	•	 	Reimbursement of up to $10,000.00 for documented miscellaneous relocation expenses.
Points or other fees paid to lower the interest rate on a mortgage are not eligible for
reimbursement.
	 
	 	•	 	Up to six airline tickets for return trips to East Greenwich, RI
	 
	 	•	 	Taxable relocation expenses will be grossed up for taxes

Please indicate your acceptance of our offer by signing below and returning to my attention by a
confidential fax at 239-274-4284. By signing this letter you warrant that you are not a party to
any agreement that would bar or limit the scope of your employment with Chico’s. As we discussed,
this offer is contingent upon a successful background check and reference checks.

Michelle, we are looking so forward to having you on our Chico’s team. Let me be the first to
welcome you aboard! We are sure you will find it a challenging and rewarding experience.

If you have any questions, please feel free to call me at 239-274-4145.

Very truly yours,

 

/s/ Scott A. Edmonds

Scott A. Edmonds

President

Chief Executive Officer

 

Chico’s
FAS, inc. • 11215 Metro Parkway • Fort Myers, Florida 33912 • (239) 277-6200

 

 

Non-Competition and Non-Solicitation Agreement

Michelle
Delahunty-Cloutier (“Executive”) hereby acknowledges that, during and solely
as a result of her employment by Chico’s FAS. Inc., including any of its
subsidiaries, (“the Company”) she
may have received and shall continue to receive: (1) special training and education
with respect to the operations of a retail clothing chain and other related matters;
(2) access to confidential information; and (3) access to the Company’s business and
professional contacts with clients, customers, suppliers and others. In consideration
of the special and unique opportunities afforded to the Executive by
the Company as a
result of the Executive’s employment, as outlined in the previous sentence, the
Executive hereby agrees as follows:

     (a) Executive
agrees that if she should exercise her right to voluntarily
terminate her employment with the Company due to a Change in Management as described
in her offer letter, then for a period of one (1) year after the termination of her
employment with Company, she shall not, directly or indirectly, within the United
States, (i) for herself; (ii) as a consultant, manager, supervisor,
employee or owner; or (iii) as an independent contractor, enter into, engage in, be
employed by or consult with any business which competes with the business of the
Company by selling, offering to sell, soliciting offers to buy, or producing, or by
consulting with others concerning the selling or producing of, any product
substantially similar to those now sold or produced by the Company or included in the
product lines then developed by the Company for sale or production. These
restrictions above shall not be violated by (i) the ownership of no more than 2% of
the outstanding securities of any company whose stock is traded on a national
securities exchange or is quoted in the Automated Quotation System of the National
Association of Securities Dealers (NASDAQ), or (ii) other outside business
investments that do not in any manner conflict with the services to be rendered by
the Executive for the Company and that do not diminish or detract from the
Executive’s ability to render her required attention to the business of the Company.
 

      

Chico’s
FAS, inc. • 11215 Metro Parkway • Fort Myers, Florida 33912 • (239) 277-6200

 

 

MICHELLE DELAHUNTY-CLOUTlER

 

Signature

7/30/06

 

Date

 

 

Chico’s
FAS, inc. • 11215 Metro Parkway • Fort Myers, Florida 33912 • (239) 277-6200

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