Document:

EXHIBIT 10.1 - 03/20/2003 FORM 8-K

EXHBIIT 10.1

Bally Total Fitness Holding Corporation
8700 Bryn Mawr Avenue
Chicago, Illinois 60631

March 19, 2003

Scott L. Swid

SLS Management, LLC

140 West 57th Street, Suite 7B

New York, NY 10019

Dear Sirs:

      
SLS Management, LLC, a Delaware limited liability company (the
“Shareholder”), its managing member, Scott L. Swid
(“SLS”), and Bally Total Fitness Holding Corporation, a
Delaware corporation (the “Company”), acting through its board
of directors (the “Board”), have reached an understanding that
it would be in the best interests of the Company and its stockholders for the
Company to take certain actions described below related to the composition and
operation of the Board. 

      
Section 1. Board Actions. The Company hereby agrees to take, and the
Company represents and warrants to the Shareholder that the Board, at a meeting,
duly called and held on March 19, 2003, by the unanimous vote of the entire
Board, has duly taken, the following actions, each in accordance with the
Restated Certificate of Incorporation (the “Certificate”) and
the Amended and Restated By-laws (the “By-laws”) of the Company
and in accordance with the Delaware General Corporation Law
(“DGCL”): 

      
(a) accepted, with the greatest gratitude for their long and distinguished
service to the Company, the resignations (the "Resignations") of George
N. Aronoff and Liza M. Walsh who have tendered to the Company their written
resignations from the Board in accordance with the Certificate and
By-laws;

      
(b) adopted the resolutions attached hereto as Exhibit A (i) fixing the number
of directors constituting the Board at seven (7) and apportioning the vacancy
thus created to Class III; (ii) in order to fill the vacancies in Class I
created by the Resignations, and the vacancy in Class III created by the
enlargement of the Board, appointing to the Board the following persons, each
into the class of the Board set forth next to his name: Martin E. Franklin
(Class I) and Paul Toback (Class I), to fill the vacancies created by the
Resignations; and Stephen C. Swid (Class III); and (iii) nominating each of
Martin E. Franklin and Paul Toback for re-election to the Board at the 2003
Annual Meeting of Stockholders of the Company (the "2003 Annual
Meeting").

      
(c) adopted the resolutions attached hereto as Exhibit B amending the By-laws
(the "By-law Amendment") to provide that (i) any two directors may call a
special meeting of the Board and (ii) the provisions of the By-laws covered by
the By-law Amendment may only be modified or amended by the stockholders of the
Company and not by action of the Board.

      
Section 2. The Company’s Covenants. The Board and the Company hereby
agree: (a) to take all steps necessary or desirable to nominate each of
Messrs. Franklin and Toback (the “2003 Slate”) for re-election
to the Board at the 2003 Annual Meeting, to recommend to the stockholders of the
Company that the 2003 Slate be elected to the Board and to solicit proxies in
favor of the election of the 2003 Slate; (b) not to increase the size of
the Board, which shall remain fixed at seven (7) directors, at least through the
conclusion of the 2004 Annual Meeting of Stockholders of the Company (the
“2004 Annual Meeting”) unless either Martin E. Franklin or
Stephen C. Swid have voted in favor of the resolution of the Board authorizing
such increase; and (c) not to appoint any person to fill the existing vacancy in
Class II of the Board or nominate any person for election by the shareholders at
the 2003 Annual Meeting to fill such vacancy unless either Martin E. Franklin or
Stephen C. Swid have voted in favor of the resolution of the Board authorizing
such appointment or nomination. 

      
Section 3. The Shareholder’s Covenants. (a) Each of the Shareholder
and SLS shall cause all shares of common stock, par value $0.01 per share, of
the Company beneficially owned by them and/or their affiliates on the record
date for each of the 2003 Annual Meeting and the 2004 Annual Meeting,
respectively (i) to be represented in person or by proxy at each of the
2003 Annual Meeting and the 2004 Annual Meeting, respectively, and (ii) to
be voted at the 2003 Annual Meeting for the election of the 2003 Slate and at
the 2004 Annual Meeting for the election of the slate of nominees selected by
the Board. 

      
(b) Neither the Shareholder nor SLS shall make, or encourage any other person to
make, or in any way be a "participant" in, any "solicitation" of proxies (as
such terms are defined in Regulation 14A under the Securities Exchange Act of
1934, as amended) with respect to the common stock of the Company in connection
with the 2003 Annual Meeting or the 2004 Annual Meeting.

      
Section 4. Representations and Warranties. (a) The Company represents and warrants
to the Shareholder and SLS that (i) its execution, delivery and performance
of this Letter Agreement has been approved by the Board and does not violate the
Certificate or By-laws or any agreement to which it is a party, and
(ii) this Letter Agreement constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms. 

      
(b) Each of the Shareholder and SLS represents and warrants to the Company that
(i) the execution, delivery and performance of this Letter Agreement has been
approved by all necessary corporate approvals of the Shareholder and does not
violate its constituent documents or any agreement to which either the
Shareholder or SLS is a party, and (ii) this Letter Agreement constitutes a
valid and binding obligation of each of the Shareholder and SLS, respectively,
enforceable against the Shareholder and SLS, respectively, in accordance with
its terms.

      
Section 5. Miscellaneous. This Letter Agreement represents the entire
understanding of the parties hereto with reference to the subject matter hereof
and supersedes any and all other oral or written agreements and understandings
among the parties heretofore made. This Letter Agreement may be amended only by
an instrument in writing signed by or on behalf of each of the parties hereto,
provided that this Letter Agreement may not be amended by or on behalf of the
Company unless the amendment is approved by a vote of the majority of the board
of directors other than Martin E. Franklin and Stephen C. Swid. This Letter
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Delaware. Each of the parties hereto shall use such party’s
best efforts to take such actions as may be necessary or reasonably requested by
the other party hereto to carry out and consummate the transactions contemplated
by this Letter Agreement. No party to this Letter Agreement directly or
indirectly, shall, or shall permit anyone acting on its behalf to challenge the
validity or enforceability of any provision of this Letter Agreement or the
matters contemplated hereby. The parties hereto agree that irreparable damage
may occur in the event that any provision of this Letter Agreement is not
performed in accordance with the terms hereof and that the non-breaching party
will be entitled (in addition to any other remedy at law or equity) to an
injunction or injunctions to prevent breaches of the provisions of this Letter
Agreement and to enforce the terms and provisions of this Letter Agreement by a
decree of specific performance in any action instituted in any court of the
United States or any state thereof having jurisdiction without the necessity of
proving the inadequacy of a remedy of money damages. If any term or other
provision of this Letter Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions of this Letter Agreement shall nevertheless remain in full force and
effect. 

      
If the terms of this Letter Agreement are in accordance with your understandings
and agreements with us, please sign and return the enclosed duplicate of this
letter, whereupon this Letter Agreement shall constitute a binding agreement
between us. 

	  	Very truly yours,
	  	  
	  	BALLY TOTAL FITNESS HOLDING CORPORATION

	  	By:	/s/ Paul Toback
	  	  	

	  	Name:	Paul Toback
	  	Title:	President and Chief Executive Officer

Accepted and agreed to as of

the date first above written:

SLS MANAGEMENT, LLC

By: /s/ Scott L. Swid

	  	

	Name:	Scott L. Swid
	Title:	Managing Member

	  	/s/ Scott L. Swid

	  	Scott L. Swid

EXHIBIT A

Board Resolutions

      
RESOLVED, that the Board of Directors hereby accepts, with the greatest
gratitude for their long and distinguished service to the Company, the
resignations of George N. Aronoff and Liza M. Walsh who had tendered to the
Company their written resignations from the Board in accordance with the
Certificate and By-laws pursuant to Article Sixth of the Restated Certificate of
Incorporation of the Company. 

      
RESOLVED, that pursuant to Article Sixth of the Restated Certificate of
Incorporation of the Company, (a) the number of directors constituting the
Board of Directors shall be increased by one and is hereby fixed at seven (7),
(b) the vacancy created by such increase in the number of directors is
hereby apportioned to Class III and (c) the following individuals are
hereby appointed as directors of the Company to fill the following existing
vacancies on the Board of Directors, each to serve as a director in the class of
the Board set forth next to his name: Martin E. Franklin (Class I), to fill the
vacancy in such class created by the resignation of Liza M. Walsh; Paul Toback
(Class I), to fill the vacancy in such class created by the resignation of
George N. Aronoff; and Stephen C. Swid (Class III), to fill the vacancy created
by the increase to the size of the Board. 

      
RESOLVED, that pursuant to Article III, Section 1 of the By-laws of the Company,
each of Martin E. Franklin and Paul Toback are hereby nominated by the Board of
Directors for re-election to the Board at the 2003 Annual Meeting of
Stockholders of the Company. 

EXHIBIT B

By-law Amendment Resolutions
(New Matter is underlined)

      
RESOLVED, that Section 2 to Article III of the By-laws of the Company be, and is
hereby amended and restated in its entirety to read as follows: 

“SECTION 2.
Meetings. The Board of Directors may hold meetings, both regular and
special, either within or without the State of Delaware. Regular meetings of the
Board of Directors may be held without notice at such time and at such place as
may from time to time be determined by the Board of Directors. Special Meetings
of the Board of Directors may be called by the Chairman of the Board, the
President or a majority of the entire Board of Directors or any two (2)
members of the Board of  Directors. Notice thereof stating the place,
date and hour of the meeting shall be given to each director either by mail not
less than forty-eight (48) hours before the date of the meeting, by telephone,
telegram or facsimile transmission on twenty-four (24) hours notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances, provided that not  less than one
hundred and twenty (120) hours notice shall be given of any such  meeting
called by only two members of the Board of Directors.” 

      
RESOLVED, that Article VII of the By-laws of the Company be, and is hereby
amended and supplemented to add a new Section 5 as follows: 

“SECTION 5.
Amendment of Bylaws. Section 1 of Article III and this Section 5 of
Article VII of these Bylaws may only be altered, amended, changed or repealed by
action of the shareholders of the Corporation.”EXHIBIT 10.2 - 03/20/2003 FORM 8-K

EXHIBIT 10.2

Martin E. Franklin
555 Theodore Fremd Avenue, Suite B302
Rye, NY 10580

March 19, 2003

Bally Total Fitness Holding Corporation

8700 Bryn Mawr Avenue

Chicago, Illinois 60631

To the Board of Directors:

      
In consideration of my appointment today as a director of Bally Total Fitness
Holding Corporation, a Delaware corporation (the “Company”),
for a term through the 2006 Annual Meeting of Stockholders of the Company, I
hereby agree that, during the period beginning on the date hereof and ending on
the date of the 2006 Annual Meeting of Stockholders of the Company (the
“Standstill Period”), I shall not seek or accept appointment as
an officer of the Company and neither I nor any entity which I control shall:

	make or encourage any
other person to make, or in any way be a "participant" in, any "solicitation" of
proxies (as such terms are defined in Regulation 14A under the Securities
Exchange Act of 1934, as amended) with respect to the common stock of the
Company (other than in my capacity as a director of the Company in connection
with solicitations by the board of directors of the Company); or

	make or submit or
publicly announce (or encourage any other person to make or submit or publicly
announce) any proposal or offer to acquire the Company or the assets of the
Company or to effect any extraordinary transaction with the Company or any of
its subsidiaries (other than in my capacity as a director of the Company in
connection with decisions made by the board of directors of
Company).

      
Additionally, I shall cause all shares of common stock, par value $0.01 per
share, of the Company which I (or any entity I control) beneficially own on the
record date for each of the 2003 and the 2004 Annual Meetings of Stockholders of
the Company, respectively (i) to be represented in person or by proxy at
each of the 2003 Annual Meeting and the 2004 Annual Meeting, respectively, and
(ii) to be voted at the 2003 Annual Meeting for the election of myself and
Paul Toback and at the 2004 Annual Meeting for the election of the slate of
nominees selected by the Board. 

      
The Company acknowledges that nothing in this Letter Agreement shall be deemed
to restrict or limit my ability, when acting in my capacity as a director of the
Company, to act in accordance with and fulfill my fiduciary duties to the
stockholders of the Company or my ability to resign my position as a director of
the Company during the Standstill Period at any time, upon delivery of written
notice to the Company, however my obligations pursuant to the prior paragraphs
shall survive any such resignation. Upon the expiration of the Standstill
Period, this Letter Agreement and my obligations hereunder shall cease to have
any force or effect. 

      
This Letter Agreement represents the entire understanding of the parties hereto
with reference to the subject matter hereof and supersedes any and all other
oral or written agreements and understandings among the parties heretofore made.
This Letter Agreement may be amended only by an instrument in writing signed by
or on behalf of each of the parties hereto, provided that this Letter Agreement
may not be amended by or on behalf of the Company unless the amendment is
approved by a vote of the majority of the board of directors other than Martin
E. Franklin and Stephen C. Swid. This Letter Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware. Each of the
parties hereto shall use such party’s best efforts to take such actions as
may be necessary or reasonably requested by the other party hereto to carry out
and consummate the transactions contemplated by this Letter Agreement. No party
to this Letter Agreement directly or indirectly, shall, or shall permit anyone
acting on its behalf to challenge the validity or enforceability of any
provision of this Letter Agreement or the matters contemplated hereby. The
parties hereto agree that irreparable damage may occur in the event that any
provision of this Letter Agreement is not performed in accordance with the terms
hereof and that the non-breaching party will be entitled (in addition to any
other remedy at law or equity) to an injunction or injunctions to prevent
breaches of the provisions of this Letter Agreement and to enforce the terms and
provisions of this Letter Agreement by a decree of specific performance in any
action instituted in any court of the United States or any state thereof having
jurisdiction without the necessity of proving the inadequacy of a remedy of
money damages. If any term or other provision of this Letter Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Letter Agreement shall
nevertheless remain in full force and effect. 

      
If the terms of this Letter Agreement are in accordance with your understandings
and agreements with me, please sign and return the enclosed duplicate of this
letter, whereupon this Letter Agreement shall constitute a binding agreement
between us. 

	  	Very truly yours,
	  	  
	  	/s/ Martin E. Franklin
	  	

	  	Martin E. Franklin

Accepted and agreed to as of

the date first above written:

BALLY TOTAL FITNESS HOLDING CORPORATION

By: /s/ Paul Toback

	  	

	Name:	Paul Toback
	Title:	President and Chief Executive Officer

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