EXHIBIT 10.01
(EDMC LETTERHEAD) [j1634101j1634190.gif]
October 12, 2005
David J. Pauldine
1820 Willow Oak Drive
Wexford, PA 15090
Dear Dave:
I am writing to you to acknowledge and accept your resignation from employment
with EDMC effective October 14, 2005 (the “Separation Date”). You have stated
your desire to pursue other interests and that you may seek a position as
Executive Vice President with a competitor of EDMC previously identified to us
(such competitor, with its subsidiary and affiliated companies are referred to
collectively as the “Competitor”). As you know, you and EDMC are parties to an
employment agreement, dated September 8, 1999, containing, among other
provisions, restrictive covenants regarding confidentiality, noncompetition and
nonsolicitation in the event you voluntarily resign without “Good Reason,” as
defined in the employment agreement. You have inquired as to whether EDMC would
agree to waive or otherwise release you from the noncompete covenant under the
employment agreement in the event that following your resignation you take a
position with the Competitor.
In light of your long service with and loyalty to EDMC, and with all proper
corporate authorizations having been obtained, EDMC agrees to release you from
the noncompete provisions of Section 8.3 of your employment agreement as
follows:

  i)   Your resignation is voluntary and without “Good Reason” in accordance
with Section 5.3 of your employment agreement and EDMC shall timely provide you
with all of the payments and benefits to which you are entitled under
Section 7.2 of your employment agreement in the event of a resignation without
“Good Reason,” including without limitation, a bonus of $61,229. You will also
receive the increase in “Base Salary” provided for in Section 3.1 of your
employment agreement, retroactive to July 1, 2005 through the Separation Date,
based on a CPI of 3.5%. All payments hereunder or under the employment agreement
are subject to all applicable tax withholdings. Your current health insurance
coverage shall continue through and including the last day of the calendar month
which includes the Separation Date;     ii)   Your employment with the
Competitor will not be a violation of the provisions of Section 8.3 of your
employment agreement, and this letter constitutes EDMC’s prior written consent
to such employment and your participation in “Competitive Activities” as defined
in your employment agreement, as long as you do not develop, advise or otherwise
work on any academic programs listed on Appendix A for a period of one year
following the Separation Date;

 

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  iii)   The other restrictive covenant provisions of Section 8 of your
employment agreement, including the confidentiality and nonsolicitation
provisions, remain in full force and effect as provided under that agreement in
the event of your voluntary resignation without “Good Reason.” This includes the
noncompete provisions except solely with respect to the Competitor as described
herein. We understand that in order to comply with your ongoing obligations to
EDMC, you may have to identify to the Competitor the academic programs listed on
Appendix A and we consent to you doing so, provided that you do not reveal any
“confidential information” (as described in your employment agreement) about
such programs;     iv)   You hereby agree to the release of claims set forth in
Appendix B to this letter;     v)   EDMC will provide you with a draft copy of
any press release relating to your termination of employment and opportunity to
comment on such press release;     vi)   Up to and including the Separation
Date, you will be required to continue to comply with all of the applicable
requirements of EDMC’s insider trading policy, and following the Separation
Date, you shall not sell or buy any shares of EDMC stock in violation of federal
or state securities law, and, except for purchases of shares upon the exercise
of options granted to you by EDMC, you shall not buy or sell any shares of EDMC
stock prior to the third business day following the public release of its first
quarter earnings for the current fiscal year (such third business day is
currently expected to be November 7, 2005);     vii)   The terms of this letter
shall remain strictly confidential, except that EDMC shall be entitled to
publicly disclose this letter and its contents if it deems such disclosure
necessary or appropriate. You agree that prior to the date this letter is
publicly disclosed by EDMC, you will not disclose or discuss this letter or its
terms with anyone other than the Competitor or your spouse, attorney and
professional financial advisor; and     viii)   You agree not to make any
statement, oral or written, which directly or indirectly impugns the quality or
integrity of EDMC’s or any of its subsidiaries’ business practices, programs,
products, services, operations or policies, or to make any other disparaging or
derogatory remarks about EDMC or any of its subsidiaries, their current or
former officers, directors, managerial personnel, or other employees, or their
customers to any other person or entity. EDMC agrees not to make any statement,
oral or written, which directly or indirectly impugns your ability, performance
or integrity, or to make any other disparaging or derogatory remarks about you
to any other person or entity.

Appendix A and Appendix B hereto are incorporated by reference into this letter
and are made a part hereof as if set fully herein. Except as modified by this
letter, those provisions of your

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employment agreement which survive your termination of employment shall remain
in full force and effect in accordance with their terms.
Dave, we will certainly miss you after you leave EDMC, but we understand that
you have made this decision based on your personal, as well as professional,
circumstances.

            Sincerely,

/s/ John R. McKernan, Jr.

John R. McKernan, Jr.
Chief Executive Officer

Accepted and agreed to this 12th day of
October, 2005.

/s/ David J. Pauldine

David J. Pauldine
                     

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APPENDIX A
ACADEMIC PROGRAMS
The academic programs covered by Mr. Pauldine’s continuing non-compete
obligations are any academic programs of the type offered or under development
as of the Separation Date by EDMC’s Art Institutes, including without limitation
design, culinary arts, media arts and fashion programs, and any substantially
similar programs.

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APPENDIX B
RELEASE
I, David J. Pauldine, acknowledge that the benefits I am to receive from
Education Management Corporation (“EDMC”) and all of its subsidiaries, shall be
in full satisfaction of all claims (whether asserted or unasserted), if any,
against or with respect to EDMC, its subsidiaries and other affiliates, and
their respective stockholders, directors, officers, employees and agents, past
and present. Except for the continuing obligations under my employment agreement
(including the restrictive covenant obligations referred to in Section 8, as
modified by the letter to which this Appendix B is attached), I do, for myself
and my heirs, personal representatives, successors and assigns, hereby
irrevocably release, promise, quitclaim and discharge EDMC, its subsidiaries and
other affiliates, their respective stockholders, directors, officers, employees
and agents, past and present, and EDMC’s predecessors, successors and attorneys,
of and from any and all manner of actions, causes of action, claims, suits,
debts, dues, sums of money, controversies, agreements, promises and demands
whatsoever, both at law and in equity, which I now have or ever had or may in
the future have, for, upon, or by reason of any matter, cause or thing
whatsoever on or before October 14, 2005 (the “Separation Date”) for, on account
of or arising out of any transactions or events that have occurred prior to the
Separation Date. This release is for any relief no matter how called, including,
but not limited to, wages, back pay, front pay, stock or other equity
compensation, debt repayment, compensatory damages, liquidated damages, punitive
damages, damages for pain or suffering, costs, attorneys’ fees and expenses and
claims to be reinstated to employment with EDMC. I represent that I have
carefully read the foregoing release, that I have had the opportunity to have an
attorney explain to me the terms of the foregoing release, that I accept full
responsibility and consequences of my action or nonaction in this regard, that I
know and understand the content of this release, that I execute this release
knowingly and voluntarily as my own free act and deed, that the terms of this
release are totally satisfactory and thoroughly understood by me, and that this
release was freely negotiated and entered into without fraud, duress or
coercion.

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