Document:

EX-10.01

 

EXHIBIT 10.01

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;

 

 

	 	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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                                                                  EXHIBIT 10.1

                                A G R E E M E N T

     This Agreement ("Agreement") is made between STEWART K. OWENS ("Executive")
and BOB EVANS FARMS, INC. ("Bob Evans" or the "Company").

     WHEREAS, the parties acknowledge it is in their individual and mutual best
interests to amicably end their employment relationship and to agree upon their
subsequent responsibilities to one another;

     NOW, THEREFORE, in exchange for and in consideration of the following
mutual covenants and promises, the undersigned parties, intending to be legally
bound, hereby agree as follows:

     1. Executive and Bob Evans acknowledge and agree that the Employee's last
day of employment with Bob Evans was August 9, 2005.

     2. Bob Evans agrees:

     (a)  To provide Executive a lump sum payment of One Million Five Hundred
          Forty-Four Thousand Six Hundred Thirty-Nine and 17/100 Dollars
          ($1,544,639.17), less appropriate withholding amounts, on or about
          July 1, 2006. Such amount constitutes twenty-four (24) months' salary
          continuation, sixteen and one-half (16 1/2) weeks' severance pay, and
          Five Thousand Dollars ($5,000.00) for out placement assistance; and

     (b)  To continue to pay its share of the premiums of Executive's group
          health insurance coverage, so long as Executive pays his share, until
          the earlier of the following events:

          (1)  August 9, 2007; or

<PAGE>

          (2)  Executive becomes eligible for health insurance coverage through
               his employer.

          On or after August 9, 2007, Executive may elect to continue his health
          insurance coverage under COBRA at his sole expense. All other benefits
          and remuneration of any kind, including profit sharing, bonus plans,
          life insurance, and long term disability insurance, terminate
          effective August 9, 2005. Executive will be provided with the option
          to convert his current term life insurance policy to an individual
          policy with all premiums to be paid by Executive.

     3. As used in this Agreement, "Confidential Information" means all of the
Company's confidential and proprietary information and trade secrets, including,
but not limited to:

     (a)  All information relating to Bob Evans' products, goods, and services,
          whether fully or partially developed (collectively, the "Products"),
          which information is used or usable by the Company in its business or
          by its customers and has not been published or disseminated or
          otherwise become a matter of general public knowledge or of general
          knowledge within the industry;

     (b)  The whole or any portion or phase of any business plans, financial
          information, legal information, employment or employee-related
          information, purchasing data, supplier data, accounting data or other
          financial information which has not been published or disseminated, or
          otherwise become a matter of general public knowledge or of general
          knowledge within the industry;

     (c)  The whole or any portion or phase of any legal issues and strategies,
          research and development information, design procedures or processes
          or other technical

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<PAGE>

          information which has not been published or disseminated or otherwise
          become a matter of general public knowledge or of general knowledge
          within the industry;

     (d)  The whole or any portion or phase of any marketing or sales
          information, sales records, customer lists, prices, sales projections
          or other sales information which has not been published or
          disseminated or otherwise become a matter of general public knowledge
          or of general knowledge within the industry; and

     (e)  Trade secrets, as defined by the laws of the State of Ohio.

     (f)  The following information shall not be considered to be Confidential
          Information hereunder: (i) Executive's personnel records, (ii)
          information reasonably necessary for Executive to file all required
          income tax returns, including Executive's compensation information,
          and (iii) Executive's rolodex or other compilation of contact
          information.

     4. Executive acknowledges that all information falling within the
definition in paragraph 3 shall be presumed to be Confidential Information if
the Company takes or has taken measures designed to prevent it, in the ordinary
course of business, from being available to persons other than those selected by
the Company to have access thereto for limited purposes.

     5. All information disclosed to Executive or to which Executive obtains or
has obtained access during the period of Executive's employment, which Executive
has a reasonable basis to believe to be Confidential Information, shall be
presumed to be Confidential Information.

     6. Executive will never use or disclose any Confidential Information, as
defined in Paragraph 3 hereof. All records of Confidential Information,
including, but not limited to, all notes, memos, plans, records, letters,
reports or other tangible materials, including copies thereof

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<PAGE>

in Executive's possession, and including any and all documents and copies
thereof provided to Executive's attorney, whether prepared by Executive or by
others, shall be left with, or delivered by October 15, 2005 to the Company.
Anything herein to the contrary notwithstanding, the provisions of this
Paragraph 6 shall not apply (i) when disclosure is required by law or by any
court, arbitrator, mediator or administrative or legislative body (including any
committee thereof) with actual or apparent jurisdiction to order the Executive
to disclose or make accessible any information, (ii) with respect to any other
litigation, arbitration or mediation involving this Agreement, including, but
not limited to, the enforcement of this Agreement, (iii) as to information that
becomes generally known to the public or within the relevant trade or industry
other than due to the Executive's violation of this Paragraph or (iv) as to
information that is or becomes available to the Executive on a non-confidential
basis from a source which is entitled to disclose it to the Executive.

     7. Executive agrees, unless compelled by legal process, not to discuss with
any current, future, or former employees of Bob Evans, its subsidiaries and
affiliates, their attorney[s] or other representatives, or anyone else, any
information concerning: (a) the existing, former, or potential claims of
Executive or of any current, future, or former employees of Bob Evans, its
subsidiaries and affiliates, against Bob Evans and/or any of its subsidiaries,
affiliates, and its or their officers, directors, agents or employees, or (b)
the business sensitive policies, personnel or business practices of Bob Evans,
its subsidiaries and affiliates. Additionally, Executive shall not otherwise
counsel or assist such individuals in investigating, pursuing, or prosecuting
claims, charges, or lawsuits against Bob Evans and/or any of its subsidiaries
and affiliates, and/or any of its or their officers, directors, agents or
employees. Should Executive be compelled to give testimony pursuant to legal
process, he agrees to immediately notify Bob Evans as soon as he

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<PAGE>

becomes aware of such legal process. Such notice shall be by phone and in
writing to either Donald Radkoski (Phone 614-491-2225), Bob Evans Farms, Inc.,
3776 South High Street, P.O. Box 07863, Columbus, Ohio 43207 or Chris J. North
(Phone 614-464-6391), P.O. Box 1008, 52 East Gay Street, Columbus, Ohio
43216-1008.

     8. Executive agrees not to at any time talk about, write about, or
otherwise publicize or disclose to any third party the terms of this Agreement
or any fact concerning its negotiation, execution or implementation, except with
(1) an attorney, accountant, or other advisor engaged by Executive to advise
him; (2) the Internal Revenue Service or other governmental agency; and (3) his
immediate family, providing that all such persons agree in advance to keep said
information confidential and not to disclose it to others. Nothing in this
paragraph shall be construed to prohibit Executive from disclosing to potential
employers the existence of this Agreement and the general nature of its
provisions.

     9. Executive agrees that he shall not make or publish any statement (orally
or in writing) that becomes or reasonably could be expected to become publicly
known or otherwise impact the Company's business, or instigate, assist or
participate in the making or publication of any such statement, which would
libel, slander or disparage (whether or not such disparagement legally
constitutes libel or slander) the Company or any person affiliated with the
Company, or the reputations of any of its past or present officers and
directors. Except as necessary to communicate to its Board of Directors and/or
its officers the circumstances surrounding the separation of Executive's
employment, the Company agrees that neither it nor its directors or officers
shall make or publish any statement (orally or in writing) that becomes or
reasonably could be expected to become publicly known or otherwise impact
Executive's subsequent employment, business ventures, or reputation, or
instigate, assist or participate in the making or

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<PAGE>

publication of any such statement, which would libel, slander or disparage
(whether or not such disparagement legally constitutes libel or slander)
Executive.

     10. In consideration of the receipt of the sums and covenants stated
herein, Executive does hereby, on behalf of himself, his heirs, administrators,
executors, agents, and assigns, forever release, requite, and discharge Bob
Evans and its agents, parents, subsidiaries, affiliates, divisions, officers,
directors, employees, successors, and assigns ("Released Parties"), from any and
all charges, claims, demands, judgments, actions, causes of action, damages,
expenses, costs, attorneys' fees, and liabilities of any kind whatsoever,
whether known or unknown, vested or contingent, in law, equity or otherwise,
which Executive has ever had, now has, or may hereafter have against said
Released Parties for or on account of any matter, cause or thing whatsoever
which has occurred prior to the date Executive signed this Agreement, including,
without limitation of the generality of the foregoing, any and all claims which
are related to Executive's employment with Bob Evans and the termination
thereof, and any and all rights which Executive has or may have under the Age
Discrimination in Employment Act, as amended; the Older Worker Benefit
Protection Act; Title VII of the Civil Rights Act of 1964, as amended by the
Equal Employment Opportunity Act of 1972; the Civil Rights Act of 1991; the
Employee Retirement Income Security Act, 29 U.S.C. Section 1001 et seq.; 42
U.S.C. Section 1981; the Americans With Disabilities Act; Ohio Revised Code
Sections 4101.17 and 4112.02 et seq. and other federal and state statutes which
regulate employment; and the laws of contract, torts, and other subjects.
Nothing contained herein shall be construed as a waiver or release of (i)
Executive's vested rights under any employee benefit or compensation program
including the Company's 401(k) Retirement Plan and The Bob Evans Farms, Inc. and
Affiliates Executive Deferral Program or (ii) Executive's rights, if any, to
indemnification by or from the Company or its affiliates. Bob

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<PAGE>

Evans and its directors and officers release Executive from any and all
charges, claims, demands, judgments, actions, causes of action, damages,
expenses, costs, attorneys' fees, and liabilities of any kind which have
occurred prior to the date the Company has signed this Agreement, including,
without limitation, any and all claims arising from Executive's employment with
Bob Evans and/or the termination thereof.

     11. Bob Evans and Executive agree and acknowledge that Executive
voluntarily resigned his employment with Bob Evans.

     12. Executive understands and agrees that, by entering into this Agreement,
any and all rights he had, has, or may hereafter have, under the following
plans, policies, agreements, and/or documents are, except as hereinafter
specifically excepted and retained, hereby revoked, extinguished, and released:
(1) 1989 Change in Control Agreement; and (2) 2002 Change in Control Agreement.
Bob Evans agrees that Employee's rights, if any, under the 2002 Change in
Control Agreement which arise as a result of a "Change in Control" as defined
therein occurring subsequent to August 9, 2005 are excepted from the foregoing
revocation, extinguishment, and release, and are hereafter retained by Employee
subject to the terms of the 2002 Change in Control Agreement. Further, with
respect to the 1998 Stock Option and Incentive Plan only, Executive's
termination shall be deemed not for Cause.

     13. Executive understands and agrees that, even after his employment with
the Company ends, he is still bound by the provisions of the Company's February
25, 2004 "Policy Statement Against Insider Trading", which provides, in relevant
part, that:

          This Policy Statement continues to apply to your transactions in our
          securities even after your service with us ends. If you are aware of
          material nonpublic information when your service with us ends, you may
          not trade in our securities until that information has become public
          or is no longer material.

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<PAGE>

     14. It is hereto agreed that this Agreement constitutes, among other
things, a full and complete release of any and all claims which the parties
hereto may have against each other, upon or by reason of any matter or thing
whatsoever which has occurred prior to the signature date of this Agreement,
including without limitation all age discrimination claims under the Age
Discrimination in Employment Act, as amended, and it is the intention of the
parties hereto that this Agreement is and shall be a complete and absolute
defense to anything released hereunder. Executive expressly and knowingly waives
his rights to assert any claims against Bob Evans or the other Released Parties
which are released hereunder, and covenants not to sue Bob Evans or the other
Released Parties based upon any claims released hereunder. Bob Evans and its
officers, directors, successors, and assigns, expressly and knowingly waive
their rights to assert any claims against Executive which are released
hereunder, and covenant not to sue Executive based upon any claims released
hereunder.

     15. It is understood that this Agreement is, among other things, a
compromise of disputed claims, and no party, by entering into this Agreement,
acknowledges the validity of the other's claims or defenses, and the
above-mentioned payments and covenants are not, and should not be construed as,
an admission or acknowledgment by Bob Evans or any other Released Party of any
liability whatsoever to Executive or any other person or entity, nor should any
provision contained herein be construed as an admission of liability or
wrongdoing by Executive.

     16. Each of the parties hereto further states and represents that he or it
has carefully read the foregoing Agreement, consisting of ten (10) pages, and
knows the contents thereof, and that he or it has executed the same as his or
its own free act and deed.

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<PAGE>

     17. Executive acknowledges that he has been and is hereby advised in
writing to consult with an attorney concerning this Agreement and that he had
the opportunity to seek the advice of legal counsel in connection with the
negotiation and execution of this Agreement. Executive further acknowledges that
he has had the opportunity to ask questions about each and every provision of
this Agreement and that he fully understands the effect of the provisions
contained herein upon his legal rights. Executive understands that he has
twenty-one (21) days within which to consider signing this Agreement, and that
after signing and returning this Agreement, he may revoke his signature at any
time before the expiration of seven (7) days after he signs and returns this
Agreement. This Agreement does not take effect until eight (8) days after
Executive signs it.

     18. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Ohio. If any provision or provisions
hereof shall at any time be found or declared invalid or unenforceable, such
finding or declaration shall not impair the remaining provisions hereof, but the
same shall remain valid and enforceable.

     19. Executive's obligations and agreements under this Agreement shall be
binding on the Executive's heirs, executors, legal representatives and assigns
and shall inure to the benefit of any successors and assigns of Bob Evans.

     20. This Agreement constitutes the entire agreement between the parties
hereto in respect of the subject matter hereof and this Agreement supersedes all
prior and contemporaneous agreements between the parties hereto in connection
with the subject matter hereof, except as otherwise provided herein. No change,
termination or attempted waiver of any of the provisions of this Agreement shall
be binding on any party hereto unless in writing and signed by the party
affected.

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<PAGE>

     21. The failure of any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed to be a waiver of any
such provision, nor in any way to affect the validity of this Agreement or any
part thereof or the right of any party thereof to enforce each and every such
provision. No waiver or any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.

EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ AND FULLY UNDERSTANDS ALL THE
PROVISIONS OF THIS RELEASE AND SETTLEMENT AGREEMENT, THAT HE HAS BEEN GIVEN AT
LEAST TWENTY-ONE DAYS WITHIN WHICH TO CONSIDER SIGNING THIS AGREEMENT, THAT HE
HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY, THAT HE MAY REVOKE THIS AGREEMENT
WITHIN SEVEN DAYS AFTER HE SIGNS IT (THE "REVOCATION PERIOD"), AND THAT HE
KNOWINGLY AND VOLUNTARILY HAS ENTERED INTO THIS AGREEMENT IN EXCHANGE FOR
VALUABLE CONSIDERATION, INCLUDING THE PAYMENTS IDENTIFIED IN PARAGRAPH 2, TO
WHICH HE WOULD NOT OTHERWISE BE ENTITLED ABSENT THIS AGREEMENT.

     IN WITNESS WHEREOF, the undersigned have hereto set their hands this 10th
day of October, 2005.

                                         /s/ Stewart K. Owens
                                         -----------------------------------
                                         STEWART K. OWENS

STATE OF OHIO              :
                           :  SS
COUNTY OF    Franklin      :
         -----------------

     The foregoing instrument was acknowledged before me this 7th day of
October, 2005 by Stewart K. Owens.

                                         /s/ Sondra L. Shook
                                         ------------------------------------
                                         Notary Public

                                 [SEAL]  Sondra L. Shook
                                         Notary Public, State of Ohio
                                         My Commission Expires 10-16-06

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<PAGE>

                                         BOB EVANS FARMS, INC.

                                         By:  /s/ Larry C. Corbin
                                             --------------------------------
                                             LARRY C. CORBIN

                                         Its:  President and Chief
                                               Executive Officer

STATE OF OHIO              :
                           :  SS
COUNTY OF FRANKLIN         :

     The foregoing instrument was acknowledged before me this 10th day of
October, 2005 by Larry C. Corbin, President and Chief Executive Officer, of Bob
Evans Farms, Inc. on behalf of the corporation.

                                         /s/ Tammy L. Joseph
                                         ------------------------------------
                                         Notary Public

                                [SEAL]   Tammy L. Joseph
                                         Notary Public, State of Ohio
                                         My Commission Expires December 15, 2005

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