Exhibit 10.1
AMENDMENT TO EMPLOYMENT AGREEMENT
March 3, 2006
Education Management Corporation, a Pennsylvania corporation (the
"Company"), and Xxxxxx X. XxXxxxxx (the "Executive") are parties to an
Employment Agreement, dated September 8, 1999 (the "Employment Agreement"). The
Company and the Executive wish to amend the Employment Agreement, as set forth
herein (the "Amendment") and effective as of the date set forth above, to
reflect the Executive's right to receive certain benefits following a Change in
Control and to reflect the Executive's desire to resign from the position of
Chief Financial Officer as of June 29, 2006. Capitalized terms used but not
otherwise defined in this Amendment shall have the same meanings as in the
Employment Agreement.
NOW, THEREFORE, for good and valuable consideration and intending to
be legally bound hereby, the Parties amend the Employment Agreement as follows:
1. Severance Benefit. Section 7.3 of the Employment Agreement is
amended by adding new subsections (e), (f) and (g) at the end of that Section,
reading as follows:
(e) Effective from and after March 3, 2006 (the "Amendment
Date"), upon the consummation of a transaction constituting a Change in
Control (a "Triggering Event") which occurs before June 30, 2008, the
Executive shall be entitled to receive a payment equal to two (2) times
the sum of the Executive's current annual salary plus his "average bonus"
as defined below, payable in a single lump sum cash payment within fifteen
(15) days after the date of the Triggering Event, subject to the following:
(i) The Executive's rights to the payment described above
shall be in addition to, and shall not supersede, the Executive's
rights under Section 7.3(b), which, without limiting the foregoing,
shall explicitly include the right to receive the sum of his Accrued
Obligations, payable in accordance with subsection (f)(i) hereof, and
continued participation in the Company's welfare and other benefits
programs; provided, however, that if the Executive becomes entitled to
the lump sum payment described under subsection (e) above, he shall
not be entitled to any other severance payment under this Agreement or
any other severance or similar payments that would otherwise be
payable under any other agreement, plan, program or policy of the
Company.
(ii) For purposes of clarification, the date of the
consummation of a transaction constituting a Change in Control with
respect to a merger of the
Company shall mean the effective time of the closing of the merger, as
defined in the applicable merger agreement.
(f) Notwithstanding the provisions of Section 5.2 and 5.3, from
the Amendment Date until June 29, 2006, the Company shall only be permitted
to terminate the Executive's employment for Cause and the Executive shall
only be able to terminate his employment with Good Reason. Thereafter, the
Executive's employment may only terminate in accordance with subsection
(f)(ii) hereof. In the event the Executive's employment is not terminated
in accordance with the foregoing sentence, the Executive agrees to resign
from all offices and relinquish all titles with respect to the Company and
its subsidiaries, including Chief Financial Officer, as of June 29, 2006
(the "Resignation"), subject to the provisions of subsection (ii) of this
Section 7.3(f). The parties will mutually agree on a press release
announcing the Resignation. From the Amendment Date until the date of the
Resignation, the Executive shall continue to serve as the Chief Financial
Officer of the Company unless his replacement is hired prior to such date
and will work with the Company to effect a transition of his duties and
responsibilities in a manner that the Company reasonably requests and
directs. If his replacement is hired before the Resignation date, the
Executive shall continue to report directly to the Company's Chief
Executive Officer and have such duties as he reasonably directs until the
Resignation date. Executive's benefits and compensation shall not be
decreased after the execution of this Amendment except as expressly set
forth herein.
(i) Upon the earlier of (A) his termination from employment
with the Company or (B) the date of Resignation, the Executive shall
receive the sum of his Accrued Obligations as of the date of such
termination or Resignation, as applicable, that amount payable in a
single lump sum cash payment within 30 days of the date of such
termination or Resignation. The Company and the Executive acknowledge
and agree that this payment of Accrued Obligations shall equal any
accrued but unpaid Base Salary and the Executive's Pro Rata Bonus for
the period from July 1, 2005 through the date of termination or
Resignation, as applicable, based on the Executive's Average Bonus as
described in Section 7.3(g). Upon payment of his Accrued Obligations
under this Section 7.3(f)(i), the Executive agrees that he shall have
no entitlement or claim to any further bonus or other incentive
compensation under Section 3.2 (including any Pro Rata Bonus) for any
period prior to or following his termination or Resignation, as
applicable.
(ii) Upon Resignation, the following additional terms shall
apply:
(A) In the event that a Triggering Event occurs on or prior
to June 29, 2006 and the Executive becomes entitled to payment
pursuant to Section 7.3(e), the Executive shall be required to be
available to provide consulting services to the Company of up to
twenty (20) hours per week during the period of June 30, 2006
through August 31, 2006 (the "Consulting Period"), with no
carryover from week to week, at times and dates mutually agreed
upon between the Company and Executive; provided, however, that
the Executive will be entitled to take a paid two-week vacation
during the months of June, July or August with reasonable prior
notice to the Company. The Company shall pay the
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Executive for such consulting services in the gross amount of
Twenty-Four Thousand Three Hundred Five Dollars and Twelve Cents
($24,305.12) per month, payable in accordance with the Company's
normal payroll practices
(B) In the event that a Triggering Event does not occur on
or prior to June 29, 2006, during the period of June 30, 2006
through August 31, 2006, the Executive shall be available to
provide up to twenty (20) hours of work per week to the Company,
with no carryover from week to week, at times and dates mutually
agreed upon between the Company and Executive; provided, however,
that the Executive will be entitled to take a paid two-week
vacation during the months of June, July or August with
reasonable prior notice to the Company. Thereafter, for the
period of September 1, 2006 through September 30, 2007, the
Executive shall be available to provide up to twenty (20) hours
of work per month to the Company, with no carryover from month to
month, at times and dates mutually agreed upon between the
Company and Executive. For purposes of this Agreement, the term
"Transition Period" shall mean the period from June 30, 2006
through September 30, 2007; provided, however, that in the event
that a Triggering Event occurs during the Transition Period and
the Executive is entitled to receive a payment under subsection
(e) of this Section 7.3 as a result of that Triggering Event,
then the Transition Period will end (I) August 31, 2006 if such
Triggering Event occurs during the period of June 30, 2006
through August 31, 2006, or (II) as of the end of the month in
which such Triggering Event occurs if such Triggering Event
occurs during the period of September 1, 2006 through August 31,
2007. During the Transition Period, Executive shall remain a
part-time employee of the Company and be entitled to all
benefits, rights and privileges under the Employment Agreement as
if he were, and under the same terms and conditions as, a full
time employee (including continued vesting of his outstanding
stock options and restricted stock awards in accordance with the
terms of the applicable award agreements, and as the restricted
stock awards granted by the Company in September 2005 may be
enhanced in the future for other executive officers of the
Company), subject to and in accordance with the terms of the
applicable benefit plans, policies and programs as in effect from
time to time and subject to any applicable employee contribution
toward the cost of such benefits. Notwithstanding the foregoing,
the Executive shall not be entitled to any bonuses or other
incentive compensation under Section 3.2 relating to work
performed during the Transition Period. In each month of the
Transition Period, the Executive shall be paid a gross amount
equal to Forty-Eight Thousand Six Hundred Ten Dollars ($48,610),
payable in accordance with the Company's normal payroll
practices. By way of clarification, the Executive shall continue
to have the right to receive the payment set forth in subsection
(e) of this Section 7.3 if a Triggering Event occurs during the
Transition Period and the Executive is otherwise entitled to
receive a payment under Section 7.3(e).
(C) During the Consulting Period or the Transition Period,
whichever is applicable, the Executive shall continue to be
reimbursed for all expenses in accordance with Section 4.1 and
otherwise in compliance with the
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Company's applicable policies, and shall continue to be provided
with a suitable office space and secretarial support, a cell
phone and service, as well as a lap top computer and related
accessories consistent with the equipment assigned to him as of
the Amendment Date.
(D) Upon the expiration of the Consulting Period, if there
is a Triggering Event on or prior to June 29, 2006, or the
Transition Period, if there is not a Triggering Event on or prior
to June 29, 2006, whichever is applicable, the Executive's
employment with the Company shall terminate and such date shall
be considered the Executive's Date of Termination for purposes of
this Agreement.
(E) Subject to the requirement that the Executive continue
to be treated as an employee pursuant to the Employment
Agreement, the Company shall not be required to engage the
Executive for the total twenty (20) hours per week during the
period June 30, 2006 through August 31, 2006 or twenty (20) hours
per month during the period of September 1, 2006 through
September 30, 2007. Provided that such other employment does not
violate the terms of his Employment Agreement, as amended, or
unreasonably interfere with the duties herein, the Executive
shall be permitted to seek and obtain concurrent employment
elsewhere during the period September 1, 2006 through September
30, 2007 with no reduction in the compensation set forth herein.
(g) Effective as of the Amendment Date, the Executive's "Average
Bonus" used in determining that component of the Accrued Obligations under
the Employment Agreement, as amended by this Amendment, shall mean the
gross amount of the annual bonus earned for fiscal 2005 by the Executive.
Notwithstanding any provision of this Agreement to the contrary, all
payments under this Section 7.3 and the Agreement generally shall be
subject to any required tax withholding in accordance with Section 9.8. In
the case of the Death or Disability of the Executive, all payments due
hereunder shall be payable to the estate of the executive in the case of
Death, or to the Executive or his legal representative in the case of
Disability, and the Executive shall be released and excused from providing
consulting services otherwise required hereunder.
2. Section 409A. The Employment Agreement is amended to add Section
7.8 as follows:
Notwithstanding the foregoing provisions of this agreement, if the Company
determines that any amounts to be paid to Executive hereunder are subject
to Section 409A of the Internal Revenue Code, then the Company shall in
good faith adjust the form and the timing of such payments as it reasonably
determines to be necessary or advisable to be in compliance with Section
409A. If a payment hereunder must be delayed to comply with Section 409A,
then the deferred payments shall be paid at the earliest practicable date
permitted by Section 409A.
3. Additional Non-Compete Provisions. Section 8.3 of the Employment
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Agreement is amended by replacing the last sentence of that Section in its
entirety with the following:
In the event that the Executive's employment is terminated (i) by the
Company with or without Cause, in anticipation of or within two (2) years
after a Change in Control, or by the Executive with Good Reason, the
Executive shall not be subject to the covenants contained in this Section
8.3 and such covenants shall not be enforceable against the Executive from
and after the Date of Termination, or (ii) upon the expiration of the
Consulting Period or the Transition Period under Section 7.3(f), the
Executive shall be subject to the covenants contained in this Section 8.3
and such covenants shall be enforceable against the Executive for a period
of six (6) months from the Date of Termination.
4. Continuation of Directors and Officers Liability Insurance. Section
9 of the Employment Agreement shall be amended to add a new Section 9.14 as
follows:
Insurance and Indemnification. The Company agrees to maintain directors and
officers liability insurance so that the Executive remains insured for any
acts or omissions that are alleged to have occurred during or arising out
of his employment with the Company, including the period during which the
Executive may be required to provide consulting services under Section
7.3(f)(ii). Such coverage shall be at least at the same levels that the
Executive was insured as of the Amendment Date. This requirement to
maintain insurance shall be binding upon the Company and its successors,
including, without limitation, any person or entity succeeding to the
business and/or all or substantially all of the assets of the Company. To
the fullest extent permitted under the Company's or its successor's
by-laws, the Company also agrees to defend and indemnify the Executive from
and against any claims that arise out of or relate to his employment or
duties with the Company.
The foregoing amendment is hereby accepted and the terms and
conditions thereof hereby accepted and agreed to by the undersigned.
EDUCATION MANAGEMENT CORPORATION
By: /s/ Xxxx X. XxXxxxxx, Xx.
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Name: Xxxx X. XxXxxxxx, Xx.
Title: Chief Executive Officer
EXECUTIVE
By: /s/ Xxxxxx X. XxXxxxxx
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Xxxxxx X. XxXxxxxx
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