Document:

Exhibit 10.1

EXHIBIT 10.1
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of October 2, 2012 (the “Amendment”), is entered into by and between Education Management Corporation, a Pennsylvania corporation (together with its successors and assigns, the “Company”), and Edward H. West (the “Executive”).
WHEREAS, the Company and the Executive previously entered into an Employment Agreement dated as of June 1, 2006 (the “Agreement”);
WHEREAS, the Agreement may be amended from time to time in accordance with the provisions of Section 8.2 thereof; and
WHEREAS, the Company and the Executive wish to amend the Agreement, effective as of the date hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valid consideration the sufficiency of which is acknowledged, the Executive and the Company hereby amend the Agreement, effective as of the date hereof, as follows:
		
	1.
	Section 1.2 of the Agreement is deleted in its entirety and restated in full as follows:

1.2    Duties.  During the Term, the Executive shall serve as the Company's Chief Executive Officer, and such other positions as officer or director of the Company and its affiliates as the Executive and the Board of directors of the Company (the “Board”) shall mutually agree from time to time. In such positions, the Executive shall perform such duties, functions and responsibilities during the Term commensurate with the Executive's positions. Subject to Section 1.3 below, the Executive shall have all authorities, duties and responsibilities customarily exercised by an individual serving in the foregoing positions at an entity of the size and nature of the Company; shall be assigned no duties or responsibilities that are materially inconsistent with, or that materially impair his ability to discharge, the foregoing duties and responsibilities; shall have such additional duties and responsibilities, consistent with the foregoing, as may be from time to time assigned to him; and in his capacity as Chief Executive Officer shall report solely and directly to the Board.  During the Term, the Executive shall also serve as a member of the Board.
		
	2.
	Section 2.1 is deleted in its entirety and restated in full as follows:

2.1    Salary.  As compensation for the performance of the Executive's services hereunder, during the Term, the Company shall pay to the Executive a salary at an annual rate of five hundred sixty-eight thousand and seven dollars ($568,007), payable in accordance with the Company's standard payroll policies (the “Base Salary”); provided, effective July 1, 2013, the Executive's Base Salary shall be increased to eight hundred fifty thousand dollars ($850,000).  The Base Salary will be reviewed annually and may be adjusted upward by the Board (or a committee thereof) in its discretion, based on competitive data and the Executive's performance.  

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	3.
	Section 2.2(a) is deleted in its entirety and restated in full as follows:

2.2    Annual Bonus.   
(a)    During the Term, the Executive will be eligible for an annual incentive bonus (the “Annual Bonus”) for each complete fiscal year occurring during the Term. The Executive's target bonus will be one hundred twenty-five percent (125%) of the Base Salary; provided, for purposes of this Section 2.2, for the fiscal year ending June 30, 2013 the Executive's “Base Salary” shall be deemed to be eight hundred fifty thousand dollars ($850,000) effective July  1, 2012. The actual Annual Bonus paid for any year will depend on meeting Company and individual performance standards established by the Board.  The Annual Bonus will be paid in cash within seventy-five (75) days of the end of the fiscal year. 
		
	4.
	Section 2.3 is amended by adding after the last sentence thereof the following:

On or within thirty (30) days after the date hereof, the Company shall award to the Executive a stock option, pursuant to one or more award agreements, for an aggregate of 1,000,000 shares of the Company's Common Stock under one or more duly-adopted long-term incentive plans, having an exercise price equal to the fair market value of Company Common Stock as provided under the applicable plan when granted and have such vesting and other terms and conditions as are set forth in a form (or forms) of stock option agreement(s) provided to, and as agreed by, the Executive.
		
	5.
	Section 3.2(a) of the Agreement is deleted in its entirety and restated in full as follows:

(a) Termination by the Company Other than for Cause; Termination by the Executive for Good Reason.  If the Executive's employment hereunder is terminated by the Company during the Term other than for Cause, or by the Executive with Good Reason, in addition to the Accrued Amounts the Executive shall be entitled to a lump sum severance payment of (i) one and one-half (1.5) times (or three (3) times if (x) the Executive reasonably demonstrates that the termination is In Anticipation Of, or (y) occurring on or within two (2) years following, a “Change in Control” (as defined in the Company's 2006 Stock Option Plan (or successor long-term incentive plan))) the sum of the Executive's Base Salary plus the target Annual Bonus and (ii) a pro-rata Annual Bonus (determined by multiplying the actual Annual Bonus earned by the Executive for the fiscal year of termination (without regard for any exercise of negative discretion under the applicable annual bonus plan) by a fraction, the numerator of which is the number of days he was employed by the Company during such fiscal year and the denominator of which is the number of days in such fiscal year) (the “Pro-Rata Annual Bonus Payment”) ((i) and (ii), collectively the “Severance Payment”), subject to the provisions of the last sentence of Section 4.8 hereof. The Company's obligations to make the Severance Payment shall be conditioned upon the Executive's execution, delivery and non-revocation of a valid and enforceable general release of claims substantially in the form attached hereto as Exhibit C (the “Release”) within thirty (30) days of the date of termination.  Subject to Section 3.2(e) and Section 8.13, the Severance Payment will be paid to the Executive as soon as practicable following the effectiveness of the Release. The Company shall also reimburse the Executive, on a monthly basis, for an amount of his COBRA premiums (for the duration of COBRA continuation coverage, not to exceed eighteen (18) months following termination of employment) equal to difference between (x) the amount of COBRA premium charged to the Executive minus (y) the amount of premium charged to actively employed senior executives for like coverage as that elected by the Executive. 

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	6.
	Section 3.2(c) of the Agreement is deleted in its entirety and restated in full as follows:

(i)    Termination Due to Disability. Upon a determination that the Executive is Disabled, the Company may give notice to the Executive that it intends to replace him. If the Executive does not return to the performance of his duties on essentially a full-time basis within thirty (30) days after receiving such notice, the Company may replace the Executive without breaching this Agreement; provided, however, that this Agreement and the Executive's employment thereunder shall not terminate until the anniversary date of this Agreement next following the date that the Executive is determined to be Disabled. For the period from the date the Executive is determined to be Disabled through the earlier of such anniversary date or the date of the Executive's death (the “Disability Period”), the Company shall continue to provide the Executive all compensation and benefits provided for in Section 2; provided, however, that (x) the Company's obligation to pay the Executive's Base Salary shall be reduced by the amounts paid to the Executive under any long-term disability insurance plan sponsored or otherwise maintained by the Company (if any) and that in no event shall the total annual obligation of the Company under this Agreement to make Base Salary payments to the Executive during the Disability Period be greater than an amount equal to two-thirds (2/3) of the Executive's Base Salary, computed on a pro rata basis beginning with the date that the Executive is replaced in accordance with this Section 3.2(c)(i) and continuing until the expiration of the Disability Period and (y) the Executive's Annual Bonus due for fiscal year (or years) in which all or a portion of the Disability Period occurs shall not be reduced on account of the Executive's absence from active service due to his Disability from what otherwise may be earned and payable to him. 
(ii)    Termination Due to Death. If the Executive's employment hereunder is terminated by reason of his death, the Company shall continue to pay the Executive's Base Salary at the rate in effect at the time of his death to such person or persons as the Executive shall have designated for that purpose in a notice filed with the Company, or, if no such person shall have been so designated, to his estate, for a period of six (6) months after the Executive's date of death. The Company also shall pay to such person(s) or estate (i) the amount of the Accrued Amounts and a Pro-Rata Annual Bonus Payment (except, for which purpose the Annual Bonus shall be deemed earned and payable at target) for the year of termination and (ii) an amount equal to one-twelfth (1/12) of the Executive's average Annual Bonus paid or payable to the Executive with respect to the most recent three (3) full fiscal years or, if greater, the most recent twelve (12)-month period (in each case, determined by annualizing the bonus paid or payable with respect to any partial fiscal year) that amount being payable in each of the six (6) months following the date of termination. Any amounts payable under this Section 3.2(c)(ii) shall be exclusive of and in addition to any payments which the Executive's widow, beneficiaries or estate may be entitled to receive pursuant to any pension plan, profit sharing plan, employee benefit plan, or life insurance policy maintained by the Company. 
		
	7.
	Section 3.2(d)(1) of the Agreement is deleted in its entirety and restated in full as follows:

(1) “Good Reason” shall mean the occurrence of any of the following events without either the Executive's prior written consent or full cure within thirty (30) days after he gives written notice to the Company describing the event and requesting cure: (i) any material diminution in the Executive's authorities, titles or offices, or the assignment to the Executive of duties that materially impair his ability to perform the duties normally assigned to an executive in the Executive's role at a corporation of the size and nature of the Company; (ii) any change in the reporting structure so that the Executive reports to someone other than to the Board; (iii) any failure to re-elect the Executive as a member of the Board; (iv) any relocation of the Company's principal office, or of the Executive's own principal place of employment, to a location more than fifty (50) miles from Pittsburgh, 

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Pennsylvania; (v) any material breach by the Company or any of its affiliates of any material obligation to the Executive; or (vi) any failure of the Company to obtain the assumption in writing of its obligation to perform this Employment Agreement by any successor to all or substantially all of the assets of the Company within fifteen (15) days after any merger, consolidation, sale or similar transaction, except where such assumption occurs by operation of law. If the Company fails to cure a Good Reason event during the thirty (30) day cure period, the Executive must terminate his employment within sixty (60) days after the expiration of such thirty (30) day period if such termination is to be treated as for Good Reason based on such uncured Good Reason event. 
		
	8.
	A new Section 8.13 is hereby added to the Agreement, to read as follows:

8.13   409A Compliance.  Notwithstanding the other provisions hereof, this Agreement is intended to comply with the requirements of section 409A of the Internal Revenue Code of 1986, as amended.  Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to comply with section 409A and if necessary, any such provision shall be deemed amended comply with Section 409A and the regulations thereunder.  Further, for purposes of the limitations on nonqualified deferred compensation under section 409A, each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Section 409A deferral election rules and the exclusion from section 409A for certain short-term deferral amounts.  Any amounts payable solely on account of an involuntary separation from service of the Executive within the meaning of section 409A shall be excludible from the requirements of section 409A, either as involuntary separation pay or as short-term deferral amounts (e.g., amounts payable under the schedule prior to March 15 of the calendar year following the calendar year of involuntary separation) to the maximum possible extent.  Any reimbursements or in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the period of time specified in this Agreement, (ii) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.  Any severance payment to the Executive that is conditioned upon the execution and non-revocation of a release of claims shall be paid in the taxable year in which ends the maximum period of time that the Executive had to consider and revoke such release, regardless of when such release is actually executed.
		
	9.
	The Company agrees to promptly pay all fees and charges of the Executive's attorneys reasonably incurred by the Executive in connection with the negotiation, preparation and execution of this Amendment and grants of stock options provided herein, up to a maximum of ten thousand dollars ($10,000).

10.Except as specifically modified herein, the Agreement shall remain in full force and effect in accordance with all of the terms and conditions thereof.
11.This Amendment may be executed in counterparts, all of which together shall comprise one and the same instrument.
[Signature page follows]

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IN WITNESS WHEREOF, the Parties have executed this Amendment to the Agreement as of the date first written above.
	
			
	 
	EDUCATION MANAGEMENT CORPORATION 

	

/s/ Edward H. West
	By:   
	

 /s/ Randall J. Killeen   

	Edward H. West
	Name:
	Randall J. Killeen

	 
	Title:  
	Vice President and Acting Chief Financial Officer

5Exhibit 10.2

EXHIBIT 10.2

EDUCATION MANAGEMENT CORPORATION
EXECUTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT (the “Agreement”), is entered into and made effective as of October 2, 2012 (the “Grant Date”), between Education Management Corporation, a Pennsylvania corporation (the “Company”), and the participant set forth on the signature page hereto (the “Grantee” and together with the Company, the “Parties”):
R E C I T A L S:
WHEREAS, the Company has adopted the Education Management Corporation 2012 Omnibus Long-Term Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Agreement to the extent set forth in Section 16 below.  Capitalized terms not otherwise defined herein or by reference herein shall have the meanings given thereto in the Plan; and
WHEREAS, the Committee has determined that it is in the best interests of the Company and its shareholders to grant an Option to the Grantee pursuant to the Plan, the Employment Agreement between the Grantee and the Company (the “Parties”) (the “Employment Agreement”), and the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the Parties agree as follows:
1.Grant of the Option.  The Company hereby grants to the Grantee the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of the number of shares of the Company's Stock set forth on the signature page hereto (the “Shares”), subject to adjustment as set forth in the Plan.  The Option Price shall be as set forth on the signature page hereto, which the Parties agree is not less than the Fair Market Value of a share of Stock as of the Grant Date.  If designated on the signature page hereto as an Incentive Stock Option, this Option is intended to qualify as an “incentive stock option” as defined in Section 422 of the Code.  Nevertheless, to the extent that the Option fails to meet the requirements of an “incentive stock option” under Section 422 of the Code, this Option shall be treated as a Non-qualified Stock Option.  The grant of this Option is conditioned on the Grantee's acceptance of the provisions set forth in this Agreement within 60 days after the Agreement is presented to the Grantee for review.

2.Duration.  Subject to the provisions of the Plan and this Agreement, the Grantee may exercise all or any part of the Vested Portion of the Option at any time prior to the tenth anniversary of the Grant Date (the “Expiration Date”).  The Option may not be cancelled or forfeited without the Grantee's prior written consent prior to such Expiration Date, other than as expressly provided (x) in Section 15 of the Plan (relating to “Transactions”), or (y) in this Agreement.

3.Vesting.
(a)Subject solely to the provisions of Sections 3(b), 4(a), 4(b) and 4(c) below and Section 15 of the Plan, the Option shall vest and become exercisable with respect to an aggregate of 

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twenty-five percent (25%) of the Shares originally subject to the Option on each of August 15, 2013 and the three successive anniversaries thereof.  The portion of the Option which has become vested and exercisable as described in Sections 3(a) or 3(b) is hereinafter referred to as the “Vested Portion.”  Notwithstanding the foregoing, the Committee may, in its discretion, accelerate vesting of the Option or extend the applicable exercise period subject to the terms and restrictions of the Plan.

(b)Notwithstanding the foregoing, one hundred percent (100%) of the Shares then subject to the Option shall be accelerated and become vested and exercisable immediately prior to, but subject to the consummation of, a Change in Control. 

(c)If the Grantee's Service is terminated by the Company without Cause or by the Grantee for Good Reason (as defined in the Employment Agreement), the Option shall vest and become exercisable on the next anniversary of the Date of Grant with respect to twenty five percent (25%) of the Shares then subject to the Option.  The remaining portion of the Option shall automatically be canceled without payment of any consideration therefor.

For purposes of this Section 3(c), and of the percentages set forth in it, Shares previously subject to the Option, and in respect of which the Option has already been exercised, shall be treated as still subject to the Option.  If the Grantee's Service is terminated by the Company without Cause or by the Grantee for Good Reason, the Vested Portion of the Option (including that which continues to vest in accordance with this Section 3(c)) shall remain exercisable until the Expiration Date.
4.Effect of a Separation from Service.  
(a)If the Grantee's Service is terminated by the Company for Cause, the Option shall, whether or not vested, automatically be canceled without payment of consideration therefor.

(b)If the Grantee's Service is terminated by the Grantee without Good Reason (as defined in the Employment Agreement) and not for death or Disability, the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until the Expiration Date.  

(c)If the Grantee's Service is terminated due to the Grantee's death or Disability, the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until the Expiration Date.  

5.Liquidity Restriction.  Notwithstanding anything herein to the contrary, unless and until any of the Principal Stockholders sell a portion of their holdings of Common Stock (a “Liquidity Event”), the Grantee shall be restricted from selling any of the shares of Common Stock acquired through the exercise of the Vested Portion of the Option (the “Liquidity Restriction”).  The foregoing Liquidity Restriction shall lapse upon the eighth (8th) anniversary of the Grant Date.  Upon the occurrence of a Liquidity Event by one or more Principal Stockholders (prior to such eighth (8th) anniversary), the Liquidity Restriction shall lapse with respect to (i) the shares of Common Stock acquired pursuant to this Option, and (ii) any shares which may be acquired upon exercise of the Option on the date of such Liquidity Event or at any time thereafter, in the aggregate, in the same ratio that the number of shares of Common Stock sold in the Liquidity Event by the Principal Stockholders  bears to the total number of shares of Common Stock owned by the Principal Stockholders as of the Grant Date.  For the avoidance of doubt, the lapse of the Liquidity Restriction as to any unvested portion of the Option shall not accelerate 

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vesting from the date that such portion otherwise vests hereunder.  The Grantee shall remain subject to all notice and pre-clearance requirements that may be applicable under the Company's insider trading policy. 

6.Exercise of Option.
(a)Subject to Section 2 and any electronic exercise methods implemented by the Company, any part of the Vested Portion of the Option may be exercised by delivering to the Company on any business day at its principal office written notice of intent to so exercise; provided that the Option may be exercised with respect to whole shares of Stock only.  Such notice shall specify the number of Shares for which the Option is being exercised (the “Purchased Shares”) and shall be accompanied by payment in full of the Option Price of the Purchased Shares in cash or by check or wire transfer; provided, however, that, in the sole discretion of the Committee,  payment of such aggregate Option Price may instead be made, in whole or in part, by one or more of the following:  (i) provided that the Company is not then contractually prohibited from permitting exercise in this fashion, the delivery to the Company of a certificate or certificates representing Stock, duly endorsed or accompanied by a duly executed stock power, which delivery effectively transfers to the Company good and valid title to such Stock, free and clear of any pledge, commitment, lien, claim or other encumbrance (such shares of Stock to be valued at their aggregate Fair Market Value on the date of such exercise), provided that if a certificate or certificates representing shares of Stock in excess of the amount required are delivered, a certificate (or other satisfactory evidence of ownership) representing the excess number of shares of Stock shall promptly be returned by the Company, (ii) a reduction in the number of Purchased Shares to be issued upon such exercise having a Fair Market Value on the date of exercise equal to the aggregate Option Price in respect of the Purchased Shares, provided that the Company is not then contractually prohibited from permitting exercise in this fashion, or (iii) other cashless exercise procedures approved by the Committee.  The Grantee shall not have any rights to dividends or other rights of a stockholder with respect to Shares subject to the Option until the Grantee has given written notice of exercise of the Option, paid the Option Price in full for such Shares and, if applicable, has satisfied any other conditions pursuant to the Plan or this Agreement (including provisions for the payment of applicable withholding taxes, which provisions may be made in any of the ways in which the Option Price may be paid).  Notwithstanding anything to the contrary contained in this Agreement or the Plan, for purposes of this Section 6(a), the Fair Market Value of a share of Stock shall, to the extent necessary to avoid incurring “additional tax,” interest or penalties under Section 409A of the Code, not be treated as greater than the “fair market value” of a share of Stock determined consistently with Section 409A of the Code and the regulations and guidance promulgated thereunder.

(b)Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and Federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange (collectively, the “Legal Requirements”) that the Committee shall in its sole discretion determine to be necessary or advisable, unless an exemption to such registration or qualification is available and satisfied.  The Committee may establish additional procedures as it deems necessary or desirable in connection with the exercise of the Option or the issuance of any Shares upon such exercise to comply with any Legal Requirements, including suspending exercises of the Option and the tolling of any applicable exercise period and the Expiration Date during such suspension.  Such procedures may include but are not limited to the establishment of limited periods during which the Option may be exercised or that following receipt of the notice of exercise, and prior to the completion of the exercise, the Grantee will be required to affirm the exercise of the Option following receipt of any disclosure deemed necessary or desirable by the Committee.

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(c)The Company shall, upon payment in accordance with Section 6(a) above of the Option Price for Purchased Shares, deliver such Purchased Shares as soon as reasonably practicable to the Grantee and pay all original issue and transfer taxes and all other fees and expenses incident to such delivery.  All Shares delivered upon any exercise of the Option shall, when delivered, (i) be duly authorized, validly issued, fully paid and nonassessable, (ii) be registered for sale, and for resale, under U.S. state and federal securities laws to the extent that other shares of Stock issued under the Plan are then so registered or qualified and (iii) be listed, or otherwise qualified, for trading on any securities exchange or securities market on which other shares of Stock issued under the Plan of the same class are then listed or qualified.

(d)In the event of the Grantee's death, the Vested Portion of the Option shall remain exercisable by the Grantee's executor or administrator, or the person or persons to whom the Grantee's rights under this Agreement shall pass by will or by the laws of descent and distribution, or the person or persons to whom such rights have passed under Section 11, as the case may be, to the extent set forth in Section 4 (and the term “Grantee” shall be deemed to include such heir or legatee or permitted transferee).  Any such heir or legatee or permitted transferee of the Grantee shall take rights herein granted subject to the terms and conditions hereof.

7.Transactions.  This Option shall be subject to the provisions of Section 15.1.2 of the Plan in the event of a Transaction.

8.Taxes
(a)If (i) the aggregate of all amounts and benefits due to the Grantee under this Option or under any other Company plan, program, agreement or arrangement would, if received by the Grantee in full and valued under Section 280G of the Code, constitute “parachute payments” as defined in and under Section 280G of the Code (collectively, “280G Benefits”), and if (ii) such aggregate 280G Benefits would, if reduced by all federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to Section 4999 of the Code, be less than the amount the Grantee would receive, after all taxes, if the Grantee received aggregate 280G Benefits equal (as valued under Section 280G of the Code) to only three times the Grantee's “base amount” as defined in and under Section 280G of the Code, less $1.00, then (iii) such 280G Benefits payable in cash, and/or such benefits under performance-vesting options, if any, in either case as the Grantee shall select shall (to the extent that the reduction of such 280G Benefits can achieve the intended result) be reduced or eliminated to the extent necessary so that the aggregate 280G Benefits received by the Grantee will not constitute “excess parachute payments” under Section 280G of the Code.  The determinations with respect to this Section 8(a) shall be made by an independent auditor (the “Auditor”) paid by the Company.  The Auditor shall be the Company's regular independent auditor.

(b)It is possible that after the determinations and selections made pursuant to Section 8(a) the Grantee will receive 280G Benefits that are, in the aggregate, either more or less than the amount provided under Section 7.1 (hereafter referred to as an “Excess Payment” or “Underpayment,” respectively).  If it is established, pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, then the Grantee shall promptly pay an amount equal to the Excess Payment to the Company, together with interest on such amount at the applicable federal rate (as defined in and under Section 1274(d) of the Code) from the date of the Grantee's receipt of such Excess Payment until the date of such payment; provided, however, that the amount of the Excess Payment to be repaid by the Grantee will be reduced to the extent that the Auditor determines that any portion of the Excess Payment to be repaid will not be offset by a corresponding reduction in any applicable excise tax payable by the Grantee under 

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Section 4999 of the Code by reason of such repayment of the Excess Payment.  In the event that it is determined (x) by a court or (y) by the Auditor upon request by the Company or the Grantee, that an Underpayment has occurred, the Company shall promptly pay an amount equal to the Underpayment to the Grantee, together with interest on such amount at the applicable federal rate from the date such amount would have been paid to the Grantee had the provisions of Section 8.1 not been applied until the date of such payment and such payment will be deemed to have been made in accordance with the requirements of Treasury Regulation Section 1.409A‐3(g) to the extent that Section 409A of the Code would be applicable.

9.No Right to Continued Employment.  The granting of the Option evidenced hereby and this Agreement shall impose no obligation on the Company or any Affiliate to continue the Service of the Grantee and shall not lessen or affect the Company's or its Affiliates' right to terminate the Service of the Grantee.

10.Legend on Certificates.  The certificates representing the Shares purchased by exercise of the Option shall be subject to such stop transfer orders and other restrictions as the Committee may reasonably deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions, provided, however, that any such legends shall be removed, promptly upon the Grantee's reasonable written request, to the extent that the grounds that supported requiring the legend no longer apply.

11.Transferability.  The Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Grantee otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance otherwise than by will or by the laws of descent and distribution shall be void and unenforceable against the Company or any Affiliate; provided that the designation of one or more beneficiaries to whom the Option shall be transferred, in whole or in part, upon the death of the Grantee shall not constitute a prohibited assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

12.Withholding Taxes.  Prior to the issuance of any Shares upon exercise of the Option, the Grantee shall be required to satisfy any applicable withholding taxes in respect of the Option in accordance with Section 6(a) above.  Subject to the foregoing, the Grantee shall be solely responsible for the payment of all taxes relating to the payment or provision of any amounts or benefits hereunder.  All amounts and benefits due to the Grantee under this Agreement are subject to Section 7 of the Employment Agreement.

13.Securities Laws.  In connection with the acquisition of any Shares pursuant to the exercise of the Option, the Grantee will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with any Legal Requirements or with this Agreement.

14.Notices.  Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Grantee at the address appearing in the personnel records of the Company for the Grantee or to either party hereto at such other address as either party may hereafter designate in writing to the other.  Any such notice shall be deemed effective upon receipt thereof by the addressee.

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15.Choice of Law.  This Agreement shall be governed by and construed in accordance with its express terms, and otherwise in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law, provided that the provisions set forth herein that are required to be governed by the Pennsylvania Business Corporation Law of 1988, as amended, shall be governed by the Pennsylvania Business Corporation Law of 1988, as amended.

16.Option Subject to Plan.  By entering into this Agreement, the Grantee agrees and acknowledges that the Grantee has received and read a copy of the Plan.  The Option is subject to the Plan to the extent that the Plan is not inconsistent with this Agreement.  The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference.  In the event of any inconsistency between (x) any term or provision of this Agreement or any other Company Arrangement (as defined in the Employment Agreement), other than the Employment Agreement, and (y) any term or provision of the Plan, the terms and provisions of the Plan will govern and prevail.

17.Electronic Signature; Multiple Counterparts.  This Agreement may be signed by the Parties through an electronic acknowledgment of the terms and conditions set forth herein and may also be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  The Company may sign the Agreement electronically prior to distribution to the Grantee.  Signatures delivered by facsimile or other electronic means approved or recognized by the Committee shall be effective for all purposes.

[signature page follows]

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IN WITNESS WHEREOF, the Parties have executed this Executive Stock Option Agreement, effective as of the Grant Date.
EDUCATION MANAGEMENT CORPORATION

By:          /s/ Randall J. Killeen                
Name:      Randall J. Killeen
Title:        Vice President and Acting
     Chief Financial Officer

Agreed and acknowledged as
of the date first above written:

   /s/ Edward H. West             
Edward H. West

Number of time-vesting Shares
subject to the Option:  1,000,000
Option Price:    $3.03 per share
Type of Option:    Non-qualified Stock Option
Grant Date:    October 2, 2012

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