Document:

EX-10.01

 

Exhibit 10.01

The

Education Management Corporation

Deferred Compensation Plan

Amended for Implementation August 1, 2003

with Resolution for Rescission of 2005 Contributions under the AJCA,

effected December 14, 2005

      

			
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Table of Contents

	 	 	 	 	 
	Table of Contents

	 	 	 	 
	Welcome to the Plan!
	 	 	3	 
	Participation
	 	 	3	 
	Salary Deferrals
	 	 	4	 
	Company Credits
	 	 	5	 
	Investment Credits
	 	 	7	 
	Deferral of Gain from the Exercise of Stock Options
	 	 	8	 
	Lack of Funding
	 	 	9	 
	Payment of Benefits
	 	 	10	 
	Hardship Withdrawals
	 	 	13	 
	Administration, Claims and Appeals
	 	 	14	 
	Miscellaneous
	 	 	14	 

      

			
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Welcome to the Plan!

     Introduction. This is the plan document for the Education Management Corporation
Deferred Compensation Plan. This is an unfunded, non-qualified deferred compensation arrangement.
The purpose is to allow additional retirement savings for a select group of management or highly
compensated employees in view of the restrictions on the contributions that can be made, or
benefits that can be accrued, for these employees under tax-qualified retirement plans of the
employer.

     Ordinary names. In this document, we will call things by their ordinary names. Education
Management Corporation will be called “the company.” This plan will simply be called “the plan.”
When we say “you,” we mean employees who are eligible to participate in the plan and choose to do
so. When we say “the Code,” we mean the Internal Revenue Code of 1986, as amended.

     Effective date. This document amends and restates the plan effective August 1, 2003. This
amendment and restatement does not attempt to describe the rules that were in effect under the plan
before that date and therefore does not apply to any participant whose employment with the employer
terminated before that date (any such participant’s rights being governed by the terms of the plan
as in effect when his termination of employment occurred).

Participation

     Committee discretion. The Retirement Committee has complete discretion to select
employees for participation in this plan.

     Current criteria. At present, the Retirement Committee has exercised its discretion to make
eligible:

     • outside directors of the company, with respect to their director’s fees and gain on
the exercise of stock options,

     • school presidents, and

     • executive employees of the company and designated subsidiaries who earn $150,000 or
more per year.

     Legal limitation. Despite the discretion of the Retirement Committee and the current criteria
just described, no employee will be selected for participation or continued as a participant in
this plan if, due to the employee’s participation, the plan would fail to qualify as primarily for
the purpose of providing deferred compensation to a select group of management or highly
compensated employees, within the meaning of sections 201, 301 and 401 of the Employee Retirement
Income Security Act of 1974, as amended.

      

			
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     Participation agreement. Participation is not automatic if and when you satisfy the current
criteria. Instead, employees who satisfy the current criteria will be notified of their
eligibility and offered the opportunity to participate. If you wish to participate, you must
complete and file with the administrator of the plan a written participation agreement.

     If you choose to make salary deferrals, the participation agreement will reflect your choice.
But in any event, the participation agreement will (i) confirm your participation, (ii) indicate
your initial choice with regard to investment credits on any company credits that may be made,
(iii) indicate your choice as to the form of payment and (iv) designate your beneficiary.

     Annual determination. Eligibility to participate is determined annually. The fact that you
were eligible to participate (and did participate) in one year does not automatically entitle you
to participate in any future year.

     Your participation agreement, however, is “evergreen.” It remains in effect and governs your
choices under the plan during those years when you do participate in the plan, unless and until you
change it.

     Changing your participation agreement. Except for changes with regard to investment credits
(which we will explain in just a moment), you change your participation agreement by completing and
filing a new one with the administrator of the plan.

     A change in the amount of salary deferrals will take effect at the beginning of the next
calendar year, as long as it is filed with the administrator no later than December 31 of the
preceding calendar year. A change in the time or form of payment will take effect as described
later in the plan in the section called “Payment.” A change of beneficiary will take effect
immediately upon filing with the administrator.

     With regard to investment credits, you change your choices in the same manner as under the
Retirement Plan—by calling Fidelity at (800) 835-5092 during normal business hours—and the
changes take effect as soon as Fidelity processes them.

Salary Deferrals

     Introduction. You may choose to defer a certain percentage of your salary and/or bonus
into the plan. If you do, that amount will not be paid to you currently in cash but will be
credited to a bookkeeping account in your name under the plan. (With regard to outside directors,
references in this section to “salary” will be understood as referring to director’s fees.)

     Amount. There are two possible elements of your choice to defer.

     Ordinary deferral of salary. First, you may defer a fixed, whole percentage of your salary
and/or bonus. The amount of deferral must be at least 1% of your compensation or $1,000, whichever
is less. The amount may not be more than 100% of your compensation. Alternatively, you may defer
a fixed dollar amount, as long as the amount is within those limits.

     Supplemental deferral based on amounts returned under Retirement Plan. Second, entirely

      

			
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separate from the percentage described in the preceding paragraph (and assuming you have not
already chosen to defer 100% of your compensation, of course), you may defer an additional amount
of salary equal to all or a portion of any elective contributions (plus interest) that are returned
to you from the Education Management Corporation Retirement Plan (we’ll just call it the
“Retirement Plan”) by reason of the non-discrimination requirements of law.

     That is to say, in a given calendar year, elective contributions made under the Retirement
Plan in the preceding year may be returned to you (with interest) because of the non-discrimination
requirements of law. If you have elected supplemental deferral under this paragraph, while the
elective contributions (and interest) will still be returned to you in cash from the Retirement
Plan, an offsetting additional deferral will be taken from your current salary under this plan.
The net economic effect will be that the amount remains deferred, but under this plan instead of
under the Retirement Plan. You may elect to defer any whole percentage of any such return of
elective contributions, from zero to 100%.

     Written election. In order to defer compensation into the plan, you must complete and file
with the administrator of the plan a written election. The written election will specify the
percentage and whether it applies to salary or bonus or both. The election will also specify
whether you wish to defer an additional amount equal to all or any portion of any elective
contributions (and interest) that may be returned to you in the particular calendar year.

     Timing. In order to defer for a particular calendar year, you must complete and file the
written election with the administrator of the plan no later than December 31 of the preceding
calendar year.

     With respect to the additional deferral equal to all or a portion of the elective
contributions that may be returned under the Retirement Plan, the timing may require more
explanation. An election made by December 31 of Year 1 applies to compensation earned in Year 2.
In the case of supplemental deferrals equal to contributions that are returned under the Retirement
Plan, the supplemental deferral occurs in Year 2 based on elective contributions that are returned
in Year 2 and the deferral is made from compensation earned and otherwise payable in Year 2.

     This is so even though the contributions returned from the Retirement Plan in Year 2 were made
to the Retirement Plan in Year 1. An election of supplemental deferral under this plan must
therefore be made before it is known whether elective contributions will be returned from the
Retirement Plan at all. The election will therefore be contingent—applicable only if and when
elective contributions are in fact returned under the Retirement Plan.

     Notwithstanding any other provision of this plan, if you made a deferral election with respect
to your 2005 compensation, you may, on or before December 15, 2005, file a cancellation of such
election, and if you do so, the amount of your 2005 contributions shall be paid to you, less
applicable withholding taxes, on or before December 31, 2005.

Company Credits

     Introduction. Whether or not you choose to defer salary and/or bonus, you may receive
company credits under the plan in the following circumstances.

     Matching contributions. If you made elective contributions under the Retirement Plan
that generated the maximum matching contribution under the Retirement Plan (or your matching

      

			
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contributions did not reach the maximum because your elective contributions reached the dollar
limit before the end of the year), you may be entitled to a company credit under this section.

     If so, you are entitled to a credit under this section if the amount of matching contributions
that you received under the Retirement Plan was limited:

     • by section 401(a)(17) of the Code (which limits compensation taken into account under
the Retirement Plan to a stated amount, (which is $220,000 in 2006, for example) or

     • by section 402(g) of the Code (which limits elective contributions under the
Retirement Plan to a stated amount, which is $15,000 in 2006, for example).

If so, the company will credit you under this plan with an amount equal to the additional matching
contribution that you would have received under the Retirement Plan if you had not been so limited.

EXAMPLE 1—Not eligible for company matching credit. It is 2006. Your compensation
is $230,000 (although only $220,000 can be taken into account under the Retirement
Plan). You make elective contributions under the Retirement Plan of 4% of
compensation. You receive no credit under this section of this plan, because you
did not make elective contributions under the Retirement Plan that generated the
maximum matching contribution under the Retirement Plan, nor did your matching
contributions reach the maximum because your elective contributions reached the
dollar limit.

EXAMPLE 2—Eligible and limited by 401(a)(17). It is 2006. Your compensation is
$230,000 (although only $220,000 can be taken into account under the Retirement
Plan). You make elective contributions under the Retirement Plan of 6% of
compensation, which generate the maximum matching contribution of 4.5% (that is,
4.5% of $220,000, which is $9,900). If the compensation that is taken into account
under the Retirement Plan were not limited to $220,000, your matching contribution
would have been $10,350 (that is, 4.5% of $230,000). Therefore, under this section
of this plan, you receive a company credit equal to the difference of $10,350 minus
$9,900, or $450.

EXAMPLE 3—Eligible and limited by 402(g). It is 2006. Your compensation is
$230,000. You make elective contributions under the Retirement Plan of 10% of
compensation, a percentage calculated to generate the maximum matching contribution.
But your elective contributions reach the limit of $15,000 well before the end of
the year (whenever your cumulative compensation during the year reaches $150,000),
at which point they stop. When your elective contributions stop, so do the matching
contributions, which up to that point have accumulated to $6,750. Effective January
1, 1999, under the Retirement Plan a “catch-up” matching contribution is made at the
end of the year to bring your matching contributions up to the legal maximum of
$9,900; that adjustment relieves you of the effect of your elective contributions
stopping before the end of the year. But before 1999 (and if that “catch-up”
provision is ever eliminated), you would get a credit under this section equal to
the “catch-up” amount (that is, the maximum of $9,900 minus your actual matching
contributions of $6750 or $3150).

Discretionary contributions and forfeitures. Your share of company discretionary
contributions and forfeitures under the Retirement Plan may be limited by either or both of two
legal limits—the limit on compensation that may be taken into account (in 2006, $220,000) and the
limit under section 415 of the Code on total allocations of contributions and forfeitures. If so,
the company will credit you under this plan with the discretionary contributions and/or forfeitures
that you would have received under the

      

			
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Retirement Plan (if the Retirement Plan had not been subject
to those two legal limits) but did not receive under the
Retirement Plan. (These are credits of
cash, not stock, even if they relate to forfeitures from employer stock accounts under the
Retirement Plan.)

      

			
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Investment Credits

     Introduction. The amount that you are entitled to receive under the plan is a function
of the salary deferrals that you make, the company credits that you receive under the plan, and
investment credits. This section will explain the system of investment credits.

     Hypothetical investments. Investment credits are calculated as if the amounts standing to
your credit under the plan were invested in one or more of a variety of mutual or collective funds
(listed below). While we call them investment “credits,” you realize of course that they may be
either positive or negative, depending on the performance of the funds that are used as measuring
devices.

     In addition, we want to emphasize that, for legal reasons, the amounts standing to your credit
under the plan are nothing more than bookkeeping entries that measure the extent of the company’s
contractual obligation to pay you under the terms of the plan. That includes the investment
credits. You do not have any right to, or interest in, any assets that the company may set aside
for this purpose or investment gains on them.

     Your choice. You do, however, have a choice as to the mutual or collective funds that will be
used as the measuring stick for the investment credits that will be added to your account. When
you first become eligible to participate, you will be asked to choose from among the funds offered
under the Retirement Plan. Those choices are shown on Appendix B to the Information Statement for
the EDMC Deferred Compensation Plan.

     EDMC stock is now an investment option. If you elect to allocate a portion of your account to
the employer stock fund, you will receive stock credits under this plan, expressed as the number of
shares of stock that represent the portion of your account invested in this fund. We will call
these “stock credits” in the remainder of this plan. As with all other amounts deferred under this
plan, stock credits represent nothing more than the company’s unfunded, unsecured promise to pay
the shares to you at a future date, in accordance with the terms of this plan. You do not own the
stock unless and until it is paid to you pursuant to the terms of this plan.

If for any reason there is no current choice on file for you, the plan hereby
requires that the measuring stick be the Fidelity Intermediate Bond Fund, and
neither the plan administrator nor any other fiduciary of the plan shall have any
authority or discretion to direct otherwise. The same applies to any portion of
your choice that becomes out of date, such as if you have chosen a particular fund
and that fund is no longer offered (unless a substitute fund is automatically
provided).

     The choice that you make for the amounts currently standing to your credit under the plan need
not be the same as the choice you make for future credits. But choices among the funds are not
permitted in increments smaller than 10% of the amount to which they apply.

     As noted above, you may change your choice with regard to investment credits at any time by
calling Fidelity during normal business hours at (800) 835-5092.

     Statements. Fidelity Investments will provide annual statements showing the amounts standing
to your credit under the plan. The statements will separately account for salary deferrals,
different types of company credits, and investment credits. But you may inquire about your balance
or get a statement at any time by calling Fidelity at (800) 835-5092. Or you can visit the
Fidelity website at www.401k.com.

      

			
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Deferral of Gain from the

Exercise of Stock Options *

* — THIS SECTION IS NO LONGER APPLICABLE UNDER THE AMERICAN JOB CREATION ACT OF 2004 AND
WILL BE ELIMINATED WHEN THE FULL PLAN IS AMENDED BY DECEMBER 31, 2006TO COMPLY WITH SECTION 409A OF
THE IRS CODE, RETROACTIVE TO JANUARY 1, 2005.

     Introduction. If you hold a stock option under one of the company’s Stock Incentive Plans,
then entirely apart from the system of salary deferrals, company credits and investment credits
which has been described up to this point, you may choose to defer under this plan the gain that
you would otherwise realize upon the exercise of that stock option. If you do, the gain that you
would otherwise have received upon exercise of the stock option will not be paid to you currently
but will be credited to a bookkeeping account in your name under the plan for payment to you (or
your beneficiary) at a future date.

     Written election. In order to defer gain from the exercise of a stock option into the plan,
you must complete and file with the administrator of the plan a written election. The written
election will specify either (a) the particular options from which the gain will be deferred under
this plan, regardless of when the option is exercised, or (b) the particular exercises from which
the gain will be deferred under this plan, identified by a date or range of dates, or (c) a
combination of both.

     For example, you may elect to defer under this plan the gain from (a) the exercise of all
non-qualified stock options granted to you, but none of the incentive stock options, or (b) all
exercises of stock options during a stated calendar year, or (c) all exercises of non-qualified
stock options granted to you that occur during a particular calendar year.

Please note: As explained in more detail below, the purpose of this section of the
plan is to postpone federal income taxation on the element of gain from exercising a
stock option—taxation that would otherwise occur when you exercise the option.
Since federal income taxation of the gain at exercise applies to non-qualified stock
options but not to incentive stock options, you may reasonably conclude that this
section should only be used with respect to non-qualified stock options.

     Timing. You may make the election to defer under this section of the plan at any time. But
the election will apply only to exercises that satisfy both of the following conditions:

     • the exercise occurs in a calendar year following the calendar year in which the
election was filed with the administrator of this plan, and

     • the exercise occurs at least six months after the election was filed with the
administrator of this plan.

     For example, if an election is filed with the plan administrator on February 15, 2004, it
cannot apply to any exercises that occur before January 1, 2005. If an election is filed with the
administrator on October 15, 2003, it cannot apply to any exercises that occur before April 15,
2004.

     Once filed with the plan administrator, an election under this section of the plan may only be
revoked by a written revocation election filed with the plan administrator at least 13 months prior
to the effective date of such revocation.

     For example, if you filed an election effective January 1, 2004 to defer the gain on
non-qualified

      

			
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options granted to you in 2003 and you file a revocation of that election on March
15, 2005, that revocation may take effect no earlier than April 15, 2006.

Exercising the option. If you have elected to defer under this section of the plan, do
not initiate an exercise of your stock option through Mellon Investor Services (or the then-current
transfer agent). Instead, please contact the Human Resources department at the EDMC Corporate
Staff offices to initiate the process, in order to assure that the option stock is not issued to
you, as we will explain here.

     Upon exercise, you will not receive the shares of stock nor the dollar amount that represents
the element of gain from exercising the stock option, depending on method of exercise. When we say
“the element of gain from exercising the stock option,” we mean the excess of the value of the
stock that you would receive by exercising the stock option over the amount that you had to pay to
exercise the stock option (either in cash or in stock). This is the amount on which you would
ordinarily be taxed if you did not use this section of this plan.

EXAMPLE: You have the option to buy 100 shares of company stock at an option price
of $20. The stock has a current market value of $25. You exercise your option by
paying $2,000 and, in return, would ordinarily receive 100 shares of stock valued at
$2,500. In this example, $2,000 worth of that stock represents a return of your
purchase price; $500 worth of stock represents the element of gain from exercising
the stock option. In this example, the gain from exercising the option consists of
20 shares of stock ($500 worth of stock at $25 per share equals 20 shares).

EXAMPLE: The facts are the same as the previous example, except that you exercise
by using a cashless method such as “exercise and sell to cover,” meaning that you
are treated as if you exercised the option by buying 100 shares at $20, costing
$2,000, and then sold 80 shares at $25 to cover the cost of exercising the option
(selling 80 shares at $25 raises $2,000). That would likewise leave you with 20
shares as the element of gain from exercising the option.

     Upon exercise, instead of receiving the shares of stock that represent the element of gain
from exercising the option, you will receive stock credits under this plan, expressed as the number
of shares of stock that represent the element of gain. In the examples above, you would receive a
stock credit under this plan equal to 20 shares of stock.

     Dividends. You do not earn investment credits on shares of stock that are credited to your
account under this section of the plan. Instead, if dividends are payable on the stock for which
the stock credit under this plan is a substitute, then your account under this plan will receive
additional credits, expressed in shares of company stock, equal to the value of the dividends.
Alternatively, if you so choose by written election made and filed with the plan administrator
before a dividend is declared, you may receive a current cash payment from the company equal to the
dividend in the same manner as if you actually owned the stock that stands to your credit under
this plan.

Plan not Funded

     Introduction. We say “credits” in this document deliberately, because this plan
involves nothing more than a contractual promise by the company to pay deferred compensation when
(and in the amounts) determined under the terms of the plan. Legally, the plan is unfunded and
unsecured, as this section will explain.

      

			
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     Unfunded, unsecured promise to pay. This plan is unfunded and has no assets. The promise of
benefits under the plan is no more than a contractual obligation of the company to be
satisfied from its general assets. Participation in the plan gives you nothing more than the
company’s contractual promise to pay deferred compensation when due in accordance with the terms of
this plan.

     Salary deferral. Just to make the point clear once again, if you choose to defer salary under
the plan, the amount that you choose to defer is not an “employee contribution” and is not an asset
of yours or of the plan. It reflects nothing more than a re-structuring of your compensation
arrangement, whereby current compensation is somewhat less and deferred compensation is somewhat
more.

     Reserves. The company is not required to segregate, maintain or invest any portion of its
assets by reason of its contractual commitment to pay deferred compensation under this plan. If
the company nevertheless chooses to establish and invest a reserve (as a matter of prudent
management of its contractual liability), such reserve remains an asset of the company in which no
participating employee has any right, title or interest. Employees entitled to deferred
compensation under this plan have the status of general unsecured creditors of the company.

     Rabbi trust. Though not required to do so, the company may establish (and has in fact
established) a so-called rabbi trust (so named because it was invented by a synagogue and first
approved by the IRS for a rabbi). Here is how the rabbi trust works:

     • The rabbi trust is held by a financial institution as trustee under a detailed,
written trust agreement. The trustee of this rabbi trust is Fidelity Management Trust Company,
which is why the plan refers you to Fidelity for information about your account and to change your
choices about investment credits.

     • The company contributes cash to the rabbi trust at whatever times and in whatever
amounts it chooses. Please note that this applies only to salary deferrals, company credits, and
investment credits. If you use this plan to defer the element of gain from the exercise of a stock
option, and therefore receive stock credits under this plan, no stock is transferred to, or held
in, the rabbi trust.

     • The assets of the trust are considered to be assets of the company. For example, the
investment earnings of the trust are taxable income to the company under the “grantor trust” rules.
As noted in the previous section of this plan, no participant or beneficiary of the plan has any
right, title or interest in the assets of the rabbi trust.

     • But under the terms of the rabbi trust, the assets may be used only for the purpose
of paying benefits under this plan, barring bankruptcy of the company (or similar events), in which
event the assets of the rabbi trust are available not just to participants and beneficiaries of
this plan but to all other creditors of the company as well.

     • To the extent that payments are made to participants and beneficiaries by the trustee
from the rabbi trust, those payments are considered payments by the company under the plan and
satisfy the company’s obligation under the plan.

Payment of Benefits

     Introduction. This section of the plan explains when you are entitled to payment under
the plan, how much, and in what form.

			
	 
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     Deferrals to a stated date, even before termination of employment. On your participation
form, you may designate salary deferrals (not company credits, which are subject to vesting) to be
credited to accounts which are payable on dates that you specify. When the stated date arrives,
you are entitled to the total amount standing to your credit in that account (including investment
credits), regardless of whether your employment with the company has terminated. You may use this
feature to defer for a child’s education, for example.

     Termination of employment. Apart from accounts that are payable on a stated date (as
explained in the previous section), payment is triggered by any one of the following events,
whichever happens first. When we say “the total amount standing to your credit under the plan,”
remember that we are only talking about accounts that are not designated to be paid on stated dates
(as explained the in previous section).

     • Normal retirement. If your employment with the company terminates on or after your
65th birthday, you are entitled to receive payment equal to the total amount standing to your
credit under the plan, including salary deferral credits, company credits, investment credits and
stock credits (if any).

     • Early retirement. If your employment with the company terminates on or after your
55th birthday and you have completed at least 5 years of service with the company (with the meaning
of the Retirement Plan), you are entitled to receive payment equal to the total amount standing to
your credit under the plan, including salary deferral credits, company credits, investment credits,
and stock credits (if any).

     • Disability. If you become totally and permanently disabled while still employed by
the company, you are entitled to receive payment equal to the total amount standing to your credit
under the plan, including salary deferral credits, company credits, investment credits, and stock
credits (if any).

     For this purpose, total and permanent disability means that you are unable to engage in any
substantial gainful activity by reason of any physical or mental impairment which is expected to
result in death or be of a long, continued and indefinite duration, as certified by a written
opinion of a physician selected by the administrator of the plan.

     • Death. If you die while still employed by the company, your beneficiary is entitled
to receive payment equal to the total amount standing to your credit under the plan, including
salary deferral credits, company credits, investment credits, and stock credits (if any).

     • Other termination of employment. If your employment with the company terminates
under any circumstances other than those previously listed in this section, you are entitled to
receive all of your salary deferral credits and investment credits on them, as well as all of your
stock credits (if any). You are also entitled to receive all of the company credits and investment
credits on them if you have completed at least 3 years of service (within the meaning of the
Retirement Plan). If you have not completed at least 3 years of service (within the meaning of the
Retirement Plan), you are not entitled to receive any of the company credits and investment credits
on them, with one exception.

     As an exception, if you had completed at least 3 years of service (within the meaning of the
Retirement Plan) by April 1, 2000, then you are entitled to 20% of the company credits and
investment credits on them (if you have completed only 3 years of service at the time of your
termination) or 40% of the company credits and investment credits on them (if you have completed
only 4 years of service at the time of your termination).

     When payment is made. By default, payment is made (or begun, if payment is to be made in
installments) as soon as administratively feasible after the triggering event. If you die before
payment is made in full, the balance of your entitlement will be paid to your beneficiary as soon
as administratively feasible.

      

			
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     But you may alter the default time of payment if you act sufficiently in advance of the
triggering event. Sufficiently in advance of the triggering event means (a) during the calendar
year before the calendar year in which the triggering event occurs and (b) at least six months
before the triggering event occurs. If you file a written form with the plan administration
sufficiently in advance of the triggering event, you may postpone the triggering event either for a
fixed period or until a fixed date (stated on your form).

  EXAMPLE 1: It is August 2006. You are thinking of taking early retirement (age 55
plus 5 years of service) on April 1, 2007. Early retirement will trigger payment
under this plan. But you file a written form with the plan administrator no later
than September 30, 2006 stating that you wish payment to be deferred until 3 years
after your early retirement. You take early retirement on April 1, 2007. Because
the form was filed during the preceding calendar year and at least six months before
your early retirement, payment is successfully postponed until 3 years after your
early retirement.

  EXAMPLE 2: Same facts as Example 1, except that you die on January 15, 2007. Your
death triggers payment under this plan. Because your form was not filed at least
six months before the triggering event, however, it is not given effect. Your
beneficiary is paid as soon as administratively possible after your death.

     Form of payment. Payment of salary deferral credits, company credits and investment credits
on both is made in cash, except that you may elect to receive for your stock credits in the form of
shares of employer stock (the value of fractional shares will be paid in cash). Payment of stock
units resulting from the deferral of option gains is automatically made in stock. In either case,
by default, payment is made in a single payment.

     But you may alter the default form of payment if you act sufficiently in advance of the
triggering event. Sufficiently in advance of the triggering event means (a) during the calendar
year before the calendar year in which the triggering event occurs and (b) at least six months
before the triggering event occurs. If you file a written form with the plan administration
sufficiently in advance of the triggering event, you may choose to have payments made in annual
installments over a period that you choose, as long as it is at least 2 years and not more than 10
years.

     If you choose installment payments, the unpaid balance of your entitlement will remain in the
plan and will remain subject to investment credits. The amount of each annual payment will be the
balance then standing to your credit under the plan multiplied by a fraction which is 1 divided by
the number of remaining payments.

Please note: Before January 1, 2003, the plan required you to choose the form of
payment on your original participation agreement, and you could not change the form
of payment except as applied to amounts deferred in the future. That restriction no
longer applies. The choices that you made on your original participation agreement
will remain in effect on and after January 1, 2003 if you take no further action.
But if you would like to change your choices, you may do so at any time (in
accordance with the rules just described) with respect to both past and future
accruals.

     Your beneficiary. Your beneficiary is the individual or entity designated on the last
participation agreement that was completed and filed with the administrator of the plan before your
death. Please note that separation or divorce does not automatically change your designation of
beneficiary. It is your responsibility to keep your designation current based on your current
circumstances.

      

			
	Deferred Compensation Plan
	 	Page 13

 

 

     If no designated beneficiary survives you, your estate will be considered your beneficiary.
This might occur if you fail to name a beneficiary or if all of your designated beneficiaries die
before you do.

     If your beneficiary is a minor or legally incompetent, the administrator may, in its
discretion, make payment to a legal or natural guardian, other relative, court-appointed
representative, or any other adult with whom the minor or incompetent resides. Any payment made in
good faith by the administrator will fully discharge the obligation of the plan with regard to that
payment, and the administrator will have no duty or responsibility to see to the proper application
of any such payment.

     Forfeitures. If your employment terminates as described above under the heading “Other
termination of employment” and you are not entitled to 100% of your company credits (and investment
credits on them), the balance will be retained on the books of the plan until you have a “Break in
Service” within the meaning of the Retirement Plan but will then be permanently forfeited.

     That is to say, if you return to employment before incurring a “Break in Service,” the
forfeiture amount will remain in your account and you may be able to earn additional entitlement to
that amount with additional years of service. But if you return after incurring a “Break in
Service,” the forfeiture amount will have been removed from your account and you will never be able
to earn any additional entitlement to that amount.

Hardship Withdrawals

     Introduction. Besides deferrals to a stated date, there is one more circumstance in
which you may be able to withdraw from the plan while still employed.

     Administrator’s discretion. The administrator of the plan has discretion to grant an
in-service withdrawal in the circumstance where you establish hardship. But hardship withdrawal is
limited to your salary deferral credits and stock credits (if any). That means no company credits
and no investment credits on either salary deferral credits or company credits.

     Hardship. For this purpose, hardship means severe financial hardship to you resulting from:

     • a sudden and unexpected illness or accident of you or a dependent (within the meaning
of section 152(a) of the Code),

     • loss of your property due to casualty, or

     • other similar extraordinary and unforeseeable circumstances arising as a result of
events beyond your control.

     The need to send a child to college and the desire to purchase a home do not qualify for a
hardship withdrawal.

     Amount available. The amount available is not more than is reasonably necessary to satisfy
the need after exhaustion of other sources such as:

      

			
	Page 14
	 	The Education Management Corporation

 

 

     • reimbursement or compensation by insurance or otherwise,

     • liquidation of other assets (except to the extent that such liquidation would itself
create a hardship), and

     • cessation of salary deferrals under this plan.

Administration, Claims

and Appeals

     Introduction. The administrator of the plan is the Retirement Committee appointed by
the board of directors of the company. The administrator has all rights, duties and powers
necessary or appropriate for the administration of the plan.

     Claims. To claim your money (or stock) under the plan, file a written claim with the
administrator (c/o Education Management Corporation, 210 Sixth Avenue, Pittsburgh, PA 15222). The
plan administrator will respond in writing within 90 days and, if the claim is denied, point out
the specific reasons and plan provisions on which the denial is based, describe any additional
information needed to complete the claim, and describe the appeal procedure.

     Appeal. If your claim is denied and you disagree and want to pursue the matter, you must file
an appeal in accordance with the following procedure. You cannot take any other steps unless and
until you have exhausted the appeal procedure. For example, if your claim is denied and you do not
use the appeal procedure, the denial of your claim is conclusive and cannot be challenged, even in
court.

     To file an appeal, write to the administrator stating the reasons why you disagree with the
denial of your claim. You must do this within 60 days after the claim was denied. In the appeal
process, you have the right to review pertinent documents. You have the right to be represented by
anyone else, including a lawyer if you wish. And you have the right to present evidence and
arguments in support of your position.

     The administrator will ordinarily issue a written decision within 60 days. The administrator
may extend the time to 120 days as long as it notifies you of the extension within the original 60
days. The administrator may, in its sole discretion, hold a hearing. The decision will explain
the reasoning of the administrator and refer to the specific provisions of this plan on which the
decision is based.

     Discretionary authority. The administrator shall have and shall exercise complete
discretionary authority to construe, interpret and apply all of the terms of the plan, including
all matters relating to eligibility for benefits, amount, time or form of benefits, and any
disputed or allegedly doubtful terms. In exercising such discretion, the administrator shall give
controlling weight to the intent of the company in establishing the plan. All decisions of the
administrator in the exercise of its appellate authority under the plan (or in the exercise of its
claims authority, absent an appeal) shall be final and binding on the plan, the company and all
participants and beneficiaries.

Miscellaneous

      

			
	Deferred Compensation Plan
	 	Page 15

 

 

     No guarantee of tax consequences. While the company is pleased to be able to offer
this plan for those employees who are eligible for it and wish to take advantage of it, the plan
does not qualify for any program under which the Internal Revenue Service would issue an advance
ruling or other determination on the federal tax consequences of the plan. This is particularly
true of the feature under which the element of gain on the exercise of a stock option may be
deferred under this plan—a relatively recent innovation on which the IRS has not yet spoken (when
this edition of the plan was adopted). The company does not guarantee the tax consequences of the
plan; consult your own tax advisor.

     Integration. This plan document represents the totality of the company’s commitment to
provide deferred compensation under this plan. There are no other writings, nor are there any oral
representations or understandings, that reflect, add to, subtract from, or alter the terms of this
document.

     Amendment and termination. Although the plan was not established with the intention that it
be temporary or expire on a certain date, the company reserves the right, in its sole discretion,
to amend or terminate the plan at any time, for any reason (or no reason), without notice,
retroactively or prospectively.

     As the only exception to the foregoing authority to amend or terminate, the company may not
amend or terminate the plan in such a way as to reduce the balance that stands to the credit of any
participant as of the date of adoption of any such amendment or termination, including salary
deferral credits, company credits, and investment credits earned up to that time.

     Expenses. The expenses of the plan will be borne by the company.

     Non-alienation. As required by the Internal Revenue Service, your right to benefits under
this plan is not subject in any manner to anticipation, sale, transfer, assignment, pledge,
encumbrance, attachment, garnishment or any other type of alienation, whether initiated by you or
by creditors of you or your beneficiary. Any attempt at alienation will simply be void.

     Limitation of liability. No director, officer, or other employee of the company shall be
personally liable for any action taken or omitted in connection with this plan and its
administration unless attributable to his own fraud or willful misconduct.

     The company hereby agrees to provide insurance to, or otherwise indemnify, every
director, officer, and other employee of the company who serves the plan in an administrative or
fiduciary capacity against any and all claims, loss, damages, expense, and liability arising from
any act or failure to act in that capacity unless there is a final court decision that the person
was guilty of gross negligence or willful misconduct.

     Applicable law. This plan will be construed according to the law of the Commonwealth of
Pennsylvania to the extent not pre-empted by ERISA.

      

			
	Page 16
	 	The Education Management CorporationEX-4.1

 

Exhibit 4.1

AMENDMENT NO. 5 TO RIGHTS AGREEMENT

     This Amendment No. 5 to Rights Agreement, dated as of December 19, 2005 (this “Amendment”), is
entered into by and between Mylan Laboratories Inc., a Pennsylvania corporation (the “Company”),
and American Stock Transfer & Trust Company (the “Rights Agent”).

     WHEREAS, the Company and the Rights Agent are party to that certain Rights Agreement dated as
of August 22, 1996, as amended as of November 8, 1999, August 13, 2004, September 8, 2004 and
December 2, 2004 (as so amended, the “Rights Agreement”);

     WHEREAS, the Board of Directors of the Company has approved and adopted this Amendment at a
meeting of the directors duly called and held; and

     WHEREAS, pursuant to and in accordance with Section 27 thereof, the parties desire to further
amend the Rights Agreement as set forth in this Amendment.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein
and in the Rights Agreement, the parties hereto agree as follows:

     1. The proviso in paragraph 1 of Amendment No. 4 to Rights Agreement, dated as of December 2,
2004, is hereby amended and restated in its entirety to read as follows:

“provided, however, that (x) at 12:01 a.m. (New York time) on
January 1, 2006, each such reference to 10% shall automatically
revert to 15% and (y) until such clearance expires, the foregoing
subsection (x) shall not apply to any Person who has received, prior
to the date of this Amendment, clearance under the Hart-Scott-Rodino
Antitrust Improvements Act, as amended, to acquire a dollar value of
Common Shares of the Company, which value of Common Shares otherwise
would permit acquisition of 10% or more of the Common Shares
outstanding at the time of such acquisition.”

     2. The term “Agreement” as used in the Rights Agreement shall be deemed to refer to the Rights
Agreement as amended hereby.

     3. (a) The parties acknowledge and agree that this Amendment is an integral part of the Rights
Agreement. Notwithstanding any provision of the Rights Agreement to the contrary, in the event of
any conflict between this Amendment and the Rights Agreement or any part of either of them, the
terms of this Amendment shall control.

     (b) Except as expressly set forth herein, the terms and conditions of the Rights Agreement are
and shall remain in full force and effect and shall be otherwise unaffected hereby.

1

 

     (c) The Rights Agreement, as amended by this Amendment, sets forth the entire understanding of
the parties with respect to the subject matter thereof and hereof.

     (d) This Amendment shall be governed by, interpreted under and construed in accordance with
the laws of the Commonwealth of Pennsylvania, without regard to laws that might otherwise govern
under applicable conflicts of laws principles.

     (e) This Amendment may be executed in any number of counterparts, each of which shall be an
original and all of which shall constitute one and the same document.

2

 

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and
attested, all as of the day and year first above written.

	 	 	 	 	 
	 	MYLAN LABORATORIES INC.

 	 
	 	By:  	/s/  Edward J. Borkowski
 	 
	 	Name:  	 	Edward J. Borkowski 	 
	 	Title:  	 	Chief Financial Officer

 	 
	 

	 	 	 	 	 
	 	AMERICAN STOCK TRANSFER & TRUST COMPANY

 	 
	 	By:  	/s/ Paula Caroppoli
 	 
	 	Name:  	 	Paula Caroppoli 	 
	 	Title:  	 	Vice President

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