8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 29, 2011

Education Management Corporation

(Exact name of registrant as specified in its charter)

Pennsylvania	001-34466	25-1119571
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

210 Sixth Avenue, Pittsburgh, Pennsylvania	15222
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (412) 562-0900

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EX-10.1

Item 2.04 — Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.

On April 29, 2011, Education Management LLC and Education Management Finance Corp. (the “Issuers”), subsidiaries of Education Management Corporation (the “Company”), issued a notice of redemption to holders of their outstanding $47.7 million aggregate principal amount of 10.25% Senior Subordinated Notes due 2016 (the “Senior Subordinated Notes”). The Senior Subordinated Notes were issued and the redemption will be effected pursuant to the provisions of the Indenture, dated as of June 1, 2006, among the Issuers, the guarantors listed on the signature pages thereto and The Bank of New York, as trustee. The Senior Subordinated Notes will be redeemed at a redemption price of 105.125% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the date of redemption. The redemption date will be June 1, 2011. The redemption will be financed from cash generated from operations. The premium of $2.4 million and remaining amortization of related deferred financing fees of $0.6 million will be recorded as a loss on extinguishment of debt in the fourth quarter of fiscal 2011.

Item 5.02 — Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On April 29, 2011, the Compensation Committee of the Company’s Board of Directors approved an amendment (the “Amendment”) to the outstanding performance-based options granted to the Company’s executive officers, including named executive officers, under the Company’s 2006 Stock Option Plan, as amended, to provide alternative vesting criteria for the options.

The performance-based options vest upon the attainment of specified returns on invested capital in the Company by certain affiliates of the private investors that acquired the Company in 2006 (the “Principal Stockholders”). More specifically, the performance-based options generally vest in 20% increments upon the Principal Stockholders’ realizing, through one or more “Realization Events” (as defined in the performance-based option agreements), multiples of their invested capital of two, two and a half, three, three and a half, and four.

The Amendment provides alternative vesting criteria for the options. In addition to vesting upon satisfaction of the criteria specified above, following the Amendment, the performance-based options will also generally vest upon the occurrence of a Realization Event in which any Principal Stockholder receives cash or marketable securities upon a sale, exchange or other disposition of the Company’s common stock. The options will vest in the same proportion as the number of shares sold by the Principal Stockholders in such Realization Event bears to the total number of shares held by all of the Principal Stockholders.

The Amendment applies to the following performance-based options held by the Company’s named executive officers:

			No. of Shares of
	Option		Common Stock		Option		Option
	Grant Date		Underlying Option		Exercise Price		Expiration Date
Todd S. Nelson		3/9/2007		1,262,039	$	12.29		3/8/2017
Edward H. West		8/1/2006		306,095	$	11.18		5/31/2016
		6/28/2007		45,913	$	13.41		6/27/2017
Danny D. Finuf		12/5/2006		41,381	$	11.18		5/31/2016
		6/28/2007		6,205	$	13.41		6/27/2017
John M. Mazzoni		12/5/2006		148,079	$	11.18		5/31/2016
		6/28/2007		22,211	$	13.41		6/27/2017
John T. South, III		12/5/2006		99,763	$	11.18		5/31/2016
		6/28/2007		14,964	$	13.41		6/27/2017

The foregoing description is not complete and is qualified in its entirety by reference to form of amendment to the performance-based option agreements, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 9.01 — Financial Statements and Exhibits.

(a) None.

(b) None.

(c) None.

(d) Exhibits.

Exhibit 10.1 Form of Amendment to Executive Performance-Vested Stock Option Agreement.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EDUCATION MANAGEMENT CORPORATION
By:	/s/ Edward H. West
	Edward H. West
	President and Chief Financial Officer

Dated: May 5, 2011

EXHIBIT INDEX

Exhibit No.	Description
10.1	Form of Amendment to Executive Performance-Vested Stock Option Agreement.

EX-10.1

Exhibit 10.1

EDUCATION MANAGEMENT CORPORATION

AMENDMENT TO
NONQUALIFIED STOCK OPTION AGREEMENT
(Performance-Vesting)

     This Amendment to Nonqualified Stock Option Agreement (Performance-Vesting) (this “Amendment”) is entered into by and between Education Management Corporation, a Pennsylvania corporation (the “Company”), and _______________ (the “Participant”).

RECITALS:

     WHEREAS, the Company adopted the Education Management Corporation 2006 Stock Option Plan, as amended (the “Plan”), for the benefit of its eligible employees and directors (capitalized terms not otherwise defined herein shall have the meanings given thereto in the Plan);

     WHEREAS, on ______________, the Company and the Participant entered into a Nonqualified Stock Option Agreement (Performance-Vesting) under the Plan (the “Agreement”), pursuant to which the Company granted the Participant an Option to purchase shares of the Company’s common stock on the terms and conditions set forth therein;

     WHEREAS, the Company and the Participant wish to amend the vesting criteria for the Option set forth in the Agreement; and

     WHEREAS, pursuant to Section 16 of the Agreement, the Agreement may be amended by mutual agreement of the Company and the Participant.

     NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:

          1. Section 3 of the Agreement is amended and restated in its entirety to read as follows:

          “3. Vesting.

          (a) Subject solely to the provisions of Sections 4(a), 4(b) and 4(c) below and Section 8(b) of the Plan, the Option shall vest and become exercisable with respect to the Shares then subject to it at the times, and to the degree, set forth in this Section 3, upon one or more Realization Events. If a Realization Event would result in vesting under each of Section 3(b) and 3(c), then the number of Shares that shall vest upon any such Realization Event shall equal the greater of the number of Shares that would vest upon such Realization Event pursuant to Section 3(b) or Section 3(c). The portion of the Option which has become vested and exercisable as described in this Section 3 is hereinafter referred to as the “Vested Portion.”

          (b) Upon the occurrence of a Realization Event in which any Principal Stockholder receives cash or marketable securities in respect of its interest in Shares by means of a sale, exchange or other disposition of its interest in Shares (other than transfers by members of the Principal Stockholders to or among their respective Affiliates), the Option shall vest and become exercisable with respect to (i) that number of Shares subject to the Option that bears the same proportion to (ii) the total number of Shares subject to the Option (treating Shares in respect of which the Option has already been exercised as, for this purpose, then still subject to the Option) as (x) the number of Shares sold by the Principal Stockholders in the Realization Event bears to (y) the total number of Shares held by the Principal Stockholders (including, for this purpose, Shares previously sold, exchanged or otherwise disposed of).

          (c) Upon the occurrence of a Realization Event, the Option shall vest and become exercisable with respect to the Shares then subject to it at the times, and to the degree, set forth in the following schedule:

Cash on Cash Return Realized by Principal
Stockholders on Invested Capital			Applicable Percentage
	200	%	20% of the Shares then subject to the Option
	250	%	40% of the Shares then subject to the Option (treating Shares in respect of which the Option has already been exercised as, for this purpose, then still subject to the Option)
	300	%	60% of the Shares then subject to the Option (treating Shares in respect of which the Option has already been exercised as, for this purpose, then still subject to the Option)
	350	%	80% of the Shares then subject to the Option (treating Shares in respect of which the Option has already been exercised as, for this purpose, then still subject to the Option)
	400	%	100% of the Shares then subject to the Option

For purposes of this Agreement, “Cash on Cash Return” shall mean the aggregate gross cash return (e.g., without deduction for taxes or for amounts invested by the Principal Stockholders in Shares) realized by the Principal Stockholders on all of the capital invested by them in Shares. Such return shall include cash (and marketable securities) realized as a result of any disposition or exchange of Shares owned by the Principal Stockholders, as well as cash (and marketable securities) received as dividends or other distributions in respect of Shares owned by the Principal Stockholders. The Cash on Cash Return targets shall be separately calculated for, and must be separately satisfied with respect to, capital invested in Shares by the Principal Stockholders after the Effective Date, so that the applicable Cash on Cash Return target stated as a percentage equals 100 + ((x/36) times (y-100)), where x = the number of months that have

elapsed from the date of investment through the date the return is being measured, (provided that x shall not exceed 36), and y = the applicable Cash on Cash Return percentage from the schedule above; provided, however, that for purposes of such calculation, returns shall first be attributed to the earliest capital invested.¹ If one or more of the Principal Stockholders ceases to own any Shares, Cash on Cash Return shall thereafter be determined based solely on the returns realized by the remaining Principal Stockholder(s). Immediately following a Realization Event described in clause (ii) of the definition thereof in Section 2(w) of the Plan (a “Clause (ii) Realization Event”), the sum of (x) the Fair Market Value of the remaining Shares owned by the Principal Stockholders, plus (y) the Fair Market Value of property previously received by the Principal Stockholders in respect of Shares in forms other than cash (or marketable securities), shall be considered as cash proceeds received by the Principal Stockholders, and there shall be no further vesting thereafter; provided, however, that in the event that some or all of the proceeds received (or to be received) by the Principal Stockholders in respect of any disposition of Shares owned by them is in the form of contingent payments or proceeds (e.g., installment sale proceeds, earn-out proceeds, escrow amounts, etc.), then, at the time that such contingent payments or proceeds (if any) are received by the Principal Stockholders, the Cash on Cash Return shall be recalculated and the Applicable Percentage above increased if necessary to reflect the receipt of such payments or proceeds. Notwithstanding the foregoing, to the extent that a Clause (ii) Realization Event has not occurred as of the nine-year and six-month anniversary of the Date of Grant and there are any contingent payments or proceeds that have not been received by the Principal Stockholders (or property previously received by the Principal Stockholders that has not already been reduced to cash or marketable securities) as of that date, then the Fair Market Value of such contingent payments or proceeds (or property) shall be determined and the Cash on Cash Return shall be recalculated and the Applicable Percentage above increased, if necessary.”

          2. Except to the extent expressly amended hereby, the Agreement shall remain in full force and effect in all respects.

[Signature page follows]

¹ For purposes of illustration, to achieve a 60% Applicable Percentage, (i) a 300% Cash on Cash Return would have to be realized on the Principal Stockholders’ initial capital investment and (ii) on subsequently invested capital measured on a realized return to the Principal Stockholders two years following the date of investment, the Cash on Cash Return needed on that subsequently invested capital would be equal to 233% (100 + ((24/36) * (300-100)) = 233).

          IN WITNESS WHEREOF, the Company and the Participant have caused this Amendment to be executed as of the ____ day of _________, 2011.

EDUCATION MANAGEMENT CORPORATION

By:

Name:

Title:

PARTICIPANT

Print Name: