PREM14A 1 j1906901prem14a.htm EDUCATION MANAGEMENT CORPORATION PREM14A Education Management Corp. PREM14A
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
SCHEDULE 14A
Proxy Statement: Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant      þ
Filed by a Party other than the Registrant      o
Check the appropriate box:
þ   Preliminary Proxy Statement
o   Confidential for Use of the Commission Only (as permitted by Rule 14a–6(e)(2))
o   Definitive Proxy Statement
o   Definitive Additional Materials
o   Soliciting Material Pursuant to § 240.14a–12
EDUCATION MANAGEMENT CORPORATION
 
(Name of Registrant as Specified In Its Charter)
N/A
 
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
o   No fee required.
þ   Fee computed below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)   Title of each class of securities to which transaction applies:
Common Stock, $0.01 per share, of Education Management Corporation (“Common Stock”)
 
  (2)   Aggregate number of securities to which transaction applies:
75,758,076 shares of Common Stock
4,468,891 shares of Common Stock issuable upon exercise of options
570,183 shares of restricted Common Stock
 
  (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0–11 (set forth the amount on which the filing fee is calculated and state how it was determined): The filing fee was determined based upon the sum of (A) 75,758,076 shares of Common Stock multiplied by $43.00 per share, (B) 570,183 shares of restricted Common Stock multiplied by $43.00 per share and (C) options to purchase 4,468,891 shares of Common Stock with exercise prices below $43.00, multiplied by $20.15 per share (which is the difference between $43.00 and the weighted average exercise price per share). In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying 0.0001070 by the sum of the amounts set forth in the preceding sentence.
 
 
 
  (4)   Proposed maximum aggregate value of transaction:
$3,372,163,291
 
 
 
  (5)   Total fee paid:
$360,822
 
 
 
o   Fee paid previously with preliminary materials.
o   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)   Amount Previously Paid:
 
 
 
  (2)   Form, Schedule or Registration Statement No.:
 
 
 
  (3)   Filing Party:
 
 
 
  (4)   Date Filed:
 
 
 

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EDUCATION MANAGEMENT CORPORATION
210 Sixth Avenue, 33rd Floor
Pittsburgh, Pennsylvania 15222
[ •  ], 2006
Dear Shareholder:
      The board of directors of Education Management Corporation (the “Company”) has unanimously approved a merger providing for the acquisition of the Company by EM Acquisition Corporation, an entity whose owners currently consist of private equity funds sponsored by Providence Equity Partners and Goldman Sachs Capital Partners. If the merger is completed, you will receive $43.00 in cash, without interest, for each share of the Company’s common stock that you own.
      You will be asked, at a special meeting of the Company’s shareholders, to adopt the merger agreement. The board of directors has unanimously approved and declared advisable the merger, the merger agreement and the transactions contemplated by the merger agreement and has unanimously determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are fair to, and in the best interests of, the Company’s shareholders. The board of directors unanimously recommends that the Company’s shareholders vote “FOR” the adoption of the merger agreement.
      The time, date and place of the special meeting to consider and vote upon the adoption of the merger agreement are as follows:
      [ •  ] a.m. Eastern Time, [ •  ], 2006
      [Address]
      The proxy statement attached to this letter provides you with information about the proposed merger and the special meeting of the Company’s shareholders. We encourage you to carefully read the entire proxy statement. You may also obtain more information about the Company from documents we have filed with the Securities and Exchange Commission.
      YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF THE COMPANY’S COMMON STOCK THAT YOU OWN. THE ADOPTION OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST BY HOLDERS OF SHARES OF THE COMPANY’S COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AT THE SPECIAL MEETING, ASSUMING A QUORUM IS PRESENT. ACCORDINGLY, YOU ARE REQUESTED TO VOTE YOUR SHARES BY PROMPTLY COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ENVELOPE PROVIDED OR BY VOTING BY TELEPHONE OR INTERNET PRIOR TO THE SPECIAL MEETING, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
      Submitting your proxy will not prevent you from voting your shares in person if you subsequently choose to attend the special meeting.
      Thank you for your cooperation and continued support.
  Very truly yours,
 
  /s/ Robert B. Knutson
 
 
  Robert B. Knutson
  Chairman
THIS PROXY STATEMENT IS DATED [ •  ], 2006
AND IS FIRST BEING MAILED TO SHAREHOLDERS ON OR ABOUT [ •  ], 2006.

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EDUCATION MANAGEMENT CORPORATION
 
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD [ •  ], 2006
 
Dear Shareholder:
      A special meeting of shareholders of Education Management Corporation, a Pennsylvania corporation (the “Company”), will be held on [ •  ], 2006, at [ •  ] a.m., Eastern Time, at [ •  ], for the following purposes:
        1. To consider and vote on the adoption of the Agreement and Plan of Merger, dated as of March 3, 2006, by and between the Company and EM Acquisition Corporation, a Pennsylvania corporation (“Merger Co”), as it may be amended from time to time, pursuant to which, upon the merger becoming effective, each outstanding share of common stock, par value $0.01 per share, of the Company (other than shares held in the treasury of the Company or owned by Merger Co or any subsidiary of Merger Co or the Company) will be converted into the right to receive $43.00 in cash, without interest;
 
        2. To approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the merger agreement; and
 
        3. To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.
      Only shareholders of record on [ •  ], 2006, are entitled to notice of and to vote at the special meeting and at any adjournment or postponement of the special meeting. All shareholders of record are cordially invited to attend the special meeting in person.
      The adoption of the merger agreement requires the affirmative vote of a majority of the votes cast by holders of shares of the Company’s common stock entitled to vote thereon at the special meeting, assuming a quorum is present. Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return the enclosed proxy, or submit your proxy by telephone or the Internet prior to the special meeting and thus ensure that your shares will be represented at the special meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the adoption of the merger agreement. If you fail to return your proxy card or fail to submit your proxy by telephone or the Internet, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and, if a quorum is present, will not effect whether the merger agreement is adopted, since adoption merely requires the affirmative vote of the holders of a majority of the shares voting at the special meeting. If you are a shareholder of record and do attend the special meeting and wish to vote in person, you may revoke your proxy and vote in person.
  By order of the board of directors,
 
  /s/ J. Devitt Kramer
 
 
  J. Devitt Kramer
  Acting Corporate Secretary
[ •  ], 2006

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
      The following questions and answers address briefly some questions you may have regarding the special meeting and the proposed merger. These questions and answers may not address all questions that may be important to you as a shareholder of Education Management Corporation. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement. In this proxy statement, the terms “EDMC,” “Company,” “we,” “our,” “ours,” and “us” refer to Education Management Corporation and its subsidiaries.
Q. What is the proposed transaction?
 
A. The proposed transaction is the acquisition of the Company by an entity currently owned by private equity funds sponsored by Providence Equity Partners (“Providence”) and Goldman Sachs Capital Partners (“Goldman” and together with Providence, the “Sponsors”) pursuant to an Agreement and Plan of Merger (as may be amended from time to time, the “merger agreement”) dated as of March 3, 2006 between the Company and EM Acquisition Corporation (“Merger Co”). Once the merger agreement has been adopted by the Company’s shareholders and the other closing conditions under the merger agreement have been satisfied or waived, Merger Co will merge with and into EDMC (the “merger”). EDMC will be the surviving corporation in the merger (the “surviving corporation”), but shares of its common stock will not be publicly traded after the merger.
 
Q. What will I receive in the merger?
 
A. Upon completion of the merger, you will receive $43.00 in cash, without interest and less any required withholding taxes, for each share of our common stock that you own. For example, if you own 100 shares of our common stock, you will receive $4,300.00 in cash in exchange for your EDMC shares, less any required withholding taxes. You will not own shares in the surviving corporation.
 
Q. Where and when is the special meeting?
 
A. The special meeting will take place at [ •  ], on [ •  ], 2006, at [ •  ] a.m. Eastern Time.
 
Q. What vote of our shareholders is required to adopt the merger agreement?
 
A. For us to complete the merger, shareholders holding at least a majority of the votes cast entitled to vote at the special meeting, assuming a quorum is present in person or by proxy, must vote “FOR” the adoption of the merger agreement.
 
Q. How does the Company’s board of directors recommend that I vote?
 
A. Our board of directors unanimously recommends that shareholders vote “FOR” the adoption of the merger agreement. You should read “The Merger-Reasons for the Merger” for a discussion of the factors that our board of directors considered in deciding to recommend the adoption of the merger agreement.
 
Q. What do I need to do now?
 
A. We urge you to carefully read this proxy statement, including its annexes, and to consider how the merger affects you. If you are a shareholder of record, then you can ensure that your shares are voted at the special meeting by submitting your proxy via:
 
          (1) telephone, using the toll–free number listed on each proxy card (if you are a registered shareholder, that is if you hold your stock in your name) or vote instruction card (if your shares are held in “street name,” that is if your shares are held in the name of a broker, bank or other nominee, and your bank, broker or nominee makes telephone voting available);
 
          (2) the Internet, at the address provided on each proxy card (if you are a registered shareholder) or vote instruction card (if your shares are held in “street name” and your bank, broker or nominee makes Internet voting available); or
 
          (3) mail, by completing, signing, dating and mailing each proxy card or vote instruction card and returning it in the envelope provided.
 
The deadline for voting by telephone or the Internet is 11:59 p.m., Eastern Time, on [ •  ], 2006.

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Q: If my shares are held in “street name” by my broker, will my broker vote my shares for me?
 
A: Yes, but only if you provide instructions to your broker on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Without those instructions, your shares will not be voted.
 
Q: How do I vote if I participate in the Company’s 401(k) Plan or ESOP?
 
A: If you own shares through the 401(k) plan, including the ESOP, your shares are held in a nominee position with Fidelity Investments, the 401(k) plan trustee. Fidelity will seek instructions from you on how to vote your shares.
 
Q: How do I revoke or change my vote?
 
A: You can change your vote at any time before your proxy is voted at the special meeting. If you are a registered holder, you may revoke your proxy by notifying the Company’s Acting Corporate Secretary in writing or by submitting a new proxy by telephone, the Internet or mail, in each case, dated after the date of the proxy being revoked. In addition, your proxy may be revoked by attending the special meeting and voting in person. However, simply attending the special meeting without voting will not revoke your proxy. If you hold your shares in “street name” and have instructed a broker to vote your shares, the above-described options for changing your vote do not apply, and instead you must follow the instructions received from your broker to change your vote. To revoke your proxy with respect to shares held in the Company’s 401(k) plan, including the ESOP, you must follow directions provided by Fidelity Investments.
 
Q: What does it mean if I get more than one proxy card or vote instruction card?
 
A: If your shares are registered differently and are in more than one account, you will receive more than one card. Please complete and return all of the proxy cards or vote instruction cards you receive (or submit your proxy by telephone or the Internet, if available to you) to ensure that all of your shares are voted.
 
Q. When do you expect the merger to be completed?
 
A. We are working toward completing the merger as quickly as possible, and we anticipate that it will be completed during the summer of 2006. In order to complete the merger, we must obtain shareholder approval and satisfy the other closing conditions under the merger agreement. See “The Merger Agreement-Conditions to the Merger.”
 
Q. Will I have dissenters’ rights in connection with the merger?
 
A. No. Under Pennsylvania law, since our common stock is traded on the Nasdaq Global Market, you do not have the right to exercise dissenters’ rights in connection with the merger. See “No Dissenters’ Rights.”
 
Q. Should I send in my stock certificates now?
 
A. No. Shortly after the merger is completed, you will receive a letter of transmittal with instructions informing you how to send in your stock certificates to the paying agent in order to receive the merger consideration. You should use the letter of transmittal to exchange stock certificates for the merger consideration to which you are entitled as a result of the merger. DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY.
 
Q. Who can help answer my other questions?
 
A. If you have more questions about the merger, need assistance in submitting your proxy or voting your shares or need additional copies of the proxy statement or the enclosed proxy card, you should contact our proxy solicitation agent, MacKenzie Partners, Inc. toll-free at 800-322-2885. If your broker holds your shares, you should also call your broker for additional information.

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SUMMARY
      The following summary highlights selected information from this proxy statement and may not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that item.
The Parties to the Merger (Page 8)
Education Management Corporation
210 Sixth Avenue, 33rd Floor
Pittsburgh, PA 15222
      EDMC is among the largest providers of private post-secondary education in North America, based on student enrollment and revenue. We deliver education to students through traditional classroom settings as well as through online instruction. Our educational institutions offer a broad range of academic programs concentrated in the media arts, design, fashion, culinary arts, behavioral sciences, health sciences, education, information technology, legal studies and business fields, culminating in the award of non-degree certificates and associate’s through doctoral degrees. We have 72 primary campus locations in 24 states and two Canadian provinces. EDMC is a Pennsylvania corporation.
EM Acquisition Corporation
c/o Providence Equity Partners
50 Kennedy Plaza, 18th Floor
Providence, RI 02903
and
c/o Goldman Sachs Capital Partners
85 Broad Street
New York, NY 10004
      Merger Co is a Pennsylvania corporation and was organized solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Merger Co’s current owners consist of private equity funds sponsored by Providence Equity Partners and Goldman Sachs Capital Partners. The members of the investor group have the right to transfer a portion of their prospective interest in Merger Co in certain circumstances, provided that any such transfer will not release the members of the investor group of their obligations under the guarantees and the equity commitment letter. As a result, the investor group may ultimately include additional equity participants. Merger Co has not conducted any activities to date other than activities incidental to its formation and in connection with the transactions contemplated by the merger agreement.
The Special Meeting
Time, Place and Date (Page 9)
      The special meeting will be held on [ •  ], 2006, starting at [ •  ] a.m., Eastern Time, at [ •  ].
Purpose (Page 9)
      You will be asked to consider and vote upon adoption of the merger agreement. The merger agreement provides that Merger Co will be merged with and into the Company, and each outstanding share of the Company’s common stock (other than shares held in the treasury of the Company or owned by Merger Co or any subsidiary of Merger Co or the Company) will be converted into the right to receive $43.00 in cash, without interest.

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Other Matters (Page 61)
      The persons named in the accompanying proxy will also have discretionary authority to vote upon other business, if any, that properly comes before the special meeting and any adjournments or postponements of the special meeting.
Record Date and Quorum (Page 9)
      You are entitled to vote at the special meeting if you owned shares of the Company’s common stock at the close of business on [ •  ], 2006, the record date for the special meeting. You will have one vote for each share of the Company’s common stock that you owned on the record date. As of the record date, there were [ •  ] shares of the Company’s common stock entitled to be voted.
Vote Required (Page 9)
      For us to complete the merger, shareholders holding at least a majority of the votes cast at the special meeting, assuming a quorum is present in person or by proxy, must vote “FOR” the adoption of the merger agreement.
Share Ownership of Directors and Executive Officers (Pages 10 and 58)
      As of the record date, the directors and current executive officers of EDMC beneficially owned in the aggregate (excluding options) approximately [ •  ]% of the shares of the Company’s common stock entitled to vote at the special meeting. Each of our directors has advised us that they plan to vote all of their shares in favor of the adoption of the merger agreement.
Voting and Proxies (Page 9)
      Any EDMC shareholder of record entitled to vote may submit a proxy by telephone, the Internet or by returning the enclosed proxy by mail, or may vote in person by appearing at the special meeting. If your shares are held in “street name” by your broker, you should instruct your broker on how to vote your shares using the instructions provided by your broker. If you do not provide your broker with instructions, your shares will not be voted.
Revocability of Proxy (Page 10)
      Any EDMC shareholder of record who executes and returns a proxy card (or submits a proxy via telephone or the Internet) may revoke the proxy at any time before it is voted in any one of the following ways:
  •  filing with the Company’s Acting Corporate Secretary, at or before the special meeting, a written notice of revocation that is dated a later date than the proxy;
 
  •  sending a later-dated proxy relating to the same shares to the Acting Company’s Corporate Secretary, at or before the special meeting;
 
  •  submitting a later-dated proxy by telephone or the Internet, before the special meeting; or
 
  •  attending the special meeting and voting in person by ballot.
      Simply attending the special meeting will not constitute revocation of a proxy. If you have instructed your broker to vote your shares, the above-described options for revoking your proxy do not apply and instead you must follow the directions provided by your broker to change these instructions.
When the Merger Will be Completed (Page 40)
      We are working to complete the merger as soon as possible. We anticipate completing the merger during the summer of 2006 subject to adoption of the merger agreement by the Company’s shareholders and the satisfaction of the other closing conditions. In addition, Merger Co is not obligated to complete the merger until the expiration of a 20 consecutive business day “marketing period” during which Merger Co will conduct

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its offering of debt securities to complete its debt financing of the merger. The marketing period begins to run following the delivery of the financial information that the Company is required to provide to Merger Co pursuant to the merger agreement and the satisfaction of specified conditions to the closing.
Effects of the Merger (Page 41)
      If the merger agreement is adopted by the Company’s shareholders and the other conditions to closing are satisfied, Merger Co will be merged with and into the Company, with the Company being the surviving corporation. Upon completion of the merger, the Company’s common stock will be converted into the right to receive $43.00 per share, without interest and less any required withholding taxes. Following the completion of the merger, shares of our common stock will no longer be publicly traded and you will cease to have any ownership interest in the Company and will not participate in any future earnings and growth of the Company.
Board Recommendation (Page 20)
      After careful consideration, our board of directors has unanimously:
  •  determined that the merger, the merger agreement and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of the Company and its shareholders;
 
  •  approved the merger agreement, the merger and the other transactions contemplated by the merger agreement; and
 
  •  recommended that the Company’s shareholders vote “FOR” the adoption of the merger agreement.
      For factors considered by our board of directors in reaching its decision to approve and adopt the merger agreement and the merger, see “The Merger-Reasons for the Merger”.
Opinions of the Company’s Financial Advisors (Page 20 and Annex B and Annex C)
      Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) delivered its opinion to the Company’s board of directors that, as of the date of its opinion and based upon and subject to the factors and assumptions set forth therein, the merger consideration of $43.00 in cash per share to be received by holders of the Company’s common stock pursuant to the merger agreement was fair from a financial point of view to such holders. In addition, Lazard Frères & Co. LLC (“Lazard”) delivered its opinion to the Company’s board of directors that, as of the date of its opinion and based upon and subject to the factors and assumptions set forth therein, the merger consideration of $43.00 in cash per share to be received by holders of the Company’s common stock pursuant to the merger agreement was fair from a financial point of view to such holders.
      The opinions of Merrill Lynch and Lazard do not constitute a recommendation as to how any of our shareholders should vote with respect to the merger agreement. The full text of the written opinions of Merrill Lynch, dated March 3, 2006, and Lazard, dated March 3, 2006, which set forth the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken in connection with such opinions, are attached as Annex B and Annex C, respectively, to this proxy statement. We recommend that you carefully read each opinion in its entirety. Pursuant to the terms of the engagement letters with each of Merrill Lynch and Lazard, the Company has agreed to pay to each of Merrill Lynch and Lazard a fee. Substantially all of the Merrill Lynch fee is payable only upon consummation of the merger.
Financing (Page 30)
      The Company and Merger Co estimate that the total amount of funds necessary to consummate the merger and related transactions will be approximately $3.55 billion, which will be funded by new credit facilities, private offerings of debt securities and equity financing. Funding of the equity and debt financing is subject to the satisfaction of the conditions set forth in the commitment letters pursuant to which the financing will be provided (see “The Merger-Financing.”)

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      The closing of the merger is not conditioned on the receipt of the debt financing by Merger Co. Merger Co, however, is not required to consummate the merger until after the completion of the marketing period as described above under “When the Merger Will be Completed” and in further detail under “The Merger Agreement-Effective Time; Marketing Period”.
Treatment of Stock Options (Pages 32 and 41)
      The merger agreement provides that all outstanding Company stock options issued pursuant to the Company’s stock incentive plans, whether or not vested or exercisable, will be cashed out and canceled in connection with the completion of the merger. Each option holder will be entitled to receive, in exchange for the cancellation of all stock options, an amount in cash, less applicable withholding taxes, without interest, equal to:
  •  the number of shares of our common stock subject to each option as of the effective time of the merger, multiplied by
 
  •  the excess, if any, of $43.00 over the exercise price per share of common stock subject to the option.
      In addition, our stock incentive plans provide for full vesting upon the approval by our shareholders of the merger, unless immediately following such merger, more than 50% of the surviving entity’s outstanding capital stock and voting power is beneficially owned by our current shareholders. Consequently, in the event that our shareholders approve the merger, but the merger does not in fact occur, all of the Company’s outstanding unvested stock options may become immediately vested and exercisable under the terms of our stock incentive plans.
Treatment of Restricted Stock (Pages 34 and 42)
      The merger agreement provides that at the effective time of the merger, all shares of restricted stock then outstanding, if any, will be canceled, and the holder of each such share will be entitled to receive a cash payment of $43.00 per share of restricted stock, without interest and less any applicable withholding taxes. In addition, our stock incentive plans provide for full vesting of outstanding awards upon the approval by our shareholders of the merger, unless immediately following such merger, more than 50% of the surviving entity’s outstanding capital stock and voting power is beneficially owned by our current shareholders. Consequently, in the event that our shareholders approve the merger, but the merger does not in fact occur, all of the Company’s outstanding shares of restricted stock may become immediately vested under the terms of our stock incentive plans.
Interests of the Company’s Directors and Executive Officers in the Merger (Page 32)
      Our directors and executive officers may have interests in the merger that are different from, or in addition to, yours, including the following:
  •  Our directors and executive officers will have their vested and unvested stock options and restricted stock cashed out and canceled in connection with the merger, meaning that they will be entitled to (i) receive cash payments for each share subject to an outstanding stock option equal to the excess, if any, of $43.00 per share over the exercise price per share under the option, without interest and less applicable withholding taxes, and (ii) receive $43.00 per share for their outstanding restricted stock, without interest and less applicable withholding taxes.
     
  •  Each of our executive officers has an employment agreement with us that provides for specified severance payments and benefits in the case of his or her termination of employment under specified circumstances and, in addition, the value of these benefits are substantially increased if the termination occurs within two years after, or in anticipation of, a change in control (such as the merger). Moreover, these employment agreements provide that, if the executive officer would incur certain excise tax liabilities as a result of the payments and other benefits received in connection with the merger, the executive officer is also entitled to receive from the Company a “gross-up” payment in an amount that

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  would place the executive officer in the same after-tax position that he or she would have been in if no excise tax had applied.
 
  •  In connection with the retirement of Robert T. McDowell, our Chief Financial Officer, which is anticipated to occur irrespective of whether the merger is completed, we entered into an amendment to our employment agreement with Mr. McDowell. This amendment provides, among other things, that Mr. McDowell will (i) provide us with paid consulting services for a specified period after his retirement, the term of which depends on whether and when a change in control occurs, (ii) receive a payment equal to two times his annual base salary and the amount of his bonus for fiscal year 2005 if a change in control occurs prior to June 30, 2008 and (iii) be subject to a six-month non-compete restriction after his consulting services end.
 
  •  In connection with the resignation of J. William Brooks, our President and Chief Operating Officer, which is anticipated to occur irrespective of whether the merger is completed, we entered into a letter agreement with Mr. Brooks which modifies certain terms of his employment. This agreement provides, among other things, that Mr. Brooks will (i) receive a payment equal to his annual base salary and average bonus if a change in control occurs prior to June 30, 2008, reduced by any cash severance payments he receives upon his resignation and (ii) be subject to a non-compete restriction until the earlier of June 30, 2007 and the change in control.
 
  •  The merger agreement provides for indemnification arrangements for each of our current and former directors and officers that will continue for six years following the effective time of the merger as well as insurance coverage covering his or her service to the Company as a director or officer.
 
  •  Although no agreements have been entered into as of the date of this proxy statement, the Sponsors have informed us that it is their intention to retain members of our existing management team with the surviving corporation after the merger is completed. In that regard, members of management, other than those executives who have announced their retirement or resignation, currently are engaged in discussions with representatives of Merger Co. We believe that these persons are likely to enter into new arrangements with Merger Co or its affiliates regarding employment with, and the right to purchase or participate in the equity of, the surviving corporation, although such matters are subject to further negotiation and discussion and no terms or conditions have been finalized.

Material United States Federal Income Tax Consequences (Page 37)
      If you are a U.S. holder of our common stock, the merger will be a taxable transaction to you. For U.S. federal income tax purposes, your receipt of cash in exchange for your shares of the Company’s common stock generally will cause you to recognize gain or loss measured by the difference, if any, between the cash you receive in the merger and your adjusted tax basis in your shares. If you are a non-U.S. holder of our common stock, the merger will generally not be a taxable transaction to you under U.S. federal income tax laws unless you have certain connections to the United States. You should consult your own tax advisor for a full understanding of how the merger will affect your particular tax consequences.
Regulatory Approvals (Page 39 )
      The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “Hart-Scott-Rodino Act”), provides that transactions such as the merger may not be completed until certain information has been submitted to the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice (the “Antitrust Division”) and a statutory waiting period, which is 30 days from the date of filing, has expired or the antitrust authorities have granted early termination of such period. The Company and Merger Co, respectively, will each file a Notification and Report Form with the Antitrust Division and the Federal Trade Commission and will request an early termination of the statutory waiting period.
      The Company and Merger Co have made filings and taken other actions, and will continue to make filings and take actions, necessary to obtain approvals from all appropriate governmental and educational authorities in connection with the merger. Regulatory approvals required to complete the merger include

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approval of a number of the state authorizing agencies and accrediting agencies that currently approve and accredit the EDMC schools and their educational programs. The merger agreement requires that we submit pre-acquisition review applications with the U.S. Department of Education (“DOE”) prior to the completion of the merger. In addition, after closing the merger, we will need to obtain approval from the DOE for each of the EDMC schools to continue to participate in the U.S. federal student financial aid programs administered by the DOE.
Procedure for Receiving Merger Consideration (Page 42)
      As soon as practicable after the effective time of the merger, a paying agent will mail a letter of transmittal and instructions to you and our other shareholders. The letter of transmittal and instructions will tell you how to surrender your stock certificates or book-entry shares in exchange for the merger consideration. You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.
No Solicitation of Transactions (Page 48)
      The merger agreement contains restrictions on our ability to solicit or engage in discussions or negotiations with a third party regarding specified transactions involving the Company. Notwithstanding these restrictions, under certain circumstances, our board of directors may respond to an unsolicited written bona fide proposal for an alternative acquisition or terminate the merger agreement and enter into an agreement with respect to a superior proposal after paying the termination fee specified in the merger agreement.
Conditions to the Merger (Page 53)
      Before we can complete the merger, a number of conditions must be satisfied. These include:
  •  the receipt of Company shareholder approval;
 
  •  the absence of governmental orders that have the effect of making the merger illegal or that otherwise prohibit the closing;
 
  •  the expiration or termination of the waiting period under the Hart-Scott-Rodino Act;
 
  •  performance by each of the parties of its agreements and covenants under the merger agreement in all material respects;
 
  •  the absence of specified market disruptions;
 
  •  the absence of specified adverse events affecting parties that are expected to provide debt financing necessary to complete the merger;
 
  •  the receipt of governmental and certain specified educational authority consents required to be obtained prior to the closing, without, in the case of educational authority consents, the imposition of certain non-customary limitations on us; and
 
  •  the receipt by us of a written response from the DOE to the pre-acquisition review applications, without the imposition of certain non-customary limitations on us.
      It is also a condition to the merger that we do not receive written notification from certain educational authorities or accrediting agencies stating that such authority or agency will not issue any required post-closing consent or that such consents will include certain non-customary limitations.
      Other than the conditions pertaining to the Company shareholder approval, the absence of governmental orders and the expiration or termination of the Hart-Scott-Rodino Act waiting period, either the Company, on the one hand, or Merger Co, on the other hand, may elect to waive conditions to their respective performance and complete the merger. Neither the Company nor Merger Co, however, has any intention to waive any condition as of the date of this proxy statement.

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Termination of the Merger Agreement (Page 55)
      EDMC and Merger Co may agree in writing to terminate the merger agreement at any time without completing the merger, even after the shareholders of EDMC have adopted the merger agreement. The merger agreement may also be terminated at any time prior to the effective time of the merger in certain other circumstances, including:
  •  by either Merger Co or the Company if:
  •  the closing has not occurred on or before September 3, 2006, so long as the failure to complete the merger is not the result of the failure of the terminating party to comply with the terms of the merger agreement;
 
  •  a final, non-appealable governmental order prohibits the merger;
 
  •  the Company shareholders do not adopt the merger agreement at the special meeting or any postponement or adjournment thereof;
 
  •  the terminating party is not in material breach of its obligations under the merger agreement and there is a breach by the non-terminating party of its representations, warranties, covenants or agreements in the merger agreement such that the applicable closing conditions to the merger would not be satisfied, which breach cannot be or has not been cured within 30 days after notice;
  •  by Merger Co, if our board of directors withdraws, modifies or changes its recommendation or approval of the transactions contemplated by the merger agreement or recommends or approves an acquisition proposal other than the transactions contemplated by the merger agreement;
 
  •  by the Company, prior to the special meeting, if we receive a superior proposal, as defined in the merger agreement, but only after we have (i) provided Merger Co a two business day period to revise its offer, during which we are required to cooperate and negotiate with Merger Co to enable it to make such an offer and (ii) paid the termination fee described below; or
 
  •  by the Company if a specified market disruption event has occurred and Merger Co has not waived its closing condition relating to such event within a certain period of time following a written request for a waiver from the Company.
Termination Fees (Page 56)
      Under certain circumstances, in connection with the termination of the merger agreement, the Company will be required to pay Merger Co an $84 million termination fee. In addition, under certain circumstances, in connection with the termination of the merger agreement, Merger Co will be required to pay the Company an $84 million termination fee.
Market Price of EDMC Stock (Page 57)
      Our common stock is listed on the Nasdaq Global Market (“Nasdaq”) under the trading symbol “EDMC”. On March 3, 2006, which was the last trading day before we announced the merger, the closing price of Company’s common stock was $36.98 per share. On [ •  ], 2006, which was the last trading day before this proxy statement was printed, the closing price of the Company’s common stock was $[ •  ] per share.
No Dissenter’s Rights (Page 60)
      You do not have appraisal or similar rights of dissenters under Pennsylvania law with respect to the merger, any transaction contemplated by the merger agreement or any other matter described in this proxy statement.

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CAUTIONARY STATEMENT CONCERNING FORWARD–LOOKING INFORMATION
      This proxy statement contains statements that may be forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. We have tried to use terms such as “believes,” “estimates,” “anticipates,” “continues,” “contemplates,” “expects,” “may,” “will,” “could,” “should” or “would” and similar expressions to identify these forward-looking statements. These statements, which are based on information currently available to us, are not guarantees of future performance and may involve risks and uncertainties that could cause our actual growth, results of operations, performance and business prospects, and opportunities to materially differ from those expressed in, or implied by, these statements. We expressly disclaim any obligation or understanding to release publicly any updates or revisions to any forward-looking statement included in this proxy statement. These statements are subject to risks, uncertainties, and other factors, including, among others:
  •  risks inherent in operating private for-profit post-secondary educational institutions, including the effects of extensive and changing regulations on our business;
 
  •  general economic, political and business conditions;
 
  •  changing market needs and technology; our ability to:
  •  implement our operating and growth strategy;
 
  •  attract and retain students at our institutions;
 
  •  meet regulatory and accrediting agency requirements;
 
  •  compete with enhanced competition and new competition in the education industry;
 
  •  attract and retain key employees and faculty;
 
  •  successfully integrate our acquired institutions and continue our acquisition strategy; and
  •  other factors discussed elsewhere in our other filings with the SEC (see “Where You Can Find Additional Information”).
THE PARTIES TO THE MERGER
Education Management Corporation
      EDMC is among the largest providers of private post-secondary education in North America, based on student enrollment and revenue. We deliver education to students through traditional classroom settings as well as through online instruction. Our educational institutions offer a broad range of academic programs concentrated in the media arts, design, fashion, culinary arts, behavioral sciences, health sciences, education, information technology, legal studies and business fields, culminating in the award of associate’s through doctoral degrees. We have 72 primary campus locations in 24 states and two Canadian provinces.
      EDMC is incorporated in the state of Pennsylvania with its principal executive offices at 210 Sixth Avenue, 33rd Floor, Pittsburgh, Pennsylvania, 15222. The Company’s telephone number is (412) 562-0900.
EM Acquisition Corporation
      Merger Co is a Pennsylvania corporation with its principal executive offices located at c/o Goldman Sachs Capital Partners, 85 Broad Street, New York, NY 10004 and its telephone number is (212) 902-2000. Merger Co’s current owners consist of private equity funds sponsored by Providence Equity Partners and Goldman Sachs Capital Partners. The members of the investor group have the right to transfer a portion of their prospective interest in Merger Co in certain circumstances, provided that any such transfer will not release the members of the investor group of their obligations under the guarantees and the equity commitment letter. As a result, the investor group may ultimately include additional equity participants. Merger Co was organized solely for the purpose of entering into the merger agreement and consummating the

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transactions contemplated by the merger agreement. It has not conducted any activities to date other than activities incidental to its formation and in connection with the transactions contemplated by the merger agreement. Under the terms of the merger agreement, Merger Co will merge with and into the Company. The Company will survive the merger and Merger Co will cease to exist.
THE SPECIAL MEETING
Time, Place and Purpose of the Special Meeting
      This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by our board of directors for use at the special meeting to be held on [ •  ], 2006, starting at [ •  ] a.m., Eastern Time, at [ •  ] or at any postponement or adjournment thereof. The purpose of the special meeting is for our shareholders to consider and vote upon the adoption of the merger agreement. Our shareholders must adopt the merger agreement in order for the merger to occur. If the shareholders fail to adopt the merger agreement, the merger will not occur. A copy of the merger agreement is attached to this proxy statement as Annex A. This proxy statement and the enclosed form of proxy are first being mailed to our shareholders on or about [ •  ], 2006.
Record Date and Quorum
      The holders of record of the Company’s common stock as of the close of business on [ •  ], 2006, the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting. On the record date, there were [ •  ] shares of the Company’s common stock outstanding.
      The holders of a majority of the outstanding shares of the Company’s common stock on the record date, represented in person or by proxy, will constitute a quorum for purposes of the special meeting. A quorum is necessary to hold the special meeting. Any shares of the Company’s common stock held in treasury by the Company or by any of its subsidiaries are not considered to be outstanding for purposes of determining a quorum. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any postponement or adjournment of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established.
Required Vote
      Each outstanding share of the Company’s common stock on the record date entitles the holder to one vote at the special meeting. Completion of the merger requires the adoption of the merger agreement by the affirmative vote of a majority of the votes cast by holders of shares of the Company’s common stock present in person or represented by proxy at the special meeting, assuming a quorum is present. In order for your shares of the Company’s common stock to be included in the vote, if you are a shareholder of record, you must submit a proxy by telephone or the Internet or return the enclosed proxy card by mail or vote in person at the special meeting.
      If your shares are held in “street name” by your broker, you should instruct your broker how to vote your shares using the instructions provided by your broker. If you have not received such voting instructions or require further information regarding such voting instructions, contact your broker and they can give you directions on how to vote your shares. Your broker will not vote your shares without instruction from you. Abstentions and broker non–votes, if any, will be treated as shares that are present and entitled to vote at the special meeting for purposes of determining whether a quorum exists. Because adoption of the merger agreement requires the affirmative vote of a majority of the votes cast by holders of shares of the Company’s common stock present in person or represented by proxy at the special meeting, assuming a quorum is present, failures to vote, abstentions and broker non–votes, if any, will not effect whether the merger agreement is adopted.
      If you own shares of the Company’s common stock through the Company’s 401(k) plan, including the ESOP, you will receive a voting instruction card with respect to those shares of common stock subject to the

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plan which will provide Fidelity Investments, the plan’s trustee, with instructions on how to vote such shares. You must submit your voting instructions for your shares to Fidelity by the close of business on [ •  ] to allow Fidelity time to receive your voting instructions and vote on behalf of the plan.
      As of the record date, the directors and current executive officers of EDMC beneficially owned (excluding options), in the aggregate, [ •  ] shares of the Company’s common stock, or approximately [ •  ]% of the outstanding shares of the Company’s common stock. The directors have informed EDMC that they intend to vote all of their shares of the Company’s common stock “FOR” the adoption of the merger agreement.
Proxies; Revocation
      If you submit a proxy by telephone or the Internet or by returning a signed proxy card by mail, your shares will be voted at the special meeting as you indicate on your proxy card or by such other method. If no instructions are indicated on your proxy card, your shares of the Company’s common stock will be voted “FOR” the adoption of the merger agreement. The deadline for voting by telephone or the Internet is 11:59 p.m., Eastern Time, on [ •  ], 2006.
      You may revoke your proxy at any time before the vote is taken at the special meeting. To revoke your proxy, you must either advise our Acting Corporate Secretary in writing, submit a proxy by telephone, the Internet or mail dated after the date of the proxy you wish to revoke or attend the special meeting and vote your shares in person. Attendance at the special meeting will not by itself constitute revocation of a proxy.
      If you have instructed your broker to vote your shares, the above-described options for revoking your proxy do not apply and instead you must follow the directions provided by your broker to change these instructions. To revoke your proxy with respect to shares held in the Company’s 401(k) plan, you must follow directions provided by Fidelity Investments.
      EDMC does not expect that any matter other than the adoption of the merger agreement will be brought before the special meeting. If, however, such a matter is properly presented at the special meeting or any adjournment or postponement of the special meeting, the persons appointed as proxies will have discretionary authority to vote the shares represented by duly executed proxies in accordance with their discretion and judgment.
Solicitation of Proxies
      EDMC will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, directors, officers and employees of EDMC may solicit proxies personally and by telephone, facsimile or other electronic means of communication. These persons will not receive additional or special compensation for such solicitation services.
      EDMC will, upon request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. EDMC has retained MacKenzie Partners, Inc. to assist it in the solicitation of proxies for the special meeting and will pay MacKenzie Partners, Inc. a fee of approximately $20,000.00, plus reimbursement of out-of–pocket expenses.