1375891--8/27/2009--Education_Management

related topics

{regulation, government, change}

{acquisition, growth, future}

{debt, indebtedness, cash}

{system, service, information}

{product, market, service}

{financial, litigation, operation}

{personnel, key, retain}

{capital, credit, financial}

{competitive, industry, competition}

{operation, natural, condition}

{condition, economic, financial}

Congress may change eligibility standards or reduce funding for federal student financial aid programs, or other governmental or regulatory bodies may change similar laws or regulations relating to other student financial aid programs, which could reduce the growth of our student population and revenue. If we do not meet specific financial responsibility ratios and other compliance tests established by the U.S. Department of Education, our schools may lose eligibility to participate in federal student financial aid programs, which may result in a reduction in our student enrollment and an adverse effect on our results of operations. If any of our schools either fails to demonstrate administrative capability to the U.S. Department of Education or violates other requirements of Title IV programs, the U.S. Department of Education may impose sanctions or terminate that school s participation in Title IV programs. If our institutions do not comply with the 90/10 Rule, they will lose eligibility to participate in federal student financial aid programs. Our failure to comply with various state regulations or to maintain any national, regional or programmatic accreditation could result in actions taken by those states or accrediting agencies that would have a material adverse effect on our student enrollment and results of operations. Loss of or reductions in state financial aid programs for our students could negatively impact our revenues from students. If regulators do not approve transactions involving a change of control or change in our corporate structure, we may lose our ability to participate in federal student financial aid programs, which would result in declines in our student enrollment, and thereby adversely affect our results of operations. Government and regulatory and accrediting agencies may conduct compliance reviews, bring claims or initiate litigation against us, which may adversely impact our licensing or accreditation status, and thereby adversely affect our results of operations. Our regulatory environment and our reputation may be negatively influenced by the actions of other post-secondary education institutions. We do not have significant experience in processing student loans through the Direct Loan program and, if we are required to process all or a substantial portion of our students federal loans through this program, we could experience increases to our administrative costs and delays to the receipt of federal loan proceeds. RISKS RELATED TO OUR BUSINESS If our students were unable to obtain private loans from third party lenders, our business could be adversely affected given our reliance on such lenders as a source of net revenues. We recently introduced the Education Finance Loan program, which could have a material adverse effect on our financial condition, results of operations and cash flows. Our business may be adversely affected by a general economic slowdown or recession in the U.S. or abroad. The current unprecedented disruptions in the credit and equity markets worldwide may impede or prevent our access to the capital markets for additional funding to expand or operate our business and may affect the availability or cost of borrowing under our existing credit facilities. We may have difficulty opening additional new schools and growing our online academic programs, and we may be unable to achieve the anticipated return on our investment. We may not be able to implement our growth strategy optimally if we are not able to improve the content of our existing academic programs or to develop new programs on a timely basis and in a cost-effective manner. Our marketing and advertising programs may not be effective in attracting prospective students, current students or potential employers of our graduates. A decline in the overall growth of enrollment in post-secondary institutions could cause us to experience lower enrollment at our schools, which would negatively impact our future growth. Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and expose us to interest rate risk to the extent of our variable rate debt. We may not be able to generate sufficient cash to service all of our debt obligations and may be forced to take other actions in an effort to satisfy our obligations under such indebtedness, which may not be successful. Our debt agreements contain restrictions that limit our flexibility in operating our business. Failure to keep pace with changing market needs and technology could harm our ability to attract students. Failure to obtain additional capital in the future could adversely effect our ability to grow. Failure to effectively manage our growth could harm our business. Capacity constraints or system disruptions to our online computer networks could have a material adverse effect on our ability to attract and retain students. The personal information that we collect may be vulnerable to breach, theft or loss that could adversely affect our reputation and operations. We may not be able to retain our key personnel or hire and retain additional personnel needed for us to sustain and grow our business as planned. If we are not able to integrate acquired schools, we may experience operational inefficiencies. Our inability to operate one or more of our schools or locations due to a natural disaster, terrorist act or widespread epidemic or to restore a damaged school or location to its prior operational level could materially hurt our operating results. We operate in a highly competitive industry, and competitors with greater resources could harm our business. We could experience an event of default under our senior secured credit agreement if Goldman Sachs Capital Partners, Providence Equity Partners and Leeds Equity Partners (collectively, the Sponsors ) cease to own an aggregate of at least 35% of the voting interests of EDMC s outstanding capital stock, and such an event of default could adversely effect our liquidity and financial position.

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1375891--8/27/2009--Education_Management_LLC