EMPLOYMENT AGREEMENT

Exhibit 10.02

EXECUTION COPY

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of February 8, 2007 (the “ Employment Agreement ”), by and among Education Management LLC, a Delaware limited liability company (together with its successors and assigns, the “ Company ”), Todd S. Nelson (the “ Executive ”), and for the limited purpose set forth on the signature page hereto, Education Management Corporation, a Pennsylvania corporation and indirect parent of the Company (the “ Parent ”) (each of the Executive and the Company, a “ Party ,” and collectively, the “ Parties ”).

WHEREAS, the Company desires to employ the Executive and utilize his management services as indicated herein, and the Executive desires to be employed by the Company, all on the terms and conditions set forth in this Employment Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valid consideration the sufficiency of which is acknowledged, the Parties agree as follows:

1.1. Term . The Company agrees to employ the Executive, and the Executive agrees to be employed by the Company, in each case pursuant to this Employment Agreement, for a period commencing on February 20, 2007 (the “ Effective Date ”) and ending on the third (3rd) anniversary of the Effective Date (the “ Initial Term ”); provided, however, that the term of this Employment Agreement and the Executive’s employment hereunder shall renew automatically for successive one (1) year periods (each, a “ Renewal Term ”), unless at least one hundred eighty (180) days prior to the end of the Initial Term or any subsequent anniversary of the Effective Date, either Party shall have given notice to the other Party that this Employment Agreement shall terminate on that anniversary date (the Initial Term, together with any Renewal Terms, the “ Term ”). Notwithstanding the foregoing, the Executive’s employment shall be subject to earlier termination in accordance with Section 3 hereof.

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

1.3. Exclusivity . During the Term, the Executive shall devote his full business time and attention to the business and affairs of the Company, shall faithfully serve the Company, and shall in all material respects conform to and comply with such lawful and

reasonable directions and instructions given to him as are consistent with Sections 1.2 and 1.3 hereof. During the Term, the Executive shall use his reasonable best efforts to promote and serve the interests of the Company and shall not engage in any other business activity, whether or not such activity shall be engaged in for pecuniary profit. Notwithstanding the foregoing provisions of this Section 1.3, but subject to the other provisions of this Employment Agreement, the Executive may (i) engage in charitable activities and community affairs, (ii) serve, with the prior approval of the Board (such approval not to be unreasonably withheld), on the boards of a reasonable number of business entities, trade associations and charitable organizations, (iii) accept and fulfill a reasonable number of speaking engagements, and (iv) manage his personal investments and affairs; provided that such activities do not either individually or in the aggregate materially interfere with the performance of his duties hereunder.

2.1. Salary . As compensation for the performance of the Executive’s services hereunder, during the Term, the Company shall pay to the Executive a salary at an annual rate of five hundred fifty thousand dollars ($550,000), payable in accordance with the Company’s standard payroll policies (the “ Base Salary ”). The Base Salary will be reviewed annually and may be adjusted upward by the Board (or a committee thereof) in its discretion, based on competitive data and the Executive’s performance.

2.2. Annual Bonus . The Executive will be eligible for an annual incentive bonus (the “ Annual Bonus ”) for each complete fiscal year occurring during the Term. The Executive’s target bonus will be one hundred twenty-five percent (125%) of the Base Salary. The actual Annual Bonus paid for any year will depend on meeting Company and individual performance standards established by the Board. The Annual Bonus will be paid in cash within seventy-five (75) days of the end of the fiscal year. Notwithstanding the foregoing, for the fiscal year ending June 30, 2007, the Executive will be entitled to five-twelfths (5/12) of an Annual Bonus, based on the Company’s actual performance measured against the management plan established by the Board for 2007.

2.3. Equity . (a)  Stock Purchase . On or about the Effective Date, the Executive will purchase ten million dollars ($10,000,000) of Common Stock of the Parent pursuant to a subscription agreement between the Parent and the Executive substantially in the form attached hereto as Exhibit A.

(b) Option Grant . As of the Effective Date, the Parent will grant to the Executive time-vesting and performance-vesting options to purchase 564,203 shares of Common Stock of the Parent, fifty percent (50%) of which will be pursuant to a time-vesting option agreement between the Parent and the Executive substantially in the form attached hereto as Exhibit B, and fifty percent (50%) of which will be pursuant to a performance-vesting option agreement between the Parent and the Executive substantially in the form attached hereto as Exhibit C.

2.4. Employee Benefits . During the Term, the Executive shall be eligible to participate in such health and other employee welfare, retirement and other employee benefit plans and programs, and perquisites, of the Company as in effect from time to time on the same basis as similarly situated executives of the Company.

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2.5. Vacation . During the Term, the Executive shall be entitled to paid vacation in accordance with the Company’s vacation policy as in effect from time to time.

2.6. Business Expenses . The Company shall pay or reimburse the Executive for all commercially reasonable business out-of-pocket expenses that the Executive incurs during the Term in performing his duties under this Employment Agreement upon presentation of documentation and in accordance with the expense reimbursement policy of the Company as approved by the Board (or a committee thereof) and in effect from time to time.

2.7. Attorney’s Fees . The Company agrees to promptly pay all fees and charges of the Executive’s attorneys reasonably incurred by the Executive in connection with the negotiation and execution of this Employment Agreement, his purchase of common stock of the Parent, and related agreements.

2.8. Housing . It is expected that the Executive will perform his duties hereunder about 50% of the time in the Company’s Pittsburgh office and about 50% of the time in Arizona and Utah; provided , however , that no later than June 30, 2009, the Executive will relocate his primary residence to the metropolitan Pittsburgh, Pennsylvania area and will perform his duties hereunder substantially in the Pittsburgh office (other than time spent on business travel). Until such relocation, the Executive will be provided with Company housing in the metropolitan Pittsburgh area and will be reimbursed for reasonable travel expenses for travel between Arizona and Pittsburgh and between Utah and Pittsburgh.

3.1. Termination of Employment . The Company may terminate the Executive’s employment hereunder for any reason during the Term, and the Executive may voluntarily terminate his employment hereunder for any reason during the Term, in each case (other than a termination by the Company for Cause) at any time upon not less than thirty (30) days’ notice to the other Party. Upon any termination of the Executive’s employment hereunder for any reason during the Term, the Executive shall be entitled to (i) any Base Salary earned but unpaid through the date of termination; (ii) any other payment or benefit to which he is entitled under the applicable terms of any applicable plan, program, agreement or arrangement of the Company or its affiliates (each, a “ Company Arrangement ”), including the plans, programs, agreements and arrangements referred to in Sections 2.2 through 2.7 and 8.1 ((i) and (ii) being, collectively, the “ Accrued Amounts ”); provided , however, that if the Executive’s employment hereunder is terminated (x) by the Company for Cause, or (y) by the Executive voluntarily without Good Reason and not for death or Disability, then any Annual Bonus earned pursuant to Section 2.2 in respect of a prior fiscal year, but not yet paid or due to be paid, shall be forfeited.

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3.2. Certain Terminations .

(a) Termination by the Company Other than for Cause; Termination by the Executive for Good Reason . If the Executive’s employment hereunder is terminated by the Company during the Term other than for Cause, or by the Executive with Good Reason, in addition to the Accrued Amounts the Executive shall be entitled to a lump sum severance payment of (i) one and one-half (1.5) times (or three (3) times if (x) the Executive reasonably demonstrates that the termination is In Anticipation Of, or (y) occurring within two (2) years following, a “Change in Control” (as defined in the Parent’s 2006 Stock Option Plan)) the sum of the Executive’s Base Salary plus the target Annual Bonus and (ii) a pro-rata Annual Bonus (determined by multiplying the target Annual Bonus for the year of termination by a fraction, the numerator of which is the number of days he was employed by the Company during such fiscal year and the denominator of which is the number of days in such fiscal year) (the “ Pro-Rata Annual Bonus Payment ”) ((i) and (ii), collectively the “ Severance Payment ”), subject to the provisions of the last sentence of Section 4.8 hereof. The Company’s obligations to make the Severance Payment shall be conditioned upon the Executive’s execution, delivery and non-revocation of a valid and enforceable general release of claims substantially in the form attached hereto as Exhibit D (the “ Release ”). Subject to Section 3.2(e), the Severance Payment will be paid to the Executive as soon as practicable following the effectiveness of the Release. The Company shall also reimburse the Executive, on a monthly basis, for an amount of his COBRA premiums (for the duration of COBRA continuation coverage, not to exceed eighteen (18) months following termination of employment) equal to difference between (x) the amount of COBRA premium charged to the Executive minus (y) the amount of premium charged to actively employed senior executives for like coverage as that elected by the Executive.

(b) Termination at Expiration of the Term at the Company’s Request . If the Executive’s employment hereunder is terminated solely as a result of the Company’s electing under Section 1.1 not to renew the Employment Agreement at the expiration of the then current Term by giving notice thereof to the Executive, and the Executive terminates his employment within thirty (30) days after the end of the Term, then such termination of employment shall be considered a termination without Cause hereunder.

(c) Termination Due to Death or Disability . If the Executive’s employment hereunder is terminated during the Term due to the Executive’s death or Disability, the Company shall pay the Executive or his estate, as applicable, in addition to the Accrued Amounts, a Pro-Rata Annual Bonus Payment for the year of such termination.

(d) Definitions . For purposes of this Section 3.2, the following terms shall have the following meanings:

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

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miles from Pittsburgh, Pennsylvania; provided , however , that this clause (iii) of Section 3.2(d)(1) shall apply only following the Executive’s relocation to the metropolitan Pittsburgh area as described in Section 2.8 hereof; (iv) any material breach by the Company or any of its affiliates of any material obligation to the Executive; or (v) any failure of the Company to obtain the assumption in writing of its obligation to perform this Employment Agreement by any successor to all or substantially all of the assets of the Company within fifteen (15) days after any merger, consolidation, sale or similar transaction, except where such assumption occurs by operation of law. If the Company fails to cure a Good Reason event during the thirty (30) day cure period, the Executive must terminate his employment within sixty (60) days after the expiration of such thirty (30) day period if such termination is to be treated as for Good Reason based on such uncured Good Reason event.

(2) “ Cause ” shall mean (i) the Executive’s willful and continued failure to use his best efforts to perform his reasonably assigned duties (other than on account of Disability); (ii) the Executive is indicted for, convicted of, or enters a plea of guilty or nolo contendere to, (x) a felony or (y) a misdemeanor involving moral turpitude; (iii) in carrying out his duties under this Employment Agreement, the Executive engages in (x) gross negligence causing material harm to the Parent, the Company, or its or their business or reputation, (y) willful and material misconduct, or (z) willful and material breach of fiduciary duty; (iv) the Executive willfully and materially breaches (x) the restrictive covenants described in Section 4 of this Employment Agreement or (y) any of the material written policies listed on Exhibit E, as in effect on the Effective Date; or (v) the Executive is named in and receives a Wells Notice or is notified by the United States Department of Justice or U.S. Attorneys Office that he has been designated a “target” of an investigation by either of them. The determination of whether Cause exists shall be made, prior to the termination becoming effective, at a duly called meeting of the Board at which the Executive has been given notice of the grounds claimed to constitute Cause and an opportunity to be heard together with his counsel, and shall require a vote of not less than two-thirds of the members of the Board (not including for this purpose the Executive if he is then a member of the Board); provided that any such determination of Cause by the Board shall be subject to de novo review, at the Executive’s election, through arbitration in accordance with Section 8.6. No act or omission of the Executive shall be “willful” if conducted in good faith or with a reasonable belief that such conduct was in the best interests of the Company.

(3) “ Disability ” shall mean the Executive is entitled to receive long-term disability benefits under the long-term disability plan of the Company in which Executive participates, or, if there is no such plan, the Executive’s inability, due to physical or mental incapacity, to substantially perform his duties and responsibilities under this Employment Agreement for one hundred eighty (180) consecutive days.

(4) “ In Anticipation Of ” shall mean that the termination (i) was at the request of a third party that has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with a Change in Control that has been proposed, so long as in either case such Change in Control shall actually have occurred.

(e) Section 409A . If the Executive is a “specified employee” for purposes of Section 409A of the United States Internal Revenue Code of 1986, as amended, and

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the regulations thereunder (“ Section 409A ”), any Severance Payment required to be made pursuant to Section 3.2 which is subject to postponement under Section 409A shall not be paid until one day after the date which is six (6) months from the date of termination.

3.3. Exclusive Remedy . The foregoing payments upon termination of the Executive’s employment shall constitute the exclusive severance payments due the Executive upon a termination of his employment under this Employment Agreement.

3.4. Resignation from All Positions . Upon the termination of the Executive’s employment with the Company for any reason, the Executive shall be deemed to have resigned, as of the date of such termination, from all positions he then holds as an officer, director, employee and member of the board (and any committee thereof) of the Parent and any of its subsidiaries.

3.5. Cooperation . Following the termination of the Executive’s employment with the Company for any reason, the Executive agrees to reasonably cooperate with the Company upon reasonable request of the Board and to be reasonably available to the Company (taking into account any other full time employment of the Executive) with respect to matters arising out of the Executive’s services to the Parent and its subsidiaries. The Company shall reimburse the Executive for expenses reasonably incurred in connection with such matters as agreed by the Executive and the Board and, to the extent the Executive is required to spend substantial time on such matters, the Company shall compensate the Executive at an hourly rate based on the Executive’s most recent Base Salary.

4.1. Unauthorized Disclosure . The Executive agrees and understands that in the Executive’s position with the Company, the Executive has been and will be exposed to and has and will receive non-public information relating to the confidential affairs of the Company and its affiliates, including, without limitation, technical information, intellectual property, business and marketing plans, strategies, customer information, software, other information concerning the products, promotions, development, financing, expansion plans, business policies and practices of the Company and its affiliates and other non-public forms of information considered by the Company and its affiliates to be confidential and in the nature of trade secrets (including, without limitation, ideas, research and development, know-how, technical data, customer and supplier lists, pricing and cost information and business and marketing plans and proposals) (collectively, the “ Confidential Information ”). The Executive agrees that at all times during the Executive’s employment with the Company, except as may be required for the Executive to discharge his duties as an officer of the Company, and thereafter, the Executive shall not disclose such Confidential Information, either directly or indirectly, to any