EDUCATION MANAGEMENT CORPORATION NONQUALIFIED STOCK OPTION AGREEMENT

Exhibit 10.08

EDUCATION MANAGEMENT CORPORATION

NONQUALIFIED STOCK OPTION AGREEMENT

(Performance-Vesting)

THIS AGREEMENT (the “Agreement”), is made effective as of December 7, 2006 (the “Date of Grant”), between Education Management Corporation, a Pennsylvania corporation, and the participant set forth on the signature page hereto (the “Participant”):

R E C I T A L S :

WHEREAS, the Company has adopted the Education Management Corporation 2006 Stock Option Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Agreement to the extent set forth in Section 14 below. Capitalized terms not otherwise defined herein or by reference herein shall have the meanings given thereto in the Plan; and

WHEREAS, the Committee has determined that it is in the best interests of the Company and its shareholders to grant an Option to the Participant pursuant to the Plan, the Employment Agreement between the Participant and the Company (the “Parties”) dated as of even date herewith (the “Employment Agreement”), and the terms set forth herein.

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the Parties agree as follows:

1. Grant of the Option . The Company hereby grants to the Participant the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of the number of Shares set forth on the signature page hereto, subject to adjustment as set forth in the Plan. The Option Price shall be as set forth on the signature page hereto, which the Parties agree is not less than the fair market value of a Share as of the date hereof.

2. Duration . Subject to the provisions of the Plan and this Agreement, the Participant may exercise all or any part of the Vested Portion of the Option at any time prior to the tenth anniversary of the Date of Grant. The Option may not be cancelled or forfeited without the Participant’s prior written consent prior to such tenth anniversary, other than as expressly provided (x) in Section 8(b) of the Plan (relating to “Transactions”) or (y) in this Agreement.

3. Vesting . 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 the following schedule, upon one or more Realization Events:

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

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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. The portion of the Option which has become vested and exercisable as described in Section 3 is hereinafter referred to as the “Vested Portion.”

4. Termination of Employment .

(a) If the Participant’s Employment is terminated by the Company for Cause or by the Participant for any reason (other than a termination due to the Participant’s death, Disability or Retirement (as such term is defined in the Shareholders’ Agreement attached hereto as Exhibit A)), the Option shall, whether or not vested, automatically be canceled without payment of consideration therefor.

(b) If the Participant’s Employment is terminated by the Participant due to the Participant’s Retirement, the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until thirty days following the date of termination of Employment.

(c) If the Participant’s Employment is terminated by the Company other than for Cause, or by the Participant for Good Reason (as defined in the Employment Agreement) the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until the tenth anniversary of the Date of Grant.

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(d) If the Participant’s Employment is terminated due to the Participant’s death or Disability, the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until the first anniversary of the date of termination of Employment.

5. Exercise of Option .

(a) Subject to Section 2, t