Document:

Employment Letter Agreement

 Exhibit 10.1 
  
 [HEALTH NET, INC. LETTERHEAD] 
  
 January 19, 2005 
  
 Stephen Lynch 
 3175 Continental Dr. 
 Turner, OR 97392 
  
 Dear Stephen: 
  
 On behalf of Health Net, Inc. (the “Company”), we would like to
offer you the promotion to President Regional Health Plans of the Company. The terms and conditions of your promotion by the Company are as set forth in this letter agreement (this “Agreement”). Pursuant to the terms of this Agreement,
your promotion will be effective as of January 1, 2005. 
  
 1.
Salary  
  
 A. Salary. You will be paid an annual
base salary of $450,000, less applicable withholdings (payable on a bi-weekly basis) (“Base Salary”), which covers all hours worked. Generally, your Base Salary will be reviewed annually, but the Company reserves the right to change your
compensation from time-to-time. Pursuant to charter of the Compensation & Stock Option Committee (the “Committee”) of the Company’s Board of Directors, any adjustment to your compensation must be made with the approval of the
Committee (or, in the event that you constitute one of the top two (2) highest paid executive officers of the Company, with the ratification of the Company’s Board of Directors). 
  
 B. Duties. Your duties and responsibilities will be for the overall management of Health Net - California and Health
Net - Oregon but the Company reserves the right to assign you other duties as needed and to change your duties from time to time on reasonable notice, based on your skills and the needs of the Company. You will report directly to Jay Gellert,
President and Chief Executive Officer of the Company, but your reporting relationship may be changed from time to time at the discretion of the Company. Your title will be President Regional Health Plans, but may be changed at the discretion of the
Company to a title that reflects a similarly senior executive position. Please be advised that the Company intends to make a public announcement of the change in your role on or about the date the Company announces its year-end and 4th quarter earnings for 2004. 
  
 2. Adjustments and Changes in Employment Status. You understand that the Company reserves the right, to make personnel decisions regarding your
employment, including but not limited to decisions regarding any promotion, salary adjustment, transfer or disciplinary action, up to and including termination, consistent with the needs of the business or the Company. Generally, your performance
and compensation will be reviewed on an annual basis. 

 3. Protection of Proprietary and Confidential Information. You agree that your employment creates
a relationship of confidence and trust with the Company with respect to Proprietary and Confidential Information (as defined below) of the Company learned by you during your employment. 
  
 A. You agree not to directly or indirectly use or disclose any of the Proprietary and Confidential Information of the
Company or any of its affiliates at any time except in connection with the services you provide to such entities. “Proprietary and Confidential Information” shall mean trade secrets, confidential knowledge, data or any other proprietary or
confidential information of the Company or any of its affiliates, or of any customers, members, employees or directors of any of such entities, but shall not include any information that (i) was publicly known and made generally available in the
public domain prior to the time of disclosure to you by the Company or (ii) becomes publicly known and made generally available after disclosure to you by the Company. By way of illustration but not limitation, “Proprietary and Confidential
Information” includes: (i) trade secrets, documents, memoranda, reports, files, correspondence, lists and other written and graphic records affecting or relating to any such entity’s business; (ii) confidential marketing information
including without limitation marketing strategies, customer and client names and requirements, services, prices, margins and costs; (iii) confidential financial information; (iv) personnel information (including without limitation employee
compensation); and (v) other confidential business information. 
  
 B. You further agree that at all times during your employment and thereafter, you will keep in confidence and trust all Proprietary and Confidential Information, and that you will not use or disclose any Proprietary and Confidential
Information or anything related to such information without the written consent of the Company, except as may be necessary in the ordinary course of performing your duties to the Company. 
  
 C. All Company property, including, but not limited to, Proprietary and Confidential Information, documents, data, records,
apparatus, equipment and other physical property, whether or not pertaining to Proprietary and Confidential Information, provided to you by the Company or any of its affiliates or produced by you or others in connection with your providing services
to the Company or any of its affiliates shall be and remain the sole property of the Company or its affiliates (as the case may be) and shall be returned promptly to such appropriate entity as and when requested by such entity. You shall return and
deliver all such property upon termination of your employment, and you may not take any such property or any reproduction of such property upon such termination. 
  
 D. You recognize that the Company and its affiliates have received and in the future will receive information from third
parties which is private, proprietary or confidential information subject to a duty on such entity’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. You agree that during your
employment, and thereafter, you owe such entities and such third parties a duty to hold all 

 
such private, proprietary or confidential information received from third parties in the strictest confidence and not to disclose it, except as necessary in
carrying out your work for such entities consistent with such entities’ agreements with such third parties, and not to use it for the benefit of anyone other than for such entities or such third parties consistent with such entities’
agreements with such third parties. 
  
 E. Your obligations under
this Section 3 shall continue after the termination of your employment and any breach of this Section 3 shall be a material breach of this Agreement. 
  
 4. Representation and Warranty of Employee. You represent and warrant to the Company that the performance of your duties, and the entering into of
this Agreement, has not violated and will not violate any agreements with or trade secrets of any other person or entity. You further represent and warrant that you do not have any relationship or commitment to any other person or entity that might
be in conflict with your obligations to the Company under this offer, including but not limited to outside employment, sales broker relationships, investments or business activities. You further understand and agree that while employed by the
Company you are expected to refrain from engaging in any outside activities that might be in conflict with the business interests of the Company. In addition, you represent and warrant to the Company that you have not shared with or disclosed to,
and will not share with or disclose to, the Company any proprietary or confidential information of your previous employers or any other third party. 
  
 5. Employee Benefits. 
  
 A. Employee Benefit Programs. You will continue to be eligible for various employee benefit programs if you meet the applicable participation
requirements. These benefit programs include paid time off (“PTO”), holidays, group medical, dental, vision, term life, and short and long term disability insurance and participation in the Company’s 401(k) plan, deferred compensation
plan and tuition reimbursement plan. You will also be eligible to participate in any employee benefit programs added at any future time that are generally applicable to senior executives of the Company and that have been approved by the Committee,
provided that you meet the applicable participation requirements; provided, however, that this provision does not extend to any individually negotiated or tailored benefits, plans or programs covering a particular employee or
employees. Although the Company may sponsor a benefit or plan or program for some employees, it is not required to do so for all employees and may exclude certain employees now or in the future from one or more benefits, plans or programs. The
Company or its subsidiaries or affiliates may modify, terminate or amend any benefit or plan in its discretion, retroactively or prospectively, subject only to applicable law. 
  
 B. Required Insurance. You will be covered by workers’ compensation insurance and state disability insurance, as
required by state law. 

 C. Financial Counseling Allowance. You will be reimbursed up to the amount of $5,000 per year for
documented costs incurred for your personal financial counseling services, including tax preparation. 
  
 D. Incentive Bonus. You will be eligible to participate in the Health Net, Inc. Executive Incentive Plan (also known as the Management Incentive
Plan (“MIP”)) in accordance with the terms of the MIP, which provides you with a target opportunity to earn each plan year up to 80% of your Base Salary as additional compensation according to the terms of the actual MIP documents. The
bonus payment will range from 0% to 200% of target depending upon the actual results achieved, and specific, individually tailored measures will be established by the Company that must be achieved by you in order for you to be eligible to receive
bonus payments for a given plan year. It is understood that the Committee and the Company will award bonus amounts, if any, as it deems appropriate consistent with the guidelines of the MIP. You acknowledge that in the event you are one of the top
five (5) highest paid executive officers of the Company for a given calendar year under applicable federal securities laws, your bonus for that year, if any, will be subject to the Company’s Performance Based 162(m) Plan in lieu of the MIP.

  
 E. Relocation Benefits. You will be provided with
Corporate Housing for a period of six (6) months through July 31, 2005. At the end of the six (6) months, you will be provided the following relocation assistance: 
  

	 	•	 	Home Purchase: You will be covered under the applicable Home Purchase Relocation Benefit Guidelines of the Company currently in effect. All relocation expenses not deductible
under IRS regulations, except the miscellaneous spending allowance, will be “grossed up” for income tax purposes at the supplemental federal tax rate and applicable state tax liability. 

  

	 	•	 	Housing Differential: $225,000 net differential, grossed-up for tax by the Company. When you purchase a home in California, you will receive the housing differential amount
to offset the housing costs between Oregon and California. If you leave prior to three (3) years from the date of the housing differential payment, you will be required to pay a pro-rata portion of the $225,000 housing differential amount to the
Company. The pro-rata amount will be determined as follows: $225,000 divided by the number of months remaining of the 36 months. 

  
 F. Expenses. Subject to and in accordance with the Company’s written guidelines and procedures for business and travel expenses, you will
receive reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by you in the performance of your duties pursuant to this Agreement. 
  
 6. Stock Options and Restricted Stock. Upon your acceptance of this promotion and with a grant date effective as of
your promotion date hereunder, you will be granted a non-qualified stock option (the “Stock Option”) to purchase 50,000 shares of the Common Stock of the Company (the “Common Stock”). All Stock Options granted to you will be
granted under the applicable Company Stock Option Plan (the “Stock Option Plan”), and will be 

 
subject to the terms of the Company’s form of stock option agreement as adopted by the Committee (the “Stock Option Agreement”). These Stock
Options will expire ten (10) years from the grant date (subject to earlier termination as provided in the Stock Option Agreement and the Stock Option Plan) and will have an exercise price equal to the closing sales price of the Common Stock on the
New York Stock Exchange on your promotion date. The Stock Options will vest at the rate of 1/4th of the shares
covered thereby of the first through fourth anniversaries of the grant date. 
  
 In addition, as of your promotion date, you will be granted 25,000 restricted shares of Common Stock (the “Restricted Shares”) which will vest as follows: 50% of the shares (12,500) will vest upon your
achievement of specific 2005 plan year performance goals as determined by the Company and 50% of the shares (12,500) will vest upon your achievement of specific 2006 plan year performance goals as determined by the Company. The Restricted Shares
granted to you will be granted under the applicable Health Net, Inc. Stock Option Plan in accordance with and subject to the terms of the Company’s form Restricted Stock Agreement as adopted by the Committee. In the event you should leave the
employ of the Company, all unvested Restricted Shares shall be forfeited. 
  
 As set forth in the applicable Stock Option Plans and in the Stock Option Agreement and Restricted Stock Agreement used by the Company, vesting of your Stock Options and the Restricted Shares may be accelerated upon
the consummation of certain “Change in Control” transactions (as defined in such documents) subject to the terms and conditions of such documents. Please note that the definition of “Change in Control” contained in these
documents is different in various respects from the definition set forth in Section 8(d) below. In the event of any inconsistency with this Agreement, the terms of the Stock Option Agreement, the Restricted Stock Agreement and the Stock Option Plan
shall control. Any future Stock Option and/or Restricted Share grants to you are at the discretion of the Committee. 
  
 7. Term of Employment. Your employment with the Company is “at-will,” which means that either you or the Company may terminate the
employment relationship at any time, with or without advance notice and with or without Cause (as defined below). Upon termination of your employment for any reason, in addition to any other payments that may be payable to you hereunder, you (or
your beneficiaries or estate) will be paid (in each case to the extent not theretofore paid) within thirty (30) days following your date of termination (or such shorter period that may be required by applicable law): your annual Base Salary through
the date of termination, any compensation previously deferred by you (together with any interest and earnings therein), accrued but unused PTO, reimbursable expenses incurred by you prior to the termination date and any other compensatory plan,
arrangement or program payment to which you may be entitled. 
  
 8. Severance Pay. 
  
 A. If your employment is
terminated by the Company without Cause (as defined in subsection (C) below) at any time that is not within two (2) years after a Change in Control (as defined in subsection (D) below) of Health Net, Inc., you will be entitled to receive, provided
you sign a Waiver and Release of Claims substantially in the form attached hereto as Exhibit A, which is incorporated into this Agreement by reference, 

 (a) a lump sum cash payment equal to twelve (12) months’ of your Base Salary in
effect immediately prior to the date of your termination; and 
  
 (b) the continuation, under the federal law known as COBRA, of your medical, dental and vision benefits (as maintained for your benefit immediately prior to the date of your termination) for you and your covered
dependents for a period of twelve (12) months with premium payments paid by the Company on your behalf, provided, that you properly elect to continue those benefits under COBRA, 
  
 The lump sum payments referred to above will be paid within thirty (30) days following your termination of
employment. 
  
 B. If at any time within two (2) years after a
Change in Control (as defined in subsection (D) below) of Health Net, Inc. your employment is terminated by the Company without Cause or you terminate your employment for Good Reason (as defined in subsection (E) below) (by giving the Company at
least fourteen (14) days prior written notice of the effective date of termination), then you will be entitled to receive, provided you sign a Waiver and Release of Claims substantially in the form attached hereto as Exhibit A, which is
incorporated into this Agreement by reference, (i) a lump sum payment equal to twenty-four (24) months’ of your Base Salary in effect immediately prior to the date of your termination, and (ii) the continuation of your medical, dental and
vision benefits for you and your dependents for six (6) months following your date of termination and (iii) after expiration of such six (6) months benefits continuation period, the continuation, under COBRA, of your medical, dental and vision
benefits (maintained for your benefit immediately prior to the date of your termination) for you and your dependents for a period of eighteen (18) months following the effective date of your termination with premium payments made by the Company on
your behalf, provided, that you properly elect to continue those benefits under COBRA and provided, further, that in the event the Company requests, in writing, prior to such voluntary termination by you for Good Reason that you
continue in the employ of the Company for a period of time up to 90 days following such Change in Control, then you shall forfeit such severance allowance if you voluntarily leave the employ of the Company prior to the expiration of such period of
time. In the event that your employment is voluntarily terminated by you at any time (except for Good Reason within two (2) years after a Change in Control of Health Net, Inc.), then you shall not be eligible to receive any payments set forth in
this Section 10). The lump sum payment will be paid within thirty (30) days following your termination of employment. 
  
 C. You further understand and acknowledge that the Company will have no obligation to provide the severance benefits called for in this letter if you
terminate your employment voluntarily or if you are terminated for cause. For purposes of this letter, a “termination for cause” is defined as a termination of employment based on the determination by the Company, in its sole discretion,
that you engaged in conduct that (1) violates a federal, 

 
state or local law, regulation or ordinance that is material to your performance or to your trustworthiness, (2) evidences dishonesty, gross carelessness or
misconduct, negligence or neglect of duty, breach of a fiduciary obligation, or abandonment of the responsibilities of your position, (3) violates any policy or known business practice of the Company, (4) evidences habitual drunkenness or narcotic
drug addiction, (5) results in the knowing unauthorized disclosure of confidential information relating to the business of the Company or any of its affiliates, (6) amounts to a breach of your obligations hereunder (or under any Company policy) to
protect the proprietary and confidential information of the Company or any of its affiliates, or (7) is adverse to the best business interests of the Company. 
  

D. For purposes of this Agreement, “Change in Control” is defined as any of the following which occurs subsequent to the effective date of
your employment: 
  
 (i) Any person (as such term is defined
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), corporation or other entity (other than Health Net, Inc. or any of its subsidiaries, or any employee benefit plan sponsored by Health Net,
Inc. or any of its subsidiaries) is or becomes the beneficial owner (as such term is defined in Rule 13d-3 under the Exchange Act) of securities of Health Net, Inc. representing twenty percent (20%) or more of the combined voting power of the
outstanding securities of Health Net, Inc. which ordinarily (and apart from rights accruing under special circumstances) have the right to vote in the election of directors (calculated as provided in paragraph (d) of such Rule 13d-3 in the case of
rights to acquire Health Net, Inc.’s securities) (the “Securities”); 
  
 (ii) As a result of a tender offer, merger, sale of assets or other major transaction, the persons who are directors of Health Net, Inc. immediately prior to such transaction cease to constitute a majority of the
Board of Directors of Health Net, Inc. (or any successor corporations) immediately after such transaction; 
  
 (iii) Health Net, Inc. is merged or consolidated with any other person, firm, corporation or other entity and, as a result, the shareholders of Health
Net, Inc., as determined immediately before such transaction, own less than eighty percent (80%) of the outstanding Securities of the surviving or resulting entity immediately after such transaction: 
  
 (iv) A tender offer or exchange offer is made and consummated for the
ownership of twenty percent (20%) or more of the outstanding Securities of Health Net, Inc.; 
  
 (v) Health Net, Inc. transfers substantially all of its assets to another person, firm, corporation or other entity that is not a wholly-owned subsidiary of Health Net, Inc.; or 
  
 (vi) Health Net, Inc. enters into a management agreement with another person,
firm, corporation or other entity that is not a wholly-owned subsidiary of Health Net, Inc. and such management agreement extends hiring and firing authority over you to an individual or organization other than Health Net, Inc. 

 E. For purposes of this Agreement, the term “Good Reason” means any of the following which
occurs, without your consent, subsequent to the effective date of a Change in Control as defined above: 
  
 (i) A demotion or a substantial reduction in the scope of your position, duties, responsibilities or status with the Company, or any removal of you from
or any failure to reelect you to any of the positions (or functional equivalent of such positions) referred to in the introductory paragraphs hereof, except in connection with the termination of your employment for Disability (as defined below),
normal retirement or Cause or by you voluntarily other than for Good Reason; 
  
 (ii) A reduction by the Company in your Base Salary or a material reduction in the benefits or perquisites available to you as in effect immediately prior to any such reduction; 
  
 (iii) A relocation of you to a work location more than fifty (50) miles from
your work location immediately prior to such proposed relocation; provided that such proposed relocation results in a materially greater commute for you based on your residence immediately prior to such relocation; or 
  
 (iv) The failure of the Company to obtain an assumption agreement from any
successor contemplated under Section 16 of this Agreement. 
  
 9.
Termination by the Company for Cause. The Company may terminate your employment for Cause at any time with or without advance notice. In the event of such termination, you will not be eligible to receive any of the payments set forth in
Section 9(A) above. 
  
 10. Termination due to Death or
Disability. In the event that your employment is terminated at any time due to death or Disability, you (or your beneficiaries or estate) shall be entitled, to (a) continuation of all medical and dental insurance for a period of twelve (12)
months from the date of termination and (b) a lump sum payment equal to twelve (12) months of your Base Salary in effect immediately prior to the date of your termination, to be paid within thirty (30) days following your termination of employment,
provided in the event of a termination due to Disability, you sign the Waiver and Release of Claims which is incorporated into this Agreement by reference as Exhibit A. For purposes of this Agreement, a termination for “Disability”
shall mean a termination of your employment due to your absence from your duties with the Company on a full-time basis for at least 180 consecutive days as a result of your incapacity due to physical or mental illness. 
  
 11. Withholding. All payments required to be made by the Company
hereunder to you or your estate or beneficiaries shall be subject to the withholding of such amounts relating to taxes as the Company may reasonably determine should be withheld pursuant to any applicable law or regulation. 

 12. Potential Tax Consequences for “Parachute” Payments. 
  
 The intent of this Section is to minimize excess parachute payments (thereby also minimizing
your payment of the Excise Tax) without placing you in a worse overall after-tax position than if this Section did not exist. For purposes of this Section: 
  
 “Auditor” means the accounting firm that was, immediately prior to the change of Control, the Company’s independent auditor; 
  
 “Code” means the Internal Revenue Code of 1986, as amended;

  
 “Excise Tax” means the excise tax imposed by
Section 4999 of the Code on people who receive excess parachute payments within the meaning of Section 280G(b) of the Code; 
  
 “Other Agreements” means all other plans, arrangements or agreements with (i) the Company, (ii) any person whose actions result in a Change of
Control, or (iii) any person affiliated with the Company or such person; 
  
 “Severance Payments” means the cash payments and non-cash benefits payable to you pursuant to Section 13; 
  
 “Tax Counsel” means a tax counsel selected by the Auditor and reasonably acceptable to you; and 
  
 “Total Payments” means any payment or benefit you receive or are
to receive in connection with a Change of Control or the termination of your employment (pursuant to this Agreement or any Other Agreement), including the Severance Payments. 
  
 All other meanings in this Section shall be interpreted consistent with the intent hereof and with Section 280(G) of the
Code. 
  
 Notwithstanding any other provisions of this Agreement,
if after reduction of Total Payments intended to minimize imposition of the Excise Tax pursuant to Other Agreements, Total Payments would still be subject (in whole or in part) to the Excise Tax, Severance Payments will be reduced to the extent
necessary to eliminate such Excise Tax (subject to the limitation set forth below). 
  
 Any reduction described in the above paragraph will occur only if after giving effect to such reduction you receive Total Payments net of federal, state and local income taxes imposed on them equal to or greater than
the amount of net Total Payments you would have received in the absence of such reduction (i.e. net of the Excise Tax and net of federal, state and local income taxes imposed on the unreduced amount). 

 Unless you elect to have the non-cash Severance Payments reduced or eliminated first, cash Severance
Payments will be reduced (to zero if necessary) and then non-cash Severance Payments will be reduced or eliminated (if applicable). 
  
 In determining whether and to what extent the Total Payments will be subject to the Excise Tax, the following shall be excluded: 
  
 Any of the Total Payments which you waive the right to receive so that they
do not constitute a payment to you under Code Section 280(G)(b); 
  
 Any of the Total Payments which, in the opinion of Tax Counsel, do not constitute a parachute payment within the meaning of Section 280(G)(b)(2) of the Code; and 
  
 Any of the Total Payments which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually
rendered before the Change of Control in excess of the applicable base amount. 
  
 The Auditor shall determine the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. 

 When such payments are made, the Company will provide you with a written statement explaining the manner
in which such payments were calculated and the basis for such calculations including any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (attaching any such written opinions or advice
to the statement). 
  
 13. Restrictive Covenants.

  
 A. You hereby agree that, during (i) the six (6)-month period
following a termination of your employment with the Company that entitles you to receive severance benefits under this Agreement or a written agreement with or policy of the Company or (ii) the twelve (12)-month period following a termination of
your employment with the Company that does not entitle you to receive such severance benefits (the period referred to in either clause (i) or (ii), the “Restricted Period”), you shall not undertake any employment or activity (including,
but not limited to, consulting services) with a Competitor (as defined below) in any geographic area in which the Company or any of its affiliates operate (the “Market Area”), where the loyal and complete fulfillment of the duties of the
competitive employment or activity would call upon you to reveal, to make judgments on or otherwise use or disclose any confidential business information or trade secrets of the business of the Company or any of its affiliates to which you had
access during your employment with the Company. For purposes of this Section, “Competitor” shall refer to any health maintenance organization or insurance company that provides managed health care or related services similar to those
provided by the Company or any of its affiliates. 
  
 B. In
addition, you agree that, during the applicable Restricted Period following termination of your employment with the Company, you shall not, directly or indirectly, (i) solicit, interfere with, hire, offer to hire or induce any person, who is or was
an employee of the Company or any of its affiliates at the time of such solicitation, interference, hiring, offering to hire or inducement, to discontinue his/her relationship with the Company or any of its affiliates or to accept employment by, or
enter into a business relationship with, you or any other entity or person or (ii) solicit, interfere with or otherwise contact any customer or client of the Company or any of its affiliates. 
  
 C. It is hereby further agreed that if any court of competent jurisdiction
shall determine that the restrictions imposed in this Section 13 are unreasonable (including, but not limited to, the definition of Market Area or Competitor or the time period during which this provision is applicable), the parties hereto hereby
agree to any restrictions that such court would find to be reasonable under the circumstances. 
  
 D. You also acknowledge that the services to be rendered by you to the Company are of a special and unique character, which gives this Agreement a peculiar value to the Company or any of its affiliates, the loss of
which may not be reasonably or adequately compensated for by damages in an action at law, and that a material breach or threatened breach by you of any of the provisions contained in this Section 13 will cause the Company or any of its affiliates
irreparable injury. You therefore agree that the Company may be entitled, in addition to the remedies set forth above in this Section 13 and any other right or remedy, to 

 
a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or
security, enjoining or restraining you from any such violation or threatened violations. 
  
 14. Successors; Binding Agreement. 
  
 A. This Agreement shall not be terminated by any merger or consolidation of the Company whereby the Company is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially
all of the assets of the Company. In the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are
transferred. 
  
 B. The Company agrees that concurrently with any
merger, consolidation or transfer of assets referred to in this Section 14, it will cause any successor or transferee to unconditionally assume, by written instrument delivered to you (or his beneficiary or estate), all of the obligations of the
Company hereunder. Failure of the Company to obtain such assumption prior to the effectiveness of any such merger, consolidation or transfer of assets shall be a breach of this Agreement and shall entitle you to compensation and other benefits from
the Company in the same amount and on the same terms as you would be entitled hereunder if your employment were terminated without Cause. For purposes of implementing the foregoing, the date on which any such merger, consolidation or transfer
becomes effective shall be deemed the date of termination. 
  
 C.
This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you shall die while any amounts would be payable to you
hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by you to receive such amounts or, if no person is
so appointed, to your estate. 
  
 15. Severability. If any
term of this Agreement is held to be invalid, void or unenforceable, the remainder of this Agreement shall remain in full force and effect and shall in no way be affected and the parties shall use their best efforts to find an alternative way to
achieve the same result. 
  
 16. Integrated Agreement. This
Agreement supersedes any prior agreements, representations or promises of any kind, whether written, oral, express or implied between the parties hereto with respect to the subject matters herein. It constitutes the full, complete and exclusive
agreement between you and the Company with respect to the subject matters herein. This Agreement cannot be changed unless in writing, signed by you and the Chief Executive Officer of the Company and approved by the Board of Directors of the Company
(or the Committee, if permitted by the Committee’s charter). 
  
 17. Waiver. No waiver of any default hereunder shall operate as a waiver of any subsequent default. Failure by either party to enforce any of the terms or conditions of this Agreement, for any length of time or from time to time,
shall not be deemed to waive or decrease the rights of such party to insist thereafter upon strict performance by the other party. 

 18. Notices. All notices and communications required or permitted hereunder shall be in writing
and shall be deemed given (a) if delivered personally, (b) one (1) business day after being sent by Federal Express or a similar commercial overnight service, or (c) three (3) business days after being mailed by registered or certified mail, return
receipt requested, prepaid and addressed to the following addresses, or at such other addresses as the parties may designate by written notice in the manner aforesaid: 
  

			
	If to the Company:	  	 Health Net, Inc.

	 	  	 Organization Effectiveness Department

	 	  	 21650 Oxnard Street, 22nd Floor

	 	  	 Woodland Hills, CA 91367

	 	  	 Attention: Karin Mayhew

		
	If to the Employee:	  	 Stephen Lynch

	 	  	 3175 Continental Drive

	 	  	 Turner, OR 97392

  
 19. Governing
Law. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without regard to the principle of conflicts of laws. The
invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which other provisions shall remain in full force and effect. 
  
 20. Survival and Enforcement. Sections 3, 8, 10, 12 and 13 of this
Agreement and any rights and remedies arising out of this Agreement shall survive and continue in full force and effect in accordance with the respective terms thereof, notwithstanding any termination of this Agreement or your employment. The
parties agree that the Company would be damaged irreparably in the event any provision of Sections 3 or 15 of this Agreement were not performed in accordance with its terms or were otherwise breached and that money damages would be an inadequate
remedy for any such nonperformance or breach. Therefore, the Company or its successors or assigns shall be entitled in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened
breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security). 
  
 21. Acknowledgement. You acknowledge that you have had the opportunity to discuss the content of this Agreement with and obtain advice from your
attorney, have had sufficient time to and have carefully read and fully understood all of the provisions of this Agreement, and you are knowingly and voluntarily entering into this Agreement. You further acknowledge that you are obligated to become
familiar with and comply at all times with all written policies of the Company. 

 We look forward to your joining our organization. In order to confirm your agreement with the Company and your acceptance
of these terms, please sign one copy of this letter agreement and return it to me. 
  
 Sincerely, 
  

	
	 /s/ Karin D. Mayhew

	Karin D. Mayhew
	Senior Vice President, Organization Effectiveness

  

			
	cc:	  	Jay Gellert
	 	  	Debbie Francis

  
 This will confirm my agreement to the
terms of my employment with the Company as set forth in this letter agreement. 
  

	
	 /s/ Stephen Lynch

	Stephen Lynch

 EXHIBIT A 
  
 WAIVER AND RELEASE OF CLAIMS 
  
 This WAIVER AND RELEASE OF CLAIMS (this “Release”) is made and entered into by and between Health Net, Inc. and its affiliates and subsidiaries
(hereinafter referred to as the “Company”) and Stephen Lynch (hereinafter referred to as the “Employee”). 
  
 WHEREAS, the Company and Employee are parties to an Employment Letter Agreement dated as of January 19, 2005 (the “Employment Letter Agreement”)
and are entering into this Release as a condition to Employee’s receipt of a severance payment thereunder (capitalized terms used but not defined herein shall have the meanings set forth in the Employment Letter Agreement). 
  
 NOW, THEREFORE, the Company and Employee agree as follows: 
  

	1.	Employee’s employment with the Company will terminate on [TERM DATE ] (the “Termination Date”). Upon termination of employment, Employee will not represent to
anyone that he is an employee of the Company and will not say or do anything purporting to bind the Company. Upon Employee’s termination of employment, Employee shall be deemed to have resigned from all other positions with the Company, if any,
held by Employee. 

  

	2.	Employee’s termination of employment with the Company shall be considered a [DESCRIBE TYPE OF TERMINATION] under the Employment Letter Agreement, and Employee is
therefore eligible to receive [DESCRIBE PAYMENTS AND OTHER BENEFITS TO BE RECEIVED]. 

  

	3.	Employee acknowledges that all unused accrued vacation and unused personal absence time will be paid in their final regular paycheck in keeping with the company’s policy and
practice or such shorter time as may be required by applicable law. Employee further acknowledges that no further vacation/paid-time-off benefits will accrue after the Termination Date. 

  

	4.	Employee’s participation in all Company employee benefit plans as an active employee shall cease on the Termination Date, and Employee shall not be eligible to make
contributions to or to receive allocations under the Health Net, Inc. 401(k) Associate Savings Plan, to purchase shares of Company stock under the Health Net, Inc. Employee Stock Purchase Plan or to make any deferrals pursuant to any deferred
compensation plan of the Company after the Termination Date. 

  

	5.	 In partial consideration of the Company providing Employee the payments and benefits set forth above and as a condition to receive such payments and benefits,
Employee freely and voluntarily enters into this Release and by signing this Release Employee, on his/her own behalf and on behalf of his or her heirs, beneficiaries, successors, representatives, trustees, administrators and assigns, hereby waives
and 

	 	 
releases the Company, and each of its past, present and future officers, directors, shareholders, employees, consultants, accountants, attorneys, agents,
managers, insurers, sureties, parent and sister corporations, divisions, subsidiary corporations and entities, partners, joint venturers, affiliates, beneficiaries, successors, representatives and assigns, from any and all claims, demands, damages,
debts, liabilities, controversies, obligations, actions or causes of action of any nature whatsoever, whether based on tort, statute, contract, indemnity, rescission or any other theory of recovery, including but not limited to claims arising under
federal, state or local laws prohibiting discrimination in employment, including Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1866, as amended, claims of disability discrimination under the Americans with
Disabilities Act, the Age Discrimination in Employment Act, as amended (“ADEA”), the Worker Adjustment and Retraining Notification Act (“WARN”), or claims growing out of any legal restrictions on the Company’s
right to terminate its employees and whether for compensatory, punitive, equitable or other relief, whether known, unknown, suspected or unsuspected, against the Company, including without limitation claims which may have arisen or may in the future
arise in connection with any event which occurred on or before the date of Employee’s execution of this Release. The provisions in this paragraph do not extend to any rights Employee may have to enforce the terms of this Agreement and are not
intended to prohibit Employee from filing a claim for unemployment insurance. 

  

	6.	Employee expressly waives any right or claim of right to assert hereafter that any claim, demand, obligation and/or cause of action has, through ignorance, oversight or error, been
omitted from the terms of this Release. Employee makes this waiver with full knowledge of his/her rights and with specific intent to release both his/her known and unknown claims, and therefore specifically waives the provisions of Section 1542 of
the Civil Code of California or other similar provisions of any other applicable law, which reads as follows: 

  
 “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the debtor.” 
  
 Employee understands and acknowledges the significance and consequence of this Release and of such specific waiver of Section 1542, and expressly agrees that this Agreement shall be given full force and effect
according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims, demands, obligations and causes of action herein above specified. 
  

	7.	 Employee shall not initiate or cause to be initiated against the Company any compliance review, suit, action, investigation or proceeding of any kind, or
voluntarily participate in same, individually or as a representative, witness or member of a class, under contract, law or regulation, federal, state or local, pertaining to any matter related to his/her employment with the Company, unless Employee
first cooperates in making his/her allegations known to the Company for the Company to take corrective action at a time and place designated by the Company. In addition, Employee shall, 

	 	 
without further compensation, cooperate with and assist the Company in the investigation of, preparation for or defense of any actual or threatened third
party claim, investigation or proceeding involving the Company or its predecessors or affiliates and arising from or relating to, in whole or in part, Employee’s employment with the Company or its predecessors or affiliates for which the
Company requests Employee’s assistance, which cooperation and assistance shall include, but not be limited to, providing testimony and assisting in information and document gathering efforts. In this connection, it is agreed that the Company
will use its reasonable best efforts to assure that any request for such cooperation will not unduly interfere with Employee’s other material business and personal obligations and commitments. 

  

	8.	Employee agrees he will return to the Company immediately upon termination any building keys, security passes or other access or identification cards and any Company property that
was in his or her possession, including but not limited to any documents, credit cards, computer equipment, mobile phones or data files. Employee agrees to clear all expense accounts and pay all amounts owed on any corporate credit cards which the
Company previously issued to Employee, subject to the Company’s obligation to reimburse Employee for any properly reimbursable business expenses in accordance with the Company’s expense policies and procedures then in effect.

  

	9.	Employee shall not, without the Company’s written consent by an authorized representative, at any time prior or subsequent to the execution of this Release, disclose, use,
remove or copy any confidential, trade secret or proprietary information he acquired during the course of his employment by the Company, including without limitation, any technical, actuarial, economic, financial, procurement, provider, customer,
underwriting, contractual, managerial, marketing or other information of any type that has economic value in the business in which the Company is engaged, but not including any previously published information or other information generally in the
public domain. 

  

	10.	In addition to any other part or term of this Release or the Employment Letter Agreement, Employee agrees that he will not, (a) for a period of one (1) year from the date of this
Agreement, irrespective of the reason for the termination, either directly or indirectly, on his own behalf or on behalf of any other person: (1) make known to any person, firm, corporation or other entity of any type, the names and addresses of any
of the Company’s customers, enrollees or providers or any other information pertaining to them; or (2) disrupt, solicit or influence or attempt to solicit, disrupt or influence any of the Company’s customers, providers, vendors, agents or
independent contractors with whom the Employee became acquainted during the course of employment or service for the purpose of terminating such a person’s or entity’s relationship with the Company or causing such a person or entity to
associate with a competitor of the Company, and (b) for the six month period following the Termination Date undertake any employment or activity prohibited by the Employment Letter Agreement for the time periods set forth therein. The prohibitions
of this paragraph are not intended to deny employment opportunities within the Employee’s field of employment but are limited only to those prohibitions necessary to protect the Company from unfair competition. 

	11.	Nothing contained herein shall be construed as an admission of any wrongful act, including but not limited to violation of any contract, express or implied, or any federal, state or
local employment laws or regulations, and nothing contained herein shall be used for any purpose except in proceedings related to the enforcement of this Release. 

  

	12.	If any part or term of this Release is held invalid or unenforceable, such invalidity or unenforceability shall not affect in any way the validity or enforceability of any other
part or term of this Release. In addition, if any court of competent jurisdiction construes the covenants contained in Section 10 hereof, or any part thereof, to be unenforceable in any respect, the court may reduce the duration or scope to the
extent necessary so that the provision is enforceable, and the provision, as reduced, shall then be enforceable. 

  

	13.	Employee agrees and acknowledges that this Release recites all payments and benefits Employee is entitled to receive hereunder and under the Employment Agreement, and that no other
payments or benefits will be asserted or requested by Employee. 

  

	14.	The Employee acknowledges that he has had an opportunity to consult and be represented by counsel of his own choosing in the review of this Release, and that he has been advised by
the Company to do so, that the Employee is fully aware of this Release and of its legal effect, that the preceding paragraphs recite the sole consideration for this Release, and that Employee enters into this Release freely, without coercion, and
based on the Employee’s own judgment and not in reliance upon any representation or promise made by the other party, other than those contained herein. There may be no modification of the terms of this Release except in writing signed by the
parties hereto including an appropriately authorized Officer of the Company. 

  

	15.	This Release constitutes the full, complete and exclusive agreement between you and the Company with respect to the subject matters herein and supersedes any prior agreements,
representations or promises of any kind, whether written, oral, express or implied, with respect to the subject matters herein. This Release cannot be changed unless in writing, signed by you and the Chief Executive Officer of the Company.

  

	16.	This Release shall be construed and governed by the laws of the State of Delaware. 

  
 EMPLOYEE ACKNOWLEDGES BY SIGNING BELOW that (i) Employee has not relied upon any representations, written or oral, not set
forth in this Release; (ii) at the time Employee was given this Release Employee was informed in writing by the Company that (a) Employee had at least 21 days in which to consider whether Employee would sign the Release and (b) Employee should
consult with an attorney before signing the Release; and (iii) Employee had an opportunity to consult with an attorney and either had such consultations or has freely decided to sign this Release without consulting an attorney. 

 Employee further acknowledges that he may revoke acceptance of this Release by delivering a letter of
revocation within seven (7) days after the later of the dates set forth below addressed to: Health Net, Inc., Corporate Legal Department, 21650 Oxnard Street, Woodland Hills, California 91367, Attention: General Counsel. 
  
 Finally, Employee acknowledges that he understands that this Release will not
become effective until the eighth (8th) day following his signing this Release and that if Employee does not revoke his acceptance of the terms of this Release within the seven (7) day period following the date on which Employee signs this Release
as set forth above, this Release will be binding and enforceable. 
  
 IN WITNESS WHEREOF, the parties hereto have executed this Release as of the dates set forth below. 
  

							
	Employee	 	Health Net, Inc.
				
	By:	 	                 [EXHIBIT COPY]

	 	By:	 	                 [EXHIBIT COPY]

	Name:	 	 	 	Name:	 	 
	Title:	 	 	 	Title:	 	 
	Dated:	 	                 [TO BE INSERTED]

	 	Dated:	 	                 [TO BE INSERTED]Credit Agreement

 Exhibit 4.1 
 FIRST AMENDMENT TO SECOND AMENDED 
 AND RESTATED CREDIT AGREEMENT 
  
 This First Amendment to Second Amended and Restated Credit Agreement (the
“Amendment”) is dated as of December 2, 2004, and is made by and among EDUCATION MANAGEMENT CORPORATION, (the “Borrower”), the BANKS under the Credit Agreement (as hereafter defined), NATIONAL CITY BANK OF PENNSYLVANIA (the
“Agent”), as the Agent for the Banks and Issuing Bank, WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndication Agent, SUNTRUST BANK, as Syndication Agent, BANK OF AMERICA, N.A., as Documentation Agent, and JP MORGAN CHASE BANK, as
Documentation Agent. 
  
 RECITALS: 
  
 WHEREAS, the Borrower, the Banks and the Agent entered into that certain
Second Amended and Restated Credit Agreement dated as of August 18, 2003 (as amended, modified, extended or restated from time to time, the “Credit Agreement”); 
  
 WHEREAS, the Borrower and Argosy Education Group, Inc. contemplate entering into certain transactions with Sallie Mae, Inc.
and the SLM Education Credit Finance Corporation relating to loans to be made available by Argosy to students attending schools operated by the Borrower and Argosy; and 
  
 WHEREAS, in connection with the student loan transactions described above, the Borrower has requested the Banks modify
certain covenants applicable to the Borrower and Argosy under the Credit Agreement. 
  
 NOW, THEREFORE, in consideration of the foregoing and intending to be legally bound, the parties hereto agree as follows: 
  
 AGREEMENT: 
  
 1. Capitalized terms used herein and not otherwise defined shall have the meanings given to them under the Credit Agreement. 
  
 2. Subsection 6.5 of the Credit Agreement is hereby amended and restated as
follows: 
  
 “6.5 Disposal of Assets. 
  
 The Borrower will not, nor will it permit any of its Subsidiaries to, sell,
lease or otherwise dispose of, in any one Fiscal Year during the term hereof, assets having an aggregate fair market value in excess of $5,000,000 or directly or indirectly enter into an agreement or arrangement whereby the Borrower or any of its
Subsidiaries shall sell or transfer assets having an aggregate 

 fair market value in excess of $5,000,000; provided, however, that with the consent of the Required Banks, the
Borrower and its Subsidiaries shall be permitted to make such agreements, arrangements and dispositions of assets having an aggregate fair market value in excess of $5,000,000 in any one Fiscal Year so long as the net proceeds of such dispositions
in excess of $5,000,000 are paid to the Agent as a mandatory prepayment of the Loans in accordance with Section 2.4(f). Provided no Event of Default has occurred and is continuing, the Agent shall release any Encumbrance of the Agent and the Banks
in the assets of the Borrower and its Subsidiaries disposed of in accordance with the foregoing permitted dispositions. In addition to the dispositions permitted above, the Borrower and its Subsidiaries may make the dispositions of assets which
consist of (i) the sale of inventory in the ordinary course of business, (ii) a merger or consolidation otherwise permitted pursuant to Section 6.10, (iii) the sale by Argosy to the SLM Education Credit Finance Corporation or other affiliate of
Sallie Mae, Inc. of student loans made by Argosy to students attending schools operated by Argosy for consideration reasonably equivalent to or greater than the face value of such student loans, and (iv) prior to the occurrence and during the
continuation of a Default or Event of Default, the sale and lease-back of owned real estate and improvements which are not subject to the lien of any of the Mortgages.” 
  
 3. Subsection 6.6 of the Credit Agreement is hereby amended and restated as follows: 
  
 “6.6 Permitted Indebtedness. 
  
 The Borrower will not, and will not permit any Subsidiary to, guarantee or
incur or suffer to exist any Indebtedness for Borrowed Money except: 
  
 (i) the Bank Indebtedness and reimbursement obligations of the Borrower’s Subsidiaries related to Letters of Credit; 
  
 (ii) Indebtedness for Borrowed Money secured by Permitted Encumbrances; 
  
 (iii) Guarantees of Indebtedness for Borrowed Money to the extent such Indebtedness for Borrowed Money is permitted by this
Section 6.6; 
  
 (iv) Indebtedness for Borrowed Money incurred by
any Subsidiary and due to the Borrower; 
  
 (v) Indebtedness for
Borrowed Money not specifically enumerated in items (i) through (iv) above outstanding on the Closing Date as more fully set forth on Schedule 6.6, as the same may be extended or renewed but not increased. 
  
 (vi) Guarantees of Teach-Out Obligations and other education-related
obligations of the Borrower or its Active Subsidiaries; 
  

 2 

 (vii) Indebtedness incurred in connection with a Permitted Acquisition; 
  
 (viii) (a) a Guarantee of the Borrower in favor of Sallie Mae, Inc. in the
form of escrowed funds or fees of up to $3,000,000 (excluding interest earned on any escrowed funds) in any Fiscal Year as permitted under Section 6.7(xiii) which secure the repayment of certain student loans, and (b) in addition to Guarantees in
favor of Sallie Mae, Inc. described above, other Guarantees or fees related of any student loan programs of the Borrower or its Active Subsidiaries in an aggregate amount of up to $5,000,000; 
  
 (ix) Indebtedness for Borrowed Money in a principal amount of up to
$25,000,000 in the aggregate outstanding in connection with real estate financings and sale and lease-back real estate transactions (other than sale and lease-back transactions prohibited by Section 6.5 above), including without limitation, any
reimbursement obligations incurred with respect to a bond financing that is secured by real estate, provided that, neither the Borrower nor any Subsidiary of the Borrower shall Guarantee any Indebtedness for Borrowed Money permitted under
this Subsection (other than the Guarantee by Argosy of the Indebtedness for Borrowed Money of Western State University College of Law (“WSU”) in favor of Union Bank of California in connection with a real estate financing of real property
owned by WSU, solely to the extent that the aggregate principal amount of such Indebtedness subject to such Guarantee does not exceed $3,500,000) and, further provided that, if such Indebtedness for Borrowed Money is incurred by a Subsidiary,
the Subsidiary shall execute a Subsidiary Guarantee; 
  
 (x) In
addition to the other Indebtedness for Borrowed Money permitted by this Section 6.6, unsecured Indebtedness for Borrowed Money whether now outstanding or hereafter incurred by the Borrower or any Subsidiary that when aggregated with other
Indebtedness for Borrowed Money of the type permitted by this Subsection (x) of the Borrower and all of the Subsidiaries (excluding Bank Indebtedness) is not more than $125,000,000 at any time; provided, however, that if Indebtedness for Borrowed
Money in excess of $100,000,000 is incurred under this Section 6.6(x), the Revolving Credit Commitments as well as the ability to increase such Revolving Credit Commitments provided for in Section 2.1(j) shall, on the date any such Indebtedness for
Borrowed Money is incurred, be automatically and permanently reduced to the extent such Indebtedness for Borrowed Money exceeds $100,000,000; provided, further that the Revolving Credit Commitments shall not be required to be reduced below
$250,000,000 pursuant to this Section 6.6(x); and 
  
 (xi)
Indebtedness for Borrowed Money incurred by the Borrower or its Subsidiaries with respect to any currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management device, provided that (w) such agreements
or devices are not entered into for speculative purposes (x) the other party to such agreement shall be a Bank or a financial institution acceptable to the Agent in its reasonable discretion, (y) such Bank or financial institution shall calculate
its credit exposure in a reasonable and customary manner utilizing standards and contracts on forms promulgated by the International Swap Dealers Association, and (z) except for agreements with Banks and Affiliates of Banks which are secured by the
Loan Documents, the obligations of the Borrower and its Subsidiaries shall be unsecured.” 
  

 3 

 4. Subsection 6.7(a) of the Credit Agreement is hereby amended and restated as follows: 
  
 “(a) Lien Prohibition. The Borrower will not create, assume,
incur or suffer to exist, or allow any Subsidiary to create, assume, incur or suffer to exist, any Encumbrance upon any of its assets, whether now owned or hereafter acquired, nor acquire nor agree to acquire any asset subject to an Encumbrance,
except: 
  
 (i) Encumbrances in favor of the Agent and/or the
Banks granted hereunder or under the other Loan Documents; 
  
 (ii) Encumbrances for taxes or assessments or governmental charges or levies which are not due or remain payable, without penalty, or which are being contested in good faith by appropriate proceedings and with respect to which the Borrower
or the affected Subsidiary has created reserves which are determined by the Borrower to be adequate by the application of GAAP consistently applied; 
  
 (iii) Encumbrances to secure the obligations of the Borrower or any Subsidiary under workmen’s compensation laws, unemployment insurance laws, social
security laws or other similar legislation; 
  
 (iv) Encumbrances
to secure the obligations of the Borrower or any Active Subsidiary directly associated with state licensing or accreditation requirements; 
  
 (v) Encumbrances in connection with bids, tenders, performance bonds, contracts or leases (including, without limitation, the posting of collateral for
any operating lease) to which the Borrower or any Subsidiary is a party, or to secure public or statutory obligations in an amount of up to $1,000,000 in the aggregate; 
  
 (vi) Encumbrances for landlords’, mechanics’, carriers’, workmen’s, warehousemen’s,
materialmen’s or repairmen’s liens or other like Encumbrances in the ordinary course of business; 
  
 (vii) Encumbrances upon tangible personal property securing loans and capital leases to any Subsidiary or Borrower or deferred payments by the Borrower or
any Subsidiary for the purchase or lease under a Capitalized Lease of such tangible personal property, provided that the amount of the Indebtedness for Borrowed Money secured by the Encumbrance does not exceed the purchase price of such tangible
personal property and the Encumbrances do not extend to any other property of such Subsidiary or the Borrower; 
  
 (viii) Encumbrances on particular parcels of real estate or buildings that are given in connection with typical mortgage-type financings to secure
Indebtedness for Borrowed Money that is permitted under Section 6.6(ix); provided however, such Encumbrances shall not encumber any of the Collateral; provided further, that such Encumbrances do not secure Indebtedness for Borrowed Money in excess
of $15,000,000; 
  

 4 

 (ix) Encumbrances to secure surety, replevin, attachment or appeal bonds relating to legal proceedings to
which the Borrower or any Subsidiary is a party; 
  
 (x)
Encumbrances arising out of judgments or awards against the Borrower or any Subsidiary with respect to which the Borrower is currently engaged in proceedings for review or appeal and with respect to which the Borrower shall have secured a stay of
execution pending such proceedings for review or appeal, provided, that the aggregate amount of the foregoing shall at no time exceed $5,000,000; 
  
 (xi) minor survey exceptions, minor Encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraph
and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Encumbrances incidental to the conduct of the business of the Borrower or its Subsidiaries or to the ownership of their properties
which were not incurred in connection with Indebtedness for Borrowed Money or other extensions of credit and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of
the business of the Borrower or such Subsidiaries; 
  
 (xii)
Encumbrances to secure any extension, renewal or replacement (or successive extensions, renewals or replacements) as a whole, or in part, of any obligations secured by any Encumbrances referred to in the foregoing clauses (i) through (xi) and clause
(xiii), provided that (y) such extended, renewed or replaced Encumbrances shall be limited to all or a part of the same property that secured the Encumbrances extended, renewed or replaced (plus improvements on such property) and (z) the
obligations secured by such Encumbrances at such time are not increased except in accordance with the terms thereof; 
  
 (xiii) Encumbrances on or the payment into escrow of funds or the payment of fees in an aggregate amount not in excess of $3,000,000 (excluding interest
earned on escrowed funds) in any Fiscal Year to secure guarantee obligations of the Borrower to Sallie Mae, Inc. in connection with its Creative Education Loan Program Recourse Agreement with the Borrower pursuant to which Sallie Mae, Inc. may make
loans to students of the Borrower or one or more of its Subsidiaries in an amount of up to $15,000,000 in any Fiscal Year. In connection with such payment into escrow of funds or such payment of fees (subject to the foregoing aggregate amount of
$3,000,000 in any Fiscal Year), (a) the balance of escrowed funds or fees may be increased by interest earned thereon, and (b) the balance of escrowed funds or fees may exceed $3,000,000 to the extent that funds paid into escrow in prior years were
not previously used by or paid to Sallie Mae, Inc.; and 
  
 (xiv)
Encumbrances not specifically enumerated in items (i) through (xii) above which were in existence on the date hereof and described on Schedule 6.7 hereto.” 
  
 5. By its execution below, the Borrower acknowledges and agrees that except as amended by this Amendment, the Credit
Agreement and the other Loan Documents and all obligations thereunder remain in full force and effect with respect to the Bank Indebtedness. 
  

 5 

 6. The Credit Agreement, the Loan Documents and all prior amendments and modifications thereto are hereby
modified solely to the extent that any of the terms or provisions thereof are irreconcilably inconsistent with the terms and provisions of this Amendment. 
  
 7. The Recitals set forth above are incorporated herein by reference and made a part hereof, and the Borrower represents, warrants and attests to the
veracity thereof as well as to the veracity of the representations set forth in the Credit Agreement as of the date hereof (except representations which expressly relate solely to an earlier date or time, which representations shall be true as of
the specific dates or times referred to therein). 
  
 8. The
Borrower represents that this Amendment has been duly executed and delivered by the Borrower and constitutes the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with its terms, except to the
extent that the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforceability of creditors rights generally or by general equitable principles.

  
 9. Neither this Amendment nor the consummation of the
transactions contemplated herein nor the performance by the Borrower of its obligations hereunder will (i) violate any law, rule or regulation or court order to which the Borrower is subject; (ii) conflict with or result in a breach of the
Borrower’s articles of incorporation or bylaws or any material agreement or instrument to which any Borrower is subject or by which its properties are bound or (iii) result in the creation or imposition of any lien, security interest or
encumbrance on the property of any Borrower, whether now owned or hereafter acquired, other than liens in favor of Agent for the benefit of the Lenders. 
  
 10. This Amendment may be executed by different parties hereto on any number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one and the same instrument. 
  
 11. This Amendment shall become effective when it has been executed by the Borrower, the Banks and the Agent. 
  
 [SIGNATURES BEGIN ON NEXT PAGE] 
  

 6 

 [SIGNATURE PAGE 1 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  
 Executed as of the day and year first above written. 
  

					
	EDUCATION MANAGEMENT CORPORATION
			
	By	 	 /s/ Kristen P Gribble

	 	(Seal)
	Name:	 	Kristen P. Gribble	 	 
	Title:	 	Treasurer	 	 

 [SIGNATURE PAGE 2 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	 NATIONAL CITY BANK OF PENNSYLVANIA,
 individually and as Agent

		
	By	 	 /s/ Vincent J. Delie Jr.

	Name:	 	Vincent J. Delie, Jr.
	Title:	 	Executive Vice President

 [SIGNATURE PAGE 3 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	 WACHOVIA BANK, NATIONAL
 ASSOCIATION,
individually and as Syndication
 Agent

		
	By	 	 /s/ Patrick J. Kaufman

	Name:	 	Patrick J. Kaufman
	Title:	 	Vice President

 [SIGNATURE PAGE 4 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	 SUNTRUST BANK, individually and as
 Syndication Agent

		
	By	 	 /s/ William C. Washburn, Jr.

	Name:	 	William C. Washburn, Jr.
	Title:	 	Vice President

 [SIGNATURE PAGE 1 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	 BANK OF AMERICA, N.A., individually and as
 Documentation Agent

		
	By	 	 /s/ Kenneth G. Wood

	Name:	 	Kenneth G. Wood
	Title:	 	Senior Vice President
	
	 FLEET NATIONAL BANK, A BANK OF
 AMERICA
COMPANY

		
	By	 	 /s/ Kenneth G. Wood

	Name:	 	Kenneth G. Wood
	Title:	 	Senior Vice President

 [SIGNATURE PAGE 6 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	 JPMORGAN CHASE BANK N.A., individually
 and
as Documentation Agent

		
	By	 	 /s/ Robert M. Stanchak

	Name:	 	Robert M. Stanchak
	Title:	 	Vice-President

 [SIGNATURE PAGE 7 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	BANK ONE, NA
	(Main Office Chicago)
		
	By	 	  

	Name	 	  

	Title	 	  

	
	See preceding signature page for JP Morgan Chase Bank, N.A.

 [SIGNATURE PAGE 8 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	FIFTH THIRD BANK
		
	By	 	 /s/ John L. Hayes IV

	Name:	 	John L. Hayes IV
	Title:	 	VP

  
  

 [SIGNATURE PAGE 9 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	UNION BANK OF CALIFORNIA, N.A.
		
	By	 	 /s/ Albert W. Kelley

	Name:	 	Albert W. Kelley
	Title:	 	Vice President

 [SIGNATURE PAGE 10 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	LASALLE BANK NATIONAL ASSOCIATION
		
	By	 	 /s/ Michael Berent

	Name:	 	Michael Berent
	Title:	 	First Vice President

 [SIGNATURE PAGE 11 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	CITIZENS BANK OF PENNSYLVANIA
		
	By	 	 /s/ John J. Ligday, Jr.

	Name:	 	John J. Ligday, Jr.
	Title:	 	Vice President

  
  

 [SIGNATURE PAGE 12 OF 12 TO FIRST AMENDMENT TO 
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT] 
  

			
	FIRSTMERIT BANK, N.A.
		
	By	 	 /s/ Robert G. Morlan

	Name:	 	Robert G. Morlan
	Title:	 	Senior Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}]]