CHANGE IN CONTROL AGREEMENT

THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is entered into as of June
15, 2006, (the "Effective Date"), by and between Terry Bayer (the "Executive")
and Molina Healthcare, Inc., a Delaware corporation (the "Company").

Definitions
. The following definitions shall apply for all purposes under this Agreement:
Change in Control
. "Change in Control" means the occurrence of any of the following events after
the Effective Date:

 i.   The acquisition (other than by an Excluded Person), directly or
      indirectly, in one or more transactions, by any person or by any group of
      persons, within the meaning of Section 13(d) or 14(d) of the Exchange Act,
      of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange
      Act) of more than fifty percent (50%) of either the outstanding shares of
      common stock or the combined voting power of the Company's outstanding
      voting securities entitled to vote generally, whether or not the
      acquisition was previously approved by the existing directors, other than
      an acquisition that complies with clause (x) and (y) of paragraph (ii);
 ii.  Consummation of a reorganization, merger, or consolidation of the Company
      or the sale or other disposition of all or substantially all of the
      Company's assets unless, immediately following such event, (x) all or
      substantially all of the stockholders of the Company immediately prior to
      such event own, directly or indirectly, more than fifty percent (50%) of
      the then outstanding voting securities of the resulting corporation
      (including without limitation, a corporation which as a result of such
      event owns the Company or all or substantially all of the Company's assets
      either directly or indirectly through one or more subsidiaries) and (y)
      the securities of the surviving or resulting corporation received or
      retained by the stockholders of the Company are publicly traded;
 iii. Approval by the stockholders of the complete liquidation or dissolution of
      the Company; or
 iv.  A change in the composition of a majority of the directors on the
      Company's Board of Directors within 12 months if not approved by a
      majority of the pre-existing directors.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.

Excluded Person
. "Excluded Person" means:
 i.   Any person described in and satisfying the conditions of Rule 13d-1(b)(1)
      under the Exchange Act;
 ii.  The Company;
 iii. An employee benefit plan (or related trust) sponsored or maintained by the
      Company or its successor;
 iv.  Any person who is the beneficial owner (as defined in Rule 13d-3 under the
      Exchange Act) of more than 15% of the Common Stock on the Effective Date
      (or any affiliate, successor, heir, descendant, or related party of or to
      such person).

Good Reason
. "Good Reason" shall mean that, on or after the effective date of a Change in
Control, the Executive (without Executive's written consent):
 i.   Has incurred a material reduction in his or her authority or
      responsibility in comparison to the Executive's authority or
      responsibility prior to the public announcement of the Change in Control
      (the "Announcement");
 ii.  Has incurred one or more reductions in his or her "total compensation"
      which is defined as follows:
       A. any reduction in base salary, or
       B. any reduction in the target annual bonus percentage of base salary; or

 iii. Has been notified that his or her principal place of work will be
      relocated by a distance of 50 miles or more.

For purposes of this Agreement, "base salary" shall mean the Executive's
annualized base salary as of the Effective Date, as may be subsequently adjusted
upward for increases.

Just Cause
. "Just Cause" includes but is not limited to any of the following committed by
Executive (or omitted to be done by Executive) that occur on or after the
Effective Date:

 i.    Theft, unethical or unlawful activity, or other dishonesty;
 ii.   Neglect of or failure to perform employment duties;
 iii.  Inability or unwillingness to perform employment duties;
 iv.   Insubordination;
 v.    Abuse of alcohol or other drugs or substances;
 vi.   Breach of this Agreement;
 vii.  A conviction of or plea of "guilty" or "no contest" to a felony under the
       laws of the United States or any state thereof; or
 viii. Any violation or breach of any Company policy that has been established
       to comply with either the Sarbanes-Oxley Act of 2002 (or any regulations
       or rules or decisions that implement/interpret such act) or any laws,
       rules, or requirements of the Securities and Exchange Commission or the
       New York Stock Exchange.

Total Disability
. "Total Disability" shall be deemed to occur on the ninetieth (90th)
consecutive or non-consecutive calendar day within any twelve (12) month period
that Executive is unable to perform his or her duties because of any physical or
mental illness or disability.

Severance Payment and Equity Compensation
.
 a. The Executive shall be entitled to receive a severance payment from the
    Company as provided herein (the "Severance Payment") if within the first
    twelve (12) month period after the occurrence of a Change in Control,
    either:
     i.  The Executive voluntarily resigns his or her employment for Good Reason
         within sixty (60) days after the Executive becomes aware of the
         occurrence of an event specified in Section 1(c); or
     ii. The Company terminates the Executive's employment for any reason other
         than Just Cause, death, or Total Disability.

    For all purposes under this Agreement, the amount of the Severance Payment
    shall be equal to two times (2X) the Executive's annual base salary, as in
    effect on the date of the termination of Executive's employment (or if
    Executive's salary was greater, on the date of the Announcement), plus a
    prorata portion of the Executive's target bonus for the fiscal year in which
    Executive's employment is terminated, based on the number of entire months
    of such fiscal year that have elapsed through the date of Executive's
    termination of employment as a fraction of twelve (12). The Severance
    Payment shall be made to Executive in a single lump sum cash payment not
    later than seven (7) business days following the date that Executive becomes
    entitled to a Severance Payment.

    Except as may be provided under Sections 2(b) and 2(c), the Severance
    Payment shall be in lieu of any other post-termination employment payments.

    Incentive, Deferred Compensation, and Retirement Programs
    . If the Executive is entitled to a Severance Payment under Section 2(a) and
    notwithstanding anything to the contrary in any stock option or stock
    appreciation right (SAR) or deferred compensation plan or retirement plan or
    agreements, then (i) the Executive shall become immediately fully vested in
    all of his or her outstanding stock options, SARs, warrants, restricted
    stock, phantom stock, deferred compensation, retirement or similar plans or
    agreements of the Company, and (ii) the Executive (or his or her personal
    representative if applicable) shall be permitted to exercise any of his or
    her vested stock options/SARs until the earlier of (i) one (1) year after
    Executive's termination of employment or (ii) the term of such unexercised
    stock options, warrants, or SARs.
    Health Coverage
    . If the Executive is entitled to a Severance Payment under Section 2(a),
    the Company shall reimburse Executive for a portion of the cost of any group
    health continuation coverage that the Company is otherwise required to offer
    under the Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA")
    until the earlier of the date that (i) the Executive becomes covered by
    comparable health coverage, offered by another employer, or (ii) is twelve
    (12) months after the date upon which the Executive becomes entitled to a
    Severance Payment under Section 2(a). The Executive shall continue to be
    responsible to pay for the cost of the employee portion of COBRA coverage
    (such employee portion cost shall not be reimbursed by the Company).
    Mitigation
    . Except as may be expressly provided elsewhere in this Agreement, the
    Executive shall not be required to mitigate the amount of any payment or
    benefit contemplated by this Section 2 (whether by seeking new employment or
    in any other manner). No such payment shall be reduced by earnings that the
    Executive may receive from any other source.
    Conditions
    . All payments and benefits provided under this Section 2 are conditioned on
    Executive's continuing compliance with this Agreement and the Company's
    policies. All payments and benefits are also conditioned on, and in
    consideration for, Executive's execution (and effectiveness) of a release of
    claims and covenant not to sue substantially in the form provided in
    Exhibit A
    upon termination of employment, to be delivered by Executive simultaneously
    upon payment by the Company.

Successors
.
Company's Successors
. Any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation, or otherwise) to all or substantially all of
the Company's business and/or assets, shall be obligated to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform it in the absence of a succession.
Executive's Successors
. This Agreement and all rights of the Executive hereunder shall inure to the
benefit of, and be enforceable by, the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees.

Miscellaneous Provisions
.
Notice
. Notices and all other communications contemplated by this Agreement shall be
in writing and shall be deemed to have been duly given when personally delivered
or when mailed by U.S. registered or certified mail, return receipt requested
and postage prepaid. In the case of the Executive, mailed notices shall be
addressed to him or her at the home address which he or she most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
Waiver
. No provision of this Agreement shall be modified, waived or discharged unless
the modification, waiver or discharge is agreed to in writing and signed by the
Executive and by an authorized officer of the Company (other than the
Executive). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.
Whole Agreement
. This Agreement contains all the legally binding understandings and agreements
between Executive and the Company pertaining to the subject matter of this
Agreement and supersedes all such agreements, whether oral or in writing,
previously entered into between the parties.
Withholding Taxes
. All payments made under this Agreement shall be subject to reduction to
reflect taxes required to be withheld by law.
Choice of Law
. The validity, interpretation, construction, and performance of this Agreement
shall be governed by the laws of the State of California without regard to the
conflicts of laws principles thereof.
Severability
. The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision
hereof, which shall remain in full force and effect.
Arbitration
. Any controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by arbitration in Los Angeles County in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Discovery shall be permitted to the same extent as in a proceeding
under the Federal Rules of Civil Procedure, including (without limitation) such
discovery as is specifically authorized by section 1283.05 of the California
Code of Civil Procedure, without need of prior leave of the arbitrator under
section 1283.05(e) of such Code. Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. All fees and
expenses of the arbitrator and such Association and attorney fees shall be paid
as determined by the arbitrator.
No Assignment
. The rights of Executive to payments or benefits under this Agreement shall not
be made subject to option or assignment, either by voluntary or involuntary
assignment or by operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in violation
of this Subsection (h) shall be void.
Nondisparagement; Confidentiality
. On the Effective Date and thereafter, Executive agrees that he/she will not
disparage the Company or its directors, officers, employees, affiliates,
subsidiaries, predecessors, successors or assigns in any written or oral
communications to any third party. Executive further agrees that he/she will not
direct anyone to make any disparaging oral or written remarks to any third
parties. During Executive's employment and following Executive's termination of
employment for any reason, Executive agrees to not intentionally use or disclose
the confidential information or trade secrets of the Company.
Nonsolicit
. During the Executive's employment with Company and for twelve months after
Executive's termination of employment, the Executive shall not, directly or
indirectly, either as an individual or as an employee, agent, consultant,
advisor, independent contractor, general partner, officer, director,
stockholder, investor, lender, or in any other capacity whatsoever, of any
person, firm, corporation, or partnership: (i) induce or attempt to induce any
person who at the time of such inducement is an employee of the Company to
perform work or service for any other person or entity other than the Company or
(ii) participate or engage in the design, development, manufacture, production,
marketing, sale, or servicing of any product, or the provision of any service,
that directly or indirectly relates to Company business.
Notice of Employment
. During Executive's employment and for twelve months after Executive's
termination of employment, Executive will promptly notify the Company in writing
if Executive becomes (or agrees to become) an employee or director of any other
employer. Such notice shall include the name of the other employer and the date
of commencement of employment or service as a director.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.

EXECUTIVE:

/s/ Terry Bayer

Terry Bayer

MOLINA HEALTHCARE, INC.:

 

/s/ Joseph M. Molina

By: Joseph M. Molina

Its: President, CEO, and Chairman of the Board

EXHIBIT A

Form of Release of Claims and Covenant Not To Sue

In consideration of the payments and other benefits that Molina Healthcare,
Inc., a Delaware corporation (the "Company"), is providing to Terry Bayer
("Executive") under the Change in Control Agreement entered into by and between
Executive and the Company, dated June 12, 2006, the Executive, on his or her own
behalf and on behalf of Employee's representatives, agents, heirs and assigns,
waives, releases, discharges and promises never to assert any and all claims,
demands, actions, costs, rights, liabilities, damages or obligations of every
kind and nature, whether known or unknown, suspected or unsuspected that
Executive ever had, now have or might have as of the date of Executive's
termination of employment with the Company against the Company or its
predecessors, parent, affiliates, subsidiaries, stockholders, owners, directors,
officers, employees, agents, attorneys, insurers, successors, or assigns
(including all such persons or entities that have a current and/or former
relationship with the Company) for any claims arising from or related to
Executive's employment with the Company, its parent or any of its affiliates and
subsidiaries and the termination of that employment.

These released claims also specifically include, but are not limited to, any
claims arising under any federal, state and local statutory or common law, such
as (as amended and as applicable) Title VII of the Civil Rights Act, the Age
Discrimination in Employment Act, the Americans With Disabilities Act, the
Employee Retirement Income Security Act, the Family Medical Leave Act, the Equal
Pay Act, the Fair Labor Standards Act, the Industrial Welfare Commission's
Orders, the California Fair Employment and Housing Act, the California
Constitution, the California Government Code, the California Labor Code and any
other federal, state or local constitution, law, regulation or ordinance
governing the terms and conditions of employment or the termination of
employment, and the law of contract and tort and any claim for attorneys' fees.

Furthermore, the Executive acknowledges that this waiver and release is knowing
and voluntary and that the consideration given for this waiver and release is in
addition to anything of value to which Executive was already entitled. Executive
acknowledges that there may exist facts or claims in addition to or different
from those which are now known or believed by Executive to exist. Nonetheless,
this Agreement extends to all claims of every nature and kind whatsoever,
whether known or unknown, suspected or unsuspected, past or present. Executive
also expressly waives the provisions of California Civil Code section 1542,
which provides: "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/her must have materially affected his settlement
with the debtor." With respect to the claims released in the preceding
sentences, the Executive will not initiate or maintain any legal or
administrative action or proceeding of any kind against the Company or its
predecessors, parent, affiliates, subsidiaries, stockholders, owners, directors,
officers, employees, agents, successors, or assigns (including all such persons
or entities that have a current or former relationship with the Company), for
the purpose of obtaining any personal relief, nor assist or participate in any
such proceedings, including any proceedings brought by any third parties (except
as otherwise required or permitted by law). The Executive further acknowledges
that she has been advised by this writing that:

 * she should consult with an attorney prior to executing this release;
 * she has at least twenty-one (21) days within which to consider this release;
 * she has up to seven (7) days following the execution of this release by the
   parties to revoke the release; and
 * this release shall not be effective until such seven (7) day revocation
   period has expired.

Executive agrees that the release set forth above shall be and remain in effect
in all respects as a complete general release as to the matters released.

EXECUTIVE

 

__________________________________

Terry Bayer

Date: