FIRST AMENDMENT AND WAIVER dated as of October 5, 2005 (this "First Amendment
and Waiver"), among Molina Healthcare, Inc., a Delaware corporation (the
"Borrower"), the Lenders (as defined below) party hereto, Bank of America, N.A.,
as Administrative Agent (in such capacity, the "Administrative Agent") for the
Lenders.

The Borrower is a party to an Amended and Restated Credit Agreement dated as of
March 9, 2005 (the "Credit Agreement"), among the Borrower, the lenders from
time to time party thereto (the "Lenders"), Bank of America, N.A., as
Administrative Agent, Swing Line Lender and L/C Issuer, and the other agents,
joint lead arrangers and joint book managers party thereto. Capitalized terms
used and not otherwise defined herein shall have the meanings assigned to such
terms in the Credit Agreement.

The parties hereto have agreed, subject to the terms and conditions hereof, to
amend and waive certain terms of the Credit Agreement.

Accordingly, the parties hereto hereby agree as follows:

Amendments to Section 1.01

. (a) Section 1.01 of the Credit Agreement is hereby amended by deleting the
first paragraph and the pricing grid in the definition for "Applicable Rate" and
by deleting the definitions for "Fixed Charge Coverage Ratio" and "Permitted
Acquisitions" in their entirety and inserting the following in lieu thereof:

""Applicable Rate" means, from time to time, the following percentages per
annum, based upon the Consolidated Leverage Ratio as set forth in the most
recent Compliance Certificate received by the Administrative Agent pursuant to
Section 6.02(b):

Pricing

Level

Consolidated

Leverage

Ratio

Eurodollar

Rate+

and Letters of Credit

Base Rate+

and

Swing Line Loans

Commitment

Fee

I.

³

1.5

1.75%

.75%

.500%

II.

< 1.5 but

³

1.0

1.50%

.50%

.375%

III.

< 1.0 but

³

0.5

1.25%

.25%

.375%

IV.

< 0.5

1.00%

0.0%

.375%"

""Fixed Charge Coverage Ratio" means, for any period, the ratio of (i) the sum
of the Borrower's unconsolidated EBITDAR (which includes management fees from
Regulated Subsidiaries), plus EBITDAR of Non-Regulated Subsidiaries, plus Net
Dividends, less consolidated Capital Expenditures, to (ii) the sum of Borrower
Fixed Charges."

""Net Dividends" means, for any period, dividends paid by Regulated Subsidiaries
to the Borrower, less Required Investments in Regulated Subsidiaries."

""Permitted Acquisitions" means any Acquisition (or series of related
Acquisitions) by the Borrower, any other Loan Party or any wholly-owned
Subsidiary of the Borrower whose stock is pledged pursuant to the Pledge
Agreement (for purposes hereof, an "Acquiring Party" and any such Acquisition
(or series of related Acquisitions) a "Subject Acquisition"); provided that:

(a) in the case of an Acquisition of the capital stock of another Person, the
Person to be acquired will be a direct or indirect wholly-owned Subsidiary of
the Borrower after giving effect to such Acquisition and the Person to be
acquired is in the Health Care Business;

(b) the Property acquired (or the Property of the Person acquired) in such
Subject Acquisition shall be used or useful in the Health Care Business of the
Borrower or its Subsidiaries;

(c) all Property to be acquired in connection with such Subject Acquisition
shall be located in the United States of America;

(d) in the case of an Acquisition of the capital stock of another Person, the
board of directors (or other comparable governing body) of such other Person
shall have duly approved such Acquisition

(e) no Default shall exist immediately after giving effect to such Subject
Acquisition on a Pro Forma Basis;

(f) the Subject Acquisition shall not involve an interest in a partnership or
have a requirement that the Borrower or any other Loan Party be a general
partner or involve a partial interest in any entity or joint venture interest;

(g) the Acquiring Party shall, and shall cause the party that is the subject of
the Subject Acquisition to, execute and deliver such joinder and pledge
agreements, security agreements and intercompany notes and take such other
actions as may be necessary for compliance with the provisions of Sections 6.13,
6.14 and 6.15;

(h) (i) if Consolidated EBITDA (as reported in the most recently delivered
Compliance Certificate prior to a Subject Acquisition for the four fiscal
quarters most recently ended as of the date of such Compliance Certificate) is
equal to or greater than $100 million, then (A) the Acquisition Purchase Price
for such Subject Acquisition is less than or equal to $100 million, and (B) the
Acquisition Purchase Price for all such Subject Acquisitions during any fiscal
year is less than or equal to $125 million; or (ii) if Consolidated EBITDA (as
reported in the most recently delivered Compliance Certificate prior to a
Subject Acquisition for the four fiscal quarters most recently ended as of the
date of such Compliance Certificate) is less than $100 million, then (A) the
Acquisition Purchase Price for each Subject Acquisition is less than or equal to
$25 million, and (B) the Acquisition Purchase Price for all such Subject
Acquisitions during any fiscal year is less than or equal to $40 million;

(i) if (i) Consolidated EBITDA (as reported in the most recently delivered
Compliance Certificate prior to a Subject Acquisition for the four fiscal
quarters most recently ended as of the date of such Compliance Certificate) is
less than $100 million, or (ii) the Acquisition Purchase Price for each Subject
Acquisition (or series of related acquisitions) is more than $30 million, then,
in each case, the Borrower shall have delivered to the Administrative Agent a
Compliance Certificate signed by Responsible Officers of the Borrower
demonstrating or describing the following:

(A) compliance with the financial covenants hereunder after giving effect to the
Subject Acquisition on a Pro Forma Basis and compliance with clauses (g) and (h)
above and showing that the Consolidated Leverage Ratio on a Pro Forma Basis
after giving effect to the Acquisition shall not exceed 1.75 to 1.00, and
reaffirming that the representations are true and correct in all material
respects as of such date and providing supplements to the Schedules as required
by the Compliance Certificate,

(B) after giving effect to the Subject Acquisition and all Borrowings related
thereto, on the date of the Subject Acquisition, there shall be at least $25
million of remaining availability existing under the Aggregate Commitments,

(C) after giving effect to the Subject Acquisition on a Pro Forma Basis, no
Event of Default exists, and

(D) describing the Person to be acquired, including, without limitation, the
location and type of operations, key management and Health Care Business or
other assets of such Person, if any;

provided

,
however
, that the Subject Acquisition shall not result in interests in such Person or
the property of such Person being directly or indirectly held by or transferred
into Molina Healthcare of California or any of its Subsidiaries so long as the
stock of Molina Healthcare of California has not been pledged pursuant to terms
of this Agreement, except that Molina Healthcare of California and its
Subsidiaries located in California, shall be permitted to make one or more
Subject Acquisitions in accordance with the provisions set forth in this
definition but solely within the State of California, where the consideration
therefor is payable (x) solely in the form of common stock of the Borrower or
(y) in the form of cash and non-cash consideration in an amount equal to 50% of
the amounts set forth in subclauses (h)(i) and (ii) above and otherwise in
accordance with such subclauses, but only if the Consolidated Leverage Ratio is
less than 1.00 to 1.00;
provided
that for purposes of clarification the aforementioned sublimits in the proviso
shall apply to Molina Healthcare of California and its Subsidiaries and shall
reduce the limits stated in clauses (h)(i) and (ii) above by the amount of any
cash consideration paid for any such Subject Acquisition."

(b) Section 1.01 of the Credit Agreement is hereby amended by adding the
following new definitions in the appropriate alphabetical order:

""Borrower Fixed Charges" means, for any period for the Borrower and any Loan
Party, the sum of (i) the aggregate amount of taxes paid in cash, plus (ii)
interest payable on all Indebtedness for borrowed money, plus (iii) rent payable
under leases of real, personal, or mixed property, plus (iv) scheduled principal
payments on all Indebtedness for borrowed money."

""Required Investments in Regulated Subsidiaries" means, for any period, the
cash Investments made by the Borrower in the Regulated Subsidiaries, minus
initial investments made in Regulated Subsidiaries to finance the costs of
acquisition and/or formation, minimum net worth requirements, initial capital
expenditures, transaction costs and transition costs, in each case made within
90 days prior to or after acquisition, formation or commencement of operations."

Amendment to Section 5.06

. Subsection 5.06(b) of the Credit Agreement is hereby amended to delete the
following clause from such subsection: ", if determined adversely," and
inserting the following in lieu thereof: ", in the case of any such suit,
proceeding, claim or dispute which is reasonably likely to be adversely
determined, either individually or in the aggregate, if determined adversely,
could reasonably be expected to have a Material Adverse Effect".

Amendment to Section 7.06(e)

. Subsection 7.06(e) of the Credit Agreement is hereby amended by deleting
subsection 7.06(e) in its entirety and inserting the following in lieu thereof:

"(e) the Borrower may make any other Restricted Payments so long as, at the time
of any such Restricted Payment:

(i) No Default or Event of Default shall have occurred and be continuing;

(ii) (A) If Consolidated EBITDA (for the four fiscal quarters most recently
ended as reported in the most recently delivered Compliance Certificate) is
equal to or greater than $100 million, then the aggregate amount paid to make
such Restricted Payment, together with the aggregate amount paid to make all
other Restricted Payments pursuant to this Section 7.06(e) during the same
fiscal year shall not exceed $30 million, or (B) if Consolidated EBITDA (for the
four fiscal quarters most recently ended as reported in the most recently
delivered Compliance Certificate) is less than $100 million, then the aggregate
amount paid to make such Restricted Payment, together with the aggregate amount
paid to make all other Restricted Payments pursuant to this Section 7.06(e)
during the same fiscal year shall not exceed $5 million; and

(iii) after giving effect to such Restricted Payments (as well as any
Indebtedness incurred in connection therewith) on a Pro Forma Basis (as
demonstrated by delivery to the Administrative Agent of a Compliance Certificate
if any additional Indebtedness is incurred by the Borrower in connection with
such Restricted Payment) (A) the Consolidated Leverage Ratio is less than or
equal to 1.75 to 1.00 and (B) there shall be at least $25 million of remaining
availability existing under the Aggregate Commitments."

Amendment to Section 7.18(a)

. Subsection 7.18(a) of the Credit Agreement is hereby amended by deleting
subsection 7.18(a) in its entirety and inserting the following in lieu thereof:

"(a) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio as of
the end of any fiscal quarter of the Borrower (calculated for each four
consecutive fiscal quarter period) to be less than the ratio set forth below
opposite the period in which such date occurs:

Four Fiscal Quarters Ending

Minimum Fixed Charge Coverage Ratio

Closing Date through June 30, 2005

2.00:1.00

July 1, 2005 through September 30, 2005

1.75:1.00

October 1, 2005 through March 31, 2006

2.25:1.00

April 1, 2006 through June 30, 2006

1.20:1.00

July 1, 2006 through December 31, 2007

2.00:1.00

January 1, 2008 through December 31, 2008

2.50:1.00

January 1, 2009 and each fiscal quarter thereafter"

3.00:1.00

Amendment to Section 7.19(a)(i)

. Subsection 7.19(a)(i) of the Credit Agreement is hereby amended by deleting
subsection 7.19(a)(i) in its entirety and inserting the following in lieu
thereof:

"(i) with respect to Regulated Subsidiaries operating in a state in which
regulatory action may be taken against a Regulated Subsidiary that does not
maintain a minimum Statutory Net Worth threshold at a level equal to or greater
than Company Action Level, such Regulated Subsidiary to maintain a ratio of
Statutory Net Worth to Company Action Level Risk-Based Capital at a level less
than 1.10:1.00; provided that for the fiscal quarter ended September 30, 2005,
each Regulated Subsidiary operating in the State of New Mexico shall maintain a
ratio of Statutory Net Worth to Company Action Level Risk-Based Capital at a
level less than 1.00:1.00; and"

Amendment to Exhibit D

. Schedule 2 to Exhibit D is hereby amended by deleting Schedule 2 to Exhibit D
in its entirety and replacing Schedule 2 to Exhibit D with the attached Schedule
2.

Waivers; Retroactive Effectiveness and Deliverables

. (a) The undersigned, solely with respect to any Defaults or Events of Default
arising from non-compliance with the Fixed Charge Coverage Ratio set forth in
Section 7.18(a) of the Credit Agreement as of the end of the fiscal quarters of
the Borrower ending June 30, 2005 and September 30, 2005, waive such Defaults or
Events of Default.

(b) The undersigned, solely with respect to the Statutory Net Worth ratio set
forth in Section 7.19 of the Credit Agreement for the periods from April 1, 2005
through June 30, 2005 and from July 1, 2005 through September 30, 2005, waive
any Defaults or Events of Default arising from non-compliance with such covenant
for Regulated Subsidiaries operating in the state of New Mexico.

(c) The undersigned hereby agree upon the First Amendment and Waiver Effective
Date that the waivers contained in this Section 1.07 shall be retroactively
effective for the fiscal quarters ending June 30, 2005 and September 30, 2005.

(d) The Borrower agrees to deliver to the Administrative Agent, on behalf of the
Lenders, a duly executed Compliance Certificate for the fiscal quarter ended
September 30, 2005 on the date required by Section 6.02(b) of the Credit
Agreement (taking into account the terms of this First Amendment and Waiver).

Representations and Warranties

. The Borrower hereby represents and warrants to the Administrative Agent and
the Lenders, as follows:

The representations and warranties of the Borrower contained in Article V of the
Credit Agreement or any other Loan Document or which are contained in any
document furnished at any time under or in connection therewith are true and
correct in all material respects on and as of the date hereof and on and as of
the First Amendment and Waiver Effective Date (as defined below) with the same
effect as if made on and as of the date hereof or the First Amendment and Waiver
Effective Date, as the case may be, (i) except to the extent such
representations and warranties specifically refer to an earlier date, in which
case they are true and correct in all material respects as of such earlier date,
(ii) except the representations and warranties contained in subsections (a) and
(b) of Section 5.05 of the Credit Agreement shall be deemed to refer to the most
recent financial statements furnished pursuant to subsections (a) and (b),
respectively, of Section 6.01 of the Credit Agreement, and (iii) references to
Schedules shall be deemed to refer to the most updated supplements to the
Schedules furnished pursuant to subsection (b) of Section 6.02 of the Credit
Agreement.

After giving effect to this First Amendment and Waiver, each of the Borrower and
the other Loan Parties is in compliance with all the terms and conditions of the
Credit Agreement, as amended by the First Amendment and Waiver, and the other
Loan Documents on its part to be observed or performed and no Default has
occurred or is continuing under the Credit Agreement, as amended by the First
Amendment and Waiver.

The execution, delivery and performance by the Borrower of this First Amendment
and Waiver have been duly authorized by the Borrower.

Each of this First Amendment and Waiver and the Credit Agreement, as amended by
this First Amendment and Waiver, constitutes the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms.

The execution, delivery, performance and compliance with the terms and
provisions by the Borrower of this First Amendment and Waiver, and by each
Guarantor of the consent to this First Amendment and Waiver pursuant to Section
1.09(a)(ii) and the consummation of the transactions contemplated herein, do not
and will not: (i) contravene the terms of any of such Person's Organization
Documents; (ii) conflict with or result in any breach or contravention of, or
(except for the Liens created under the Loan Documents) the creation of any Lien
under, (A) any material Contractual Obligation to which such Person is a party
or (B) any order, injunction, writ or decree of any Governmental Authority or
any arbitral award to which such Person or its property is subject; or (C)
violate any material Law, including, without limitation, state and Federal Laws
relating to health care organizations and health care providers, except for such
violations as could not reasonably be expected to have a Material Adverse
Effect.

Effectiveness

. This First Amendment and Waiver shall become effective only upon satisfaction
of the following conditions precedent (the first date upon which each such
condition has been satisfied being herein called the "
First Amendment and Waiver Effective Date
"):

The Administrative Agent shall have received duly executed counterparts of (i)
this First Amendment and Waiver which, when taken together, bear the authorized
signatures of the Borrower and the Required Lenders and (ii) a consent to this
First Amendment and Waiver which bears the authorized signatures of each
Guarantor.

The representations and warranties set forth in Section 1.08 hereof shall be
true and correct on and as of the First Amendment and Waiver Effective Date.

There shall exist no actions, suits, proceedings, claims or disputes pending or,
to the Actual Knowledge of the Borrower, threatened, at law, in equity, in
arbitration or before any Governmental Authority, by or against the Borrower or
any of the Subsidiaries or against any of their respective properties or
revenues or injunctions, writs, temporary restraining orders or other orders of
any nature issued by any court or Governmental Authority that (i) purport to
affect, pertain to or enjoin or restrain the execution, delivery or performance
of this First Amendment and Waiver or the Credit Agreement or any other Loan
Document, or any transactions contemplated hereby or thereby, or (ii) either
individually or in the aggregate, in the case of any such suit, proceeding,
claim or dispute which is reasonably likely to be adversely determined, either
individually or in the aggregate, if determined adversely, could reasonably be
expected to have a Material Adverse Effect.

The Administrative Agent on behalf of the Lenders shall have received such other
documents, instruments and certificates as they shall reasonably request and
such other documents, instruments and certificates shall be satisfactory in form
and substance to the Required Lenders and their counsel. All corporate and other
proceedings taken or to be taken in connection with this First Amendment and
Waiver and all documents incidental thereto, whether or not referred to herein,
shall be satisfactory in form and substance to the Required Lenders and their
counsel.

The Administrative Agent shall have received payment of all fees and expenses
referred to in Section 1.12.

Lender Consent

. For purposes of determining compliance with the conditions specified in
Section 1.09
, each Lender that has signed this First Amendment and Waiver shall be deemed to
have consented to, approved or accepted or to be satisfied with, each document
or other matter required thereunder to be consented to or approved by or
acceptable or satisfactory to a Lender unless the Administrative Agent shall
have received notice from such Lender prior to the proposed First Amendment and
Waiver Effective Date specifying its objection thereto.

APPLICABLE LAW

. THIS FIRST AMENDMENT AND WAIVER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT
THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA MAY APPLY.

Fees and Expenses

. On the First Amendment and Waiver Effective Date, the Borrower shall pay all
costs and expenses of the Administrative Agent in connection with the
preparation, execution and delivery of the First Amendment and Waiver and the
other instruments and documents to be delivered hereunder (including, without
limitation, the reasonable fees and expenses of counsel for the Administrative
Agent) in accordance with the terms of Section 10.04(a) of the Credit Agreement
which are invoiced to the Borrower on or prior to the First Amendment and Waiver
Effective Date.

(b) The Borrower agrees to pay to the Administrative Agent, for the ratable
benefit of the Lenders (including Bank of America) approving the First Amendment
and Waiver (the "Approving Lenders"), a fee (the "Amendment Fee") in an amount
equal to 0.10% multiplied by the Aggregate Commitments of the Approving Lenders,
as of the First Amendment and Waiver Effective Date. Such Amendment Fee shall be
for the Approving Lenders' participation in the First Amendment and Waiver and
shall be payable in full upon the First Amendment and Waiver Effective Date.

Counterparts

. This First Amendment and Waiver may be executed in any number of counterparts,
each of which shall constitute an original but all of which when taken together
shall constitute but one agreement. Delivery by facsimile by any of the parties
hereto of an executed counterpart of this First Amendment and Waiver shall be as
effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered,
but the failure to deliver a manually executed counterpart shall not affect the
validity, enforceability or binding effect of this First Amendment and Waiver.

Credit Agreement

. Except as expressly set forth herein, the amendment and waiver provided herein
shall not, by implication or otherwise, limit, constitute a waiver of, or
otherwise affect the rights and remedies of the Lenders or the Administrative
Agent under the Credit Agreement or any other Loan Document, nor shall it
constitute a waiver of any Default, nor shall it alter, modify, amend or in any
way affect any of the terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or any other Loan Document. The amendment and
waiver provided herein shall apply and be effective only with respect to the
provisions of the Credit Agreement specifically referred to by such amendment or
waiver. Except to the extent a provision in the Credit Agreement is expressly
amended herein, the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof.

[Signature pages follow]

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment and
Waiver to be duly executed by their duly authorized officers, all as of the date
first above written.

MOLINA HEALTHCARE, INC.

, a Delaware

corporation, as the Borrower

By: /s/ John C. Molina

Name: John C. Molina

Title: Executive Vice President, CFO

 

 

BANK OF AMERICA, N.A.,

as
Administrative Agent

By: /s/ Amie L. Edwards

Name: Amie L. Edwards

Title: Vice President

 

 

BANK OF AMERICA, N.a.,

as a Lender, L/C Issuer and Swing Line Lender

By: /s/ Amie L. Edwards

Name: Amie L. Edwards

Title: Vice President

 

CIBC INC.

, as Lender

By: /s/ E. Lindsay Gordon

Name: E. Lindsay Gordon

Title: Authorized Signatory

CITICORP NORTH AMERICA, INC.

, as Lender

By: /s/ Allen Fisher

Name: Allen Fisher

Title: Director

 

U.S. BANK NATIONAL ASSOCIATION

, as Lender

By: /s/ Christian E. Stein III

Name: Christian E. Stein III

Title: Vice President

UBS LOAN FINANCE LLC

, as Lender

By: /s/ Wilfred V. Saint

Name: Wilfred V. Saint

Title: Director

HARRIS TRUST AND SAVINGS BANK

, as Lender

By: /s/ Gloria Compean-Endicott

Name: Gloria Compean-Endicott

Title: Managing Director

SOCIETE GENERALE

, as Lender

By: /s/ Mary Brickley

Name: Mary Brickley

Title: Director

UNION BANK OF CALIFORNIA, N.A.

, as Lender

By: /s/ Gina M. West

Name: Gina M. West

Title: Vice President

EAST WEST BANK

, as Lender

By: /s/ Kathleen Kwan

Name: Kathleen Kwan

Title: SVP

BANK OF THE WEST

, as Lender

By: /s/ Jennifer L. Banks

Name: Jennifer L. Banks

Title: Vice President

 

WELLS FARGO BANK, N.A.

, as Lender

By: /s/ Lucy Nixon

Name: Lucy Nixon

Title: Senior Vice President

 

BANK OF COMMUNICATIONS, NEW YORK BRANCH

, as Lender

By: /s/ Yuning Liu

Name: Yuning Liu

Title: Deputy General Manager