Exhibit 10.1

SECOND AMENDMENT AND WAIVER dated as of November 6, 2006 (this “Second Amendment
and Waiver”), among Molina Healthcare, Inc., a Delaware corporation (the
“Borrower”), the Lenders (as defined below) party hereto, and 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 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, as amended by the First Amendment and Waiver dated as of
October 5, 2005 (the “Credit Agreement”). 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:

SECTION 1.01. Amendments to Section 1.01. Section 1.01 of the Credit Agreement
is hereby amended by deleting the definition for “Required Investments in
Regulated Subsidiaries” in its entirety, and by deleting the definitions for
“Fixed Charge Coverage Ratio” and “Net Dividends” in their entirety and
inserting the following in lieu thereof:

““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 to (ii) the sum of Borrower Fixed Charges.”

““Net Dividends” means, for any period, without duplication, cash dividends paid
by the Regulated Subsidiaries to the Borrower, less any cash Investments made by
the Borrower in the Regulated Subsidiaries, plus the following to the extent
deducted in calculating cash Investments made by the Borrower in the Regulated
Subsidiaries: (i) initial cash Investments made in the 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 operation, (ii) cash Investments made by the Borrower in
Molina Healthcare of California or its Subsidiaries located in California during
the fiscal year 2006 and the fiscal quarter ended March 31, 2007 in an aggregate
amount of no more than $25 million to fund operating losses of Molina Healthcare
of California or its Subsidiaries located in California, (iii) cash Investments
made by the Borrower in any of the Regulated Subsidiaries located in the States
of Indiana, Ohio and Texas during the fiscal years ended 2006 and 2007 in an
aggregate amount of no more than $20 million to fund losses relating to
membership

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growth in such Regulated Subsidiaries in the States of Indiana, Ohio and Texas,
and (iv) cash Investments made by the Borrower in its Regulated Subsidiaries to
fund membership growth in the Regulated Subsidiaries which Investments result in
an increase in total capital and surplus on the applicable financial statements
of such Regulated Subsidiaries prepared in accordance with SAP.”

SECTION 1.02. Amendment to Section 7.17. Section 7.17 of the Credit Agreement is
hereby amended by deleting Section 7.17 in its entirety and inserting the
following in lieu thereof:

“Capital Expenditures. Make, or become legally obligated to make, any Capital
Expenditure, except for Capital Expenditures determined on a consolidated basis
in accordance with GAAP in the ordinary course of business not exceeding, in the
aggregate amount for the Borrower and the Subsidiaries during each fiscal year
set forth below, the amount set forth opposite such fiscal year:

 

Fiscal Year

   Amount

2005

   $ 15 million

2006

   $ 22 million

2007

   $ 30 million

2008

   $ 35 million

2009

   $ 37.5 million

2010

   $ 40 million”

SECTION 1.03. 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

September 30, 2006 through June 30, 2007

   2.75:1.00

September 30, 2007 through June 30, 2008

   3.00:1.00

September 30, 2008 and each fiscal quarter thereafter”

   3.50:1.00

 

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SECTION 1.04. Amendment to Section 10.06(b)(iv). Subsection 10.06(b)(iv) of the
Credit Agreement is hereby amended by deleting Subsection 10.06(b)(iv) in its
entirety and inserting the following in lieu thereof:

“(iv) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee in the amount of $3,500 (other than assignments by any
Lender to one of its Affiliates).”

SECTION 1.05. Amendment to Article X. Article X of the Credit Agreement is
hereby amended by inserting a new Section 10.17, which shall read as follows:

“No Advisory or Fiduciary Responsibility. In connection with all aspects of each
transaction contemplated hereby, the Borrower and each other Loan Party
acknowledges and agrees, and acknowledges its Affiliates’ understanding, that:
(i) the credit facility provided for hereunder and any related arranging or
other services in connection therewith (including in connection with any
amendment, waiver or other modification hereof or of any other Loan Document)
are an arm’s-length commercial transaction between the Borrower, each other Loan
Party and their respective Affiliates, on the one hand, and the Administrative
Agent and the Joint Lead Arrangers, on the other hand, and the Borrower and each
other Loan Party is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated hereby
and by the other Loan Documents (including any amendment, waiver or other
modification hereof or thereof); (ii) in connection with the process leading to
such transaction, the Administrative Agent and each Joint Lead Arranger each is
and has been acting solely as a principal and is not the financial advisor,
agent or fiduciary, for the Borrower, any other Loan Party or any of their
respective Affiliates, stockholders, creditors or employees or any other Person;
(iii) neither the Administrative Agent nor any Joint Lead Arranger has assumed
or will assume an advisory, agency or fiduciary responsibility in favor of the
Borrower or any other Loan Party with respect to any of the transactions
contemplated hereby or the process leading thereto, including with respect to
any amendment, waiver or other modification hereof or of any other Loan Document
(irrespective of whether the Administrative Agent or any Joint Lead Arranger has
advised or is currently advising the Borrower, any other Loan Party or any of
their respective Affiliates on other matters) and neither the Administrative
Agent nor any Joint Lead Arranger has any obligation to the Borrower, any other
Loan Party or any of their respective Affiliates with respect to the
transactions contemplated hereby except those obligations expressly set forth
herein and in the other Loan Documents; (iv) the Administrative Agent and the
Joint Lead Arrangers and their respective Affiliates may be engaged in a broad
range of transactions that involve interests that differ from those of the
Borrower, the other Loan Parties and their respective Affiliates, and neither
the Administrative Agent nor any Joint Lead Arranger has any obligation to
disclose any of such interests by virtue of any advisory, agency or fiduciary
relationship; and (v) the Administrative Agent and the Joint Lead Arrangers have
not provided and will not provide any legal, accounting, regulatory or tax
advice with respect to any

 

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of the transactions contemplated hereby (including any amendment, waiver or
other modification hereof or of any other Loan Document) and each of the
Borrower and the other Loan Parties has consulted its own legal, accounting,
regulatory and tax advisors to the extent it has deemed appropriate. Each of the
Borrower and the other Loan Parties hereby waives and releases, to the fullest
extent permitted by law, any claims that it may have against the Administrative
Agent and the Joint Lead Arrangers with respect to any breach or alleged breach
of agency or fiduciary duty.”

SECTION 1.06. 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.

SECTION 1.07. 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) (and the definitions related thereto) of the Credit Agreement as
of the end of the fiscal quarter of the Borrower ending September 30, 2006,
waive such Defaults or Events of Default.

(b) The undersigned hereby agree upon the Second Amendment and Waiver Effective
Date that the waivers contained in this Section 1.07 shall be retroactively
effective for the fiscal quarter September 30, 2006.

(c) 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, 2006 on the date required by Section 6.02(b) of the Credit
Agreement (taking into account the terms of this Second Amendment and Waiver).

SECTION 1.08. Representations and Warranties. The Borrower hereby represents and
warrants to the Administrative Agent and the Lenders, as follows:

(a) 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 Second Amendment and Waiver Effective Date (as defined below) with the same
effect as if made on and as of the date hereof or the Second 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.

(b) After giving effect to this Second Amendment and Waiver, each of the
Borrower and the other Loan Parties is in compliance with all the terms and
conditions of

 

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the Credit Agreement, as amended by the Second 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 Second
Amendment and Waiver.

(c) The execution, delivery and performance by the Borrower of this Second
Amendment and Waiver have been duly authorized by the Borrower.

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

(e) The execution, delivery, performance and compliance with the terms and
provisions by the Borrower of this Second Amendment and Waiver 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.

SECTION 1.09. Effectiveness. This Second 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 “Second Amendment and Waiver Effective Date”):

(a) The Administrative Agent shall have received duly executed counterparts of
this Second Amendment and Waiver which, when taken together, bear the authorized
signatures of the Borrower and the Required Lenders.

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

(c) 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 Second 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.

 

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(d) 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 Second 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.

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

SECTION 1.10. Lender Consent. For purposes of determining compliance with the
conditions specified in Section 1.09, each Lender that has signed this Second
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 Second Amendment and Waiver Effective Date specifying its objection
thereto.

SECTION 1.11. APPLICABLE LAW. THIS SECOND 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.

SECTION 1.12. Fees and Expenses. (a) On the Second 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 Second 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 Second 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 Second
Amendment and Waiver (the “Approving Lenders”), a fee (the “Amendment Fee”) in
an amount equal to 0.15% multiplied by the Aggregate Commitments of the
Approving Lenders, as of the Second Amendment and Waiver Effective Date. Such
Amendment Fee shall be for the Approving Lenders’ participation in the Second
Amendment and Waiver and shall be payable in full upon the Second Amendment and
Waiver Effective Date.

SECTION 1.13. Counterparts. This Second 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 Second
Amendment and Waiver shall be as

 

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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 Second Amendment and Waiver.

SECTION 1.14. 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]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Second 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:

 

 

Name:

 

 

Title:

 

 

 

1

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BANK OF AMERICA, N.A., as

Administrative Agent

By:

 

 

Name:

 

 

Title:

 

 

 

2

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BANK OF AMERICA, N.A., as a Lender, Swing Line Lender and L/C Issuer

By:

 

 

Name:

 

 

Title:

 

 

 

3

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CIBC INC., as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

4

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CITICORP NORTH AMERICA, INC., as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

5

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U.S. BANK NATIONAL ASSOCIATION, as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

6

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UBS LOAN FINANCE LLC, as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

7

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HARRIS NATIONAL ASSOCIATION, as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

8

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SOCIETE GENERALE, as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

9

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UNION BANK OF CALIFORNIA, N.A., as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

10

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EAST WEST BANK, as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

11

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BANK OF THE WEST, as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

12

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WELLS FARGO BANK, N.A., as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

13

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BANK OF COMMUNICATIONS, NEW YORK BRANCH, as Lender

By:

 

 

Name:

 

 

Title:

 

 

 

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