Exhibit 10.1

SECOND AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

This Second Amended and Restated Employment Agreement (this “Agreement”) is made
as of March 16, 2016, between Joseph M. Molina, MD (“Executive”) and Molina
Healthcare, Inc. (the “Company”).

RECITALS

The Company desires to establish its right to the services of Executive in the
capacities described below, on the terms and conditions hereinafter set forth,
and Executive is willing to accept such employment on such terms and conditions.
The parties hereto have previously entered into an Employment Agreement dated
January 2, 2002, as formally amended on July 1, 2006, and as formally amended
and restated on December 31, 2009 (the “Existing Agreement”), and this Agreement
supersedes the Existing Agreement.

The parties desire to amend and restate the Existing Agreement on the terms set
forth below.

AGREEMENT

The parties agree as follows:

 

1. DUTIES

(a) The Company does hereby hire, engage, and employ Executive as Chief
Executive Officer and President of the Company, and Executive does hereby accept
and agree to such hiring, engagement, and employment. During the Period of
Employment (as defined in Section 2), Executive shall serve the Company in such
position in conformity with the provisions of this Agreement, directives of the
Board of Directors of the Company (the “Board”) and the corporate policies of
the Company as they presently exist, and as such policies may be amended,
modified, changed, or adopted during the Period of Employment. Executive shall
have duties and authority consistent with Executive’s position as Chief
Executive Officer and shall report to the Board (the “Reporting Relationship”).

(b) Throughout the Period of Employment, Executive shall devote his time,
energy, and skill to the performance of his duties for the Company, vacations
and other leave authorized under this Agreement excepted. Notwithstanding the
foregoing, Executive shall be permitted to (i) engage in charitable and
community affairs, (ii) make direct investments of any character in any
non-competing business or businesses and to manage such investments (but not be
involved in the day-to-day operations of any such business), and (iii) serve on
the board of directors of any non-competing business or businesses; provided, in
each case, and in the aggregate, that such activities do not materially
interfere with the performance of Executive’s duties hereunder, and further
provided that Executive may invest in a publicly traded competing business so
long as such investment does not equal or exceed one percent of the outstanding
shares of such publicly traded competing business.

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(c) Executive hereby represents to the Company that the execution and delivery
of this Agreement by Executive and the Company and the performance by Executive
of Executive’s duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any employment or other agreement or policy to which
Executive is a party or otherwise bound.

 

2. PERIOD OF EMPLOYMENT

The “Period of Employment” shall, unless sooner terminated as provided herein,
be a period commencing effective as of January 1, 2016 and ending with the close
of business on December 31, 2016. Notwithstanding the preceding sentence,
commencing with January 1, 2017 and on each January 1st thereafter (each an
“Extension Date”), the Period of Employment shall be automatically extended for
an additional one-year period so as to expire one year from such Extension Date,
unless the Company or Executive provides the other party hereto ninety
(90) days’ prior written notice before the next scheduled Extension Date that
the Period of Employment shall not be so extended (the “Non-Extension Notice”).
The term “Period of Employment” shall include any extension that becomes
applicable pursuant to the preceding sentence.

 

3. COMPENSATION

(a) BASE SALARY. Executive’s Base Salary shall be at a rate of not less than
$1,170,000 on an annual basis (“Executive’s Base Salary”), commencing effective
as of January 1, 2016, and paid in accordance with the Company’s regular payroll
practices. The Company’s Compensation Committee shall review at least annually
Executive’s Base Salary for possible increase and may, in its sole discretion
and in accordance with applicable rules and regulations of the Securities and
Exchange Commission and the New York Stock Exchange, periodically adjust
Executive’s Base Salary.

(b) BONUS. Executive shall be eligible to earn annual performance and/or
discretionary bonuses as determined each year at the discretion of the Company’s
Compensation Committee. Annual performance bonus compensation earned and payable
pursuant hereto shall be paid at the same time as annual performance bonuses are
paid to the senior executives of the Company generally, and in all cases in the
calendar year following the fiscal year for which the bonus is earned.
Notwithstanding the foregoing, all cash bonus awards shall be unconditionally
earned and payable if applicable specified performance goals are achieved in the
relevant fiscal year. Executive shall be entitled to participate in all bonus or
incentive plans applicable to the senior executives of the Company, including
without limitation, any Effective Equity Compensation Plan (as defined in
Section 4(e)).

 

4. BENEFITS

(a) HEALTH AND WELFARE. During the Period of Employment, Executive shall be
entitled to participate, on the same terms and at the same level as other
executives, in all health and welfare benefit plans and programs generally
available to other executives or employees of the Company (including, without
limitation, the Company’s medical, dental, vision, life benefits, life
insurance, and long-term disability plans) as in effect from time to time and to
receive any special benefits provided from time to time, subject to any legally
required

 

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restrictions specified in such plans and programs. Without limiting the
generality of the foregoing, Company shall provide life insurance for Executive,
with Executive to designate the beneficiary thereunder, in an amount equal to
Executive’s Base Salary as in effect on the date of this Agreement and as in
effect on the first business day of each calendar year thereafter.

(b) PAID TIME OFF AND OTHER LEAVE. During the Period of Employment, Executive
shall receive 8.62 hours of paid time off per “pay period” of the Company (the
“PTO”), subject to the Company’s policies concerning accrual of PTO, and
provided that for any three hundred sixty five (365) day period within the
Period of Employment Executive shall earn no less than a total of twenty-eight
(28) days of PTO. Executive shall also be entitled to all other holiday and
leave pay generally available to other executives of the Company.

(c) TRAVEL AND EXPENSE REIMBURSEMENTS. During the Period of Employment, Company
will reimburse Executive for all reasonable expenses incurred in connection with
performance of his duties under Section 1 of this Agreement in accordance with
the Company’s expense reimbursement policies.

(d) RETIREMENT. During the Period of Employment, Executive shall be eligible to
participate on the same terms and at the same level as other executives, in all
retirement, 401(k), deferred compensation, or other savings plans generally
available to other executives, or employees of the Company as in effect from
time to time, subject to any legally required restrictions specified in such
plans and programs.

(e) EQUITY GRANTS. Executive shall be eligible, at the discretion of the
Company’s Compensation Committee, for grants of equity compensation (the “Equity
Compensation”) pursuant to an equity compensation agreement. Any Equity
Compensation will be granted under and subject to the terms and conditions of an
equity compensation plan of the Company as then in effect (as of the date of any
grant, an “Effective Equity Compensation Plan”). The terms and conditions of
such Equity Compensation are intended to be such that Executive shall receive a
compensation package commensurate with executives performing the same functions
as executives for businesses similar to the Company.

(f) OTHER BENEFITS. In addition to benefits specifically provided herein, during
the Period of Employment, Executive shall be entitled to participate, on the
same terms and at the same level as other executives, in all fringe benefit
plans and perquisites provided by Company to its executives. The employee
benefits described in Sections 4(a) through (f) inclusive are referred to as
“Executive Benefits.”

(g) CLAWBACK. The Company and Executive each acknowledge that amounts paid under
this Agreement are subject to the Company’s Clawback Policy, effective as of
March 10, 2013, as the same may be amended from time to time.

 

5. DEATH OR DISABILITY

(a) PERMANENTLY DISABLED AND PERMANENT DISABILITY. The terms “Permanently
Disabled” and “Permanent Disability” shall mean (i) the inability to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous

 

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period of not less than twelve (12) months, or (ii) the receipt of income
replacement benefits for a period of not less than three (3) months under an
accident and health plan covering employees of the Company, by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than twelve (12) months.

(b) TERMINATION DUE TO DEATH OR DISABILITY. If Executive dies or becomes
Permanently Disabled during the Period of Employment, the Period of Employment
and Executive’s employment shall automatically cease and terminate as of the
date of Executive’s death or the date of Permanent Disability (which date shall
be referred to as the “Disability Date”), as the case may be. In the event of
the termination of the Period of Employment and Executive’s employment hereunder
due to Executive’s death or Permanent Disability, Executive or his estate shall
be entitled to receive:

(i) (x) within five (5) business days, a lump sum cash payment equal to the sum
of any accrued but unpaid Base Salary and PTO as of the Termination Date
hereunder and (y) any unpaid annual incentive compensation in respect of the
most recently completed fiscal year preceding the Termination Date (the “Unpaid
Annual Bonus”), payable at the same time such annual incentive compensation is
paid to the senior executives of the Company generally; and

(ii) Within thirty (30) days, such employee benefits described in Sections 4(a)
and 4(c) through 4(f) inclusive, if any, as to which Executive may be entitled
as of the Termination Date under the employee benefit plans and arrangements of
the Company ((i) and (ii) collectively, the “Accrued Obligations”).

 

6. TERMINATION BY THE COMPANY

(a) TERMINATION FOR CAUSE. The Company may terminate for Cause (as defined
below) at any time the Period of Employment and Executive’s employment hereunder
by providing to Executive written notice of such termination (“Notice of
Termination for Cause”). The term “Cause” shall mean a termination of service
based upon a finding by the Company, acting in good faith and based on its
reasonable belief at the time, that Executive:

(i) has engaged in unlawful acts involving moral turpitude or gross negligence
with respect to the Company;

(ii) has consistently and willfully failed to perform his duties or has
intentionally breached any material provision of any agreement with the Company
or an affiliated entity; provided, however, that such failure or breach shall
not constitute Cause unless it is (A) not reasonably curable or (B) if
reasonably curable, is not cured by the Executive within thirty (30) days’
notice from the Company.

If the Executive’s employment is terminated for Cause, the termination shall
take effect on the Termination Date (as defined below). In the event of
termination of the Period of Employment and Executive’s employment hereunder due
to a termination by the Company for Cause, Executive shall be entitled to
receive the Accrued Obligations. All of the Accrued Obligations shall be paid on
the Termination Date except those benefits described in Sections 4(a) and 4(c)
through (f) inclusive, which shall be paid within thirty (30) days of the
Termination Date, and any Unpaid Annual Bonus, which shall be paid as set forth
in Section 5(b)(i).

 

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If the Company attempts to terminate Executive’s employment pursuant to this
Section 6(a) and it is ultimately determined that the Company lacked Cause, the
provisions of Section 6(b) (“Termination by the Company-Termination Without
Cause”) shall apply as if the Company had provided Executive with Notice of
Termination Without Cause (as defined below) on the date the Company actually
provided Executive with Notice of Termination for Cause.

(b) TERMINATION WITHOUT CAUSE. The Company may, without cause or reason,
terminate at any time the Period of Employment and Executive’s employment
hereunder by providing Executive written notice of such termination (“Notice of
Termination Without Cause”). A Non-Extension Notice by the Company shall be
considered a termination without Cause. If Executive’s employment is terminated
without Cause, the termination shall take effect on the Termination Date. In the
event of the termination of Executive’s employment hereunder due to a
termination by the Company without Cause (other than due to Executive’s death or
Permanent Disability):

(i) Executive shall be entitled to receive: (1) an amount equal to 400% of the
Executive’s Base Salary then in effect as of the Termination Date (the
“Severance Payment”), which Severance Payment shall be distributable upon
Executive’s Separation from Service; (2) a pro rata portion of the Termination
Bonus for the year in which Executive’s employment is terminated, based on the
number of entire months of such year that have elapsed through the date of
Executive’s termination of employment as a fraction of twelve (12) (the “Pro
Rata Bonus”), which Pro Rata Bonus shall be distributable upon Executive’s
Separation from Service; (3) the Accrued Obligations; (4) the entirety of
Executive’s contributions and the Company’s contributions to Executive’s 401(k)
plan account as if Executive were fully vested as of the Termination Date; and
(5) a cash payment of $65,000 representing eighteen (18) months of health and
welfare benefits as contemplated under Section 4(a). The term “Termination
Bonus” shall mean an amount equal to one-and-a-half (1 1⁄2) times the
Executive’s Base Salary for the most recently completed fiscal year.

(ii) Executive shall be entitled to one hundred percent vesting of all of the
previously granted Equity Compensation, including, without limitation, shares of
restricted stock and options to purchase shares of common stock of the Company
held by Executive as of the Termination Date.

(iii) Amounts payable under this Section 6(b) shall be payable as follows:

(A) the total amount payable under clauses (i)(1), (2) and (5) shall be subject
to and shall comply with Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”) and shall be paid in a lump sum payment within the ten
(10) day period commencing on the 60th day after the date of Executive’s
Separation from Service; provided, however, that, if Executive is a Specified
Employee on the date of Executive’s Separation from Service, such payment shall
be paid within the ten (10) day period following the earlier of (x) the
expiration of the six (6) month period commencing on the date of Executive’s
Separation from Service, or (y) the date of Executive’s death.

 

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(B) amounts representing accrued but unpaid Executive Base Salary and PTO shall
be paid on the Termination Date, and any Unpaid Annual Bonus shall be paid as
set forth in Section 5(b)(i).

Executive shall have no duty to mitigate damages and none of the payments
provided in this Section 6(b) shall be reduced by any amounts earned or received
by Executive from a third party at any time.

 

7. TERMINATION BY EMPLOYEE

(a) TERMINATION WITHOUT GOOD REASON. Executive shall have the right to terminate
the Period of Employment and Executive’s employment hereunder at any time
without Good Reason (as defined below) upon fifteen (15) days prior written
notice of such termination to the Company. A Non-Extension Notice by Executive
shall be considered a termination without Good Reason. Any such termination by
Executive without Good Reason shall be treated for all purposes of this
Agreement as a termination by the Company for Cause and the provisions of
Section 6(a) shall apply.

(b) TERMINATION WITH GOOD REASON. Executive may terminate the Period of
Employment and resign from employment hereunder for “Good Reason.” “Good Reason”
shall mean (with or without regard to whether a Change in Control Event has
occurred), without obtaining Executive’s prior written consent thereto:

(i) a material and adverse change in Executive’s position, duties,
responsibilities, or Reporting Relationship with the Company,

(ii) a change in Executive’s office location to a point more than fifty
(50) miles from Executive’s current office,

(iii) the taking of any action by the Company to: (A) eliminate benefit plans
applicable to Executive without providing substitutes which provide a
substantially similar aggregate value of benefits, (B) materially reduce
Executive’s benefits thereunder or (C) substantially diminish the aggregate
value to Executive of incentive awards or other fringe benefits, provided,
however, that it shall not constitute Good Reason for the Company to, as part of
an overall cost-reduction program, take any action described in (A) — (C) so
long as such action is taken with respect to all senior executives and Executive
is not disproportionately affected thereby,

(iv) any reduction in the Base Salary, provided, however, that it shall not
constitute Good Reason for the Company to, as part of an overall cost-reduction
program, reduce Executive’s Base Salary so long as the base salaries of all
other senior executives are simultaneously reduced by not less than the same
percentage, or

(v) any breach of this Agreement by the Company or any successor thereto,
including without limitation any failure by the Company to obtain the consent of
any Successor Entity (as defined below) to the provisions contained in
Section 15;

 

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provided, however, that none of the events described in clauses (i) through
(v) of this Section 7(b) shall constitute Good Reason unless Executive shall
have notified the Company in writing describing the events which constitute Good
Reason within ninety (90) days following the initial occurrence of such event,
and then only if the Company shall have failed to cure such event within thirty
(30) days after the Company’s receipt of such written notice; and provided,
further, that a termination for Good Reason occurs within the two-year period
following the initial existence of such event.

Any such termination by Executive for Good Reason shall be treated for all
purposes of this Agreement as a termination by the Company without Cause and the
provisions of Section 6(b) shall apply; provided, however, that if Executive
attempts to resign for Good Reason pursuant to this Section 7(b) and it is
ultimately determined that Good Reason did not exist, Executive shall be deemed
to have resigned from employment without Good Reason and the provisions of
Section 7(a) and, by reference therein, the provisions of Section 6(a), shall
apply.

 

8. TERMINATION DATE

The term “Termination Date” shall mean (i) if Executive’s employment is
terminated by the Company for Cause, or by Executive for Good Reason, the
effective date (pursuant to Section 25 (“Notices”)) of written notice of such
termination to Executive or to the Company, as the case may be; (ii) if
Executive’s employment is terminated by the Company other than for Cause or
Disability, the date on which the Company notifies Executive of such
termination; or (iii) if Executive’s employment is terminated by reason of Death
or Disability, the Disability Date.

 

9. CHANGE IN CONTROL

(a) Notwithstanding anything to the contrary in this Agreement, if a Change in
Control Event (as defined below) of the Company occurs during the term of this
Agreement, and if within two years following such Change in Control Event either
(1) the Company terminates Executive’s employment without Cause or (2) Executive
terminates his employment for Good Reason:

(i) the Company shall pay to Executive an amount equal to the sum of (w) the
Severance Payment, which shall be distributable upon Executive’s Separation from
Service, (x) the Pro Rata Bonus, which shall be distributable upon Executive’s
Separation from Service, (y) the Accrued Obligations and (z) the entirety of
Executive’s contributions and the Company’s contributions to Executive’s 401(k)
plan account as if Executive were fully vested as of the Termination Date. This
payment shall be in lieu of the payment otherwise payable under clause (i) of
Section 6(b).

(ii) the Company shall also pay to Executive a cash payment of $135,000
representing thirty-six (36) months of health and welfare benefits contemplated
under Section 4(a).

(iii) and, regardless of whether any of the Equity Compensation has been assumed
by any Successor Entity, the provisions of clause (ii) of Section 6(b) will
apply.

 

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(iv) upon a change in control all unassumed and unvested Equity Compensation
shall vest immediately.

(v) the total amount payable under clauses (i)(w) and (x) and (ii) shall be
subject to and shall comply with Section 409A of the Code and shall be paid in a
lump sum payment within the ten (10) day period commencing on the 60th day after
the date of Executive’s Separation from Service; provided, however, that, if
Executive is a Specified Employee on the date of Executive’s Separation from
Service, such payment shall be paid within the ten (10) day period following the
earlier of (x) the expiration of the six (6) month period commencing on the date
of Executive’s Separation from Service, or (y) the date of Executive’s death.
Any Unpaid Annual Bonus shall be paid as set forth in Section 5(b)(i).

(b) A “Change in Control Event” shall mean any of the following:

(i) Approval by the Board and by shareholders of the Company (or, if no
shareholder approval is required, by the Board alone) of the dissolution or
liquidation of the Company, other than in the context of a transaction that does
not constitute a Change in Control Event under clause (ii) below;

(ii) Consummation of a merger, consolidation, or other reorganization, with or
into, or the sale of all or substantially all of the Company’s business and/or
assets as an entirety to, one or more entities that are not Subsidiaries or
other affiliates of the Company (a “Business Combination”), unless (1) as a
result of the Business Combination, more than fifty percent (50%) of the
outstanding voting power generally in the election of directors of the surviving
or resulting entity or a parent thereof (the “Successor Entity”) immediately
after the reorganization is, or will be, owned, directly or indirectly, by
holders of the Company’s voting securities immediately before the Business
Combination; and (2) no “person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), excluding the Successor Entity or an Excluded
Person, beneficially owns, directly or indirectly, more than fifty percent
(50%) of the outstanding shares or the combined voting power of the outstanding
voting securities of the Successor Entity, after giving effect to the Business
Combination, except to the extent that such ownership existed prior to the
Business Combination; or

(iii) Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) other than an Excluded Person: (a) becomes the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than fifty percent (50%) of the
combined voting power of the Company’s then outstanding securities entitled to
then vote generally in the election of directors (the “Voting Power”) of the
Company (a “Majority Holder”), other than as a result of (1) an acquisition
directly from the Company, (2) an acquisition by the Company, or (3) an
acquisition by an entity pursuant to a transaction which is expressly excluded
under clause (ii) above (an “Excluded Transaction”); or (b) provided that the
beneficial owner of a majority of the Voting Power as of January 1, 2002 is no
longer a Majority Holder, becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing more than thirty percent (30%) of the Voting Power, other than as a
result of an Excluded Transaction.

 

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(iv) For the purposes of this Section 9(b):

(A) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended
from time to time.

(B) “Excluded Person” shall mean (a) any person described in and satisfying the
conditions of Rule 13d-1(b)(1) under the Exchange Act, (b) the Company, (c) an
employee benefit plan (or related trust) sponsored or maintained by the Company
or the Successor Entity, or (d) any person who is the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of more than 25% of the Common
Stock on January 1, 2002 (or an affiliate, successor, heir, descendant, or
related party of or to such person, including a trust in which such person or an
affiliate, heir, descendant, or related party of or to such person serves as a
trustee or is a beneficiary).

(C) “Subsidiary” shall mean any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned, directly or
indirectly, by the Company.

(c) Executive shall have no duty to mitigate damages and none of the payments
provided in this Section 9 shall be reduced by any amounts earned or received by
Executive from a third party at any time. Notwithstanding anything to the
contrary in this Section 9, if, in connection with a Change in Control Event,
Executive voluntarily enters a new written employment agreement with the Company
or the Successor Entity, Executive may no longer rely upon the provisions of
this Section 9.

 

10. CONFIDENTIALITY

Executive will not at any time (whether during or after his employment with the
Company), unless compelled by lawful process, disclose or use for his own
benefit or purposes or the benefit or purposes of any other person, firm,
partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
subsidiaries or affiliates, any trade secrets, or other confidential data or
information relating to customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial data,
financing methods, or plans of the Company or of any subsidiary or affiliate of
the Company (“Protected Information”); provided that the foregoing shall not
apply to information which is not unique to the Company or which is generally
known to the industry or the public other than as a result of Executive’s breach
of this covenant. Executive agrees that upon termination of his employment with
the Company for any reason, he will return to the Company immediately all
memoranda, books, papers, plans, information, letters and other data, and all
copies thereof or therefrom, in any way relating to the business of the Company
and its affiliates, except that he may retain personal notes, notebooks and
diaries that do not contain confidential information of the type described in
the preceding sentence. Executive further agrees that he will not retain or use
for his account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of the
Company or its affiliates.

 

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11. NON-SOLICITATION AND NON-DISPARAGEMENT

During the Period of Employment and for a period of eighteen (18) months
thereafter, Executive will not, directly or indirectly: (a) solicit or attempt
to solicit any employee of the Company to terminate his or her relationship with
the Company in order to become an employee, consultant or independent contractor
to or for any other person or business entity; (b) solicit, through the use of
Protected Information, customers, suppliers or clients of the Company to reduce
or discontinue their business with the Company or to engage in business with any
competing entity; (c) disparage the Company, its business, or its reputation; or
(d) otherwise disrupt or interfere with business relationships (whether formed
before or after the date of this Agreement) between the Company or any of its
affiliates and customers, suppliers, partners, members or investors of the
Company or its affiliates.

 

12. RELEASE REQUIRED FOR SEVERANCE PAYMENTS

Notwithstanding anything to the contrary in this Agreement, as a condition
precedent to the receipt of any payment under Section 6, Section 7, or Section 9
of this Agreement pursuant to Executive’s termination of employment with the
Company, Executive shall be required to execute a general waiver and release
agreement, in form drafted by and satisfactory to the Company, providing for the
complete waiver, release, and discharge of all known and unknown present and
future claims against the Company to be delivered no later than sixty (60) days
following the Executive’s Separation of Service, any revocation of release
period provided by law has run, and Executive has not revoked the release of
claims and covenant not to sue within such period.

 

13. SECTION 280G

Notwithstanding any provision of this Agreement or any other applicable
agreement or arrangement, if it is determined that any payment, distribution,
transfer, or benefit by the Company or a direct or indirect subsidiary or
affiliate of the Company, to or for the benefit of Executive or Executive’s
dependents, heirs or beneficiaries (whether such payment, distribution,
transfer, benefit or other event occurs pursuant to the terms of this Agreement
or otherwise) (each, a “Payment” and collectively, the “Payments”) is subject to
the excise tax imposed by Section 4999 of the Code (the “Excise Tax”) then, the
Payments shall either be (i) delivered in full, or (ii) delivered in such amount
so that no portion of the Payments would be subject to the Excise Tax, whichever
of the foregoing results in the receipt by the Executive and his dependents,
heirs and beneficiaries of the greatest benefit on an after-tax basis (taking
into account the applicable federal, state and local income taxes and the Excise
Tax). The determination that a Payment is subject to the Excise Tax shall be
made in writing by the principal certified public accounting firm then retained
by the Company to audit its annual financial statements (the “Accounting Firm”).
Such determination shall include the amount of the Excise Tax and detailed
computations thereof, including any assumptions used in such computations. The
determination by the Accounting Firm will be binding on the Company and
Executive.

 

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14. CONTRACT REIMBURSEMENT

The Company shall reimburse Executive on a fully grossed-up, after-tax basis or
directly pay for all reasonable legal fees and costs attributed to the
development, reviews and modifications of this Agreement and associated legal
services. This Section 14 shall not be deemed to limit any of Executive’s rights
under Section 23 (“Attorneys’ Fees”).

 

15. ASSIGNMENT

This Agreement is personal in its nature and neither of the parties hereto
shall, without the consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder; provided, however, that, in the event of a
merger, consolidation, or transfer or sale of all or substantially all of the
assets of the Company with or to any other individual(s) or entity, this
Agreement shall, subject to the provisions hereof, be binding upon and inure to
the benefit of such successor and such successor shall discharge and perform all
the promises, covenants, duties, and obligations of the Company hereunder.

 

16. GOVERNING LAW

This Agreement and the legal relations hereby created between the parties hereto
shall be governed by and construed under and in accordance with the internal
laws of the State of California, without regard to conflicts of laws principles
thereof.

 

17. ENTIRE AGREEMENT

This Agreement embodies the entire agreement of the parties hereto respecting
the matters within its scope. This Agreement supersedes all prior agreements of
the parties hereto on the subject matter hereof, including the Existing
Agreement. Any prior negotiations, correspondence, agreements, proposals, or
understandings relating to the subject matter hereof shall be deemed to be
merged into this Agreement and to the extent inconsistent herewith, such
negotiations, correspondence, agreements, proposals, or understandings shall be
deemed to be of no force or effect. There are no representations, warranties, or
agreements, whether express or implied, or oral or written, with respect to the
subject matter hereof, except as set forth herein.

 

18. MODIFICATIONS

This Agreement shall not be modified by any oral agreement, either express or
implied, and all modifications hereof shall be in writing and signed by the
parties hereto.

 

19. WAIVER

Failure to insist upon strict compliance with any of the terms, covenants, or
conditions hereof shall not be deemed a waiver of such term, covenant, or
condition, nor shall any waiver or relinquishment of, or failure to insist upon
strict compliance with, any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.

 

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20. NUMBER AND GENDER

Where the context requires, the singular shall include the plural, the plural
shall include the singular, and any gender shall include all other genders.

 

21. SECTION HEADINGS

The section headings in this Agreement are for the purpose of convenience only
and shall not limit or otherwise affect any of the terms hereof.

 

22. ARBITRATION

Any controversy arising out of or relating to Executive’s employment, this
Agreement, its enforcement or interpretation, or because of an alleged breach,
default, or misrepresentation in connection with any of its provisions, shall be
submitted to arbitration in Los Angeles County, California, before a sole
arbitrator who is either (a) a member of the National Academy of Arbitrators
located in the State of California or (b) a retired California Superior Court or
Appellate Court judge, and shall be conducted in accordance with the provisions
of California Civil Procedure Code Sections 1280 et seq. as the exclusive remedy
of such dispute; provided, however, that provisional injunctive relief may, but
need not, be sought in a court of law while arbitration proceedings are pending,
and any provisional injunctive relief granted by such court shall remain
effective until the matter is finally determined by the Arbitrator. Final
resolution of any dispute through arbitration may include any remedy or relief
which the Arbitrator deems just and equitable. Any award or relief granted by
the Arbitrator hereunder shall be final and binding on the parties hereto and
may be enforced by any court of competent jurisdiction. The parties acknowledge
and agree that they are hereby waiving any rights to trial by jury in any
action, proceeding or counterclaim brought by either of the parties against the
other in connection with any matter whatsoever arising out of or in any way
connected with this Agreement or Executive’s employment.

 

23. ATTORNEYS’ FEES

Executive and the Company agree that in any dispute resolution proceedings
arising out of this Agreement, the prevailing party shall be entitled to
reimbursement for its or his reasonable attorneys’ fees and costs incurred by it
or him in connection with resolution of the dispute in addition to any other
relief granted (the “Legal Fees”). Any reimbursement of Executive’s Legal Fees
under this Section 23 shall be provided in a manner that complies with Treasury
Regulation Section 1.409A-3(i)(1)(iv). Executive’s Legal Fees shall be
reimbursed only if such Legal Fees are incurred not later than ten (10) years
following the date of Executive’s Separation from Service. The Legal Fees paid
to Executive for any taxable year of Executive shall not affect the Legal Fees
paid to Executive for any other taxable year of Executive. The Legal Fees shall
be paid to Executive on or before the last day of Executive’s taxable year
following the taxable year in which the Legal Fees are incurred. Executive’s
right to reimbursement of Legal Fees shall not be subject to liquidation or
exchange for any other benefit. If the Legal Fees are payable in connection with
Executive’s Separation from Service, and Executive is a Specified Employee on
the date of Executive’s Separation from Service, the Legal Fees shall be paid
within the ten (10) day period following the earlier of (x) the expiration of
the six (6) month period commencing on the date of Executive’s Separation from
Service, or (y) the date of Executive’s death.

 

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24. SEVERABILITY

In the event that a court of competent jurisdiction determines that any portion
of this Agreement is in violation of any statute or public policy, then only the
portions of this Agreement which violate such statute or public policy shall be
stricken, and all portions of this Agreement which do not violate any statute or
public policy shall continue in full force and effect. Furthermore, any court
order striking any portion of this Agreement shall modify the stricken terms as
narrowly as possible to give as much effect as possible to the intentions of the
parties under this Agreement.

 

25. NOTICES

All notices under this Agreement shall be in writing and shall be either
personally delivered or mailed postage prepaid, by certified mail, return
receipt requested:

(a) if to the Company:

Molina Healthcare, Inc.

Attention: General Counsel

200 Oceangate, Suite 100

Long Beach, California 90802

(b) if to Executive:

Joseph M. Molina, MD

1311 Chelten Way

South Pasadena, CA 91030

Notice shall be effective when personally delivered, or five (5) business days
after being so mailed, or when transmitted via facsimile with confirmation of
receipt.

 

26. COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.

 

27. WITHHOLDING TAXES

The Company may withhold from any amounts payable under this Agreement such
federal, state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.

 

28. APPENDIX

Appendix A hereto regarding Code Section 409A is incorporated herein by this
reference.

 

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IN WITNESS WHEREOF, the Company and Executive have executed this Second Amended
and Restated Employment Agreement as of the date first above written.

 

MOLINA HEALTHCARE, INC.

/s/ Dale B. Wolf

By:   Dale B. Wolf Title:   Chairman of Compensation Committee EXECUTIVE

/s/ Joseph M. Molina, MD

Joseph M. Molina, MD

 

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Appendix A

SECTION 409A PROVISIONS

 

1. EXEMPTION FROM AND COMPLIANCE WITH SECTION 409A OF THE CODE

(a) ADMINISTRATION OF AGREEMENT. Certain payments and benefits payable under the
Agreement are intended to be exempt from, or comply with, the requirements of
Section 409A of the Code. The Agreement shall be interpreted in accordance with
the applicable exemptions from Section 409A of the Code and the Treasury
Regulations thereunder. To the extent the payments and benefits under the
Agreement are subject to Section 409A of the Code, the Agreement shall be
interpreted, construed, and administered in a manner that satisfies the
requirements of Sections 409A(a)(2), (3), and (4) of the Code and the Treasury
Regulations and interpretive guidance issued thereunder. If the Company and
Executive determine that any compensation, benefits or other payments that are
payable under the Agreement and intended to comply with Sections 409A(a)(2),
(3) and (4) of the Code do not comply with Section 409A of the Code, the
Treasury Regulations and interpretive guidance issued thereunder, the Company
and Executive agree to amend the Agreement, or take such other actions as the
Company and Executive deem reasonably necessary or appropriate, to comply with
the requirements of Section 409A of the Code, the Treasury Regulations and
interpretive guidance issued thereunder. In the case of any compensation,
benefits or other payments that are payable under the Agreement and intended to
comply with Sections 409A(a)(2), (3) and (4) of the Code, if any provision of
the Agreement would cause such compensation, benefits or other payments to fail
to so comply, such provision shall not be effective and shall be null and void
with respect to such compensation, benefits or other payments, and such
provision shall otherwise remain in full force and effect.

(b) DELAYED DISTRIBUTION UNDER SECTION 409A OF THE CODE. If Executive is a
Specified Employee on the date of Executive’s Separation from Service, any
payments or benefits under the Agreement that are subject to Section 409A of the
Code shall be delayed in order to comply with Section 409A(a)(2)(B)(i) of the
Code, and such payments or benefits shall be paid or distributed to Executive
within the ten (10) day period following the earlier of (x) the expiration of
the six (6) month period commencing on the date of Executive’s Separation from
Service, or (y) the date of Executive’s death.

(c) CERTAIN REIMBURSEMENTS. Any taxable expense reimbursement under Section 4(c)
shall be provided in a manner that complies with Treasury Regulation
Section 1.409A-3(i)(1)(iv), to the extent applicable. The reimbursements paid to
Executive for any taxable year of Executive shall not affect the reimbursements
paid to Executive for any other taxable year of Executive. The reimbursements
shall be paid to Executive on or before the last day of Executive’s taxable year
following the taxable year in which the underlying expenses are incurred.
Executive’s right to reimbursement of expenses shall not be subject to
liquidation or exchange for any other benefit. If the expenses are payable in
connection with Executive’s Separation from Service, and Executive is a
Specified Employee on the date of Executive’s Separation from Service, the
reimbursements shall be paid within the ten (10) day period following the
earlier of (x) the expiration of the six (6) month period commencing on the date
of Executive’s Separation from Service, or (y) the date of Executive’s death.

 

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2. DEFINITIONS

For purposes of this Agreement, the following capitalized terms have the
meanings set forth below:

(a) The “Exemption Limit” shall mean the exemption limit set forth in Treasury
Regulation Section 1.409A-1(b)(9)(iii)(A) and shall equal two times the lesser
of:

(i) the amount of Executive’s annualized compensation based upon the Executive’s
annual rate of pay for the calendar year immediately preceding the calendar year
in

which Executive’s Separation from Service occurs (adjusted for any increase
during the calendar year in which such Separation from Service occurs that would
be expected to continue indefinitely had Executive remained employed with the
Company), or

(ii) the maximum amount that may be taken into account under a qualified plan
pursuant to Section 401(a)(17) of the Code for the calendar year in which
Executive’s Separation from Service occurs (the Section 401(a)(17) annual
compensation limit for 2009 is $245,000).

(b) “Separation from Service”, with respect to Executive (or another Service
Provider), means Executive’s (or such Service Provider’s) “separation from
service,” as defined in Treasury Regulation Section 1.409A-1(h), with respect to
the Service Recipient.

(c) “Service Provider” means Executive or any other “service provider,” as
defined in Treasury Regulation Section 1.409A-1(f).

(d) “Service Recipient,” with respect to Executive, means Molina Healthcare,
Inc. or the subsidiary of Molina Healthcare, Inc. employing the Executive,
whichever is applicable, and all persons considered part of the “service
recipient,” as defined in Treasury Regulation Section 1.409A-1(g), as determined
from time to time. As provided in Treasury Regulation Section 1.409A-1(g), the
“Service Recipient” shall mean the person for whom the services are performed
and with respect to whom the legally binding right to compensation arises, and
all persons with whom such person would be considered a single employer under
Section 414(b) or 414(c) of the Code.

(e) “Specified Employee” means a Service Provider who, as of the date of the
Service Provider’s Separation from Service is a “Key Employee” of the Service
Recipient any stock of which is publicly traded on an established securities
market or otherwise. For purposes of this definition, a Service Provider is a
“Key Employee” if the Service Provider meets the requirements of
Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with
the Treasury Regulations thereunder and disregarding Section 416(i)(5) of the
Code) at any time during the twelve (12)-month period ending on the Specified
Employee Identification Date. If a Service Provider is a “Key Employee” (as
defined above) as of a Specified Employee Identification Date, the Service
Provider shall be treated as “Key Employee” for the entire twelve (12) month
period beginning on the Specified Employee Effective Date. The “Specified
Employees” shall be determined in accordance with Section 409A(a)(2)(B)(i) of
the Code and Treasury Regulation Section 1.409A-1(i).

 

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(f) “Specified Employee Effective Date” means the first day of the fourth month
following the Specified Employee Identification Date. The Specified Employee
Effective Date may be changed by Molina Healthcare, Inc., in its discretion, in
accordance with Treasury Regulation Section 1.409A-1(i)(4).

(g) “Specified Employee Identification Date”, for purposes of Treasury
Regulation Section 1.409A-1(i)(3), shall mean December 31. The “Specified
Employee Identification Date” shall apply to all “nonqualified deferred
compensation plans” (as defined in Treasury Regulation Section 1.409A-1(a)) of
the Service Recipient and all affected Service Providers. The “Specified
Employee Identification Date” may be changed by Molina Healthcare, Inc., in its
discretion, in accordance with Treasury Regulation Section 1.409A-1(i)(3).

 

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