Document:

<PAGE>

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS DOCUMENT.
PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED ARE DENOTED BY "[*]".
CONFIDENTIAL INFORMATION OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.

                                                                    EXHIBIT 10.4

                            UTAH DEPARTMENT OF HEALTH
                 288 North 1460 West, Salt Lake City, Utah 84116

                                    CONTRACT
    H9920205                                                   006146
---------------------                                 -------------------------
Department Log Number                                   State Contract Number

1.   CONTRACT NAME:
     The name of this Contract is HMO-AMERICAN FAMILY CARE.

2.   CONTRACTING PARTIES:
     This Contract is between the Utah Department of Health (DEPARTMENT), and
     American Family Care (CONTRACTOR).

3.   CONTRACT PERIOD:
     The service period of this Contract will be July 1, 1999 through June 30,
     2004, unless terminated or extended by agreement in accordance with the
     terms and conditions of this Contract.

4.   CONTRACT AMOUNT:
     The Contractor will be paid up to a maximum amount of $    [*]     for the
                                                            -----------
     Contract period in accordance with the provisions in this Contract. This
     Contract is funded with 71.61% Federal funds and with 28.39% State funds.
     The CFDA# is 93.778 and relates to the federal funds provided.

5.   CONTRACT INQUIRIES:
     Inquiries regarding this Contract shall be directed to the following
     individuals:

     CONTRACTOR:       AMERICAN FAMILY CARE      DEPARTMENT OF HEALTH
     Contact Person:   Brian Monsen
     Business Address: American Family Care      Program: Managed Health Care
                       2120 South 1300 East,     Contact Person: Ed Ewia
                       Suite 303
                       Salt Lake City, UT 84106  Phone Number: (801) 538-6505
     Phone Number:     (801) 524-2725

6.   REFERENCE TO ATTACHMENTS INCLUDED AS PART OF THIS CONTRACT:
     Attachment A:   Utah Department of Health General Provisions
     Attachment B:   Special Provisions
     Attachment C:   Covered Services
     Attachment D:   Quality Assurance & Utilization Management
     Attachment E:   Medicaid Enrollment (Table 1), Cost Data (Table 2),
                     Utilization Data (Table 3), Medicaid Malpractice
                     Information (Table 4)
     Attachment F:   Rates and Rate-Related Terms
     Attachment G:   Quality Assurance Monitoring Plan

7.   PROVISIONS INCORPORATED INTO THIS CONTRACT BY REFERENCE, BUT NOT ATTACHED
     HERETO:
     A. All other governmental laws, rules, regulations, or actions applicable
        to services provided herein.
     B. If the Contractor has provided the Department with Assurances, then the
        Department is entering into this agreement based upon the Assurances
        provided by the Contractor and the Assurances are incorporated by
        reference.

8.   If the Contractor is not a local public procurement unit as defined by the
     Utah Procurement Code (UCA Section 63-56-5), this Contract must be signed
     by a representative of the State Division of Finance and the State Division
     of Purchasing to bind the State and the Department to this Contract.

9.   This Contract, its attachments, and all documents incorporated by reference
     constitute the entire agreement between the parties and supercede all prior
     negotiations, representations, or agreements, either written or oral
     between the parties relating to the subject matter of this Contract.

IN WITNESS WHEREOF, the parties sign this Contract.

CONTRACTOR: AMERICAN FAMILY CARE            UTAH DEPARTMENT OF HEALTH

By: /s/                      26 Aug 99  By: /s/                      9/16/99
    ------------------------ ----------     ------------------------ -----------
    Signature of Authorized  Date           Shari A. Watkins, C.P.A. Date
    Individual                              Director
                                            Official of Fiscal
                                            Operations

Print Name:     Kirk Olsen
           ----------------------------

Title:     Chief Executive Officer           [SEAL]                  10/4/99
      ---------------------------------      ----------------------- -----------
                                             State Finance:          Date

           33-0617992
------------------------------------
Federal Tax Identification Number or         /s/                     SEP 24 1999
      Social Security Number                 ----------------------- -----------
                                             State Purchasing:       Date

                                     Page 1

<PAGE>

                                 ATTACHMENT "A"

                            UTAH DEPARTMENT OF HEALTH

                               GENERAL PROVISIONS

I.     CONTRACT DEFINITIONS ...................................  1

II.    AUTHORITY ..............................................  1

III.   MISCELLANEOUS PROVISIONS ...............................  2

IV.    UTAH INDOOR CLEAN AIR ACT ..............................  3

V.     RELATED PARTIES & CONFLICTS OF INTEREST ................  3

VI.    OTHER CONTRACTS ........................................  3

VII.   SUBCONTRACTS & ASSIGNMENTS .............................  4

VIII.  FURTHER WARRANTY .......................................  4

IX.    INFORMATION OWNERSHIP ..................................  4

X.     SOFTWARE OWNERSHIP .....................................  4

XI.    INFORMATION PRACTICES ..................................  5

XII.   INDEMNIFICATION ........................................  5

XIII.  SUBMISSION OF REPORTS ..................................  5

XIV.   PAYMENT ................................................  5

XV.    RECORD KEEPING, AUDITS, & INSPECTIONS ..................  6

XVI.   CONTRACT ADMINISTRATION REQUIREMENTS ...................  6

XVII.  DEFAULT, TERMINATION, & PAYMENT ADJUSTMENT .............  9

XVIII. FEDERAL REQUIREMENTS ...................................  9

                                        i

<PAGE>

                                 ATTACHMENT "A"

                  UTAH DEPARTMENT OF HEALTH GENERAL PROVISIONS

                             I. CONTRACT DEFINITIONS
The following definitions apply in these general provisions:
     "Assign" or "Assignment" means the transfer of all rights and delegation of
        all duties in the contract to another person.
     "Business" means any corporation, partnership, individual, sole
        proprietorship, joint stock company, joint venture, or any other private
        legal entity.
     "This Contract" means this agreement between the Department and the
        Contractor, including both the General Provisions and the Special
        Provisions.
     "The Contractor" means the person who delivers the services or goods
        described in this Contract, other than the state or the Department.
     "The Department" means the Utah Department of Health.
     "Director" means the Executive Director of the Department or authorized
        representative.
     "Equipment" means capital equipment which costs at least $1,000 and has a
        useful life of one year or more unless a different definition or amount
        is set forth in the Special Provisions or specific Department Program
        policy as described in writing to Contractor.
     "Federal law" means the constitution, orders, case law, statutes, rules,
        and regulations of the federal government.
     "General provisions" means those provisions of this Contract which are set
        forth under the heading "General Provisions."
     "Governmental entity" means a federal, state, local, or
        federally-recognized Indian tribal government, or any subdivision
        thereof.
     "Individual" means a living human being.
     "Local health department" means a local health department as defined
        in Section 26A-1-102, Utah Code Annotated, 1953 as amended (UCA.).
     "Non-governmental entity" means privately held non-profit or for profit
        organization not classified as a "Governmental entity."
     "Person" means any governmental entity, business, individual, union,
        committee, club, other organization, or group of individuals.
     "Recipient" means an individual who is eligible for services provided by
        the Department or by an authorized Contractor of the Department under
        the terms of this Contract.
     "Services" means the furnishing of labor, time, or effort by a Contractor,
        not involving the delivery of a specific end product other than reports
        which are merely incidental to the required performance.
     "Special provisions" means those provisions of this Contract which are in
        addition to the General Provisions and which more fully describe the
        goods or services covered by this Contract.
     "State" means the State of Utah.
     "State law" means the constitution, orders, case law, statutes, and rules,
        of the state.
     "Subcontract" means any signed agreement between the Contractor and a third
        party to provide goods or services for which the Contractor is
        obligated, except purchase orders for standard commercial equipment,
        products, or services.
     "Subcontractor" means the person who performs the services or delivers the
        goods described in a subcontract.

                                  II. AUTHORITY
1. The Department's authority to enter into this Contract is derived from
Chapter 56, Title 63, UCA; Titles 26 and 26A, UCA; and from related statutes.

                                  Page 1 of 13

<PAGE>

                                 ATTACHMENT "A"

2. The Contractor represents that it has the institutional, managerial, and
financial capability to ensure proper planning, management, and completion of
the project or services described in this Contract.

                          III. MISCELLANEOUS PROVISIONS
1. For reference clarity, as used in these general provisions: "ARTICLE" refers
to a major topic designated by capitalized roman numerals; "SECTION" refers to
the next lower numbered heading designated by arabic numerals, and "SUBSECTIONS"
refers to the next two lower headings designated by lower case letters and lower
case roman numerals.
2. If the general provisions and the special provisions of this Contract
conflict, the special provisions govern.
3. These provisions distinguish between two Contractor types: Governmental and
Non-governmental. Unspecified text applies to both types. Type-specific
statements appear in bold print (e.g., Non-governmental entities only).
4. Once signed by the Director and the State Division of Finance, when
applicable, and the State Division of Purchasing, when applicable, this Contract
becomes effective on the date specified in this Contract. Changes made to the
unsigned Contract document shall be initialed by both persons signing this
Contract on page one. Changes made to this Contract after the signatures are
made on page one may only be made by a separate written amendment signed by
persons authorized to amend this Contract.
5. Neither party may enlarge, modify, or reduce the terms, scope of work, or
dollar amount in this Contract, except by written amendment as provided in
section 4.
6. This Contract and the contracts that incorporate its provisions contain the
entire agreement between the Department and the Contractor. Any statements,
promises, or inducements made by either party or the agent of either party which
are not contained in the written Contract or other contracts are not valid or
binding.
7. The Contractor shall comply with all applicable laws regarding federal and
state taxes, unemployment insurance, disability insurance, and workers'
compensation.
8. The Contractor is an independent Contractor, having no authorization, express
or implied, to bind the Department to any agreement, settlement, liability, or
understanding whatsoever, and agrees not to perform any acts as agent for the
Department unless expressly set forth herein. Compensation stated herein shall
be the total amount payable to the Contractor by the Department. The Contractor
shall be responsible for the payment of all income tax and social security
amounts due as a result of payments received from the Department for these
contract services.
9. The Contractor shall maintain all licenses, permits, and authority required
to accomplish its obligations under this Contract.
10. The Contractor shall obtain prior written Department approval before
purchasing any equipment with contract funds.
11. Notice shall be in writing, directed to the contact person on page one of
this Contract, and delivered by certified mail or by hand to the other party's
most currently known address. The notice shall be effective when placed in the
U.S. mail or hand-delivered.
12. The Department and the Contractor shall attempt to resolve contract disputes
through available administrative remedies prior to initiating any court action.
13. This Contract shall be construed and governed by the laws of the State of
Utah. The Contractor submits to the jurisdiction of the courts of the State of
Utah for any dispute arising out of this Contract or the breach thereof. The
proper venue of any legal action arising under this contract shall be in Salt
Lake City, Utah.
14. Any court ruling or other binding legal declaration which declares that any
provision of this Contract is illegal or void, shall not affect the legality and
enforceability of any other provision of this Contract, unless the provisions
are mutually dependent.
15. The Contractor agrees to maintain the confidentiality of records that it
holds as agent for the Department as required by the Government Records Access
and Management Act, Title 63, Chapter 2, UCA and the confidentiality of records
requirements of Title 26, UCA.
16. The Contractor agrees to abide by the State of Utah's executive order, dated
June 30, 1989, which prohibits

                                  Page 2 of 13

<PAGE>

                                 ATTACHMENT "A"

sexual harassment in the workplace.
17. The waiver by either party of any provision, term, covenant or condition of
this Contract shall not be deemed to be a waiver of any other provision,
covenant or condition of this Contract nor any subsequent breach of the same or
any other provision, term, covenant or condition of this Contract.
18. The Contractor agrees to warrant and assume responsibility for each
hardware, firmware, and/or software product (hereafter called the product) that
it licenses, or sells, to the Department under this Contract. The Contractor
acknowledges that the Uniform Commercial Code applies to this Contract. In
general, the Contractor warrants that: (1) the product will do what the
salesperson said it would do, (2) the product will live up to all specific
claims that the manufacturer makes in their advertisements, (3) the product will
be suitable for the ordinary purposes for which such product is used, (4) the
product will be suitable for any special purposes that the Department has relied
on the Contractor's skill or judgement to consider when it advised the
Department about the product, especially to ensure year 2000 compatibility and
fitness, (5) the product has been properly designed and manufactured, and (6)
the product is free of significant defects or unusual problems about which the
Department has not been warned. In general, "year 2000 compatibility and
fitness" means: (1) the product warranted by the Contractor will not cease to
perform before, during, or after the calendar year 2000, (2) the product will
not produce abnormal, invalid, and/or incorrect results before, during, or after
the calendar year 2000, (3) will include, but not be limited to, date data
century recognition, calculations that accommodate same century and
multi-century formats, date data values that reflect century, and (4) accurately
process date data (including, but not limited to, calculating, comparing, and
sequencing) from, into, and between the twentieth and twenty-first centuries,
including leap year calculations.
     If problems arise, the Contractor will repair or replace (at no charge to
the Department) the product whose noncompliance is discovered and made known to
the Contractor in writing. If there is a Year 2000 problem, the Contractor
agrees to immediately assign senior engineering staff to work continuously until
the product problem is corrected, time being of the essence.
     The Contractor warrants that it is Year 2000 compliant with respect to all
aspects of performing this Contract. The Contractor bears the risk of loss for
Year 2000 failures on its behalf, its subcontractors, or agents relevant to the
performance of this Contract.
     Nothing in this warranty will be construed to limit any rights or remedies
the Department may otherwise have under this Contract with respect to defects
other than Year 2000 performance.
19. The State of Utah's sales and use tax exemption number is E33399. The
tangible personal property or services being purchased are being paid for from
State funds and used in the exercise of that entity's essential functions. If
the items purchased are construction materials, they will be converted into real
property by employees of this government entity, unless otherwise stated in the
contract.

                          IV. UTAH INDOOR CLEAN AIR ACT
The Contractor, for all personnel operating within the State of Utah, shall
comply with the Utah Indoor Clean Air Act, Title 26, Chapter 38, UCA, which
prohibits smoking in public places.

                   V. RELATED PARTIES & CONFLICTS OF INTEREST
1. The Contractor may not pay related parties for goods, services, facilities,
leases, salaries, wages, professional fees, or the like for contract expenses
without the prior written consent of the Department. The Department may consider
the payments to the related parties as disallowed expenditures and accordingly
adjust the Department's payment to the Contractor for all related party payments
made without the Department's consent. As used in this section, "related
parties" means any person related to the Contractor by blood, marriage,
partnership, common directors or officers, or 10% or greater direct or indirect
ownership in a common entity.
2. The Contractor shall comply with the Public Officers' and Employees' Ethics
Act, Section 67-16-10, UCA, which prohibits actions that may create or that are
actual or potential conflicts of interest. It also provides that "no person
shall induce or seek to induce any public officer or public employee to violate
any of the provisions of this act." The Contractor represents that none of its
officers or employees are officers or employees of the State of Utah,

                                  Page 3 of 13

<PAGE>

                                 ATTACHMENT "A"

unless disclosure has been made in accordance with Section 67-16-8, UCA.

                               VI. OTHER CONTRACTS
1. The Department may perform additional work related to this Contract or award
other contracts for such work. The Contractor shall cooperate fully with other
contractors, public officers, and public employees in scheduling and
coordinating contract work. The Contractor shall give other contractors
reasonable opportunity to execute their work and shall not interfere with the
scheduled work of other contractors, public officers, and public employees.
2. The Department shall not unreasonably interfere with the Contractor's
performance of its obligations under this Contract.

                         VII. SUBCONTRACTS & ASSIGNMENTS
The Contractor shall not assign this Agreement without the written consent of
the Department. The Department agrees that the Contractor may partially
subcontract services, provided that the Contractor retains ultimate
responsibility for performance of all terms, conditions and provisions of this
Agreement. When subcontracting, the Contractor agrees to use written
subcontracts that conform with Federal and State laws. The Contractor shall
request Department approval for any assignment at least 20 days prior to its
effective date.

                             VIII. FURTHER WARRANTY
The Contractor warrants that (a) all services shall be performed in conformity
with the requirements of this Contract by qualified personnel in accordance with
generally recognized standards; and (b) all goods or products furnished pursuant
to this Contract shall be free from defects and shall conform to contract
requirements. For any item that the Department determines does not conform with
the warranty, the Department may arrange to have the item repaired or replaced,
either by the Contractor or by a third party at the Department's option, at the
Contractor's expense.

                            IX. INFORMATION OWNERSHIP
Except for confidential medical records held by direct care providers, the
Department shall own exclusive title to all information gathered, reports
developed, and conclusions reached in performance of this Contract. The
Contractor may not use, except in meeting its obligations under this Contract,
information gathered, reports developed, or conclusions reached in performance
of this Contract without the express written consent of the Department.

                              X. SOFTWARE OWNERSHIP
1. If the Contractor develops or pays to have developed computer software
exclusively with funds or proceeds from this Contract to perform its obligations
under this Contract, or to perform computerized tasks that it was not previously
performing to meet its obligations under this Contract, the computer software
shall be exclusively owned by or licensed to the Department. In the case of
software owned by the Department, the Department grants to the Contractor a
nontransferable, nonexclusive license to use the software in the performance of
this Contract. In the case of software licensed to the Department, the
Department grants to the Contractor permission to use the software in the
performance of this Contract. This license or permission, as the case may be,
terminates when the Contractor has completed its work under this Contract.
2. If the Contractor develops or pays to have developed computer software which
is an addition to existing software owned by or licensed exclusively with funds
or proceeds from this Contract, or to modify software to perform computerized
tasks in a manner different than previously performed, to meet its obligations
under this Contract, the addition shall be exclusively owned by or licensed to
the Department. In the case of software owned by the Department, the Department
grants to the Contractor a nontransferable, nonexclusive license to use the
software in the performance of this Contract. In the case of software licensed
to the Department, the Department grants to the Contractor permission to use the
software in the performance of this Contract. This license or permission, as the
case may be, terminates when the Contractor has completed its work under this
Contract.

                                  Page 4 of 13

<PAGE>

                                 ATTACHMENT "A"

3. If the Contractor uses computer software licensed to it which it does not
modify or program to handle the specific tasks required by this Contract, then
to the extent allowed by the license agreement between the Contractor and the
owner of the software, the Contractor grants to the Department a continuing
nonexclusive license to use the software, either by the Department or by a
different Contractor, to perform work substantially identical to the work
performed by the Contractor under this Contract. If the Contractor cannot grant
the license as required by this section, then the Contractor shall reveal the
input screens, report formats, data structures, linkages, and relations used in
performing its obligations under this Contract in such a manner to allow the
Department or another contractor to continue the work performed by the
Contractor under this Contract.
4. The Contractor shall deliver to the Department a copy of the software or
information required by this Article within 90 days after the commencement of
this Contract and thereafter immediately upon making a modification to any of
the software which is the subject of this Contract.

                            XI. INFORMATION PRACTICES
1. (Governmental entities only) The Contractor shall establish, maintain, and
practice information procedures and controls that comply with Federal and State
law. The Contractor assures that any information about an individual that it
receives or requests from the Department pursuant to this Contract is necessary
to the performance of its duties and functions and that the information will be
used only for the purposes set forth in this Contract. The Department shall
inform the Contractor of any non-public designation of any information it
provides to the Contractor.
2. (Non-governmental entities only) The Contractor shall establish, maintain,
and practice information procedures and controls that comply with Federal and
State law. The Contractor may not release any information regarding any person
from any information provided by the Department, unless the Department first
consents in writing to the release.

                              XII. INDEMNIFICATION
1. (Governmental entities only) It is mutually agreed that each party assumes
liability for the negligent or wrongful acts committed by its own agents,
officials, or employees, regardless of the source of funding for this Contract.
Neither party waives any rights or defenses otherwise available under the
Governmental Immunity Act.
2. (Non-governmental entities only) To the extent authorized by law, the
Contractor shall indemnify and hold harmless the Department and any of its
agents, officers, and employees, from any claims, demands, suits, actions,
proceedings, loss, injury, death, and damages of every kind and description,
including any attorney's fees and litigation expenses, which may be brought,
made against, or incurred by that party on account of loss or damage to any
property, or for injuries to or death of any person, caused by, arising directly
or indirectly out of, or contributed to in whole or in part, by reason of any
alleged act, omission, professional error, fault, mistake, or negligence of the
Contractor or its employees, agents, or representatives, or subcontractors or
their employees, agents, or representatives, in connection with, incident to, or
arising directly or indirectly out of this Contract, or arising out of workers'
compensation claims, unemployment, or claims under similar such laws or
obligations.

                           XIII. SUBMISSION OF REPORTS
If the Contractor is a Local Health Department, it shall submit monthly
expenditure reports to the Department in a format approved by the Department.
All other Contractors shall submit monthly summarized billing statements to the
Department. Expenditure reports and billing statements must be submitted to the
Department within 20 days following the last day of the month in which the
expenditures were incurred or the services provided.

                                  XIV. PAYMENT
1. If a recipient, a recipient's insurance, or any third-party is responsible to
pay for services rendered pursuant to this Contract, the Contractor shall bill
and collect for the goods or services provided to the recipient. The Department
shall reimburse total actual expenditures, less amounts collected as required by
this section.
2. Under no circumstances shall the Department authorize payment to the
Contractor that exceeds the amount

                                  Page 5 of 13

<PAGE>

                                 ATTACHMENT "A"

specified in this Contract without an amendment to the Contract.
3. The Department agrees to make every effort to pay for completed services, and
payments are conditioned upon receipt of applicable, accurate, and completed
reports prepared by the Contractor and delivered to the Department. The
Department may delay or deny payment for final expenditure reports received more
than 20 days after the Contractor has satisfied all Contract requirements.

                    XV. RECORD KEEPING, AUDITS, & INSPECTIONS
1. The Contractor shall use an accrual or a modified accrual basis for reporting
annual fiscal data, as required by Generally Accepted Accounting Principles
(GAAP). Required monthly or quarterly reports may be reported using a cash
basis.
2. The Contractor and any subcontractors shall maintain financial and operation
records relating to contract services, requirements, collections, and
expenditures in sufficient detail to document all contract fund transactions.
The Contractor and any subcontractors shall maintain and make all records
necessary and reasonable for a full and complete audit available for audit or
inspection during normal business hours or by appointment, until all audits
initiated by federal and state auditors are completed, or for a period of four
years from the date of termination of this Contract, whichever is longer, or for
any period required elsewhere in this Contract.
3. The Contractor shall retain all records which relate to disputes,
litigations, claim settlements arising from contract performance, or
cost/expense exceptions initiated by the Director, until all disputes,
litigations, claims, or exceptions are resolved.
4. The Contractor shall comply with federal and state regulations concerning
cost principles, audit requirements, and grant administration requirements,
cited in Table 1. Unless specifically exempted in this Contract's special
provisions, the Contractor must comply with applicable federal cost principles
and grant administration requirements if state funds are received. The
Contractor shall also provide the Department with a copy of all reports required
by the State Legal Compliance Audit Guide (SLCAG) as defined in Chapter 2, Title
51, UCA. All federal and state principles and requirements cited in Table 1 are
available for inspection at the Utah Department of Health during normal business
hours. A Contractor who receives $50,000.00 or more in a year from all federal
or from all state sources may be subject to federal and state audit
requirements. A Contractor who receives $300,000.00 or more per year from
federal sources may be subject to the federal single audit requirement.
Counties, cities, towns, school districts, and all non-profit corporations that
receive 50% or more of their funds from federal, state or local governmental
entities are subject to the State of Utah Legal Compliance Audit Guide. Copies
of required audit reports shall be sent to the Utah Department of Health, Bureau
of Financial Audit, Box 144002, Salt Lake City, Utah 84114-4002.

                  FEDERAL AND STATE PRINCIPLES AND REQUIREMENTS

<TABLE>
<CAPTION>
                          Cost                Federal Audit        State Audit    Grant Admin.
Contractor                Principles          Requirements         Requirements   Requirements
-----------------------   -----------------   ------------------   ------------   ------------------
<S>                       <C>                 <C>                  <C>            <C>
State or Local Govt. &
Indian Tribal Govts.      OMB Circular A-87   OMB Circular A-133   SLCAG          OMB Common Rule

Hospitals                 45 CFR 74, App. E   OMB Circular A-133   SLCAG          OMB Common Rule or
                                                                                   Circular A-110

College or University     OMB Circular A-21   OMB Circular A-133   SLCAG          OMB Circular A-110

Non-Profit Organization   OMB Circular A-122  OMB Circular A-133   SLCAG          OMB Circular A-110

For-Profit Organization   48 CFR 31                   n/a           n/a           OMB Circular A-110
</TABLE>

Table 1

                                  Page 6 of 13

<PAGE>

                                 ATTACHMENT "A"

                    XVI. CONTRACT ADMINISTRATION REQUIREMENTS
The Contractor agrees to administer this Contract in compliance with either OMB
Common Rule or OMB Circular A-l10 depending upon the legal status of the
Contractor as shown in Table 1. Financial management, procurement, and
affirmative step requirements specify that:
1. the Contractor must have fiscal control and accounting procedures sufficient
to:
          a. permit preparation of reports required by this Contract, and
          b. permit the tracing of funds to a level of expenditures adequate to
          establish that such funds have not been used in violation of the
          restrictions and prohibitions of applicable statutes.
2. the Contractor's financial management systems must meet the following
standards:
          a. financial reporting. Accurate, current, and complete disclosure of
          the financial results of financially assisted activities must be made
          in accordance with the financial reporting requirements of this
          Contract.
          b. accounting records. The Contractor must maintain records which
          adequately identify the source and application of funds provided for
          federally financially-assisted activities. These records must contain
          information pertaining to the Contract's awards and authorizations,
          obligations, unobligated balances, assets, liabilities, outlays or
          expenditures, and income.
          c. internal control. Effective control and accountability must be
          maintained for all Contract cash, real and personal property, and
          other assets. The Contractor must adequately safeguard all such
          property and must assure that it is used solely for authorized
          purposes.
          d. budget control. Actual expenditures or outlays must be compared
          with budgeted amounts for the Contract. Financial information must be
          related to performance or productivity data, including the development
          of unit cost information whenever appropriate or specifically required
          in this Contract. If unit cost data are required, estimates based on
          available documentation will be accepted whenever possible.
3. Federal OMB cost principles, federal agency program regulations, and the
terms of grant and subgrant, and contract agreements will be followed in
determining the reasonableness, allowability, and allocability of costs.
          a. source documentation. Accounting records must be supported by such
          source documentation as canceled checks, paid bills, payrolls, time
          and attendance records, contract and subcontract award documents, etc.
          b. cash management. Procedures for minimizing the time elapsing
          between the transfer of funds from the U.S. Treasury and disbursement
          by the Department and the Contractor must be followed whenever advance
          payment procedures are used.
4. the Contractor shall use its own procurement procedures which reflect
applicable State and local laws, rules, and regulations, provided that the
procurements conform to applicable Federal law and the standards identified in
this Contract.
          a. The Contractor will maintain a contract administration system which
ensures that subcontractors perform in accordance with the terms, conditions,
and specifications of its contracts or purchase orders.
          b. The Contractor will maintain a written code of standards of conduct
governing the performance of its employees engaged in the award and
administration of contracts. No employee, officer or agent of the Department or
the Contractor shall participate in selection, or in the award or administration
of a contract supported by federal funds if a conflict of interest, real or
apparent, would be involved. Such a conflict would arise when:
                  i.   the employee, officer or agent,
                  ii.  any member of his immediate family,
                  iii. his or her partner; or
                  iv.  an organization which employs, or is about to employ, any
                  of the above, has a financial or other interest in the firm
                  selected for award. The Department's or the Contractor's
                  officer, employees or agents will neither solicit nor accept
                  gratuities, favors or anything of monetary value from
                  contractors, potential contractors, or parties to
                  subagreements. The Department and the Contractor may set
                  minimum rules where the financial interest is not substantial
                  or the gift is

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                                 ATTACHMENT "A"

                  an unsolicited item of nominal intrinsic value. To the extent
                  permitted by State or local law or regulations, such standards
                  or conduct will provide for penalties, sanctions, or other
                  disciplinary actions for violations of such standards by the
                  Department's or the Contractor's officers, employees, or
                  agents, or by subcontractors or their agents.
          c. The Contractor's procedures will provide for a review of proposed
procurements to avoid purchase of unnecessary or duplicative items.
Consideration should be given to consolidating or breaking out procurements to
obtain a more economical purchase. Where appropriate, an analysis will be made
of lease versus purchase alternatives, and any other appropriate analysis to
determine the most economical approach.
          d. To foster greater economy and efficiency, the Contractor, if a
governmental entity, is encouraged to enter into State and local
intergovernmental agreements for procurement or use of common goods and
services.
          e. If allowed by law, the Contractor is encouraged to use Federal
excess and surplus property in lieu of purchasing new equipment and property
whenever such use is feasible and reduces project costs.
          f. The Contractor may contract only with responsible contractors
possessing the ability to perform successfully under the terms and conditions of
a proposed procurement.
          g. The Contractor shall maintain records sufficient to detail the
significant history of a procurement. These records shall include, but are not
necessarily limited to the following:
                  i.   the rationale for the method of procurement,
                  ii.  selection of contract type,
                  iii. contractor selection or rejection, and
                  iv.  the basis for the contract price.
          h. The Contractor may use time and material type contracts only:
                  i.   after a determination that no other contract is suitable,
                       and
                  ii.  if the Contract includes a ceiling price that the
                       Contractor exceeds at its own risk.
          i. The Contractor alone will be responsible, in accordance with good
administrative practice and sound business judgment, for the settlement of all
contractual and administrative issues arising out of procurements. These issues
include, but are not limited to source evaluation, protests, disputes, and
claims. These standards do not relieve the Contractor of any contractual
responsibilities under its contracts.
          j. The Contractor shall have protest procedures to handle and resolve
disputes relating to its procurements and shall in all instances disclose
information regarding the protest to the federal funding agency. A protestor
must exhaust all administrative remedies with the Department and the Contractor
before pursuing a protest with the federal funding agency.
5. the Contractor shall take all necessary affirmative steps to assure that
minority firms, women's business enterprises, and labor surplus area firms are
used when possible. Affirmative steps shall include:
          a. placing qualified small and minority businesses and women's
          business enterprises on solicitation lists;
          b. assuring that small and minority businesses, and women's business
          enterprises are solicited whenever they are potential sources;
          c. dividing total requirements, when economically feasible, into
          smaller tasks or quantities to permit maximum participation by small
          and minority business, and women's business enterprises;
          d. establishing delivery schedules, where the requirement permits,
          which encourage participation by small and minority business, and
          women's business enterprises;
          e. using the services and assistance of the Small Business
          Administration, and the Minority Business Development Agency of the
          Department of Commerce; and
          f. requiring the prime contractor, if subcontracts are to be let, to
          take the affirmative steps listed in Article XVI, section 5,
          subsections a - e.

                XVII. DEFAULT, TERMINATION, & PAYMENT ADJUSTMENT
1. Each party may terminate this Contract with cause. If the cause for
termination is due to the default of a party, the non-defaulting party shall
send a notice, which meets the notice requirements of this Contract, citing the
default and giving notice to the defaulting party of its intent to terminate.
The defaulting party may cure the default within

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                                 ATTACHMENT "A"

fifteen days of the notice. If the default is not cured within the fifteen days,
the party giving notice may terminate this Contract 45 days from the date of the
initial notice of default or at a later date specified in the notice.
2. The Department may terminate this Contract without cause, in advance of the
specified termination date, upon 30 days written notice.
3. The Department agrees to use its best efforts to obtain funding for
multi-year contracts. If continued funding for this Contract is not appropriated
or budgeted at any time throughout the multi-year contract period, the
Department may terminate this Contract upon 30 days notice.
4. If funding to the Department is reduced due to an order by the Legislature or
the Governor, or is required by federal or state law, the Department may
terminate this Contract or proportionately reduce the services and goods due and
the amount due from the Department upon 30 days written notice. If the specific
funding source for the subject matter of this Contract is reduced, the
Department may terminate this Contract or proportionately reduce the services
and goods due and the amount due from the Department upon 30 written notice
being given to the Contractor.
5. If the Department terminates this Contract, the Department may procure
replacement goods or services upon terms and conditions necessary to replace the
Contractor's obligations. If the termination is due to the Contractor's failure
to perform, and the Department procures replacement goods or services, the
Contractor agrees to pay the excess costs associated with obtaining the
replacement goods or services.
6. If the Contractor terminates this Contract without cause, the Department may
treat the Contractor's action as a default under this Contract.
7. The Department may terminate this Contract if the Contractor becomes
debarred, insolvent, files bankruptcy or reorganization proceedings, sells 30%
or more of the company's assets or corporate stock, or gives notice of its
inability to perform its obligations under this Contract.
8. If the Contractor defaults in any manner in the performance of any obligation
under this Contract, or if audit exceptions are identified, the Department may,
at its option, either adjust the amount of payment or withhold payment until
satisfactory resolution of the default or exception. Default and audit
exceptions for which payment may be adjusted or withheld include disallowed
expenditures of federal or state funds as a result of the Contractor's failure
to comply with federal regulations or state rules. In addition, the Department
may withhold amounts due the Contractor under this Contract, any other current
contract between the Department and the Contractor, or any future payments due
the Contractor to recover the funds. The Department shall notify the Contractor
of the Department's action in adjusting the amount of payment or withholding
payment. This Contract is executory until such repayment is made.
9. The rights and remedies of the Department enumerated in this article are in
addition to any other rights or remedies provided in this Contract or available
in law or equity.

                           XVIII. FEDERAL REQUIREMENTS
The Contractor shall comply with all applicable federal requirements. To the
extent that the Department is able, the Department shall give further
clarification of federal requirements upon the Contractor's request. If the
Contractor is receiving federal funds under this Contract, certain federal
requirements apply. The Contractor agrees to comply with the federal
requirements to the extent that they are applicable to the subject matter of
this Contract and are required by the amount of federal funds involved in this
Contract.

1. CIVIL RIGHTS REQUIREMENTS:

          a. The Civil Rights Act of 1964, Title VI, provides that no person in
          the United States shall, on the grounds of race, color, or national
          origin, be excluded from participation in, be denied the benefits of,
          or be subjected to discrimination under any program or activity
          receiving federal financial assistance. The Health and Human Services
          regulation implementing this requirement is 45 CFR Part 80.
          b. The Civil Rights Act of 1964, Title VII, (P.L. 88-352 & 42 U.S.C.
          Section 2000e) prohibits employers from discriminating against
          employees on the basis of race, color, religion, national origin, and
          sex. Title VII applies to employers of fifteen or more employees, and
          prohibits all discriminatory employment

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                                 ATTACHMENT "A"

          practices.
          c. The Rehabilitation Act of 1973, as amended, section 504, provides
          that no otherwise qualified handicapped individual in the United
          States shall, solely by reason of the handicap, be excluded from
          participation in, be denied the benefits of, or be subjected to
          discrimination under any program or activity receiving federal
          financial assistance. The Health and Human Services regulation 45 CFR
          Part 84 implements this requirement.
          d. The Age Discrimination Act of 1975, as amended (42 U.S.C. Sections
          6101-6107), prohibits unreasonable discrimination on the basis of age
          in any program or activity receiving federal financial assistance. The
          Health and Human Services regulation implementing the provisions of
          the Age Discrimination Act is 45 CFR Part 91.
          e. The Education Amendments of 1972, Title IX, (20 U.S.C. Sections
          1681-1683 and 1685-1686), section 901, provides that no person in the
          United States shall, on the basis of sex, be excluded from
          participation in, be denied the benefits of, or be subjected to
          discrimination under any educational program or activity receiving
          federal financial assistance. Health and Human Services regulation 45
          CFR Part 86 implements this requirement.
          f. Executive Order No. 11246, as amended by Executive Order 11375
          relates to "Equal Employment Opportunity," (all construction contracts
          and subcontracts in excess of $10,000.00)
          g. Americans with Disabilities Act of 1990, (P.L. 101-336), section
          504 of the Rehabilitation Act of 1973, as amended (29 U.S.C. Section
          794), prohibits discrimination on the basis of disability.
          h. The Public Health Service Act, as amended, Title VII, section 704
          and TITLE VIII, section 855, forbids the extension of federal support
          for health manpower and nurse training programs authorized under those
          titles to any entity that discriminates on the basis of sex in the
          admission of individuals to its training programs. Health and Human
          Services regulation implementing this requirement is 45 CFR Part 83.
          i. The Public Health Service Act, as amended, section 526, provides
          that drug abusers who are suffering from medical conditions shall not
          be discriminated against in admission or treatment because of their
          drug abuse or drug dependence, by any private or public general
          hospital that receives support in any form from any federally funded
          program. This prohibition is extended to all outpatient facilities
          receiving or benefitting from federal financial assistance by 45 CFR
          Part 84.
          j. The Public Health Service Act, as amended, section 522, provides
          that alcohol abusers and alcoholics who are suffering from medical
          conditions shall not be discriminated against in admission or
          treatment, solely because of their alcohol abuse or alcoholism, by any
          private or public general hospital that receives support in any form
          from any federally funded program. This prohibition is extended to all
          outpatient facilities receiving or benefitting from federal financial
          assistance by 45 CFR Part 84.
2. Confidentiality: The Public Health Service Act, as amended, sections 301(d)
and 543, require that certain records be kept confidential except under certain
specified circumstances and for specified purposes. Confidential records include
records of the identity, diagnosis, prognosis, or treatment of any patient that
are maintained in connection with the performance of any activity or program
relating to drug abuse prevention, i.e., drug abuse education, training,
treatment, or research, or alcoholism or alcohol abuse education, training,
treatment, rehabilitation, or research that is directly or indirectly assisted
by the federal government. Public Health Service regulations 42 CFR Parts 2 and
2a implement these requirements.
3. Lobbying Restrictions: Lobbying restrictions as required by 31 U.S.C. Section
1352, requires the Contractor to abide by this section and to place it's
language in all of it's contracts:
          a. No federal funds have been paid or will be paid, by or on behalf of
          the Contractor, to any person for influencing or attempting to
          influence an officer or employee of any federal agency, a member of
          Congress, an officer or employee of Congress, or an employee of a
          member of Congress in connection with the awarding of any federal
          contract, the making of any federal grant, the making of any federal
          loan, the entering into of any cooperative agreement, or the
          extension, continuation, renewal, amendment, or modification of any
          federal contract, grant, loan, or cooperative agreement.

                                  Page 10 of 13

<PAGE>

                                 ATTACHMENT "A"

          b. If any funds other than federal appropriated funds have been paid
          or will be paid to any person for influencing or attempting to
          influence an officer or employee of any federal agency, a member of
          Congress, an officer or employee of Congress, or an employee of a
          member of Congress in connection with the federal contract, grant,
          loan, or cooperative agreement, the Contractor shall complete and
          submit Federal Standard Form LLL, "Disclosure Form to report
          Lobbying," in accordance with its instructions.
          c. The Contractor shall require that the language of this article be
          included in the award documents for all subcontracts and that
          subcontractors shall certify and disclose accordingly.
4. Debarment, suspension or other ineligibility: The Contractor must notify the
Department in accordance with the notification requirements specified in Article
III, section 11 of this Contract if the Contractor has been debarred within the
contract period. Debarment regulations are stated in Health and Human Services
regulation 45 CFR Part 76.
5. Environmental Impact: The National Environmental Policy Act of 1969 (NEPA)
(Public Law 91-190) establishes national policy goals and procedures to protect
and enhance the environment. NEPA applies to all federal agencies and requires
them to consider the probable environmental consequences of any major federal
activity, including activities of other organizations operating with the
concurrence or support of a federal agency. This includes grant-supported
activities under this Contract if federal funds are involved. Additional
environmental requirements include:
          a. the institution of environmental quality control measures under the
          National Environmental Policy Act of 1969 (P.L. 91-190) and Executive
          Order 11514;
          b. the notification of violating facilities pursuant to Executive
          Order 11738 (all contracts, subcontracts, and subgrants in excess of
          $100,000.00);
          c. the protection of wetlands pursuant to Executive Order 11990;
          d. the evaluation of flood hazards in floodplains in accordance with
          Executive Order 11988;
          e. the assurance of project consistency with the approved State
          management program developed under the Coastal Zone Management Act of
          1972 (16 U.S.C. Sections 1451 et seq.);
          f. the conformity of Federal actions to State (Clear Air)
          Implementation Plans under Section 176(c) of the Clear Air Act of
          1955, as amended (42 U.S.C. Section 7401 et seq.);
          g. the protection of underground sources of drinking water under the
          Safe Drinking Water Act of 1974, as amended, (P.L. 93-523),
          h. the protection of endangered species under the Endangered Species
          Act of 1973, as amended, (P.L. 93-205) and;
          i. the protection of the national wild and scenic rivers system under
          the Wild and Scenic Rivers Act of 1968 (16 U.S.C. Sections 1271 et
          seq.).
6. Human Subjects: The Public Health Service Act, section 474(a), implemented by
45 CFR Part 46, requires basic protection for human subjects involved in Public
Health Service grant supported research activities. Human subject is defined in
the regulation as "a living individual about whom an investigator (whether
professional or student) conducting research obtains data through intervention
or interaction with the individual or identifiable private information." The
regulation extends to the use of human organs, tissues, and body fluids from
individually identifiable human subjects as well as to graphic, written, or
recorded information derived from individually identifiable human subjects. The
regulation also specifies additional protection for certain classes of human
research involving fetuses, pregnant women, human in vitro fertilization, and
prisoners. However, the regulation exempts certain categories of research
involving human subjects which normally involve little or no risk. The
exemptions are listed in 45 CFR Part 46.101(b). The protection of human subjects
involved in research, development, and related activities is found in P.L.
93-348.
7. Sterilization: Health and Human Services and Public Health Service have
established certain limitations on the performance of nonemergency
sterilizations by Public Health Service grant-supported programs or projects
that are otherwise authorized to perform such sterilizations. Public Health
Service has issued regulations that establish safeguards to ensure that such
sterilizations are performed on the basis of informed consent and that the

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<PAGE>

                                 ATTACHMENT "A"

solicitation of consent is not based on the withholding of benefits. These
regulations, published at 42 CFR Part 50, Subpart B, apply to the performance of
nonemergency sterilizations on persons legally capable of consenting to the
sterilization. Federal financial participation is not available for any
sterilization procedure performed on an individual who is under the age of 21,
legally incapable of consenting to the sterilization, declared mentally
incompetent, or is institutionalized.
8. Abortions and Related Medical Services: Federal financial participation is
generally not available for the performance of an abortion in a grant-supported
health services project. For further information on this subject, consult the
regulation at 42 CFR Part 50. Subpart C.
9. Recombinant DNA and Institutional Biosafety Committees: Each institution
where research involving recombinant DNA technology is being or will be
conducted must establish a standing Biosafety Committee. Requirements for the
composition of such a committee are given in Section IV of Guidelines for
Research Involving Recombinant DNA Molecules, (49 FR 46266 or latest revision),
which also discusses the roles and responsibilities of principal investigators
and grantee institutions. Guidelines for Research Involving Recombinant DNA
Molecules and Administrative Practices Supplement should be consulted for
complete requirements for the conduct of projects involving recombinant DNA
technology.
10. Animal Welfare: The Public Health Service Policy on Humane Care and Use of
Laboratory Animals By Awardee Institutions requires that applicant organizations
establish and maintain appropriate policies and procedures to ensure the humane
care and use of live vertebrate animals involved in research activities
supported by Public Health Service. This policy implements and supplements the
U.S. Government Principles for the Utilization and Care of Vertebrate Animals
Used in Testing, Research, and Training and requires that institutions use the
Guide for the Care and Use of Laboratory Animals as a basis for developing and
implementing an institutional animal care and use program. This policy does not
affect applicable State or local laws or regulations which impose more stringent
standards for the care and use of laboratory animals. All institutions are
required to comply, as applicable, with the Animal Welfare Act as amended (7
U.S.C. 2131 et seq.) and other federal statutes and regulations relating to
animals. These documents are available from the Office for Protection from
Research Risks (OPRR), National Institutes of Health, Bethesda, MD 20892, (301)
496-7005.
11. Contract Provisions: The Contractor must include the following provisions in
its contracts, as limited by the statements enclosed within the parentheses
following each provision:
          a. administrative, contractual, or legal remedies in instances where
          contractors violate or breach contract terms, and provides for such
          sanctions and penalties as may be appropriate. (Contracts other than
          small purchases. Small purchase involve relatively simple and informal
          procurement methods that do not cost more than $100,000 in aggregate.)
          b. termination for cause and for convenience by the grantee or
          subgrantee including the manner by which it will be effected and the
          basis for settlement. (All contracts in excess of $10,000)
          c. compliance with Executive Order 11246 of September 24, 1965
          entitled "Equal Employment Opportunity," as amended by Executive Order
          11375 of October 13, 1967 and as supplemented in Department of Labor
          regulations (41 CFR Chapter 60). (All construction contracts awarded
          in excess of $10,000 by the Contractor and its contractors or
          subgrantees)
          d. compliance with the Copeland "Anti-Kickback" Act (18 U.S.C. 874) as
          supplemented in Department of Labor regulations (29 CFR Part 3). (All
          contracts and subgrants for construction or repair)
          e. compliance with the Davis-Bacon Act (40 U.S.C. 276a to a-7) as
          supplemented by Department of Labor regulations (29 CFR Part 5).
          (Construction contracts in excess of $2,000 awarded when required by
          Federal grant program legislation)
          f. compliance with the Contract Work Hours and Safety Standards Act,
          sections 103 and 107, (40 U.S.C. 327-330) as supplemented by
          Department of Labor regulations (29 CFR Part 5). (Construction
          contracts awarded in excess of $2,000, and in excess of $2,500 for
          other contracts which involve the employment of mechanics or laborers)
          g. notice of the federal awarding agency requirements and regulations
          pertaining to reporting.
          h. notice of federal awarding agency requirements and regulations
          pertaining to patent rights with

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<PAGE>

                                 ATTACHMENT "A"

          respect to any discovery or invention which arises or is developed in
          the course of or under such contract.
          i. federal awarding agency requirements and regulations pertaining to
          copyrights and rights in data.
          j. access by the Department, the Contractor, the Federal funding
          agency, the Comptroller General of the United States, or any of their
          duly authorized representatives to any books, documents, papers, and
          records of the contractor which are directly pertinent to that
          specific contract for the purpose of making audit, examination,
          excerpts, and transcriptions.
          k. compliance with all applicable standards, orders, or requirements
          of the Clear Air Act, section 306, (42 U.S.C. 1857(h)), the Clean
          Water Act, section 508, (33 U.S.C. 1368), Executive Order 11738, and
          Environmental Protection Agency regulations (40 CFR Part 15).
          (Contracts, subcontracts, and subgrants of amounts in excess of
          $100,000)
          1. mandatory standards and policies relating to energy efficiency
          which are contained in the state energy conservation plan issued in
          compliance with the Energy Policy and Conservation Act (Pub. L.
          94-163).

12. (Governmental entities only) Merit System Standards: The Intergovernmental
Personnel Act of 1970 (42 U.S.C. Section 4728-4763), requires adherence to
prescribed standards for merit systems funded with federal funds.
13. Misconduct in Science: The United States Public Health Service requires
certain levels of ethical standards for all PHS grant-supported projects and
requires recipient institutions to inquire into, investigate and resolve all
instances of alleged or apparent misconduct in science. Issues involving
potential criminal violations must be promptly reported to the HHS Office of
Inspector General. (See regulations in 42 CFR Part 50, Subpart A)

                            END OF GENERAL PROVISIONS

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<PAGE>

                        ATTACHMENT B - SPECIAL PROVISIONS
<TABLE>
<S>                                                                                                                <C>
Article I - Definitions ........................................................................................   1
          Advance Directives ...................................................................................   1
          Balance Bill .........................................................................................   1
          CHEC Eligible ........................................................................................   1
          CHEC Program .........................................................................................   1
          Division of Health Care Financing ....................................................................   1
          Emergency Services ...................................................................................   1
          Enrollee .............................................................................................   1
          Enrollment Area ......................................................................................   2
          Family Member ........................................................................................   2
          Home and Community-Based Services ....................................................................   2
          Managed Care Organization or MCO .....................................................................   2
          Marketing Material ...................................................................................   2
          Medically Necessary ..................................................................................   2
          Member Services ......................................................................................   2
          Physician Incentive Plan .............................................................................   2
          Prepaid Mental Health Plan ...........................................................................   2
          Primary Care Provider ................................................................................   3
          Restriction Program ..................................................................................   3
          State Plan ...........................................................................................   3

Article II - Service Area ......................................................................................   3

Article III - Enrollment, Orientation, Marketing, and Disenrollment ............................................   3
          A.    Enrollment Process .............................................................................   3
                1.      Enrollee Choice ........................................................................   3
                2.      Period of Enrollment ...................................................................   3
                3.      Open Enrollment ........................................................................   4
                4.      No Health Screening ....................................................................   4
                5.      Independent Enrollment .................................................................   4
                6.      Representative Population ..............................................................   4
                7.      Eligibility Transmission ...............................................................   4
                        a.      In general .....................................................................   4
                        b.      New Enrollees ..................................................................   5
                        c.      Retroactive Enrollees ..........................................................   5
                        d.      Reinstated Enrollees ...........................................................   5
                        e.      Deleted Enrollees ..............................................................   5
                        f.      Advanced Notification Transmission .............................................   5
                8.      Change of Enrollment Procedures ........................................................   5
          B.    Member Orientation .............................................................................   6
                1.      Initial Contact - General Orientation ..................................................   6
                2.      Identification of Enrollees with Special Health Care Needs .............................   6
                3.      Inability to Contact Enrollee for Orientation ..........................................   7
                4.      Enrollees Receiving Out-of-Plan Care Prior to Orientation ..............................   7
          C.    Marketing and Member Education .................................................................   7
                1.      Approval of Marketing Materials ........................................................   7
                        a.      No Door-to-Door, Telephonic, or "Cold Call" Marketing ..........................   7
                        b.      Distribution of Marketing Materials ............................................   8
                2.      Enrollee Materials Must be Comprehensible ..............................................   8
                3.      Member Handbook ........................................................................   8
                4.      Plan Card ..............................................................................   9
                5.      Notification to Enrollees of Policies and Procedures ...................................   9
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                                                               <C>
                        a.      Changes to Policies and Procedures..............................................   9
                        b.      Annual Education on Emergency Care and Grievance Procedures.....................   9
                6.      Monthly Notification to DEPARTMENT of Changes in Provider Network.......................   9
          D.    Disenrollment by Enrollee.......................................................................   9
                1.      Enrollee's Right to Disenroll...........................................................   9
                2.      Enrollee's in an Inpatient Hospital Setting.............................................  10
                3.      Annual Study of Enrollees who Disenrolled...............................................  10
          E.    Disenrollment by CONTRACTOR   ..................................................................  10
                1.      Cannot Disenroll for Adverse Change in Enrollee's Health................................  10
                2.      Valid Reasons for Disenrollment.........................................................  10
                3.      Approval by DEPARTMENT Required.........................................................  11
                4.      Enrollee's Right to File a Grievance....................................................  11
                5.      Refusal of Re-enrollment................................................................  11
          F.    Enrollee Transition Between MCOs/Health Plans...................................................  11
                1.      Must Accept Pre-enrollment Prior Authorizations.........................................  11
                2.      Must Provide Medical Records to Enrollee's New MCO......................................  11

Article IV - Benefits...........................................................................................  12
          A.    In General......................................................................................  12
          B.    Provider Services Function......................................................................  12
          C.    Scope of Services...............................................................................  12
                1.      Underwriting Risk.......................................................................  12
                2.      Responsible for all Benefits in Attachment C (Covered Services).........................  12
                3.      Changes to Benefits.....................................................................  12
          D.    Subcontracts....................................................................................  13
                1.      No Discrimination Based on License or Certification.....................................  13
                2.      Any Covered Service may be Subcontracted................................................  13
                3.      No Provisions to Reduce or Limit Medically Necessary Services...........................  13
                4.      Requirement of 60 Days Written Notice Prior to Termination of Contract..................  13
                5       Compliance with CONTRACTOR's Quality Assurance Plan.....................................  13
                6.      Unique Identifier Required..............................................................  14
                7.      Payment of Provider Claims..............................................................  14
          E.    Clarification of Covered Services...............................................................  14
                1.      Emergency Services......................................................................  14
                        a.      In General......................................................................  14
                        b.      Determining Liability for Emergency Services....................................  15
                        c.      Co-payments.....................................................................  16
                2.      Care Provided in Skilled Nursing Facilities.............................................  16
                        a.      In General: Stays Lasting 30 Days or Less.......................................  16
                        b.      Process for Stays Longer than 30 Days...........................................  16
                        c.      Process for Stays Less than 30 Days.............................................  17
                3.      Enrollees with Special Health Care Needs................................................  17
                        a.      In General......................................................................  17
                        b.      Identification..................................................................  18
                        c.      Choosing a Primary Care Provider................................................  18
                        d.      Referrals and Access to Specialty Providers.....................................  18
                        e.      Survey of Enrollees with Special Health Care Needs..............................  18
                        f.      Collaboration with Other Programs...............................................  19
                        g.      Required Elements of a Case Management System...................................  19
                        h.      Hospice.........................................................................  20
                4.      Inpatient Hospital Services.............................................................  20
                5.      Maternity Stays.........................................................................  20
                        a.      The Newborns' and Mothers' Health Protection Act (NMHPA)........................  20
                        b.      Early Discharges................................................................  20
                        c.      Post-Delivery Care..............................................................  21
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                               <C>
                        d.      Timely Post-Delivery Care.......................................................  21
                6.      Children in Custody of the Department of Human Services.................................  21
                        a.      In General......................................................................  21
                        b.      Schedule of Visits..............................................................  22
                7.      Organ Transplantations..................................................................  22
                        a.      In General......................................................................  22
                        b.      Specific Organ Transplantations Covered.........................................  23
                        c.      Psychosocial Assessment Required................................................  23
                        d.      Out-of-State Transplantations...................................................  23
                8.      Mental Health Services..................................................................  23
                9.      Developmental and Organic Disorders.....................................................  24
                        a.      Covered Services for Child Enrollees through Age 20.............................  24
                        b.      Covered Services for Adult Enrollees Age 21 and Older...........................  24
                        c.      Non-covered Services............................................................  24
                        d.      Responsibility of the Prepaid Mental Health Plan................................  24
                10.     Out-of-State Accessory Services.........................................................  25
                11.     Non-Contractor Prior Authorizations.....................................................  25
                        a.      Prior Authorizations - General..................................................  25
                        b.      When the CONTRACTOR has not Authorized the Service..............................  25
          F.    Clarification of Payment Responsibilities.......................................................  26
                1.      Covered Services Received Outside CONTRACTOR's Network but Paid by
                        CONTRACTOR..............................................................................  26
                2.      When Covered Services are not the CONTRACTOR's Responsibility...........................  26
                3.      The DEPARTMENT's Responsibility.........................................................  26
                4.      Covered Services Provided by the Department of Health, Division of Community
                        and Family Health Services..............................................................  26
                5.      Enrollee Transition Between MCOs, or Between Fee-For-Service and
                        CONTRACTOR..............................................................................  27
                        a.      Inpatient Hospital..............................................................  27
                        b.      Home Health Services............................................................  27
                        c.      Medical Equipment...............................................................  28
                6.      Surveys.................................................................................  28

Article V - Enrollee Rights/Services............................................................................  28
          A.    Member Services Function........................................................................  28
          B.    Enrollee Liability..............................................................................  29
          C.    General Information to be Provided to Enrollees.................................................  29
          D.    Access..........................................................................................  29
                1.      In General..............................................................................  29
                2.      Specific Provisions.....................................................................  30
                        a.      Elimination of Access Problems Caused by Geographic, Cultural and
                                Language Barriers and Physical Disabilities.....................................  30
                        b.      Interpretive Services...........................................................  30
                        c.      No Restrictions of Provider's Ability to Advise and Counsel.....................  29
                        d.      Waiting Time Benchmarks.........................................................  30
                        e.      No Delay While Coordinating Coverage with a Prepaid Mental Health
                                Plan............................................................................  31
          E.    Choice..........................................................................................  31
          F.    Coordination....................................................................................  31
                1.      In General..............................................................................  31
                2.      Prepaid Mental Health Plan..............................................................  31
          G.    Billing Enrollees...............................................................................  32
                1.      In General....... ......................................................................  32
                2.      Circumstances When an Enrollee May be Billed............................................  32
                3.      CONTRACTOR May Not Hold Enrollee's Medicaid Card........................................  33
                4.      Criminal Penalties......................................................................  33
</TABLE>

                                       iii

<PAGE>

<TABLE>
<S>                                                                                                               <C>
Article VI - Grievance Procedures...............................................................................  33
          A.    In General......................................................................................  33
          B.    Nondiscrimination...............................................................................  33
          C.    Minimum Requirements of Grievance Procedures....................................................  33
          D.    Final Review by DEPARTMENT......................................................................  34

Article VII - Other Requirements................................................................................  34
          A.    Compliance with Public Health Service Act.......................................................  34
          B.    Compliance with OBRA'90 Provision and 42 CFR 434.28.............................................  34
          C.    Fraud and Abuse Requirements....................................................................  35
          D.    Disclosure of Ownership and Control Information.................................................  36
          E.    Safeguarding Confidential Information on Enrollees..............................................  36
          F.    Disclosure of Provider Incentive Plans..........................................................  36
          G.    Debarred or Suspended Individuals...............................................................  37
          H.    HCFA Consent Required...........................................................................  37

Article VIII - Payments.........................................................................................  38
          A.    Risk Contract...................................................................................  38
          B.    Payment Amounts.................................................................................  38
                1.      Payment Schedule........................................................................  38
                2.      Calculation of Premiums.................................................................  38
                3.      Federally Qualified Health Centers (FQHCs)..............................................  38
                4.      Time Frame for Request of Delivery Payment..............................................  38
                5.      Contract Maximum........................................................................  38
          C.    Medicare........................................................................................  39
                1.      Payment of Medicare Part B Premiums.....................................................  39
                2.      Payment of Medicare Deductible and Coinsurance..........................................  39
                3.      Must Not Balance Bill Enrollees.........................................................  39
          D.    Third Party Liability (Coordination of Benefits)................................................  39
                1.      TPL Collections.........................................................................  39
                2.      Duplication of Benefits.................................................................  40
                3.      Reconciliation of Other TPL.............................................................  40
                4.      When TPL is Denied......................................................................  40
                5.      Notification of Personal Injury Cases...................................................  40
                6.      ORS to Pursue Collections...............................................................  41
                7.      Rebate of Duplicate Premiums............................................................  41
                8.      Insurance Buy-Out Program...............................................................  41
                9.      CONTRACTOR Must Pay Provider Administrative Fee for Immunizations.......................  42

          E.    Third Party Responsibility (Including Worker's Compensation)....................................  42
                1.      CONTRACTOR to Bill Usual and Customary Charges..........................................  42
                2.      Third Party's Obligation to Pay for Covered Services....................................  42
                3.      First Dollar Coverage for Accidents.....................................................  42
                4.      Notification of Stop-Loss...............................................................  42
          F.    Changes in Covered Services.....................................................................  42

Article IX - Records, Reports and Audits........................................................................  43
          A.    Federally Required Reports......................................................................  43
                1.      Financial Disclosure Report.............................................................  43
                2.      Disclosure of Ownership and Control Interest Statement..................................  43
                3.      CHEC/EPSDT Reports......................................................................  43
                        a.      CHEC/EPSDT Screenings...........................................................  43
                        b.      Immunization Data...............................................................  43
</TABLE>

                                       iv

<PAGE>

<TABLE>
<S>                                                                                                               <C>
          B.    Periodic Reports................................................................................  43
                1.      Enrollment, Cost and Utilization Reports (Attachment E).................................  43
                2.      Semi-Annual Reports.....................................................................  44
                        a.      Organ Transplants...............................................................  44
                        b.      Obstetrical Information.........................................................  44
                        c.      Complaints and Formal Grievances................................................  44
                        d.      Aberrant Physician Behavior.....................................................  44
                3.      Quality Assurance Activities............................................................  45
                4.      HEDIS...................................................................................  45
                5.      Encounter Data..........................................................................  45
                6.      Documents Due Prior to Quality Monitoring Reviews.......................................  45
                7.      Audit of Abortions, Sterilizations and Hysterectomies...................................  46
                8.      Development of New Reports..............................................................  46
          C.    Record System Requirements......................................................................  46
          D.    Medical Records.................................................................................  46
          E.    Audits..........................................................................................  46
                1.      Right of DEPARTMENT and HCFA to Audit...................................................  46
                2.      Information to Determine Allowable Costs................................................  47
                3.      Management and Utilization Audits.......................................................  47
          F.    Independent Quality Review......................................................................  47
                1.      In General..............................................................................  47
                2.      Specific Requirements...................................................................  48
                        a.      Liaison for Routine Communication...............................................  48
                        b.      Representative to Assist with Projects..........................................  48
                        c.      Copies and On-Site Access.......................................................  48
                        d.      Format of Enrollee Files........................................................  48
                        e.      Time-frame for Providing Data...................................................  48
                        f.      Work Space for On-Site Reviews..................................................  48
                        g.      Staff Assistance During On-Site Visits..........................................  49
                        h.      Confidentiality.................................................................  49

Article X - Sanctions...........................................................................................  49

Article XI - Termination of the Contract........................................................................  50
          A.    Automatic Termination...........................................................................  50
          B.    Optional Year-End Termination ..................................................................  50
          C.    Termination for Failure to Agree Upon Rates.....................................................  50
          D.    Effect of Termination...........................................................................  50
                1.      Coverage................................................................................  50
                2.      Enrollee Not Liable for Debts of CONTRACTOR or its Subcontractors.......................  50
                3.      Information for Claims Payment..........................................................  50
                4.      Changes in Enrollment Process...........................................................  50
                5.      Hearing Prior to Termination............................................................  51
          E.    Assignment......................................................................................  51

Article XII - Miscellaneous.....................................................................................  51
          A.    Integration.....................................................................................  51
          B.    Enrollees May Not Enforce Contract..............................................................  51
          C.    Interpretation of Laws and Regulations..........................................................  51
          D.    Adoption of Rules...............................................................................  52

Article XIII - Effect of General Provisions.....................................................................  52
</TABLE>

                                        v

<PAGE>

                         ATTACHMENT C - COVERED SERVICES
<TABLE>
<S>                                                                                                                <C>
A.        In General............................................................................................   1

B.        Hospital Services.....................................................................................   1
          1.    Inpatient Hospital..............................................................................   1
          2.    Outpatient Hospital.............................................................................   1
          3.    Emergency Department Services...................................................................   1

C.        Physician Services....................................................................................   1

D.        General Preventive Services...........................................................................   1

E.        Vision Care...........................................................................................   2

F.        Lab and Radiology Services............................................................................   2

G.        Physical and Occupational Therapy.....................................................................   2
          1.    Physical Therapy................................................................................   2
          2.    Occupational Therapy............................................................................   2

H.        Speech and Hearing Services...........................................................................   3

I.        Podiatry Services.....................................................................................   3

J.        End Stage Renal Disease - Dialysis....................................................................   3

K.        Home Health Services..................................................................................   3

L.        Hospice Services......................................................................................   3

M.        Private Duty Nursing..................................................................................   3

N.        Medical Supplies and Medical Equipment................................................................   3

O.        Abortions and Sterilizations..........................................................................   4

P.        Treatment for Substance Abuse and Dependency..........................................................   4

Q.        Organ Transplants.....................................................................................   4

R.        Other Outside Medical Services........................................................................   4

S.        Long Term Care........................................................................................   4

T.        Transportation Services...............................................................................   4

U.        Services to CHEC Enrollees............................................................................   5
          1.    CHEC Services...................................................................................   5
          2.    CHEC Policies and Procedures....................................................................   5

V.        Family Planning Services..............................................................................   5

W.        High-Risk Prenatal Services...........................................................................   6
          1.    In General - Ensure Service are Appropriate and Coordinated.....................................   6
</TABLE>

                                       vi

<PAGE>

<TABLE>
<S>                                                                                                               <C>
          2.    Risk Assessment.................................................................................   6
                a.      Criteria................................................................................   6
                b.      Recommended Prenatal Screening..........................................................   6
                c.      Classification..........................................................................   6
          3.    Prenatal Initiative Program.....................................................................   8

X.        Services for Children with Special Needs..............................................................   8
          1.    In General......................................................................................   8
          2.    Services Requiring Timely Access................................................................   9
          3.    Definition of Children with Special Health Care Needs...........................................   9

Y.        Medical and Surgical Services of a Dentist............................................................  10
          1.    Who May Provide Services........................................................................  10
          2.    Universe of Covered Services....................................................................  10
          3.    Services Specifically Covered...................................................................  10
          4.    Dental Services Not Covered.....................................................................  11

Z.        Diabetes Education....................................................................................  11

AA. HIV Prevention..............................................................................................  11
          1.    General Program.................................................................................  11
          2.    Focused Program for Women.......................................................................  11

            ATTACHMENT D - QUALITY ASSURANCE & UTILIZATION MANAGEMENT

A.        Quality of Care.......................................................................................   1
          1.    In General......................................................................................   1
          2.    Required Elements of Plans......................................................................   1

B.        Internal Monitoring...................................................................................   1
          1.    In General......................................................................................   1
          2     Elements of Internal Quality Assurance Plan.....................................................   2
          3.    Demonstration of High Quality Health Care.......................................................   2

C.        Quality Assurance Monitoring..........................................................................   3
          1.    Objective.......................................................................................   3
          2.    Monitoring of Providers and Recipients Necessary to Achieve Objective...........................   3

D.        The DEPARTMENT'S Quality Assurance Monitoring Plan....................................................   3

E.        Corrective Action.....................................................................................   3
          1.    When Corrective Actions are Necessary...........................................................   3
          2.    Initial Response by CONTRACTOR..................................................................   4
          3.    Submission of Corrective Action to DEPARTMENT...................................................   4
          4.    Initial Appeal of DEPARTMENT's Findings.........................................................   5
          5.    Formal Hearing..................................................................................   5
          6.    CONTRACTOR Unwilling or Unable to Implement Corrective Action Plan..............................   6
          7.    Collection of Financial Penalties...............................................................   6

F.        Federal Sanctions for Comprehensive Contracts.........................................................   6
</TABLE>

                                       vii

<PAGE>

For the purpose of the Contract all article, section, and subsection headings in
these Attachments B, C, and D are for convenience in referencing the provisions
of the Contract. They are not enforceable as part of the text of the Contract
and may not be used to interpret the meaning of the provisions that lie beneath
them.

                        ATTACHMENT B - SPECIAL PROVISIONS

                             ARTICLE I - DEFINITIONS

For the purpose of the Contract:

A.   "Advance Directives" means oral and written instructions about an
     individual's medical care, in the event the individual is unable to
     communicate. There are two types of Advance Directives: a living will and a
     medical power of attorney.

B.   "Balance Bill" means the practice of billing patients for charges that
     exceed the amount that the MCO will pay.

C.   "CHEC Eligible" means any Medicaid recipient under the age of 21 who is
     eligible to receive Early Periodic Screening Diagnostic and Treatment
     (EPSDT) services in accordance with 42 CFR Part 441, Subpart B.

D.   "CHEC Program" or Child Health Evaluation and Care program is Utah's
     version of the federally mandated Early Periodic Screening, Diagnosis and
     Treatment (EPSDT) program as defined in 42 CFR Part 441, Subpart B. (See
     Attachment C, Covered Services, 21.)

E.   "Division of Health Care Financing" or "DHCF" means the division within the
     Department of Health responsible for the administration of the Utah
     Medicaid program.

F.   "Emergency Services" means those services provided in a hospital, clinic,
     office, or other facility that is equipped to furnish the required care,
     after the sudden onset of a medical condition manifesting itself by acute
     symptoms of sufficient severity (including severe pain) such that a prudent
     layperson, who possesses an average knowledge of health and medicine, could
     reasonably expect that the absence of immediate medical attention to result
     in:

     1. Placing the health of the individual (or, with respect to a pregnant
        woman, the health of a woman or her unborn child) in serious jeopardy;

     2. Serious impairment to bodily functions; or

     3. Serious dysfunction of any bodily organ or part.

G.   "Enrollee" means any Medicaid eligible: (1) who, at the time of enrollment
     resides within the geographical limits of the CONTRACTOR's Service Area;
     (2) whose name appears on the DEPARTMENT's Eligibility Transmission as a
     new, reinstate, or retroactive Enrollee; and (3) who is accepted for
     enrollment by the CONTRACTOR according to the conditions set forth in this
     Contract excluding residents of the Utah State Hospital, Utah State
     Developmental Center, and long-term care facilities except as defined in
     Attachment C.

                                  Page 1 of 52

<PAGE>

H.   "Enrollment Area" or "Service Area" means the counties enumerated in
     Article II.

I.   "Family Member" means all Medicaid eligibles who are members of the same
     family living at home.

J.   "Home and Community-Based Services" means services, not otherwise furnished
     under the State's Medicaid plan, that are furnished under a waiver of
     statutory requirements granted under the provisions of CFR Part 441,
     subpart G. These services cover an array of Home and Community-Based
     Services that are cost-effective and necessary for an individual to avoid
     institutionalization.

K.   "Managed Care Organization" or "MCO" means an organization that meets the
     State Plan's definition of an HMO or prepaid health plan and which
     provides, either directly or through arrangement with other providers,
     comprehensive general medical services to Medicaid eligibles on a
     contractual prepayment basis.

L.   "Marketing Material" means materials in all mediums, including member
     handbooks, brochures and leaflets, newspaper, magazine, radio, television,
     billboard and yellow pages advertisements, and presentation materials used
     by marketing representatives. It includes materials mailed to, distributed
     to, or aimed at Medicaid clients specifically, and any material that
     mentions "Medicaid," "Medicaid Assistance," or "Title XIX."

M.   "Medically Necessary" means any medical service that (a) is reasonably
     calculated to prevent, diagnose, or cure conditions in the Enrollee that
     endanger life, cause suffering or pain, cause deformity or malfunction, or
     threaten to cause a handicap, and (b) there is no equally effective course
     of treatment available or suitable for the Enrollee requesting the service
     which is more conservative or substantially less costly. Medical services
     will be of a quality that meets professionally recognized standards of
     health care, and will be substantiated by records including evidence of
     such medical necessity and quality. Those records will be made available to
     the DEPARTMENT upon request. For CHEC enrollees, "Medically Necessary"
     means preventive screening services and other medical care, diagnostic
     services, treatment, and other measures necessary to correct or ameliorate
     defects and physical and mental illnesses and conditions, even if the
     services are not included in the Utah State Medicaid Plan.

N.   "Member Services" means a method of assisting Enrollees in understanding
     CONTRACTOR policies and procedures, facilitating referrals to participating
     specialists, and assisting in the resolution of problems and member
     complaints. The purpose of Member Services is to improve access to services
     and promote Enrollee satisfaction.

O.   "Physician Incentive Plan" means any compensation between a contracting
     organization and a physician group that may directly or indirectly have the
     effect of reducing or limiting services provided with respect to Enrollees
     in the organization.

P.   "Prepaid Mental Health Plan" means the mental health centers that contract
     with the DEPARTMENT to provide inpatient and outpatient mental health
     services to Medicaid clients living within each mental health center's
     jurisdiction.

                                  Page 2 of 52

<PAGE>

Q.   "Primary Care Provider" or "PCP" means a health care provider the majority
     of whose practice is devoted to internal medicine, family/general practice
     or pediatrics. The MCO may allow other specialists to be PCPs, when
     appropriate. PCPs are responsible for delivering primary care services,
     coordinating and managing Enrollees' overall health and, authorizing
     referrals for other necessary care.

R.   "Restriction Program" means the Federally mandated program (42 CFR
     431.54(e)) for Medicaid clients who over-utilize Medicaid services. If the
     DEPARTMENT in conjunction with the CONTRACTOR finds that an Enrollee has
     utilized Medicaid services at a frequency or amount that is not Medically
     Necessary, as determined in accordance with utilization guidelines adopted
     by the DEPARTMENT, the DEPARTMENT may place the Enrollee under the
     Restriction Program for a reasonable period of time to obtain Medicaid
     services from designated providers only.

S.   "State Plan" means the State Plan for organization and operation of the
     Medicaid program as defined pursuant to Section 1102 of the Social Security
     Act (42 U.S.C. 1302).

                            ARTICLE II - SERVICE AREA

The Service Area is limited to the urban counties of Davis, Salt Lake, Utah and
Weber.

       ARTICLE III - ENROLLMENT, ORIENTATION, MARKETING, AND DISENROLLMENT

A.   ENROLLMENT PROCESS

     1.   ENROLLEE CHOICE

          The DEPARTMENT will offer potential Enrollees a choice among all MCOs
          available in the Enrollment Area. The DEPARTMENT will inform potential
          Enrollees of Medicaid benefits. The Medicaid client's intent to enroll
          is established when the applicant selects The CONTRACTOR, either
          verbally or by signing a choice of health care delivery form or
          equivalent. This initiates the action to send an advance notification
          to the CONTRACTOR. Medicaid Enrollees made eligible for a retroactive
          period prior to the current month are not eligible for CONTRACTOR
          enrollment during the retroactive period.

     2.   PERIOD OF ENROLLMENT

          Each Enrollee will be enrolled for the period of the Contract or the
          period of Medicaid eligibility or until such person disenrolls or is
          disenrolled, whichever is earlier. Until the DEPARTMENT notifies the
          CONTRACTOR that an Enrollee is no longer Medicaid eligible, the
          CONTRACTOR may assume that the Enrollee continues to be eligible. Each
          Enrollee will be automatically re-enrolled at the end of each month
          unless that Enrollee notifies the DEPARTMENT's Health Program
          Representative of an intent not to re-enroll in the MCO prior to the
          benefit issuance date.

                                  Page 3 of 52

<PAGE>

     3.   OPEN ENROLLMENT

          The CONTRACTOR will have a continuous open enrollment period that
          meets the requirements of Section 1301(d) of the Public Health Service
          Act. The DEPARTMENT will certify, and the CONTRACTOR agrees to accept
          individuals who are eligible to be enrolled in the MCO under the
          provisions of this Contract:

          a. in the order in which they apply; and

          b. without restrictions unless authorized by the DEPARTMENT.

     4.   NO HEALTH SCREENING

          The DEPARTMENT and the CONTRACTOR agree that no potential Enrollee
          will be pre-screened or selected by either party for enrollment on the
          basis of pre-existing health problems or on the basis of race, color,
          national origin, disability or age.

     5.   INDEPENDENT ENROLLMENT

          Each Medicaid eligible can be enrolled or disenrolled in the MCO,
          independent of any other Family Member's enrollment or disenrollment.

     6.   REPRESENTATIVE POPULATION

          The CONTRACTOR will service a population representative of the
          categories of eligibility within the area it serves.

     7.   ELIGIBILITY TRANSMISSION

          a.   IN GENERAL

               Before the close of business of each day, the DEPARTMENT will
               provide to the CONTRACTOR an Eligibility Transmission which is an
               electronic file that includes individuals which the DEPARTMENT
               certifies as Medicaid eligible and who enrolled in the MCO.
               Eligibility transmissions include new Enrollees, reinstated
               Enrollees, retroactive Enrollees, deleted Enrollees and Enrollees
               whose eligibility information results in a change to a critical
               field. The Eligibility Transmission will be in accordance with
               the Utah Health Information Network (UHIN) standard. The
               DEPARTMENT represents and warrants to the CONTRACTOR that the
               appearance of an individual's name on the Eligibility
               Transmission, other than a deleted Enrollee, will be conclusive
               evidence for purposes of this Contract, that such person is
               enrolled in the program and qualifies for medical assistance
               under Medicaid Title XIX and that the DEPARTMENT agrees to pay
               premiums for such Enrollees.

                                  Page 4 of 52

<PAGE>

          b.   NEW ENROLLEES

               New Enrollees are enrolled in this MCO until otherwise specified;
               these Enrollees will not appear on future transmissions unless
               there is a change in a critical field. Critical fields are
               coverage dates, recipient name, date of birth, date of death,
               sex, social security number, case information, address, telephone
               number, payment code, coordination of benefits, and the
               Enrollee's provider under the Restriction Program. Enrollees with
               a spenddown requirement will appear on the eligibility
               transmission on a month by month basis after the spenddown is
               met.

          c.   RETROACTIVE ENROLLEES

               Retroactive Enrollees are those who were Enrollees previous to
               the current month. Retroactive Enrollees include newborn
               Enrollees or Enrollees who have been reported in one payment
               category in a previous month but have been changed to a new
               payment category for that previous month.

          d.   REINSTATED ENROLLEES

               Reinstated Enrollees are those who were enrolled for the previous
               month and also closed at the end of the previous month. These
               Enrollees are eligible retroactively to the beginning of the
               current month.

          e.   DELETED ENROLLEES

               Deleted Enrollees are those who are no longer eligible for
               Medicaid or who were disenrolled from the MCO.

          f.   ADVANCED NOTIFICATION TRANSMISSION

               An Advanced Notification Transmission is another electronic file
               (separate from the Eligibility Transmission) that will be sent to
               the CONTRACTOR when an individual has selected the MCO prior to
               becoming eligible for Medicaid. These individuals may or may not
               become eligible for Medicaid. Use of information about such
               individuals is restricted to providing the individual with an
               orientation to the MCO prior to the individual's eligibility for
               Medicaid. The CONTRACTOR is not required to orient individuals
               until they appear on the Eligibility Transmission.

     8.   CHANGE OF ENROLLMENT PROCEDURES

          The CONTRACTOR will be advised of anticipated changes in DEPARTMENT
          policies and procedures as they relate to the enrollment process and
          their comments will be solicited. The CONTRACTOR agrees to be bound by
          such changes in DEPARTMENT policies and procedures that are mutually
          agreed upon by the CONTRACTOR and the DEPARTMENT.

                                  Page 5 of 52

<PAGE>

B.   MEMBER ORIENTATION

     1.   INITIAL CONTACT - GENERAL ORIENTATION

          The CONTRACTOR will make a good faith effort to ensure that each
          Enrollee or Enrollee's family or guardian receives the CONTRACTOR's
          member handbook. The CONTRACTOR Representative will make a good faith
          effort, as evidenced in written or electronic records, to make an
          initial contact with the Enrollee within 10 working days after the
          CONTRACTOR has been notified through the Eligibility Transmission of
          the Enrollee's MCO enrollment. The initial contact will be in person
          or by telephone (or in writing, but only if reasonable attempts have
          been made to make the contact in person by telephone) and will inform
          the Enrollee of the MCO rules and policies. The CONTRACTOR must ensure
          that Enrollees are provided interpreters, Telecommunication Device for
          the Deaf (TDD), and other auxiliary aids to ensure that Enrollees
          understand their rights and responsibilities. During the initial
          contact the CONTRACTOR Representative will provide, at a minimum, the
          following information to the Enrollee or potential Enrollee:

          a.   specific written and oral instructions on the use of the
               CONTRACTOR's Covered Services and procedures;

          b.   availability and accessibility of all Covered Services, including
               the availability of family planning services and that the
               Enrollee may obtain family planning services from Medicaid
               providers other than providers affiliated with the CONTRACTOR;

          c.   the client's rights and responsibilities as an Enrollee of the
               Health Plan, including the right to file a grievance and how to
               file a grievance;

          d.   the right to terminate enrollment with the MCO; and

          e.   encouragement to make a medical appointment with a CONTRACTOR
               provider.

     2.   IDENTIFICATION OF ENROLLEES WITH SPECIAL HEALTH CARE NEEDS

          During the initial contact with each Enrollee the CONTRACTOR
          representative will use a process that will identify children and
          adults with special health care needs. The CONTRACTOR representative
          will clearly describe to each Enrollee during the initial contact the
          process for requesting specialist care. When an Enrollee is identified
          as having special health care needs, the CONTRACTOR Representative
          will forward this information to a CONTRACTOR individual with
          knowledge of coordination of care and services necessary for such
          Enrollees. The CONTRACTOR individual with knowledge of coordination of
          care for Enrollees with special health care needs will make a good
          faith effort to contact Enrollees within ten working days after
          identification to begin coordination of health care needs, if
          necessary. The CONTRACTOR will not discriminate on the basis of health
          status or the need for health care services.

                                  Page 6 of 52

<PAGE>

          The DEPARTMENT's Health Program Representatives are responsible to
          forward information, i.e., pink sheets identifying Enrollees with
          special health care needs and limited language proficiency needs to
          the CONTRACTOR in a timely way coinciding with the daily Eligibility
          Transmission as much as possible.

     3.   INABILITY TO CONTACT ENROLLEE FOR ORIENTATION

          If the CONTRACTOR Representative cannot contact the Enrollee within 10
          working days or at all, the CONTRACTOR Representative will document
          its efforts to contact the Enrollee.

     4.   ENROLLEES RECEIVING OUT-OF-PLAN CARE PRIOR TO ORIENTATION

          If the Enrollee receives Covered Services by an out-of-plan provider
          after the first day of the month in which the client's enrollment
          became effective, and if a CONTRACTOR orientation either in-person or
          by telephone (or in writing, but only if reasonable attempts have been
          made to make the contact in person or by telephone) has not taken
          place prior to receiving such services, the CONTRACTOR is responsible
          for payment of the services rendered provided the DEPARTMENT informs
          the CONTRACTOR by the 20th of any month prior to the month that MCO
          enrollment begins.

C.   MARKETING AND MEMBER EDUCATION

     1.   APPROVAL OF MARKETING MATERIALS

          The CONTRACTOR's marketing plans, procedures and materials will be
          accurate, and may not mislead, confuse, or defraud either Enrollees or
          the DEPARTMENT. All Medicaid marketing plans, procedures and materials
          will be reviewed and approved by the DEPARTMENT in consultation with
          the Medical Care Advisory Committee for Marketing Review before
          implemented or released by the CONTRACTOR. The DEPARTMENT will notify
          the CONTRACTOR of its approval or disapproval, in writing, of such
          materials within ten working days after receiving them unless the
          DEPARTMENT and the CONTRACTOR agree to another time frame. If the
          DEPARTMENT does not respond within the agreed upon time frame, the
          CONTRACTOR shall deem such materials approved. Marketing materials
          will not be approved if the DEPARTMENT determines that the material is
          materially inaccurate or misleading or otherwise makes material
          misrepresentations. Health education materials and newsletters not
          specifically related to Enrollees do not need to be approved by the
          DEPARTMENT.

          a.   NO DOOR-TO-DOOR, TELEPHONIC, OR "COLD CALL" MARKETING

               The Contractor cannot, either directly or indirectly, conduct
               door-to-door, telephonic or "cold call" marketing of enrollment.
               These three marketing practices are prohibited whether conducted
               by the Health Plan itself ("directly") or by an agent or
               independent contractor ("indirectly"). Cold call marketing is any
               unsolicited personal contact with a potential enrollee by an
               employee or agent of a managed care entity for the purpose of
               influencing the individual to

                                  Page 7 of 52

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               enroll with the Health Plan. The Contractor may not entice a
               potential enrollee to join the Health Plan by offering the sale
               of any other type of insurance as a bonus for enrollment. All
               other non-requested marketing approaches to Medicaid clients by
               the CONTRACTOR are also prohibited unless specifically approved
               in advance by the DEPARTMENT.

          b.   DISTRIBUTION OF MARKETING MATERIALS

               Marketing materials must be distributed to the entire Service
               Area.

     2.   ENROLLEE MATERIALS MUST BE COMPREHENSIBLE

          The CONTRACTOR will attempt to write all Enrollee and potential
          enrollee information, instructional and educational materials,
          including member handbooks, at no greater than a sixth grade reading
          level. If the MCO has more than 5% of its Enrollees who speak a
          language other than English as a first language, the CONTRACTOR must
          make available written material (e.g. member handbooks, educational
          newsletters) in that language. Marketing materials must include a
          statement that the CONTRACTOR does not discriminate against any
          Enrollee on the basis of race, color, national origin, disability, or
          age in admission, treatment, or participation in its programs,
          services and activities. In addition, the materials must include the
          phone number of the nondiscrimination coordinator for Enrollees to
          call if they have questions about the nondiscrimination policy or
          desire to file a complaint or grievance alleging violations of the
          nondiscrimination policy.

     3.   MEMBER HANDBOOK

          The CONTRACTOR will produce a member handbook that must be submitted
          to the DEPARTMENT for review and approval before distribution. The
          DEPARTMENT will notify the CONTRACTOR in writing of its approval or
          disapproval within ten working days after receiving the member
          handbook unless the DEPARTMENT and CONTRACTOR agree to another time
          frame. If the DEPARTMENT does not respond within the agreed upon time
          frame, the CONTRACTOR may deem such materials are approved. If there
          are changes to the content of the material in the handbook, the
          CONTRACTOR must update the member handbook and submit a draft to the
          DEPARTMENT for review and approval before distribution to its
          Enrollees. At a minimum, the member handbook must explain in clear
          terms the following information:

          a.   The scope of benefits provided by the MCO;
          b.   Instructions on where and how to obtain Covered Services,
               including referral requirements;
          c.   Instructions on what to do in an emergency or urgent medical
               situation, including emergency numbers;
          d.   Enrollee options on obtaining family planning services;
          e.   Instructions on how to choose a PCP and how to change PCPs;
          f.   Description on Enrollee cost-sharing requirements (if
               applicable);
          g.   Toll-free telephone number;
          h.   Description of Member Services function;

                                  Page 8 of 52

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          i.   How to register a complaint or grievance;
          j.   Information on Advance Directives;
          k.   Services covered by Medicaid, but not covered by the CONTRACTOR;
          1.   Clients' rights and responsibilities;
          m.   A statement that the Contractor does not discriminate against any
               Enrollee on the basis of race, color, national origin,
               disability, or age in admission, treatment, or participation in
               its programs, services and activities; and
          n.   The phone number of the nondiscrimination coordinator for
               Enrollees to call if they have questions about the
               nondiscrimination policy or desire to file a complaint or
               grievance alleging violations of the nondiscrimination policy.

     4.   PLAN CARD

          The CONTRACTOR must issue a generic plan card to all Enrollees
          listing, at a minimum, the name of the MCO and a toll-free number that
          is available to Enrollees twenty-four hours a day, seven days a week.
          The CONTRACTOR must issue the generic plan card to new enrollees
          within fifteen business days after the DEPARTMENT notifies the
          CONTRACTOR of the Medicaid client's enrollment.

     5.   NOTIFICATION TO ENROLLEES OF POLICIES AND PROCEDURES

          a.   CHANGES TO POLICIES AND PROCEDURES

               The CONTRACTOR must periodically notify Enrollees, in writing, of
               changes to its plan such as changes to its policies or procedures
               either through a newsletter or other means.

          b.   ANNUAL EDUCATION ON EMERGENCY CARE AND GRIEVANCE PROCEDURES

               The CONTRACTOR must annually reinforce, in writing, to Enrollees
               how to access emergency and urgent services and how to register a
               complaint or grievance.

     6.   MONTHLY NOTIFICATION TO DEPARTMENT OF CHANGES IN PROVIDER NETWORK

          The CONTRACTOR must notify the DEPARTMENT at least monthly of changes
          in its provider network so that the DEPARTMENT can ensure its listing
          of providers is accurate.

D.   DISENROLLMENT BY ENROLLEE

     1.   ENROLLEE'S RIGHT TO DISENROLL

          Enrollees will have the right to disenroll from this MCO at any time
          with or without cause. The disenrollment will be effective once the
          DEPARTMENT has been notified by the Enrollee and the DEPARTMENT issues
          a new Medicaid card and the disenrollment is indicated on the
          Eligibility Transmission.

                                  Page 9 of 52

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     2.   ENROLLEES IN AN INPATIENT HOSPITAL SETTING

          The DEPARTMENT agrees that if a new Enrollee is a patient in an
          inpatient hospital setting on the date the new Enrollee's name appears
          on the CONTRACTOR Eligibility Transmission, the obligation of the
          CONTRACTOR to provide Covered Services to such person will commence
          following discharge. If an Enrollee is a patient in an inpatient
          hospital setting on the date that his or her name appears as a deleted
          Enrollee on the CONTRACTOR Eligibility Transmission or he or she is
          otherwise disenrolled under this Contract, the CONTRACTOR will remain
          financially responsible for such care until discharge.

     3.   ANNUAL STUDY OF ENROLLEES WHO DISENROLLED

          Annually, the DEPARTMENT and CONTRACTOR will work cooperatively to
          conduct an analysis of Enrollees who have voluntarily disenrolled from
          this MCO. The results of the analysis will include explanations of
          patterns of disenrollments and strategies or a corrective action plan
          to address unusual rates or patterns of disenrollment. The DEPARTMENT
          will inform the CONTRACTOR of such disenrollments.

E.   DISENROLLMENT BY CONTRACTOR

     1.   CANNOT DISENROLL FOR ADVERSE CHANGE IN ENROLLEE'S HEALTH

          The CONTRACTOR may not terminate enrollment because of an adverse
          change in the Enrollee's health.

     2.   VALID REASONS FOR DISENROLLMENT

          The CONTRACTOR may initiate disenrollment of any Enrollee's
          participation in the MCO upon one or more of the following grounds:

          a.   For reasons specifically identified in the CONTRACTOR's member
               handbook.
          b.   When the Enrollee ceases to be eligible for medical assistance
               under the State Plan, in accordance with Title 42 USCA, 1396,
               et. seq., and as finally determined by the DEPARTMENT.
          c.   Upon termination or expiration of the Contract.
          d.   Death of the Enrollee.
          e.   Confinement of the Enrollee in an institution when confinement
               is not a Covered Service under this Contract.
          f.   Violation of enrollment requirements developed by the CONTRACTOR
               and approved by the DEPARTMENT but only after the CONTRACTOR
               and/or the Enrollee has exhausted the CONTRACTOR's applicable
               internal grievance procedure.

                                  Page 10 of 52

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     3.   APPROVAL BY DEPARTMENT REQUIRED

          To initiate disenrollment of an Enrollee's participation with this
          MCO, the CONTRACTOR will provide the DEPARTMENT with documentation
          justifying the proposed disenrollment. The DEPARTMENT will approve or
          deny the disenrollment request in writing within thirty (30) days of
          receipt of the request. Failure by the DEPARTMENT to deny a
          disenrollment request within such thirty (30) day period will
          constitute approval of such disenrollment requests.

     4.   ENROLLEE'S RIGHT TO FILE A GRIEVANCE

          If the DEPARTMENT approves the CONTRACTOR's disenrollment request, the
          CONTRACTOR will give the Enrollee thirty (30) days written notice of
          the proposed disenrollment, and will notify the Enrollee of his or her
          opportunity to invoke the internal grievance procedure and appeals
          process for a fair hearing. The CONTRACTOR will give a copy of the
          written notice to the DEPARTMENT at the time the notice is sent to the
          Enrollee.

     5.   REFUSAL OF RE-ENROLLMENT

          If a person is disenrolled because of violation of responsibilities
          included in the CONTRACTOR's member handbook, the CONTRACTOR may
          refuse re-enrollment of that Enrollee.

F.   ENROLLEE TRANSITION BETWEEN MCOS/HEALTH PLANS

     1.   MUST ACCEPT PRE-ENROLLMENT PRIOR AUTHORIZATIONS

          For Covered Services other than inpatient, home health services, and
          medical equipment, if authorization has been given for a Covered
          Service and an enrollee transitions between MCOs prior to the delivery
          of such Covered Service, the receiving MCO shall be bound by the
          relinquishing MCO's prior authorization until the receiving MCO has
          evaluated the Enrollee and a new plan of care is established with the
          MCO provider. (See Article IV, Benefits, Section F, Clarification of
          Payment Responsibilities, Subsection 5, for inpatient, home health
          services, and medical equipment explanations.)

     2.   MUST PROVIDE MEDICAL RECORDS TO ENROLLEE'S NEW MCO

          When enrollees are transitioned between MCOs the relinquishing MCO
          provider will submit, upon request of the new MCO provider, any
          critical medical information about the transitioning enrollee prior to
          the transition including, but not limited to, whether the member is
          hospitalized, pregnant, involved in the process of organ
          transplantation, scheduled for surgery or post-surgical follow-up on a
          date subsequent to transition, scheduled for prior-authorized
          procedures or therapies on a date subsequent to transition, receiving
          dialysis or is chronically ill (e.g. diabetic, hemophilic, HIV
          positive).

                                  Page 11 of 52

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                              ARTICLE IV - BENEFITS

A.   IN GENERAL

     The CONTRACTOR will provide to Enrollees under this Contract, directly or
     through arrangements with subcontractors, all Medically Necessary Covered
     Services described in Attachment C as promptly and continuously as is
     consistent with generally accepted standards of medical practice. The
     CONTRACTOR provider will follow generally accepted standards of medical
     care in diagnosing Enrollees who request services from the CONTRACTOR.

B.   PROVIDER SERVICES FUNCTION

     The CONTRACTOR must operate a Provider Services function during regular
     business hours. At a minimum, Provider Services staff must be responsible
     for the following:

     1.   Training, including ongoing training, of network providers and
          subcontracting providers in Medicaid rules and regulations that will
          enable providers to appropriately provide services to Enrollees;

     2.   Assisting providers to verify whether an individual is enrolled
          with the MCO;

     3.   Assisting providers with prior authorization and referral
          protocols;

     4.   Assisting providers with claims payment procedures;

     5.   Fielding and responding to provider questions and complaints and
          grievances.

C.   SCOPE OF SERVICES

     1.   UNDERWRITING RISK

          In consideration of the premiums paid by the DEPARTMENT, the
          CONTRACTOR will, for all Enrollees, assume underwriting risk for
          Covered Services in Attachment C.

     2.   RESPONSIBLE FOR ALL BENEFITS IN ATTACHMENT C (COVERED SERVICES)

          Except as otherwise provided for cases of Emergency Services, the
          CONTRACTOR has the exclusive right and responsibility to arrange for
          all benefits listed in Attachment C. The CONTRACTOR is responsible for
          payment of Emergency Services 24 hours a day and 7 days a week whether
          the service was provided by a network or out-of-network provider and
          whether the service was provided in or out of the CONTRACTOR's Service
          Area.

     3.   CHANGES TO BENEFITS

          Amendments, revisions, or additions to the State Plan or to State or
          Federal regulations, guidelines, or policies and court or
          administrative orders will, insofar as they affect the scope or nature
          of benefits available to Enrollees, be amendments to the Covered

                                  Page 12 of 52

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          Services under Attachment C. The DEPARTMENT will notify the
          CONTRACTOR, in writing, of any such changes and their effective date.
          Rate adjustments, when appropriate, will be negotiated between the
          DEPARTMENT and the CONTRACTOR.

D.   SUBCONTRACTS

     1.   NO DISCRIMINATION BASED ON LICENSE OR CERTIFICATION

          The CONTRACTOR shall not discriminate against providers with respect
          to participation, reimbursement, or indemnification as to any provider
          who is acting within the scope of that provider's license or
          certification under applicable State law solely on the basis of the
          provider's license or certification.

     2.   ANY COVERED SERVICE MAY BE SUBCONTRACTED.

          Any Covered Service may be subcontracted. All subcontracts will be in
          writing and will include the general requirements of this Contract
          that are appropriate to the service or activity including
          confidentiality requirements and will assure that all duties of the
          CONTRACTOR under this Contract are performed. No subcontract
          terminates the legal responsibility of the CONTRACTOR to the
          DEPARTMENT to assure that all activities under this Contract are
          carried out. The CONTRACTOR will make all subcontracts available upon
          request.

     3.   NO PROVISIONS TO REDUCE OR LIMIT MEDICALLY NECESSARY SERVICES

          The CONTRACTOR will ensure that subcontractors abide by the
          requirements of Section 1128(b) of the Social Security Act prohibiting
          the CONTRACTOR and other such providers from making payments directly
          or indirectly to a physician or other provider as an inducement to
          reduce or limit Medically Necessary services provided to Enrollees.

     4.   REQUIREMENT OF 60 DAYS WRITTEN NOTICE PRIOR TO TERMINATION OF
          CONTRACT

          All subcontracts and agreements will include a provision stating that
          if either party (the subcontractor or CONTRACTOR) wishes to terminate
          the subcontract or agreement, whichever party initiates the
          termination will give the other party written notice of termination at
          least 60 calendar days prior to the effective termination date. The
          CONTRACTOR will notify the DEPARTMENT of the termination on the same
          day that the CONTRACTOR either initiates termination or receives the
          notice of termination from the subcontractor.

     5.   COMPLIANCE WITH CONTRACTOR'S QUALITY ASSURANCE PLAN

          All CONTRACTOR providers must be aware of the CONTRACTOR's Quality
          Assurance Plan and activities. All subcontracts with the CONTRACTOR
          must include a requirement securing cooperation with the CONTRACTOR's
          Quality Assurance Plan and activities and must allow the CONTRACTOR
          access to the subcontractor's medical records of its Enrollees.

                                  Page 13 of 52

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     6.   UNIQUE IDENTIFIER REQUIRED

          All physicians who provide services under this Contract must have a
          unique identifier in accordance with the system established under
          section 1173(b) of the Social Security Act and in accordance with the
          Health Insurance Portability and Accountability Act.

     7.   PAYMENT OF PROVIDER CLAIMS

          The CONTRACTOR must pay its participating providers and subcontractors
          on a timely basis consistent with the claims payment procedures
          described in section 1902(a)(37)(A) of the Social Security Act and the
          implementing Federal regulation at 42 CFR 447.45, unless the health
          care provider and the Health Plan agree to an alternate payment
          schedule. The Contractor must ensure that 90 percent of claims for
          payment (for which no further written information or substantiation is
          required in order to make payment) made for Covered Services and
          furnished by subcontracting providers are paid within 30 days of
          receipt of such claims and that 99 percent of such claims are paid
          within 90 days of the date of receipt of such claims.

E.   CLARIFICATION OF COVERED SERVICES

     1.   EMERGENCY SERVICES

          a.   IN GENERAL

               The Health Plan must provide coverage for Emergency Services
               without regard to prior authorizations or the emergency care
               provider's contractual relationship with the MCO. MCOs must
               inform their enrollees that access to emergency services is not
               restricted and that if an enrollee experiences a medical
               emergency, he or she may obtain services from a non-plan
               physician or other qualified provider, without penalty. However,
               the MCO may require the enrollee to notify the MCO within a
               specified time after the Enrollee's condition is stabilized, and
               may require the enrollee to obtain prior authorization for any
               follow-up care delivered pursuant to the emergency. The
               CONTRACTOR must comply with Medicare guidelines for
               post-stabilization of care.

               The CONTRACTOR must pay for services where the presenting
               symptoms are of sufficient severity that a person with average
               knowledge of health and medicine would reasonably expect the
               absence of immediate medical attention to result in (I) placing
               the health of the individual (or, with respect to a pregnant
               woman, the health of a woman or her unborn child) in serious
               jeopardy; serious impairment to bodily functions; or serious
               dysfunction of any bodily organ or part.

               The CONTRACTOR may not retroactively deny a claim for an
               emergency screening examination because the condition, which
               appeared to be an emergency medical condition under the prudent
               layperson standard, turned out to be non-emergency in nature.

                                  Page 14 of 52

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          b.   DETERMINING LIABILITY FOR EMERGENCY SERVICES

               1)   Presence of a clinical emergency

                    If the screening examination leads to a clinical
                    determination by the examining physician that an actual
                    emergency medical condition exists, the CONTRACTOR must pay
                    for both the services involved in the screening examination
                    and the services required to stabilize the Enrollee.

               2)   Emergency services continue until the Enrollee can be safely
                    discharged or transferred

                    The CONTRACTOR must pay for all emergency services that are
                    Medically Necessary until the clinical emergency is
                    stabilized. This includes all treatment that may be
                    necessary to assure, within reasonable medical probability,
                    that no material deterioration of the Enrollee's condition
                    is likely to result from, or occur during, discharge of the
                    Enrollee or transfer of the Enrollee to another facility. If
                    there is a disagreement between a hospital and the
                    CONTRACTOR concerning whether the Enrollee is stable enough
                    for discharge or transfer, or whether the medical benefits
                    of an unstabilized transfer outweigh the risks, the
                    judgement of the attending physician(s) actually caring for
                    the Enrollee at the treating facility prevails and is
                    binding on the CONTRACTOR. The CONTRACTOR may establish
                    arrangements with hospitals whereby the CONTRACTOR may send
                    one of its own physicians with appropriate ER privileges to
                    assume the attending physician's responsibilities to
                    stabilize, treat, and transfer the Enrollee.

               3)   Absence of a clinical emergency

                    If the screening examination leads to a clinical
                    determination by the examining physician that an actual
                    emergency medical condition did not exist, then the
                    determining factor for payment liability should be whether
                    the Enrollee had acute symptoms of sufficient severity at
                    the time of presentation. In these cases, the CONTRACTOR
                    must review the presenting symptoms of the Enrollee and must
                    pay for all services involved in the screening examination
                    where the presenting symptoms (including severe pain) were
                    of sufficient severity to have warranted emergency attention
                    under the prudent layperson standard.

               4)   Referrals

                    When an Enrollee's Primary Care Physician or other plan
                    representative instructs the Enrollee to seek emergency care
                    in or out of network, the CONTRACTOR is responsible for
                    payment of the medical screening examination and for other
                    Medically Necessary emergency services, without regard to
                    whether the Enrollee meets the prudent layperson standard.

                                  Page 15 of 52

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          c.   CO-PAYMENTS

               The CONTRACTOR may impose a co-payment of $6.00 (or the amount
               Medicaid imposes on fee-for-service Medicaid clients) on
               Enrollees for non-emergency use of the emergency room and who are
               not exempt from being charged a co-payment. Those Enrollees who
               are exempt from liability for a co-payment are children under the
               age of 18 and women who are pregnant.

     2.   CARE PROVIDED IN SKILLED NURSING FACILITIES

          a.   IN GENERAL: STAYS LASTING 30 DAYS OR LESS

               The CONTRACTOR may provide long term care for Enrollees in
               skilled nursing facilities and then reimburse such facilities
               when the plan of care includes a prognosis of recovery and
               discharge within 30 days. It is the responsibility of a
               CONTRACTOR physician to make the determination if the patient
               will require the services of a nursing facility for fewer or
               greater than 30 days.

          b.   PROCESS FOR STAYS LONGER THAN 30 DAYS

               When the prognosis of an Enrollee indicates that long term care
               greater than 30 days will be required, the following process will
               occur:

               1)   The CONTRACTOR will notify the Enrollee, hospital discharge
                    planner, and nursing facility that the CONTRACTOR will not
                    be responsible for the services provided for the Enrollee
                    during the stay at the skilled nursing facility.

               2)   The CONTRACTOR will notify the DHCF, Bureau of Managed
                    Health Care, of this determination to suspend premium
                    payment for that Enrollee.

               3)   If the CONTRACTOR incurs expenses, the Bureau of Managed
                    Health Care will determine if the CONTRACTOR will retain the
                    premium for the month during which the Enrollee is admitted
                    to the skilled nursing facility. If the CONTRACTOR does not
                    incur expenses during the month in which the Enrollee is
                    admitted to a skilled nursing facility, the Bureau of
                    Managed Health Care will retract from the CONTRACTOR the
                    premium for that Enrollee.

               4)   Retraction of the premium payment will be subject to "3"
                    above, but the Eligibility Transmission will indicate the
                    non-payment on the first day of the month following the
                    prognosis determination of greater than 30 days.
               5)   Premium payment to the CONTRACTOR will recommence beginning
                    the first full month that the Enrollee is no longer residing
                    in the nursing facility.

                                  Page l6 of 52

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          c.   PROCESS FOR STAYS LESS THAN 30 DAYS

               When the prognosis of skilled nursing facility services is
               anticipated to be less than 30 days, but during the 30-day period
               the CONTRACTOR determines that the Enrollee will require skilled
               nursing facility services for greater than 30 days, the following
               process will be in effect:

               1)   The CONTRACTOR will notify the nursing facility that a
                    determination has been made that the Enrollee will require
                    services for more than 30 days.

               2)   The CONTRACTOR will notify the DHCF, Bureau of Managed
                    Health Care, of the determination that the Enrollee will
                    require services in a nursing facility for more than 30
                    days.

               3)   If the CONTRACTOR incurs expenses for the Enrollee, the
                    Bureau of Managed Health Care will determine if the
                    CONTRACTOR will retain the premium for the month during
                    which the change in status was determined. If the CONTRACTOR
                    does not incur expenses during the month in which the change
                    in status is determined, the Bureau of Managed Health Care
                    will retract from the CONTRACTOR the premium for that
                    Enrollee.

               4)   Retraction of the premium payment will be subject to "3"
                    above, but the Recipient Subsystem will indicate the
                    non-payment on the first day of the month following the
                    prognosis determination of more than 30 days.

               5)   The CONTRACTOR will be responsible for payment for three
                    working days after the CONTRACTOR has notified the nursing
                    facility that skilled nursing care will be required for more
                    than 30 days.

               6)   Premium payment to the CONTRACTOR will recommence
                    beginning the first full month that the recipient is no
                    longer residing in the nursing facility.

     3.   ENROLLEES WITH SPECIAL HEALTH CARE NEEDS

          a.   IN GENERAL

               The CONTRACTOR will ensure there is access to all Medically
               Necessary Covered Services to meet the health needs of Enrollees
               with special health care needs. Individuals with special health
               care needs are those who have or are at increased risk for
               chronic physical, developmental, behavioral, or emotional
               conditions and who also require health and related services of a
               type or amount beyond that required by adults and children
               generally. Such health conditions limit physical functioning,
               activities of daily living, or social role in comparison to age
               peers.

                                  Page 17 of 52

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          b.   IDENTIFICATION

               The CONTRACTOR will identify Enrollees with special health care
               needs using a process at the initial contact made by the
               CONTRACTOR Representative to educate the client and will offer
               the client care coordination or case management services. Care
               coordination services are services to assist the client in
               obtaining Medically Necessary Covered Services from the
               CONTRACTOR or another entity if the medical service is not
               covered under the Contract.

          c.   CHOOSING A PRIMARY CARE PROVIDER

               The CONTRACTOR will have a mechanism to inform care givers and,
               when appropriate, Enrollees with special health care needs about
               primary care providers who have training in caring for such
               Enrollees so that an informed selection of a provider can be
               made. The CONTRACTOR will have primary care providers with skills
               and experience to meet the needs of Enrollees with special health
               care needs. The CONTRACTOR will allow an appropriate specialist
               to be the primary care provider but only if the specialist has
               the skills to monitor the Enrollee's preventive and primary care
               services.

          d.   REFERRALS AND ACCESS TO SPECIALTY PROVIDERS

               The CONTRACTOR will ensure there is access to appropriate
               specialty providers to provide Medically Necessary Covered
               Services for adults and children with special health care needs.
               If the CONTRACTOR does not employ or contract with a specialty
               provider to treat a special health care condition at the time the
               Enrollee needs such Covered Services, the CONTRACTOR will have a
               process to allow the Enrollee to receive Covered Services from a
               qualified specialist who may not be affiliated with the
               CONTRACTOR. The CONTRACTOR will reimburse the specialist for such
               care at no less than Medicaid's rate for the service when the
               service is rendered. The process for requesting specialist's care
               will be clearly described by the CONTRACTOR and explained to each
               Enrollee during the initial contact with the Enrollee.

               If the CONTRACTOR restricts the number of referrals to
               specialists, the CONTRACTOR will not penalize those providers who
               make such referrals for Enrollees with special health care needs.

          e.   SURVEY OF ENROLLEES WITH SPECIAL HEALTH CARE NEEDS

               At least bi-annually, the CONTRACTOR, in conjunction with the
               DEPARTMENT, will survey a sample of Enrollees with special health
               care needs using a national consumer assessment questionnaire, to
               evaluate their perceptions of services they have received. The
               survey process, including the survey instrument, will be a
               standardized and developed collaboratively between the DEPARTMENT
               and all contracting MCOs. The DEPARTMENT will analyze the results
               of the surveys. The results and analysis of the surveys will be
               reviewed by the CONTRACTOR's quality assurance committee for
               action.

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          f.   COLLABORATION WITH OTHER PROGRAMS

               If the individual with special health care needs is enrolled in
               the Prepaid Mental Health Plan or is enrolled in any of the
               Medicaid home and community-based waiver programs and is
               receiving case management services through that program, or is
               covered by one of the other Medicaid targeted case management
               programs, the CONTRACTOR care coordinator will collaborate with
               the appropriate program person, i.e., the targeted case manager,
               etc., for that program once the program person has contacted the
               CONTRACTOR care coordinator. When necessary, the CONTRACTOR care
               coordinator will make an effort to contact the program person of
               those Enrollees who have medical needs that require such
               coordination.

          g.   REQUIRED ELEMENTS OF A CASE MANAGEMENT SYSTEM

               A case management system includes but is not limited to:

               1)   procedures and the capacity to implement the provision of
                    individual needs assessment including the screening for
                    special needs (e.g. mental health, high risk health
                    problems, functional problems, language or comprehension
                    barriers); the development of an individual treatment plan
                    as necessary based on the needs assessment; the
                    establishment of treatment objectives, treatment follow-up,
                    the monitoring of outcomes, and a process to ensure that
                    treatment plans are revised as necessary. These procedures
                    will be designed to accommodate the specific cultural and
                    linguistic needs of the Enrollee;

               2)   procedures designed to address those Enrollees, including
                    children with special health care needs, who may require
                    services from multiple providers, facilities and agencies
                    and require complex coordination of benefits and services,
                    including social services and other community resources;

               3)   a strategy to ensure that all Enrollees and/or authorized
                    Family Members or guardians are involved in treatment
                    planning and consent to the medical treatment;

               4)   procedures and criteria for making referrals and
                    coordinating care by specialists and sub-specialists that
                    will promote continuity as well as cost-effectiveness of
                    care; and

               5)   procedures to provide continuity of care for new Enrollees
                    to prevent disruption in the provision of Covered Services
                    that include, but are not limited to, appropriate case
                    management staff able to evaluate and handle individual case
                    transition and care planning, internal mechanisms to
                    evaluate plan networks and special case needs.

                                  Page 19 of 52

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          h.   HOSPICE

               If an Enrollee is receiving hospice services at the time of
               enrollment in the MCO or if the Enrollee is already enrolled in
               the MCO and has less than six months to live, the Enrollee will
               be offered hospice services or the continuation of hospice
               services if he or she is already receiving such services prior to
               enrollment in the MCO.

     4.   INPATIENT HOSPITAL SERVICES

          If a CONTRACTOR provider admits an Enrollee for inpatient hospital
          care, the CONTRACTOR has the responsibility for all services needed by
          the Enrollee during the hospital stay that are ordered by the
          CONTRACTOR provider. Needed services include but are not limited to
          diagnostic tests, pharmacy, and physician services, including services
          provided by psychiatrists. If diagnostic tests conducted during the
          inpatient stay reveal that the Enrollee's condition is outside the
          scope of the CONTRACTOR's responsibility, the CONTRACTOR remains
          responsible for the Enrollee until the Enrollee is discharged or until
          responsibility is transferred to another appropriate entity and the
          appropriate entity agrees to take financial responsibility, including
          negotiating a payment for services. If the Enrollee is discharged and
          needs further services, the admitting CONTRACTOR will coordinate with
          the other appropriate entity to ensure continued care is provided. The
          CONTRACTOR and appropriate entity will work cooperatively in the best
          interest of the Enrollee. The appropriate entity includes, but is not
          limited to, a Prepaid Mental Health Plan or another MCO.

     5.   MATERNITY STAYS

          a.   THE NEWBORNS' AND MOTHERS' HEALTH PROTECTION ACT (NMHPA)

               The CONTRACTOR must meet the requirements of the Newborns' and
               Mothers' Health Protection Act (NMHPA). The CONTRACTOR must
               record early discharge information for monitoring, quality, and
               improvement purposes. The CONTRACTOR will ensure that coverage is
               provided with respect to a mother who is an Enrollee and her
               newborn child for a minimum of 48 hours of inpatient care
               following a normal vaginal delivery, and a minimum of 96 hours of
               inpatient care following a caesarean section, without requiring
               the attending provider to obtain authorization from the
               CONTRACTOR in order to keep a mother and her newborn child in the
               inpatient setting for such period of time.

          b.   EARLY DISCHARGES

               Notwithstanding the prior sentence, the CONTRACTOR will not be
               required to provide coverage for post-delivery inpatient care for
               a mother who is an Enrollee and her newborn child during such
               period of time if (1) a decision to discharge the mother and her
               newborn child prior to the expiration of such period is made by
               the attending provider in consultation with the mother; and (2)
               the CONTRACTOR provides coverage for timely post-delivery
               follow-up care.

                                  Page 20 of 52

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          c.   POST-DELIVERY CARE

               Post-delivery care will be provided to a mother and her newborn
               child by a registered nurse, physician, nurse practitioner, nurse
               midwife or physician assistant experienced in maternal and child
               health in (1) the home, a provider's office, a hospital, a
               federally qualified health center, a federally qualified rural
               health clinic, or a State health department maternity clinic; or
               (2) another setting determined appropriate under regulations
               promulgated by the Secretary of Health and Human Services,
               (including a birthing center or an intermediate care facility);
               except that such coverage will ensure that the mother has the
               option to be provided with such care in the home.

          d.   TIMELY POST-DELIVERY CARE

               "Timely post-delivery care" means health care that is provided
               (1) following the discharge of a mother and her newborn child
               from the inpatient setting; and (2) in a manner that meets the
               health needs of the mother and her newborn child, that provides
               for the appropriate monitoring of the conditions of the mother
               and child, and that occurs within the 24 to 72 hour period
               immediately following discharge.

     6.   CHILDREN IN CUSTODY OF THE DEPARTMENT OF HUMAN SERVICES

          a.   IN GENERAL

               The CONTRACTOR will work with the Division of Child and Family
               Services (DCFS) or the Division of Youth Corrections (DYC) in the
               Department of Human Services (DHS) to ensure systems are in place
               to meet the health needs of children in custody of the Department
               of Human Services. The CONTRACTOR will ensure these children
               receive timely access to appointments through coordination with
               DCFS or DYC. The CONTRACTOR must have available providers who
               have experience and training in abuse and neglect issues.

               The CONTRACTOR or subcontracting provider will make every
               reasonable effort to ensure that a child who is in custody of the
               Department of Human Services may continue to use the medical
               provider with whom the child has an established professional
               relationship when the medical provider is part of the
               CONTRACTOR's network. The CONTRACTOR will facilitate timely
               appointments with the provider of record to ensure continuity of
               care for the child.

               While it is the CONTRACTOR's responsibility to ensure Enrollees
               who are children in custody of DHS have access to needed
               services, DHS personnel are primarily responsible to assist
               children in custody in arranging for and getting to medical
               appointments and evaluations with the CONTRACTOR's network of
               providers. DHS staff are primarily responsible for contacting the
               CONTRACTOR to coordinate care for children in custody and
               informing the

                                  Page 21 of 52

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               CONTRACTOR of the special health care needs of these Enrollees.
               The Fostering Healthy Children staff may assist the DHS staff in
               performing these functions by communicating with the CONTRACTOR.

          b.   SCHEDULE OF VISITS

               1)   Where physical and/or sexual abuse is suspected

                    In cases where the child protection worker suspects physical
                    and/or sexual abuse the CONTRACTOR will ensure that the
                    child has access to an appropriate examination within 24
                    hours of notification that the child was removed from the
                    home. If the CONTRACTOR cannot provide an appropriate
                    examination, the CONTRACTOR will ensure the child has access
                    to a provider who can provide an appropriate examination
                    within the 24 hour period.

               2)   All other cases

                    In all other cases, the CONTRACTOR will ensure that the
                    child has access to an initial health screening within five
                    calendar days of notification that the child was removed
                    from the home. The CONTRACTOR will ensure this exam
                    identifies any health problems that might determine the
                    selection of a suitable placement, or require immediate
                    attention.

               3)   CHEC exams

                    In all cases, the CONTRACTOR will ensure that the child has
                    access to a Child Health Evaluation and Care (CHEC)
                    screening within 30 calendar days of notification that the
                    child was removed from the home. Whenever possible, the CHEC
                    screening should be completed within the five-day time
                    frame. Additionally, the CONTRACTOR will ensure the child
                    has access to a CHEC screening according to the CHEC
                    periodicity schedule until age six, then annually
                    thereafter.

     7.   ORGAN TRANSPLANTATIONS

          a.   IN GENERAL

               All organ transplantation services are the responsibility of the
               CONTRACTOR for all Enrollees in accordance with the criteria set
               forth in Rule R414-10A of the Utah Administrative Code, unless
               amended under the provisions of Attachment B, Article IV
               (Benefits), Section C, Subsection 3 of this Contract. The
               DEPARTMENT's criteria will be provided to the CONTRACTOR.

                                  Page 22 of 52

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          b.   SPECIFIC ORGAN TRANSPLANTATIONS COVERED

               The following transplantations are covered under Rule R414-10A:
               Kidney, liver, cornea, bone marrow, heart, intestine, lung,
               pancreas, small bowel, combination heart/lung, combination
               intestine/liver, combination kidney/pancreas, combination
               liver/kidney, multi visceral, and combination liver/small bowel.

          c.   PSYCHOSOCIAL ASSESSMENT REQUIRED

               Medicaid requires that Medicaid eligibles who have applied for
               organ transplantations undergo a psychosocial assessment to
               assist in determining the Enrollees'/families' mental stability,
               commitment and potential to be compliant with the treatment and
               follow-up care that will go on for the rest of the Enrollee's
               life. This psychosocial evaluation is a Covered Service under
               this Contract.

               If a request is made for a transplantation not listed above, the
               CONTRACTOR will contact the DEPARTMENT. Such requests will be
               addressed as set forth in R414-10A-23.

          d.   OUT-OF-STATE TRANSPLANTATIONS

               When the CONTRACTOR arranges the transplantation to be performed
               out-of-state, the CONTRACTOR is responsible for coverage of food,
               lodging, transportation and airfare expenses for the Enrollee and
               attendant. The CONTRACTOR will follow, at a minimum, the
               DEPARTMENT's criteria for coverage of food, lodging,
               transportation and airfare expenses.

     8.   MENTAL HEALTH SERVICES

          When an Enrollee presents with a possible mental health condition to
          his or her CONTRACTOR primary care physician, it is the responsibility
          of the primary care provider to determine whether the Enrollee should
          be referred to a psychologist, pediatric specialist, psychiatrist,
          neurologist, or other specialist. Mental health conditions may be
          handled by the CONTRACTOR primary care provider and referred to the
          Enrollee's Prepaid Mental Health Plan when more specialized services
          are required for the Enrollee. CONTRACTOR primary care providers may
          seek consultation from the Prepaid Mental Health Plan when the primary
          care provider chooses to manage the Enrollee's symptoms.

          An independent panel comprised of specialists appropriate to the
          concern will be established by the DEPARTMENT with representative from
          the CONTRACTOR and Prepaid Mental Health Plan to adjudicate disputes
          regarding which entity (the CONTRACTOR or Prepaid Mental Health Plan)
          is responsible for payment and/or treatment of a condition. The panel
          will be convened on a case-by-case basis. The CONTRACTOR and Prepaid
          Mental Health Plan will adhere to the final decision of the panel.

                                  Page 23 of 52

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     9.   DEVELOPMENTAL AND ORGANIC DISORDERS

          a.   COVERED SERVICES FOR CHILD ENROLLEES THROUGH AGE 20

               1)   The CONTRACTOR is responsible for all inpatient and
                    physician outpatient Covered Services for child Enrollees
                    with developmental (ICD-9 codes 299 through 299.8 and 317
                    through 319.9) or organic diagnoses (ICD-9 codes 290 through
                    294.9 and 310 through 310.9) including, but not limited to,
                    diagnostic work-ups and other medical care such as
                    medication management services related to the developmental
                    or organic disorder.

               2)   The CONTRACTOR is responsible for all psychological
                    evaluations and testing including neuropsychological
                    evaluations and testing for child Enrollees with
                    developmental or organic disorders such as brain tumors,
                    brain injuries, and seizure disorders.

          b.   COVERED SERVICES FOR ADULT ENROLLEES AGE 21 AND OLDER

               The CONTRACTOR is responsible for all inpatient and physician
               outpatient Covered Services for adult Enrollees with
               developmental (ICD-9 codes 299 through 299.8 and 317 through
               319.9) and organic diagnoses (ICD-9 codes 290 through 294.9 and
               310 through 310.9) including diagnostic work-ups and other
               medical care such as medication management services related to
               the developmental or organic disorder.

          c.   NON-COVERED SERVICES

               1)   Psychological evaluations and testing including
                    neuropsychological evaluations and testing for adult
                    Enrollees is not the responsibility of the CONTRACTOR.

               2)   Habilitative and behavioral management services are not
                    the responsibility of the CONTRACTOR. If habilitative
                    services are required, the Enrollee should be referred to
                    the Division of Services for People with Disabilities
                    (DSPD), the school system, the Early Intervention Program,
                    or similar support program or agency. The enrollee should
                    also be referred to DSPD for consideration of other benefits
                    and programs that may be available through DSPD.
                    Habilitative services are defined in Section 1915(c)(5)(a)
                    of the Social Security Act as "services designed to assist
                    individuals in acquiring, retaining and improving the
                    self-help, socialization and adaptive skills necessary to
                    reside successfully in home and community based settings."

          d.   RESPONSIBILITY OF THE PREPAID MENTAL HEALTH PLAN

               The Prepaid Mental Health Plan is responsible for needed mental
               health services to individuals with an organic and a psychiatric
               diagnosis or with a developmental and a psychiatric diagnosis..

                                  Page 24 of 52

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     10.  OUT-OF-STATE ACCESSORY SERVICES

          When the CONTRACTOR arranges a Covered Service to be performed
          out-of-state, the CONTRACTOR is responsible for coverage of airfare,
          food and lodging for the Enrollee and one attendant during the stay at
          the out-of-state facility and ground transportation costs to and from
          the medical facility at which the Enrollee is receiving services are
          also the responsibility of the CONTRACTOR. The CONTRACTOR will follow,
          at a minimum, the DEPARTMENT's criteria for coverage of food, lodging,
          transportation, and airfare expenses.

     11.  NON-CONTRACTOR PRIOR AUTHORIZATIONS

          a.   PRIOR AUTHORIZATIONS - GENERAL

               The CONTRACTOR shall honor prior authorizations for organ
               transplantations and any other ongoing services initiated by the
               DEPARTMENT while the Enrollee was covered under Medicaid
               fee-for-service until the Enrollee is evaluated by the CONTRACTOR
               and a new plan of care is established.

          b.   WHEN THE CONTRACTOR HAS NOT AUTHORIZED THE SERVICE

               For services that require a prior authorization, the CONTRACTOR
               will pay the provider of the service at the Medicaid rate, if the
               following conditions are met:

               1)   the servicing provider is not a participating provider under
                    contract with the CONTRACTOR; and

               2)   the DEPARTMENT issued a prior authorization for an
                    Enrollee to the servicing provider approving payment of the
                    service; and

               3)   the servicing provider has completed the CONTRACTOR's
                    hearing process without resolution of the claim, and has
                    requested a hearing with the State Formal Hearings Unit
                    requesting payment for the services rendered: and

               4)   in the hearing process it is determined that service
                    rendered was a Medically Necessary service covered under
                    this Contract, and that the CONTRACTOR will be responsible
                    for payment of the claim.

               The CONTRACTOR may elect to have payment of the servicing
               provider's claim made through the DEPARTMENT's MMIS system, with
               an equal reduction in the payments made to the CONTRACTOR

                                  Page 25 of 52

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F.   CLARIFICATION OF PAYMENT RESPONSIBILITIES

     1.   COVERED SERVICES RECEIVED OUTSIDE CONTRACTOR'S NETWORK BUT PAID BY
          CONTRACTOR

          The CONTRACTOR will not be required to pay for Covered Services,
          defined in Attachment C, which the Enrollee receives from sources
          outside The CONTRACTOR's network, not arranged for and not authorized
          by the CONTRACTOR except as follows:

          a.   Emergency Services;

          b.   Court ordered services that are Covered Services defined in
               Attachment C and which have been coordinated with the CONTRACTOR;
               or

          c.   Cases where the Enrollee demonstrates that such services are
               Medically Necessary Covered Services and were unavailable from
               the CONTRACTOR.

     2.   WHEN COVERED SERVICES ARE NOT THE CONTRACTOR'S RESPONSIBILITY

          a.   The CONTRACTOR is not responsible for payment when family
               planning services are obtained by an Enrollee from sources other
               than the CONTRACTOR.

          b.   The CONTRACTOR will not be required to provide, arrange for,
               or pay for Covered Services to Enrollees whose illness or injury
               results directly from a catastrophic occurrence or disaster,
               including, but not limited to, earthquakes or acts of war. The
               effective date of excluding such Covered Services will be the
               date specified by the Federal Government or the State of Utah
               that a Federal or State emergency exists or disaster has
               occurred.

     3.   THE DEPARTMENT'S RESPONSIBILITY

          Except as described in Attachment F (Rates and Rate-Related Terms) of
          this Contract, the DEPARTMENT will not be required to pay for any
          Covered Services under Attachment C which the Enrollee received from
          any sources outside the CONTRACTOR except for family planning
          services.

     4.   COVERED SERVICES PROVIDED BY THE DEPARTMENT OF HEALTH, DIVISION OF
          COMMUNITY AND FAMILY HEALTH SERVICES

          For Enrollees who qualify for special services offered by or through
          the Department of Health, Division of Community and Family Health
          Services (DCFHS), the CONTRACTOR agrees to reimburse DCFHS at the
          standard Medicaid rate in effect at the time of service for one
          outpatient team evaluation and one follow-up visit for each Enrollee
          upon each instance that the Enrollee both becomes Medicaid eligible
          and selects the CONTRACTOR as its provider. The CONTRACTOR agrees to
          waive any prior authorization requirement for one outpatient team
          evaluation and one follow-up visit. The services provided in the
          outpatient team evaluation and follow-up visit for

                                  Page 26 of 52

<PAGE>

          which the CONTRACTOR will reimburse DCFHS are limited to the services
          that the CONTRACTOR is otherwise obligated to provide under this
          Contract.

          If the CONTRACTOR desires a more detailed agreement for additional
          services to be provided by or through DCFHS for children with special
          health care needs, the CONTRACTOR may subcontract with DCFHS. The
          CONTRACTOR agrees that the subcontract with DCFHS will acknowledge and
          address the specific needs of DCFHS as a government provider.

     5.   ENROLLEE TRANSITION BETWEEN MCOS, OR BETWEEN FEE-FOR-SERVICE AND
          CONTRACTOR

          a.   INPATIENT HOSPITAL

               When an Enrollee is in an inpatient hospital setting and selects
               another MCO or becomes fee-for-service anytime prior to discharge
               from the hospital, the CONTRACTOR is financially responsible for
               the entire hospital stay including all services related to the
               hospital stay, i.e. physician, etc. The MCO in which the
               individual is enrolled at the time of discharge from the hospital
               is financially responsible for services provided during the
               remainder of the month when the individual was discharged. If
               such individual is fee-for-service at the time of discharge from
               the hospital, the DEPARTMENT is financially responsible for the
               remainder of the month when the individual was discharged. If a
               Medicaid eligible is in an inpatient hospital setting and selects
               the MCO anytime prior to discharge from the hospital, the
               DEPARTMENT is financially responsible for the entire hospital
               stay including all services related to the hospital stay, i.e.
               physician, etc. Enrollees who are in an inpatient hospital
               setting at the time the CONTRACTOR terminates this Contract and
               who have enrolled with another MCO are the responsibility of the
               receiving MCO beginning the day after the termination is
               effective.

          b.   HOME HEALTH SERVICES

               Medicaid clients who are under fee-for-service or are enrolled in
               an MCO other than this MCO and are receiving home health services
               from an agency not contracting with the CONTRACTOR will be
               transitioned to the CONTRACTOR's home health agency. The
               CONTRACTOR is responsible for payment, not to exceed Medicaid
               payment, for a period not to exceed seven calendar days, unless
               the CONTRACTOR and the home health agency agree to another time
               period in writing, after the CONTRACTOR notifies the
               non-participating home health agency of the change in status or
               the non-participating home health agency notifies the CONTRACTOR
               that services are being provided by its agency. The CONTRACTOR
               will assess the needs of the Enrollee at the time the CONTRACTOR
               provides the orientation to the Enrollee.

               The CONTRACTOR will include the Enrollee in developing the plan
               of care to be provided by the CONTRACTOR's home health agency
               before the transition is complete. The CONTRACTOR will address
               Enrollee's concerns regarding

                                  Page 27 of 52

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               Covered Services provided by the CONTRACTOR's home health agency
               before the new plan of care is implemented.

          c.   MEDICAL EQUIPMENT

               When medical equipment is ordered for an Enrollee by the
               CONTRACTOR and the Enrollee enrolls in a different MCO before
               receiving the equipment, the CONTRACTOR is responsible for
               payment for such equipment. Medical equipment includes
               specialized wheelchairs or attachments, prosthesis, and other
               equipment designed or modified for an individual client. Any
               attachments to the equipment, replacements, or new equipment is
               the responsibility of the MCO in which the client is enrolled at
               the time such equipment is ordered.

     6.   SURVEYS

          All surveys required under this Contract will be funded by the
          CONTRACTOR unless funded by another source such as the Utah Department
          of Health Office of Health Data Analysis. The surveys must be
          conducted by an independent vendor mutually agreed upon by the
          DEPARTMENT and CONTRACTOR. The DEPARTMENT or designee will analyze the
          results of the surveys. Before publishing articles, data, reports,
          etc. related to surveys the DEPARTMENT will provide drafts of such
          material to the CONTRACTOR for review and feedback. The CONTRACTOR
          will not be responsible for the costs incurred for such publishing by
          the DEPARTMENT.

                      ARTICLE V - ENROLLEE RIGHTS/SERVICES

A.   MEMBER SERVICES FUNCTION

     The CONTRACTOR must operate a Member Services function during regular
     business hours. Ongoing training, as necessary, shall be provided by the
     CONTRACTOR to ensure that the Member Services staff is conversant in the
     CONTRACTOR's policies and procedures as they relate to Enrollees. At a
     minimum, Member Services staff must be responsible for the following:

     1.   Explaining the CONTRACTOR's rules for obtaining services;

     2.   Assisting Enrollees to select or change primary care providers;

     3.   Fielding and responding to Enrollee questions and complaints and
          grievances.

     The CONTRACTOR shall conduct ongoing assessment of its orientation staff to
     determine staff member's understanding of the MCO and its Medicaid managed
     care policies and provide training, as needed.

                                  Page 28 of 52

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B.   ENROLLEE LIABILITY

     1.   The CONTRACTOR will not hold an Enrollee liable for the following:

          a.   The debts of the CONTRACTOR if it should become insolvent.

          b.   Payment for services provided by the CONTRACTOR if the CONTRACTOR
               has not received payment from the DEPARTMENT for the services, or
               if the provider, under contract with the CONTRACTOR, fails to
               receive payment from the CONTRACTOR.

          c.   The payments to providers that furnish Covered Services under a
               contract or other arrangement with the CONTRACTOR that are in
               excess of the amount that normally would be paid by the Enrollee
               if the service had been received directly from the CONTRACTOR.

C.   GENERAL INFORMATION TO BE PROVIDED TO ENROLLEES

     The CONTRACTOR will make the following information available to Enrollees
     and potential enrollees on request:

     1.   The identity, locations, qualification, and availability of
          participating providers (at a minimum, area of specialty, board
          certification, and any special areas of expertise must be available
          that would be helpful to individuals deciding whether to enroll with
          the CONTRACTOR);

     2.   The rights and responsibilities of Enrollees;

     3.   The procedures available to Enrollees and providers to challenge or
          appeal the failure of the CONTRACTOR to cover a services; and

     4.   All items and services that are available to Enrollees that are
          covered either directly or through a method of referral or prior
          authorization.

D.   ACCESS

     1.   IN GENERAL

          The CONTRACTOR shall provide the DEPARTMENT and the Health Care
          Financing Administration, adequate assurances that the CONTRACTOR,
          with respect to a service area, has the capacity to serve the expected
          enrollment in such service area, including assurances that the
          CONTRACTOR offers an appropriate range of services and access to
          preventive and primary care services for the population expected to
          enroll in such service area, and maintains a sufficient number, mix
          and geographic distribution of providers of services.

          The CONTRACTOR will provide services which are accessible to Enrollees
          and appropriate in terms of timeliness, amount, duration, and scope.

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     2.   SPECIFIC PROVISIONS

          a.   ELIMINATION OF ACCESS PROBLEMS CAUSED BY GEOGRAPHIC, CULTURAL AND
               LANGUAGE BARRIERS AND PHYSICAL DISABILITIES

               The CONTRACTOR will minimize, with a goal to eliminate,
               Enrollee's access problems due to geographic, cultural and
               language barriers, and physical disabilities. The CONTRACTOR will
               provide assistance to Enrollees who have communication
               impediments or impairments to facilitate proper diagnosis and
               treatment. The CONTRACTOR must guarantee equal access to services
               and benefits for all Enrollees by making available interpreters,
               Telecommunication Devices for the Deaf (TDD), and other auxiliary
               aids to all Enrollees as needed. The CONTRACTOR will accommodate
               Enrollees with physical and other disabilities in accordance with
               the American Disabilities Act of 1990 (ADA), as amended. If the
               CONTRACTOR's facilities are not accessible to Enrollees with
               physical disabilities, the CONTRACTOR will provide services in
               other accessible locations.

          b.   INTERPRETIVE SERVICES

               The CONTRACTOR will provide interpretive services for languages
               on an as needed basis. These requirements will extend to both
               in-person and telephone communications to ensure that Enrollees
               are able to communicate with the CONTRACTOR and CONTRACTOR
               providers and receive Covered Services. Professional interpreters
               will be used when needed where technical, medical, or treatment
               information is to be discussed, or where use of a Family Member
               or friend as interpreter is inappropriate. A family member or
               friend may be used as an interpreter if this method is requested
               by the patient, and the use of such a person would not compromise
               the effectiveness of services or violate the patient's
               confidentiality, and the patient is advised that a free
               interpreter is available.

          c.   NO RESTRICTIONS OF PROVIDER'S ABILITY TO ADVISE AND
               COUNSEL

               The CONTRACTOR may not restrict a health care provider's ability
               to advise and counsel Enrollees about Medically Necessary
               treatment options. All contracting providers acting within his or
               her scope of practice, must be permitted to freely advise an
               Enrollee about his or her health status and discuss appropriate
               medical care or treatment for that condition or disease
               regardless of whether the care or treatment is a Covered Service.

          d.   WAITING TIME BENCHMARKS

               The CONTRACTOR will adopt benchmarks for waiting times for
               physician appointments as follows:

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               Waiting Time for Appointments

               1)   Primary Care Providers:
                    .    within 30 days for routine, non-urgent appointments
                    .    within 60 days for school physicals
                    .    within 2 days for urgent, symptomatic, but not
                         life-threatening care (care that can be treated in the
                         doctor's office)

               2)   Specialists:
                    .    within 30 days for non-urgent
                    .    within 2 days for urgent, symptomatic, but not
                         life-threatening care (care that can be treated in a
                         doctor's office)

               These benchmarks do not apply to appointments for regularly
               scheduled visits to monitor a chronic medical condition if the
               schedule calls for visits less frequently than once every month.

          e.   NO DELAY WHILE COORDINATING COVERAGE WITH A PREPAID MENTAL HEALTH
               PLAN

               When an Enrollee is also enrolled in a Prepaid Mental Health
               Plan, the CONTRACTOR will not delay an Enrollee's access to
               needed services in disputes regarding responsibility for payment.
               Payment issues should be addressed only after needed services are
               rendered. As described in Attachment B, IV (Benefits), Section E
               (Clarification of Covered Services), Subsection 8 of this
               Contract, the independent panel established by the DEPARTMENT
               will assist in adjudicating such disputes when requested to do so
               by either party.

E.   CHOICE

     The CONTRACTOR must allow Enrollees the opportunity to select a
     participating Primary Care Provider. This excludes clients who are under
     the Restriction Program. If an Enrollee's Primary Care Provider ceases to
     participate in the CONTRACTOR's network, the CONTRACTOR must offer the
     Enrollee the opportunity to select a new Primary Care Provider.

F.   COORDINATION

     1.   IN GENERAL

          The CONTRACTOR will provide access to a coordinated, comprehensive and
          continuous array of needed services through coordination with other
          appropriate entities. The CONTRACTOR provider is not responsible for
          directly providing waiver services.

     2.   PREPAID MENTAL HEALTH PLAN

          a.   When an Enrollee is also enrolled in a Prepaid Mental Health
               Plan, the CONTRACTOR and Prepaid Mental Health Plan will share
               appropriate information regarding the Enrollee's health care to
               ensure coordination of physical and mental health care services.

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          b.   Clients enrolled in the MCO and a Prepaid Mental Health Plan
               who due to a psychiatric condition require lab, radiology and
               similar outpatient services covered under this Contract, but
               prescribed by the Prepaid Mental Health Plan physician, will have
               access to such services in a timely fashion. The CONTRACTOR and
               Prepaid Mental Health Plan will reduce or eliminate unnecessary
               barriers that may delay the Enrollee's access to these critical
               services.

G.   BILLING ENROLLEES

     1.   IN GENERAL

          Except as provided herein Attachment B, Article V (Enrollee
          Rights/Services), Section G (Billing Enrollees), no claim for payment
          will be made at any time by the CONTRACTOR or CONTRACTOR provider to
          an Enrollee accepted by that provider as a Medicaid Enrollee for any
          service covered under this Contract. When a provider accepts an
          Enrollee as a patient he or she will look solely to third party
          coverage or the CONTRACTOR for reimbursement. If the provider fails to
          receive payment from the CONTRACTOR, the Enrollee cannot be held
          responsible for these payments.

     2.   CIRCUMSTANCES WHEN AN ENROLLEE MAY BE BILLED

          An Enrollee may in certain circumstances be billed by the CONTRACTOR
          provider for non-Covered Services. A non-Covered Service is one that
          is not covered under this Contract, or includes special features or
          characteristics that are desired by the Enrollee, such as more
          expensive eyeglass frames, hearing aids, custom wheelchairs, etc., but
          do not meet the Medical Necessity criteria for amount, duration, and
          scope as set forth in the Utah State Plan. The DEPARTMENT will specify
          to the CONTRACTOR the extent of Covered Services and items under the
          Contract, as well as services not covered under the Contract but
          provided by Medicaid on a fee-for-service basis that would effect the
          CONTRACTOR's Covered Services. An Enrollee may be billed for a service
          not covered under this Contract only when the following conditions are
          met:

          a.   The CONTRACTOR has an established policy for billing all patients
               for services not covered by a third party. (Non-Covered Services
               cannot be billed only to Enrollees.)

          b.   The CONTRACTOR will inform Enrollees of its policy and the
               services and items that are non covered under this Contract and
               include this information in the Enrollee's member handbook.

          c.   The CONTRACTOR provider will advise the Enrollee prior to
               rendering the service that the service is not covered under this
               Contract and that the Enrollee will be personally responsible for
               making payment.
          d.   The Enrollee agrees to be personally responsible for the payment
               and an agreement is made in writing between the CONTRACTOR
               provider and the Enrollee which details the service and the
               amount to be paid by the Enrollee.

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     3.   CONTRACTOR MAY NOT HOLD ENROLLEE'S MEDICAID CARD

          The CONTRACTOR or CONTRACTOR provider will not hold the Enrollee's
          Medicaid card as guarantee of payment by the Enrollee, nor may any
          other restrictions be placed upon the Enrollee.

     4.   CRIMINAL PENALTIES

          Criminal penalties shall be imposed on MCO providers as authorized
          under section 1128B(d)(l)of the Social Security Act if the provider
          knowingly and willfully charges an Enrollee at a rate other than those
          allowed under this Contract.

                        ARTICLE VI - GRIEVANCE PROCEDURES

A.   IN GENERAL

     The CONTRACTOR will maintain a system for reviewing and adjudicating
     complaints and grievances by Enrollees, and providers. The CONTRACTOR's
     complaint and grievance procedures must permit an Enrollee, or provider on
     behalf of an Enrollee, to challenge the denials of coverage of medical
     assistance or denials of payment for Covered Services. The CONTRACTOR will
     submit such grievance plans and procedures to the DEPARTMENT for approval
     prior to instituting or changing such procedures. Such procedures will
     provide for expeditious resolution of complaints and grievances by the
     CONTRACTOR's personnel who have authority to correct problems.

B.   NONDISCRIMINATION

     The Contractor shall designate a nondiscrimination coordinator who will 1)
     ensure the Contractor complies with Federal Laws and Regulations regarding
     nondiscrimination, and 2) take complaints and grievances from Enrollees
     alleging nondiscrimination violations based on race, color, national
     origin, disability, or age. The nondiscrimination coordinator may also
     handle complaints regarding the violation of other civil rights (sex and
     religion) as other Federal laws and Regulations protect against these forms
     of discrimination. The Contractor will develop and implement a written
     method of administration to assure that the Contractor's programs,
     activities, services, and benefits are equally available to all persons
     without regard to race, color, national origin, disability, or age.

C.   MINIMUM REQUIREMENTS OF GRIEVANCE PROCEDURES

     1.   Definitions of complaints and grievance;
     2.   Details of how, when, where and with whom an Enrollee or provider
          may file a grievance;
     3.   Assurances of the participation of individuals with authority to take
          corrective action;
     4.   Responsibilities of the various components and staff of the
          organization;
     5.   Description of the process for timely review, prompt (45 days)
          resolution of complaints and grievances;
     6.   Details of an appeal process; and

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     7.   Provision stating that during the pendency of any grievance procedure
          or an appeal of such grievances, the Enrollee will remain enrolled
          except as otherwise stated in this Contract.

D.   FINAL REVIEW BY DEPARTMENT

     When an Enrollee or provider has exhausted the CONTRACTOR's grievance
     process and a final decision has been made, the CONTRACTOR must provide
     written notification to the party who initiated the grievance of the
     grievance's outcome and explain in clear terms a detailed reason for the
     denial.

     The CONTRACTOR must provide notification to Enrollees and providers that
     the final decision of the CONTRACTOR may be appealed to the DEPARTMENT and
     will give to the Enrollee or provider the DEPARTMENT's form to request a
     formal hearing with the DEPARTMENT. The MCO must inform the Enrollee or
     provider the time frame for filing an appeal with the DEPARTMENT. The
     formal hearing with the DEPARTMENT is a de novo hearing. If the Enrollee or
     provider request a formal hearing with the DEPARTMENT, all parties to the
     formal hearing agree to be bound by the DEPARTMENT's decision until any
     judicial reviews are completed and are in the Enrollee's or provider's
     favor. Any decision made by the DEPARTMENT pursuant to the hearing shall be
     subject to appeal rights as provided by State and Federal laws and rules.

                        ARTICLE VII - OTHER REQUIREMENTS

A.   COMPLIANCE WITH PUBLIC HEALTH SERVICE ACT

     The CONTRACTOR will comply with all requirements of Section 1301 to and
     including 1318 of the Public Health Service Act. The CONTRACTOR will
     provide verification of such compliance to the DEPARTMENT upon the
     DEPARTMENT's request. This Contract is a "prospective risk" contract which
     means that payment is made by means of a capitation rate offered each month
     as reimbursement in advance for services incurred that month regardless of
     the level of utilization actually experienced. Nothing herein will be
     construed or interpreted to mean that this is a cost reimbursement
     contract. Cost reimbursement means payment is made by means of a settlement
     based on cost incurred over a given period.

B.   COMPLIANCE WITH OBRA'90 PROVISION AND 42 CFR 434.28

     The CONTRACTOR will comply with the OBRA '90 provision which requires an
     MCO provide patients with information regarding their rights under State
     law to make decisions about their health care including the right to
     execute a living will or to grant power of attorney to another individual.

     The CONTRACTOR will comply with the requirements of 42 CFR 434.28 relating
     to maintaining written Advance Directives as outlined under Subpart I of
     489.100 through 489.102.

                                  Page 34 of 52

<PAGE>

C.   FRAUD AND ABUSE REQUIREMENTS

     The CONTRACTOR agrees to abide by Federal and/or State fraud and abuse
     requirements including, but not limited to, the following:

     1.   Refer in writing to the DEPARTMENT all detected incidents of potential
          fraud or abuse on the part of providers of services to Enrollees or to
          other patients.

     2.   Refer in writing to the DEPARTMENT all detected incidents of patient
          fraud or abuse involving Covered Services provided which are paid for
          in whole, or in part, by the DEPARTMENT.

     3.   Refer in writing to the DEPARTMENT the names and Medicaid ID numbers
          of those Enrollees that the CONTRACTOR suspects of inappropriate
          utilization of services, and the nature of the suspected inappropriate
          utilization.

     4.   Inform the DEPARTMENT in writing when a provider is removed from the
          CONTRACTOR's panel for reasons relating to suspected fraud, abuse or
          quality of care concerns.

     5.   The CONTRACTOR may not employ or subcontract with any sanctioned
          provider. The DEPARTMENT will inform the CONTRACTOR of any provider
          sanctioned by Medicaid or Medicare.

          The CONTRACTOR may not employ or subcontract with any provider who is
          an ineligible entity as defined under the State Medicaid Manual
          Section 2086.16. This section is available upon request. The
          CONTRACTOR will attest that the entities listed below are not involved
          with the CONTRACTOR. Ineligible organizations can be included in the
          following categories as referenced in the Social Security Act (the
          Act):

          a.   Entities which could be excluded under section 1128(b)(8) of
               the Act--these are entities in which a person who is an officer,
               director, agent, or managing employee of the entity, or a person
               who has a direct or indirect ownership or control interest of 5%
               or more in the entity and has been convicted of the following
               crimes:

               1)   any criminal offense related to the delivery of a Medicare
                    or Medicaid item or service (see section 1128(a)(l) of the
                    Act);

               2)   patient abuse (section 1128(a)(2));

               3)   fraud (1128(b)(l));

               4)   obstruction of an investigation (1128(b)(2)); or

               5)   offenses related to controlled substances (1128(b)(3)).

                                  Page 35 of 52

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          b.   Entities which have a direct or indirect substantial
               contractual relationship with an individual or entity listed in
               subsection "a" above-- a substantial contractual relationship is
               defined as any contractual relationship which provides for one or
               more of the following:

               1)   the administration, management, or provision of medical
                    services;

               2)   the establishment of policies pertaining to the
                    administration, management or provision of medical services;
                    or

               3)   the provision of operational support for the administration,
                    management, or provision of medical services.

          c.   Entities which employ, contract with, or contract through any
               individual or entity that is excluded from participation in
               Medicaid under Section 1128 or 1128A of the Act, for the
               provision of health care, utilization review, medical social work
               or administration services.

D.   DISCLOSURE OF OWNERSHIP AND CONTROL INFORMATION

     The CONTRACTOR agrees to meet the requirements of 42 CFR 455, Subpart B
     related to disclosure by the CONTRACTOR of ownership and control
     information.

E.   SAFEGUARDING CONFIDENTIAL INFORMATION ON ENROLLEES

     The CONTRACTOR agrees that information about Enrollees is confidential
     information and agrees to safeguard all confidential information and
     conform to the requirements set forth in 42CFR, Part 431, Subpart F as well
     as all other applicable Federal and State confidentiality requirements.

F.   DISCLOSURE OF PROVIDER INCENTIVE PLANS

     Per 42 CFR 417.749(a), no specific payment can be made directly or
     indirectly under a physician incentive plan to a physician or physician
     group as an inducement to reduce or limit Medically Necessary services
     furnished to an Enrollee.

     The CONTRACTOR may operate a physician incentive plan only if the stop-loss
     protection, Enrollee survey, and disclosure requirements are met. The
     CONTRACTOR must disclose to the DEPARTMENT the following information on
     provider incentive plans in sufficient detail to determine whether the
     incentive plan complies with the regulatory requirements. The disclosure
     must contain:

     1.   Whether services not furnished by the physician or physician group
          are covered by the incentive plan. If only the services furnished by
          the physician or physician group are covered by the incentive plan,
          disclosure of other aspects of the plan need not be made.

     2.   The type of incentive arrangement (i.e., withhold, bonus, capitation).

                                  Page 36 of 52

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     3.   If the incentive plan involves a withhold or bonus, the percent of
          the withhold or bonus.

     4.   Proof that the physician or physician group has adequate stop-loss
          protection, including the amount and type of stop-loss protection.

     5.   The panel size and, if patients are pooled; the method used.

     6.   To the extent provided for in HCFA implementation guidelines,
          capitation payments paid to primary care physicians for the most
          recent year broken down by percent for primary care services, referral
          services to specialists, and hospital and other types of provider
          services (i.e., nursing home and home health agency) for capitated
          physicians or physician groups.

     7.   In the case of those prepaid plans that are required to conduct
          beneficiary surveys, the survey results. (The Contractor must conduct
          a customer satisfaction of both Enrollees and disenrollees if any
          physicians or physicians groups contracting with the CONTRACTOR are
          placed at substantial financial risk for referral services. The survey
          must include either all current Enrollees and those who have
          disenrolled in the past twelve months, or a sample of these same
          Enrollees and disenrollees. Recognizing that different questions are
          asked of the disenrollees than those asked of Enrollees, the same
          survey cannot be used for both populations.)

     The CONTRACTOR must disclose this information to the DEPARTMENT (1) prior
     to approval of its contract or agreement and (2) upon the contract or
     agreements anniversary or renewal effective date. The CONTRACTOR must
     provide the capitation data required (see 6 above) for the previous
     contract year to the DEPARTMENT three months after the end of the contract
     year. The CONTRACTOR will provide to the Enrollee upon request whether the
     CONTRACTOR uses a physician incentive plan that affects the use of referral
     services, the type of incentive arrangement, whether stop-loss protection
     is provided, and the survey results of any enrollee/disenrollee surveys
     conducted.

G.   DEBARRED OR SUSPENDED INDIVIDUALS

     Under Section 1921(d)(1) of the Social Security Act, the CONTRACTOR may not
     knowingly have a director, officer, partner, or person with beneficial
     ownership of more than 5% of the CONTRACTOR's equity who has been debarred
     or suspended by any federal agency. The CONTRACTOR may not have an
     employment, consulting, or any other agreement with a debarred or suspended
     person for the provision of items or services that are significant and
     material to meeting the provisions under this Contract.

     The CONTRACTOR must certify to the DEPARTMENT that the requirements under
     Section 1921(d)(l) of the Social Security Act are met prior to the
     effective date of this Contract and at any time there is a change from the
     last such certification.

H.   HCFA CONSENT REQUIRED

     If HCFA directs the DEPARTMENT to terminate this Contract, the DEPARTMENT
     will not be permitted to renew this Contract without HCFA consent.

                                  Page 37 of 52

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                             ARTICLE VIII - PAYMENTS

A.   RISK CONTRACT

     This Contract is a risk contract as described in 42 CFR 447.361. Payments
     made to the CONTRACTOR may not exceed the cost to the DEPARTMENT of
     providing these same Covered Services on a fee-for-service basis, to an
     actuarially equivalent non-enrolled population.

B.   PAYMENT AMOUNTS

     1.   PAYMENT SCHEDULE

          On or before the 10th day of each month, the DEPARTMENT will pay to
          the CONTRACTOR the premiums due for each category shown for Enrollees
          for that month as determined by the DEPARTMENT from the Eligibility
          Transmission. Premiums shown in Attachment F-3 are based on rate
          negotiations between the CONTRACTOR and the DEPARTMENT.

     2.   CALCULATION OF PREMIUMS

          The premiums do not include payment for recoupment of any previous
          losses incurred by the CONTRACTOR. The premiums established in this
          Contract will be prospectively set so as not to exceed the cost of
          providing the same Covered Services to an actuarially equivalent
          non-enrolled Medicaid population. The actuarially set fee-for-service
          equivalents developed by the DEPARTMENT are prospectively determined
          and conform with Federal guidelines as defined in CFR 447.361.

     3.   FEDERALLY QUALIFIED HEALTH CENTERS (FQHCS)

          If the CONTRACTOR enters into a subcontract with a Federally Qualified
          Health Center (FQHC), the CONTRACTOR will reimburse the FQHC an amount
          equal to what the CONTRACTOR pays comparable providers that are not
          FQHCs. The FQHC may be entitled to additional reimbursement from the
          DEPARTMENT for the difference between CONTRACTOR payments to the FQHC
          and the FQHC's reasonable costs. The cost audits will be conducted by
          the DEPARTMENT. If the CONTRACTOR has a capitated arrangement with an
          FQHC, the DEPARTMENT is not responsible to either the CONTRACTOR or
          the FQHC for 100% of the FQHC's reasonable costs.

     4.   TIME FRAME FOR REQUEST OF DELIVERY PAYMENT

          The CONTRACTOR will submit a request for payment of the lump sum
          delivery amount within six months of the delivery date.

     5.   CONTRACT MAXIMUM

          In no event will the aggregate amount of payments to the Contractor
          exceed the Contract maximum amount. If payments to the CONTRACTOR
          approach or exceed the Contract amount before the renewal date of the
          Contract, the DEPARTMENT shall execute a

                                  Page 38 of 52

<PAGE>

          Contract amendment to increase the Contract amount within 30 calendar
          days of the date the Contract amount is exceeded.

C.   MEDICARE

     1.   PAYMENT OF MEDICARE PART B PREMIUMS

          The DEPARTMENT will pay the Medicare Part B premium for each Enrollee
          who is on Medicare. The Enrollee will assign to the CONTRACTOR his or
          her Medicare reimbursement for benefits received under Medicare. The
          Eligibility Transmission includes and identifies those Enrollees who
          are covered under Medicare.

     2.   PAYMENT OF MEDICARE DEDUCTIBLE AND COINSURANCE

          The DEPARTMENT's financial obligation under this Contract for
          Enrollees who are covered by both Medicare and the MCO is limited to
          the Medicare Part B premium and the CONTRACTOR premium. The CONTRACTOR
          is responsible for payment of the Medicare deductible and coinsurance
          for Enrollees when a service is paid for by Medicare. The CONTRACTOR
          is responsible for payment whether or not the Medicare covered service
          is rendered by a CONTRACTOR provider or has been authorized by the
          CONTRACTOR. If a Medicare covered service is rendered by an
          out-of-plan Medicare provider or a non-Medicare participating
          provider, the CONTRACTOR is responsible to pay for no more than the
          Medicare authorized amount. Attachment E, Table 2, will be used to
          identify the total cost to the CONTRACTOR of providing care for
          Enrollees who are also covered by Medicare.

     3.   MUST NOT BALANCE BILL ENROLLEES

          The CONTRACTOR and CONTRACTOR provider will not Balance Bill the
          Enrollee and will consider the reimbursement from Medicare and from
          the CONTRACTOR payment in full.

D.   THIRD PARTY LIABILITY (COORDINATION OF BENEFITS)

The DEPARTMENT will provide the CONTRACTOR a monthly listing of Enrollees
covered under the Buy-out Program, including the premium amount paid by the
DEPARTMENT.

     1.   TPL COLLECTIONS

          The CONTRACTOR will be responsible to coordinate benefits and collect
          third party liability (TPL). The CONTRACTOR will keep TPL collections.
          The DEPARTMENT will set rates net of expected TPL collections
          excluding the lump sum rate set for deliveries. The rate set for
          deliveries is the maximum amount the DEPARTMENT will pay the
          CONTRACTOR for each delivery. The CONTRACTOR must attempt to collect
          TPL before the DEPARTMENT will reimburse the CONTRACTOR the delivery
          rate less TPL. The DHCF audit staff will monitor collections to ensure
          the CONTRACTOR is making a good faith effort to pursue TPL. The
          DEPARTMENT will properly account for TPL in its rate structure.

                                  Page 39 of 52

<PAGE>

          The CONTRACTOR will provide a quarterly match of Enrollees to the
          CONTRACTOR's commercial insurance eligibility files. The Office of
          Recovery Services (ORS) will provide an electronic list of

     2.   DUPLICATION OF BENEFITS

          This provision applies when, under another health insurance plan such
          as a prepaid plan, insurance contract, mutual benefit association or
          employer's self-funded group health and welfare program, etc., an
          Enrollee is entitled to any benefits that would totally or partially
          duplicate the benefits that the CONTRACTOR is obligated to provide
          under this Contract. Duplication exists when (1) the CONTRACTOR has a
          duty to provide, arrange for or pay for the cost of Covered Services,
          and (2) another health insurance plan, pursuant to its own terms, has
          a duty to provide, arrange for or pay for the same type of Covered
          Services regardless of whether the duty of the CONTRACTOR is to
          provide the Covered Services and the duty of the other health
          insurance plan is only to pay for the Covered Services. Under State
          and Federal laws and regulations, Medicaid funds are the last dollar
          source and all other health insurance plans as referred to above are
          primarily responsible for the costs of providing Covered Services.

     3.   RECONCILIATION OF OTHER TPL

          In order to assist the CONTRACTOR in billing and collecting from other
          health insurance plans the DEPARTMENT will include on the Eligibility
          Transmission other health insurance plans of each Enrollee when it is
          known. The CONTRACTOR will review the Eligibility Transmission and
          will report to the Office of Recovery Services or the DEPARTMENT any
          TPL discrepancies identified within 30 working days of receipt of the
          Eligibility Transmission. The CONTRACTOR's report will include a
          listing of Enrollees that the CONTRACTOR has independently identified
          as being covered by another health insurance plan.

     4.   WHEN TPL IS DENIED

          On a monthly basis, the CONTRACTOR will report to the Office of
          Recovery Services (ORS) claims that have been billed to other health
          care plans but have been denied which will include the following
          information:

          a.   patient name and Medicaid identification number
          b.   ICD-9-CM code;
          c.   procedure codes; and
          d.   insurance company.

     5.   NOTIFICATION OF PERSONAL INJURY CASES

          The CONTRACTOR will be responsible to notify ORS of all personal
          injury cases, as defined by ORS and agreed to by the CONTRACTOR, no
          later than 30 days after the CONTRACTOR has received a "clean" claim.
          A clean claim is a claim that is ready to adjudicate. The following
          data elements will be provided by the CONTRACTOR to ORS:

                                  Page 40 of 52

<PAGE>

          a.   patient name and Medicaid identification number
          b.   date of accident;
          c.   specific type of injury by ICD-9-CM code;
          d.   procedure codes; and
          e.   insurance company, if known.

     6.   ORS TO PURSUE COLLECTIONS

          ORS will pursue collection on all claims described in Attachment B,
          Article VIII (Payments), Section D, Subsections 4 and 5 of this
          Contract. The DEPARTMENT will retain, for administrative costs, one
          third of the collections received for the period during which medical
          services were provided by the CONTRACTOR, and remit the balance to the
          CONTRACTOR.

     7.   REBATE OF DUPLICATE PREMIUMS

          The CONTRACTOR will rebate to the DEPARTMENT on a quarterly basis any
          duplicate premiums paid to the CONTRACTOR for Enrollees. Payments are
          deemed duplicate when the CONTRACTOR receives premium both from the
          DEPARTMENT and from another payment source for the same Enrollee or
          from the DEPARTMENT and from the Medicaid Buy-out Program for the same
          Enrollee.

     8.   INSURANCE BUY-OUT PROGRAM

          The Insurance Buy-out Program is an optional program in which the
          DEPARTMENT purchases group health insurance for a recipient who is
          eligible for Medicaid when it is determined cost-effective for the
          Medicaid program to do so. The insurance buy-out process will be
          coordinated by the DEPARTMENT in cooperation with the Office of
          Recovery Services, and Medicaid eligibility workers. The following
          procedures regarding the buy-out program are:

          a.   the CONTRACTOR will file claims against group MCOs first before
               claiming services against the CONTRACTOR or other MCOs.

          b.   The DEPARTMENT will pay the CONTRACTOR a Medicaid premium for
               every buy-out Enrollee.

          c.   The DEPARTMENT will provide the CONTRACTOR a monthly listing of
               Enrollees covered under the Buy-out Program for the upcoming
               month.

          d.   On a quarterly basis, the Buy-out Program will bill the
               CONTRACTOR the lower of the Buy-out premium or the premium paid
               under this Contract when the Buy-out premium was paid to an
               entity other than the CONTRACTOR, i.e., the Buy-out premium is
               not a duplicate premium as defined in this Article VIII,
               Section D., Item 7. The CONTRACTOR will remit to the Buy-out
               Program the amount billed within 60 days of receipt of the
               Buy-out bill.

                                  Page 41 of 52

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     9.   CONTRACTOR MUST PAY PROVIDER ADMINISTRATIVE FEE FOR IMMUNIZATIONS

          When an Enrollee has third party coverage for immunizations, the
          CONTRACTOR will pay the provider the administrative fee for providing
          the immunization and not require the provider to bill the third party
          as a cost avoidance method. The CONTRACTOR may choose to pursue the
          third party amount for the administrative fee after payment has been
          made to the provider.

E.   THIRD PARTY RESPONSIBILITY (INCLUDING WORKER'S COMPENSATION)

     1.   CONTRACTOR TO BILL USUAL AND CUSTOMARY CHARGES

          When a third party has an obligation to pay for Covered Services
          provided by the CONTRACTOR to an Enrollee pursuant to this Contract,
          the CONTRACTOR will bill the third party for the usual and customary
          charges for Covered Services provided and costs incurred. Should any
          sum be recovered by the Enrollee or otherwise, from or on behalf of
          the person responsible for payment for the service, the CONTRACTOR
          will be paid out of such recovery for the charges for service provided
          and costs incurred by the CONTRACTOR.

     2.   THIRD PARTY'S OBLIGATION TO PAY FOR COVERED SERVICES

          Examples of situations where a third party has an obligation to pay
          for Covered Services provided by the CONTRACTOR are when (a) the
          Enrollee is injured by a person due to the negligent or intentional
          acts (or omissions) of the person; or (b) the Enrollee is eligible to
          receive payment through Worker's Compensation Insurance. If the
          Enrollee does not diligently seek such recovery, the CONTRACTOR may
          institute such rights that it may have.

     3.   FIRST DOLLAR COVERAGE FOR ACCIDENTS

          In addition, both parties agree that the following will apply
          regarding first dollar coverage for accidents: If the injured party
          has additional insurance, primary coverage my be given to the motor
          insurance effective at the time of the accident. Once the motor
          vehicle policy is exhausted, the CONTRACTOR will be the secondary
          payer and pay for all of the Enrollee's Covered Services. If medical
          insurance does not exist, the CONTRACTOR will be the primary payer for
          all Covered Services.

     4.   NOTIFICATION OF STOP-LOSS

          The CONTRACTOR will provide ORS with quarterly updates of costs
          incurred by the CONTRACTOR when such costs exceed Stop Loss
          (reinsurance) provisions as defined in the contract between
          TransAmerica and the CONTRACTOR.

F.   CHANGES IN COVERED SERVICES

     If Covered Services are amended under the provisions of Attachment B,
     Article IV (Benefits), Section C, Subsection 3 of this Contract, rates may
     be renegotiated.

                                  Page 42 of 52

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                    ARTICLE IX - RECORDS, REPORTS AND AUDITS

A.   FEDERALLY REQUIRED REPORTS

     1.   FINANCIAL DISCLOSURE REPORT

          If this Contract is being renewed, the CONTRACTOR will complete the
          Section 1318 Financial Disclosure Report for transactions (all
          transactions, not just Medicaid) occurring during the prior contract
          period, and submit it to the DEPARTMENT prior to the renewal start
          date. If the Contract is being renewed and the CONTRACTOR has a
          Medicare MCO product, the CONTRACTOR will submit the Medicare report
          to the DEPARTMENT upon request by the DEPARTMENT.

     2.   DISCLOSURE OF OWNERSHIP AND CONTROL INTEREST STATEMENT

          The CONTRACTOR will submit to the DEPARTMENT a copy of the "Disclosure
          of Ownership and Control Interest Statement" (HCFA-1513) prior to the
          effective date of the Contract and by April 15 of each year
          thereafter.

     3.   CHEC/EPSDT REPORTS

          The CONTRACTOR agrees to act as a continuing care provider for the
          CHEC/EPSDT program in compliance with OBRA '89 and Social Security Act
          Sections 1902 (a)(43), 1905(a)(4)(B)and 1905 (r).

          a.   CHEC/EPSDT SCREENINGS

               Annually, the CONTRACTOR will submit to the DEPARTMENT
               information on CHEC/EPSDT screenings to meet the Federal EPSDT
               reporting requirements (Form HCFA-416). The data will be in a
               mutually agreed upon format. The CHEC/EPSDT information is due
               December 31 for the prior federal fiscal year's data (October 1
               through September 30).

          b.   IMMUNIZATION DATA

               The CONTRACTOR will submit immunization data as part of the
               CHEC/EPSDT reporting. Enrollee name, Medicaid ID, type of
               immunization identified by procedure code, and date of
               immunization will be reported in the same format as the
               CHEC/EPSDT data.

B.   PERIODIC REPORTS

     1.   ENROLLMENT, COST AND UTILIZATION REPORTS (ATTACHMENT E)

          Enrollment, cost and utilization reports will be submitted on
          diskettes in Excel or Lotus and in the format specified in Attachment
          E. A hard copy of the report must be submitted as well. The DEPARTMENT
          will send to the CONTRACTOR a template of the Attachment E format on a
          diskette. The CONTRACTOR may not customize or

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          change the report format. The financial information for these reports
          will be reported as defined in HCFA Publication 75, and if applicable,
          HCFA 15-1. The CONTRACTOR will certify in writing the accuracy and
          completeness, to the best of its knowledge, of all costs and
          utilization data provided to the DEPARTMENT on Attachment E.

          Two Attachment E reports will be submitted covering dates of service
          for each contract year.

          a.   Attachment E is due May 1 for the preceding six-month reporting
               period (July through December).

          b.   Attachment E is due November 1 for the preceding 12-month
               reporting period (July through June).

          If necessary, the CONTRACTOR may request, in writing, an extension of
          the due date up to 30 days beyond the required due date. The
          DEPARTMENT will approve or deny the extension request writing within
          seven calendar days of receiving the request.

     2.   SEMI-ANNUAL REPORTS

          The following semi-annual reports are due May 1 for the preceding
          six-month reporting period ending December 31 (July through December)
          and are due November 1 for the preceding six month period ending June
          30 (January through June).

          a.   ORGAN TRANSPLANTS

               A report of the total number of organ transplants by type of
               transplant.

          b.   OBSTETRICAL INFORMATION

               A report of obstetrical information including

               1)   total number of obstetrical deliveries by aid category
                    grouping
               2)   total number of caesarean sections and total number of
                    vaginal deliveries;
               3)   total number low birth weight infants; and
               4)   total number of Enrollees requiring prenatal hospital
                    admission.

          c.   COMPLAINTS AND FORMAL GRIEVANCES

               A summary of complaints and formal grievances, by type of
               complaint or grievance, received by the CONTRACTOR under this
               Contract and actions taken to resolve such complaints and
               grievances

          d.   ABERRANT PHYSICIAN BEHAVIOR

               Summary information of corrective actions taken on physicians who
               have been identified by the CONTRACTOR as exhibiting aberrant
               physician behavior and

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               the names of physicians who have been removed from the CONTRACTOR
               network due to quality concerns.

     3.   QUALITY ASSURANCE ACTIVITIES

          Annually, the CONTRACTOR will submit their written quality improvement
          plan and their quality improvement work plan within 30 days of
          approval by the CONTRACTOR's governing body.

          Annually, on November 1, the CONTRACTOR will submit a report that
          identifies the CONTRACTOR's internal quality assurance activities,
          results thereof, and corrective actions taken during the previous
          contract year ending (July through June).

     4.   HEDIS

          Audited Health Plan Employer Data and Information Set (HEDIS)
          performance measures will cover services rendered during each calendar
          year and will be reported as set forth in State rule by the Office of
          Health Data Analysis. For example, calendar year 1997 HEDIS measures
          will be reported in 1998.

     5.   ENCOUNTER DATA

          Encounter data, as defined in the DEPARTMENT's Encounter Data
          Technical Manual, is due (including all replacements) nine months
          after the end of the quarter being reported. Encounter data will be
          submitted in accordance with the instructions detailed in the
          Encounter Data User Manual for dates of service beginning July 1,
          1997.

     6.   DOCUMENTS DUE PRIOR TO QUALITY MONITORING REVIEWS

          The following documents are due on request or at least 60 days prior
          to the DEPARTMENT's quality assurance monitoring review unless the
          DEPARTMENT has already received documents that are in effect:

          a.   the CONTRACTOR's most current (may be in draft stage) written
               plan for quality improvement;
          b.   the CONTRACTOR's most current (may be in draft stage) annual
               quality improvement work plan;
          c.   the CONTRACTOR's reports that identify over and under utilization
               of covered services and efforts put in place to resolve
               inappropriate over utilization and under utilization;
          d.   the CONTRACTOR's process for identifying and correcting aberrant
               provider behavior; and
          e.   other information requested by the DEPARTMENT to facilitate the
               DEPARTMENT's review of the CONTRACTOR's compliance to standards
               defined in the Division of Health Care Financing's MCO Quality
               Assurance Monitoring Plan (Attachment G).

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          The above  documents  will show evidence of a well defined,  organized
          program designed to improve client care.

     7.   AUDIT OF ABORTIONS, STERILIZATIONS AND HYSTERECTOMIES

          The CONTRACTOR must conduct an annual audit of all abortions in
          addition to an audit of a sample of sterilizations and hysterectomies
          as set by the DEPARTMENT that the CONTRACTOR providers performed
          during each contract year to assure compliance of its providers with
          all Federal and State requirements related to Federal financial
          participation of abortions. On November 1 of each year, the CONTRACTOR
          will submit to the DEPARTMENT the results of the audit for the
          previous calendar year.

     8.   DEVELOPMENT OF NEW REPORTS

          Any new reports/data requirements mandated by the DEPARTMENT will be
          mutually developed by the DEPARTMENT and the CONTRACTOR.

C.   RECORD SYSTEM REQUIREMENTS

     In accordance with Section 4752 of OBRA '90 (amended section 1903 (m)(2)(A)
     of the Social Security Act), the CONTRACTOR agrees to maintain sufficient
     patient encounter data to identify the physician who delivers Covered
     Services to Enrollees. The CONTRACTOR agrees to provide this encounter
     data, upon request of the DEPARTMENT, within 30 days of the request.

D.   MEDICAL RECORDS

     The CONTRACTOR agrees that medical records are considered confidential
     information and agrees to follow Federal and State confidentiality
     requirements.

     The CONTRACTOR will require that subcontracting providers maintain a
     medical record keeping system through which all pertinent information
     relating to the medical management of the Enrollee is maintained,
     organized, and is readily available to appropriate professionals.
     Notwithstanding any other provision of this Contract to the contrary,
     medical records covering Enrollees will remain the property of the
     CONTRACTOR provider, and the CONTRACTOR provider will respect every
     Enrollee's privacy by restricting the use and disclosure of information in
     such records to purposes directly connected with the Enrollee's health care
     and administration of this Contract. The CONTRACTOR will use and disclose
     information pertaining to individual Enrollees and prospective Enrollees
     only for purposes directly connected with the administration of the
     Medicaid Program and this Contract.

E.   AUDITS

     1.   RIGHT OF DEPARTMENT AND HCFA TO AUDIT

          The DEPARTMENT and the Secretary of the Department of Health and Human
          Services within HCFA will have the right to audit and inspect any
          books and records of the CONTRACTOR and its subcontractors pertaining
          (I) to the ability of the

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          CONTRACTOR to bear the risk of potential financial losses, or (II) to
          evaluate services performed or determinations of amounts payable under
          the Contract.

     2.   INFORMATION TO DETERMINE ALLOWABLE COSTS

          The CONTRACTOR will make available to the DEPARTMENT all reasonable
          and related financial, statistical, clinical or other information
          needed for the determination of allowable costs to the Medicaid
          program for "related party/home office" transactions as defined in
          HCFA 15-1. These records are to be made available in Utah or the
          CONTRACTOR will pay the increased cost (incremental travel, per diem,
          etc.) of auditing at the out-of-state location. The cost to the
          CONTRACTOR will include round-trip travel and two days per
          diem/lodging. Additional travel costs of the site audit will be shared
          equally by the CONTRACTOR and the DEPARTMENT.

     3.   MANAGEMENT AND UTILIZATION AUDITS

          The MCO will allow the DEPARTMENT and the Department of Health and
          Human Services within HCFA to perform audits for identification and
          collection of management data, including Enrollee satisfaction data,
          quality of care data, patient outcome cost, and utilization data,
          which will include patient profiles, exception reports, etc. The
          CONTRACTOR will provide all data required by the DEPARTMENT or the
          independent quality review examiners in performance of these audits.
          Prior to beginning any audit, the DEPARTMENT will give the CONTRACTOR
          reasonable notice of audit, and the DEPARTMENT will be responsible for
          costs of its auditors or representatives.

F.   INDEPENDENT QUALITY REVIEW

     1.   IN GENERAL

          Pursuant to Section 1932(c)(2)(A) of the Social Security Act the
          DEPARTMENT will provide for an annual external independent review
          conducted by a qualified independent entity of the quality outcomes
          and timeliness of, and access to Covered Services. The CONTRACTOR will
          support the annual external independent review.

          The DEPARTMENT will choose an agency to perform an annual independent
          quality review pursuant to federal law and will pay for such review.
          The CONTRACTOR will maintain all clinical and administrative records
          for use by the quality review contractor.

          The CONTRACTOR agrees to support quality assurance reviews, focused
          studies and other projects performed for the DEPARTMENT by the
          external quality review organization (EQRO). The purpose of the
          reviews and studies are to comply with federal requirements for an
          annual independent audit of the quality outcomes and timeliness of,
          and access to Covered Services. The external independent reviews are
          conducted by the EQRO, with the advice, assistance, and cooperation of
          a planning team composed of representatives from the CONTRACTOR, the
          EQRO and the DEPARTMENT with final approval by the DEPARTMENT.

                                  Page 47 of 52

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     2.   SPECIFIC REQUIREMENTS

          a.   LIAISON FOR ROUTINE COMMUNICATION

               The CONTRACTOR will designate an individual to serve as liaison
               with the EQRO for routine communication with the EQRO.

          b.   REPRESENTATIVE TO ASSIST WITH PROJECTS

               The CONTRACTOR will designate a minimum of two representatives
               (unless one individual can service both functions) to serve on
               the planning team for each EQRO project. Representatives will
               include a quality improvement representative and a data
               representative. The planning team is a joint collaborative forum
               between DEPARTMENT staff, the EQRO and the CONTRACTOR. The role
               of the planning team is to participate in the process and
               completion of EQRO projects.

          c.   COPIES AND ON-SITE ACCESS

               The CONTRACTOR will be responsible for obtaining copies of
               Enrollee information and facilitating on-site access to Enrollee
               information as needed by the EQRO. Such information will be used
               to plan and conduct projects and to investigate complaints and
               grievances. Any associated copying costs are the responsibility
               of the CONTRACTOR. Enrollee information includes medical records,
               administrative data such as, but not limited to, enrollment
               information and claims, nurses' notes, medical logs, etc. of the
               CONTRACTOR or its providers.

          d.   FORMAT OF ENROLLEE FILES

               The CONTRACTOR will provide Enrollee information in a mutually
               agreed upon format compatible for the EQRO's use, and in a timely
               fashion to allow the EQRO to select cases for its review.

          e.   TIME-FRAME FOR PROVIDING DATA

               The CONTRACTOR will provide data requests to the EQRO within 15
               working days of the written request from the EQRO and will
               provide medical records within 30 working days of the written
               request from the EQRO. Requests for extensions of these time
               frames will be reviewed and approved or disapproved by the
               DEPARTMENT on a case-by-case basis.

          f.   WORK SPACE FOR ON-SITE REVIEWS

               The CONTRACTOR will assure that the EQRO staff and consultants
               have adequate work space, access to a telephone and copy machines
               at the time of review. The review will be performed during
               agreed-upon hours.

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          g.   STAFF ASSISTANCE DURING ON-SITE VISITS

               The CONTRACTOR will assign appropriate person(s) to assist the
               EQRO personnel conduct the reviews during on-site visits and to
               participate in an informal discussion of screening observations
               at the end of each on-site visit, if necessary.

          h.   CONFIDENTIALITY

               For information received from the EQRO, the CONTRACTOR will
               comply with the Department of Health and Human Services
               regulations relating to confidentiality of data and information
               (42 CFR Part 476.107 and 476.108).

                              ARTICLE X - SANCTIONS

     The DEPARTMENT may impose intermediate sanctions on the CONTRACTOR if the
     CONTRACTOR defaults in any manner in the performance of any obligation
     under this Contract including but not limited to the following situations:

     (1)  the CONTRACTOR fails to substantially provide Medically Necessary
          Covered Services to Enrollees;

     (2)  the CONTRACTOR imposes premiums or charges Enrollees in excess of the
          premiums or charges permitted under this Contract;

     (3)  the CONTRACTOR acts to discriminate among Enrollees on the basis of
          their health status or requirements for health care services,
          including expulsion or refusal to re-enroll an individual, except as
          permitted by Title XIX, or engaging in any practice that would
          reasonably be expected to have the effect of denying or discouraging
          enrollment with the MCO by potential enrollees whose medical condition
          or history indicates a need for substantial future medical services;

     (4)  the CONTRACTOR misrepresents or falsifies information furnished to the
          Health Care Financing Administration, the DEPARTMENT, an Enrollee,
          potential Enrollee or health care provider;

     (5)  the CONTRACTOR fails to comply with the physician incentive
          requirements under Section 1903(m)(2)(A)(x) of the Social Security
          Act.

     (6)  the CONTRACTOR distributed directly or through any agent or
          independent contractor marketing materials that contain false or
          misleading information.

     The DEPARTMENT must follow the 1997 Balance Budget Act guidelines on the
     types of intermediate sanctions the DEPARTMENT may impose, including civil
     monetary penalties, the appointment of temporary management, and suspension
     of payment.

                                  Page 49 of 52

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                    ARTICLE XI - TERMINATION OF THE CONTRACT

A.   AUTOMATIC TERMINATION

     This Contract will automatically terminate June 30, 2004.

B.   OPTIONAL YEAR-END TERMINATION

     At the end of each contract year, either party may terminate the Contract
     without cause for subsequent years by giving the other party written notice
     of termination at least 90 days prior to the end of the contract year (July
     1 through June 30).

C.   TERMINATION FOR FAILURE TO AGREE UPON RATES

     At least 60 days prior to the end of each contract year, the parties will
     meet and negotiate in good faith the rates (Attachment F) applicable to the
     upcoming year. If the parties cannot agree upon future rates by the end of
     the contract year, then either party may terminate the Contract for
     subsequent years by giving the other party written notice of termination
     and the termination will become effective 90 days after receipt of the
     written notice of termination.

D.   EFFECT OF TERMINATION

     1.   COVERAGE

          Inasmuch as the CONTRACTOR is paid on a monthly basis, the CONTRACTOR
          will continue providing the Covered Services required by this Contract
          until midnight of the last day of the calendar month in which the
          termination becomes effective. If an Enrollee is a patient in an
          inpatient hospital setting during the month in which termination
          becomes effective, the CONTRACTOR is responsible for the entire
          hospital stay including physician charges until discharge or thirty
          days following termination, whichever occurs first.

     2.   ENROLLEE NOT LIABLE FOR DEBTS OF CONTRACTOR OR ITS SUBCONTRACTORS

          If the CONTRACTOR or one of its subcontractors becomes insolvent or
          bankrupt, the Enrollees will not be liable for the debts of the
          CONTRACTOR or its subcontractor. The CONTRACTOR will include this term
          in all of its subcontracts.

     3.   INFORMATION FOR CLAIMS PAYMENT

          The CONTRACTOR will promptly supply to the DEPARTMENT all information
          necessary for the reimbursement of any Medicaid claims not paid by the
          CONTRACTOR.

     4.   CHANGES IN ENROLLMENT PROCESS

          The CONTRACTOR will be advised of anticipated changes in policies and
          procedures as they relate to the enrollment process and their comments
          will be solicited. The

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          CONTRACTOR agrees to be bound by such changes in policies and
          procedures unless they are not agreeable to the CONTRACTOR, in which
          case the CONTRACTOR may terminate the Contract in accordance with the
          Contract termination provisions.

     5.   HEARING PRIOR TO TERMINATION

          Regarding the General Provisions, Article XVII (Default, Termination,
          & Payment Adjustment), item 3, if the CONTRACTOR fails to meet the
          requirements of the Contract, the DEPARTMENT must give the CONTRACTOR
          a hearing prior to termination. Enrollees must be informed of the
          hearing and will be allowed to disenroll from the MCO without cause.

E.   ASSIGNMENT

     Assignment of any or all rights or obligations under this Contract without
     the prior written consent of the DEPARTMENT is prohibited. Sale of all or
     any part of the rights or obligations under this Contract will be deemed an
     assignment. Consent may be withheld in the DEPARTMENT's sole and absolute
     discretion.

                           ARTICLE XII - MISCELLANEOUS

A.   INTEGRATION

     This Contract contains the entire agreement between the parties with
     respect to the subject matter of this Contract. There are no
     representations, warranties, understandings, or agreements other than those
     expressly set forth herein. Previous contracts between the parties hereto
     and conduct between the parties which precedes the implementation of this
     Contract will not be used as a guide to the interpretation or enforcement
     of this Contract or any provision hereof.

B.   ENROLLEES MAY NOT ENFORCE CONTRACT

     Although this Contract relates to the provision of benefits for Enrollees
     and others, no Enrollee is entitled to enforce any provision of this
     Contract against the CONTRACTOR nor will any provision of this Contract be
     constructed to constitute a promise by the CONTRACTOR to any Enrollee or
     potential Enrollee.

C.   INTERPRETATION OF LAWS AND REGULATIONS

     The DEPARTMENT will be responsible for the interpretation of all federal
     and State laws and regulations governing or in any way affecting this
     Contract. When interpretations are required, the CONTRACTOR will submit
     written requests to the DEPARTMENT. The DEPARTMENT will retain full
     authority and responsibility for the administration of the Medicaid program
     in accordance with the requirements of Federal and State law.

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D.   ADOPTION OF RULES

     Adoption of rules by the DEPARTMENT, subsequent to this amendment, and
     which govern the Medicaid program, will be automatically incorporated into
     this Contract upon receipt by the CONTRACTOR of written notice thereof.

                   ARTICLE XIII - EFFECT OF GENERAL PROVISIONS

If there is a conflict between these Special Provisions (Attachment B) or the
General Provisions (Attachment A), then these Special Provisions will control.

                                  Page 52 of 52

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                         ATTACHMENT C - COVERED SERVICES

A.   IN GENERAL

     The CONTRACTOR will provide the following benefits to Enrollees in
     accordance with Medicaid benefits as defined in the Utah State Plan subject
     to the exception or limitations as noted below. The DEPARTMENT reserves the
     right to interpret what is in the State plan. Medicaid services can only be
     limited through utilization criteria based on Medical Necessity. The
     CONTRACTOR will provide at least the following benefits to Enrollees.

     The CONTRACTOR is responsible to provide or arrange for all Medically
     Necessary Covered Services on an emergency basis 24 hours each day, seven
     days a week. The CONTRACTOR is responsible for payment for all covered
     Emergency Services furnished by providers that do not have arrangements
     with the CONTRACTOR.

B.   HOSPITAL SERVICES

     1.   INPATIENT HOSPITAL

          Services furnished in a licensed, certified hospital.

     2.   OUTPATIENT HOSPITAL

          Services provided to Enrollees at a licensed, certified hospital who
          are not admitted to the hospital.

     3.   EMERGENCY DEPARTMENT SERVICES

          Emergency Services provided to Enrollees in designated hospital
          emergency departments.

C.   PHYSICIAN SERVICES

     Services provided directly by licensed physicians or osteopaths, or by
     other licensed professionals such as physician assistants, nurse
     practitioners, or nurse midwives under the physician's or osteopath's
     supervision.

D.   GENERAL PREVENTIVE SERVICES

     The CONTRACTOR must develop or adopt practice guidelines consistent with
     current standards of care, as recommended by professional groups such as
     the American Academy of Pediatric and the U.S. Task Force on Preventive
     Care.

     A minimum of three screening programs for prevention or early intervention
     (e.g. Pap Smear, diabetes, hypertension).

                                  Page 1 of 11

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E.   VISION CARE

     Services provided by licensed ophthalmologists or licensed optometrists,
     and opticians within their scope of practice. Eyeglasses will be provided
     to eligible recipients based on medical necessity. Services include, but
     are not limited to, the following:

     1.   Eye refractions, examinations
     2.   Laboratory work
     3.   Lenses
     4.   Eyeglass Frames
     5.   Repair of Frames
     6.   Repair or Replacement of Lenses
     7.   Contact Lenses (when Medically Necessary)

F.   LAB AND RADIOLOGY SERVICES

     Professional and technical laboratory and X-ray services furnished by
     licensed and certified providers. All laboratory testing sites, including
     physician office labs, providing services under this Contract will have
     either a Clinical Laboratory Improvement Amendments (CLIA) certificate of
     Waiver or a certificate of registration along with a CLIA identification
     number.

     Those laboratories with certificates of waiver will provide only the eight
     types of tests permitted under the terms of their waiver. Laboratories with
     certificates of registration may perform a full range of laboratory tests.

G.   PHYSICAL AND OCCUPATIONAL THERAPY

     1.   PHYSICAL THERAPY

          Treatment and services provided by a licensed physical therapist.
          Treatment and services must be authorized by a physician and include
          services prescribed by a physician or other licensed practitioner of
          the healing arts within the scope of his or her practice under State
          law and provided to an Enrollee by or under the direction of a
          qualified physical therapist. Necessary supplies and equipment will be
          reviewed for medical necessity and follow the criteria of the R414.12
          rule.

     2.   OCCUPATIONAL THERAPY

          Treatment of services provided by a licensed occupational therapist.
          Treatment and services must be authorized by a physician and include
          services prescribed by a physician or other licensed practitioner of
          the healing arts within the scope of his or her practice under State
          law and provided to an Enrollee by or under the direction of a
          qualified occupational therapist. Necessary supplies and equipment
          will be reviewed for medical necessity and follow the criteria of the
          R414.12 rule.

                                  Page 2 of 11

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H.   SPEECH AND HEARING SERVICES

     Services and appliances, including hearing aids and hearing aid batteries,
     provided by a licensed medical professional to test and treat speech
     defects and hearing loss.

I.   PODIATRY SERVICES

     Services provided by a licensed podiatrist.

J.   END STAGE RENAL DISEASE - DIALYSIS

     Treatment of end stage renal dialysis for kidney failure. Dialysis is to be
     rendered by a Medicare-certified Dialysis facility.

K.   HOME HEALTH SERVICES

     Home health services are defined as intermittent nursing care provided by
     certified nursing professionals (registered nurses, licensed practical
     nurses, and home health aides) in the client's home when the client is
     homebound or semi-homebound. Home health care must be rendered by a
     Medicare-certified Home Health Agency that has a surety bond.

     Personal care services as defined in the DEPARTMENT's Medicaid Personal
     Care Provider Manual are included in this Contract. Personal care services
     may be provided by a State licensed home health agency.

L.   HOSPICE SERVICES

     Services delivered to terminally ill patients (six months life expectancy)
     who elect palliative versus aggressive care. Hospice care is to be rendered
     by a Medicare-certified hospice.

M.   PRIVATE DUTY NURSING

     Services provided by licensed nurses for ventilator-dependent children and
     technology-dependent adults in their home in lieu of hospitalization if
     Medically Necessary, feasible, and safe to be provided in the patient's
     home. Requests for continuous care will be evaluated on a case by case
     basis and must be approved by the CONTRACTOR.

N.   MEDICAL SUPPLIES AND MEDICAL EQUIPMENT

     This Covered Service includes any necessary supplies and equipment used to
     assist the Enrollee's medical recovery, including both durable and
     non-durable medical supplies and equipment, and prosthetic devices. The
     objective of the medical supplies program is to provide supplies for
     maximum reduction of physical disability and restore the Enrollee to his or
     her best functional level. Medical supplies may include any necessary
     supplies and equipment recommended by a physical or occupational therapist,
     but should be ordered by a physician. Durable medical equipment includes,
     but is not limited to, prosthetic devices and specialized wheelchairs.
     Durable medical equipment and supplies must be provided by a durable
     medical

                                  Page 3 of 11

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     equipment supplier that has a surety bond. Necessary supplies and equipment
     will be reviewed for medical necessity and follow the criteria of the
     R414.12 of the Utah Administrative Code, with the exception of criteria
     concerning long term care since long term care services are not covered
     under the Contract.

O.   ABORTIONS AND STERILIZATIONS

     These services are provided to the extent permitted by Federal and State
     law and must meet the documentation requirement of 42 CFR 441, Subparts E
     and F. These requirements must be met regardless of whether Medicaid is
     primary or secondary payer.

P.   TREATMENT FOR SUBSTANCE ABUSE AND DEPENDENCY

     Treatment will cover medical detoxification for alcohol or substance abuse
     conditions. Medical services including hospital services will be provided
     for the medical non-psychiatric aspects of the conditions of alcohol/drug
     abuse.

Q.   ORGAN TRANSPLANTS

     The following transplantations are covered for all Enrollees: Kidney,
     liver, cornea, bone marrow, heart, intestine, lung, pancreas, small bowel,
     combination heart/lung, combination intestine/liver, combination
     kidney/pancreas, combination liver/kidney, multi visceral, and combination
     liver/small bowel unless amended under the provisions of Attachment B,
     Article IV (Benefits), Section C, Subsection 3 of this Contract.

R.   OTHER OUTSIDE MEDICAL SERVICES

     The CONTRACTOR, at its discretion and without compromising quality of care,
     may choose to provide services in Freestanding Emergency Centers, Surgical
     Centers and Birthing Centers.

S.   LONG TERM CARE

     The CONTRACTOR may provide long term care for Enrollees in skilled nursing
     facilities requiring such care as a continuum of a medical plan when the
     plan includes a prognosis of recovery and discharge within thirty (30) days
     or less. When the prognosis of an Enrollee indicates that long term care
     (over 30 days) will be required, the CONTRACTOR will notify the DEPARTMENT
     and the skilled nursing facility of the prognosis determination and will
     initiate disenrollment to be effective on the first day of the month
     following the prognosis determination. Skilled nursing care is to be
     rendered in a skilled nursing facility which meets federal regulations of
     participation.

T.   TRANSPORTATION SERVICES

     Ambulance (ground and air) service for medical emergencies. The CONTRACTOR
     is also responsible to pay for authorized emergency transportation for an
     illness or accident episode which, upon subsequent medical evaluation at
     the hospital, is determined to be psychiatric-related. The CONTRACTOR will
     submit its emergency transportation policy to the

                                  Page 4 of 11

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     DEPARTMENT for review. The CONTRACTOR is not responsible for transporting
     an Enrollee from an acute care facility to another acute care facility for
     a psychiatric admission. The CONTRACTOR's scope of coverage for emergency
     transportation services is limited to the same scope of coverage as defined
     in the transportation Medicaid provider manual.

U.   SERVICES TO CHEC ENROLLEES

     1.   CHEC SERVICES

          The CONTRACTOR will provide to CHEC Enrollees preventive screening
          services and other necessary medical care, diagnostic services,
          treatment, and other measures necessary to correct or ameliorate
          defects and physical and mental illnesses and conditions discovered by
          the screening services, whether or not such services are covered under
          the State Medicaid Plan. The CONTRACTOR is not responsible for home
          and community-based services available through Utah's Home and
          Community-Based waiver programs.

          The CONTRACTOR will provide the full early and periodic screening,
          diagnosis, and treatment services to all eligible children and young
          adults up to age 21 in accordance with the periodicity schedule as
          described in the Utah CHEC Provider Manual. All children between six
          months and 72 months must be screened for blood lead levels.

     2.   CHEC POLICIES AND PROCEDURES

          The CONTRACTOR agrees to have written policies and procedures for
          conducting tracking, follow-up, and outreach to ensure compliance with
          the CHEC periodicity schedules. These policies and procedures will
          emphasize outreach and compliance monitoring for children and young
          adults, taking into account the multi-lingual, multicultural nature as
          well as other unique characteristics of the CHEC Enrollees.

V.   FAMILY PLANNING SERVICES

     This service includes disseminating information, counseling, and treatments
     relating to family planning services. All services must be provided by or
     authorized by a physician, certified nurse midwife, or nurse practitioner.
     All services must be provided in concert with Utah law.

     Birth control services include information and instructions related to the
     following:

     1.   Birth control pills;
     2.   Norplant;
     3.   Depo Provera;
     4.   IUDs;
     5.   Barrier methods including diaphragms, male and female condoms, and
          cervical caps;
     6.   Vasectomy or tubal ligations; and
     7.   Office calls, examinations or counseling related to contraceptive
          devices.

                                  Page 5 of 11

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W.   HIGH-RISK PRENATAL SERVICES

     1.   IN GENERAL - ENSURE SERVICE ARE APPROPRIATE AND COORDINATED

          The CONTRACTOR must ensure that high risk pregnant Enrollees receive
          an appropriate level of quality perinatal care that is coordinated,
          comprehensive and continuous either by direct service or referral to
          an appropriate provider or facility. In the determination of the
          provider and facility to which a high risk prenatal Enrollee will be
          referred, care must be taken to ensure that the provider and facility
          both have the appropriate training, expertise and capability to
          deliver the care needed by the Enrollee and her fetus/infant. Although
          many complications in perinatal health cannot be anticipated, most can
          be identified early in pregnancy. Ideally, preconceptional counseling
          and planned pregnancy are the best ways to assure successful pregnancy
          outcome, but this is often not possible. Provision of routine
          preconceptional counseling must be made available to those women who
          have conditions identified as impacting pregnancy outcome, i.e.,
          diabetes mellitus, medications which may result in fetal anomalies or
          poor pregnancy outcome, or previous severe anomalous fetus/infant,
          among others.

     2.   RISK ASSESSMENT

          a.   CRITERIA

               Enrollees who are pregnant should be risk assessed for medical
               and psychosocial conditions which may contribute to a poor birth
               outcome at their first prenatal visit, preferably in the first
               trimester. The patient who is determined not to be at high risk
               should be evaluated for change in risk status throughout her
               pregnancy. There are a number of complex systems to determine how
               to assess the risk of pregnancies. The DEPARTMENT has developed a
               risk assessment tool available through the Division of Community
               and Family Health Services which is available upon request.

          b.   RECOMMENDED PRENATAL SCREENING

               The DEPARTMENT recommends prenatal screening of every woman for
               hepatitis B surface antigen (HBsAg) to identify all those at high
               risk for transmitting the virus to their newborns. When a woman
               is found to be HBsAg-positive, the CONTRACTOR will provide HBIG
               and HB vaccine at birth. Initial treatments should be given
               during the first 12 hours of life.

          c.   CLASSIFICATION

               Upon identification of pregnancy or the development of a risk
               factor, each patient should be assigned a classification as
               outlined below.

               1)   Group I
                    Group I patients have no significant risk factors. They may
                    receive obstetrical care by an obstetrician/gynecologist
                    (OB/GYN), family

                                  Page 6 of 11

<PAGE>

                    practitioner or certified nurse midwife.

               2)   Group II
                    Group II patients have the following risk factors, and
                    require consultation (consultation may be either by
                    telephone or in person, as appropriate) with an OB/GYN:

                    i.      pregnancy beyond 42 weeks
                    ii.     preterm labor in the current pregnancy less than 34
                            weeks
                    iii.    fetal malpresentation at 37 weeks gestation and
                            beyond*
                    iv.     oxytocin or antepartum prostaglandin use is
                            contemplated*
                    v.      arrest of dilatation in labor, or arrest of descent
                            in labor*
                    vi.     bleeding in labor, beyond bloody show*
                    vii.    abnormal fetal heart rate pattern potentially
                            requiring specific intervention*
                    viii.   chorioamnionitis*
                    ix.     preeclampsia
                    x.      VBAC*

                    *Criteria do not apply if family physician has cesarean
                    privileges.

               3.   Group III
                    Group III patients have the following risk factors, and
                    require consultation by a Maternal Fetal Medicine (MFM)
                    specialist (board certified perinatologist)

                    i.      intrauterine growth restriction prior to 37 weeks
                    ii.     patient at increased risk for fetal anomaly
                            (including teratogen exposure)
                    iii.    patient has known fetal anomaly

                    iv.     preterm delivery (less than 36 weeks) in a prior
                            pregnancy

                    v.      abnormal serum screening

                    vi.     previous child with congenital anomaly
                    vii.    antibody sensitization
                    viii.   anemia, excluding iron deficiency
                    ix.     significant concurrent medical illness
                    x.      spontaneous premature rupture of the membranes, not
                            in labor (less than 34 weeks)
                    xi.     history of thromboembolic disease
                    xii.    thromboembolic disease in current pregnancy
                    xiii.   habitual pregnancy loss (3 or more consecutive
                            losses)
                    xiv.    two or more previous stillbirths or neonatal deaths

               4.   Group IV
                    Group IV patients have the following risk factors, and
                    require total obstetric care by an OB/GYN, or co-management
                    with an OB/GYN or MFM

                                  Page 7 of 11

<PAGE>

                    i.      any significant medical complication, including
                            patients with insulin dependent diabetes millitus,
                            chronic hypertension requiring medication, maternal
                            neoplastic disease
                    ii.     twins
                    iii.    known or suspected cervical incompetence
                    iv.     placenta previa beyond 28 week gestation
                    v.      severe preeclampsia

               5.   Group V
                    Group V patients have the following risk factors, and
                    require total obstetric care by a MFM (exceptions may be
                    made by a regional MFM specialist, on a case-by-case basis,
                    after MFM consultation)

                    i.      triplets and above
                    ii.     patient has an organ transplant (except cornea)
                    iii.    diabetes mellitus with severe renal impairment
                    iv.     cardiac disease, not functional class I, including
                            all pulmonary hypertension
                    v.      twin-twin transfusion syndrome
                    vi.     patient requires fetal surgical procedure

     3.   PRENATAL INITIATIVE PROGRAM

          Prenatal services provided directly or through agreements with
          appropriate providers includes those services covered under Medicaid's
          Prenatal Initiative Program which includes the following enhanced
          services for pregnant women:

          a.   perinatal care coordination
          b.   prenatal and postnatal home visits
          c.   group prenatal and postnatal education
          d.   nutritional assessment and counseling
          e.   prenatal and postnatal psychosocial counseling

          Psychosocial counseling is a service designed to benefit the pregnant
          client by helping her cope with the stress that may accompany her
          pregnancy. Enabling her to manage this stress improves the likelihood
          that she will have a healthy pregnancy. This counseling is intended to
          be short term and directly related to the pregnancy. However, pregnant
          women who are also suffering from a serious emotional or mental
          illness should be referred to an appropriate mental health care
          provider.

X.   SERVICES FOR CHILDREN WITH SPECIAL NEEDS

     1.   IN GENERAL

          In addition to primary care, children with chronic illnesses and
          disabilities need specialized care provided by trained experienced
          professionals. Since early diagnosis and intervention will prevent
          costly complications later on, the specialized care must be provided
          in a timely manner. The specialized care must comprehensively address
          all

                                  Page 8 of 11

<PAGE>

          areas of need to be most effective and must be coordinated with
          primary care and other services to be most efficient. The children's
          families must be involved in the planning and delivery of the care for
          it to be acceptable and successful.

     2.   SERVICES REQUIRING TIMELY ACCESS

          All children with special health care needs must have timely access to
          the following services:

          a.   Comprehensive evaluation for the condition.

          b.   Pediatric subspecialty consultation and care appropriate to the
               condition.

          c.   Rehabilitative services provided by professionals with pediatric
               training in areas such as physical therapy, occupational therapy
               and speech therapy.

          d.   Durable medical equipment appropriate for the condition.

          e.   Care coordination for linkage to early intervention, special
               education and family support services and for tracking progress.

          In addition, children with the conditions marked by * below must have
          timely access to coordinated multispecialty clinics, when Medically
          Necessary, for their disorder.

     3.   DEFINITION OF CHILDREN WITH SPECIAL HEALTH CARE NEEDS

          The definition of children with special health needs includes, but is
          not limited to, the following conditions:

          a.   Nervous System Defects such as
               Spina Bifida*
               Sacral Agenesis*
               Hydrocephalus

          b.   Craniofacial Defects such as
               Cleft Lip and Palate*
               Treacher - Collins Syndrome

          c.   Complex Skeletal Defects such as
               Arthrogryposis*
               Osteogenesis Imperfecta*
               Phocomelia*

          d.   Inborn Metabolic Disorders such as
               Phenylketonuria*
               Galactosemia*

                                  Page 9 of 11

<PAGE>

          e.   Neuromotor Disabilities such as
               Cerebral palsy*
               Muscular Dystrophy*
               Complex Seizure Disorders

          f.   Congenital Heart Defects

          g.   Genetic Disorders such as
               Chromosome Disorders
               Genetic Disorders

          h.   Chronic Illnesses such as
               Cystic Fibrosis
               Hemophilia
               Rheumatoid Arthritis
               Bronchopulmonary Dysplasia
               Cancer
               Diabetes
               Nephritis
               Immune Disorders

          i.   Developmental Disabilities with multiple or global delays in
               development such as Down Syndrome or other conditions associated
               with mental retardation.

          The CONTRACTOR agrees to cover all Medically Necessary services for
          children with special health care needs such as the ones listed above.
          The CONTRACTOR further agrees to cooperate with the DEPARTMENTS
          quality assurance monitoring for this population by providing
          requested information.

Y.   MEDICAL AND SURGICAL SERVICES OF A DENTIST

     1.   WHO MAY PROVIDE SERVICES

          Under Utah law, medical and surgical services of a dentist may be
          provided by either a physician or a doctor of dental medicine or
          dental surgery.

     2.   UNIVERSE OF COVERED SERVICES

          Medical and surgical services that under Utah law may be provided by a
          physician or a doctor of dental medicine or dental surgery, are
          covered under the Contract.

     3.   SERVICES SPECIFICALLY COVERED

          Palliative care and pain relief for severe mouth or tooth pain in an
          emergency room are covered services. The CONTRACTOR is responsible for
          authorized/approved medical services provided by oral surgeons
          consistent with injury, accident, or disease including, but not
          limited to, removal of tumors in the mouth, setting and wiring a
          fractured jaw. If

                                  Page 10 of 11

<PAGE>

          the emergency room physician determines that it is not an emergency
          and the client requires services at a lesser level, the provider
          should refer the client to a dentist for treatment. If the
          dental-related problem is serious enough for the client to be admitted
          to the hospital the CONTRACTOR is responsible for coverage of the
          inpatient hospital stay.

     4.   DENTAL SERVICES NOT COVERED

          The CONTRACTOR is not responsible for services that are usually
          considered dental such as fillings, pulling of teeth, treatment of
          abscess or infection, orthodontics, and pain relief when provided by a
          dentist in the office or in an outpatient setting such as surgical
          center or scheduled same day surgery in a hospital.

Z.   DIABETES EDUCATION

     The CONTRACTOR shall provide diabetes self-management education from a Utah
     certified or American Diabetes Association recognized program when an
     Enrollee:

     1.   has recently been diagnosed with diabetes, or

     2.   is determined by the health care professional to have experienced a
          significant change in symptoms, progression of the disease or health
          condition that warrants changes in the Enrollee's self-management
          plan, or

     3.   is determined by the health care professional to require re-education
          or refresher training.

AA. HIV PREVENTION

     The CONTRACTOR shall have in place the following:

     1.   GENERAL PROGRAM

          The CONTRACTOR must have educational methods for promoting HIV
          prevention to Enrollees. HIV prevention information, both primary
          (targeted to uninfected Enrollees), as well as secondary (targeted to
          those Enrollees with HIV) should must be culturally and linguistically
          appropriate. All Enrollees should be informed of the availability of
          both in-plan HIV counseling and testing services, as well as those
          available from Utah State-operated programs.

     2.   FOCUSED PROGRAM FOR WOMEN

          Special attention should be paid identifying HIV+ women and engaging
          them in routine care in order to promote treatment including, but not
          limited to, antiretroviral therapy during pregnancy.

                                  Page 11 of 11

<PAGE>

                      ATTACHMENT D - QUALITY ASSURANCE AND
                             UTILIZATION MANAGEMENT

A.   QUALITY OF CARE

     1.   IN GENERAL

          The CONTRACTOR will establish a written quality assurance plan, an
          annual quality improvement work plan, and a plan for utilization
          management for covered services. All plans should show evidence of a
          well defined, organized program designed to improve client care, to
          monitor over utilization and under utilization, and to identify and
          correct aberrant provider behavior. Prior to the effective date of the
          Contract, all plans must be reviewed by the DEPARTMENT.

     2.   REQUIRED ELEMENTS OF PLANS

          Together, all plans will:

          a.   Show systematic surveillance and assessment of all modes of
               delivery by appropriate health professionals;

          b.   Show mechanisms and/or designation of individuals with specific
               responsibility to resolve identified problems;

          c.   Provide for monitoring to assure that resolution is achieved and
               maintained with documentary evidence of same;

          d.   Require use of written, clinically sound criteria to enhance
               client services and assure sound clinical performance by health
               care deliveries;

          e.   Result in identification of important client service problems or
               potential problems including utilization of service patterns by
               provider and recipient;

          f.   Monitor the effectiveness of the client grievance process; and

          g.   Be in accordance with the Code of Federal Regulations, Title 42,
               and the Utah State Title XIX Plan. Adherence to the points and
               conditions of Attachment D will assure compliance with this
               requirement unless modified by addendum to this attachment for
               specific services.

B.   INTERNAL MONITORING

     1.   IN GENERAL
          In   order to assess medical necessity, appropriateness, quality of
          care, and timeliness of service, the CONTRACTOR will monitor
          services to all Enrollees in accordance with the CONTRACTOR's
          written quality assurance plans.

                                   Page 1 of 6

<PAGE>

     2.   ELEMENTS OF INTERNAL QUALITY ASSURANCE PLAN

          The CONTRACTOR will provide for an internal quality assurance plan
          that:

          a.   Is consistent with the utilization control requirement of part
               456 of 42 CFR;

          b.   Provides for review by appropriate health professionals of the
               process followed in providing health services;

          c.   Provides for systematic data collection of performance and
               patient results;

          d.   Provides for interpretation of this data to the practitioners;
               and

          e.   Provides for making needed changes.

     3.   DEMONSTRATION OF HIGH QUALITY HEALTH CARE

          Provision of high-quality health care services will be demonstrated
          by:

          a.   Adequate and appropriate diagnostic procedures;

          b.   Treatment necessary and relevant to the working diagnosis;

          c.   Appropriate consultation(s);

          d.   Patient compliance with treatment;

          e.   Continuity of care with adequate transfer of information between
               health care providers;

          f.   Appropriate, accurate, and complete client records;

          g.   Patient satisfaction;

          h.   Accessibility and availability of services including Emergency
               Services;

          i.   Patient instruction in self-care, prevention and the use of
               medications and therapies.

          j.   The utilization of the least invasive and most cost-effective
               resources when possible;

          k.   The use of ancillary services consistent with patients' needs;
               and

          l.   Conducting Enrollee satisfaction surveys at least annually.

                                   Page 2 of 6

<PAGE>

C.   QUALITY ASSURANCE MONITORING

     1.   OBJECTIVE

          The objective of the quality assurance monitoring process is to ensure
          compliance to State and Federal policies, rules and regulations;
          adherence to community standards; and integrity of Medicaid payments
          made for medical services provided to eligible recipients under the
          CONTRACTOR.

     2.   MONITORING OF PROVIDERS AND RECIPIENTS NECESSARY TO ACHIEVE OBJECTIVE

          a.   The CONTRACTOR will report all cases of program abuse or
               suspected abusive or fraudulent behavior by either providers or
               recipients.

          b.   The CONTRACTOR will inform the DEPARTMENT in writing when a
               provider is removed from the CONTRACTOR's panel for reasons
               relating to quality of care concerns.

          c.   The CONTRACTOR will take appropriate, effective and coordinated
               action on all such information.

          d.   The CONTRACTOR will make reasonable efforts, pursuant to the
               CONTRACTOR's standard procedures, to correct the behavior of
               providers or recipients violating program regulations or
               exhibiting inappropriate program utilization;

          e.   Report to the DEPARTMENT, in writing, any providers or recipients
               who fail to correct aberrant practices and continue to abuse the
               program;

          f.   Ensure that funds do not continue to be disbursed in the presence
               of evidence indicating such practices; and

          g.   Attempt to recover any funds improperly disbursed, as a result of
               such practices.

D.   THE DEPARTMENT'S QUALITY ASSURANCE MONITORING PLAN

     The DEPARTMENT will review the CONTRACTOR for compliance to standards
     defined in the Division of Health Care Financing's MCO Quality Assurance
     Monitoring Plan (Attachment G).

E.   CORRECTIVE ACTION

     1.   WHEN CORRECTIVE ACTIONS ARE NECESSARY

          The CONTRACTOR agrees to implement corrective action as specified by
          the DEPARTMENT when quality assurance monitoring including but not
          limited to site reviews, CONTRACTOR documentation reviews, data
          analysis, medical audits, or complaints/grievances, determines the
          need for such corrective action. In addition, if the

                                   Page 3 of 6

<PAGE>

          DEPARTMENT determines that the CONTRACTOR has not provided services in
          accordance with the Contract or within expected professional
          standards, the DEPARTMENT will request in writing that the CONTRACTOR
          correct deficiencies or identified problems by developing a corrective
          action plan.

     2.   INITIAL RESPONSE BY CONTRACTOR

          The CONTRACTOR has 20 working days from the date the DEPARTMENT mails,
          through certified mail, its written request for the CONTRACTOR to
          respond to the problems identified and will either

          a.   submit a corrective action plan,

          b.   submit a letter summarizing the CONTRACTOR's disagreements with
               the DEPARTMENT's findings, or

          c.   request, in writing, an extension of the 20-day time frame. The
               CONTRACTOR may only request an extension if it determines it will
               conduct a medical records review or there are other extenuating
               circumstances.

          If the CONTRACTOR fails to respond in one of the above ways, the
          CONTRACTOR will be subject the following sanction:

               A $500 penalty for each working day, beginning on the
               first day after the 20-day time period has expired, and
               continuing until the day a corrective action plan is
               submitted to the DEPARTMENT.

     3.   SUBMISSION OF CORRECTIVE ACTION TO DEPARTMENT

          a.   ACCEPTANCE OF CORRECTIVE ACTION PLAN

               If the CONTRACTOR submits a corrective action plan to the
               DEPARTMENT within 20 working days (or other agreed upon time
               frame) and the DEPARTMENT accepts the corrective action plan, the
               DEPARTMENT will send written notice to the CONTRACTOR officially
               approving the corrective action plan.

          b.   WHEN CORRECTIVE ACTION PLAN REQUIRES REVISIONS

               If the CONTRACTOR submits a corrective action plan, but the
               DEPARTMENT determines the corrective action plan requires
               revisions, the CONTRACTOR will have 20 working days to submit a
               revised plan from the date the DEPARTMENT mails, through
               certified mail, the request for a revised plan. The DEPARTMENT's
               letter will state the specific revisions to be made in the
               corrective action plan.

               If the CONTRACTOR is unable or unwilling to submit to the
               DEPARTMENT within the established time frame, a revised
               corrective action plan containing the

                                   Page 4 of 6

<PAGE>

               DEPARTMENT's requested revisions, the CONTRACTOR will be subject
               to the following sanction:

                    A $500 penalty for each working day, beginning on
                    the first day after the 20-day time period has
                    expired, and continuing until the day a corrective
                    action plan is submitted to the DEPARTMENT.

     4.   INITIAL APPEAL OF DEPARTMENT'S FINDINGS

          If the CONTRACTOR disagrees with the DEPARTMENT's findings and wishes
          to appeal those findings, the CONTRACTOR will submit in writing to the
          DEPARTMENT within the established time frame a detailed explanation of
          the disagreement. If the DEPARTMENT agrees with the CONTRACTOR, the
          DEPARTMENT will provide written notification of its decision and will
          withdraw the request for a corrective action plan.

          If the DEPARTMENT upholds its request for a corrective plan, the
          CONTRACTOR has 20 days from the date the DEPARTMENT mails, through
          certified mail, a letter upholding its request for a corrective action
          plan to submit a corrective action plan. If the CONTRACTOR does not
          submit a corrective action plan within that time frame, the CONTRACTOR
          will be subject to the following sanction:

               A $500 penalty for each working day, beginning on the
               first day after the 20-day time period has expired, and
               continuing until the day a corrective action plan is
               submitted.

     5.   FORMAL HEARING

          If the DEPARTMENT upholds its decision that a corrective action plan
          is required, the CONTRACTOR may file a request for a formal hearing
          with the DEPARTMENT within 30 days from the date the DEPARTMENT mails,
          through certified mail, a letter upholding its decision. If the $500
          penalty has begun, it will discontinue once the DEPARTMENT receives
          the formal hearing request from the CONTRACTOR.

          If the outcome of the formal hearing is in favor of the CONTRACTOR,
          the DEPARTMENT will provide the CONTRACTOR with written notification
          that a corrective action plan is no longer required. The DEPARTMENT
          will reimburse the CONTRACTOR any penalties the CONTRACTOR has paid to
          the DEPARTMENT that accrued beginning on day 21 from the date the
          DEPARTMENT mails, through certified mail, the request for a corrective
          action plan and ending on the day the request for a formal hearing is
          received by the DEPARTMENT.

          If the outcome of the formal hearing is in favor of the DEPARTMENT,
          the CONTRACTOR will submit a corrective action plan, as determined by
          the formal hearing decision, within 20 days of the date of the hearing
          decision, otherwise the CONTRACTOR will be subject to the following
          sanction:

                                   Page 5 of 6

<PAGE>

               A $500 penalty for each working day, beginning on the
               first day after the 20-day time period has expired, and
               continuing until the day a corrective action plan that
               complies with the formal hearing decision is submitted
               to the DEPARTMENT. If the DEPARTMENT determines that
               the corrective action plan requires revisions, the
               CONTRACTOR will again be subject to a S500 penalty for
               each working day beginning on the first day after the
               DEPARTMENT verbally notifies the CONTRACTOR that the
               corrective action plan requires revisions and
               continuing until the day the DEPARTMENT receives the
               corrective action plan containing the DEPARTMENT's
               required revisions.

     6.   CONTRACTOR UNWILLING OR UNABLE TO IMPLEMENT CORRECTIVE ACTION PLAN

          If the CONTRACTOR is unwilling or unable to implement the corrective
          action plan to the satisfaction of the DEPARTMENT, the CONTRACTOR will
          be subject to the following sanction:

               A $500 penalty for each working day, beginning on the
               first day after the DEPARTMENT verbally notifies the
               CONTRACTOR that the corrective action plan has not been
               implemented, and continuing until the day the
               CONTRACTOR successfully demonstrates to the DEPARTMENT
               that it has implemented the plan. Following the
               DEPARTMENT's verbal notification, the DEPARTMENT will
               mail, through certified mail, a letter stating the
               penalty has been invoked.

          The CONTRACTOR will be apprized of its right to request a formal
          hearing. If the CONTRACTOR decides to formally appeal the DEPARTMENT's
          decision that the corrective action plan has not been implemented,
          then the procedures detailed in number 2 above apply. If the outcome
          of the formal hearing is in favor of the DEPARTMENT, penalties will
          resume on the date of the formal hearing decision and continue until
          the CONTRACTOR complies with the decision of the formal hearing.

     7.   COLLECTION OF FINANCIAL PENALTIES

          The DEPARTMENT may deduct any financial penalties assessed by the
          DEPARTMENT from the monthly payment to the CONTRACTOR.

F.   FEDERAL SANCTIONS FOR COMPREHENSIVE CONTRACTS

     Per 42 CFR 434.22, payments made to the CONTRACTOR by the DEPARTMENT under
     this Contract will be denied for new Enrollees when, and for so long as,
     payment for those Enrollees are denied by the Health Care Financing
     Administration for the reasons and the manner specified under 42 CFR
     434.67(e).

                                   Page 6 of 6

<PAGE>

<TABLE>
<S>                         <C>                                                <C>                                    <C>
PROVIDER NAME:              ________________________________________________       ATTACHMENT E                       ATTACHMENT E
SERVICE REPORTING PERIOD:     BEGINNING_______________  ENDING  ____________    TABLE 1 PAGE 1 OF 1                        TABLE 1
PAYMENT DATES:                BEGINNING_______________  ENDING  ____________   MEDICAID ENROLLMENT                    Page 1 of 15
</TABLE>

<TABLE>
<CAPTION>
  1         2          3          4           5           6           7         8       9         10       11      12       13
----------------------------------------------------------------------------------------------------------------------------------
                                 AFDC                    AFDC
                                 MALE                   FEMALE
 LINE               INFANTS      LESS                    LESS
                                 THAN        AFDC        THAN
                                21 YEARS     MALE       21 YEARS                                                        NON AFDC
                                GREATER                  GREATER    AFDC                                  MED     MED   PREGNANT
                                 THAN                      THAN     FEMALE           DISABLED  DISABLED   NEEDY   NEEDY   FEMALE
  NO      MONTH     0-12 MOS    12 MOS    21 + YEARS     12 MOS   21 + YEARS   AGED    MALE     FEMALE    CHILD   OTHER  (SOBRA)
----------------------------------------------------------------------------------------------------------------------------------
 <S>    <C>                <C>         <C>         <C>         <C>         <C>    <C>       <C>       <C>     <C>     <C>       <C>
  1     JULY
----------------------------------------------------------------------------------------------------------------------------------
  2     AUGUST
----------------------------------------------------------------------------------------------------------------------------------
  3     SEPTEMBER
----------------------------------------------------------------------------------------------------------------------------------
  4     OCTOBER
----------------------------------------------------------------------------------------------------------------------------------
  5     NOVEMBER
----------------------------------------------------------------------------------------------------------------------------------
  6     DECEMBER
----------------------------------------------------------------------------------------------------------------------------------
  7     JANUARY
----------------------------------------------------------------------------------------------------------------------------------
  8     FEBRUARY
----------------------------------------------------------------------------------------------------------------------------------
  9     MARCH
----------------------------------------------------------------------------------------------------------------------------------
 10     APRIL
----------------------------------------------------------------------------------------------------------------------------------
 11     MAY
----------------------------------------------------------------------------------------------------------------------------------
 12     JUNE
----------------------------------------------------------------------------------------------------------------------------------
 13     TOTAL              0           0           0           0           0      0         0         0       0       0         0
----------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
  1         2            14          15           16
------------------------------------------------------------
                                               MEDICAID
                                                 TOTAL
 LINE                RESTRICTION             (SUM OF COLS
  NO      MONTH        CLIENTS      AIDS       3 THRU 15)
------------------------------------------------------------
 <S>    <C>                    <C>     <C>               <C>
  1     JULY                                             0
------------------------------------------------------------
  2     AUGUST                                           0
------------------------------------------------------------
  3     SEPTEMBER                                        0
------------------------------------------------------------
  4     OCTOBER                                          0
------------------------------------------------------------
  5     NOVEMBER                                         0
------------------------------------------------------------
  6     DECEMBER                                         0
------------------------------------------------------------
  7     JANUARY                                          0
------------------------------------------------------------
  8     FEBRUARY                                         0
------------------------------------------------------------
  9     MARCH                                            0
------------------------------------------------------------
 10     APRIL                                            0
------------------------------------------------------------
 11     MAY                                              0
------------------------------------------------------------
 12     JUNE                                             0
------------------------------------------------------------
 13     TOTAL                  0       0                 0
------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                         <C>                                                 <C>                                   <C>
PROVIDER NAME:              ________________________________________________       ATTACHMENT E                       ATTACHMENT E
SERVICE REPORTING PERIOD:     BEGINNING_______________  ENDING  ____________    TABLE 2 PAGE 1 OF 2                        TABLE 2
PAYMENT DATES:                BEGINNING_______________  ENDING  ____________    REVENUES AND COST                     Page 2 of 15
</TABLE>

<TABLE>
<CAPTION>
                                              ----------------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-----------------
  1                  2                          3             4            5             6            7            8          9
------------------------------------------------------------------------------------------------------------------------------------
                                            TOTAL UTAH                     AFDC                      AFDC
                                            OPERATIONS                     MALE                     FEMALE
                                                                           LESS                      LESS
                                                                           THAN                      THAN
LINE                                        (INCLUDING     INFANTS      21 YEARS                   21 YEARS
                                                                         GREATER       AFDC         GREATER       AFDC
                                                                           THAN        MALE           THAN       FEMALE
 NO              DESCRIPTION               ALL MEDICAID)   0-12 MOS      12 MOS      21 + YEARS     12 MOS     21 + YEARS    AGED
------------------------------------------------------------------------------------------------------------------------------------
               REVENUES                                                  ROUND TO THE NEAREST DOLLAR
------------------------------------------------------------------------------------------------------------------------------------
 <S>  <C>                                            <C>         <C>           <C>          <C>          <C>          <C>      <C>
------------------------------------------------------------------------------------------------------------------------------------
 1    PREMIUMS
------------------------------------------------------------------------------------------------------------------------------------
 2    DELIVERY FEES (CHILD BIRTH)
------------------------------------------------------------------------------------------------------------------------------------
 3    REINSURANCE
------------------------------------------------------------------------------------------------------------------------------------
 4    STOP LOSS
------------------------------------------------------------------------------------------------------------------------------------
 5    TPL COLLECTIONS - MEDICARE
------------------------------------------------------------------------------------------------------------------------------------
 6    TPL COLLECTIONS - OTHER
------------------------------------------------------------------------------------------------------------------------------------
 7    OTHER (SPECIFY)
------------------------------------------------------------------------------------------------------------------------------------
 8    OTHER (SPECIFY)
------------------------------------------------------------------------------------------------------------------------------------
 9    TOTAL REVENUES                                 $ 0         $ 0           $ 0          $ 0          $ 0          $ 0      $ 0
------------------------------------------------------------------------------------------------------------------------------------
            MEDICAL COSTS                                                ROUND TO THE NEAREST DOLLAR
------------------------------------------------------------------------------------------------------------------------------------
 10   INPATIENT HOSPITAL SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 11   OUTPATIENT HOSPITAL SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 12   EMERGENCY DEPARTMENT SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 13   PRIMARY CARE PHYSICIAN SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 14   SPECIALTY CARE PHYSICIAN SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 15   ADULT SCREENING SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 16   VISION CARE - OPTOMETRIC SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 17   VISION CARE - OPTICAL SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 18   LABORATORY (PATHOLOGY) SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 19   RADIOLOGY SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 20   PHYSICAL AND OCCUPATIONAL THERAPY
------------------------------------------------------------------------------------------------------------------------------------
 21   SPEECH AND HEARING SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 22   PODIATRY SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 23   END STAGE RENAL DISEASE
       (ESRD) SERVICES-DIALYSIS
------------------------------------------------------------------------------------------------------------------------------------
 24   HOME HEALTH SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 25   HOSPICE SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 26   PRIVATE DUTY NURSING
------------------------------------------------------------------------------------------------------------------------------------
 27   MEDICAL SUPPLIES AND MEDICAL
       EQUIPMENT
------------------------------------------------------------------------------------------------------------------------------------
 28   ABORTIONS
------------------------------------------------------------------------------------------------------------------------------------
 29   STERILIZATIONS
------------------------------------------------------------------------------------------------------------------------------------
 30   DETOXIFICATION
------------------------------------------------------------------------------------------------------------------------------------
 31   ORGAN TRANSPLANTS
------------------------------------------------------------------------------------------------------------------------------------
 32   OTHER OUTSIDE MEDICAL SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 33   LONG TERM CARE
------------------------------------------------------------------------------------------------------------------------------------
 34   TRANSPORTATION SERVICES
------------------------------------------------------------------------------------------------------------------------------------
 35   OTHER (SPECIFY)
------------------------------------------------------------------------------------------------------------------------------------
 36   TOTAL MEDICAL COSTS                            $ 0         $ 0           $ 0          $ 0          $ 0          $ 0      $ 0
------------------------------------------------------------------------------------------------------------------------------------

<CAPTION>

                                              ----------------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-----------------
                                              10         11        12      13        14          15           16           17
----------------------------------------------------------------------------------------------------------------------------------
                                                                                  NON AFDC                              MEDICAID
                                                                   MED     MED    PREGNANT                                TOTAL
LINE                                        DISABLED   DISABLED   NEEDY   NEEDY    FEMALE    RESTRICTION              (SUM OF COLS
 NO              DESCRIPTION                  MALE      FEMALE    CHILD   OTHER   (SOBRA)      CLIENTS       AIDS       4 THRU 16)
----------------------------------------------------------------------------------------------------------------------------------
                 REVENUES                                                ROUND TO THE NEAREST DOLLAR
----------------------------------------------------------------------------------------------------------------------------------
 <S>  <C>                                        <C>        <C>     <C>     <C>        <C>            <C>      <C>             <C>
 1    PREMIUMS                                                                                                                 $ 0
----------------------------------------------------------------------------------------------------------------------------------
 2    DELIVERY FEES (CHILD BIRTH)                                                                                              $ 0
----------------------------------------------------------------------------------------------------------------------------------
 3    REINSURANCE                                                                                                              $ 0
----------------------------------------------------------------------------------------------------------------------------------
 4    STOP LOSS                                                                                                                $ 0
----------------------------------------------------------------------------------------------------------------------------------
 5    TPL COLLECTIONS - MEDICARE                                                                                               $ 0
----------------------------------------------------------------------------------------------------------------------------------
 6    TPL COLLECTIONS - OTHER                                                                                                  $ 0
----------------------------------------------------------------------------------------------------------------------------------
 7    OTHER (SPECIFY)                                                                                                          $ 0
----------------------------------------------------------------------------------------------------------------------------------
 8    OTHER (SPECIFY)                                                                                                          $ 0
----------------------------------------------------------------------------------------------------------------------------------
 9    TOTAL REVENUES                             $ 0        $ 0     $ 0     $ 0        $ 0            $ 0      $ 0             $ 0
----------------------------------------------------------------------------------------------------------------------------------
              MEDICAL COSTS                                              ROUND TO THE NEAREST DOLLAR
----------------------------------------------------------------------------------------------------------------------------------
 10   INPATIENT HOSPITAL SERVICES                                                                                              $ 0
----------------------------------------------------------------------------------------------------------------------------------
 11   OUTPATIENT HOSPITAL SERVICES                                                                                             $ 0
----------------------------------------------------------------------------------------------------------------------------------
 12   EMERGENCY DEPARTMENT SERVICES                                                                                            $ 0
----------------------------------------------------------------------------------------------------------------------------------
 13   PRIMARY CARE PHYSICIAN SERVICES                                                                                          $ 0
----------------------------------------------------------------------------------------------------------------------------------
 14   SPECIALTY CARE PHYSICIAN SERVICES                                                                                        $ 0
----------------------------------------------------------------------------------------------------------------------------------
 15   ADULT SCREENING SERVICES                                                                                                 $ 0
----------------------------------------------------------------------------------------------------------------------------------
 16   VISION CARE - OPTOMETRIC SERVICES                                                                                        $ 0
----------------------------------------------------------------------------------------------------------------------------------
 17   VISION CARE - OPTICAL SERVICES                                                                                           $ 0
----------------------------------------------------------------------------------------------------------------------------------
 18   LABORATORY (PATHOLOGY) SERVICES                                                                                          $ 0
----------------------------------------------------------------------------------------------------------------------------------
 19   RADIOLOGY SERVICES                                                                                                       $ 0
----------------------------------------------------------------------------------------------------------------------------------
 20   PHYSICAL AND OCCUPATIONAL THERAPY                                                                                        $ 0
----------------------------------------------------------------------------------------------------------------------------------
 21   SPEECH AND HEARING SERVICES                                                                                              $ 0
----------------------------------------------------------------------------------------------------------------------------------
 22   PODIATRY SERVICES                                                                                                        $ 0
----------------------------------------------------------------------------------------------------------------------------------
 23   END STAGE RENAL DISEASE
       (ESRD) SERVICES-DIALYSIS                                                                                                $ 0
----------------------------------------------------------------------------------------------------------------------------------
 24   HOME HEALTH SERVICES                                                                                                     $ 0
----------------------------------------------------------------------------------------------------------------------------------
 25   HOSPICE SERVICES                                                                                                         $ 0
----------------------------------------------------------------------------------------------------------------------------------
 26   PRIVATE DUTY NURSING                                                                                                     $ 0
----------------------------------------------------------------------------------------------------------------------------------
 27   MEDICAL SUPPLIES AND MEDICAL
       EQUIPMENT                                                                                                               $ 0
----------------------------------------------------------------------------------------------------------------------------------
 28   ABORTIONS                                                                                                                $ 0
----------------------------------------------------------------------------------------------------------------------------------
 29   STERILIZATIONS                                                                                                           $ 0
----------------------------------------------------------------------------------------------------------------------------------
 30   DETOXIFICATION                                                                                                           $ 0
----------------------------------------------------------------------------------------------------------------------------------
 31   ORGAN TRANSPLANTS                                                                                                        $ 0
----------------------------------------------------------------------------------------------------------------------------------
 32   OTHER OUTSIDE MEDICAL SERVICES                                                                                           $ 0
----------------------------------------------------------------------------------------------------------------------------------
 33   LONG TERM CARE                                                                                                           $ 0
----------------------------------------------------------------------------------------------------------------------------------
 34   TRANSPORTATION SERVICES                                                                                                  $ 0
----------------------------------------------------------------------------------------------------------------------------------
 35   OTHER (SPECIFY)                                                                                                          $ 0
----------------------------------------------------------------------------------------------------------------------------------
 36   TOTAL MEDICAL COSTS                        $ 0        $ 0     $ 0     $ 0        $ 0            $ 0      $ 0             $ 0
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                                                                             <C>                                 <C>
PROVIDER NAME:                                                      ATTACHMENT E                                    ATTACHMENT E

SERVICE REPORTING PERIOD:                                        TABLE 2 PAGE 2 OF 2                                     TABLE 2

PAYMENT DATES:                                                   REVENUES AND COST                                  Page 3 of 15
</TABLE>

<TABLE>
<CAPTION>

                                              ----------------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-----------------
  1                   2                         3             4            5             6            7            8          9
----------------------------------------------------------------------------------------------------------------------------------
                                            TOTAL UTAH                     AFDC                       AFDC
                                            OPERATIONS                     MALE                      FEMALE
                                                                           LESS                       LESS
                                                                           THAN                       THAN
LINE                                        (INCLUDING     INFANTS       21 YEARS                   21 YEARS
                                                                          GREATER       AFDC         GREATER      AFDC
                                                                            THAN        MALE           THAN      FEMALE
 NO              DESCRIPTION               ALL MEDICAID)   0-12 MOS       12 MOS     21 + YEARS      12 MOS     21 + YEARS    AGED
----------------------------------------------------------------------------------------------------------------------------------
            ADMINISTRATIVE COSTS                                         ROUND TO THE NEAREST DOLLAR
----------------------------------------------------------------------------------------------------------------------------------
 <S>                                                 <C>         <C>           <C>          <C>          <C>          <C>      <C>

----------------------------------------------------------------------------------------------------------------------------------
 37   ADMINISTRATION - ADVERTISING
----------------------------------------------------------------------------------------------------------------------------------
 38   HOME OFFICE INDIRECT COST
       ALLOCATIONS
----------------------------------------------------------------------------------------------------------------------------------
 39   UTILIZATION
----------------------------------------------------------------------------------------------------------------------------------
 40   ADMINISTRATION - OTHER
----------------------------------------------------------------------------------------------------------------------------------
 41   TOTAL ADMINISTRATIVE COSTS                     $ 0         $ 0           $ 0          $ 0          $ 0          $ 0      $ 0
----------------------------------------------------------------------------------------------------------------------------------
 42   TOTAL COSTS (MED & ADMIN)                      $ 0         $ 0           $ 0          $ 0          $ 0          $ 0      $ 0
----------------------------------------------------------------------------------------------------------------------------------
 43   NET INCOME [Gain or (Loss)]                    $ 0         $ 0           $ 0          $ 0          $ 0          $ 0      $ 0
----------------------------------------------------------------------------------------------------------------------------------
 44   ENROLLEE MONTHS                                              0             0            0            0            0        0
----------------------------------------------------------------------------------------------------------------------------------
 45   MEDICAL COST @ ENROLLEE MO
0----------------------------------------------------------------------------------------------------------------------------------
 46   ADMIN COST @ ENROLLEE MO
----------------------------------------------------------------------------------------------------------------------------------
 47   TOTAL COST @ ENROLLEE MO
----------------------------------------------------------------------------------------------------------------------------------
               OTHER DATA
------------------------------------------                ------------------------------------------------------------------------
 48   TPL SAVINGS - COST AVOIDANCE **
------------------------------------------                ------------------------------------------------------------------------
 49   DUPLICATE PREMIUMS ***
------------------------------------------                ------------------------------------------------------------------------
 50   NUMBER OF DELIVERIES ****
------------------------------------------                ------------------------------------------------------------------------
 51   FAMILY PLANNING SERVICES
------------------------------------------                ------------------------------------------------------------------------
 52   REINSURANCE PREMIUMS RECEIVED
------------------------------------------                ------------------------------------------------------------------------
 53   REINSURANCE PREMIUMS PAID
------------------------------------------                ------------------------------------------------------------------------
 54   ADMINISTRATIVE REVENUE
       RETAINED BY THE CONTRACTOR
------------------------------------------                ------------------------------------------------------------------------

<CAPTION>

                                              ----------------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-----------------
                                              10         11        12      13        14          15           16           17
----------------------------------------------------------------------------------------------------------------------------------
                                                                                  NON AFDC                              MEDICAID
                                                                   MED     MED    PREGNANT                                TOTAL
LINE                                        DISABLED   DISABLED   NEEDY   NEEDY    FEMALE    RESTRICTION              (SUM OF COLS
 NO              DESCRIPTION                  MALE      FEMALE    CHILD   OTHER   (SOBRA)      CLIENTS       AIDS       4 THRU 16)
----------------------------------------------------------------------------------------------------------------------------------
            ADMINISTRATIVE COSTS                                         ROUND TO THE NEAREST DOLLAR
----------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>        <C>     <C>     <C>        <C>           <C>        <C>            <C>
 37   ADMINISTRATION - ADVERTISING                                                                                             $ 0
----------------------------------------------------------------------------------------------------------------------------------
 38   HOME OFFICE INDIRECT COST
       ALLOCATIONS                                                                                                             $ 0
----------------------------------------------------------------------------------------------------------------------------------
 39   UTILIZATION                                                                                                              $ 0
----------------------------------------------------------------------------------------------------------------------------------
 40   ADMINISTRATION - OTHER                                                                                                   $ 0
----------------------------------------------------------------------------------------------------------------------------------
 41   TOTAL ADMINISTRATIVE COSTS                 $ 0        $ 0     $ 0     $ 0        $ 0           $ 0        $ 0            $ 0
----------------------------------------------------------------------------------------------------------------------------------
 42   TOTAL COSTS (MED & ADMIN)                  $ 0        $ 0     $ 0     $ 0        $ 0           $ 0        $ 0            $ 0
----------------------------------------------------------------------------------------------------------------------------------
 43   NET INCOME [Gain or (Loss)]                $ 0        $ 0     $ 0     $ 0        $ 0           $ 0        $ 0            $ 0
----------------------------------------------------------------------------------------------------------------------------------
 44   ENROLLEE MONTHS                              0          0       0       0          0             0          0              0
----------------------------------------------------------------------------------------------------------------------------------
 45   MEDICAL COST @ ENROLLEE MO
----------------------------------------------------------------------------------------------------------------------------------
 46   ADMIN COST @ ENROLLEE MO
----------------------------------------------------------------------------------------------------------------------------------
 47   TOTAL COST @ ENROLLEE MO
----------------------------------------------------------------------------------------------------------------------------------
               OTHER DATA
----------------------------------------------------------------------------------------------------------------------------------
 48   TPL SAVINGS - COST AVOIDANCE **                                                                                          $ 0
----------------------------------------------------------------------------------------------------------------------------------
 49   DUPLICATE PREMIUMS ***                                                                                                   $ 0
----------------------------------------------------------------------------------------------------------------------------------
 50   NUMBER OF DELIVERIES ****                                                                                                  0
----------------------------------------------------------------------------------------------------------------------------------
 51   FAMILY PLANNING SERVICES                                                                                                 $ 0
----------------------------------------------------------------------------------------------------------------------------------
 52   REINSURANCE PREMIUMS RECEIVED                                                                                            $ 0
----------------------------------------------------------------------------------------------------------------------------------
 53   REINSURANCE PREMIUMS PAID                                                                                                $ 0
----------------------------------------------------------------------------------------------------------------------------------
 54   ADMINISTRATIVE REVENUE
       RETAINED BY THE CONTRACTOR                                                                                              $ 0
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

**   COST OF SERVICES PROVIDED TO HMO CLIENTS, NOT PAID FOR BY HMO,
     E.G."AVOIDED", BECAUSE OTHER INSURANCE PAID FOR IT.
***  CASH AMOUNT RETURNED TO MEDICAID BY HMO BECAUSE HMO CLIENT WAS
     COVERED IN THE SAME HMO BY ANOTHER CARRIER.
**** NUMBER OF CHILDREN DELIVERED. THIS NUMBER TIMES RATES SHOULD EQUAL
     DELIVERY REVENUE.

     In this Medicaid portion, include only costs for Medicaid clients under the
     capitation agreement - exclude revenue, costs & TPL categories per this
     form that do not apply to your organization or contract.

<PAGE>

                                                                    Attachment E
                                                                    Page 4 of 15

            MEDICAL SERVICES REVENUE AND COST DEFINITIONS FOR TABLE 2

REVENUES (Report all revenues received or receivable at the end-of-period date
on the form)

1.   Premiums

     Report premium payments received or receivable from the DEPARTMENT.

2.   Delivery Fees

     Report the delivery fee received or receivable from the DEPARTMENT.

3.   Reinsurance

     Report the reinsurance payments received or receivable from the REINSURANCE
     CARRIER (See Attachment F, Section D, Items 1 and 2).

4.   Stop Loss

     Report stop loss payments received or receivable from the DEPARTMENT (See
     Attachment F, Section D, Item 2).

5.   TPL Collections - Medicare

     Report all third party collections received from Medicare.

6.   TPL Collections - Other

     Report all third party collections received other than Medicare
     collections. (Report TPL savings because of cost avoidance as a memo amount
     on line 48).

7.   Other (specify)

8.   Other (specify)

     For lines seven and eight: Report all other revenue not included in lines
     one through six. (There may not be any amount to report; however, this line
     can be used to report revenue from total Utah operations that do not fit
     lines one through six.)

9.   TOTAL REVENUES

     Total lines one through eight.

NOTE: Duplicate premiums are not considered a cost or revenue as they are
collected by the CONTRACTOR and paid to the DEPARTMENT. Therefore, the payment
to the DEPARTMENT would reduce or offset the revenue recorded when the duplicate
premium was received. However, line 49 has been established for reporting
duplicate premiums as a memo amount.

<PAGE>

                                                                    Attachment E
                                                                    Page 5 of 15

MEDICAL COSTS: Report all costs accrued as of the ending date on the form. In
the first data column (column 3), report all costs for Utah operations per the
general ledger. In the 14 Medicaid data columns (columns 4 through 17), report
only costs for Medicaid Enrollees.

10.  Inpatient Hospital Services

     Costs incurred in providing inpatient hospital services to Enrollees
     confined to a hospital.

11.  Outpatient Hospital Services

     Costs incurred in providing outpatient hospital services to Enrollees, not
     including services provided in the emergency department.

12.  Emergency Department Services

     Costs incurred in providing outpatient hospital emergency room services to
     Enrollees.

13.  Primary Care Physician Services (Including EPSDT Services, Prenatal Care,
     and Family Planning Services)

     All costs incurred for Enrollees as a result of providing primary care
     physician, osteopath, physician assistant, nurse practitioner, and nurse
     midwife services, including payroll expenses, any capitation and/or
     contract payments, fee-for-service payments, fringe benefits, travel and
     office supplies.

14.  Specialty Care Physician Services (Including EPSDT Services, Prenatal Care,
     and Family Planning Services)

     All costs incurred as a result of providing specialty care physician,
     osteopath, physician assistant, nurse practitioner, and nurse midwife
     services to Enrollees, including payroll expenses, any capitation and/or
     contract payments, fee-for-service payments, fringe benefits, travel and
     office supplies.

15.  Adult Screening Services

     Expenses associated with providing screening services to Enrollees.

16.  Vision Care - Optometric Services

     Included are payroll costs, any capitation and/or contract payments, and
     fee-for-service payments for services and procedures performed by an
     optometrist and other non-payroll expenses directly related to providing
     optometric services for Enrollees.

17.  Vision Care - Optical Services

     Included are payroll costs, any capitation and/or contract payments and
     fee-for-service payments for services and procedures performed by an
     optician and other supportive staff, cost of eyeglass frames and lenses and
     other non-payroll expenses directly related to providing optical services
     for Enrollees.

<PAGE>

                                                                    Attachment E
                                                                    Page 6 of 15

18.  Laboratory (Pathology) Services

     Costs incurred as a result of providing pathological tests or services to
     Enrollees including payroll expenses, any capitation and/or contract
     payments, fee-for-service payments and other expenses directly related to
     in-house laboratory services. Excluded are costs associated with a hospital
     visit.

19.  Radiology Services

     Cost incurred in providing x-ray services to Enrollees, including x-ray
     payroll expenses, any capitation and/or contract payments, fee-for-service
     payments, and occupancy overhead costs. Excluded are costs associated with
     a hospital visit.

20.  Physical and Occupational Therapy

     Included are payroll costs, any capitation and/or contract payments,
     fee-for-service costs, and other non-payroll expenditures directly related
     to providing physical and occupational therapy services.

21.  Speech and Hearing Services

     Payroll costs, any capitation and/or contract payments, fee-for-service
     payments, and non-payroll costs directly related to providing speech and
     hearing services for Enrollees.

22.  Podiatry Services

     Salary expenses or outside claims, capitation and/or contract payments,
     fee-for-service payments, and non-payroll costs directly related to
     providing services rendered by a podiatrist to Enrollees.

23.  End Stage Renal Disease (ESRD) Services - Dialysis

     Costs incurred in providing renal dialysis (ESRD) services to Enrollees.

24.  Home Health Services

     Included are payroll costs, any capitation and/or contract payments,
     fee-for-service payments, and other non-payroll expenses directly related
     to providing home health services for Enrollees.

25.  Hospice Services

     Expenses related to hospice care for Enrollees including home care, general
     inpatient care for Enrollees suffering terminal illness and inpatient
     respite care for caregivers of Enrollees suffering terminal illness.

26.  Private Duty Nursing

     Expenses associated with private duty nursing for Enrollees.

<PAGE>

                                                                    Attachment E
                                                                    Page 7 of 15

27.  Medical Supplies and Medical Equipment

     This cost center contains fee-for-service cost for outside acquisition of
     medical requisites, special appliances as prescribed by the CONTRACTOR to
     Enrollees.

28.  Abortions

     Medical and hospital costs incurred in providing abortions for Enrollees.

29.  Sterilizations

     Medical and hospital costs incurred in providing sterilizations for
     Enrollees.

30.  Detoxification

     Medical and hospital costs incurred in providing treatment for substance
     abuse and dependency (detoxification) for Enrollees.

31.  Organ Transplants

     Medical and hospital costs incurred in providing transplants for Enrollees.

32.  Other Outside Medical Services

     The costs for specialized testing and outpatient surgical centers for
     Enrollees ordered by the CONTRACTOR.

33.  Long Term Care

     Costs incurred in providing long-term care for Enrollees required under
     Attachment C.

34.  Transportation Services

     Costs incurred in providing ambulance (ground and air) services for
     Enrollees.

35.  Other

     Report costs not otherwise reported.

36.  TOTAL MEDICAL COSTS

     Total lines 10 through 35.

<PAGE>

                                                                    Attachment E
                                                                    Page 8 of 15

ADMINISTRATIVE COSTS

Report payroll costs, any capitation and/or contract payments, non-payroll costs
and occupancy overhead costs for accounting services, claims processing
services, health plan services, data processing services, purchasing, personnel,
Medicaid marketing and regional administration.

Report the administration cost under four categories - advertising, home office
indirect cost allocation, utilization and all other administrative costs. If
there are no advertising costs or indirect home office cost allocations, report
a zero amount in the applicable lines.

37.  Administration - Advertising

38.  Home Office Indirect Cost Allocations

39.  Utilization

     Payroll cost and any capitation and/or contract payments for utilization
     staff and other non-payroll costs directly associated with controlling and
     monitoring outside physician referral and hospital admission and discharges
     of Enrollees.

40.  Administration - Other

41.  TOTAL ADMINISTRATIVE COSTS

     Total lines 37 through 40.

42.  TOTAL COSTS (Medical and Administrative)

     Total lines 36 and 41.

43.  NET INCOME (Gain or Loss)

     Line 9 minus line 42.

44.  ENROLLEE MONTHS

     Total Enrollee months for period of time being reported.

45.  MEDICAL COSTS PER ENROLLEE MONTH

     Line 36 divided by line 44.

46.  ADMINISTRATIVE COSTS PER ENROLLEE MONTH

     Line 41 divided by line 44.

47.  TOTAL COSTS PER ENROLLEE MONTH

     Line 42 divided by line 44.

<PAGE>

                                                                    Attachment E
                                                                    Page 9 of 15

OTHER DATA

48.  TPL Savings - Cost Avoidance

49.  Duplicate Premiums

     Include all premiums received for Enrollees from all sources other than
     Medicaid.

50.  Number of Deliveries

     Total number of Enrollee deliveries when the delivery occurred at 24 weeks
     or later.

51.  Family Planning Services

     Include costs associated with family planning services as defined in
     Attachment C (Covered Services, Section V, Family Planning Services).

52.  Reinsurance Premiums Received

     Include the reinsurance premiums received or receivable from the
     DEPARTMENT.

53.  Reinsurance Premiums Paid.

     Include reinsurance premiums paid to the REINSURANCE CARRIER.

54.  Administrative Revenue Retained by the CONTRACTOR

     Include the administrative revenue retained by the CONTRACTOR from the
     reinsurance premiums received or receivable from the DEPARTMENT.

<PAGE>

<TABLE>
<S>                         <C>                                                 <C>                                    <C>
PROVIDER NAME:              ______________________________________________        ATTACHMENT E                          ATTACHMENT E

SERVICE REPORTING PERIOD:   BEGINNING_______________  ENDING  ____________      TABLE 3 PAGE 1 OF 1                          TABLE 3

PAYMENT DATES:              BEGINNING_______________  ENDING  ____________         UTILIZATION                         Page 10 of 15
</TABLE>

<TABLE>
<CAPTION>
                                                     -----------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-------------
  1                   2                                    3             4            5           6            7          8
--------------------------------------------------------------------------------------------------------------------------------
                                                                                              AFDC
                                                                   AFDC MALE                  FEMALE
                                                                   LESS THAN                  LESS THAN
                   SERVICE                                         21 YEARS                   21 YEARS
                 DESCRIPTION                                       GREATER                    GREATER         AFDC
 LINE  (REFER TO THE UNIT OF SERVICE)                   INFANTS    THAN           AFDC MALE   THAN           FEMALE
  NO   DEFINITIONS IN THE INSTRUCTIONS)                 0-12 MOS   12 MOS        21 + YEARS   12 MOS        21 + YEARS   AGED
--------------------------------------------------------------------------------------------------------------------------------
 <S>   <C>
   1   HOSPITAL SERVICES - GENERAL DAYS
--------------------------------------------------------------------------------------------------------------------------------
   2   HOSPITAL SERVICES - DISCHARGES
--------------------------------------------------------------------------------------------------------------------------------
   3   HOSPITAL SERVICES - OUTPATIENT VISITS
--------------------------------------------------------------------------------------------------------------------------------
   4   EMERGENCY DEPARTMENT VISITS
--------------------------------------------------------------------------------------------------------------------------------
   5   PRIMARY CARE PHYSICIAN SERVICES
--------------------------------------------------------------------------------------------------------------------------------
   6   SPECIALTY CARE PHYSICIAN SERVICES
--------------------------------------------------------------------------------------------------------------------------------
   7   ADULT SCREENING SERVICES
--------------------------------------------------------------------------------------------------------------------------------
   8   VISION CARE - OPTOMETRIC SERVICES
--------------------------------------------------------------------------------------------------------------------------------
   9   VISION CARE - OPTICAL SERVICES
--------------------------------------------------------------------------------------------------------------------------------
  10   LABORATORY (PATHOLOGY) PROCEDURES
--------------------------------------------------------------------------------------------------------------------------------
  11   RADIOLOGY PROCEDURES
--------------------------------------------------------------------------------------------------------------------------------
  12   PHYSICAL AND OCCUPATIONAL THERAPY SERVICES
--------------------------------------------------------------------------------------------------------------------------------
  13   SPEECH AND HEARING SERVICES
--------------------------------------------------------------------------------------------------------------------------------
  14   PODIATRY SERVICES
--------------------------------------------------------------------------------------------------------------------------------
  15   END STAGE RENAL DISEASE (ESRD) SERVICES - DIALYSIS
--------------------------------------------------------------------------------------------------------------------------------
  16   HOME HEALTH SERVICES
--------------------------------------------------------------------------------------------------------------------------------
  17   HOSPICE DAYS
--------------------------------------------------------------------------------------------------------------------------------
  18   PRIVATE DUTY NURSING SERVICES
--------------------------------------------------------------------------------------------------------------------------------
  19   MEDICAL SUPPLIES AND MEDICAL EQUIPMENT
--------------------------------------------------------------------------------------------------------------------------------
  20   ABORTIONS PROCEDURES
--------------------------------------------------------------------------------------------------------------------------------
  21   STERILIZATION PROCEDURES
--------------------------------------------------------------------------------------------------------------------------------
  22   DETOXIFICATION DAYS
--------------------------------------------------------------------------------------------------------------------------------
  23   ORGAN TRANSPLANTS
--------------------------------------------------------------------------------------------------------------------------------
  24   OTHER OUTSIDE MEDICAL SERVICES
--------------------------------------------------------------------------------------------------------------------------------
  25   LONG TERM CARE FACILITY DAYS
--------------------------------------------------------------------------------------------------------------------------------
  26   TRANSPORTATION TRIPS
--------------------------------------------------------------------------------------------------------------------------------
  27   OTHER (SPECIFY)
--------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
                                                     -----------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-------------
  1                   2                                  9          10        11     12      13         14        15        16
----------------------------------------------------------------------------------------------------------------------------------
                   SERVICE                                                                NON AFDC  RESTRICTION          MEDICAID
                 DESCRIPTION                                                 MED    MED   PREGNANT    CLIENTS             TOTAL
 LINE  (REFER TO THE UNIT OF SERVICE)                 DISABLED   DISABLED   NEEDY  NEEDY   FEMALE   RESTRICTION       (SUM OF COLS
  NO   DEFINITIONS IN THE INSTRUCTIONS)                 MALE      FEMALE    CHILD  OTHER   (SOBRA)    CLIENTS    AIDS   3 THRU 15)
----------------------------------------------------------------------------------------------------------------------------------
 <S>   <C>                                                                                                                       <C>
   1   HOSPITAL SERVICES - GENERAL DAYS                                                                                          0
----------------------------------------------------------------------------------------------------------------------------------
   2   HOSPITAL SERVICES - DISCHARGES                                                                                            0
----------------------------------------------------------------------------------------------------------------------------------
   3   HOSPITAL SERVICES - OUTPATIENT VISITS                                                                                     0
----------------------------------------------------------------------------------------------------------------------------------
   4   EMERGENCY DEPARTMENT VISITS                                                                                               0
----------------------------------------------------------------------------------------------------------------------------------
   5   PRIMARY CARE PHYSICIAN SERVICES                                                                                           0
----------------------------------------------------------------------------------------------------------------------------------
   6   SPECIALTY CARE PHYSICIAN SERVICES                                                                                         0
----------------------------------------------------------------------------------------------------------------------------------
   7   ADULT SCREENING SERVICES                                                                                                  0
----------------------------------------------------------------------------------------------------------------------------------
   8   VISION CARE - OPTOMETRIC SERVICES                                                                                         0
----------------------------------------------------------------------------------------------------------------------------------
   9   VISION CARE - OPTICAL SERVICES                                                                                            0
----------------------------------------------------------------------------------------------------------------------------------
  10   LABORATORY (PATHOLOGY) PROCEDURES                                                                                         0
----------------------------------------------------------------------------------------------------------------------------------
  11   RADIOLOGY PROCEDURES                                                                                                      0
----------------------------------------------------------------------------------------------------------------------------------
  12   PHYSICAL AND OCCUPATIONAL THERAPY SERVICES                                                                                0
----------------------------------------------------------------------------------------------------------------------------------
  13   SPEECH AND HEARING SERVICES                                                                                               0
----------------------------------------------------------------------------------------------------------------------------------
  14   PODIATRY SERVICES                                                                                                         0
----------------------------------------------------------------------------------------------------------------------------------
  15   END STAGE RENAL DISEASE (ESRD) SERVICES -
        DIALYSIS                                                                                                                 0
----------------------------------------------------------------------------------------------------------------------------------
  16   HOME HEALTH SERVICES                                                                                                      0
----------------------------------------------------------------------------------------------------------------------------------
  17   HOSPICE DAYS                                                                                                              0
----------------------------------------------------------------------------------------------------------------------------------
  18   PRIVATE DUTY NURSING SERVICES                                                                                             0
----------------------------------------------------------------------------------------------------------------------------------
  19   MEDICAL SUPPLIES AND MEDICAL EQUIPMENT                                                                                    0
----------------------------------------------------------------------------------------------------------------------------------
  20   ABORTIONS PROCEDURES                                                                                                      0
----------------------------------------------------------------------------------------------------------------------------------
  21   STERILIZATION PROCEDURES                                                                                                  0
----------------------------------------------------------------------------------------------------------------------------------
  22   DETOXIFICATION DAYS                                                                                                       0
----------------------------------------------------------------------------------------------------------------------------------
  23   ORGAN TRANSPLANTS                                                                                                         0
----------------------------------------------------------------------------------------------------------------------------------
  24   OTHER OUTSIDE MEDICAL SERVICES                                                                                            0
----------------------------------------------------------------------------------------------------------------------------------
  25   LONG TERM CARE FACILITY DAYS                                                                                              0
----------------------------------------------------------------------------------------------------------------------------------
  26   TRANSPORTATION TRIPS                                                                                                      0
----------------------------------------------------------------------------------------------------------------------------------
  27   OTHER (SPECIFY)                                                                                                           0
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE: MEDICAL REQUISITIONS HAS BEEN DITCHED!!

                                  ATTACHMENT E
                                     TABLE 3

                                  Page 10 of 15

<PAGE>

                                                                    Attachment E
                                                                   Page 11 of 15

              MEDICAL SERVICES UTILIZATION DEFINITIONS FOR TABLE 3

MEDICAL SERVICES

1.   Hospital Services - General Days

     Record total number of inpatient hospital days associated with inpatient
     medical care.

2.   Hospital Services - Discharges

     Record total number of inpatient hospital discharges.

3.   Hospital Services - Outpatient Visits

     Record total number of outpatient visits.

4.   Emergency Department Visits

     Record total number of emergency room visits

5.   Primary Care Physician Services

     Number of services and procedures defined by CPT-4 codes provided by
     primary care physicians or licensed physician extenders or assistants under
     direct supervision of a physician inclusive of all services except
     radiology, laboratory and injections/immunizations which should be reported
     in their appropriate section. The reporting of data under this category
     includes both outpatient and inpatient services.

6.   Specialty Care Physician Services

     Number of services and procedures defined by CPT-4 codes provided by
     specialty care physicians or licensed physician extenders or assistants
     under direct supervision of a physician inclusive of all services except
     radiology, laboratory and injections/immunizations which should be reported
     in their appropriate section. The reporting of data under this category
     includes both outpatient and inpatient services.

7.   Adult Screening Services

     Number of adult screenings performed.

8.   Vision Care - Optometric Services

     Number of optometric services and procedures performed by an optometrist.

9.   Vision Care - Optical Services

     Number of eye glasses and contact lenses dispensed.

<PAGE>

                                                                    Attachment E
                                                                   Page 12 of 15

10.  Laboratory (Pathology) Procedures

     Number of procedures defined by CPT-4 Codes under the Pathology and
     Laboratory section. Excluded are services performed in conjunction with a
     hospital outpatient or emergency department visit.

11.  Radiology Procedures

     Number of procedures defined by CPT-4 Codes under the Radiology section.
     Excluded are services performed in conjunction with a hospital outpatient
     or emergency department visit.

12.  Physical and Occupational Therapy Services

     Physical therapy refers to physical and occupational therapy services and
     procedures performed by a physician or physical therapist.

13.  Speech and Hearing Services

     Number of services and procedures.

14.  Podiatry Services

     Number of services and procedures.

15.  End Stage Renal Disease (ESRD) Services - Dialysis

     Number of ESRD procedures provided upon referral.

16.  Home Health Services

     Number of home health visits, such as skilled nursing, home health aide,
     and personal care aide visits.

17.  Hospice Days

     Number of days hospice care is provided, including respite care.

18.  Private Duty Nursing Services

     Hours of skilled care delivered.

19.  Medical Supplies and Medical Equipment

     Durable medical equipment such as wheelchairs, hearing aids, etc., and
     nondurable supplies such as oxygen etc.

20.  Abortion Procedures

     Number of procedures performed.

<PAGE>

                                                                    Attachment E
                                                                   Page 13 of 15

21.  Sterilization Procedures

     Number of procedures performed.

22.  Detoxification Days

     Days of inpatient detoxification.

23.  Organ Transplants

     Number of transplants.

24.  Other Outside Medical Services

     Specialized testing and outpatient surgical services ordered by IHC.

25.  Long Term Care Facility Days

     Total days associated with long-term care.

26.  Transportation Trips

     Number of ambulance trips.

27.  Other (specify)

<PAGE>

                                  ATTACHMENT E
                               TABLE 4 PAGE 1 OF 1
                        MEDICAID MALPRACTICE INFORMATION

PROVIDER NAME:            ______________________________________________________

SERVICE REPORTING PERIOD: BEGINNING ___________  ENDING ____________

ORGANIZATIONS NAMED IN THE MALPRACTICE CLAIM:

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

MEDICAL PROFESSIONALS SPECIFIED:

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

LOCATIONS WHERE CLAIMS ORIGINATED:

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

MEDICAID CLIENT IDENTIFICATION:

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

DATES OF SERVICE:

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

AWARDS TO MEDICAID CLIENTS - AMOUNTS & DATES PAID

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

HMO'S DIRECT COSTS (IF ANY)

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

ATTACH A SUMMARY OF FACTS FOR EACH CASE, DESCRIBING THE CLAIM, THE CAUSES,
CIRCUMSTANCES, ETC.

                                  ATTACHMENT E
                                     TABLE 4

                                  Page 14 of 15

<PAGE>

                                                                    Attachment E
                                                                   Page 15 of 15

The information reported on this form should come from known malpractice cases
of the MCO providers. This may only be applicable if the MCO was named as a
participant in the malpractice suit. However, if suits against MCO providers are
known, provide us with information on the Medicaid client(s) involved and any
large settlements paid when the information is available.

<PAGE>

                   ATTACHMENT F - RATES AND RATE-RELATED TERMS

                             Effective July 1, 1999

                              AMERICAN FAMILY CARE

A.   PREMIUM RATES

     1.   MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS

------------------------------------------------------------------------------
    Age       TANF Male   TANF Male    TANF Female    TANF Female
   0 to1       1 to 21    21 & Over      1 to 21       21 & Over       Aged
==============================================================================
  $ [*]        $  [*]      $   [*]       $  [*]         $  [*]        $ [*]
------------------------------------------------------------------------------

------------------------------------------------------------------------------
  Disabled   Disabled   Medically     Medically       Non TANF     Restriction
    Male      Female   Needy Child   Needy Adult      Pregnant F     Program
==============================================================================
  $ [*]        $  [*]      $   [*]       $  [*]         $  [*]        $ [*]
------------------------------------------------------------------------------

     2.   SPECIAL RATE

          An AIDS rate of $[*] per month will be paid in addition to the regular
          monthly premium when the T-Cell count is below 200.

B.   PER DELIVERY REIMBURSEMENT SCHEDULE

     The DEPARTMENT shall reimburse the CONTRACTOR $[*] per delivery to cover
     all Medically Necessary antepartum care, delivery, and postpartum
     professional, facility and ancillary services. The monthly premium amount
     for the enrollee is in addition to the delivery fee. The delivery payment
     will be made when the delivery occurs at 22 weeks or later, regardless of
     viability.

C.   CHEC SCREENING INCENTIVE CLAUSE

     1.   CHEC SCREENING GOAL

          The CONTRACTOR will ensure that Medicaid children have access to
          appropriate well-child visits. The CONTRACTOR will follow the Utah
          EPSDT (CHEC) guidelines for the periodicity schedule for well-child
          protocol. The federal agency, Health Care Financing Administration,
          mandates that all states have 80% of all children screened. The
          DEPARTMENT and the CONTRACTOR will work toward that goal.

                                   Page 1 of 3

<PAGE>

     2.   CALCULATION OF CHEC INCENTIVE PAYMENT

          The DEPARTMENT will pay the CONTRACTOR $[*] for each percentage point
          over 60% achieved by the CONTRACTOR. The DEPARTMENT will calculate the
          CONTRACTOR's annual participation rate based on information supplied
          by the CONTRACTOR under the EPSDT (CHEC) reporting requirements at the
          same time each federal fiscal year's HCFA-416 is calculated. Payment
          will be based on the percentages determined at that time.

     3.   CONTRACTOR'S USE OF INCENTIVE PAYMENT

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the EPSDT (CHEC)
          participation rate.

D.   STOP-LOSS/REINSURANCE POLICY

     Stop-loss under item #1 below will be administered by a reinsurer,
     TransAmerica Occidental Life Insurance Company (TransAmerica). TransAmerica
     will partially administer stop-loss under item #2 below.

     1.   REINSURANCE (all services including kidney, liver, and cornea and
          excluding specific organ transplantations defined in D.2. below)

          Costs, net of TPL, for all inpatient and outpatient services listed in
          Attachment C (including kidney, liver, and cornea transplantations,
          but excluding bone marrow, heart, intestine, lung, pancreas, small
          bowel, combination heart/lung, combination intestine/liver,
          combination kidney/pancreas, multi visceral, combination liver/small
          bowel, any additional approved transplantations) that are covered on
          the date of service rendered and incurred from July 1, 1999 through
          June 30, 2000 by the MCO for an Enrollee shall be shared by
          Transamerica under the following conditions:

          a.   the date of service is from July 1, 1999 through June 30, 2000
               (based on date of discharge if inpatient hospital stay);

          b.   paid claims incurred by the MCO exceed $50,000; and

          c.   services shall have been incurred by the MCO during the time the
               client is enrolled with the MCO.

          If the above conditions are met, TransAmerica shall bear [*]% and the
          MCO shall bear [*]% of the amount that exceeds $50,000.

     2.   STOP-LOSS/REINSURANCE FOR SPECIFIC ORGAN TRANSPLANTATIONS

          Costs, net of TPL, for bone marrow, heart, intestine, lung, pancreas,
          small bowel, combination heart/lung, combination intestine/liver,
          combination kidney/pancreas, multi visceral, combination liver/small
          bowel, and any additional approved transplantations (other than
          kidney, liver, and cornea) that are covered on the date of service
          rendered and incurred from July 1, 1999 through June 30, 2000 by the

                                   Page 2 of 3

<PAGE>

          MCO for an Enrollee shall be shared by the DEPARTMENT, Transamerica
          and the MCO under the following conditions:

          a.   the date of service is from July 1, 1999 through June 30, 2000
               (based on date of discharge if inpatient hospital stay);

          b.   paid claims incurred by the MCO exceed $40,000; and

          c.   services shall have been incurred by the MCO during the time the
               client is enrolled with the MCO;

          d.   the stop-loss billings for the first $40,000 must be submitted to
               the DEPARTMENT in a format mutually agreed upon; and

          e.   stop-loss billings for the first $40,000 must be submitted to the
               DEPARTMENT within six months of the end of the Contract year.

          If the above conditions are met, the DEPARTMENT shall reimburse the
          MCO the first $40,000; TransAmerica, shall bear [*]% and the MCO shall
          bear [*]% of the amount that exceeds $40,000.

          Stop-loss/reinsurance provisions are normally based on services
          provided within the contract period ending June 30. However, for
          purposes of this stop-loss/ reinsurance provision the Contract period
          is extended for transplantations performed between April 1, 2000 and
          June 30, 2000. When the transplantation is performed between April 1,
          2000 and June 30, 2000 the payment for the first $40,000 of the
          transplantation costs and the costs that exceed $40,000 can be applied
          to this stop-loss/reinsurance provision for up to 90 days after the
          transplantation is performed.

E.   REIMBURSEMENT FOR REINSURANCE

     The CONTRACTOR agrees to purchase reinsurance from TransAmerica at the rate
     negotiated by the DEPARTMENT of $[*] per Enrollee per month. The DEPARTMENT
     will reimburse the CONTRACTOR for their premium payments to TransAmerica.
     In addition, the DEPARTMENT will pay the CONTRACTOR [*]% of the premium to
     cover reinsurance administrative costs.

     1.   INTERIM PAYMENTS

          Beginning July 1, 1999, the DEPARTMENT will make monthly interim
          payments to the CONTRACTOR based on the reinsurance premiums the
          CONTRACTOR pays to Insurance Strategies, an agent of TransAmerica. The
          reinsurance premiums will be calculated using the previous month's
          number of Enrollees.

     2.   FINAL SETTLEMENT

          The DEPARTMENT will calculate the actual reinsurance amount due to the
          CONTRACTOR one month after the end of each contract year. The
          settlement will be based on actual Enrollee months.

                                   Page 3 of 3

<PAGE>

                                                                    ATTACHMENT G

                   UTAH MCO QUALITY ASSURANCE MONITORING PLAN

                                     [SEAL]

                         Utah State Department of Health
                        Division of Health Care Financing
                         Bureau of Managed Health Care
                                  July 1, 1999

<PAGE>

                   UTAH MCO QUALITY ASSURANCE MONITORING PLAN
                          BUREAU OF MANAGED HEALTH CARE
                     UTAH DIVISION OF HEALTH CARE FINANCING

AUTHORITY

     The authority for the evaluation of care provided to Medicaid clients by
the Managed Care Organizations (MCOs) contracting with the State is found in CFR
417; and 443 Subpart C, D, and E.

PURPOSE

     The purpose of the Utah MCO Quality Assurance Monitoring Plan is to assure
quality care is received by the Medicaid client in a cost-effective manner and
to monitor that problems identified are addressed to continually improve the
quality of services delivered.

METHOD OF REVIEW

     A. Accreditation by a nationally recognized accreditation agency that is
        also recognized by the State will be accepted to fulfill some
        standards and requirements. The MCO will have to show proof of
        accreditation in that area.

     B. State staff and/or an external quality review organization (EQRO) or a
        combination of the two will monitor other standards and requirements.
        This will be done by an on-site review or by documentation submitted
        by the MCO.

DEFINITIONS AND ABBREVIATIONS

     A. Division of Health Care Financing (DHCF)

     B. External Quality Review Organization (EQRO)

     C. Health Maintenance Organization (HMO) - means a public or private
        organization operating under State law that is federally qualified or
        meets the State Plan's definition of an HMO. The HMO operates under a
        prepaid arrangement to provide specified services to a specific group
        of clients.

     D. Managed Care Organization (MCO) - means an organization that meets the
        State Plan's definition of an HMO or the State Plan's definition of a
        prepaid health plan and which provides, either directly or through
        arrangements with other providers, comprehensive general medical
        services to Medicaid eligibles on a contractual prepayment basis.

     E. Quality Assurance Plan (QAP)

     F. State Medicaid Agency - means Division of Health Care Financing (DHCF)

Utah division of health care financing                              Page 2 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

QUALITY ASSURANCE STANDARDS

     All MCOs contracting with the Utah Division of Health Care Financing will
be monitored for compliance of the following standards.

Standards I through IX, XV and XVI should be addressed in the MCO's Quality
Assurance Plan (QAP). The QAP should also address confidentiality of the
information gathered during quality assurance activities.

STANDARD I: WRITTEN QUALITY ASSURANCE PLAN DESCRIPTION. The organization must
have a written description of its QAP. The written description must meet the
following criteria.

     A. Goals and Objectives - The written description contains a detailed set
        of quality assurance objectives which are developed annually and include
        a timetable for implementation and accomplishment.

     B. Scope:

        1.   The scope of the QAP is comprehensive, addressing both the quality
             of clinical care and the quality of non-clinical aspects of
             service, such as and including: availability, accessibility,
             coordination, and continuity of care.

        2.   The QAP methodology provides for review of the entire range of care
             provided by the organization, by assuring that all demographic
             groups, care settings (e.g. inpatient, ambulatory [including care
             provided in private practice offices], and home care), and types of
             services (e.g., preventative, primary, specialty care, and
             ancillary) are included in the scope of the review.

             This review of the entire range of care is expected to be carried
             out over multiple review periods and not on a concurrent basis.

     C. Specific Activities: - The written description specifies quality of care
        studies and other activities to be undertaken over a prescribed period
        of time, and methodologies and organizational arrangements to be used to
        accomplish them. Individuals responsible for the studies and other
        activities are clearly identified and are appropriate.

     D. Continuous Activity - The written description provides for continuous
        performance of the activities, including tracking of issues over time.

     E. Provider Review - The QAP provides for:

        1.   Review by physicians and other health professionals of the process
             followed in the provision of health services; and

        2.   Feedback to health professionals and MCO staff regarding
             performance and patient results.

     F. Focus on health outcomes - The QAP methodology addresses health outcomes
        to the extent consistent with existing technology.

Utah division of health care financing                              Page 3 of 39

<PAGE>

Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

STANDARD II: SYSTEMATIC PROCESS OF QUALITY ASSESSMENT AND IMPROVEMENT. The QAP
objectively and systematically monitors and evaluates the quality and
appropriateness of care and service to members, through quality of care studies
and related activities, and pursues opportunities for improvement on an ongoing
basis. The QAP has written guidelines for its quality of care studies and
related activities which include:

     A. Specification of clinical or health services delivery areas to be
        monitored.

        1.   The monitoring and evaluation of care reflects the population
             served by the MCO in terms of age groups, disease categories, and
             special risk status.

        2.   For the Medicaid population, the QAP monitors and evaluates, at a
             minimum, care and services in certain priority areas of concern
             selected by the State. This would include studies specified in the
             Medicaid contract with each individual MCO.

     B. Use of Quality Indicators - Quality indicators are measurable variables
        relating to a specified clinical or health services delivery area, which
        are reviewed over a period of time to monitor the process of care
        delivered in that area.

        1.   The organization identifies and uses quality indicators that are
             objective, measurable, and based on current knowledge and clinical
             experience.

        2.   For the priority areas selected by the State from the HCFA Medicaid
             Bureau's list of priority clinical and health services delivery
             areas of concern, the organization monitors and evaluates quality
             of care through studies which include, but are not limited to those
             specified in Attachment A.

        3.   Methods and frequency of data collection are appropriate and
             sufficient to detect need for program change.

     C. Use of clinical care standards\practice guidelines.

        1.   The studies or other activities of the QAP specify the health
             service delivery standards or practice guidelines used to monitor
             the quality of care for each area identified in Standard II A.

        2.   The standards/guidelines are based on reasonable scientific
             evidence and are developed or reviewed by plan providers.

        3.   The standards/guidelines focus on the process and outcomes of
             health care delivery, as well as access to care.

        4.   A mechanism is in place for continuously updating the
             standard/guidelines.

        5.   The standards/guidelines shall be disseminated to providers as they
             are adopted.

        6.   The standards/guidelines address preventive health services.

        7.   Standards/guidelines are developed for the full spectrum of
             populations enrolled in the plan.

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

        8.   The QAP shall use these standards/guidelines to evaluate the
             quality of care provided by the MCO's providers.

     D. Analysis of clinical care and related services.

        1.   Appropriate clinicians monitor and evaluate quality through review
             of individual cases where there are questions about care, and
             through studies analyzing patterns of clinical care and related
             service. For quality issues identified in the QAP's targeted
             clinical areas, the analysis includes the identified quality
             indicators and uses clinical care standards or practice guidelines.

        2.   Multidisciplinary teams are used, where indicated, to analyze and
             address systems issues.

        3.   From 1 and 2, clinical and related service areas requiring
             improvement are identified.

     E. Implementation of remedial/corrective actions.

        The QAP includes written procedures for taking appropriate remedial
        action whenever services are furnished, or services that should have
        been furnished were not, as determined under the QAP as inappropriate or
        substandard. These written remedial/corrective action procedures
        include:

        1.   specification of the types of problems requiring
             remedial/corrective action;

        2.   specification of the person(s) or body responsible for making the
             final determinations regarding quality problems;

        3.   specific actions to be taken;

        4.   provision of feedback to appropriate health professionals,
             providers and staff;

        5.   the schedule and accountability for implementing corrective
             actions;

        6.   the approach to modifying the corrective action if improvements do
             not occur; and

        7.   procedures for terminating the affiliation with the physician, or
             other health professional or provider.

     F. Assess effectiveness of corrective actions.

        1.   As actions are taken to improve care, there is monitoring and
             evaluation of corrective actions to assure that appropriate changes
             have been made. In addition, changes in practice patterns are
             tracked.

        2.   The MCO assures follow-up on identified issues to ensure that
             actions for improvement have been effective.

     G. Evaluation of continuity and effectiveness of the QAP.

        1.   The MCO conducts a regular and periodic examination of the scope
             and content of the QAP to ensure it covers all types of services in
             all settings, as specified in STANDARD I-B-2.

Utah division of health care financing                              Page 5 of 39

<PAGE>

Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

        2.   At the end of each year, a written report on the QAP is prepared,
             which addresses: Quality assurance studies and other activities
             completed; trending of clinical and services indicators and other
             performance data; demonstrated improvements in quality; areas of
             deficiency and recommendations for corrective action, and an
             evaluation of the overall effectiveness of the QAP.

        3.   There is evidence that quality assurance activities have
             contributed to significant improvements in the care delivered to
             members.

STANDARD III: ACCOUNTABILITY TO THE GOVERNING BODY. The governing body of the
organization is the Board of Directors or, where the Board's participation with
quality improvement issues is not direct, a designated committee of the senior
management of the MCO. Responsibilities of the Governing Body for monitoring,
evaluation, and making improvements to care includes:

     A. Oversight of QAP - there is documentation that the Governing Body has
        approved the overall QAP and an annual QAP.

     B. Oversight - The Governing Body has formally designated an accountable
        entity or entities within the organization to provide oversight for
        quality assurance activities or has formally decided to provide such
        oversight as a committee of the whole.

     C. QAP progress reports - The Governing Body routinely receives written
        reports from the QAP describing actions taken, progress in meeting
        quality assurance objectives, and improvements made.

     D. Annual QAP review - The Governing Body formally reviews on a periodic
        basis (but no less frequently than annually) a written report on the QAP
        that includes: studies undertaken, results, subsequent actions, and
        aggregate data on utilization and quality of services rendered to assess
        the QAP's continuity, effectiveness and current acceptability.

     E. Program modification - Upon receipt of regular written reports from the
        QAP delineating actions taken and improvements made, the Governing Body
        takes action when appropriate and directs that the operational QAP be
        modified on an ongoing basis to accommodate review findings and issues
        of concern within the MCO. This activity is documented in the minutes of
        the meetings of the Governing Board in sufficient detail to demonstrate
        that it has directed and followed up on necessary actions pertaining to
        quality assurance.

STANDARD IV: ACTIVE QUALITY ASSURANCE COMMITTEE. The QAP delineates an
identifiable structure responsible for performing quality assurance functions
within the MCO. This committee has:

     A. Regular meetings -- The committee meets on a regular basis. The
        frequency of meetings is sufficient to demonstrate that the committee
        is following-up on all findings and required actions, but in no case
        are meeting less frequently than quarterly;

     B. Established parameters for operating - The role, structure and function
        of the committee are specified;

     C. Documentation -- There are records documenting the committee's
        activities, finding, recommendations and actions;

Utah division of health care financing                              Page 6 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

     D. Accountability -- The QAP committee is accountable to the Governing Body
        and reports to it (or its designee) on a scheduled basis on activities,
        findings, recommendations and actions; and

     E. Membership -- there is active participation on the Quality Assurance
        Committee from health plan providers, who are representative of the
        composition of the health plan's providers.

STANDARD V: QUALITY ASSURANCE PLAN SUPERVISION. There is a designated senior
executive who is responsible for QAP implementation. The organization's Medical
Director has substantial involvement in quality assurance activities.

STANDARD VI: ADEQUATE RESOURCES. The QAP has sufficient material resources; and
staff with the necessary education, experience, or training; to effectively
carry out its specified activities.

STANDARD VII: PROVIDER PARTICIPATION IN THE QUALITY ASSURANCE PLAN.

     A. Participating physicians and other providers are kept informed about the
        written QAP.

     B. The MCO includes in all its provider contracts and employment
        agreements, for both physicians and non-physician providers, a
        requirement securing cooperation with the QAP.

     C. Contracts specify that hospitals and other contractors will allow the
        MCO access to the medical records of its members.

STANDARD VIII: DELEGATION OF QAP. The MCO remains accountable for all QAP
functions, even if certain functions are delegated to other entities. If the MCO
delegates any quality assurance activities to contractors:

     A. There is a written description of: the delegated activities; the
        delegate's accountability for these activities; and the frequency of
        reporting to the MCO.

     B. The MCO has written procedures for monitoring and evaluating the
        implementation of the delegated functions and for verifying the actual
        quality of care being provided.

     C. There is evidence of continuous and ongoing evaluation of delegated
        activities, including approval of quality improvement plans and regular
        specified reports.

STANDARD IX: CREDENTIALING AND RECREDENTIALING. The QAP contains the following
provisions to determine whether physicians and other health care professionals,
who are licensed by the State and who are under contract to the MCO, are
qualified to perform their services.

     A. Written policies and procedures - The MCO has written policies and
        procedures for the credentialing process, which includes the
        organization's initial credentialing of practitioners, as well as its
        subsequent recredentialing, recertifying and/or reappointment of
        practitioners.

     B. Oversight by governing body - The Governing Body, or the group or
        individual to which the governing body has formally delegated the
        credentialing function, has reviewed and approved the credentialing
        policies and procedures.

     C. Credentialing entity - The plan designates a credentialing committee or
        other peer review body which makes recommendations regarding
        credentialing decision.

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

     D. Process - The initial credentialing process obtains and reviews
        verification of the following information, at a minimum:

        1.   the practitioner holds a current valid license to practice;

        2.   valid DEA (Drug Enforcement Agency) or CDS (Controlled Dangerous
             Substances) certificate, as applicable;

        3.   graduation from medical school and completion of a residency, or
             other post-graduate training, as applicable;

        4.   work history;

        5.   professional liability claims history;

        6.   good standing of clinical privileges at the hospital designated
             by the practitioner as the primary admitting facility (This
             requirement may be waived for practices which do not have or do
             not need access to hospital.);

        7.   the practitioner holds current, adequate malpractice insurance
             according to the plan's policy;

        8.   any revocation or suspension of a state license or DEA (Drug
             Enforcement Agency) number;

        9.   any curtailment or suspension of medical staff privileges (other
             than for incomplete medical records);

        10.  any sanctions imposed by Medicare and/or Medicaid; and

        11.  any censure by the State or local Medical Association.

        12.  The organization requests information on the practitioner from
             the National Practitioner Data Bank and the State Department of
             Professional Licensing.

        13.  The application process includes a statement by the applicant
             regarding;

                  a.   any physical or mental health problems that may affect
                       current ability to provide health care;

                  b.   history of loss of license and/or felony convictions;

                  c.   history of loss or limitation of privileges or
                       disciplinary activity; and

                  d.   an attestation to correctness/ completeness of the
                       application.

             This information should be used to evaluate the practitioners's
             current ability to practice.

     E. Recredentialing - A process for the periodic reverification of
        clinical credentials (recredentialing, reappointment, or
        recertification) is described in the organization's policies and
        procedures.

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

        1.   There is evidence that the procedure is implemented at least
             every two years.

        2.   The MCO conducts periodic review of information from the National
             Practitioner Data Bank, along with performance data, on all
             physicians, to decide whether to renew the participating physician
             agreement. At a minimum, the recredentialing, recertification or
             reappointment process is organized to verify current standing on
             items listed in "D-l" through "D-12", above.

        3.   The recredentialing, recertification or reappointment process also
             includes review of data from:

                  a.   member complaints;

                  b.   results of quality reviews;

                  c.   utilization management;

                  d.   member satisfaction surveys; and

                  e.   reverification of hospital privileges and current
                       licensure.

     F. Delegation of credentialing activities - If the MCO delegates
        credentialing (and recredentialing, recertification, or reappointment)
        activities, there is a written description of the delegated
        activities, and the delegate's accountability for these activities.
        There is also evidence that the delegate accomplished the
        credentialing activities. The MCO monitors the effectiveness of the
        delegate's credentialing and reappointment or recertification process.

     G. Retention of credentialing authority - The MCO retains the right to
        approve new providers and sites, and to terminate or suspend
        individual providers. The organization has policies and procedures for
        the suspension, reduction or termination of practitioner privileges.

     H. Reporting requirement - There is a mechanism for, and evidence of
        implementation of, the reporting of serious quality deficiencies
        resulting in suspension or termination of a practitioner, to the
        appropriate authorities.

     I. Appeals process - There is a provider appellate process for instances
        where the MCO chooses to reduce, suspend or terminate a practitioner's
        privileges with the organization.

STANDARD X: ENROLLEE RIGHTS AND RESPONSIBILITIES. The organization demonstrates
a commitment to treating members in a manner that acknowledges their rights and
responsibilities.

     A. Written policy and enrollee rights. The organization has a written
        policy that recognizes the following rights of members:

        1.   to be treated with respect, and recognition of their dignity and
             need for privacy;

        2.   to be provided with information about the organization, its
             services, the practitioners providing care, and members rights
             and responsibilities;

        3.   to be allowed to choose practitioners, within the limits of the
             plan network, including the right to refuse care from specific
             practitioners;

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

        4.   to participate in decision-making regarding their health care;

        5.   to voice grievances about the organization or care provided;

        6.   to formulate advance directives; and

        7.   to have access to his/her medical records in accordance with
             applicable federal and state laws.

     B. Written policy on enrollee responsibilities. The organization has a
        written policy that addresses members' responsibility for cooperating
        with those providing health care services. This written policy
        addresses members' responsibility for:

        1.   providing, to the extent possible, information needed by
             professional staff in caring for the member; and

        2.   following instructions and guidelines given by those providing
             health care services.

     C. Communication of policies to providers - A copy of the organization's
        policies on members' rights and responsibilities is provided to all
        participating providers.

     D. Communication of policies to enrollees/members - Upon enrollment,
        members are provided a written statement that includes information on
        the following:

        1.   rights and responsibilities of members;

        2.   benefits and services included and excluded as a condition of
             membership, and how to obtain them, including a description of:

                  a.   any special benefit provisions that may apply to
                       service obtained outside the system; and

                  b.   the procedures for obtaining out-of-area coverage.

        3.   provisions for after-hours and emergency coverage;

        4.   the organization's policy on referrals for specialty care;

        5.   procedures for notifying those members affected by the
             termination or change in any benefits, services, or service
             delivery office/site;

        6.   procedures for appealing decisions adversely affecting the
             members's coverage, benefits, or relationship to the
             organization;

        7.   procedures for changing practitioners;

        8.   procedures for disenrollment; and

        9.   procedures for voicing complaints and/or grievances and for
             recommending changes in policies and services.

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

     E. Enrollee/member grievance procedures. The organization has a system(s)
        for resolving members complaints and formal grievances. This system
        includes:

        1.   procedures for registering and responding to complaints and
             grievances in a timely fashion (organizations should establish
             and monitor standard for timeliness);

        2.   documentation of the substance of complaints or grievances, and
             actions taken;

        3.   procedures to ensure a resolution of the complaint or grievance;

        4.   aggregation and analysis of complaint and grievance data and use
             of the data for quality improvement; and

        5.   an appeal process for grievances.

     F. Enrollee/member suggestions. Opportunity is provided for members to
        offer suggestions for changes in policies and procedures.

     G. Steps to assure accessibility of services. The MCO takes steps to
        promote accessibility of services offered to members. These steps
        include:

        1.   points of access to primary care, specialty care, and hospital
             services are identified for members; and

        2.   at a minimum, members are given information about:

                  a.   how to obtain services during regular hours of
                       operations,

                  b.   how to obtain emergency and after-hours care, and

                  c.   how to obtain the names, qualifications, and titles of
                       the professionals providing and/or responsible for
                       their care.

     H. Cultural and ethnic sensitivity is shown to members when accessing and
        receiving care.

     I. Written information for members. Written information provided to
        members must:

        1.   be written in prose that is readable and easily understood (for
             example, subscriber brochures, announcements, handbooks); and

        2.   be available, as needed, in the languages of the major population
             groups served-- a "major" population group is one which
             represents at least 10% of a plan's membership.

     J. Confidentiality of patient information. The organization acts to
        ensure that the confidentiality of specific patient information and
        records is protected. The organization must:

        1.   establish in writing, and enforce, policies and procedures on
             confidentiality, including confidentiality of medical records;

        2.   ensure that patient care offices/sites have implemented
             mechanisms that guard against the unauthorized or inadvertent
             disclosure of confidential information to persons outside of

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

             the medical care organization;

        3.   shall hold confidential all information obtained by its personnel
             about enrollees related to their examination, care and treatment
             and should not divulge it without the enrollee's authorization,
             unless

                  a.   it is required by law;

                  b.   it is necessary to coordinate the patient's care with
                       physicians, hospitals, or other health care entities,
                       or to coordinate insurance or other matters pertaining
                       to payment; or

                  c.   it is necessary in compelling circumstances to protect
                       the health or safety of an individual.

        4.   report to the patient in a timely manner any release of
             information in response to a court order; and

        5.   ensure that when enrollee records may be disclosed, whether or
             not authorized by the enrollee, to qualified personnel for the
             purpose of conducting scientific research, these organizations
             and personnel may not identify, directly or indirectly, any
             individual enrollee in any report of the research or otherwise
             disclose participant identity in any manner.

     K. Treatment of minors. The organization has written policies regarding
        the appropriate treatment of minors.

     L. Assessment of member satisfaction. The organization conducts periodic
        surveys of member satisfaction with its services. The surveys:

        1.   include content on perceived problems in the quality,
             availability, and accessibility or care;

        2.   assess at least a sample of:

                  a.   Medicaid members,

                  b.   Medicaid member requests to change practitioners and/or
                       facilities, and

                  c.   disenrollment by Medicaid members;

        3.   and, as a result of the surveys, the organization:

                  a.   identifies and investigates sources of dissatisfaction,

                  b.   outlines action steps to follow-up on the findings, and

                  c.   informs practitioners and providers of assessment
                       results; and

        4.   the organization reevaluates the effects of the above activities.

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

STANDARD XI: STANDARD FOR AVAILABILITY AND ACCESSIBILITY. The MCO has
established standards for access (e.g., to routine, urgent and emergency care;
telephone appointments; advice; and member service lines). Performance on these
dimensions of access are assessed against the standards.

STANDARD XII: MEDICAL RECORD STANDARDS.

     A. Accessibility and availability of medical records.

        1.   The MCO shall include provisions in provider contracts for
             appropriate access to the medical records of its enrollees for
             purposes of quality review.

        2.   Records are available to health care practitioners at each
             encounter.

     B. Record keeping. Medical records may be on paper or electronic. The MCO
        takes steps to promote maintenance of medical records in a legible,
        current, detailed, organized and comprehensive manner that permits
        effective patient care and quality review.

        1.   Medical record standards. The organization sets standards for
             medical records. The records reflect all aspects of patient care,
             including ancillary services. These standards shall, at a minimum
             include requirements for:

                  a.   patient identification information -- each page or
                       electronic file in the record contains the patient's
                       name or patient ID number;

                  b.   personal/biographical data -- including age, sex,
                       address, employer, home and work telephone numbers, and
                       marital status;

                  c.   entry date -- all entries are dated;

                  d.   provider identification -- all entries are identified
                       as to author;

                  e.   legibility -- the record is legible to someone other
                       than the writer. Any record judged illegible by one
                       physician reviewer should be evaluated by a second
                       reviewer.

                  f.   allergies -- medication allergies and adverse reactions
                       are prominently noted on the record absence of
                       allergies (no known allergies -- NKA) is noted in an
                       easily recognizable location;

                  g.   past medical history -- (for patients seen three or
                       more times) past medical history is easily identified
                       including serious accidents, operations, illnesses; for
                       children, past medical history relates to prenatal care
                       and birth;

                  h.   immunizations -- for pediatric records (ages 12 and
                       under) there is a completed immunization record or a
                       notation that immunizations are up-to-date;

                  i.   diagnostic information;

                  j.   medication information;

                  k.   identification of current problems-- significant
                       illnesses, medical conditions and health maintenance
                       concerns are identified in the medical record;

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                  l.   smoking/alcohol/substance abuse-- notation concerning
                       cigarettes and alcohol use and substance abuse is
                       present;

                  m.   consultations, referrals and specialist reports --
                       notes from any consultations are in the record;
                       consultation, lab, and x-ray reports filed in the chart
                       have the ordering physician's initials or other
                       documentation signifying review; consultation and
                       significantly abnormal lab and imaging study results
                       have an explicit notation in the record of follow-up
                       plans;

                  n.   emergency care;

                  o.   hospital discharge summaries-- discharge summaries are
                       included as part of the medical record for 1), all
                       hospital admission which occur while the patient is
                       enrolled in the MCO, and 2), prior admissions as
                       necessary;

                  p.   advance directive -- for medical records of adults, the
                       medical record documents whether or not the individual
                       has executed an advance directive which is a written
                       instruction such as a living will or durable power of
                       attorney for health care relating to the provision of
                       health care when the individual is incapacitated;

        2.   Patient visit data. Documentation of individual encounters must
             provide adequate evidence of, at a minimum:

                  a.   history and physical examination-- appropriate
                       subjective and objective information is obtained for
                       the presenting complaints;

                  b.   plan of treatment;

                  c.   diagnostic tests;

                  d.   therapies and other prescribed regimens;

                  e.   follow-up -- encounter forms or notes have a notation,
                       when indicated, concerning follow-up care, call or
                       visit and the specific time to return is noted in
                       weeks, months, or PRN, with unresolved problems from
                       previous visits being addressed in subsequent visits;

                  f.   referrals and results thereof; and

                  g.   all other aspects of patient care, including ancillary
                       services.

     C. Record review process. The MCO:

        1.   has a system (record review process) to assess the content of
             medical records for legibility, organization, completion and
             conformance to its standards; and

        2.   the record assessment system addresses documentation of the items
             listed in XII(B), above.

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STANDARD XIII: UTILIZATION REVIEW.

     A. Written program description. The organization has a written
        utilization management program description which includes, at a
        minimum, procedures to evaluate medical necessity, criteria used,
        information sources and the process used to review and approve the
        provision of medical services.

     B. Scope. The program has mechanisms to detect under utilization as well
        as over utilization.

     C. Preauthorization and concurrent review requirements. For organization
        with preauthorization or concurrent review programs:

        1.   preauthorization and concurrent review decisions are supervised
             by qualified medical professionals;

        2.   efforts are made to obtain all necessary information, including
             pertinent clinical information, and consult with the treating
             physician as appropriate;

        3.   the reasons for decisions are clearly documented and available to
             the member;

        4.   there are well-publicized and readily available appeals
             mechanisms for both providers and patients. Notification of a
             denial includes a description of how to file an appeal;

        5.   decisions and appeals are made in a timely manner as required by
             the exigencies of the situation;

        6.   here are mechanisms to evaluate the effects of the program using
             data on member satisfaction, provider satisfaction or other
             appropriate measures; and

        7.   the organization has mechanisms, if it delegates responsibility
             for utilization management, to ensure that these standards are
             met by the delegate.

STANDARD XIV: CONTINUITY OF CARE SYSTEM. The MCO has put a basic system in place
which promotes continuity of care and case management.

STANDARD XV: QUALITY ASSURANCE PLAN DOCUMENTATION.

     A. Scope. The MCO shall document that it is monitoring the quality of
        care across all services and all treatment modalities, according to
        its written QAP.

     B. Maintenance and availability of documentation. The MCO must maintain
        and make available to the State studies, reports, protocols,
        standards, worksheets, minutes, or such other documentation as may be
        appropriate, concerning its quality assurance activities and
        corrective actions.

STANDARD XVI: COORDINATION OF QUALITY ASSURANCE ACTIVITY WITH OTHER MANAGEMENT
ACTIVITY. The findings, conclusions, recommendations, actions taken, and results
of the actions taken as a result of quality assurance activity, are documented
and reported to appropriate individuals within the organization and through
established quality assurance channels.

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     A. Quality assurance information is used in recredentialing,
        recontracting and/or annual performance evaluations.

     B. Quality assurance activities are coordinated with other performance
        monitoring activities, including utilization management, risk
        management, and resolution and monitoring of member complaints and
        grievances.

     C. There is a linkage between quality assurance and the other management
        functions of the health plan such as:

        1.   network changes;

        2.   benefits redesign;

        3.   medical management systems (e.g. pre-certification);

        4.   practice feedback to physicians;

        5.   patient education; and

        6.   member services.

STANDARD XVII: DATA COLLECTION.

     A. The MCO will submit information to DHCF using HEDIS (Health Plan
        Employer Data and Information Set) performance measures and reports.
        Data for measures of quality, utilization, member satisfaction and
        access will be reported for the plan in general as well as Medicaid
        specific.

     B. Specific areas of study required will be stated in the contract with
        each individual MCO (See Attachment A).

     C. Data or studies required by the contract must be submitted timely, be
        accurate and complete.

     D. Studies involving grievance/complaint information, childhood
        immunization, prenatal and obstetrical care are required annually.

STANDARD XVIII: FINANCIAL SOLVENCY.

     A. The MCO will submit their annual report as submitted to the Utah
        Department of Insurance.

     B. The MCO will submit annually Measures of Financial Performance from
        the HEDIS report.

MONITORING ACCOUNTABILITY

  An annual review will be conducted for all contracting MCO's. In addition
DHCF will monitor and analyze complaints/grievances and periodically conduct
patient satisfaction surveys.

  If DHCF through quality assurance monitoring such as on-site reviews, MCO
documentation review, data analysis, medical audits, or complaints/grievances
determines that the MCO has not provided services in accordance with the
contract or within expected professional standards, DHCF will request in

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writing that the MCO correct the deficiencies or identified problems. The MCO
will be given 15 calendar days to respond to the problem and develop a
corrective action plan or appeal the DHCF findings. In complaint cases involving
the need for medical record review, the MCO may send a written request to DHCF
for extension of the time frames. If the MCO's plan requires revisions, as
determined by the DHCF, the MCO will have 15 calendar days from the date the
plan is returned by the DHCF to make revisions and resubmit the plan to the
DHCF. If the MCO is unable or unwilling to develop a plan within 15 calendar
days or to satisfactorily revise a plan within 15 calendar days, the MCO will be
subject to the following sanctions:

     $500 for each day, beginning on the first day after the 15 day
     time period has expired, and continuing until the day a
     corrective action plan is submitted or a revised corrective
     action plan containing DHCF recommendations for implementation by
     the MCO is submitted.

  If the MCO is unwilling or unable to implement a corrective action plan to
the satisfaction of the DHCF by the date(s) included in the DHCF approved plan,
the MCO will be subject to the following sanctions:

     $500 for each day, beginning on the first day after the DHCF
     determines that the MCO has not implemented the corrective action
     plan, and continuing until the day the MCO successfully
     demonstrates to the DHCF that it has implemented the plan; and
     other remedies included in the general provisions of the
     contract.

  Any financial sanctions assessed by the DHCF will be deducted from the
monthly payment to the MCO.

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

                                  ATTACHMENT A

                          Areas for Studies and Reviews

Required studies will be listed in the Managed Care Organization (MCO) contract
with the Utah Division of Health Care Finance (DHCF) as determined by the
Managed Health Care and MCO staff. Amendments to the contract may be made as
necessary during the contract period. Additional studies will be conducted by an
external quality review organization (EQRO). Determination of study subjects
will by made by the DHCF/Managed Health Care staff with input from the EQRO and
the contracting MCOs.

Clinical Areas of Concern:

      1.  Childhood Immunizations (Required)
      2.  Pregnancy (Required)
      3.  Breast Cancer/Mammography
      4.  Cervical Cancer/Pap Smears
      5.  Lead toxicity/Screening
      6.  Comprehensive Well Child Periodic Health Assessment
      7.  HIV Status
      8.  Asthma
      9.  Hysterectomies
     10.  Diabetes
     11.  Hypertension
     12.  Sexually Transmitted Diseases
     13.  Heritable Diseases (newborn screens)
     14.  Coronary Artery Disease
     15.  Motor Vehicle Accidents
     16.  Pregnancy prevention
     17.  Tuberculosis
     18.  Failure to thrive
     19.  Hepatitis B
     20.  Otitis Media
     21.  Prescription Drug Abuse
     22.  Hip Fractures
     23.  Cholesterol Screening and Management
     24.  Treatment of Myocardial Infarctions
     25.  Prevention of Influenza
     26.  Smoking Prevention and Cessation
     27.  Hearing and Vision Screening and Services for Individuals Less Than 21
          Years of Age
     28.  Dental Screening and Services for Individuals Less Than 21 Years of
          Age
     29.  Domestic Violence

Health Services Delivery Areas of Concern:

      1.  Access to care
      2.  Utilization of services
      3.  Coordination of care
      4.  Continuity of care

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      5.  Health Education
      6.  Emergency services

The EQRO may periodically conduct the following reviews at the request of
Managed Health Care Staff.

      1.  Sterilizations
      2.  Abortions
      3.  Children with multiple medical problems

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

                                  ATTACHMENT B

                             Quality Review Process

If the MCO is accredited by a nationally recognized accreditation board, DHCF
will accept that as compliance in the following standards.

     Standard III:      Accountability to the Governing Body
     Standard IV:       Active Quality Assurance Committee
     Standard V:        Quality Assurance Plan Supervision
     Standard VI:       Adequate Resources
     Standard VII:      Provider Participation in the Quality Assurance Plan
     Standard VIII:     Delegation of Quality Assurance Plan Activities
     Standard IX:       Credentialing and Recredentialing
     Standard XII:      Medical Records Standards
     Standard XIII:     Utilization Review
     Standard XIV:      Continuity of Care System
     Standard XVI:      Coordination of Quality Assurance Activity with
                        Other Management Activity

The following standards will be reviewed annually by DHCF staff:

     Standard I:        Written Quality Assurance Plan Description
     Standard II:       Systematic Process of Quality Assessment and Improvement
     Standard X:        Enrollee Rights and Responsibilities
     Standard XI:       Standard For Availability and Accessibility
     Standard XV:       Quality Assurance Plan Documentation
     Standard XVII:     Data Collection
     Standard XVIII:    Financial Solvency

If the MCO is not accredited by a nationally recognized accreditation board,
DHCF staff will monitor all standards.

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

                                  ATTACHMENT C

                              Monitoring Work Sheet

The ...[following] work sheets will be used to monitor all MCOs contracting with
the Utah Division of Health Care Finance. It is the responsibility of the MCO to
submit a plan of correction for any deficiencies identified. List of Work
Sheets:

<TABLE>
     <S>                <C>
     Standard I:        Written Quality Assurance Plan Description
     Standard II:       Systematic Process of Quality Assessment and Improvement
     Standard III:      Accountability to the Governing Body
     Standard IV:       Active Quality Assurance Committee
     Standard V:        Quality Assurance Plan Supervision and Standard VI: Adequate Resources
     Standard VII:      Provider Participation in the Quality Assurance Plan and Delegation of Quality
                        Assurance Plan Activities
     Standard VIII:     Delegation of Quality Assurance Plan Activities
     Standard IX:       Credentialing and Recredentialing
     Standard X:        Enrollee Rights and Responsibilities
     Standard XI:       Standard for Availability and Accessibility
     Standard XII:      Medical Records Standards
     Standard XIII:     Utilization Review
     Standard XIV:      Continuity of Care System and
     Standard XV:       Quality Assurance Plan Documentation
     Standard XVI:      Coordination of Quality Assurance Activity with Other Management Activity
     Standard XVII:     Data Collection
     Standard XVIII:    Financial Solvency
</TABLE>

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

STANDARD I -- WRITTEN QUALITY ASSURANCE PLAN DESCRIPTION

Contractor:_____________________ Review Date:_____________

Reviewer Signature:___________________________________

1.   MET  NOT MET   The QAP contains a detailed set of objectives that are
                    developed annually and include a timetable for
                    implementation and accomplishment.

2.   MET  NOT MET   The QAP is comprehensive in scope and provides for review
                    of the entire range of care (clinical as well as
                    non-clinical) provided under the contract. The needs of all
                    demographic groups are considered in the QAP.

3.   MET  NOT MET   The QAP specifies activities to be undertaken,
                    methodologies to be used and individuals responsible for
                    implementing them. The activities undertaken are on a
                    continuing basis with tracking of issues over time.

4.   MET  NOT MET   The QAP provides for review of the process followed by
                    health professionals and feedback to the health
                    professionals on the results of the review.

5.   MET  NOT MET   The QAP methodology addresses health outcomes to the extent
                    consistent with existing technology.

6.   MET  NOT MET   The contractor regularly monitors provider and
                    subcontractor performance/compliance with program policies
                    and contractual requirements.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD II -- SYSTEMATIC PROCESS OF QUALITY ASSESSMENT AND IMPROVEMENT

Contractor:___________________________ Date:_________

Reviewer Signature:____________________________________

1.   MET  NOT MET   The QAP specifies the clinical or health services delivery
                    areas to be monitored, which includes certain priority areas
                    of concern selected by the DHCF for Medicaid clients and
                    reflects the population served in terms of age groups,
                    disease categories and special risk status.

2.   MET  NOT MET   The QAP identifies and utilizes quality indicators that are
                    objective, measurable and based on current knowledge and
                    clinical experience.

3.   MET  NOT MET   Clinical care standards or practice guidelines are used to
                    monitor the quality of care provided. The standards used are
                    based upon reasonable scientific evidence and are included
                    in provider education materials.

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4.   MET  NOT MET   There is on-going analysis of care and services by
                    appropriate clinical and/or multidisciplinary teams. Areas
                    requiring improvement are identified.

5.   MET  NOT MET   Data from studies required in the contract with the Medicaid
                    Agency are submitted in the format and time frames specified
                    in the contract.

6.   MET  NOT MET   Standards/guidelines used focus on the process and outcomes
                    of health care delivery, as well as access to care.

7.   MET  NOT MET   Standards/guidelines address preventive health services.

8.   MET  NOT MET   There is a mechanism in place for continuously updating the
                    standard/guidelines.

9.   MET  NOT MET   The QAP includes procedures for remedial action when
                    deficiencies are identified. It specifies the types of
                    problem requiring corrective action, the individuals
                    responsible for making final determinations regarding
                    quality problems, the actions to be taken, provision for
                    providing feedback to appropriate individuals, the next
                    steps should improvement not occur and procedures and
                    conditions for terminating a provider.

10.  MET  NOT MET   The QAP includes provisions for monitoring and evaluation of
                    corrective actions to ensure that actions for improvement
                    have been effective.

11.  MET  NOT MET   The organization routinely evaluates the QAP and produces
                    quality assurance reports.

12.  MET  NOT MET   Written reports on the QAP are prepared that address:
                    Quality assurance studies and other activities completed;
                    trending of clinical and service indicators and other
                    performance data; demonstrated improvement in quality; areas
                    of deficiency and recommendations for corrective action; and
                    an evaluation of the overall effectiveness of the QAP.
                    Reports are submitted to the Medicaid Agency in accordance
                    with the contract.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD III -- ACCOUNTABILITY TO THE GOVERNING BODY;

Contractor:______________________ Date:__________ Met By Accreditation:___

Reviewer Signature:__________________________________

1.   MET  NOT MET   There is documentation that the Governing Body has approved
                    the overall QAP and an annual QAP.

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2.   MET  NOT MET   There is evidence that the Governing Body has formally
                    designated an accountable entity or entities to provide
                    oversight and quality assurance.

3.   MET  NOT MET   There is evidence that the Governing Body receives written
                    progress reports of the activities of the QAP and directs
                    that the operational QAP be modified on an ongoing basis to
                    accommodate review findings and issues of concern.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Standard IV -- ACTIVE QUALITY ASSURANCE COMMITTEE

Contractor:________________________ Date:________Met By Accreditation:____

Reviewer Signature:_________________________________

1.   MET  NOT MET   The QAP delineates an identifiable structure responsible for
                    performing quality assurance functions.

2.   MET  NOT MET   There is evidence that the committee or other structure has
                    regular meetings, established parameters for operating,
                    documentation of activities, and active participation of
                    providers who are representative of the composition of the
                    health plan's providers.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD V -- QUALITY ASSURANCE PLAN SUPERVISION

Contractor:____________________Date:___________ Met By Accreditation:________

Reviewer Signature:_________________________________

1.   MET  NOT MET   There is a designated senior executive who is responsible
                    for program implementation.

2.   MET  NOT MET   The medical director is actively involved in the
                    administration of the plan.

3.   MET  NOT MET   There is evidence that the medical director is actively
                    involved in peer review/education.

4.   MET  NOT MET   The medical director is readily available to staff to
                    provide daily consultation.

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Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD VI -- ADEQUATE RESOURCES

Contractor:_______________________ Date:_______Met By Accreditation:_________

Reviewer Signature:____________________________________

1.   MET  NOT MET   The QAP staffing conforms with usual and customary industry
                    practices.

2.   MET  NOT MET   The organization has established contingency plans to
                    fulfill the responsibilities of any vacant key positions.

3.   MET  NOT MET   There is evidence of open communication between divisions
                    within the plan such as: provider services, member services,
                    contracting, planning and management.

4.   MET  NOT MET   Managers/staff from the above specialty division participate
                    in planning and quality improvement activities.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD VII -- PROVIDER PARTICIPATION IN THE QUALITY ASSURANCE PLAN

Contractor:____________________ Date:________Met By Accreditation:________

Reviewer Signature:__________________________________

1.   MET  NOT MET   All providers both physician and non-physician are aware of
                    the QAP and kept apprised of quality assurance activities.

2.   MET  NOT MET   All provider contracts/agreements require cooperation with
                    the QAP.

3.   MET  NOT MET   All contracts/agreements require access to medical records
                    of enrollees.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

STANDARD VIII -- DELEGATION OF QUALITY ASSURANCE PLAN ACTIVITIES

Contractor:______________________ Date:______Met By Accreditation:_________

Reviewer Signature:___________________________________

1.   MET  NOT MET N/A  QAP activities delegated to contractors include a written
                       description of activities and the delegates
                       accountability for the activities.

2.   MET  NOT MET N/A  There is evidence that there is continuous and ongoing
                       evaluation of the delegated activities by the MCO.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD IX -- CREDENTIALING AND RECREDENTIALING

Contractor:_____________________Date:__________Met By Accreditation:________

Reviewer Signature:____________________________________

1.   MET  NOT MET   The contractor has written credentialing standards and/or
                    procedures.

2.   MET  NOT MET   The credentialing activities include the following:

                       Yes  No   Verification of licensure

                       Yes  No   Verification of board and specialty
                                 certification

                       Yes  No   Verification of acceptable levels of
                                 malpractice coverage

                       Yes  No   Evaluation of practice history, particularly
                                 related to participation in the Medicaid
                                 program

                       Yes  No   Verification of hospital admitting privileges

3.   MET  NOT MET   The contractor has an established recredentialing process.

4.   MET  NOT MET   The recredentialing process includes the same elements as
                    the initial credentialing process. (Note differences in
                    comment section)

5.   MET  NOT MET   Board certification or board admissibility is required for
                    specialists.

6.   MET  NOT MET   There are procedures in place to identify/address situations
                    where a participating physician loses licensure, admitting
                    privileges, or board certification.

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Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD X -- ENROLLEE RIGHTS AND RESPONSIBILITIES

Contractor:___________________Date:_________________

Reviewer Signature:_________________________________

 1.  MET  NOT MET   There is an established member services function.

 2.  MET  NOT MET   Member service representatives are qualified.

 3.  MET  NOT MET   Multilingual service representatives are available as
                    necessary.

 4.  MET  NOT MET   Members are informed of the availability/role of member
                    services.

 5.  MET  NOT MET   Members services handbooks are issued upon enrollment.

 6.  MET  NOT MET   Written materials are accurate and appropriate (e.g.
                    available in foreign languages and low reading levels when
                    necessary).

 7.  MET  NOT MET   Member services handbooks inform members of all relevant
                    policies and procedures and include information on obtaining
                    further explanations.

 8.  MET  NOT MET   Updated handbooks are regularly distributed to existing
                    members.

 9.  MET  NOT MET   If the contractor disseminates a newsletter to members, it
                    is distributed to Medicaid enrollees, also.

10.  MET  NOT MET   Members are presented written and oral information on
                    appropriate utilization of services, prior authorization
                    procedures, appropriate use of the emergency room, use of
                    out-of-plan services, and obtaining care when outside the
                    plan's service area.

11.  MET  NOT MET   Written materials that describe coverage and how to access
                    services include a contact person to call if the enrollee
                    has difficulty understanding the procedures.

12.  MET  NOT MET   Written policies/procedures are followed.

13.  MET  NOT MET   Changes in primary care providers are processed promptly and
                    in accordance with contractual requirements.

14.  MET  NOT MET   Member service representative appropriately address
                    inquiries from members.

Utah Division of Health Care Financing                             Page 27 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

15.  MET  NOT MET   The contractor offers health education programs for members
                    and these programs are based on a needs assessment of
                    Medicaid members.

16.  MET  NOT MET   Health education programs are accessible to Medicaid members
                    considering such factors as cost, location, child care, etc.

17.  MET  NOT MET   The contractor regularly evaluates the effectiveness of its
                    health promotion activities and such activities are
                    restructured as a result of such evaluations.

18.  MET  NOT MET   The contractor conducts out reach efforts to: 1) enhance
                    pediatric preventive care; 2) promote early access to
                    prenatal care services; 3) promote early diagnosis and
                    treatment for HIV disease; and 4) promote use of other
                    preventive services, such as family planning.

19.  MET  NOT MET   Protocols for non-compliant members are present.

20.  MET  NOT MET   The contractors written complaint/grievance procedures are
                    consistent with those approved by Medicaid. (Note
                    discrepancies in "comments" section)

21.  MET  NOT MET   Complaints and/or grievances filed within the past contract
                    year were handled in accordance with approved procedures.

22.  MET  NOT MET   Grievances are effectively tracked.

23.  MET  NOT MET   Grievances are handled in a timely manner

24.  MET  NOT MET   Unresolved grievances are promptly referred to Medicaid for
                    resolution.

25.  MET  NOT MET   Complaints and/or grievances are reported to the
                    contractor's quality assurance committee.

26.  MET  NOT MET   Member services representative actively participate in
                    complaint/grievance resolution.

27.  MET  NOT MET   Employees, providers, and subcontractors are aware of the
                    grievance policies and procedures.

28.  MET  NOT MET   Members have received written copies of the
                    complaint/grievance procedures.

29.  MET  NOT MET   Materials distributed to members include the following:

                       Yes  No   Titles and telephone numbers of individuals to
                                 whom a grievance should be directed;

                       Yes  No   Where and how to obtain any forms or
                                 documentation that may be necessary;

                       Yes  No   How and with whom a face-to-face meeting can be
                                 held to

Utah Division of Health Care Financing                             Page 28 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

                                 discuss the complaint/grievance;

                       Yes  No   The appeals process and options available in
                                 the event that the enrollee is not satisfied
                                 with contractor's response (including an appeal
                                 to the Medicaid agency and the right to a fair
                                 hearing) and the time frames to be followed in
                                 responding to the initial grievance and any
                                 appeals;

                       Yes  No   Titles of the personnel participating in the
                                 process who have the authority to require
                                 corrective action; and

                       Yes  No   An explanation of applicable time frames.

30.  MET  NOT MET   The member is advised in writing of the status/outcome of
                    the complaint or grievance and of the next step in the
                    process if the issue is not resolved.

31.  MET  NOT MET   The contractor regularly inform members about changes in the
                    grievance procedures.

32.  MET  NOT MET   There is evidence that the primary care providers understand
                    member complaint/grievance procedures.

33.  MET  NOT MET   Recorded grievances identify areas for improvement in the
                    contractor's policies and procedures, provider network,
                    benefits design, etc. When areas are identified, the
                    information is incorporated into the contractor's quality
                    assurance activities.

34.  MET  NOT MET   The quality assurance committee evaluates if there is a
                    correlation between complaint/grievances and disenrollment
                    from coordinated care.

35.  MET  NOT MET   The policies and procedures used by the contractor safeguard
                    client information including: name, address, medical
                    services provided, social and economic circumstances, agency
                    evaluation of personal information, medical data (including
                    diagnosis) and information related to medical assistance
                    eligibility and third party coverage.

36.  MET  NOT MET   The contractor has written policies/procedures that address
                    the use and disclosure of information concerning Medicaid
                    enrollees.

37.  MET  NOT MET   The types of information to be safeguarded and the
                    conditions for release of safeguarded information is clearly
                    defined.

38.  MET  NOT MET   There are procedures in place to protect against
                    unauthorized disclosure.

39.  MET  NOT MET   The records regarding family planning services are kept
                    confidential.

40.  MET  NOT MET   There are written policies regarding the appropriate
                    treatment of minors.

41.  MET  NOT MET   The plan conducts patient satisfaction surveys at least
                    yearly.

42.  MET  NOT MET   The results of the survey of Medicaid member satisfaction
                    compares

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

                    favorably with results of the survey of commercial members.

43.  MET  NOT MET   The survey results do not indicate critical areas for
                    further investigation/ action. If indications present
                    explain in comment section.

44.  MET  NOT MET   Enrollees change primary care providers at a frequency
                    comparable to other plans.

45.  MET  NOT MET   Enrollees disenroll from the plan at a rate comparable to
                    enrollees of other plans.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD XI -- STANDARD FOR AVAILABILITY AND ACCESSIBILITY

Contractor:__________________________Date:___________

Reviewer Signature:____________________________________

 1.  MET  NOT MET   There are established standards for access (e.g., to
                    routine, urgent and emergency care, telephone appointments;
                    advice; and member service lines).

 2.  MET  NOT MET   There is an effective system for authorizing care (prompt
                    and appropriate authorization).

 3.  MET  NOT MET   There is an effective system for monitoring follow-up care.

 4.  MET  NOT MET   Member service telephone calls are answered promptly.

 5.  MET  NOT MET   Non-English speaking members and hearing impaired members
                    can reach a member services representative by telephone.

 6.  MET  NOT MET   The availability of materials in languages other than
                    English is sufficient to meet the needs of the eligible
                    population.

 7.  MET  NOT MET   Staff is educated in ways to show cultural and ethnic
                    sensitivity to members.

 8.  MET  NOT MET   Member services representatives assist members in their
                    selection of primary care providers.

 9.  MET  NOT MET   The contractor has agreements in place with primary care
                    practitioners, specialists, hospitals, home health agencies,
                    pharmacies, and other providers of services offered to plan
                    members.

10.  MET  NOT MET   Special population groups are accessing needed services.

11.  MET  NOT MET   The contractor has appropriate linkages to social service
                    agencies to be used

Utah Division of Health Care Financing                             Page 30 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

                    with their case management services.

12.  MET  NOT MET   Providers are located near mass transportation (at least to
                    the extent that non-plan Medicaid providers are located
                    near transportation).

13.  MET  NOT MET   Provider facilities are accessible to individuals with
                    limited mobility and other disabilities.

14.  MET  NOT MET   The contractor accepts new enrollees in the order they apply
                    until reaching full capacity.

15.  MET  NOT MET   There is no evidence of discrimination in marketing
                    practices related to health status or health care needs
                    (i.e., use of a pre-enrollment "health screening" form).

16.  MET  NOT MET   Members have a choice of at least two primary care
                    physicians- -within a specified radius of their residence
                    (i.e., 40 miles/40 minutes).

17.  MET  NOT MET   The contractor has written standards for clinically
                    appropriate waiting times for medical appointments.

18.  MET  NOT MET   The contractor regularly monitors waiting times.

19.  MET  NOT MET   The contractor has a formal outreach effort targeted to
                    pregnant women.

20.  MET  NOT MET   The contractor has a mechanism to identify pregnant women
                    already enrolled in the plan and to help them enter prenatal
                    care.

21.  MET  NOT MET   The contractor has a mechanism established to track the
                    prenatal care that pregnant members receive.

22.  MET  NOT MET   The contractor has protocols established to follow up on
                    members who do not comply with prenatal care visits.

23.  MET  NOT MET   The contractor assigns an obstetrician or other qualified
                    provider to pregnant women on enrollment, or in a timely
                    manner as soon as the pregnancy is identified.

24.  MET  NOT MET   The contractor has mechanisms to ensure early entry to care
                    for pregnant women.

25.  MET  NOT MET   The plan's percentage of sick newborns relative to total
                    births have decreased. (Trend and not a single reporting
                    period phenomenon)

26.  MET  NOT MET   The contractor monitors provider compliance with CHEC/EPSDT
                    requirements.

27.  MET  NOT MET   The contractor provides training and education on CHEC/EPSDT
                    requirements to providers and their staff.

28.  MET  NOT MET   All members are notified of CHEC/EPSDT screening services
                    and notified in

Utah Division of Health Care Financing                            Page 31 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

                    writing when appointments need to be scheduled.

29.  MET  NOT MET   Referrals are tracked to ensure that members receive needed
                    care.

30.  MET  NOT MET   Follow-up tracking is done on members who do not make
                    appointments or keep appointments to investigate any low
                    penetration of CHEC/EPSDT services (i.e. outreach plans for
                    protocols for the age group which is not seeking services).

31.  MET  NOT MET   Outreach programs are being actively developed to encourage
                    eligible members to utilize available services.

32.  MET  NOT MET   A sufficient sample of CHEC/EPSDT charts are audited on
                    a regular basis.

33.  MET  NOT MET   System management reports and other utilization reports are
                    reviewed in the health plan's assessment of the
                    effectiveness and utilization of CHEC/EPSDT services.

34.  MET  NOT MET   The contractor enforces policies and procedures that protect
                    the client's freedom to choose any qualified provider of
                    family planning services.

35.  MET  NOT MET   Family planning services are geographically accessible to
                    each member in the health plan's service area.

36.  MET  NOT MET   The member's participation in family planning services
                    (utilization of services) are on a voluntary basis, and not
                    a prerequisite to eligibility or receipt of other services.

37.  MET  NOT MET   The medical care components of family planning services are
                    overseen by the plan's medical director.

38.  MET  NOT MET   The contractor's network contains physicians with special
                    training or experience in family planning services.

39.  MET  NOT MET   The contractor has developed written protocols that detail
                    specific procedures for the provision of each family
                    planning service offered.

40.  MET  NOT MET   Hysterectomies and sterilization procedures are conducted
                    according to Federal and State regulation.

41.  MET  NOT MET   The contractor has developed measures to monitor the
                    utilization of family planning services.

42.  MET  NOT MET   Utilization data regarding family planning services is
                    monitored by the contractor.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Utah Division of Health Care Financing                            Page 32 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

STANDARD XII -- MEDICAL RECORDS STANDARDS

Contractor:_____________________Date:________Met By Accreditation:________

Reviewer Signature:____________________________________

1.   MET  NOT MET   The contractor has written procedures for record keeping.

2.   MET  NOT MET   The medical records keeping system is designed to capture
                    the following information:

                       Yes  No   Enrollee identifiers (i.e. name, date of birth,
                                 and enrollee identification number)

                       Yes  No   Whether or not the patient has written an
                                 advance directive.

                       Yes  No   Patient background and medical history
                                 including allergies, immunizations, and
                                 medication information.

                       Yes  No   Date of service

                       Yes  No   Description of service

                       Yes  No   Place of service

                       Yes  No   Date of request/referral

                       Yes  No   Name of servicing provider(s)

                       Yes  No   Name of referring provider, if applicable

                       Yes  No   Diagnosis

                       Yes  No   The terms of any referrals/authorization made
                                 by the primary care physician (i.e. number of
                                 visits authorized, open ended referral vs.
                                 specified number of visits)

                       Yes  No   Documentation of emergency care, hospital
                                 discharge summaries, ancillary services

                       Yes  No   Clinical indicators

                       Yes  No   Outcome measures

3.   MET  NOT MET   All entries in the medical record are dated and all authors
                    identified.

4.   MET  NOT MET   Records are available to providers at each patient
                    encounter.

5.   MET  NOT MET   Records are maintained for the amount of time specified in
                    the contract.

Utah Division of Health Care Financing                             Page 33 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

6.   MET  NOT MET   Records (medical, financial, enrollment, disenrollment,
                    administrative, quality assurance and operating records) are
                    accessible to personnel and government authorities as
                    necessary and appropriate.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD XIII -- UTILIZATION REVIEW

Contractor:_________________ Date:______Met By Accreditation:_________

Reviewer Signature:_______________________________

 1.  MET  NOT MET   The contractor has written policies and procedures
                    describing its utilization review program.

 2.  MET  NOT MET   The contractor has a formally established utilization review
                    committee.

 3.  MET  NOT MET   Appropriate medical consultants participate in the UR
                    committee.

 4.  MET  NOT MET   The utilization review system include the following
                    components.

                       Yes  No   Prior approval review

                       Yes  No   Second opinion program

                       Yes  No   Concurrent review

                       Yes  No   Discharge planning

                       Yes  No   Physician profile reports

                       Yes  No   Trend reports

                       Yes  No   Identification of patterns of care

                       Yes  No   Tracking of clinical indicators

                       Yes  No   Referral tracking

 5.  MET  NOT MET   The UR program identifies both over and under utilization.

 6.  MET  NOT MET   The contractor's outreach activities are sufficient given
                    the size of the plan.

 7.  MET  NOT MET   The Contractor's utilization review program is effective.

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

 8.  MET  NOT MET   There are sufficient qualified personnel/resources devoted
                    to utilization review.

 9.  MET  NOT MET   The contractor regularly evaluate the effectiveness of the
                    utilization review program.

10.  MET  NOT MET   Members receive necessary and appropriate services.

11.  MET  NOT MET   Enrollees receive appropriate diagnostic test and specialty
                    referrals.

12.  MET  NOT MET   Preauthorization and concurrent review decisions are
                    supervised by qualified medical professionals.

13.  MET  NOT MET   Efforts are made to obtain all necessary information and
                    consult with the treating physician as appropriate during
                    preauthorization and concurrent review.

14.  MET  NOT MET   Reasons for decisions are clearly documented and available
                    to the member.

15.  MET  NOT MET   Providers and members are informed of the utilization review
                    appeals process.

16.  MET  NOT MET   Appeals are handled in a timely manner.

17.  MET  NOT MET   Analysis of data from the UR system is part of the quality
                    assurance process.

18.  MET  NOT MET   Utilization review activities reflect use of alternative
                    health care services in lieu of hospitalization.

19.  MET  NOT MET   Physician profiling is part of the utilization review
                    process.

20.  MET  NOT MET   The physician profile information is shared with plan
                    providers for educational purposes.

 Comments:______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD XIV -- CONTINUITY OF CARE SYSTEM

Contractor:____________________Date:_______Met By Accreditation:________

Reviewer Signature:___________________________________

1.   MET  NOT MET   There is a basic system in place to assure continuity of
                    care to all enrollees.

2.   MET  NOT MET   There is a case management system in place to assist
                    enrollees requiring these services.

Utah Division of Health Care Financing                             Page 35 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD XV -- QUALITY ASSURANCE PLAN DOCUMENTATION

Contractor:_________________________Date:____________

Reviewer Signature:____________________________________

1.   MET  NOT MET   There is documentation that the MCO is monitoring the
                    quality of care across all services and all treatment
                    modalities, according to its written QAP.

2.   MET  NOT MET   Documentation of QAP activities including corrective actions
                    is maintained and available for review by the State Agency
                    or its designee. (studies, protocols, standards, meeting
                    minutes, reports, worksheets, etc.)

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD XVI -- COORDINATION OF QUALITY ASSURANCE ACTIVITY WITH OTHER MANAGEMENT
                ACTIVITY

Contractor:___________________Date:_______Met By Accreditation:________

Reviewer Signature:_________________________________

1.   MET  NOT MET   The quality assurance activities are coordinated with other
                    performance monitoring activities.

2.   MET  NOT MET   There is linkage between quality assurance and the other
                    management functions of the health plan, such as network
                    changes, benefits redesign, medical management systems,
                    physician education and patient education.

3.   MET  NOT MET   Data from the utilization review system is used to educate
                    providers regarding norms and expected utilization patterns.

4.   MET  NOT MET   Utilization review findings are incorporated into quality
                    assurance activities, provider recredentialing activities
                    and long range planning.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Utah Division of Health Care Financing                             Page 36 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

STANDARD XVII -- DATA COLLECTION

Contractor:____________________ Date:___________

Reviewer Signature:__________

1.   MET  NOT MET   The data provided is in accordance with contract
                    requirements.

2.   MET  NOT MET   Membership reports are timely, accurate and complete:

                       Yes No    Enrollment data

                       Yes  No   Disenrollment summaries (reasons for leaving
                                 plan)

                       Yes  No   Outreach activities

                       Yes  No   Satisfaction surveys

                       Yes  No   Grievance reports

3.   MET  NOT MET   Quality assurance/access reports are timely, accurate and
                    complete.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

STANDARD XVIII -- FINANCIAL SOLVENCY

Contractor:________________________Date:___________

Reviewer Signature:_________________________________

1.   MET  NOT MET   The contractor complies with requirements to allow
                    inspection/audit of financial records.

2.   MET  NOT MET   The contractor is found to be financially solvent by the
                    Utah State Insurance Commission.

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Utah Division of Health Care Financing                             Page 37 of 39

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Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

                                WORK SHEET TOTALS

MET   NOT MET                   STANDARD

___     ____     Standard I     - Written Quality Assurance Plan Description

___     ____     Standard II    - Systematic Process of Quality Assessment and
                                  Improvement

___     ____     Standard III   - Accountability to the Governing Body

___     ____     Standard IV    - Active Quality Assurance Committee

___     ____     Standard V     - Quality Assurance Plan Supervision

___     ____     Standard VI    - Adequate Resources

___     ____     Standard VII   - Provider Participation and Delegation of
                                  Quality Assurance Plan Activities

___     ____     Standard VIII  - Delegation of Quality Assurance Plan
                                  Activities

___     ____     Standard IX    - Credentialing and Recredentialing

___     ____     Standard X     - Enrollee Rights and Responsibilities

___     ____     Standard XI    - Availability and Accessibility

___     ____     Standard XII   - Medical Records

___     ____     Standard XIII  - Utilization Review

___     ____     Standard XIV   - Continuity of Care System

___     ____     Standard XV    - Quality Assurance Plan Documentation

___     ____     Standard XVI   - Coordination of Quality Assurance Activity
                                  with other Management Activity

___     ____     Standard XVII  - Data Collection

___     ____     Standard XVIII - Financial Solvency

================================================================================

___     ____   TOTAL

Comments:_______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Utah Division of Health Care Financing                             Page 38 of 39

<PAGE>

Bureau of Managed Health Care         Utah MCO Quality Assurance Monitoring Plan

                                      NOTES

Utah Division of Health Care Financing                             Page 39 of 39

<PAGE>

                            UTAH DEPARTMENT OF HEALTH
                 288 North 1460 West, Salt Lake City, Utah 84116

                               CONTRACT AMENDMENT
    H9920205-01                                                   00-6146
---------------------                                      ---------------------
Department Log Number                                      State Contract Number

1.   CONTRACT NAME:
     The name of this Contract is HMO-AMERICAN FAMILY CARE the Contract number
     assigned by the State Division of Finance is 00-6146 the Department log
     number assigned by the Utah Department of Health is H9920205, and this
     Amendment is number 01.

2.   CONTRACTING PARTIES:
     This Contract Amendment is between the Utah Department of Health
     (DEPARTMENT), and American Family Care (CONTRACTOR).

3.   PURPOSE OF CONTRACT AMENDMENT:
     To add rural counties to the Contractor's service area effective January 1,
     2000; to establish rates specifically for the rural counties, and to
     increase the Contract amount from $ [*] to $ [*]

4.   CHANGES TO CONTRACT:

     A.   Under Page 1, Item 4, CONTRACT AMOUNT is changed to read:
          "The Contractor will be paid up to a maximum amount of $ [*]
          for the Contract period in accordance with the provisions in this
          Contract. This Contract is funded with 71.61% Federal funds and with
          28.39% State funds. The CFDA # is 93.778 and relates to the federal
          funds provided."

     B.   Under Page 1, Item 6, REFERENCE TO ATTACHMENTS INCLUDED AS PART OF
          THIS CONTRACT is amended by adding Attachment F-1, Rates and Rate
          Related Terms for the Rural counties.

     C.   Under Attachment B, Special Provisions, Article II, Service Area is
          changed to read:
          "The Service Area is limited to the urban counties of Davis, Salt
          Lake, Utah and Weber, and the rural counties of Box Elder, Cache,
          Beaver, Garfield, Iron, Kane, and Washington."

     D.   Attachment F-1, Rates and Rate-Related Terms for the Rural Counties is
          added to the Contract as attached to this Amendment.

     E.   All other provisions of the Contract remain unchanged.

5.   If the Contractor is not a local public procurement unit as defined by the
     Utah Procurement Code (UCA Section 63-56-5), this Contract Amendment must
     be signed by a representative of the State Division of Finance and the
     State Division of Purchasing to bind the State and the Department to this
     Contract Amendment.

6.   This Contract, its attachments, and all documents incorporated by reference
     constitute the entire agreement between the parties and supercede all prior
     negotiations, representations, or agreements, either written or oral
     between the parties relating to the subject matter of this Contract.

IN WITNESS WHEREOF, the parties sign this Contract Amendment.

CONTRACTOR: AMERICAN FAMILY CARE          UTAH DEPARTMENT OF HEALTH

By: /s/ Kirk Olsen            4 Jan 2000  By: /s/ Shari A. Watkins,   01/07/2000
   -------------------------  ----------     ------------------------ ----------
   Signature of Authorized    Date           Shari A. Watkins, C.P.A. Date
   Individual                                Director
                                             Official of Fiscal
                                             Operations

Print Name:     Kirk Olsen                [SEAL]                      1/7/00
            ----------------------------  -------------------------   ----------
                                          State Finance:              Date
Title:     Chief Executive Officer
      ----------------------------------  /s/ [ILLEGIBLE]             1/7/2000
                                          -------------------------   ----------
           33-0617992                     State Purchasing:           Date
------------------------------------
Federal Tax Identification Number or
      Social Security Number

                                     Page 1

<PAGE>

                ATTACHMENT F-1 RURAL RATES AND RATE-RELATED TERMS

                            Effective January 1, 2000

                              AMERICAN FAMILY CARE

 A.  PREMIUM RATES

     7.   MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
    Age         TANF Male        TANF Male       TANF Female       TANF Female
   0 to 1        1 to 21         21 & Over        1 to 21           21 & Over           Aged
====================================================================================================
 <S>            <C>              <C>             <C>                <C>                 <C>
 $   [*]         $ [*]            $ [*]           $    [*]         $     [*]            $ [*]
----------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
 Disabled         Disabled          Medically         Medically        Non TANF       Restriction
   Male            Female          Needy Child       Needy Adult      Pregnant F        Program
====================================================================================================
 <S>             <C>              <C>             <C>              <C>                  <C>
 $   [*]         $ [*]            $ [*]           $    [*]         $     [*]            $ [*]
----------------------------------------------------------------------------------------------------
</TABLE>

     8.   SPECIAL RATE

          An AIDS rate of $[*] per month will be paid in addition to the regular
          monthly premium when the T-Cell count is below 200.

B.   PER DELIVERY REIMBURSEMENT SCHEDULE

     The DEPARTMENT shall reimburse the CONTRACTOR $[*] per delivery to cover
     all Medically Necessary antepartum care, delivery, and postpartum
     professional, facility and ancillary services. The monthly premium amount
     for the enrollee is in addition to the delivery fee. The delivery payment
     will be made when the delivery occurs at 22 weeks or later, regardless of
     viability.

C.   CHEC SCREENING INCENTIVE CLAUSE

     1.   CHEC Screening Goal

          The CONTRACTOR will ensure that Medicaid children have access to
          appropriate well-child visits. The CONTRACTOR will follow the Utah
          EPSDT (CHEC) guidelines for the periodicity schedule for well-child
          protocol. The federal agency, Health Care Financing Administration,
          mandates that all states have 80% of all children screened. The
          DEPARTMENT and the CONTRACTOR will work toward that goal.

                                   Page 1 of 4

<PAGE>

     2.   Calculation of CHEC Incentive Payment

          The DEPARTMENT will pay the CONTRACTOR $ [*] for each percentage point
          over 60% achieved by the CONTRACTOR. The DEPARTMENT will calculate the
          CONTRACTOR'S annual participation rate based on information supplied
          by the CONTRACTOR under the EPSDT (CHEC) reporting requirements at the
          same time each federal fiscal year's HCFA-416 is calculated. Payment
          will be based on the percentages determined at that time.

     3.   CONTRACTOR's Use of Incentive Payment

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the EPSDT (CHEC)
          participation rate.

D.   STOP-LOSS/REINSURANCE POLICY

     Stop-loss under item #1 below will be administered by a reinsurer,
     TransAmerica Occidental Life Insurance Company (TransAmerica). TransAmerica
     will partially administer stop-loss under item #2 below.

     1.   REINSURANCE (all services including kidney, liver, and cornea and
          excluding specific organ transplantations defined in D.2. below)

          Costs, net of TPL, for all inpatient and outpatient services listed in
          Attachment C (including kidney, liver, and cornea transplantations,
          but excluding bone marrow, heart, intestine, lung, pancreas, small
          bowel, combination heart/lung, combination intestine/liver,
          combination kidney/pancreas, multi visceral, combination liver/small
          bowel, any additional approved transplantations) that are covered on
          the date of service rendered and incurred from July 1, 1999 through
          June 30, 2000 by the MCO for an Enrollee shall be shared by
          Transamerica under the following conditions:

          a.   the date of service is from July 1, 1999 through June 30, 2000
               (based on date of discharge if inpatient hospital stay);

          b.   paid claims incurred by the MCO exceed $50,000; and

          c.   services shall have been incurred by the MCO during the time the
               client is enrolled with the MCO.

          If the above conditions are met, TransAmerica shall bear [*]% and the
          MCO shall bear [*]% of the amount that exceeds $50,000.

                                   Page 2 of 4

<PAGE>

     2.   STOP-LOSS/REINSURANCE FOR SPECIFIC ORGAN TRANSPLANTATIONS

          Costs, net of TPL, for bone marrow, heart, intestine, lung, pancreas,
          small bowel, combination heart/lung, combination intestine/liver,
          combination kidney/pancreas, multi visceral, combination liver/small
          bowel, and any additional approved transplantations (other than
          kidney, liver, and cornea) that are covered on the date of service
          rendered and incurred from July 1, 1999 through June 30, 2000 by the
          MCO for an Enrollee shall be shared by the DEPARTMENT, Transamerica
          and the MCO under the following conditions:

          a.   the date of service is from July 1, 1999 through June 30, 2000
               (based on date of discharge if inpatient hospital stay);

          b.   paid claims incurred by the MCO exceed $40,000; and

          c.   services shall have been incurred by the MCO during the time the
               client is enrolled with the MCO;

          d.   the stop-loss billings for the first $40,000 must be submitted to
               the DEPARTMENT in a format mutually agreed upon; and

          e.   stop-loss billings for the first $40,000 must be submitted to the
               DEPARTMENT within six months of the end of the Contract year.

          If the above conditions are met, the DEPARTMENT shall reimburse the
          MCO the first $40,000; TransAmerica, shall bear [*]% and the MCO shall
          bear [*]% of the amount that exceeds $40,000.

          Stop-loss/reinsurance provisions are normally based on services
          provided within the contract period ending June 30. However, for
          purposes of this stop-loss/reinsurance provision the Contract period
          is extended for transplantations performed between April 1, 2000 and
          June 30, 2000. When the transplantation is performed between April 1,
          2000 and June 30, 2000 the payment for the first $40,000 of the
          transplantation costs and the costs that exceed $40,000 can be applied
          to this stop-loss/reinsurance provision for up to 90 days after the
          transplantation is performed.

E.   REIMBURSEMENT FOR REINSURANCE

     The CONTRACTOR agrees to purchase reinsurance from TransAmerica at the rate
     negotiated by the DEPARTMENT of $ [*] per Enrollee per month. The
     DEPARTMENT will reimburse the CONTRACTOR for their premium payments to
     TransAmerica.
        In addition, the DEPARTMENT will pay the CONTRACTOR [*]% of the premium
     to cover reinsurance administrative costs.

                                   Page 3 of 4

<PAGE>

     1.   INTERIM PAYMENTS

          Beginning July 1, 1999, the DEPARTMENT will make monthly interim
          payments to the CONTRACTOR based on the reinsurance premiums the
          CONTRACTOR pays to Insurance Strategies, an agent of TransAmerica. The
          reinsurance premiums will be calculated using the previous month's
          number of Enrollees.

     2.   FINAL SETTLEMENT

          The DEPARTMENT will calculate the actual reinsurance amount due to the
          CONTRACTOR one month after the end of each contract year. The
          settlement will be based on actual Enrollee months.

F.   RISK SHARING PROVISION

     The DEPARTMENT agrees to retroactively adjust annual payments made to the
     CONTRACTOR under this Contract for clients living in the rural counties of
     Box Elder, Cache, Iron, Kane, Washington, Garfield and Beauer.

     1.   CONTRACTOR'S CLAIM EXPENDITURES EXCEEDING PREMIUMS, ETC.

          If the CONTRACTOR'S claim expenditures exceed the premiums paid plus
          other contract payments, the DEPARTMENT will reimburse the CONTRACTOR
          for the unrecovered costs related to claim expenditures. Claim
          contract payments include stop-loss payments. Therefore, the paid
          claims expenditures will also include stop-loss claims paid by the
          CONTRACTOR.

     2.   CONTRACTOR'S CLAIM EXPENDITURES LESS THAN PREMIUMS, ETC.

          If the CONTRACTOR'S claim expenditures are less than the premiums paid
          plus other contract payments, the CONTRACTOR can retain up to [*]% of
          the excess premiums paid and other payments. If there are additional
          savings after the CONTRACTOR has recovered the 10%, the DEPARTMENT and
          CONTRACTOR will share these savings on a 50-50 basis. Claim contract
          payments include stop-loss payments. Therefore, the paid claims
          expenditures will also include stop-loss claims paid by the
          CONTRACTOR.

          A request for a risk sharing adjustment shall be submitted to the
          DEPARTMENT no later than six months after the close of the contract
          year. The CONTRACTOR agrees to use its Medicaid payment rates and fee
          schedules used to price their Medicaid product as a basis for the risk
          sharing calculation.

                                   Page 4 of 4

<PAGE>

                            UTAH DEPARTMENT OF HEALTH
                 288 North 1460 West, Salt Lake City, Utah 84116

                               CONTRACT AMENDMENT

    H9920205-02                                                  00-6146
---------------------                                     ---------------------
Department Log Number                                     State Contract Number

1. CONTRACT NAME:
   The name of this Contract is HMO-AMERICAN FAMILY CARE, the Contract number
   assigned by the State Division of Finance is 006146, the Department log
   number assigned by the Utah Department of Health is H9920205, and this
   Amendment is number 2.

2. CONTRACTING PARTIES:
   This Contract Amendment is between the Utah Department of Health
   (DEPARTMENT), and American Family Care of Utah, Inc. (CONTRACTOR).

3. PURPOSE OF CONTRACT AMENDMENT:
   To modify some of the provisions under Attachments B, C, and E; to add
   provisions under Attachment B; and to increase the rates effective July 1,
   2000.

4. CHANGES TO CONTRACT:
   A. Effective July 1, 2000, under Attachment B (Special Provisions), Article I
      - Definitions, item D. "CHEC Program," delete "(See Attachment C, Covered
      Services, 21.)."

   B. Effective July 1, 2000, under Attachment B (Special Provisions), Article
      IV - Benefits, Section C. Scope of Services, add Subsection "4" as
      follows:

      4.  MEDICAL NECESSITY DENIALS

          When the CONTRACTOR determines that a service will not be covered due
          to the lack of medical necessity, the CONTRACTOR must send all
          documentation supporting their decision to the DEPARTMENT for its
          review before the CONTRACTOR's determination is deemed final, when the
          following conditions are met:

          a.   there are no established national standards for determining
               medical necessity; and

          b.   the DEPARTMENT does not have medical necessity criteria for the
               service.

          The DEPARTMENT will review the documentation and determine what the
          DEPARTMENT's decision would be regarding coverage for the service. The
          DEPARTMENT and the CONTRACTOR will work collaboratively in making a
          final decision on whether the service is to be covered by the
          CONTRACTOR.

   C. Effective July 1, 2000, under Attachment B (Special Provisions), Article
      IV-Benefits, Section E. Clarification of Covered Services, Subsection 1
      Emergency Services, delete item "c."

   D. Effective July 1, 2000, under Attachment B (Special Provisions), Article
      V-Enrollee Rights/Services, Section F. Coordination, add Subsection "3"
      as follows:

      3.  DOMESTIC VIOLENCE

          The CONTRACTOR will ensure that providers are knowledgeable about
          methods to detect domestic violence and about resources in the
          community to which they can refer patients.

   E. Effective July 1, 2000, under Attachment B (Special Provisions), Article
      VII - Other Requirements, Section C. Fraud and Abuse Requirements, add the
      following language:

      "The CONTRACTOR must have a compliance program to identify and refer
      suspected fraud and abuse activities. The compliance program should
      outline the CONTRACTOR's internal processes for identifying fraud and
      abuse."

                                   Page 1 of 3

<PAGE>

   F. Effective July 1, 2000, under Attachment B (Special Provisions), Article
      IX - Record, Reports and Audits, Section B. Periodic Reports, add
      Subsection 2. Interpretive Services as follows and renumber subsequent
      sections "3" through "9":

      2.  INTERPRETIVE SERVICES

          Annually, the CONTRACTOR will submit to the DEPARTMENT information
          about the use of interpretive services as follows: all sources of
          interpreter services, the languages for which interpreter services
          were secured, the amount of time spent by language, the expenditures
          by language, the amount of time spent by clinical versus
          administrative purposes, and the expenditures by clinical versus
          administrative purposes.

   G. Effective July 1, 2000, under Attachment B (Special Provisions), Article
      IX - Records, Reports and Audits, Section B. Periodic Reports, Subsection
      5. Encounter Data, is changed to Subsection 6 and changed to read:

      "Encounter data, as defined in the DEPARTMENT's "Encounter Records
      Technical Manual," is due (including all replacements) six months after
      the end of the quarter being reported. Encounter data will be submitted in
      accordance with the instructions detailed in the Encounter Records
      Technical Manual for dates of service beginning July 1, 1996."

   H. Effective July 1, 2000, under Attachment C. Covered Services, Item Y.
      Medical and Surgical Services of a Dentist, number 3. Services
      Specifically Covered, is changed to read as follows:

      3.  SERVICES SPECIFICALLY COVERED

          The CONTRACTOR is responsible for palliative care and pain relief for
          severe mouth or tooth pain in an emergency room. If the emergency room
          physician determines that it is not an emergency and the client
          requires services at a lesser level, the provider should refer the
          client to a dentist for treatment. If the dental-related problem is
          serious enough for the client to be admitted to the hospital, the
          CONTRACTOR is responsible for coverage of the inpatient hospital stay.
          The CONTRACTOR is responsible for authorized/ approved medical
          services provided by oral surgeons consistent with injury, accident,
          or disease (excluding dental decay and periodontal disease) including,
          but not limited to, removal of tumors in the mouth, setting and wiring
          a fractured jaw. Also covered are injuries to sound natural teeth and
          associated bone and tissue resulting from accidents including services
          by dentists performed in facilities other than the emergency room or
          hospital.

   I. Effective July 1, 2000, under Attachment C. Covered Services, Item Y.
      Medical and Surgical Services of a Dentist, number 4. Dental Services Not
      Covered, is changed to read as follows:

      4.  DENTAL SERVICES NOT COVERED

          The CONTRACTOR is not responsible for routine dental services such as
          fillings, extractions, treatment of abscess or infection,
          orthodontics, and pain relief when provided by a dentist in the office
          or in an outpatient setting such as a surgical center or scheduled
          same day surgery in a hospital including the surgical facilities
          charges.

   J. Effective July 1, 2000, under Attachment E, replace Table 2 (Cost Data)
      with Table 2 (Cost Data) and MEDICAL SERVICES REVENUE AND COST DEFINITIONS
      FOR TABLE 2 as attached to this Amendment #1.

   K. Effective July 1, 2000, replace Attachment F - Rates and Rate-Related
      Terms with Attachment F - Urban Rates and Rate-Related Terms, Effective
      July 1, 2000, as attached to this Amendment #2.

   L. Effective July 1, 2000, replace Attachment F-1 Rural Rates and
      Rate-Related Terms with Attachment F-1 Rural Rates and Rate-Related Terms,
      Effective July 1, 2000, as attached to this Amendment #2.

   M. All other provisions of the Contract remain unchanged.

                                   Page 2 of 3

<PAGE>

5.   If the Contractor is not a local public procurement unit as defined by the
     Utah Procurement Code (UCA Section 63-56-5), this Contract Amendment must
     be signed by a representative of the State Division of Finance and the
     State Division of Purchasing to bind the State and the Department to this
     Contract Amendment.

6.   This Contract, its attachments, and all documents incorporated by reference
     constitute the entire agreement between the parties and supercede all prior
     negotiations, representations, or agreements, either written or oral
     between the parties relating to the subject matter of this Contract.

IN WITNESS WHEREOF, the parties sign this Contract Amendment.

CONTRACTOR: American Family Care of Utah,     UTAH DEPARTMENT OF HEALTH
Inc.

By: /s/ Kirk Olsen          5 September 2000 By:/s/ Shari A. Watkins 9/12/2000
    ----------------------- ----------------    -------------------- -----------
    Signature of Authorized Date                Shari A. Watkins,    Date
    Individual                                  C.P.A.
                                                Director
                                                Office of Fiscal
                                                Operations

Print Name: Kirk Olsen                          [SEAL]               9/26/2000
           --------------------------           -------------------- -----------
                                                State Finance:       Date
Title: Chief Executive Officer
       ------------------------------
                                                /s/ [ILLEGIBLE]      SEP 22 2000
              33-0617992                        -------------------- -----------
---------------------------------------         State Purchasing     Date
Federal Tax Identification Number or
       Social Security Number

                                   Page 3 of 3

<PAGE>

<TABLE>
<S>                              <C>                                            <C>                                  <C>
PROVIDER NAME:                   _________________________________________         ATTACHMENT E                      ATTACHMENT E
SERVICE REPORTING PERIOD:        BEGINNING____________  ENDING____________      TABLE 1 PAGE 1 OF 1                       TABLE 1
PAYMENT DATES:                   BEGINNING____________  ENDING____________      MEDICAID ENROLLMENT                  Page 1 of 15
</TABLE>

<TABLE>
<CAPTION>
   1           2             3          4             5             6          7          8        9         10        11      12
------------------------------------------------------------------------------------------------------------------------------------
                                        AFDC                       AFDC
                                        MALE         AFDC         FEMALE       AFDC                                    MED     MED
 LINE                     INFANTS    * 21 YEARS      MALE       * 21 YEARS    FEMALE            DISABLED   DISABLED   NEDDY   NEDDY
  NO         MONTH        0-12 MOS  ** 12 MOS     21 + YEARS   **12 MOS    21 + YEARS   AGED     MALE      FEMALE    CHILD   OTHER
------------------------------------------------------------------------------------------------------------------------------------
  <S>      <C>                   <C>         <C>           <C>         <C>          <C>   <C>        <C>        <C>     <C>     <C>
   1       JULY
------------------------------------------------------------------------------------------------------------------------------------
   2       AUGUST
------------------------------------------------------------------------------------------------------------------------------------
   3       SEPTEMBER
------------------------------------------------------------------------------------------------------------------------------------
   4       OCTOBER
------------------------------------------------------------------------------------------------------------------------------------
   5       NOVEMBER
------------------------------------------------------------------------------------------------------------------------------------
   6       DECEMBER
------------------------------------------------------------------------------------------------------------------------------------
   7       JANUARY
------------------------------------------------------------------------------------------------------------------------------------
   8       FEBRUARY
------------------------------------------------------------------------------------------------------------------------------------
   9       MARCH
------------------------------------------------------------------------------------------------------------------------------------
  10       APRIL
------------------------------------------------------------------------------------------------------------------------------------
  11       MAY
------------------------------------------------------------------------------------------------------------------------------------
  12       JUNE
------------------------------------------------------------------------------------------------------------------------------------
  13       TOTAL                 0           0             0           0            0     0          0          0       0       0
------------------------------------------------------------------------------------------------------------------------------------
* less than
** greater than

<CAPTION>
   1           2             13          14         15       16
----------------------------------------------------------------------
                          NON AFDC                          MEDICAID
                          PREGNANT                            TOTAL
 LINE                      FEMALE    RESTRICTION          (SUM OF COLS
  NO         MONTH        (SOBRA)      CLIENTS     AIDS     3 THRU 15)
----------------------------------------------------------------------
  <S>      <C>                   <C>           <C>    <C>            <C>
   1       JULY                                                      0
----------------------------------------------------------------------
   2       AUGUST                                                    0
----------------------------------------------------------------------
   3       SEPTEMBER                                                 0
----------------------------------------------------------------------
   4       OCTOBER                                                   0
----------------------------------------------------------------------
   5       NOVEMBER                                                  0
----------------------------------------------------------------------
   6       DECEMBER                                                  0
----------------------------------------------------------------------
   7       JANUARY                                                   0
----------------------------------------------------------------------
   8       FEBRUARY                                                  0
----------------------------------------------------------------------
   9       MARCH                                                     0
----------------------------------------------------------------------
  10       APRIL                                                     0
----------------------------------------------------------------------
  11       MAY                                                       0
----------------------------------------------------------------------
  12       JUNE                                                      0
----------------------------------------------------------------------
  13       TOTAL                 0             0      0              0
----------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                             <C>                                             <C>                                     <C>
PROVIDER NAME:                  _________________________________________         ATTACHMENT E                          ATTACHMENT E
SERVICE REPORTING PERIOD:       BEGINNING____________  ENDING____________       TABLE 2 PAGE 1 OF 2                          TABLE 2
PAYMENT DATES:                  BEGINNING____________  ENDING____________       REVENUES AND COST                       PAGE 2 OF 15
</TABLE>

<TABLE>
<CAPTION>
                                        -------------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)---------------
    1             2                     3              4        5            6           7          8
----------------------------------------------------------------------------------------------------------------------
                                     TOTAL UTAH                 AFDC                          AFDC
                                     OPERATIONS                 MALE           AFDC          FEMALE          AFDC
LINE                                 (INCLUDING     INFANTS    * 21 YEARS      MALE       * 21 YEARS        FEMALE
 NO          DESCRIPTION            ALL MEDICAID)   0-12 MOS  ** 12 MOS     21 + YEARS   ** 12 MOS        21 + YEARS
----------------------------------------------------------------------------------------------------------------------
               REVENUES                              ROUND TO THE NEAREST DOLLAR
----------------------------------------------------------------------------------------------------------------------
 <S> <C>                                     <C>         <C>           <C>         <C>            <C>            <C>
  1  PREMIUMS
----------------------------------------------------------------------------------------------------------------------
  2  DELIVERY FEES (CHILD BIRTH)
----------------------------------------------------------------------------------------------------------------------
  3  REINSURANCE
----------------------------------------------------------------------------------------------------------------------
  4  STOP LOSS
----------------------------------------------------------------------------------------------------------------------
  5  TPL COLLECTIONS - MEDICARE
----------------------------------------------------------------------------------------------------------------------
  6  TPL COLLECTIONS - OTHER
----------------------------------------------------------------------------------------------------------------------
  7  OTHER (SPECIFY)
----------------------------------------------------------------------------------------------------------------------
  8  OTHER (SPECIFY)
----------------------------------------------------------------------------------------------------------------------
  9  TOTAL REVENUES                          $ 0         $ 0           $ 0         $  0           $ 0            $  0
----------------------------------------------------------------------------------------------------------------------
             MEDICAL COSTS                           ROUND TO THE NEAREST DOLLAR
----------------------------------------------------------------------------------------------------------------------
 10  INPATIENT HOSPITAL SERVICES
----------------------------------------------------------------------------------------------------------------------
 11  OUTPATIENT HOSPITAL SERVICES
----------------------------------------------------------------------------------------------------------------------
 12  EMERGENCY DEPARTMENT SERVICES
----------------------------------------------------------------------------------------------------------------------
 13  PRIMARY CARE PHYSICIAN
      SERVICES
----------------------------------------------------------------------------------------------------------------------
 14  SPECIALTY CARE PHYSICIAN
      SERVICES
----------------------------------------------------------------------------------------------------------------------
 15  ADULT SCREENING SERVICES
----------------------------------------------------------------------------------------------------------------------
 16  VISION CARE - OPTOMETRIC
      SERVICES
----------------------------------------------------------------------------------------------------------------------
 17  VISION CARE - OPTICAL
      SERVICES
----------------------------------------------------------------------------------------------------------------------
 18  LABORATORY (PATHOLOGY)
      SERVICES
----------------------------------------------------------------------------------------------------------------------
 19  RADIOLOGY SERVICES
----------------------------------------------------------------------------------------------------------------------
 20  PHYSICAL AND OCCUPATIONAL
      THERAPY
----------------------------------------------------------------------------------------------------------------------
 21  SPEECH AND HEARING SERVICES
----------------------------------------------------------------------------------------------------------------------
 22  PODIATRY SERVICES
      END STAGE RENAL DISEASE
----------------------------------------------------------------------------------------------------------------------
 23  (ESRD) SERVICES - DIALYSIS
----------------------------------------------------------------------------------------------------------------------
 24  HOME HEALTH SERVICES
----------------------------------------------------------------------------------------------------------------------
 25  HOSPICE SERVICES
----------------------------------------------------------------------------------------------------------------------
 26  PRIVATE DUTY NURSING
----------------------------------------------------------------------------------------------------------------------
 27  MEDICAL SUPPLIES AND MEDICAL
      EQUIPMENT
----------------------------------------------------------------------------------------------------------------------
 28  ABORTIONS
----------------------------------------------------------------------------------------------------------------------
 29  STERILIZATIONS
----------------------------------------------------------------------------------------------------------------------
 30  DETOXIFICATION
----------------------------------------------------------------------------------------------------------------------
 31  ORGAN TRANSPLANTS
----------------------------------------------------------------------------------------------------------------------
 32  OTHER OUTSIDE MEDICAL
      SERVICES
----------------------------------------------------------------------------------------------------------------------
 33  LONG TERM CARE
----------------------------------------------------------------------------------------------------------------------
 34  TRANSPORTATION SERVICES
----------------------------------------------------------------------------------------------------------------------
 35  ACCRUED COSTS
----------------------------------------------------------------------------------------------------------------------
 36  OTHER (SPECIFY)
----------------------------------------------------------------------------------------------------------------------
 37  OTHER (SPECIFY)
----------------------------------------------------------------------------------------------------------------------
 38  TOTAL MEDICAL COSTS                     $ 0         $ 0           $ 0         $  0           $ 0            $  0
----------------------------------------------------------------------------------------------------------------------

* less than
** greater than

<CAPTION>
                                        -------------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)---------------
    1             2                   9        10         11       12       13        14         15          16        17
-------------------------------------------------------------------------------------------------------------------------------
                                                                                  NON AFDC                           MEDICAID
                                                                  MED     MED     PREGNANT                             TOTAL
LINE                                       DISABLED   DISABLED   NEDDY   NEEDY     FEMALE    RESTRICTION           (SUM OF COLS
 NO          DESCRIPTION            AGED     MALE      FEMALE    CHILD   OTHER     (SOBRA)    CLIENTS      AIDS      4 THRU 16)
-------------------------------------------------------------------------------------------------------------------------------
             REVENUES                                ROUND TO THE NEAREST DOLLAR
-------------------------------------------------------------------------------------------------------------------------------
 <S> <C>                             <C>        <C>        <C>     <C>     <C>         <C>           <C>    <C>             <C>

  1  PREMIUMS
-------------------------------------------------------------------------------------------------------------------------------
  2  DELIVERY FEES (CHILD BIRTH)
-------------------------------------------------------------------------------------------------------------------------------
  3  REINSURANCE
-------------------------------------------------------------------------------------------------------------------------------
  4  STOP LOSS
-------------------------------------------------------------------------------------------------------------------------------
  5  TPL COLLECTIONS - MEDICARE
-------------------------------------------------------------------------------------------------------------------------------
  6  TPL COLLECTIONS - OTHER
-------------------------------------------------------------------------------------------------------------------------------
  7  OTHER (SPECIFY)
-------------------------------------------------------------------------------------------------------------------------------
  8  OTHER (SPECIFY)
-------------------------------------------------------------------------------------------------------------------------------
  9  TOTAL REVENUES                  $ 0        $ 0        $ 0     $ 0     $ 0         $ 0           $ 0    $ 0             $ 0
-------------------------------------------------------------------------------------------------------------------------------
             MEDICAL COSTS                           ROUND TO THE NEAREST DOLLAR
-------------------------------------------------------------------------------------------------------------------------------
 10  INPATIENT HOSPITAL SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 11  OUTPATIENT HOSPITAL SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 12  EMERGENCY DEPARTMENT SERVICE
-------------------------------------------------------------------------------------------------------------------------------
 13  PRIMARY CARE PHYSICIAN
      SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 14  SPECIALTY CARE PHYSICIAN
      SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 15  ADULT SCREENING SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 16  VISION CARE - OPTOMETRIC
      SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 17  VISION CARE - OPTICAL
      SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 18  LABORATORY (PATHOLOGY)
      SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 19  RADIOLOGY SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 20  PHYSICAL AND OCCUPATIONAL
      THERAPY
-------------------------------------------------------------------------------------------------------------------------------
 21  SPEECH AND HEARING SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 22  PODIATRY SERVICES
      END STAGE RENAL DISEASE
-------------------------------------------------------------------------------------------------------------------------------
 23  (ESRD) SERVICES - DIALYSIS
-------------------------------------------------------------------------------------------------------------------------------
 24  HOME HEALTH SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 25  HOSPICE SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 26  PRIVATE DUTY NURSING
-------------------------------------------------------------------------------------------------------------------------------
 27  MEDICAL SUPPLIES AND MEDICAL
      EQUIPMENT
-------------------------------------------------------------------------------------------------------------------------------
 28  ABORTIONS
-------------------------------------------------------------------------------------------------------------------------------
 29  STERILIZATIONS
-------------------------------------------------------------------------------------------------------------------------------
 30  DETOXIFICATION
-------------------------------------------------------------------------------------------------------------------------------
 31  ORGAN TRANSPLANTS
-------------------------------------------------------------------------------------------------------------------------------
 32  OTHER OUTSIDE MEDICAL
      SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 33  LONG TERM CARE
-------------------------------------------------------------------------------------------------------------------------------
 34  TRANSPORTATION SERVICES
-------------------------------------------------------------------------------------------------------------------------------
 35  ACCRUED COSTS
-------------------------------------------------------------------------------------------------------------------------------
 36  OTHER (SPECIFY)
-------------------------------------------------------------------------------------------------------------------------------
 37  OTHER (SPECIFY)
-------------------------------------------------------------------------------------------------------------------------------
 38  TOTAL MEDICAL COSTS             $ 0        $ 0        $ 0     $ 0     $ 0         $ 0           $ 0    $ 0             $ 0
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                                                                             <C>                                <C>
PROVIDER NAME:                                                                    ATTACHMENT E                     ATTACHMENT E
SERVICE REPORTING PERIOD:                                                       TABLE 2 PAGE 1 OF 2                    TABLE 2
PAYMENT DATES:                                                                  REVENUES AND COST                  PAGE 3 OF 15
</TABLE>

<TABLE>
<CAPTION>
                                        -------------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-------------------
 1                 2                     3              4              5              6              7              8
---------------------------------------------------------------------------------------------------------------------------
                                    TOTAL UTAH                       AFDC                          AFDC
                                    OPERATIONS                       MALE           AFDC          FEMALE         AFDC
LINE                                (INCLUDING       INFANTS      * 21 YEARS        MALE        * 21 YEARS      FEMALE
 NO           DESCRIPTION          ALL MEDICAID)     0-12 MOS    ** 12 MOS       21 + YEARS   ** 12 MOS      21 + YEARS
---------------------------------------------------------------------------------------------------------------------------
        ADMINISTRATIVE COSTS                                      ROUND TO THE NEAREST DOLLAR
---------------------------------------------------------------------------------------------------------------------------
 <S> <C>                                   <C>          <C>             <C>            <C>           <C>            <C>
 39  ADMINISTRATION - ADVERTISING
---------------------------------------------------------------------------------------------------------------------------
 40  HOME OFFICE INDIRECT COST
      ALLOCATIONS
---------------------------------------------------------------------------------------------------------------------------
 41  UTILIZATION
---------------------------------------------------------------------------------------------------------------------------
 42  ADMINISTRATION - OTHER
---------------------------------------------------------------------------------------------------------------------------
 43  TOTAL ADMINISTRATIVE COSTS            $ 0          $ 0             $ 0            $ 0           $ 0            $ 0
---------------------------------------------------------------------------------------------------------------------------
 44  TOTAL COSTS (MED & ADMIN)             $ 0          $ 0             $ 0            $ 0           $ 0            $ 0
---------------------------------------------------------------------------------------------------------------------------
 45  NET INCOME [Gain or (Loss)]           $ 0          $ 0             $ 0            $ 0           $ 0            $ 0
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
 46  ENROLLEE MONTHS                                      0               0              0             0              0
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
 47  MEDICAL COST @ ENROLLEE MO
---------------------------------------------------------------------------------------------------------------------------
 48  ADMIN COST @ ENROLLEE MO
---------------------------------------------------------------------------------------------------------------------------
 49  TOTAL COST @ ENROLLEE MO
---------------------------------------------------------------------------------------------------------------------------
            OTHER DATA
---------------------------------------------------------------------------------------------------------------------------
 50  TPL SAVINGS  COST AVOIDANCE"
----------------------------------                -------------------------------------------------------------------------
 51  DUPLICATE PREMIUMS ***
----------------------------------                -------------------------------------------------------------------------
 52  NUMBER OF DELIVERIES ****
----------------------------------                -------------------------------------------------------------------------
 53  FAMILY PLANNING SERVICES
----------------------------------                -------------------------------------------------------------------------
 54  REINSURANCE PREMIUMS RECEIVED
----------------------------------                -------------------------------------------------------------------------
 55  REINSURANCE PREMIUMS PAID
----------------------------------                -------------------------------------------------------------------------
 56  ADMINISTRATIVE REVENUE
      RETAINED BY THE CONTRACTOR
----------------------------------                -------------------------------------------------------------------------

* less than
** greater than

<CAPTION>
                                        -------------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-------------------
  1                2                     9             10             11              12            13             14
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                NON AFDC
                                                                                    MED             MED         PREGNANT
LINE                                                DISABLED       DISABLED        NEDDY           NEDDY         FEMALE
 NO           DESCRIPTION              AGED           MALE          FEMALE         CHILD           OTHER         (SOBRA)
---------------------------------------------------------------------------------------------------------------------------
        ADMINISTRATIVE COSTS                                      ROUND TO THE NEAREST DOLLAR
---------------------------------------------------------------------------------------------------------------------------
 <S> <C>                               <C>              <C>           <C>           <C>             <C>             <C>
---------------------------------------------------------------------------------------------------------------------------
 39  ADMINISTRATION -ADVERTISING
---------------------------------------------------------------------------------------------------------------------------
 40  HOME OFFICE INDIRECT COST
      ALLOCATIONS
---------------------------------------------------------------------------------------------------------------------------
 41  UTILIZATION
---------------------------------------------------------------------------------------------------------------------------
 42  ADMINISTRATION - OTHER
---------------------------------------------------------------------------------------------------------------------------
 43  TOTAL ADMINISTRATIVE COSTS        $ 0              $ 0           $  0          $ 0             $ 0             $ 0
---------------------------------------------------------------------------------------------------------------------------
 44  TOTAL COSTS (MED & ADMIN)         $ 0              $ 0           $  0          $ 0             $ 0             $ 0
---------------------------------------------------------------------------------------------------------------------------
 45  NET INCOME [Gain or (Loss)]       $ 0              $ 0           $  0          $ 0             $ 0             $ 0
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
 46  ENROLLEE MONTHS                     0                0              0            0               0               0
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
 47  MEDICAL COST @ ENROLLEE MO
---------------------------------------------------------------------------------------------------------------------------
 48  ADMIN COST @ ENROLLEE MO
---------------------------------------------------------------------------------------------------------------------------
 49  TOTAL COST @ ENROLLEE MO
---------------------------------------------------------------------------------------------------------------------------
            OTHER DATA
---------------------------------------------------------------------------------------------------------------------------
 50  TPL SAVINGS COST AVOIDANCE **
---------------------------------------------------------------------------------------------------------------------------
 51  DUPLICATE PREMIUMS ***
---------------------------------------------------------------------------------------------------------------------------
 52  NUMBER OF DELIVERIES ****
---------------------------------------------------------------------------------------------------------------------------
 53  FAMILY PLANNING SERVICES
---------------------------------------------------------------------------------------------------------------------------
 54  REINSURANCE PREMIUMS RECEIVED
---------------------------------------------------------------------------------------------------------------------------
 55  REINSURANCE PREMIUMS PAID
---------------------------------------------------------------------------------------------------------------------------
 56  ADMINISTRATIVE REVENUE
      RETAINED BY THE CONTRACTOR
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>
                                -MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-
  1               2                     15             16             17
------------------------------------------------------------------------------
                                                                   MEDICAID
                                                                     TOTAL
LINE                                RESTRICTION                  (SUM OF COLS
 NO           DESCRIPTION             CLIENTS         AIDS         4 THRU 16)
------------------------------------------------------------------------------
        ADMINISTRATIVE COSTS            ROUND TO THE NEAREST DOLLAR
------------------------------------------------------------------------------
 <S> <C>                                   <C>         <C>               <C>
 39  ADMINISTRATION -ADVERTISING
------------------------------------------------------------------------------
 40  HOME OFFICE INDIRECT COST
      ALLOCATIONS
------------------------------------------------------------------------------
 41  UTILIZATION
------------------------------------------------------------------------------
 42  ADMINISTRATION - OTHER
------------------------------------------------------------------------------
 43  TOTAL ADMINISTRATIVE COSTS            $ 0         $ 0               $ 0
------------------------------------------------------------------------------
 44  TOTAL COSTS (MED & ADMIN)             $ 0         $ 0               $ 0
------------------------------------------------------------------------------
 45  NET INCOME [Gain or (Loss)]           $ 0         $ 0               $ 0
------------------------------------------------------------------------------

------------------------------------------------------------------------------
 46  ENROLLEE MONTHS                         0           0                 0
------------------------------------------------------------------------------

------------------------------------------------------------------------------
 47  MEDICAL COST @ ENROLLEE MO
------------------------------------------------------------------------------
 48  ADMIN COST @ ENROLLEE MO
------------------------------------------------------------------------------
 49  TOTAL COST @ ENROLLEE MO
------------------------------------------------------------------------------
            OTHER DATA
------------------------------------------------------------------------------
 50  TPL SAVINGS o COST AVOIDANCE"                                       $ 0
------------------------------------------------------------------------------
 51  DUPLICATE PREMIUMS ***                                              $ 0
------------------------------------------------------------------------------
 52  NUMBER OF DELIVERIES ****                                             0
------------------------------------------------------------------------------
 53  FAMILY PLANNING SERVICES                                            $ 0
------------------------------------------------------------------------------
 54  REINSURANCE PREMIUMS RECEIVED                                       $ 0
------------------------------------------------------------------------------
 55  REINSURANCE PREMIUMS PAID                                           $ 0
------------------------------------------------------------------------------
 56  ADMINISTRATIVE REVENUE
      RETAINED BY THE CONTRACTOR                                         $ 0
------------------------------------------------------------------------------
</TABLE>

**   COST OF SERVICES PROVIDED TO HMO CLIENTS. NOT PAID FOR BY HMO, E.G.
     "AVOIDED", BECAUSE OTHER INSURANCE PAID FOR IT.
***  CASH AMOUNT RETURNED TO MEDICAID BY HMO BECAUSE HMO CLIENT WAS COVERED IN
     THE SAME HMO BY ANOTHER CARRIER.
**** NUMBER OF CHILDREN DELIVERED. THIS NUMBER TIMES RATES SHOULD EQUAL DELIVERY
     REVENUE.

      In this Medicaid portion, include only costs for Medicaid clients under
      the capitation agreement - exclude revenue, costs & TPL categories per
      this form that do not apply to your organization or contract.

<PAGE>

                                                                    Attachment E
                                                                    Page 4 of 15

            MEDICAL SERVICES REVENUE AND COST DEFINITIONS FOR TABLE 2

REVENUES (Report all revenues received or receivable at the end-of-period date
on the form)

1.   Premiums

     Report premium payments received or receivable from the DEPARTMENT.

2.   Delivery Fees

     Report the delivery fee received or receivable from the DEPARTMENT.

3.   Reinsurance

     Report the reinsurance payments received or receivable from the REINSURANCE
     CARRIER (See Attachment F, Section D, Items 1 and 2).

4.   Stop Loss

     Report stop loss payments received or receivable from the DEPARTMENT (See
     Attachment F, Section D, Item 2).

5.   TPL Collections - Medicare

     Report all third party collections received from Medicare.

6.   TPL Collections - Other

     Report all third party collections received other than Medicare
     collections. (Report TPL savings because of cost avoidance as a memo amount
     on line 48).

7.   Other (specify)

8.   Other (specify)

     For lines seven and eight: Report all other revenue not included in lines
     one through six. (There may not be any amount to report; however, this line
     can be used to report revenue from total Utah operations that do not fit
     lines one through six.)

9.   TOTAL REVENUES

     Total lines one through eight.

NOTE: Duplicate premiums are not considered a cost or revenue as they are
collected by the CONTRACTOR and paid to the DEPARTMENT. Therefore, the payment
to the DEPARTMENT would reduce or offset the revenue recorded when the duplicate
premium was received. However, line 49 has been established for reporting
duplicate premiums as a memo amount.

<PAGE>

                                                                    Attachment E
                                                                    Page 5 of 15

MEDICAL COSTS: Report all costs accrued as of the ending date on the form. In
the first data column (column 3), report all costs for Utah operations per the
general ledger. In the 14 Medicaid data columns (columns 4 through 17), report
only costs for Medicaid Enrollees.

10.  Inpatient Hospital Services

     Costs incurred in providing inpatient hospital services to Enrollees
     confined to a hospital.

11.  Outpatient Hospital Services

     Costs incurred in providing outpatient hospital services to Enrollees, not
     including services provided in the emergency department.

12.  Emergency Department Services

     Costs incurred in providing outpatient hospital emergency room services to
     Enrollees.

13.  Primary Care Physician Services (Including EPSDT Services, Prenatal Care,
     and Family Planning Services)

     All costs incurred for Enrollees as a result of providing primary care
     physician, osteopath, physician assistant, nurse practitioner, and nurse
     midwife services, including payroll expenses, any capitation and/or
     contract payments, fee-for-service payments, fringe benefits, travel and
     office supplies.

14.  Specialty Care Physician Services (Including EPSDT Services, Prenatal Care,
     and Family Planning Services)

     All costs incurred as a result of providing specialty care physician,
     osteopath, physician assistant, nurse practitioner, and nurse midwife
     services to Enrollees, including payroll expenses, any capitation and/or
     contract payments, fee-for-service payments, fringe benefits, travel and
     office supplies.

15.  Adult Screening Services

     Expenses associated with providing screening services to Enrollees.

16.  Vision Care - Optometric Services

     Included are payroll costs, any capitation and/or contract payments, and
     fee-for-service payments for services and procedures performed by an
     optometrist and other non-payroll expenses directly related to providing
     optometric services for Enrollees.

17.  Vision Care - Optical Services

     Included are payroll costs, any capitation and/or contract payments and
     fee-for-service payments for services and procedures performed by an
     optician and other supportive staff, cost of eyeglass frames and lenses and
     other non-payroll expenses directly related to providing optical services
     for Enrollees.

<PAGE>

                                                                    Attachment E
                                                                    Page 6 of 15

18.  Laboratory (Pathology) Services

     Costs incurred as a result of providing pathological tests or services to
     Enrollees including payroll expenses, any capitation and/or contract
     payments, fee-for-service payments and other expenses directly related to
     in-house laboratory services. Excluded are costs associated with a hospital
     visit.

19.  Radiology Services

     Cost incurred in providing x-ray services to Enrollees, including x-ray
     payroll expenses, any capitation and/or contract payments, fee-for-service
     payments, and occupancy overhead costs. Excluded are costs associated with
     a hospital visit.

20.  Physical and Occupational Therapy

     Included are payroll costs, any capitation and/or contract payments,
     fee-for-service costs, and other non-payroll expenditures directly related
     to providing physical and occupational therapy services.

21.  Speech and Hearing Services

     Payroll costs, any capitation and/or contract payments, fee-for-service
     payments, and non-payroll costs directly related to providing speech and
     hearing services for Enrollees.

22.  Podiatry Services

     Salary expenses or outside claims, capitation and/or contract payments,
     fee-for-service payments, and non-payroll costs directly related to
     providing services rendered by a podiatrist to Enrollees.

23.  End Stage Renal Disease (ESRD) Services - Dialysis

     Costs incurred in providing renal dialysis (ESRD) services to Enrollees.

24.  Home Health Services

     Included are payroll costs, any capitation and/or contract payments,
     fee-for-service payments, and other non-payroll expenses directly related
     to providing home health services for Enrollees.

25.  Hospice Services

     Expenses related to hospice care for Enrollees including home care, general
     inpatient care for Enrollees suffering terminal illness and inpatient
     respite care for caregivers of Enrollees suffering terminal illness.

26.  Private Duty Nursing

     Expenses associated with private duty nursing for Enrollees.

<PAGE>

                                                                    Attachment E
                                                                    Page 7 of 15

27.  Medical Supplies and Medical Equipment

     This cost center contains fee-for-service cost for outside acquisition of
     medical requisites, special appliances as prescribed by the CONTRACTOR to
     Enrollees.

28.  Abortions

     Medical and hospital costs incurred in providing abortions for Enrollees.

29.  Sterilizations

     Medical and hospital costs incurred in providing sterilizations for
     Enrollees.

30.  Detoxification

     Medical and hospital costs incurred in providing treatment for substance
     abuse and dependency (detoxification) for Enrollees.

31.  Organ Transplants

     Medical and hospital costs incurred in providing transplants for Enrollees.

32.  Other Outside Medical Services

     The costs for specialized testing and outpatient surgical centers for
     Enrollees ordered by the CONTRACTOR.

33.  Long Term Care

     Costs incurred in providing long-term care for Enrollees required under
     Attachment C.

34.  Transportation Services

     Costs incurred in providing ambulance (ground and air) services for
     Enrollees.

35.  Accrued Costs

     Costs Incurred for services rendered to Enrollees but not yet billed.

36 & 37.   Other

     Report costs not otherwise reported.

38.  TOTAL MEDICAL COSTS

     Total lines 10 through 38.

<PAGE>

                                                                    Attachment E
                                                                    Page 8 of 15

ADMINISTRATIVE COSTS

Report payroll costs, any capitation and/or contract payments, non-payroll costs
and occupancy overhead costs for accounting services, claims processing
services, health plan services, data processing services, purchasing, personnel,
Medicaid marketing and regional administration.

Report the administration cost under four categories - advertising, home office
indirect cost allocation, utilization and all other administrative costs. If
there are no advertising costs or indirect home office cost allocations, report
a zero amount in the applicable lines.

39.  Administration - Advertising

40.  Home Office Indirect Cost Allocations

41.  Utilization

     Payroll cost and any capitation and/or contract payments for utilization
     staff and other non-payroll costs directly associated with controlling and
     monitoring outside physician referral and hospital admission and discharges
     of Enrollees.

42.  Administration - Other

43.  TOTAL ADMINISTRATIVE COSTS

     Total lines 39 through 43.

44.  TOTAL COSTS (MEDICAL AND ADMINISTRATIVE)

     Total lines 38 and 44.

45.  NET INCOME (GAIN OR LOSS)

     Line 9 minus line 44.

46.  ENROLLEE MONTHS

     Total Enrollee months for period of time being reported.

47.  MEDICAL COSTS PER ENROLLEE MONTH

     Line 38 divided by line 46.

48.  ADMINISTRATIVE COSTS PER ENROLLEE MONTH

     Line 43 divided by line 46.

49.  TOTAL COSTS PER ENROLLEE MONTH

     Line 44 divided by line 46.

<PAGE>

                                                                    Attachment E
                                                                    Page 9 of 15

OTHER DATA

50.  TPL Savings - Cost Avoidance

51.  Duplicate Premiums

     Include all premiums received for Enrollees from all sources other than
     Medicaid.

52.  Number of Deliveries

     Total number of Enrollee deliveries when the delivery occurred at 24 weeks
     or later.

53.  Family Planning Services

     Include costs associated with family planning services as defined in
     Attachment C (Covered Services, Section V, Family Planning Services).

54.  Reinsurance Premiums Received

     Include the reinsurance premiums received or receivable from the
     DEPARTMENT.

55.  Reinsurance Premiums Paid

     Include reinsurance premiums paid to the REINSURANCE CARRIER.

56.  Administrative Revenue Retained by the CONTRACTOR

     Include the administrative revenue retained by the CONTRACTOR from the
     reinsurance premiums received or receivable from the DEPARTMENT.

<PAGE>

<TABLE>
<S>                                <C>                                  <C>                                   <C>
PROVIDER NAME:                     _______________________________          ATTACHMENT E                       ATTACHMENT E

SERVICE REPORTING PERIOD:          BEGINNING________ENDING________      TABLE 3 PAGE 1 OF 1                         TABLE 3

PAYMENT DATES:                     BEGINNING________ENDING________          UTILIZATION                       PAGE 10 OF 15
</TABLE>

<TABLE>
<CAPTION>
                                        -------------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-------------------
 1                 2                     3              4              5              6            7              8
---------------------------------------------------------------------------------------------------------------------------
                SERVICE
              DESCRIPTION                             AFDC                          AFDC
         (REFER TO THE UNIT FOR                       MALE           AFDC          FEMALE        AFDC
LINE   SERVICE DEFINITIONS IN THE     INFANTS      * 21 YEARS        MALE        * 21 YEARS     FEMALE
 NO          INSTRUCTIONS             0-12 MOS    ** 12 MOS       21 + YEARS    ** 12 MOS      21 + YEARS        AGED
---------------------------------------------------------------------------------------------------------------------------
 <S> <C>                                   <C>         <C>               <C>           <C>            <C>           <C>
  1  HOSPITAL SERVICES - GENERAL
      DAYS
---------------------------------------------------------------------------------------------------------------------------
  2  HOSPITAL SERVICES -
      DISCHARGES
---------------------------------------------------------------------------------------------------------------------------
  3  HOSPITAL SERVICES -
      OUTPATIENT VISITS
---------------------------------------------------------------------------------------------------------------------------
  4  EMERGENCY DEPARTMENT
      VISITS
---------------------------------------------------------------------------------------------------------------------------
  5  PRIMARY CARE PHYSICIAN
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
  6  SPECIALTY CARE PHYSICIAN
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
  7  ADULT SCREENING SERVICES
---------------------------------------------------------------------------------------------------------------------------
  8  VISION CARE - OPTOMETRIC
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
  9  VISION CARE - OPTICAL
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
 10  LABORATORY (PATHOLOGY)
      PROCEDURES
---------------------------------------------------------------------------------------------------------------------------
 11  RADIOLOGY PROCEDURES
---------------------------------------------------------------------------------------------------------------------------
 12  PHYSICAL AND OCCUPATIONAL
      THERAPY SERVICES
---------------------------------------------------------------------------------------------------------------------------
 13  SPEECH AND HEARING SERVICES
---------------------------------------------------------------------------------------------------------------------------
 14  PODIATRY SERVICES
---------------------------------------------------------------------------------------------------------------------------
 15  END STAGE RENAL DISEASE(ESRD)
      SERVICES - DIALYSIS
---------------------------------------------------------------------------------------------------------------------------
 16  HOME HEALTH SERVICES
---------------------------------------------------------------------------------------------------------------------------
 17  HOSPICE DAYS
---------------------------------------------------------------------------------------------------------------------------
 18  PRIVATE DUTY NURSING SERVICES
---------------------------------------------------------------------------------------------------------------------------
 19  MEDICAL SUPPLIES AND MEDICAL
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
 20  ABORTIONS PROCEDURES
---------------------------------------------------------------------------------------------------------------------------
 21  STERILIZATION PROCEDURES
---------------------------------------------------------------------------------------------------------------------------
 22  DETOXIFICATION DAYS
---------------------------------------------------------------------------------------------------------------------------
 23  ORGAN TRANSPLANTS
---------------------------------------------------------------------------------------------------------------------------
 24  OTHER OUTSIDE MEDICAL
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
 25  LONG TERM CARE FACILITY DAYS
---------------------------------------------------------------------------------------------------------------------------
 26  TRANSPORTATION TRIPS
---------------------------------------------------------------------------------------------------------------------------
 27  OTHER (SPECIFY)
---------------------------------------------------------------------------------------------------------------------------

* less than
** greater than

<CAPTION>
                                        -------------------MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)-------------------
 1                 2                     9             10             11             12             13             14
---------------------------------------------------------------------------------------------------------------------------
                SERVICE
              DESCRIPTION                                                                      NON AFDC
         (REFER TO THE UNIT FOR                                   MED            MED           PREGNANT
LINE   SERVICE DEFINITIONS IN THE     DISABLED     DISABLED      NEEDY          NEEDY           FEMALE          RESTRICTION
 NO          INSTRUCTIONS               MALE        FEMALE       CHILD          OTHER           (SOBRA)           CLIENTS
---------------------------------------------------------------------------------------------------------------------------
 <S> <C>                                 <C>           <C>            <C>            <C>            <C>             <C>
  1  HOSPITAL SERVICES - GENERAL
      DAYS
---------------------------------------------------------------------------------------------------------------------------
  2  HOSPITAL SERVICES -
      DISCHARGES
---------------------------------------------------------------------------------------------------------------------------
  3  HOSPITAL SERVICES -
      OUTPATIENT VISITS
---------------------------------------------------------------------------------------------------------------------------
  4  EMERGENCY DEPARTMENT
      VISITS
---------------------------------------------------------------------------------------------------------------------------
  5  PRIMARY CARE PHYSICIAN
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
  6  SPECIALTY CARE PHYSICIAN
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
  7  ADULT SCREENING SERVICES
---------------------------------------------------------------------------------------------------------------------------
  8  VISION CARE - OPTOMETRIC
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
  9  VISION CARE - OPTICAL
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
 10  LABORATORY (PATHOLOGY)
      PROCEDURES
---------------------------------------------------------------------------------------------------------------------------
 11  RADIOLOGY PROCEDURES
---------------------------------------------------------------------------------------------------------------------------
 12  PHYSICAL AND OCCUPATIONAL
      THERAPY SERVICES
---------------------------------------------------------------------------------------------------------------------------
 13  SPEECH AND HEARING SERVICES
---------------------------------------------------------------------------------------------------------------------------
 14  PODIATRY SERVICES
---------------------------------------------------------------------------------------------------------------------------
 15  END STAGE RENAL DISEASE(ESRD)
      SERVICES - DIALYSIS
---------------------------------------------------------------------------------------------------------------------------
 16  HOME HEALTH SERVICES
---------------------------------------------------------------------------------------------------------------------------
 17  HOSPICE DAYS
---------------------------------------------------------------------------------------------------------------------------
 18  PRIVATE DUTY NURSING SERVICES
---------------------------------------------------------------------------------------------------------------------------
 19  MEDICAL SUPPLIES AND MEDICAL
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
 20  ABORTIONS PROCEDURES
---------------------------------------------------------------------------------------------------------------------------
 21  STERILIZATION PROCEDURES
---------------------------------------------------------------------------------------------------------------------------
 22  DETOXIFICATION DAYS
---------------------------------------------------------------------------------------------------------------------------
 23  ORGAN TRANSPLANTS
---------------------------------------------------------------------------------------------------------------------------
 24  OTHER OUTSIDE MEDICAL
      SERVICES
---------------------------------------------------------------------------------------------------------------------------
 25  LONG TERM CARE FACILITY DAYS
---------------------------------------------------------------------------------------------------------------------------
 26  TRANSPORTATION TRIPS
---------------------------------------------------------------------------------------------------------------------------
 27  OTHER (SPECIFY)
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>
                                 --MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)--
 1                 2                                      15             16
----------------------------------------------------------------------------------
                SERVICE
              DESCRIPTION                                              MEDICAID
         (REFER TO THE UNIT OF                                          TOTAL
LINE   SERVICE DEFINITIONS IN THE                                    (SUM OF COLS
 NO          INSTRUCTIONS                                 AIDS        3 THRU 15)
----------------------------------------------------------------------------------
 <S> <C>                                                                      <C>
  1  HOSPITAL SERVICES - GENERAL
      DAYS                                                                    0
----------------------------------------------------------------------------------
  2  HOSPITAL SERVICES -
      DISCHARGES                                                              0
----------------------------------------------------------------------------------
  3  HOSPITAL SERVICES -
      OUTPATIENT VISITS                                                       0
----------------------------------------------------------------------------------
  4  EMERGENCY DEPARTMENT
      VISITS                                                                  0
----------------------------------------------------------------------------------
  5  PRIMARY CARE PHYSICIAN
      SERVICES                                                                0
----------------------------------------------------------------------------------
  6  SPECIALTY CARE PHYSICIAN
      SERVICES                                                                0
----------------------------------------------------------------------------------
  7  ADULT SCREENING SERVICES                                                 0
----------------------------------------------------------------------------------
  8  VISION CARE - OPTOMETRIC
      SERVICES                                                                0
----------------------------------------------------------------------------------
  9  VISION CARE - OPTICAL
      SERVICES                                                                0
----------------------------------------------------------------------------------
 10  LABORATORY (PATHOLOGY)
      PROCEDURES                                                              0
----------------------------------------------------------------------------------
 11  RADIOLOGY PROCEDURES                                                     0
----------------------------------------------------------------------------------
 12  PHYSICAL AND OCCUPATIONAL
      THERAPY SERVICES                                                        0
----------------------------------------------------------------------------------
 13  SPEECH AND HEARING SERVICES                                              0
----------------------------------------------------------------------------------
 14  PODIATRY SERVICES                                                        0
----------------------------------------------------------------------------------
 15  END STAGE RENAL DISEASE(ESRD)
      SERVICES - DIALYSIS                                                     0
----------------------------------------------------------------------------------
 16  HOME HEALTH SERVICES                                                     0
----------------------------------------------------------------------------------
 17  HOSPICE DAYS                                                             0
----------------------------------------------------------------------------------
 18  PRIVATE DUTY NURSING SERVICES                                            0
----------------------------------------------------------------------------------
 19  MEDICAL SUPPLIES AND MEDICAL
      SERVICES                                                                0
----------------------------------------------------------------------------------
 20  ABORTIONS PROCEDURES                                                     0
----------------------------------------------------------------------------------
 21  STERILIZATION PROCEDURES                                                 0
----------------------------------------------------------------------------------
 22  DETOXIFICATION DAYS                                                      0
----------------------------------------------------------------------------------
 23  ORGAN TRANSPLANTS                                                        0
----------------------------------------------------------------------------------
 24  OTHER OUTSIDE MEDICAL
      SERVICES                                                                0
----------------------------------------------------------------------------------
 25  LONG TERM CARE FACILITY DAYS                                             0
----------------------------------------------------------------------------------
 26  TRANSPORTATION TRIPS                                                     0
----------------------------------------------------------------------------------
 27  OTHER (SPECIFY)                                                          0
----------------------------------------------------------------------------------
</TABLE>

NOTE: MEDICAL REQUISITIONS HAS BEEN DITCHED!!

                                  ATTACHMENT E
                                     TABLE 3
                                  Page 10 of 15

<PAGE>

                                                                    Attachment E
                                                                   Page 11 of 15

              MEDICAL SERVICES UTILIZATION DEFINITIONS FOR TABLE 3

MEDICAL SERVICES

1.   Hospital Services - General Days

     Record total number of inpatient hospital days associated with inpatient
     medical care.

2.   Hospital Services - Discharges

     Record total number of inpatient hospital discharges.

3.   Hospital Services - Outpatient Visits

     Record total number of outpatient visits.

4.   Emergency Department Visits

     Record total number of emergency room visits

5.   Primary Care Physician Services

     Number of services and procedures defined by CPT-4 codes provided by
     primary care physicians or licensed physician extenders or assistants under
     direct supervision of a physician inclusive of all services except
     radiology, laboratory and injections/immunizations which should be reported
     in their appropriate section. The reporting of data under this category
     includes both outpatient and inpatient services.

6.   Specialty Care Physician Services

     Number of services and procedures defined by CPT-4 codes provided by
     specialty care physicians or licensed physician extenders or assistants
     under direct supervision of a physician inclusive of all services except
     radiology, laboratory and injections/immunizations which should be reported
     in their appropriate section. The reporting of data under this category
     includes both outpatient and inpatient services.

7.   Adult Screening Services

     Number of adult screenings performed.

8.   Vision Care - Optometric Services

     Number of optometric services and procedures performed by an optometrist.

9.   Vision Care - Optical Services

     Number of eye glasses and contact lenses dispensed.

<PAGE>

                                                                    Attachment E
                                                                   Page 12 of 15

10.  Laboratory (Pathology) Procedures

     Number of procedures defined by CPT-4 Codes under the Pathology and
     Laboratory section. Excluded are services performed in conjunction with a
     hospital outpatient or emergency department visit.

11.  Radiology Procedures

     Number of procedures defined by CPT-4 Codes under the Radiology section.
     Excluded are services performed in conjunction with a hospital outpatient
     or emergency department visit.

12.  Physical and Occupational Therapy Services

     Physical therapy refers to physical and occupational therapy services and
     procedures performed by a physician or physical therapist.

13.  Speech and Hearing Services

     Number of services and procedures.

14.  Podiatry Services

     Number of services and procedures.

15.  End Stage Renal Disease (ESRD) Services - Dialysis

     Number of ESRD procedures provided upon referral.

16.  Home Health Services

     Number of home health visits, such as skilled nursing, home health aide,
     and personal care aide visits.

17.  Hospice Days

     Number of days hospice care is provided, including respite care.

18.  Private Duty Nursing Services

     Hours of skilled care delivered.

19.  Medical Supplies and Medical Equipment

     Durable medical equipment such as wheelchairs, hearing aids, etc., and
     nondurable supplies such as oxygen etc.

20.  Abortion Procedures

     Number of procedures performed.

<PAGE>

                                                                    Attachment E
                                                                   Page 13 of 15
21.  Sterilization Procedures

     Number of procedures performed.

22.  Detoxification Days

     Days of inpatient detoxification.

23.  Organ Transplants

     Number of transplants.

24.  Other Outside Medical Services

     Specialized testing and outpatient surgical services ordered by IHC.

25.  Long Term Care Facility Days

     Total days associated with long-term care.

26.  Transportation Trips

     Number of ambulance trips.

27.  Other (specify)

<PAGE>

                                  ATTACHMENT E
                               TABLE 4 PAGE 1 OF 1
                        MEDICAID MALPRACTICE INFORMATION

PROVIDER NAME:             _____________________________________________________

SERVICE REPORTING PERIOD:  BEGINNING __________ ENDING  ________________________

ORGANIZATIONS NAMED IN THE MALPRACTICE CLAIM:

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

MEDICAL PROFESSIONALS SPECIFIED:

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

LOCATIONS WHERE CLAIMS ORIGINATED:

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

MEDICAID CLIENT IDENTIFICATION:

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

DATES OF SERVICE:

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

AWARDS TO MEDICAID CLIENTS - AMOUNTS & DATES PAID

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

HMO'S DIRECT COSTS (IF ANY)

     CLAIM NUMBER 1 ____________________________________________________________

     CLAIM NUMBER 2 ____________________________________________________________

     CLAIM NUMBER 3 ____________________________________________________________

ATTACH A SUMMARY OF FACTS FOR EACH CASE, DESCRIBING THE CLAIM, THE CAUSES,
CIRCUMSTANCES, ETC.

                                  ATTACHMENT E
                                     TABLE 4
                                  Page 14 of 15

<PAGE>

                                                                    Attachment E
                                                                   Page 15 of 15

     The information reported on this form should come from known malpractice
     cases of the MCO providers. This may only be applicable if the MCO was
     named as a participant in the malpractice suit. However, if suits against
     MCO providers are known, provide us with information on the Medicaid
     client(s) involved and any large settlements paid when the information is
     available.

<PAGE>

                                                            Attachment F - Urban
                                                          Effective July 1, 2000

                ATTACHMENT F - URBAN RATES AND RATE-RELATED TERMS

                             Effective July 1, 2000

                       AMERICAN FAMILY CARE OF UTAH, INC.

A.   PREMIUM RATES

     1.   MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS

-----------------------------------------------------------------------------
   Age       TANF Male    TANF Male    TANF Female  TANF Female
  0 to 1      1 to 21     21 & Over      1 to 21     21 & Over      Aged
=============================================================================
  $ [*]       $ [*]        $ [*]         $ [*]        $ [*]         $ [*]
-----------------------------------------------------------------------------

-----------------------------------------------------------------------------
  Disabled     Disabled    Medically    Medically    Non TANF     Restriction
    Male        Female    Needy Child  Needy Adult  Pregnant F      Program
=============================================================================
  $ [*]        $ [*]       $ [*]        $ [*]        $ [*]          $ [*]
-----------------------------------------------------------------------------

     2.   SPECIAL RATE

          An AIDS rate of $ [*] per month will be paid in addition to the
          regular monthly premium when the T-Cell count is below 200.

B.   PER DELIVERY REIMBURSEMENT SCHEDULE

     The DEPARTMENT shall reimburse the CONTRACTOR $ [*] per delivery to cover
     all Medically Necessary antepartum care, delivery, and postpartum
     professional, facility and ancillary services. The monthly premium amount
     for the enrollee is in addition to the delivery fee. The delivery payment
     will be made when the delivery occurs at 22 weeks or later, regardless of
     viability.

C.   CHEC SCREENING INCENTIVE CLAUSE

     1.   CHEC Screening Goal

          The CONTRACTOR will ensure that Medicaid children have access to
          appropriate well- child visits. The CONTRACTOR will follow the Utah
          EPSDT (CHEC) guidelines for the periodicity schedule for well-child
          protocol. The federal agency, Health Care Financing Administration,
          mandates that all states have 80% of all children screened. The
          DEPARTMENT and the CONTRACTOR will work toward that goal.

                                   Page 1 of 2

<PAGE>

                                                            Attachment F - Urban
                                                          Effective July 1, 2000

     2.   Calculation of CHEC Incentive Payment

          The DEPARTMENT will pay the CONTRACTOR $ [*]    for each percentage
          point over 60% achieved by the CONTRACTOR. The DEPARTMENT will
          calculate the CONTRACTOR'S annual participation rate based on
          information supplied by the CONTRACTOR under the EPSDT (CHEC)
          reporting requirements at the same time each federal fiscal year's
          HCFA-416 is calculated. Payment will be based on the percentages
          determined at that time.

     3.   CONTRACTOR's Use of Incentive Payment

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the EPSDT (CHEC)
          participation rate.

D.   REINSURANCE POLICY

     Reinsurance will be administered by a reinsurer, Zurich Insurance.

     Costs, net of TPL, for all inpatient and outpatient services listed in
     Attachment C that are covered on the date of service rendered and incurred
     from July 1, 2000 through June 30, 2001 by the CONTRACTOR for an Enrollee
     shall be shared by Zurich Insurance under the following conditions:

     1.   the date of service is from July 1, 2000 through June 30, 2001 (based
          on the date of discharge if inpatient hospital stay);

     2.   paid claims incurred by the CONTRACTOR exceed $50,000.00; and

     3.   services shall have been incurred by the CONTRACTOR during the time
          the client is enrolled with the CONTRACTOR.

          If the above conditions are met, Zurich Insurance shall bear [*]% and
          the CONTRACTOR shall bear [*]% of the amount that exceeds $50,000.00.

E.   REIMBURSEMENT FOR REINSURANCE

     The CONTRACTOR agrees to purchase reinsurance from Zurich Insurance at the
     rate negotiated by the DEPARTMENT of $ [*] per Enrollee per month. The
     DEPARTMENT will reimburse the CONTRACTOR for their premium payments to
     Zurich Insurance. In addition, the DEPARTMENT will pay the CONTRACTOR
     $ [*] to cover reinsurance administrative costs.

     Beginning July 1, 2000, the DEPARTMENT will make monthly payments to the
     CONTRACTOR based on the reinsurance premiums the CONTRACTOR pays to Zurich
     Insurance. The DEPARTMENT will calculate the reinsurance premiums using the
     DEPARTMENT's data on the number of Enrollees.

                                   Page 2 of 2

<PAGE>

                                                            Attachment F-1 Rural
                                                          Effective July 1, 2000

               ATTACHMENT F-1 - RURAL RATES AND RATE-RELATED TERMS

                             Effective July 1, 2000

                       AMERICAN FAMILY CARE OF UTAH, INC.

A.   PREMIUM RATES

     1.   MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS

-----------------------------------------------------------------------------
   Age       TANF Male    TANF Male    TANF Female  TANF Female
  0 to 1      1 to 21     21 & Over      1 to 21     21 & Over      Aged
=============================================================================
  $  [*]      $ [*]        $ [*]        $  [*]       $  [*]        $ [*]
-----------------------------------------------------------------------------

-----------------------------------------------------------------------------
  Disabled    Disabled     Medically    Medically     Non TANF    Restriction
    Male       Female     Needy Child  Needy Adult   Pregnant F     Program
=============================================================================
  $  [*]      $ [*]        $ [*]        $  [*]       $  [*]        $ [*]
-----------------------------------------------------------------------------

     2.   SPECIAL RATE

          An AIDS rate of $ [*] per month will be paid in addition to the
          regular monthly premium when the T-Cell count is below 200.

B.   PER DELIVERY REIMBURSEMENT SCHEDULE

     The DEPARTMENT shall reimburse the CONTRACTOR $ [*] per delivery to cover
     all Medically Necessary antepartum care, delivery, and postpartum
     professional, facility and ancillary services. The monthly premium amount
     for the enrollee is in addition to the delivery fee. The delivery payment
     will be made when the delivery occurs at 22 weeks or later, regardless of
     viability.

C.   CHEC SCREENING INCENTIVE CLAUSE

     1.   CHEC SCREENING GOAL

          The CONTRACTOR will ensure that Medicaid children have access to
          appropriate well- child visits. The CONTRACTOR will follow the Utah
          EPSDT (CHEC) guidelines for the periodicity schedule for well-child
          protocol. The federal agency, Health Care Financing Administration,
          mandates that all states have 80% of all children screened. The
          DEPARTMENT and the CONTRACTOR will work toward that goal.

                                   Page 1 of 3

<PAGE>

                                                            Attachment F-1 Rural
                                                          Effective July 1, 2000

     2.   CALCULATION OF CHEC INCENTIVE PAYMENT

          The DEPARTMENT will pay the CONTRACTOR $ [*] for each percentage
          point over 60% achieved by the CONTRACTOR. The DEPARTMENT will
          calculate the CONTRACTOR's annual participation rate based on
          information supplied by the CONTRACTOR under the EPSDT (CHEC)
          reporting requirements at the same time each federal fiscal year's
          HCFA-416 is calculated. Payment will be based on the percentages
          determined at that time.

     3.   CONTRACTOR'S USE OF INCENTIVE PAYMENT

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the EPSDT (CHEC)
          participation rate.

D.   REINSURANCE POLICY

     Reinsurance will be administered by a reinsurer, Zurich Insurance.

     Costs, net of TPL, for all inpatient and outpatient services listed in
     Attachment C that are covered on the date of service rendered and incurred
     from July 1, 2000 through June 30, 2001 by the CONTRACTOR for an Enrollee
     shall be shared by Zurich Insurance under the following conditions:

     1.   The date of service is from July 1, 2000 through June 30, 2001 (based
          on the date of discharge if inpatient hospital stay);

     2.   paid claims incurred by the CONTRACTOR exceed $50,000.00; and

     3.   services shall have been incurred by the CONTRACTOR during the time
          the client is enrolled with the CONTRACTOR.

          If the above conditions are met, Zurich Insurance shall bear [*]% and
          the CONTRACTOR shall bear [*]% of the amount that exceeds $50,000.00.

E.   REIMBURSEMENT FOR REINSURANCE

     The CONTRACTOR agrees to purchase reinsurance from Zurich Insurance at the
     rate negotiated by the DEPARTMENT of $ [*] per Enrollee per month. The
     DEPARTMENT will reimburse the CONTRACTOR for their premium payments to
     Zurich Insurance. In addition, the DEPARTMENT will pay the CONTRACTOR
     $ [*] to cover reinsurance administrative costs.

     Beginning July 1, 2000, the DEPARTMENT will make monthly payments to the
     CONTRACTOR based on the reinsurance premiums the CONTRACTOR pays to Zurich
     Insurance. The DEPARTMENT will calculate the reinsurance premiums using the
     DEPARTMENT's data on the number of Enrollees.

                                   Page 2 of 3

<PAGE>

                                                            Attachment F-1 Rural
                                                          Effective July 1, 2000

F.   RISK SHARING PROVISION

     The DEPARTMENT agrees to retroactively adjust annual payments made to the
     CONTRACTOR under this Contract for clients living in the rural counties
     served by the CONTRACTOR.

     1.   CONTRACTOR's CLAIM EXPENDITURES EXCEEDING PREMIUMS, ETC.

          If the CONTRACTOR's claim expenditures exceed the premiums paid plus
          other Contract payments, the DEPARTMENT will reimburse the CONTRACTOR
          for the unrecovered costs related to claim expenditures. Claim
          contract payments include stop-loss payments. Therefore, the paid
          claims expenditures will also include stop-loss claims paid by the
          CONTRACTOR.

     2.   CONTRACTOR'S CLAIM EXPENDITURES LESS THAN PREMIUMS, ETC.

          If the CONTRACTOR's claim expenditures are less than the premiums paid
          plus other Contract payments, the CONTRACTOR can retain up to [*]% of
          the excess premiums paid and other payments. If there are additional
          savings after the CONTRACTOR has recovered the [*]%, the DEPARTMENT
          and the CONTRACTOR will share these savings on a [*] basis. Claim
          contract payments include stop-loss payments. Therefore, the paid
          claims expenditures will also include stop-loss claims paid by the
          CONTRACTOR.

     A request for a risk sharing adjustment shall be submitted to the
     DEPARTMENT no later than six months after the close of the Contract year.
     The CONTRACTOR agrees to use its Medicaid payment rates and fee schedules
     used to price their Medicaid product as a basis for the risk sharing
     calculation.

                                   Page 3 of 3

<PAGE>

                            UTAH DEPARTMENT OF HEALTH
                 288 North 1460 West, Salt Lake City, Utah 84116
                               CONTRACT AMENDMENT

   H992020205-03                                                 00-6146
---------------------                                      ---------------------
Department Log Number                                      State Contract Number

1.   CONTRACT NAME:
     The name of this Contract is HMO-AFC/MOLINA, the Department log number
     assigned by the Utah Department of Health is H992020205, and this Amendment
     is number 3.

2.   CONTRACTING PARTIES:
     This Contract Amendment is between the Utah Department of Health
     (DEPARTMENT), and Molina Healthcare of Utah (CONTRACTOR).

3.   PURPOSE OF CONTRACT AMENDMENT:
     To change the names of the Contract and CONTRACTOR, clarify some of the
     Contract provisions, add provisions, and to change the rates and
     rate-related provisions effective July 1, 2001.

4.   CHANGES TO CONTRACT:
     A.   On Page 1, item #1, CONTRACT NAME is changed to read "HMO-AFC/MOLINA."

     B.   On Page 1, item #2, CONTRACTOR is changed to read "Molina Healthcare
          of Utah."

     C.   Effective July 1, 2001, replace Attachment B with Attachment B as
          attached to this Amendment #3.

     D.   Effective July 1, 2001, replace Attachment F - Urban Rates and
          Rate-Related Terms and Attachment F-1 Rural Rates and Rate-Related
          Terms with Attachment F - Urban & Rural Rates and Rate-Related Terms
          as attached to this Amendment #3.

     E.   All other provisions of the Contract remain unchanged.

5.   If the Contractor is not a local public procurement unit as defined by the
     Utah Procurement Code (UCA Section 63-56-5), this Contract Amendment must
     be signed by a representative of the State Division of Finance and the
     State Division of Purchasing to bind the State and the Department to this
     Contract Amendment.

6.   This Contract, its attachments, and all documents incorporated by reference
     constitute the entire agreement between the parties and supercede all prior
     negotiations, representations, or agreements, either written or oral
     between the parties relating to the subject matter of this Contract.

IN WITNESS WHEREOF, the parties sign this Contract Amendment.

CONTRACTOR: Molina Healthcare of Utah       UTAH DEPARTMENT OF HEALTH

By: /s/ Kirk Olsen          30 Aug 2001   By: /s/ Shari A. Watkins     09/17/01
   -----------------------  -----------      ------------------------  --------
   Signature of Authorized  Date             Shari A. Watkins, C.P.A.  Date
   Individual                                Director
                                             Office of Fiscal
                                             Operations

Print Name: Kirk Olsen
            ---------------------------

Title: Chief Executive Officer            [SEAL]                       10-12-01
       ---------------------------------  ---------------              --------
                                          State Finance:               Date

       33-0617992
--------------------------                [ILLEGIBLE]
Federal Tax Identification                ---------------              --------
 Number or Social Security                State Purchasing:            Date
 Number

                                     Page 1

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

For the purpose of the Contract all article. section, and subsection headings in
these Attachments B, C, and D are for convenience in referencing the provisions
of the Contract. They are not enforceable as part of the text of the Contract
and may not be used to interpret the meaning of the provisions that lie beneath
them.

                        ATTACHMENT B - SPECIAL PROVISIONS
                              Effective July 1,2001

                             ARTICLE I - DEFINITIONS

For the purpose of the Contract:

A.   "Advance Directives" means oral and written instructions about an
     individual's medical care, in the event the individual is unable to
     communicate. There are two types of Advance Directives: a living will and a
     medical power of attorney.

B.   "Balance Bill" means the practice of billing patients for charges that
     exceed the amount that the MCO will pay.

C.   "CHEC Eligible" means any Medicaid recipient under the age of 21 who is
     eligible to receive Early Periodic Screening Diagnostic and Treatment
     (EPSDT) services in accordance with 42 CFR Part 441, Subpart B.

D.   "CHEC Program" or Child Health Evaluation and Care program is Utah's
     version of the federally mandated Early Periodic Screening, Diagnosis and
     Treatment (EPSDT) program as defined in 42 CFR Part 441, Subpart B. (See
     Attachment C, Covered Services, U.)

E.   "Child with Special Health Care Needs" means a child under 21 who has or is
     at increased risk for chronic physical, developmental, behavioral, or
     emotional conditions and requires health and related services of a type or
     amount beyond that required by children generally, including a child who,
     consistent with 1932(a)(2)(A) of the Social Security Act, 42 U.S.C.,
     Section 1396u-2(a)(2)(A):

     (1)  is blind or disabled or in a related population (eligible for SSI
     under title XVI of the Social Security Act);
     (2)  is in foster care or other out-of-home placement;
     (3)  is receiving foster care or adoption assistance; or
     (4)  is receiving services through a family-centered, community-based
     coordinated care system that receives grant funds described in section
     501(a)(l)(D) of title V.

F.   "Division of Health Care Financing" or "DHCF" means the division within the
     Department of Health responsible for the administration of the Utah
     Medicaid program.

G.   "Emergency Services" means those services provided in a hospital, clinic,
     office, or other facility that is equipped to furnish the required care,
     after the sudden onset of a medical condition manifesting itself by acute
     symptoms of sufficient severity (including severe pain) such that a

                                  Page 1 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     prudent layperson, who possesses an average knowledge of health and
     medicine, could reasonably expect that the absence of immediate medical
     attention to result in:

     1.   Placing the health of the individual (or, with respect to a pregnant
          woman, the health of a woman or her unborn child) in serious jeopardy;

     2.   Serious impairment to bodily functions; or

     3.   Serious dysfunction of any bodily organ or part.

H.   "Enrollee" means any Medicaid eligible: (1) who, at the time of enrollment
     resides within the geographical limits of the CONTRACTOR's Service Area;
     (2) whose name appears on the DEPARTMENT's Eligibility Transmission as a
     new, reinstate, or retroactive Enrollee; and (3) who is accepted for
     enrollment by the CONTRACTOR according to the conditions set forth in this
     Contract excluding residents of the Utah State Hospital, Utah State
     Developmental Center, and long-term care facilities except as defined in
     Attachment C.

I.   "Enrollees with Special Health Care Needs" means enrollees who have or are
     at increased risk for chronic physical, developmental, behavioral, or
     emotional conditions and who also require health and related services of a
     type or amount beyond that required by adults and children generally.

J.   "Enrollment Area" or "Service Area" means the counties enumerated in
     Article II.

K.   "Family Member" means all Medicaid eligibles who are members of the same
     family living at home.

L.   "Home and Community-Based Services" means services, not otherwise furnished
     under the State's Medicaid plan, that are furnished under a waiver of
     statutory requirements granted under the provisions of CFR Part 441,
     subpart G. These services cover an array of Home and Community-Based
     Services that are cost-effective and necessary for an individual to avoid
     institutionalization.

M.   "Managed Care Organization" or "MCO" means an organization that meets the
     State Plan's definition of an HMO or prepaid health plan and which
     provides, either directly or through arrangement with other providers,
     comprehensive general medical services to Medicaid eligibles on a
     contractual prepayment basis.

N.   "Marketing Material" means materials in all mediums, including member
     handbooks, brochures and leaflets, newspaper, magazine, radio, television,
     billboard and yellow pages advertisements, and presentation materials used
     by marketing representatives. It includes materials mailed to, distributed
     to, or aimed at Medicaid clients specifically, and any material that
     mentions "Medicaid," "Medicaid Assistance," or "Title XIX."

O.   "Medically Necessary" means any medical service that (a) is reasonably
     calculated to prevent,

                                  Page 2 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     diagnose, or cure conditions in the Enrollee that endanger life, cause
     suffering or pain, cause deformity or malfunction, or threaten to cause a
     handicap, and (b) there is no equally effective course of treatment
     available or suitable for the Enrollee requesting the service which is more
     conservative or substantially less costly. Medical services will be of a
     quality that meets professionally recognized standards of health care, and
     will be substantiated by records including evidence of such medical
     necessity and quality. Those records will be made available to the
     DEPARTMENT upon request. For CHEC Enrollees, "Medically Necessary" means
     preventive screening services and other medical care, diagnostic services,
     treatment, and other measures necessary to correct or ameliorate defects
     and physical and mental illnesses and conditions, even if the services are
     not included in the Utah State Medicaid Plan.

P.   "Member Services" means a method of assisting Enrollees in understanding
     CONTRACTOR policies and procedures, facilitating referrals to participating
     specialists, and assisting in the resolution of problems and member
     complaints. The purpose of Member Services is to improve access to services
     and promote Enrollee satisfaction.

Q.   "Physician Incentive Plan" means any compensation between a contracting
     organization and a physician group that may directly or indirectly have the
     effect of reducing or limiting services provided with respect to Enrollees
     in the organization.

R.   "Prepaid Mental Health Plan" means the mental health centers that contract
     with the DEPARTMENT to provide inpatient and outpatient mental health
     services to Medicaid clients living within each mental health center's
     jurisdiction.

S.   "Primary Care Provider" or "PCP" means a health care provider the majority
     of whose practice is devoted to internal medicine, family/general practice
     or pediatrics. The MCO may allow other specialists to be PCPs, when
     appropriate. PCPs are responsible for delivering primary care services,
     coordinating and managing Enrollees' overall health and, authorizing
     referrals for other necessary care.

T.   "Restriction Program" means the Federally mandated program (42 CFR
     431.54(e)) for Medicaid clients who over-utilize Medicaid services. If the
     DEPARTMENT in conjunction with the CONTRACTOR finds that an Enrollee has
     utilized Medicaid services at a frequency or amount that is not Medically
     Necessary, as determined in accordance with utilization guidelines adopted
     by the DEPARTMENT, the DEPARTMENT may place the Enrollee under the
     Restriction Program for a reasonable period of time to obtain Medicaid
     services from designated providers only.

U.   "State Plan" means the State Plan for organization and operation of the
     Medicaid program as defined pursuant to Section 1102 of the Social Security
     Act (42 U.S.C. 1302).

                                  Page 3 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

                            ARTICLE II - SERVICE AREA

The Service Area is limited to the urban counties of Cache, Davis, Iron, Salt
Lake, Utah, Washington and Weber.

       ARTICLE III - ENROLLMENT, ORIENTATION, MARKETING, AND DISENROLLMENT

A.   ENROLLMENT PROCESS

     1.   ENROLLEE CHOICE

          The DEPARTMENT will offer potential Enrollees a choice among all MCOs
          available in the Enrollment Area. The DEPARTMENT will inform potential
          Enrollees of Medicaid benefits. The Medicaid client's intent to enroll
          is established when the applicant selects The CONTRACTOR, either
          verbally or by signing a choice of health care delivery form or
          equivalent. This initiates the action to send an advance notification
          to the CONTRACTOR. Medicaid Enrollees made eligible for a retroactive
          period prior to the current month are not eligible for CONTRACTOR
          enrollment during the retroactive period.

     2.   PERIOD OF ENROLLMENT

          Each Enrollee will be enrolled for the period of the Contract or the
          period of Medicaid eligibility or until such person disenrolls or is
          disenrolled, whichever is earlier. Until the DEPARTMENT notifies the
          CONTRACTOR that an Enrollee is no longer Medicaid eligible, the
          CONTRACTOR may assume that the Enrollee continues to be eligible. Each
          Enrollee will be automatically re-enrolled at the end of each month
          unless that Enrollee notifies the DEPARTMENT'S Health Program
          Representative of an intent not to re-enroll in the MCO prior to the
          benefit issuance date.

     3.   OPEN ENROLLMENT

          The CONTRACTOR will have a continuous open enrollment period that
          meets the requirements of Section 1301(d) of the Public Health Service
          Act. The DEPARTMENT will certify, and the CONTRACTOR agrees to accept
          individuals who are eligible to be enrolled in the MCO under the
          provisions of this Contract:

          a.   in the order in which they apply; and

          b.   without restrictions unless authorized by the DEPARTMENT.

                                  Page 4 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     4.   NO HEALTH SCREENING

          The DEPARTMENT and the CONTRACTOR agree that no potential Enrollee
          will be pre-screened or selected by either party for enrollment on the
          basis of pre-existing  health problems or on the basis of race, color,
          national origin, disability or age.

     5.   INDEPENDENT ENROLLMENT

          Each Medicaid eligible can be enrolled or disenrolled in the MCO,
          independent of any other Family Member's enrollment or disenrollment.

     6.   REPRESENTATIVE POPULATION

          The CONTRACTOR will service a population representative of the
          categories of eligibility within the area it serves.

     7.   ELIGIBILITY TRANSMISSION

          a.   IN GENERAL

               Before the close of business of each day, the DEPARTMENT will
               provide to the CONTRACTOR an Eligibility Transmission which is an
               electronic file that includes individuals which the DEPARTMENT
               certifies as Medicaid eligible and who enrolled in the MCO.
               Eligibility transmissions include new Enrollees, reinstated
               Enrollees, retroactive Enrollees, deleted Enrollees and Enrollees
               whose eligibility information results in a change to a critical
               field. The Eligibility Transmission will be in accordance with
               the Utah Health Information Network (UHIN) standard. The
               DEPARTMENT represents and warrants to the CONTRACTOR that the
               appearance of an individual's name on the Eligibility
               Transmission, other than a deleted Enrollee, will be conclusive
               evidence for purposes of this Contract, that such person is
               enrolled in the program and qualifies for medical assistance
               under Medicaid Title XIX and that the DEPARTMENT agrees to pay
               premiums for such Enrollees.

          b.   NEW ENROLLEES

               New Enrollees are enrolled in this MCO until otherwise specified;
               these Enrollees will not appear on future transmissions unless
               there is a change in a critical field. Critical fields are
               coverage dates, recipient name, date of birth, date of death,
               sex, social security number, case information, address, telephone
               number, payment code, coordination of benefits, and the
               Enrollee's provider under the Restriction Program. Enrollees with
               a spenddown requirement will appear on the eligibility
               transmission on a month by month basis after the spenddown is
               met.

                                  Page 5 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          c.   RETROACTIVE ENROLLEES

               Retroactive Enrollees are those who were Enrollees previous to
               the current month. Retroactive Enrollees include newborn
               Enrollees or Enrollees who have been reported in one payment
               category in a previous month but have been changed to a new
               payment category for that previous month.

          d.   REINSTATED ENROLLEES

               Reinstated Enrollees are those who were enrolled for the previous
               month and also closed at the end of the previous month. These
               Enrollees are eligible retroactively to the beginning of the
               current month.

          e.   DELETED ENROLLEES

               Deleted Enrollees are those who are no longer eligible for
               Medicaid or who were disenrolled from the MCO.

          f.   ADVANCED NOTIFICATION TRANSMISSION

               An Advanced Notification Transmission is another electronic file
               (separate from the Eligibility Transmission) that will be sent to
               the CONTRACTOR when an individual has selected the MCO prior to
               becoming eligible for Medicaid. These individuals may or may not
               become eligible for Medicaid. Use of information about such
               individuals is restricted to providing the individual with an
               orientation to the MCO prior to the individual's eligibility for
               Medicaid. The CONTRACTOR is not required to orient individuals
               until they appear on the Eligibility Transmission.

     8.   CHANGE OF ENROLLMENT PROCEDURES

          The CONTRACTOR will be advised of anticipated changes in DEPARTMENT
          policies and procedures as they relate to the enrollment process and
          their comments will be solicited. The CONTRACTOR agrees to be bound by
          such changes in DEPARTMENT policies and procedures that are mutually
          agreed upon by the CONTRACTOR and the DEPARTMENT.

B.   MEMBER ORIENTATION

     1.   INITIAL CONTACT - GENERAL ORIENTATION

          The CONTRACTOR will make a good faith effort to ensure that each
          Enrollee or Enrollee's family or guardian receives the CONTRACTOR's
          member handbook. The CONTRACTOR representative will make a good faith
          effort, as evidenced in written or electronic records, to make an
          initial contact with the Enrollee within 10 working days

                                  Page 6 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July I, 2001

          after the CONTRACTOR has been notified through the Eligibility
          Transmission of the Enrollee's MCO enrollment. The initial contact
          will be in person or by telephone (or in writing, but only if
          reasonable attempts have been made to make the contact in person by
          telephone) and will inform the Enrollee of the MCO rules and policies.
          The CONTRACTOR must ensure that Enrollees are provided interpreters,
          Telecommunication Device for the Deaf (TDD), and other auxiliary aids
          to ensure that Enrollees understand their rights and responsibilities.
          During the initial contact the CONTRACTOR Representative will provide,
          at a minimum, the following information to the Enrollee or potential
          Enrollee:

          a.   specific written and oral instructions on the use of the
               CONTRACTOR's Covered Services and procedures;

          b.   availability and accessibility of all Covered Services, including
               the availability of family planning services and that the
               Enrollee may obtain family planning services from Medicaid
               providers other than providers affiliated with the CONTRACTOR;

          c.   the client's rights and responsibilities as an Enrollee of the
               Health Plan, including the right to file a grievance and how to
               file a grievance;

          d.   the right to terminate enrollment with the MCO; and

          e.   encouragement to make a medical appointment with a provider.

     2.   IDENTIFICATION OF ENROLLEES WITH SPECIAL HEALTH CARE NEEDS

          During the initial contact with each Enrollee, the CONTRACTOR
          representative will use a process that will identify children and
          adults with special health care needs. The CONTRACTOR representative
          will clearly describe to each Enrollee during the initial contact the
          process for requesting specialist care. When an Enrollee is identified
          as having special health care needs, the CONTRACTOR Representative
          will forward this information to a CONTRACTOR individual with
          knowledge of coordination of care and services necessary for such
          Enrollees. The CONTRACTOR individual with knowledge of coordination of
          care for Enrollees with special health care needs will make a good
          faith effort to contact Enrollees within ten working days after
          identification to begin coordination of health care needs, if
          necessary. The CONTRACTOR will not discriminate on the basis of health
          status or the need for health care services.

          The DEPARTMENT's Health Program Representatives are responsible to
          forward information, i.e., pink sheets identifying Enrollees with
          special health care needs and limited language proficiency needs to
          the CONTRACTOR in a timely way coinciding with the daily Eligibility
          Transmission as much as possible.

                                  Page 7 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     3.   INABILITY TO CONTACT ENROLLEE FOR ORIENTATION

          If the CONTRACTOR's representative cannot contact the Enrollee within
          10 working days or at all, the CONTRACTOR representative will document
          its efforts to contact the Enrollee.

     4.   ENROLLEES RECEIVING OUT-OF-PLAN CARE PRIOR TO ORIENTATION

          If the Enrollee receives Covered Services by an out-of-plan provider
          after the first day of the month in which the client's enrollment
          became effective, and if a CONTRACTOR orientation either in-person or
          by telephone (or in writing, but only if reasonable attempts have been
          made to make the contact in person or by telephone) has not taken
          place prior to receiving such services, the CONTRACTOR is responsible
          for payment of the services rendered provided the DEPARTMENT informs
          the CONTRACTOR by the 20th of any month prior to the month that MCO
          enrollment begins.

C.   MARKETING AND MEMBER EDUCATION

     1.   APPROVAL OF MARKETING MATERIALS

          The CONTRACTOR's marketing plans, procedures and materials will be
          accurate, and may not mislead, confuse, or defraud either Enrollees or
          the DEPARTMENT. All Medicaid marketing plans, procedures and materials
          will be reviewed and approved by the DEPARTMENT in consultation with
          the Medical Care Advisory Committee for Marketing Review before
          implemented or released by the CONTRACTOR. The DEPARTMENT will notify
          the CONTRACTOR of its approval or disapproval, in writing, of such
          materials within ten working days after receiving them unless the
          DEPARTMENT and the CONTRACTOR agree to another time frame. If the
          DEPARTMENT does not respond within the agreed upon time frame, the
          CONTRACTOR shall deem such materials approved. Marketing materials
          will not be approved if the DEPARTMENT determines that the material is
          materially inaccurate or misleading or otherwise makes material
          misrepresentations. Health education materials and newsletters not
          specifically related to Enrollees do not need to be approved by the
          DEPARTMENT.

          a.   NO DOOR-TO-DOOR, TELEPHONIC, OR "COLD CALL" MARKETING

               The CONTRACTOR cannot, either directly or indirectly, conduct
               door-to-door, telephonic or "cold call" marketing of enrollment.
               These three marketing practices are prohibited whether conducted
               by the Health Plan itself ("directly") or by an agent or
               independent contractor ("indirectly"). Cold call marketing is any
               unsolicited personal contact with a potential Enrollee by an
               employee or agent of a managed care entity for the purpose of
               influencing the individual to enroll with the Health Plan. The
               CONTRACTOR may not entice a potential Enrollee to join the Health
               Plan by offering the sale of any other type of

                                  Page 8 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               insurance as a bonus for enrollment. All other non-requested
               marketing approaches to Medicaid clients by the CONTRACTOR are
               also prohibited unless specifically approved in advance by the
               DEPARTMENT.

          b.   DISTRIBUTION OF MARKETING MATERIALS

               Marketing materials must be distributed to the entire Service
               Area.

     2.   ENROLLEE MATERIALS MUST BE COMPREHENSIBLE

          The CONTRACTOR will attempt to write all Enrollee and potential
          Enrollee information, instructional and educational materials,
          including member handbooks, at no greater than a sixth grade reading
          level. If the MCO has more than 5% of its Enrollees who speak a
          language other than English as a first language, the CONTRACTOR must
          make available written material (e.g. member handbooks, educational
          newsletters) in that language. Marketing materials must include a
          statement that the CONTRACTOR does not discriminate against any
          Enrollee on the basis of race, color, national origin, disability, or
          age in admission, treatment, or participation in its programs,
          services and activities. In addition, the materials must include the
          phone number of the nondiscrimination coordinator for Enrollees to
          call if they have questions about the nondiscrimination policy or
          desire to file a complaint or grievance alleging violations of the
          nondiscrimination policy.

     3.   MEMBER HANDBOOK

          The CONTRACTOR will produce a member handbook that must be submitted
          to the DEPARTMENT for review and approval before distribution. The
          DEPARTMENT will notify the CONTRACTOR in writing of its approval or
          disapproval within ten working days after receiving the member
          handbook unless the DEPARTMENT and CONTRACTOR agree to another time
          frame. If the DEPARTMENT does not respond within the agreed upon time
          frame, the CONTRACTOR may deem such materials are approved. If there
          are changes to the content of the material in the handbook, the
          CONTRACTOR must update the member handbook and submit a draft to the
          DEPARTMENT for review and approval before distribution to its
          Enrollees. At a minimum, the member handbook must explain in clear
          terms the following information:

          a.   The scope of benefits provided by the MCO;

          b.   Instructions on where and how to obtain Covered Services,
               including referral requirements;

          c.   Instructions on what to do in an emergency or urgent medical
               situation, including emergency numbers;

          d.   Enrollee options on obtaining family planning services;

                                  Page 9 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1. 2001

          e.   Instructions on how to choose a PCP and how to change PCPs;

          f.   Description on Enrollee cost-sharing requirements
               (if applicable);

          g.   Toll-free telephone number;

          h.   Description of Member Services function;

          i.   How to register a complaint or grievance;

          j.   Information on Advance Directives;

          k.   Services covered by Medicaid, but not covered by the CONTRACTOR;

          l.   Clients' rights and responsibilities;

          m.   A statement that the CONTRACTOR does not discriminate against any
               Enrollee on the basis of race, color, national origin,
               disability, or age in admission, treatment, or participation in
               its programs, services and activities; and

          n.   The phone number of the nondiscrimination coordinator for
               Enrollees to call if they have questions about the
               nondiscrimination policy or desire to file a complaint or
               grievance alleging violations of the nondiscrimination policy.

     4.   NOTIFICATION TO ENROLLEES OF POLICIES AND PROCEDURES

          a.   CHANGES TO POLICIES AND PROCEDURES

               The CONTRACTOR must periodically notify Enrollees, in writing, of
               changes to its plan such as changes to its policies or procedures
               either through a newsletter or other means.

          b.   ANNUAL EDUCATION ON EMERGENCY CARE AND GRIEVANCE PROCEDURES

               The CONTRACTOR must annually reinforce, in writing, to Enrollees
               how to access emergency and urgent services and how to register a
               complaint or grievance.

     5.   MONTHLY NOTIFICATION TO DEPARTMENT OF CHANGES IN PROVIDER NETWORK

          The CONTRACTOR must notify the DEPARTMENT at least monthly of changes
          in its provider network so that the DEPARTMENT can ensure its listing
          of providers is accurate.

                                  Page 10 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

D.   DISENROLLMENT BY ENROLLEE

     1.   ENROLLEE'S RIGHT TO DISENROLL

          Enrollees will have the right to disenroll from this MCO at any time
          with or without cause. The disenrollment will be effective once the
          DEPARTMENT has been notified by the Enrollee and the DEPARTMENT issues
          a new Medicaid card and the disenrollment is indicated on the
          Eligibility Transmission.

     2.   ENROLLEES IN AN INPATIENT HOSPITAL SETTING

          The DEPARTMENT agrees that if a new Enrollee is a patient in an
          inpatient hospital setting on the date the new Enrollee's name appears
          on the CONTRACTOR Eligibility Transmission, the obligation of the
          CONTRACTOR to provide Covered Services to such person will commence
          following discharge. If an Enrollee is a patient in an inpatient
          hospital setting on the date that his or her name appears as a deleted
          Enrollee on the CONTRACTOR Eligibility Transmission or he or she is
          otherwise disenrolled under this Contract, the CONTRACTOR will remain
          financially responsible for such care until discharge.

     3.   ANNUAL STUDY OF ENROLLEES WHO DISENROLLED

          Annually, the DEPARTMENT and CONTRACTOR will work cooperatively to
          conduct an analysis of Enrollees who have voluntarily disenrolled from
          this MCO. The results of the analysis will include explanations of
          patterns of disenrollments and strategies or a corrective action plan
          to address unusual rates or patterns of disenrollment. The DEPARTMENT
          will inform the CONTRACTOR of such disenrollments.

E.   DISENROLLMENT BY CONTRACTOR

     1.   CANNOT DISENROLL FOR ADVERSE CHANGE IN ENROLLEE'S HEALTH

          The CONTRACTOR may not terminate enrollment because of an adverse
          change in the Enrollee's health.

     2.   VALID REASONS FOR DISENROLLMENT

          The CONTRACTOR may initiate disenrollment of any Enrollee's
          participation in the MCO upon one or more of the following grounds:

          a.   For reasons specifically identified in the CONTRACTOR's member
               handbook.

          b.   When the Enrollee ceases to be eligible for medical assistance
               under the State Plan, in accordance with Title 42 USCA, 1396, et.
               seq., and as finally determined by the DEPARTMENT.

                                  Page 11 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          c.   Upon termination or expiration of the Contract.

          d.   Death of the Enrollee.

          e.   Confinement of the Enrollee in an institution when confinement is
               not a Covered Service under this Contract.

          f.   Violation of enrollment requirements developed by the CONTRACTOR
               and approved by the DEPARTMENT but only after the CONTRACTOR
               and/or the Enrollee has exhausted the CONTRACTOR's applicable
               internal grievance procedure.

     3.   APPROVAL BY DEPARTMENT REQUIRED

          To initiate disenrollment of an Enrollee's participation with this
          MCO, the CONTRACTOR will provide the DEPARTMENT with documentation
          justifying the proposed disenrollment. The DEPARTMENT will approve or
          deny the disenrollment request in writing within thirty (30) days of
          receipt of the request. Failure by the DEPARTMENT to deny a
          disenrollment request within such thirty (30) day period will
          constitute approval of such disenrollment requests.

     4.   ENROLLEE'S RIGHT TO FILE A GRIEVANCE

          If the DEPARTMENT approves the CONTRACTOR's disenrollment request, the
          CONTRACTOR will give the Enrollee thirty (30) days written notice of
          the proposed disenrollment, and will notify the Enrollee of his or her
          opportunity to invoke the internal grievance procedure and appeals
          process for a fair hearing. The CONTRACTOR will give a copy of the
          written notice to the DEPARTMENT at the time the notice is sent to the
          Enrollee.

     5.   REFUSAL OF RE-ENROLLMENT

          If a person is disenrolled because of violation of responsibilities
          included in the CONTRACTOR'S member handbook, the CONTRACTOR may
          refuse re-enrollment of that Enrollee.

F.   ENROLLEE TRANSITION BETWEEN MCOs/HEALTH PLANS

     1.   MUST ACCEPT PRE-ENROLLMENT PRIOR AUTHORIZATIONS

          For Covered Services other than inpatient, home health services, and
          medical equipment, if authorization has been given for a Covered
          Service and an enrollee transitions between MCOs prior to the delivery
          of such Covered Service, the receiving MCO shall be bound by the
          relinquishing MCO's prior authorization until the receiving MCO has
          evaluated the Enrollee and a new plan of care is established. (See
          Article IV, Benefits, Section F,

                                  Page 12 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          Clarification of Payment Responsibilities, Subsection 5, for
          inpatient, home health services, and medical equipment explanations.)

     2.   MUST PROVIDE MEDICAL RECORDS TO ENROLLEE'S NEW MCO

          When enrollees are transitioned between MCOs the relinquishing MCO's
          provider will submit, upon request of the new MCO's provider, any
          critical medical information about the transitioning enrollee prior to
          the transition including, but not limited to, whether the member is
          hospitalized, pregnant, involved in the process of organ
          transplantation, scheduled for surgery or post-surgical follow-up on a
          date subsequent to transition, scheduled for prior-authorized
          procedures or therapies on a date subsequent to transition, receiving
          dialysis or is chronically ill (e.g. diabetic, hemophilic, HIV
          positive).

                              ARTICLE IV - BENEFITS

A.   IN GENERAL

     The CONTRACTOR will provide to Enrollees under this Contract, directly or
     through arrangements with subcontractors, all Medically Necessary Covered
     Services described in Attachment C as promptly and continuously as is
     consistent with generally accepted standards of medical practice. The
     subcontractors will follow generally accepted standards of medical care in
     diagnosing Enrollees who request services from the CONTRACTOR.

B.   PROVIDER SERVICES FUNCTION

     The CONTRACTOR must operate a Provider Services function during regular
     business hours. At a minimum, Provider Services staff must be responsible
     for the following:

     1.   Training, including ongoing training, of the CONTRACTOR's providers on
          Medicaid rules and regulations that will enable providers to
          appropriately render services to Enrollees;

     2.   Assisting providers to verify whether an individual is enrolled with
          the MCO;

     3.   Assisting providers with prior authorization and referral protocols;

     4.   Assisting providers with claims payment procedures;

     5.   Fielding and responding to provider questions and complaints and
          grievances.

C.   SCOPE OF SERVICES

     1.   UNDERWRITING RISK

                                  Page 13 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          In consideration of the premiums paid by the DEPARTMENT, the
          CONTRACTOR will, for all Enrollees, assume underwriting risk for
          Covered Services in Attachment C.

     2.   RESPONSIBLE FOR ALL BENEFITS IN ATTACHMENT C (COVERED SERVICES)

          Except as otherwise provided for cases of Emergency Services, the
          CONTRACTOR has the exclusive right and responsibility to arrange for
          all benefits listed in Attachment C. The CONTRACTOR is responsible for
          payment of Emergency Services 24 hours a day and 7 days a week whether
          the service was provided by a network or out-of-network provider and
          whether the service was provided in or out of the CONTRACTOR's Service
          Area.

     3.   CHANGES TO BENEFITS

          Amendments, revisions, or additions to the State Plan or to State or
          Federal regulations, guidelines, or policies and court or
          administrative orders will, insofar as they affect the scope or nature
          of benefits available to Enrollees, be amendments to the Covered
          Services under Attachment C. The DEPARTMENT will notify the
          CONTRACTOR, in writing, of any such changes and their effective date.
          Rate adjustments, when appropriate, will be negotiated between the
          DEPARTMENT and the CONTRACTOR.

     4.   MEDICAL NECESSITY DENIALS

          When the CONTRACTOR determines that a service will not be covered due
          to the lack of medical necessity, the CONTRACTOR must send all
          documentation supporting their decision to the DEPARTMENT for its
          review before the CONTRACTOR's determination is deemed final, when the
          following conditions are met:

          a.   there are no established national standards for determining
               medical necessity; and

          b.   the DEPARTMENT does not have medical necessity criteria for the
               service.

          The DEPARTMENT will review the documentation and determine what the
          DEPARTMENT's decision would be regarding coverage for the service. The
          DEPARTMENT and the CONTRACTOR will work collaboratively in making a
          final decision on whether the service is to be covered by the
          CONTRACTOR.

D.   SUBCONTRACTS

     1.   NO DISCRIMINATION BASED ON LICENSE OR CERTIFICATION

          The CONTRACTOR shall not discriminate against providers with respect
          to participation, reimbursement, or indemnification as to any provider
          who is acting within the scope of that provider's license or
          certification under applicable State law solely on

                                  Page 14 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          the basis of the provider's license or certification.

     2.   ANY COVERED SERVICE MAY BE SUBCONTRACTED.

          Any Covered Service may be subcontracted. All subcontracts will be in
          writing and will include the general requirements of this Contract
          that are appropriate to the service or activity including
          confidentiality requirements and will assure that all duties of the
          CONTRACTOR under this Contract are performed. No subcontract
          terminates the legal responsibility of the CONTRACTOR to the
          DEPARTMENT to assure that all activities under this Contract are
          carried out. The CONTRACTOR will make all subcontracts available upon
          request.

     3.   NO PROVISIONS TO REDUCE OR LIMIT MEDICALLY NECESSARY SERVICES

          The CONTRACTOR will ensure that subcontractors abide by the
          requirements of Section 1128(b) of the Social Security Act prohibiting
          the CONTRACTOR and other such providers from making payments directly
          or indirectly to a physician or other provider as an inducement to
          reduce or limit Medically Necessary services provided to Enrollees.

     4.   REQUIREMENT OF 60 DAYS WRITTEN NOTICE PRIOR TO TERMINATION OF CONTRACT

          All subcontracts and agreements will include a provision stating that
          if either party (the subcontractor or CONTRACTOR) wishes to terminate
          the subcontract or agreement, whichever party initiates the
          termination will give the other party written notice of termination at
          least 60 calendar days prior to the effective termination date. The
          CONTRACTOR will notify the DEPARTMENT of the termination on the same
          day that the CONTRACTOR either initiates termination or receives the
          notice of termination from the subcontractor.

     5.   COMPLIANCE WITH CONTRACTOR's QUALITY ASSURANCE PLAN

          All of the CONTRACTOR's providers must be aware of the CONTRACTOR's
          Quality Assurance Plan and activities. All subcontracts with the
          CONTRACTOR must include a requirement securing cooperation with the
          CONTRACTOR's Quality Assurance Plan and activities and must allow the
          CONTRACTOR access to the subcontractor's medical records of its
          Enrollees.

     6.   UNIQUE IDENTIFIER REQUIRED

          All physicians who provide services under this Contract must have a
          unique identifier in accordance with the system established under
          section 1173(b) of the Social Security Act and in accordance with the
          Health Insurance Portability and Accountability Act.

                                  Page 15 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     7.   PAYMENT OF PROVIDER CLAIMS

          The CONTRACTOR must pay its providers on a timely basis consistent
          with the claims payment procedures described in section 1902(a)(37)(A)
          of the Social Security Act and the implementing Federal regulation at
          42 CFR 447.45, unless the provider and CONTRACTOR agree to an
          alternate payment schedule. The Contractor must ensure that 90 percent
          of claims for payment (for which no further written information or
          substantiation is required in order to make payment) made for Covered
          Services and furnished by its providers are paid within 30 days of
          receipt of such claims and that 99 percent of such claims are paid
          within 90 days of the date of receipt of such claims.

E.   CLARIFICATION OF COVERED SERVICES

     1.   EMERGENCY SERVICES

          a.   IN GENERAL

               The CONTRACTOR must provide coverage for Emergency Services
               without regard to prior authorizations or the emergency care
               provider's contractual relationship with the CONTRACTOR. The
               CONTRACTOR must inform their Enrollees that access to Emergency
               Services is not restricted and that if an Enrollee experiences a
               medical emergency, he or she may obtain services from a non-plan
               physician or other qualified provider, without penalty. However,
               the CONTRACTOR may require the Enrollee to notify the CONTRACTOR
               within a specified time after the Enrollee's condition is
               stabilized, and may require the Enrollee to obtain prior
               authorization for any follow-up care delivered pursuant to the
               emergency. The CONTRACTOR must comply with Medicare guidelines
               for post-stabilization of care.

               The CONTRACTOR must pay for services where the presenting
               symptoms are of sufficient severity that a person with average
               knowledge of health and medicine would reasonably expect the
               absence of immediate medical attention to result in placing the
               health of the individual (or, with respect to a pregnant woman,
               the health of a woman or her unborn child) in serious jeopardy;
               serious impairment to bodily functions; or serious dysfunction of
               any bodily organ or part.

               The CONTRACTOR may not retroactively deny a claim for an
               emergency screening examination because the condition, which
               appeared to be an emergency medical condition under the prudent
               layperson standard, turned out to be non-emergency in nature.

          b.   DETERMINING LIABILITY FOR EMERGENCY SERVICES

               1)   Presence of a clinical emergency

                                  Page 16 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

                    If the screening examination leads to a clinical
                    determination by the examining physician that an actual
                    emergency medical condition exists, the CONTRACTOR must pay
                    for both the services involved in the screening examination
                    and the services required to stabilize the Enrollee.

               2)   Emergency services continue until the Enrollee can be safely
                    discharged or transferred

                    The CONTRACTOR must pay for all Emergency Services that are
                    Medically Necessary until the clinical emergency is
                    stabilized. This includes all treatment that may be
                    necessary to assure, within reasonable medical probability,
                    that no material deterioration of the Enrollee's condition
                    is likely to result from, or occur during, discharge of the
                    Enrollee or transfer of the Enrollee to another facility. If
                    there is a disagreement between a hospital and the
                    CONTRACTOR concerning whether the Enrollee is stable enough
                    for discharge or transfer, or whether the medical benefits
                    of an unstabilized transfer outweigh the risks, the
                    judgement of the attending physician(s) actually caring for
                    the Enrollee at the treating facility prevails and is
                    binding on the CONTRACTOR. The CONTRACTOR may establish
                    arrangements with hospitals whereby the CONTRACTOR may send
                    one of its own physicians with appropriate ER privileges to
                    assume the attending physician's responsibilities to
                    stabilize, treat, and transfer the Enrollee.

               3)   Absence of a clinical emergency

                    If the screening examination leads to a clinical
                    determination by the examining physician that an actual
                    emergency medical condition did not exist, then the
                    determining factor for payment liability should be whether
                    the Enrollee had acute symptoms of sufficient severity at
                    the time of presentation. In these cases, the CONTRACTOR
                    must review the presenting symptoms of the Enrollee and must
                    pay for all services involved in the screening examination
                    where the presenting symptoms (including severe pain) were
                    of sufficient severity to have warranted emergency attention
                    under the prudent layperson standard.

               4)   Referrals

                    When an Enrollee's Primary Care Physician or other plan
                    representative instructs the Enrollee to seek emergency care
                    in or out of network, the CONTRACTOR is responsible for
                    payment of the medical screening examination and for other
                    Medically Necessary Emergency Services, without regard to
                    whether the Enrollee meets the prudent layperson standard.

                                  Page 17 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     2.   CARE PROVIDED IN SKILLED NURSING FACILITIES

          a.   IN GENERAL: STAYS LASTING 30 DAYS OR LESS

               The CONTRACTOR may provide long term care for Enrollees in
               skilled nursing facilities and then reimburse such facilities
               when the plan of care includes a prognosis of recovery and
               discharge within 30 days. It is the responsibility of a
               CONTRACTOR physician to make the determination if the patient
               will require the services of a nursing facility for fewer or
               greater than 30 days.

          b.   PROCESS FOR STAYS LONGER THAN 30 DAYS

               When the prognosis of an Enrollee indicates that long term care
               greater than 30 days will be required, the following process will
               occur:

               1)   The CONTRACTOR will notify the Enrollee, hospital discharge
                    planner, and nursing facility that the CONTRACTOR will not
                    be responsible for the services provided for the Enrollee
                    during the stay at the skilled nursing facility.

               2)   The CONTRACTOR will notify the DHCF, Bureau of Managed
                    Health Care, of this determination to suspend premium
                    payment for that Enrollee.

               3)   If the CONTRACTOR incurs expenses, the Bureau of Managed
                    Health Care will determine if the CONTRACTOR will retain the
                    premium for the month during which the Enrollee is admitted
                    to the skilled nursing facility. If the CONTRACTOR does not
                    incur expenses during the month in which the Enrollee is
                    admitted to a skilled nursing facility, the Bureau of
                    Managed Health Care will retract from the CONTRACTOR the
                    premium for that Enrollee.

               4)   Retraction of the premium payment will be subject to "3"
                    above, but the Eligibility Transmission will indicate the
                    non-payment on the first day of the month following the
                    prognosis determination of greater than 30 days.

               5)   Premium payment to the CONTRACTOR will recommence beginning
                    the first full month that the Enrollee is no longer residing
                    in the nursing facility.

          c.   PROCESS FOR STAYS LESS THAN 30 DAYS

               When the prognosis of skilled nursing facility services is
               anticipated to be less than 30 days, but during the 30-day period
               the CONTRACTOR determines that

                                  Page 18 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               the Enrollee will require skilled nursing facility services for
               greater than 30 days, the following process will be in effect:

               1)   The CONTRACTOR will notify the nursing facility that a
                    determination has been made that the Enrollee will require
                    services for more than 30 days.

               2)   The CONTRACTOR will notify the DHCF, Bureau of Managed
                    Health Care, of the determination that the Enrollee will
                    require services in a nursing facility for more than 30
                    days.

               3)   If the CONTRACTOR incurs expenses for the Enrollee, the
                    Bureau of Managed Health Care will determine if the
                    CONTRACTOR will retain the premium for the month during
                    which the change in status was determined. If the CONTRACTOR
                    does not incur expenses during the month in which the change
                    in status is determined, the Bureau of Managed Health Care
                    will retract from the CONTRACTOR the premium for that
                    Enrollee.

               4)   Retraction of the premium payment will be subject to "3"
                    above, but the Recipient Subsystem will indicate the
                    non-payment on the first day of the month following the
                    prognosis determination of more than 30 days.

               5)   The CONTRACTOR will be responsible for payment for three
                    working days after the CONTRACTOR has notified the nursing
                    facility that skilled nursing care will be required for more
                    than 30 days.

               6)   Premium payment to the CONTRACTOR will recommence beginning
                    the first full month that the recipient is no longer
                    residing in the nursing facility.

     3.   ENROLLEES WITH SPECIAL HEALTH CARE NEEDS

          a.   IN GENERAL

               The CONTRACTOR will ensure there is access to all Medically
               Necessary Covered Services to meet the health needs of Enrollees
               with special health care needs. Individuals with special health
               care needs are those who have or are at increased risk for
               chronic physical, developmental, behavioral, or emotional
               conditions and who also require health and related services of a
               type or amount beyond that required by adults and children
               generally.

          b.   IDENTIFICATION

               The CONTRACTOR will identify Enrollees with special health care
               needs using

                                  Page 19 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               a process at the initial contact made by the CONTRACTOR
               Representative to educate the client and will offer the client
               care coordination or case management services. Care coordination
               services are services to assist the client in obtaining Medically
               Necessary Covered Services from the CONTRACTOR or another entity
               if the medical service is not covered under the Contract.

          c.   CHOOSING A PRIMARY CARE PROVIDER

               The CONTRACTOR will have a mechanism to inform care givers and,
               when appropriate, Enrollees with special health care needs about
               primary care providers who have training in caring for such
               Enrollees so that an informed selection of a provider can be
               made. The CONTRACTOR will have primary care providers with skills
               and experience to meet the needs of Enrollees with special health
               care needs. The CONTRACTOR will allow an appropriate specialist
               to be the primary care provider but only if the specialist has
               the skills to monitor the Enrollee's preventive and primary care
               services.

          d.   REFERRALS AND ACCESS TO SPECIALTY PROVIDERS

               The CONTRACTOR will ensure there is access to appropriate
               specialty providers to provide Medically Necessary Covered
               Services for adults and children with special health care needs.
               If the CONTRACTOR does not employ or contract with a specialty
               provider to treat a special health care condition at the time the
               Enrollee needs such Covered Services, the CONTRACTOR will have a
               process to allow the Enrollee to receive Covered Services from a
               qualified specialist who may not be affiliated with the
               CONTRACTOR. The CONTRACTOR will reimburse the specialist for such
               care at no less than Medicaid's rate for the service when the
               service is rendered. The process for requesting specialist's care
               will be clearly described by the CONTRACTOR and explained to each
               Enrollee during the initial contact with the Enrollee.

               If the CONTRACTOR restricts the number of referrals to
               specialists, the CONTRACTOR will not penalize those providers who
               make such referrals for Enrollees with special health care needs.

          e.   SURVEY OF ENROLLEES WITH SPECIAL HEALTH CARE NEEDS

               At least every two years, the CONTRACTOR in conjunction with the
               DEPARTMENT will survey a sample of Enrollees with special health
               care needs using a national consumer assessment questionnaire. to
               evaluate their perceptions of services they have received. The
               survey process, including the survey instrument, will be
               standardized and developed collaboratively between the DEPARTMENT
               and all contracting MCOs. The DEPARTMENT will analyze the results
               of the surveys. The results and analysis of the surveys will be
               reviewed by the CONTRACTOR's quality assurance committee for
               action.

                                  Page 20 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          f.   COLLABORATION WITH OTHER PROGRAMS

               If the individual with special health care needs is enrolled in
               the Prepaid Mental Health Plan or is enrolled in any of the
               Medicaid home and community-based waiver programs and is
               receiving case management services through that program, or is
               covered by one of the other Medicaid targeted case management
               programs, the CONTRACTOR care coordinator will collaborate with
               the appropriate program person, i.e., the targeted case manager,
               etc., for that program once the program person has contacted the
               CONTRACTOR care coordinator. When necessary, the CONTRACTOR care
               coordinator will make an effort to contact the program person of
               those Enrollees who have medical needs that require such
               coordination.

               The CONTRACTOR must coordinate health care needs for children
               with special health care needs with the services of other
               agencies (e.g., mental and substance abuse, public health
               departments, transportation, home and community based care,
               developmental disabilities, Title V, local schools, IDA programs,
               and child welfare), and with families, caregivers, and advocates.

          g.   REQUIRED ELEMENTS OF A CASE MANAGEMENT SYSTEM

               A case management system includes but is not limited to:

               1)   procedures and the capacity to implement the provision of
                    individual needs assessment including the screening for
                    special needs (e.g. mental health, high risk health
                    problems, functional problems, language or comprehension
                    barriers); the development of an individual treatment plan
                    as necessary based on the needs assessment; the
                    establishment of treatment objectives, treatment follow-up,
                    the monitoring of outcomes, and a process to ensure that
                    treatment plans are revised as necessary. These procedures
                    will be designed to accommodate the specific cultural and
                    linguistic needs of the Enrollee;

               2)   procedures designed to address those Enrollees, including
                    children with special health care needs, who may require
                    services from multiple providers, facilities and agencies
                    and require complex coordination of benefits and services,
                    including social services and other community resources;

               3)   a strategy to ensure that all Enrollees and/or authorized
                    Family Members or guardians are involved in treatment
                    planning and consent to the medical treatment;

               4)   procedures and criteria for making referrals and
                    coordinating care by specialists and sub-specialists that
                    will promote continuity as well as

                                  Page 21 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

                    cost-effectiveness of care; and

               5)   procedures to provide continuity of care for new Enrollees
                    to prevent disruption in the provision of Covered Services
                    that include, but are not limited to, appropriate case
                    management staff able to evaluate and handle individual case
                    transition and care planning, internal mechanisms to
                    evaluate plan networks and special case needs.

          h.   HOSPICE

               If an Enrollee is receiving hospice services at the time of
               enrollment in the MCO or if the Enrollee is already enrolled in
               the MCO and has less than six months to live, the Enrollee will
               be offered hospice services or the continuation of hospice
               services if he or she is already receiving such services prior to
               enrollment in the MCO.

     4.   INPATIENT HOSPITAL SERVICES

          If a CONTRACTOR's provider admits an Enrollee for inpatient hospital
          care, the CONTRACTOR has the responsibility for all services needed by
          the Enrollee during the hospital stay that are ordered by the
          CONTRACTOR's provider. Needed services include but are not limited to
          diagnostic tests, pharmacy, and physician services, including services
          provided by psychiatrists. If diagnostic tests conducted during the
          inpatient stay reveal that the Enrollee's condition is outside the
          scope of the CONTRACTOR's responsibility, the CONTRACTOR remains
          responsible for the Enrollee until the Enrollee is discharged or until
          responsibility is transferred to another appropriate entity and the
          appropriate entity agrees to take financial responsibility, including
          negotiating a payment for services. If the Enrollee is discharged and
          needs further services, the admitting CONTRACTOR will coordinate with
          the other appropriate entity to ensure continued care is provided. The
          CONTRACTOR and appropriate entity will work cooperatively in the best
          interest of the Enrollee. The appropriate entity includes, but is not
          limited to, a Prepaid Mental Health Plan or another MCO.

     5.   MATERNITY STAYS

          a.   THE NEWBORNS' AND MOTHERS' HEALTH PROTECTION ACT (NMHPA)

               The CONTRACTOR must meet the requirements of the Newborns' and
               Mothers' Health Protection Act (NMHPA). The CONTRACTOR must
               record early discharge information for monitoring, quality, and
               improvement purposes. The CONTRACTOR will ensure that coverage is
               provided with respect to a mother who is an Enrollee and her
               newborn child for a minimum of 48 hours of inpatient care
               following a normal vaginal delivery, and a minimum of 96 hours of
               inpatient care following a caesarean section, without requiring
               the attending provider to obtain authorization from the
               CONTRACTOR in order to keep a

                                  Page 22 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               mother and her newborn child in the inpatient setting for such
               period of time.

          b.   EARLY DISCHARGES

               Notwithstanding the prior sentence, the CONTRACTOR will not be
               required to provide coverage for post-delivery inpatient care for
               a mother who is an Enrollee and her newborn child during such
               period of time if (1) a decision to discharge the mother and her
               newborn child prior to the expiration of such period is made by
               the attending provider in consultation with the mother; and (2)
               the CONTRACTOR provides coverage for timely post-delivery
               follow-up care.

          c.   POST-DELIVERY CARE

               Post-delivery care will be provided to a mother and her newborn
               child by a registered nurse, physician, nurse practitioner, nurse
               midwife or physician assistant experienced in maternal and child
               health in (1) the home, a provider's office, a hospital, a
               federally qualified health center, a federally qualified rural
               health clinic, or a State health department maternity clinic; or
               (2) another setting determined appropriate under regulations
               promulgated by the Secretary of Health and Human Services,
               (including a birthing center or an intermediate care facility);
               except that such coverage will ensure that the mother has the
               option to be provided with such care in the home.

          d.   TIMELY POST-DELIVERY CARE

               "Timely post-delivery care" means health care that is provided
               (1) following the discharge of a mother and her newborn child
               from the inpatient setting; and (2) in a manner that meets the
               health needs of the mother and her newborn child, that provides
               for the appropriate monitoring of the conditions of the mother
               and child, and that occurs within the 24 to 72 hour period
               immediately following discharge.

     6.   CHILDREN IN CUSTODY OF THE DEPARTMENT OF HUMAN SERVICES

          a.   IN GENERAL

               The CONTRACTOR will work with the Division of Child and Family
               Services (DCFS) or the Division of Youth Corrections (DYC) in the
               Department of Human Services (DHS) to ensure systems are in place
               to meet the health needs of children in custody of the Department
               of Human Services. The CONTRACTOR will ensure these children
               receive timely access to appointments through coordination with
               DCFS or DYC. The CONTRACTOR must have available providers who
               have experience and training in abuse and neglect issues.

               The CONTRACTOR or its providers will make every reasonable effort
               to ensure

                                  Page 23 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               that a child who is in custody of the Department of Human
               Services may continue to use the provider with whom the child has
               an established professional relationship when the provider is
               part of the CONTRACTOR's network. The CONTRACTOR will facilitate
               timely appointments with the provider of record to ensure
               continuity of care for the child.

               While it is the CONTRACTOR's responsibility to ensure Enrollees
               who are children in the custody of DHS have access to needed
               services, DHS personnel are primarily responsible to assist
               children in custody in arranging for and getting to medical
               appointments and evaluations with the CONTRACTOR's network of
               providers. DHS staff are primarily responsible for contacting the
               CONTRACTOR to coordinate care for children in custody and
               informing the CONTRACTOR of the special health care needs of
               these Enrollees. The Fostering Healthy Children staff may assist
               the DHS staff in performing these functions by communicating with
               the CONTRACTOR.

          b.   SCHEDULE OF VISITS

               1)   Where physical and/or sexual abuse is suspected

                    In cases where the child protection worker suspects physical
                    and/or sexual abuse, the CONTRACTOR will ensure that the
                    child has access to an appropriate examination within 24
                    hours of notification that the child was removed from the
                    home. If the CONTRACTOR cannot provide an appropriate
                    examination, the CONTRACTOR will ensure the child has access
                    to a provider who can provide an appropriate examination
                    within the 24 hour period.

               2)   All other cases

                    In all other cases, the CONTRACTOR will ensure that the
                    child has access to an initial health screening within five
                    calendar days of notification that the child was removed
                    from the home. The CONTRACTOR will ensure this exam
                    identifies any health problems that might determine the
                    selection of a suitable placement, or require immediate
                    attention.

               3)   CHEC exams

                    In all cases, the CONTRACTOR will ensure that the child has
                    access to a Child Health Evaluation and Care (CHEC)
                    screening within 30 calendar days of notification that the
                    child was removed from the home. Whenever possible, the CHEC
                    screening should be completed within the five-day time
                    frame. Additionally, the CONTRACTOR will ensure the child
                    has access to a CHEC screening according to the CHEC
                    periodicity

                                  Page 24 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

                    schedule until age six, then annually thereafter.

     7.   ORGAN TRANSPLANTATIONS

          a.   IN GENERAL

               All organ transplantation services are the responsibility of the
               CONTRACTOR for all Enrollees in accordance with the criteria set
               forth in Rule R414-10A of the Utah Administrative Code, unless
               amended under the provisions of Attachment B, Article IV
               (Benefits), Section C, Subsection 3 of this Contract. The
               DEPARTMENT's criteria will be provided to the CONTRACTOR.

          b.   SPECIFIC ORGAN TRANSPLANTATIONS COVERED

               The following transplantations are covered under Rule R414-10A:
               Kidney, liver, cornea, bone marrow, heart, intestine, lung,
               pancreas, small bowel, combination heart/lung, combination
               intestine/liver, combination kidney/pancreas, combination
               liver/kidney, multi visceral, and combination liver/small bowel.

          c.   PSYCHOSOCIAL EVALUATION REQUIRED

               Enrollees who have applied for organ transplantations, except
               cornea or kidney, must undergo a comprehensive psycho-social
               evaluation by a board-certified or board-eligible psychiatrist.
               The evaluation must include a comprehensive history regarding
               substance abuse and compliance with medical treatment. In
               addition, the parent(s) or guardian(s) of Enrollees who are less
               than 18 years of age must undergo a psycho-social evaluation that
               includes a comprehensive history regarding substance abuse, and
               past and present compliance with medical treatment.

               If a request is made for a transplantation not listed above, the
               CONTRACTOR will contact the DEPARTMENT. Such requests will be
               addressed as set forth in R414-10A-23.

          d.   OUT-OF-STATE TRANSPLANTATIONS

               When the CONTRACTOR arranges the transplantation to be performed
               out-of- state, the CONTRACTOR is responsible for coverage of
               food, lodging, transportation and airfare expenses for the
               Enrollee and attendant. The CONTRACTOR will follow, at a minimum,
               the DEPARTMENT's criteria for coverage of food, lodging,
               transportation and airfare expenses.

     8.   MENTAL HEALTH SERVICES

          When an Enrollee presents with a possible mental health condition to
          his or her

                                  Page 25 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          CONTRACTOR primary care physician, it is the responsibility of the
          primary care provider to determine whether the Enrollee should be
          referred to a psychologist, pediatric specialist, psychiatrist,
          neurologist, or other specialist. Mental health conditions may be
          handled by the CONTRACTOR primary care provider and referred to the
          Enrollee's Prepaid Mental Health Plan when more specialized services
          are required for the Enrollee. CONTRACTOR primary care providers may
          seek consultation from the Prepaid Mental Health Plan when the primary
          care provider chooses to manage the Enrollee's symptoms.

          An independent panel comprised of specialists appropriate to the
          concern will be established by the DEPARTMENT with representatives
          from the CONTRACTOR and Prepaid Mental Health Plan to adjudicate
          disputes regarding which entity (the CONTRACTOR or Prepaid Mental
          Health Plan) is responsible for payment and/or treatment of a
          condition. The panel will be convened on a case-by-case basis. The
          CONTRACTOR and Prepaid Mental Health Plan will adhere to the final
          decision of the panel.

     9.   DEVELOPMENTAL AND ORGANIC DISORDERS

          a.   COVERED SERVICES FOR CHILD ENROLLEES THROUGH AGE 20

               1)   The CONTRACTOR is responsible for all inpatient and
                    physician outpatient Covered Services for child Enrollees
                    with developmental (ICD-9 codes 299 through 299.8 and 317
                    through 319.9) or organic diagnoses (ICD-9 codes 290 through
                    294.9 and 310 through 310.9) including, but not limited to,
                    diagnostic work-ups and other medical care such as
                    medication management services related to the developmental
                    or organic disorder.

               2)   The CONTRACTOR is responsible for all psychological
                    evaluations and testing including neuropsychological
                    evaluations and testing for child Enrollees with
                    developmental or organic disorders such as brain tumors,
                    brain injuries, and seizure disorders.

          b.   COVERED SERVICES FOR ADULT ENROLLEES AGE 21 AND OLDER

               The CONTRACTOR is responsible for all inpatient and physician
               outpatient Covered Services for adult Enrollees with
               developmental (ICD-9 codes 299 through 299.8 and 317 through
               319.9) and organic diagnoses (ICD-9 codes 290 through 294.9 and
               310 through 310.9) including diagnostic work-ups and other
               medical care such as medication management services related to
               the developmental or organic disorder.

          c.   NON-COVERED SERVICES

               1)   Psychological evaluations and testing including
                    neuropsychological

                                  Page 26 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July I, 2001

                    evaluations and testing for adult Enrollees is not the
                    responsibility of the CONTRACTOR.

               2)   Habilitative and behavioral management services are not the
                    responsibility of the CONTRACTOR. If habilitative services
                    are required, the Enrollee should be referred to the
                    Division of Services for People with Disabilities (DSPD),
                    the school system, the Early Intervention Program, or
                    similar support program or agency. The Enrollee should also
                    be referred to DSPD for consideration of other benefits and
                    programs that may be available through DSPD. Habilitative
                    services are defined in Section 1915(c)(5)(a) of the Social
                    Security Act as "services designed to assist individuals in
                    acquiring, retaining and improving the self-help,
                    socialization and adaptive skills necessary to reside
                    successfully in home and community based settings."

          d.   RESPONSIBILITY OF THE PREPAID MENTAL HEALTH PLAN

               The Prepaid Mental Health Plan is responsible for needed mental
               health services to individuals with an organic and a psychiatric
               diagnosis or with a developmental and a psychiatric diagnosis.

     10.  OUT-OF-STATE ACCESSORY SERVICES

          When the CONTRACTOR arranges a Covered Service to be performed
          out-of-state, the CONTRACTOR is responsible for coverage of airfare,
          food and lodging for the Enrollee and one attendant during the stay at
          the out-of-state facility. Ground transportation costs only from the
          airport to the hotel or hospital and back to the airport, one time
          only are also the responsibility of the CONTRACTOR. The CONTRACTOR
          will follow, at a minimum, the DEPARTMENT's criteria for coverage of
          food, lodging, transportation, and airfare expenses.

     11.  NON-CONTRACTOR PRIOR AUTHORIZATIONS

          a.   PRIOR AUTHORIZATIONS - GENERAL

               The CONTRACTOR shall honor prior authorizations for organ
               transplantations and any other ongoing services initiated by the
               DEPARTMENT while the Enrollee was covered under Medicaid
               fee-for-service until the Enrollee is evaluated by the CONTRACTOR
               and a new plan of care is established.

          b.   WHEN THE CONTRACTOR HAS NOT AUTHORIZED THE SERVICE

               For services that require a prior authorization, the CONTRACTOR
               will pay the provider of the service at the Medicaid rate, if the
               following conditions are met:

                                  Page 27 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               1)   the servicing provider is not a participating provider under
                    contract with the CONTRACTOR; and

               2)   the DEPARTMENT issued a prior authorization for an Enrollee
                    to the servicing provider approving payment of the service;
                    and

               3)   the servicing provider has completed the CONTRACTOR's
                    hearing process without resolution of the claim, and has
                    requested a hearing with the State Formal Hearings Unit
                    requesting payment for the services rendered: and

               4)   in the hearing process it is determined that service
                    rendered was a Medically Necessary service covered under
                    this Contract, and that the CONTRACTOR will be responsible
                    for payment of the claim.

               The CONTRACTOR may elect to have payment of the servicing
               provider's claim made through the DEPARTMENT's MMIS system, with
               an equal reduction in the payments made to the CONTRACTOR

F.   CLARIFICATION OF PAYMENT RESPONSIBILITIES

     1.   COVERED SERVICES RECEIVED OUTSIDE CONTRACTOR's NETWORK BUT PAID BY
          CONTRACTOR

          The CONTRACTOR will not be required to pay for Covered Services,
          defined in Attachment C, which the Enrollee receives from sources
          outside The CONTRACTOR's network, not arranged for and not authorized
          by the CONTRACTOR except as follows:

          a.   Emergency Services;

          b.   Court ordered services that are Covered Services defined in
               Attachment C and which have been coordinated with the CONTRACTOR;
               or

          c.   Cases where the Enrollee demonstrates that such services are
               Medically Necessary Covered Services and were unavailable from
               the CONTRACTOR.

     2.   WHEN COVERED SERVICES ARE NOT THE CONTRACTOR's RESPONSIBILITY

          a.   The CONTRACTOR is not responsible for payment when family
               planning services are obtained by an Enrollee from sources other
               than the CONTRACTOR.

          b.   The CONTRACTOR will not be required to provide, arrange for, or
               pay for Covered Services to Enrollees whose illness or injury
               results directly from a catastrophic occurrence or disaster,
               including, but not limited to, earthquakes or

                                  Page 28 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               acts of war. The effective date of excluding such Covered
               Services will be the date specified by the Federal Government or
               the State of Utah that a Federal or State emergency exists or
               disaster has occurred.

     3.   THE DEPARTMENT'S RESPONSIBILITY

          Except as described in Attachment F (Rates and Rate-Related Terms) of
          this Contract, the DEPARTMENT will not be required to pay for any
          Covered Services under Attachment C which the Enrollee received from
          any sources outside the CONTRACTOR except for family planning
          services.

     4.   COVERED SERVICES PROVIDED BY THE DEPARTMENT OF HEALTH, DIVISION OF
          COMMUNITY AND FAMILY HEALTH SERVICES

          For Enrollees who qualify for special services offered by or through
          the Department of Health, Division of Community and Family Health
          Services (DCFHS), the CONTRACTOR agrees to reimburse DCFHS at the
          standard Medicaid rate in effect at the time of service for one
          outpatient team evaluation and one follow-up visit for each Enrollee
          upon each instance that the Enrollee both becomes Medicaid eligible
          and selects the CONTRACTOR as its provider. The CONTRACTOR agrees to
          waive any prior authorization requirement for one outpatient team
          evaluation and one follow-up visit. The services provided in the
          outpatient team evaluation and follow-up visit for which the
          CONTRACTOR will reimburse DCFHS are limited to the services that the
          CONTRACTOR is otherwise obligated to provide under this Contract.

          If the CONTRACTOR desires a more detailed agreement for additional
          services to be provided by or through DCFHS for children with special
          health care needs, the CONTRACTOR may subcontract with DCFHS. The
          CONTRACTOR agrees that the subcontract with DCFHS will acknowledge and
          address the specific needs of DCFHS as a government provider.

     5.   ENROLLEE TRANSITION BETWEEN MCOS, OR BETWEEN FEE-FOR-SERVICE AND
          CONTRACTOR

          a.   INPATIENT HOSPITAL

               When an Enrollee is in an inpatient hospital setting and selects
               another MCO or becomes fee-for-service anytime prior to discharge
               from the hospital, the CONTRACTOR is financially responsible for
               the entire hospital stay including all services related to the
               hospital stay, i.e. physician, etc. The MCO in which the
               individual is enrolled at the time of discharge from the hospital
               is financially responsible for services provided during the
               remainder of the month when the individual was discharged. If
               such individual is fee-for-service at the time of discharge from
               the hospital, the DEPARTMENT is financially responsible for the
               remainder of the month when the individual was discharged. If a
               Medicaid

                                  Page 29 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               eligible is in an inpatient hospital setting and selects the MCO
               anytime prior to discharge from the hospital, the DEPARTMENT is
               financially responsible for the entire hospital stay including
               all services related to the hospital stay, i.e. physician, etc.
               Enrollees who are in an inpatient hospital setting at the time
               the CONTRACTOR terminates this Contract and who have enrolled
               with another MCO are the responsibility of the receiving MCO
               beginning the day after the termination is effective.

          b.   HOME HEALTH SERVICES

               Medicaid clients who are under fee-for-service or are enrolled in
               an MCO other than this MCO and are receiving home health services
               from an agency not contracting with the CONTRACTOR will be
               transitioned to the CONTRACTOR's home health agency. The
               CONTRACTOR is responsible for payment, not to exceed Medicaid
               payment, for a period not to exceed seven calendar days, unless
               the CONTRACTOR and the home health agency agree to another time
               period in writing, after the CONTRACTOR notifies the non-
               participating home health agency of the change in status or the
               non-participating home health agency notifies the CONTRACTOR that
               services are being provided by its agency. The CONTRACTOR will
               assess the needs of the Enrollee at the time the CONTRACTOR
               provides the orientation to the Enrollee.

               The CONTRACTOR will include the Enrollee in developing the plan
               of care to be provided by the CONTRACTOR's home health agency
               before the transition is complete. The CONTRACTOR will address
               Enrollee's concerns regarding Covered Services provided by the
               CONTRACTOR's home health agency before the new plan of care is
               implemented.

          c.   MEDICAL EQUIPMENT

               When medical equipment is ordered for an Enrollee by the
               CONTRACTOR and the Enrollee enrolls in a different MCO before
               receiving the equipment, the CONTRACTOR is responsible for
               payment for such equipment. Medical equipment includes
               specialized wheelchairs or attachments, prosthesis, and other
               equipment designed or modified for an individual client. Any
               attachments to the equipment, replacements, or new equipment is
               the responsibility of the MCO in which the client is enrolled at
               the time such equipment is ordered.

     6.   SURVEYS

          All surveys required under this Contract will be funded by the
          CONTRACTOR unless funded by another source such as the Utah Department
          of Health, Office of Health Care Statistics. The surveys must be
          conducted by an independent vendor mutually agreed upon by the
          DEPARTMENT and CONTRACTOR. The DEPARTMENT or designee will analyze the
          results of the surveys. Before publishing articles, data, reports,
          etc.

                                  Page 30 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          related to surveys the DEPARTMENT will provide drafts of such material
          to the CONTRACTOR for review and feedback. The CONTRACTOR will not be
          responsible for the costs incurred for such publishing by the
          DEPARTMENT.

                      ARTICLE V - ENROLLEE RIGHTS/SERVICES

A.   MEMBER SERVICES FUNCTION

     The CONTRACTOR must operate a Member Services function during regular
     business hours. Ongoing training, as necessary, shall be provided by the
     CONTRACTOR to ensure that the Member Services staff is conversant in the
     CONTRACTOR's policies and procedures as they relate to Enrollees. At a
     minimum, Member Services staff must be responsible for the following:

     1.   Explaining the CONTRACTOR's rules for obtaining services;

     2.   Assisting Enrollees to select or change primary care providers;

     3.   Fielding and responding to Enrollee questions and complaints and
          grievances.

     The CONTRACTOR shall conduct ongoing assessment of its orientation staff to
     determine staff member's understanding of the MCO and its Medicaid managed
     care policies and provide training, as needed.

B.   ENROLLEE LIABILITY

     1.   The CONTRACTOR will not hold an Enrollee liable for the following:

          a.   The debts of the CONTRACTOR if it should become insolvent.

          b.   Payment for services provided by the CONTRACTOR if the CONTRACTOR
               has not received payment from the DEPARTMENT for the services, or
               if the provider, under contract with the CONTRACTOR, fails to
               receive payment from the CONTRACTOR.

          c.   The payments to providers that furnish Covered Services under a
               contract or other arrangement with the CONTRACTOR that are in
               excess of the amount that normally would be paid by the Enrollee
               if the service had been received directly from the CONTRACTOR.

C.   GENERAL INFORMATION TO BE PROVIDED TO ENROLLEES

     The CONTRACTOR will make the following information available to Enrollees
     and potential Enrollees on request:

     1.   The identity, locations, qualification, and availability of
          participating providers (at a

                                  Page 31 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          minimum, area of specialty, board certification, and any special areas
          of expertise must be available that would be helpful to individuals
          deciding whether to enroll with the CONTRACTOR);

     2.   The rights and responsibilities of Enrollees;

     3.   The procedures available to Enrollees and providers to challenge or
          appeal the failure of the CONTRACTOR to cover a services; and

     4.   All items and services that are available to Enrollees that are
          covered either directly or through a method of referral or prior
          authorization.

D.   ACCESS

     1.   IN GENERAL

          The CONTRACTOR shall provide the DEPARTMENT and the Department of
          Health and Human Services, Centers for Medicare and Medicaid, adequate
          assurances that the CONTRACTOR, with respect to a service area, has
          the capacity to serve the expected enrollment in such service area,
          including assurances that the CONTRACTOR offers an appropriate range
          of services and access to preventive and primary care services for the
          population expected to enroll in such service area, and maintains a
          sufficient number, mix and geographic distribution of providers of
          services.

          The CONTRACTOR will provide services which are accessible to Enrollees
          and appropriate in terms of timeliness, amount, duration, and scope.

     2.   SPECIFIC PROVISIONS

          a.   ELIMINATION OF ACCESS PROBLEMS CAUSED BY GEOGRAPHIC, CULTURAL AND
               LANGUAGE BARRIERS AND PHYSICAL DISABILITIES

               The CONTRACTOR will minimize, with a goal to eliminate,
               Enrollee's access problems due to geographic, cultural and
               language barriers, and physical disabilities. The CONTRACTOR will
               provide assistance to Enrollees who have communication
               impediments or impairments to facilitate proper diagnosis and
               treatment. The CONTRACTOR must guarantee equal access to services
               and benefits for all Enrollees by making available interpreters,
               Telecommunication Devices for the Deaf (TDD), and other auxiliary
               aids to all Enrollees as needed. The CONTRACTOR will accommodate
               Enrollees with physical and other disabilities in accordance with
               the American Disabilities Act of 1990 (ADA), as amended. If the
               CONTRACTOR's facilities are not accessible to Enrollees with
               physical disabilities, the CONTRACTOR will provide services in
               other accessible locations.

                                  Page 32 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          b.   INTERPRETIVE SERVICES

               The CONTRACTOR will provide interpretive services for languages
               on an as needed basis. These requirements will extend to both
               in-person and telephone communications to ensure that Enrollees
               are able to communicate with the CONTRACTOR and CONTRACTOR's
               providers and receive Covered Services. Professional interpreters
               will be used when needed where technical, medical, or treatment
               information is to be discussed, or where use of a Family Member
               or friend as interpreter is inappropriate. A family member or
               friend may be used as an interpreter if this method is requested
               by the patient, and the use of such a person would not compromise
               the effectiveness of services or violate the patient's
               confidentiality, and the patient is advised that a free
               interpreter is available.

          c.   CULTURAL COMPETENCE REQUIREMENTS

               The CONTRACTOR shall incorporate in its policies, administration,
               and delivery of services the values of honoring Enrollee's
               beliefs; being sensitive to cultural diversity; and promoting
               attitudes and interpersonal communication styles with staff and
               providers which respect Enrollees' cultural backgrounds. The
               CONTRACTOR must foster cultural competency among its providers.
               Culturally competent care is care given by a provider who can
               communicate with the Enrollee and provide care with sensitivity,
               understanding, and respect for the Enrollee's culture, background
               and beliefs. The CONTRACTOR shall strive to ensure its providers
               provide culturally sensitive services to Enrollees. These
               services shall include but are not limited to providing training
               to providers regarding how to promote the benefits of health care
               services as well as training about health care attitudes,
               beliefs, and practices that affect access to health care
               services.

          d.   NO RESTRICTIONS OF PROVIDER's ABILITY TO ADVISE AND COUNSEL

               The CONTRACTOR may not restrict a health care provider's ability
               to advise and counsel Enrollees about Medically Necessary
               treatment options. All contracting providers acting within his or
               her scope of practice, must be permitted to freely advise an
               Enrollee about his or her health status and discuss appropriate
               medical care or treatment for that condition or disease
               regardless of whether the care or treatment is a Covered Service.

          e.   WAITING TIME BENCHMARKS

               The CONTRACTOR will adopt benchmarks for waiting times for
               physician appointments as follows:

               Waiting Time for Appointments

                                  Page 33 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               1)   Primary Care Providers:
                    .    within 30 days for routine, non-urgent appointments
                    .    within 60 days for school physicals
                    .    within 2 days for urgent, symptomatic, but not
                         life-threatening care (care that can be treated in the
                         doctor's office)

               2)   Specialists:
                    .    within 30 days for non-urgent
                    .    within 2 days for urgent, symptomatic, but not
                         life-threatening care (care that can be treated in a
                         doctor's office)

               These benchmarks do not apply to appointments for regularly
               scheduled visits to monitor a chronic medical condition if the
               schedule calls for visits less frequently than once every month.

          f.   NO DELAY WHILE COORDINATING COVERAGE WITH A PREPAID MENTAL HEALTH
               PLAN

               When an Enrollee is also enrolled in a Prepaid Mental Health
               Plan, the CONTRACTOR will not delay an Enrollee's access to
               needed services in disputes regarding responsibility for payment.
               Payment issues should be addressed only after needed services are
               rendered. As described in Attachment B, IV (Benefits), Section E
               (Clarification of Covered Services), Subsection 8 of this
               Contract, the independent panel established by the DEPARTMENT
               will assist in adjudicating such disputes when requested to do so
               by either party.

E.   CHOICE

     The CONTRACTOR must allow Enrollees the opportunity to select a
     participating Primary Care Provider. This excludes clients who are under
     the Restriction Program. If an Enrollee's Primary Care Provider ceases to
     participate in the CONTRACTOR's network, the CONTRACTOR must offer the
     Enrollee the opportunity to select a new Primary Care Provider.

F.   COORDINATION

     1.   IN GENERAL

          The CONTRACTOR will ensure access to a coordinated, comprehensive and
          continuous array of needed services through coordination with other
          appropriate entities. The CONTRACTOR's providers are not responsible
          for rendering waiver services.

     2.   PREPAID MENTAL HEALTH PLAN

          a.   When an Enrollee is also enrolled in a Prepaid Mental Health
               Plan, the CONTRACTOR and Prepaid Mental Health Plan will share
               appropriate information regarding the Enrollee's health care to
               ensure coordination of physical and mental health care services.

                                  Page 34 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                           Effective July 1,2001

          b.   Clients enrolled in the MCO and a Prepaid Mental Health Plan who
               due to a psychiatric condition require lab, radiology and similar
               outpatient services covered under this Contract, but prescribed
               by the Prepaid Mental Health Plan physician, will have access to
               such services in a timely fashion. The CONTRACTOR and Prepaid
               Mental Health Plan will reduce or eliminate unnecessary barriers
               that may delay the Enrollee's access to these critical services.

     3.   DOMESTIC VIOLENCE

          The CONTRACTOR will ensure that providers are knowledgeable about
          methods to detect domestic violence and about resources in the
          community to which they can refer patients.

     4.   RESTRICTION PCP

          The CONTRACTOR will ensure that Enrollees who are on the Restriction
          Program are linked to a primary care physician (PCP). If the
          restricted Enrollee's PCP chooses to no longer serve as the Enrollee's
          PCP or the provider ceases participation with the CONTRACTOR, the
          CONTRACTOR must assist the Enrollee in finding a new PCP.

G.   BILLING ENROLLEES

     1.   IN GENERAL

          Except as provided herein Attachment B, Article V (Enrollee
          Rights/Services), Section G (Billing Enrollees), subsection 2, no
          claim for payment will be made at any time by the CONTRACTOR or its
          providers to an Enrollee accepted by that provider as an Enrollee for
          any Covered Service. When a provider accepts an Enrollee as a patient
          he or she will look solely to the CONTRACTOR and any third party
          coverage for reimbursement. If the provider fails to receive payment
          from the CONTRACTOR, the Enrollee cannot be held responsible for these
          payments.

     2.   CIRCUMSTANCES WHEN AN ENROLLEE MAY BE BILLED

          An Enrollee may in certain circumstances be billed by the provider for
          non-Covered Services. A non-Covered Service is one that is not covered
          under this Contract, or includes special features or characteristics
          that are desired by the Enrollee, such as more expensive eyeglass
          frames, hearing aids, custom wheelchairs, etc., but do not meet the
          Medical Necessity criteria for amount, duration, and scope as set
          forth in the Utah State Plan. The DEPARTMENT will specify to the
          CONTRACTOR the extent of Covered Services and items under the
          Contract, as well as services not covered under the Contract but
          provided by Medicaid on a fee-for-service basis that would effect the
          CONTRACTOR's Covered Services. An Enrollee may be billed for a service
          not covered under this Contract only when all of the following
          conditions are met:

                                  Page 35 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          a.   the provider has an established policy for billing all patients
               for services not covered by a third party (non-Covered Services
               cannot be billed only to Enrollees.);

          b.   the provider has informed the Enrollee of its policy and the
               services and items that are not covered under this Contract and
               included this information in the Enrollee's member handbook;

          c.   the provider has advised the Enrollee prior to rendering the
               service that the service is not covered under this Contract and
               that the Enrollee will be personally responsible for making
               payment; and

          d.   the Enrollee agrees to be personally responsible for the payment
               and an agreement is made in writing between the provider and the
               Enrollee which details the service and the amount to be paid by
               the Enrollee.

     3.   CONTRACTOR MAY NOT HOLD ENROLLEE'S MEDICAID CARD

          The CONTRACTOR or its providers will not hold the Enrollee's Medicaid
          card as guarantee of payment by the Enrollee, nor may any other
          restrictions be placed upon the Enrollee.

     4.   CRIMINAL PENALTIES

          Criminal penalties shall be imposed on MCO providers as authorized
          under section 1128B(d)(1)of the Social Security Act if the provider
          knowingly and willfully charges an Enrollee at a rate other than those
          allowed under this Contract.

H.   SURVEY REQUIREMENTS

     Surveys will be conducted of the CONTRACTOR's Enrollees that will include
     questions about Enrollees' perceptions of access to and the quality of care
     received through the CONTRACTOR. The survey process, including the survey
     instrument, will be standardized and developed collaboratively among the
     DEPARTMENT and all contracting MCOs. The DEPARTMENT will analyze the
     results of the surveys. The CONTRACTOR's quality assurance committee will
     review the results of the surveys, identify areas needing improvement,
     outline action steps to follow up on findings, and inform (at a minimum),
     subcontractors, and member and provider services staff, when applicable.

     1.   GENERAL POPULATION SURVEY

          At least every two years, the CONTRACTOR in conjunction with the
          DEPARTMENT will survey a sample of its general population Enrollees;
          i.e.,

                                  Page 36 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          Enrollees who do not meet the definition of those with special health
          care needs.

     2.   SPECIAL NEEDS SURVEY

          At least every two years, the CONTRACTOR in conjunction with the
          DEPARTMENT will survey a sample of Enrollees with special health care
          needs.

                        ARTICLE VI - GRIEVANCE PROCEDURES

A.   IN GENERAL

     The CONTRACTOR will maintain a system for reviewing and adjudicating
     complaints and grievances by Enrollees and providers. The CONTRACTOR's
     complaint and grievance procedures must permit an Enrollee, or provider on
     behalf of an Enrollee, to challenge the denials of coverage of medical
     assistance or denials of payment for Covered Services. The CONTRACTOR will
     submit such grievance plans and procedures to the DEPARTMENT for approval
     prior to instituting or changing such procedures. Such procedures will
     provide for expeditious resolution of complaints and grievances by the
     CONTRACTOR's personnel who have authority to correct problems. The
     CONTRACTOR shall ensure that each Enrollee with limited English proficiency
     shall have the right to receive oral interpreter services without charge to
     the Enrollee at each stage of the CONTRACTOR's complaint and grievance
     process, including final determination.

B.   NONDISCRIMINATION

     The CONTRACTOR shall designate a nondiscrimination coordinator who will 1)
     ensure the CONTRACTOR complies with Federal Laws and Regulations regarding
     nondiscrimination, and 2) take complaints and grievances from Enrollees
     alleging nondiscrimination violations based on race, color, national
     origin, disability, or age. The nondiscrimination coordinator may also
     handle complaints regarding the violation of other civil rights (sex and
     religion) as other Federal laws and Regulations protect against these forms
     of discrimination. The CONTRACTOR, will develop and implement a written
     method of administration to assure that the CONTRACTOR's programs,
     activities, services, and benefits are equally available to all persons
     without regard to race, color, national origin, disability, or age.

C.   MINIMUM REQUIREMENTS OF GRIEVANCE PROCEDURES

     At a minimum, the CONTRACTOR's complaint and grievance procedures must
     include

     1.   definitions of complaints and grievance;

     2.   details of how, when, where and with whom an Enrollee or provider may
          file a

                                  Page 37 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          grievance;

     3.   assurances of the participation of individuals with authority to take
          corrective action;

     4.   responsibilities of the various components and staff of the
          organization;

     5.   a description of the process for timely review, prompt (45 days)
          resolution of complaints and grievances;

     6.   details of an appeal process; and

     7.   a provision stating that during the pendency of any grievance
          procedure or an appeal of such grievances, the Enrollee will remain
          enrolled except as otherwise stated in this Contract.

D.   FINAL REVIEW BY DEPARTMENT

     When an Enrollee or provider has exhausted the CONTRACTOR's grievance
     process and a final decision has been made, the CONTRACTOR must provide
     written notification to the party who initiated the grievance of the
     grievance's outcome and explain in clear terms a detailed reason for the
     denial.

     The CONTRACTOR must provide notification to Enrollees and providers that
     the final decision of the CONTRACTOR may be appealed to the DEPARTMENT and
     will give to the Enrollee or provider the DEPARTMENT's form to request a
     formal hearing with the DEPARTMENT. The MCO must inform the Enrollee or
     provider the time frame for filing an appeal with the DEPARTMENT. The
     formal hearing with the DEPARTMENT is a de novo hearing. If the Enrollee or
     provider request a formal hearing with the DEPARTMENT, all parties to the
     formal hearing agree to be bound by the DEPARTMENT's decision until any
     judicial reviews are completed and are in the Enrollee's or provider's
     favor. Any decision made by the DEPARTMENT pursuant to the hearing shall be
     subject to appeal rights as provided by State and Federal laws and rules.

                        ARTICLE VII - OTHER REQUIREMENTS

A.   COMPLIANCE WITH PUBLIC HEALTH SERVICE ACT

     The CONTRACTOR will comply with all requirements of Section 1301 to and
     including 1318 of the Public Health Service Act. The CONTRACTOR will
     provide verification of such compliance to the DEPARTMENT upon the
     DEPARTMENT's request. This Contract is a "prospective risk" contract which
     means that payment is made by means of a capitation rate offered each month
     as reimbursement in advance for services incurred that month regardless of
     the level of utilization

                                  Page 38 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     actually experienced. Nothing herein will be construed or interpreted to
     mean that this is a cost reimbursement contract. Cost reimbursement means
     payment is made by means of a settlement based on cost incurred over a
     given period.

B.   COMPLIANCE WITH OBRA'90 PROVISION AND 42 CFR 434.28

     The CONTRACTOR will comply with the OBRA '90 provision which requires an
     MCO provide patients with information regarding their rights under State
     law to make decisions about their health care including the right to
     execute a living will or to grant power of attorney to another individual.

     The CONTRACTOR will comply with the requirements of 42 CFR 434.28 relating
     to maintaining written Advance Directives as outlined under Subpart I of
     489.100 through 489.102.

C.   FRAUD AND ABUSE REQUIREMENTS

     The CONTRACTOR must have a compliance program to identify and refer
     suspected fraud and abuse activities. The compliance program must outline
     the CONTRACTOR's internal processes for identifying fraud and abuse. The
     CONTRACTOR agrees to abide by Federal and/or State fraud and abuse
     requirements including, but not limited to, the following:

     1.   Refer in writing to the DEPARTMENT all detected incidents of potential
          fraud or abuse on the part of providers of services to Enrollees or to
          other patients.

     2.   Refer in writing to the DEPARTMENT all detected incidents of patient
          fraud or abuse involving Covered Services provided which are paid for
          in whole, or in part, by the DEPARTMENT.

     3.   Refer in writing to the DEPARTMENT the names and Medicaid ID numbers
          of those Enrollees that the CONTRACTOR suspects of inappropriate
          utilization of services, and the nature of the suspected inappropriate
          utilization.

     4.   Inform the DEPARTMENT in writing when a provider is removed from the
          CONTRACTOR's panel for reasons relating to suspected fraud, abuse or
          quality of care concerns.

     5.   The CONTRACTOR may not employ or subcontract with any sanctioned
          provider. The DEPARTMENT shall notify the CONTRACTOR how to access
          information on providers sanctioned by Medicaid or Medicare. It is the
          responsibility of the CONTRACTOR to keep apprized of sanctioned
          providers.

          The CONTRACTOR may not employ or subcontract with any provider who is
          an ineligible entity as defined under the State Medicaid Manual
          Section 2086.16. This

                                  Page 39 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          section is available upon request. The CONTRACTOR will attest that the
          entities listed below are not involved with the CONTRACTOR. Entities
          that must be excluded -

          a.   Entities that could be excluded under section 1128(b)(8) of the
               Social Security Act (the Act)--these are entities in which a
               person who is an officer, director, agent, or managing employee
               of the entity, or a person who has a direct or indirect ownership
               or control interest of 5% or more in the entity and has been
               convicted of the following crimes:

               1)   any criminal offense related to the delivery of a Medicare
                    or Medicaid item or service (see section 1128(a)(1) of the
                    Act);

               2)   patient abuse (section 1128(a)(2));

               3)   fraud (1128(b)(1));

               4)   obstruction of an investigation (1128(b)(2)); or

               5)   offenses related to controlled substances (1128(b)(3)).

          b.   Entities that have a direct or indirect substantial contractual
               relationship with an individual or entity listed in subsection
               "a" above--a substantial contractual relationship is defined as
               any contractual relationship which provides for one or more of
               the following:

               1)   the administration, management, or provision of medical
                    services;

               2)   the establishment of policies pertaining to the
                    administration, management or provision of medical
                    services; or

               3)   the provision of operational support for the
                    administration, management, or provision of medical
                    services.

          c.   Entities which employ, contract with, or contract through any
               individual or entity that is excluded from Medicaid participation
               under Section 1128 or Section 1128A of the Act, for the provision
               of health care, utilization review, medical social work or
               administration services.

D.   DISCLOSURE OF OWNERSHIP AND CONTROL INFORMATION

     The CONTRACTOR agrees to meet the requirements of 42 CFR 455, Subpart B
     related to disclosure by the CONTRACTOR of ownership and control
     information.

                                  Page 40 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

E.   SAFEGUARDING CONFIDENTIAL INFORMATION ON ENROLLEES

     The CONTRACTOR agrees that information about Enrollees is confidential
     information and agrees to safeguard all confidential information and
     conform to the requirements set forth in 42CFR, Part 431, Subpart F as well
     as all other applicable Federal and State confidentiality requirements.

F.   DISCLOSURE OF PROVIDER INCENTIVE PLANS

     The CONTRACTOR must submit to the DEPARTMENT information on its physician
     incentive plans as listed in 42 CFR 417.479(h)(1) and summarized in this
     Article VII, Section F, Subsections 1 through 5, by May 1 of each year. The
     CONTRACTOR must provide to the DEPARTMENT the enrollee/disenrollee survey
     results when beneficiary surveys are required as specified in 42 CFR
     417.479(g) and summarized in this Article VII, Section F, Subsection 7, by
     October 1 or three months after the end of the Contract year. The
     CONTRACTOR must submit to the DEPARTMENT information on capitation payments
     paid to primary care physicians as specified in 42 CFR 417.479(h)(1)(vi).

     Per 42 CFR 417.479(a), no specific payment may be made directly or
     indirectly under a physician incentive plan to a physician or physician
     group as an inducement to reduce or limit Medically Necessary services
     furnished to an Enrollee.

     The CONTRACTOR may operate a physician incentive plan only if the stop-loss
     protection, Enrollee survey, and disclosure requirements are met. The
     CONTRACTOR must disclose to the DEPARTMENT the following information on
     provider incentive plans in sufficient detail to determine whether the
     incentive plan complies with the regulatory requirements. The disclosure
     must contain:

     1.   Whether services not furnished by the physician or physician group are
          covered by the incentive plan. If only the services furnished by the
          physician or physician group are covered by the incentive plan,
          disclosure of other aspects of the plan need not be made.

     2.   The type of incentive arrangement (i.e., withhold, bonus, capitation).

     3.   If the incentive plan involves a withhold or bonus, the percent of the
          withhold or bonus.

     4.   Proof that the physician or physician group has adequate stop-loss
          protection, including the amount and type of stop-loss protection.

     5.   The panel size and, if patients are pooled; the method used.

     6.   To the extent provided for in the Department of Health and Human
          Services, Centers for Medicare and Medicaid Services' (CMS)
          implementation guidelines, capitation payments paid to primary care
          physicians for the most recent year broken down by percent for primary
          care services, referral services to specialists, and hospital and
          other types of

                                  Page 41 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          provider services (i.e., nursing home and home health agency) for
          capitated physicians or physician groups.

     7.   In the case of those prepaid plans that are required to conduct
          beneficiary surveys, the survey results. (The CONTRACTOR must conduct
          a customer satisfaction of both Enrollees and disenrollees if any
          physicians or physicians groups contracting with the CONTRACTOR are
          placed at substantial financial risk for referral services. The survey
          must include either all current Enrollees and those who have
          disenrolled in the past twelve months, or a sample of these same
          Enrollees and disenrollees. Recognizing that different questions are
          asked of the disenrollees than those asked of Enrollees, the same
          survey cannot be used for both populations.)

     The CONTRACTOR must disclose this information to the DEPARTMENT (1) prior
     to approval of its Contract or agreement and (2) upon the Contract or
     agreements anniversary or renewal effective date. The CONTRACTOR must
     provide the capitation data required (see 6 above) for the previous
     Contract year to the DEPARTMENT three months after the end of the Contract
     year. The CONTRACTOR will provide to the Enrollee upon request whether the
     CONTRACTOR uses a physician incentive plan that affects the use of referral
     services, the type of incentive arrangement, whether stop-loss protection
     is provided, and the survey results of any enrollee/disenrollee surveys
     conducted.

G.   DEBARRED OR SUSPENDED INDIVIDUALS

     Under Section 1921(d)(1) of the Social Security Act, the CONTRACTOR may
     not knowingly have a director, officer, partner, or person with beneficial
     ownership of more than 5% of the CONTRACTOR's equity who has been debarred
     or suspended by any federal agency. The CONTRACTOR may not have an
     employment, consulting, or any other agreement with a debarred or suspended
     person for the provision of items or services that are significant and
     material to meeting the provisions under this Contract.

     The CONTRACTOR must certify to the DEPARTMENT that the requirements under
     Section 1921(d)(1) of the Social Security Act are met prior to the
     effective date of this Contract and at any time there is a change from the
     last such certification.

H.   CMS CONSENT REQUIRED

     If the Department of Health and Human Services, Centers for Medicare and
     Medicaid (CMS) directs the DEPARTMENT to terminate this Contract, the
     DEPARTMENT will not be permitted to renew this Contract without CMS
     consent.

                             ARTICLE VIII - PAYMENTS

A.   RISK CONTRACT

                                  Page 42 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     This Contract is a risk contract as described in 42 CFR 447.361. Payments
     made to the CONTRACTOR may not exceed the cost to the DEPARTMENT of
     providing these same Covered Services on a fee-for-service basis, to an
     actuarially equivalent non-enrolled population.

B.   PAYMENT AMOUNTS

     1.   PAYMENT SCHEDULE

          On or before the 10th day of each month, the DEPARTMENT will pay to
          the CONTRACTOR the premiums due for each category shown for Enrollees
          for that month as determined by the DEPARTMENT from the Eligibility
          Transmission. Premiums shown in Attachment F-3 are based on rate
          negotiations between the CONTRACTOR and the DEPARTMENT.

     2.   CALCULATION OF PREMIUMS

          The premiums do not include payment for recoupment of any previous
          losses incurred by the CONTRACTOR. The premiums established in this
          Contract will be prospectively set so as not to exceed the cost of
          providing the same Covered Services to an actuarially equivalent
          non-enrolled Medicaid population. The actuarially set fee-for-service
          equivalents developed by the DEPARTMENT are prospectively determined
          and conform with Federal guidelines as defined in CFR 447.361.

     3.   FEDERALLY QUALIFIED HEALTH CENTERS (FQHCs)

          If the CONTRACTOR enters into a subcontract with a Federally Qualified
          Health Center (FQHC), the CONTRACTOR will reimburse the FQHC an amount
          not less than what the CONTRACTOR pays comparable providers that are
          not FQHCs.

     4.   TIME FRAME FOR REQUEST OF DELIVERY PAYMENT

          The CONTRACTOR will submit a request for payment of the lump sum
          delivery amount within six months of the delivery date.

     5.   CONTRACT MAXIMUM

          In no event will the aggregate amount of payments to the CONTRACTOR
          exceed the Contract maximum amount. If payments to the CONTRACTOR
          approach or exceed the Contract amount before the renewal date of the
          Contract, the DEPARTMENT shall execute a Contract amendment to
          increase the Contract amount within 30 calendar days of the date the
          Contract amount is exceeded.

C.   MEDICARE

     1.   PAYMENT OF MEDICARE PART B PREMIUMS

                                  Page 43 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          The DEPARTMENT's will pay the Medicare Part B premium for each
          Enrollee who is on Medicare. The Enrollee will assign to the
          CONTRACTOR his or her Medicare reimbursement for benefits received
          under Medicare. The Eligibility Transmission includes and identifies
          those Enrollees who are covered under Medicare.

     2.   PAYMENT OF MEDICARE DEDUCTIBLE AND COINSURANCE

          The DEPARTMENTs financial obligation under this Contract for Enrollees
          who are covered by both Medicare and the MCO is limited to the
          Medicare Part B premium and the CONTRACTOR premium. The CONTRACTOR is
          responsible for payment of the Medicare deductible and coinsurance for
          Enrollees when a service is paid for by Medicare whether or not the
          service is covered under this Contract. The CONTRACTOR is responsible
          for payment whether or not the Medicare covered service is rendered by
          a network provider or has been authorized by the CONTRACTOR. If a
          Medicare covered service is rendered by an out-of-network Medicare
          provider or a non-Medicare participating provider, the CONTRACTOR is
          responsible to pay for no more than the Medicare authorized amount.
          Attachment E, Table 2, will be used to identify the total cost to the
          CONTRACTOR of providing care for Enrollees who are also covered by
          Medicare.

     3.   MUST NOT BALANCE BILL ENROLLEES

          The CONTRACTOR or its providers will not Balance Bill the Enrollee and
          will consider reimbursement from Medicare and from the CONTRACTOR as
          payment in full.

D.   THIRD PARTY LIABILITY (COORDINATION OF BENEFITS)

     The DEPARTMENT will provide the CONTRACTOR a monthly listing of Enrollees
     covered under the Buy-out Program, including the premium amount paid by the
     DEPARTMENT.

     1.   TPL COLLECTIONS

          The CONTRACTOR will be responsible to coordinate benefits and collect
          third party liability (TPL). The CONTRACTOR will keep TPL collections.
          The DEPARTMENT will set rates net of expected TPL collections
          excluding the lump sum rate set for deliveries. The rate set for
          deliveries is the maximum amount the DEPARTMENT will pay the
          CONTRACTOR for each delivery. The CONTRACTOR must attempt to collect
          TPL before the DEPARTMENT will finalize payment for the lump sum
          delivery. The DHCF audit staff will monitor collections to ensure the
          CONTRACTOR is making a good faith effort to pursue TPL. The DEPARTMENT
          will properly account for TPL in its rate structure.

                                  Page 44 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

2.   DUPLICATION OF BENEFITS

     This provision applies when, under another health insurance plan such as a
     prepaid plan, insurance contract, mutual benefit association or employer's
     self-funded group health and welfare program, etc., an Enrollee is entitled
     to any benefits that would totally or partially duplicate the benefits that
     the CONTRACTOR is obligated to provide under this Contract. Duplication
     exists when (1) the CONTRACTOR has a duty to provide, arrange for or pay
     for the cost of Covered Services, and (2) another health insurance plan,
     pursuant to its own terms, has a duty to provide, arrange for or pay for
     the same type of Covered Services regardless of whether the duty of the
     CONTRACTOR is to provide the Covered Services and the duty of the other
     health insurance plan is only to pay for the Covered Services. Under State
     and Federal laws and regulations, Medicaid funds are the last dollar source
     and all other health insurance plans as referred to above are primarily
     responsible for the costs of providing Covered Services.

3.   RECONCILIATION OF OTHER TPL

     In order to assist the CONTRACTOR in billing and collecting from other
     health insurance plans the DEPARTMENT will include on the Eligibility
     Transmission other health insurance plans of each Enrollee when it is
     known. The CONTRACTOR will review the Eligibility Transmission and will
     report to the Office of Recovery Services or the DEPARTMENT any TPL
     discrepancies identified within 30 working days of receipt of the
     Eligibility Transmission. The CONTRACTOR's report will include a listing of
     Enrollees that the CONTRACTOR has independently identified as being covered
     by another health insurance plan.

4.   WHEN TPL IS DENIED

     On a monthly basis, the CONTRACTOR will report to the Office of Recovery
     Services (ORS) claims that have been billed to other health care plans but
     have been denied which will include the following information:

     a.   patient name and Medicaid identification number

     b.   ICD-9-CM code;

     c.   procedure codes; and

     d.   insurance company.

5.   NOTIFICATION OF PERSONAL INJURY CASES

     The CONTRACTOR will be responsible to notify ORS of all personal injury
     cases, as defined by ORS and agreed to by the CONTRACTOR, no later than 30
     days after the

                                  Page 45 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     CONTRACTOR has received a "clean" claim. A clean claim is a claim that is
     ready to adjudicate. The following data elements will be provided by the
     CONTRACTOR to ORS:

     a.   patient name and Medicaid identification number

     b.   date of accident;

     c.   specific type of injury by ICD-9-CM code;

     d.   procedure codes; and

     e.   insurance company, if known.

6.   ORS TO PURSUE COLLECTIONS

     ORS will pursue collection on all claims described in Attachment B, Article
     VIII (Payments), Section D, Subsections 4 and 5 of this Contract. The
     DEPARTMENT will retain, for administrative costs, one third of the
     collections received for the period during which medical services were
     provided by the CONTRACTOR, and remit the balance to the CONTRACTOR.

7.   INSURANCE BUY-OUT PROGRAM

     The Insurance Buy-out Program is an optional program in which the
     DEPARTMENT purchases group health insurance for a recipient who is eligible
     for Medicaid when it is determined cost-effective for the Medicaid program
     to do so. The insurance buy-out process will be coordinated by the
     DEPARTMENT in cooperation with the Office of Recovery Services, and
     Medicaid eligibility workers. The following procedures regarding the
     buy-out program are:

     a.   the CONTRACTOR will file claims against group MCOs first before
          claiming services against the CONTRACTOR or other MCOs.

     b.   The DEPARTMENT will pay the CONTRACTOR a Medicaid premium for every
          buy-out Enrollee.

     c.   The DEPARTMENT will provide the CONTRACTOR a monthly listing of
          Enrollees covered under the Buy-out Program for the upcoming month.

     d.   On a quarterly basis, the Buy-out Program will bill the CONTRACTOR the
          lower of the Buy-out premium or the premium paid under this Contract
          when the Buy-out premium was paid to an entity other than the
          CONTRACTOR, i.e., the Buy-out premium is not a duplicate premium as
          defined in this Article VIII,

                                  Page 46 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               Section D, Item 7. The CONTRACTOR will remit to the Buy-out
               Program the amount billed within 60 days of receipt of the
               Buy-out bill.

     8.   CONTRACTOR MUST PAY PROVIDER ADMINISTRATIVE FEE FOR IMMUNIZATIONS

          When an Enrollee has third party coverage for immunizations, the
          CONTRACTOR will pay the provider the administrative fee for providing
          the immunization and not require the provider to bill the third party
          as a cost avoidance method. The CONTRACTOR may choose to pursue the
          third party amount for the administrative fee after payment has been
          made to the provider.

E.   THIRD PARTY RESPONSIBILITY (INCLUDING WORKER'S COMPENSATION)

     1.   CONTRACTOR TO BILL USUAL AND CUSTOMARY CHARGES

          When a third party has an obligation to pay for Covered Services
          provided by the CONTRACTOR to an Enrollee pursuant to this Contract,
          the CONTRACTOR will bill the third party for the usual and customary
          charges for Covered Services provided and costs incurred. Should any
          sum be recovered by the Enrollee or otherwise, from or on behalf of
          the person responsible for payment for the service, the CONTRACTOR
          will be paid out of such recovery for the charges for service provided
          and costs incurred by the CONTRACTOR.

     2.   THIRD PARTY'S OBLIGATION TO PAY FOR COVERED SERVICES

          Examples of situations where a third party has an obligation to pay
          for Covered Services provided by the CONTRACTOR are when (a) the
          Enrollee is injured by a person due to the negligent or intentional
          acts (or omissions) of the person; or (b) the Enrollee is eligible to
          receive payment through Worker's Compensation Insurance. If the
          Enrollee does not diligently seek such recovery, the CONTRACTOR may
          institute such rights that it may have.

     3.   FIRST DOLLAR COVERAGE FOR ACCIDENTS

          In addition, both parties agree that the following will apply
          regarding first dollar coverage for accidents: if the injured party
          has additional insurance, primary coverage may be given to the motor
          insurance effective at the time of the accident. Once the motor
          vehicle policy is exhausted, the CONTRACTOR will be the secondary
          payer and pay for all of the Enrollee's Covered Services. If medical
          insurance does not exist, the CONTRACTOR will be the primary payer for
          all Covered Services.

                                  Page 47 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     4.   NOTIFICATION OF STOP-LOSS

          The CONTRACTOR will provide ORS with quarterly updates of costs
          incurred by the CONTRACTOR when such costs exceed Stop Loss
          (reinsurance) provisions as defined in the Contract between the
          reinsurer and the CONTRACTOR.

F.   CHANGES IN COVERED SERVICES

     If Covered Services are amended under the provisions of Attachment B,
     Article IV (Benefits), Section C, Subsection 3 of this Contract, rates may
     be renegotiated.

                    ARTICLE IX - RECORDS, REPORTS AND AUDITS

A.   FEDERALLY REQUIRED REPORTS

     1.   CHEC/EPSDT REPORTS

          The CONTRACTOR agrees to act as a continuing care provider for the
          CHEC/EPSDT program in compliance with OBRA '89 and Social Security Act
          Sections 1902(a)(43), 1905(a)(4)(B)and l905(r).

          a.   CHEC/EPSDT SCREENINGS

               Annually, the CONTRACTOR will submit to the DEPARTMENT
               information on CHEC/EPSDT screenings to meet the Federal EPSDT
               reporting requirements (Form HCFA-416). The data will be in a
               mutually agreed upon format. The CHEC/EPSDT information is due
               December 31 for the prior federal fiscal year's data (October 1
               through September 30).

          b.   IMMUNIZATION DATA

               The CONTRACTOR will submit immunization data as part of the
               CHEC/EPSDT reporting. Enrollee name, Medicaid ID, type of
               immunization identified by procedure code, and date of
               immunization will be reported in the same format as the
               CHEC/EPSDT data.

     2.   DISCLOSURE OF PHYSICIAN INCENTIVE PLANS

          The CONTRACTOR must submit to the DEPARTMENT information on its
          physician incentive plans as listed in 42 CFR 417.479(h)(1) [or
          Article VII - Other Requirements, F - Disclosure of Provider Incentive
          Plans, 1 through 5] by May 1 of each year. The CONTRACTOR must provide
          to the DEPARTMENT the enrollee/disenrollee survey

                                  Page 48 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          results when beneficiary surveys are required as specified in 42 CFR
          417.479(g) [or #7 under Article VII.F.] by October 1 or three months
          after the end of the Contract year. The CONTRACTOR must submit to the
          DEPARTMENT information on capitation payments paid to primary care
          physicians as specified in 42 CFR 417.479(h)(1)(vi).

B.   PERIODIC REPORTS

     1.   ENROLLMENT, COST AND UTILIZATION REPORTS (ATTACHMENT E)

          Enrollment, cost and utilization reports will be submitted on
          diskettes in Excel or Lotus and in the format specified in Attachment
          E. A hard copy of the report must be submitted as well. The DEPARTMENT
          will send to the CONTRACTOR a template of the Attachment E format on a
          diskette. The CONTRACTOR may not customize or change the report
          format. The financial information for these reports will be reported
          as defined in HCFA Publication 75, and if applicable, HCFA 15-1. The
          CONTRACTOR will certify in writing the accuracy and completeness, to
          the best of its knowledge, of all costs and utilization data provided
          to the DEPARTMENT on Attachment E.

          Two Attachment E reports will be submitted covering dates of service
          for each Contract year.

          a.   Attachment E is due May 1 for the preceding six-month reporting
               period (July through December).

          b.   Attachment E is due November 1 for the preceding 12-month
               reporting period (July through June).

          If necessary, the CONTRACTOR may request, in writing, an extension of
          the due date up to 30 days beyond the required due date. The
          DEPARTMENT will approve or deny the extension request writing within
          seven calendar days of receiving the request.

     2.   INTERPRETIVE SERVICES

          Annually, on November 1, the CONTRACTOR will submit summary
          information about the use of interpretive services during the previous
          Contract year (July 1 through June 30). The information must include
          the following, broken out by month and by county:

          a.   a list of all sources of interpreter services;

          b.   the total amount of time interpretive services were used broken
               out by clinical versus administrative;

          c.   total expenditures for each language;

                                  Page 49 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          d.   total expenditures for clinical versus administrative;

          e.   number of Enrollees who used interpretive services for each
               language;

          f.   number of services provided by type of service within clinical
               versus administrative.

     3.   SEMI-ANNUAL REPORTS

          The following semi-annual reports are due May 1 for the preceding
          six-month reporting period ending December 31 (July through December)
          and are due November 1 for the preceding six month period ending June
          30 (January through June).

          a.   ORGAN TRANSPLANTS

               A report of the total number of organ transplants by type of
               transplant.

          b.   OBSTETRICAL INFORMATION

               A report of obstetrical information including

               1)   total number of obstetrical deliveries by aid category
                    grouping;

               2)   total number of caesarean sections and total number of
                    vaginal deliveries;

               3)   total number low birth weight infants; and

               4)   total number of Enrollees requiring prenatal hospital
                    admission.

          c.   COMPLAINTS AND FORMAL GRIEVANCES

               A summary of complaints and formal grievances, by type of
               complaint or grievance, received by the CONTRACTOR under this
               Contract and actions taken to resolve such complaints and
               grievances

          d.   ABERRANT PHYSICIAN BEHAVIOR

               Summary information of corrective actions taken on physicians who
               have been identified by the CONTRACTOR as exhibiting aberrant
               physician behavior and the names of physicians who have been
               removed from the CONTRACTOR's network due to aberrant behavior.
               The summary shall include the reasons for the corrective action
               or removal.

                                  Page 50 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     4.   QUALITY ASSURANCE ACTIVITIES

          Annually, the CONTRACTOR will submit its written quality improvement
          plan, quality improvement work plan, and a report that identifies the
          CONTRACTOR's internal quality assurance activities, results thereof,
          and corrective actions taken during the previous year. These reports
          are due within three months of the CONTRACTOR's new year; i.e., by
          March 31 if on a calendar year.

     5.   HEDIS

          Audited Health Plan Employer Data and Information Set (HEDIS)
          performance measures will cover services rendered during each calendar
          year and will be reported as set forth in State rule by the Office of
          Health Data Analysis. For example, calendar year 1997 HEDIS measures
          will be reported in 1998.

          The CONTRACTOR must receive certification from an independent,
          credible vendor that its electronic submissions of encounter data are
          compliant with the Health Insurance Portability and Accountability Act
          (HIPAA) requirements. At a minimum, the CONTRACTOR must be
          HIPAA-compliant in the first four levels of HIPAA compliance: Level 1
          - Integrity Testing, Level 2 - Requirement Testing, Level 3 -
          Balancing, and Level 4 - Situation Testing.

     6.   ENCOUNTER DATA

          Encounter data, as defined in the DEPARTMENT's "Encounter Records
          Technical Manual," is due (including all replacements) six months
          after the end of the quarter being reported. Encounter data will be
          submitted in accordance with the instructions detailed in the
          Encounter Records Technical Manual for dates of service beginning July
          1, 1996. The CONTRACTOR must receive certification from an
          independent, credible vendor that their electronic submissions of
          encounter data are compliant with the Health Insurance Portability and
          Accountability Act (HIPAA) requirements. At a minimum, the CONTRACTOR
          must be HIPAA-compliant in the first four levels of HIPAA compliance:
          Level 1 - Integrity Testing, Level 2 - Requirement Testing, Level 3 -
          Balancing, and Level 4 - Situation Testing.

     7.   DOCUMENTS DUE PRIOR TO QUALITY MONITORING REVIEWS

          The following documents are due on request or at least 60 days prior
          to the DEPARTMENT's quality assurance monitoring review unless the
          DEPARTMENT has already received documents that are in effect:

          a.   the CONTRACTOR's most current (may be in draft stage) written
               plan for quality improvement;

                                  Page 51 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          b.   the CONTRACTOR's most current (may be in draft stage) annual
               quality improvement work plan;

          c.   the CONTRACTOR's reports that identify over and under utilization
               of covered services and efforts put in place to resolve
               inappropriate over utilization and under utilization;

          d.   the CONTRACTOR's process for identifying and correcting aberrant
               provider behavior; and

          e.   other information requested by the DEPARTMENT to facilitate the
               DEPARTMENT's review of the CONTRACTOR's compliance to standards
               defined in the Division of Health Care Financing's MCO Quality
               Assurance Monitoring Plan (Attachment G).

          The above documents must show evidence of a well defined, organized
          program designed to improve client care.

     8.   AUDIT OF ABORTIONS, STERILIZATIONS AND HYSTERECTOMIES

          The CONTRACTOR must conduct an annual audit of all abortions in
          addition to an audit of a sample of sterilizations and hysterectomies
          as set by the DEPARTMENT that the CONTRACTOR's providers performed
          during each Contract year to assure compliance of its providers with
          all federal and state requirements related to federal financial
          participation of abortions.

          On November 1 of each year, the CONTRACTOR will submit to the
          DEPARTMENT the following information on the results of the abortion,
          sterilization and hysterectomy audit for the previous calendar year.
          For the sterilization and hysterectomy audit, submit documentation of
          the methodology used to pull the sample of sterilization and
          hysterectomies and sampling proportions for each sample.

          In an Excel file, submit the following information for all abortions,
          the sample of sterilizations, and the sample of hysterectomies:

          .    client name
          .    Medicaid ID number
          .    procedure code
          .    date of service
          .    history/physical (yes/no)
          .    operative report (yes/no)
          .    pathology report (yes/no)
          .    consent form (yes/no)

                                  Page 52 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          .    medical necessity criteria - hysterectomies only

     9.   DEVELOPMENT OF NEW REPORTS

          Any new reports/data requirements mandated by the DEPARTMENT will be
          mutually developed by the DEPARTMENT and the CONTRACTOR.

C.   RECORD SYSTEM REQUIREMENTS

     In accordance with Section 4752 of OBRA '90 (amended section 1903 (m)(2)(A)
     of the Social Security Act), the CONTRACTOR agrees to maintain sufficient
     patient encounter data to identify the physician who delivers Covered
     Services to Enrollees. The CONTRACTOR agrees to provide this encounter
     data, upon request of the DEPARTMENT, within 30 days of the request.

D.   MEDICAL RECORDS

     The CONTRACTOR agrees that medical records are considered confidential
     information and agrees to follow Federal and State confidentiality
     requirements.

     The CONTRACTOR will require that its providers maintain a medical record
     keeping system through which all pertinent information relating to the
     medical management of the Enrollee is maintained, organized, and is readily
     available to appropriate professionals. Notwithstanding any other provision
     of this Contract to the contrary, medical records covering Enrollees will
     remain the property of the provider, and the provider will respect every
     Enrollee's privacy by restricting the use and disclosure of information in
     such records to purposes directly connected with the Enrollee's health care
     and administration of this Contract. The CONTRACTOR will use and disclose
     information pertaining to individual Enrollees and prospective Enrollees
     only for purposes directly connected with the administration of the
     Medicaid Program and this Contract.

E.   AUDITS

     1.   RIGHT OF DEPARTMENT AND CMS TO AUDIT

          The DEPARTMENT and the Department of Health and Human Services,
          Centers for Medicare and Medicaid Services may audit and inspect any
          financial records of the CONTRACTOR or its subcontractors relating (I)
          to the ability of the CONTRACTOR to bear the risk of potential
          financial losses, or (II) to evaluate services performed or
          determinations of amounts payable under the Contract.

     2.   INFORMATION TO DETERMINE ALLOWABLE COSTS

          The CONTRACTOR will make available to the DEPARTMENT all reasonable
          and related financial, statistical, clinical or other information
          needed for the determination of allowable costs to the Medicaid
          program for "related party/home office" transactions as

                                  Page 53 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          defined in HCFA 15-1. These records are to be made available in Utah
          or the CONTRACTOR will pay the increased cost (incremental travel, per
          diem, etc.) of auditing at the out-of-state location. The cost to the
          CONTRACTOR will include round-trip travel and two days per
          diem/lodging. Additional travel costs of the site audit will be shared
          equally by the CONTRACTOR and the DEPARTMENT.

     3.   MANAGEMENT AND UTILIZATION AUDITS

          The MCO will allow the DEPARTMENT and the Department of Health and
          Human Services, Centers for Medicare and Medicaid Services, to perform
          audits for identification and collection of management data, including
          Enrollee satisfaction data, quality of care data, fraud-related data,
          abuse-related data, patient outcome data, and cost and utilization
          data, which will include patient profiles, exception reports, etc. The
          CONTRACTOR will provide all data required by the DEPARTMENT or the
          independent quality review examiners in performance of these audits.
          Prior to beginning any audit, the DEPARTMENT will give the CONTRACTOR
          reasonable notice of audit, and the DEPARTMENT will be responsible for
          costs of its auditors or representatives.

F.   INDEPENDENT QUALITY REVIEW

     1.   IN GENERAL

          Pursuant to Section 1932(c)(2)(A) of the Social Security Act the
          DEPARTMENT will provide for an annual external independent review
          conducted by a qualified independent entity of the quality outcomes
          and timeliness of and access to Covered Services. The CONTRACTOR will
          support the annual external independent review.

          The DEPARTMENT will choose an agency to perform an annual independent
          quality review pursuant to federal law and will pay for such review.
          The CONTRACTOR will maintain all clinical and administrative records
          for use by the quality review contractor.

          The CONTRACTOR agrees to support quality assurance reviews, focused
          studies and other projects performed for the DEPARTMENT by the
          external quality review organization (EQRO). The purpose of the
          reviews and studies are to comply with federal requirements for an
          annual independent audit of the quality outcomes and timeliness of,
          and access to, Covered Services. The external independent reviews are
          conducted by the EQRO, with the advice, assistance, and cooperation of
          a planning team composed of representatives from the CONTRACTOR, the
          EQRO and the DEPARTMENT with final approval by the DEPARTMENT.

     2.   SPECIFIC REQUIREMENTS

          a.   LIAISON FOR ROUTINE COMMUNICATION

                                  Page 54 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

               The CONTRACTOR will designate an individual to serve as liaison
               with the EQRO for routine communication with the EQRO.

          b.   REPRESENTATIVE TO ASSIST WITH PROJECTS

               The CONTRACTOR will designate a minimum of two representatives
               (unless one individual can service both functions) to serve on
               the planning team for each EQRO project. Representatives will
               include a quality improvement representative and a data
               representative. The planning team is a joint collaborative forum
               between DEPARTMENT staff, the EQRO and the CONTRACTOR. The role
               of the planning team is to participate in the process and
               completion of EQRO projects.

          c.   COPIES AND ON-SITE ACCESS

               The CONTRACTOR will be responsible for obtaining copies of
               Enrollee information and facilitating on-site access to Enrollee
               information as needed by the EQRO. Such information will be used
               to plan and conduct projects and to investigate complaints and
               grievances. Any associated copying costs are the responsibility
               of the CONTRACTOR. Enrollee information includes medical records,
               administrative data such as, but not limited to, enrollment
               information and claims, nurses' notes, medical logs, etc. of the
               CONTRACTOR or its providers.

          d.   FORMAT OF ENROLLEE FILES

               The CONTRACTOR will provide Enrollee information in a mutually
               agreed upon format compatible for the EQRO's use, and in a timely
               fashion to allow the EQRO to select cases for its review.

          e.   TIME-FRAME FOR PROVIDING DATA

               The CONTRACTOR will provide data requests to the EQRO within 15
               Working days of the written request from the EQRO and will
               provide medical records within 30 working days of the written
               request from the EQRO. Requests for extensions of these time
               frames will be reviewed and approved or disapproved by the
               DEPARTMENT on a case-by-case basis.

          f.   WORK SPACE FOR ON-SITE REVIEWS

               The CONTRACTOR will assure that the EQRO staff and consultants
               have adequate work space, access to a telephone and copy machines
               at the time of review. The review will be performed during
               agreed-upon hours.

                                  Page 55 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

          g.   STAFF ASSISTANCE DURING ON-SITE VISITS

               The CONTRACTOR will assign appropriate person(s) to assist the
               EQRO personnel conduct the reviews during on-site visits and to
               participate in an informal discussion of screening observations
               at the end of each on-site visit, if necessary.

          h.   CONFIDENTIALITY

               For information received from the EQRO, the CONTRACTOR will
               comply with the Department of Health and Human Services
               regulations relating to confidentiality of data and information
               (42 CFR Part 476.107 and 476.108).

                              ARTICLE X - SANCTIONS

     The DEPARTMENT may impose intermediate sanctions on the CONTRACTOR if the
     CONTRACTOR defaults in any manner in the performance of any obligation
     under this Contract including but not limited to the following situations:

     (1)  the CONTRACTOR fails to substantially provide Medically Necessary
          Covered Services to Enrollees;

     (2)  the CONTRACTOR imposes premiums or charges Enrollees in excess of the
          premiums or charges permitted under this Contract;

     (3)  the CONTRACTOR acts to discriminate among Enrollees on the basis of
          their health status or requirements for health care services,
          including expulsion or refusal to re-enroll an individual, except as
          permitted by Title XIX, or engaging in any practice that would
          reasonably be expected to have the effect of denying or discouraging
          enrollment with the MCO by potential Enrollees whose medical condition
          or history indicates a need for substantial future medical services;

     (4)  the CONTRACTOR misrepresents or falsifies information furnished to the
          Department of Health and Human Services, Centers for Medicare and
          Medicaid Services, the DEPARTMENT, an Enrollee, potential Enrollee or
          health care provider;

     (5)  the CONTRACTOR fails to comply with the physician incentive
          requirements under Section 1903(m)(2)(A)(x) of the Social Security
          Act.

     (6)  the CONTRACTOR distributed directly or through any agent or
          independent contractor marketing materials that contain false or
          misleading information.

     The DEPARTMENT must follow the 1997 Balance Budget Act guidelines on the
     types of

                                  Page 56 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     intermediate sanctions the DEPARTMENT may impose, including civil monetary
     penalties, the appointment of temporary management, and suspension of
     payment.

                    ARTICLE XI - TERMINATION OF THE CONTRACT

A.   AUTOMATIC TERMINATION

     This Contract will automatically terminate June 30, 2004.

B.   OPTIONAL YEAR-END TERMINATION

     At the end of each Contract year, either party may terminate the Contract
     without cause for subsequent years by giving the other party written notice
     of termination at least 90 days prior to the end of the Contract year (July
     1 through June 30).

C.   TERMINATION FOR FAILURE TO AGREE UPON RATES

     At least 60 days prior to the end of each Contract year, the parties will
     meet and negotiate in good faith the rates (Attachment F) applicable to the
     upcoming year. If the parties cannot agree upon future rates by the end of
     the Contract year, then either party may terminate the Contract for
     subsequent years by giving the other party written notice of termination
     and the termination will become effective 90 days after receipt of the
     written notice of termination.

D.   EFFECT OF TERMINATION

     1.   COVERAGE

          In as much as the CONTRACTOR is paid on a monthly basis, the
          CONTRACTOR will continue providing the Covered Services required by
          this Contract until midnight of the last day of the calendar month in
          which the termination becomes effective. If an Enrollee is a patient
          in an inpatient hospital setting during the month in which termination
          becomes effective, the CONTRACTOR is responsible for the entire
          hospital stay including physician charges until discharge or thirty
          days following termination, whichever occurs first.

     2.   ENROLLEE NOT LIABLE FOR DEBTS OF CONTRACTOR OR ITS SUBCONTRACTORS

          If the CONTRACTOR or one of its subcontractors becomes insolvent or
          bankrupt, the Enrollees will not be liable for the debts of the
          CONTRACTOR or its subcontractor. The CONTRACTOR will include this term
          in all of its subcontracts.

                                  Page 57 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

     3.   INFORMATION FOR CLAIMS PAYMENT

          The CONTRACTOR will promptly supply to the DEPARTMENT all information
          necessary for the reimbursement of any Medicaid claims not paid by the
          CONTRACTOR.

     4.   CHANGES IN ENROLLMENT PROCESS

          The CONTRACTOR will be advised of anticipated changes in policies and
          procedures as they relate to the enrollment process and their comments
          will be solicited. The CONTRACTOR agrees to be bound by such changes
          in policies and procedures unless they are not agreeable to the
          CONTRACTOR, in which case the CONTRACTOR may terminate the Contract in
          accordance with the Contract termination provisions.

     5.   HEARING PRIOR TO TERMINATION

          Regarding the General Provisions, Article XVII (Default, Termination,
          & Payment Adjustment), item 3, if the CONTRACTOR fails to meet the
          requirements of the Contract, the DEPARTMENT must give the CONTRACTOR
          a hearing prior to termination. Enrollees must be informed of the
          hearing and will be allowed to disenroll from the MCO without cause.

E.   ASSIGNMENT

     Assignment of any or all rights or obligations under this Contract without
     the prior written consent of the DEPARTMENT is prohibited. Sale of all or
     any part of the rights or obligations under this Contract will be deemed an
     assignment. Consent may be withheld in the DEPARTMENT's sole and absolute
     discretion.

                           ARTICLE XII - MISCELLANEOUS

A.   INTEGRATION

     This Contract contains the entire agreement between the parties with
     respect to the subject matter of this Contract. There are no
     representations, warranties, understandings, or agreements other than those
     expressly set forth herein. Previous contracts between the parties hereto
     and conduct between the parties which precedes the implementation of this
     Contract will not be used as a guide to the interpretation or enforcement
     of this Contract or any provision hereof.

                                  Page 58 of 59

<PAGE>

                                                                    Attachment B
                                                       Molina Healthcare of Utah
                                                          Effective July 1, 2001

B.   ENROLLEES MAY NOT ENFORCE CONTRACT

     Although this Contract relates to the provision of benefits for Enrollees
     and others, no Enrollee is entitled to enforce any provision of this
     Contract against the CONTRACTOR nor will any provision of this Contract be
     constructed to constitute a promise by the CONTRACTOR to any Enrollee or
     potential Enrollee.

C.   INTERPRETATION OF LAWS AND REGULATIONS

     The DEPARTMENT will be responsible for the interpretation of all federal
     and State laws and regulations governing or in any way affecting this
     Contract. When interpretations are required, the CONTRACTOR will submit
     written requests to the DEPARTMENT. The DEPARTMENT will retain full
     authority and responsibility for the administration of the Medicaid program
     in accordance with the requirements of Federal and State law.

D.   ADOPTION OF RULES

     Adoption of rules by the DEPARTMENT, subsequent to this amendment, and
     which govern the Medicaid program, will be automatically incorporated into
     this Contract upon receipt by the CONTRACTOR of written notice thereof.

                   ARTICLE XIII - EFFECT OF GENERAL PROVISIONS

If there is a conflict between these Special Provisions (Attachment B) or the
General Provisions (Attachment A), then these Special Provisions will control.

                                  Page 59 of 59

<PAGE>

                                                  Attachment F - Urban and Rural
                                                          Effective July 1, 2001

                                   AFC/MOLINA

                   URBAN & RURAL RATES AND RATE-RELATED TERMS
                              Effective July 1,2001

A.   PREMIUM RATES

     1.   URBAN MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS

--------------------------------------------------------------------------------
   Age     TANF Male       TANF Male       TANF Female     TANF Female
  0 to l    1 to 21        21 & Over         1 to 21        21 & Over      Aged
================================================================================
  $  [*]   $ [*]           $ [*]           $  [*]          $  [*]          $ [*]
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
  Disabled        Disabled         Medically         Medically           Non TANF                    Restriction
    Male           Female         Needy Child       Needy Adult         Pregnant F        BCC          Program
====================================================================================================================
  <S>             <C>             <C>               <C>                 <C>               <C>         <C>
  $ [*]           $ [*]           $ [*]             $ [*]               $ [*]             $  [*]      $ [*]
--------------------------------------------------------------------------------------------------------------------
</TABLE>

     2.   RURAL MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS

--------------------------------------------------------------------------------
  Age     TANF Male       TANF Male       TANF Female     TANF Female
 0 to l    1 to 21        21 & Over         1 to 21        21 & Over      Aged
================================================================================
 $  [*]   $ [*]           $ [*]           $  [*]          $  [*]          $ [*]
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
  Disabled        Disabled         Medically         Medically          Non TANF                     Restriction
    Male           Female         Needy Child       Needy Adult        Pregnant F          BCC         Program
====================================================================================================================
  <S>             <C>             <C>               <C>                 <C>               <C>        <C>
  $ [*]           $ [*]           $ [*]             $ [*]               $ [*]             $  [*]      $ [*]
--------------------------------------------------------------------------------------------------------------------
</TABLE>

     3.   SPECIAL RATE

          An AIDS rate of $ [*]  per month will be paid in addition to the
          regular monthly premium when the T-Cell count is below 200.

                                   Page 1 of 5

<PAGE>

                                                  Attachment F - Urban and Rural
                                                          Effective July 1, 2001

B.   PER DELIVERY REIMBURSEMENT SCHEDULE

     The DEPARTMENT shall reimburse the CONTRACTOR $  [*]  per delivery to cover
     all Medically Necessary antepartum care, delivery, and postpartum
     professional, facility and ancillary services. The monthly premium amount
     for the enrollee is in addition to the delivery fee. The delivery payment
     will be made when the delivery occurs at 22 weeks or later, regardless of
     viability.

C.   CHEC SCREENING INCENTIVE CLAUSE

     1.   CHEC SCREENING GOAL

          The CONTRACTOR will ensure that Medicaid children have access to
          appropriate well-child visits. The CONTRACTOR will follow the Utah
          EPSDT (CHEC) guidelines for the periodicity schedule for well-child
          protocol. The federal agency, Health Care Financing Administration,
          mandates that all states have 80% of all children screened. The
          DEPARTMENT and the CONTRACTOR will work toward that goal.

     2.   CALCULATION OF CHEC INCENTIVE PAYMENT

          The DEPARTMENT will calculate the CONTRACTOR's annual participation
          rate based on information supplied by the CONTRACTOR under the
          HCFA-416 EPSDT (CHEC) reporting requirements. Based on the HCFA-416
          data, the CONTRACTOR's well-child participation rate was 100% for
          Federal Fiscal Year (FFY) 2000 (October 1999 through September 2000).
          The incentive payment for the contract year ending June 30, 2002 will
          be based on the CONTRACTOR's FFY 2001 (October 1, 2000 through
          September 30, 2001) HCFA-416 participation rate. The DEPARTMENT will
          pay the CONTRACTOR $ [*]  if a rate of 90% or higher is maintained
          during FFY 2001. The participation rate will be calculated no later
          than April 15, 2002; the CONTRACTOR will be notified of the incentive
          payment, if applicable, no later than April 30, 2002.

     3.   CONTRACTOR's USE OF INCENTIVE PAYMENT

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the EPSDT (CHEC)
          participation rate.

D.   IMMUNIZATION INCENTIVE CLAUSE

     The CONTRACTOR will ensure that Enrollees have access to recommended
     immunizations.
     The CONTRACTOR will follow the Advisory Committee on Immunization
     Practices'

                                   Page 2 of 5

<PAGE>

                                                  Attachment F - Urban and Rural
                                                          Effective July 1, 2001

     recommendations for immunizations for children.

     1.   IMMUNIZATIONS FOR TWO-YEAR-OLDS

          Utah has achieved a statewide immunization level of 76% for
          two-year-olds. The average Medicaid HMO rate was 53.2% for the 1999
          HEDIS Combination 1 immunization measure for two-year-olds.

          Based on the CONTRACTOR's 2000 HEDIS measure for the Combination I
          immunization for two-year-olds, the DEPARTMENT will pay the CONTRACTOR
          $ [*] for each full percentage point above 53.2%.

     2.   IMMUNIZATIONS FOR ADOLESCENTS

          The DEPARTMENT realizes it is important that adolescents are
          vaccinated according to schedule as recommended by the Advisory
          Committee on Immunization Practices. The average Medicaid HMO rate was
          3.7% for the 1999 HEDIS Combination I immunization measure for
          adolescents.

          Based on the CONTRACTOR's 2000 HEDIS measure for adolescent
          immunizations, the DEPARTMENT will pay the CONTRACTOR $ [*] for
          each full percentage point above 3.7% up to 53.7%.

     3.   IMMUNIZATIONS FOR ADULTS

          The HEDIS immunization measure for adults is not reported for Medicaid
          clients age 65 and older. The DEPARTMENT intends to expand this
          incentive clause to include improved immunization rates for influenza
          and pneumonia vaccines among Enrollees age 65 and older. The
          DEPARTMENT will work with contractors to collect this data during this
          Contract year (July 1, 2001 - June 30, 2002).

     4.   CONTRACTOR's USE OF INCENTIVE PAYMENT

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the HEDIS
          immunization measures.

E.   REINSURANCE POLICY

     Reinsurance will be administered by a reinsurer, Centre Insurance Company.

     Costs, net of TPL, for all inpatient and outpatient services listed in
     Attachment C that are covered on the date of service rendered and incurred
     from July 1, 2001 through June 30, 2002 by the

                                   Page 3 of 5

<PAGE>

                                                  Attachment F - Urban and Rural
                                                          Effective July 1, 2001

     MCO for an Enrollee shall be shared by Centre Insurance Company under the
     following conditions:

     1.   the date of service is from July 1, 2001 through June 30, 2002 (based
          on date of discharge if inpatient hospital stay);

     2.   paid claims incurred by the MCO exceed $50,000; and

     3.   services shall have been incurred by the MCO during the time the
          client is enrolled with the MCO.

          If the above conditions are met, Centre Insurance Company shall bear
          [*]% and the MCO shall bear [*]% of the amount that exceeds $50,000.

F.   REIMBURSEMENT FOR REINSURANCE

     The CONTRACTOR agrees to purchase reinsurance from Centre Insurance Company
     at the per Enrollee per month rate negotiated by the DEPARTMENT and the
     reinsurer. The DEPARTMENT will reimburse the CONTRACTOR for its premium
     payments to Centre Insurance Company. In addition, the DEPARTMENT will pay
     the CONTRACTOR $ [*] per Enrollee per month to cover reinsurance
     administrative costs.

     Beginning July 1, 2001, the DEPARTMENT will make monthly payments to the
     CONTRACTOR based on the reinsurance premiums the CONTRACTOR pays to Centre
     Insurance Company. The DEPARTMENT will calculate the reinsurance premiums
     using the DEPARTMENT's data on the number of Enrollees.

G.   RETROSPECTIVE ADJUSTMENT

     The DEPARTMENT agrees to retroactively adjust annual payments to the
     CONTRACTOR under this Contract for Enrollees who qualify for Medicaid due
     to a diagnosis of breast cancer or cervical cancer.

     If the CONTRACTOR's claim expenditures for Enrollees in the Breast/
     Cervical Cancer (BCC) rate cell exceed the premiums plus other BCC
     payments, the DEPARTMENT will reimburse the CONTRACTOR for the unrecovered
     costs related to BCC claim expenditures. Claim contract payments include
     reinsurance and TPL payments. Therefore, paid claim expenditures will also
     include reinsurance (stop-loss) claims paid by the CONTRACTOR for BCC
     Enrollees.

     If the CONTRACTOR's claim expenditures for BCC Enrollees are less than the
     BCC premiums paid plus other BCC contract payments, the CONTRACTOR can
     retain up to [*]% of the excess premiums and other payments paid for BCC
     Enrollees. If there are additional savings after the

                                   Page 4 of 5

<PAGE>

                                                  Attachment F - Urban and Rural
                                                          Effective July 1, 2001

CONTRACTOR has recovered the [*]%, the excess premium and other payment amounts
for BCC Enrollees will be reimbursed to the DEPARTMENT. Claim contract payments
include reinsurance and TPL payments. Therefore, paid claims expenditures will
also include reinsurance (stop-loss) claims paid by the CONTRACTOR for BCC
Enrollees.

The CONTRACTOR shall submit to the DEPARTMENT a request for this retrospective
adjustment no later than six months after the close of the contract year. agrees
to use its Medicaid payment rates and fee schedules used to price their Medicaid
product as a basis for the retrospective adjustment calculation.

                                   Page 5 of 5

<PAGE>

                            UTAH DEPARTMENT OF HEALTH
                 288 North 1460 West, Salt Lake City, Utah 84116

                               CONTRACT AMENDMENT

    H992020205-04                                                 006146
---------------------                                      ---------------------
Department Log Number                                      State Contract Number

1.   CONTRACT NAME:
     The name of this Contract is HMO-AFC/MOLINA, the Contract number assigned
     by the State Division of Finance is 006146, the Contract number assigned by
     the Utah Department of Health is H992020205, and this Amendment is number
     4.

2.   CONTRACTING PARTIES:
     This Contract Amendment is between the Utah Department of Health
     (DEPARTMENT), and Molina Healthcare of Utah (CONTRACTOR).

3.   PURPOSE OF CONTRACT AMENDMENT:
     To change the rates effective November 1, 2001 due to the co-payment
     policy; to change the rates effective February 1, 2002 due to the
     co-insurance policy; and to replace the reinsurance provision with
     stop-loss provision.

4.   CHANGES TO CONTRACT:
     A.   Effective July 1, 2001, under Attachment E, Medical Services Revenue
          and Cost Definitions for Table 2, replace the language in items 3, 4,
          54, 55, and 56 with the following:

          1.   On Page 4 of Attachment E, under Revenue, replace item 3,
               Reinsurance, as follows:
               "Report the reinsurance payments received or receivable from a
               reinsurance carrier other than the DEPARTMENT."
          2.   On Page 4 of Attachment E, under Revenue, replace item 4, Stop
               Loss, as follows:
               "Report stop loss payments received or receivable from the
               DEPARTMENT."
          3.   On Page 9 of Attachment E, under Other Data, replace item 54,
               Reinsurance Premiums Received, as follows:
               "Include the reinsurance premiums received or receivable that are
               not counted as revenue."
          4.   On Page 9 of Attachment E, under Other Data, replace item 55,
               Reinsurance Premiums Paid, as follows:
               "Include reinsurance premiums paid to a reinsurance carrier other
               than the DEPARTMENT."
          5.   On Page 9 of Attachment E, under Other Data, replace item 56,
               Administrative Revenue Retained by the CONTRACTOR, as follows:
               "Include the administrative revenue retained by the CONTRACTOR
               from the reinsurance premiums received or receivable."

     B.   Effective July 1, 2001, replace Attachment F - Urban and Rural Rates
          with Rate-Related Terms with Attachment F - Urban and Rural Rates and
          Rate-Related Terms as attached to this Amendment #4.

     C.   All other provisions of the Contract remain unchanged.

5.   If the Contractor is not a local public procurement unit as defined by the
     Utah Procurement Code (UCA Section 63-56-5), this Contract Amendment must
     be signed by a representative of the State Division of Finance and the
     State Division of Purchasing to bind the State and the Department to this
     Contract Amendment.

6.   This Contract, its attachments, and all documents incorporated by reference
     constitute the entire agreement between the parties and supercede all prior
     negotiations, representations, or agreements, either written or oral
     between the parties relating to the subject matter of this Contract.

                                   Page 1 of 2

<PAGE>

                            UTAH DEPARTMENT OF HEALTH
                 288 North 1460 West, Salt Lake City. Utah 84116

                               CONTRACT AMENDMENT

    H992020205-04                                                 00-6146
---------------------                                      ---------------------
Department Log Number                                      State Contract Number

IN WITNESS WHEREOF, the parties sign this Contract Amendment.

CONTRACTOR: Molina Healthcare of Utah     UTAH DEPARTMENT OF HEALTH

By: /s/ Kirk Olsen          13 Mar 2002 By: /s/ Shari A. Watkins     4/03/02
    ----------------------- -----------     ------------------------ -----------
    Signature of Authorized Date            Shari A. Watkins, C.P.A. Date
    Individual                              Director
                                            Office Of Fiscal
                                            Operations

Print Name: Kirk Olsen
           --------------------------

Title: Chief Executive Officer          [SEAL]                       4/17/02
       ------------------------------   ---------------------------- -----------
                                        State Finance:               Date

         33-0617992
------------------------------------    [ILLEGIBLE]                  APR 18 2002
Federal Tax Identification Number or    ---------------------------- -----------
   Social Security Number               State Purchasing:            Date

                                   Page 2 of 2

<PAGE>

                                                      Attachment F-Urban & Rural
                                                          Effective July 1, 2001

                                   AFC/MOLINA
                   URBAN & RURAL RATES AND RATE-RELATED TERMS

A.   PREMIUM RATES

     1.   URBAN MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS (EFFECTIVE
          JULY 1, 2001 THROUGH OCTOBER 31, 2001)

--------------------------------------------------------------------------------
     Age     TANF Male     TANF Male     TANF Female   TANF Female     Aged
    0 to 1    1 to 21      21 & Over       1 to 21      21 & Over
================================================================================
    $ [*]    $ [*]         $ [*]         $ [*]         $ [*]           $ [*]
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
  Disabled        Disabled         Medically         Medically           Non TANF                     Restriction
    Male           Female         Needy Child       Needy Adult         Pregnant F         BCC          Program
====================================================================================================================
  <S>             <C>             <C>               <C>                 <C>                <C>        <C>
  $ [*]           $ [*]           $  [*]            $ [*]               $ [*]              $ [*]       $ [*]
--------------------------------------------------------------------------------------------------------------------
</TABLE>

     2.   URBAN MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS (EFFECTIVE
          NOVEMBER 1, 2001 THROUGH JANUARY 31, 2002)

--------------------------------------------------------------------------------
      Age     TANF Male     TANF Male    TANF Female    TANF Female    Aged
    0 to 1     1 to 21      21 & Over      1 to 21       21 & Over
================================================================================
    $ [*]     $ [*]         $ [*]        $ [*]          $ [*]          $ [*]
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
  Disabled        Disabled         Medically          Medically          Non TANF                     Restriction
    Male           Female         Needy Child        Needy Adult        Pregnant F          BCC         Program
===================================================================================================================
  <S>             <C>             <C>                <C>                <C>                 <C>       <C>
  $ [*]           $ [*]           $ [*]              $ [*]              $ [*]               $ [*]     $  [*]
-------------------------------------------------------------------------------------------------------------------
</TABLE>

     3.   URBAN MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS (EFFECTIVE
          FEBRUARY 1, 2002 THROUGH JUNE 30, 2002)

--------------------------------------------------------------------------------
    Age      TANF Male    TANF Male     TANF Female    TANF Female    Aged
   0 to 1     1 to 21     21 & Over      1 to 21        21 & Over
================================================================================
   $ [*]     $ [*]        $ [*]         $ [*]          $ [*]          $ [*]
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
  Disabled        Disabled         Medically          Medically          Non TANF                     Restriction
    Male           Female         Needy Child        Needy Adult        Pregnant F          BCC         Program
===================================================================================================================
  <S>             <C>             <C>                <C>                <C>                 <C>       <C>
  $ [*]           $ [*]           $ [*]              $ [*]              $ [*]               $ [*]     $ [*]
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                   Page 1 of 5

<PAGE>

     4.   RURAL MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS (EFFECTIVE
          JULY 1, 2001 THROUGH OCTOBER 31, 2001)

--------------------------------------------------------------------------------
    Age      TANF Male    TANF Male     TANF Female    TANF Female    Aged
   0 to 1     1 to 21     21 & Over      1 to 21        21 & Over
================================================================================
   $ [*]     $ [*]        $ [*]         $ [*]          $ [*]          $ [*]
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
  Disabled        Disabled         Medically          Medically          Non TANF                     Restriction
    Male           Female         Needy Child        Needy Adult        Pregnant F          BCC         Program
===================================================================================================================
  <S>             <C>             <C>                <C>                <C>                 <C>       <C>
  $ [*]           $ [*]           $ [*]              $ [*]              $ [*]              $ [*]        $ [*]
-------------------------------------------------------------------------------------------------------------------
</TABLE>

     5.   RURAL MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS (EFFECTIVE
          NOVEMBER 1, 2001 THROUGH JANUARY 31, 2002)

--------------------------------------------------------------------------------
    Age      TANF Male    TANF Male     TANF Female    TANF Female    Aged
   0 to 1     1 to 21     21 & Over       1 to 21       21 & Over
================================================================================
   $ [*]     $ [*]        $ [*]         $ [*]          $ [*]          $ [*]
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
  Disabled        Disabled         Medically          Medically          Non TANF                     Restriction
    Male           Female         Needy Child        Needy Adult        Pregnant F          BCC         Program
===================================================================================================================
  <S>             <C>             <C>                <C>                <C>                 <C>       <C>
  $ [*]           $ [*]           $ [*]              $ [*]             $ [*]               $ [*]       $ [*]
-------------------------------------------------------------------------------------------------------------------
</TABLE>

     6.   RURAL MONTHLY PREMIUM RATES BASED ON ENROLLEES' RATE CELLS (EFFECTIVE
          FEBRUARY 1, 2002 THROUGH JUNE 30, 2002)

--------------------------------------------------------------------------------
    Age      TANF Male    TANF Male     TANF Female    TANF Female
   0 to 1     1 to 21     21 & Over      1 to 21        21 & Over     Aged
================================================================================
   $ [*]      $ [*]        $ [*]         $ [*]          $ [*]         $ [*]
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
  Disabled        Disabled         Medically          Medically          Non TANF                     Restriction
    Male            Female         Needy Child        Needy Adult        Pregnant F          BCC         Program
===================================================================================================================
  <S>             <C>             <C>                <C>                <C>                 <C>       <C>
  $ [*]            $ [*]           $ [*]              $ [*]              $ [*]               $ [*]     $ [*]
-------------------------------------------------------------------------------------------------------------------
</TABLE>

     7.   SPECIAL RATE

          An AIDS rate of $ [*] per month will be paid in addition to the
          regular monthly premium when the T-Cell count is below 200.

                                   Page 2 of 5

<PAGE>

B.   PER DELIVERY REIMBURSEMENT SCHEDULE

     The DEPARTMENT shall reimburse the CONTRACTOR $ [*] per delivery to cover
     all Medically Necessary antepartum care, delivery, and postpartum
     professional, facility and ancillary services. The monthly premium amount
     for the enrollee is in addition to the delivery fee. The delivery payment
     will be made when the delivery occurs at 22 weeks or later, regardless of
     viability.

C.   CHEC SCREENING INCENTIVE CLAUSE

     1.   CHEC SCREENING GOAL

          The CONTRACTOR will ensure that Medicaid children have access to
          appropriate well-child visits. The CONTRACTOR will follow the Utah
          EPSDT (CHEC) guidelines for the periodicity schedule for well-child
          protocol. The federal agency, Centers for Medicare and Medicaid
          Services (CMS), mandates that all states have 80% of all children
          screened. The DEPARTMENT and the CONTRACTOR will work toward that
          goal.

     2.   CALCULATION OF CHEC INCENTIVE PAYMENT

          The DEPARTMENT will calculate the CONTRACTOR's annual participation
          rate based on information supplied by the CONTRACTOR under the CMS-416
          EPSDT (CHEC) reporting requirements. Based on the CMS-416 data, the
          CONTRACTOR's well-child participation rate was 100% for Federal Fiscal
          Year (FFY) 2000 (October 1999 through September 2000). The incentive
          payment for the Contract year ending June 30, 2002 will be based on
          the CONTRACTOR's FFY 2001 (October 1, 2000 through September 30, 2001)
          CMS-416 participation rate. The DEPARTMENT will pay the CONTRACTOR
          $ [*] if a rate of 90% or higher is maintained during FFY 2001. The
          participation rate will be calculated no later than April 15, 2002;
          the CONTRACTOR will be notified of the incentive payment, if
          applicable, no later than April 30, 2002.

     3.   CONTRACTOR's USE OF INCENTIVE PAYMENT

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the EPSDT (CHEC)
          participation rate.

D.   IMMUNIZATION INCENTIVE CLAUSE

     The CONTRACTOR will ensure that Enrollees have access to recommended
     immunizations. The CONTRACTOR will follow the Advisory Committee on
     Immunization Practices recommendations for immunizations for children.

     1.   IMMUNIZATIONS FOR TWO-YEAR-OLDS

          Utah has achieved a statewide immunization level of 76% for
          two-year-olds. The average Medicaid HMO rate was 53.2% for the 1999
          HEDIS Combination 1 immunization measure for two-year-olds.

                                   Page 3 of 5

<PAGE>

          Based on the CONTRACTOR's 2000 HEDIS measure for the Combination I
          immunization for two-year-olds, the DEPARTMENT will pay the CONTRACTOR
          $ [*]  for each full percentage point above 53.2%.

     2.   IMMUNIZATIONS FOR ADOLESCENTS

          The DEPARTMENT realizes it is important that adolescents are
          vaccinated according to schedule as recommended by the Advisory
          Committee on Immunization Practices. The average Medicaid HMO rate was
          3.7% for the 1999 HEDIS Combination I immunization measure for
          adolescents.

          Based on the CONTRACTOR's 2000 HEDIS measure for adolescent
          immunizations, the DEPARTMENT will pay the CONTRACTOR $  [*]  for each
          full percentage point above 3.7% up to 53.7%.

     3.   IMMUNIZATIONS FOR ADULTS

          The HEDIS immunization measure for adults is not reported for Medicaid
          clients age 65 and older. The DEPARTMENT intends to expand this
          incentive clause to include improved immunization rates for influenza
          and pneumonia vaccines among Enrollees age 65 and older. The
          DEPARTMENT will work with contractors to collect this data during this
          Contract year (July 1, 2001 - June 30, 2002).

     4.   CONTRACTOR's USE OF INCENTIVE PAYMENT

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the HEDIS
          immunization measures.

E.   STOP LOSS

     1.   Costs, net of TPL, for all inpatient and outpatient services listed in
          Attachment C that are covered on the date of service rendered and
          incurred from July 1, 2001 through June 30, 2002 by the MCO for an
          Enrollee shall be shared by the DEPARTMENT under the following
          conditions:

          a.   the date of service is from July 1, 2001 through June 30, 2002;

          b.   inpatient claims that overlap years will be prorated to each
               contract year, based on patient days:

          c.   paid claims incurred by the MCO exceed $50,000.00;

          d.   services shall have been incurred by the MCO during the time the
               client is enrolled with the MCO;

          e.   the stop-loss billing must be in a format mutually agreed upon
               and must include, at a minimum. Enrollee Medicaid identification
               number, date of birth, type of service, beginning date of
               service, ending date of service, billed charge. HMO payment,
               third party liability (TPL) collected, and primary diagnosis:

                                   Page 4 of 5

<PAGE>

          f.   stop-loss billing must be submitted to the DEPARTMENT within
               seven months of the end of the Contract year;

          If the above conditions are met, the DEPARTMENT shall bear 80% and the
          MCO shall bear 20% of the amount that exceeds $  [*]  The maximum
          amount the DEPARTMENT will reimburse the CONTRACTOR under the
          stop-loss  provision is $  [*]  per Enrollee per Contract year.

     2.   PAYMENT OF STOP-LOSS

          The DEPARTMENT will make interim payments to the CONTRACTOR equal to
          90% of the expected payment pending an audit of the stop-loss claims
          submitted by the CONTRACTOR.

          The DEPARTMENT will calculate the actual stop-loss amount due to the
          CONTRACTOR by July 1, 2003. The final settlement will be based on an
          audit conducted by the DEPARTMENT. The allowed payment for inpatient
          hospital stop-loss claims will be limited to 90% of the Medicaid fee
          schedule when the claim is from a related hospital as defined by CMS
          Pub. 15-I.

F.   RETROSPECTIVE ADJUSTMENT

     The DEPARTMENT agrees to retroactively adjust annual payments to the
     CONTRACTOR under this contract for Enrollees who qualify for Medicaid due
     to a diagnosis of breast cancer or cervical cancer.

     If the CONTRACTOR's claim expenditures for Enrollees in the Breast/
     Cervical Cancer (BCC) rate cell exceed the premiums plus other BCC
     payments, the DEPARTMENT will reimburse the CONTRACTOR for the unrecovered
     costs related to BCC claim expenditures. Claim contract payments include
     reinsurance and TPL payments.

     If the CONTRACTOR's claim expenditures for BCC Enrollees are less than the
     BCC premiums paid plus other BCC contract payments, the CONTRACTOR can
     retain up to 10% of the excess premiums and other payments paid for BCC
     Enrollees. If there are additional savings after the CONTRACTOR has
     recovered the 10%, the excess premium and other payment amounts for BCC
     Enrollees will be reimbursed to the DEPARTMENT. Claim contract payments
     include reinsurance and TPL payments.

     The CONTRACTOR shall submit to the DEPARTMENT a request for this
     retrospective adjustment no later than six months after the close of the
     Contract year. The CONTRACTOR agrees to use its Medicaid payment rates and
     fee schedules used to price their Medicaid product as a basis for the
     retrospective adjustment calculation.

                                   Page 5 of 5

<PAGE>

                            UTAH DEPARTMENT OF HEALTH
                 288 North 1460 West, Salt Lake City. Utah 84116

                               CONTRACT AMENDMENT

    H9920205-05                                                   006146
---------------------                                      ---------------------
Department Log Number                                      State Contract Number

1.   CONTRACT NAME:
     The name of this Contract is HMO-AFC/MOLINA, the Contract number assigned
     by the State Division of Finance is 006146, the Contract number assigned by
     the Utah Department of Health is H9920205, and this Amendment is number 5.

2.   CONTRACTING PARTIES:
     This Contract Amendment is between the Utah Department of Health
     (DEPARTMENT), and Molina Healthcare of Utah (CONTRACTOR).

3    PURPOSE OF CONTRACT AMENDMENT:
     The purpose is to increase the maximum Contract Amount.

4.   CHANGES TO CONTRACT:
     A. On Page 1, Paragraph 4, CONTRACT AMOUNT, is changed to read as follows:
        "The Contractor will be paid up to a maximum amount of $[*] for the
        Contract Period in accordance with the provisions in this Contract. This
        Contract is funded with 70% Federal funds and 30% State funds. The CFDA
        # is 93.778 and relates to the federal funds provided."
             ------

     B. All other provisions of the Contract remain unchanged.

5.   If the Contractor is not a local public procurement unit as defined by the
     Utah Procurement Code (UCA Section 63-56-5), this Contract Amendment must
     be signed by a representative of the State Division of Finance and the
     State Division of Purchasing to bind the State and the Department to this
     Contract Amendment.

6.   This Contract, its attachments, and all documents incorporated by reference
     constitute the entire agreement between the parties and supercede all prior
     negotiations, representations, or agreements, either written or oral
     between the parties relating to the subject matter of this Contract.

IN WITNESS WHEREOF, the parties sign this Contract Amendment.

CONTRACTOR:  Molina Healthcare of Utah   UTAH DEPARTMENT OF HEALTH
             -------------------------

By: /s/ G. K. Olsen           8-8-02   By: /s/                       8/9/02
    -----------------------   ------       ------------------------  ------
    Signature of Authorized   Date         Shari A. Watkins, C.P.A.   Date
    Individual                             Director
                                           Office of Fiscal
                                           Operations

Print Name:  Kirk Olsen                    CONTRACT RECEIVED AND
             -----------------------           PROCESSED BY
                                            DIVISION OF FINANCE      AUG 12 2002
                                           ------------------------  -----------
                                           State Finance:            Date

Title:  Chief Executive Officer
        ----------------------------

           33-0617992                      /s/ [ILLEGIBLE]           [ILLEGIBLE]
------------------------------------       ------------------------  -----------
Federal Tax identification Number or       State Purchasing:         Date
  Social Security Number

                                                    Doc # 98-001 amd Rev.5/18/98
                                                         hmo/molina am6 (8/7/02)

                                     Page 1

<PAGE>

                            UTAH DEPARTMENT OF HEALTH
                 288 North 1460 West, Salt Lake City. Utah 84116
                               CONTRACT AMENDMENT

    H9920205-06                                                   006146
---------------------                                      ---------------------
Department Log Number                                      State Contract Number

1.   CONTRACT NAME:
     The name of this Contract is HMO-AFC/MOLINA, the Contract number assigned
     by the State Division of Finance is 006146, the Department log number
     assigned by the Utah Department of Health is H9920205, and this Amendment
     is number 6.

2.   CONTRACTING PARTIES:
     This Contract Amendment is between the Utah Department of Health
     (DEPARTMENT), and Molina Healthcare of Utah (CONTRACTOR or MHU).

3.   PURPOSE OF CONTRACT AMENDMENT:
     Effective July 1, 2002 this contract amendment clarifies and adds some
     provisions; delineates the reduced benefit package for the Non-Traditional
     Medicaid population; changes the benefit package for the Traditional
     Medicaid group; outlines the co-payment and co-insurance requirements for
     both Traditional and Non-Traditional Medicaid populations; and sets forth
     the payment methodology.

4.   CHANGES TO CONTRACT:
     A. Effective July 1, 2002, replace Attachment B, Special Provisions, with
        Attachment B dated July 1, 2002, as attached to this Amendment #6.

     B. Effective July 1, 2002, replace Attachment C, Covered Services, with
        Attachment C dated July 1, 2002, as attached to this Amendment #6.

     C. Effective July 1, 2002, replace Attachment E (Tables 1, 2, 3, and
        revenue and cost definitions for Table 2) with Attachment E dated July
        1, 2002, as attached to this Amendment #6.

     D. Effective July 1, 2002, replace Attachment F, Rates and Rate-Related
        Terms with Attachment F-4 dated July 1, 2002, as attached to this
        Amendment #6.

     E. All other provisions of the Contract remain unchanged.

5.   If the Contractor is not a local public procurement unit as defined by the
     Utah Procurement Code (UCA Section 63-56-5), this Contract Amendment must
     be signed by a representative of the State Division of Finance and the
     State Division of Purchasing to bind the State and the Department to this
     Contract Amendment.

6.   This Contract, its attachments, and all documents incorporated by reference
     constitute the entire agreement between the parties and supercede all prior
     negotiations, representations, or agreements, either written or oral
     between the parties relating to the subject matter of this Contract.

IN WITNESS WHEREOF, the parties sign this Contract Amendment.

CONTRACTOR:  Molina Healthcare of Utah   UTAH DEPARTMENT OF HEALTH
             -------------------------

By: /s/ G. K. Olsen                    By: /s/                       10/10/02
    -----------------------   ------       ------------------------  --------
    Signature of Authorized   Date         Shari A. Watkins, C.P.A.   Date
    Individual                             Director
                                           Office of Fiscal
                                           Operations

Print Name:  Kirk Olsen
             -----------------------
                                           ------------------------  --------
                                           State Finance:            Date

Title:  Chief Executive Officer
        ----------------------------

           33-0617992                      /s/ [ILLEGIBLE]           10/17/02
------------------------------------       ------------------------  --------
Federal Tax identification Number or       State Purchasing:         Date
  Social Security Number

                                                    Doc # 98-001 amd Rev 5/18/98
                                                        hmo/molina am6 (9/05/02)

                                     Page 1

<PAGE>

                                TABLE OF CONTENTS

                                  ATTACHMENT B
                SPECIAL PROVISIONS FOR AMENDMENT 6 (JULY 1, 2002)

ARTICLE I.    DEFINITIONS......................................................1

ARTICLE II.   SERVICE AREA.....................................................4

ARTICLE III.  ENROLLMENT, ORIENTATION, MARKETING, AND DISENROLLMENT............4

        A.    Enrollment Process...............................................4
        B.    Member Orientation...............................................6
        C.    Marketing and Member Education...................................8
        D.    Disenrollment by Enrollee.......................................10
        E.    Disenrollment by Contractor.....................................10
        F.    Enrollee Transition Between MCOs ...............................11
        G.    Enrollee Transition from Fee-For-Service to MCO or from MCO to
              Fee-For-Service.................................................12

ARTICLE IV.   BENEFITS........................................................12

        A.    In General......................................................12
        B.    Provider Services Function......................................13
        C.    Scope of Services...............................................13
        D.    Subcontracts....................................................14
        E.    Clarification of Covered Services...............................15
        F.    Clarification of Payment Responsibilities.......................26

ARTICLE V.    ENROLLEE RIGHTS/SERVICES........................................29

        A.    Member Services Function........................................29
        B.    Enrollee Liability..............................................29
        C.    General Information to be Provided to Enrollees.................29
        D.    Access..........................................................30
        E.    Choice..........................................................32
        F.    Coordination....................................................32
        G.    Billing Enrollees...............................................33
        H.    Survey Requirements.............................................35

ARTICLE VI.   GRIEVANCE PROCEDURES............................................35

        A.    In General......................................................35

                                        i

<PAGE>

        B.    Nondiscrimination...............................................35
        C.    Minimum Requirements of Grievance Procedures....................36
        D.    Final Review by Department......................................36

ARTICLE VII.  OTHER REQUIREMENTS..............................................37

        A.    Compliance with Public Health Service Act.......................37
        B.    Compliance with OBRA '90 Provision and 42 CFR 434.28............37
        C.    Fraud and Abuse Requirements....................................37
        D.    Disclosure of Ownership and Control Information.................38
        E.    Safeguarding Confidential Information on Enrollees..............38
        F.    Disclosure of Provider Incentive Plans..........................38
        G.    Debarred or Suspended Individuals...............................40
        H.    CMS Consent Required............................................40

ARTICLE VIII. PAYMENTS........................................................40

        A.    Non-Risk Contract...............................................40
        B.    Payment Methodology.............................................40
        C.    Contract Maximum................................................40
        D.    Medicare........................................................40
        E.    Third Party Liability (Coordination of Benefits)................41
        F.    Third Party Responsibility (including Worker's
              Compensation)...................................................43
        G.    Changes in Covered Services.....................................44

ARTICLE IX.   RECORDS, REPORTS AND AUDITS.....................................44

        A.    Records, Reports and Audits.....................................44
        B.    Periodic Reports................................................45
        C.    Record System Requirements......................................48
        D.    Medical Records.................................................49
        E.    Audits..........................................................49
        F.    Independent Quality Review......................................50

ARTICLE X.    SANCTIONS.......................................................51

ARTICLE XI.   TERMINATION OF THE CONTRACT.....................................52

        A.    Automatic Termination...........................................52
        B.    Optional Year-End Termination...................................52
        C.    Termination for Failure to Agree Upon Rates.....................52
        D.    Effect of Termination...........................................52
        E.    Assignment......................................................53

                                       ii

<PAGE>

ARTICLE XII.  MISCELLANEOUS...................................................53

        A.    Integration.....................................................53
        B.    Enrollees May Not Enforce Contract..............................54
        C.    Interpretation of Laws and Regulations..........................54
        D.    Adoption of Rules...............................................54

ARTICLE XIII. EFFECT OF GENERAL PROVISIONS....................................54

                                       iii

<PAGE>

                                               Attachment B - Special Provisions
                                                                          Molina
                                                                    July 1, 2002

For the purpose of the Contract all article, section, and subsection headings in
these Attachments B, C, and D are for convenience in referencing the provisions
of the Contract. They are not enforceable as part of the text of the Contract
and may not be used to interpret the meaning of the provisions that lie beneath
them.

                        ATTACHMENT B - SPECIAL PROVISIONS
                             Effective July 1, 2002

                             ARTICLE I - DEFINITIONS

For the purpose of the Contract:

A.   "ADVANCE DIRECTIVES" means oral and written instructions about an
     individual's medical care, in the event the individual is unable to
     communicate. There are two types of Advance Directives: a living will and a
     medical power of attorney.

B.   "BALANCE BILL" means the practice of billing patients for charges that
     exceed the amount that the MCO will pay.

C.   "CHEC ELIGIBLE" means any Medicaid recipient under the age of 21 who is
     eligible to receive Early Periodic Screening Diagnostic and Treatment
     (EPSDT) services in accordance with 42 CFR Part 441, Subpart B.

D.   "CHEC PROGRAM" or Child Health Evaluation and Care program is Utah's
     version of the federally mandated Early Periodic Screening, Diagnosis and
     Treatment (EPSDT) program as defined in 42 CFR Part 441, Subpart B.
     Medicaid recipients who are eligible for the Non-Traditional Medicaid Plan
     are not eligible to receive EPSDT services. (See Attachment C, Covered
     Services, U.)

E.   "CHILD WITH SPECIAL HEALTH CARE NEEDS" means a child under 21 who has or is
     at increased risk for chronic physical, developmental, behavioral, or
     emotional conditions and requires health and related services of a type or
     amount beyond that required by children generally, including a child who,
     consistent with 1932(a)(2)(A) of the Social Security Act, 42 U.S.C.,
     Section 1396u- 2(a)(2)(A):
     (1) is blind or disabled or in a related population (eligible for SSI under
     title XVI of the Social Security Act);
     (2) is in foster care or other out-of-home placement;
     (3) is receiving foster care or adoption assistance; or
     (4) is receiving services through a family-centered, community-based
     coordinated care system that receives grant funds described in section
     501(a)(l)(D) of title V.

F.   "DIVISION OF HEALTH CARE FINANCING" or "DHCF" means the division within the
     Department of Health responsible for the administration of the Utah
     Medicaid program.

G.   "EMERGENCY SERVICES" means those services provided in a hospital, clinic,
     office, or other facility that is equipped to furnish the required care,
     after the sudden onset of a medical condition manifesting itself by acute
     symptoms of sufficient severity (including severe pain) such that a prudent
     layperson, who possesses an average knowledge of health and medicine, could
     reasonably expect that the absence of immediate medical attention to result
     in:

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     1.   Placing the health of the individual (or, with respect to a pregnant
          woman, the health of a woman or her unborn child) in serious jeopardy;
     2.   Serious impairment to bodily functions; or
     3.   Serious dysfunction of any bodily organ or part.

H.   "ENROLLEE" means any Medicaid eligible: (1) who, at the time of enrollment
     resides within the geographical limits of the CONTRACTOR's Service Area;
     (2) whose name appears on the DEPARTMENT's Eligibility Transmission as a
     new, reinstate, or retroactive Enrollee; and (3) who is accepted for
     enrollment by the CONTRACTOR according to the conditions set forth in this
     Contract excluding residents of the Utah State Hospital, Utah State
     Developmental Center, and long-term care facilities except as defined in
     Attachment C.

I.   "ENROLLEES WITH SPECIAL HEALTH CARE NEEDS" means enrollees who have or are
     at increased risk for chronic physical, developmental, behavioral, or
     emotional conditions and who also require health and related services of a
     type or amount beyond that required by adults and children generally.

J.   "ENROLLMENT AREA" or "Service Area" means the counties enumerated in
     Article II.

K.   "FAMILY MEMBER" means all Medicaid eligibles who are members of the same
     family living at home.

L.   "HOME AND COMMUNITY-BASED SERVICES" means services, not otherwise furnished
     under the State's Medicaid plan, that are furnished under a waiver of
     statutory requirements granted under the provisions of CFR Part 441,
     subpart G. These services cover an array of Home and Community-Based
     Services that are cost-effective and necessary for an individual to avoid
     institutionalization.

M.   "MANAGED CARE ORGANIZATION" or "MCO" means an organization that meets the
     State Plan's definition of an HMO or prepaid health plan and which
     provides, either directly or through arrangement with other providers,
     comprehensive general medical services to Medicaid eligibles on a
     contractual prepayment basis.

N.   "MARKETING MATERIAL" means materials in all mediums, including member
     handbooks, brochures and leaflets, newspaper, magazine, radio, television,
     billboard and yellow pages advertisements, and presentation materials used
     by marketing representatives. It includes materials mailed to, distributed
     to, or aimed at Medicaid clients specifically, and any material that
     mentions "Medicaid," "Medicaid Assistance," or "Title XIX."

O.   "MEDICALLY NECESSARY" means any medical service that (a) is reasonably
     calculated to prevent, diagnose, or cure conditions in the Enrollee that
     endanger life, cause suffering or pain, cause deformity or malfunction, or
     threaten to cause a handicap, and (b) there is no equally effective course
     of treatment available or suitable for the Enrollee requesting the service
     which is more conservative or substantially less costly. Medical services
     will be of a quality that meets professionally recognized standards of
     health care, and will be substantiated by records including evidence of
     such medical necessity and quality. Those records will be made available to
     the DEPARTMENT upon request. FOR CHEC ENROLLEES, "Medically Necessary"
     means preventive screening services and other medical care, diagnostic
     services, treatment, and other measures necessary to correct or ameliorate
     defects and physical and mental illnesses and conditions, even

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     if the services are not included in the Utah State Medicaid Plan.

P.   "MEMBER SERVICES" means a method of assisting Enrollees in understanding
     CONTRACTOR policies and procedures, facilitating referrals to participating
     specialists, and assisting in the resolution of problems and member
     complaints. The purpose of Member Services is to improve access to services
     and promote Enrollee satisfaction.

Q.   "NON-TRADITIONAL MEDICAID PLAN" means the reduced benefit plan provided to
     Medicaid eligibles age 19 through 64 who are in certain TANF, Medically
     Needy, and Transitional Medicaid aid categories. Services covered under the
     reduced benefit plan are similar to the Traditional Medicaid Plan with some
     limitations and exclusions.

R.   "PHYSICIAN INCENTIVE PLAN" means any compensation between a contracting
     organization and a physician group that may directly or indirectly have the
     effect of reducing or limiting services provided with respect to Enrollees
     in the organization.

S.   "PREPAID MENTAL HEALTH PLAN" means the mental health centers that contract
     with the DEPARTMENT to provide inpatient and outpatient mental health
     services to Medicaid clients living within each mental health center's
     jurisdiction.

T.   "PRIMARY CARE PROVIDER" or "PCP" means a health care provider the majority
     of whose practice is devoted to internal medicine, family/general practice
     or pediatrics. The MCO may allow other specialists to be PCPs, when
     appropriate. PCPs are responsible for delivering primary care services,
     coordinating and managing Enrollees' overall health and, authorizing
     referrals for other necessary care.

U.   "RESTRICTION PROGRAM" means the Federally mandated program (42 CFR
     431.54(e)) for Medicaid clients who over-utilize Medicaid services. If the
     DEPARTMENT in conjunction with the CONTRACTOR finds that an Enrollee has
     utilized Medicaid services at a frequency or amount that is not Medically
     Necessary, as determined in accordance with utilization guidelines adopted
     by the DEPARTMENT, the DEPARTMENT may place the Enrollee under the
     Restriction Program for a reasonable period of time to obtain Medicaid
     services from designated providers only.

V.   "STATE PLAN" means the State Plan for organization and operation of the
     Medicaid program as defined pursuant to Section 1102 of the Social Security
     Act (42 U.S.C. 1302).

W.   "TRADITIONAL MEDICAID PLAN" means the scope of services contained in the
     state plan provided to Medicaid eligibles who fall under one of the
     following eligibility groups:

     (1) Section 1931 children and related poverty level populations
         (TANF/AFDC);
     (2) Section 1931 pregnant women (TANF/AFDC);
     (3) Blind/disabled children and related populations (SSI);
     (4) Blind/disabled adults and related populations (SSI);
     (5) Aged and related populations (SSI, QMB and Medicaid, Medicare and
         Medicaid);
     (6) Foster care children;
     (7) Individuals who qualify for Medicaid by paying a spenddown and are
         under age 19 or are also aged or disabled;
     (8) Pregnant women (non-TANF/AFDC)

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

                            ARTICLE II - SERVICE AREA

The Service Area is limited to the counties of Cache, Davis, Iron, Salt Lake,
Utah, Washington, and Weber.

       ARTICLE III - ENROLLMENT, ORIENTATION, MARKETING, AND DISENROLLMENT

A.   ENROLLMENT PROCESS

     1.   ENROLLEE CHOICE

          The DEPARTMENT will offer potential Enrollees a choice among all MCOs
          available in the Enrollment Area. The DEPARTMENT will inform potential
          Enrollees of Medicaid benefits. The Medicaid client's intent to enroll
          is established when the applicant selects The CONTRACTOR, either
          verbally or by signing a choice of health care delivery form or
          equivalent. This initiates the action to send an advance notification
          to the CONTRACTOR. Medicaid Enrollees made eligible for a retroactive
          period prior to the current month are not eligible for CONTRACTOR
          enrollment during the retroactive period.

     2.   PERIOD OF ENROLLMENT

          Each Enrollee will be enrolled for the period of the Contract or the
          period of Medicaid eligibility or until such person disenrolls or is
          disenrolled, whichever is earlier. Until the DEPARTMENT notifies the
          CONTRACTOR that an Enrollee is no longer Medicaid eligible, the
          CONTRACTOR may assume that the Enrollee continues to be eligible. Each
          Enrollee will be automatically re-enrolled at the end of each month
          unless that Enrollee notifies the DEPARTMENT's Health Program
          Representative of an intent not to re-enroll in the MCO prior to the
          benefit issuance date.

     3.   OPEN ENROLLMENT

          The CONTRACTOR will have a continuous open enrollment period that
          meets the requirements of Section 1301(d) of the Public Health Service
          Act. The DEPARTMENT will certify, and the CONTRACTOR agrees to accept
          individuals who are eligible to be enrolled in the MCO under the
          provisions of this Contract:

          a.   in the order in which they apply; and
          b.   without restrictions unless authorized by the DEPARTMENT.

     4.   NO HEALTH SCREENING

          The DEPARTMENT and the CONTRACTOR agree that no potential Enrollee
          will be pre-screened or selected by either party for enrollment on the
          basis of pre-existing health problems or on the basis of race, color,
          national origin, disability or age.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     5.   INDEPENDENT ENROLLMENT

          Each Medicaid eligible can be enrolled or disenrolled in the MCO,
          independent of any other Family Member's enrollment or disenrollment.

     6.   REPRESENTATIVE POPULATION

          The CONTRACTOR will service a population representative of the
          categories of eligibility within the area it serves.

     7.   ELIGIBILITY TRANSMISSION

          a.   IN GENERAL

               Before the close of business of each day, the DEPARTMENT will
               provide to the CONTRACTOR an Eligibility Transmission which is an
               electronic file that includes individuals which the DEPARTMENT
               certifies as Medicaid eligible and who enrolled in the MCO.
               Eligibility transmissions include new Enrollees, reinstated
               Enrollees, retroactive Enrollees, deleted Enrollees and Enrollees
               whose eligibility information results in a change to a critical
               field. The Eligibility Transmission will be in accordance with
               the Utah Health Information Network (UHIN) standard. The
               DEPARTMENT represents and warrants to the CONTRACTOR that the
               appearance of an individual's name on the Eligibility
               Transmission, other than a deleted Enrollee, will be conclusive
               evidence for purposes of this Contract, that such person is
               enrolled in the program and qualifies for medical assistance
               under Medicaid Title XIX.

          b.   NEW ENROLLEES

               New Enrollees are enrolled in this MCO until otherwise specified;
               these Enrollees will not appear on future transmissions unless
               there is a change in a critical field. Critical fields are
               coverage dates, recipient name, date of birth, date of death,
               sex, social security number, case information, address, telephone
               number, payment code, coordination of benefits, and the
               Enrollee's provider under the Restriction Program. Enrollees with
               a spenddown requirement will appear on the eligibility
               transmission on a month by month basis after the spenddown is
               met.

          c.   RETROACTIVE ENROLLEES

               Retroactive Enrollees are those who were Enrollees previous to
               the current month. Retroactive Enrollees include newborn
               Enrollees or Enrollees who have been reported in one payment
               category in a previous month but have been changed to a new
               payment category for that previous month.

          d.   REINSTATED ENROLLEES

               Reinstated Enrollees are those who were enrolled for the previous
               month and also closed at the end of the previous month. These
               Enrollees are eligible

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

               retroactively to the beginning of the current month.

          e.   DELETED ENROLLEES

               Deleted Enrollees are those who are no longer eligible for
               Medicaid or who were disenrolled from the MCO.

          f.   ADVANCED NOTIFICATION TRANSMISSION

               An Advanced Notification Transmission is another electronic file
               (separate from the Eligibility Transmission) that will be sent to
               the CONTRACTOR when an individual has selected the MCO prior to
               becoming eligible for Medicaid. These individuals may or may not
               become eligible for Medicaid. Use of information about such
               individuals is restricted to providing the individual with an
               orientation to the MCO prior to the individual's eligibility for
               Medicaid. The CONTRACTOR is not required to orient individuals
               until they appear on the Eligibility Transmission.

     8.   CHANGE OF ENROLLMENT PROCEDURES

          The CONTRACTOR will be advised of anticipated changes in DEPARTMENT
          policies and procedures as they relate to the enrollment process and
          their comments will be solicited. The CONTRACTOR agrees to be bound by
          such changes in DEPARTMENT policies and procedures that are mutually
          agreed upon by the CONTRACTOR and the DEPARTMENT.

B.   MEMBER ORIENTATION

     1.   INITIAL CONTACT - GENERAL ORIENTATION

          The CONTRACTOR will make a good faith effort to ensure that each
          Enrollee or Enrollee's family or guardian receives the CONTRACTOR's
          member handbook. The CONTRACTOR representative will make a good faith
          effort, as evidenced in written or electronic records, to make an
          initial contact with the Enrollee within 10 working days after the
          CONTRACTOR has been notified through the Eligibility Transmission of
          the Enrollee's MCO enrollment. The initial contact will be in person
          or by telephone (or in writing, but only if reasonable attempts have
          been made to make the contact in person by telephone) and will inform
          the Enrollee of the MCO rules and policies. The CONTRACTOR must ensure
          that Enrollees are provided interpreters, Telecommunication Device for
          the Deaf (TDD), and other auxiliary aids to ensure that Enrollees
          understand their rights and responsibilities. During the initial
          contact the CONTRACTOR Representative will provide, at a minimum, the
          following information to the Enrollee or potential Enrollee
          appropriate to the Enrollee's eligibility (Traditional versus
          Non-Traditional Medicaid):

          a.   specific written and oral instructions on the use of the
               CONTRACTOR's Covered Services and procedures;
          b.   availability and accessibility of all Covered Services, including
               the availability of family planning services and that the
               Enrollee may obtain family planning

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

               services from Medicaid providers other than providers affiliated
               with the CONTRACTOR;
          c.   the client's rights and responsibilities as an Enrollee of the
               MCO, including the right to file a grievance and how to file a
               grievance;
          d.   the right to terminate enrollment with the MCO; and
          e.   encouragement to make a medical appointment with a provider.

     2.   IDENTIFICATION OF ENROLLEES WITH SPECIAL HEALTH CARE NEEDS

          During the initial contact with each Enrollee, the CONTRACTOR
          representative will use a process that will identify children and
          adults with special health care needs. The CONTRACTOR representative
          will clearly describe to each Enrollee during the initial contact the
          process for requesting specialist care. When an Enrollee is identified
          as having special health care needs, the CONTRACTOR Representative
          will forward this information to a CONTRACTOR individual with
          knowledge of coordination of care and services necessary for such
          Enrollees. The CONTRACTOR individual with knowledge of coordination of
          care for Enrollees with special health care needs will make a good
          faith effort to contact Enrollees within ten working days after
          identification to begin coordination of health care needs, if
          necessary. The CONTRACTOR will not discriminate on the basis of health
          status or the need for health care services.

          The DEPARTMENT's Health Program Representatives are responsible to
          forward information, i.e., pink sheets identifying Enrollees with
          special health care needs and limited language proficiency needs to
          the CONTRACTOR in a timely way coinciding with the daily Eligibility
          Transmission as much as possible.

     3.   INABILITY TO CONTACT ENROLLEE FOR ORIENTATION

          If the CONTRACTOR's representative cannot contact the Enrollee within
          10 working days or at all, the CONTRACTOR representative will document
          its efforts to contact the Enrollee.

     4.   ENROLLEES RECEIVING OUT-OF-PLAN CARE PRIOR TO ORIENTATION

          If the Enrollee receives Covered Services by an out-of-plan provider
          after the first day of the month in which the client's enrollment
          became effective, and if a CONTRACTOR orientation either in-person or
          by telephone (or in writing, but only if reasonable attempts have been
          made to make the contact in person or by telephone) has not taken
          place prior to receiving such services, the CONTRACTOR is responsible
          for payment of the services rendered provided the DEPARTMENT informs
          the CONTRACTOR by the 20th of any month prior to the month that MCO
          enrollment begins.

C.   MARKETING AND MEMBER EDUCATION

     1.   APPROVAL OF MARKETING MATERIALS

          The CONTRACTOR's marketing plans, procedures and materials will be
          accurate, and may not mislead, confuse, or defraud either Enrollees or
          the DEPARTMENT. All Medicaid marketing plans, procedures and materials
          will be reviewed and approved by

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          the DEPARTMENT in consultation with the Medical Care Advisory
          Committee for Marketing Review before implemented or released by the
          CONTRACTOR. The DEPARTMENT will notify the CONTRACTOR of its approval
          or disapproval, in writing, of such materials within ten working days
          after receiving them unless the DEPARTMENT and the CONTRACTOR agree to
          another time frame. If the DEPARTMENT does not respond within the
          agreed upon time frame, the CONTRACTOR shall deem such materials
          approved. Marketing materials will not be approved if the DEPARTMENT
          determines that the material is materially inaccurate or misleading or
          otherwise makes material misrepresentations. Health education
          materials and newsletters not specifically related to Enrollees do not
          need to be approved by the DEPARTMENT.

          a.   NO DOOR-TO-DOOR, TELEPHONIC, OR "COLD CALL" MARKETING

               The CONTRACTOR cannot, either directly or indirectly, conduct
               door-to-door, telephonic or "cold call" marketing of enrollment.
               These three marketing practices are prohibited whether conducted
               by the CONTRACTOR itself ("directly") or by an agent or
               independent contractor ("indirectly"). Cold call marketing is any
               unsolicited personal contact with a potential Enrollee by an
               employee or agent of a managed care entity for the purpose of
               influencing the individual to enroll with the CONTRACTOR's health
               plan. The CONTRACTOR may not entice a potential Enrollee to join
               its health plan by offering the sale of any other type of
               insurance as a bonus for enrollment. All other non-requested
               marketing approaches to Medicaid clients by the CONTRACTOR are
               also prohibited unless specifically approved in advance by the
               DEPARTMENT.

          b.   DISTRIBUTION OF MARKETING MATERIALS

               Marketing materials must be distributed to the entire Service
               Area.

     2.   ENROLLEE MATERIALS MUST BE COMPREHENSIBLE

          The CONTRACTOR will attempt to write all Enrollee and potential
          Enrollee information, instructional and educational materials,
          including member handbooks, at no greater than a sixth grade reading
          level. If the MCO has more than 5% of its Enrollees who speak a
          language other than English as a first language, the CONTRACTOR must
          make available written material (e.g. member handbooks, educational
          newsletters) in that language. Marketing materials must include a
          statement that the CONTRACTOR does not discriminate against any
          Enrollee on the basis of race, color, national origin, disability, or
          age in admission, treatment, or participation in its programs,
          services and activities. In addition, the materials must include the
          phone number of the nondiscrimination coordinator for Enrollees to
          call if they have questions about the nondiscrimination policy or
          desire to file a complaint or grievance alleging violations of the
          nondiscrimination policy.

     3.   MEMBER HANDBOOK

          The CONTRACTOR will produce a member handbook that must be submitted
          to the

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          DEPARTMENT for review and approval before distribution. The DEPARTMENT
          will notify the CONTRACTOR in writing of its approval or disapproval
          within ten working days after receiving the member handbook unless the
          DEPARTMENT and CONTRACTOR agree to another time frame. If the
          DEPARTMENT does not respond within the agreed upon time frame, the
          CONTRACTOR may deem such materials are approved. If there are changes
          to the content of the material in the handbook, the CONTRACTOR must
          update the member handbook and submit a draft to the DEPARTMENT for
          review and approval before distribution to its Enrollees. At a
          minimum, the member handbook must explain in clear terms the following
          information:

          a.   The scope of benefits provided by the CONTRACTOR delineating
               Traditional versus Non-Traditional Medicaid scopes of service;
          b.   Instructions on where and how to obtain Covered Services,
               including referral requirements;
          c.   Instructions on what to do in an emergency or urgent medical
               situation, including emergency numbers;
          d.   Enrollee options on obtaining family planning services;
          e.   Instructions on how to choose a PCP and how to change PCPs;
          f.   Description on Enrollee cost-sharing requirements (if
               applicable);
          g.   Toll-free telephone number;
          h.   Description of Member Services function;
          i.   How to register a complaint or grievance;
          j.   Information on Advance Directives;
          k.   Services covered by Medicaid, but not covered by the CONTRACTOR;
          1.   Clients' rights and responsibilities;
          m.   A statement that the CONTRACTOR does not discriminate against any
               Enrollee on the basis of race, color, national origin,
               disability, or age in admission, treatment, or participation in
               its programs, services and activities; and
          n.   The phone number of the nondiscrimination coordinator for
               Enrollees to call if they have questions about the
               nondiscrimination policy or desire to file a complaint or
               grievance alleging violations of the nondiscrimination policy.

     4.   NOTIFICATION TO ENROLLEES OF POLICIES AND PROCEDURES

          a.   CHANGES TO POLICIES AND PROCEDURES

               The CONTRACTOR must periodically notify Enrollees, in writing, of
               changes to its plan such as changes to its policies or procedures
               either through a newsletter or other means.

          b.   ANNUAL EDUCATION ON EMERGENCY CARE AND GRIEVANCE PROCEDURES

               The CONTRACTOR must annually reinforce, in writing, to Enrollees
               how to access emergency and urgent services and how to register a
               complaint or grievance.

     5.   MONTHLY NOTIFICATION TO DEPARTMENT OF CHANGES IN PROVIDER NETWORK

          The CONTRACTOR must notify the DEPARTMENT at least monthly of changes
          in its

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          provider network so that the DEPARTMENT can ensure its listing of
          providers is accurate.

D.   DISENROLLMENT BY ENROLLEE

     1.   ENROLLEE's RIGHT TO DISENROLL

          Enrollees will have the right to disenroll from this MCO at any time
          with or without cause. The disenrollment will be effective once the
          DEPARTMENT has been notified by the Enrollee and the DEPARTMENT issues
          a new Medicaid card and the disenrollment is indicated on the
          Eligibility Transmission.

     2.   ENROLLEES IN AN INPATIENT HOSPITAL SETTING

          The DEPARTMENT agrees that if a new Enrollee is a patient in an
          inpatient hospital setting on the date the new Enrollee's name appears
          on the CONTRACTOR Eligibility Transmission, the obligation of the
          CONTRACTOR to provide Covered Services to such person will commence
          following discharge. If an Enrollee is a patient in an inpatient
          hospital setting on the date that his or her name appears as a deleted
          Enrollee on the CONTRACTOR Eligibility Transmission or he or she is
          otherwise disenrolled under this Contract, the CONTRACTOR will remain
          financially responsible for such care until discharge.

     3.   ANNUAL STUDY OF ENROLLEES WHO DISENROLLED

          Annually, the DEPARTMENT and CONTRACTOR will work cooperatively to
          conduct an analysis of Enrollees who have voluntarily disenrolled from
          this MCO. The results of the analysis will include explanations of
          patterns of disenrollments and strategies or a corrective action plan
          to address unusual rates or patterns of disenrollment. The DEPARTMENT
          will inform the CONTRACTOR of such disenrollments.

E.   DISENROLLMENT BY CONTRACTOR

     1.   CANNOT DISENROLL FOR ADVERSE CHANGE IN ENROLLEE's HEALTH

          The CONTRACTOR may not terminate enrollment because of an adverse
          change in the Enrollee's health.

     2.   VALID REASONS FOR DISENROLLMENT

          The CONTRACTOR may initiate disenrollment of any Enrollee's
          participation in the MCO upon one or more of the following grounds:

          a.   For reasons specifically identified in the CONTRACTOR's member
               handbook.
          b.   When the Enrollee ceases to be eligible for medical assistance
               under the State Plan, in accordance with Title 42 USCA, 1396, et.
               seq., and as finally determined by the DEPARTMENT.
          c.   Upon termination or expiration of the Contract.
          d.   Death of the Enrollee.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          e.   Confinement of the Enrollee in an institution when confinement is
               not a Covered Service under this Contract.
          f.   Violation of enrollment requirements developed by the CONTRACTOR
               and approved by the DEPARTMENT but only after the CONTRACTOR
               and/or the Enrollee has exhausted the CONTRACTOR's applicable
               internal grievance procedure.

     3.   APPROVAL BY DEPARTMENT REQUIRED

          To initiate disenrollment of an Enrollee's participation with this
          MCO, the CONTRACTOR will provide the DEPARTMENT with documentation
          justifying the proposed disenrollment. The DEPARTMENT will approve or
          deny the disenrollment request in writing within thirty (30) days of
          receipt of the request. Failure by the DEPARTMENT to deny a
          disenrollment request within such thirty (30) day period will
          constitute approval of such disenrollment requests.

     4.   ENROLLEE's RIGHT TO FILE A GRIEVANCE

          If the DEPARTMENT approves the CONTRACTOR's disenrollment request, the
          CONTRACTOR will give the Enrollee thirty (30) days written notice of
          the proposed disenrollment, and will notify the Enrollee of his or her
          opportunity to invoke the internal grievance procedure and appeals
          process for a fair hearing. The CONTRACTOR will give a copy of the
          written notice to the DEPARTMENT at the time the notice is sent to the
          Enrollee.

     5.   REFUSAL OF RE-ENROLLMENT

          If a person is disenrolled because of violation of responsibilities
          included in the CONTRACTOR's member handbook, the CONTRACTOR may
          refuse re-enrollment of that Enrollee.

F.   ENROLLEE TRANSITION BETWEEN MCOs

     1.   MUST ACCEPT PRE-ENROLLMENT PRIOR AUTHORIZATIONS

          For Covered Services other than inpatient, home health services, and
          medical equipment, if authorization has been given for a Covered
          Service and an enrollee transitions between MCOs prior to the delivery
          of such Covered Service, the receiving MCO shall be bound by the
          relinquishing MCO's prior authorization until the receiving MCO has
          evaluated the medical necessity of the service and agrees with the
          relinquishing MCO's prior authorization or has made a different
          determination. (See Article IV, Benefits, Section F, Clarification of
          Payment Responsibilities, Subsection 5, for inpatient, home health
          services, and medical equipment explanations.)

     2.   MUST PROVIDE MEDICAL RECORDS TO ENROLLEE's NEW MCO

          When enrollees are transitioned between MCOs the relinquishing MCO's
          provider will submit, upon request of the new MCO's provider, any
          critical medical information about the transitioning enrollee prior to
          the transition including, but not limited to, whether the

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          member is hospitalized, pregnant, involved in the process of organ
          transplantation, scheduled for surgery or post-surgical follow-up on a
          date subsequent to transition, scheduled for prior-authorized
          procedures or therapies on a date subsequent to transition, receiving
          dialysis or is chronically ill (e.g. diabetic, hemophilic, HIV
          positive).

G.   ENROLLEE TRANSITION FROM FEE-FOR-SERVICE TO MCO OR FROM MCO TO
     FEE-FOR-SERVICE

     1.   CONTRACTOR MUST ACCEPT PRE-ENROLLMENT PRIOR AUTHORIZATIONS

          For Covered Services other than inpatient, home health services, and
          medical equipment, if authorization has been given for a Covered
          Service and a Medicaid client transitions from Medicaid
          fee-for-service to enrollment with the CONTRACTOR's health plan prior
          to the delivery of such Covered Service, the CONTRACTOR shall be bound
          by the DEPARTMENT's fee-for-service prior authorization until the
          CONTRACTOR has evaluated the medical necessity of the service and
          agrees with the DEPARTMENT's fee-for-service prior authorization or
          has made a different determination. (See Article IV, Benefits, Section
          F, Clarification of Payment Responsibilities, Subsection 5, for
          inpatient, home health services, and medical equipment explanations.)

     2.   DEPARTMENT MUST ACCEPT CONTRACTOR's PRIOR AUTHORIZATION

          For Covered Services other than inpatient, home health services, and
          medical equipment, if authorization has been given for a Covered
          Service and an Enrollee transitions to Medicaid fee-for-service prior
          to the delivery of such Covered Service, the DEPARTMENT shall be bound
          by the CONTRACTOR's prior authorization until the DEPARTMENT has
          evaluated the medical necessity of the service and agrees with the
          CONTRACTOR's fee-for-service prior authorization or has made a
          different determination. (See Article IV, Benefits, Section F,
          Clarification of Payment Responsibilities, Subsection 5, for
          inpatient, home health services, and medical equipment explanations.)

     3.   MUST PROVIDE MEDICAL RECORDS TO ENROLLEE's MCO OR TO THE DEPARTMENT

          When enrollees are transitioned from MCO to fee-for-service or from
          fee-for-service to MCO, the relinquishing entity (MCO or DEPARTMENT)
          will submit, upon request of the new entity, any critical medical
          information about the transitioning Medicaid client prior to the
          transition including, but not limited to, whether the member is
          hospitalized, pregnant, involved in the process of organ
          transplantation, scheduled for surgery or post-surgical follow-up on a
          date subsequent to transition, scheduled for prior-authorized
          procedures or therapies on a date subsequent to transition, receiving
          dialysis or is chronically ill (e.g. diabetic, hemophilic, HIV
          positive).

                              ARTICLE IV - BENEFITS

A.   IN GENERAL

     The CONTRACTOR will provide to Enrollees under this Contract, directly or
     through arrangements with subcontractors, all Medically Necessary Covered
     Services described in

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     Attachment C as promptly and continuously as is consistent with generally
     accepted standards of medical practice. The subcontractors will follow
     generally accepted standards of medical care in diagnosing Enrollees who
     request services from the CONTRACTOR.

B.   PROVIDER SERVICES FUNCTION

     The CONTRACTOR must operate a Provider Services function during regular
     business hours. At a minimum, Provider Services staff must be responsible
     for the following:

     1.   Training, including ongoing training, of the CONTRACTOR's providers on
          Medicaid rules and regulations that will enable providers to
          appropriately render services to Enrollees;
     2.   Assisting providers to verify whether an individual is enrolled with
          the MCO;
     3.   Assisting providers with prior authorization and referral protocols;
     4.   Assisting providers with claims payment procedures;
     5.   Fielding and responding to provider questions and complaints and
          grievances.

C.   SCOPE OF SERVICES

     1.   RESPONSIBLE FOR ALL BENEFITS IN ATTACHMENT C (COVERED SERVICES)

          Except as otherwise provided for cases of Emergency Services, the
          CONTRACTOR has the exclusive right and responsibility to arrange for
          all benefits listed in Attachment C. The CONTRACTOR is responsible for
          payment of Emergency Services 24 hours a day and 7 days a week whether
          the service was provided by a network or out-of-network provider and
          whether the service was provided in or out of the CONTRACTOR's Service
          Area.

     2.   CHANGES TO BENEFITS

          Amendments, revisions, or additions to the State Plan or to State or
          Federal regulations, guidelines, or policies and court or
          administrative orders will, insofar as they affect the scope or nature
          of benefits available to Enrollees, be amendments to the Covered
          Services under Attachment C. The DEPARTMENT will notify the
          CONTRACTOR, in writing, of any such changes and their effective date.
          Rate adjustments, when appropriate, will be negotiated between the
          DEPARTMENT and the CONTRACTOR.

     3.   MEDICAL NECESSITY DENIALS

          When the CONTRACTOR determines that a service will not be covered due
          to the lack of medical necessity, the CONTRACTOR must send all
          documentation supporting their decision to the DEPARTMENT for its
          review before the CONTRACTOR's determination is deemed final, when the
          following conditions are met:

          a.   there are no established national standards for determining
               medical necessity and
          b.   the DEPARTMENT does not have medical necessity criteria for the
               service.

          The  DEPARTMENT will review the documentation and determine what the

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          DEPARTMENT's decision would be regarding coverage for the service. The
          DEPARTMENT and the CONTRACTOR will work collaboratively in making a
          final decision on whether the service is to be covered by the
          CONTRACTOR.

D.   SUBCONTRACTS

     1.   NO DISCRIMINATION BASED ON LICENSE OR CERTIFICATION

          The CONTRACTOR shall not discriminate against providers with respect
          to participation, reimbursement, or indemnification as to any provider
          who is acting within the scope of that provider's license or
          certification under applicable State law solely on the basis of the
          provider's license or certification.

     2.   ANY COVERED SERVICE MAY BE SUBCONTRACTED.

          Any Covered Service may be subcontracted. All subcontracts will be in
          writing and will include the general requirements of this Contract
          that are appropriate to the service or activity including
          confidentiality requirements and will assure that all duties of the
          CONTRACTOR under this Contract are performed. No subcontract
          terminates the legal responsibility of the CONTRACTOR to the
          DEPARTMENT to assure that all activities under this Contract are
          carried out. The CONTRACTOR will make all subcontracts available upon
          request.

     3.   NO PROVISIONS TO REDUCE OR LIMIT MEDICALLY NECESSARY SERVICES

          The CONTRACTOR will ensure that subcontractors abide by the
          requirements of Section 1128(b) of the Social Security Act prohibiting
          the CONTRACTOR and other such providers from making payments directly
          or indirectly to a physician or other provider as an inducement to
          reduce or limit Medically Necessary services provided to Enrollees.

     4.   REQUIREMENT OF 60 DAYS WRITTEN NOTICE PRIOR TO TERMINATION OF CONTRACT

          All subcontracts and agreements will include a provision stating that
          if either party (the subcontractor or CONTRACTOR) wishes to terminate
          the subcontract or agreement, whichever party initiates the
          termination will give the other party written notice of termination at
          least 60 calendar days prior to the effective termination date. The
          CONTRACTOR will notify the DEPARTMENT of the termination on the same
          day that the CONTRACTOR either initiates termination or receives the
          notice of termination from the subcontractor.

     5.   COMPLIANCE WITH CONTRACTOR's QUALITY ASSURANCE PLAN

          All of the CONTRACTOR's providers must be aware of the CONTRACTOR's
          Quality Assurance Plan and activities. All subcontracts with the
          CONTRACTOR must include a requirement securing cooperation with the
          CONTRACTOR's Quality Assurance Plan and activities and must allow the
          CONTRACTOR access to the subcontractor's medical records of its
          Enrollees.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     6.   UNIQUE IDENTIFIER REQUIRED

          All physicians who provide services under this Contract must have a
          unique identifier in accordance with the system established under
          section 1173(b) of the Social Security Act and in accordance with the
          Health Insurance Portability and Accountability Act.

     7.   PAYMENT OF PROVIDER CLAIMS

          The CONTRACTOR must pay its providers on a timely basis consistent
          with the claims payment procedures described in section 1902(a)(37)(A)
          of the Social Security Act and the implementing Federal regulation at
          42 CFR 447.45, unless the provider and CONTRACTOR agree to an
          alternate payment schedule. The Contractor must ensure that 90 percent
          of claims for payment (for which no further written information or
          substantiation is required in order to make payment) made for Covered
          Services and furnished by its providers are paid within 30 days of
          receipt of such claims and that 99 percent of such claims are paid
          within 90 days of the date of receipt of such claims.

     8.   FEDERALLY QUALIFIED HEALTH CENTERS (FQHCs)

          If the CONTRACTOR enters into a subcontract with a Federally Qualified
          Health Center (FQHC), the CONTRACTOR will reimburse the FQHC an amount
          not less than what the CONTRACTOR pays comparable providers that are
          not FQHCs.

E.   CLARIFICATION OF COVERED SERVICES

     1.   EMERGENCY SERVICES

          a.   IN GENERAL

               The CONTRACTOR must provide coverage for Emergency Services
               without regard to prior authorizations or the emergency care
               provider's contractual relationship with the CONTRACTOR. The
               CONTRACTOR must inform their Enrollees that access to Emergency
               Services is not restricted and that if an Enrollee experiences a
               medical emergency, he or she may obtain services from a non-plan
               physician or other qualified provider, without penalty. However,
               the CONTRACTOR may require the Enrollee to notify the CONTRACTOR
               within a specified time after the Enrollee's condition is
               stabilized, and may require the Enrollee to obtain prior
               authorization for any follow-up care delivered pursuant to the
               emergency. The CONTRACTOR must comply with Medicare guidelines
               for post-stabilization of care.

               The CONTRACTOR must pay for services where the presenting
               symptoms are of sufficient severity that a person with average
               knowledge of health and medicine would reasonably expect the
               absence of immediate medical attention to result in placing the
               health of the individual (or, with respect to a pregnant woman,
               the health of a woman or her unborn child) in serious jeopardy;
               serious impairment to bodily functions; or serious dysfunction of
               any bodily organ or part.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

               The CONTRACTOR may not retroactively deny a claim for an
               emergency screening examination because the condition, which
               appeared to be an emergency medical condition under the prudent
               layperson standard, turned out to be non-emergency in nature.

          b.   DETERMINING LIABILITY FOR EMERGENCY SERVICES

               1)   Presence of a clinical emergency

                    If the screening examination leads to a clinical
                    determination by the examining physician that an actual
                    emergency medical condition exists, the CONTRACTOR must pay
                    for both the services involved in the screening examination
                    and the services required to stabilize the Enrollee.

               2)   Emergency services continue until the Enrollee can be safely
                    discharged or transferred

                    The CONTRACTOR must pay for all Emergency Services that are
                    Medically Necessary until the clinical emergency is
                    stabilized. This includes all treatment that may be
                    necessary to assure, within reasonable medical probability,
                    that no material deterioration of the Enrollee's condition
                    is likely to result from, or occur during, discharge of the
                    Enrollee or transfer of the Enrollee to another facility. If
                    there is a disagreement between a hospital and the
                    CONTRACTOR concerning whether the Enrollee is stable enough
                    for discharge or transfer, or whether the medical benefits
                    of an unstabilized transfer outweigh the risks, the
                    judgement of the attending physician(s) actually caring for
                    the Enrollee at the treating facility prevails and is
                    binding on the CONTRACTOR. The CONTRACTOR may establish
                    arrangements with hospitals whereby the CONTRACTOR may send
                    one of its own physicians with appropriate ER privileges to
                    assume the attending physician's responsibilities to
                    stabilize, treat, and transfer the Enrollee.

               3)   Absence of a clinical emergency

                    If the screening examination leads to a clinical
                    determination by the examining physician that an actual
                    emergency medical condition did not exist, then the
                    determining factor for payment liability should be whether
                    the Enrollee had acute symptoms of sufficient severity at
                    the time of presentation. In these cases, the CONTRACTOR
                    must review the presenting symptoms of the Enrollee and must
                    pay for all services involved in the screening examination
                    where the presenting symptoms (including severe pain) were
                    of sufficient severity to have warranted emergency attention
                    under the prudent layperson standard.

               4)   Referrals

                    When an Enrollee's Primary Care Physician or other plan
                    representative instructs the Enrollee to seek emergency care
                    in or out of network, the

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

                    CONTRACTOR is responsible for payment of the medical
                    screening examination and for other Medically Necessary
                    Emergency Services, without regard to whether the Enrollee
                    meets the prudent layperson standard.

     2.   CARE PROVIDED IN SKILLED NURSING FACILITIES

          a.   IN GENERAL: STAYS LASTING 30 DAYS OR LESS

               The CONTRACTOR may provide long term care for Enrollees in
               skilled nursing facilities and then reimburse such facilities
               when the plan of care includes a prognosis of recovery and
               discharge within 30 days. It is the responsibility of a
               CONTRACTOR physician to make the determination if the patient
               will require the services of a nursing facility for fewer or
               greater than 30 days.

          b.   PROCESS FOR STAYS LONGER THAN 30 DAYS

               When the prognosis of an Enrollee indicates that long term care
               greater than 30 days will be required, the following process will
               occur:

               1)   The CONTRACTOR will notify the Enrollee, hospital discharge
                    planner, and nursing facility that the CONTRACTOR will not
                    be responsible for the services provided for the Enrollee
                    during the stay at the skilled nursing facility.

               2)   The CONTRACTOR will notify the DHCF, Bureau of Managed
                    Health Care (BMHC) of this determination and the BMHC will
                    change the status of the Enrollee to fee-for-service.

          c.   PROCESS FOR STAYS LESS THAN 30 DAYS

               When the prognosis of skilled nursing facility services is
               anticipated to be less than 30 days, but during the 30-day period
               the CONTRACTOR determines that the Enrollee will require skilled
               nursing facility services for greater than 30 days, the following
               process will be in effect:

               1)   The CONTRACTOR will notify the nursing facility that a
                    determination has been made that the Enrollee will require
                    services for more than 30 days.

               2)   The CONTRACTOR will notify the DHCF, Bureau of Managed
                    Health Care, of the determination that the Enrollee will
                    require services in a nursing facility for more than 30
                    days.

               3)   The CONTRACTOR will be responsible for payment for three
                    working days after the CONTRACTOR has notified the nursing
                    facility that skilled nursing care will be required for more
                    than 30 days.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     3.   ENROLLEES WITH SPECIAL HEALTH CARE NEEDS

          a.   IN GENERAL

               The CONTRACTOR will ensure there is access to all Medically
               Necessary Covered Services to meet the health needs of Enrollees
               with special health care needs. Individuals with special health
               care needs are those who have or are at increased risk for
               chronic physical, developmental, behavioral, or emotional
               conditions and who also require health and related services of a
               type or amount beyond that required by adults and children
               generally.

          b.   IDENTIFICATION

               The CONTRACTOR will identify Enrollees with special health care
               needs using a process at the initial contact made by the
               CONTRACTOR Representative to educate the client and will offer
               the client care coordination or case management services. Care
               coordination services are services to assist the client in
               obtaining Medically Necessary Covered Services from the
               CONTRACTOR or another entity if the medical service is not
               covered under the Contract.

          c.   CHOOSING A PRIMARY CARE PROVIDER

               The CONTRACTOR will have a mechanism to inform care givers and,
               when appropriate, Enrollees with special health care needs about
               primary care providers who have training in caring for such
               Enrollees so that an informed selection of a provider can be
               made. The CONTRACTOR will have primary care providers with skills
               and experience to meet the needs of Enrollees with special health
               care needs. The CONTRACTOR will allow an appropriate specialist
               to be the primary care provider but only if the specialist has
               the skills to monitor the Enrollee's preventive and primary care
               services.

          d.   REFERRALS AND ACCESS TO SPECIALTY PROVIDERS

               The CONTRACTOR will ensure there is access to appropriate
               specialty providers to provide Medically Necessary Covered
               Services for adults and children with special health care needs.
               If the CONTRACTOR does not employ or contract with a specialty
               provider to treat a special health care condition at the time the
               Enrollee needs such Covered Services, the CONTRACTOR will have a
               process to allow the Enrollee to receive Covered Services from a
               qualified specialist who may not be affiliated with the
               CONTRACTOR. The CONTRACTOR will reimburse the specialist for such
               care at no less than Medicaid's rate for the service when the
               service is rendered. The process for requesting specialist's care
               will be clearly described by the CONTRACTOR and explained to each
               Enrollee during the initial contact with the Enrollee.

               If the CONTRACTOR restricts the number of referrals to
               specialists, the CONTRACTOR will not penalize those providers who
               make such referrals for Enrollees with special health care needs.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          e.   SURVEY OF ENROLLEES WITH SPECIAL HEALTH CARE NEEDS

               At least every two years, the CONTRACTOR in conjunction with the
               DEPARTMENT will survey a sample of Enrollees with special health
               care needs using a national consumer assessment questionnaire, to
               evaluate their perceptions of services they have received. The
               survey process, including the survey instrument, will be
               standardized and developed collaboratively between the DEPARTMENT
               and all contracting MCOs. The DEPARTMENT will analyze the results
               of the surveys. The results and analysis of the surveys will be
               reviewed by the CONTRACTOR's quality assurance committee for
               action.

          f.   COLLABORATION WITH OTHER PROGRAMS

               If the individual with special health care needs is enrolled in
               the Prepaid Mental Health Plan or is enrolled in any of the
               Medicaid home and community-based waiver programs and is
               receiving case management services through that program, or is
               covered by one of the other Medicaid targeted case management
               programs, the CONTRACTOR care coordinator will collaborate with
               the appropriate program person, i.e., the targeted case manager,
               etc., for that program once the program person has contacted the
               CONTRACTOR care coordinator. When necessary, the CONTRACTOR care
               coordinator will make an effort to contact the program person of
               those Enrollees who have medical needs that require such
               coordination.

               The CONTRACTOR must coordinate health care needs for children
               with special health care needs with the services of other
               agencies (e.g., mental and substance abuse, public health
               departments, transportation, home and community based care,
               developmental disabilities, Title V, local schools, IDA programs,
               and child welfare), and with families, caregivers, and advocates.

          g.   REQUIRED ELEMENTS OF A CASE MANAGEMENT SYSTEM

               A case management system includes but is not limited to:

               1)   procedures and the capacity to implement the provision of
                    individual needs assessment including the screening for
                    special needs (e.g. mental health, high risk health
                    problems, functional problems, language or comprehension
                    barriers); the development of an individual treatment plan
                    as necessary based on the needs assessment; the
                    establishment of treatment objectives, treatment follow-up,
                    the monitoring of outcomes, and a process to ensure that
                    treatment plans are revised as necessary. These procedures
                    will be designed to accommodate the specific cultural and
                    linguistic needs of the Enrollee;

               2)   procedures designed to address those Enrollees, including
                    children with special health care needs, who may require
                    services from multiple providers, facilities and agencies
                    and require complex coordination of benefits and services,
                    including social services and other community resources;

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

               3)   a strategy to ensure that all Enrollees and/or authorized
                    Family Members or guardians are involved in treatment
                    planning and consent to the medical treatment;

               4)   procedures and criteria for making referrals and
                    coordinating care by specialists and sub-specialists that
                    will promote continuity as well as cost-effectiveness of
                    care; and

               5)   procedures to provide continuity of care for new Enrollees
                    to prevent disruption in the provision of Covered Services
                    that include, but are not limited to, appropriate case
                    management staff able to evaluate and handle individual case
                    transition and care planning, internal mechanisms to
                    evaluate plan networks and special case needs.

          h.   HOSPICE

               If an Enrollee is receiving hospice services at the time of
               enrollment in the MCO or if the Enrollee is already enrolled in
               the MCO and has less than six months to live, the Enrollee will
               be offered hospice services or the continuation of hospice
               services if he or she is already receiving such services prior to
               enrollment in the MCO.

     4.   INPATIENT HOSPITAL SERVICES

          If a CONTRACTOR's provider admits an Enrollee for inpatient hospital
          care, the CONTRACTOR has the responsibility for all services needed by
          the Enrollee during the hospital stay that are ordered by the
          CONTRACTOR's provider. Needed services include but are not limited to
          diagnostic tests, pharmacy, and physician services, including services
          provided by psychiatrists. If diagnostic tests conducted during the
          inpatient stay reveal that the Enrollee's condition is outside the
          scope of the CONTRACTOR's responsibility, the CONTRACTOR remains
          responsible for the Enrollee until the Enrollee is discharged or until
          responsibility is transferred to another appropriate entity and the
          entity agrees to take financial responsibility, including negotiating
          a payment for services. If the Enrollee is discharged and needs
          further services, the admitting CONTRACTOR will coordinate with the
          other appropriate entity to ensure continued care is provided. The
          CONTRACTOR and appropriate entity will work cooperatively in the best
          interest of the Enrollee. The appropriate entity includes, but is not
          limited to, a Prepaid Mental Health Plan or another MCO.

     5.   MATERNITY STAYS

          a.   THE NEWBORNS' AND MOTHERS' HEALTH PROTECTION ACT (NMHPA)

               The CONTRACTOR must meet the requirements of the Newborns' and
               Mothers' Health Protection Act (NMHPA). The CONTRACTOR must
               record early discharge information for monitoring, quality, and
               improvement purposes. The CONTRACTOR will ensure that coverage is
               provided with respect to a mother who is an Enrollee and her
               newborn child for a minimum of 48 hours of inpatient care
               following a normal vaginal delivery, and a minimum of 96 hours

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                                  Page 20 of 54

<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

               of inpatient care following a caesarean section, without
               requiring the attending provider to obtain authorization from the
               CONTRACTOR in order to keep a mother and her newborn child in the
               inpatient setting for such period of time.

          b.   EARLY DISCHARGES

               Notwithstanding the prior sentence, the CONTRACTOR will not be
               required to provide coverage for post-delivery inpatient care for
               a mother who is an Enrollee and her newborn child during such
               period of time if (1) a decision to discharge the mother and her
               newborn child prior to the expiration of such period is made by
               the attending provider in consultation with the mother; and (2)
               the CONTRACTOR provides coverage for timely post-delivery
               follow-up care.

          c.   POST-DELIVERY CARE

               Post-delivery care will be provided to a mother and her newborn
               child by a registered nurse, physician, nurse practitioner, nurse
               midwife or physician assistant experienced in maternal and child
               health in (1) the home, a provider's office, a hospital, a
               federally qualified health center, a federally qualified rural
               health clinic, or a State health department maternity clinic; or
               (2) another setting determined appropriate under regulations
               promulgated by the Secretary of Health and Human Services,
               (including a birthing center or an intermediate care facility);
               except that such coverage will ensure that the mother has the
               option to be provided with such care in the home.

          d.   TIMELY POST-DELIVERY CARE

               "Timely post-delivery care" means health care that is provided
               (1) following the discharge of a mother and her newborn child
               from the inpatient setting; and (2) in a manner that meets the
               health needs of the mother and her newborn child, that provides
               for the appropriate monitoring of the conditions of the mother
               and child, and that occurs within the 24 to 72 hour period
               immediately following discharge.

     6.   CHILDREN IN CUSTODY OF THE DEPARTMENT OF HUMAN SERVICES

          a.   IN GENERAL

               The CONTRACTOR will work with the Division of Child and Family
               Services (DCFS) or the Division of Youth Corrections (DYC) in the
               Department of Human Services (DHS) to ensure systems are in place
               to meet the health needs of children in custody of the Department
               of Human Services. The CONTRACTOR will ensure these children
               receive timely access to appointments through coordination with
               DCFS or DYC. The CONTRACTOR must have available providers who
               have experience and training in abuse and neglect issues.

               The CONTRACTOR or its providers will make every reasonable effort
               to ensure that a child who is in custody of the Department of
               Human Services may

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

               continue to use the provider with whom the child has an
               established professional relationship when the provider is part
               of the CONTRACTOR's network. The CONTRACTOR will facilitate
               timely appointments with the provider of record to ensure
               continuity of care for the child.

               While it is the CONTRACTOR's responsibility to ensure Enrollees
               who are children in the custody of DHS have access to needed
               services, DHS personnel are primarily responsible to assist
               children in custody in arranging for and getting to medical
               appointments and evaluations with the CONTRACTOR's network of
               providers. DHS staff are primarily responsible for contacting the
               CONTRACTOR to coordinate care for children in custody and
               informing the CONTRACTOR of the special health care needs of
               these Enrollees. The Fostering Healthy Children staff may assist
               the DHS staff in performing these functions by communicating with
               the CONTRACTOR.

          b.   SCHEDULE OF VISITS

               1)   Where physical and/or sexual abuse is suspected

                    In cases where the child protection worker suspects physical
                    and/or sexual abuse, the CONTRACTOR will ensure that the
                    child has access to an appropriate examination within 24
                    hours of notification that the child was removed from the
                    home. If the CONTRACTOR cannot provide an appropriate
                    examination, the CONTRACTOR will ensure the child has access
                    to a provider who can provide an appropriate examination
                    within the 24 hour period.

               2)   All other cases

                    In all other cases, the CONTRACTOR will ensure that the
                    child has access to an initial health screening within five
                    calendar days of notification that the child was removed
                    from the home. The CONTRACTOR will ensure this exam
                    identifies any health problems that might determine the
                    selection of a suitable placement, or require immediate
                    attention.

               3)   CHEC exams

                    In all cases, the CONTRACTOR will ensure that the child has
                    access to a Child Health Evaluation and Care (CHEC)
                    screening within 30 calendar days of notification that the
                    child was removed from the home. Whenever possible, the CHEC
                    screening should be completed within the five-day time
                    frame. Additionally, the CONTRACTOR will ensure the child
                    has access to a CHEC screening according to the CHEC
                    periodicity schedule until age six, then annually
                    thereafter.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     7.   ORGAN TRANSPLANTATIONS

          a.   IN GENERAL

               All organ transplantation services are the responsibility of the
               CONTRACTOR for all Enrollees in accordance with the criteria set
               forth in Rule R414-10A of the Utah Administrative Code, unless
               amended under the provisions of Attachment B, Article IV
               (Benefits), Section C, Subsection 3 of this Contract. The
               DEPARTMENT's criteria will be provided to the CONTRACTOR.

          b.   SPECIFIC ORGAN TRANSPLANTATIONS COVERED

               The following transplantations are covered for Enrollees under
               the Traditional Medicaid Plan as described in Rule R414-10A:
               Kidney, liver, cornea, bone marrow, stem cell, heart, intestine,
               lung, pancreas, small bowel, combination heart/lung, combination
               intestine/liver, combination kidney/pancreas, combination
               liver/kidney, multi visceral, and combination liver/small bowel.
               Transplantations for Enrollees under the Non-Traditional Medicaid
               Plan are limited to kidney, liver, cornea, bone marrow, stem
               cell, heart, and lung.

          c.   PSYCHOSOCIAL EVALUATION REQUIRED

               Enrollees who have applied for organ transplantations, except
               cornea or kidney, must undergo a comprehensive psycho-social
               evaluation by a board-certified or board-eligible psychiatrist.
               The evaluation must include a comprehensive history regarding
               substance abuse and compliance with medical treatment. In
               addition, the parent(s) or guardian(s) of Enrollees who are less
               than 18 years of age must undergo a psycho-social evaluation that
               includes a comprehensive history regarding substance abuse, and
               past and present compliance with medical treatment.

               If a request is made for a transplantation not listed above, the
               CONTRACTOR will contact the DEPARTMENT. Such requests will be
               addressed as set forth in R414-10A-23.

          d.   OUT-OF-STATE TRANSPLANTATIONS

               When the CONTRACTOR arranges the transplantation to be performed
               out-of-state, the CONTRACTOR is responsible for coverage of food,
               lodging, transportation and airfare expenses for the Enrollee and
               attendant. The CONTRACTOR will follow, at a minimum, the
               DEPARTMENT's criteria for coverage of food, lodging,
               transportation and airfare expenses.

     8.   MENTAL HEALTH SERVICES

          When an Enrollee presents with a possible mental health condition to
          his or her CONTRACTOR primary care physician, it is the responsibility
          of the primary care provider to determine whether the Enrollee should
          be referred to a psychologist, pediatric specialist, psychiatrist,
          neurologist, or other specialist. Mental health

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          conditions may be handled by the CONTRACTOR primary care provider and
          referred to the Enrollee's Prepaid Mental Health Plan when more
          specialized services are required for the Enrollee. CONTRACTOR primary
          care providers may seek consultation from the Prepaid Mental Health
          Plan when the primary care provider chooses to manage the Enrollee's
          symptoms.

          An independent panel comprised of specialists appropriate to the
          concern will be established by the DEPARTMENT with representatives
          from the CONTRACTOR and Prepaid Mental Health Plan to adjudicate
          disputes regarding which entity (the CONTRACTOR or Prepaid Mental
          Health Plan) is responsible for payment and/or treatment of a
          condition. The panel will be convened on a case-by-case basis. The
          CONTRACTOR and Prepaid Mental Health Plan will adhere to the final
          decision of the panel.

     9.   DEVELOPMENTAL AND ORGANIC DISORDERS

          a.   COVERED SERVICES FOR CHILD ENROLLEES THROUGH AGE 20

               1)   The CONTRACTOR is responsible for all inpatient and
                    physician outpatient Covered Services for child Enrollees
                    with developmental (ICD-9 codes 299 through 299.8 and 317
                    through 319.9) or organic diagnoses (ICD-9 codes 290 through
                    294.9 and 310 through 310.9) including, but not limited to,
                    diagnostic work-ups and other medical care such as
                    medication management services related to the developmental
                    or organic disorder.

               2)   The CONTRACTOR is responsible for all psychological
                    evaluations and testing including neuropsychological
                    evaluations and testing for child Enrollees with
                    developmental or organic disorders such as brain tumors,
                    brain injuries, and seizure disorders.

          b.   COVERED SERVICES FOR ADULT ENROLLEES AGE 21 AND OLDER

               The CONTRACTOR is responsible for all inpatient and physician
               outpatient Covered Services for adult Enrollees with
               developmental (ICD-9 codes 299 through 299.8 and 317 through
               319.9) and organic diagnoses (ICD-9 codes 290 through 294.9 and
               310 through 310.9) including diagnostic work-ups and other
               medical care such as medication management services related to
               the developmental or organic disorder.

          c.   NON-COVERED SERVICES

               1)   Psychological evaluations and testing including
                    neuropsychological evaluations and testing for adult
                    Enrollees is not the responsibility of the CONTRACTOR.

               2)   Habilitative and behavioral management services are not the
                    responsibility of the CONTRACTOR. If habilitative services
                    are required, the Enrollee should be referred to the
                    Division of Services for

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

                    People with Disabilities (DSPD), the school system, the
                    Early Intervention Program, or similar support program or
                    agency. The Enrollee should also be referred to DSPD for
                    consideration of other benefits and programs that may be
                    available through DSPD. Habilitative services are defined in
                    Section 1915(c)(5)(a) of the Social Security Act as
                    "services designed to assist individuals in acquiring,
                    retaining and improving the self-help, socialization and
                    adaptive skills necessary to reside successfully in home and
                    community based settings."

          d.   RESPONSIBILITY OF THE PREPAID MENTAL HEALTH PLAN

               The Prepaid Mental Health Plan is responsible for the treatment
               of the mental illness to individuals with both an organic and a
               psychiatric diagnosis or with both a developmental and a
               psychiatric diagnosis.

     10.  OUT-OF-STATE ACCESSORY SERVICES

          When the CONTRACTOR arranges a Covered Service to be performed
          out-of-state, the CONTRACTOR is responsible for coverage of airfare,
          food and lodging for the Enrollee and one attendant during the stay at
          the out-of-state facility. Ground transportation costs only from the
          airport to the hotel or hospital and back to the airport, one time
          only are also the responsibility of the CONTRACTOR. The CONTRACTOR
          will follow, at a minimum, the DEPARTMENT's criteria for coverage of
          food, lodging, transportation, and airfare expenses.

     11.  NON-CONTRACTOR PRIOR AUTHORIZATIONS

          a.   PRIOR AUTHORIZATIONS - GENERAL

               The CONTRACTOR shall honor prior authorizations for organ
               transplantations and any other ongoing services initiated by the
               DEPARTMENT while the Enrollee was covered under Medicaid
               fee-for-service until the Enrollee is evaluated by the CONTRACTOR
               and a new plan of care is established.

          b.   WHEN THE CONTRACTOR HAS NOT AUTHORIZED THE SERVICE AND THE
               PROVIDER IS NOT A PARTICIPATING PROVIDER

               For services that require a prior authorization, the CONTRACTOR
               will pay the provider of the service at the Medicaid rate, if all
               of the following conditions are met:

               1)   the servicing provider is not a participating provider under
                    contract with the CONTRACTOR; and

               2)   the DEPARTMENT issued a prior authorization for an Enrollee
                    to the servicing provider; and

               3)   the servicing provider has completed the CONTRACTOR's
                    appeals process without resolution of the claim, and has
                    requested a hearing with

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

                    the State Formal Hearings Unit requesting payment for the
                    services rendered; and

               4)   in the hearing process it is determined that the service
                    rendered was a Medically Necessary service covered under
                    this Contract, and that the CONTRACTOR will be responsible
                    for payment of the claim.

F.   CLARIFICATION OF PAYMENT RESPONSIBILITIES

     1.   COVERED SERVICES RECEIVED OUTSIDE CONTRACTOR's NETWORK BUT PAID BY
          CONTRACTOR

          The CONTRACTOR will not be required to pay for Covered Services,
          defined in Attachment C, which the Enrollee receives from sources
          outside The CONTRACTOR's network, not arranged for and not authorized
          by the CONTRACTOR except as follows:

          a.   Emergency Services;
          b.   Court ordered services that are Covered Services defined in
               Attachment C and which have been coordinated with the CONTRACTOR;
               or
          c.   Cases where the Enrollee demonstrates that such services are
               Medically Necessary Covered Services and were unavailable from
               the CONTRACTOR.

     2.   PAYMENT TO NON-NETWORK PROVIDERS AND TO PROVIDERS OUT OF THE SERVICE
          AREA

          Payment by the CONTRACTOR to an out-of-network provider for emergency
          services and/or to a provider out of the Service Area for services
          that are approved for payment by the CONTRACTOR shall not exceed the
          lower of the following rates applicable at the time the services were
          rendered to an Enrollee, unless there is a negotiated arrangement:

          a.   The usual charges made to the general public by the provider;
          b.   The rate equal to the applicable Medicaid fee-for-service rate;
               or
          c.   The rate agreed to by the CONTRACTOR and the provider.

     3.   WHEN COVERED SERVICES ARE NOT THE CONTRACTOR's RESPONSIBILITY

          a.   The CONTRACTOR is not responsible for payment when family
               planning services are obtained by an Enrollee from sources other
               than the CONTRACTOR.

          b.   The CONTRACTOR will not be required to provide, arrange for, or
               pay for Covered Services to Enrollees whose illness or injury
               results directly from a catastrophic occurrence or disaster,
               including, but not limited to, earthquakes or acts of war. The
               effective date of excluding such Covered Services will be the
               date specified by the Federal Government or the State of Utah
               that a Federal or State emergency exists or disaster has
               occurred.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     4.   THE DEPARTMENT's RESPONSIBILITY

          Except as described in Attachment F (Rates and Rate-Related Terms) of
          this Contract, the DEPARTMENT will not be required to pay for any
          Covered Services under Attachment C which the Enrollee received from
          any sources outside the CONTRACTOR except for family planning
          services.

     5.   COVERED SERVICES PROVIDED BY THE DEPARTMENT OF HEALTH, DIVISION OF
          COMMUNITY AND FAMILY HEALTH SERVICES

          For Enrollees who qualify for special services offered by or through
          the Department of Health, Division of Community and Family Health
          Services (DCFHS), the CONTRACTOR agrees to reimburse DCFHS at the
          standard Medicaid rate in effect at the time of service for one
          outpatient team evaluation and one follow-up visit for each Enrollee
          upon each instance that the Enrollee both becomes Medicaid eligible
          and selects the CONTRACTOR as its provider. The CONTRACTOR agrees to
          waive any prior authorization requirement for one outpatient team
          evaluation and one follow-up visit. The services provided in the
          outpatient team evaluation and follow-up visit for which the
          CONTRACTOR will reimburse DCFHS are limited to the services that the
          CONTRACTOR is otherwise obligated to provide under this Contract.

          If the CONTRACTOR desires a more detailed agreement for additional
          services to be provided by or through DCFHS for children with special
          health care needs, the CONTRACTOR may subcontract with DCFHS. The
          CONTRACTOR agrees that the subcontract with DCFHS will acknowledge and
          address the specific needs of DCFHS as a government provider.

     6.   ENROLLEE TRANSITION BETWEEN MCOs, OR BETWEEN FEE-FOR-SERVICE AND
          CONTRACTOR

          a.   INPATIENT HOSPITAL

               When an Enrollee is in an inpatient hospital setting and selects
               another MCO or becomes fee-for-service anytime prior to discharge
               from the hospital, the CONTRACTOR is financially responsible for
               the entire hospital stay including all services related to the
               hospital stay, i.e. physician, etc. The MCO in which the
               individual is enrolled when discharged from the hospital is
               financially responsible for services provided during the
               remainder of the month when the individual was discharged. If
               such individual is fee-for-service when discharged from the
               hospital, the DEPARTMENT is financially responsible for the
               remainder of the month when the individual was discharged. If a
               Medicaid eligible is fee-for-service when admitted to the
               hospital and selects an MCO anytime prior to discharge from the
               hospital, the DEPARTMENT is financially responsible for the
               entire hospital stay including all services related to the
               hospital stay, i.e. physician, etc. The MCO in which the
               individual is enrolled when discharged from the hospital is
               financially responsible for services provided during the
               remainder of the month when the individual was discharged. When
               an Enrollee is in an inpatient hospital setting at the time the
               CONTRACTOR terminates this Contract and the Enrollee selects
               another MCO

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

               anytime prior to discharge from the hospital, the receiving MCO
               is financially responsible for the hospital stay beginning 30
               days after termination of the Contract.

          b.   HOME HEALTH SERVICES

               Medicaid clients who are under fee-for-service or are enrolled in
               an MCO other than this MCO and are receiving home health services
               from an agency not contracting with the CONTRACTOR will be
               transitioned to the CONTRACTOR's home health agency. The
               CONTRACTOR is responsible for payment, not to exceed Medicaid
               payment, for a period not to exceed seven calendar days, unless
               the CONTRACTOR and the home health agency agree to another time
               period in writing, after the CONTRACTOR notifies the
               non-participating home health agency of the change in status or
               the non-participating home health agency notifies the CONTRACTOR
               that services are being provided by its agency. The CONTRACTOR
               will assess the needs of the Enrollee at the time the CONTRACTOR
               provides the orientation to the Enrollee.

               The CONTRACTOR will include the Enrollee in developing the plan
               of care to be provided by the CONTRACTOR's home health agency
               before the transition is complete. The CONTRACTOR will address
               Enrollee's concerns regarding Covered Services provided by the
               CONTRACTOR's home health agency before the new plan of care is
               implemented.

          c.   MEDICAL EQUIPMENT

               When medical equipment is ordered for an Enrollee by the
               CONTRACTOR and the Enrollee enrolls in a different MCO or becomes
               fee-for-service before receiving the equipment, the CONTRACTOR is
               responsible for payment of such equipment. When medical equipment
               is ordered for a Medicaid eligible by the DEPARTMENT and the
               Enrollee selects an MCO, the DEPARTMENT is responsible for
               payment of such equipment. Medical equipment includes, but is not
               limited to, specialized wheelchairs or attachments, prostheses,
               and other equipment designed or modified for an individual
               client. Any attachments to the equipment, replacements, or new
               equipment is the responsibility of the MCO in which the client is
               enrolled at the time such equipment is ordered.

     7.   SURVEYS

          All surveys required under this Contract will be funded by the
          CONTRACTOR unless funded by another source such as the Utah Department
          of Health, Office of Health Care Statistics. The surveys must be
          conducted by an independent vendor mutually agreed upon by the
          DEPARTMENT and CONTRACTOR. The DEPARTMENT or designee will analyze the
          results of the surveys. Before publishing articles, data, reports,
          etc. related to surveys the DEPARTMENT will provide drafts of such
          material to the CONTRACTOR for review and feedback. The CONTRACTOR
          will not be responsible for the costs incurred for such publishing by
          the DEPARTMENT.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

                      ARTICLE V - ENROLLEE RIGHTS/SERVICES

A.   MEMBER SERVICES FUNCTION

     The CONTRACTOR must operate a Member Services function during regular
     business hours. Ongoing training, as necessary, shall be provided by the
     CONTRACTOR to ensure that the Member Services staff is conversant in the
     CONTRACTOR's policies and procedures as they relate to Enrollees. At a
     minimum, Member Services staff must be responsible for the following:

     1.   Explaining the CONTRACTOR's rules for obtaining services;

     2.   Assisting Enrollees to select or change primary care providers;

     3.   Fielding and responding to Enrollee questions and complaints and
          grievances.

     The CONTRACTOR shall conduct ongoing assessment of its orientation staff to
     determine staff member's understanding of the MCO and its Medicaid managed
     care policies and provide training, as needed.

B.   ENROLLEE LIABILITY

     1.   The CONTRACTOR will not hold an Enrollee liable for the following:

          a.   The debts of the CONTRACTOR if it should become insolvent.

          b.   Payment for services provided by the CONTRACTOR if the CONTRACTOR
               has not received payment from the DEPARTMENT for the services, or
               if the provider, under contract with the CONTRACTOR, fails to
               receive payment from the CONTRACTOR.

          c.   The payments to providers that furnish Covered Services under a
               contract or other arrangement with the CONTRACTOR that are in
               excess of the amount that normally would be paid by the Enrollee
               if the service had been received directly from the CONTRACTOR.

C.   GENERAL INFORMATION TO BE PROVIDED TO ENROLLEES

     The CONTRACTOR will make the following information available to Enrollees
     and potential Enrollees on request:

     1.   The identity, locations, qualification, and availability of
          participating providers (at a minimum, area of specialty, board
          certification, and any special areas of expertise must be available
          that would be helpful to individuals deciding whether to enroll with
          the CONTRACTOR);

     2.   The rights and responsibilities of Enrollees;

     3.   The procedures available to Enrollees and providers to challenge or
          appeal the failure of

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          the CONTRACTOR to cover a services; and

     4.   All items and services that are available to Enrollees that are
          covered either directly or through a method of referral or prior
          authorization.

D.   ACCESS

     1.   IN GENERAL

          The CONTRACTOR shall provide the DEPARTMENT and the Department of
          Health and Human Services, Centers for Medicare and Medicaid, adequate
          assurances that the CONTRACTOR, with respect to a service area, has
          the capacity to serve the expected enrollment in such service area,
          including assurances that the CONTRACTOR offers an appropriate range
          of services and access to preventive and primary care services for the
          population expected to enroll in such service area, and maintains a
          sufficient number, mix and geographic distribution of providers of
          services.

          The CONTRACTOR will provide services which are accessible to Enrollees
          and appropriate in terms of timeliness, amount, duration, and scope.

     2.   SPECIFIC PROVISIONS

          a.   ELIMINATION OF ACCESS PROBLEMS CAUSED BY GEOGRAPHIC, CULTURAL AND
               LANGUAGE BARRIERS AND PHYSICAL DISABILITIES

               The CONTRACTOR will minimize, with a goal to eliminate,
               Enrollee's access problems due to geographic, cultural and
               language barriers, and physical disabilities. The CONTRACTOR will
               provide assistance to Enrollees who have communication
               impediments or impairments to facilitate proper diagnosis and
               treatment. The CONTRACTOR must guarantee equal access to services
               and benefits for all Enrollees by making available interpreters,
               Telecommunication Devices for the Deaf (TDD), and other auxiliary
               aids to all Enrollees as needed. The CONTRACTOR will accommodate
               Enrollees with physical and other disabilities in accordance with
               the American Disabilities Act of 1990 (ADA), as amended. If the
               CONTRACTOR's facilities are not accessible to Enrollees with
               physical disabilities, the CONTRACTOR will provide services in
               other accessible locations.

          b.   INTERPRETIVE SERVICES

               The CONTRACTOR will provide interpretive services for languages
               on an as needed basis. These requirements will extend to both
               in-person and telephone communications to ensure that Enrollees
               are able to communicate with the CONTRACTOR and CONTRACTOR's
               providers and receive Covered Services. Professional interpreters
               will be used when needed where technical, medical, or treatment
               information is to be discussed, or where use of a Family Member
               or friend as interpreter is inappropriate. A family member or
               friend may be used as an interpreter if this method is requested
               by the patient, and the use of such a

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

               person would not compromise the effectiveness of services or
               violate the patient's confidentiality, and the patient is advised
               that a free interpreter is available.

          c.   CULTURAL COMPETENCE REQUIREMENTS

               The CONTRACTOR shall incorporate in its policies, administration,
               and delivery of services the values of honoring Enrollee's
               beliefs; being sensitive to cultural diversity; and promoting
               attitudes and interpersonal communication styles with staff and
               providers which respect Enrollees' cultural backgrounds. The
               CONTRACTOR must foster cultural competency among its providers.
               Culturally competent care is care given by a provider who can
               communicate with the Enrollee and provide care with sensitivity,
               understanding, and respect for the Enrollee's culture, background
               and beliefs. The CONTRACTOR shall strive to ensure its providers
               provide culturally sensitive services to Enrollees. These
               services shall include but are not limited to providing training
               to providers regarding how to promote the benefits of health care
               services as well as training about health care attitudes,
               beliefs, and practices that affect access to health care
               services.

          d.   NO RESTRICTIONS OF PROVIDER's ABILITY TO ADVISE AND COUNSEL

               The CONTRACTOR may not restrict a health care provider's ability
               to advise and counsel Enrollees about Medically Necessary
               treatment options. All contracting providers acting within his or
               her scope of practice, must be permitted to freely advise an
               Enrollee about his or her health status and discuss appropriate
               medical care or treatment for that condition or disease
               regardless of whether the care or treatment is a Covered Service.

          e.   WAITING TIME BENCHMARKS

               The CONTRACTOR will adopt benchmarks for waiting times for
               physician appointments as follows:

               Waiting Time for Appointments
               1)   Primary Care Providers:
                    .      within 30 days for routine, non-urgent appointments
                    .      within 60 days for school physicals
                    .      within 2 days for urgent, symptomatic, but not
                           life-threatening care (care that can be treated in
                           the doctor's office)

               2)   Specialists:
                    .      within 30 days for non-urgent
                    .      within 2 days for urgent, symptomatic, but not
                           life-threatening care (care that can be treated in a
                           doctor's office)

               These benchmarks do not apply to appointments for regularly
               scheduled visits to monitor a chronic medical condition if the
               schedule calls for visits less frequently than once every month.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

E.   CHOICE

     The CONTRACTOR must allow Enrollees the opportunity to select a
     participating Primary Care Provider. This excludes clients who are under
     the Restriction Program. If an Enrollee's Primary Care Provider ceases to
     participate in the CONTRACTOR's network, the CONTRACTOR must offer the
     Enrollee the opportunity to select a new Primary Care Provider.

F.   COORDINATION

     1.   IN GENERAL

          The CONTRACTOR will ensure access to a coordinated, comprehensive and
          continuous array of needed services through coordination with other
          appropriate entities. The CONTRACTOR's providers are not responsible
          for rendering waiver services.

     2.   PREPAID MENTAL HEALTH PLAN

          a.   When an Enrollee is also enrolled in a Prepaid Mental Health
               Plan, the CONTRACTOR and Prepaid Mental Health Plan will share
               appropriate information regarding the Enrollee's health care to
               ensure coordination of physical and mental health care services.

          b.   The CONTRACTOR will educate its subcontracted providers regarding
               an effective model of coordination such as the model developed by
               the PMHP/MCO Coordination of Care Committee. The CONTRACTOR will
               ensure its subcontracted providers coordinate the provision of
               physical health care services with mental health care services as
               appropriate.

          c.   When an Enrollee is also enrolled in a Prepaid Mental Health
               Plan, the CONTRACTOR will not delay an Enrollee's access to
               needed services in disputes regarding responsibility for payment.
               Payment issues should be addressed only after needed services are
               rendered. As described in Attachment B, IV (Benefits), Section E
               (Clarification of Covered Services), Subsection 8 of this
               Contract, the independent panel established by the DEPARTMENT
               will assist in adjudicating such disputes when requested to do so
               by either party.

          d.   Clients enrolled in the MCO and a Prepaid Mental Health Plan who
               due to a psychiatric condition require lab, radiology and similar
               outpatient services covered under this Contract, but prescribed
               by the Prepaid Mental Health Plan physician, will have access to
               such services in a timely fashion. The CONTRACTOR and Prepaid
               Mental Health Plan will reduce or eliminate unnecessary barriers
               that may delay the Enrollee's access to these critical services.

     3.   DOMESTIC VIOLENCE

          The CONTRACTOR will ensure that providers are knowledgeable about
          methods to detect domestic violence and about resources in the
          community to which they can refer patients.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     4.   RESTRICTION PCP

          The CONTRACTOR will ensure that Enrollees who are on the Restriction
          Program are linked to a primary care physician (PCP) who agrees to
          serve as a Restriction PCP. The Restriction PCP must agree to the
          following:

          a.   manage all of the Enrollee's medical care;

          b.   educate the Enrollee regarding appropriate use of medical
               services;

          c.   provide a referral to another physician when needed care is not
               within the PCP's field of expertise, or when for some other
               reason the care cannot be provided by the PCP;

          d.   must be telephonically available 24 hours a day, seven days a
               week (or make certain a provider of comparable specialty is
               available) for urgent/emergent medical situations to assure the
               availability of prompt, quality, medical services and continuity
               of care;

          e.   manage acute and/or chronic long term pain through a variety of
               services or treatment options including office calls, medication
               administration, physical therapy, counseling and mental health
               referral with emphasis on teaching Enrollees to manage their pain
               by adapting actions and behaviors;

          f.   approve or deny drugs prescribed by other providers when
               contacted by the pharmacy to which the Enrollee is restricted;

          g.   work with the Restriction pharmacy, specialists, dentists, etc.
               sharing pertinent information regarding the Enrollee; and

          h.   provide information to the DEPARTMENT's Restriction staff that
               will help assess Restriction Enrollees' progress and that may
               include periodic written or telephonic evaluations when requested
               by the Restriction staff.

          If the Restricted Enrollee's PCP chooses to no longer serve as the
          Enrollee's PCP, the CONTRACTOR must assist the Enrollee in finding a
          new PCP and coordinate with the DEPARTMENT's Restriction staff.

          If a Restriction PCP ceases participation with the CONTRACTOR, the
          CONTRACTOR must communicate this immediately to the DEPARTMENT's
          Restriction staff. The CONTRACTOR must assist all affected Enrollees
          in finding a new PCP and notify the DEPARTMENT when the new PCP is
          selected.

G.   BILLING ENROLLEES

     1.   IN GENERAL

          Except as provided herein Attachment B. Article V (Enrollee
          Rights/Services), Section G (Billing Enrollees). subsection 2, no
          claim for payment will be made at any time by the

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          CONTRACTOR or its providers to an Enrollee accepted by that provider
          as an Enrollee for any Covered Service. When a provider accepts an
          Enrollee as a patient he or she will look solely to the CONTRACTOR and
          any third party coverage for reimbursement. If the provider fails to
          receive payment from the CONTRACTOR, the Enrollee cannot be held
          responsible for these payments.

     2.   CIRCUMSTANCES WHEN AN ENROLLEE MAY BE BILLED

          An Enrollee may in certain circumstances be billed by the provider for
          non-Covered Services and/or for unpaid Medicaid co-payments or
          Medicaid co-insurance. A non-Covered Service is one that is not
          covered under this Contract, or includes special features or
          characteristics that are desired by the Enrollee, such as more
          expensive eyeglass frames, hearing aids, custom wheelchairs, etc., but
          do not meet the Medical Necessity criteria for amount, duration, and
          scope as set forth in the Utah State Plan. The DEPARTMENT will specify
          to the CONTRACTOR the extent of Covered Services and items under the
          Contract, as well as services not covered under the Contract but
          provided by Medicaid on a fee-for-service basis that would effect the
          CONTRACTOR's Covered Services. An Enrollee may be billed for a service
          not covered under this Contract and/or for unpaid Medicaid co-payment
          or co-insurance only when all of the following conditions are met:

          a.   the provider has an established policy for billing all patients
               for services not covered by a third party and/or for billing all
               patients for unpaid co-payment or co-insurance (non-Covered
               Services cannot be billed only to Enrollees.);

          b.   the provider has informed the Enrollee of its policy and the
               services and items that are not covered under this Contract
               and/or Medicaid co-payment or co insurance requirements and
               included this information in the Enrollee's member handbook;

          c.   the provider has advised the Enrollee prior to rendering the
               service that the service is not covered under this Contract
               and/or that a Medicaid co-payment or co-insurance is required and
               that the Enrollee will be personally responsible for making
               payment; and

          d.   in the case of non-Covered Services, the Enrollee agrees to be
               personally responsible for the payment of the non-Covered Service
               and an agreement is made in writing between the provider and the
               Enrollee which details the service and the amount to be paid by
               the Enrollee.

     3.   CONTRACTOR MAY NOT HOLD ENROLLEE's MEDICAID CARD

          The CONTRACTOR or its providers will not hold the Enrollee's Medicaid
          card as guarantee of payment by the Enrollee. nor may any other
          restrictions be placed upon the Enrollee.

     4.   CRIMINAL PENALTIES

          Criminal penalties shall be imposed on MCO providers as authorized
          under section

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          1128B(d)(1)of the Social Security Act if the provider knowingly and
          willfully charges an Enrollee at a rate other than those allowed under
          this Contract.

H.   SURVEY REQUIREMENTS

     Surveys will be conducted of the CONTRACTOR's Enrollees that will include
     questions about Enrollees' perceptions of access to and the quality of care
     received through the CONTRACTOR. The survey process, including the survey
     instrument, will be standardized and developed collaboratively among the
     DEPARTMENT and all contracting MCOs. The DEPARTMENT will analyze the
     results of the surveys. The CONTRACTOR's quality assurance committee will
     review the results of the surveys, identify areas needing improvement,
     outline action steps to follow up on findings, and inform (at a minimum),
     subcontractors, and member and provider services staff, when applicable.

     1.   GENERAL POPULATION SURVEY

          At least every two years, the CONTRACTOR in conjunction with the
          DEPARTMENT will survey a sample of its general population Enrollees;
          i.e., Enrollees who do not meet the definition of those with special
          health care needs.

     2.   SPECIAL NEEDS SURVEY

          At least every two years, the CONTRACTOR in conjunction with the
          DEPARTMENT will survey a sample of Enrollees with special health care
          needs.

                        ARTICLE VI - GRIEVANCE PROCEDURES

A.   IN GENERAL

     The CONTRACTOR will maintain a system for reviewing and adjudicating
     complaints and grievances by Enrollees and providers. The CONTRACTOR's
     complaint and grievance procedures must permit an Enrollee, or provider on
     behalf of an Enrollee, to challenge the denials of coverage of medical
     assistance or denials of payment for Covered Services. The CONTRACTOR will
     submit such grievance plans and procedures to the DEPARTMENT for approval
     prior to instituting or changing such procedures. Such procedures will
     provide for expeditious resolution of complaints and grievances by the
     CONTRACTOR's personnel who have authority to correct problems. The
     CONTRACTOR shall ensure that each Enrollee with limited English proficiency
     shall have the right to receive oral interpreter services without charge to
     the Enrollee at each stage of the CONTRACTOR's complaint and grievance
     process, including final determination. The CONTRACTOR shall separately
     track complaints and grievances that are related to Children with Special
     Health Care Needs and those related to Non-Traditional Medicaid Enrollees.

B.   NONDISCRIMINATION

     The CONTRACTOR shall designate a nondiscrimination coordinator who will 1)
     ensure the CONTRACTOR complies with Federal Laws and Regulations regarding
     nondiscrimination, and 2) take complaints and grievances from Enrollees
     alleging nondiscrimination violations based on

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     race, color, national origin, disability, or age. The nondiscrimination
     coordinator may also handle complaints regarding the violation of other
     civil rights (sex and religion) as other Federal laws and Regulations
     protect against these forms of discrimination. The CONTRACTOR will develop
     and implement a written method of administration to assure that the
     CONTRACTOR's programs, activities, services, and benefits are equally
     available to all persons without regard to race, color, national origin,
     disability, or age.

C.   MINIMUM REQUIREMENTS OF GRIEVANCE PROCEDURES

     At a minimum, the CONTRACTOR's complaint and grievance procedures must
     include

     1.   definitions of complaints and grievance;

     2.   details of how, when, where and with whom an Enrollee or provider may
          file a grievance;

     3.   assurances of the participation of individuals with authority to take
          corrective action;

     4.   responsibilities of the various components and staff of the
          organization;

     5.   a description of the process for timely review, prompt (45 days)
          resolution of complaints and grievances;

     6.   details of an appeal process; and

     7.   a provision stating that during the pendency of any grievance
          procedure or an appeal of such grievances, the Enrollee will remain
          enrolled except as otherwise stated in this Contract.

D.   FINAL REVIEW BY DEPARTMENT

     When an Enrollee or provider has exhausted the CONTRACTOR's grievance
     process and a final decision has been made, the CONTRACTOR must provide
     written notification to the party who initiated the grievance of the
     grievance's outcome and explain in clear terms a detailed reason for the
     denial.

     The CONTRACTOR must provide notification to Enrollees and providers that
     the final decision of the CONTRACTOR may be appealed to the DEPARTMENT and
     will give to the Enrollee or provider the DEPARTMENT's form to request a
     formal hearing with the DEPARTMENT. The MCO must inform the Enrollee or
     provider the time frame for filing an appeal with the DEPARTMENT. The
     formal hearing with the DEPARTMENT is a de novo hearing. If the Enrollee or
     provider request a formal hearing with the DEPARTMENT, all parties to the
     formal hearing agree to be bound by the DEPARTMENT's decision until any
     judicial reviews are completed and are in the Enrollee's or provider's
     favor. Any decision made by the DEPARTMENT pursuant to the hearing shall be
     subject to appeal rights as provided by State and Federal laws and rules.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

                        ARTICLE VII - OTHER REQUIREMENTS

A.   COMPLIANCE WITH PUBLIC HEALTH SERVICE ACT

     The CONTRACTOR will comply with all requirements of Section 1301 to and
     including 1318 of the Public Health Service Act, as applicable. The
     CONTRACTOR will provide verification of such compliance to the DEPARTMENT
     upon the DEPARTMENT's request.

B.   COMPLIANCE WITH OBRA'90 PROVISION AND 42 CFR 434.28

     The CONTRACTOR will comply with the OBRA '90 provision which requires an
     MCO provide patients with information regarding their rights under State
     law to make decisions about their health care including the right to
     execute a living will or to grant power of attorney to another individual.

     The CONTRACTOR will comply with the requirements of 42 CFR 434.28 relating
     to maintaining written Advance Directives as outlined under Subpart I of
     489.100 through 489.102.

C.   FRAUD AND ABUSE REQUIREMENTS

     The CONTRACTOR must have a compliance program to identify and refer
     suspected fraud and abuse activities. The compliance program must outline
     the CONTRACTOR's internal processes for identifying fraud and abuse. The
     CONTRACTOR agrees to abide by Federal and/or State fraud and abuse
     requirements including, but not limited to, the following:

     1.   Refer in writing to the DEPARTMENT all detected incidents of potential
          fraud or abuse on the part of providers of services to Enrollees or to
          other patients.

     2.   Refer in writing to the DEPARTMENT all detected incidents of patient
          fraud or abuse involving Covered Services provided which are paid for
          in whole, or in part, by the DEPARTMENT.

     3.   Refer in writing to the DEPARTMENT the names and Medicaid ID numbers
          of those Enrollees that the CONTRACTOR suspects of inappropriate
          utilization of services, and the nature of the suspected inappropriate
          utilization.

     4.   Inform the DEPARTMENT in writing when a provider is removed from the
          CONTRACTOR's panel for reasons relating to suspected fraud, abuse or
          quality of care concerns.

     5.   The CONTRACTOR may not employ or subcontract with any sanctioned
          provider. The DEPARTMENT shall notify the CONTRACTOR how to access
          information on providers sanctioned by Medicaid or Medicare. It is the
          responsibility of the CONTRACTOR to keep apprized of sanctioned
          providers. The CONTRACTOR may not employ or subcontract with any
          provider who is an ineligible entity as defined under the State
          Medicaid Manual Section 2086.16. This section is available upon
          request. The CONTRACTOR will attest that the entities listed below are
          not involved with the CONTRACTOR. Entities that must be excluded -

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          a.   Entities that could be excluded under section 1128(b)(8) of the
               Social Security Act (the Act)~these are entities in which a
               person who is an officer, director, agent, or managing employee
               of the entity, or a person who has a direct or indirect ownership
               or control interest of 5% or more in the entity and has been
               convicted of the following crimes:

               1)   any criminal offense related to the delivery of a Medicare
                    or Medicaid item or service (see section 1128(a)(l) of the
                    Act);
               2)   patient abuse (section 1128(a)(2));
               3)   fraud (1128(b)(l));
               4)   obstruction of an investigation (1128(b)(2)); or
               5)   offenses related to controlled substances (1128(b)(3)).

          b.   Entities that have a direct or indirect substantial contractual
               relationship with an individual or entity listed in subsection
               "a" above-- a substantial contractual relationship is defined as
               any contractual relationship which provides for one or more of
               the following:

               1)   the administration, management, or provision of medical
                    services;
               2)   the establishment of policies pertaining to the
                    administration, management or provision of medical services;
                    or
               3)   the provision of operational support for the administration,
                    management, or provision of medical services.

          c.   Entities which employ, contract with, or contract through any
               individual or entity that is excluded from Medicaid participation
               under Section 1128 or Section 1128A of the Act, for the provision
               of health care, utilization review, medical social work or
               administration services.

D.   DISCLOSURE OF OWNERSHIP AND CONTROL INFORMATION

     The CONTRACTOR agrees to meet the requirements of 42 CFR 455, Subpart B
     related to disclosure by the CONTRACTOR of ownership and control
     information.

E.   SAFEGUARDING CONFIDENTIAL INFORMATION ON ENROLLEES

     The CONTRACTOR agrees that information about Enrollees is confidential
     information and agrees to safeguard all confidential information and
     conform to the requirements set forth in 42CFR, Part 431, Subpart F as well
     as all other applicable Federal and State confidentiality requirements. The
     CONTRACTOR must be in compliance with the privacy regulations issued under
     the Health Insurance Portability and Accountability Act (HIPAA) of 1996
     when they go into effect.

F.   DISCLOSURE OF PROVIDER INCENTIVE PLANS

     The CONTRACTOR must submit to the DEPARTMENT information on its physician
     incentive plans as listed in 42 CFR 417.479(h)(l) and summarized in this
     Article VII, Section F, Subsections 1 through 5, by May 1 of each year. The
     CONTRACTOR must provide to the

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

     DEPARTMENT the enrollee/disenrollee survey results when beneficiary surveys
     are required as specified in 42 CFR 417.479(g) and summarized in this
     Article VII, Section F, Subsection 7, by October 1 or three months after
     the end of the Contract year. The CONTRACTOR must submit to the DEPARTMENT
     information on capitation payments paid to primary care physicians as
     specified in 42 CFR 417.479(h)(l)(vi).

     Per 42 CFR 417.479(a), no specific payment may be made directly or
     indirectly under a physician incentive plan to a physician or physician
     group as an inducement to reduce or limit Medically Necessary services
     furnished to an Enrollee.

     The CONTRACTOR may operate a physician incentive plan only if the stop-loss
     protection, Enrollee survey, and disclosure requirements are met. The
     CONTRACTOR must disclose to the DEPARTMENT the following information on
     provider incentive plans in sufficient detail to determine whether the
     incentive plan complies with the regulatory requirements. The disclosure
     must contain:

     1.   Whether services not furnished by the physician or physician group are
          covered by the incentive plan. If only the services furnished by the
          physician or physician group are covered by the incentive plan,
          disclosure of other aspects of the plan need not be made.

     2.   The type of incentive arrangement (i.e., withhold, bonus, capitation).

     3.   If the incentive plan involves a withhold or bonus, the percent of the
          withhold or bonus.

     4.   Proof that the physician or physician group has adequate stop-loss
          protection, including the amount and type of stop-loss protection.

     5.   The panel size and, if patients are pooled; the method used.

     6.   To the extent provided for in the Department of Health and Human
          Services, Centers for Medicare and Medicaid Services' (CMS)
          implementation guidelines, capitation payments paid to primary care
          physicians for the most recent year broken down by percent for primary
          care services, referral services to specialists, and hospital and
          other types of provider services (i.e., nursing home and home health
          agency) for capitated physicians or physician groups.

     7.   In the case of those prepaid plans that are required to conduct
          beneficiary surveys, the survey results. (The CONTRACTOR must conduct
          a customer satisfaction of both Enrollees and disenrollees if any
          physicians or physicians groups contracting with the CONTRACTOR are
          placed at substantial financial risk for referral services. The survey
          must include either all current Enrollees and those who have
          disenrolled in the past twelve months, or a sample of these same
          Enrollees and disenrollees. Recognizing that different questions are
          asked of the disenrollees than those asked of Enrollees, the same
          survey cannot be used for both populations.)
          The CONTRACTOR must disclose this information to the DEPARTMENT (1)
          prior to approval of its Contract or agreement and (2) upon the
          Contract or agreements anniversary or renewal effective date. The
          CONTRACTOR must provide the capitation data required (see 6 above) for
          the previous Contract year to the DEPARTMENT three months after the
          end of the Contract year. The CONTRACTOR will provide to the

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          Enrollee upon request whether the CONTRACTOR uses a physician
          incentive plan that affects the use of referral services, the type of
          incentive arrangement, whether stop-loss protection is provided, and
          the survey results of any enrollee/disenrollee surveys conducted.

G.   DEBARRED OR SUSPENDED INDIVIDUALS

     Under Section 1921(d)(l) of the Social Security Act, the CONTRACTOR may not
     knowingly have a director, officer, partner, or person with beneficial
     ownership of more than 5% of the CONTRACTOR's equity who has been debarred
     or suspended by any federal agency. The CONTRACTOR may not have an
     employment, consulting, or any other agreement with a debarred or suspended
     person for the provision of items or services that are significant and
     material to meeting the provisions under this Contract.

     The CONTRACTOR must certify to the DEPARTMENT that the requirements under
     Section 1921(d)(l) of the Social Security Act are met prior to the
     effective date of this Contract and at any time there is a change from the
     last such certification.

H.   CMS CONSENT REQUIRED

     If the Department of Health and Human Services, Centers for Medicare and
     Medicaid (CMS) directs the DEPARTMENT to terminate this Contract, the
     DEPARTMENT will not be permitted to renew this Contract without CMS
     consent.

                             ARTICLE VIII - PAYMENTS

A.   NON-RISK CONTRACT

     This Contract is a non-risk contract as described in 42 CFR 447.362.
     Aggregate payments made to the CONTRACTOR may not exceed what the
     DEPARTMENT would have paid, on a fee-for-service basis, for the services
     actually furnished to recipients. The DEPARTMENT will reimburse the
     CONTRACTOR based on their paid claims plus 9% of paid claims for
     administration.

B.   PAYMENT METHODOLOGY

     The payment methodology is described in Attachment F of this Contract.

C.   CONTRACT MAXIMUM

     In no event will the aggregate amount of payments to the CONTRACTOR exceed
     the Contract maximum amount. If payments to the CONTRACTOR approach or
     exceed the Contract amount before the renewal date of the Contract, the
     DEPARTMENT shall execute a Contract amendment to increase the Contract
     amount within 30 calendar days of the date the Contract amount is exceeded.

D.   MEDICARE

     1.   PAYMENT OF MEDICARE PART B PREMIUMS

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          The DEPARTMENT will pay the Medicare Part B premium for each Enrollee
          who is on Medicare. The Enrollee will assign to the CONTRACTOR his or
          her Medicare reimbursement for benefits received under Medicare. The
          Eligibility Transmission includes and identifies those Enrollees who
          are covered under Medicare.

     2.   PAYMENT OF MEDICARE DEDUCTIBLE AND COINSURANCE

          The DEPARTMENT's financial obligation under this Contract for
          Enrollees who are covered by both Medicare and the MCO is limited to
          the Medicare Part B premium and the CONTRACTOR premium. The CONTRACTOR
          is responsible for payment of the Medicare deductible and coinsurance
          up to the CONTRACTOR's allowed amount for Enrollees when a service is
          paid for by Medicare whether or not the service is covered under this
          Contract. The CONTRACTOR is responsible for payment whether or not the
          Medicare covered service is rendered by a network provider or has been
          authorized by the CONTRACTOR. If a Medicare covered service is
          rendered by an out-of-network Medicare provider or a non-Medicare
          participating provider, the CONTRACTOR is responsible to pay the lower
          of the coinsurance/deductible and the CONTRACTOR's allowed amount.
          Attachment E, Table 2, will be used to identify the total cost to the
          CONTRACTOR of providing care for Enrollees who are also covered by
          Medicare.

     3.   MUST NOT BALANCE BILL ENROLLEES

          The CONTRACTOR or its providers will not Balance Bill the Enrollee and
          will consider reimbursement from Medicare and from the CONTRACTOR as
          payment in full.

D.   THIRD PARTY LIABILITY (COORDINATION OF BENEFITS)

     The DEPARTMENT will provide the CONTRACTOR a monthly listing of Enrollees
     covered under the Buy-out Program, including the premium amount paid by the
     DEPARTMENT.

     1.   TPL COLLECTIONS

          The CONTRACTOR will be responsible to coordinate benefits and collect
          third party liability (TPL). The CONTRACTOR will keep TPL collections.
          The DEPARTMENT will set rates net of expected TPL collections
          excluding the lump sum rate set for deliveries. The rate set for
          deliveries is the maximum amount the DEPARTMENT will pay the
          CONTRACTOR for each delivery. The CONTRACTOR must attempt to collect
          TPL before the DEPARTMENT will finalize payment for the lump sum
          delivery. The DHCF audit staff will monitor collections to ensure the
          CONTRACTOR is making a good faith effort to pursue TPL. The DEPARTMENT
          will properly account for TPL in its rate structure.

     2.   DUPLICATION OF BENEFITS

          This provision applies when, under another health insurance plan such
          as a prepaid plan, insurance contract, mutual benefit association or
          employer's self-funded group health and welfare program, etc., an
          Enrollee is entitled to any benefits that would totally or partially
          duplicate the benefits that the CONTRACTOR is obligated to provide
          under this Contract. Duplication exists when (I) the CONTRACTOR has a
          duty to provide,

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          arrange for or pay for the cost of Covered Services, and (2) another
          health insurance plan, pursuant to its own terms, has a duty to
          provide, arrange for or pay for the same type of Covered Services
          regardless of whether the duty of the CONTRACTOR is to provide the
          Covered Services and the duty of the other health insurance plan is
          only to pay for the Covered Services. Under State and Federal laws and
          regulations, Medicaid funds are the last dollar source and all other
          health insurance plans as referred to above are primarily responsible
          for the costs of providing Covered Services.

     3.   RECONCILIATION OF OTHER TPL

          In order to assist the CONTRACTOR in billing and collecting from other
          health insurance plans the DEPARTMENT will include on the Eligibility
          Transmission other health insurance plans of each Enrollee when it is
          known. The CONTRACTOR will review the Eligibility Transmission and
          will report to the Office of Recovery Services or the DEPARTMENT any
          TPL discrepancies identified within 30 working days of receipt of the
          Eligibility Transmission. The CONTRACTOR's report will include a
          listing of Enrollees that the CONTRACTOR has independently identified
          as being covered by another health insurance plan.

     4.   WHEN TPL IS DENIED

          On a monthly basis, the CONTRACTOR will report to the Office of
          Recovery Services (ORS) claims that have been billed to other health
          care plans but have been denied which will include the following
          information:

          a.   patient name and Medicaid identification number
          b.   ICD-9-CM code;
          c.   procedure codes; and
          d.   insurance company.

     5.   NOTIFICATION OF PERSONAL INJURY CASES

          The CONTRACTOR will be responsible to notify ORS of all personal
          injury cases, as defined by ORS and agreed to by the CONTRACTOR, no
          later than 30 days after the CONTRACTOR has received a "clean" claim.
          A clean claim is a claim that is ready to adjudicate. The following
          data elements will be provided by the CONTRACTOR to ORS:

          a.   patient name and Medicaid identification number
          b.   date of accident;
          c.   specific type of injury by ICD-9-CM code;
          d.   procedure codes; and
          e.   insurance company, if known.

     6.   ORS TO PURSUE COLLECTIONS

          ORS will pursue collection on all claims described in Attachment B,
          Article VIII (Payments), Section D, Subsections 4 and 5 of this
          Contract. The DEPARTMENT will retain, for administrative costs, one
          third of the collections received for the period during

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          which medical services were provided by the CONTRACTOR, and remit the
          balance to the CONTRACTOR.

     7.   INSURANCE BUY-OUT PROGRAM

          The Insurance Buy-out Program is an optional program in which the
          DEPARTMENT purchases group health insurance for a recipient who is
          eligible for Medicaid when it is determined cost-effective for the
          Medicaid program to do so. The insurance buy-out process will be
          coordinated by the DEPARTMENT in cooperation with the Office of
          Recovery Services, and Medicaid eligibility workers. The CONTRACTOR
          will file claims against group MCOs first before claiming services
          against the CONTRACTOR or other MCOs.

     8.   CONTRACTOR MUST PAY PROVIDER ADMINISTRATIVE FEE FOR IMMUNIZATIONS

          When an Enrollee has third party coverage for immunizations, the
          CONTRACTOR will pay the provider the administrative fee for providing
          the immunization and not require the provider to bill the third party
          as a cost avoidance method. The CONTRACTOR may choose to pursue the
          third party amount for the administrative fee after payment has been
          made to the provider.

E.   THIRD PARTY RESPONSIBILITY (INCLUDING WORKER's COMPENSATION)

     1.   CONTRACTOR TO BILL USUAL AND CUSTOMARY CHARGES

          When a third party has an obligation to pay for Covered Services
          provided by the CONTRACTOR to an Enrollee pursuant to this Contract,
          the CONTRACTOR will bill the third party for the usual and customary
          charges for Covered Services provided and costs incurred. Should any
          sum be recovered by the Enrollee or otherwise, from or on behalf of
          the person responsible for payment for the service, the CONTRACTOR
          will be paid out of such recovery for the charges for service provided
          and costs incurred by the CONTRACTOR.

     2.   THIRD PARTY's OBLIGATION TO PAY FOR COVERED SERVICES

          Examples of situations where a third party has an obligation to pay
          for Covered Services provided by the CONTRACTOR are when (a) the
          Enrollee is injured by a person due to the negligent or intentional
          acts (or omissions) of the person; or (b) the Enrollee is eligible to
          receive payment through Worker's Compensation Insurance. If the
          Enrollee does not diligently seek such recovery, the CONTRACTOR may
          institute such rights that it may have.

     3.   FIRST DOLLAR COVERAGE FOR ACCIDENTS

          In addition, both parties agree that the following will apply
          regarding first dollar coverage for accidents: if the injured party
          has additional insurance, primary coverage may be given to the motor
          insurance effective at the time of the accident. Once the motor
          vehicle policy is exhausted, the CONTRACTOR will be the secondary
          payer and pay for all of the Enrollee's Covered Services. If medical
          insurance does not exist, the

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          CONTRACTOR will be the primary payer for all Covered Services.

     4.   NOTIFICATION OF STOP-LOSS

          The CONTRACTOR will provide ORS with quarterly updates of costs
          incurred by the CONTRACTOR when such costs exceed Stop Loss
          (reinsurance) provisions as defined in the Contract between the
          reinsurer and the CONTRACTOR.

F.   CHANGES IN COVERED SERVICES

     If Covered Services are amended under the provisions of Attachment B,
     Article IV (Benefits), Section C, Subsection 3 of this Contract, rates may
     be renegotiated.

                    ARTICLE IX - RECORDS, REPORTS AND AUDITS

A.   FEDERALLY REQUIRED REPORTS

     1.   CHEC/EPSDT REPORTS

          The CONTRACTOR agrees to act as a continuing care provider for the
          CHEC/EPSDT program in compliance with OBRA '89 and Social Security Act
          Sections 1902 (a)(43), 1905(a)(4)(B)and 1905 (r).

          a.   CHEC/EPSDT SCREENINGS

               Annually, the CONTRACTOR will submit to the DEPARTMENT
               information on CHEC/EPSDT screenings to meet the Federal EPSDT
               reporting requirements (Form HCFA-416). The data will be in a
               mutually agreed upon format. The CHEC/EPSDT information is due
               December 31 for the prior federal fiscal year's data (October 1
               through September 30).

          b.   IMMUNIZATION DATA

               The CONTRACTOR will submit immunization data as part of the
               CHEC/EPSDT reporting. Enrollee name, Medicaid ID, type of
               immunization identified by procedure code, and date of
               immunization will be reported in the same format as the
               CHEC/EPSDT data.

     2.   DISCLOSURE OF PHYSICIAN INCENTIVE PLANS

          The CONTRACTOR must submit to the DEPARTMENT information on its
          physician incentive plans as listed in 42 CFR 417.479(h)(l) [or
          Article VII - Other Requirements, F - Disclosure of Provider Incentive
          Plans, 1 through 5] by May 1 of each year. The CONTRACTOR must provide
          to the DEPARTMENT the enrollee/disenrollee survey results when
          beneficiary surveys are required as specified in 42 CFR 417.479(g) [or
          #7 under Article VII.F.] by October 1 or three months after the end of
          the Contract year. The CONTRACTOR must submit to the DEPARTMENT
          information on capitation payments paid to primary care physicians as
          specified in 42 CFR 417.479(h)(l)(vi).

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

B.   PERIODIC REPORTS

     1.   ENROLLMENT, COST AND UTILIZATION REPORTS (ATTACHMENT E)

          Enrollment, cost and utilization reports will be submitted on
          diskettes in Excel or Lotus and in the format specified in Attachment
          E. A hard copy of the report must be submitted as well. The DEPARTMENT
          will send to the CONTRACTOR a template of the Attachment E format on a
          diskette. The CONTRACTOR may not customize or change the report
          format. The financial information for these reports will be reported
          as defined in HCFA Publication 75, and if applicable, HCFA 15-1. The
          CONTRACTOR will certify in writing the accuracy and completeness, to
          the best of its knowledge, of all costs and utilization data provided
          to the DEPARTMENT on Attachment E.

          Two Attachment E reports will be submitted covering dates of service
          for each Contract year.

          a.   Attachment E is due May 1 for the preceding six-month reporting
               period (July through December).

          b.   Attachment E is due November 1 for the preceding 12-month
               reporting period (July through June).

          If necessary, the CONTRACTOR may request, in writing, an extension of
          the due date up to 30 days beyond the required due date. The
          DEPARTMENT will approve or deny the extension request writing within
          seven calendar days of receiving the request.

     2.   INTERPRETIVE SERVICES

          Annually, on November 1, the CONTRACTOR will submit summary
          information about the use of interpretive services during the previous
          Contract year (July 1 through June 30). The information must include
          the following:

          a.   a list of all sources of interpreter services;
          b.   total expenditures for each language;
          c.   total expenditures for clinical versus administrative;
          d.   number of Enrollees who used interpretive services for each
               language;
          e.   number of services provided categorized by clinical versus
               administrative.

     3.   SEMI-ANNUAL REPORTS

          The following semi-annual reports are due May 1 for the preceding
          six-month reporting period ending December 31 (July through December)
          and are due November 1 for the preceding six month period ending June
          30 (January through June).

          a.   Organ Transplants: Report the total number of organ transplants
               by type of transplant.

          b.   Obstetrical Information: Report obstetrical information including

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

               1)   total number of obstetrical deliveries by aid category
                    grouping;
               2)   total number of caesarean sections and total number of
                    vaginal deliveries;
               3)   total number low birth weight infants; and
               4)   total number of Enrollees requiring prenatal hospital
                    admission.

          c.   COMPLAINTS AND FORMAL GRIEVANCES

               Separate reports of complaints/grievances are required for adults
               and children; and for Traditional Medicaid Plan Enrollees and
               Non-Traditional Plan Enrollees. Each report must distinguish
               between those Enrollees with special health care needs and the
               general population of children. Report summary information on the
               number of complaints/grievances by type of complaint/grievance
               and indicate the number that have been resolved. Include an
               analysis of the type and number of complaints/grievances received
               by the CONTRACTOR.

          d.   ABERRANT PHYSICIAN BEHAVIOR

               Report summary information of corrective actions taken on
               physicians who have been identified by the CONTRACTOR as
               exhibiting aberrant physician behavior and the names of
               physicians who have been removed from the CONTRACTOR's network
               due to aberrant behavior. The summary shall include the reasons
               for the corrective action or removal.

     4.   ANNUAL QUALITY IMPROVEMENT PROGRAM DOCUMENTATION

          Annually, the CONTRACTOR will submit to the DEPARTMENT the following
          documents:

          a.   the CONTRACTOR's quality improvement program description;
          b.   the CONTRACTOR's quality improvement work plan;
          c.   the CONTRACTOR's quality improvement work plan evaluation for
               previous calendar year.

          These reports must be in the format developed by the DEPARTMENT and
          include signature(s) of approval by the CONTRACTOR's designated
          authorizing authority. Reports for each calendar year are due no later
          than March 31st of each year.

     5.   DOCUMENTS DUE PRIOR TO QUALITY MONITORING REVIEWS

          The following documents are due at least 60 days prior to the
          DEPARTMENT's quality assurance monitoring review, or earlier on
          request, unless the DEPARTMENT has already received documents that are
          in effect:

          a.   the CONTRACTOR's most current (may be in draft stage) written
               quality improvement program description;

          b.   the CONTRACTOR's most current (may be in draft stage) annual
               quality improvement work plan;

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          c.   the CONTRACTOR's most current (may be in draft stage) quality
               improvement work plan evaluation for the previous calendar year;

          d.   documentation of the CONTRACTOR's compliance to standards defined
               in the defined in the Utah MCO Quality Assurance Monitoring Plan
               (Attachment G).

          e.   all other information requested by the DEPARTMENT to facilitate
               the DEPARTMENT's review of the CONTRACTOR's compliance to
               standards defined in the Utah MCO Quality Assurance Monitoring
               Plan (Attachment G).

          The above documents must show evidence of a well defined, organized
          program designed to improve client care.

     6.   IMPACT OF CO-PAYMENTS

          The following semi-annual report is due May 1 for the preceding
          six-month reporting period ending April 30 (November of previous year
          through April of current year) and November 1 for the preceding
          six-month period ending October 31 (May through October of the current
          year):

          Report shall document all instances when Enrollees have contacted the
          CONTRACTOR with a complaint about being denied services because they
          did not pay their Medicaid co-payment or co-insurance. For each
          instance, report the Enrollee's name, Medicaid ID, provider, and the
          service the Enrollee was scheduled to receive.

     7.   HEDIS

          Audited Health Plan Employer Data and Information Set (HEDIS)
          performance measures will cover services rendered to Enrollees and
          will be reported as set forth in State rule by the Office of Health
          Data Analysis. For example, calendar year 1997 HEDIS measures will be
          reported in 1998.

     8.   ENCOUNTER DATA

          Encounter data, as defined in the DEPARTMENT's "Encounter Records
          Technical Manual," is due (including all replacements) six months
          after the end of the quarter being reported. Encounter data will be
          submitted in accordance with the instructions detailed in the
          Encounter Records Technical Manual for dates of service beginning July
          1, 1996. The CONTRACTOR must receive certification from an
          independent, credible vendor that their electronic submissions of
          encounter data are compliant with the Health Insurance Portability and
          Accountability Act (HIPAA) requirements. At a minimum, the CONTRACTOR
          must be HIPAA-compliant in the first four levels of HIPAA compliance:
          Level 1 - Integrity Testing, Level 2 - Requirement Testing, Level 3 -
          Balancing, and Level 4 - Situation Testing.

     9.   AUDIT OF ABORTIONS, STERILIZATIONS AND HYSTERECTOMIES

          The CONTRACTOR must conduct an annual audit of abortion, hysterectomy
          and sterilization procedures performed by the CONTRACTOR's providers.
          The purpose of

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          the audit is to monitor compliance with federal and state requirements
          for the reimbursement of these procedures under Medicaid. The
          CONTRACTOR must audit all abortions and a sample of hysterectomy and
          sterilization procedures as defined by the DEPARTMENT.

          On November 1 of each year, the CONTRACTOR will submit to the
          DEPARTMENT the following information on the results of the abortion,
          sterilization and hysterectomy audit for the previous calendar year.

          For the sterilization and hysterectomy audit, submit documentation of
          the methodology used to pull the sample of sterilization and
          hysterectomies and include the sampling proportions.

          In an Excel file, submit the following information for all abortions,
          the sample of sterilizations, and the sample of hysterectomies:

          .    client name
          .    Medicaid ID number
          .    procedure code
          .    date of service
          .    history/physical (yes/no)
          .    operative report (yes/no)
          .    pathology report (yes/no)
          .    consent form (yes/no)
          .    medical necessity criteria - hysterectomies only

          When information is submitted electronically, the CONTRACTOR must use
          a secured electronic transmission process.

          The DEPARTMENT will evaluate the results of the CONTRACTOR's audit and
          identify the cases that will require medical record submission.
          Medical record submission will be required for all abortions and a
          random sample of hysterectomy and sterilization cases. The DEPARTMENT
          will notify the CONTRACTOR in writing of the cases that will require
          medical record submission and the time line for the medical record
          submissions.

     10.  DEVELOPMENT OF NEW REPORTS

          Any new reports/data requirements mandated by the DEPARTMENT will be
          mutually developed by the DEPARTMENT and the CONTRACTOR.

C.   RECORD SYSTEM REQUIREMENTS

     In accordance with Section 4752 of OBRA '90 (amended section 1903 (m)(2)(A)
     of the Social Security Act), the CONTRACTOR agrees to maintain sufficient
     patient encounter data to identify the physician who delivers Covered
     Services to Enrollees. The CONTRACTOR agrees to provide this encounter
     data, upon request of the DEPARTMENT, within 30 days of the request.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

D.   MEDICAL RECORDS

     The CONTRACTOR agrees that medical records are considered confidential
     information and agrees to follow Federal and State confidentiality
     requirements.

     The CONTRACTOR will require that its providers maintain a medical record
     keeping system through which all pertinent information relating to the
     medical management of the Enrollee is maintained, organized, and is readily
     available to appropriate professionals. Notwithstanding any other provision
     of this Contract to the contrary, medical records covering Enrollees will
     remain the property of the provider, and the provider will respect every
     Enrollee's privacy by restricting the use and disclosure of information in
     such records to purposes directly connected with the Enrollee's health care
     and administration of this Contract. The CONTRACTOR will use and disclose
     information pertaining to individual Enrollees and prospective Enrollees
     only for purposes directly connected with the administration of the
     Medicaid Program and this Contract.

E.   AUDITS

     1.   RIGHT OF DEPARTMENT AND CMS TO AUDIT

          The DEPARTMENT and the Department of Health and Human Services,
          Centers for Medicare and Medicaid Services may audit and inspect any
          financial records of the CONTRACTOR or its subcontractors relating (I)
          to the ability of the CONTRACTOR to bear the risk of potential
          financial losses, or (II) to evaluate services performed or
          determinations of amounts payable under the Contract.

     2.   INFORMATION TO DETERMINE ALLOWABLE COSTS

          The CONTRACTOR will make available to the DEPARTMENT all reasonable
          and related financial, statistical, clinical or other information
          needed for the determination of allowable costs to the Medicaid
          program for "related party/home office" transactions as defined in
          HCFA 15-1. These records are to be made available in Utah or the
          CONTRACTOR will pay the increased cost (incremental travel, per diem,
          etc.) of auditing at the out-of-state location. The cost to the
          CONTRACTOR will include round-trip travel and two days per
          diem/lodging. Additional travel costs of the site audit will be shared
          equally by the CONTRACTOR and the DEPARTMENT.

     3.   MANAGEMENT AND UTILIZATION AUDITS

          The MCO will allow the DEPARTMENT and the Department of Health and
          Human Services, Centers for Medicare and Medicaid Services, to perform
          audits for identification and collection of management data, including
          Enrollee satisfaction data, quality of care data, fraud-related data,
          abuse-related data, patient outcome data, and cost and utilization
          data, which will include patient profiles, exception reports, etc. The
          CONTRACTOR will provide all data required by the DEPARTMENT or the
          independent quality review examiners in performance of these audits.
          Prior to beginning any audit, the DEPARTMENT will give the CONTRACTOR
          reasonable notice of audit, and the DEPARTMENT will be responsible for
          costs of its auditors or representatives.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

F.   INDEPENDENT QUALITY REVIEW

     1.   IN GENERAL

          Pursuant to Section 1932(c)(2)(A) of the Social Security Act the
          DEPARTMENT may provide for an annual external independent review
          conducted by a qualified independent entity of the quality outcomes
          and timeliness of and access to Covered Services. The CONTRACTOR will
          support the annual external independent review.

          The DEPARTMENT will choose an agency to perform an annual independent
          quality review pursuant to federal law and will pay for such review.
          The CONTRACTOR will maintain all clinical and administrative records
          for use by the quality review contractor. The CONTRACTOR agrees to
          support quality assurance reviews, focused studies and other projects
          performed for the DEPARTMENT by the external quality review
          organization (EQRO). The purpose of the reviews and studies are to
          comply with federal requirements for an annual independent audit of
          the quality outcomes and timeliness of, and access to, Covered
          Services. The external independent reviews are conducted by the EQRO,
          with the advice, assistance, and cooperation of a planning team
          composed of representatives from the CONTRACTOR, the EQRO and the
          DEPARTMENT with final approval by the DEPARTMENT.

     2.   SPECIFIC REQUIREMENTS

          a.   LIAISON FOR ROUTINE COMMUNICATION

               The CONTRACTOR will designate an individual to serve as liaison
               with the EQRO for routine communication with the EQRO.

          b.   REPRESENTATIVE TO ASSIST WITH PROJECTS

               The CONTRACTOR will designate a minimum of two representatives
               (unless one individual can service both functions) to serve on
               the planning team for each EQRO project. Representatives will
               include a quality improvement representative and a data
               representative. The planning team is a joint collaborative forum
               between DEPARTMENT staff, the EQRO and the CONTRACTOR. The role
               of the planning team is to participate in the process and
               completion of EQRO projects.

          c.   COPIES AND ON-SITE ACCESS

               The CONTRACTOR will be responsible for obtaining copies of
               Enrollee information and facilitating on-site access to Enrollee
               information as needed by the EQRO. Such information will be used
               to plan and conduct projects and to investigate complaints and
               grievances. Any associated copying costs are the responsibility
               of the CONTRACTOR. Enrollee information includes medical records,
               administrative data such as, but not limited to, enrollment
               information and claims, nurses' notes, medical logs, etc. of the
               CONTRACTOR or its providers.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          d.   FORMAT OF ENROLLEE FILES

               The CONTRACTOR will provide Enrollee information in a mutually
               agreed upon format compatible for the EQRO's use, and in a timely
               fashion to allow the EQRO to select cases for its review.

          e.   TIME-FRAME FOR PROVIDING DATA

               The CONTRACTOR will provide data requests to the EQRO within 15
               working days of the written request from the EQRO and will
               provide medical records within 30 working days of the written
               request from the EQRO. Requests for extensions of these time
               frames will be reviewed and approved or disapproved by the
               DEPARTMENT on a case-by-case basis.

          f.   WORK SPACE FOR ON-SITE REVIEWS

               The CONTRACTOR will assure that the EQRO staff and consultants
               have adequate work space, access to a telephone and copy machines
               at the time of review. The review will be performed during
               agreed-upon hours.

          g.   STAFF ASSISTANCE DURING ON-SITE VISITS

               The CONTRACTOR will assign appropriate person(s) to assist the
               EQRO personnel conduct the reviews during on-site visits and to
               participate in an informal discussion of screening observations
               at the end of each on-site visit, if necessary.

          h.   CONFIDENTIALITY

               For information received from the EQRO, the CONTRACTOR will
               comply with the Department of Health and Human Services
               regulations relating to confidentiality of data and information
               (42 CFR Part 476.107 and 476.108).

                              ARTICLE X - SANCTIONS

     The DEPARTMENT may impose intermediate sanctions on the CONTRACTOR if the
     CONTRACTOR defaults in any manner in the performance of any obligation
     under this Contract including but not limited to the following situations:

     (1)  the CONTRACTOR fails to substantially provide Medically Necessary
          Covered Services to Enrollees;

     (2)  the CONTRACTOR imposes premiums or charges Enrollees in excess of the
          premiums or charges permitted under this Contract;

     (3)  the CONTRACTOR acts to discriminate among Enrollees on the basis of
          their health status or requirements for health care services,
          including expulsion or refusal to re-enroll an individual, except as
          permitted by Title XIX, or engaging in any practice that would

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          reasonably be expected to have the effect of denying or discouraging
          enrollment with the MCO by potential Enrollees whose medical condition
          or history indicates a need for substantial future medical services;

     (4)  the CONTRACTOR misrepresents or falsifies information furnished to the
          Department of Health and Human Services, Centers for Medicare and
          Medicaid Services, the DEPARTMENT, an Enrollee, potential Enrollee or
          health care provider;

     (5)  the CONTRACTOR fails to comply with the physician incentive
          requirements under Section 1903(m)(2)(A)(x) of the Social Security
          Act.

     (6)  the CONTRACTOR distributed directly or through any agent or
          independent contractor marketing materials that contain false or
          misleading information.

     The DEPARTMENT must follow the 1997 Balance Budget Act guidelines on the
     types of intermediate sanctions the DEPARTMENT may impose, including civil
     monetary penalties, the appointment of temporary management, and suspension
     of payment.

                    ARTICLE XI - TERMINATION OF THE CONTRACT

A.   AUTOMATIC TERMINATION

     This Contract will automatically terminate June 30, 2004.

B.   OPTIONAL YEAR-END TERMINATION

     At the end of each Contract year, either party may terminate the Contract
     without cause for subsequent years by giving the other party written notice
     of termination at least 90 days prior to the end of the Contract year (July
     1 through June 30).

C.   TERMINATION FOR FAILURE TO AGREE UPON RATES

     At least 60 days prior to the end of each Contract year, the parties will
     meet and negotiate in good faith the rates (Attachment F) applicable to the
     upcoming year. If the parties cannot agree upon future rates by the end of
     the Contract year, then either party may terminate the Contract for
     subsequent years by giving the other party written notice of termination
     and the termination will become effective 90 days after receipt of the
     written notice of termination.

D.   EFFECT OF TERMINATION

     1.   COVERAGE

          Inasmuch as the CONTRACTOR is paid on a monthly basis, the CONTRACTOR
          will continue providing the Covered Services required by this Contract
          until midnight of the last day of the calendar month in which the
          termination becomes effective. If an Enrollee is a patient in an
          inpatient hospital setting during the month in which termination
          becomes effective, the CONTRACTOR is responsible for the entire
          hospital

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

          stay including physician charges until discharge or thirty days
          following termination, whichever occurs first.

     2.   ENROLLEE NOT LIABLE FOR DEBTS OF CONTRACTOR OR ITS SUBCONTRACTORS

          If the CONTRACTOR or one of its subcontractors becomes insolvent or
          bankrupt, the Enrollees will not be liable for the debts of the
          CONTRACTOR or its subcontractor. The CONTRACTOR will include this term
          in all of its subcontracts.

     3.   INFORMATION FOR CLAIMS PAYMENT

          The CONTRACTOR will promptly supply to the DEPARTMENT all information
          necessary for the reimbursement of any Medicaid claims not paid by the
          CONTRACTOR.

     4.   CHANGES IN ENROLLMENT PROCESS

          The CONTRACTOR will be advised of anticipated changes in policies and
          procedures as they relate to the enrollment process and their comments
          will be solicited. The CONTRACTOR agrees to be bound by such changes
          in policies and procedures unless they are not agreeable to the
          CONTRACTOR, in which case the CONTRACTOR may terminate the Contract in
          accordance with the Contract termination provisions.

     5.   HEARING PRIOR TO TERMINATION

          Regarding the General Provisions, Article XVII (Default, Termination,
          & Payment Adjustment), item 3, if the CONTRACTOR fails to meet the
          requirements of the Contract, the DEPARTMENT must give the CONTRACTOR
          a hearing prior to termination. Enrollees must be informed of the
          hearing and will be allowed to disenroll from the MCO without cause.

E.   ASSIGNMENT

     Assignment of any or all rights or obligations under this Contract without
     the prior written consent of the DEPARTMENT is prohibited. Sale of all or
     any part of the rights or obligations under this Contract will be deemed an
     assignment. Consent may be withheld in the DEPARTMENT's sole and absolute
     discretion.

                           ARTICLE XII - MISCELLANEOUS

A.   INTEGRATION

     This Contract contains the entire agreement between the parties with
     respect to the subject matter of this Contract. There are no
     representations, warranties, understandings, or agreements other than those
     expressly set forth herein. Previous contracts between the parties hereto
     and conduct between the parties which precedes the implementation of this
     Contract will not be used as a guide to the interpretation or enforcement
     of this Contract or any provision hereof.

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<PAGE>

                                                                    Attachment B
                                                          Effective July 1, 2002

B.   ENROLLEES MAY NOT ENFORCE CONTRACT

     Although this Contract relates to the provision of benefits for Enrollees
     and others, no Enrollee is entitled to enforce any provision of this
     Contract against the CONTRACTOR nor will any provision of this Contract be
     constructed to constitute a promise by the CONTRACTOR to any Enrollee or
     potential Enrollee.

C.   INTERPRETATION OF LAWS AND REGULATIONS

     The DEPARTMENT will be responsible for the interpretation of all federal
     and State laws and regulations governing or in any way affecting this
     Contract. When interpretations are required, the CONTRACTOR will submit
     written requests to the DEPARTMENT. The DEPARTMENT will retain full
     authority and responsibility for the administration of the Medicaid program
     in accordance with the requirements of Federal and State law.

D.   ADOPTION OF RULES

     Adoption of rules by the DEPARTMENT, subsequent to this amendment, and
     which govern the Medicaid program, will be automatically incorporated into
     this Contract upon receipt by the CONTRACTOR of written notice thereof.

                   ARTICLE XIII - EFFECT OF GENERAL PROVISIONS

If there is a conflict between these Special Provisions (Attachment B) or the
General Provisions (Attachment A), then these Special Provisions will control.

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<PAGE>

                                TABLE OF CONTENTS

                                  ATTACHMENT C
                                COVERED SERVICES
                           LIMITATIONS AND EXCLUSIONS
                    CO-PAYMENT AND CO-INSURANCE REQUIREMENTS

A.      In General...........................................................  1

B.      Hospital Services....................................................  1

C.      Physician Services...................................................  2

D.      General Preventive Services..........................................  3

E.      Vision Care..........................................................  3

F.      Lab and Radiology....................................................  3

G.      Physical and Occupational Therapy....................................  4

H.      Speech and Hearing Services..........................................  4

I.      Podiatry Services....................................................  5

J.      End Stage Renal Disease - Dialysis...................................  5

K.      Home Health Services.................................................  5

L.      Hospice Services.....................................................  5

M.      Private Duty Nursing.................................................  6

N.      Medical Supplies and Medical Equipment...............................  6

O.      Abortions and Sterilizations.........................................  6

P.      Treatment for Substance Abuse and Dependency.........................  6

Q.      Organ Transplants....................................................  6

R.      Other Outside Medical Services.......................................  7

S.      Long Term Care.......................................................  7

T.      Transportation Services..............................................  7

U.      Services to CHEC Enrollees...........................................  8

                                        i

<PAGE>

                                TABLE OF CONTENTS

V.      Family Planning Services.............................................  8

W.      High Risk Prenatal Services..........................................  9

X.      Services for Children with Special Needs   .......................... 12

Y.      Medical and Surgical Services of a Dentist  ......................... 14

Z.      Diabetes Education   ................................................ 15

AA.     HIV Prevention....................................................... 15

Summary of Co-Payment and Co-Insurance Requirements.......................... 16

                                       ii

<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

                         ATTACHMENT C - COVERED SERVICES
                            LIMITATIONS & EXCLUSIONS
                     CO-PAYMENT & CO-INSURANCE REQUIREMENTS

Covered Services are the same under both the Traditional and Non-Traditional
Medicaid Plans unless otherwise indicated. Co-payments and co-insurances are
listed if required. Pregnant women and children under age 18 are exempt from all
co-payment and co-insurance requirements. Services related to family planning
are excluded from all co-payment and co-insurance requirements. Medicaid
Provider Manuals provide detailed information regarding covered services and are
available to the CONTRACTOR upon request.

A.   IN GENERAL

     The CONTRACTOR will provide the following benefits to Enrollees in
     accordance with Medicaid benefits as defined in the Utah State Plan subject
     to the exception or limitations as noted below. The DEPARTMENT reserves the
     right to interpret what is in the State plan. Medicaid services can only be
     limited through utilization criteria based on Medical Necessity. The
     CONTRACTOR will provide at least the following benefits to Enrollees.

     The CONTRACTOR is responsible to provide or arrange for all Medically
     Necessary Covered Services on an emergency basis 24 hours each day, seven
     days a week. The CONTRACTOR is responsible for payment for all covered
     Emergency Services furnished by providers that do not have arrangements
     with the CONTRACTOR.

B.   HOSPITAL SERVICES

     1.   INPATIENT HOSPITAL

          Services furnished in a licensed, certified hospital.

          Non-Traditional Medicaid Plan excludes the following revenue
          codes:
          430 - 439 (Occupational Therapy)
          380 - 382, and 391 (Whole Blood)
          390 and 399 (Autologous or self blood storage for future use)
          811 - 813 (Organ Donor charges)

          CO-INSURANCE
          Traditional Medicaid: $[*] for non-emergency admissions.
          Limited to $[*] per Enrollee per calender year.
          Non-Traditional Medicaid: $[*] for each non-emergency admission per
          Enrollee. Counts toward total maximum co-payment and co-insurance of
          $[*] per Enrollee per calendar year.

                                  Page 1 of 16

<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

     2.   OUTPATIENT HOSPITAL

          Services provided to Enrollees at a licensed, certified hospital who
          are not admitted to the hospital.

          CO-PAYMENT
          Traditional Medicaid: $2.00 co-payment per visit. Limited to one
          co-payment per date of service per provider. The facility fees
          associated with services provided in an outpatient hospital or
          free-standing ambulatory surgical centers are subject to $2.00
          co-payment per date of service per provider. Annual calendar year
          maximum for any combination of physician, podiatry, outpatient
          hospital, and surgical centers is $100.00 per Enrollee.
          Non-Traditional Medicaid: $3.00 co-payment per visit. Limited to one
          co-payment per date of service per provider. The facility fees
          associated with services provided in an outpatient hospital or a free
          standing ambulatory surgical centers are subject to $3.00 co-payment
          per date of service per provider. Counts toward total maximum
          co-payment and co-insurance of $500.00 per Enrollee per calendar year.

     3.   EMERGENCY DEPARTMENT SERVICES

          Emergency Services provided to Enrollees in designated hospital
          emergency departments.

          CO-PAYMENT
          Traditional Medicaid: $6.00 co-payment for non-emergency use of the
          emergency room.
          Non-Traditional Medicaid: $6.00 co-payment for non-emergency use of
          the emergency room. Counts toward total maximum co-payment and
          co-insurance of $500.00 per Enrollee per calendar year.

C.   PHYSICIAN SERVICES

     Services provided directly by licensed physicians or osteopaths, or by
     other licensed professionals such as physician assistants, nurse
     practitioners, or nurse midwives under the physician's or osteopath's
     supervision.

     Non-Traditional Medicaid Excludes office visits in conjunction with allergy
     injections (CPT codes 95115 through 95134 and 95144 through 95199).

     CO-PAYMENT
     Traditional Medicaid: $2.00 co-payment per visit. Limited to one co-payment
     per date of service per provider. Annual calendar year maximum is $100.00
     per Enrollee for any combination of physician, podiatry, outpatient
     hospital, freestanding emergency centers,

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

     and surgical centers. Co-payment required for preventive services and
     immunizations.
     Non-Traditional Medicaid: $3.00 co-payment per visit. Limited to one
     co-payment per date of service per provider. No co-payment for preventive
     services and immunizations. Counts toward total maximum co-payment and
     co-insurance of $500.00 per Enrollee per calendar year.

D.   GENERAL PREVENTIVE SERVICES

     The CONTRACTOR must develop or adopt practice guidelines consistent with
     current standards of care, as recommended by professional groups such as
     the American Academy of Pediatric and the U.S. Task Force on Preventive
     Care.

     A minimum of three screening programs for prevention or early intervention
     (e.g. Pap Smear, diabetes, hypertension).

E.   VISION CARE

     Services provided by licensed ophthalmologists or licensed optometrists,
     and opticians within their scope of practice. Eyeglasses will be provided
     to eligible recipients based on medical necessity. Services include, but
     are not limited to, the following:

     1.   Eye refractions, examinations
     2.   Laboratory work
     3.   Lenses
     4.   Eyeglass Frames
     5.   Repair of Frames
     6.   Repair or Replacement of Lenses
     7.   Contact Lenses (when Medically Necessary)

     Non-Traditional Medicaid Plan is limited to the following service and
     limitation: Eye refraction/examination is limited to one eye examination
     every 12 months. Annual coverage limited to $30.00. All amounts over $30.00
     paid by Enrollee. No coverage for eyeglasses.

F.   LAB AND RADIOLOGY SERVICES

     Professional and technical laboratory and X-ray services furnished by
     licensed and certified providers. All laboratory testing sites, including
     physician office labs, providing services under this Contract will have
     either a Clinical Laboratory Improvement Amendments (CLIA) certificate of
     Waiver or a certificate of registration along with a CLIA identification
     number.

     Those laboratories with certificates of waiver will provide only the eight
     types of tests permitted under the terms of their waiver. Laboratories with
     certificates of registration

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

     may perform a full range of laboratory tests.

G.   PHYSICAL AND OCCUPATIONAL THERAPY

     1.   PHYSICAL THERAPY

          Treatment and services provided by a licensed physical therapist.
          Treatment and services must be authorized by a physician and include
          services prescribed by a physician or other licensed practitioner of
          the healing arts within the scope of his or her practice under State
          law and provided to an Enrollee by or under the direction of a
          qualified physical therapist. Necessary supplies and equipment will be
          reviewed for medical necessity and follow the criteria of the R414.12
          rule.

     2.   OCCUPATIONAL THERAPY

          Treatment of services provided by a licensed occupational therapist.
          Treatment and services must be authorized by a physician and include
          services prescribed by a physician or other licensed practitioner of
          the healing arts within the scope of his or her practice under State
          law and provided to an Enrollee by or under the direction of a
          qualified occupational therapist. Necessary supplies and equipment
          will be reviewed for medical necessity and follow the criteria of the
          R414.12 rule.

          Non-Traditional Medicaid Plan is limited by the number of services:
          Visits to a licensed physical therapist, licensed occupational
          therapist and chiropractor are limited to a combination of 16 visits
          per calendar year. Chiropractic services are covered under
          fee-for-service and are not the responsibility of the CONTRACTOR.

          CO-PAYMENT
          Non-Traditional Medicaid: $3.00 co-payment per visit. Limited to one
          co-payment per date of service per provider. Counts toward total
          maximum co-payment and co-insurance of $500.00 per Enrollee per
          calendar year.

H.   SPEECH AND HEARING SERVICES

     Services and appliances, including hearing aids and hearing aid batteries,
     provided by a licensed medical professional to test and treat speech
     defects and hearing loss.

     Traditional Medicaid Plan: Coverage is limited to children up to age 21 and
     pregnant women.

     Non-Traditional Medicaid Plan: Not covered.

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

I.   PODIATRY SERVICES

     Services provided by a licensed podiatrist.

     Traditional Medicaid Plan: Full coverage is limited to children up to age
     21 and pregnant women. Effective October 1, 2002, limited podiatry benefits
     are covered for adults.

     Non-Traditional Medicaid Plan: Effective October 1, 2002, limited podiatry
     benefits are covered.

     CO-PAYMENT
     Traditional Medicaid: $2.00 co-payment per visit. Limited to one co-payment
     per date of service per provider. Annual calendar year maximum is $100.00
     per Enrollee for any combination of physician, podiatry, outpatient
     hospital, freestanding emergency centers, and surgical centers. Co-payment
     required for preventive services and immunizations.

     Non-Traditional Medicaid: $3.00 co-payment per visit. Limited to one
     co-payment per date of service per provider. Counts toward total maximum
     co-payment and co-insurance of $500.00 per Enrollee per calendar year.

J.   END STAGE RENAL DISEASE - DIALYSIS

     Treatment of end stage renal dialysis for kidney failure. Dialysis is to be
     rendered by a Medicare-certified Dialysis facility.

K.   HOME HEALTH SERVICES

     Home health services are defined as intermittent nursing care provided by
     certified nursing professionals (registered nurses, licensed practical
     nurses, and home health aides) in the client's home when the client is
     homebound or semi-homebound. Home health care must be rendered by a
     Medicare-certified Home Health Agency that has a surety bond.

     Personal care services as defined in the DEPARTMENT's Medicaid Personal
     Care Provider Manual are included in this Contract. Personal care services
     may be provided by a State licensed home health agency.

L.   HOSPICE SERVICES

     Services delivered to terminally ill patients (six months life expectancy)
     who elect palliative versus aggressive care. Hospice care must be rendered
     by a Medicare-certified hospice.

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

M.   PRIVATE DUTY NURSING

     Services provided by licensed nurses for ventilator-dependent children and
     technology-dependent adults in their home in lieu of hospitalization if
     Medically Necessary, feasible, and safe to be provided in the patient's
     home. Requests for continuous care will be evaluated on a case by case
     basis and must be approved by the CONTRACTOR.

     Non-Traditional Medicaid Plan: Private Duty Nursing is not a covered
     service.

N.   MEDICAL SUPPLIES AND MEDICAL EQUIPMENT

     This Covered Service includes any necessary supplies and equipment used to
     assist the Enrollee's medical recovery, including both durable and
     non-durable medical supplies and equipment, and prosthetic devices. The
     objective of the medical supplies program is to provide supplies for
     maximum reduction of physical disability and restore the Enrollee to his or
     her best functional level. Medical supplies may include any necessary
     supplies and equipment recommended by a physical or occupational therapist,
     but should be ordered by a physician. Durable medical equipment (DME)
     includes, but is not limited to, prosthetic devices and specialized
     wheelchairs. Durable medical equipment and supplies must be provided by a
     DME supplier that has a surety bond. Necessary supplies and equipment will
     be reviewed for medical necessity and follow the criteria of the R414.12 of
     the Utah Administrative Code, with the exception of criteria concerning
     long term care since long term care services are not covered under the
     Contract.

     Non-Traditional Medicaid Plan excludes blood pressure monitors, and
     replacement of lost, damaged, or stolen durable medical equipment or
     prosthesis.

O.   ABORTIONS AND STERILIZATIONS

     These services are provided to the extent permitted by Federal and State
     law and must meet the documentation requirement of 42 CFR 441, Subparts E
     and F. These requirements must be met regardless of whether Medicaid is
     primary or secondary payer.

P.   TREATMENT FOR SUBSTANCE ABUSE AND DEPENDENCY

     Treatment will cover medical detoxification for alcohol or substance abuse
     conditions. Medical services including hospital services will be provided
     for the medical non-psychiatric aspects of the conditions of alcohol/drug
     abuse.

Q.   ORGAN TRANSPLANTS

     The following transplantations are covered for all Enrollees: Kidney,
     liver, cornea, bone marrow, stem cell, heart, intestine, lung, pancreas,
     small bowel, combination heart/lung, combination intestine/liver,
     combination kidney/pancreas, combination liver/kidney,

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

     multi visceral, and combination liver/small bowel unless amended under the
     provisions of Attachment B, Article IV (Benefits), Section C, Subsection 2
     of this Contract.

     Non-Traditional Medicaid Plan is limited to kidney, liver, cornea, bone
     marrow, stem cell, heart, and lung transplantations.

R.   OTHER OUTSIDE MEDICAL SERVICES

     The CONTRACTOR, at its discretion and without compromising quality of care,
     may choose to provide services in Freestanding Emergency Centers, Surgical
     Centers and Birthing Centers.

     CO-PAYMENT
     Traditional Medicaid: $2.00 co-payment per visit. Limited to one co-payment
     per date of service per provider. Annual calendar year maximum is $100.00
     per Enrollee for any combination of physician, podiatry, outpatient
     hospital, freestanding emergency centers, and surgical centers. (Co-payment
     does not apply to birthing centers.)
     Non-Traditional Medicaid: $3.00 co-payment per visit. Limited to one
     co-payment per date of service per provider. Counts toward total maximum
     co-payment and co-insurance of $500.00 per Enrollee per calendar year.

S.   LONG TERM CARE

     The CONTRACTOR may provide long term care for Enrollees in skilled nursing
     facilities requiring such care as a continuum of a medical plan when the
     plan includes a prognosis of recovery and discharge within thirty (30) days
     or less. When the prognosis of an Enrollee indicates that long term care
     (over 30 days) will be required, the CONTRACTOR will notify the DEPARTMENT
     and the skilled nursing facility of the prognosis determination and will
     initiate disenrollment to be effective on the first day of the month
     following the prognosis determination. Skilled nursing care is to be
     rendered in a skilled nursing facility which meets federal regulations of
     participation.

T.   TRANSPORTATION SERVICES

     Ambulance (ground and air) service for medical emergencies. The CONTRACTOR
     is also responsible to pay for authorized emergency transportation for an
     illness or accident episode which, upon subsequent medical evaluation at
     the hospital, is determined to be psychiatric-related. The CONTRACTOR will
     submit its emergency transportation policy to the DEPARTMENT for review.
     The CONTRACTOR is not responsible for transporting an Enrollee from an
     acute care facility to another acute care facility for a psychiatric
     admission. The CONTRACTOR's scope of coverage for emergency transportation
     services is limited to the same scope of coverage as defined in the
     transportation Medicaid provider manual.

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

     Effective September 1, 2002 the CONTRACTOR is not responsible for ambulance
     (ground and air) services.

U.   SERVICES TO CHEC ENROLLEES

     1.   CHEC SERVICES

          The CONTRACTOR will provide to CHEC Enrollees preventive screening
          services and other necessary medical care, diagnostic services,
          treatment, and other measures necessary to correct or ameliorate
          defects and physical and mental illnesses and conditions discovered by
          the screening services, whether or not such services are covered under
          the State Medicaid Plan. The CONTRACTOR is not responsible for home
          and community-based services available through Utah's Home and
          Community-Based waiver programs.

          The CONTRACTOR will provide the full early and periodic screening,
          diagnosis, and treatment services to all eligible children and young
          adults up to age 21 in accordance with the periodicity schedule as
          described in the Utah CHEC Provider Manual. All children between six
          months and 72 months must be screened for blood lead levels.

          Non-Traditional Medicaid: CHEC services are not covered. Enrollees who
          are 19 or 20 years of age receive the adult scope of services.

     2.   CHEC POLICIES AND PROCEDURES

          The CONTRACTOR agrees to have written policies and procedures for
          conducting tracking, follow-up, and outreach to ensure compliance with
          the CHEC periodicity schedules. These policies and procedures will
          emphasize outreach and compliance monitoring for children and young
          adults, taking into account the multi-lingual, multi-cultural nature
          as well as other unique characteristics of the CHEC Enrollees.

V.   FAMILY PLANNING SERVICES

     This service includes disseminating information, counseling, and treatments
     relating to family planning services. All services must be provided by or
     authorized by a physician, certified nurse midwife, or nurse practitioner.
     All services must be provided in concert with Utah law.

     Birth control services include information and instructions related to the
     following:

     1.   Birth control pills;
     2.   Norplant;

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

     3.   Depo Provera;
     4.   IUDs;
     5.   Barrier methods including diaphragms, male and female condoms, and
          cervical caps;
     6.   Vasectomy or tubal ligations; and
     7.   Office calls, examinations or counseling related to contraceptive
          devices.

     Non-Traditional Medicaid: Norplant is not a covered service.

W.   HIGH-RISK PRENATAL SERVICES

     1.   IN GENERAL - ENSURE SERVICE ARE APPROPRIATE AND COORDINATED

          The CONTRACTOR must ensure that high risk pregnant Enrollees receive
          an appropriate level of quality perinatal care that is coordinated,
          comprehensive and continuous either by direct service or referral to
          an appropriate provider or facility. In the determination of the
          provider and facility to which a high risk prenatal Enrollee will be
          referred, care must be taken to ensure that the provider and facility
          both have the appropriate training, expertise and capability to
          deliver the care needed by the Enrollee and her fetus/infant. Although
          many complications in perinatal health cannot be anticipated, most can
          be identified early in pregnancy. Ideally, preconceptional counseling
          and planned pregnancy are the best ways to assure successful pregnancy
          outcome, but this is often not possible. Provision of routine
          preconceptional counseling must be made available to those women who
          have conditions identified as impacting pregnancy outcome, i.e.,
          diabetes mellitus, medications which may result in fetal anomalies or
          poor pregnancy outcome, or previous severe anomalous fetus/infant,
          among others.

     2.   RISK ASSESSMENT

          a.   CRITERIA

               Enrollees who are pregnant should be risk assessed for medical
               and psychosocial conditions which may contribute to a poor birth
               outcome at their first prenatal visit, preferably in the first
               trimester. The patient who is determined not to be at high risk
               should be evaluated for change in risk status throughout her
               pregnancy. There are a number of complex systems to determine how
               to assess the risk of pregnancies. The DEPARTMENT has developed a
               risk assessment tool available through the Division of Community
               and Family Health Services which is available upon request.

          b.   RECOMMENDED PRENATAL SCREENING

               The DEPARTMENT recommends prenatal screening of every woman for

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

               hepatitis B surface antigen (HBsAg) to identify all those at high
               risk for transmitting the virus to their newborns. When a woman
               is found to be HBsAg-positive, the CONTRACTOR will provide HBIG
               and HB vaccine at birth. Initial treatments should be given
               during the first 12 hours of life.

          c.   CLASSIFICATION

               Upon identification of pregnancy or the development of a risk
               factor, each patient should be assigned a classification as
               outlined below.
               1)   Group I
                    Group I patients have no significant risk factors. They may
                    receive obstetrical care by an obstetrician/gynecologist
                    (OB/GYN), family practitioner or certified nurse midwife.

               2)   Group II
                    Group II patients have the following risk factors, and
                    require consultation (consultation may be either by
                    telephone or in person, as appropriate) with an OB/GYN:

                    i.     pregnancy beyond 42 weeks
                    ii.    preterm labor in the current pregnancy less than 34
                           weeks
                    iii.   fetal malpresentation at 37 weeks gestation and
                           beyond*
                    iv.    oxytocin or antepartum prostaglandin use is
                           contemplated*
                    v.     arrest of dilatation in labor, or arrest of descent
                           in labor*
                    vi.    bleeding in labor, beyond bloody show*
                    vii.   abnormal fetal heart rate pattern potentially
                           requiring specific intervention*
                    viii.  chorioamnionitis*
                    ix.    preeclampsia
                    x.     VBAC*

                    *Criteria do not apply if family physician has cesarean
                    privileges.

               3)   Group III
                    Group III patients have the following risk factors, and
                    require consultation by a Maternal Fetal Medicine (MFM)
                    specialist (board certified perinatologist)

                    i.     intrauterine growth restriction prior to 37 weeks
                    ii.    patient at increased risk for fetal anomaly
                           (including teratogen exposure)
                    iii.   patient has known fetal anomaly
                    iv.    preterm delivery (<36 weeks) in a prior pregnancy
                    v.     abnormal serum screening
                    vi.    previous child with congenital anomaly
                    vii.   antibody sensitization

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                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

                    viii.  anemia, excluding iron deficiency
                    ix.    significant concurrent medical illness
                    x.     spontaneous premature rupture of the membranes, not
                           in labor (<34 weeks)
                    xi.    history of thromboembolic disease
                    xii.   thromboembolic disease in current pregnancy
                    xiii.  habitual pregnancy loss (3 or more consecutive
                           losses)
                    xiv.   two or more previous stillbirths or neonatal deaths

               4)   Group IV

                    Group IV patients have the following risk factors, and
                    require total obstetric care by an OB/GYN, or co-management
                    with an OB/GYN or MFM

                    i.     any significant medical complication, including
                           patients with insulin dependent diabetes millitus,
                           chronic hypertension requiring medication, maternal
                           neoplastic disease
                    ii.    twins
                    iii.   known or suspected cervical incompetence
                    iv.    placenta previa beyond 28 week gestation
                    v.     severe preeclampsia

               5)   Group V
                    Group V patients have the following risk factors, and
                    require total obstetric care by a MFM (exceptions may be
                    made by a regional MFM specialist, on a case-by-case basis,
                    after MFM consultation)

                    i.     triplets and above
                    ii.    patient has an organ transplant (except cornea)
                    iii.   diabetes mellitus with severe renal impairment
                    iv.    cardiac disease, not functional class I, including
                           all pulmonary hypertension
                    v.     twin-twin transfusion syndrome
                    vi.    patient requires fetal surgical procedure

     3.   PRENATAL INITIATIVE PROGRAM

          Prenatal services provided directly or through agreements with
          appropriate providers includes those services covered under Medicaid's
          Prenatal Initiative Program which includes the following enhanced
          services for pregnant women:

          a.   perinatal care coordination
          b.   prenatal and postnatal home visits

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                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

          c.   group prenatal and postnatal education
          d.   nutritional assessment and counseling
          e.   prenatal and postnatal psychosocial counseling

          Psychosocial counseling is a service designed to benefit the pregnant
          client by helping her cope with the stress that may accompany her
          pregnancy. Enabling her to manage this stress improves the likelihood
          that she will have a healthy pregnancy. This counseling is intended to
          be short term and directly related to the pregnancy. However, pregnant
          women who are also suffering from a serious emotional or mental
          illness should be referred to an appropriate mental health care
          provider.

X.   SERVICES FOR CHILDREN WITH SPECIAL NEEDS

     1.   IN GENERAL

          In addition to primary care, children with chronic illnesses and
          disabilities need specialized care provided by trained experienced
          professionals. Since early diagnosis and intervention will prevent
          costly complications later on, the specialized care must be provided
          in a timely manner. The specialized care must comprehensively address
          all areas of need to be most effective and must be coordinated with
          primary care and other services to be most efficient. The children's
          families must be involved in the planning and delivery of the care for
          it to be acceptable and successful.

     2.   SERVICES REQUIRING TIMELY ACCESS

          All children with special health care needs must have timely access to
          the following services:

          a.   Comprehensive evaluation for the condition.

          b.   Pediatric subspecialty consultation and care appropriate to the
               condition.

          c.   Rehabilitative services provided by professionals with pediatric
               training in areas such as physical therapy, occupational therapy
               and speech therapy.

          d.   Durable medical equipment appropriate for the condition.

          e.   Care coordination for linkage to early intervention, special
               education and family support services and for tracking progress.

          In addition, children with the conditions marked by * below must have
          timely access to coordinated multispecialty clinics, when Medically
          Necessary, for their disorder.

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

     3.   DEFINITION OF CHILDREN WITH SPECIAL HEALTH CARE NEEDS

          The definition of children with special health needs includes, but is
          not limited to, the following conditions:

          a.   Nervous System Defects such as
               Spina Bifida*
               Sacral Agenesis*
               Hydrocephalus

          b.   Craniofacial Defects such as
               Cleft Lip and Palate*
               Treacher - Collins Syndrome

          c.   Complex Skeletal Defects such as
               Arthrogryposis*
               Osteogenesis Imperfecta*
               Phocomelia*

          d.   Inborn Metabolic Disorders such as
               Phenylketonuria*
               Galactosemia*

          e.   Neuromotor Disabilities such as
               Cerebral palsy*
               Muscular Dystrophy*
               Complex Seizure Disorders

          f.   Congenital Heart Defects

          g.   Genetic Disorders such as
               Chromosome Disorders
               Genetic Disorders

          h.   Chronic Illnesses such as
               Cystic Fibrosis
               Hemophilia
               Rheumatoid Arthritis
               Bronchopulmonary Dysplasia
               Cancer
               Diabetes
               Nephritis
               Immune Disorders

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

          i.   Developmental Disabilities with multiple or global delays in
               development such as Down Syndrome or other conditions associated
               with mental retardation.

          The CONTRACTOR agrees to cover all Medically Necessary services for
          children with special health care needs such as the ones listed above.
          The CONTRACTOR further agrees to cooperate with the DEPARTMENT's
          quality assurance monitoring for this population by providing
          requested information.

Y.   MEDICAL AND SURGICAL SERVICES OF A DENTIST

     1.   WHO MAY PROVIDE SERVICES

          Under Utah law, medical and surgical services of a dentist may be
          provided by either a physician or a doctor of dental medicine or
          dental surgery.

     2.   UNIVERSE OF COVERED SERVICES

          Medical and surgical services that under Utah law may be provided by a
          physician or a doctor of dental medicine or dental surgery, are
          covered under the Contract.

     3.   SERVICES SPECIFICALLY COVERED

          The CONTRACTOR is responsible for palliative care and pain relief for
          severe mouth or tooth pain in an emergency room. If the emergency room
          physician determines that it is not an emergency and the client
          requires services at a lesser level, the provider should refer the
          client to a dentist for treatment. If the dental-related problem is
          serious enough for the client to be admitted to the hospital, the
          CONTRACTOR is responsible for coverage of the inpatient hospital stay.
          The CONTRACTOR is responsible for authorized/approved medical services
          provided by oral surgeons consistent with injury, accident, or disease
          (excluding dental decay and periodontal disease) including, but not
          limited to, removal of tumors in the mouth, setting and wiring a
          fractured jaw. Also covered are injuries to sound natural teeth and
          associated bone and tissue resulting from accidents including services
          by dentists performed in facilities other than the emergency room or
          hospital.

     4.   DENTAL SERVICES NOT COVERED

          The CONTRACTOR is not responsible for routine dental services such as
          fillings, extractions, treatment of abscess or infection,
          orthodontics, and pain relief when provided by a dentist in the office
          or in an outpatient setting such as a surgical center or scheduled
          same day surgery in a hospital including the surgical facilities
          charges.

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

Z.   DIABETES EDUCATION

     The CONTRACTOR shall provide diabetes self-management education from a Utah
     certified or American Diabetes Association recognized program when an
     Enrollee:

     1.   has recently been diagnosed with diabetes, or

     2.   is determined by the health care professional to have experienced a
          significant change in symptoms, progression of the disease or health
          condition that warrants changes in the Enrollee's self-management
          plan, or

     3.   is determined by the health care professional to require re-education
          or refresher training.

AA.  HIV PREVENTION

     The CONTRACTOR shall have in place the following:

     1.   GENERAL PROGRAM

          The CONTRACTOR must have educational methods for promoting HIV
          prevention to Enrollees. HIV prevention information, both primary
          (targeted to uninfected Enrollees), as well as secondary (targeted to
          those Enrollees with HIV) should must be culturally and linguistically
          appropriate. All Enrollees should be informed of the availability of
          both in-plan HIV counseling and testing services, as well as those
          available from Utah State-operated programs.

     2.   FOCUSED PROGRAM FOR WOMEN

          Special attention should be paid identifying HIV+ women and engaging
          them in routine care in order to promote treatment including, but not
          limited to, antiretroviral therapy during pregnancy.

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<PAGE>

                                                  Attachment C - Covered Service
                                                                          Molina
                                                                    July 1, 2002

                            SUMMARY OF CO-PAYMENT AND
                            CO-INSURANCE REQUIREMENTS

Pregnant women and children under age 18 are exempt from all co-payment and
co-insurance requirements. Services related to family planning are excluded from
all co-payment and co-insurance requirements.

A.   TRADITIONAL MEDICAID PLAN
     -------------------------

1.   Inpatient hospital: Each Enrollee must pay a $220.00 co-insurance for
     non-emergency inpatient hospital admissions. The maximum co-payment per
     Enrollee per calendar year is $220.00 for non-emergency inpatient hospital
     admissions.

2.   Emergency Department: Each enrollee must pay a $6.00 co-payment for non-
     emergency use of the emergency room.

3.   Physician, osteopath, podiatrist, outpatient hospital, freestanding
     emergency centers, and surgical centers: Each Enrollee must pay a $2.00
     co-payment per provider per day. The maximum co-payment per Enrollee per
     calendar year is $100.00 for any combination of the services provided by
     the above providers.

4.   Prescription Drugs: Each Enrollee must pay a co-payment of $1.00 per
     prescription. The maximum co-payment is $5.00 per Enrollee per month.*

There is no overall out-of-pocket maximum for the above services.

B.   NON-TRADITIONAL MEDICAID PLAN
     -----------------------------

1.   Inpatient hospital: Each Enrollee must pay a $220.00 co-insurance for each
     non-emergency inpatient hospital admissions.

2.   Emergency Department: Each enrollee must pay a $6.00 co-payment for non-
     emergency use of the emergency room.

3.   Physician, osteopath, podiatrist, physical therapist, occupational
     therapist, chiropractor*, freestanding emergency centers, surgical centers:
     Each Enrollee must pay a $3.00 co-payment per provider per day.

4.   Prescription Drugs: Each Enrollee must pay a co-payment of $2.00 per
     prescription.*

The out-of-pocket maximum for each Enrollee is $500.00 for any combination of
the above co-payments and co-insurance.

* Pharmacy services and chiropractic services are not the responsibility of the
  CONTRACTOR.

                                                        hmo/molina am6 (9/05/02)

                                  Page 16 of 16

<PAGE>
<TABLE>
<CAPTION>
PROVIDER NAME:                                                                                                     ATTACHMENT E
              ---------------------------------------------------                                               TABLE 1 PAGE 1 OF 15
SERVICE REPORTING PERIOD:  BEGINNING            ENDING                                                          MEDICAID ENROLLMENT
                                     ----------        ----------
PAYMENT DATES:             BEGINNING            ENDING
                                     ----------        ----------
Effective Date: July 1, 2002

                                      TRADITIONAL MEDICAID RATE CELLS                          NON-TRADITIONAL MEDICAID RATE CELLS
               -----------------------------------------------------------------------------  --------------------------------------
 1       2      3     4      5     6     7      8       9       10        11      12     13    14     15     16       17       18
---- --------- ----  ----  ------ ---- -----  ------  -----  --------  -------- ------- ----  ----  ------  -----  -------- --------
                                                                                                                   RESTRIC-
                                                      MED                       RESTRIC-      TANF  TANF    MED    TION     MEDICAID
               AGE   TANF  TANF        DIS-   DIS-    NEEDY  NON TANF  BREAST/  TION          MALE  FEMALE  NEEDY  PROGRAM  TOTAL
LINE           0-12  MALE  FEMALE      ABLED  ABLED   CHILD  PREGNANT  CERVICAL PROGRAM       19 &  19 &    19 &   19 &     (SUM OF
NO   MONTH     Mos.  1-18  1-18   AGED MALE   FEMALE  1-18   FEMALE    CANCER   0-18    AIDS  OVER  OVER    OVER   OVER     COLS)
---- --------- ----  ----  ------ ---- -----  ------  -----  --------  -------- ------- ----  ----  ------  -----  -------- --------
<S>  <C>       <C>   <C>   <C>    <C>  <C>    <C>     <C>    <C>       <C>      <C>     <C>   <C>   <C>     <C>    <C>      <C>
 1   JULY                                                                                                                          0
 2   AUGUST                                                                                                                        0
 3   SEPTEMBER                                                                                                                     0
 4   OCTOBER                                                                                                                       0
 5   NOVEMBER                                                                                                                      0
 6   DECEMBER                                                                                                                      0
 7   JANUARY                                                                                                                       0
 8   FEBRUARY                                                                                                                      0
 9   MARCH                                                                                                                         0
10   APRIL                                                                                                                         0
11   MAY                                                                                                                           0
12   JUNE                                                                                                                          0
13   TOTAL        0     0       0    0     0       0      0         0         0       0    0     0       0      0         0        0
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PROVIDER NAME:                                                        ATTACHMENT E                                   ATTACHMENT E
              -------------------------------------------------    TABLE 2 PAGE 1 OF 2                                  TABLE 2
SERVICE REPORTING PERIOD: BEGINNING            ENDING               REVENUES AND COST                                Page 2 of 15
                                    ---------        ----------
PAYMENT DATES:            BEGINNING            ENDING
                                    ---------        ----------

                                                 MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)
                                ---------------------------------------------------------------------------------
                                                                                                          NON-TRADITIONAL
                                                 TRADITIONAL MEDICAID RATE CELLS                        MEDICAID RATE CELLS
                                ----------------------------------------------------------------------- -------------------
 1            2             3    4    5    6     7     8     9     10     11      12      13     14   15   16   17     18     19
---- ------------------- ----- ---- ---- ------ ---- ----- ------ ----- ------ -------- ------- ---- ---- ---- ----- ------ --------
                         TOTAL
                         UTAH
                         OPERA-
                         TIONS                                                                                       RESTRIC-
                         (INCLUD-                                       NON                               TANF       TION   MEDICAID
                         ING                                      MED   TANF            RESTRIC-     TANF FE-  MED   PRO-   TOTAL
                         ALL   AGE  TANF TANF        DIS-  DIS-   NEEDY PREG-  BREAST/  TION         MALE MALE NEEDY GRAM   (SUM OF
LINE                     MEDI- 0-12 MALE FEMALE      ABLED ABLED  CHILD NANT   CERVICAL PROGRAM      19 & 19 & 19 &  19 &   COLS 4
NO   DESCRIPTION         CAID) MOS. 1-18 1-18   AGED MALE  FEMALE 1-18  FEMALE CANCER   0-18    AIDS OVER OVER OVER  OVER   THRU 16
---- ------------------- ----- ---- ---- ------ ---- ----- ------ ----- ------ -------- ------- ---- ---- ---- ----- ------ --------
<S>  <C>                 <C>   <C>  <C>  <C>    <C>  <C>   <C>    <C>   <C>      <C>      <C>     <C>  <C>  <C>  <C>   <C>  <C>
         REVENUES                                           ROUND TO THE NEAREST DOLLAR

  1  PREMIUMS                                                                                                                     $0
  2  DELIVERY FEES
      (CHILD BIRTHS)                                                                                                              $0
  3  REINSURANCE                                                                                                                  $0
  4  STOP LOSS                                                                                                                    $0
  5  TFL COLLECTIONS -
      MEDICARE                                                                                                                    $0
  6  TFL COLLECTIONS -
      OTHER                                                                                                                       $0
  7  OTHER (SPECIFY)                                                                                                              $0
  8  OTHER (SPECIFY)                                                                                                              $0
  9  TOTAL REVENUES         $0   $0   $0     $0   $0    $0     $0    $0     $0       $0      $0   $0   $0   $0    $0     $0       $0

       MEDICAL COSTS                                        ROUND TO THE NEAREST DOLLAR

 10  INPATIENT HOSPITAL
      SERVICES                                                                                                                    $0
 11  OUTPATIENT HOSPI-
      TAL SERVICES                                                                                                                $0
 12  EMERGENCY DEPARTMENT
      SERVICES                                                                                                                    $0
 13  PRIMARY CARE
      PHYSICIAN SERVICES                                                                                                          $0
 14  SPECIALTY CARE
      PHYSICIAN SERVICES                                                                                                          $0
 15  ADULT SCREENING
      SERVICES                                                                                                                    $0
 16  VISION CARE - OPTO-
      METRIC SERVICES                                                                                                             $0
 17  VISION CARE -
      OPTICAL SERVICES                                                                                                            $0
 18  LABORATORY (PATH-
      OLOGY) SERVICES                                                                                                             $0
 19  RADIOLOGY SERVICES                                                                                                           $0
 20  PHYSICAL AND
      OCCUPATIONAL
      THERAPY                                                                                                                     $0
 21  SPEECH AND HEARING
      SERVICES                                                                                                                    $0
 22  PODIATRY SERVICES                                                                                                            $0
 23  END STAGE RENAL DISEASE
      (ESRD) SERVICES -
      DIALYSIS                                                                                                                    $0
 24  HOME HEALTH
      SERVICES                                                                                                                    $0
 25  HOSPICE SERVICES                                                                                                             $0
 26  PRIVATE DUTY NURSING                                                                                                         $0
 27  MEDICAL SUPPLIES AND
      MEDICAL EQUIPMENT                                                                                                           $0
 28  ABORTIONS                                                                                                                    $0
 29  STERILIZATIONS                                                                                                               $0
 30  DETOXIFICATION                                                                                                               $0
 31  ORGAN TRANSPLANTS                                                                                                            $0
 32  OTHER OUTSIDE
      MEDICAL SERVICES                                                                                                            $0
 33  LONG TERM CARE                                                                                                               $0
 34  TRANSPORTATION
      SERVICES                                                                                                                    $0
 35  ACCRUED COSTS                                                                                                                $0
 36  OTHER (SPECIFY)                                                                                                              $0
 37  OTHER (SPECIFY)                                                                                                              $0
 38  TOTAL MEDICAL COST     $0   $0   $0     $0   $0    $0     $0    $0     $0       $0      $0   $0   $0   $0    $0     $0       $0
</TABLE>

<PAGE>

<TABLE>
PROVIDER NAME:                                               ATTACHMENT 3                                               ATTACHMENT E

SERVICE REPORTING PERIOD:                                 TABLE 3 PAGE 2 OF 2                                                TABLE 2

PAYMENT DATES:                                             REVENUES AND COST                                            Page 3 of 15

<CAPTION>
                                                                  MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)
                                           -----------------------------------------------------------------------------------------
                                                                         TRADITIONAL MEDICAID RATE CELLS
                                           -----------------------------------------------------------------------------------------
 1               2                 3           4      5     6     7      8        9        10        11       12        13       14
---- ----------------------- ------------- --------- ---- ------ ---- -------- -------- --------- -------- -------- ----------- ----
                              TOTAL UTAH
                              OPERATIONS             TANF  TANF                         MED NEEDY NON TANF  BREAST/ RESTRICTION
LINE                          (INCLUDING     AGE     MALE FEMALE      DISABLED DISABLED   CHILD   PREGNANT CERVICAL   PROGRAM
 NO         DESCRIPTION      ALL MEDICAID) 0-12 Mos. 1-18  1-18  AGED   MALE    FEMALE    1-18     FEMALE   CANCER     0-18     AIDS
---- ----------------------- ------------- --------- ---- ------ ---- -------- -------- --------- -------- -------- ----------- ----
<C>  <S>                     <C>           <C>       <C>  <C>    <C>  <C>      <C>      <C>       <C>      <C>      <C>         <C>
      ADMINISTRATIVE COSTS                                       ROUND TO THE NEAREST DOLLAR

 39  ADMINISTRATION -
     ADVERTISING
 40  HOME OFFICE INDIRECT
     COST ALLOCATIONS
 41  UTILIZATION
 42  ADMINISTRATION - OTHER
 43  TOTAL ADMINISTRATIVE
     COSTS                         $0         $0      $0    $0    $0     $0       $0        $0       $0       $0         $0      $0
 44  TOTAL COSTS [MED &
     ADMIN]                        $0         $0      $0    $0    $0     $0       $0        $0       $0       $0         $0      $0
 45  NET INCOME [GAIN OR
     (LOSS)]                       $0         $0      $0    $0    $0     $0       $0        $0       $0       $0         $0      $0
 46  ENROLLEE MONTHS                           0       0     0     0      0        0         0        0        0          0       0
 47  MEDICAL COST @ ENROLLEE
     MO
 48  ADMIN COST @
     ENROLLEE MO
 49  TOTAL COST @ ENROLLEE
     MO

           OTHER DATA

 50  TPL SAVINGS -
     COST AVOIDANCE**
 51  DUPLICATE PREMIUMS***
 52  NUMBER OF
     DELIVERIES****
 53  FAMILY PLANNING
     SERVICES
 54  REINSURANCE PREMIUMS
     RECEIVED
 55  REINSURANCE PREMIUMS
     PAID
 56  ADMINISTRATIVE REVENUE
     RETAINED BY THE
     CONTRACTOR

<CAPTION>
                              MEDICAID (CAPITATED
                               ONLY, NO FEE FOR
                                    SERVICE)
                              --------------------
                                         NON-TRADITIONAL MEDICAID RATE CELLS
                              ----------------------------------------------------------
 1               2               15         16         17          18            19
---- -----------------------  ---------  ---------  ---------  -----------  ------------
                                                                               MEDICAID
                                TANF       TANF        MED     RESTRICTION     TOTAL
LINE                            MALE      FEMALE      NEEDY      PROGRAM    (SUM OF COLS
 NO         DESCRIPTION       19 & OVER  19 & OVER  19 & OVER   19 & OVER    4 THRU 16)
---- -----------------------  ---------  ---------  ---------  -----------  ------------
<C>  <S>                      <C>        <C>        <C>        <C>          <C>
      ADMINISTRATIVE COSTS                   ROUND TO THE NEAREST DOLLAR

 39  ADMINISTRATION -
     ADVERTISING                                                                 $0
 40  HOME OFFICE INDIRECT
     COST ALLOCATIONS                                                            $0
 41  UTILIZATION                                                                 $0
 42  ADMINISTRATION - OTHER                                                      $0
 43  TOTAL ADMINISTRATIVE
     COSTS                       $0          $0         $0          $0           $0
 44  TOTAL COSTS [MED &
     ADMIN]                      $0          $0         $0          $0           $0
 45  NET INCOME [GAIN OR
     (LOSS)]                     $0          $0         $0          $0           $0
 46  ENROLLEE MONTHS              0           0          0           0            0
 47  MEDICAL COST @ ENROLLEE
     MO                                                                          $0
 48  ADMIN COST @
     ENROLLEE MO                                                                 $0
 49  TOTAL COST @ ENROLLEE
     MO                                                                          $0

           OTHER DATA

 50  TPL SAVINGS -
     COST AVOIDANCE**                                                            $0
 51  DUPLICATE PREMIUMS***                                                       $0
 52  NUMBER OF
     DELIVERIES****                                                              $0
 53  FAMILY PLANNING
     SERVICES                                                                    $0
 54  REINSURANCE PREMIUMS
     RECEIVED                                                                    $0
 55  REINSURANCE PREMIUMS
     PAID                                                                        $0
 56  ADMINISTRATIVE REVENUE
     RETAINED BY THE
     CONTRACTOR                                                                  $0
</TABLE>

  **  COST OF SERVICES PROVIDED TO HMO CLIENTS, NOT PAID FOR BY HMO, E.G.
      "AVOIDED", BECAUSE OTHER INSURANCE PAID FOR IT.
 ***  CASH AMOUNT RETURNED TO MEDICAID BY HMO BECAUSE HMO CLIENT WAS COVERED IN
      THE SAME HMO BY ANOTHER CARRIER.
****  NUMBER OF CHILDREN DELIVERED. THIS NUMBER TIMES RATES SHOULD EQUAL
      DELIVERY REVENUE.

     In this Medicaid portion, include only costs for Medicaid clients under the
capitation agreement - exclude revenue, costs & TPL categories per this form
that do not apply to your organization or contract.

<PAGE>

                                                                    Attachment E
                                                          Effective July 1, 2002
                                                                    Page 4 of 15

            MEDICAL SERVICES REVENUE AND COST DEFINITIONS FOR TABLE 2

REVENUES (Report all revenues received or receivable at the end-of-period date
on the form)

1.     Premiums
       --------

       Report premium payments received or receivable from the DEPARTMENT.

2.     Delivery Fees
       -------------

       Report the delivery fee received or receivable from the DEPARTMENT.

3.     Reinsurance
       -----------

       Report the reinsurance payments received or receivable from a reinsurance
       carrier other than the DEPARTMENT.

4.     Stop Loss
       ---------

       Report stop loss payments received or receivable from the DEPARTMENT.

5.     TPL Collections - Medicare
       --------------------------

       Report all third party collections received from Medicare.

6.     TPL Collections - Other
       -----------------------

       Report all third party collections received other than Medicare
       collections. (Report TPL savings because of cost avoidance as a memo
       amount on line 48).

7.     Other (specify)
       -----

8.     Other (specify)
       -----

       For lines seven and eight: Report all other revenue not included in lines
       one through six. (There may not be any amount to report; however, this
       line can be used to report revenue from total Utah operations that do not
       fit lines one through six.)

9.     TOTAL REVENUES

       Total lines one through eight.

NOTE: Duplicate premiums are not considered a cost or revenue as they are
collected by the CONTRACTOR and paid to the DEPARTMENT. Therefore, the payment
to the DEPARTMENT would reduce or offset the revenue recorded when the duplicate
premium was received. However, line 49 has been established for reporting
duplicate premiums as a memo amount.

                                                               hmo-attach E 7/02

<PAGE>

                                                                    Attachment E
                                                          Effective July 1, 2002
                                                                    Page 5 of 15

MEDICAL COSTS: Report all costs accrued as of the ending date on the form. In
the first data column (column 3), report all costs for Utah operations per the
general ledger. In the 15 Medicaid data columns (columns 4 through 18), report
only costs for Medicaid Enrollees.

10.    Inpatient Hospital Services
       ---------------------------

       Costs incurred in providing inpatient hospital services to Enrollees
       confined to a hospital.

11.    Outpatient Hospital Services
       ----------------------------

       Costs incurred in providing outpatient hospital services to Enrollees,
       not including services provided in the emergency department.

12.    Emergency Department Services
       -----------------------------

       Costs incurred in providing outpatient hospital emergency room services
       to Enrollees.

13.    Primary Care Physician Services (Including EPSDT Services, Prenatal Care,
       -------------------------------------------------------------------------
       and Family Planning Services)
       -----------------------------

       All costs incurred for Enrollees as a result of providing primary care
       physician, osteopath, physician assistant, nurse practitioner, and nurse
       midwife services, including payroll expenses, any capitation and/or
       contract payments, fee-for-service payments, fringe benefits, travel and
       office supplies.

14.    Specialty Care Physician Services (Including EPSDT Services, Prenatal
       ---------------------------------------------------------------------
       Care, and Family Planning Services)
       -----------------------------------

       All costs incurred as a result of providing specialty care physician,
       osteopath, physician assistant, nurse practitioner, and nurse midwife
       services to Enrollees, including payroll expenses, any capitation and/or
       contract payments, fee-for-service payments, fringe benefits, travel and
       office supplies.

15.    Adult Screening Services
       ------------------------

       Expenses associated with providing screening services to Enrollees.

16.    Vision Care - Optometric Services
       ---------------------------------

       Included are payroll costs, any capitation and/or contract payments, and
       fee-for-service payments for services and procedures performed by an
       optometrist and other non-payroll expenses directly related to providing
       optometric services for Enrollees.

17.    Vision Care - Optical Services
       ------------------------------

       Included are payroll costs, any capitation and/or contract payments and
       fee-for-service payments for services and procedures performed by an
       optician and other supportive staff, cost of eyeglass frames and lenses
       and other non-payroll expenses directly related to providing optical
       services for Enrollees.

18.    Laboratory (Pathology) Services
       -------------------------------

       Costs incurred as a result of providing pathological tests or services to
       Enrollees including payroll

                                                               hmo-attach E 7/02

<PAGE>

                                                                    Attachment E
                                                          Effective July 1, 2002
                                                                    Page 6 of 15

       expenses, any capitation and/or contract payments, fee-for-service
       payments and other expenses directly related to in-house laboratory
       services. Excluded are costs associated with a hospital visit.

19.    Radiology Services
       ------------------

       Cost incurred in providing x-ray services to Enrollees, including x-ray
       payroll expenses, any capitation and/or contract payments,
       fee-for-service payments, and occupancy overhead costs. Excluded are
       costs associated with a hospital visit.

20.    Physical and Occupational Therapy
       ---------------------------------

       Included are payroll costs, any capitation and/or contract payments,
       fee-for-service costs, and other non-payroll expenditures directly
       related to providing physical and occupational therapy services.

21.    Speech and Hearing Services
       ---------------------------

       Payroll costs, any capitation and/or contract payments, fee-for-service
       payments, and non-payroll costs directly related to providing speech and
       hearing services for Enrollees.

22.    Podiatry Services
       -----------------

       Salary expenses or outside claims, capitation and/or contract payments,
       fee-for-service payments, and non-payroll costs directly related to
       providing services rendered by a podiatrist to Enrollees.

23.    End Stage Renal Disease (ESRD) Services - Dialysis
       --------------------------------------------------

       Costs incurred in providing renal dialysis (ESRD) services to Enrollees.

24.    Home Health Services
       --------------------

       Included are payroll costs, any capitation and/or contract payments,
       fee-for-service payments, and other non-payroll expenses directly related
       to providing home health services for Enrollees.

25.    Hospice Services
       ----------------

       Expenses related to hospice care for Enrollees including home care,
       general inpatient care for Enrollees suffering terminal illness and
       inpatient respite care for caregivers of Enrollees suffering terminal
       illness.

26.    Private Duty Nursing
       --------------------

       Expenses associated with private duty nursing for Enrollees.

27.    Medical Supplies and Medical Equipment
       --------------------------------------

       This cost center contains fee-for-service cost for outside acquisition of
       medical requisites, special appliances as prescribed by the CONTRACTOR to
       Enrollees.

                                                               hmo-attach E 7/02

<PAGE>

                                                                    Attachment E
                                                          Effective July 1, 2002
                                                                    Page 7 of 15

28.    Abortions
       ---------

       Medical and hospital costs incurred in providing abortions for Enrollees.

29.    Sterilizations
       --------------

       Medical and hospital costs incurred in providing sterilizations for
       Enrollees.

30.    Detoxification
       --------------

       Medical and hospital costs incurred in providing treatment for substance
       abuse and dependency (detoxification) for Enrollees.

31.    Organ Transplants
       -----------------

       Medical and hospital costs incurred in providing transplants for
       Enrollees.

32.    Other Outside Medical Services
       ------------------------------

       The costs for specialized testing and outpatient surgical centers for
       Enrollees ordered by the CONTRACTOR.

33.    Long Term Care
       --------------

       Costs incurred in providing long-term care for Enrollees required under
       Attachment C.

34.    Transportation Services
       -----------------------

       Costs incurred in providing ambulance (ground and air) services for
       Enrollees.

35.    Accrued Costs
       -------------

       Costs Incurred for services rendered to Enrollees but not yet billed.

36/37  Other
       -----

       Report costs not otherwise reported.

38.    TOTAL MEDICAL COSTS

       Total lines 10 through 37.

ADMINISTRATIVE COSTS

Report payroll costs, any capitation and/or contract payments, non-payroll costs
and occupancy overhead costs for accounting services, claims processing
services, health plan services, data processing services, purchasing, personnel,
Medicaid marketing and regional administration.

Report the administration cost under four categories - advertising, home office
indirect cost allocation, utilization and all other administrative costs. If
there are no advertising costs or indirect home office cost allocations, report
a zero amount in the applicable lines.

                                                               hmo-attach E 7/02

<PAGE>

                                                                    Attachment E
                                                          Effective July 1, 2002
                                                                    Page 8 of 15

39.    Administration - Advertising
       ----------------------------

40.    Home Office Indirect Cost Allocations
       -------------------------------------

41.    Utilization
       -----------

       Payroll cost and any capitation and/or contract payments for utilization
       staff and other non-payroll costs directly associated with controlling
       and monitoring outside physician referral and hospital admission and
       discharges of Enrollees.

42.    Administration - Other
       ----------------------

43.    TOTAL ADMINISTRATIVE COSTS

       Total lines 39 through 42.

44.    TOTAL COSTS (MEDICAL AND ADMINISTRATIVE)

       Total lines 38 and 43.

45.    NET INCOME (GAIN OR LOSS)

       Line 9 minus line 44.

46.    ENROLLEE MONTHS

       Total Enrollee months for period of time being reported.

47.    MEDICAL COSTS PER ENROLLEE MONTH

       Line 38 divided by line 46.

48.    ADMINISTRATIVE COSTS PER ENROLLEE MONTH

       Line 43 divided by line 46.

49.    TOTAL COSTS PER ENROLLEE MONTH

       Line 44 divided by line 46.

OTHER DATA

50.    TPL Savings - Cost Avoidance
       ----------------------------

51.    Duplicate Premiums
       ------------------

       Include all premiums received for Enrollees from all sources other than
       Medicaid.

52.    Number of Deliveries
       --------------------

       Total number of Enrollee deliveries when the delivery occurred at 24
       weeks or later.

                                                               hmo-attach E 7/02

<PAGE>

                                                                    Attachment E
                                                          Effective July 1, 2002
                                                                    Page 9 of 15

53.    Family Planning Services
       ------------------------

       Include costs associated with family planning services as defined in
       Attachment C (Covered Services, Section V, Family Planning Services).

54.    Reinsurance Premiums Received
       -----------------------------

       Include the reinsurance premiums received or receivable that are not
       counted as revenue.

55.    Reinsurance Premiums Paid
       -------------------------

       Include reinsurance premiums paid to a reinsurance carrier other than the
       DEPARTMENT.

56.    Administrative Revenue Retained by the CONTRACTOR
       -------------------------------------------------

       Include the administrative revenue retained by the CONTRACTOR from the
       reinsurance premiums received or receivable.

                                                               hmo-attach E 7/02

<PAGE>

<TABLE>
<CAPTION>
PROVIDER NAME:                                                           ATTACHMENT E                            ATTACHMENT E
                            --------------------------------------
SERVICE REPORTING PERIOD:   BEGINNING            ENDING               TABLE 3 PAGE 1 OF 1                             TABLE 3
                                      ----------        ----------
PAYMENT DATES:              BEGINNING            ENDING                   UTILIZATION                           Page 10 of 15
                                      ----------        ----------
EFFECTIVE DATE: JULY 1, 2002

                                                         MEDICAID (CAPITATED ONLY, NO FEE FOR SERVICE)
                                           ------------------------------------------------------------------------
                                                                         TRADITIONAL MEDICAID RATE CELLS
                                           -----------------------------------------------------------------------------------------
 1                     2                       3      4     5     6      7        8         9        10       11         12      13
---- ------------------------------------- --------- ---- ------ ---- -------- -------- --------- -------- -------- ----------- ----
                    SERVICE
                  DESCRIPTION                        TANF  TANF                         MED NEEDY NON TANF  BREAST/ RESTRICTION
LINE     (REFER TO THE UNIT OF SERVICE        AGE    MALE FEMALE      DISABLED DISABLED   CHILD   PREGNANT CERVICAL   PROGRAM
 NO     DEFINITIONS IN THE INSTRUCTIONS)   0-12 Mos. 1-18  1-18  AGED   MALE    FEMALE    1-18     FEMALE   CANCER      0-18    AIDS
---- ------------------------------------- --------- ---- ------ ---- -------- -------- --------- -------- -------- ----------- ----
<C>  <S>                                   <C>       <C>  <C>    <C>  <C>      <C>      <C>       <C>      <C>      <C>         <C>
  1  HOSPITAL SERVICES - GENERAL DAYS
  2  HOSPITAL SERVICES - DISCHARGES
  3  HOSPITAL SERVICES - OUTPATIENT VISITS
  4  EMERGENCY DEPARTMENT VISITS
  5  PRIMARY CARE PHYSICIAN SERVICES
  6  SPECIALTY CARE PHYSICIAN SERVICES
  7  ADULT SCREENING SERVICES
  8  VISION CARE - OPTOMETRIC SERVICES
  9  VISION CARE - OPTICAL SERVICES
 10  LABORATORY (PATHOLOGY) PROCEDURES
 11  RADIOLOGY PROCEDURES
 12  PHYSICAL AND OCCUPATIONAL THERAPY
     SERVICES
 13  SPEECH AND HEARING SERVICES
 14  PODIATRY SERVICES
 15  RENAL DISEASE (ESRD) SERVICES -
     DIALYSIS
 16  HOME HEALTH SERVICES
 17  HOSPICE DAYS
 18  PRIVATE DUTY NURSING SERVICES
 19  MEDICAL SUPPLIES AND MEDICAL
     EQUIPMENT
 20  ABORTIONS PROCEDURES
 21  STERILIZATION PROCEDURES
 22  DETOXIFICATION DAYS
 23  ORGAN TRANSPLANTS
 24  OTHER OUTSIDE MEDICAL SERVICES
 25  LONG TERM CARE FACILITY DAYS
 26  TRANSPORTATION TRIPS
 27  OTHER (SPECIFY)

<CAPTION>
                                                NON-TRADITIONAL MEDICAID RATE CELLS
                                            --------------------------------------------
 1                     2                       14         15         16          17            18
---- -------------------------------------  ---------  ---------  ---------  -----------  -------------
                    SERVICE                                                                  MEDICAID
                  DESCRIPTION                 TANF       TANF        MED     RESTRICTION      TOTAL
LINE     (REFER TO THE UNIT OF SERVICE        MALE      FEMALE      NEEDY      PROGRAM    (SUM OF COLS)
 NO     DEFINITIONS IN THE INSTRUCTIONS)    19 & OVER  19 & OVER  19 & OVER   19 & OVER     3 THRU 15
---- -------------------------------------  ---------  ---------  ---------  -----------  -------------
<C>  <S>                                    <C>        <C>        <C>        <C>          <C>
  1  HOSPITAL SERVICES - GENERAL DAYS
  2  HOSPITAL SERVICES - DISCHARGES
  3  HOSPITAL SERVICES - OUTPATIENT VISITS
  4  EMERGENCY DEPARTMENT VISITS
  5  PRIMARY CARE PHYSICIAN SERVICES
  6  SPECIALTY CARE PHYSICIAN SERVICES
  7  ADULT SCREENING SERVICES
  8  VISION CARE - OPTOMETRIC SERVICES
  9  VISION CARE - OPTICAL SERVICES
 10  LABORATORY (PATHOLOGY) PROCEDURES
 11  RADIOLOGY PROCEDURES
 12  PHYSICAL AND OCCUPATIONAL THERAPY
     SERVICES
 13  SPEECH AND HEARING SERVICES
 14  PODIATRY SERVICES
 15  RENAL DISEASE (ESRD) SERVICES -
     DIALYSIS
 16  HOME HEALTH SERVICES
 17  HOSPICE DAYS
 18  PRIVATE DUTY NURSING SERVICES
 19  MEDICAL SUPPLIES AND MEDICAL
     EQUIPMENT
 20  ABORTIONS PROCEDURES
 21  STERILIZATION PROCEDURES
 22  DETOXIFICATION DAYS
 23  ORGAN TRANSPLANTS
 24  OTHER OUTSIDE MEDICAL SERVICES
 25  LONG TERM CARE FACILITY DAYS
 26  TRANSPORTATION TRIPS
 27  OTHER (SPECIFY)
</TABLE>

                                  ATTACHMENT E
                                     TABLE 3
                                  Page 10 of 15

<PAGE>

                                                                    Attachment E
                                                                   Page 11 of 15

              MEDICAL SERVICES UTILIZATION DEFINITIONS FOR TABLE 3

MEDICAL SERVICES

1.     Hospital Services - General Days
       --------------------------------

       Record total number of inpatient hospital days associated with inpatient
       medical care.

2.     Hospital Services - Discharges
       ------------------------------

       Record total number of inpatient hospital discharges.

3.     Hospital Services - Outpatient Visits
       -------------------------------------

       Record total number of outpatient visits.

4.     Emergency Department Visits
       ---------------------------

       Record total number of emergency room visits

5.     Primary Care Physician Services
       -------------------------------

       Number of services and procedures defined by CPT-4 codes provided by
       primary care physicians or licensed physician extenders or assistants
       under direct supervision of a physician inclusive of all services except
       radiology, laboratory and injections/immunizations which should be
       reported in their appropriate section. The reporting of data under this
       category includes both outpatient and inpatient services.

6.     Specialty Care Physician Services
       ---------------------------------

       Number of services and procedures defined by CPT-4 codes provided by
       specialty care physicians or licensed physician extenders or assistants
       under direct supervision of a physician inclusive of all services except
       radiology, laboratory and injections/immunizations which should be
       reported in their appropriate section. The reporting of data under this
       category includes both outpatient and inpatient services.

7.     Adult Screening Services
       ------------------------

       Number of adult screenings performed.

8.     Vision Care - Optometric Services
       ---------------------------------

       Number of optometric services and procedures performed by an optometrist.

9.     Vision Care - Optical Services
       ------------------------------

       Number of eye glasses and contact lenses dispensed.

<PAGE>

                                                                    Attachment E
                                                                   Page 12 of 15

10.    Laboratory (Pathology) Procedures
       ---------------------------------

       Number of procedures defined by CPT-4 Codes under the Pathology and
       Laboratory section. Excluded are services performed in conjunction with a
       hospital outpatient or emergency department visit.

11.    Radiology Procedures
       --------------------

       Number of procedures defined by CPT-4 Codes under the Radiology section.
       Excluded are services performed in conjunction with a hospital outpatient
       or emergency department visit.

12.    Physical and Occupational Therapy Services
       ------------------------------------------

       Physical therapy refers to physical and occupational therapy services and
       procedures performed by a physician or physical therapist.

13.    Speech and Hearing Services
       ---------------------------

       Number of services and procedures.

14.    Podiatry Services
       -----------------

       Number of services and procedures.

15.    End Stage Renal Disease (ESRD) Services - Dialysis
       --------------------------------------------------

       Number of ESRD procedures provided upon referral.

16.    Home Health Services
       --------------------

       Number of home health visits, such as skilled nursing, home health aide,
       and personal care aide visits.

17.    Hospice Days
       ------------

       Number of days hospice care is provided, including respite care.

18.    Private Duty Nursing Services
       -----------------------------

       Hours of skilled care delivered.

19.    Medical Supplies and Medical Equipment
       --------------------------------------

       Durable medical equipment such as wheelchairs, hearing aids, etc., and
       nondurable supplies such as oxygen etc.

20.    Abortion Procedures
       -------------------

       Number of procedures performed.

<PAGE>

                                                                    Attachment E
                                                                   Page 13 of 15

21.    Sterilization Procedures
       ------------------------

       Number of procedures performed.

22.    Detoxification Days
       -------------------

       Days of inpatient detoxification.

23.    Organ Transplants
       -----------------

       Number of transplants.

24.    Other Outside Medical Services
       ------------------------------

       Specialized testing and outpatient surgical services ordered by IHC.

25.    Long Term Care Facility Days
       ----------------------------

       Total days associated with long-term care.

26.    Transportation Trips
       --------------------

       Number of ambulance trips.

27.    Other (specify)
       ---------------

<PAGE>

                                  ATTACHMENT E
                               TABLE 4 PAGE 1 OF 1
                        MEDICAID MALPRACTICE INFORMATION

PROVIDER NAME:                 _________________________________________________

SERVICE REPORTING PERIOD:      BEGINNING ________    ENDING __________

ORGANIZATIONS NAMED IN THE MALPRACTICE CLAIM:
        CLAIM NUMBER 1  ________________________________________________________
        CLAIM NUMBER 2  ________________________________________________________
        CLAIM NUMBER 3  ________________________________________________________

MEDICAL PROFESSIONALS SPECIFIED:
        CLAIM NUMBER 1  ________________________________________________________
        CLAIM NUMBER 2  ________________________________________________________
        CLAIM NUMBER 3  ________________________________________________________

LOCATIONS WHERE CLAIMS ORIGINATED:
        CLAIM NUMBER 1  ________________________________________________________
        CLAIM NUMBER 2  ________________________________________________________
        CLAIM NUMBER 3  ________________________________________________________

MEDICAID CLIENT IDENTIFICATION:
        CLAIM NUMBER 1  ________________________________________________________
        CLAIM NUMBER 2  ________________________________________________________
        CLAIM NUMBER 3  ________________________________________________________

DATES OF SERVICE:
        CLAIM NUMBER 1  ________________________________________________________
        CLAIM NUMBER 2  ________________________________________________________
        CLAIM NUMBER 3  ________________________________________________________

AWARDS TO MEDICAID CLIENTS - AMOUNTS & DATES PAID
        CLAIM NUMBER 1  ________________________________________________________
        CLAIM NUMBER 2  ________________________________________________________
        CLAIM NUMBER 3  ________________________________________________________

HMO'S DIRECT COSTS (IF ANY)
        CLAIM NUMBER 1  ________________________________________________________
        CLAIM NUMBER 2  ________________________________________________________
        CLAIM NUMBER 3  ________________________________________________________

ATTACH A SUMMARY OF FACTS FOR EACH CASE, DESCRIBING THE CLAIM, THE CAUSES,
CIRCUMSTANCES, ETC.

                                  ATTACHMENT E
                                     TABLE 4
                                  Page 14 of 15

<PAGE>

                                                                    Attachment E
                                                                   Page 15 of 15

The information reported on this form should come from known malpractice cases
of the MCO providers. This may only be applicable if the MCO was named as a
participant in the malpractice suit. However, if suits against MCO providers are
known, provide us with information on the Medicaid client(s) involved and any
large settlements paid when the information is available.

<PAGE>

                                                                  Attachment F-4
                                                                          Molina
                                                                    July 1, 2002

                                   AFC/MOLINA

                      ATTACHMENT F-4 - PAYMENT METHODOLOGY

The DEPARTMENT agrees to provide a no-loss guarantee to MHU by underwriting any
financial losses sustained by MHU for a period of twelve months, beginning July
1, 2002. No later than April 1, 2003, MHU will submit to the DEPARTMENT all paid
claims from July 1 through December 31, 2002. The parties will conduct a
financial review of MHU's paid claims history from July 1 through December 31,
2002 to determine if the Contract should revert to a risk-based contract
effective July 1, 2003.

A.   PAYMENT METHODOLOGY

     1.   EFFECTIVE JULY 1, 2002 THROUGH DECEMBER 31, 2002

          The DEPARTMENT shall make interim payments for the months of July 2002
          through December 2002 based on the premium methodology in effect on
          June 30, 2002. MHU must submit to the DEPARTMENT a summary of paid
          claims on a monthly basis with no more than two months delay after the
          month being reported. No later then April 1, 2003, MHU will submit to
          the DEPARTMENT all paid claims from July 1 through December 31, 2002.
          The payment made to MHU by the DEPARTMENT will be retrospectively
          adjusted to reflect MHU's actual claim expenditures under this
          Contract plus 9% of actual claim expenditures to cover administrative
          costs.

     2.   EFFECTIVE JANUARY 1, 2003 THROUGH JUNE 30, 2003

          The DEPARTMENT will reimburse MHU within 60 days of the month in which
          MHU paid claims for services rendered under this Contract and will be
          based on a summary of paid claims data received from MHU. In addition,
          9% of actual claim expenditures will be added to the payment for
          administrative services and patient management expenses incurred by
          MHU. MHU must submit to the DEPARTMENT the summary of paid claims
          within 30 days of the month in which MHU paid the claims.

     3.   RETROSPECTIVE ADJUSTMENT FOR COSTS INCURRED FROM JULY 1, 2002 THROUGH
          JUNE 30, 2003

          Profit sharing occurs if MHU's costs plus 9% administration fee are
          less than MHU's revenues under this Contract. Revenues are defined as
          the amount the DEPARTMENT would have paid had this Contract remained a
          risk contract as

                                                        hmo-molina am6 (9/09/02)

                                   Page 1 of 4

<PAGE>

                                                                  Attachment F-4
                                                                          Molina
                                                                    July 1, 2002

          described in 42 CFR 447.361. MHU may retain the savings as follows: if
          the difference between MHU's costs plus administration and total
          revenues is 5% or less of total revenues, MHU may retain the entire
          amount. The portion of savings greater than the 5% shall be shared
          50/50 with the DEPARTMENT.

          On or before October 1, 2002, MHU will provide to the DEPARTMENT their
          payment schedule in effect from July 1 through September 30, 2002. Any
          changes made to MHU's payment schedule must maintain cost neutrality
          to the DEPARTMENT and are subject to approval by the DEPARTMENT. A
          final settlement between the parties shall be reconciled within six
          months of the end of the Contract year.

B.   PHARMACY MANAGEMENT INCENTIVE

     The DEPARTMENT will establish a target for pharmacy costs for the Contract
     year. The target will be the historical average cost per member per month
     (PMPM) for Medicaid client enrolled in MCOs in the previous Contract year.
     The average cost will be determined for each rate cell. An overall weighted
     average PMPM pharmacy cost will be established based on MHU's monthly
     enrollment during the Contract year. The 2002 Contract year's history will
     be adjusted by the inflation indices published by the US Department of
     Labor. If actual pharmacy costs for MHU's enrollees are below the target
     for the Contract year, the savings will be shared [*] with the DEPARTMENT
     and MHU.

C.   CHEC SCREENING INCENTIVE CLAUSE

     1.   CHEC SCREENING GOAL

          The CONTRACTOR will ensure that Medicaid children have access to
          appropriate well-child visits. The CONTRACTOR will follow the Utah
          EPSDT (CHEC) guidelines for the periodicity schedule for well-child
          protocol. The federal agency, Centers for Medicare and Medicaid
          Services (CMS), mandates that all states have 80% of all children
          screened. The DEPARTMENT and the CONTRACTOR will work toward that
          goal.

     2.   CALCULATION OF CHEC INCENTIVE PAYMENT

          The DEPARTMENT will calculate the CONTRACTOR's annual participation
          rate based on information supplied by the CONTRACTOR under the CMS-416
          EPSDT (CHEC) reporting requirements. Based on the CMS-416 data, the
          CONTRACTOR's well-child participation rate was 97% for Federal Fiscal
          Year (FFY) 2001 (October 1, 2000 through September 30, 2001). The
          incentive

                                                    hmo-afc/molina am6 (9/09/02)

                                   Page 2 of 4

<PAGE>

                                                                  Attachment F-4
                                                                          Molina
                                                                    July 1, 2002

          payment for the Contract year ending June 30, 2003 will be based on
          the CONTRACTOR's FFY 2002 (October 1, 2001 through September 30, 2002)
          CMS-416 participation rate. The DEPARTMENT will pay the CONTRACTOR
          $[*] if a rate of 90% or higher is maintained during FFY2002. The
          participation rate will be calculated no later than April 15, 2003;
          the CONTRACTOR will be notified of the incentive payment, if
          applicable, no later than April 30, 2003.

     3.   CONTRACTOR's USE OF INCENTIVE PAYMENT

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the EPSDT (CHEC)
          participation rate.

D.   IMMUNIZATION INCENTIVE CLAUSE

     The CONTRACTOR will ensure that Enrollees have access to recommended
     immunizations. The CONTRACTOR will follow the Advisory Committee on
     Immunization Practices' recommendations for immunizations for children.

     1.   IMMUNIZATIONS FOR TWO-YEAR-OLDS

          Utah has achieved a statewide immunization level of 77.4% for
          two-year-olds. The CONTRACTOR's 2000 HEDIS rate was 46.4% for the
          Combination 1 immunization measure for two-year olds. Based on the
          CONTRACTOR's 2001 HEDIS measure for the Combination 1 immunization
          measure, the DEPARTMENT will pay the CONTRACTOR $[*] for each full
          percentage point above 46.4% up to 96.4%.

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the HEDIS rate.

     2.   IMMUNIZATIONS FOR ADOLESCENTS

          The DEPARTMENT realizes it is important that adolescents are
          vaccinated according to schedule as recommended by the Advisory
          Committee on Immunization Practices and other professional groups. The
          CONTRACTOR's 2000 HEDIS rate was 6.8% for the Combination 1
          immunization measure for adolescents. Based on the CONTRACTOR's 2001
          HEDIS measure for adolescent immunizations, the DEPARTMENT will pay
          the CONTRACTOR $[*] for each full percentage point above 6.8% up to
          56.8%.

                                                    hmo-afc/molina am6 (9/09/02)

                                   Page 3 of 4

<PAGE>

                                                                  Attachment F-4
                                                                          Molina
                                                                    July 1, 2002

          The CONTRACTOR agrees to use this incentive payment to reward the
          CONTRACTOR's employees responsible for improving the HEDIS rate.

     3.   IMMUNIZATIONS FOR ADULTS

          The HEDIS immunization measure for adults is not reported for Medicaid
          clients age 65 and older. The DEPARTMENT intends to expand this
          incentive clause to include improved immunization rates for influenza
          and pneumonia vaccines among Enrollees age 65 and older. The
          DEPARTMENT will work with contractors to collect this data during this
          Contract year (July 1, 2002 - June 30, 2003).

                                                    hmo-afc/molina am6 (9/09/02)

                                   Page 4 of 4<PAGE>

                                                                   EXHIBIT 10.15

                                                                  EXECUTION COPY

================================================================================

                                CREDIT AGREEMENT

                           Dated as of March 19, 2003

                                      among

                            MOLINA HEALTHCARE, INC.,
                            a California corporation,

                                as the Borrower,

                             BANK OF AMERICA, N.A.,

                             as Administrative Agent

                                       and

                                   L/C Issuer,

                            CIBC WORLD MARKETS CORP.,

                              as Syndication Agent,

                                       and

                         THE OTHER LENDERS PARTY HERETO

                        ==================================

                         BANC OF AMERICA SECURITIES LLC,

                                       and

                            CIBC WORLD MARKETS CORP.,
                                       as
                                Co-Lead Arrangers

                        ==================================

                                SOCIETE GENERALE,

                                       as

                               Documentation Agent

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section                                                                                               Page
-------                                                                                               ----
<S>                                                                                                     <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS...............................................................1
   Section 1.01      Defined Terms.......................................................................1
   Section 1.02      Other Interpretive Provisions......................................................27
   Section 1.03      Accounting Terms...................................................................28
   Section 1.04      Rounding...........................................................................29
   Section 1.05      References to Agreements and Laws..................................................29
   Section 1.06      Times of Day.......................................................................29
   Section 1.07      Letter of Credit Amounts...........................................................29

ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS........................................................29
   Section 2.01      Loans..............................................................................29
   Section 2.02      Borrowings, Conversions and Continuations of Loans.................................30
   Section 2.03      Letters of Credit..................................................................31
   Section 2.04      [Intentionally Omitted]............................................................38
   Section 2.05      Prepayments........................................................................38
   Section 2.06      Termination or Reduction of Commitments............................................39
   Section 2.07      Repayment of Loans.................................................................40
   Section 2.08      Interest...........................................................................40
   Section 2.09      Fees...............................................................................40
   Section 2.10      Computation of Interest and Fees...................................................41
   Section 2.11      Evidence of Debt...................................................................41
   Section 2.12      Payments Generally.................................................................42
   Section 2.13      Sharing of Payments................................................................44

ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY......................................................45
   Section 3.01      Taxes..............................................................................45
   Section 3.02      Illegality.........................................................................46
   Section 3.03      Inability to Determine Rates.......................................................46
   Section 3.04      Increased Cost and Reduced Return; Capital Adequacy; Reserves
                     on Eurodollar Rate Loans...........................................................46
   Section 3.05      Funding Losses.....................................................................47
   Section 3.06      Matters Applicable to all Requests for Compensation................................48
   Section 3.07      Survival...........................................................................48

ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS....................................................48
   Section 4.01      Conditions of Initial Credit Extension.............................................48
   Section 4.02      Conditions to all Credit Extensions................................................51

ARTICLE V REPRESENTATIONS AND WARRANTIES................................................................52
   Section 5.01      Existence, Qualification and Power.................................................52
   Section 5.02      Authorization; No Contravention....................................................52
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                                                     <C>
   Section 5.03      Governmental Authorization; Other Consents.........................................53
   Section 5.04      Binding Effect.....................................................................53
   Section 5.05      Financial Statements; No Material Adverse Effect...................................53
   Section 5.06      Litigation.........................................................................54
   Section 5.07      No Default.........................................................................54
   Section 5.08      Subsidiaries.......................................................................54
   Section 5.09      Ownership of Personal Property; Liens..............................................54
   Section 5.10      Intellectual Property; Licenses, Etc...............................................55
   Section 5.11      Real Estate, Lease.................................................................55
   Section 5.12      Environmental Matters..............................................................56
   Section 5.13      Security Documents.................................................................57
   Section 5.14      Insurance..........................................................................57
   Section 5.15      Taxes..............................................................................57
   Section 5.16      ERISA Compliance...................................................................58
   Section 5.17      Margin Regulations; Investment Company Act; Public Utility Holding Company Act.....58
   Section 5.18      Disclosure.........................................................................59
   Section 5.19      Compliance with Laws...............................................................59
   Section 5.20      Labor Matters......................................................................60
   Section 5.21      Fraud And Abuse....................................................................61
   Section 5.22      Licensing..........................................................................61
   Section 5.23      Solvency...........................................................................61
   Section 5.24      Material Contracts.................................................................61

ARTICLE VI AFFIRMATIVE COVENANTS........................................................................62
   Section 6.01      Financial Statements...............................................................62
   Section 6.02      Certificates; Other Information....................................................63
   Section 6.03      Notices............................................................................64
   Section 6.04      Payment of Obligations.............................................................65
   Section 6.05      Preservation of Existence, Etc.....................................................66
   Section 6.06      Maintenance of Properties..........................................................66
   Section 6.07      Maintenance of Insurance...........................................................66
   Section 6.08      Reinsurance Arrangements...........................................................67
   Section 6.09      Compliance with Laws...............................................................67
   Section 6.10      Books and Records..................................................................67
   Section 6.11      Inspection Rights..................................................................67
   Section 6.12      Use of Proceeds....................................................................68
   Section 6.13      Further Assurances with Respect to Eligible Subsidiaries...........................68
   Section 6.14      Further Assurances with Respect to HMO Subsidiaries................................68
   Section 6.15      Further Assurances with Respect to other Collateral................................69
   Section 6.16      Performance of Material Contracts..................................................72
   Section 6.17      Maintenance of Licensing, Etc......................................................73
   Section 6.18      Environmental......................................................................73

ARTICLE VII NEGATIVE COVENANTS..........................................................................74
   Section 7.01      Liens..............................................................................74
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                     <C>
   Section 7.02      Investments........................................................................75
   Section 7.03      Indebtedness.......................................................................76
   Section 7.04      Fundamental Changes and Acquisitions...............................................77
   Section 7.05      Dispositions.......................................................................78
   Section 7.06      Restricted Payments................................................................79
   Section 7.07      Amendment, Etc. of Indebtedness, Other Material Contracts and Constitutive
                     Documents and Payments in respect of Indebtedness..................................79
   Section 7.08      Change in Nature of Business.......................................................80
   Section 7.09      Transactions with Affiliates.......................................................80
   Section 7.10      Limitations on Restricted Actions..................................................80
   Section 7.11      Operating Lease Obligations........................................................81
   Section 7.12      Use of Proceeds....................................................................81
   Section 7.13      Impairment of Security Interests...................................................81
   Section 7.14      Ownership of Subsidiaries, Foreign Subsidiaries and Other
                     Restrictions Relating to Subsidiaries..............................................81
   Section 7.15      Fiscal Year........................................................................82
   Section 7.16      Partnerships, etc..................................................................82
   Section 7.17      Capital Expenditures...............................................................82
   Section 7.18      Financial Covenants................................................................82
   Section 7.19      Risk-Based Capital Ratio...........................................................83

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES.............................................................83
   Section 8.01      Events of Default..................................................................83
   Section 8.02      Remedies Upon Event of Default.....................................................86
   Section 8.03      Application of Funds...............................................................87

ARTICLE IX ADMINISTRATIVE AGENT.........................................................................88
   Section 9.01      Appointment and Authorization of Administrative Agent..............................88
   Section 9.02      Delegation of Duties...............................................................88
   Section 9.03      Liability of Agent-Related Persons.................................................88
   Section 9.04      Reliance by Administrative Agent...................................................89
   Section 9.05      Notice of Default..................................................................89
   Section 9.06      Credit Decision; Disclosure of Information by Administrative Agent.................90
   Section 9.07      Indemnification of Administrative Agent............................................90
   Section 9.08      Administrative Agent in its Individual Capacity....................................91
   Section 9.09      Successor Administrative Agent.....................................................91
   Section 9.10      Administrative Agent May File Proofs of Claim......................................92
   Section 9.11      Collateral and Guaranty Matters....................................................93
   Section 9.12      Other Agents; Arrangers and Managers...............................................93

ARTICLE X MISCELLANEOUS.................................................................................93
   Section 10.01     Amendments, Etc....................................................................93
   Section 10.02     Notices and Other Communications; Facsimile Copies.................................95
   Section 10.03     No Waiver; Cumulative Remedies.....................................................96
   Section 10.04     Attorney Costs, Expenses and Taxes.................................................96
   Section 10.05     Indemnification by the Borrower....................................................97
</TABLE>

                                       iii

<PAGE>

<TABLE>
   <S>                                                                                                 <C>
   Section 10.06     Payments Set Aside.................................................................98
   Section 10.07     Successors and Assigns.............................................................98
   Section 10.08     Confidentiality...................................................................101
   Section 10.09     Set-off...........................................................................102
   Section 10.10     Interest Rate Limitation..........................................................102
   Section 10.11     Counterparts......................................................................102
   Section 10.12     Integration.......................................................................102
   Section 10.13     Survival of Representations and Warranties........................................103
   Section 10.14     Severability......................................................................103
   Section 10.15     Tax Forms.........................................................................103
   Section 10.16     [Intentionally omitted.]..........................................................105
   Section 10.17     Governing Law.....................................................................105
   Section 10.18     Waiver of Right to Trial by Jury..................................................106
   Section 10.19     Replacement of Lenders............................................................106
</TABLE>

                                       iv

<PAGE>

SCHEDULES

         2.01     Commitments and Pro Rata Shares
         5.03     Third Party Consents
         5.08     Subsidiaries and Other Equity Investments
         5.11     Fee Properties, Leased Properties
         5.14     Insurance
         5.20     Labor Matters
         5.24     Material Contracts
         7.01     Existing Liens
         7.02     Existing Investments
         7.03     Existing Indebtedness
         7.04     Reincorporation Merger Documents
         7.09     Transactions with Affiliates
         10.02    Administrative Agent's Office, Certain Addresses for Notices

EXHIBITS

         FORM OF
         A        Loan Notice
         B        Note
         C        Compliance Certificate
         D        Assignment and Assumption
         E        Joinder Agreement
         F        Opinion Matters
         G        Pledge Agreement
         H        Security Agreement
         I        Subsidiary Guaranty
         J        Mortgage

                                        v

<PAGE>

                                CREDIT AGREEMENT

         This CREDIT AGREEMENT ("Agreement") is entered into as of March 19,
2003, among MOLINA HEALTHCARE, INC., a California corporation (the "Borrower"),
each lender from time to time party hereto (collectively, the "Lenders" and
individually, a "Lender"), BANK OF AMERICA, N.A., as Administrative Agent and
L/C Issuer and CIBC WORLD MARKETS CORP., as Syndication Agent.

                                   WITNESSETH:

         WHEREAS, the Borrower has requested that the Lenders provide a
revolving credit facility in the aggregate principal amount of $75 million, and
the Lenders are willing to do so on the terms and conditions set forth herein;

         NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto covenant and agree as follows:

                                    ARTICLE I
                        DEFINITIONS AND ACCOUNTING TERMS

         Section 1.01      Defined Terms. As used in this Agreement, the
following terms shall have the meanings set forth below:

         "Account Control Agreements" means, collectively, the Account Control
Agreements each substantially in the form of Exhibits B-1 and B-2, as
applicable, to the Security Agreement.

         "Acquiring Party" has the meaning specified within the definition of
Permitted Acquisitions.

         "Acquisition", by any Person, means the purchase or acquisition by such
Person of any capital stock of another Person other than a Loan Party or all or
any substantial portion of the Property (other than the capital stock) of
another Person other than a Loan Party, whether involving a merger or
consolidation with such other Person.

         "Administrative Agent" means Bank of America in its capacity as
administrative agent and collateral agent, as applicable, under any of the Loan
Documents, or any successor administrative agent.

         "Administrative Agent's Office" means the Administrative Agent's
address and, as appropriate, account as set forth on Schedule 10.02, or such
other address or account as to which the Administrative Agent may from time to
time notify the Borrower and the Lenders pursuant to Section 10.02 hereof.

         "Administrative Services Agreements" means any and all administrative
services, consulting, corporate allocation, management, tax allocation and
similar agreements between or among the Borrower and any of its HMO
Subsidiaries.

<PAGE>

         "Administrative Questionnaire" means an Administrative Questionnaire in
a form supplied by the Administrative Agent.

         "Affiliate" means, with respect to any Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified. "Control"
means the power to direct or cause the direction of the management or policies
of a Person, whether through the ability to exercise voting power, by contract
or otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
Without limiting the generality of the foregoing, a Person shall be deemed to be
Controlled by another Person if such other Person possesses, directly or
indirectly, power to vote 10% or more of the securities having ordinary voting
power for the election of directors, managing general partners or the
equivalent.

         "Agent-Related Persons" means the Administrative Agent, together with
its Affiliates (including, in the case of Bank of America in its capacity as the
Administrative Agent, Banc of America Securities in its capacity as a Co-Lead
Arranger), and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.

         "Aggregate Commitments" means the Commitments of all the Lenders.

         "Agreement" means this Credit Agreement, as it may be amended, amended
and restated, supplemented or otherwise modified from time to time.

         "Applicable Rate" means 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):

                             APPLICABLE RATE
                           PRE-SUCCESSFUL IPO
        -----------------------------------------------------
                                     EURODOLLAR
                                       RATE +
                                     ----------
        PRICING     CONSOLIDATED     LETTERS OF
         LEVEL     LEVERAGE RATIO      CREDIT     BASE RATE +
        -----------------------------------------------------
           1            * 1.5           2.75%       1.75%
           2       * 1.0 but ** 1.5      2.5%        1.5%
           3           ** 1.0           2.25%       1.25%
        -----------------------------------------------------

*  greater than
** less than

                                        2

<PAGE>

                             APPLICABLE RATE
                           POST-SUCCESSFUL IPO
        -----------------------------------------------------
                                     EURODOLLAR
                                       RATE +
                                     ----------
        PRICING     CONSOLIDATED     LETTERS OF
         LEVEL     LEVERAGE RATIO      CREDIT     BASE RATE +
        -----------------------------------------------------
           1           *  1.5            2.5%        1.5%
           2       * 1.0 but ** 1.5     2.25%       1.25%
           3           ** 1.0            2.0%        1.0%
        -----------------------------------------------------

         Any increase or decrease in the Applicable Rate resulting from a change
in the Consolidated Leverage Ratio shall become effective as of the first
Business Day immediately following the date a Compliance Certificate is
delivered pursuant to Section 6.02(b); provided, however, that if a Compliance
Certificate is not delivered when due in accordance with such Section, then
Pricing Level 1 shall apply for the period beginning on the first Business Day
after the date on which such Compliance Certificate was required to have been
delivered and continue until the date five Business Days after such Compliance
Certificate is delivered, whereupon the Applicable Rate shall be adjusted based
on the information contained in such Compliance Certificate. The Applicable Rate
in effect from the Closing Date through and for a period of six months therefrom
shall be determined based upon Pricing Level 1 of the Applicable Rate
Pre-Successful IPO.

         "Approved Fund" has the meaning specified in Section 10.07(g).

         "Assignment and Assumption" means an Assignment and Assumption,
substantially in the form of Exhibit D hereto.

         "Attorney Costs" means and includes all reasonable fees, expenses and
disbursements of any law firm or other external counsel.

         "Attributable Indebtedness" means, on any date, in respect of any
Capitalized Lease of any Person, the capitalized amount thereof that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP.

         "Audited Financial Statements" means the audited consolidated balance
sheets of the Borrower and the Subsidiaries for the fiscal years ended December
31, 2002, December 31, 2001 and December 31, 2000, and the related consolidated
statements of income or operations, shareholders' equity and cash flows for each
such fiscal years of the Borrower and the Subsidiaries, including the notes
thereto.

         "Availability Period" means the period from and including the Closing
Date to the earliest of (a) the Maturity Date, (b) the date of termination of
the Aggregate Commitments pursuant to Section 2.06, and (c) the date of
termination of the Commitment of each Lender to

*  greater than
** less than

                                        3

<PAGE>

make Loans and of the obligation of the of the L/C Issuer to make L/C Credit
Extensions pursuant to Section 8.02.

         "Banc of America Securities" means Banc of America Securities LLC and
its successors.

         "Bank of America" means Bank of America, N.A. and its successors.

         "Base Rate" means, for any day a fluctuating rate per annum equal to
the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of
interest in effect for such day as publicly announced from time to time by Bank
of America as its "prime rate." The "prime rate" is a rate set by Bank of
America based upon various factors including Bank of America's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in such rate announced by Bank of America shall
take effect at the opening of business on the day specified in the public
announcement of such change.

         "Base Rate Loan" means a Loan that bears interest based on the Base
Rate.

         "Borrower" has the meaning specified in the introductory paragraph
hereto.

         "Borrowing" means a borrowing consisting of simultaneous Loans of the
same Type and, in the case of Eurodollar Rate Loans, having the same Interest
Period made by each of the Lenders pursuant to Section 2.01.

         "Building Finance Loan" means a loan to Molina Healthcare of California
by California Federal Bank in a principal amount of $3.4 million used in 1999 to
purchase the Borrower's corporate headquarters building located at One Golden
Shore Drive, Long Beach, California 90802, which loan is secured by a Lien on
such building.

         "Businesses" has the meaning specified in Section 5.12(a).

         "Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized to close under the Laws of, or are in
fact closed in, the state where the Administrative Agent's Office is located
and, if such day relates to any Eurodollar Rate Loan, means any such day on
which dealings in Dollar deposits are conducted by and between banks in the
London interbank eurodollar market.

         "Capital Assets" means, with respect to any Person, all equipment,
fixed assets and real property or improvements, replacements or substitutions
therefor or additions thereto, that, in accordance with GAAP, have been or
should be reflected as additions to property, plant or equipment on the balance
sheet of such Person or that have a useful life of more than one year.

         "Capital Expenditures" means, for any period for any Person, without
duplication (a) all expenditures made directly or indirectly during such period
for Capital Assets (whether paid in cash or other consideration or accrued as a
liability and including, without limitation, all expenditures for maintenance
and repairs which are required, in accordance with GAAP, to be capitalized on
the books of such Person) and (b) solely to the extent not otherwise included in
clause (a) of this definition, the aggregate principal amount of all
Indebtedness (including,

                                        4

<PAGE>

without limitation, obligations in respect of Capitalized Leases) assumed or
incurred during such period in connection with any such expenditures for Capital
Assets. For purposes of this definition, (i) Permitted Acquisitions shall not be
included in Capital Expenditures, and (ii) the purchase price of equipment that
is purchased simultaneously with the trade-in of existing assets, equipment or
other property or with insurance proceeds, condemnation awards or other
settlements in respect of lost, destroyed, damaged or condemned assets,
equipment or other property shall be included in Capital Expenditures only to
the extent of the gross amount by which such purchase price exceeds the credit
granted by the seller of such asset, equipment or other property for the asset,
equipment or other property being traded in at such time or the amount of such
insurance proceeds, as the case may be.

         "Capitalized Lease" means any lease with respect to which the lessee is
required to recognize concurrently the acquisition of property or an asset and
the incurrence of a liability in accordance with GAAP.

         "Cash Collateralize" has the meaning specified in Section 2.03(g).

         "CHAMPUS" means the United States Department of Defense Civilian Health
and Medical Program of the Uniformed Services.

         "Change of Control" means, with respect to any Person, an event or
series of events by which:

                  (a)      any "person" or "group" (as such terms are used in
         Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but
         excluding any employee benefit plan of such person or its subsidiaries
         and any person or entity acting in its capacity as trustee, agent or
         other fiduciary or administrator of any such plan) becomes the
         "beneficial owner" (as defined in Rules 13d-3 and 13d-5 promulgated
         under the Securities Exchange Act of 1934, except that a person or
         group shall be deemed to have "beneficial ownership" of all securities
         that such person or group has the right to acquire (such right, an
         "option right"), whether such right is exercisable immediately or only
         after the passage of time), directly or indirectly, of 30% or more of
         the equity securities of such Person entitled to vote for members of
         the board of directors or equivalent governing body of such Person on a
         fully-diluted basis (and taking into account all such securities that
         such person or group has the right to acquire pursuant to any option
         right); or

                  (b)      during any period of 12 consecutive months, a
         majority of the members of the board of directors or other equivalent
         governing body of such Person cease to be composed of individuals (i)
         who were members of that board or equivalent governing body on the
         first day of such period, (ii) whose election or nomination to that
         board or equivalent governing body was approved by individuals referred
         to in clause (i) above constituting at the time of such election or
         nomination at least a majority of that board or equivalent governing
         body or (iii) whose election or nomination to that board or other
         equivalent governing body was approved by individuals referred to in
         clauses (i) and (ii) above constituting at the time of such election or
         nomination at least a majority of that board or equivalent governing
         body (excluding, in the case of both clause (ii) and clause (iii), any
         individual whose initial nomination for, or assumption of office as, a
         member of

                                        5

<PAGE>

         that board or equivalent governing body occurs as a result of an actual
         or threatened solicitation of proxies or consents for the election or
         removal of one or more directors by any person or group other than a
         solicitation for the election of one or more directors by or on behalf
         of the board of directors); or

                  (c)      any Person or two or more Persons acting in concert
         shall have acquired by contract or otherwise, or shall have entered
         into a contract or arrangement that, upon the consummation thereof,
         will result in its or their acquisition of power to exercise, directly
         or indirectly, a controlling influence over the management or policies
         of the Borrower or control over the equity Securities of the Borrower
         entitled to vote for members of the board of directors or equivalent
         governing body of the Borrower on a fully diluted basis (and taking
         into account all such securities that such Person or group has the
         right to acquire pursuant to any option right) representing 30% or more
         of the combined voting power of such securities; provided, however,
         that notwithstanding any of the foregoing, transfers of equity
         securities among members of the Molina Family and/or trusts
         beneficially owned by any member of the Molina Family shall not be
         considered a Change of Control hereunder.

         "Closing Date" means the first date all the conditions precedent in
Section 4.01 are satisfied or waived in accordance with Section 4.01 (or, in the
case of Section 4.01(d), waived by the Person entitled to receive the applicable
payment).

         "CIBC Inc." means CIBC Inc. and its successors.

         "CMS" means the Centers for Medicare and Medicaid Services and any
successor thereof.

         "Code" means the Internal Revenue Code of 1986.

         "Co-Lead Arrangers" means Banc of America Securities, in its capacity
as a co-lead arranger, and CIBC World Markets Corp., in its capacity as a
co-lead arranger.

         "Collateral" means all the "Collateral" referred to in the Collateral
Documents.

         "Collateral Documents" means, collectively, the Security Agreement, the
Pledge Agreement, each Account Control Agreement, each Waiver Agreement, each
Mortgage and any other security agreements, pledge agreements or similar
instruments delivered to the Administrative Agent as collateral agent from time
to time pursuant to Sections 6.13, 6.14 and 6.15 and each other agreement,
instrument or document that creates or purports to create a Lien in favor of the
Administrative Agent, as collateral agent, for the benefit of the Secured
Parties.

         "Commitment" means, as to each Lender, its obligation to (a) make Loans
to the Borrower pursuant to Section 2.01, and (b) purchase participations in L/C
Obligations, in an aggregate principal amount at any one time outstanding not to
exceed the amount set forth opposite such Lender's name on Schedule 2.01 or in
the Assignment and Assumption pursuant to which such Lender becomes a party
hereto, as applicable, as such amount may be adjusted from time to time in
accordance with this Agreement.

                                        6

<PAGE>

         "Commitment Letter" means the commitment letter agreement, dated
February 1, 2003 among the Borrower, Bank of America, CIBC Inc. and the Co-Lead
Arrangers.

         "Company Action Level" means the Company Action Level risk-based
capital threshold, as defined by the HMO Model Act.

         "Compensation Period" has the meaning specified in Section 2.12(c)(ii).

         "Compliance Certificate" means a certificate substantially in the form
of Exhibit C hereto.

         "Consolidated EBITDA" means, for any period for the Borrower and the
Subsidiaries on a consolidated basis in accordance with GAAP, an amount equal to
Consolidated Net Income for such period, plus the following to the extent
deducted in calculating such Consolidated Net Income: (i) Consolidated Interest
Charges for such period; (ii) the provision for federal, state, local and
foreign income taxes for such period; and (iii) the amount of depreciation and
amortization expense deducted in determining such Consolidated Net Income.

         "Consolidated Funded Indebtedness" means, for the Borrower and the
Subsidiaries determined on a consolidated basis in accordance with GAAP, as of
any date of determination, the sum of (a) the outstanding principal amount of
all obligations, whether current or long-term, for borrowed money (including
Obligations hereunder) and all obligations evidenced by bonds, debentures,
notes, loan agreements or other similar instruments, (b) all purchase money
Indebtedness, (c) all direct obligations arising under letters of credit
(including standby and commercial), bankers' acceptances, bank guaranties,
surety bonds and similar instruments, (d) all obligations in respect of the
deferred purchase price of property or services (other than trade accounts
payable in the ordinary course of business), (e) Attributable Indebtedness in
respect of Capitalized Leases, (f) the attributed principal amount of
Securitization Transactions, (g) all preferred stock or comparable equity
interests providing for mandatory redemption, sinking fund or other like
payments, (h) without duplication, all Guarantees with respect to outstanding
Indebtedness of the types specified in clauses (a) through (g) above, and (i)
all Indebtedness of the types referred to in clauses (a) through (h) above of
any partnership or joint venture (other than a joint venture that is itself a
corporation or limited liability company) in which such Person is a general
partner or joint venturer, unless such Indebtedness is expressly made
non-recourse to such Person.

         "Consolidated Interest Charges" means, for any period, for the Borrower
and the Subsidiaries on a consolidated basis, all consolidated interest expense
in accordance with GAAP with respect to Indebtedness for borrowed money
(including capitalized interest) or in connection with the deferred purchase
price of assets.

         "Consolidated Leverage Ratio" means, as of any date of determination,
the ratio of (a) Consolidated Funded Indebtedness as of such date to (b)
Consolidated EBITDA for the period of the four fiscal quarters most recently
ended for which the Borrower has delivered financial statements pursuant to
Section 6.01(a) or (b).

                                        7

<PAGE>

         "Consolidated Net Income" means, for any period, on a consolidated
basis, the Net Income of the Borrower and the Subsidiaries on a consolidated
basis for that period.

         "Consolidated Net Worth" means, as of any date of determination, for
the Borrower and the Subsidiaries on a consolidated basis, Shareholders' Equity
of the Borrower and the Subsidiaries on a consolidated basis on that date as
determined in accordance with GAAP.

         "Contract Provider" means any Person or any employee, agent or
subcontractor of such Person who provides professional health care services
under or pursuant to any contract with the Borrower or any of the Subsidiaries.

         "Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

         "Control" has the meaning specified in the definition of "Affiliate."

         "Credit Extension" means each of the following: (a) a Borrowing; and
(b) an L/C Credit Extension.

         "Debtor Relief Laws" means the Bankruptcy Code of the United States,
and all other liquidation, conservatorship, bankruptcy, assignment for the
benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States or other
applicable jurisdictions from time to time in effect and affecting the rights of
creditors generally.

         "Default" means any event or condition that constitutes an Event of
Default or that, with the giving of any notice, the passage of time, or both,
would be an Event of Default.

         "Default Rate" means an interest rate equal to (a) in the case of
Eurodollar Rate Loans, the sum of (i) the Eurodollar Rate for such Loans, plus
(ii) the Applicable Rate applicable to such Loans, plus (iii) 2% per annum, and
(b) in the case of Base Rate Loans and for all other purposes, the sum of (i)
the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate
Loans plus (iii) 2% per annum.

         "Defaulting Lender" means any Lender that (a) has failed to fund any
portion of the Loans or participations in L/C Obligations required to be funded
by it hereunder within one Business Day of the date required to be funded by it
hereunder, (b) has otherwise failed to pay over to the Administrative Agent or
any other Lender any other amount required to be paid by it hereunder within one
Business Day of the date when due, unless the subject of a good faith dispute,
or (c) has been deemed insolvent or become the subject of a bankruptcy or
insolvency proceeding.

         "Disposition" or "Dispose" means the sale, transfer, license, lease or
other disposition (including any sale and leaseback transaction) of any property
by any Person, including any sale, assignment, transfer or other disposal, with
or without recourse, of any notes or accounts receivable or any rights and
claims associated therewith.

                                        8

<PAGE>

         "Dollar" and "$" mean lawful money of the United States.

         "EBITDA" means, for any period for any Person, an amount equal to Net
Income for such period, plus the following to the extent deducted in calculating
such Net Income: (i) Interest Charges for such period; (ii) the provision for
federal, state, local and foreign income taxes payable for such period; and
(iii) the amount of depreciation and amortization expense deducted in
determining such Net Income.

         "EBITDAR" means for any period for any Person, EBITDA for such period
plus Rental Expense.

         "Eligible Assignee" has the meaning specified in Section 10.07(g).

         "Eligible Subsidiary" means any Subsidiary, other than a Subsidiary
that is restricted by HMO Regulations from giving a guaranty of the Loans and
other Obligations under this Agreement pursuant to a Subsidiary Guaranty.

         "Environmental Laws" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

         "Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower, any other Loan Party or any of their
respective Subsidiaries directly or indirectly resulting from or based upon (a)
violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the release or threatened release of
any Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

         "ERISA" means the Employee Retirement Income Security Act of 1974.

         "ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).

         "ERISA Event" means (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment

                                        9

<PAGE>

as a termination under Sections 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e)
an event or condition which constitutes grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Pension
Plan or Multiemployer Plan; or (f) the imposition of any liability under Title
IV of ERISA, other than for PBGC premiums due but not delinquent under Section
4007 of ERISA, upon the Borrower or any ERISA Affiliate.

         "Eurodollar Rate" means for any Interest Period with respect to any
Eurodollar Rate Loan:

                  (a)      the rate per annum equal to the rate determined by
         the Administrative Agent to be the offered rate that appears on the
         page of the Telerate screen (or any successor thereto) that displays an
         average British Bankers Association Interest Settlement Rate for
         deposits in Dollars (for delivery on the first day of such Interest
         Period) with a term equivalent to such Interest Period, determined as
         of approximately 11:00 a.m. (London time) two Business Days prior to
         the first day of such Interest Period; or

                  (b)      if the rate referenced in the preceding subsection
         (a) does not appear on such page or service or such page or service
         shall not be available, the rate per annum equal to the rate determined
         by the Administrative Agent to be the offered rate on such other page
         or other service that displays an average British Bankers Association
         Interest Settlement Rate for deposits in Dollars (for delivery on the
         first day of such Interest Period) with a term equivalent to such
         Interest Period, determined as of approximately 11:00 a.m. (London
         time) two Business Days prior to the first day of such Interest Period;
         or

                  (c)      if the rates referenced in the preceding subsections
         (a) and (b) are not available, the rate per annum determined by the
         Administrative Agent as the rate of interest at which deposits in
         Dollars for delivery on the first day of such Interest Period in same
         day funds in the approximate amount of the Eurodollar Rate Loan being
         made, continued or converted by Bank of America and with a term
         equivalent to such Interest Period would be offered by Bank of
         America's London branch to major banks in the London interbank
         eurodollar market at their request at approximately 4:00 p.m. (London
         time) two Business Days prior to the first day of such Interest Period.

         "Eurodollar Rate Loan" means a Loan that bears interest at a rate based
on the Eurodollar Rate.

         "Event of Default" has the meaning specified in Section 8.01.

         "Exclusion Event" means the exclusion of the Borrower or any of the
Subsidiaries from participation in any Medical Reimbursement Program.

         "Federal Funds Rate" means, for any day, the rate per annum equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal

                                       10

<PAGE>

Reserve Bank on the Business Day next succeeding such day; provided that (a) if
such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate (rounded upward, if necessary, to a whole multiple
of 1/100 of 1%) charged to Bank of America on such day on such transactions as
determined by the Administrative Agent.

         "Fee Letter" means the fee letter agreement, dated February 1, 2003
among the Borrower, Bank of America, CIBC Inc. and the Co-Lead Arrangers.

         "Fixed Charge Coverage Ratio" means, for any period, the ratio of (i)
the sum of the Borrower's unconsolidated EBITDAR, plus EBITDAR of any other Loan
Party, plus Net Dividends, to (ii) the sum of Fixed Charges of the Borrower and
any other Loan Party, plus Capital Expenditures of the Borrower and any other
Loan Party.

         "Fixed Charges" means, for any period for any Person, 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.

         "Foreign Lender" has the meaning specified in Section 10.15(a)(i).

         "Foreign Subsidiary" means a subsidiary that is not organized under the
Laws of a political subdivision of the United States.

         "FRB" means the Board of Governors of the Federal Reserve System of the
United States.

         "Fund" has the meaning set forth in Section 10.07(g).

         "GAAP" means generally accepted accounting principles in the United
States set forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board, that are
applicable to the circumstances as of the date of determination, consistently
applied.

         "Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative tribunal, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

         "Governmental Reimbursement Program Cost" means with respect to and
payable by the Borrower and the Subsidiaries, the sum of:

                  (a)      all amounts (including punitive and other similar
         amounts) agreed to be paid or payable (i) in settlement of claims made
         pursuant to any litigation, suit, arbitration, investigation or other
         legal or administrative proceeding relating to a dispute

                                       11

<PAGE>

         or (ii) as a result of a final, non-appealable judgment, award or
         similar order, in each case, relating to participation in Medical
         Reimbursement Programs;

                  (b)      all final, non-appealable fines, penalties,
         forfeitures or other amounts rendered pursuant to criminal indictments
         or other criminal proceedings relating to participation in Medical
         Reimbursement Programs; and

                  (c)      the amount of final, non-appealable recovery,
         damages, awards, penalties, forfeitures or similar amounts rendered in
         any litigation, suit, arbitration, investigation or other legal or
         administrative proceeding of any kind relating to participation in
         Medical Reimbursement Programs.

         "Guarantor" means each Eligible Subsidiary identified as a "Guarantor"
on the signature pages to the Subsidiary Guaranty and each other Person that
joins as a Guarantor pursuant to Section 6.13, together with their successors
and permitted assigns.

         "Guarantee" means, as to any Person, (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect, (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation, (ii) to purchase or lease property,
securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person; provided that Guarantee shall not include
endorsements for collection or deposits in the ordinary course of business. The
amount of any Guarantee shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof, in
respect of which such Guarantee is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith. The term "Guarantee" as a verb has a
corresponding meaning.

         "Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos-containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

         "HHS" means the United States Department of Health and Human Services
and any successor thereof.

                                       12

<PAGE>

         "HMO" means any health maintenance organization or similar managed care
organization, or any health service plan under California Law, any Person doing
business as a health maintenance organization or similar managed care
organization, or a health care service plan under California Law, or any Person
required to qualify or be licensed as a health maintenance organization or
similar managed care organization under applicable federal or state Law or a
health care service plan under California Law (including, without limitation, in
each case, HMO Regulations).

         "HMO Business" means the business of owning and operating an HMO.

         "HMO Event" means (a) any material non-compliance by the Borrower or
any of the Subsidiaries to the extent subject to HMO Regulations with any of the
terms and provisions of the HMO Regulations pertaining to its fiscal soundness,
solvency or financial condition, or (b) the assertion in writing, after the date
hereof, by an HMO Regulator that it intends to take administrative action
against the Borrower or any of the Subsidiaries to revoke or modify in a
material and adverse manner any license, charter or permit or (c) the
commencement of proceedings against the Borrower or any of its Subsidiaries in
which an HMO Regulator asserts that the Borrower or any Subsidiary has failed to
comply with the soundness, solvency or financial provisions or requirements of
the HMO Regulations.

         "HMO Model Act" means the Health Maintenance Organization Model Act
adopted by the National Association of Insurance Commissioners.

         "HMO Regulations" means all laws, regulations, directives and
administrative orders applicable under federal or state law or the law of the
District of Columbia to any HMO Subsidiary (and any regulations, orders and
directives promulgated or issued pursuant to any of the foregoing) and
Subchapter XI of Chapter 6A of Title 42 of the United States Code Annotated (and
any regulations, orders and directives promulgated or issued pursuant thereto,
including, without limitation, Part 417 of Chapter IV of 42 Code of Federal
Regulations (1990)).

         "HMO Regulator" means any Governmental Authority charged with the
administration, oversight or enforcement of an HMO Regulation, whether
primarily, secondarily or jointly.

         "HMO Subsidiary" means each of the Subsidiaries identified as an HMO
Subsidiary on Schedule 5.08 hereto, and any other existing or future Subsidiary
that is licensed as an HMO, conducting HMO Business and/or providing managed
care services.

         "Honor Date" has the meaning specified in Section 2.03(c)(i).

         "Improvements" shall mean, with respect to any Mortgaged Property, all
buildings, structures and other improvements now or hereafter existing, erected
or placed on or under the Mortgaged Property or any portion thereof, and all
fixtures of every kind and nature whatsoever now or hereafter owned and used or
procured for use in connection with the Mortgaged Property.

         "Indebtedness" means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

                                       13

<PAGE>

                  (a)      all obligations of such Person for borrowed money and
         all obligations of such Person evidenced by bonds, debentures, notes,
         loan agreements or other similar instruments;

                  (b)      all direct or contingent obligations of such Person
         arising under letters of credit (including standby and commercial),
         bankers' acceptances, bank guaranties, surety bonds and similar
         instruments;

                  (c)      the net obligations of such Person under any Swap
         Contract;

                  (d)      all obligations of such Person to pay the deferred
         purchase price of property or services (other than trade accounts
         payable in the ordinary course of business;

                  (e)      indebtedness (excluding prepaid interest thereon)
         secured by a Lien on property owned or being purchased by such Person
         (including indebtedness arising under conditional sales or other title
         retention agreements), whether or not such indebtedness shall have been
         assumed by such Person or is limited in recourse;

                  (f)      Capitalized Leases;

                  (g)      all obligations of such Person to purchase, redeem,
         retire, defease or otherwise make any payment in respect of any equity
         interests in such Person or any other Person or any warrants, rights or
         options to acquire such equity interests, valued in the case of
         redeemable preferred interests, at the greater of its voluntary or
         involuntary liquidation preference plus accrued and unpaid dividends;

                  (h)      all Indebtedness in respect of any of the foregoing
         of another Person secured by (or for which the holder of such
         Indebtedness has an existing right, contingent or otherwise, to be
         secured by) any Lien on the property (including, without limitation,
         accounts and contract rights) owned by such Person, even though such
         Person has not assumed or become liable for such Indebtedness; and

                  (i)      all Guarantees of such Person in respect of any of
         the foregoing.

         For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date. The amount of any Capitalized Lease as of any date
shall be deemed to be the amount of Attributable Indebtedness in respect thereof
as of such date.

         "Indemnified Liabilities" has the meaning specified in Section 10.05.

         "Indemnitees" has the meaning specified in Section 10.05.

         "Information" has the meaning specified in Section 10.08.

                                       14

<PAGE>

         "Intellectual Property Collateral" has the meaning specified in the
Security Agreement.

         "Intercompany Note" means the promissory notes issued as contemplated
by Section 7.02(d), substantially in the form of Exhibit A to the Pledge
Agreement.

         "Interest Charges" means, for any period for any Person, the sum of (a)
all interest, premium payments, debt, discount, fees, charges and related
expenses in connection with Indebtedness for borrowed money (including
capitalized interest) or in connection with the deferred purchase price of
assets, in each case to the extent treated as interest in accordance with GAAP,
and (b) the portion of rent expense with respect to such period under
Capitalized Leases that is treated as interest in accordance with GAAP.

         "Interest Payment Date" means (a) as to any Eurodollar Rate Loan, the
last day of each Interest Period applicable to such Loan and the Maturity Date;
provided, however, that if any Interest Period for a Eurodollar Rate Loan
exceeds three months, the respective dates that fall every three months after
the beginning of such Interest Period shall also be Interest Payment Dates; and
(b) as to any Base Rate Loan, the last Business Day of each March, June,
September and December and the Maturity Date.

         "Interest Period" means, as to each Eurodollar Rate Loan, the period
commencing on the date such Eurodollar Rate Loan is disbursed or converted to or
continued as a Eurodollar Rate Loan and ending on the date one, two, three or
six months thereafter, as selected by the Borrower in its Loan Notice; provided
that:

                  (i)      any Interest Period that would otherwise end on a day
         that is not a Business Day shall be extended to the next succeeding
         Business Day unless such Business Day falls in another calendar month,
         in which case such Interest Period shall end on the immediately
         preceding Business Day;

                  (ii)     any Interest Period that begins on the last Business
         Day of a calendar month (or on a day for which there is no numerically
         corresponding day in the calendar month at the end of such Interest
         Period) shall end on the last Business Day of the calendar month at the
         end of such Interest Period; and

                  (iii)    no Interest Period shall extend beyond the Maturity
         Date.

         "Investment" means, as to any Person, any direct or indirect
acquisition or investment by such Person, whether by means of (a) the purchase
or other acquisition of capital stock or other securities of another Person, (b)
a loan, advance or capital contribution to, Guarantee or assumption of debt of,
or purchase or other acquisition of, any other debt or equity participation or
interest in, another Person, including any partnership or joint venture interest
in such other Person, or (c) the purchase or other acquisition (in one
transaction or a series of transactions) of assets of another Person that
constitute a business unit. For purposes of covenant compliance at the
particular time in question, the amount of any Investment shall be the amount
actually invested, without adjustment for subsequent increases or decreases in
the value of such Investment.

                                       15

<PAGE>

         "IP Rights" has the meaning set forth in Section 5.10.

         "IRS" means the United States Internal Revenue Service.

         "Joinder Agreement" means a joinder agreement executed and delivered in
accordance with the provisions of Sections 6.13 and 6.14, substantially in the
form of Exhibit E hereto.

         "Laws" means, collectively, all international, foreign, Federal, state
and local statutes, treaties, rules, guidelines, regulations, ordinances, codes
and administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of any Governmental Authority.

         "L/C Advance" means, with respect to each Lender, such Lender's funding
of its participation in any L/C Borrowing in accordance with its Pro Rata Share.

         "L/C Borrowing" means an extension of credit resulting from a drawing
under any Letter of Credit which has not been reimbursed by the Borrower on the
Honor Date or refinanced as a Borrowing.

         "L/C Credit Extension" means, with respect to any Letter of Credit, the
issuance thereof or extension of the expiry date thereof, or the renewal or
increase of the amount thereof.

         "L/C Issuer" means Bank of America in its capacity as issuer of Letters
of Credit hereunder, or any successor issuer of Letters of Credit hereunder.

         "L/C Obligations" means, as at any date of determination, the aggregate
undrawn amount of all outstanding Letters of Credit plus the aggregate of all
Unreimbursed Amounts, including all L/C Borrowings.

         "Lender" has the meaning specified in the introductory paragraph hereto
and, as the context requires, includes each Lender with a commitment to make
Loans as designated in Section 2.01 or in an Assignment and Assumption Agreement
or a joinder pursuant to which such Lender becomes a party hereto and the L/C
Issuer.

         "Lending Office" means, as to any Lender, the office or offices of such
Lender described as such in such Lender's Administrative Questionnaire, or such
other office or offices as to which a Lender may from time to time notify the
Borrower and the Administrative Agent.

         "Letter of Credit" means a commercial letter of credit or a standby
letter of credit issued hereunder.

         "Letter of Credit Application" means an application and agreement for
the issuance or amendment of a Letter of Credit in the form from time to time in
use by the L/C Issuer.

                                       16

<PAGE>

         "Letter of Credit Expiration Date" means the day that is seven days
prior to the Maturity Date then in effect (or, if such day is not a Business
Day, the immediately preceding Business Day).

         "Letter of Credit Sublimit" means an amount equal to the lesser of (a)
$10 million and (b) the unused amount of the Aggregate Commitments at such time.
The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate
Commitments.

         "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, and any financing lease having substantially the same economic effect
as any of the foregoing).

         "Loan" means an extension of credit by a Lender to the Borrower under
Article II in the form of a Loan.

         "Loan Documents" means this Agreement, the Notes, the Fee Letter, each
Letter of Credit Application, the Subsidiary Guaranty, Secured Swap Contract,
the Collateral Documents and all other documents delivered to the Administrative
Agent or any Lender in connection herewith or therewith.

         "Loan Notice" means a notice of (a) a Borrowing, (b) a conversion of
Loans from one Type to the other, or (c) a continuation of Eurodollar Rate
Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially
in the form of Exhibit A hereto.

         "Loan Parties" means, collectively, the Borrower and each Guarantor.

         "Master Agreement" has the meaning specified in the definition of "Swap
Contract".

         "Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect on, (a) the operations, business, properties,
liabilities (actual or contingent) or condition (financial or otherwise) of the
Borrower or Subsidiaries taken as a whole, (b) the ability of any Loan Party to
perform its obligations under any Loan Document to which it is a party, (c) the
Lien of any Collateral Document, or (d) the material rights, powers, or remedies
of the Administrative Agent or any Lender under any Loan Document.

         "Material Contract" means, with respect to the Borrower and the
Subsidiaries, (a) the contracts set forth on Schedule 5.24, (b) each credit
agreement, capital lease or other agreement related to any Indebtedness of the
Borrower and the Subsidiaries in an amount greater than $5 million (other than
the Loan Documents), (c) each Swap Contract to which the Borrower or any of the
Subsidiaries is a party, (d) any voting or shareholder's agreement related to
the equity interest in any Person to which the Borrower or any of the
Subsidiaries is a party, and (e) any other contract to which any such Person is
a party involving aggregate consideration payable to or by such Person of $5
million or more in any year or otherwise material to the business, condition
(financial or otherwise), operations, performance, properties of the Borrower
and the

                                       17

<PAGE>

Subsidiaries, taken as a whole; provided, however, that agreements entered into
in connection with a Permitted Acquisition shall be excluded from this
definition.

         "Maturity Date" means March 20, 2006.

         "Medicaid" means that means-tested entitlement program under Title XIX,
P.L. 89-87 of the Social Security Act, which provides federal grants to states
for medical assistance based on specific eligibility criteria, as set forth on
Section 1396, et seq. of Title 42 of the United States Code, as amended.

         "Medicaid Regulations" means, collectively, (a) all federal statutes
(whether set forth in Title XIX of the Social Security Act or elsewhere)
affecting the medical assistance program established by Title XIX of the Social
Security Act and any statutes succeeding thereto, (b) all applicable provisions
of all federal rules, regulations, manuals and orders of all Governmental
Authorities promulgated pursuant to or in connection with the statutes described
in subsection (a) above and all federal administrative, reimbursement and other
guidelines of all Governmental Authorities having the force of law promulgated
pursuant to or in connection with the statutes described in subsection (a)
above, (c) all state or other political subdivision statutes and regulations for
medical assistance enacted in connection with the statutes and provisions
described in subsections (a) and (b) above, and (d) all applicable provisions of
all rules, regulations, manuals and orders of all Governmental Authorities
promulgated pursuant to or in connection with the statutes described in clause
(iii) above and all state administrative, reimbursement and other guidelines of
all Governmental Authorities having the force of law promulgated pursuant to or
in connection with the statutes described in subsection (b) above, in each case
as may be amended, supplemented or otherwise modified from time to time.

         "Medical Reimbursement Programs" means a collective reference to the
Medicare, Medicaid and CHAMPUS programs and any other health care program
operated by or financed in whole or in part by any Governmental Authority.

         "Medicare" means that government-sponsored entitlement program under
Title XVIII, P.L. 89-87, of the Social Security Act, which provides for a health
insurance system for eligible elderly and disabled individuals, as set forth at
Section 1395, et seq. of Title 42 of the United States Code, as amended.

         "Medicare Regulations" means, collectively, all federal statutes
(whether set forth in Title XVIII of the Social Security Act or elsewhere)
affecting the health insurance program for the aged and disabled established by
Title XVIII of the Social Security Act and any statutes succeeding thereto,
together with all applicable provisions of all rules, regulations, manuals and
orders and administrative, reimbursement and other guidelines having the force
of law of all applicable provisions of all rules, regulations, manuals and
orders and administrative, reimbursement and other guidelines having the force
of law of all Governmental Authorities (including, without limitation, CMS, the
OIG, HHS, or any person succeeding to the functions of the foregoing)
promulgated pursuant to or in connection with any of the foregoing having the
force of law, as each may be amended, supplemented or otherwise modified from
time to time.

                                       18

<PAGE>

         "Molina Family" means Mary R. Molina, Joseph M. Molina, Mary Martha
Bernadett, M.D., John C. Molina, Janet M. Watt and Josephine M. Battiste, and
the spouses, natural and legal issue and other descendants and the stepchildren
(including the natural and legal issue of the stepchildren) of any of the
above-named persons.

         "Molina Healthcare of California" means Molina Healthcare of
California, a California corporation.

         "Molina Healthcare of Michigan" means Molina Healthcare of Michigan,
Inc., a Michigan corporation.

         "Molina Healthcare of Utah" means Molina Healthcare of Utah, Inc.,
d.b.a. American Family Care of Utah, a Utah corporation.

         "Molina Healthcare of Washington" means Molina Healthcare of
Washington, Inc., a Washington corporation.

         "Mortgage" means a mortgage, deed of trust, assignment of leases and
rents, leasehold mortgage or other security document granting a security
interest to the Administrative Agent on the Mortgaged Property, substantially in
the form of Exhibit J hereto or in such form as is suitable for filing in the
applicable jurisdiction.

         "Mortgaged Property" means (a) all Real Property Assets identified on
Schedule 5.11 that are identified as Mortgaged Property and (b) all other Real
Property Assets with respect to which a Mortgage is granted pursuant to Section
6.15.

         "Multiemployer Plan" means any employee benefit plan of the type
described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA
Affiliate makes or is obligated to make contributions, or during the preceding
five plan years, has made or has been obligated to make contributions.

         "NAIC" means the National Association of Insurance Commissioners, a
national organization of insurance regulators.

         "Net Dividends" means, for any period, dividends paid by the HMO
Subsidiaries to the Borrower, minus cash Investments made by the Borrower in the
HMO Subsidiaries.

         "Net Income" means, for any period, net income of any Person (excluding
extraordinary gains but including extraordinary cash losses) for that period.

         "Note" means a promissory note made by the Borrower in favor of a
Lender evidencing Loans made by such Lender, substantially in the form of
Exhibit B hereto.

         "Obligations" means all advances to, and debts, liabilities,
obligations, covenants and duties of, any Loan Party arising under any Loan
Document (including any Secured Swap Contract entered into after the date of
this Agreement) or otherwise with respect to any Loan or Letter of Credit,
whether direct or indirect (including those acquired by assumption), absolute or
contingent, due or to become due, now existing or hereafter arising and
including interest and

                                       19

<PAGE>

fees that accrue after the commencement by or against any Loan Party or any
Affiliate thereof of any proceeding under any Debtor Relief Laws naming such
Person as the debtor in such proceeding, regardless of whether such interest and
fees are allowed claims in such proceeding. Without limiting the generality of
the foregoing, the Obligations of the Borrower under the Loan Documents include
(a) the obligation to pay principal, interest, Letter of Credit commissions,
charges, expenses, fees, Attorney Costs and disbursements, indemnities and other
amounts payable by the Borrower under any Loan Document and (b) the obligations
of the Borrower to reimburse any amount in respect of any of the foregoing that
any Lender, in its reasonable discretion, may elect to pay or advance on behalf
of the Borrower.

         "OIG" means the Office of Inspector General of HHS and any successor
thereof.

         "Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any Property that is not a Capitalized Lease other than any such
lease in which that Person is the lessor.

         "Organization Documents" means (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws, (b) with respect to any
limited liability company, the certificate or articles of formation or
organization and operating agreement, and (c) with respect to any partnership,
joint venture, trust or other form of business entity, the partnership, joint
venture or other applicable agreement of formation or organization and any
agreement, instrument, filing or notice with respect thereto filed in connection
with its formation or organization with the applicable Governmental Authority in
the jurisdiction of its formation or organization and, if applicable, any
certificate or articles of formation or organization of such entity.

         "Other Taxes" has the meaning specified in Section 3.01(b).

         "Outstanding Amount" means (a) with respect to Loans on any date, the
aggregate outstanding principal amount thereof after giving effect to any
borrowings and prepayments or repayments of Loans occurring on such date, and
(b) with respect to any L/C Obligations on any date, the amount of such L/C
Obligations on such date after giving effect to any L/C Credit Extension
occurring on such date and any other changes in the aggregate amount of the L/C
Obligations as of such date, including as a result of any reimbursements of
outstanding unpaid drawings under any Letters of Credit or any reductions in the
maximum amount available for drawing under Letters of Credit taking effect on
such date.

         "Participant" has the meaning specified in Section 10.07(d).

         "PBGC" means the Pension Benefit Guaranty Corporation.

         "Pension Plan" means any "employee pension benefit plan" (as such term
is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Borrower or
any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes
or has an obligation to contribute, or in the case of a multiple employer or
other plan described in Section 4064(a) of ERISA, has made contributions at any
time during the immediately preceding five plan years.

                                       20

<PAGE>

         "Permitted Acquisitions" means any Acquisition 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"); provided that (a) the Person to be acquired is a direct or indirect
wholly-owned Subsidiary of the Borrower and is in the HMO Business or a
healthcare services-related business, (b) the Property acquired (or the Property
of the Person acquired) in such Acquisition shall be used or useful in the same
or similar line of business as the Borrower and the Subsidiaries on the Closing
Date, (c) all Property to be acquired in connection with such 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 Acquisition
on a Pro Forma Basis, (f) the 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 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) for each Acquisition (or a series of related Acquisitions)
the aggregate consideration (including for purposes of consideration (A) cash
consideration, (B) non-cash consideration (including any assumed debt) and (C)
for such Person to be acquired, an amount determined by the Acquiring Party in
good faith at the time of the Acquisition of projected capital infusions
required by Governmental Authorities or necessary in order to maintain
compliance by such Person with the provisions of this Agreement as of the end of
that fiscal year) (excluding for purposes of such calculation, the fair market
value of any capital stock or other equity interest of the Borrower issued as
part of the consideration for any such Acquisition) is less than or equal to the
amount determined pursuant to the table below, (ii) for all Acquisitions, the
aggregate consideration in a fiscal year (including for purposes of
consideration (A) cash consideration, (B) non-cash consideration (including any
assumed debt) and (C) for such Person to be acquired, an amount determined by
the Acquiring Party in good faith at the time of the Acquisition of projected
capital infusions required by Governmental Authorities or necessary in order to
maintain compliance by such Person with the provisions of this Agreement as of
the end of that fiscal year) (excluding for purposes of such calculation, the
fair market value of any capital stock or other equity interest of the Borrower
issued as part of the consideration for any such Acquisition) is less than or
equal to the amount determined pursuant to the table below, and (i) the Borrower
shall have delivered to the Administrative Agent (A) a Compliance Certificate
signed by Responsible Officers of the Borrower demonstrating 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 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 and (B) a certificate of a Responsible Officer of the
Borrower describing the Person to be acquired, including, without limitation,
the location and type of operations, key management and HMO assets of such
Person, if any; provided, however, that the 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 and, so long as Molina
Healthcare of Michigan is a wholly-owned Subsidiary of

                                       21

<PAGE>

Molina Healthcare of California, into Molina Healthcare of Michigan and its
Subsidiaries, except that Molina Healthcare of California and its Subsidiaries
located in California and Molina Healthcare of Michigan so long as it is a
wholly-owned Subsidiary of Molina Healthcare of California and its Subsidiaries,
shall be permitted to make one or more Acquisitions in accordance with the
provisions set forth in this definition but solely within the States of
California and, while Molina Healthcare of Michigan is wholly owned by Molina
Healthcare of California, Michigan, 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 the table below for less than 1.0 times in accordance with clauses
(h)(i) and (ii) above, but only if the Consolidated Leverage Ratio is less than
1.0 times; provided that for purposes of clarification the aforementioned
sublimits in the proviso shall apply to Molina Healthcare of California and its
Subsidiaries and Molina Healthcare of Michigan, so long as it is a wholly-owned
Subsidiary of Molina Healthcare of California, and its Subsidiaries and shall
reduce the limits stated in the table below by the amount of any cash
consideration paid for any such Acquisition.

<TABLE>
<CAPTION>
                             PRE-SUCCESSFUL IPO                                 POST-SUCCESSFUL IPO
------------------------------------------------------------------------------------------------------------------------
   Consolidated        Each Acquisition        All Acquisitions in a         Each Acquisition      All Acquisitions in
     Leverage                               Fiscal Year in the Aggregate                          a Fiscal Year in the
       Ratio                                                                                            Aggregate
------------------------------------------------------------------------------------------------------------------------
       <S>                <C>                       <C>                        <C>                     <C>
       >= 1.0             $10 million               $20 million                $15 million             $30 million
       <= 1.0             $15 million               $30 million                $20 million             $40 million
------------------------------------------------------------------------------------------------------------------------
</TABLE>

         "Permitted Lien" has the meaning specified in Section 7.01.

         "Permitted Stock Redemptions/ESOP Transactions" means the redemption by
the Borrower of outstanding shares of its common stock and purchases of
outstanding shares of the Borrower's common stock by an employee stock ownership
plan, in each case from MRM GRAT 301/2, Mary Martha Molina Trust (1995), Janet
Marie Watt Trust (1995), Josephine M. Molina Trust (1995), Mary R. Molina Living
Trust, Molina Marital Trust and Mary Martha Bernadett, M.D.; provided that (a)
the stock redemption portion of the Permitted Stock Redemptions/ESOP
Transactions was completed on February 19, 2003, and the ESOP portion of the
Permitted Stock Redemptions/ESOP Transactions shall be completed no later than
September 30, 2003, (b) shall be for consideration of no more than $40 million
in the aggregate and shall comply with the requirements of Section 6.12 and (c)
shall be on terms reasonably satisfactory to the Administrative Agent and the
Required Lenders.

         "Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.

                                       22

<PAGE>

         "Plan" means any "employee benefit plan" (as such term is defined in
Section 3(3) of ERISA) established by the Borrower or, with respect to any such
plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate.

         "Pledge Agreement" means the Pledge Agreement executed by the Borrower
and any Subsidiary party thereto, which Pledge Agreement shall be substantially
in the form of Exhibit G hereto.

         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

         "Pro Forma Basis" means, for purposes of determining the applicable
pricing level under the definition of "Applicable Rate," and determining
compliance with any financial covenant or test hereunder and determining whether
the conditions precedent to a Permitted Acquisition have been met, that the
subject transaction shall be deemed to have occurred as of the first day of the
period of four consecutive fiscal quarters ending as of the end of the most
recent fiscal quarter for which annual or quarterly financial statements shall
have been delivered in accordance with the provisions hereof (the "Reference
Period"). Further, for purposes of making calculations on a "Pro Forma Basis"
hereunder, (a) any funds to be used by any Person in consummating a Permitted
Acquisition will be assumed to have been used for that purpose as of the first
day of the Reference Period, (b) EBITDA and EBITDAR for the Reference Period
associated with the assets acquired or to be acquired in any Permitted
Acquisition will be included in the calculation of Consolidated EBITDA and
EBITDAR, (c) any Indebtedness to be incurred by any Person in connection with
the consummation of any Permitted Acquisition will be assumed to have been
incurred on the first day of the Reference Period, (d) the gross interest
expenses, determined in accordance with GAAP, with respect to such Indebtedness
assumed to have been incurred on the first day of the Reference Period that
bears interest at a floating rate shall be calculated at the current rate under
the agreement governing such Indebtedness (including this Agreement if the
Indebtedness is incurred hereunder), and (e) any gross interest expense,
determined in accordance with GAAP, incurred during the Reference Period that
was or is to be refinanced with proceeds of Indebtedness assumed to have been
incurred as of the first day of the Reference Period will be excluded from the
calculation for which a Pro Forma Basis is being given.

         "Pro Rata Share" means, with respect to each Lender at any time, a
fraction (expressed as a percentage, carried out to the ninth decimal place),
the numerator of which is the amount of the Commitment of such Lender at such
time and the denominator of which is the amount of the Aggregate Commitments at
such time; provided that if the commitment of each Lender to make Loans and the
obligation of the L/C Issuer to make L/C Credit Extensions have been terminated
pursuant to Section 8.02, then the Pro Rata Share of each Lender shall be
determined based on the Pro Rata Share of such Lender immediately prior to such
termination and after giving effect to any subsequent assignments made pursuant
to the terms hereof. The initial Pro Rata Share of each Lender is set forth
opposite the name of such Lender on Schedule 2.01 or in the Assignment and
Assumption pursuant to which such Lender becomes a party hereto, as applicable.

         "Real Property Assets" means all interest (including leasehold
interests) of the Borrower and any Eligible Subsidiary in any real property.

                                       23

<PAGE>

         "Register" has the meaning specified in Section 10.07(c).

         "Reincorporation Merger Documents" means that certain Agreement of
Merger by and between Molina Healthcare, Inc., a California corporation, and
Molina Healthcare, Inc., a Delaware corporation, in the form attached hereto as
Schedule 7.04 with any non-substantive and non-material technical corrections
thereto mandated by the applicable California or Delaware regulatory
authorities, and that certain Certificate of Merger merging Molina Healthcare,
Inc., a California corporation, into Molina Healthcare, Inc., a Delaware
corporation, in the form attached hereto as Schedule 7.04 with any
non-substantive and non-material technical corrections thereto mandated by the
applicable California or Delaware regulatory authorities.

         "Rental Expense" means, for any period of determination, for any
Person, the gross rental expenses for such period.

         "Reportable Event" means any of the events set forth in Section 4043(c)
of ERISA, other than events for which the 30 day notice period has been waived.

         "Request for Credit Extension" means (a) with respect to a Borrowing,
conversion or continuation of Loans, a Loan Notice, and (b) with respect to an
L/C Credit Extension, a Letter of Credit Application.

         "Required Advances" means advances required by HMO Regulators to be
made by the Borrower or any of the Subsidiaries to a Contract Provider; provided
that the Borrower shall have provided reasonably satisfactory evidence of any
such requirement to the Administrative Agent.

         "Required Lenders" means, as of any date of determination, at least
three Lenders having more than 50% of the Aggregate Commitments or, if the
commitment of each Lender to make Loans and the obligation of the L/C Issuer to
make L/C Credit Extensions have been terminated pursuant to Section 8.02, or
otherwise, at least three Lenders holding in the aggregate more than 50% of the
Total Outstandings (with the aggregate amount of each Lender's risk
participation and funded participation in L/C Obligations being deemed "held" by
such Lender for purposes of this definition); provided that the Commitment of,
and the portion of the Total Outstandings held or deemed held by, any Defaulting
Lender shall be excluded for purposes of making a determination of Required
Lenders.

         "Responsible Officer" means the chief executive officer, president,
chief financial officer, or treasurer of any Person. Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Loan Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Loan Party.

         "Restricted Payment" means any dividend or other distribution (whether
in cash, securities or other property) with respect to any capital stock or
other equity interest of the Borrower or any of the Subsidiaries (including,
without limitation, any payment in connection with any dissolution, merger,
consolidation or disposition involving the Borrower or any of the Subsidiaries),
and any redemption, retirement, cancellation, termination, payment in any
sinking

                                       24

<PAGE>

fund or similar payment, purchase, or other acquisition of any such capital
stock or other equity interest or of any option, warrant or other right to
acquire any such capital stock or other equity interest or on account of any
warrant or other right to acquire any such capital stock or other equity
interest, or on account of any return of capital to the Borrower's or any of the
Subsidiaries' stockholders, partners or members (or the equivalent Persons
thereof) or the issuance of any equity interest or acceptance of any capital
contributions.

         "Risk-Based Capital" means, with respect to each HMO Subsidiary, at any
time, the Company Action Level Risk-Based Capital (as defined by the NAIC on the
date of determination and as determined in accordance with SAP) of such HMO
Subsidiary.

         "SAP" means, with respect to each HMO Subsidiary, the statutory
accounting principles and procedures prescribed or permitted by applicable HMO
Regulations for such HMO Subsidiary, applied on a consistent basis.

         "Sarbanes-Oxley" means the Sarbanes-Oxley Act of 2002.

         "SEC" means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.

         "Secured Obligations" has the meaning specified in Section 2.2 of the
Security Agreement.

         "Secured Party" means the Administrative Agent, each Lender and each
Swap Bank.

         "Secured Swap Contract" means any Swap Contract required or permitted
under this Agreement that is entered into by and between the Borrower and any
Swap Bank.

         "Securitization Transaction" means any financing transaction or series
of financing transactions, including factoring transactions, that have been or
may be entered into by the Borrower or any of its Subsidiaries pursuant to which
such Person may sell, convey or otherwise transfer to (i) a Subsidiary or
Affiliate of such Person, or (ii) any other Person, or may grant a security
interest in, any accounts receivable, notes receivable, rights to future lease
payments or residuals or other similar rights to payment (the "Securitization
Receivables") (whether such Securitization Receivables are then existing or
arising in the future) of the Borrower or such Subsidiary, as applicable, and
any assets related thereto, including, without limitation, all security
interests in merchandise or services financed thereby, the proceeds of such
Securitization Receivables, and other assets that are customarily sold or in
respect of which security interests are customarily granted in connection with
securitization or factoring transactions involving such assets.

         "Security Agreement" means the Security Agreement executed by the
Borrower and each Eligible Subsidiary, substantially in the form of Exhibit H
hereto.

         "Shareholders' Equity" means, as of any date of determination,
consolidated shareholders' equity of the Borrower and the Subsidiaries as of
that date determined in accordance with GAAP.

                                       25

<PAGE>

         "Social Security Act" means the Social Security Act of 1965 as set
forth in Title 42 of the United States Code, as amended, and any successor
statute thereto, as interpreted by the rules and regulations issued thereunder,
in each case as in effect from time to time. References to sections of the
Social Security Act shall be construed to refer to any successor sections.

         "Stark I and II" means Section 1877 of the Social Security Act as set
forth at Section 1395nn of Title 42 of the United States Code, as amended, and
any successor statute thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time.

         "Subject Properties" has the meaning specified in Section 5.12(a).

         "Subsidiary" of a Person means a corporation, partnership, joint
venture, limited liability company or other business entity which is organized
under the Laws of a political subdivision of the United States of which a
majority of the shares of securities or other interests having ordinary voting
power for the election of directors or other governing body (other than
securities or interests having such power only by reason of the happening of a
contingency) are at the time beneficially owned, or the management of which is
otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise specified, all
references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a
Subsidiary or Subsidiaries of the Borrower.

         "Subsidiary Guaranty" means the Subsidiary Guaranty Agreement duly
executed by each Guarantor, substantially in the form of Exhibit I hereto.

         "Successful IPO" means an initial public offering of the capital stock
of the Borrower which results in net cash proceeds to the Borrower of at least
$50 million.

         "Swap Bank" means any Lender or an Affiliate of a Lender in its
capacity as a party to a Swap Contract entered into after the date of this
Agreement.

         "Swap Contract" means (a) any and all rate swap transactions, basis
swaps, credit derivative transactions, forward rate transactions, commodity
swaps, commodity options, forward commodity contracts, equity or equity index
swaps or options, bond or bond price or bond index swaps or options or forward
bond or forward bond price or forward bond index transactions, interest rate
options, forward foreign exchange transactions, cap transactions, floor
transactions, collar transactions, currency swap transactions, cross-currency
rate swap transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a "Master Agreement"), including
any such obligations or liabilities under any Master Agreement.

                                       26

<PAGE>

         "Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

         "Syndication Agent" means CIBC World Markets Corp. in its capacity as
syndication agent under any of the Loan Documents, or any successor syndication
agent.

         "Taxes" has the meaning specified in Section 3.01(a).

         "Threshold Amount" means $5 million.

         "Title Insurance Company" has the meaning specified in Section
6.15(b)(ii).

         "Total Adjusted Capital" means, with respect to each HMO Subsidiary, at
any time, the Total Adjusted Capital (as defined by the NAIC on the date of
determination and as determined in accordance with SAP) of such HMO Subsidiary.

         "Total Outstandings" means the aggregate Outstanding Amount of all
Loans and all L/C Obligations.

         "Type" means, with respect to a Loan, its character as a Base Rate Loan
or a Eurodollar Rate Loan.

         "UCC" means the Uniform Commercial Code.

         "Unfunded Pension Liability" means the excess of a Pension Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Pension Plan's assets, determined in accordance with the assumptions
used for funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.

         "United States" and "U.S." mean the United States of America.

         "Unreimbursed Amount" has the meaning specified in Section 2.03(c)(i).

         "Waiver Agreement" means, collectively, the Waiver Agreements, each
substantially in the form of Exhibit C to the Security Agreement.

         Section 1.02      Other Interpretive Provisions. With reference to this
Agreement and each other Loan Document, unless otherwise specified herein or in
such other Loan Document:

                  (a)      The meanings of defined terms are equally applicable
         to the singular and plural forms of the defined terms.

                                       27

<PAGE>

                  (b)      (i)      The words "herein," "hereto," "hereof" and
"hereunder" and words of similar import when used in any Loan Document shall
refer to such Loan Document as a whole and not to any particular provision
thereof.

                           (ii)     Article, Section, Exhibit and Schedule
         references are to the Loan Document in which such reference appears.

                           (iii)    The term "including" is by way of example
         and not limitation.

                  (c)      The term "documents" includes any and all
instruments, documents, agreements, certificates, notices, reports, financial
statements and other writings, however evidenced, whether in physical or
electronic form.

                  (d)      In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including;" the words "to" and "until" each mean "to but excluding;" and the
word "through" means "to and including."

                  (e)      Each reference to "basis points" or "bps" shall be
interpreted in accordance with the convention that 100 bps = 1.0%.

                  (f)      Section headings herein and in the other Loan
Documents are included for convenience of reference only and shall not affect
the interpretation of this Agreement or any other Loan Document.

         Section 1.03      Accounting Terms.

                  (a)      All accounting terms not specifically or completely
defined herein shall be construed in conformity with, and all financial data
(including financial ratios and other financial calculations) required to be
submitted pursuant to this Agreement shall be prepared in conformity with, GAAP
applied on a consistent basis, as in effect from time to time, applied in a
manner consistent with that used in preparing the Audited Financial Statements,
except as otherwise specifically prescribed herein. Notwithstanding anything
herein to the contrary, determination of (i) the applicable pricing level under
the definition of "Applicable Rate", (ii) compliance with any financial covenant
or test hereunder and (iii) whether the conditions precedent to a Permitted
Acquisition have been met shall be made on a Pro Forma Basis.

                  (b)      If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in any Loan
Document, and either the Borrower or the Required Lenders shall so request, the
Administrative Agent, the Lenders and the Borrower shall negotiate in good faith
to amend such ratio or requirement to preserve the original intent thereof in
light of such change in GAAP (subject to the approval of the Required Lenders);
provided that, until so amended, (i) such ratio or requirement shall continue to
be computed in accordance with GAAP prior to such change therein and (ii) the
Borrower shall provide to the Administrative Agent and the Lenders financial
statements and other documents required under this Agreement or as reasonably
requested hereunder setting forth a reconciliation between calculations of such
ratio or requirement made before and after giving effect to such change in GAAP.

                                       28

<PAGE>

         Section 1.04      Rounding. Any financial ratios required to be
maintained by the Borrower pursuant to this Agreement shall be calculated by
dividing the appropriate component by the other component, carrying the result
to one place more than the number of places by which such ratio is expressed
herein and rounding the result up or down to the nearest number (with a
rounding-up if there is no nearest number).

         Section 1.05      References to Agreements and Laws. Unless otherwise
expressly provided herein, (a) references to Organization Documents, agreements
(including the Loan Documents) and other contractual instruments shall be deemed
to include all subsequent amendments, restatements, extensions, supplements and
other modifications thereto, but only to the extent that such amendments,
restatements, extensions, supplements and other modifications are not prohibited
by any Loan Document, and (b) references to any Law shall include all statutory
and regulatory provisions consolidating, amending, replacing, supplementing or
interpreting such Law.

         Section 1.06      Times of Day. Unless otherwise specified, all
references herein to times of day shall be references to Eastern time (daylight
or standard, as applicable).

         Section 1.07      Letter of Credit Amounts. Unless otherwise specified,
all references herein to the amount of a Letter of Credit at any time shall be
deemed to mean the maximum face amount of such Letter of Credit after giving
effect to all increases thereof contemplated by such Letter of Credit or the
Letter of Credit Application therefor, whether or not such maximum face amount
is in effect at such time.

                                   ARTICLE II
                      THE COMMITMENTS AND CREDIT EXTENSIONS

         Section 2.01      Loans. Subject to the terms and conditions set forth
herein, each Lender severally agrees to make loans (each such loan, a "Loan") to
the Borrower from time to time, on any Business Day during the Availability
Period, in an aggregate amount not to exceed at any time outstanding the amount
of such Lender's Commitment; provided, however, that after giving effect to any
Borrowing, (i) the Total Outstandings shall not exceed the Aggregate
Commitments, and (ii) the aggregate Outstanding Amount of the Loans of any
Lender, plus such Lender's Pro Rata Share of the Outstanding Amount of all L/C
Obligations shall not exceed such Lender's Commitment. Within the limits of each
Lender's Commitment, and subject to the other terms and conditions hereof, the
Borrower may borrow under this Section 2.01, prepay under Section 2.05, and
reborrow under this Section 2.01. Loans may be Base Rate Loans or Eurodollar
Rate Loans, as further provided herein.

         Section 2.02      Borrowings, Conversions and Continuations of Loans.

                  (a)      Each Borrowing, each conversion of Loans from one
Type to the other, and each continuation of Eurodollar Rate Loans shall be made
upon the Borrower's irrevocable notice to the Administrative Agent, which may be
given by telephone. Each such notice must be received by the Administrative
Agent not later than 11:00 a.m. (i) three Business Days prior to the requested
date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans
or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on
the requested date

                                       29

<PAGE>

of any Borrowing of Base Rate Loans. Each telephonic notice by the Borrower
pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the
Administrative Agent of a written Loan Notice, appropriately completed and
signed by a Responsible Officer of the Borrower. Each Borrowing of, conversion
to, or continuation of, Eurodollar Rate Loans shall be in a principal amount of
$5 million or a whole multiple of $500,000 in excess thereof. Except as provided
in Sections 2.03(c), each Borrowing of or conversion to Base Rate Loans shall be
in a principal amount of $500,000 or a whole multiple of $100,000 in excess
thereof. Each Loan Notice (whether telephonic or written) shall specify (i)
whether the Borrower is requesting a Borrowing, a conversion of Loans from one
Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the
requested date of the Borrowing, conversion or continuation, as the case may be
(which shall be a Business Day), (iii) the principal amount of Loans to be
borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to
which existing Loans are to be converted, and (v) if applicable, the duration of
the Interest Period with respect thereto. If the Borrower fails to specify a
Type of Loan in a Loan Notice or if the Borrower fails to give a timely notice
requesting a conversion or continuation, then the applicable Loans shall be made
as, or converted to, Base Rate Loans. Any such automatic conversion of a
Eurodollar Rate Loan to Base Rate Loans shall be effective as of the last day of
the Interest Period then in effect with respect to the applicable Eurodollar
Rate Loans. If the Borrower requests a Borrowing of, conversion to, or
continuation of Eurodollar Rate Loans in any such Loan Notice, but fails to
specify an Interest Period, it will be deemed to have specified an Interest
Period of one month.

                  (b)      Following receipt of a Loan Notice, the
Administrative Agent shall promptly notify each Lender of the amount of its Pro
Rata Share of the applicable Loans, and if no timely notice of a conversion or
continuation is provided by the Borrower, the Administrative Agent shall notify
each Lender of the details of any automatic conversion to Base Rate Loans
described in the preceding subsection (a). In the case of a Borrowing, each
Lender shall make the amount of its Loan available to the Administrative Agent
in immediately available funds at the Administrative Agent's Office not later
than 1:00 p.m. on the Business Day specified in the applicable Loan Notice. Upon
satisfaction of the applicable conditions set forth in Section 4.02 (and, if
such Borrowing is the initial Credit Extension, Section 4.01), the
Administrative Agent shall make all funds so received available to the Borrower
in like funds as received by the Administrative Agent either by (i) crediting
the account of the Borrower on the books of Bank of America with the amount of
such funds or (ii) wire transfer of such funds, in each case in accordance with
instructions provided to (and reasonably acceptable to) the Administrative Agent
by the Borrower; provided, however, that if, on the date the Loan Notice with
respect to such Borrowing is given by the Borrower, there are L/C Borrowings
outstanding, then the proceeds of such Borrowing shall be applied, first, to the
payment in full of any such L/C Borrowings and second, to the Borrower as
provided above.

                  (c)      Except as otherwise provided herein, a Eurodollar
Rate Loan may be continued or converted only on the last day of an Interest
Period for such Eurodollar Rate Loan. During the existence of a Default, no
Loans may be requested as, converted to or continued as Eurodollar Rate Loans
without the consent of the Required Lenders.

                  (d)      The Administrative Agent shall promptly notify the
Borrower and the Lenders of the interest rate applicable to any Interest Period
for Eurodollar Rate Loans upon

                                       30

<PAGE>

determination of such interest rate. The determination of the Eurodollar Rate by
the Administrative Agent shall be conclusive in the absence of manifest error.
At any time that Base Rate Loans are outstanding, the Administrative Agent shall
notify the Borrower and the Lenders of any change in Bank of America's prime
rate used in determining the Base Rate promptly following the public
announcement of such change.

                  (e)      After giving effect to all Borrowings, all
conversions of Loans from one Type to the other, and all continuations of Loans
as the same Type, there shall not be more than five Interest Periods in effect
with respect to Loans.

                  (f)      The failure of any Lender to make any Loan to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
any Loan to be made by such other Lender on the date of any Borrowing.

         Section 2.03      Letters of Credit.

                  (a)      The Letter of Credit Commitment.

                           (i)      Subject to the terms and conditions set
         forth herein, (A) the L/C Issuer agrees, in reliance upon the
         agreements of the other Lenders set forth in this Section 2.03, (1)
         from time to time on any Business Day during the period from the
         Closing Date until the Letter of Credit Expiration Date, to issue
         Letters of Credit for the account of the Borrower, and to amend Letters
         of Credit previously issued by it, in accordance with subsection (b)
         below, and (2) to honor drafts under the Letters of Credit, and (B) the
         Lenders severally agree to participate in Letters of Credit issued for
         the account of the Borrower; provided that the L/C Issuer shall not be
         obligated to make any L/C Credit Extension with respect to any Letter
         of Credit, and no Lender shall be obligated to participate in any
         Letter of Credit if, as of the date of such L/C Credit Extension, (x)
         the Total Outstandings would exceed the Aggregate Commitments, (y) the
         aggregate Outstanding Amount of the Loans of any Lender, plus such
         Lender's Pro Rata Share of the Outstanding Amount of all L/C
         Obligations, would exceed such Lender's Commitment, or (z) the
         Outstanding Amount of the L/C Obligations would exceed the Letter of
         Credit Sublimit. Within the foregoing limits, and subject to the terms
         and conditions hereof, the Borrower's ability to obtain Letters of
         Credit shall be fully revolving, and accordingly the Borrower may,
         during the foregoing period, obtain Letters of Credit to replace
         Letters of Credit that have expired or that have been drawn upon and
         reimbursed.

                           (ii)     The L/C Issuer shall be under no obligation
         to issue any Letter of Credit if:

                                    (A)      any order, judgment or decree of
                  any Governmental Authority or arbitrator shall by its terms
                  purport to enjoin or restrain the L/C Issuer from issuing such
                  Letter of Credit, or any Law applicable to the L/C Issuer or
                  any request or directive (whether or not having the force of
                  law) from any Governmental Authority with jurisdiction over
                  the L/C Issuer shall prohibit, or

                                       31

<PAGE>

                  request that the L/C Issuer refrain from, the issuance of
                  letters of credit generally or such Letter of Credit in
                  particular or shall impose upon the L/C Issuer with respect to
                  such Letter of Credit any restriction, reserve or capital
                  requirement (for which the L/C Issuer is not otherwise
                  compensated hereunder) not in effect on the Closing Date, or
                  shall impose upon the L/C Issuer any unreimbursed loss, cost
                  or expense which was not applicable on the Closing Date and
                  which the L/C Issuer in good faith deems material to it;

                                    (B)      the expiry date of such requested
                  Letter of Credit would occur more than twelve months after the
                  date of issuance, unless the Required Lenders have approved
                  such expiry date;

                                    (C)      the expiry date of such requested
                  Letter of Credit would occur after the Letter of Credit
                  Expiration Date, unless all the Lenders have approved such
                  expiry date;

                                    (D)      the issuance of such Letter of
                  Credit would violate one or more policies of the L/C Issuer;
                  or

                                    (E)      such Letter of Credit is in an
                  initial amount less than $100,000, in the case of a commercial
                  Letter of Credit, or $500,000, in the case of a standby Letter
                  of Credit.

                           (iii)    The L/C Issuer shall be under no obligation
         to amend any Letter of Credit if (A) the L/C Issuer would have no
         obligation at such time to issue such Letter of Credit in its amended
         form under the terms hereof, or (B) the beneficiary of such Letter of
         Credit does not accept the proposed amendment to such Letter of Credit.

                  (b)      Procedures for Issuance and Amendment of Letters of
Credit.

                           (i)      Each Letter of Credit shall be issued or
         amended, as the case may be, upon the request of the Borrower delivered
         to the L/C Issuer (with a copy to the Administrative Agent) in the form
         of a Letter of Credit Application, appropriately completed and signed
         by a Responsible Officer of the Borrower. Such Letter of Credit
         Application must be received by the L/C Issuer and the Administrative
         Agent not later than 11:00 a.m. at least two Business Days (or such
         later date and time as the L/C Issuer may agree in a particular
         instance in its sole discretion) prior to the proposed issuance date or
         date of amendment, as the case may be. In the case of a request for an
         initial issuance of a Letter of Credit, such Letter of Credit
         Application shall specify in form and detail satisfactory to the L/C
         Issuer the following: (A) the proposed issuance date of the requested
         Letter of Credit (which shall be a Business Day); (B) the amount
         thereof; (C) the expiry date thereof; (D) the name and address of the
         beneficiary thereof; (E) the documents to be presented by such
         beneficiary in case of any drawing thereunder; (F) the full text of any
         certificate to be presented by such beneficiary in case of any drawing
         thereunder; and (G) such other matters as the L/C Issuer may require.
         In the case of a request for an amendment of any outstanding Letter of
         Credit, such Letter of Credit Application shall specify in form and
         detail satisfactory to the L/C Issuer the following:

                                       32

<PAGE>

         (A) the Letter of Credit to be amended; (B) the proposed date of
         amendment thereof (which shall be a Business Day); (C) the nature of
         the proposed amendment; and (D) such other matters as the L/C Issuer
         may require.

                           (ii)     Promptly after receipt of any Letter of
         Credit Application, the L/C Issuer will confirm with the Administrative
         Agent (by telephone or in writing) that the Administrative Agent has
         received a copy of such Letter of Credit Application from the Borrower
         and, if not, the L/C Issuer will provide the Administrative Agent with
         a copy thereof. Upon receipt by the L/C Issuer of confirmation from the
         Administrative Agent that the requested issuance or amendment is
         permitted in accordance with the terms hereof, then, subject to the
         terms and conditions hereof, the L/C Issuer shall, on the requested
         date, issue a Letter of Credit for the account of the Borrower or enter
         into the applicable amendment, as the case may be, in each case in
         accordance with the L/C Issuer's usual and customary business
         practices. Immediately upon the issuance of each Letter of Credit, each
         Lender shall be deemed to, and hereby irrevocably and unconditionally
         agrees to, purchase from the L/C Issuer a risk participation in such
         Letter of Credit in an amount equal to the product of such Lender's Pro
         Rata Share times the amount of such Letter of Credit.

                           (iii)    Promptly after its delivery of any Letter of
         Credit or any amendment to a Letter of Credit to an advising bank with
         respect thereto or to the beneficiary thereof, the L/C Issuer will also
         deliver to the Borrower and the Administrative Agent a true and
         complete copy of such Letter of Credit or amendment.

                  (c)      Drawings and Reimbursements; Funding of
Participations.

                           (i)      Upon receipt from the beneficiary of any
         Letter of Credit of any notice of a drawing under such Letter of
         Credit, the L/C Issuer shall notify the Borrower and the Administrative
         Agent thereof and shall state the date payment shall be made by the L/C
         Issuer under a Letter of Credit (each such date, an "Honor Date"). Not
         later than 11:00 a.m. on the Honor Date, the Borrower shall reimburse
         the L/C Issuer through the Administrative Agent in an amount equal to
         the amount of such drawing. If the Borrower fails to so reimburse the
         L/C Issuer by such time, the Administrative Agent shall promptly notify
         each Lender of the Honor Date, the amount of the unreimbursed drawing
         (the "Unreimbursed Amount"), and the amount of such Lender's Pro Rata
         Share thereof. In such event, the Borrower shall be deemed to have
         requested a Borrowing of Base Rate Loans to be disbursed on the Honor
         Date in an amount equal to the Unreimbursed Amount, without regard to
         the minimum and multiples specified in Section 2.02 for the principal
         amount of Base Rate Loans, but subject to the amount of the unutilized
         portion of the Aggregate Commitments and the conditions set forth in
         Section 4.02 (other than the delivery of a Loan Notice). Any notice
         given by the L/C Issuer or the Administrative Agent pursuant to this
         Section 2.03(c)(i) may be given by telephone if immediately confirmed
         in writing; provided that the lack of such an immediate confirmation
         shall not affect the conclusiveness or binding effect of such notice.

                           (ii)     Each Lender (including the Lender acting as
         L/C Issuer) shall upon any notice pursuant to Section 2.03(c)(i) make
         funds available to the Administrative

                                       33

<PAGE>

         Agent for the account of the L/C Issuer at the Administrative Agent's
         Office in an amount equal to its Pro Rata Share of the Unreimbursed
         Amount not later than 1:00 p.m. on the Business Day specified in such
         notice by the Administrative Agent, whereupon, subject to the
         provisions of Section 2.03(c)(iii), each Lender that so makes funds
         available shall be deemed to have made a Base Rate Loan to the Borrower
         in such amount. The Administrative Agent shall remit the funds so
         received to the L/C Issuer.

                           (iii)    With respect to any Unreimbursed Amount that
         is not fully refinanced by a Borrowing of Base Rate Loans because the
         conditions set forth in Section 4.02 cannot be satisfied or for any
         other reason, the Borrower shall be deemed to have incurred from the
         L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount
         that is not so refinanced, which L/C Borrowing shall be due and payable
         on demand (together with interest) and shall bear interest at the
         Default Rate. In such event, each Lender's payment to the
         Administrative Agent for the account of the L/C Issuer pursuant to
         Section 2.03(c)(ii) shall be deemed payment in respect of its
         participation in such L/C Borrowing and shall constitute an L/C Advance
         from such Lender in satisfaction of its participation obligation under
         this Section 2.03.

                           (iv)     Until each Lender funds its Loan or L/C
         Advance pursuant to this Section 2.03(c) to reimburse the L/C Issuer
         for any amount drawn under any Letter of Credit, interest in respect of
         such Lender's Pro Rata Share of such amount shall be solely for the
         account of the L/C Issuer.

                           (v)      Each Lender's obligation to make Loans or
         L/C Advances to reimburse the L/C Issuer for amounts drawn under
         Letters of Credit, as contemplated by this Section 2.03(c), shall be
         absolute and unconditional and shall not be affected by any
         circumstance, including (A) any set-off, counterclaim, recoupment,
         defense or other right which such Lender may have against the L/C
         Issuer, the Administrative Agent, the Borrower or any other Person for
         any reason whatsoever, (B) the occurrence or continuance of a Default,
         or (C) any other occurrence, event or condition, whether or not similar
         to any of the foregoing; provided, however, that each Lender's
         obligation to make Loans pursuant to this Section 2.03(c) is subject to
         the conditions set forth in Section 4.02 (other than delivery by the
         Borrower of a Loan Notice). No such making of an L/C Advance shall
         relieve or otherwise impair the obligation of the Borrower to reimburse
         the L/C Issuer for the amount of any payment made by the L/C Issuer
         under any Letter of Credit, together with interest as provided herein.

                           (vi)     If any Lender fails to make available to the
         Administrative Agent for the account of the L/C Issuer any amount
         required to be paid by such Lender pursuant to the foregoing provisions
         of this Section 2.03(c) by the time specified in Section 2.03(c)(ii),
         the L/C Issuer shall be entitled to recover from such Lender (acting
         through the Administrative Agent), on demand, such amount with interest
         thereon for the period from the date such payment is required to the
         date on which such payment is immediately available to the L/C Issuer
         at a rate per annum equal to the Federal Funds Rate from time to time
         in effect. A certificate of the L/C Issuer submitted to any Lender
         (through the Administrative Agent) with respect to any amounts owing
         under this clause (vi) shall be conclusive absent manifest error.

                                       34

<PAGE>

                  (d)      Repayment of Participations.

                           (i)      At any time after the L/C Issuer has made a
         payment under any Letter of Credit and has received from any Lender
         such Lender's L/C Advance in respect of such payment in accordance with
         Section 2.03(c), if the Administrative Agent receives for the account
         of the L/C Issuer any payment in respect of the related Unreimbursed
         Amount or interest thereon (whether directly from the Borrower or
         otherwise, including proceeds of Cash Collateral applied thereto by the
         Administrative Agent), the Administrative Agent will distribute to such
         Lender its Pro Rata Share thereof (appropriately adjusted, in the case
         of interest payments, to reflect the period of time during which such
         Lender's L/C Advance was outstanding) in the same funds as those
         received by the Administrative Agent.

                           (ii)     If any payment received by the
         Administrative Agent for the account of the L/C Issuer pursuant to
         Section 2.03(c)(i) is required to be returned under any of the
         circumstances described in Section 10.06 (including pursuant to any
         settlement entered into by the L/C Issuer in its discretion), each
         Lender shall pay to the Administrative Agent for the account of the L/C
         Issuer its Pro Rata Share thereof on demand of the Administrative
         Agent, plus interest thereon from the date of such demand to the date
         such amount is returned by such Lender, at a rate per annum equal to
         the Federal Funds Rate from time to time in effect.

                  (e)      Obligations Absolute. The obligation of the Borrower
to reimburse the L/C Issuer for each drawing under each Letter of Credit and to
repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances, including the following:

                           (i)      any lack of validity or enforceability of
         such Letter of Credit, this Agreement, or any other agreement or
         instrument relating thereto;

                           (ii)     the existence of any claim, counterclaim,
         set-off, defense or other right that the Borrower may have at any time
         against any beneficiary or any transferee of such Letter of Credit (or
         any Person for whom any such beneficiary or any such transferee may be
         acting), the L/C Issuer or any other Person, whether in connection with
         this Agreement, the transactions contemplated hereby or by such Letter
         of Credit or any agreement or instrument relating thereto, or any
         unrelated transaction;

                           (iii)    any draft, demand, certificate or other
         document presented under such Letter of Credit proving to be forged,
         fraudulent, invalid or insufficient in any respect or any statement
         therein being untrue or inaccurate in any respect; or any loss or delay
         in the transmission or otherwise of any document required in order to
         make a drawing under such Letter of Credit;

                           (iv)     any payment by the L/C Issuer under such
         Letter of Credit against presentation of a draft or certificate that
         does not strictly comply with the terms of such Letter of Credit; or
         any payment made by the L/C Issuer under such Letter of Credit to any
         Person purporting to be a trustee in bankruptcy, debtor-in-possession,
         assignee for

                                       35

<PAGE>

         the benefit of creditors, liquidator, receiver or other representative
         of or successor to any beneficiary or any transferee of such Letter of
         Credit, including any arising in connection with any proceeding under
         any Debtor Relief Law;

                           (v)      any exchange, release or non-perfection of
         any collateral, or any release or amendment or waiver of or consent to
         the departure from any Guarantee, for all or any of the Obligations of
         the Borrower in respect of any Letter of Credit; or

                           (vi)     any other circumstance or happening
         whatsoever, whether or not similar to any of the foregoing, including
         any other circumstance that might otherwise constitute a defense
         available to, or a discharge of, the Borrower.

         The Borrower shall promptly examine a copy of each Letter of Credit and
each amendment thereto that is delivered to it, and, in the event of any claim
of noncompliance with the Borrower's instructions or other irregularity, the
Borrower will immediately notify the L/C Issuer. The Borrower shall be
conclusively deemed to have waived any such claim against the L/C Issuer and its
correspondents unless such notice is given as aforesaid.

                  (f)      Role of L/C Issuer. Each Lender and the Borrower
agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall
not have any responsibility to obtain any document (other than any sight draft,
certificates and documents expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document. None of the
L/C Issuer, any Agent-Related Person nor any of the respective correspondents,
participants or assignees of the L/C Issuer shall be liable to any Lender for
(i) any action taken or omitted in connection herewith at the request or with
the approval of the Lenders or the Required Lenders, as applicable, (ii) any
action taken or omitted in the absence of gross negligence or willful
misconduct, or (iii) the due execution, effectiveness, validity or
enforceability of any document or instrument related to any Letter of Credit or
Letter of Credit Application. The Borrower hereby assumes all risks of the acts
or omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided, however, that this assumption is not intended to,
and shall not, preclude the Borrower's pursuing such rights and remedies as it
may have against the beneficiary or transferee at law or under any other
agreement. None of the L/C Issuer, any Agent-Related Person, nor any of the
respective correspondents, participants or assignees of the L/C Issuer, shall be
liable or responsible for any of the matters described in clauses (i) through
(vi) of Section 2.03(e); provided, however, that anything in such clauses to the
contrary notwithstanding, the Borrower may have a claim against the L/C Issuer,
and the L/C Issuer may be liable to the Borrower, to the extent, but only to the
extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrower which the Borrower proves were caused by the L/C
Issuer's willful misconduct or gross negligence or the L/C Issuer's willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and not in limitation
of the foregoing, the L/C Issuer may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary, and the L/C Issuer shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or

                                       36

<PAGE>

assign a Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason.

                  (g)      Cash Collateral. Upon the request of the
Administrative Agent, (i) if the L/C Issuer has honored any full or partial
drawing request under any Letter of Credit and such drawing has resulted in an
L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any
Letter of Credit may for any reason remain outstanding and partially or wholly
undrawn, the Borrower shall immediately Cash Collateralize the then Outstanding
Amount of all L/C Obligations (in an amount equal to such Outstanding Amount
determined as of the date of such L/C Borrowing or the Letter of Credit
Expiration Date, as the case may be). For purposes hereof, "Cash Collateralize"
means to pledge and deposit with or deliver to the Administrative Agent, for the
benefit of the L/C Issuer and the Lenders, as collateral for the L/C
Obligations, cash or deposit account balances pursuant to documentation in form
and substance satisfactory to the Administrative Agent and the L/C Issuer (which
documents are hereby consented to by the Lenders). Derivatives of such term have
corresponding meanings. The Borrower hereby grants to the Administrative Agent,
for the benefit of the L/C Issuer and the Lenders, a security interest in all
such cash, deposit accounts and all balances therein and all proceeds of the
foregoing. Cash collateral shall be maintained in blocked, non-interest bearing
deposit accounts at Bank of America. If at any time the Administrative Agent
determines that any funds held as Cash Collateral are subject to any right or
claim of any Person other than the Administrative Agent or that the total amount
of such funds is less than the aggregate Outstanding Amount of L/C Obligations,
the Borrower will forthwith, upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited and held in deposit
accounts at Bank of America as aforesaid, an amount equal to the excess of (i)
such aggregate Outstanding Amount over (ii) the total amount of funds, if any,
then held as Cash Collateral that the Administrative Agent determines to be free
and clear of any such right and claim. Upon the drawing of any Letter of Credit
for which funds are on deposit as Cash Collateral, such funds shall be applied,
to the extent permitted under applicable Law, to reimburse the L/C Issuer.

                  (h)      Applicability of ISP98 and UCP. Unless otherwise
expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is
issued, (i) the rules of the "International Standby Practices 1998" published by
the Institute of International Banking Law & Practice (or such later version
thereof as may be in effect at the time of issuance) shall apply to each standby
Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for
Documentary Credits, as most recently published by the International Chamber of
Commerce (the "ICC") at the time of issuance (including the ICC decision
published by the Commission on Banking Technique and Practice on April 6, 1998
regarding the European single currency (euro)) shall apply to each commercial
Letter of Credit.

                  (i)      Letter of Credit Fees. The Borrower shall pay to the
Administrative Agent for the account of each Lender in accordance with its Pro
Rata Share a Letter of Credit fee for each issued Letter of Credit equal to the
Applicable Rate times the daily maximum amount available to be drawn under such
Letter of Credit (whether or not such maximum amount is then in effect under
such issued Letter of Credit). Such letter of credit fees shall be computed on a
quarterly basis in arrears. Such letter of credit fees shall be due and payable
on the last Business Day of each March, June, September and December, commencing
with the first such date to

                                       37

<PAGE>

occur after the issuance of such Letter of Credit, on the Letter of Credit
Expiration Date and thereafter on demand. If there is any change in the
Applicable Rate during any quarter, the daily maximum amount of each issued
Letter of Credit shall be computed and multiplied by the Applicable Rate
separately for each period during such quarter that such Applicable Rate was in
effect.

                  (j)      Fronting Fee and Documentary and Processing Charges
Payable to L/C Issuer. The Borrower shall pay directly to the L/C Issuer for its
own account a fronting fee with respect to each Letter of Credit in an amount
equal to 0.125% per annum of the maximum available amount to be drawn under such
Letter of Credit on the date of the issuance of such Letter of Credit payable on
such date. In addition, the Borrower shall pay directly to the L/C Issuer for
its own account the customary issuance, presentation, amendment and other
processing fees, and other standard costs and charges, of the L/C Issuer
relating to letters of credit as from time to time in effect. Such customary
fees and standard costs and charges are due and payable on demand and are
nonrefundable.

                  (k)      Conflict with Letter of Credit Application. In the
event of any conflict between the terms hereof and the terms of any Letter of
Credit Application, the terms hereof shall control.

         Section 2.04      [Intentionally Omitted].

         Section 2.05      Prepayments.

                  (a)      The Borrower may, upon notice to the Administrative
Agent, at any time or from time to time voluntarily prepay Loans in whole or in
part without premium or penalty; provided that (i) such notice must be received
by the Administrative Agent not later than 11:00 a.m. (A) three Business Days
prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of
prepayment of Base Rate Loans, (ii) any prepayment of Eurodollar Rate Loans
shall be in a principal amount of $5 million or a whole multiple of $500,000 in
excess thereof, and (iii) any prepayment of Base Rate Loans shall be in a
principal amount of $500,000 or a whole multiple of $100,000 in excess thereof
or, in each case, if less, the entire principal amount thereof then outstanding.
Each such notice shall specify the date and amount of such prepayment and the
Type(s) of Loans to be prepaid. The Administrative Agent will promptly notify
each Lender of its receipt of each such notice, and of the amount of such
Lender's Pro Rata Share of such prepayment. If such notice is given by the
Borrower, the Borrower shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified therein.
Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued
interest thereon, together with any additional amounts required pursuant to
Section 3.05. Each such prepayment shall be applied to the Loans of the Lenders
in accordance with their respective Pro Rata Shares.

                  (b)      In the event the Successful IPO of the Borrower has
not been consummated on or prior to the day which is 18 months after the Closing
Date, the Borrower shall promptly prepay the Loans and/or Cash Collateralize or
pay the L/C Obligations in an aggregate amount necessary to reduce the
Outstanding Amount of Loans plus the Outstanding Amount of L/C Obligations to
$50 million.

                                       38

<PAGE>

                  (c)      In the event the Successful IPO of the Borrower has
not been consummated on or prior to the which is day 30 months after the Closing
Date, the Borrower shall promptly prepay the Loans and/or Cash Collateralize or
pay the L/C Obligations in an aggregate amount necessary to reduce the
Outstanding Amount of Loans plus the Outstanding Amount of L/C Obligations to
$40 million.

                  (d)      If for any reason the Total Outstandings at any time
exceed the Aggregate Commitments then in effect, the Borrower shall immediately
prepay Loans and/or Cash Collateralize the L/C Obligations in an aggregate
amount equal to such excess; provided, however, that the Borrower shall not be
required to Cash Collateralize the L/C Obligations pursuant to this Section
2.05(d) unless, after the prepayment in full of the Loans, the Total
Outstandings exceed the Aggregate Commitments then in effect.

         Section 2.06      Termination or Reduction of Commitments.

                  (a)      The Borrower may, upon notice to the Administrative
Agent, terminate the Aggregate Commitments, or from time to time permanently
reduce the Aggregate Commitments; provided that (i) any such notice shall be
received by the Administrative Agent not later than 11:00 a.m. five Business
Days prior to the date of termination or reduction, (ii) any such partial
reduction shall be in an aggregate amount of $2.5 million or any whole multiple
of $500,000 in excess thereof, (iii) the Borrower shall not terminate or reduce
the Aggregate Commitments if, after giving effect thereto and to any concurrent
prepayments hereunder, the Total Outstandings would exceed the Aggregate
Commitments, and (iv) if, after giving effect to any reduction of the Aggregate
Commitments, the Letter of Credit Sublimit exceeds the amount of the Aggregate
Commitments, such Letter of Credit Sublimit shall be automatically reduced by
the amount of such excess. The Administrative Agent will promptly notify the
Lenders of any such notice of termination or reduction of the Aggregate
Commitments. Any reduction of the Aggregate Commitments shall be applied to the
Commitment of each Lender according to its Pro Rata Share. All commitment fees
accrued until the effective date of any termination of the Aggregate Commitments
shall be paid on the effective date of such termination.

                  (b)      On any date that any Loans are required to be prepaid
and/or the L/C Obligations are required to be paid or Cash Collateralized as a
result of a prepayment required by Sections 2.05 (b) or (c) (or would be so
required if any Loans or L/C Obligations were outstanding), the Aggregate
Commitments shall be automatically and permanently reduced by the total amount
of such required prepayments and Cash Collateral; provided that, regardless of
whether any Loans or L/C Obligations are outstanding, the Aggregate Commitments
shall be automatically and permanently reduced in the amounts and under the
conditions and times specified in Sections 2.05(b) and (c). The Administrative
Agent will promptly notify the Lenders of any such reduction of the Aggregate
Commitments. Any reduction of the Aggregate Commitments shall be applied to the
Commitment of each Lender according to its Pro Rata Share.

         Section 2.07      Repayment of Loans. The Borrower shall repay to the
Lenders on the Maturity Date the Outstanding Amount of Loans on such date.

                                       39

<PAGE>

         Section 2.08      Interest.

                  (a)      Subject to the provisions of subsection (b) below,
(i) each Eurodollar Rate Loan shall bear interest on the outstanding principal
amount thereof for each Interest Period at a rate per annum equal to the
Eurodollar Rate for such Interest Period plus the Applicable Rate; and (ii) each
Base Rate Loan shall bear interest on the outstanding principal amount thereof
from the applicable borrowing date at a rate per annum equal to the Base Rate
plus the Applicable Rate.

                  (b)      If any amount payable by the Borrower under any Loan
Document is not paid when due (without regard to any applicable grace periods),
whether at stated maturity, by acceleration or otherwise, such amount shall
thereafter bear interest at a fluctuating interest rate per annum at all times
equal to the Default Rate to the fullest extent permitted by applicable Law.
Furthermore, while any Event of Default exists, the Borrower shall pay interest
on the principal amount of all outstanding Obligations hereunder at the Default
Rate to the fullest extent permitted by applicable Law. Accrued and unpaid
interest on past due amounts (including interest on past due interest) shall be
due and payable upon demand.

                  (c)      Interest on each Loan shall be due and payable in
arrears on each Interest Payment Date applicable thereto and at such other times
as may be specified herein. Interest hereunder shall be due and payable in
accordance with the terms hereof before and after judgment and before and after
the commencement of any proceeding under any Debtor Relief Law.

         Section 2.09      Fees. In addition to certain fees described in
subsections (i) and (j) of Section 2.03:

                  (a)      Commitment Fee. The Borrower shall pay to the
Administrative Agent for the account of each Lender in accordance with its Pro
Rata Share, a commitment fee equal to 0.75% per annum pre-Successful IPO or
0.50% per annum post-Successful IPO, as applicable, times the actual daily
amount by which the Aggregate Commitments exceed the sum of (i) the Outstanding
Amount of Loans and (ii) the Outstanding Amount of L/C Obligations. The
commitment fee shall accrue at all times during the Availability Period,
including at any time during which one or more of the conditions in Article IV
is not met, and shall be due and payable quarterly in arrears on the last
Business Day of each March, June, September and December, commencing with the
first such date to occur after the Closing Date, and on the Maturity Date.

                  (b)      Other Fees. The Borrower shall pay to the Co-Lead
Arrangers and the Administrative Agent for their own respective accounts fees in
the amounts and at the times specified in the Commitment Letter and the Fee
Letter. Such fees shall be fully earned when paid and shall not be refundable
for any reason whatsoever.

         Section 2.10      Computation of Interest and Fees. All computations of
interest for Base Rate Loans when the Base Rate is determined by Bank of
America's "prime rate" shall be made on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed. All other computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed
(which results in more fees or interest, as applicable, being paid than if
computed on the

                                       40

<PAGE>

basis of a 365-day year). Interest shall accrue on each Loan for the day on
which the Loan is made, and shall not accrue on a Loan, or any portion thereof,
for the day on which the Loan or such portion is paid; provided that any Loan
that is repaid on the same day on which it is made shall, subject to Section
2.12(a), bear interest for one day. Each determination by the Administrative
Agent of an interest rate or fee hereunder shall be conclusive and binding for
all purposes, absent manifest error.

         Section 2.11      Evidence of Debt.

                  (a)      The Credit Extensions made by each Lender shall be
evidenced by one or more accounts or records maintained by such Lender and by
the Administrative Agent in the ordinary course of business. The accounts or
records maintained by the Administrative Agent and each Lender shall be
conclusive absent manifest error of the amount of the Credit Extensions made by
the Lenders to the Borrower and the interest and payments thereon. Any failure
to so record or any error in doing so shall not, however, limit or otherwise
affect the obligation of the Borrower hereunder to pay any amount owing with
respect to the Obligations. In the event of any conflict between the accounts
and records maintained by any Lender and the accounts and records of the
Administrative Agent in respect of such matters, the accounts and records of the
Administrative Agent shall control in the absence of manifest error. Upon the
request of any Lender made through the Administrative Agent, the Borrower shall
execute and deliver to such Lender (through the Administrative Agent) a Note,
which shall evidence such Lender's Loans in addition to such accounts or
records. Each Lender may attach schedules to its Note and endorse thereon the
date, Type, amount and maturity of its Loans and payments with respect thereto.

                  (b)      In addition to the accounts and records referred to
in subsection (a) above, each Lender and the Administrative Agent shall maintain
in accordance with its usual practice accounts or records evidencing the
purchases and sales by such Lender of participations in Letters of Credit. In
the event of any conflict between the accounts and records maintained by the
Administrative Agent and the accounts and records of any Lender in respect of
such matters, the accounts and records of the Administrative Agent shall control
in the absence of manifest error.

                  (c)      Entries made in good faith by the Administrative
Agent in the Register pursuant to subsections (a) and (b) above, and by each
Lender in its accounts pursuant to subsections (a) and (b) above, shall be prima
facie evidence of the amount of principal and interest due and payable or to
become due and payable from the Borrower to, in the case of the Register each
Lender and, in the case of such account or accounts, such Lender, under this
Agreement and the other Loan Documents, absent manifest error; provided that the
failure of the Administrative Agent or such Lender to make any entry, or any
finding that an entry is incorrect, in the Register or such account or accounts
shall not limit or otherwise affect the obligations of the Borrower under this
Agreement and the other Loan Documents.

         Section 2.12      Payments Generally.

                  (a)      All payments to be made by the Borrower shall be made
without condition or deduction for any counterclaim, defense, recoupment or
setoff. Except as otherwise expressly provided herein, all payments by the
Borrower hereunder shall be made to the Administrative

                                       41

<PAGE>

Agent, for the account of the respective Lenders to which such payment is owed,
at the Administrative Agent's Office in Dollars and in immediately available
funds not later than 2:00 p.m. on the date specified herein. The Administrative
Agent will promptly distribute to each Lender its Pro Rata Share (or other
applicable share as provided herein) of such payment in like funds as received
by wire transfer to such Lender's Lending Office. All payments received by the
Administrative Agent after 2:00 p.m. shall be deemed received on the next
succeeding Business Day and any applicable interest or fee shall continue to
accrue.

                  (b)      If any payment to be made by the Borrower shall
become due on a day other than a Business Day, payment shall be made on the next
following Business Day, and such extension of time shall be reflected in
computing interest or fees, as the case may be; provided, however, that, if such
extension would cause payment of interest on or principal of Eurodollar Rate
Loans to be made in the next succeeding calendar month, such payment shall be
made on the immediately preceding Business Day.

                  (c)      Unless the Borrower or any Lender has notified the
Administrative Agent, prior to the date any payment is required to be made by it
to the Administrative Agent hereunder, that the Borrower or such Lender, as the
case may be, will not make such payment, the Administrative Agent may assume
that the Borrower or such Lender, as the case may be, has timely made such
payment and may (but shall not be so required to), in reliance thereon, make
available a corresponding amount to the Person entitled thereto. If and to the
extent that such payment was not in fact made to the Administrative Agent in
immediately available funds, then:

                           (i)      if the Borrower failed to make such payment,
         each Lender shall forthwith on demand repay to the Administrative Agent
         the portion of such assumed payment that was made available to such
         Lender in immediately available funds, together with interest thereon
         in respect of each day from and including the date such amount was made
         available by the Administrative Agent to such Lender to the date such
         amount is repaid to the Administrative Agent in immediately available
         funds at the Federal Funds Rate from time to time in effect; and

                           (ii)     if any Lender failed to make such payment,
         such Lender shall forthwith on demand pay to the Administrative Agent
         the amount thereof in immediately available funds, together with
         interest thereon for the period from the date such amount was made
         available by the Administrative Agent to the Borrower to the date such
         amount is recovered by the Administrative Agent (the "Compensation
         Period") at a rate per annum equal to the Federal Funds Rate from time
         to time in effect. If such Lender pays such amount to the
         Administrative Agent, then such amount shall constitute such Lender's
         Loan included in the applicable Borrowing. If such Lender does not pay
         such amount forthwith upon the Administrative Agent's demand therefor,
         the Administrative Agent may make a demand therefor upon the Borrower,
         and the Borrower shall pay such amount to the Administrative Agent,
         together with interest thereon for the Compensation Period at a rate
         per annum equal to the rate of interest applicable to the applicable
         Borrowing. Nothing herein shall be deemed to relieve any Lender from
         its obligation to fulfill its Commitment or to prejudice any rights
         which the Administrative Agent or the Borrower may have against any
         Lender as a result of any default by such Lender hereunder.

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<PAGE>

         A notice of the Administrative Agent to any Lender or the Borrower with
respect to any amount owing under this subsection (c) shall be conclusive,
absent manifest error.

                  (d)      If any Lender makes available to the Administrative
Agent funds for any Loan to be made by such Lender as provided in the foregoing
provisions of this Article II, and such funds are not made available to the
Borrower by the Administrative Agent because the conditions to the applicable
Credit Extension set forth in Article IV are not satisfied or waived in
accordance with the terms hereof, the Administrative Agent shall return such
funds (in like funds as received from such Lender) to such Lender, without
interest.

                  (e)      The obligations of the Lenders hereunder to make
Loans and to fund participations in Letters of Credit are several and not joint.
The failure of any Lender to make any Loan or to fund any such participation on
any date required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Loan or purchase
its participation.

                  (f)      Nothing herein shall be deemed to obligate any Lender
to obtain the funds for any Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.

                  (g)      The Borrower hereby authorizes each Lender, if and to
the extent payment owed to such Lender is not made when due hereunder, or in the
case of a Lender under the Note held by such Lender, to charge from time to time
against any and all of the Borrower's accounts with such Lender any amount so
due.

         Section 2.13      Sharing of Payments. If, other than as expressly
provided elsewhere herein, any Lender shall obtain on account of the Loans made
by it, or the participations in L/C Obligations held by it, any payment (whether
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) in excess of its ratable share (or other share contemplated
hereunder) thereof, such Lender shall immediately (a) notify the Administrative
Agent of such fact, and (b) purchase from the other Lenders such participations
in the Loans made by them and/or such subparticipations in the participations in
L/C Obligations held by them, as the case may be, as shall be necessary to cause
such purchasing Lender to share the excess payment in respect of such Loans or
such participations, as the case may be, pro rata with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from the purchasing Lender under any of the circumstances described in
Section 10.06 (including pursuant to any settlement entered into by the
purchasing Lender in its discretion), such purchase shall to that extent be
rescinded and each other Lender shall repay to the purchasing Lender the
purchase price paid therefor, together with an amount equal to such paying
Lender's ratable share (according to the proportion of (i) the amount of such
paying Lender's required repayment to (ii) the total amount so recovered from
the purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered, without further
interest thereon. The Borrower agrees that any Lender so purchasing a
participation from another Lender may, to the fullest extent permitted by Law,
exercise all its rights of payment (including the right of set-off, but subject
to Section 10.09) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of such participation.
The Administrative Agent will keep records (which shall be conclusive and

                                       43

<PAGE>

binding in the absence of manifest error) of participations purchased under this
Section and will in each case notify the Lenders following any such purchases or
repayments. Each Lender that purchases a participation pursuant to this Section
shall from and after such purchase have the right to give all notices, requests,
demands, directions and other communications under this Agreement with respect
to the portion of the Obligations purchased to the same extent as though the
purchasing Lender were the original owner of the Obligations purchased.

                                   ARTICLE III
                     TAXES, YIELD PROTECTION AND ILLEGALITY

         Section 3.01      Taxes.

                  (a)      Subject to Section 10.15, any and all payments by the
Borrower to or for the account of the Administrative Agent or any Lender under
any Loan Document shall be made free and clear of and without deduction for any
and all present or future taxes, duties, levies, imposts, deductions,
assessments, fees, withholdings or similar charges and all liabilities with
respect thereto, excluding, in the case of the Administrative Agent and each
Lender, taxes imposed on or measured by its overall net income and franchise
taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the Laws of which the Administrative Agent
or such Lender, as the case may be, is organized or maintains a lending office
(all such non-excluded taxes, duties, levies, imposts, deductions, assessments,
fees, withholdings or similar charges, and liabilities being hereinafter
referred to as "Taxes"). Subject to Section 10.15, if the Borrower shall be
required by any Laws to deduct any Taxes from or in respect of any sum payable
under any Loan Document to the Administrative Agent or any Lender, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section), each of the Administrative Agent and such Lender receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable Law, and (iv) within 30 days after the date of such
payment, the Borrower shall furnish to the Administrative Agent (which shall
forward the same to such Lender) the original or a certified copy of a receipt
evidencing payment thereof.

                  (b)      In addition, the Borrower agrees to pay any and all
present or future stamp, court or documentary taxes and any other excise or
property taxes or charges or similar levies which arise from any payment made
under any Loan Document or from the execution, delivery, performance,
enforcement or registration of, or otherwise with respect to, any Loan Document
(hereinafter referred to as "Other Taxes").

                  (c)      If the Borrower shall be required to deduct or pay
any Taxes or Other Taxes from or in respect of any sum payable under any Loan
Document to the Administrative Agent or any Lender, the Borrower shall also pay
to the Administrative Agent or to such Lender, as the case may be, at the time
interest is paid, such additional amount that the Administrative Agent or such
Lender specifies is necessary to preserve the after-tax yield (after factoring
in all taxes, including taxes imposed on or measured by net income) that the
Administrative Agent or such Lender would have received if such Taxes or Other
Taxes had not been imposed.

                                       44

<PAGE>

                  (d)      The Borrower agrees to indemnify the Administrative
Agent and each Lender for (i) the full amount of Taxes and Other Taxes
(including any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section) paid by the Administrative Agent and such
Lender, (ii) amounts payable under this Section 3.01 and (iii) any liability
(including additions to tax, penalties, interest and expenses) arising therefrom
or with respect thereto, in each case whether or not such Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. Payment under this subsection (d) shall be made within 30 days after
the date the Lender or the Administrative Agent makes a demand therefor.

         Section 3.02      Illegality. If any Lender determines that any Law has
made it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable Lending Office to make, maintain or
fund Eurodollar Rate Loans, or to determine or charge interest rates based upon
the Eurodollar Rate, then, on notice thereof by such Lender to the Borrower
through the Administrative Agent, any obligation of such Lender to make or
continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate
Loans shall be suspended until such Lender notifies the Administrative Agent and
the Borrower that the circumstances giving rise to such determination no longer
exist. Upon receipt of such notice, and upon demand from such Lender (with a
copy to the Administrative Agent), the Borrower shall, at its sole option so
long as no Default has occurred, prepay or, if applicable, convert all
Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day
of the Interest Period therefor, if such Lender may lawfully continue to
maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender
may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such
prepayment or conversion, the Borrower shall also pay accrued interest on the
amount so prepaid or converted. Each Lender agrees to designate a different
Lending Office if such designation will avoid the need for such notice and will
not, in the good faith judgment of such Lender, otherwise be materially
disadvantageous to such Lender.

         Section 3.03      Inability to Determine Rates. If the Required Lenders
determine that for any reason adequate and reasonable means do not exist for
determining the Eurodollar Rate for any requested Interest Period with respect
to a proposed Eurodollar Rate Loan, or that the Eurodollar Rate for any
requested Interest Period with respect to a proposed Eurodollar Rate Loan does
not adequately and fairly reflect the cost to such Lenders of funding such Loan,
the Administrative Agent will promptly so notify the Borrower and each Lender.
Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate
Loans shall be suspended until the Administrative Agent (upon the instruction of
the Required Lenders) revokes such notice. Upon receipt of such notice, the
Borrower may revoke any pending request for a Borrowing of, conversion to or
continuation of Eurodollar Rate Loans or, failing that, will be deemed to have
converted such request into a request for a Borrowing of Base Rate Loans in the
amount specified therein.

         Section 3.04      Increased Cost and Reduced Return; Capital Adequacy;
Reserves on Eurodollar Rate Loans.

                  (a)      If any Lender determines that as a result of the
introduction of or any change in or in the interpretation of any Law, or such
Lender's compliance therewith, there shall be any increase in the cost to such
Lender of agreeing to make or making, funding or maintaining

                                       45

<PAGE>

Eurodollar Rate Loans or (as the case may be) issuing or participating in
Letters of Credit, or a reduction in the amount received or receivable by such
Lender in connection with any of the foregoing (excluding for purposes of this
subsection (a) any such increased costs or reduction in amount resulting from
(i) Taxes or Other Taxes (as to which Section 3.01 shall govern), (ii) changes
in the basis of taxation of overall net income or overall gross income by the
United States or any foreign jurisdiction or any political subdivision of either
thereof under the Laws of which such Lender is organized or has its Lending
Office, and (iii) reserve requirements contemplated by Section 3.04(c)), then
from time to time upon demand of such Lender (with a copy of such demand to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amounts as will compensate such Lender for such increased cost or reduction.

                  (b)      If any Lender determines that the introduction of any
Law regarding capital adequacy or any change therein or in the interpretation
thereof, or compliance by such Lender (or its Lending Office) therewith, has the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of such Lender's
obligations hereunder (taking into consideration its policies with respect to
capital adequacy and such Lender's desired return on capital), then from time to
time upon demand of such Lender (with a copy of such demand to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amounts as will compensate such Lender for such reduction; provided in no event
shall the amount set forth in such demand cover a period commencing earlier than
180 days prior to the date of the demand.

                  (c)      The Borrower shall pay to each Lender, as long as
such Lender shall be required to maintain reserves with respect to liabilities
or assets consisting of or including Eurocurrency funds or deposits (currently
known as "Eurocurrency liabilities"), additional interest on the unpaid
principal amount of each Eurodollar Rate Loan equal to the actual costs of such
reserves allocated to such Loan by such Lender (as determined by such Lender in
good faith, which determination shall be conclusive), which shall be due and
payable on each date on which interest is payable on such Loan; provided the
Borrower shall have received at least 15 days' prior notice (with a copy to the
Administrative Agent) of such additional interest from such Lender. If a Lender
fails to give notice 15 days prior to the relevant Interest Payment Date, such
additional interest shall be due and payable 15 days from receipt of such
notice.

         Section 3.05      Funding Losses. Upon demand of any Lender (with a
copy to the Administrative Agent) from time to time, the Borrower shall promptly
compensate such Lender for and hold such Lender harmless from any loss, cost or
expense incurred by it as a result of:

                  (a)      any continuation, conversion, payment or prepayment
of any Loan other than a Base Rate Loan on a day other than the last day of the
Interest Period for such Loan (whether voluntary, mandatory, automatic, by
reason of acceleration, or otherwise); or

                  (b)      any failure by the Borrower (for a reason other than
the failure of such Lender to make a Loan) to prepay, borrow, continue or
convert any Loan other than a Base Rate Loan on the date or in the amount
notified by the Borrower;

including any loss or expense arising from the liquidation or reemployment of
funds obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds

                                       46

<PAGE>

were obtained. The Borrower shall also pay any customary administrative fees
charged by such Lender in connection with the foregoing.

         For purposes of calculating amounts payable by the Borrower to the
Lenders under this Section 3.05, each Lender shall be deemed to have funded each
Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a
matching deposit or other borrowing in the London interbank eurodollar market
for a comparable amount and for a comparable period, whether or not such
Eurodollar Rate Loan was in fact so funded.

         Section 3.06      Matters Applicable to all Requests for Compensation.

                  (a)      A certificate of the Administrative Agent or any
Lender claiming compensation under this Article III and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, the Administrative
Agent or such Lender may use any reasonable averaging and attribution methods.

                  (b)      Upon a Lender's making a claim for compensation under
Sections 3.01 or 3.04, the Borrower may replace such Lender in accordance with
Section 10.19.

         Section 3.07      Survival. All of the Borrower's obligations under
this Article III shall survive termination of the Aggregate Commitments and
repayment of all other Obligations hereunder.

                                 ARTICLE IV
                    CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

         Section 4.01      Conditions of Initial Credit Extension. The
obligation of each Lender to make its initial Credit Extension hereunder is
subject to satisfaction of the following conditions precedent:

                  (a)      The Administrative Agent's receipt of the following,
each of which shall be originals or facsimiles (followed promptly by originals)
unless otherwise specified, each properly executed by a duly authorized officer
of the signing Loan Party, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing Date)
and each in form and substance satisfactory to the Administrative Agent and its
legal counsel:

                           (i)      executed counterparts of this Agreement,
         each Collateral Document and the Subsidiary Guaranty, sufficient in
         number for distribution to the Administrative Agent, each Lender and
         the Borrower;

                           (ii)     an original Note executed by the Borrower in
         favor of each Lender requesting a Note;

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<PAGE>

                           (iii)    such certificates of resolutions or other
         action, incumbency certificates evidencing the identity, authority and
         capacity of each duly authorized officer authorized to act on behalf of
         such Loan Party in connection with this Agreement and the other Loan
         Documents to which such Loan Party is a party;

                           (iv)     such documents and certifications as the
         Administrative Agent may reasonably require to evidence each of the
         Borrower and each of the Subsidiaries is duly organized or formed, and
         each of the Borrower and each of the Subsidiaries is validly existing,
         in good standing and qualified to engage in business in each
         jurisdiction where its ownership, lease or operation of properties or
         the conduct of its business requires such qualification, except to the
         extent that failure to do so could not reasonably be expected to have a
         Material Adverse Effect, including, certified copies of the
         Organization Documents of the Borrower and each of the Subsidiaries,
         certificates of good standing and/or qualification to engage in
         business and tax clearance certificates;

                           (v)      favorable opinions of counsel for the Loan
         Parties, addressed to the Administrative Agent and each Lender, as to
         the matters set forth in Exhibit F, with such customary assumptions,
         qualifications and exceptions;

                           (vi)     a certificate of a duly authorized officer
         of each Loan Party and any Subsidiary whose capital stock is subject to
         a pledge under the Pledge Agreement either (A) attaching copies of all
         consents, licenses and approvals required in connection with the
         execution, delivery and performance by such Loan Party and the validity
         against such Loan Party of the Loan Documents to which it is a party
         and, required in connection with the Loan Documents and the
         transactions contemplated thereby (including, without limitation, the
         pledge of any Subsidiary's capital stock and the expiration, without
         imposition of conditions, of all applicable waiting periods in
         connection with the transactions contemplated by the Loan Documents),
         and such consents, licenses and approvals shall be in full force and
         effect, or (B) stating that no such consents, licenses or approvals are
         so required;

                           (vii)    a certificate signed by a duly authorized
         officer of the Borrower certifying (A) that the conditions specified in
         Sections 4.02(a) and (b) have been satisfied, and (B) that there has
         been no event or circumstance since the date of the most recent Audited
         Financial Statements that has had or could be reasonably expected to
         have, either individually or in the aggregate, a Material Adverse
         Effect;

                           (viii)   evidence that all insurance required to be
         maintained pursuant to the Loan Documents has been obtained and is in
         full force and effect;

                           (ix)     original certificates evidencing all of the
         issued and outstanding shares of capital stock or other equity or other
         ownership interests required to be pledged pursuant to the terms of the
         Pledge Agreement (including without limitation pledges of all the
         capital stock of the Guarantors, Molina Healthcare of Washington and
         Molina Healthcare of Utah), which certificates shall be accompanied by
         undated stock powers duly executed in blank by each relevant pledgor in
         favor of the Administrative Agent;

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<PAGE>

                           (x)      the original Intercompany Notes required to

         be pledged pursuant to the terms of the Pledge Agreement, duly endorsed
         in blank by each relevant pledgor in favor of the Administrative Agent;

                           (xi)     certified copies of Uniform Commercial Code
         Requests for Information or Copies (Form UCC-11) or similar search
         reports certified by a party acceptable to the Administrative Agent,
         dated a date reasonably near (but prior to) the Closing Date, listing
         all effective UCC financing statements, tax liens and judgment liens
         which name the Borrower or any of the Subsidiaries, as the debtor, and
         which are filed in the jurisdictions in which the Borrower and the
         Subsidiaries are organized or have any property or assets, and in such
         other jurisdictions as the Administrative Agent may reasonably request,
         together with copies of such financing statements (none of which (other
         than financing statements filed pursuant to the terms hereof in favor
         of the Administrative Agent, if such Form UCC-11 or search report, as
         the case may be, is current enough to list such financing statements)
         shall cover any of the Collateral, other than Liens existing on the
         date hereof and listed on Schedule 7.01);

                           (xii)    with respect to all the Intellectual
         Property Collateral, search results from the United States Patent and
         Trademark Office and United States Copyright Office to the extent any
         patents, trademarks or copyrights form a part of the Collateral;

                           (xiii)   (A) acknowledgment copies of UCC financing
         statements naming the Borrower and each Eligible Subsidiary as the
         debtor and the Administrative Agent as the secured party, which such
         UCC financing statements have been filed under the UCC of all
         jurisdictions as may be necessary or, in the opinion of the
         Administrative Agent, desirable to perfect the first priority security
         interest of the Administrative Agent pursuant to the Security
         Agreement; (B) evidence reasonably satisfactory to the Administrative
         Agent of the filing (or delivery for filing) of appropriate trademark,
         copyright and patent security supplements with the United States Patent
         and Trademark Office and United States Copyright Office to the extent
         relevant; and (C) such control agreements (including the Account
         Control Agreements) as reasonably requested by the Administrative Agent
         with respect to the Collateral under the Security Agreement in which a
         security interest may be perfected by "control" (as defined in the
         relevant UCC), in each case, duly executed and delivered or
         authenticated by the parties thereto;

                           (xiv)    evidence that all other action that the
         Administrative Agent may deem necessary or desirable in order to
         perfect and protect the first priority liens and security interests
         (together with access letters) created under the Collateral Documents
         has been taken (including, without limitation, receipt of duly executed
         payoff letters, UCC-3 termination statements and landlords' and
         bailees' waiver and consent agreements);

                           (xv)     a certificate signed by a duly authorized
         officer of the Borrower attaching true and correct copies of all
         Material Contracts of each Loan Party and their respective
         Subsidiaries;

                                       49

<PAGE>

                           (xvi)    such other assurances, certificates,
         documents, consents and waivers, estoppel certificates, or opinions as
         the Administrative Agent, the L/C Issuer or the Required Lenders
         reasonably may require; and

                           (xvii)   evidence of appointment of CT Corporation
         System as agent for service of process in accordance with Section 10.17
         for the Borrower and in accordance with Section 5.16(b) of the Guaranty
         Agreement for the Guarantor.

                  (b)      The Lenders shall be satisfied that, concurrently
with the Closing Date, all existing Indebtedness of the Loan Parties and their
respective Subsidiaries has been repaid, redeemed or defeased in full or
otherwise satisfied and extinguished, except the Indebtedness listed on Schedule
7.03 hereof, which Indebtedness shall be on terms and conditions satisfactory to
the Lenders and all Liens securing such obligations have been or concurrently
with the Closing Date are being released, other than Liens listed on Schedule
7.01.

                  (c)      The Lenders shall be satisfied with the amount, terms
and conditions of all intercompany Indebtedness.

                  (d)      The fees and expenses of the Loan Parties pursuant to
the Commitment Letter, Fee Letter and Section 10.04 required to be paid on or
before the Closing Date shall have been paid.

                  (e)      The Borrower shall have paid all Attorney Costs of
the Administrative Agent to the extent invoiced prior to or on the Closing Date,
plus such additional amounts of Attorney Costs as shall constitute its
reasonable estimate of Attorney Costs incurred or to be incurred by it through
the closing proceedings (provided, that such estimate shall not thereafter
preclude a final settling of accounts between the Borrower and the
Administrative Agent).

         Section 4.02      Conditions to all Credit Extensions. The obligation
of each Lender to honor any Request for Credit Extension (other than a Loan
Notice requesting only a conversion of Loans to the other Type, or a
continuation of Eurodollar Rate Loans) is subject to the following conditions
precedent:

                  (a)      The representations and warranties of the Borrower
contained in Article V or any other Loan Document, or which are contained in any
document furnished at any time under or in connection herewith or therewith,
shall be true and correct in all material respects on and as of the date of such
Credit Extension, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and
correct in all material respects as of such earlier date, and except that for
purposes of this Section 4.02, the representations and warranties contained in
subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most
recent statements furnished pursuant to subsections (a) and (b), respectively,
of Section 6.01 and the 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.

                  (b)      No Default shall exist, or would result from such
proposed Credit Extension.

                                       50

<PAGE>

                  (c)      The Administrative Agent and, if applicable, the L/C
Issuer shall have received a Request for Credit Extension in accordance with the
requirements hereof.

                  (d)      The Administrative Agent shall have received such
other approvals, opinions or documents as any Lender, through the Administrative
Agent, may reasonably request.

         Each Request for Credit Extension (other than a Loan Notice requesting
only a conversion of Loans to the other Type or a continuation of Eurodollar
Rate Loans) submitted by the Borrower shall be deemed to be a representation and
warranty that the conditions specified in Sections 4.02(a) and (b) have been
satisfied on and as of the date of the applicable Credit Extension.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

         The Borrower represents and warrants to the Administrative Agent and
the Lenders that:

         Section 5.01      Existence, Qualification and Power. The Borrower and
each of the Subsidiaries (a) is duly organized or formed, validly existing and
in good standing under the Laws of the jurisdiction of its incorporation or
organization, (b) has all requisite corporate power and authority to (i) own its
assets and carry on its business and (ii) execute, deliver and perform its
obligations under the Loan Documents to which it is a party, including, without
limitation, to conduct its business or to own, as applicable, an HMO in the
state of its organization, and (c) is duly qualified and is licensed and in good
standing under the Laws of each jurisdiction where its ownership, lease or
operation of its properties or the conduct of its business requires such
qualification or license, except where such failure could not reasonably be
expected to have a Material Adverse Effect.

         Section 5.02      Authorization; No Contravention. The execution,
delivery and performance by each Loan Party of each Loan Document to which such
Person is party, have been duly authorized by all necessary corporate or other
organizational action. The execution, delivery and performance by each Loan
Party of each Loan Document to which it is a party, and the consummation of the
transactions contemplated hereby with respect to each Loan Party and any of
their respective Subsidiaries, do not and will not: (a) contravene the terms of
any of such Person's Organization Documents; (b) 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, (i) any material Contractual
Obligation to which such Person is a party or (ii) 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 applicable to
any Loan Party, including, without limitation, state and Federal Laws relating
to health care organizations and health care providers.

         Section 5.03      Governmental Authorization; Other Consents. Except as
specifically disclosed on Schedule 5.03, no material approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with (a) the execution, delivery or performance by, or

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enforcement against, any Loan Party of this Agreement or any other Loan Document
(other than those that have been obtained), (b) the validity or enforceability
of any Loan Documents against the Loan Parties (except such filings as are
necessary in connection with the perfection of the Liens created by such Loan
Documents), or (c) the consummation of the transactions contemplated hereby
(other than those that have been obtained by the Borrower and the Subsidiaries).

         Section 5.04      Binding Effect. This Agreement has been, and each
other Loan Document, when delivered hereunder, will have been, duly executed and
delivered by each Loan Party that is party thereto. This Agreement constitutes,
and each other Loan Document when so delivered will constitute, a legal, valid
and binding obligation of such Loan Party, enforceable against each Loan Party
that is party thereto in accordance with its terms, except as enforceability may
be limited by Debtor Relief Laws.

         Section 5.05      Financial Statements; No Material Adverse Effect.

                  (a)      The Audited Financial Statements (i) were prepared in
accordance with GAAP consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein, (ii) fairly present the financial
condition of the Borrower and the Subsidiaries as of the date thereof and their
results of operations for the period covered thereby in accordance with GAAP (or
as applicable, with respect to HMO Subsidiaries, SAP) consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, and (iii) show all material indebtedness and other material
liabilities, direct or contingent, of the Borrower and the Subsidiaries as of
the date thereof, including material liabilities for taxes, material commitments
and Indebtedness.

                  (b)      Since the date of the most recent Audited Financial
Statements, there has been no event or circumstance, either individually or in
the aggregate, that has had or could reasonably be expected to have a Material
Adverse Effect.

                  (c)      The financial statements delivered to the
Administrative Agent and each Lender pursuant to Sections 6.01(a) and (b) (i)
will be prepared in accordance with GAAP (or, as applicable, with respect to HMO
Subsidiaries, SAP), except as otherwise noted therein, and (ii) will fairly
present the financial condition of the Borrower and the Subsidiaries as of the
date thereof and their results of operations for the period covered thereby in
accordance with GAAP (or, as applicable, with respect to HMO Subsidiaries, SAP).

         Section 5.06      Litigation. There are no actions, suits, proceedings,
claims or disputes pending or, to the actual knowledge of the Borrower,
threatened or contemplated, 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 (a) purport to affect, pertain to or enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Loan Document, or any of the transactions contemplated hereby, or (b) either
individually or in the aggregate, if determined adversely, could reasonably be
expected to have a Material Adverse Effect.

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<PAGE>

         Section 5.07      No Default. No default exists and, to the knowledge
of the Borrower, no default has been asserted under or with respect to any
Contractual Obligation that could, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. No Default could
reasonably be expected to result from the consummation of the transactions
contemplated by this Agreement or any other Loan Document.

         Section 5.08      Subsidiaries. The Borrower has no Subsidiaries other
than those specifically disclosed in Part (a) of Schedule 5.08 (including the
jurisdiction of organization, classes of capital stock (including options,
warrants, rights of subscription, conversion and exchangeability and other
similar rights, ownership and ownership percentages thereof) and whether such
Subsidiaries are capitalized or licensed as an HMO, conducting HMO Business
and/or providing managed care services) and has no equity investments in any
other corporation or entity other than those specifically disclosed in Part (b)
of Schedule 5.08 or on Schedule 7.02. The outstanding shares of capital stock
shown have been validly issued, fully-paid and are non-assessable and owned free
and clear of Liens. The outstanding shares of capital stock shown are not
subject to buy-sell, voting trust or other shareholder agreement, except as
specifically disclosed in Part (c) of Schedule 5.08.

         Section 5.09      Ownership of Personal Property; Liens. Each of the
Borrower and each Subsidiary has good title to all of their respective material
personal properties and assets (except for those properties and assets disposed
of not in violation of this Agreement and the other Loan Documents and except
for encumbrances and title defects that could not be reasonably be expected to
have a Material Adverse Effect). The property and assets of the Borrower and the
Subsidiaries are subject to no Liens, other than Liens permitted by Section
7.01. Each of the Borrower and each of the Subsidiaries has obtained all
material licenses, permits, franchises or other certifications, consents,
approvals and authorizations, governmental or private, necessary to the
ownership of its property and assets and the conduct of its business.

         Section 5.10      Intellectual Property; Licenses, Etc. The Borrower
and the Subsidiaries own, or possess the right to use, all of the trademarks,
service marks, trade names, copyrights, patents, patent rights, franchises,
licenses and other intellectual property rights (collectively, "IP Rights") that
are reasonably necessary for the operation of its businesses. To the actual
knowledge of the Borrower the use of such IP Rights by the Borrower and its
Subsidiaries does not infringe on the rights of any Person, except for such
infringements that could not reasonably be expected to have a Material Adverse
Effect. To the best knowledge of the Borrower, no slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by the Borrower or any Subsidiary
infringes upon any rights held by any other Person.

         Section 5.11      Real Estate, Lease. (a) Schedule 5.11 sets forth an
accurate description, as of the Closing Date, of the location, by state and
street address, of all Real Property Assets owned by the Borrower and the
Subsidiaries under the heading "Fee Properties" and all Real Property Assets
leased by the Borrower and the Subsidiaries under the heading "Leased
Properties", together with, in the case of owned Real Property Assets, a
statement as to whether each such Real Property Asset is the subject of a
contract of sale (and, if so, a statement as to the status of such sale), and,
in the case of the each Real Property Asset, the identity of the lessor and
lessee, the term of the lease and the annual rental payments.

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<PAGE>

                  (b)      The Borrower and each of the Subsidiaries has (i)
good and marketable fee title to all of its owned Real Property Assets and (ii)
good and valid title to the leasehold estates in all of the leased Real Property
Assets, in each case free and clear of all Liens, except Permitted Liens.

                  (c)      All material permits, licenses, franchises or other
certifications, consents, approvals and authorizations, governmental or private
with respect to the Real Property Assets, necessary to enable the Borrower and
any of the Subsidiaries to lawfully occupy and use such property for all of the
purposes for which it is currently occupied and used have been lawfully issued
and are in full force and effect, other than such permits, licenses, franchises
or other certifications, consents, approvals and authorizations, governmental or
private, which, if not obtained, would not have a material adverse effect on the
intended use or operation of any such Real Property Assets. All the Real
Property Assets are in compliance in all material respects with all applicable
legal requirements, including the Americans with Disabilities Act of 1990.
Except as specifically disclosed in Schedule 5.11, no consent or approval of any
landlord or other third party in connection with any leased Property Assets is
necessary for any Loan Party to enter into and execute the Loan Documents.

                  (d)      All material easements, cross easements, licenses,
air rights and rights-of way or other similar property interests, if any,
necessary for the full utilization of the Improvements for their intended
purposes have been obtained and are in full force and effect.

         Section 5.12      Environmental Matters. Except as would not reasonably
be expected to have a Material Adverse Effect, to the knowledge of the Borrower:

                  (a)      Each of the facilities and properties owned, leased
or operated by the Borrower and the Subsidiaries (the "Subject Properties") and
all operations at the Subject Properties are in compliance with all applicable
Environmental Laws, and there is no violation of any Environmental Law with
respect to the Subject Properties or the businesses operated by the Borrower and
the Subsidiaries (the "Businesses"), and there are no conditions relating to the
Businesses or Subject Properties that could be reasonably likely to give rise to
liability under any applicable Environmental Laws.

                  (b)      None of the Subject Properties contains, or to the
actual knowledge of the Borrower, has previously contained, any Hazardous
Materials at, on or under the Subject Properties in amounts or concentrations
that constitute or constituted a violation of, or could give rise to liability
under, Environmental Laws.

                  (c)      Neither the Borrower nor any of the Subsidiaries has
received any written or verbal notice of, or inquiry from any Governmental
Authority regarding, any violation, alleged violation, non-compliance, liability
or potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Subject Properties or the
Businesses, nor does the Borrower have knowledge that any such notice will be
received or is being threatened.

                  (d)      Hazardous Materials have not been transported or
disposed of from the Subject Properties, or generated, treated, stored or
disposed of at, on or under any of the Subject

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<PAGE>

Properties or any other location, in each case by or on behalf of the Borrower
or any of the Subsidiaries in violation of, or in a manner that would be
reasonably likely to give rise to liability under, any applicable Environmental
Law.

                  (e)      There are no consent decrees or other decrees,
consent orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with respect to
the Borrower or any of the Subsidiaries, the Subject Properties or the
Businesses.

                  (f)      There has been no release or threat of release of
Hazardous Materials at or from the Subject Properties, or arising from or
related to the operations (including, without limitation, disposal) of the
Borrower or any of the Subsidiaries in connection with the Subject Properties or
otherwise in connection with the Businesses, in violation of, or in amounts or
in a manner that could give rise to liability under, Environmental Laws.

         Section 5.13      Security Documents.

                  (a)      The Security Agreement is effective to create in
favor of the Administrative Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral
identified therein owned by the Loan Parties who are a party thereto, and, when
financing statements in appropriate form are filed in the appropriate offices
for the locations specified in the schedules to the Security Agreement, the
Security Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in such
Collateral that may be perfected by filing, recording or registering a financing
statement under the UCC as in effect, in each case prior and superior in right
to any other Lien on any Collateral other than Permitted Liens.

                  (b)      The Pledge Agreement is effective to create in favor
of the Administrative Agent, for the ratable benefit of the Secured Parties, a
legal, valid and enforceable security interest in the Collateral identified
therein, and, when such Collateral is delivered to the Administrative Agent, the
Pledge Agreement shall constitute a fully perfected first priority Lien on, and
security interest in, all right, title and interest of the pledgors thereunder
in such Collateral, in each case subject to no other Lien other than Permitted
Liens.

                  (c)      The Security Agreement, together with the Notice of
Grant of a Security Interest in Trademarks when duly recorded in the United
States Patent and Trademark Office, will constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the grantors
thereunder in all Trademarks and Trademark Licenses (each as defined in the
Security Agreement) owned by such grantors and in which a security interest may
be perfected by filing, recording or registration of a Notice in the United
States Patent and Trademark Office, in each case prior and superior in right to
any other Lien other than Permitted Liens.

         Section 5.14      Insurance. The Borrower and the Subsidiaries
maintain, with financially sound and reputable insurance companies not
Affiliates of the Borrower, insurance (including workers' compensation,
liability insurance and casualty insurance), with respect to its properties and
business against loss or damage of the kinds customarily insured against by
Persons engaged in the same or similar businesses and owning similar properties
in localities where the Borrower

                                       55

<PAGE>

or such Subsidiary operates, of such types and in such amounts, with such
deductibles and covering such risks, as are customarily carried under similar
circumstances by such other Persons (or otherwise required in the Collateral
Documents). The present insurance coverage of the Borrower and each of the
Subsidiaries is described as to name of insured, carrier, policy number,
expiration date, type and amount on Schedule 5.14.

         Section 5.15      Taxes. The Borrower and each of the Subsidiaries have
filed all Federal, state and other tax returns and reports required to be filed,
and have paid all Federal, state and other taxes, assessments, fees and other
governmental charges shown thereon to be due (including interest and penalties)
and all other Federal, state and other taxes, assessments, fees and other
governmental charges owing by it, except (i) which are not yet delinquent or
(ii) that are being contested in good faith by appropriate proceedings
diligently conducted and for which adequate reserves have been provided in
accordance with GAAP (or as applicable, with respect to HMO Subsidiaries, SAP).
To the knowledge of the Borrower, there is no pending investigation or proposed
tax assessment against the Borrower or any of the Subsidiaries that would, if
made, have a Material Adverse Effect.

         Section 5.16      ERISA Compliance.

                  (a)      Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other Federal or state
Laws. Each Plan that is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS or an application for
such a letter is currently being processed by the IRS with respect thereto and,
to the best knowledge of the Borrower, nothing has occurred which would prevent,
or cause the loss of, such qualification. The Borrower and each ERISA Affiliate
have made all required contributions to each Plan subject to Section 412 of the
Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.

                  (b)      There are no pending or, to the actual knowledge of
the Borrower, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan that could reasonably be
expected to have a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan that has resulted or could reasonably be expected to result in a
Material Adverse Effect.

                  (c)      (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

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         Section 5.17      Margin Regulations; Investment Company Act; Public
Utility Holding Company Act.

                  (a)      The Borrower is not engaged, and will not engage,
principally or as one of its important activities, in the business of purchasing
or carrying margin stock (within the meaning of Regulation U issued by the FRB),
or extending credit for the purpose of purchasing or carrying margin stock, and
no proceeds of any Loans or drawings under any Letter of Credit will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying margin stock.

                  (b)      None of the Borrower, any Person Controlling the
Borrower, or any Subsidiary (i) is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, or (ii) is or is required to be registered
as an "investment company" under the Investment Company Act of 1940. Neither the
making of the Loans, nor the issuance of the Letters of Credit or the
application of the proceeds or repayment thereof by the Borrower, nor the
consummation of other transactions contemplated hereunder, will violate any
provision of any such Act or any rule, regulation or order of the SEC.

         Section 5.18      Disclosure. The Borrower has disclosed to the
Administrative Agent and the Lenders all agreements, instruments and corporate
or other restrictions to which it or any of the Subsidiaries is subject, and all
other matters known to it, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. No written
report, financial statement, certificate or other written information furnished
by or on behalf of any Loan Party or any of their respective Subsidiaries to the
Administrative Agent or any Lender in connection with the transactions
contemplated hereby and the negotiation of this Agreement and the other Loan
Documents or delivered hereunder or thereunder (as modified or supplemented by
other information so furnished) contains any material misstatement of fact or
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided that, with respect to projected financial and projected operational
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed by it to be reasonable at the time.

         Section 5.19      Compliance with Laws. Each of the Borrower and its
Subsidiaries is in compliance in all material respects with the requirements of
all Laws (including, without limitation, HMO Regulations, Medicare Regulations
and Medicaid Regulations applicable to it and its Properties) and all orders,
writs, injunctions and decrees applicable to it or to its properties, except in
such instances in which (a) such requirement of Law or order, writ, injunction
or decree is being contested in good faith by appropriate proceedings diligently
conducted or (b) the failure to comply therewith, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing, with respect to the Borrower
and each of the Subsidiaries:

                  (i)      (A) neither the Borrower nor any of the Subsidiaries
         nor any individual employed by the Borrower or any of the Subsidiaries
         is reasonably expected to have criminal culpability or to be excluded
         from participation in any Medical

                                       57

<PAGE>

         Reimbursement Program for corporate or individual actions or failures
         to act where such culpability or exclusion has resulted or could
         reasonably be expected to result in an Exclusion Event; and (B) there
         is no officer continuing to be employed by the Borrower or any of the
         Subsidiaries who may reasonably be expected to have individual
         culpability for matters under investigation by the OIG or other
         Governmental Authority relating to the Businesses unless such officer
         has been, within a reasonable period of time after discovery of such
         actual or potential culpability, either suspended or removed from
         positions of responsibility related to those activities under challenge
         by the OIG or other Governmental Authority;

                  (ii)     current billing policies, arrangements, protocols and
         instructions comply with requirements of Medical Reimbursement Programs
         and are administered by properly trained personnel, except where any
         such failure to comply would not reasonably be expected to result in an
         Exclusion Event;

                  (iii)    current medical director compensation arrangements
         comply with state and federal anti-kick back, fraud and abuse, and
         Stark I and II requirements, except where any such failure to comply
         would not reasonably be expected to result in an Exclusion Event; and

                  (iv)     the Borrower and the Subsidiaries and their
         respective Affiliates have established and implemented such policies,
         programs, procedures, contracts and systems, as are necessary for the
         Borrower and the Subsidiaries and their respective Affiliates to comply
         with the Health Insurance Portability and Accountability Act of 1996;
         Title II, Subtitle F, Sections 161-264, Public Law 104-191 and the
         Standards for Privacy of Individually Identifiable Health Information,
         45 C.F.R. Parts 160-164 as of the dates such establishment or
         implementation is required by such Laws.

         Section 5.20      Labor Matters.

         Except as would not reasonably be expected to have a Material Adverse
Effect:

                  (a)      There are no strikes or lockouts against the Borrower
or any Subsidiary pending or, to the actual knowledge of the Borrower,
threatened;

                  (b)      The hours worked by and payments made to employees of
the Borrower and the Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable federal, state, local or foreign Law
dealing with such matters in any case where a Material Adverse Effect could
reasonably be expected to occur as a result of the violation thereof;

                  (c)      All payments due from the Borrower or any of the
Subsidiaries, or for which any claim may be made against the Borrower or any
Subsidiary, on account of wages and employee health and welfare insurance and
other benefits, have been paid or accrued as a liability on the books of the
Borrower or such Subsidiary; and

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                  (d)      Neither the Borrower nor any of the Subsidiaries is a
party to a collective bargaining agreement.

         Set forth on Schedule 5.20 is a summary of all labor matters pending
or, to the actual knowledge of the Borrower, threatened by or against the
Borrower or any of the Subsidiaries, and none of such labor matters,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

         Section 5.21      Fraud And Abuse. Neither the Borrower, any of the
Subsidiaries nor any of their respective officers, directors or, to the actual
knowledge of the Borrower, any Contract Provider, has engaged in any activities
that are prohibited under Medicare Regulations or Medicaid Regulations or that
are prohibited by binding rules of professional conduct which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect.

         Section 5.22      Licensing. The Borrower and each of the Subsidiaries
and, to the actual knowledge of the Borrower, each Contract Provider, has, to
the extent applicable (a) obtained (or been duly assigned) all required
authorizations, consents, approvals, certificates of authority, certificates of
need or determinations of need as required by the relevant state Governmental
Authority for the acquisition, construction, expansion of, investment in or
operation of its businesses as currently operated, (b) obtained and maintains
all required licenses, and (c) entered into and maintains its status as a
Medicare supplier and as a Medicaid supplier. To the actual knowledge of the
Borrower, each Contract Provider is duly licensed by each state, state agency,
commission or other Governmental Authority having jurisdiction over the
provisions of such services by such Contract Provider in the locations where the
Borrower or any of the Subsidiaries conduct business, to the extent such
licensing is required to enable such Contract Provider to provide the
professional services provided by such Contract Provider and otherwise as is
necessary to enable the Borrower and the Subsidiaries to operate as currently
operated and as contemplated to be operated. To the actual knowledge of the
Borrower, all such required licenses are in full force and effect on the date
hereof and have not been revoked or suspended or otherwise limited.

         Section 5.23      Solvency. Immediately after giving effect to the
initial Credit Extension made on the Closing Date, (a) the fair value of the
assets of each of the Borrower and each of the Subsidiaries will exceed its
debts and liabilities, subordinated, contingent or otherwise, (b) the present
fair saleable value of the property of each of the Borrower and each of the
Subsidiaries will be greater than the amount that will be required to pay the
probable liability of its debts and other liabilities, subordinated, contingent
or otherwise, as such debts and other liabilities become absolute and mature,
and (c) each of the Borrower and each of the Subsidiaries will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Closing Date.

         Section 5.24      Material Contracts. Set forth on Schedule 5.24 is a
complete and accurate list of all Material Contracts of the Borrower and each of
the Subsidiaries, showing as of the date hereof, the name thereof, the parties,
the subject matter and the term. Each such Material Contract is in full force
and effect and is binding upon and enforceable against the Borrower and each
Subsidiary party thereto, (and to the actual knowledge of the Borrower, all
other parties thereto) in accordance with its terms, except to the extent
enforceability may be

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<PAGE>

limited by Debtor Relief Laws, and there exists no material default under any
Material Contract by the Borrower or any of the Subsidiaries, or to the
Borrower's actual knowledge, by any other party thereto.

                                   ARTICLE VI
                              AFFIRMATIVE COVENANTS

         So long as any Lender shall have any Commitment hereunder, any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of
Credit shall remain outstanding, the Borrower shall:

         Section 6.01      Financial Statements. Deliver to the Administrative
Agent and each Lender, in form and detail satisfactory to the Administrative
Agent and the Required Lenders:

                  (a)      as soon as available, but in any event within the
earlier of ninety-five (95) days after the end of each fiscal year, or such
shorter period required by the SEC (plus five (5) days) of the Borrower and the
Subsidiaries, (i) consolidated and consolidating balance sheets of the Borrower
and the Subsidiaries as at the end of such fiscal year, and the related
consolidated and consolidating statements of income or operations, shareholders'
equity and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and prepared in accordance with GAAP, audited and accompanied by a report
and opinion of an independent certified public accountant of nationally
recognized standing reasonably acceptable to the Required Lenders, which report
and opinion shall be prepared in accordance with generally accepted auditing
standards and shall not be subject to any "going concern" or like qualification
or exception or any qualification or exception as to the scope of such audit,
and (ii) with respect to each HMO Subsidiary, annual financial statements of
such HMO Subsidiary prepared in accordance with SAP; and

                  (b)      as soon as available, but in any event within the
earlier of fifty (50) days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower and the Subsidiaries, or such
shorter period required by the SEC (plus five (5) days), (i) consolidated and
consolidating balance sheets of the Borrower and the Subsidiaries as at the end
of such fiscal quarter, and the related consolidated and consolidating
statements of income or operations, shareholders' equity and cash flows for such
fiscal quarter and for the portion of the Borrower's or the Subsidiaries' fiscal
year then ended, setting forth in each case in comparative form the figures for
the corresponding fiscal quarter of the previous fiscal year and the
corresponding portion of the previous fiscal year, all in reasonable detail and
certified by Responsible Officers of the Borrower as fairly presenting the
consolidated and consolidating financial condition, results of operations,
shareholders' equity and cash flows of the Borrower and the Subsidiaries in
accordance with GAAP, subject only to normal year-end audit adjustments and the
absence of footnotes, and (ii) with respect to each HMO Subsidiary, quarterly
financial statements of such HMO Subsidiary prepared in accordance with SAP.

As to any information contained in materials furnished pursuant to Section
6.02(d), the Borrower shall not be separately required to furnish such
information under subsection (a) or (b) above, but the foregoing shall not be in
derogation of the obligation of the Borrower to furnish the

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information and materials described in subsections (a) and (b) above at the
times specified therein.

         Section 6.02      Certificates; Other Information. Deliver to the
Administrative Agent and each Lender, in form and detail satisfactory to the
Administrative Agent and the Required Lenders:

                  (a)      concurrently with the delivery of the financial
statements referred to in Section 6.01(a), a certificate of its independent
certified public accountants certifying such financial statements and stating
that in making the examination necessary therefor no knowledge was obtained of
any Default under the financial covenants set forth herein or, if any such
Default shall exist, stating the nature and status of such Default setting forth
the details of such Default and the action that the Borrower has taken or
proposes to take with respect thereto;

                  (b)      concurrently with the delivery of the financial
statements referred to in Sections 6.01(a) and (b), a duly completed Compliance
Certificate signed by Responsible Officers of the Borrower. In connection with
the delivery by the Borrower of each Compliance Certificate pursuant to this
Section 6.02(b), the Borrower shall deliver to the Administrative Agent
supplements to Schedules 5.08, 5.11, 5.14, 5.20 and 5.24 and the report required
by Section 6.15(c), together with a statement of the Responsible Officers
executing the Compliance Certificate, certifying that, as of the date thereof,
after giving effect to the supplements to such Schedules and such report
delivered therewith, the representations and warranties in Article V hereof are
true and correct in all material respects. In addition, for fiscal year 2003, no
later than April 30, 2003 and for any fiscal year thereafter, concurrently with
the delivery of the financial statements referred to in Section 6.01(a), a
schedule signed by a Responsible Officer of the Borrower setting forth in
reasonable detail the reinsurance arrangements maintained by each of the HMO
Subsidiaries of the Borrower;

                  (c)      promptly after receipt thereof, copies of any
detailed audit reports, management letters or recommendations submitted to the
board of directors (or the audit committee of the board of directors) of the
Borrower or any of the Subsidiaries by independent accountants in connection
with the accounts or books of the Borrower or any of the Subsidiaries, or any
audit of any of them;

                  (d)      promptly after the same are available, (i) copies of
management discussion and analysis in relationship to the financial statements
delivered pursuant to Sections 6.01(a) and 6.01(b), (ii) copies of each annual
report, proxy or financial statement or other report or communication sent to
the stockholders of the Borrower in their capacities as stockholders, and copies
of all annual, regular, periodic and special reports and registration statements
which the Borrower may file or be required to file with the SEC under Section 13
or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to
be delivered to the Administrative Agent pursuant hereto, and (iii) upon the
request of the Administrative Agent, all reports and written information to and
from the United States Environmental Protection Agency, or any state or local
agency responsible for environmental matters, the United States Occupational
Health and Safety Administration, or any state or local agency responsible for
health and safety matters, or any successor or other agencies or authorities
concerning environmental, health or safety matters;

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                  (e)      no later than the Closing Date for fiscal year 2003,
and within forty-five (45) days following the end of each fiscal year of the
Borrower thereafter, an annual business plan and budget of the Borrower and the
Subsidiaries containing, among other things, summary pro forma financial
information for the next fiscal year with respect to each calendar month and
fiscal quarter; and

                  (f)      as soon as reasonably practicable after the
Borrower's receipt of a request thereof, promptly, such additional information
regarding the business, financial or corporate affairs of the Borrower or any
Subsidiary, or compliance with the terms of the Loan Documents, as the
Administrative Agent or any Lender may from time to time reasonably request.

         Documents required to be delivered pursuant to Sections 6.01(a) or (b)
or Section 6.02(d) (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date (i) on which the
Borrower posts such documents, or provides a link thereto on the Borrower's
website on the Internet at the website address listed on Schedule 10.02, or (ii)
on which such documents are posted on the Borrower's behalf on
IntraLinks/IntraAgency or another relevant website, if any, to which each Lender
and the Administrative Agent have access (whether a commercial, third-party
website or whether sponsored by the Administrative Agent); provided that, (i)
the Borrower shall deliver paper copies of such documents to the Administrative
Agent or any Lender that requests the Borrower to deliver such paper copies
until a written request to cease delivering paper copies is given by the
Administrative Agent or such Lender, and (ii) the Borrower shall notify (which
may be by facsimile or electronic mail) the Administrative Agent and each Lender
of the posting of any such documents and provide to the Administrative Agent by
electronic mail electronic versions (i.e., soft copies) of such documents.
Notwithstanding anything contained herein, in every instance the Borrower shall
be required to provide paper copies of the Compliance Certificates required by
Section 6.02(a) and (b) to the Administrative Agent. The Administrative Agent
shall have no obligation to request the delivery or to maintain copies, except
for such Compliance Certificate of the documents referred to above, and in any
event shall have no responsibility to monitor compliance by the Borrower with
any such request for delivery, and each Lender shall be solely responsible for
requesting delivery to it or maintaining its copies of such documents.

         Section 6.03      Notices.  Promptly notify the Administrative Agent
and each Lender:

                  (a)      of the occurrence of any Default;

                  (b)      of to the actual knowledge of the Borrower, (i) any
material breach or non-performance of, or any material default under, a Material
Contract of the Borrower or any Subsidiary, (ii) any material dispute, action,
litigation, investigation or proceeding between the Borrower or any Subsidiary
and any Governmental Authority, (iii) the commencement of, or any material
development in, any material action, litigation, investigation or proceeding
affecting the Borrower or any Subsidiary, including pursuant to any applicable
Environmental Laws, (iv) the institution of any material action, litigation,
investigation or proceeding against the Borrower or any Subsidiary (or, to the
actual knowledge of the Borrower, any Contract Provider) to suspend, revoke or
terminate (or that may result in termination of) its status as a Medicaid
supplier or its status as a Medicare supplier, or any such investigation or
proceeding that may result in an

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Exclusion Event, (v) a copy of any notice of intent to exclude the Borrower or
any of the Subsidiaries from participation in any Medical Reimbursement Program,
any notice of proposal to exclude the Borrower or any of the Subsidiaries from
participation in any Medical Reimbursement Program issued by the OIG, or any
other Exclusion Event, (vi) a copy of any notice of loss of participation under
any reimbursement program or loss of applicable health care license or
certificate of authority of any HMO Subsidiary, and all other material
deficiency notices, compliance orders or adverse reports issued by any HMO
Regulator or other Governmental Authority or private insurance company pursuant
to a provider agreement that, if not promptly complied with or cured, could
reasonably be expected to result in the suspension or forfeiture of any license
or certification necessary for such HMO Subsidiary to carry on its business as
then conducted or the termination of any insurance or reimbursement program
available to any HMO Subsidiary, or (vii) any correspondence received by the
Borrower and any Subsidiary from an HMO Regulator asserting that the Borrower or
any Subsidiary is not in compliance with HMO Regulations, or to the actual
knowledge of the Borrower, threatening action against the Borrower or any
Subsidiary under the HMO Regulations, which in either case could reasonably be
expected to have a material adverse effect on the entity so notified;

                  (c)      of the occurrence of any ERISA Event;

                  (d)      of any material change in accounting policies or
financial reporting practices by the Borrower or any Subsidiary; and

                  (e)      within the period for delivery of the quarterly
financial statements provided in Section 6.01(b), of any written notification of
Investments during such fiscal quarter by the Borrower or any Subsidiary in any
HMO Subsidiary that, individually or in the aggregate in any fiscal year of the
Borrower, exceed ten percent (10%) of the Company Action Level or the relevant
state's risk-based capital threshold, as applicable, (in each case as determined
in accordance with SAP at the immediately preceding fiscal-year-end
determination thereof) of such HMO Subsidiary; provided that, to the extent such
Investments, individually or in the aggregate, materially deviate from the
business plan and budget delivered pursuant to Section 6.02(e), written
notification of such Investments shall be provided not later than fifteen days
following the end of the calendar month during which such Investments are made.

         Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer of the Borrower setting forth details of the
occurrence referred to therein and stating what action the Borrower has taken
and proposes to take with respect thereto. Each notice pursuant to Section
6.03(a) shall describe with particularity any and all provisions of this
Agreement and any other Loan Document that have been breached.

         Section 6.04      Payment of Obligations. Pay and discharge, and cause
each of the Subsidiaries to pay and discharge, as the same shall become due and
payable, all its material obligations and liabilities, including (a) all tax
liabilities, fees, assessments and governmental charges or levies upon it or its
properties or assets, unless the same are being diligently contested in good
faith by appropriate proceedings diligently conducted and adequate reserves in
accordance with GAAP are being maintained, (b) all Indebtedness, as and when due
and payable, but subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness; provided that no violation
of this clause (b) shall constitute an Event of

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Default unless such violation is also an Event of Default under Section 8.01(e),
and (c) all lawful claims that, if unpaid, could reasonably be expected to give
rise to a Lien upon any of its properties, except, in each case to the extent
being diligently contested in good faith by appropriate proceedings which
suspend the enforcement of the Lien and for which adequate reserves in
accordance with GAAP shall have been set aside on its books.

         Section 6.05      Preservation of Existence, Etc. (a) Preserve, renew
and maintain, and cause each of the Subsidiaries to preserve, renew and
maintain, in full force and effect its legal existence, legal structure, legal
name and good standing under the Laws of the jurisdiction of its incorporation
or organization, except in a transaction permitted by Sections 7.04 or 7.05; (b)
take all reasonable action, and cause each of the Subsidiaries to take all
reasonable action, to maintain all rights (charter or statutory), privileges,
permits, licenses, approvals and franchises in each case which are necessary in
the normal conduct of its business, except in a transaction permitted by
Sections 7.04 and 7.05; and (c) preserve or renew, and cause each of the
Subsidiaries to preserve and renew, all of its registered patents, trademarks,
trade names and service marks, except, in each case, where failure to do so
could not reasonably be expected to have a Material Adverse Effect.

         Section 6.06      Maintenance of Properties. Maintain, preserve and
protect, and cause each of Subsidiaries to maintain, preserve and protect, all
of its material properties and equipment necessary in the operation of its
business in good working order and condition, ordinary wear and tear excepted,
to the extent and in the manner customary for Persons engaged in similar
businesses.

         Section 6.07      Maintenance of Insurance. Maintain, and cause each of
the Subsidiaries to maintain, with financially sound and reputable insurance
companies not Affiliates of the Borrower, insurance (including workers'
compensation, liability insurance and casualty insurance), with respect to its
properties and business against loss or damage of the kinds customarily insured
against by Persons engaged in the same or similar businesses and owning similar
properties in localities where the Borrower or such Subsidiary operates, of such
types and in such amounts, with such deductibles and covering such risks, as are
customarily carried under similar circumstances by such other Persons (or
otherwise required in the Collateral Documents). The Administrative Agent shall
be named as loss payee and/or additional insured with respect to any such
insurance providing coverage in respect of any Collateral, and each provider of
any such insurance shall agree, by endorsement upon the policy or policies
issued by it or by independent instruments furnished to the Administrative
Agent, that it will give the Administrative Agent thirty (30) days prior written
notice before any such policy or policies shall be altered or canceled, and that
no act or default of the Borrower, any Subsidiary or any other Person shall
affect the rights of the Administrative Agent or the Lenders under such policy
or policies.

         Section 6.08      Reinsurance Arrangements. Deliver a schedule at the
time set forth in Section 6.02(b) signed by a Responsible Officer of the
Borrower setting forth in reasonable detail the reinsurance arrangements
maintained by each of the HMO Subsidiaries of the Borrower as of the end of such
fiscal year (with any changes subsequent to the end of such fiscal year
described therein).

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         Section 6.09      Compliance with Laws. Comply, and cause each of the
Subsidiaries to comply, in all material respects with the requirements of all
Laws and all orders, writs, injunctions and decrees applicable to it or to its
business or property, to include, without limitation, compliance with HMO
Regulations applicable to them in the operation of HMO Businesses, ERISA and the
Racketeer Influenced and Corrupt Organization Chapter of the Organized Crime
Control Act of 1970, except in such instances in which such requirement of Law
or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted.

         Section 6.10      Books and Records. (a) Maintain, and cause each of
the Subsidiaries to maintain, proper books of record and account, in which full,
true and correct entries in conformity with GAAP consistently applied shall be
made of all financial transactions and matters involving the assets and business
of the Borrower or such Subsidiary, as the case may be (and with respect to each
HMO Subsidiary, in accordance with SAP); and (b) maintain, and cause each of the
Subsidiaries to maintain, such books of record and account in material
conformity with all applicable requirements of any Governmental Authority having
regulatory jurisdiction over the Borrower or such Subsidiary, as the case may
be.

         Section 6.11      Inspection Rights. Permit, and cause each of the
Subsidiaries to permit, representatives and independent contractors of the
Administrative Agent and each Lender to visit and inspect any of its properties,
to examine its corporate, financial and operating records, and make copies
thereof or abstracts therefrom, subject, in each case to applicable Laws of
Governmental Authorities regarding confidentiality of patient health information
and other confidentiality restrictions of Governmental Authorities to which the
Borrower and its Subsidiaries are bound, and to discuss its affairs, finances
and accounts with its directors, officers, and independent public accountants,
and at such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Borrower; provided,
however, that notwithstanding anything to the contrary contained herein
(including Section 10.04), only when an Event of Default exists may the
Administrative Agent or any Lender (or any of their respective representatives
or independent contractors) do any of the foregoing at the expense of the
Borrower at any time during normal business hours and without advance notice.
The Borrower agrees that the Administrative Agent and its representatives may
conduct an annual audit of the Collateral, at the expense of the Borrower.

         Section 6.12      Use of Proceeds. In the case of the Borrower, use the
proceeds of the Credit Extensions (a) to pay fees and expenses incurred in
connection with the Loan Documents, (b) to provide for working capital for the
Borrower and the Subsidiaries in accordance with the provisions of this
Agreement, (c) for Permitted Acquisitions; (d) for the Permitted Stock
Redemption/ESOP Transactions ;provided that in no event shall more than $20
million in the aggregate be borrowed for such purpose during the term of this
Agreement; and (e) for other general corporate purposes not in contravention of
any Law or of any Loan Document (including a borrowing of an aggregate amount of
no more than $3.4 million to repay the Building Finance Loan subject to the
simultaneous release of the Lien securing the Building Finance Loan).

         Section 6.13      Further Assurances with Respect to Eligible
Subsidiaries. (a) Notify the Administrative Agent at the time that any Person
becomes an Eligible Subsidiary, (b) promptly thereafter (and in any event within
thirty (30) days), cause such Person to (i) become a

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Guarantor by executing and delivering to the Administrative Agent the Subsidiary
Guaranty, or if the Subsidiary Guaranty has been executed and delivered by
another Guarantor, a Joinder Agreement and such other documents as the
Administrative Agent shall deem appropriate for such purpose, (ii) perfect and
maintain the validity, effectiveness and any priority of security interests in
all of its personal property, assets and all proceeds and accessories therefrom
to secure the Obligations as contemplated herein and in the Collateral Documents
by executing and delivering the Security Agreement, or if the Security Agreement
has been executed and delivered by another Eligible Subsidiary, a Joinder
Agreement and such other documents as the Administrative Agent shall deem
appropriate for such purpose, and (iii) become a party to or execute all
applicable Collateral Documents, as determined by the Administrative Agent and
such other documents as the Administrative Agent shall deem appropriate for such
purpose, (c) promptly thereafter (and in any event within thirty (30) days)
pledge and maintain a pledge of one hundred percent (100%) of the capital stock
of such Eligible Subsidiary and (d) promptly thereafter (and in any event within
thirty (30) days) deliver, and cause such Person to deliver, to the
Administrative Agent documents of the types referred to in clauses (iii), (iv),
(vi), (viii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv), (xvi) and (xvii) of
Section 4.01(a) and favorable opinions of counsel to the Borrower and such
Eligible Subsidiary (which shall cover, among other things, the legality,
validity, binding effect and enforceability of the documentation referred to in
subsection (a) of Section 4.01), all in form, content and scope reasonably
satisfactory to the Administrative Agent.

         Section 6.14      Further Assurances with Respect to HMO Subsidiaries.
(a) After the consummation of the initial public offering of the Borrower, the
Borrower (i) shall use commercially reasonable efforts to obtain any necessary
consents and/or make any necessary filings in order to transfer the ownership of
Molina Healthcare of Michigan from Molina Healthcare of California to the
Borrower and (ii) if ownership is so transferred, shall obtain, or cause to be
obtained, any necessary consents and/or make any necessary filings in order to
pledge to the Administrative Agent one hundred percent (100%) of the capital
stock of Molina Healthcare of Michigan and shall take any and all action
necessary or reasonably requested by the Administrative Agent to maintain the
pledge of all such capital stock.

                  (b)      In the event the HMO Regulations in California change
or the undertaking agreement which prohibits the pledge of the capital stock of
Molina Healthcare of California or any of its Subsidiaries to secure a loan to
the Borrower or any of its Subsidiaries is terminated or changed at a date in
the future to permit the pledge of the capital stock of Molina Healthcare of
California or any of its Subsidiaries, the Borrower shall be required to take,
or cause to be taken, commercially reasonable efforts to pledge one hundred
percent (100%) of the capital stock of the Molina Healthcare of California and
its Subsidiaries.

                  (c)      (i) Notify the Administrative Agent at any time that
any other Person becomes an HMO Subsidiary, (ii) promptly thereafter (and in any
event within thirty (30) days) cause such Person to (A) become a party to and
execute all applicable Collateral Documents, as determined by the Administrative
Agent and such other documents as the Administrative Agent shall deem
appropriate for such purpose and (B) deliver to the Administrative Agent
documents of the type referred to in clauses (iii), (iv), (vi), (viii), (ix),
(xi), (xv), (xvi) and (xvii) of Section 4.01(a) and (iii) pledge and maintain
the pledge of one hundred percent (100%) of the capital

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stock of such HMO Subsidiary (subject to no Liens); provided, however with
respect to a Permitted Acquisition by Molina Healthcare of California or Molina
Healthcare of Michigan, while a wholly-owned Subsidiary of Molina Healthcare of
California, the actions specified in clauses (i) and (ii) of this clause (c)
shall only be required to the extent permitted by applicable Law.

         Section 6.15      Further Assurances with Respect to other Collateral.

                  (a)      To the fullest extent permitted by applicable Law,
execute, and cause each of the Subsidiaries (to the extent appropriate) to
execute, any and all further documents, financing statements, agreements and
instruments, and take all such further actions (including the filing and
recording of financing statements, fixture filings, mortgages, deeds of trust
and other documents), which may be required under any applicable Law, or which
the Administrative Agent or the Required Lenders may reasonably request, to
comply with the terms of this Agreement and the other Loan Documents, including
causing, to the fullest extent permitted by Law, (i) the Collateral to be
subject to a first priority security interest in favor of the Administrative
Agent (subject, in the case of non-possessory security interests, to the Liens
permitted by Section 7.01) and (ii) the pledge of the capital stock of the
Subsidiaries which capital stock is subject to a pledge pursuant to the Pledge
Agreement, in each case to secure all the Obligations, all at the expense of the
Borrower. The Borrower also agrees to provide to the Administrative Agent, from
time to time upon request, evidence reasonably satisfactory to the
Administrative Agent as to the validity, perfection and priority of the Liens
created or intended to be created by the Loan Documents.

                  (b)      If any property or asset is acquired or leased by the
Borrower or any of its Eligible Subsidiaries after the Closing Date, notify the
Administrative Agent thereof (except, in the case of personal property, such
notice shall not be required if the Administrative Agent has a valid first
priority perfected security interest in such property and assets by virtue of
any actions previously taken by or on behalf of the Administrative Agent), and
cause, to the fullest extent permitted by Law, subject to the next succeeding
sentence with respect to Real Property Assets acquired or leased after the
Closing Date, such property and assets to be subjected to a first priority
security interest, in the case of a Real Property Asset would be a first
priority deed of trust, in favor of the Administrative Agent (subject, in the
case of non-possessory security interests, to the Liens permitted by Section
7.01) take, and cause each of its Eligible Subsidiaries to take, to the fullest
extent permitted by Law, such actions as shall be necessary or reasonably
requested by the Administrative Agent or the Required Lenders to grant and
perfect such Liens, including the actions described in subsection (a) and will
obtain, and cause each of its Eligible Subsidiaries to obtain, Waiver Agreements
with respect (i) to real property assets that are leased by the Borrower or any
of its Eligible Subsidiaries and (ii) all such property and assets that are
located in a public warehouse. The Borrower and any of its Eligible Subsidiaries
shall only be required to provide a valid first priority perfected security
interest in a Real Property Asset acquired after the Closing Date with a market
value of $1 million or greater or a Real Property Asset in the form of a lease
entered into after the Closing Date (i) with annual rent of $500,000 or greater,
and (ii) wherein the granting of such lien does not cause a default by the
Borrower or its Eligible Subsidiary under the lease; provided the Borrower makes
a good faith effort to obtain

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permission from landlord to grant such lien. With respect to any such Real
Property Assets, the Borrower shall provide, or cause to be provided, the
following:

                                    (i)      only with respect to any such Real
                  Property Asset with a market value of $1,000,000 or greater,
                  or any such leasehold Real Property Asset with annual rent of
                  $500,000 or greater (and provided that the landlord consents
                  thereto without additional cost or expense to the Borrower or
                  its Eligible Subsidiary except for reasonable costs and legal
                  fees of the landlord, the Borrower and the Administrative
                  Agent), an as-built survey of the sites of the Mortgaged
                  Property (and floor plans for leasehold interests) that are
                  certified to the Administrative Agent and the Title Insurance
                  Company in a manner satisfactory to them, dated not more than
                  30 days prior to the date of the initial Credit Extension by
                  an independent professional licensed land surveyor
                  satisfactory to the Administrative Agent and the Title
                  Insurance Company (as defined hereinafter), which surveys on
                  which they are based shall be made in accordance with the
                  Minimum Standard Detail Requirements for Land Title Surveys
                  jointly established and adopted by the American Land Title
                  Association and the American Congress on Surveying and Mapping
                  in 1997 or 1999 and meeting the accuracy requirements as
                  defined therein, and, without limiting the generality of the
                  foregoing, there shall be surveyed and shown on such surveys
                  the following: (A) a current "as-built" survey showing the
                  location of any adjoining streets (including their widths and
                  any pavement or other improvements), easements (including the
                  recorded information with respect to all recorded
                  instruments), the mean high water base line or other legal
                  boundary lines of any adjoining bodies of water, fences,
                  zoning or restriction setback lines, rights-of-way, utility
                  lines to the points of connection and any encroachments; (B)
                  all means of ingress and egress, certifying the amount of
                  acreage and square footage, the address of the Mortgaged
                  Property, the legal description of the Mortgaged Property, and
                  also contain a location sketch of the Mortgaged Property; (C)
                  the location of all improvements as constructed on the
                  Mortgaged Property, all of which shall be within the boundary
                  lines of the Mortgaged Property and conform to all applicable
                  zoning ordinances, set-back lines and restrictions; (D) the
                  location of any Improvements on the Mortgaged Property with
                  the dimensions in relations to the lot and building lines; (E)
                  the measured distances from the Improvements to be set back
                  and specified distances from street or property lines in the
                  event that deed restrictions, recorded plats or zoning
                  ordinances require same; (F) all courses and distances
                  referred to in the legal description, and the names of all
                  adjoining owners on all sides of the Mortgaged Property, to
                  the extent available; and (G) the flood zone designation, if
                  any, in which the Mortgaged Property is located. The legal
                  description of the applicable Mortgaged Property shall be
                  shown on the face of each survey or affixed thereto, and the
                  same shall conform to the legal description contained in the
                  title policy described below;

                                    (ii)     A mortgagee's title insurance
                  policy (or policies) or marked up unconditional binder for
                  such insurance. Each such policy shall (A) be in an

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                  amount satisfactory to the Administrative Agent, (B) be issued
                  at ordinary rates, (C) insure that each Mortgage insured
                  thereby creates a valid first Lien on, and security interest
                  in, the Mortgaged Property (which for a leasehold Real
                  Property Asset shall mean the leasehold interest of the
                  Borrower and shall not include nor require encumbrance in any
                  manner whatsoever the fee estate of the landlord of such Real
                  Property Asset) free and clear of all Liens, except as
                  reasonably acceptable to the Administrative Agent, (D) name
                  the Administrative Agent for the benefit of the Lenders as the
                  insured thereunder, (E) be in the form of ALTA Loan Policy -
                  1970 Form B (Amended 10/17/70 and 10/17/84) (or equivalent
                  policies), if available, (F) contain such endorsements and
                  affirmative coverage as the Administrative Agent may
                  reasonably request in form and substance acceptable to the
                  Administrative Agent, including, without limitation (to the
                  extent applicable with respect to the relevant Mortgaged
                  Property and available in the jurisdiction in which such
                  Mortgaged Property is located), the following: variable rate
                  endorsement; survey endorsement, but only as to such Real
                  Property Assets for which a land survey is required pursuant
                  to clause (i) above; comprehensive endorsement; zoning (ALTA
                  3.1 with parking added) endorsement, but only as to such Real
                  Property Assets for which a land survey is required pursuant
                  to clause (i) above; first loss, last dollar and tie-in
                  endorsement; access coverage; separate tax parcel coverage;
                  usury; doing business; subdivision; environmental protection
                  lien; CLTA 119.2; contiguity coverage; and such other
                  endorsements as the Administrative Agent shall reasonably
                  require in order to provide insurance against specific risks
                  identified by the Administrative Agent in connection with the
                  Mortgaged Property (provided that all endorsements requested
                  by the Administrative Agent shall be made based on the
                  relative value of the Real Property Asset and the extent the
                  requested endorsement is generally available at commercially
                  reasonable rates) and (G) be issued by nationally recognized
                  title companies (collectively, the "Title Insurance Company"),
                  satisfactory to the Administrative Agent. The Administrative
                  Agent shall have received evidence satisfactory to it that all
                  premiums in respect of each such policy, all charges for
                  mortgage recording tax, and all related expenses, if any, have
                  been paid;

                                    (iii)    if requested by the Administrative
                  Agent, and generally available for the Real Property Asset at
                  commercially reasonable rates (but excluding a leasehold Real
                  Property Asset where such insurance is not required or
                  maintained under the terms of the subject lease), a policy of
                  flood insurance that (A) covers any parcel of the Mortgaged
                  Property that is located in a flood zone, and (B) is written
                  in an amount not less than the outstanding principal amount of
                  the Indebtedness secured by each relevant Mortgage or the
                  maximum limit of coverage made available with respect to the
                  particular type of Mortgaged Property under the National Flood
                  Insurance Act of 1968, whichever is less;

                                    (iv)     a copy of (A) all documents listed
                  as exceptions to title in, the title policy or policies
                  referred to in clause (ii) above and (B) all other material
                  documents affecting the Mortgaged Property in the possession
                  or under the

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<PAGE>

                  control of the Borrower, including, for those Real Property
                  Assets for which a land survey is requried under clause (i)
                  above, including all building, construction, environmental and
                  other permits, licenses, franchises, approvals, consents,
                  authorizations and other approvals required in connection with
                  the construction, ownership, use, occupation or operation of
                  the Mortgaged Property; and

                                    (v)      evidence reasonably acceptable to
                  the Administrative Agent that the Real Property Assets comply
                  with applicable zoning ordinances, if any.

                  (c)      At the time of delivery of the financial statements
and reports required by Section 6.01(a), deliver a schedule of the Borrower
setting forth (i) a list of registration numbers for all patents, trademarks,
service marks, tradenames and copyrights awarded to the Borrower or any of its
Eligible Subsidiaries since the last day of the immediately preceding fiscal
year and (ii) a list of all patent applications, trademark applications, service
mark applications, tradename applications and copyright applications submitted
by the Borrower or any of its Eligible Subsidiaries since the last day of the
immediately preceding fiscal year and the status of each application, all in
such form as shall be reasonably satisfactory to the Administrative Agent.

         Section  6.16     Performance of Material Contracts. Do the following,
and cause each of the Subsidiaries to do the following: (a) perform and observe
all the terms and provisions of each Material Contract to be performed or
observed by it; and (b) maintain each such Material Contract in full force and
effect, enforce each such Material Contract in accordance with its terms,
except, in either case, where the failure to do so, either individually or in
the aggregate, could not be reasonably likely to have a Material Adverse Effect.

         Section 6.17      Maintenance of Licensing, Etc. Preserve and maintain,
and cause each of the HMO Subsidiaries to preserve and maintain, (a) the
licensing and certification of each HMO Subsidiary pursuant to the HMO
Regulations, (b) all certifications and authorizations necessary to ensure that
the HMO Subsidiaries are eligible for all reimbursements available under the HMO
Regulations to the extent applicable to HMOs owned by the Borrower or any of the
Subsidiaries in their respective jurisdictions and (c) all licenses, permits,
authorizations and qualifications required under the HMO Regulations in
connection with the ownership or operation of HMOs.

         Section 6.18      Environmental. (a) Upon the reasonable written
request of the Administrative Agent following the occurrence of any event or the
discovery of any condition that the Administrative Agent or the Required Lenders
reasonably believe has caused (or could be reasonably expected to cause) the
representations and warranties set forth in Section 5.12 to be untrue in any
material respect, furnish or cause to be furnished to the Administrative Agent,
at the Borrower's expense, a report of an environmental assessment of reasonable
scope, form and depth, (including, where appropriate, invasive soil or
groundwater sampling) by a consultant reasonably acceptable to the
Administrative Agent as to the nature and extent of the presence of Hazardous
Materials on any Subject Properties and as to the compliance by the Borrower and
each Subsidiary with Environmental Laws at such Subject Properties. If the
Borrower fails to deliver such an environmental report within 75 days after
receipt of such written request then the

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Administrative Agent may arrange for the same, and the Borrower and each of the
Subsidiaries hereby grant to the Administrative Agent and their representatives
access to the Subject Properties to reasonably undertake such an assessment
(including, where appropriate, invasive soil or groundwater sampling). The
reasonable cost of any assessment arranged for by the Administrative Agent
pursuant to this provision will be payable by the Borrower on demand and added
to the obligations secured by the Collateral Documents.

                  (b)      Conduct and complete, and cause each of the
Subsidiaries to conduct and complete, all investigations, studies, sampling, and
testing and all remedial, removal, and other actions necessary to address all
Hazardous Materials on, from or affecting any of the Subject Properties to the
extent necessary for the Borrower and its Subsidiaries to be in compliance with
all Environmental Laws and with the validly issued orders and directives of all
Governmental Authorities with jurisdiction over such Subject Properties to the
extent any failure could have a Material Adverse Effect.

                                   ARTICLE VII
                               NEGATIVE COVENANTS

         So long as any Lender shall have any Commitment hereunder, any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of
Credit shall remain outstanding, the Borrower shall not, directly or indirectly:

         Section 7.01      Liens. Create, incur, assume or suffer to exist, or
permit any Subsidiary to create, incur, assume or suffer to exist, any Lien upon
any of its property, assets or revenues, whether now owned or hereafter
acquired, other than the following (collectively, the "Permitted Liens"):

                  (a)      Liens pursuant to any Loan Document;

                  (b)      Liens existing on the date hereof and listed on
Schedule 7.01 and any renewals or extensions thereof; provided that the property
covered thereby is not increased and any renewal or extension of the obligations
secured or benefited thereby is permitted by Section 7.03(b);

                  (c)      Liens for taxes, fees, assessments or other
governmental charges not yet due or which are not delinquent or remain payable
without penalty, or to the extent non-payment thereof is permitted by Section
6.04; provided that no notice of Lien has been filed or recorded under the Code
unless such is being contested in good faith and by appropriate proceedings
diligently conducted and adequate reserves with respect thereto are maintained
on the books of the applicable Person in accordance with GAAP;

                  (d)      carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not delinquent or which are being contested in good faith and by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture or
sale of the property subject thereto;

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                  (e)      pledges or deposits in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other social security legislation, other than any Lien imposed by ERISA;

                  (f)      easements, rights-of-way, restrictions and other
similar encumbrances affecting real property incurred in the ordinary course of
business which do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the applicable Person;

                  (g)      Liens securing judgments for the payment of money not
constituting an Event of Default under Section 8.01(h) or securing appeal or
other surety bonds related to such judgments; provided that enforcement of such
Liens is effectively stayed;

                  (h)      Liens securing Indebtedness permitted under Section
7.03(e); provided that (i) any such Lien attaches to such property concurrently
with or within 45 days of the acquisition thereof, (ii) such Lien does not at
any time encumber any property other than the property financed by such
Indebtedness, and (iii) the Indebtedness secured thereby does not exceed 100% of
the cost or fair market value, whichever is lower, of the property being
acquired on the date of acquisition;

                  (i)      any interest or title of a lessor under, and Liens
arising from UCC financing statements relating to, leases permitted by this
Agreement; and

                  (j)      Liens created or deemed to exist by the establishment
of trusts for the purpose of satisfying (i) Governmental Reimbursement Program
Costs and (ii) other actions or claims pertaining to the same or related
matters; provided that the Borrower in its reasonable discretion in each case
shall have established adequate reserves for such claims or actions.

         Section 7.02      Investments.  Make or hold, or permit any of the
Subsidiaries to make or hold, any Investments in any Person, except:

                  (a)      Investments by the Loan Parties held in the form of
cash equivalents or short-term marketable debt securities;

                  (b)      Investments made prior to the Closing Date and set
forth in Schedule 7.02;

                  (c)      Advances or loans to directors, officers and
employees in the ordinary course of business of the Borrower and the
Subsidiaries as presently conducted in an aggregate principal amount not to
exceed $1 million in the aggregate at any one time outstanding; provided,
however that any such advances or loans to directors or executive officers shall
only be permitted to the extent allowable under Sarbanes-Oxley;

                  (d)      Investments by the Borrower in and to any Loan Party
in the form of contributions to capital or loans or advances; provided that (i)
immediately before and after giving effect thereto, no Default exists or would
result therefrom, (ii) each item of intercompany Indebtedness shall be unsecured
and (iii) each item of Intercompany Indebtedness shall be evidenced by an
Intercompany Note which shall be pledged as security for the Obligations of the

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holder thereof under the Loan Documents and delivered to the Administrative
Agent pursuant to the terms of the Collateral Documents;

                  (e)      Investments by any Subsidiary in the Borrower or any
other Loan Party in the form of loans or advances;

                  (f)      Investments in any HMO Subsidiaries which are not
Loan Parties, and any other Subsidiaries which are not Loan Parties; provided
that such Investment (other than Investments in HMO Subsidiaries required for
capital adequacy requirements) shall not exceed in an aggregate amount $2.5
million at any time outstanding (on a cost basis);

                  (g)      Investments that constitute Permitted Acquisitions
and Investments that constitute the Permitted Stock Redemption/ESOP
Transactions;

                  (h)      (i) Required Advances and (ii) other advances to
Contract Providers (and their Affiliates) in an amount not to exceed (A) with
respect to any Contract Provider (and its Affiliates) individually, $1 million
in the aggregate at any time outstanding (excluding Required Advances) and (B)
with respect to Contract Providers collectively, $5 million in the aggregate at
any time outstanding (excluding Required Advances);

                  (i)      Investments by the Borrower in Swap Contracts
permitted under Section 7.03(d); and

                  (j)      Investments of a nature not addressed in any of the
foregoing subsections in an amount not to exceed $2.5 million in the aggregate
at any time outstanding.

         Section 7.03      Indebtedness. Create, incur, assume or suffer to
exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any
Indebtedness, except:

                  (a)      Indebtedness under the Loan Documents;

                  (b)      Indebtedness outstanding on the date hereof and
listed on Schedule 7.03 and any refinancings, refundings, renewals or extensions
thereof; provided that the amount of such Indebtedness is not increased at the
time of such refinancing, refunding, renewal or extension except by an amount
equal to a reasonable premium or other reasonable amount paid, and fees and
expenses reasonably incurred, in connection with such refinancing and by an
amount equal to any existing commitments unutilized thereunder;

                  (c)      Guarantees of any Guarantor in respect of
Indebtedness otherwise permitted hereunder of the Borrower;

                  (d)      obligations (contingent or otherwise) of the Borrower
existing or arising under any Swap Contract; provided that (i) such obligations
are (or were) entered into by such Person in the ordinary course of business for
the purpose of directly mitigating risks associated with liabilities,
commitments, investments, assets, or property held or reasonably anticipated by
such Person, or changes in the value of securities issued by such Person, and
not for purposes of speculation or taking a "market view," and (ii) such Swap
Contract does not contain any

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provision exonerating the non-defaulting party from its obligation to make
payments on outstanding transactions to the defaulting party;

                  (e)      Indebtedness in respect of Capitalized Leases and
purchase money obligations for fixed or capital assets within the limitations
set forth in the proviso in Section 7.01(h); provided, however, that the
aggregate amount of all such Indebtedness at any one time outstanding shall not
exceed $5 million;

                  (f)      Intercompany Indebtedness permitted under Section
7.02(d);

                  (g)      Indebtedness arising or existing with respect to
Governmental Reimbursement Program Costs; and

                  (h)      so long as no Default has occurred and is continuing
or would result therefrom, additional unsecured Indebtedness of the Borrower,
any Loan Party or any wholly-owned Subsidiary of the Borrower whose stock is
pledged pursuant to the Pledge Agreement not covered in the foregoing clauses in
an aggregate principal amount not to exceed $5 million at any time outstanding
pre-Successful IPO and $10 million at any time outstanding post-Successful IPO;
provided that such Indebtedness is not senior in right of payment to the payment
of the Indebtedness arising under this Agreement and the Loan Documents.

         Section 7.04      Fundamental Changes and Acquisitions.

                  (a)      Merge, dissolve, liquidate, consolidate with or into
another Person, or Dispose of, or permit any of the Subsidiaries to merge,
dissolve, liquidate, consolidate with or into another Person, or Dispose of,
(whether in one transaction or in a series of transactions) all or substantially
all of its assets (whether now owned or hereafter acquired) to or in favor of
any Person, except that, so long as no Default exists or would result therefrom:

                           (i)      Molina Healthcare, Inc., a California
         corporation, may effect a reincorporation by merger with and into
         Molina Healthcare, Inc., a Delaware corporation with Molina Healthcare,
         Inc., a Delaware corporation, being the surviving entity pursuant to
         and in accordance with the Reincorporation Merger Documents; provided
         that: (A) no Default exists or would result from such action; (B)
         satisfactory evidence is provided that no dissenters' rights exist with
         respect to the existing shareholders of Molina Healthcare, Inc., a
         California corporation, and all requisite shareholder approval of
         Molina Healthcare, Inc., a California corporation, and Molina
         Healthcare, Inc., a Delaware corporation, has been obtained and is in
         full force and effect; (C) all Obligations under the Loan Documents
         shall continue in full force and effect after Molina Healthcare, Inc.,
         a California corporation, effects the reincorporation by merger with
         and into Molina Healthcare, Inc., a Delaware corporation, on the same
         terms as applicable to Molina Healthcare, Inc., a California
         corporation, and the existing Subsidiary Guaranty shall remain in full
         force and effect and the Liens under the Collateral Documents shall
         remain in place with the same perfection and priority as required in
         the Loan Documents; (D) Molina Healthcare, Inc., a Delaware
         corporation, shall become the Borrower hereunder and under the
         Collateral Documents, shall execute and deliver an assumption agreement
         in form and substance satisfactory to the Administrative Agent and the
         Lenders and

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         Molina Healthcare, Inc., a Delaware corporation, and the Loan Parties
         shall take such other actions as the Administrative Agent reasonably
         deems necessary;

                           (ii)     a Loan Party may merge with the Borrower;
         provided that the Borrower shall be the continuing or surviving Person;

                           (iii)    a Loan Party (other than the Borrower) may
         be party to a transaction of merger or consolidation with another Loan
         Party;

                           (iv)     a Subsidiary may be a party to a transaction
         of merger or consolidation with a Person other than the Borrower or any
         Subsidiary; provided that (A) the surviving entity shall be a
         wholly-owned Subsidiary and shall execute and deliver such Joinder
         Agreement, Pledge Agreement, Security Agreement and Intercompany Notes,
         as applicable, and take other such action as may be necessary for
         compliance with the provisions of Sections 6.13, 6.14 and 6.15, and (B)
         the transaction shall otherwise constitute a Permitted Acquisition; and

                           (v)      a Subsidiary may enter into a transaction of
         merger or consolidation in connection with a Disposition permitted
         under Section 7.05.

                  (b)      Permit the Borrower or any Subsidiary to make any
Acquisition, unless:

                           (i)      in the case of an acquisition of capital
         stock of another Person, after giving effect to such acquisition,

                                    (A)      if the Acquisition is not of a
         controlling interest in the subject Person such that after giving
         effect thereto the subject Person will not be a Subsidiary, then such
         Acquisition will constitute an Investment permitted by Section 7.02;
         and

                                    (B)      if the Acquisition is of a
         controlling interest in the subject Person such that after giving
         effect thereto the subject Person will be a Subsidiary, then such
         Acquisition will constitute a Permitted Acquisition; and

                           (ii)     in the case of an Acquisition of all or any
         substantial portion of the Property (other than capital stock) of
         another Person, then such Acquisition will constitute a Permitted
         Acquisition.

         Section 7.05      Dispositions.  Make any Disposition or permit any
Subsidiary to make any Disposition, except:

                  (a)      Dispositions of obsolete or worn out property,
whether now owned or hereafter acquired, in the ordinary course of business;

                  (b)      Dispositions of inventory in the ordinary course of
business;

                  (c)      Dispositions of equipment or real property to the
extent that (i) such property is exchanged for credit against the purchase price
of similar replacement property or (ii)

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the proceeds of such Disposition are reasonably promptly applied to the purchase
price of similar replacement property;

                  (d)      Dispositions of property to a Loan Party;

                  (e)      Dispositions permitted by Section 7.04; and

                  (f)      non-exclusive licenses of IP Rights in the ordinary
course of business and substantially consistent with past practice for terms not
exceeding five years;

provided, however, that any Disposition pursuant to subsections (a) through (f)
shall be for fair market value.

         Section 7.06      Restricted Payments.  Make, or permit any Subsidiary
to make, any Restricted Payment; provided that:

                           (i)      the Borrower may so long as no Default
         exists or would result from such action, (A) make the redemptions and
         purchases in connection with Permitted Stock Redemption/ESOP
         Transactions; provided that after giving effect to any Permitted Stock
         Redemption/ESOP Transactions on a Pro Forma Basis and any Credit
         Extension related thereto, the Consolidated Leverage Ratio is less than
         1.0 times and (B) take the actions contemplated in the Reincorporation
         Merger Documents in accordance with the provisions set forth in the
         proviso of Section 7.04(a)(i);

                           (ii)     the Borrower may declare and pay dividends
         and distributions and finance the costs of Permitted Acquisitions
         payable solely in common stock of the Borrower; and

                           (iii)    any Subsidiary may declare and pay dividends
         to the Borrower or any wholly-owned Subsidiary of the Borrower.

         Section 7.07      Amendment, Etc. of Indebtedness, Other Material
Contracts and Constitutive Documents and Payments in respect of Indebtedness.

                  (a)      After the issuance thereof, amend or modify (or
permit the amendment or modification of (including any waivers of)), or permit
any Subsidiary to amend or modify (or permit the amendment or modification of
(including any waivers of)), the terms of any Indebtedness in a manner adverse
in any material respect to the interests of the Lenders (including, without
limitation, specifically shortening any maturity or average life to maturity or
requiring any payment sooner than previously scheduled or increasing the
interest rate or fees applicable thereto).

                  (b)      Cancel or terminate any other Material Contract or
consent to or accept any cancellation or termination thereof by any Subsidiary,
amend or modify (or permit the amendment or modification of (including any
waivers of)), or permit any Subsidiary to amend or modify (or permit the
amendment or modification of (including waivers of)), any Material Contract,
waive, or permit any Subsidiary to waive, any default under or breach any
Material Contract, unless, in each case, any such cancellation termination,
amendment or modification, or

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consent, waiver or approval thereunder could not reasonably be expected to have
a Material Adverse Effect.

                  (c)      Amend, or permit any of the Subsidiaries to amend,
its Organization Documents, unless, in each case, any such amendment is not
adverse in any material respect to the Lenders.

                  (d)      Make any payment, or permit any Subsidiary to make
any payment, in contravention of the terms of any subordination with respect to
any Indebtedness.

                  (e)      Except in connection with a refinancing or refunding
permitted hereunder, make any prepayment, redemption, defeasance or acquisition
for value (including, without limitation, by way of depositing money or
securities with the trustee with respect thereto before due for the purpose of
paying when due), or refund, refinance or exchange, or permit any Subsidiary to
make any prepayment, redemption, defeasance or acquisition for value (including,
without limitation, by way of depositing money or securities with the trustee
with respect thereto before due for the purpose of paying when due), or refund,
refinance or exchange, of any Indebtedness (other than the Indebtedness under
the Loan Documents and intercompany Indebtedness permitted hereunder) other than
regularly scheduled payments of principal and interest on such Indebtedness.

         Section 7.08      Change in Nature of Business. Make, or permit any
Subsidiary to make, any material change in the nature of its business as carried
on at the date hereof.

         Section  7.09     Transactions with Affiliates. Except for certain
existing transactions specifically set forth on Schedule 7.09, enter into or
permit to exist, or permit any Subsidiary to enter into or permit to exist, any
transaction or series of transactions with any Affiliate of the Borrower,
whether or not in the ordinary course of business, other than on fair and
reasonable terms and conditions substantially as favorable to the Borrower or
such Subsidiary as would be obtainable by it in a comparable arms-length
transaction with a Person other than an Affiliate; provided, however, other than
in connection with transactions pursuant to the Administrative Services
Agreements, the Borrower shall not, and shall not permit any of the Subsidiaries
to, enter into any transaction with an Affiliate if the amount to be paid
pursuant to any one such transaction (whether immediately or over time) exceeds
$2 million in the aggregate or for all transactions if the amount to be paid
pursuant to such transactions (whether immediately or over time) exceeds $10
million in the aggregate during the term of this Agreement.

         Section 7.10      Limitations on Restricted Actions. Enter into or
create or otherwise cause to exist or become effective, or permit any Subsidiary
to enter into or create or otherwise cause to exist or become effective, any
agreement or arrangement that: (a) limits the ability (i) of any Subsidiary to
make Restricted Payments to the Borrower or to otherwise transfer property to
the Borrower, (ii) of any Subsidiary to Guarantee the Indebtedness of the
Borrower or (iii) of the Borrower or any Subsidiary to create, incur, assume or
suffer to exist Liens on property of such Person; provided, however, that this
clause (iii) shall not prohibit (A) any negative pledge incurred or provided in
favor of any holder of Indebtedness permitted under Section 7.03(e) solely to
the extent any such negative pledge relates to the property financed by or the
subject of such Indebtedness or (B) any amendments to or modifications of any
undertaking between

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Molina Healthcare of California and Government Authorities in California solely
with respect to Molina Healthcare of California but only to the extent the
amendments and modifications could not reasonably be expected to have a material
adverse effect on Molina Healthcare of California; or (b) requires the grant of
a Lien to secure an obligation of such Person if a Lien is granted to secure
another obligation of such Person.

         Section 7.11      Operating Lease Obligations. Enter into, assume or
permit to exist, or allow any Subsidiary to enter into, assume or permit to
exist, any obligations for the payment of rent under Operating Leases that in
the aggregate would exceed $10 million in any fiscal year.

         Section 7.12      Use of Proceeds. Use the proceeds of any Credit
Extension, whether directly or indirectly, and whether immediately, incidentally
or ultimately, to purchase or carry margin stock (within the meaning of
Regulation U of the FRB) or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund indebtedness originally
incurred for such purpose.

         Section 7.13      Impairment of Security Interests. Permit any Loan
Party or any of their respective Subsidiaries to (a) take or omit to take any
action which action or omission might or would materially impair the security
interests in favor of the Administrative Agent with respect to the Collateral or
(b) grant to any Person (other than the Administrative Agent pursuant to the
Collateral Documents) any interest whatsoever in the Collateral, except for
Permitted Liens.

         Section 7.14      Ownership of Subsidiaries, Foreign Subsidiaries and
Other Restrictions Relating to Subsidiaries.

                  (a)      Ownership of Subsidiaries. Notwithstanding any other
provisions of this Agreement to the contrary, (i) permit any Person (other than
the Borrower or any wholly-owned Subsidiary; provided that Molina Healthcare of
California and, so long as Molina Healthcare of Michigan is a wholly-owned
Subsidiary of Molina Healthcare of California, Molina Healthcare of Michigan,
both Subsidiaries of the Borrower, shall not have any such right, except to the
extent permitted by the definition of Permitted Acquisition) to own any capital
stock of any Subsidiary (except Molina Healthcare of California presently owns
Molina Healthcare of Michigan, and except as a result of or in connection with a
dissolution, merger, consolidation or disposition of a Subsidiary permitted
under Section 7.04 or Section 7.05) or (ii) permit any Subsidiary to issue any
shares of preferred capital stock.

                  (b)      No Foreign Subsidiaries. Form or acquire, or cause
any of the Subsidiaries to form or acquire, any Foreign Subsidiaries.

                  (c)      Other Restrictions. Except as set forth in the final
proviso of the definition of Permitted Acquisition, form or acquire, any new
Subsidiaries of Molina Healthcare of California or, so long as Molina Healthcare
of Michigan is a wholly-owned Subsidiary of Molina Healthcare of California, of
Molina Healthcare of Michigan.

         Section 7.15      Fiscal Year. Change its fiscal year, or permit any
Subsidiary to change its fiscal year, unless such change is not adverse in any
respect to the Lenders.

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         Section 7.16      Partnerships, etc. Become, or permit any Subsidiary
to become, a general partner or limited partner or joint venture.

         Section 7.17      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 the aggregate amount of $15 million for the
Borrower and the Subsidiaries during each fiscal year; provided, however, that
so long as no Default has occurred and is continuing or would result from such
Capital Expenditure, any portion of any amount set forth above, if not expended
in the fiscal year for which it is permitted, may be carried over in an amount
equal to 50% of the unused portion for Capital Expenditures in the next
following fiscal year.

         Section 7.18      Financial Covenants.

                  (a)      Consolidated Net Worth. Permit Consolidated Net Worth
at any time to be less than the sum of (i) $81 million, (ii) an amount equal to
50% of the Consolidated Net Income earned in each full fiscal quarter ending
after March 31, 2003 (with no deduction for a net loss in any such fiscal
quarter), (iii) 85% of net cash proceeds from the initial public offering of the
Borrower, and (iv) an amount equal to 100% of net cash proceeds resulting from
the aggregate increases in Shareholders' Equity of the Borrower and the
Subsidiaries after the date of the initial public offering of the Borrower by
reason of the issuance and sale of capital stock or other equity interests of
the Borrower or any Subsidiary (other than issuances to the Borrower or a
wholly-owned Subsidiary), including any conversion of debt securities of the
Borrower into such capital stock or other equity interests, minus, $20.3 million
for the stock redemption portion of the Permitted Stock Redemption/ESOP
Transaction already consummated and minus, no more than $20 million for the ESOP
portion of the Permitted Stock Redemption/ESOP Transaction upon the occurrence
thereof.

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

                                                           Minimum Fixed
                                                          Charge Coverage
           Four Fiscal Quarters Ending                         Ratio
         ----------------------------------------------------------------
         Closing Date through June 30, 2004                     1.6x
         July 1, 2004 through June 30, 2005                     1.25x
         July 1, 2005 and each fiscal quarter thereafter        1.5x

                  (c)      Consolidated Leverage Ratio. Permit the Consolidated
Leverage Ratio at any time during any period of four fiscal quarters of the
Borrower to be greater than 2.00:1.0.

         Section 7.19      Risk-Based Capital Ratio.  As of the end of each
fiscal quarter:

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                           (a)      With respect to HMO Subsidiaries operating
         in a state in which regulatory action may be taken against HMOs that do
         not maintain a minimum risk-based capital threshold at a level equal to
         or greater than Company Action Level, permit each such HMO Subsidiary
         to maintain a ratio of Total Adjusted Capital to Risk-Based Capital at
         a level less than 1.10:1.00; and

                           (b)      With respect to all other HMO Subsidiaries,
         permit each such HMO Subsidiary to maintain a ratio of Total Adjusted
         Capital to the applicable state's risk-based capital threshold at a
         level less than 1.25:1.00; provided if a state's risk-based capital
         threshold exceeds or would exceed the Company Action Level (if such
         state had adopted, or in the future adopts, the HMO Model Act), then
         permit each such HMO Subsidiary to maintain a ratio of Total Adjusted
         Capital to Risk-Based Capital at a level less than 1.10:1.00;

provided in each case for the first three fiscal quarters of each year, the
denominator shall be the prescribed level as of the end of the preceding fiscal
year, and for the last fiscal quarter of each year, the denominator shall be the
prescribed level as of the end of such fiscal year.

                                  ARTICLE VIII
                         EVENTS OF DEFAULT AND REMEDIES

         Section 8.01      Events of Default.  Any of the following shall
constitute an Event of Default:

                  (a)      Non-Payment. The Borrower or any other Loan Party
fails to pay (i) when and as required to be paid herein, any amount of principal
of any Loan or any L/C Obligation, or (ii) within three days after the same
becomes due, any interest on any Loan or on any L/C Obligation, or any
commitment or other fee due hereunder, or (iii) within five days after the same
becomes due, any other amount payable hereunder or under any other Loan
Document; or

                  (b)      Specific Covenants. The Borrower fails to perform or
observe any term, covenant or agreement contained in any of Section 6.01, 6.02,
6.03, 6.05, 6.12, 6.13, 6.14 or 6.15 or Article VII; or

                  (c)      Other Defaults. The Borrower fails to perform or
observe any other covenant or agreement (not specified in subsection (a) or (b)
above) contained in any Loan Document on its part to be performed or observed
and such failure continues for 30 days; or

                  (d)      Representations and Warranties. Any representation,
warranty, certification or statement of fact made or deemed made by or on behalf
of the Borrower or any other Loan Party herein, in any other Loan Document, or
in any document delivered in connection herewith or therewith shall be incorrect
or misleading when made or deemed made; or

                  (e)      Cross-Default. (i) The Borrower or any Subsidiary (A)
fails to make any payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) beyond the applicable grace
period with respect thereto, if any in respect of (x) the

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Building Finance Loan or (y) any other Indebtedness or Guarantee (other than
Indebtedness hereunder and Indebtedness under Swap Contracts) having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than the Threshold Amount, or (B) fails to observe or
perform any other agreement or condition relating to any such Indebtedness or
Guarantee or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event occurs, the effect of which default or
other event is to cause, or to permit the holder or holders of such Indebtedness
or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness to be demanded or to become
due or to be repurchased, prepaid, defeased or redeemed (automatically or
otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity, or such Guarantee to
become payable or cash collateral in respect thereof to be demanded or; (ii) the
Borrower or any Subsidiary fails in the performance or observance (beyond the
applicable grace period with respect thereto, if any) of any Material Contract
(other than those covered in clauses (i) and (iii) hereof) and such default
together with any other such defaults, could reasonably be expected to have a
Material Adverse Effect; or (iii) there occurs under any Swap Contract an Early
Termination Date (as defined in such Swap Contract) resulting from (A) any event
of default under such Swap Contract as to which the Borrower or any Subsidiary
is the Defaulting Party (as defined in such Swap Contract) or (B) any
Termination Event (as defined in such Swap Contract) under such Swap Contract as
to which the Borrower or any Subsidiary is an Affected Party (as defined in such
Swap Contract) and, in either event, the Swap Termination Value owed by the
Borrower or such Subsidiary as a result thereof is greater than the Threshold
Amount; or

                  (f)      Insolvency Proceedings, Etc. The Borrower or any
Subsidiaries (i) institutes or consents to the institution of any proceeding
under any Debtor Relief Law, or makes an assignment for the benefit of creditors
or (ii) applies for or consents to the appointment of any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer for it or
for all or any material part of its property; or any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer is
appointed without the application or consent of such Person and the appointment
continues undischarged or unstayed for 60 calendar days; or any proceeding under
any Debtor Relief Law relating to any such Person or to all or any material part
of its property is instituted without the consent of such Person and continues
undismissed or unstayed for 60 calendar days, or an order for relief is entered
in any such proceeding; or

                  (g)      Inability to Pay Debts; Attachment. (i) The Borrower
or any Subsidiary admits in writing its inability or fails generally to pay its
debts as they become due, or (ii) any writ or warrant of attachment or execution
or similar process is issued or levied against all or any material part of the
property of any such Person and is not released, vacated or fully bonded within
30 days after its issue or levy; or

                  (h)      Judgments. There is entered against the Borrower or
any Subsidiary (i) a final judgment or order for the payment of money in an
aggregate amount exceeding the Threshold Amount (to the extent not covered by
independent third-party insurance as to which the insurer does not dispute
coverage), or (ii) any one or more non-monetary final judgments that

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have, or could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect and, in either case, there is a period of 30 (thirty)
consecutive days during which a stay of enforcement of such judgment, by reason
of a pending appeal or otherwise, is not in effect; or

                  (i)      ERISA. (i) An ERISA Event occurs with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Borrower or any Subsidiary under Title IV
of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate
amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA
Affiliate fails to pay when due, after the expiration of any applicable grace
period, any installment payment with respect to its withdrawal liability under
Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of the Threshold Amount; or

                  (j)      Invalidity of Loan Documents. Any Loan Document, at
any time after its execution and delivery and for any reason other than as
expressly permitted hereunder or satisfaction in full of all the Obligations,
ceases to be in full force and effect; or any Loan Party or any other Person
contests in any manner the validity or enforceability of any Loan Document; or
any Responsible Officer of a Loan Party denies that it has any or further
liability or obligation under any Loan Document, or purports to revoke,
terminate or rescind any Loan Document, or in the case of any Lien granted
pursuant to any Collateral Document (including any Lien granted after the
Closing Date in accordance with Section 6.13, 6.14 or 6.15) in favor of the
Administrative Agent, such Lien ceases to have the priority purported to be
granted under such Collateral Document (other than pursuant to the terms thereof
or hereunder) or is declared by a court of competent jurisdiction to be null and
void, invalid or unenforceable in any respect; or

                  (k)      Subsidiary Guaranty. The Subsidiary Guaranty given by
any Guarantor (including any Person that becomes a Guarantor after the Closing
Date in accordance with Section 6.13) or any provision thereof shall cease to be
in full force and effect, or any Responsible Officer of a Guarantor (including
any Person that becomes a Guarantor after the Closing Date in accordance with
Section 6.13) or any Person acting by or on behalf of such Guarantor shall deny
or disaffirm such Guarantor's obligations under the Subsidiary Guaranty, or any
Guarantor shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to the
Subsidiary Guaranty; or

                  (l)      Change of Control. There occurs any Change of Control
with respect to the Borrower; or

                  (m)      HMO Event. (i) An HMO Event shall remain unremedied
for sixty (60) days after the occurrence thereof (or such lesser period of time,
if any, as the HMO Regulator administering the HMO Regulations shall have
imposed for the cure of such HMO Event), or (ii) any HMO Subsidiary shall suffer
the loss of twenty-five percent (25%) or more of the enrolled recipients for
which it is responsible as measured from the beginning of the previous month or
from the close of its immediately preceding fiscal-year end and could reasonably
be expected to have a Material Adverse Effect; or

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                  (n)      Exclusion Event. There shall occur an Exclusion Event
that would result in a Material Adverse Effect.

         Section 8.02      Remedies Upon Event of Default. If any Event of
Default occurs and is continuing, the Administrative Agent shall, at the request
of, or may, with the consent of, the Required Lenders, take any or all of the
following actions:

                  (a)      declare the Commitment of each Lender to be
terminated, whereupon such Commitments and obligation shall be terminated;

                  (b)      declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and all other
amounts owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Borrower;

                  (c)      require that the Borrower Cash Collateralize the L/C
Obligations (in an amount equal to the then Outstanding Amount thereof); and

                  (d)      exercise on behalf of itself and the Lenders all
rights and remedies available to it and the Lenders under applicable Law or the
Loan Documents, including, without limitation, all rights and remedies existing
under the Collateral Documents and all rights and remedies against a Guarantor;

provided, however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to the Borrower under the Bankruptcy Code of the
United States, the obligation of each Lender to make Loans and any obligation of
the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the
unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable, and the
obligation of the Borrower to Cash Collateralize the L/C Obligations as
aforesaid shall automatically become effective, in each case without further act
of the Administrative Agent or any Lender.

         Section 8.03      Application of Funds. After the exercise of remedies
provided for in Section 8.02 (or after the Loans have automatically become
immediately due and payable and the L/C Obligations have automatically been
required to be Cash Collateralized as set forth in the proviso to Section 8.02),
any amounts received on account of the Obligations shall be applied by the
Administrative Agent in the following order:

         First, to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts (including Attorney Costs and amounts
payable under Article III hereof and Section 2.5 of the Subsidiary Guaranty)
payable to the Administrative Agent in its capacity as such;

         Second, to payment of that portion of the Obligations constituting
fees, indemnities and other amounts (other than principal and interest) payable
to the Lenders (including Attorney Costs and amounts payable under Article III
hereof and Section 2.5 of the Subsidiary Guaranty),

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ratably among them in proportion to the amounts described in this clause Second
payable to them;

         Third, to payment of that portion of the Obligations constituting
accrued and unpaid interest on the Loans and L/C Borrowings, ratably among the
Lenders in proportion to the respective amounts described in this clause Third
payable to them;

         Fourth, (i) to payment of that portion of the Obligations constituting
unpaid principal of the Loans and L/C Borrowings, ratably among the Lenders in
proportion to the respective amounts described in this subclause (i) to this
clause Fourth held by them and (ii) to payment of that portion of the
Obligations constituting amounts owing under or in respect of Secured Swap
Contracts, ratably among the Swap Banks in proportion to the respective amounts
described in this subclause (ii) to this clause Fourth held by them;

         Fifth, to the Administrative Agent for the account of the L/C Issuer,
to Cash Collateralize that portion of L/C Obligations comprised of the aggregate
undrawn amount of Letters of Credit; and

         Last, the balance, if any, after all of the Obligations have been
indefeasibly paid in full, to the Borrower or as otherwise required by
applicable Law.

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate
undrawn amount of Letters of Credit pursuant to clause Fifth above shall be
applied to satisfy drawings under such Letters of Credit as they occur. If any
amount remains on deposit as Cash Collateral after all Letters of Credit have
either been fully drawn or expired, such remaining amount shall be applied to
the other Obligations, if any, in the order set forth above.

                                   ARTICLE IX
                              ADMINISTRATIVE AGENT

         Section 9.01      Appointment and Authorization of Administrative
Agent.

                  (a)      Each Lender hereby irrevocably appoints, designates
and authorizes the Administrative Agent to take such action on its behalf under
the provisions of this Agreement and each other Loan Document and to exercise
such powers and perform such duties as are expressly delegated to it by the
terms of this Agreement or any other Loan Document, together with such powers as
are reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere herein or in any other Loan Document, neither the
Administrative Agent nor any other Agent-Related Person shall have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent and any other Agent-Related Persons have or be deemed to
have any fiduciary relationship with any Lender or participant, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent and any other Agent-Related Persons. Without
limiting the generality of the foregoing sentence, the use of the term "agent"
herein and in the other Loan Documents with reference to the Administrative
Agent is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable Law. Instead, such
term is used

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merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties.

                  (b)      The L/C Issuer shall act on behalf of the Lenders
with respect to any Letters of Credit issued by it and the documents associated
therewith, and the L/C Issuer shall have all of the benefits and immunities (i)
provided to the Administrative Agent in this Article IX with respect to any acts
taken or omissions suffered by the L/C Issuer in connection with Letters of
Credit issued by it or proposed to be issued by it and the applications and
agreements for letters of credit pertaining to such Letters of Credit as fully
as if the term "Administrative Agent" as used in this Article IX and in the
definition of "Agent-Related Person" included the L/C Issuer with respect to
such acts or omissions, and (ii) as additionally provided herein with respect to
the L/C Issuer.

         Section 9.02      Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel and other consultants or experts concerning all matters pertaining to
such duties. The Administrative Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects in the
absence of gross negligence or willful misconduct.

         Section 9.03      Liability of Agent-Related Persons. No Agent-Related
Person shall (a) be liable for any action taken or omitted to be taken by any of
them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence or
willful misconduct in connection with its duties expressly set forth herein), or
(b) be responsible in any manner to any Lender or participant for any recital,
statement, representation or warranty made by any Loan Party or any officer
thereof, contained herein or in any other Loan Document, or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Administrative Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of any Loan Party or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Lender or participant to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party or any Affiliate thereof.

         Section 9.04      Reliance by Administrative Agent.

                  (a)      The Administrative Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, communication,
signature, resolution, representation, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, electronic mail
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to any Loan Party), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under any Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate,

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and, if it so requests, it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Required Lenders (or such greater number of Lenders as may be
expressly required hereby in any instance) and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders.

                  (b)      For purposes of determining compliance with the
conditions specified in Section 4.01, each Lender that has signed this Agreement
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 Closing
Date specifying its objection thereto.

         Section 9.05      Notice of Default. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Administrative Agent for the account of the Lenders, unless
the Administrative Agent shall have received written notice from a Lender or the
Borrower referring to this Agreement, describing such Default and stating that
such notice is a "notice of default." The Administrative Agent will notify the
Lenders of its receipt of any such notice. The Administrative Agent shall take
such action with respect to such Default as may be directed by the Required
Lenders in accordance with Article VIII; provided, however, that unless and
until the Administrative Agent has received any such direction, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default as it shall deem
advisable or in the best interest of the Lenders.

         Section 9.06      Credit Decision; Disclosure of Information by
Administrative Agent. Each Lender acknowledges that no Agent-Related Person has
made any representation or warranty to it, and that no act by the Administrative
Agent hereafter taken, including any consent to and acceptance of any assignment
or review of the affairs of any Loan Party or any Affiliate thereof, shall be
deemed to constitute any representation or warranty by any Agent-Related Person
to any Lender as to any matter, including whether Agent-Related Persons have
disclosed material information in their possession. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other

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condition and creditworthiness of the Loan Parties and their respective
Subsidiaries, and all applicable bank or other regulatory Laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Borrower. Each Lender also represents that
it will, independently and without reliance upon any Agent-Related Person and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent herein, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of any of the Loan Parties or any of their
respective Affiliates which may come into the possession of any Agent-Related
Person.

         Section 9.07      Indemnification of Administrative Agent. Whether or
not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand each Agent-Related Person (to the extent not reimbursed by
or on behalf of the Borrower or any Guarantor and without limiting the
obligation of the Borrower or any Guarantor to do so), pro rata, and hold
harmless each Agent-Related Person from and against any and all Indemnified
Liabilities incurred by it; provided, however, that no Lender shall be liable
for the payment to any Agent-Related Person of any portion of such Indemnified
Liabilities to the extent determined in a final, nonappealable judgment by a
court of competent jurisdiction to have resulted from such Agent-Related
Person's own gross negligence or willful misconduct; provided, however, that no
action taken in accordance with the directions of the Required Lenders shall be
deemed to constitute gross negligence or willful misconduct for purposes of this
Section 9.07. In the case of any investigation, litigation or proceeding giving
rise to Indemnified Liabilities, this Section 9.07 applies whether any such
investigation, litigation or proceeding is brought by any Lender or any other
Person. Without limitation of the foregoing, each Lender shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Administrative
Agent is not reimbursed for such expenses by or on behalf of the Borrower. The
undertaking in this Section shall survive termination of the Aggregate
Commitments, the payment of all other Obligations and the resignation of the
Administrative Agent.

         Section 9.08      Administrative Agent in its Individual Capacity. Bank
of America and its Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with each of the Loan Parties and their respective Affiliates as though
Bank of America were not the Administrative Agent or the L/C Issuer hereunder
and without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, Bank of America or its Affiliates may receive
information regarding any Loan Party or its Affiliates (including information
that may be subject to confidentiality obligations in favor of such Loan Party
or such Affiliate) and acknowledge that the Administrative Agent shall be under
no obligation to provide such information to them. With respect to its Loans,
Bank of America shall have the same rights and powers under this Agreement as
any other Lender and may exercise such rights and powers as though it were not
the Administrative Agent or the L/C Issuer, and the terms "Lender" and "Lenders"
include Bank of America in its individual capacity.

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         Section 9.09      Successor Administrative Agent. The Administrative
Agent may resign as Administrative Agent upon 30 days' notice to the Lenders and
the Borrower; provided that any such resignation by Bank of America shall also
constitute its resignation as L/C Issuer. If the Administrative Agent resigns
under this Agreement, the Required Lenders shall appoint from among the Lenders
a successor administrative agent for the Lenders, which successor administrative
agent shall be consented to by the Borrower at all times other than during the
existence of an Event of Default (which consent of the Borrower shall not be
unreasonably withheld or delayed). If no successor administrative agent is
appointed prior to the effective date of the resignation of the Administrative
Agent, the Administrative Agent may appoint, after consulting with the Lenders
and the Borrower, a successor administrative agent from among the Lenders. Upon
the acceptance of its appointment as successor administrative agent hereunder,
the Person acting as such successor administrative agent shall succeed to all
the rights, powers and duties of the retiring Administrative Agent and L/C
Issuer and the respective terms "Administrative Agent" and "L/C Issuer" shall
mean such successor administrative agent and Letter of Credit issuer and the
retiring Administrative Agent's appointment, powers and duties as Administrative
Agent shall be terminated and the retiring L/C Issuer's rights, powers and
duties as such shall be terminated, without any other or further act or deed on
the part of such retiring L/C Issuer or any other Lender, other than the
obligation of the successor L/C Issuer to issue letters of credit in
substitution for the Letters of Credit, if any, existing at the time of such
succession or to make other arrangements satisfactory to the retiring L/C Issuer
to effectively assume the obligations of the retiring L/C Issuer with respect to
such Letters of Credit. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Article IX and
Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement. If no successor administrative agent has accepted appointment as
Administrative Agent by the date which is 30 days following a retiring
Administrative Agent's notice of resignation, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective and the
Lenders shall perform all of the duties of the Administrative Agent hereunder
until such time, if any, as the Required Lenders appoint a successor agent as
provided for above.

         Section 9.10      Administrative Agent May File Proofs of Claim. In
case of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to any Loan Party, the Administrative Agent (irrespective of
whether the principal of any Loan or L/C Obligation shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of
whether the Administrative Agent shall have made any demand on the Borrower)
shall be entitled and empowered, by intervention in such proceeding or
otherwise:

                  (a)      to file and prove a claim for the whole amount of the
principal and interest owing and unpaid in respect of the Loans, L/C Obligations
and all other Obligations that are owing and unpaid and to file such other
documents as may be necessary or advisable in order to have the claims of the
Lenders and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders and the
Administrative Agent and their respective agents and counsel and all other
amounts due the Lenders and the Administrative Agent under Sections 2.03(i) and
(j), 2.09 and 10.04) allowed in such judicial proceeding; and

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                  (b)      to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Sections 2.09 and 10.04.

         Nothing contained herein shall be deemed to authorize the
Administrative Agent to authorize or consent to or accept or adopt on behalf of
any Lender any plan of reorganization, arrangement, adjustment or composition
affecting the Obligations or the rights of any Lender or to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such
proceeding.

         Section 9.11      Collateral and Guaranty Matters. The Lenders
irrevocably authorize the Administrative Agent, at its option and in its
discretion,

                  (a)      to release any Lien on any property granted to or
held by the Administrative Agent under any Loan Document (i) upon termination of
the Aggregate Commitments and payment in full of all Obligations (other than
contingent indemnification obligations) and the expiration or termination of all
Letters of Credit, (ii) that is sold or to be sold as part of or in connection
with any sale permitted hereunder or under any other Loan Document, or (iii)
subject to Section 10.01, if approved, authorized or ratified in writing by the
Required Lenders;

                  (b)      to subordinate any Lien on any property granted to or
held by the Administrative Agent under any Loan Document to the holder of any
Lien on such property that is permitted by Section 7.01(h); and

                  (c)      to release any Guarantor from its obligations under
the Subsidiary Guaranty if such Person ceases to be a Subsidiary as a result of
a transaction permitted hereunder.

         Upon request by the Administrative Agent at any time, the Required
Lenders will confirm in writing the Administrative Agent's authority to release
or subordinate its interest in particular types or items of property, or to
release any Guarantor from its obligations under the Subsidiary Guaranty
pursuant to this Section 9.11.

         Section  9.12     Other Agents; Arrangers and Managers. None of the
Lenders or other Persons identified on the facing page or signature pages of
this Agreement as a "syndication agent," "documentation agent," "co-agent,"
"book manager," "book runner," "lead manager," "arranger," "lead arranger,"
"co-lead arranger" or "co-arranger" shall have any right, power, obligation,
liability, responsibility or duty under this Agreement other than, in the case
of such Lenders, those applicable to all Lenders as such. Without limiting the
foregoing, none of the

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Lenders or other Persons so identified shall have or be deemed to have any
fiduciary relationship with any Lender. Each Lender acknowledges that it has not
relied, and will not rely, on any of the Lenders or other Persons so identified
in deciding to enter into this Agreement or in taking or not taking action
hereunder.

                                   ARTICLE X
                                  MISCELLANEOUS

         Section  10.01    Amendments, Etc. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent to any
departure by the Borrower or any other Loan Party therefrom, shall in any event
be effective unless the same shall be in writing and signed by the Required
Lenders and the Borrower or the applicable Loan Party, as the case may be, and
acknowledged by the Administrative Agent, then each such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such amendment, waiver or consent shall:

                  (a)      waive any condition set forth in Section 4.01(a)
without the written consent of each Lender;

                  (b)      extend or increase the Commitment of any Lender (or
reinstate any Commitment terminated pursuant to Section 8.02) without the
written consent of such Lender;

                  (c)      postpone any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) or any scheduled or mandatory
reduction of the Aggregate Commitments hereunder or under any other Loan
Document without the written consent of each Lender directly affected thereby;

                  (d)      reduce the principal of, or the rate of interest
specified herein on, any Loan or L/C Borrowing, or (subject to clause (iii) of
the second proviso to this Section 10.01) any fees or other amounts payable
hereunder or under any other Loan Document without the written consent of each
Lender directly affected thereby; provided, however, that only the consent of
the Required Lenders shall be necessary (i) to amend the definition of "Default
Rate" or to waive any obligation of the Borrower to pay interest at the Default
Rate or (ii) to amend any financial covenant hereunder (or any defined term used
therein) even if the effect of such amendment would be to reduce the rate of
interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder;

                  (e)      change Section 2.13 or Section 8.03 in a manner that
would alter the pro rata sharing of payments required thereby without the
written consent of each Lender;

                  (f)      change any provision of this Section or the
definition of "Required Lenders" or any other provision hereof specifying the
number or percentage of Lenders required to amend, waive or otherwise modify any
rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender; or

                  (g)      release all or substantially all of the Guarantors
from the Subsidiary Guaranty without the written consent of each Lender, or
release all or substantially all of the

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Collateral except as specifically permitted by the Loan Documents without the
written consent of each Lender;

provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the L/C Issuer in addition to the Lenders required above,
affect the rights or duties of the L/C Issuer under this Agreement or any Letter
of Credit Application relating to any Letter of Credit issued or to be issued by
it, (ii) no amendment, waiver or consent shall, unless in writing and signed by
the Administrative Agent in addition to the Lenders required above, affect the
rights or duties of the Administrative Agent under this Agreement or any other
Loan Document, and (iii) each of the Fee Letter and the Commitment Letter may be
amended, or rights or privileges thereunder waived, in a writing executed only
by the parties thereto. Notwithstanding anything to the contrary herein, no
Defaulting Lender shall have any right to approve or disapprove any amendment,
waiver or consent hereunder, except that the Commitment of such Lender may not
be increased or extended without the consent of such Lender. Upon delivery by
the Borrower of each Compliance Certificate of Responsible Officers certifying
supplements to the Schedules to this Agreement pursuant to Section 6.02(b), the
schedule supplements attached to each such certificate shall be incorporated
into and become a part of and supplement Schedules 5.08, 5.11, 5.20, 5.24 and
6.07 hereto, as applicable, and the Administrative Agent may attach such
schedule supplements to such Schedules, and each reference to such Schedules
shall mean and be a reference to such Schedules, as supplemented pursuant
thereto.

         Section 10.02     Notices and Other Communications; Facsimile Copies.

                  (a)      General. Unless otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including by facsimile transmission). All such written notices shall be mailed,
faxed or delivered to the applicable address, facsimile number or (subject to
subsection (c) below) electronic mail address, and all notices and other
communications expressly permitted hereunder to be given by telephone shall be
made to the applicable telephone number, as follows:

                           (i)      if to the Borrower, the Administrative Agent
         or the L/C Issuer, to the address, facsimile number, electronic mail
         address or telephone number specified for such Person on Schedule 10.02
         or to such other address, facsimile number, electronic mail address or
         telephone number as shall be designated by such party in a notice to
         the other parties hereto; and

                           (ii)     if to any other Lender, to the address,
         facsimile number, electronic mail address or telephone number specified
         in its Administrative Questionnaire or to such other address, facsimile
         number, electronic mail address or telephone number as shall be
         designated by such party in a notice to the Borrower, the
         Administrative Agent and the L/C Issuer.

All such notices and other communications shall be deemed to be given or made
upon the earlier to occur of (i) actual receipt by the relevant party hereto and
(ii) (A) if delivered by hand or by courier, when signed for by or on behalf of
the relevant party hereto; (B) if delivered by mail, four Business Days after
deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent
and receipt has been confirmed by telephone; and (D) if delivered by electronic
mail

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(which form of delivery is subject to the provisions of subsection (c)
below), when delivered; provided, however, that notices and other communications
to the Administrative Agent and the L/C Issuer pursuant to Article II shall not
be effective until actually received by such Person. In no event shall a
voicemail message be effective as a notice, communication or confirmation
hereunder.

                  (b)      Effectiveness of Facsimile Documents and Signatures.
Loan Documents may be transmitted and/or signed by facsimile. The effectiveness
of any such documents and signatures shall, subject to applicable Law, have the
same force and effect as manually-signed originals and shall be binding on all
Loan Parties, the Administrative Agent, the Syndication Agent, the L/C Issuer,
the Co-Lead Arrangers and the Lenders. The Administrative Agent may also require
that any such documents and signatures be confirmed by a manually-signed
original thereof; provided, however, that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile document or signature.

                  (c)      Limited Use of Electronic Mail. Electronic mail and
Internet and intranet websites may be used only to distribute routine
communications, such as financial statements and other information as provided
in Section 6.02, and to distribute Loan Documents for execution by the parties
thereto, and may not be used for any other purpose.

                  (d)      Reliance by Administrative Agent and Lenders. The
Administrative Agent and the Lenders shall be entitled to rely and act upon any
notices (including written or telephonic Loan Notices) purportedly given by or
on behalf of the Borrower even if (i) such notices were not made in a manner
specified herein, were incomplete or were not preceded or followed by any other
form of notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof. The Borrower shall indemnify
each Agent-Related Person and each Lender from all losses, costs, expenses and
liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of the Borrower. All telephonic notices to and
other communications with the Administrative Agent may be recorded by the
Administrative Agent, and each of the parties hereto hereby consents to such
recording.

         Section 10.03     No Waiver; Cumulative Remedies. No failure by any
Lender or the Administrative Agent to exercise, and no delay by any such Person
in exercising, any right, remedy, power or privilege hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by Law.

         Section 10.04     Attorney Costs, Expenses and Taxes. The Borrower
agrees (a) to pay or reimburse the Administrative Agent and the Co-Lead
Arrangers for all reasonable costs and expenses incurred in connection with the
development, preparation, negotiation and execution of the Commitment Letter,
the Fee Letter, this Agreement and the other Loan Documents, the due diligence
related thereto, and the syndication of the Loans, and any amendment, waiver,
consent or other modification of the provisions hereof and thereof (whether or
not the transactions contemplated hereby or thereby are consummated), and the
consummation and administration of the transactions contemplated hereby and
thereby, including all Attorney Costs, and (b) to pay or

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reimburse the Administrative Agent and each Lender for all reasonable costs and
expenses incurred in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or the other Loan
Documents (including all such costs and expenses incurred during any "workout"
or restructuring in respect of the Obligations and during any legal proceeding,
including any proceeding under any Debtor Relief Law), including all Attorney
Costs. The foregoing costs and expenses shall include all search, filing,
recording, title insurance and appraisal charges and fees and taxes related
thereto, and other out-of-pocket expenses incurred by the Administrative Agent
and the cost of independent public accountants and other outside experts
retained by the Administrative Agent or any Lender. All amounts due under this
Section 10.04 shall be payable within ten Business Days after demand therefor.
The agreements in this Section shall survive the termination of the Aggregate
Commitments and repayment of all other Obligations.

         Section 10.05     Indemnification by the Borrower. Whether or not the
transactions contemplated hereby are consummated, the Borrower shall indemnify
and hold harmless each Agent-Related Person, each Co-Lead Arranger, the
Syndication Agent, each Lender and their respective Affiliates, directors,
officers, employees, counsel, agents and attorneys-in-fact (collectively the
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, claims, demands, actions, judgments, suits, costs, expenses
and disbursements (including Attorney Costs) of any kind or nature whatsoever
which may at any time be imposed on, incurred by or asserted against any such
Indemnitee in any way relating to or arising out of or in connection with (a)
the Commitment Letter (including, without limitation, the pre-closing
syndication and arrangement of the Loans), (b) the execution, delivery,
enforcement, performance or administration of any Loan Document or any other
agreement, letter or instrument delivered in connection with the transactions
contemplated thereby or the consummation of the transactions contemplated
thereby, (c) any Commitment, Loan or Letter of Credit or the use or proposed use
of the proceeds therefrom (including any refusal by the L/C Issuer to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (d) any actual or alleged presence or release of Hazardous Materials
on or from any property currently or formerly owned or operated by the Borrower,
any other Loan Party or any of their respective Subsidiaries, or any
Environmental Liability related in any way to the Borrower, any other Loan Party
or any of their respective Subsidiaries, or (e) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory (including any investigation
of, preparation for, or defense of any pending or threatened claim,
investigation, litigation or proceeding) and regardless of whether any
Indemnitee is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"), in all cases, whether or not caused by or arising, in whole or in
part, out of the negligence of the Indemnitee; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such
liabilities, obligations, losses, damages, penalties, claims, demands, actions,
judgments, suits, costs, expenses or disbursements are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnitee. No Indemnitee
shall be liable for any damages arising from the use by others of any
information or other materials obtained through IntraLinks or other similar
information transmission systems in connection with this Agreement, nor shall
any Indemnitee have any liability for any indirect or consequential damages
relating to this

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Agreement or any other Loan Document or arising out of its activities in
connection herewith or therewith (whether before or after the Closing Date). In
the case of an investigation, litigation or proceeding to which the indemnity in
this Section 10.05 applies, such indemnity shall be effective whether or not
such investigation, litigation or proceeding is brought by the Borrower or any
of the Subsidiaries, its directors, stockholders or auditors or an Indemnitee or
any other Person, whether or not any Indemnitee is otherwise a party thereto.
All amounts due under this Section 10.05 shall be payable within ten Business
Days after demand therefor. The agreements in this Section shall survive the
resignation of the Administrative Agent, the replacement of any Lender, the
termination of the Aggregate Commitments and the repayment, satisfaction or
discharge of all the other Obligations.

         Section 10.06     Payments Set Aside. To the extent that any payment by
or on behalf of the Borrower is made to the Administrative Agent or any Lender,
or the Administrative Agent or any Lender exercises its right of set-off, and
such payment or the proceeds of such set-off or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Administrative Agent
or such Lender in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such set-off had
not occurred, and (b) each Lender severally agrees to pay to the Administrative
Agent upon demand its applicable share of any amount so recovered from or repaid
by the Administrative Agent, plus interest thereon from the date of such demand
to the date such payment is made at a rate per annum equal to the Federal Funds
Rate from time to time in effect.

         Section 10.07     Successors and Assigns.

                  (a)      The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that the Borrower may not assign
or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of each Lender and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an Eligible
Assignee in accordance with the provisions of subsection (b) of this Section,
(ii) by way of participation in accordance with the provisions of subsection (d)
of this Section, or (iii) by way of pledge or assignment of a security interest
subject to the restrictions of subsection (f) of this Section (and any other
attempted assignment or transfer by any party hereto shall be null and void).
Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby, Participants to the extent provided in subsection (d)
of this Section and, to the extent expressly contemplated hereby, the
Indemnitees) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

                  (b)      Any Lender may at any time assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans (including
for purposes of this subsection (b), participations in L/C Obligations) at the
time owing to it); provided that (i) except in the case of an assignment of the
entire remaining amount of the assigning Lender's Commitment and the Loans at
the time owing to it or in the case of an assignment to a Lender or an Affiliate
of a Lender or an Approved Fund

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with respect to a Lender, the aggregate amount of the Commitment (which for this
purpose includes Loans outstanding thereunder) subject to each such assignment,
determined as of the date the Assignment and Assumption with respect to such
assignment is delivered to the Administrative Agent or, if "Trade Date" is
specified in the Assignment and Assumption, as of the Trade Date, shall not be
less than $1 million unless each of the Administrative Agent and, so long as no
Event of Default has occurred and is continuing, the Borrower otherwise consents
(each such consent not to be unreasonably withheld or delayed), (ii) each
partial assignment shall be made as an assignment of a proportionate part of all
the assigning Lender's rights and obligations under this Agreement with respect
to the Loans or the Commitment assigned, (iii) any assignment of a Commitment
must be approved by the Administrative Agent and the L/C Issuer unless the
Person that is the proposed assignee is itself a Lender (whether or not the
proposed assignee would otherwise qualify as an Eligible Assignee), and (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 of
$3,500. Subject to acceptance and recording thereof by the Administrative Agent
pursuant to subsection (c) of this Section, from and after the effective date
specified in each Assignment and Assumption, the Eligible Assignee thereunder
shall be a party to this Agreement and, to the extent of the interest assigned
by such Assignment and Assumption, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 3.01, 3.04, 3.05, 10.04 and 10.05
with respect to facts and circumstances occurring prior to the effective date of
such assignment). Upon request, the Borrower (at the expense of the assignee or
assignor Lender) shall execute and deliver a Note to the assignee Lender. Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this subsection shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with subsection (d) of this Section.

                  (c)      The Administrative Agent, acting solely for this
purpose as an agent of the Borrower, shall maintain at the Administrative
Agent's Office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans and L/C Obligations owing to,
each Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower and any Lender at any
reasonable time and from time to time upon reasonable prior notice.

                  (d)      Any Lender may at any time, without the consent of,
or notice to, the Borrower or the Administrative Agent, sell participations to
any Person (other than a natural person or the Borrower or any of the Borrower's
Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such
Lender's rights and/or obligations under this Agreement (including all or a
portion of its Commitment and/or the Loans (including such Lender's

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participations in L/C Obligations) owing to it); provided, further, that (i)
such Lender's obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrower, the Administrative Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described in the first proviso to
Section 10.01 that directly affects such Participant. Subject to subsection (e)
of this Section, the Borrower agrees that each Participant shall be entitled to
the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to subsection (b) of
this Section. To the extent permitted by Law, each Participant also shall be
entitled to the benefits of Section 10.09 as though it were a Lender; provided
such Participant agrees to be subject to Section 2.13 as though it were a
Lender.

                  (e)      A Participant shall not be entitled to receive any
greater payment under Section 3.01 or 3.04 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower's prior written consent. A Participant that would be a Foreign
Lender if it were a Lender shall not be entitled to the benefits of Section 3.01
unless the Borrower is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrower, to comply with
Section 10.15 as though it were a Lender.

                  (f)      Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.

                  (g)      As used herein, the following terms have the
following meanings:

                  "Eligible Assignee" means (i) a Lender, (ii) an Affiliate of a
         Lender, (iii) an Approved Fund, and (iv) any other Person (other than a
         natural person) approved by (A) the Administrative Agent and the L/C
         Issuer, and (B) unless an Event of Default has occurred and is
         continuing, the Borrower (each such approval not to be unreasonably
         withheld or delayed); provided that notwithstanding the foregoing,
         "Eligible Assignee" shall not include the Borrower or any of the
         Borrower's Affiliates or Subsidiaries.

                  "Fund" means any Person (other than a natural person) that is
         (or will be) engaged in making, purchasing, holding or otherwise
         investing in commercial loans and similar extensions of credit in the
         ordinary course of its business.

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                  "Approved Fund" means any Fund that is administered or managed
         by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an
         Affiliate of an entity that administers or manages a Lender.

                  (h)      Notwithstanding anything to the contrary contained
herein, if at any time Bank of America assigns all of its Commitment and Loans
pursuant to subsection (b) above, Bank of America may, upon 30 days notice to
the Borrower and the Lenders, resign as L/C Issuer. In the event of any such
resignation as L/C Issuer, the Borrower shall be entitled to appoint from among
the Lenders a successor L/C Issuer hereunder; provided, however, that no failure
by the Borrower to appoint any such successor shall affect the resignation of
Bank of America as L/C Issuer. If Bank of America resigns as L/C Issuer, it
shall retain all the rights and obligations of the L/C Issuer hereunder with
respect to all Letters of Credit outstanding as of the effective date of its
resignation as L/C Issuer and all L/C Obligations with respect thereto
(including the right to require the Lenders to make Base Rate Loans or fund risk
participations in Unreimbursed Amounts pursuant to Section 2.03(c)).

         Section 10.08     Confidentiality. Each of the Administrative Agent,
the L/C Issuer, the Syndication Agent and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any Governmental
Authority, (c) to the extent required by applicable Law or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to (i) any Eligible Assignee of or Participant in, or any
prospective Eligible Assignee of or Participant in, any of its rights or
obligations under this Agreement or (ii) any direct or indirect contractual
counterparty or prospective counterparty (or such contractual counterparty's or
prospective counterparty's professional advisor) to any credit derivative
transaction relating to obligations of the Loan Parties, (g) with the consent of
the Borrower, (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes available to
the Administrative Agent, the Syndication Agent or any Lender on a
nonconfidential basis from a source other than the Borrower, or (i) to the NAIC
or any other similar organization. In addition, the Administrative Agent, the
Syndication Agent and the Lenders may disclose the existence of this Agreement
and information about this Agreement to market data collectors, similar service
providers to the lending industry, and service providers to the Administrative
Agent, the Syndication Agent and the Lenders in connection with the
administration and management of this Agreement, the other Loan Documents, the
Commitments, and the Credit Extensions. For the purposes of this Section,
"Information" means all information received from any Loan Party, relating to
any Loan Party, its respective Subsidiaries or the business, other than any such
information that is available to the Administrative Agent, the Syndication Agent
or any Lender on a nonconfidential basis prior to disclosure by any Loan Party;
provided that, in the case of information received from a Loan Party after the
date hereof, such information is clearly identified in writing at the time of
delivery as confidential. Any Person required to maintain the

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confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

         Section 10.09     Set-off. In addition to any rights and remedies of
the Lenders provided by Law, upon the occurrence and during the continuance of
any Event of Default, each Lender is authorized at any time and from time to
time, without prior notice to the Borrower or any other Loan Party, any such
notice being waived by the Borrower (on its own behalf and on behalf of each
Loan Party) to the fullest extent permitted by Law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender to or for
the credit or the account of the respective Loan Parties against any and all
Obligations owing to such Lender hereunder or under any other Loan Document, now
or hereafter existing, irrespective of whether or not the Administrative Agent
or such Lender shall have made demand under this Agreement or any other Loan
Document and although such Obligations may be contingent or unmatured. Each
Lender agrees promptly to notify the Borrower and the Administrative Agent after
any such set-off and application made by such Lender; provided, however, that
the failure to give such notice shall not affect the validity of such set-off
and application.

         Section 10.10     Interest Rate Limitation. Notwithstanding anything to
the contrary contained in any Loan Document, the interest paid or agreed to be
paid under the Loan Documents shall not exceed the maximum rate of non-usurious
interest permitted by applicable Law (the "Maximum Rate"). If the Administrative
Agent or any Lender shall receive interest in an amount that exceeds the Maximum
Rate, the excess interest shall be applied to the principal of the Loans or, if
it exceeds such unpaid principal, refunded to the Borrower. In determining
whether the interest contracted for, charged, or received by the Administrative
Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent
permitted by applicable Law, (a) characterize any payment that is not principal
as an expense, fee, or premium rather than interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
contemplated term of the Obligations hereunder.

         Section 10.11     Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

         Section 10.12     Integration. This Agreement, together with the other
Loan Documents, comprises the complete and integrated agreement of the parties
on the subject matter hereof and thereof and supersedes all prior agreements,
written or oral, on such subject matter. In the event of any conflict between
the provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control; provided that the inclusion of
supplemental rights or remedies in favor of the Administrative Agent or the
Lenders in any other Loan Document shall not be deemed a conflict with this
Agreement. Each Loan Document was drafted with the joint participation of the
respective parties thereto and shall be construed neither against nor in favor
of any party, but rather in accordance with the fair meaning thereof.

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         Section 10.13     Survival of Representations and Warranties. All
representations and warranties made hereunder and in any other Loan Document or
other document delivered pursuant hereto or thereto or in connection herewith or
therewith shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the
Administrative Agent and each Lender, regardless of any investigation made by
the Administrative Agent or any Lender or on their behalf and notwithstanding
that the Administrative Agent or any Lender may have had notice or knowledge of
any Default at the time of any Credit Extension, and shall continue in full
force and effect as long as any Loan or any other Obligation hereunder shall
remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

         Section 10.14     Severability. If any provision of this Agreement or
the other Loan Documents is held to be illegal, invalid or unenforceable, (a)
the legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired thereby
and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

         Section 10.15     Tax Forms. (a) (i) Each Lender that is not a "United
States person" within the meaning of Section 7701(a)(30) of the Code (a "Foreign
Lender") shall deliver to the Administrative Agent, prior to receipt of any
payment subject to withholding under the Code (or upon accepting an assignment
of an interest herein), two duly signed completed copies of either IRS Form
W-8BEN or any successor thereto (relating to such Foreign Lender and entitling
it to an exemption from, or reduction of, withholding tax on all payments to be
made to such Foreign Lender by the Borrower pursuant to this Agreement) or IRS
Form W-8ECI or any successor thereto (relating to all payments to be made to
such Foreign Lender by the Borrower pursuant to this Agreement) or such other
evidence satisfactory to the Borrower and the Administrative Agent that such
Foreign Lender is entitled to an exemption from, or reduction of, U.S.
withholding tax, including any exemption pursuant to Section 881(c) of the Code.
Thereafter and from time to time, each such Foreign Lender shall (A) promptly
submit to the Administrative Agent such additional duly completed and signed
copies of one of such forms (or such successor forms as shall be adopted from
time to time by the relevant United States taxing authorities) as may then be
available under then current United States Laws to avoid, or such evidence as is
satisfactory to the Borrower and the Administrative Agent of any available
exemption from or reduction of, United States withholding taxes in respect of
all payments to be made to such Foreign Lender by the Borrower pursuant to this
Agreement, (B) promptly notify the Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction, and (C) take such steps as shall not be materially disadvantageous to
it, in the reasonable judgment of such Lender, and as may be reasonably
necessary (including the re-designation of its Lending Office) to avoid any
requirement of applicable Law that the Borrower make any deduction or
withholding for taxes from amounts payable to such Foreign Lender.

                                       99

<PAGE>

                           (ii)     Each Foreign Lender, to the extent it does
         not act or ceases to act for its own account with respect to any
         portion of any sums paid or payable to such Lender under any of the
         Loan Documents (for example, in the case of a typical participation by
         such Lender), shall deliver to the Administrative Agent on the date
         when such Foreign Lender ceases to act for its own account with respect
         to any portion of any such sums paid or payable, and at such other
         times as may be necessary in the determination of the Administrative
         Agent (in the reasonable exercise of its discretion), (A) two duly
         signed completed copies of the forms or statements required to be
         provided by such Lender as set forth above, to establish the portion of
         any such sums paid or payable with respect to which such Lender acts
         for its own account that is not subject to U.S. withholding tax, and
         (B) two duly signed completed copies of IRS Form W-8IMY (or any
         successor thereto), together with any information such Lender chooses
         to transmit with such form, and any other certificate or statement of
         exemption required under the Code, to establish that such Lender is not
         acting for its own account with respect to a portion of any such sums
         payable to such Lender.

                           (iii)    The Borrower shall not be required to pay
         any additional amount to any Foreign Lender under Section 3.01 (A) with
         respect to any Taxes required to be deducted or withheld on the basis
         of the information, certificates or statements of exemption such Lender
         transmits with an IRS Form W-8IMY pursuant to this Section 10.15(a) or
         (B) if such Lender shall have failed to satisfy the foregoing
         provisions of this Section 10.15(a); provided that if such Lender shall
         have satisfied the requirement of this Section 10.15(a) on the date
         such Lender became a Lender or ceased to act for its own account with
         respect to any payment under any of the Loan Documents, nothing in this
         Section 10.15(a) shall relieve the Borrower of its obligation to pay
         any amounts pursuant to Section 3.01 in the event that, as a result of
         any change in any applicable Law or order, or any change in the
         interpretation, administration or application thereof, such Lender is
         no longer properly entitled to deliver forms, certificates or other
         evidence at a subsequent date establishing the fact that such Lender or
         other Person for the account of which such Lender receives any sums
         payable under any of the Loan Documents is not subject to withholding
         or is subject to withholding at a reduced rate; provided, further, that
         should such Lender become subject to Taxes because of its failure to
         satisfy the foregoing provisions of this Section 10.15(a) the Borrower
         shall take steps as such Lender shall reasonably request to assist such
         Lender in recovering such Taxes.

                           (iv)     The Administrative Agent may, without
         reduction, withhold any Taxes required to be deducted and withheld from
         any payment under any of the Loan Documents with respect to which the
         Borrower is not required to pay additional amounts under Section 3.01
         or this Section 10.15(a).

                  (b)      Upon the request of the Administrative Agent, each
Lender that is a "United States person" within the meaning of Section
7701(a)(30) of the Code shall deliver to the Administrative Agent two duly
signed completed copies of IRS Form W-9. If such Lender fails to deliver such
forms, then the Administrative Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable back-up withholding tax
imposed by the Code, without reduction.

                                      100

<PAGE>

                  (c)      If any Governmental Authority asserts that the
Administrative Agent did not properly withhold or backup withhold, as the case
may be, any Tax or other amount from payments made to or for the account of any
Lender, such Lender shall indemnify the Administrative Agent therefor, including
all penalties and interest, any Taxes imposed by any jurisdiction on the amounts
payable to the Administrative Agent under this Section, and costs and expenses
(including Attorney Costs) of the Administrative Agent. The obligation of the
Lenders under this Section shall survive the termination of the Aggregate
Commitments, repayment of all other Obligations hereunder and the resignation of
the Administrative Agent.

         Section 10.16     [Intentionally omitted.]

         Section 10.17     Governing Law.

                  (a)      THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE ADMINISTRATIVE
AGENT AND EACH PARTY HERETO SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

                  (b)      ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK SITTING IN NEW YORK COUNTY OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE
BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN
DOCUMENT OR OTHER DOCUMENT RELATED THERETO. THE BORROWER HEREBY IRREVOCABLY
APPOINTS CT CORPORATION SYSTEM IN NEW YORK, NEW YORK AS ITS AUTHORIZED AGENT TO
ACCEPT AND ACKNOWLEDGE SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY
SUIT, ACTION OR PROCEEDING OF THE NATURE REFERRED TO IN THIS SECTION 10.17 AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING UPON CT
CORPORATION SYSTEM IN NEW YORK, NEW YORK IN ANY MANNER OR BY THE MAILING OF A
COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT
REQUESTED, TO THE BORROWER'S ADDRESS REFERRED TO IN SECTION 10.02. THE BORROWER
AGREES THAT SUCH SERVICE (i) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE
OF PROCESS UPON IT IN ANY SUCH SUIT, ACTION OR PROCEEDING AND (ii) SHALL, TO THE
FULLEST EXTENT PERMITTED BY LAW, BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE
UPON AND PERSONAL DELIVERY TO IT. NOTHING IN THIS SECTION 10.17 SHALL AFFECT THE
RIGHT OF ANY OTHER PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY MANNER

                                      101

<PAGE>

PERMITTED BY LAW OR LIMIT THE RIGHT OF ANY OTHER PARTY TO THIS AGREEMENT TO
BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY JURISDICTION OR
JURISDICTIONS.

         Section 10.18     Waiver of Right to Trial by Jury. THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS EACH HEREBY EXPRESSLY WAIVES THEIR
RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT
OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED
PERSON, PARTICIPANT OR ASSIGNEE WHETHER FOUNDED IN CONTRACT OR TORT OR
OTHERWISE. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS EACH HEREBY
AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.

         Section 10.19     Replacement of Lenders. Under any circumstances set
forth herein providing that the Borrower shall have the right to replace a
Lender as a party to this Agreement, the Borrower may, upon notice to such
Lender and the Administrative Agent (with a copy to the other Lenders), replace
such Lender by causing such Lender to assign its Commitment (with the assignment
fee to be paid by the Borrower in such instance) pursuant to Section 10.07(b) to
one or more other Lenders or Eligible Assignees procured by the Borrower;
provided, however, that if the Borrower elects to exercise such right with
respect to any Lender pursuant to Section 3.06(b), it shall be obligated to
replace all Lenders that have made similar requests for compensation pursuant to
Section 3.01 or 3.04 who also request replacement pursuant to this Section 10.19
within ten (10) days after receipt of a copy of the Borrower's notice of
exercise. The Borrower shall (x) pay in full all principal, interest, fees and
other amounts owing to such Lender through the date of replacement (including
any amounts payable pursuant to Section 3.05), (y) provide appropriate
assurances and indemnities (which may include letters of credit) to the L/C
Issuer as it may reasonably require with respect to any continuing obligation to
fund participation interests in any L/C Obligations and (z) release such Lender
from its obligations under the Loan Documents. Any Lender being replaced shall
execute and deliver an Assignment and Assumption with respect to such Lender's
Commitment and outstanding Loans and participations in L/C Obligations.

                                      102

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                                        MOLINA HEALTHCARE, INC., a California
                                        corporation, as the Borrower

                                        By:    /s/ JOHN C. MOLINA
                                           -------------------------------------

                                        Name:  John C. Molina
                                             -----------------------------------

                                        Title: Executive Vice President
                                             -----------------------------------

                                      S - 1

<PAGE>

                                        BANK OF AMERICA, N.A., as
                                        Administrative Agent

                                        By:    /s/ JOSEPH L. CORAH
                                           -------------------------------------

                                        Name:  Joseph L. Corah
                                             -----------------------------------

                                        Title: Principal
                                             -----------------------------------

                                      S - 2

<PAGE>

                                        CIBC WORLD MARKETS CORP. as
                                        Syndication Agent

                                        By:    /s/ TERENCE MOORE
                                           -------------------------------------

                                        Name:  Terence Moore
                                             -----------------------------------

                                        Title: Executive Director
                                             -----------------------------------

                                      S - 3

<PAGE>

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

                                        By:     /s/ Joseph L. Corah
                                           -------------------------------------

                                        Name:       Joseph L. Corah
                                             -----------------------------------

                                        Title:         Principal
                                             -----------------------------------

                                      S - 4

<PAGE>

                                        CIBC INC., as Lender

                                        By:     /s/ Terence Moore
                                           -------------------------------------

                                        Name:       Terence Moore
                                             -----------------------------------

                                        Title:    Executive Director
                                             -----------------------------------

                                      S - 5

<PAGE>

                                        SOCIETE GENERALE, as Lender

                                        By: Richard Bernof
                                           -------------------------------------

                                        Name:  Richard Bernof
                                             -----------------------------------

                                        Title:  Director
                                             -----------------------------------

                                      S - 6

<PAGE>

                                        U.S. BANK NATIONAL ASSOCIATION, as
                                        Lender

                                        By:  Christian E. Stein III
                                           -------------------------------------

                                        Name:  Christian E. Stein III
                                             -----------------------------------

                                        Title:  Vice President
                                             -----------------------------------

                                      S - 7

<PAGE>

                                        EAST WEST BANK, as Lender

                                        By:    /s/ DOUGLAS P. KRAUSE
                                           -------------------------------------

                                        Name:  Douglas P. Krause
                                             -----------------------------------

                                        Title: Executive Vice President
                                             -----------------------------------

                                     S - 8

<PAGE>

                                                                  SCHEDULE 10.02

                         ADMINISTRATIVE AGENT'S OFFICE,
                          CERTAIN ADDRESSES FOR NOTICES

MOLINA HEALTHCARE, INC., a California corporation:
One Golden Shore Drive
Long Beach, CA  90802
Attention: John C. Molina, Executive Vice President
Telephone: (562) 435-3666, Ext. 1128
Facsimile: (562) 495-7770
Electronic Mail: johnmo@molinahealthcare.com

ADMINISTRATIVE AGENT:

Administrative Agent's Office (for payments and Requests for Credit Extensions):
Bank of America, N.A.
Street Address
Attention: Laura Schultz
Telephone: 704-388-6484
Facsimile: 704-409-0008
Electronic Mail: laura.a.schultz@bankofamerica.com
Account No.:  1366212250600
Ref:  Molina Healthcare, Inc.
ABA# 053000196

Other Notices as Administrative Agent:
Bank of America, N.A.
Agency Management
1455 Market Street
Mail Code: CA5-701-05-19
San Francisco, CA  94103
Attention: Cassandra McCain
Telephone: 415-436-3400
Facsimile: 415-503-5133
Electronic Mail: cassandra.g.mccain@bankofamerica.com

<PAGE>

With a copy to:
Bank of America, N.A.
Healthcare Portfolio Management
100 North Tryon Street
Mail Code: NC1-007-17-11
Charlotte, NC 28255
Attention: Joseph Corah
Telephone: 704-386-5976
Facsimile: 704-388-6002
Electronic Mail: joseph.l.corah@bankofamerica.com

L/C ISSUER:

Bank of America, N.A.
Trade Operations-Los Angeles #22621
333 S. Beaudry Avenue, 19th Floor
Mail Code: CA9-703-19-23
Los Angeles, CA 90017-1466
Attention:   Sandra Leon
             Vice President
Telephone: 213.345.5231
Facsimile: 213.345.6694
Electronic Mail: Sandra.Leon@bankofamerica.com

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