Document:

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                                                                   EXHIBIT 10.12

                        OMNIBUS STOCK AND INCENTIVE PLAN

                             MOLINA HEALTHCARE, INC.

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                               TABLE OF CONTENTS
Item                                                                    Page
----                                                                    ----

SECTION 1.    Establishment.                                              1
SECTION 2.    Purpose of Plan.                                            1
SECTION 3.    Types of Awards Under Plan.                                 1
SECTION 4.    Eligibility.                                                1
SECTION 5.    Number of Shares Covered By Options
              and Restricted Stock Grants; No Preemptive
              Rights; Right of First Refusal.                             1
SECTION 6.    Administration.                                             2
SECTION 7.    Terms of Stock Options.                                     5
SECTION 8.    Stock Appreciation Rights and Phantom Stock.               10
SECTION 9.    Performance Shares and Units.                              13
SECTION 10.   Restricted Stock, Restricted Stock Units, and
              Unrestricted Stock Grants.                                 15
SECTION 11.   Adjustment of Number of Shares.                            18
SECTION 12.   Change of Control.                                         19
SECTION 13.   Beneficiary Designation.                                   19
SECTION 14.   Tax Withholding.                                           20
SECTION 15.   Indemnification.                                           21
SECTION 16.   Gender and Number.                                         21
SECTION 17.   Controlling Law.                                           21
SECTION 18.   No Stockholder Rights.                                     21
SECTION 19.   Amendments.                                                21
SECTION 20.   Termination or Suspension.                                 22

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                        OMNIBUS STOCK AND INCENTIVE PLAN
                             MOLINA HEALTHCARE, INC.

     SECTION 1. Establishment. There is hereby established the Omnibus Stock and
Incentive Plan (the "Plan"), pursuant to which key employees of Molina
Healthcare, Inc., a California corporation ("MHI") and its wholly owned
subsidiaries, may be permitted to participate in the increases in value of MHI
and its wholly owned subsidiaries (collectively, the "Employers").

     SECTION 2. Purpose of Plan. Under this Plan, MHI may grant any one or more
type of incentive awards to professional and managerial employees who measurably
impact the performance of the Employers.

     SECTION 3. Types of Awards Under Plan. MHI may grant under this Plan
Qualified and Non-Qualified Stock Options (as described in Section 7)
("Options"), Stock Appreciation Rights (as described in Section 8) ("SARs"),
Performance Units (as described in Section 9)("Performance Units"), Performance
Shares (as described in Section 9)("Performance Shares"), Restricted Stock
("Restricted Stock"), Restricted Stock Units ("Restricted Stock Units") and
grants of stock not subject to restrictions ("Unrestricted Stock Grants") (as
described in Section 10). Options, SARs, Performance Units, Performance Shares,
Restricted Stock Units, Unrestricted Stock Grants and Restricted Stock are
collectively referred to herein as "Awards".

     SECTION 4. Eligibility. The Committee may grant Awards to any employees
(including officers) of the Employers. Any employee to whom the Committee has
granted an Award ("Participant") shall be bound by the terms of this Plan and
the Stock Option Agreement, Stock Appreciation Right Agreement, Performance
Agreement and/or Restricted Stock Agreement (collectively, the "Award
Agreement") applicable to him.

     SECTION 5. Number of Shares Covered By Options and Restricted Stock Grants;
No Preemptive Rights; Right of First Refusal. The total number of shares that
may be awarded under this Plan shall be that number of shares that is equal to
six point eight percent (6.8%) of the issued and outstanding shares of common
stock as of the first day of each calendar year for which the Plan is in effect
("Common Stock") (or the number and kind of shares of common stock of MHI or
other securities of MHI which, in accordance with Section 11 of the Plan, shall
be substituted for such shares of Common Stock or to which

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said shares shall be adjusted; hereinafter, all references to Common Stock
includes references to said shares to which said shares are adjusted). The
issuance of Common Stock pursuant to the provisions of this Plan for Awards
shall be free from any preemptive or preferential right of subscription or
purchase on the part of any stockholder, If any outstanding Option or grant of
Restricted Stock granted under this Plan expires or is terminated for any
reason, the shares of Common Stock subject to the unexercised portion of such
Option or grant of Restricted Stock will again be available for Options and
grants of Restricted Stock issued under this Plan.

     Each certificate for Common Stock of MHI issued under the Plan shall be
endorsed with the following legend:

          "This certificate shall not be transferred except in accordance with
          the provisions of a Right of First Refusal as set forth in Section 5
          of Molina Healthcare, Inc.'s Omnibus Stock and Incentive Plan, a copy
          of which is on file in the office of Molina Healthcare, Inc., and the
          provisions of said Right of First Refusal shall be binding upon this
          certificate and each holder hereof."

     A Participant desiring to sell Common Stock of MHI issued pursuant to this
Plan shall give notice in writing of his desire to MHI. MHI thereupon shall have
the option to purchase Common Stock in exchange for the Fair Market Value as
determined under Section 7. Such option shall be exercised by written notice to
the Participant within thirty (30) days after receipt of his notice of desire to
sell stock that MHI agrees to purchase said Common Stock. Payment for such
Common Stock shall be made within one year of MHI's written notification of its
exercise of its right to purchase the common stock, with interest of eight
percent (8%) per annum, simple interest, accruing from the date of notice of
exercise of MHI's right to repurchase. Payment shall be made, at Molina
Healthcare's discretion, in either a) a lump sum, or b) multiple approximately
equal installments.

     SECTION 6. Administration.

          (a)  This Plan shall be administered by the committee (the
               "Committee") referred to in paragraph (b) of this Section.
               Subject to the express provisions of this Plan, the Committee
               shall have complete authority, in its discretion,

               (i)  to interpret this Plan, to prescribe, amend and rescind
                    rules and regulations relating to the Plan;

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               (ii) to determine the terms and provisions of Awards granted
                    hereunder and to make such determinations as to the
                    Participants to receive Awards, the form, amount and timing
                    of such Awards, the terms and provisions of such Awards, and
                    the Agreements evidencing the same, which need not be
                    uniform and which the Committee may make selectively among
                    Participants who receive, or who are to receive, Awards
                    under the Plan, whether or not the Participants are
                    similarly situated;

               (iii) to determine to whom the Options shall be granted, the
                    times and the prices at which Options are granted, the
                    Option periods, the number of shares of Common Stock to be
                    subject to each Option, whether each Option shall be an
                    Incentive Stock Option or a Non-Incentive Stock Option, and
                    to determine the terms and provisions of each Option (which
                    need not be identical);

               (iv) to determine to whom SARS shall be granted, the times and
                    duration of each SAR, the number of shares of Common Stock
                    to which each SAR relates, whether an SAR is granted with
                    respect to Options or alone, without reference to any
                    related stock option, and to determine the terms and
                    provisions of each SAR (which need not be identical);

               (v)  to determine to whom Performance Shares and Performance
                    Units shall be granted, the applicable Performance Period
                    (as that term is defined in Section 9), and the number of
                    shares of Common Stock represented by Performance Shares and
                    Performance Units ("Performance Awards"), to maintain
                    Performance Accounts (as defined in Section 9), and to
                    determine the terms and provisions of Performance Awards
                    (which need not be identical);

               (vi) to determine to whom Restricted Stock, Unrestricted Stock
                    and Restricted Stock Units shall be granted, the Restriction
                    Period (as that term is defined in Section 10), the number
                    of shares of Restricted Stock, the terms and provisions
                    (which

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                    need not be identical) of awards of Restricted Stock and
                    Restricted Stock Units and whether the Participant has met
                    the goals on or before the close of the Restriction Period;

               (vii) to impose such limitations with respect to Options and
                    Restricted Stock, including without limitation, any relating
                    to the application of federal or state securities laws, as
                    the Committee may deem necessary or desirable;

               (viii) to determine the dates of employment of any employee of
                    the Employers, and the reasons for termination of any
                    Participant;

               (ix) to determine whether any leave of absence constitutes a
                    termination of employment for purposes of this Plan and the
                    impact, if any, of such leave of absence on awards
                    theretofore made under this Plan;

               (x)  to determine when a person's change of status with respect
                    to the Employers constitutes a termination of such person's
                    employment for purposes of this Plan;

               (xi) to make such determinations as it deems equitable with
                    respect to the impact, if any, of leaves of absence from the
                    Employers upon Awards hereunder;

               (xii) to grant dividend equivalents upon Awards (other than
                    Restricted Stock, for which Participants are entitled to
                    receive dividends and other distributions paid with respect
                    to Common Shares so held), provided that any such dividend
                    equivalents shall be subject to the terms and conditions
                    imposed by the Committee; and

               (xiii) to make all other determinations necessary or advisable
                    for, the administration of the Plan.

          In making determinations under this Section 6, the Committee may take
          into account the nature of the services rendered by the respective
          employees, their present and potential contributions to the success of
          the

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          Employers and such other factors as the Committee, in its discretion,
          deems relevant. The Committee's determination on all of the matters
          referred to in this Section 6 shall be conclusive,

          (b)  The Committee shall consist of from two (2) to five (5)
               individuals who may, but need not, be members of the Board of
               Directors of MHI; provided, however, all of the functions of the
               Committee may be performed, and the powers and authority of the
               Committee exercised, by the Board of Directors of MHI, in which
               event the term "Committee" in this Plan, or in any agreement
               entered into under this Plan with respect to an Award, shall mean
               the Board of Directors of MHI. The Committee shall be appointed
               by the Board, which may at any time and from time to time, remove
               any member of the Committee, with or without cause, appoint
               additional members to the Committee and fill vacancies, however
               caused, in the Committee. A majority of members of the Committee
               shall constitute a quorum. All determinations of the Committee
               shall be made by a majority of its members. Any decision or
               determination of the Committee reduced to writing and signed by
               all of the members of the Committee shall be fully effective as
               if it had been made at a meeting duly called and held.

          (c)  Nothing contained in this Plan shall be deemed to give any
               individual any right to be granted an Award except to the extent
               and upon such terms and conditions as may be determined by the
               Committee.

          (d)  The Committee may at its election provide in any Agreement
               relating to an Award under this Plan that an Employer will loan
               to the holder thereof an amount not greater than the excess of
               (i) the purchase price of the shares of Common Stock or other
               securities issuable upon exercise over (ii) the par value of such
               shares of Common Stock or other securities. Any such loan will be
               on the terms and conditions the Committee deems appropriate.

     SECTION 7. Terms of Stock Options. Each Option granted under this Plan
shall be evidenced by a written agreement (the "Stock Option Agreement") which
shall be executed by MHI and by the Participant, and shall be subject to the
following terms and conditions:

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          (a)  The price at which shares of Common Stock covered by each Option
               may be purchased pursuant thereto shall be determined in each
               case on the date of grant by the Committee, but shall be an
               amount not less than the par value of the shares and, for Options
               that are intended to qualify as Incentive Stock Options pursuant
               to Code Section 422, not less than the Fair Market Value of the
               shares of Common Stock at the time the Option is granted. For
               purposes of this Section, the Fair Market Value of shares of
               Common Stock on any day shall be:

               (i)  in the event the Common Stock is not publicly traded, the
                    fair market value as of the regularly performed valuation
                    (or special valuation date as specified by the Committee
                    ("Valuation Date") as determined in good faith in an outside
                    appraisal by an accounting firm or certified valuation
                    specialist selected by MHI in its discretion; or

               (ii) in the event the Common Stock is publicly traded, the last
                    sale price of a share of Common Stock as reported by the
                    principal quotation service on which the Common Stock is
                    listed, or, if the last sale prices are not reported with
                    respect to the Common Stock, the mean of the high bid and
                    low asked price of a share of Common Stock as reported by
                    such principal quotation service, or, if there is no such
                    report by such quotation service, for such day, such fair
                    market value shall be the average of (A) the last sale price
                    (or, if last sale prices are not reported with respect to
                    the Common Stock, the mean of the high bid and low asked
                    prices) on the day next preceding such day for which there
                    was a report, and (B) the last sale price (or if last sale
                    prices are not reported with respect to the Common Stock,
                    the mean of the high bid and low asked prices) on the day
                    next succeeding such day for which there was a report, or as
                    otherwise determined by the Committee in its discretion
                    pursuant to any reasonable method contemplated by Section
                    422 of the Code and any Treasury regulations issued pursuant
                    to that Section.

          (b)  The option price of the shares to be purchased pursuant to each
               Option shall be paid in full in cash or, in the discretion of the

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               Committee, by delivery (i.e. surrender) of shares of Common Stock
               of MHI which have been owned by the Participant for at least six
               months prior to the exercise of the Option (provided that such
               shares are not the subject of any pledge or security interest).
               Shares of Common Stock so delivered will be valued on the day of
               delivery for the purpose of determining the extent to which the
               option price has been paid thereby, in the same manner as
               provided for in the determination of Fair Market Value as set
               forth in paragraph (a) of this Section, or as otherwise
               determined by the Committee in its discretion pursuant to any
               reasonable method contemplated by Section 422 of the Code and any
               Treasury regulations issued pursuant to that Section.

          (c)  Each Stock Option Agreement shall provide that such Option may be
               exercised by the Participant, in such parts and at such times, as
               may be specified in such Stock Option Agreement, within a period
               ending not later than ten years after the date on which the
               Option is granted (the "Option Period"); provided, however, that
               the Option Period shall end on the earlier of the date specified
               in such Stock Option Agreement or the date established below:

               (i)  Options may be exercised only

                    (A)  During the continuance of the Participant's employment;
                         or

                    (B)  If the Participant terminates employment other than by
                         retirement under (D) below or for Cause, during the
                         period ending ninety (90) days after the date of
                         termination of such employment to the extent that the
                         right to exercise such Options had accrued on or before
                         the date of termination.

                    (C)  In the case of a grant of an Option to an officer or
                         director (as those terms are used in Rule 16a-1
                         promulgated under the Securities Exchange Act of 1934
                         or any similar rule which may subsequently be in effect
                         (an "Officer")) the Committee may determine (i) no such
                         Option may be exercised during the first six (6)

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                         months of its term, or (ii) if such Option is
                         exercisable during the first six (6) months of its
                         term, no Common Stock acquired on such exercise shall
                         be transferable until the date which is six (6) months
                         following of the date of grant of the Option. Each
                         Option which is intended to qualify as an Incentive
                         Stock Option pursuant to Section 422 of the Code and
                         each Option which is intended to qualify as another
                         type of incentive stock option which may subsequently
                         be authorized by law, shall comply with the applicable
                         provisions of the Code pertaining to such options.

                    (D)  If the Participant terminates employment and the
                         Committee determines that the termination occurs
                         because of the Participant's retirement or disability,
                         the Participant may exercise the Option if such
                         exercise occurs before the first to occur of
                         anniversary of (i) the Participant's retirement or
                         disability, or (ii) the expiration of the Option
                         Period.

                    (E)  If the Participant dies within the Option Period, the
                         Options may be exercised, to the extent specified in
                         the Stock Option Agreement and as herein provided, by
                         the person or persons entitled to do so under the
                         Participant's will, or, if the Participant fails to
                         make testamentary disposition of said Options, or dies
                         intestate, by the Participant's legal representative or
                         representatives, but only if such exercise occurs
                         before the first to occur of (i) the expiration of the
                         Option Period; or (ii) the first anniversary of the
                         Participant's death.

                    (F)  A termination shall be for Cause by reason of any of
                         the following: (i) the Participant's conviction of, or
                         plea of nolo contendere to, any felony or to any crime
                         or offense causing harm to any Employer or an employee
                         (whether or not for personal gain) or involving acts of
                         moral turpitude, (ii) the Participant's repeated
                         intoxication by alcohol or drugs during the

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                         performance of his duties, (iii) malfeasance in the
                         conduct of the Participant's duties involving misuse or
                         diversion of any Employer's or an employee's funds,
                         embezzlement or willful and material misrepresentations
                         or concealments on any written reports submitted to any
                         Employer, (iv) repeated material failure by the
                         Participant to perform the duties of his employment;
                         (v) material failure by the Participant to follow or
                         comply with the reasonable and lawful written
                         directives of any Employer or the Participant's
                         immediate supervisor; or (vi) a material breach by the
                         Participant of any written agreement between the
                         Participant and any Employer, including without
                         limitation any breach of any written non competition
                         covenant or written covenant by the Participant with
                         respect to the non-disclosure of confidential
                         information.

          (d)  In the discretion of the Committee, a single Stock Option
               Agreement may include both Incentive Stock Options and
               Non-Incentive Stock Options, or separate Stock Option Agreements
               may be set forth for Incentive Stock Options and Non-Incentive
               Stock Options.

          (e)  Each Option granted under this Plan shall be non-transferable,
               and its terms shall state that it is non-transferable and shall,
               during the lifetime of the Participant be exercisable only by the
               Participant; notwithstanding the foregoing, Options shall be
               transferable by the laws of descent and distribution. However, a
               Participant may hold a Non-Incentive Stock Option in a trust,
               provided that the Committee may require that the optionee submit
               an opinion of his legal counsel, satisfactory to the Committee,
               that such holding has no adverse tax or securities law
               consequences for the Employers.

          (f)  Notwithstanding the foregoing, if any Incentive Stock Option is
               granted to any person at a time when such person owns, within the
               meaning of Section 424(d) of the Code, more than ten percent (10
               %) of the total combined voting power of all classes of stock of
               the employer corporation (or a parent or subsidiary of such

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               corporation within the meaning of Section 424 of the Code), the
               price at which each share of Common Stock covered by such Option
               may be purchased pursuant to such Option shall not be less than
               one hundred ten percent (110%) of Fair Market Value (determined
               as set forth in paragraph (a) of this Section 7) of the shares of
               Common Stock at the time the Option is granted, and such Option
               must be exercised within the period specified in the Stock Option
               Agreement, but in no event later than the tenth anniversary of
               the date on which the Option was granted.

          (g)  Stock Option Agreements under this Plan may contain such other
               terms, provisions and conditions not inconsistent herewith as
               shall be determined by the Committee, in its discretion,
               including, without limitation, provisions (i) relating to the
               vesting and termination of Options; (ii) requiring the giving of
               satisfactory assurances by the Participant that the shares are
               purchased for investment and not with a view to resale in
               connection with a distribution of such shares, and will not be
               transferred in violation of applicable securities laws; (iii)
               restricting the transferability of such shares during a specified
               period; and (iv) requiring the resale of such shares to MHI, at a
               price as specified in the Stock Option Agreement, if the
               Participant's employment by the Employers terminates prior to a
               time specified in the Stock Option Agreement.

          (h)  All Grants of Qualifying Stock Options hereunder made prior to
               the date on what shareholders approve that portion of this Plan
               granting Incentive Stock Options shall be contingent upon
               subsequent approval of the shareholders of the portion of this
               Plan, granting Incentive Stock Options.

          (i)  This Section 7 of the Plan shall terminate on, and no additional
               Awards shall be granted after, ten years from the first to occur
               of the date on which the Plan is adopted, or ten years from the
               date on which the shareholders approved the Plan.

     SECTION 8. Stock Appreciation Rights and Phantom Stock. An SAR is a right
to receive, without payment (except for applicable withholding taxes) to the
Employers, a number of shares of Common Stock, cash or a combination thereof,
the amount of which is

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determined under paragraph (d) of this Section 8. An SAR may be granted (i) with
respect to any Option granted under this Plan, either concurrently with the
grant of such Option, or at such later time as determined by the Committee (as
to all or any portion of the shares of Common Stock subject to the Option), or
(ii) alone, without reference to any related Stock Option. Each SAR granted by
the Committee under this Plan shall be subject to the terms and conditions of
this Section. SARs awarded under the Plan shall be evidenced by either a Stock
Option Agreement or a separate signed Stock Appreciation Right Agreement between
the Company and the Participant to whom the SAR is granted. Phantom Stock means
an Award with a value equivalent to shares of Common Stock. Each share of
Phantom Stock shall represent the right of a Participant to receive an amount
equal to the Fair Market Value of a share of Common Stock, determined in the
manner established by the Committee at the time of the Award. Each Award of
Phantom Stock shall be evidenced by a signed written agreement containing such
terms and conditions as the Committee may from time to time determine (the
"Phantom Stock Agreement").

          (a)  Each SAR or share of Phantom Stock granted to any Participant
               shall relate to the number of shares of Common Stock as shall be
               determined by the Committee, subject to adjustment as provided in
               Section 11. In the case of an SAR granted with respect to a Stock
               Option, the number of shares of Common Stock to which the SAR
               relates shall be reduced in the same proportion that the holder
               of such Option exercises with respect to such related Stock
               Option, and the number of shares subject to an Option shall be
               reduced in the same proportion that the holder of the SAR
               exercises with respect to the related Option.

          (b)  The term of each SAR shall be determined by the Committee. Unless
               otherwise provided by such Committee, each SAR shall become
               exercisable at such time or times and to such extent and upon
               such conditions as the Stock Option to which it relates (if any)
               is exercisable. In the case of a grant of an SAR to an Officer,
               either (i) no such SAR may be exercised during the first six (6)
               months of its term, or (ii) no such SAR may be exercised during
               the first six (6) months of its term unless the Committee
               determines to issue Common Stock alone on such exercise and such
               Common Stock shall not be transferable until the date which is
               six (6) months following the date of grant of the SAR. Except as
               provided in the preceding sentence, the Committee may, in its
               discretion, accelerate the exercisability of any SAR.

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          (c)  An SAR may be exercised, in whole or in part, by giving written
               notice to the Committee, specifying the number of SARs which the
               holder wishes to exercise. Upon receipt of such written notice,
               the Committee shall direct the Company to deliver to the
               exercising holder within ninety (90) days after receipt of the
               notice a certificate for the shares of Common Stock or cash or
               both, as determined by the Committee, to which the holder is
               entitled. No SAR granted to an Officer may be exercised in whole
               or in part except during the period described in paragraph (b)
               hereof,

          (d)  Subject to the right of the Committee to deliver cash in lieu of
               shares of Common Stock, the number of shares of Common Stock
               which shall be issuable upon the exercise of an SAR shall be
               determined by dividing:

               (i)  the number of shares of Common Stock as to which the SAR is
                    exercised multiplied by the amount of appreciation in such
                    shares (for this purpose, the "appreciation" shall be the
                    amount by which the Fair Market Value of the shares of
                    Common Stock subject to the SAR on the exercise date exceeds
                    (A) in the case of an SAR related to an Option, the purchase
                    price of the Common Shares under the Option or (B) in the
                    case of an SAR granted alone, without reference to a related
                    Option, an amount which shall be determined by the Committee
                    at the time of the grant, subject to adjustment under
                    Section 11; by

               (ii) the Fair Market Value of a share of Common Stock on the
                    exercise date,

               In lieu of issuing shares of Common Stock upon the exercise of an
               SAR, the Committee may elect to pay the holder of an SAR cash
               equal to the Fair Market Value on the exercise date of any or all
               of the shares which would otherwise be issuable. No fractional
               shares of Common Stock shall be issued upon the exercise of an
               SAR; instead, the holder of the SAR shall be entitled to receive
               a cash adjustment equal to the same fraction of the Fair Market
               Value of a share of Common Stock on the exercise date or to
               purchase the

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               portion necessary to make a whole share at its Fair Market Value
               on the date of exercise.

          (e)  Awards of Phantom Stock shall not entitle the Participant or
               Beneficiary to any dividend or voting rights or any other rights
               of a shareholder with respect to such Phantom Stock. However, the
               Committee may, in its discretion, provide the Participant with
               dividend equivalents (payable on a current or deferred basis). At
               any time subsequent to full vesting of Phantom Stock, the
               Participant may tender his Phantom Stock to the Committee, and
               MHI shall pay the Participant an amount equal to the then Fair
               Market Value of the equivalent number of shares of Common Stock;
               provided, however, that upon such tender, the Participant may
               receive no further Phantom Stock under this Plan for twelve (12)
               months following the date of such payment.

     SECTION 9. Performance Shares and Units.

          (a)  The Committee may award to any Participant Performance Shares
               and/or Performance Units ("Performance Awards"). Each Performance
               Share shall represent one share of Common Stock. Each Performance
               Unit shall represent the right of a Participant to receive an
               amount equal to the value to be determined in the manner
               established by the Committee at the time of the Award, which
               value may, without limitation, be equal to the Fair Market Value
               of one share of Common Stock. Each Performance Award under the
               Plan shall be evidenced by a signed written agreement containing
               such terms and conditions as the Committee may from time to time
               determine (the "Performance Agreement").

          (b)  At the time of the Performance Award, the Committee shall
               establish an account (the "Performance Account") for each
               Participant to whom a Performance Award has been granted.
               Performance Units and Performance Shares awarded to a Participant
               shall be credited to the Participant's Performance Account,

          (c)  The performance period for each Performance Award shall be of
               such duration as the Committee shall establish at the time of the

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               award (the "Performance Period") There may be more than one
               Performance Award in existence for a Participant at any time, and
               more than one Performance Period applicable to a Participant, and
               the duration of Performance Periods may differ.

          At the time of each Performance Award, the Committee may, in its
          complete discretion, establish performance target(s) to be achieved
          within the Performance Period(s). The performance target(s) shall be
          determined by the Committee using such measures of performance of the
          Employers over the Performance Period as the Committee shall select.
          During any Period, the Committee may adjust the performance targets
          for such Period as it deems equitable in recognition of unusual or
          non-recurring events affecting the Company, changes in applicable tax
          laws or accounting principles or such other factors as the Committee
          may determine. If the Committee determines that the Participant has
          failed to meet the performance target(s), the Participant will not
          receive payment of the Performance Award.

          Performance Awards will be earned as determined by the Committee in
          respect of a Performance Period in relation to the degree of
          attainment of performance target(s),

          (d)  Performance Awards shall be earned to the extent that their terms
               and conditions are met. Notwithstanding the foregoing,
               Performance Awards and any other amounts credited to the
               Participant's Performance Account shall be payable to the
               Participant only in accordance with the Performance Agreement.
               The Committee shall make all payment determinations during the
               four (4) month period beginning on the first day following the
               close of the Performance Period. Payment for Performance Awards
               may be made in a lump sum or in installments, in cash, Common
               Stock or in a combination thereof as the Committee may determine.

          (e)  In the event that a Participant's employment by the Employers
               terminates before the end of a Performance Period with the
               consent of the Committee, or upon a Participant's death,
               retirement or disability before the end of a Performance Period,
               the Committee, taking into consideration the performance of such
               Participant and the performance of the Employers over such
               portion of the

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               Performance Period, may authorize the payment to such Participant
               (or his legal representative or designated beneficiary) of all or
               a portion of the amount which would have been paid to him had he
               continued his employment until the end of the Performance Period.
               In the event a Participant ceases his employment for any other
               reason, any unpaid amounts for any outstanding Performance
               Periods, shall be forfeited.

     SECTION 10. Restricted Stock, Restricted Stock Units, and Unrestricted
Stock Grants.

          (a)  At the time of the Award under (b) or (c) below, there shall be
               established for each Participant a restriction period (the
               "Restriction Period") which shall lapse (i) upon the completion
               of a period of time ("Time Goal") as shall be determined by the
               Committee, or (ii) upon the achievement of stock price goals
               within certain time periods ("Price/Time Goal") as shall be
               determined by the Committee provided that, in the case of an
               award to an Officer, such Time Goal or Price/Time Goal shall last
               at least until the date which is six (6) months after the date of
               the Award.

          (b)  The Committee may award to any Participant any shares of Common
               Stock, subject to this Section 10 and such other terms and
               conditions as the Committee may prescribe (such shares being
               herein called "Restricted Stock"), or subject to no restriction
               ("Unrestricted Stock Grants"). Each certificate for Restricted
               Stock shall be registered in the name of the Participant and
               deposited by him, together with a stock power endorsed in blank,
               with the Committee. Shares of Restricted Stock awarded under this
               Plan shall be evidenced by a signed written agreement containing
               such terms and conditions as the Committee may from time to time
               determine in its discretion (the "Restricted Stock Agreement"),
               Shares of Restricted Stock may not be sold, assigned,
               transferred, pledged or otherwise encumbered, except as
               hereinafter provided, during the Restriction Period. Except for
               such restrictions on transfer, the Participant as owner of such
               shares of Restricted Stock shall have all the rights of a holder
               of such Common Stock. However, a Participant may hold Restricted
               Stock in a trust, provided that the Committee may require that
               the Participant submit an opinion of his legal counsel,
               satisfactory to the Committee, that

                                    15

<PAGE>

               such holding has no adverse tax or securities law consequences
               for MHI.

               With respect to shares of Restricted Stock which are issued
               subject to a Time Goal, the Committee shall redeliver to the
               Participant (or the Participant's legal representative or
               designated beneficiary) the certificates deposited pursuant to
               paragraph (a) of this Section 10 at the expiration of the
               Restriction Period. With respect to shares of Restricted Stock
               which are issued subject to a Price/Time Goal, the Committee
               shall redeliver to the Participant (or the Participant's legal
               representative or designated beneficiary) the certificates
               deposited pursuant to paragraph (b) of this Section 10 at the
               expiration of the Restriction Period. With respect to shares of
               Restricted Stock which are issued subject to a Price/Time Goal or
               Time Goal which fail to meet the goal before the end of the
               Restriction Period, all such shares shall be forfeited and the
               Committee shall have the right to complete a blank stock power in
               order to return such shares to MHI.

          (c)  The Committee may award to a Participant a right to receive
               Common Stock or cash equivalent to the Fair Market Value of the
               Common Stock, in the Committee's discretion, at the end of the
               Restriction Period ("Restricted Stock Units") subject to
               achievement of a Time Goal or Price/Time Goal established by the
               Committee. At the end of the Restriction Period, with respect to
               Restricted Stock Units which are subject to a Time Goal, the
               Committee shall deliver notice to the Participant (or the
               Participant's legal representative or designated beneficiary) as
               to whether the Participant has achieved the Time Goal. With
               respect to Restricted Stock Units which are awarded subject to a
               Price/Time Goal, the Committee shall deliver notice to the
               Participant (or the Participant's legal representative or
               designated beneficiary) at the end of the Restriction Period as
               to whether the Participant has achieved the Price/Time Goal. 1f
               the Committee determines that a Participant has not achieved the
               Time Goal or Price/Time Goal, the Participant shall have no
               further rights with respect to the Restricted Stock or Restricted
               Stock Units.

                                    16

<PAGE>

          (d)  In the event a Participant ceases his employment with the
               Employers with the consent of the Committee or upon the
               Participant's death, retirement or disability before the end of
               the Restriction Period and the Participant has received an Award
               subject to a Time Goal, the restrictions imposed under this
               Section shall lapse with respect to the number of those shares
               subject to a Time Goal as shall be determined by the Committee,
               but in no event less than a number equal to the product of (i) a
               fraction, the numerator of which is the number of completed
               months elapsed after the date of Award of the Restricted Stock
               subject to a Time Goal to the Participant to the date of
               termination and the denominator of which is the number of months
               in the Restriction Agreement, multiplied by (ii) the number of
               shares of Restricted Stock or Restricted Stock Units awarded to
               the Participant subject to the Time Goal.

               In the event a Participant ceases his employment the Employers
               with the consent of the Committee or upon the Participant's
               death, retirement or disability before the end of the Restriction
               Period and the Participant has received an Award subject to a
               Price/Time Goal, the restrictions imposed under this Section
               shall lapse upon the achievement of the Price/Time Goal within
               two (2) years of the Participant's termination of employment with
               respect to such number of shares or units subject to a Price/Time
               Goal as shall be determined by the Committee. In no event shall
               the number of shares or units be less than a number equal to the
               product of (i) a fraction, the numerator of which is the number
               of completed months elapsed after the date of award of the
               Restricted Stock or Restricted Stock Units subject to a
               Price/Time Goal to the Participant to the date of termination and
               the denominator of which is the number of months elapsed after
               the date award of the Restricted Stock or Restricted Stock Units
               subject to a Price/Time Goal to the Participant to the date of
               achievement of the Price/Time Goal, multiplied by (ii) the number
               of shares of Restricted Stock or Restricted Stock Units subject
               to the Price/Time Goal.

               In the event a Participant ceases his employment with the
               Employers for any other reason, all shares of Restricted Stock
               theretofore awarded to that Participant which are still subject
               to

                                    17

<PAGE>

               restrictions shall be forfeited and the Committee shall have the
               right to complete the blank stock power.

     SECTION 11. Adjustment of Number of Shares. In the event of a stock
dividend or stock split is declared upon the stock, the number of shares of
Common Stock then subject to an Award and the number of shares reserved for
issuance pursuant to this Plan but not yet covered by an Option shall be
adjusted by adding to each of such shares the number of shares which would have
been distributable thereon if such shares had been outstanding on the date fixed
for determining the stockholders entitled to receive such stock dividend or
split. In the event that the outstanding shares of Common Stock shall be changed
into or exchanged for a different number or kind of shares of stock or other
securities of MHI or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, merger or
consolidation, then there shall be substituted for each share of Common Stock
reserved for issuance pursuant to the Plan but not yet covered by an Option, the
number and kind of other stock or other securities into which each outstanding
share of Common Stock shall be so changed or for which each such share shall be
exchanged; provided, however, that in the event such change or exchange results
from a merger or consolidation, and in the judgment of the Board of Directors of
MHI such substitution cannot be effected or would be inappropriate, or if MHI
shall sell all or substantially all of its assets, MHI shall use reasonable
efforts to effect some other adjustment of each such outstanding Option which
the Board of Directors of MHI, in its sole discretion, shall deem equitable. In
the event that there shall be any change, other than as described above in this
Section, in the number or kind of the outstanding shares of Common Stock or of
any stock or other securities into which such shares of Common Stock shall have
been changed or for which they shall have been exchanged then, if the Board of
Directors of MHI shall determine that such change equitably requires an
adjustment in the number or kind of shares theretofore reserved for issuance
under the Plan but not yet covered by an Option, and of the shares then subject
to an Option or Options, such adjustment shall be made by the Board and shall be
effective and binding for all purposes of this Plan and of each Stock Option
Agreement. Notwithstanding the foregoing, if any adjustment in the number of
shares which may be issued and sold pursuant to options is required by the Code
or regulations promulgated thereunder to be approved by the stockholders in
order to enable the Company to issue Incentive Stock Options pursuant to this
Plan, then no such adjustment shall be made without the approval of the
stockholders. In the case of any such substitution or adjustment as provided for
in this Section, the option price in each Stock Option Agreement for each share
covered thereby prior to such substitution or adjustment will be the total
option price for all shares of stock or other securities which shall have been
substituted for each share or to which such share shall have been adjusted
pursuant to this Section. No adjustment or substitution provided for in this

                                       18

<PAGE>

Section shall require the Company, in any Stock Option Agreement, to sell a
fractional share, and the total substitution or adjustment with respect to each
Stock Option Agreement shall be limited accordingly. Notwithstanding the
foregoing, in the case of Incentive Stock Options, if the effect of the
adjustments or substitution is to cause the Option to fail to continue to
qualify as an Incentive Stock Option or to cause a modification, extension or
renewal of such Option within the meaning of Section 424 of the Code, the Board
of Directors of the Company shall use reasonable efforts to effect such other
adjustment of each then outstanding Option as the Board, in its sole discretion,
deems equitable.

     SECTION 12. Change of Control. In the event of a "Change of Control" or
"Initial Public Offering" (as both defined herein), all Awards hereunder shall
vest immediately. As used herein, a "Change of Control" shall mean and be deemed
to have occurred if any person (other than the individuals or entities listed on
Attachment A, which may be modified by the Committee from time to time) is or
becomes the beneficial owner of 20 percent or more of MHI's Common Stock or a
change in the composition of MHI's Board of Directors such that within any
period of two consecutive years, persons who at the beginning of such period and
whose election, or nomination for election by the shareholders of MHI was
approved by a vote of at least two-thirds of the persons who were either
directors at the beginning of such period or whose subsequent election or
nomination was previously approved in accordance with this clause, cease to
constitute at least a majority of the Board of Directors, or if MHI's Board of
Directors reaches agreement to merge or consolidate with another entity and MHI
is not the surviving corporation, or if all, or substantially all of the assets
of MHI are sold, or if MHI shall dissolve or liquidate. An "Initial Public
Offering" shall be deemed to occur if MHI offers shares to the public pursuant
to a registration filed under Form S-1 or Form S-B2 (or any replacement forms)
under the Securities Act of 1933.

     SECTION 13. Beneficiary Designation. Each Participant under the Plan may
name, from time to time, any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
in case of his death before he receives any or all of such benefit. Each
designation will be effective only with the written consent of the Participant's
spouse and will revoke all prior designations by that Participant, shall be in
the form prescribed by the Committee, and will be effective only when filed by
the Participant in writing with the Committee during his lifetime. In the
absence of any such designation, benefits remaining unpaid at the Participant's
death shall be paid to his estate.

                                       19

<PAGE>

     SECTION 14. Tax Withholding.

          (a)  The Employers shall have the power to withhold, or require a
               Participant to remit to MHI, an amount sufficient to satisfy any
               withholding or other tax due from MHI with respect to any amount
               payable and/or shares issuable under the Plan, and MHI may defer
               such payment or issuance unless indemnified to its satisfaction.

          (b)  Subject to the consent of the Committee, due to (i) the exercise
               of a Non-Incentive Stock Option, (ii) the lapse of restrictions
               on a Restricted Stock Award, or (iii) the issuance of any other
               stock award under the Plan, a Participant may make an irrevocable
               election (an "Election") to (A) have shares of Common Stock
               otherwise issuable under (i) withheld, or (B) tender back to MHI
               shares of Common Stock received pursuant to (i), (ii), or (iii),
               or (C) deliver back to the Company pursuant to (i), (ii), or
               (iii) previously acquired shares of Common Stock of MHI having a
               Fair Market Value sufficient to satisfy all or part of the
               Participant's estimated tax obligations associated with the
               transaction. Such Election must be made by a Participant prior to
               the date on which the relevant tax obligation arises (the "Tax
               Date"). The Committee may disapprove of any Election, may suspend
               or terminate the right to make Elections, or may provide with
               respect to any Award under this Plan that the right to make
               Elections shall not apply to such Awards.

          (c)  If a Participant is an Officer, then an Election is subject to
               the following additional restrictions:

               (i)  No election shall be effective for a Tax Date which occurs
                    within six months of the grant of the award.

               (ii) The Election must be made and must be effective during a
                    period beginning on the third business day following the
                    date of release for publication of MHI's quarterly or annual
                    summary statements of earnings and ending on the twelfth
                    business day following such date.

                                       20

<PAGE>

     SECTION 15. Indemnification. Each person who is or shall have been a member
of the Committee shall be indemnified and held harmless by MHI against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him in connection with or resulting from any claim, action, suit, or
proceeding to which he may be a party or in which he may be involved by reason
of any action taken or failure to act under the Plan and against and from any
and all amounts paid by him in settlement thereof, with MHI's approval, or paid
by him in satisfaction of any judgment in any such action, suit, or proceeding
against him, provided he shall give MHI an opportunity, at its own expense, to
handle and defend the same before he undertakes to handle and defend it on his
own behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under
MHI's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or
any power that MHI may have to indemnify them or hold them harmless.

     SECTION 16. Gender and Number. Except where otherwise indicated by the
context, words in the masculine gender when used in the Plan will include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.

     SECTION 17. Controlling Law. This document shall be construed under the
laws of the State of California.

     SECTION 18. No Stockholder Rights. No Participant hereunder shall have any
rights of a stockholder of MHI by reason of being granted an Award under this
Plan, except as specifically provided with respect to Restricted Stock.

     SECTION 19. Amendments. This Plan may be amended from time to time by
written resolution of the Board of Directors of MHI; provided, however, that no
amendment which shall (i) change the total number of shares which may be issued
and sold pursuant to Options granted under this Plan, (ii) change the
designation of the class of employees eligible to receive Incentive Stock
Options or the class of individuals eligible to receive Non-Incentive Stock
Options, (iii) decrease the minimum Option price set forth in paragraph (a) of
Section 7 of this Plan, (iv) extend the period during which an Option may be
granted or exercised beyond the maximum period specified in this Plan, or (v)
withdraw the authority to administer this Plan from the Committee, shall be
effective without the approval of the stockholders. Notwithstanding the
foregoing, the Board may amend the Plan to incorporate or conform to
requirements imposed by and amendments made to the Code or regulations
promulgated thereunder which the Board deems to be necessary or desirable to
preserve (a) incentive stock option status for outstanding Incentive Stock
Options and to preserve the ability to issue Incentive Stock Options pursuant to
this Plan,

                                    21

<PAGE>

(b) the deductibility by MHI of amounts taxed to Plan Participants as ordinary
compensation income, and (c) the status of any Award as exempt from registration
requirements under any securities law for which the Award was intended to be
exempt.

     SECTION 20. Termination or Suspension. The Board of Directors of MHI may
terminate the Plan or any portion thereof at any time by written resolution. No
suspension or termination shall impair the rights of Participants under
outstanding Awards without the consent of the Participants affected thereby.

                                    22

<PAGE>

                                  Attachment A

Joseph Marion Molina, M.D.

John Conrad Molina

Mary R. Molina

Martha Bernadett, M.D.

Josephine Battiste

Janet Walt

Molina Marital Trust

Mary R. Molina Living Trust

Molina Family Ltd. Partnership

Molina Siblings Trust

                                    23

<PAGE>

                             SECRETARY'S CERTIFICATE

     I, Mark L. Andrews, in my capacity as Secretary of Molina Healthcare, Inc.,
hereby confirm that the attached Omnibus Stock and Incentive Plan has been
amended pursuant to shareholder action taken on December 18, 2000.

     IN WITNESS WHEREOF, I have hereunto subscribed my name this 2nd day of
October, 2001.

                                                             /s/
                                                             -------------------
                                                             Mark L. Andrews
                                                             Corporate Secretary<PAGE>
                                                                   EXHIBIT 10.13

                             MOLINA HEALTHCARE, INC.

                           2002 EQUITY INCENTIVE PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN & DEFINITIONS

     The name of the plan is the Molina Healthcare, Inc. 2002 Equity Incentive
Plan (the "Plan"). The purpose of the Plan is to encourage and enable the
officers, directors, employees and Consultants of Molina Healthcare, Inc., a
California corporation (the "Company"), and its Subsidiaries (each as defined
below), upon whose judgment, initiative and efforts the Company largely depends
for the successful conduct of its business, to acquire a proprietary interest in
the Company. It is anticipated that providing such persons with a direct stake
in the Company's welfare will assure a closer identification of their interests
with those of the Company, thereby stimulating their efforts on the Company's
behalf and strengthening their desire to remain with and further the interests
of the Company.

     The following terms shall be defined as set forth below:

     "Acquired Company" has the meaning specified in Section 10(c).

     "Act" means the Securities Act of 1933, as amended.

     "Assumption" has the meaning specified in Section 10(b).

     "Award" or "Awards" shall include Incentive Stock Options, Non-Qualified
Stock Options, Restricted Stock Awards, Stock Bonus Awards or any combination of
the foregoing.

     "Board" means the Board of Directors of the Company or its successor
entity.

     "Code" means the Internal Revenue Code of 1986, as amended, and related
rules, regulations and interpretations.

     "Committee" has the meaning specified in Section 2(a).

     "Company" has the meaning specified in the first para graph of Section 1.

     "Consultant" means a person engaged to provide consulting or advisory
services (other than as an employee or director) to the Company or any
Subsidiary; provided that, the identity of such person, the nature of such
services or the entity to which such services are provided would not preclude
the Company from offering or selling securities to such person pursuant to the
Plan in reliance on a Form S-8 Registration Statement under the Act.

     "Covered Employee" means an employee described in Section 162(m)(3) of the
Code.

     "Disability" has the meaning specified in Section 22(e)(3) of the Code.

<PAGE>

     "Effective Date" has the meaning specified in Section 14.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Fair Market Value" of a share of Stock for a given date means (i) the last
reported closing price for a share of Stock on the NYSE; or (ii) in the absence
of reported sales on the NYSE on a given date, the closing price of the NYSE on
the last date on which a sale occurred prior to such date; or (iii) if the stock
is no longer publicly traded on the NYSE, the Committee in good faith shall
determine Fair Market Value; provided that, if the date for which the Fair
Market Value is determined is the first day when trading prices for the Stock
are reported on the NYSE, the Fair Market Value shall be the public offering
price set forth on the cover page for the final prospectus relating to the
Company's Initial Public Offering.

     "Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422(b) of the Code.

     "Initial Public Offering" means the consummation of the first fully
underwritten, firm commitment, public offering pursuant to an effective
registration statement under the Act, other than on Forms S-4 or S-8 or their
then equivalents, covering the offer and sale by the Company of its equity
securities or such other event as a result of or following which the Stock shall
be publicly held.

     "NYSE" means the New York Stock Exchange.

     "Non-Qualified Stock Option" means any Stock Option that is not designated
as an Incentive Stock Option or which does not qualify as an Incentive Stock
Option.

     "Option" or "Stock Option" means any right to purchase shares of Stock
granted pursuant to Section 5.

     "Option Agreement" means a written agreement between the Company and a
grantee setting forth the terms, conditions and restrictions of the Option
granted to the grantee and any shares of Stock acquired upon the exercise
thereof. An Option Agreement may consist of a "Notice of Grant of Stock Option"
and a form of "Stock Option Agreement" incorporated therein by reference or such
other form or forms as the Committee may approve from time to time.

     "Option Shares" means the shares of Stock which are issuable upon exercise
of a Stock Option.

     "Outside Director" means an individual who meets the requirements to
qualify as an "outside director" as defined under Treas. Reg. Sect.
1.162-27(e)(3) (or its successor).

     "Plan" has the meaning specified in the first paragraph of Section 1.

     "Prior Plan" has the meaning specified in Section 3(b).

                                       2

<PAGE>

     "Reincorporation Merger" means the merger contemplated by that certain
Agreement of Merger by and between the Company and Molina Healthcare, Inc., a
Delaware corporation, as amended.

     "Restricted Stock" has the meaning specified in Section 6(a).

     "Restricted Stock Agreement" means a written agreement between the Company
and a grantee setting forth the terms, conditions and restrictions of a
Restricted Stock Award granted to the grantee and any shares of Restricted Stock
issued to the grantee pursuant thereto.

     "Restricted Stock Award" means any Award of Restricted Stock hereunder.

     "Service Relationship" means the grantee's employment or service with the
Company or any Subsidiary, whether in the capacity of an employee, director or
Consultant. Unless otherwise determined by the Committee, a grantee's Service
Relationship shall not be deemed to have terminated merely because of a change
in the capacity in which the grantee renders service to the Company or its
Subsidiary, or a transfer between locations of the Company or any Subsidiary or
a transfer between the Company and any Subsidiary; provided that, there is no
interruption or other termination of the Service Relationship. Subject to the
foregoing and Section 9 below, the Company, in its sole discretion, shall
determine whether the grantee's Service Relationship has terminated and the
effective date of such termination.

     "Stock" means the common stock, par value $0.001 per share, of the Company,
subject to adjustment pursuant to Section 3.

     "Stock Bonus Award" has the meaning specified in Section 7.

     "Stock Option" means an Award on an option to purchase shares of Stock
under Section 5.

     "Subsidiary" means any corporation (other than the Company) in any unbroken
chain of corporations beginning with the Company if each of the corporations
(other than the last corporation in the unbroken chain) owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.

     "Transaction" means any of the following:

     (a) Approval by the Board and by the shareholders of the Company (or, if no
shareholder approval is required, by the Board alone) of the dissolution or
liquidation of the Company, other than in the context of a transaction that does
not constitute a Transaction under paragraph (b) below,

     (b) Consummation of a merger, consolidation, or other reorganization, with
or into, or the sale of all or substantially all of the Company's business
and/or assets as an entirety to, one or more entities that are not subsidiaries
or affiliates of the Company (a "Business Combination"), unless (1) as a result
of the Business Combination, more than fifty percent of the outstanding voting
power generally in the election of directors of the surviving or resulting
entity

                                       3

<PAGE>

or a parent thereof (the "Successor Entity") immediately after the
reorganization is, or will be, owned, directly or indirectly, by holder of the
Company's voting securities immediately before the Business Combination; and (2)
no "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), excluding the Successor Entity or an Excluded Person, beneficially owns,
directly or indirectly, more than fifty percent of the outstanding shares or the
combined voting power of the outstanding voting securities of the Successor
Entity, after giving effect to the Business Combination, except to the extent
that such ownership existed before the Business Combination.

     (c) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) other than an Excluded Person becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than fifty percent of the combined
voting power of the Company's then outstanding securities entitled to then vote
generally in the election of directors of the Company, other than as a result of
(1) an acquisition directly from the Company, (2) an acquisition by the Company
or (3) an acquisition by an entity pursuant to a transaction that is expressly
excluded under paragraph (b) above.

     For purposes of defining whether an event qualifies as a "Transaction,"
"Excluded Person" shall mean (1) any person described in and satisfying the
conditions of Rule 13d-1(b)(1) under the Exchange Act, (2) the Company, (3) an
employee benefit plan (or related trust) sponsored or maintained by the Company
or the Successor Entity or (4) any person who is the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than twenty-five percent
of the Stock on January 1, 2002 (or an affiliate, successor, heir, descendant,
or related party of or to such person).

     "10% Owner Optionee" means an individual who owns or is deemed to own (by
reason of the attribution rules of Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company, or of its Parent or any Subsidiary.

SECTION 2. ADMINISTRATION OF PLAN

     (a) Administration of Plan. The Plan shall be administered by the Board of
Directors of the Company (the "Board"), or at the discretion of the Board, a
committee of the Board consisting of not less than two directors (the
"Committee"); provided that, if each member of the Committee is not a
"Non-Employee Director" within the meaning of Rule 16b-3(a)(3) of the Exchange
Act, then any Awards granted to individuals subject to the reporting
requirements of Section 16 of the Exchange Act shall be approved by the Board.
Notwithstanding the foregoing, after the end of the reliance period (as defined
in Treasury Regulation 1.162-27(f)) following the Company's Initial Public
Offering, Awards granted to Covered Employees which might reasonably be
anticipated to result in the payment of employee remuneration that would
otherwise exceed the limit on employee remuneration deductible for income tax
purposes pursuant to Section 162(m) of the Code shall be approved by a Committee
composed solely of two or more Outside Directors. All references herein to the
Committee shall be deemed to refer to the entity then responsible for
administration of the Plan at the relevant time (i.e., either the Board or a
committee of the Board, as applicable).

                                       4

<PAGE>

     (b) Powers of Committee. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:

          (i) to select the persons to whom Awards may from time to time be
     granted;

          (ii) to determine the time or times of grant and the type of Award to
     be granted which may include Incentive Stock Options, Non-Qualified Stock
     Options, Restricted Stock Awards, Stock Bonus Awards or any combination of
     the foregoing, granted to any one or more grantees;

          (iii) to determine the number of shares of Stock to be covered by any
     Award;

          (iv) to approve the form of written instruments evidencing the Awards;

          (v) to determine and modify from time to time the terms and conditions
     of any Award, including restrictions, not inconsistent with the terms of
     the Plan, which terms and conditions may differ among individual Awards and
     grantees;

          (vi) to accelerate at any time the exercisability or vesting of all or
     any portion of any Award and/or to include provisions in Awards providing
     for such acceleration;

          (vii) to impose any limitations on Awards granted under the Plan,
     including limitations on transfers, repurchase provisions and the like and
     to exercise repurchase rights or obligations;

          (viii) to extend at any time the period in which Stock Options may be
     exercised; and

          (ix) at any time to adopt, alter and repeal such rules, guidelines and
     practices for administration of the Plan and for its own acts and
     proceedings as it shall deem necessary and advisable; to interpret the
     terms and provisions of the Plan and any Award (including related written
     instruments); to make all determinations it deems necessary and advisable
     for the administration of the Plan; to decide all disputes arising in
     connection with the Plan; and to otherwise supervise the administration of
     the Plan.

     All decisions and interpretations of the Committee relating to the Plan and
any Awards granted hereunder shall be binding on all persons, including the
Company, the Company's stockholders, grantees and beneficiaries.

     (c) Delegation of Authority to Grant Awards. The Committee, in its
discretion and in accordance with applicable state law, may delegate to the
Chief Executive Officer of the Company all or part of the Committee's authority
and duties with respect to the granting of Awards at Fair Market Value to
individuals who are not subject to the reporting requirements of Section 16 of
the Exchange Act or Covered Employees. The Committee may revoke or amend the
terms of a delegation at any time but such action shall not invalidate any prior
actions of the Committee's delegate or delegates that were consistent with the
terms of the Plan.

                                       5

<PAGE>

SECTION 3. STOCK ISSUABLE UNDER THE PLAN

     (a) Initial Stock Reserve. The maximum aggregate number of shares of Stock
reserved and available for issuance under the Plan shall be 40,000 shares of
Stock, subject to adjustment as provided in Section 10(a). For purposes of this
limitation, the shares of Stock underlying any Awards which are forfeited,
canceled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated (other than by exercise) without the issuance of Stock
shall be added back to the shares of Stock available for grant and issuance in
connection with future Awards under this Plan. The sum of Restricted Stock
Awards and Stock Bonus Awards issued under this Plan shall not exceed 15,000
shares, subject to adjustment under Section 10(a).

     (b) Coordination with Prior Plan

     Any authorized shares not issued or subject to outstanding grants under the
Omnibus Stock and Incentive Plan for Molina Healthcare, Inc. (the "Prior Plan")
on the Effective Date and any shares that are issuable upon exercise of options
granted under the Prior Plan that expire or become unexercisable for any reason
without having been exercised in full, will no longer be available for grant and
issuance under the Prior Plan but will be available for grant and issuance under
this Plan. In addition, any shares issued under the Prior Plan that are
repurchased or forfeited will be available for grant and issuance under this
Plan.

     (c) Annual Increase to Stock Reserve

     On the first business day of each fiscal year of the Company on or after
the Effective Date but prior to termination of the Plan, the aggregate number of
shares of Stock reserved and available for grant and issuance under this Plan
will be increased automatically by a number of shares of Stock equal to the
lesser of (i) 10,000 shares of Stock, subject to adjustment under Section 10(a)
below, and (ii) the number of shares of Stock equal to two percent (2%) of the
issued and outstanding Common Shares (calculated on a fully-diluted (including
all Stock issuable under the Plan) and as-converted basis) determined as of the
date of the applicable increase, unless the Board determines prior to the
commencement of any fiscal year that such increase shall not occur for such
fiscal year.

     (d) Shares Available for Issuance. The shares of Stock available for
issuance under the Plan may be authorized but unissued shares of Stock or shares
of Stock reacquired by the Company and held in its treasury. At all times, the
Company shall reserve and keep available a sufficient number of shares of stock
as shall be required to satisfy the requirements of all outstanding stock
options granted under the Plan and all other outstanding but unvested Awards.

SECTION 4. ELIGIBILITY

     Awards may be granted to employees, directors and Consultants of the
Company or any Subsidiary (including prospective employees, directors and
Consultants to whom Awards are granted in connection with written offers of
employment or other service with the Company or any subsidiary) as are selected
from time to time by the Committee in its sole discretion on and after the
Company's Initial Public Offering. The Board shall consider such factors as it
deems

                                       6

<PAGE>

pertinent in selecting who shall receive Awards and in determining the type and
amount of their benefits under this Plan. A person may be granted more than one
Award under this Plan. The maximum number of Common Shares subject to a benefit
that may be granted in the aggregate under the Plan during any calendar year to
any person shall be limited to 15,000 shares (subject to adjustment pursuant to
Section 10(a) below). To the extent required by Section 162(m) of the Code,
Awards subject to the foregoing limit that are cancelled or repriced during any
year continue to be counted against this limit.

SECTION 5. STOCK OPTIONS

     The Company may grant Stock Options under the Plan to any eligible person
pursuant to an Option Agreement that shall be in such form as the Committee may
from time to time approve. Option Agreements need not be identical.

     Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary; provided that, an Incentive Stock
Option may be granted to a prospective employee upon the condition that such
person becomes an employee and such grant shall be deemed granted effective on
the date that such person commences service with the Company or any Subsidiary,
with an exercise price determined as of such date in accordance with Section
5(a)(i) below. Non-Qualified Stock Options may be granted to officers,
directors, employees and Consultants of the Company or any Subsidiary. To the
extent that any Option does not qualify as an Incentive Stock Option, it shall
be deemed a Non-Qualified Stock Option.

     No Incentive Stock Option shall be granted under the Plan on or after the
tenth anniversary of the Board's adoption of the
Plan.

     (a) Terms of Stock Options. Stock Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable:

          (i) Exercise Price. The exercise price per share for the Stock covered
     by a Stock Option shall be determined by the Committee at the time of grant
     but shall not be less than one hundred percent (100%) of the Fair Market
     Value on the grant date in the case of an Incentive Stock Option. If an
     Incentive Stock Option is granted to a 10% Owner Optionee, the exercise
     price per share for the Stock covered by such Incentive Stock Option shall
     not be less than one hundred ten percent (110%) of the Fair Market Value on
     the grant date. Notwithstanding the foregoing, an Incentive Stock Option
     may be granted with an exercise price lower than the minimum exercise price
     per share set forth above if the Incentive Stock Option is granted pursuant
     to a substitution for an option of an Acquired Company in a manner
     qualifying under Section 424(a) of the Code.

          (ii) Option Term. The term of each Stock Option shall be fixed by the
     Committee, but no Stock Option shall be exercisable more than ten (10)
     years after the date the Stock Option is granted. If an Incentive Stock
     Option is granted to a 10% Owner Optionee, such Incentive Stock Option
     shall not be exercisable more than five (5) years after the grant date.

                                       7

<PAGE>

          (iii) Exercisability; Rights of a Stockholder. Stock Options shall
     become exercisable at such time or times, whether or not in installments,
     as shall be determined by the Committee and set forth in the Option
     Agreement evidencing such Option. A grantee shall have no rights of a
     stockholder of the Company with respect to any shares covered by the Option
     until the date of the issuance of the shares of Stock for which the Option
     has been exercised (as evidenced by an appropriate entry on the books of
     the Company or of a duly authorized transfer agent of the Company). No
     adjustment shall be made for dividends, distributions or other rights for
     which the record date is prior to the date such shares are issued, except
     as provided in Section 10(a) hereof.

          (iv) Method of Exercise. Stock Options may be exercised, in whole or
     in part, by giving written notice of exercise to the Company, specifying
     the number of shares of Stock to be purchased. Payment of the aggregate
     exercise price may be made by one or more of the following methods to the
     extent provided in the Option Agreement:

               (A) in cash, by certified or bank check, or other instrument
          acceptable to the Committee in U.S. funds payable to the order of the
          Company in an amount equal to the aggregate exercise price of such
          Option Shares;

               (B) if permitted by the Committee in its sole and absolute
          discretion, (x) through the delivery (or attestation to ownership) of
          shares of Stock with an aggregate Fair Market Value (as of the date
          such shares are delivered or attested to) equal to the aggregate
          Exercise Price and that have been purchased by the grantee on the open
          market or that have been held by the grantee for at least six (6)
          months and are not subject to restrictions under any plan of the
          Company, or (y) by the grantee delivering to the Company a properly
          executed exercise notice together with irrevocable instructions to a
          broker to promptly deliver to the Company cash or a check payable and
          acceptable to the Company in an amount equal to the aggregate exercise
          price; provided that, in the event the grantee chooses such payment
          procedure, the grantee and the broker shall comply with such
          procedures and enter into such agreements of indemnity and other
          agreements as the Committee shall prescribe as a condition of such
          payment procedure; or

               (C) a combination of the payment methods set forth in clauses (A)
          and (B) above.

     Payment instruments will be received subject to collection. No certificates
for Option Shares so purchased will be issued to the grantee until the Company
has completed all steps required by law to be taken in connection with the
issuance and sale of such shares, including, without limitation, obtaining from
grantee payment or provision for all withholding taxes due as a result of the
exercise of the Stock Option. The issuance of the Option Shares to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt from
the grantee (or a purchaser acting in his or her stead in accordance with the
provisions of the Stock Option) by the Company of the full exercise price for
such Option Shares and the fulfillment of any other requirements contained in
the Option Agreement or applicable provisions of law. If the grantee chooses to
pay the exercise price by delivery of previously owned shares of Stock by the
attestation method set forth in clause (B)(x) above, the shares of Stock issued
to the grantee upon the exercise of the Stock Option shall be net of the number
of the shares of Stock delivered.

                                       8

<PAGE>

     (b) Annual Limit on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined as of the time the Option is granted) of
the shares of Stock with respect to which Incentive Stock Options are
exercisable for the first time by a grantee during any calendar year (under all
option plans of the Company and its Subsidiaries) exceeds $100,000, such
Incentive Stock Options shall constitute Non-Qualified Stock Options. For
purposes of this Section 5(b), Incentive Stock Options shall be taken into
account in the order in which they were granted. If pursuant to the above, an
Incentive Stock Option is treated as an Incentive Stock Option in part and a
Non-Qualified Stock Option in part, the grantee may designate which portion of
the Stock Option the grantee is exercising. In the absence of such designation,
the grantee shall be deemed to have exercised the Incentive Stock Option portion
of the Stock Option first.

     (c) Non-transferability of Options. No Stock Option shall be transferable
by the grantee other than by will or by the laws of descent and distribution and
all Stock Options shall be exercisable, during the grantee's lifetime, only by
the grantee or by the grantee's legal representative or guardian in the event of
the grantee's incapacity. Notwithstanding the foregoing, the Committee, in its
sole discretion, may provide in the Option Agreement regarding a given
Non-Qualified Stock Option that the grantee may transfer, without consideration
for the transfer, such Stock Option to members of his or her immediate family,
to trusts for the benefit of such family members, to partnerships in which such
family members are the only partners or to limited liability companies in which
such family members are the only members; provided that, each transferee agrees
in writing with the Company to be bound by all of the terms and conditions of
the Plan and the applicable Option Agreement.

SECTION 6. RESTRICTED STOCK AWARDS

     (a) Nature of Restricted Stock Awards. The Company may grant or sell, at
par value or such greater purchase price as determined by the Committee, in its
sole discretion, shares of Stock subject to such restrictions and conditions as
the Committee may determine at the time of grant ("Restricted Stock"), which
purchase price shall be payable in cash or, if permitted by the Committee at the
time of grant of such Award, by promissory note (which may be recourse or
partially recourse to the grantee), in a form approved by the Committee;
provided that, at least so much of the purchase price as represents the par
value of the Stock shall be paid other than with a promissory note if required
by state law. Conditions may be based on the continuation of a Service
Relationship, achievement of pre-established performance goals and objectives or
such other terms as may be determined by the Committee in its sole discretion.
The grant of a Restricted Stock Award is contingent on the grantee executing a
Restricted Stock Agreement. The terms and conditions of each such Restricted
Stock Agreement shall be determined by the Committee and such terms and
conditions may differ among individual Awards and grantees.

     (b) Rights as a Stockholder. Upon execution of the Restricted Stock
Agreement and payment of any applicable purchase price, a grantee shall have the
rights of a stockholder of the Company with respect to the voting of the
Restricted Stock, subject to such conditions contained in the Restricted Stock
Agreement. Unless the Committee shall otherwise determine, certificates
evidencing the Restricted Stock shall remain in the possession of the Company
until such

                                       9

<PAGE>

Restricted Stock is vested as provided in Section 6(d) below and the grantee
shall be required, as a condition of the grant, to deliver to the Company a
stock power endorsed in blank.

     (c) Restrictions. Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Agreement. Shares of Stock issued pursuant to
a Restricted Stock Award may be subject additional conditions and restrictions
as determined by the Committee and set forth in the applicable Restricted Stock
Agreement, including but not limited to, compliance with post-employment
obligations to the Company.

     (d) Vesting of Restricted Stock. The Committee at the time of grant shall
specify the date or dates and/or performance goals, objectives and other
conditions on which Restricted Stock shall become vested, subject to such
further rights of the Company or its assigns as may be specified in the
Restricted Stock Agreement.

     (e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
Agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.

SECTION 7. STOCK BONUS AWARDS

     The Committee may, in its sole discretion, grant or sell, at par value or
such greater purchase price determined by the Committee, in exchange for any
valid consideration, including past services rendered, a Stock Bonus Award to
any grantee, pursuant to which such grantee may receive shares of Stock under
the Plan free of any vesting restrictions ("Stock Bonus Award"). Notwithstanding
the foregoing, Stock received pursuant to a Stock Bonus Award may be subject to
other conditions and restrictions as determined by the Committee, including but
not limited to compliance with post-employment obligations to the Company, at
the time of grant and the Committee may place legends referencing any such
restrictions on the certificate representing such Stock.

SECTION 8. TAX WITHHOLDING

     (a) Payment by Grantee. Each grantee shall pay to the Company, or make
arrangements satisfactory to the Committee regarding payment of, any federal,
state or local taxes of any kind required by law to be withheld with respect to
such income no later than the date as of which the value of an Award or any
Stock or other amounts received thereunder first becomes includable in the gross
income of the grantee for tax purposes. The Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the grantee.

     (b) Payment in Stock. Subject to approval by the Committee, an individual
may elect to have the minimum required tax withholding obligation (as determined
under applicable federal, state or local law) satisfied with respect to an
Award, in whole or in part, by: (i) authorizing the Company to withhold from
shares of Stock to be issued pursuant to any Award a number of shares with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy such obligation, or (ii) transferring to the Company shares of
Stock

                                       10

<PAGE>

owned by the grantee with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy such obligation.

SECTION 9. LEAVE OF ABSENCE

     (a) Exercisability. An approved leave of absence for military service,
sickness or any other purpose approved by the Company shall not be deemed a
termination of a grantee's Service Relationship for purposes of determining when
a grantee's outstanding Stock Options will expire pursuant to the Plan and the
applicable Option Agreement; provided that, if any such leave exceeds ninety
(90) days, on the ninety-first (91st) day of such leave the grantee's Service
Relationship shall be deemed to have terminated unless the grantee's right to
return to service is guaranteed by either statute or contract.

     (b) Vesting. An approved leave of absence for maternity or, in the
Company's sole discretion, a medical reason, shall be treated as service for
purposes of determining vesting under a grantee's outstanding Award agreements;
provided that, if any such leave exceeds twelve (12) weeks then, beginning on
the first (1st) day of the thirteenth (13th) week, such leave shall not be
treated as service for purposes of vesting (i.e., the vesting schedule shall be
tolled for the period of the leave of absence beyond twelve (12) weeks).
Notwithstanding anything stated in this Section 9(b), unless otherwise
designated by the Company or required by law, any other leave of absence shall
not be treated as service for purposes of vesting.

SECTION 10. CORPORATE TRANSACTIONS

     (a) Changes in Stock. If, as a result of (i) any reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company's capital stock without
consideration, (ii) the outstanding shares of Stock being increased or decreased
or being exchanged for a different number or kind of shares or other securities
of the Company, (iii) additional shares or new or different shares or other
securities of the Company or other non-cash assets being distributed with
respect to such shares of Stock or other securities, or (iv) a merger,
consolidation or sale of all or substantially all of the assets of the Company,
outstanding shares of Stock are converted into or exchanged for a different
number or kind of shares or other securities of the Company or any successor
entity (or a parent or subsidiary thereof) (including the Reincorporation
Merger), the Committee shall make an appropriate or proportionate adjustment in:
(v) the maximum number of shares reserved for issuance under the Plan, including
annual increases under Section 3(c) and limits on Restricted Stock Awards and
Stock Bonus Awards under Section 3(a), (x) the number and kind of shares or
other securities subject to any then outstanding Awards under the Plan, (y)
maximum number of shares of Stock that may be issued to a person under Section
4, and (z) the exercise price for each share subject to any then outstanding
Stock Option under the Plan, without changing the aggregate exercise price
(i.e., the exercise price multiplied by the number of shares subject to the
Stock Option); provided that such exercise price may not be less than the par
value of the Stock after any such adjustment The adjustment by the Committee
shall be final, binding and conclusive. No fractional shares of Stock shall be
issued under the Plan resulting from any such adjustment, but the Committee in
its discretion may either make a cash payment in lieu of fractional shares or
round any resulting fractional share down to the nearest whole number.

                                       11

<PAGE>

Notwithstanding the foregoing, the required adjustment under this
Section 10(a) in connection with the effectiveness of the Reincorporation
Merger, shall be consistent with the adjustment made to all then outstanding
shares of the Common Stock of the Company.

     (b) Mergers and Other Transactions. Upon the effectiveness of a
Transaction, unless provision is made in connection with the Transaction for the
assumption of a grantee's outstanding Award granted hereunder, or the
substitution of such Award with a new Award of the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and, if
appropriate, the per share exercise and/or repurchase prices, as provided in
Section 10(a) above (the "Assumption"), such Award shall terminate and, if such
Award is a Stock Option, the grantee shall be permitted to exercise such Stock
Option to the extent that it is then vested and exercisable (after giving effect
to the acceleration of vesting provided for in connection with the Transaction,
if any) for a period of at least ten (10) days prior to the date of such
termination; provided that, the exercise of the portion of such Stock Option
that becomes vested and exercisable in connection with the Transaction, if any,
shall be subject to and conditioned upon the effectiveness of the Transaction.
In addition, if no Awards are assumed or substituted for in an Assumption, this
Plan shall terminate upon the effectiveness of such Transaction. In the
Committee's sole and absolute discretion, Award agreements may contain
additional terms and conditions, not inconsistent with the foregoing, that will
apply in the event a Transaction occurs.

     (c) Awards. The Committee may grant Awards under the Plan in substitution
for stock and stock based awards held by employees, directors or consultants of
another company (an "Acquired Company") in connection with a merger or
consolidation of such Acquired Company with the Company (or any Subsidiary) or
the acquisition by the Company (or any Subsidiary) of property or stock of the
Acquired Company. The Committee may direct that the substitute Awards be granted
on such terms and conditions as the Committee considers appropriate in the
circumstances. Any substitute Awards granted under the Plan shall not count
against the share limitation set forth in Section 3(a) above.

     (d) Dissolution or Liquidation. Upon the effectiveness of a dissolution or
liquidation of the Company, any outstanding Stock Options issued under the Plan
shall be terminated if not exercised prior to such event.

SECTION 11. AMENDMENTS AND TERMINATION

     The Board may, at any time, amend or discontinue the Plan, but no such
action shall adversely affect rights under any outstanding Award without the
holder's consent unless required: (i) to ensure that a Stock Option is treated
as an Incentive Stock Option, or (ii) to comply with applicable law. Except as
herein provided, no such action of the Board, unless taken with the approval of
the stockholders of the Company, may: (a) increase the maximum number of shares
of Stock for which Awards granted under this Plan may be issued including annual
increases under Section 3(c) and limits on Restricted Stock Awards and Stock
Bonus Awards under Section 3(a) (except by operation of Section 10(a)); (b) the
maximum number of shares of Stock that may be issued to a person under Section
4; (c) alter the class of employees eligible to receive Incentive Stock Options
under the Plan; or (d) amend the Plan in any other

                                       12

<PAGE>

manner which the Board, in its discretion, determines would require the approval
of the stockholders under any applicable law, rule or regulation to become
effective even though such stockholder approval is not expressly required by
this Plan. No termination or amendment of the Plan shall affect any outstanding
Award unless expressly provided thereby or hereunder or as determined by the
Board. Nothing in this Section 11 shall limit the Board's or Committee's
authority to take any action permitted pursuant to Section 10(b). The Plan shall
continue in effect until the earlier of: (i) the tenth anniversary of the
Board's adoption of the Plan, or (ii) the date on which all of the shares of
Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the Option
Agreements and Restricted Stock Agreements covering such shares have lapsed.

SECTION 12. STATUS OF PLAN

     With respect to the portion of any Award that has not been exercised and
any payments in cash, Stock or other consideration payable under any Award which
is not received by a grantee, a grantee shall have no rights greater than those
of a general creditor of the Company unless the Committee shall otherwise
expressly determine in connection with any such Award.

SECTION 13. GENERAL PROVISIONS

     (a) No Distribution; Compliance with Legal Requirements. The grant of
Awards and the issuance of shares of Stock pursuant thereto shall be subject to
compliance with all applicable requirements of federal, state and local law with
respect to such securities. Options may not be exercised if the issuance of
shares of Stock upon exercise would constitute a violation of any applicable
federal or state securities laws or other laws or regulations or the
requirements of any stock exchange or market system upon which the Stock may
then be listed. In addition, no Option may be exercised unless: (a) a
registration statement under the Act shall at the time of exercise of the Option
be in effect with respect to the shares of Stock issuable upon exercise of the
Option, or (b) the shares of Stock issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Act. The inability of the Company to obtain
from any regulatory body having jurisdiction the authority, if any, deemed by
Company's legal counsel to be necessary for the lawful issuance and sale of any
shares hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell such shares as to which such requisite authority shall
not have been obtained. As a condition to the exercise of any Option, the
Company may require the grantee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

     (b) Delivery of Stock Certificates. Stock certificates issued under this
Plan shall be deemed delivered for all purposes when delivered in person or when
the Company or a stock transfer agent of the Company shall have mailed such
certificates by U.S. mail, addressed to the grantee, at the grantee's last known
address on file with the Company. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal, state, local or
foreign laws, rules and regulations and the rules of the NYSE or any national
securities exchange or

                                       13

<PAGE>

automated quotation system on which the Stock is listed, quoted or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock. In addition to the terms and conditions provided
herein, the Committee may require that a grantee make such reasonable covenants,
agreements and representations as the Committee, in its discretion, deems
advisable in order to comply with any such laws, rules and regulations.

     (c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Committee from adopting other or
additional compensation arrangements and such arrangements as may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any grantee any right to
continued employment or service with the Company or any Subsidiary or interfere
in any way with the right of the Company or any Subsidiary to terminate the
grantee's employment or service at any time.

     (d) Compensation, Severance and Other Benefits. Awards granted under the
Plan shall not be considered part of any grantee's ordinary salary for purposes
of pension benefits, severance, redundancy, resignation or any other purpose. If
a grantee's Service Relationship is terminated for any reason, the grantee shall
not be entitled to damages for breach of contract, dismissal or compensation for
loss of office and shall not be entitled to any other sum, shares or other
benefits to compensate for the loss or diminution in value of any actual or
prospective rights, benefits or expectations under or in relation to the Plan.

     (e) Trading Policy Restrictions. Stock received pursuant to this Plan or
upon exercise of an Award under the Plan shall be subject to any insider trading
policy-related restrictions, terms and conditions as may be established by the
Committee or in accordance with policies set by the Committee from time to time.

     (f) Conflict with Agreement, Notice. In the event of a conflict between the
terms and provisions of this Plan and the terms and provisions of any agreement
to issue an Award, the terms and provisions of this Plan shall govern.

SECTION 14. EFFECTIVE DATE

     This Plan shall be effective on the date (the "Effective Date") immediately
prior to the effectiveness of the Reincorporation Merger. All references to the
number of type of shares under the Plan, including but not limited to (x) the
maximum number of shares reserved for issuance under the Plan, including annual
increases under Section 3(c) and limits on Restricted Stock Awards and Stock
Bonus Awards under Section 3(a), and the maximum number of shares of Stock that
may be issued to a person under Section 4, shall be adjusted to take into
account changes in capital structure due to the Reincorporation Merger as
provided under Section 10(a). Notwithstanding the effectiveness of the
Reincorporation Merger, the Committee may only grant Awards on or after the
Company's Initial Public Offering.

                                       14

<PAGE>

SECTION 15. GOVERNING LAW; CONSENT TO JURISDICTION

     This Plan and all Awards and actions taken thereunder shall be governed by
the laws of the State of California applied without regard to the conflict of
laws principles thereof. Any action, suit or proceeding to enforce the terms and
provisions of this Plan or to resolve any dispute or controversy arising under
or in any way relating to this Plan may be brought in the state courts of the
State of California and the parties hereto hereby consent to the jurisdiction of
such courts.

ADOPTED BY THE BOARD OF DIRECTORS: July 25, 2002

APPROVED BY THE STOCKHOLDERS:      July 31, 2002

                                       15

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