EX-10.1






AMERIGROUP CORPORATION




2005 EQUITY INCENTIVE PLAN




INCENTIVE STOCK OPTION AGREEMENT




This Incentive Stock Option Agreement (the “Option Agreement”) is made and entered into as of
     , 200     (the “Date of Grant”), by and between AMERIGROUP Corporation, a Delaware
corporation (the “Company”), and      (the “Optionee”). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company’s 2005 Equity Incentive Plan (the
“Plan”).



1. Number of Shares. The Company hereby grants to Optionee an option (this “Option”)
to purchase      Shares (the “Option Shares”) at an Exercise Price per Share of $     ,
subject to all of the terms and conditions of this Option Agreement and the Plan. The Option is
intended to be treated as an Incentive Stock Option.



2. Option Term. The term of the Option (the “Option Term”) shall commence on the Date
of Grant set forth above and, unless the Option is previously terminated pursuant to Section 5
below, shall terminate on the [ ] anniversary thereof (the “Expiration Date”). As of the
Expiration Date, all rights of Optionee hereunder shall terminate.




3. Conditions of Exercise.



[If granted pursuant to AMERIGROUP’s Bonus Plan]



(a) Subject to Section 5 below, the Option shall become vested on the Date of Grant as to
     percent (     %) of the Option Shares, as to an additional      percent (     %) of the
Option Shares on April 1, 200     and as to an additional      percent (     %) of the Option
Shares quarterly thereafter, such that the Option shall become fully (100%) vested on
     , 200_.



[If granted other than under AMERIGROUP’s Bonus Plan]



(a) Subject to Section 5 below, the Option shall become vested as to      of the
Option Shares on the first anniversary of the Date of Grant, and as to an additional      of
the Option Shares quarterly thereafter, such that the Option shall become fully (100%) vested on
     .



(b) Prior to the Expiration Date, this Option may, subject to Section 5 below, be exercised in
whole or in part at any time, but only as to Option Shares that have vested. Without limiting
Section 5, if Optionee’s employment with the Company and all Subsidiaries and Affiliates
terminates, then from and after such Termination Date (as defined in Section 5 below), this Option
may be exercised only with respect to Option Shares that have vested as of the Termination Date and
only as expressly permitted pursuant to Section 5.




(c) This Option may not be exercised for a fraction of a share.




4. Method of Exercise of Option.



(a) The Option may be exercised by delivering to the Company an executed stock option exercise
agreement in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Administrator from time to time (the “Exercise Agreement”), which shall set forth,
inter alia, (i) Optionee’s election to exercise the Option and (ii) the number of
vested Option Shares being purchased, and payment in full of the aggregate Exercise Price of such
Option Shares. If someone other than Optionee exercises the Option, then such person must submit
documentation reasonably acceptable to the Company verifying that such person has the legal right
to exercise the Option.



(b) The Option may not be exercised unless such exercise is in compliance with all applicable
federal and state securities law, as they are in effect on the date of exercise.



(c) Payment of the aggregate Exercise Price for Option Shares being purchased and any
applicable withholding taxes may be made (i) in cash or by check, (ii) to the extent permitted by
applicable law, by means of a cashless exercise procedure through a broker acceptable to the
Administrator, or (iii) through delivery of unrestricted Shares already owned by Optionee for more
than six months on the date of surrender, to the extent the shares have an aggregate Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the Shares as to which such
Option shall be exercised.




5. Effect of Termination of Employment, Change in Control and Disabling Conduct.




(a) Termination of Employment Generally.



(i) Upon the termination of Optionee’s employment with the Company and all Subsidiaries and
Affiliates, the Option shall immediately terminate as to any Option Shares that have not previously
vested as of the date of such termination (the “Termination Date”).



(ii) Any portion of the Option that has vested as of the Termination Date shall be exercisable
in whole or in part for a period of 90 days following the Termination Date (the “Post-Termination
Exercise Period”) unless Optionee has been terminated for Cause or engaged in Disabling Conduct
(defined below); provided, in no event may the Option be exercised after the Expiration
Date.



(iii) In the event of termination by reason of Optionee’s death or Disability, the
Post-Termination Exercise Period shall extend until the date that is twelve months from the
Termination Date; provided, in no event may the Option be exercised after the Expiration
Date.



(iv) Upon the expiration of the Post-Termination Exercise Period any unexercised portion of
the Option shall terminate in full (whether or not then exercisable).




(b) Termination for Cause; Disabling Conduct.



(i) The Option shall terminate in full (whether or not then exercisable) immediately upon the
termination of Optionee’s employment with the Company or any Subsidiary or Affiliate for Cause.



(ii) The Option also shall terminate in full (whether or not then exercisable) immediately if
Optionee engages in Disabling Conduct.



[At the discretion of the Administrator, either]



(c) Change in Control. For purposes of Section 5(a) above, any portion of the Option
that has not previously vested shall be deemed fully vested if Optionee’s employment or service
with the Company or any Subsidiary or Affiliate is terminated by the Company or any Subsidiary or
Affiliate or any successor entity for any reason (other than for Cause or as a result of Disabling
Conduct) within two years following a Change in Control or if Optionee terminates employment or
service with the Company or any Subsidiary or Affiliate within two years following the Change in
Control and after there is a material adverse change in the nature or status of Optionee’s duties
or responsibilities from those in effect immediately prior to the Change in Control.



[or]



(c) Change in Control. Any portion of the Option that has not previously vested shall
become fully vested upon a Change in Control.



(d) Definition of Disabling Conduct. As used herein, “Disabling Conduct” shall mean
conduct involving a breach of the covenants made in Section 6 below.




6. Covenant Not to Compete.



(a) In consideration for the grant of the Option, and as a material condition to the grant,
Optionee hereby expressly agrees as follows:



(i) Optionee will act in the best interests of the Company and its Subsidiaries and Affiliates
(each, an “AMERIGROUP Company” and collectively, the “AMERIGROUP Companies”) throughout the period
of Optionee’s employment with any of the AMERIGROUP Companies; and



(ii) at all times while employed by any AMERIGROUP Company and at all times during the Covered
Post-Employment Period (defined below), Optionee will not (A) compete with any AMERIGROUP Company
by serving a Competitor (defined below) in any managerial capacity, or in any capacity that
influences business strategy, with respect to a Covered Product or Service (defined below) that the
Competitor is offering in a Covered Area (defined below) or developing to offer in a Covered Area,
or (B) solicit for employment, interfere with the employment relationship of or endeavor to entice
away any employee of any AMERIGROUP Company.




(b) As used herein,



(i) The “Covered Post-Employment Period” means the twelve (12) month period beginning on the
first day on which Optionee is no longer employed by any AMERIGROUP Company as a result of
Optionee’s resignation or termination for Cause and ending on the first anniversary of such date.
(In the event the Company terminates Optionee without Cause, there shall not be a Covered
Post-Employment Period.)



(ii) “Competitor” means any entity or person that provides or is planning to provide a Covered
Product or Service in competition with a Covered Product or Service that an AMERIGROUP Company is
actively developing, marketing, providing or selling.



(iii) “Confidential Information” means an AMERIGROUP Company’s material non-public information
concerning its business and affairs, including, without limitation, trade secrets, strategies,
business plans, marketing and advertising plans, member and provider information, employee and
personnel information, contracts, training manuals, financial projections, budgets and non-public
financial data (including, without limitation, statements with premium revenue and/or provider
compensation terms, reports of actuaries, medical loss reports, balance sheets and income
statements).



(iv) A “Covered Product or Service” shall mean a managed health care product or service
offered or provided to any beneficiary of and/or participant in any Medicaid, Medicaid-related, or
SSI program, any government-funded children’s health insurance program or any federal and/or state
sponsored health care program that is substantially similar to any of such programs.



(v) The “Covered Area” shall consist of each city, county and other similar governmental
territory in which an AMERIGROUP Company provides or has made material efforts to develop and
provide a Covered Product or Service to its members, if in the course of Optionee’s employment with
an AMERIGROUP Company he or she (A) has provided services to an AMERIGROUP Company with respect to
the Covered Products or Services in such city, county or governmental territory, or (B) reviewed or
discussed Confidential Information of an AMERIGROUP Company with respect to the Covered Product or
Service in such city, county or governmental territory.



(c) Optionee agrees that any breach by Optionee of the covenants made in Section 6(a) above
may cause irreparable damage to one or more of the AMERIGROUP Companies and that in the event of
such breach each AMERIGROUP Company shall have, in addition to any and all remedies of law, the
right to an injunction, specific performance or other equitable relief to prevent the violation of
Optionee’s obligations hereunder. Optionee agrees that any such AMERIGROUP Company may seek and
obtain injunctive relief without posting an injunction bond. Optionee hereby acknowledges and
agrees that Optionee will have access to confidential and proprietary information and trade secrets
concerning the AMERIGROUP Companies during Optionee’s employment and that the covenants in Section
6(a) are reasonable in scope and necessary to protect the legitimate business interests of the
AMERIGROUP Companies. Optionee hereby further expressly acknowledges and agrees that each
AMERIGROUP Company is an express third party beneficiary of the terms of this Agreement. (For the
avoidance of doubt, Optionee acknowledges and agrees that the experience and/or knowledge that
Optionee acquires in the course of his or her employment with an AMERIGROUP Company may relate not
only to the Covered Products and Services of the AMERIGROUP Company with which he or she is
employed, but also those of other AMERIGROUP Companies.)



7. Adjustments. In the event of any Change in Capitalization, the Administrator shall
take such actions pursuant to Section 5 of the Plan (including the provisions thereof relating to
the cancellation of Awards in exchange for a payment in cash or other property) as it deems
appropriate.



8. Certain Changes. The Administrator may accelerate the date on which the Option
becomes exercisable, waive or amend the operation of the provisions of this Agreement respecting
exercise after termination of employment or otherwise adjust any of the terms of the Option;
provided that no action under this Section 8 shall adversely affect Optionee’s rights
hereunder or cause the Option to be treated as other than an Incentive Stock Option without the
consent of Optionee.



9. Nontransferability of Option. Except under the laws of descent and distribution,
Optionee shall not be permitted to sell, transfer, pledge or assign the Option or this Option
Agreement, and the Option shall be exercisable, during Optionee’s lifetime, only by Optionee.
Without limiting the generality of the foregoing, except as otherwise provided herein, the Option
may not be assigned, transferred, pledged or hypothecated in any way, shall not be assignable by
operation of law, and shall not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary
to the provisions hereof, and the levy of any execution, attachment or similar process upon the
Option shall be null and void and without effect.



10. Notices. All notices and other communications under this Agreement shall be in
writing and shall be given by facsimile or first class mail, certified or registered with return
receipt requested, and shall be deemed to have been duly given three days after mailing or 24 hours
after transmission by facsimile to the respective parties named below:



	 	 	 	 	 
	If to the Company:
	 	AMERIGROUPCorporation

	 
	 	4425 Corporation Lane
	 
	 	Virginia Beach, VA 23462

	 
	 	Facsimile: (757) 557-6743

	 
	 	Attn: Stanley F. Baldwin

	If to Optionee:
	 	 	—	 








Facsimile:



Either party hereto may change such party’s address for notices by notice duly given pursuant
hereto.



11. Tax Consequences. The tax laws and regulations applicable to the exercise of the
Option and the disposition of the Option Shares are complex and subject to change. Optionee should
consult a tax adviser before exercising the Option or disposing of the Shares.



12. Securities Laws Requirements. The Option shall not be exercisable to any extent,
and the Company shall not be obligated to transfer any Option Shares to Optionee upon exercise of
such Option, if such exercise, in the opinion of counsel for the Company, would violate the
Securities Act of 1933 (the “Securities Act”) or any other Federal or state statutes having similar
requirements as may be in effect at that time.



13. No Obligation to Register Option Shares. The Company shall be under no obligation
to register the Option Shares pursuant to the Securities Act or any other Federal or state
securities laws.



14. Investment Representation. Optionee hereby represents and warrants to the Company
that Optionee, by reason of Optionee’s business or financial experience (or the business or
financial experience of Optionee’s professional advisors who are unaffiliated with and who are not
compensated by the Company or any affiliate or selling agent of the Company, directly or
indirectly), has the capacity to protect Optionee’s own interests in connection with the
transactions contemplated under this Option Agreement.



15. Market Stand-Off. In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement filed under the
Securities Act for such period as the Company or its underwriters may request (such period not to
exceed 180 days following the date of the applicable offering), Optionee shall not, directly or
indirectly, sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any
option or other contract for the purchase of, purchase any option or other contract for the sale
of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions
with respect to, any Option Shares acquired under this Option Agreement without the prior written
consent of the Company or its underwriters.



16. Protections Against Violations of Agreement. No purported sale, assignment,
mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting or other)
or other disposition of, or creation of a security interest in or lien on, any of the Option Shares
by any holder thereof in violation of the provisions of this Agreement or the Certificate of
Incorporation or the Bylaws of the Company, will be valid, and the Company will not transfer any of
said Option Shares on its books nor will any of said Option Shares be entitled to vote, nor will
any dividends be paid thereon, unless and until there has been full compliance with said provisions
to the satisfaction of the Company. The foregoing restrictions are in addition to and not in lieu
of any other remedies, legal or equitable, available to enforce said provisions.



17. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any
time any provision of this Option Agreement shall in no way be construed to be a waiver of such
provision or of any other provision hereof.



18. Governing Law. With the exception of Section 6 above, this Option Agreement shall
be governed by and construed according to the laws of the State of Delaware without regard to its
principles of conflict of laws. The provisions of Section 6 above shall be governed by and
construed according to the laws of the Commonwealth of Virginia without regard to its principles of
conflict of laws.



19. Incorporation of Plan. The Plan is hereby incorporated by reference and made a
part hereof, and the Option and this Option Agreement shall be subject to all terms and conditions
of the Plan.



20. Amendments; Construction. The Administrator may amend the terms of this Option
Agreement prospectively or retroactively at any time, but no such amendment shall impair the rights
of Optionee hereunder (or cause the Option to be treated as other than an Incentive Stock Option)
without his or her consent. To the extent the terms of Section 6 above conflict with any prior
agreement between the parties related to such subject matter, the terms of Section 6 shall
supersede such conflicting terms and control. Headings to Sections of this Option Agreement are
intended for convenience of reference only, are not part of this Option Agreement and shall have no
affect on the interpretation hereof.



21. Rights as a Stockholder. Neither Optionee nor any of Optionee’s successors in
interest shall have any rights as a stockholder of the Company with respect to any shares of Common
Stock subject to the Option until the date of issuance of a stock certificate for such shares of
Common Stock.



22. Agreement Not a Contract for Services. Neither the Plan, the granting of the
Option, this Option Agreement nor any other action taken pursuant to the Plan shall constitute or
be evidence of any agreement or understanding, express or implied, that Optionee has a right to
continue to provide services as an officer, director, employee, consultant or advisor of the
Company or any Subsidiary or Affiliate for any period of time or at any specific rate of
compensation.



23. Authority of the Administrator. The Administrator shall have full authority to
interpret and construe the terms of the Plan and this Option Agreement. The determination of the
Administrator as to any such matter of interpretation or construction shall be final, binding and
conclusive.



24. Certain Tax Matters. If Optionee fails to comply with the requirements of Section
422(a) of the Code (as from time to time redesignated or amended), subsection (a)(1) of which
currently requires that any Option Shares not be disposed of within two (2) years of the date of
grant and one (1) year from the date on which such shares are acquired, Optionee understands that
the tax treatment otherwise applicable to the Option shall not be available. Optionee agrees to
notify the Company in writing immediately after Optionee makes a disqualifying disposition (within
the meaning of Sections 421 and 422 of the Code) of any Option Shares. The Company’s obligations
under this Option Agreement shall be subject to all applicable tax and other withholding
requirements, and the Company shall, to the extent permitted by law, have the right to deduct any
withholding amounts from any payment or transfer of any kind otherwise due to Optionee. The
Company may, in its discretion, require that Optionee pay to the Company at or after (as determined
by the Administrator) the time of exercise of any portion of the Option any such additional amount
as the Company deems necessary to satisfy its liability to withhold federal, state or local income
tax or any other taxes incurred by reason of the exercise or the transfer of Option Shares.



25. Survival of Terms. This Option Agreement shall apply to and bind Optionee and the
Company and their respective permitted assignees and transferees, heirs, legatees, executors,
administrators and legal successors. The terms of Section 6 shall expressly survive the
termination of the Option and this Agreement.



26. Acceptance. Optionee hereby acknowledges receipt of a copy of the Plan and this
Option Agreement. Optionee has read and understand the terms and provision thereof, and accepts
the Option subject to all the terms and conditions of the Plan and this Agreement.



27. Severability. Should any provision of this Option Agreement be held by a court of
competent jurisdiction to be unenforceable, or enforceable only if modified, such holding shall not
affect the validity of the remainder of this Option Agreement, the balance of which shall continue
to be binding upon the parties hereto with any such modification (if any) to become a part hereof
and treated as though contained in this original Option Agreement. Moreover, if one or more of the
provisions contained in this Option Agreement shall for any reason be held to be excessively broad
as to scope, activity, subject or otherwise so as to be unenforceable, in lieu of severing such
unenforceable provision, such provision or provisions shall be construed by the appropriate
judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent
compatible with the applicable law as it shall then appear, and such determination by such judicial
body shall not affect the enforceability of such provisions or provisions in any other
jurisdiction.



IN WITNESS WHEREOF, the parties hereto have executed and delivered this Option Agreement on
the day and year first above written.




AMERIGROUP Corporation




By




Stanley F. Baldwin


Executive Vice President, General Counsel


and Secretary




     




Address:




Social Security Number:



1




EXHIBIT A




AMERIGROUP CORPORATION

2005 EQUITY INCENTIVE PLAN




STOCK OPTION AGREEMENT

NOTICE OF EXERCISE




______________, ____




AMERIGROUP Corporation


[Address]



Attn:



On      , I was granted an option (an “Option”) by AMERIGROUP Corporation (the “Company”)
under the Company’s 2000 Equity Incentive Plan (the “Plan”) and a stock option agreement, between
me and the Company (the “Agreement”). This letter is to notify you that I wish to purchase Option
Shares under the Agreement as set forth below.



Exercise of Option



1. I wish to purchase      Option Shares at the current exercise price of $    per share for
a total cost of $     .




2. I am paying for these Option Shares as follows:




	 	 	 	     By enclosing cash and/or a certified or
cashier’s check payable to the Company in the amount of $     .






	 	 	 	     By means of a cashless exercise procedure
through the following broker:      .






	 	 	 	     By delivery of unrestricted shares of
Company stock already owned by me for more than six months on the
date of surrender, and which have an aggregate fair market value on
the date of surrender equal to the





2






 aggregate exercise price
of the Option Shares as to which the Option is being exercised, with
any fractional share amounts to be settled by cash and/or a
certified or cashier’s check.






3. I am paying the local, state and federal withholding taxes and/or all other taxes that the
Company has advised me are due as follows:




	 	 	 	     By enclosing cash and/or a certified or
cashier’s check payable to the Company in the amount of $     .






	 	 	 	     By authorizing the Company to withhold
from the number of Option Shares I would otherwise receive that
number of whole Shares having a fair market value equal to the
minimum tax withholding due, with any fractional share amounts to be
settled by cash and/or a certified or cashier’s check.






	 	 	 	     By delivery of unrestricted shares of
Company stock already owned by me for more than six months on the
date of surrender, and which have an aggregate fair market value on
the date of surrender equal to the minimum tax withholding due, with
any fractional share amounts to be settled by cash and/or a
certified or cashier’s check.





4. In exercising my Option I hereby warrant and represent to the Company that I have not
engaged in Disabling Conduct and acknowledge that the Company has no obligation to issue a
certificate evidencing any Option Shares purchasable by me until the purchase price of such Option
Shares is fully paid as set forth in the Option Agreement.




Very truly yours,




Optionee



Name and Address (please print)



	 	 	 	 	 
	Telephone Number
	 	 	(   	)
	 
	 	 	 	 
	Social Security Number
	 	 	 	 
	 
	 	 	 	 








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