exv10w1



 





Exhibit 10.1




Opening Transaction




	 	 	 
	 

	 	AMERIGROUP Corporation
	To:

	 	4425 Corporation Lane
	 

	 	Virginia Beach, VA 23462
	 
	 	 
	A/C:

	 	[Insert Account Number]
	 
	 	 
	From:

	 	Wells Fargo Bank, National Association
	 
	 	 
	Re:

	 	Convertible Bond Hedge Transaction
	 
	 	 
	Ref. No:

	 	[Insert Reference Number]
	 
	 	 
	Date:

	 	March 22, 2007






      



Dear Sir(s):




     The purpose of this communication (this “Confirmation”) is to set forth the terms and
conditions of the above-referenced transaction entered into on the Trade Date specified below (the
“Transaction”) between Wells Fargo Bank, National Association (“Dealer”) and AMERIGROUP Corporation
(“Counterparty”). This communication constitutes a “Confirmation” as referred to in the ISDA
Master Agreement specified below.



     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the
2000 ISDA Definitions (including the Annex thereto) (the “2000 Definitions”) and the definitions
and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”, and
together with the 2000 Definitions, the “Definitions”), in each case as published by the
International Swaps and Derivatives Association, Inc. (“ISDA”). In the event of any inconsistency
between the 2000 Definitions and the Equity Definitions, the Equity Definitions will govern.
Certain defined terms used herein have the meanings assigned to them in the Indenture to be dated
as of March 28, 2007 between Counterparty and The Bank of New York, N.A., as trustee (the
“Indenture”) relating to the USD240,000,000 principal amount of the 2.00% convertible senior notes
due 2012 (the “Convertible Debentures”). In the event of any inconsistency between the terms
defined in the Indenture and this Confirmation, this Confirmation shall govern. For the avoidance
of doubt, (i) the Transaction shall be the only transaction under the Agreement and (ii) references
herein to sections of the Indenture are based on the draft of the Indenture most recently reviewed
by the parties at the time of execution of this Confirmation. If any relevant sections of the
Indenture are changed, added or renumbered between the execution of this Confirmation and the
execution of the Indenture, the parties will amend this Confirmation in good faith to preserve the
economic intent of the parties. Furthermore, for the avoidance of doubt, even if all Convertible
Debentures cease to be outstanding prior to the Expiration Date (as set forth below), for purposes
of the references herein to sections of the Indenture, the Convertible Debentures shall be deemed
to remain outstanding. The parties further acknowledge that references to the Indenture herein are
references to the Indenture as in effect on the date of its execution and if the Indenture is
amended following its execution, any such amendment will be disregarded for purposes of this
Confirmation unless the parties agree otherwise in writing. The Transaction is subject to early
unwind if the closing of the Convertible Debentures is not consummated for any reason, as set forth
below in Section 8(k).



     Each party is hereby advised, and each such party acknowledges, that the other party has
engaged in, or refrained from engaging in, substantial financial transactions and has taken other
material actions in reliance upon the parties’ entry into the Transaction to which this
Confirmation relates on the terms and conditions set forth below.



 









 





     This Confirmation evidences a complete and binding agreement between Dealer and Counterparty
as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall be
subject to an agreement (the “Agreement”) in the form of the 1992 ISDA Master Agreement as if
Dealer and Counterparty had executed an agreement in such form on the date hereof (but without any
Schedule except for (i) the election of Loss and Second Method and US Dollars (“USD”) as the
Termination Currency, (ii) the replacement of the word “third” in the last line of Section 5(a)(i)
with the word “first” and (iii) the election that the “Cross Default” provisions of Section
5(a)(vi) shall apply to Counterparty, with a “Threshold Amount” of USD10 million).



     All provisions contained in, or incorporated by reference to, the Agreement will govern this
Confirmation except as expressly modified herein. In the event of any inconsistency between this
Confirmation and either the Definitions or the Agreement, this Confirmation shall govern.



     2. The Transaction constitutes a Share Option Transaction for purposes of the Equity
Definitions. The terms of the particular Transaction to which this Confirmation relates are as
follows:


General Terms:




	 	 	 	 	 
	 

	 	Trade Date:
	 	March 22, 2007
	 
	 	 	 	 
	 

	 	Effective Date:
	 	March 28, 2007 or such other date as agreed by the parties.
	 
	 	 	 	 
	 

	 	Option Style:
	 	American
	 
	 	 	 	 
	 

	 	Option Type:
	 	Call
	 
	 	 	 	 
	 

	 	Seller:
	 	Dealer
	 
	 	 	 	 
	 

	 	Buyer:
	 	Counterparty
	 
	 	 	 	 
	 

	 	Shares:
	 	The Common Stock of Counterparty,
par value USD0.01 per share (Ticker Symbol: “AGP”).
	 
	 	 	 	 
	 

	 	Number of Options:
	 	The number of Convertible Debentures in denominations of USD1,000
principal amount issued by Counterparty on the closing date for the initial issuance
of the Convertible Debentures; provided that the Number of Options shall be
automatically increased as of the date of exercise by Goldman, Sachs & Co. (“GS &
Co.”), as representative of the several Purchasers (as defined in the Purchase
Agreement), of its option pursuant to Section 2 of the Purchase Agreement dated as of
March 22, 2007 between Counterparty and GS & Co. as representative of the several
Purchasers party thereto (the “Purchase Agreement”) by the number of Convertible
Debentures in denominations of USD1,000 principal amount issued pursuant to such
exercise (such Convertible Debentures, the “Additional Convertible Debentures”). For
the avoidance of doubt, the Number of Options outstanding shall be reduced by each
exercise of Options hereunder.
	 
	 	 	 	 
	 

	 	Option Entitlement:
	 	As of any date, a number of Shares per Option equal to the Conversion
Rate (as defined in the Indenture, but without regard to any adjustments to the
Conversion Rate pursuant to Section 12.01(e) or 12.05(f) of the Indenture) as of such
date.






2









 






	 	 	 	 	 
	 

	 	Strike Price:
	 	As of any date, an amount in USD, rounded to the nearest cent (with 0.5 cents
being rounded upwards), equal to USD1,000 divided by the Option Entitlement as of such
date.
	 
	 	 	 	 
	 

	 	Number of Shares:
	 	The product of the Number of Options and the Option Entitlement.
	 
	 	 	 	 
	 

	 	Premium:
	 	USD48,648,000.00 (Premium per Option USD202.70); provided that if the Number of
Options is increased pursuant to the proviso to the definition of “Number of Options”
above, an additional Premium equal to the product of the number of Options by which
the Number of Options is so increased and the Premium per Option shall be paid on the
Additional Premium Payment Date.
	 
	 	 	 	 
	 

	 	Premium Payment Date:
	 	The Effective Date
	 
	 	 	 	 
	 

	 	Additional Premium Payment Date:
	 	The closing date for the purchase and sale of the
Additional Convertible Debentures.
	 
	 	 	 	 
	 

	 	Exchange:
	 	New York Stock Exchange
	 
	 	 	 	 
	 

	 	Related Exchange:
	 	All Exchanges
	 
	 	 	 	 
	Procedures for Exercise:	 	 
	 
	 	 	 	 
	 

	 	Independent Threshold Date:
	 	The earlier to occur of (x) any Conversion Date (as defined
below) that is not also an Exercise Date and (y) the first Exercise Date on which
Counterparty exercises a number of Options not equal to the number of Relevant
Convertible Debentures (as defined below) on such date, if any.
	 
	 	 	 	 
	 

	 	Conversion Date:
	 	Each “Conversion Date”, as defined in the Indenture, occurring during the
Exercise Period for Convertible Debentures other than Convertible Debentures with
respect to which Counterparty makes the direction described in Section 12.02(a)(3) of
the Indenture and the financial institution designated by Counterparty accepts such
Convertible Debentures in accordance with Section 12.02(a)(3) of the Indenture (such
Convertible Debentures, other than those excluded above (each in denominations of
USD1,000 principal amount), the “Relevant Convertible Debentures” for such Conversion
Date). For the avoidance of doubt, Convertible Debentures are “accepted” for purposes
of the foregoing upon the earlier of the declaration of the designated financial
institution’s agreement to exchange such Convertible Debentures or delivery of such
Convertible Debentures to such financial institution for purposes of such exchange.
	 
	 	 	 	 
	 

	 	Exercise Period:
	 	The period from and excluding the Trade Date to and including the
Expiration Date.
	 
	 	 	 	 
	 

	 	Expiration Date:
	 	The third Scheduled Trading Day immediately preceding the “Maturity Date”,
as defined in the Indenture.
	 
	 	 	 	 
	 

	 	Multiple Exercise:
	 	Applicable






3









 






	 	 	 	 	 
	 

	 	Minimum Number of Options:
	 	Zero
	 
	 	 	 	 
	 

	 	Maximum Number of Options:
	 	Number of Options
	 
	 	 	 	 
	 

	 	Integral Multiple:
	 	One
	 
	 	 	 	 
	 

	 	Automatic Exercise:
	 	Applicable; subject to the provisions of “Notice of Exercise” below.
	 
	 	 	 	 
	 

	 	Notice of Exercise:
	 	Notwithstanding anything to the contrary in the Equity Definitions, (x)
in order for Counterparty to exercise any Options on any Exercise Date that precedes
the Independent Threshold Date, Counterparty or the “Trustee”, as defined in the
Indenture, must have notified Dealer and the Calculation Agent in writing prior to
5:00 PM, New York City time, on the Scheduled Trading Day prior to the first Scheduled
Trading Day of the “Observation Period”, as defined in the Indenture, relating to the
Convertible Debentures converted on the Conversion Date on which such Exercise Date
occurs (the “Notice Deadline”) of (i) the relevant Exercise Date, (ii) the number of
Options being exercised on such Exercise Date and, for each holder of Convertible
Debentures being converted on such Exercise Date, the aggregate principal amount of
the Relevant Convertible Debentures held by such holder that will be so converted,
(iii) the scheduled settlement date under the Indenture for the Convertible Debentures
converted on the Conversion Date on which such Exercise Date occurs, (iv) the first
day of the relevant Observation Period and (v) the applicable Cash Percentage as
defined in the Indenture; provided that, notwithstanding the foregoing, such notice
shall be effective so long as it relates to an Exercise Date that precedes the
Independent Threshold Date and the notice is given after the Notice Deadline but prior
to 5:00 PM (New York City time) on the fifth Exchange Business Day of such Observation
Period and prior to the Independent Threshold Date (it being understood that such
delayed notice does not itself cause the Independent Threshold Date to occur), in
which event the Calculation Agent shall have the right to adjust the Delivery
Obligation as appropriate to reflect the additional costs (including, but not limited
to, hedging mismatches and market losses) and expenses incurred by Dealer or Hedging
Party or any of their respective affiliates in connection with their hedging
activities (including the unwinding of any hedge position) as a result of their not
having received such notice prior to the Notice Deadline; and (y) in order to exercise
any Options on any Exercise Date that is or is following the Independent Threshold
Date, Counterparty must notify Dealer and the Calculation Agent in writing prior to
5:00 PM, New York City time, on the Exchange Business Day prior to the first Scheduled
Trading Day of the






4









 






	 	 	 	 	 
	 	 	“Observation Period”, as defined in the
Indenture, determined as if the Exercise Date
were a Conversion Date, of (i) the relevant
Exercise Date, (ii) the number of Options being
exercised on such Exercise Date, (iii) the first
day of the Observation Period (determined in
accordance with Section 1.01 of the Indenture for
the Convertible Debentures converted on the
corresponding Conversion Date, if any, or, if
such Exercise Date did not occur on a Conversion
Date, determined in accordance with Section 1.01
of the Indenture as if such Exercise Date were a
Conversion Date) and (v) the applicable Cash
Percentage and, with respect to this clause (y)
except in relation to any Exercise Date occurring
during the period from and including the
25th Scheduled Trading Day prior to
the “Maturity Date” to and including the
Expiration Date (the “Final Conversion Period”),
Counterparty shall also make in such notice
written representations, warranties and
agreements set forth in Section 7(a)(i) hereof.
Notwithstanding the foregoing, in respect of
Options with an Exercise Date occurring during
the Final Conversion Period, (a) the Notice
Deadline shall be 12:00 p.m. (New York City time)
on the Scheduled Trading Day immediately
following the relevant Exercise Date and the
content of such notice shall be as set forth in
clauses (x)(i) and (x)(ii) or (y)(i) and (y)(ii)
above, as applicable, and (b) Counterparty shall
notify Dealer and the Calculation Agent of the
applicable Cash Percentage on the date it
notifies the Trustee (as defined in the
Indenture) thereof, but in no event later than
the Scheduled Trading Day immediately preceding
the first day of the Final Conversion Period.
For the avoidance of doubt, if an exercise of
Options is in connection with a conversion of
Convertible Debentures, Counterparty shall
designate the Exercise Date in its Notice of
Exercise as the corresponding Conversion Date.
	 
	 	 	 	 
	Dealer’s Telephone Number
and Telex and/or Facsimile Number
and Contact Details for purpose of Giving Notice:

	 	To:
	 	Wells Fargo Bank, N.A.
	 

	 	 	 	550 California Street
	 

	 	 	 	14th Floor
	 

	 	 	 	San Francisco, CA 94104
	 
	 	 	 	 
	 

	 	Attn:
	 	Financial Products Documentation Group

Equities Trading Manager
	 
	 	 	 	 
	 

	 	Telephone:
	 	(415) 396-3962
	 

	 	Facsimile:
	 	(415) 646-9208
	 
	 	 	 	 
	 

	 	With a copy to:	 	 
	 
	 	 	 	 
	 

	 	Attn:
	 	Michele Beasley






5









 






	 	 	 	 	 	 	 
	 

	 	 	 	Facsimile:
	 	(415) 646-9208
	 
	 	 	 	 	 	 
	 

	 	Calculation Agent’s Telephone Number
and Telex and/or Facsimile Number
and Contact Details for purpose of	 	 	 	 
	 	 	Giving Notice:	 	All communications relating to the Transaction or the Agreement shall be
transmitted exclusively:
	 
	 	 	 	 	 	 
	 

	 	 	 	Through:
	 	Goldman, Sachs & Co.
	 

	 	 	 	 	 	One New York Plaza
	 

	 	 	 	 	 	New York, NY 10004
	 
	 	 	 	 	 	 
	 

	 	 	 	Attn:
	 	Equity Operations:
	 

	 	 	 	 	 	Options and Derivatives
	 

	 	 	 	Telephone:
	 	(212) 902-1981
	 

	 	 	 	Facsimile:
	 	(212) 428-1980/1983
	 
	 	 	 	 	 	 
	 

	 	 	 	With a copy to:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Attn:
	 	Tracey McCabe
	 

	 	 	 	 	 	Equity Capital Markets
	 

	 	 	 	Telephone:
	 	(212) 357-0428
	 

	 	 	 	Facsimile:
	 	(212) 902-3000
	 
	 	 	 	 	 	 
	Settlement Terms:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Settlement Date:	 	In respect of an Exercise Date occurring on a Conversion Date, the
settlement date for the Shares to be delivered in respect of the Convertible
Debentures being converted on such Conversion Date under the terms of the Indenture.
In respect of any other Exercise Date, the date one Settlement Cycle immediately
following the last day of the relevant Observation Period, determined as if such
Exercise Date were a Conversion Date.
	 
	 	 	 	 	 	 
	 	 	Delivery Obligation:	 	In lieu of the obligations set forth in Sections 8.1 and 9.1 of the
Equity Definitions, and subject to “Notice of Exercise” above, in respect of an
Exercise Date, Dealer will deliver to Counterparty, on the related Settlement Date, a
number of Shares and/or an amount of cash, determined by the Calculation Agent, to be
equal to (i) a number of Shares equal to the aggregate number of Shares that
Counterparty is (or would have been) obligated to deliver to the holder(s) of the
Relevant Convertible Debentures for such Conversion Date pursuant to Section 12.02 of
the Indenture (rounded down to the nearest whole number); (ii) an amount of cash, if
any, in USD in lieu of any fractional Share resulting from rounding of such aggregate
number of Shares valued at the “Daily VWAP” (as defined in the Indenture) on the last
day of the relevant Observation Period; and/or (iii) the aggregate amount of cash that
Counterparty is (or would have been) obligated to deliver in lieu of “Deliverable
Shares”, as defined in the Indenture






6









 






	 	 	 	 	 
	 

	 	 	 	(other than any cash owed in lieu of fractional
Shares under clause (ii) above) to the holder(s)
of the Relevant Convertible Debentures for such
Conversion Date pursuant to the election
described in Section 12.02(a)(2) of the Indenture
(and, if such Exercise Date does not occur on a
Conversion Date or, if the number of Options
being exercised on such Exercise Date differs
from the number of the Relevant Convertible
Debentures for the Conversion Date that coincides
with such Exercise Date, in each case as
determined by the Calculation Agent pursuant to
Section 12.02 of the Indenture as if such
Exercise Date were a Conversion Date for a number
of Convertible Debentures equal to the number of
Options being exercised on such Exercise Date)
(such Shares and cash collectively, the
“Convertible Obligation”); provided that such
obligation shall be determined excluding any
Shares and cash that Counterparty is (or would
have been) obligated to deliver to holder(s) of
the Convertible Debentures as a direct or
indirect result of any adjustments to the
Conversion Rate pursuant to Sections 12.01(e) or
12.05(f) of the Indenture and any interest
payment that Counterparty is (or would have been)
obligated to deliver to holder(s) of the
Convertible Debenture converted on such
Conversion Date. For the avoidance of doubt, if
the “Daily Conversion Value”, as defined in the
Indenture, for each of the “VWAP Trading Days”,
as defined in the Indenture, occurring in the
relevant Observation Period, is (or would have
been) less than or equal to USD50, Dealer will
have no delivery obligation hereunder in respect
of such Exercise Date.
	 
	 	 	 	 
	 

	 	Notice of Delivery Obligation:
	 	No later than the later of (1) the relevant Exercise Date
and (2) the Exchange Business Day immediately following the last day of the
Observation Period, Counterparty shall give Dealer and the Calculation Agent notice
of the final number of Shares and/or the amount of cash comprising the relevant
Convertible Obligation; provided that, with respect to any Exercise Date occurring
during the Final Conversion Period, Counterparty may provide Dealer and the
Calculation Agent each with a single notice of the aggregate number of Shares and the
amount of cash, if any, comprising the Convertible Obligations for all Exercise Dates
occurring during such period (it being understood, for the avoidance of doubt, that
the requirement of Counterparty to deliver such notice shall not limit Counterparty’s
obligations with respect to Notice of Exercise or Dealer’s obligations with respect to
Delivery Obligation, each as set forth above, in any way).
	 
	 	 	 	 
	 

	 	Other Applicable Provisions:
	 	To the extent Dealer is obligated to deliver Shares
hereunder, the provisions of Sections 9.1(c), 9.8, 9.9, 9.11 and 9.12 of the Equity
Definitions will be






7









 






	 	 	 	 	 
	 

	 	 	 	applicable as if “Physical Settlement” applied to
the Transaction; provided that the Representation
and Agreement contained in Section 9.11 of the
Equity Definitions shall be modified by excluding
any representations therein relating to
restrictions, obligations, limitations or
requirements under applicable securities laws
that exist as a result of the fact that Buyer is
the issuer of the Shares.
	 
	 	 	 	 
	 

	 	Restricted Certificated Shares:
	 	Notwithstanding anything to the contrary in the Equity
Definitions, Dealer may, in whole or in part, deliver Shares in certificated form
representing the Number of Shares to be Delivered to Counterparty in lieu of delivery
through the Clearance System.
	 
	 	 	 	 
	Adjustments:	 	 
	 
	 	 	 	 
	 

	 	Method of Adjustment:
	 	Notwithstanding Section 11.2 of the Equity Definitions, upon the
occurrence of any event or condition set forth in Sections 12.05(a), (b), (c), (d) or
(e) of the Indenture, the Calculation Agent shall make the corresponding adjustment in
respect of any one or more of the Number of Options, the Option Entitlement and any
other variable relevant to the exercise, settlement or payment of the Transaction, to
the extent an analogous adjustment is made under the Indenture. Immediately upon the
occurrence of any Adjustment Event, Counterparty shall notify the Calculation Agent of
such Adjustment Event; and once the adjustments to be made to the terms of the
Indenture and the Convertible Debentures in respect of such Adjustment Event have been
determined, Counterparty shall immediately notify the Calculation Agent in writing of
the details of such adjustments.
	 
	 	 	 	 
	Extraordinary Events:	 	 
	 
	 	 	 	 
	 

	 	Merger Events:
	 	Notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger Event”
means the occurrence of any event or condition set forth in Section 12.12 of the
Indenture.
	 
	 	 	 	 
	 

	 	Consequences of Merger Events:
	 	Notwithstanding Section 12.2 of the Equity Definitions, upon
the occurrence of a Merger Event, the Calculation Agent shall make the corresponding
adjustment in respect of any adjustment under the Indenture to any one or more of the
nature of the Shares, the Number of Options, the Option Entitlement and any other
variable relevant to the exercise, settlement or payment for the Transaction, to the
extent an analogous adjustment is made under the Indenture in respect of such Merger
Event; provided that such adjustment shall be made without regard to any adjustment to
the Conversion Rate for the issuance of additional Shares as set forth in Sections
12.01(e) or 12.05(f) of the Indenture.






8









 






	 	 	 	 	 	 	 
	Notice of Merger Consideration:	 	Upon the occurrence of a Merger Event that causes the
Shares to be converted into the right to receive more than a single type of
consideration (determined based in part upon any form of stockholder election),
Counterparty shall reasonably promptly (but in any event prior to the Merger Date)
notify the Calculation Agent of the weighted average of the types and amounts of
consideration received by the holders of Shares entitled to receive cash, securities
or other property or assets with respect to or in exchange for such Shares in any
Merger Event who affirmatively make such an election.
	 
	 	 	 	 	 	 
	Nationalization, Insolvency
or Delisting:	 	Cancellation and Payment (Calculation Agent Determination);
provided that in addition to the provisions of Section 12.6(a)(iii) of the Equity
Definitions, it will also constitute a Delisting if the Exchange is located in the
United States and the Shares are not immediately re-listed, re-traded or re-quoted on
any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global
Select Market or the NASDAQ Global Market (or their respective successors); if the
Shares are immediately re-listed, re-traded or re-quoted on any such exchange or
quotation system, such exchange or quotation system shall thereafter be deemed to be
the Exchange.
	 
	 	 	 	 	 	 
	Additional Disruption Events:	 	 
	 
	 	 	 	 	 	 
	 

	 	(a)
	 	Change in Law:
	 	Applicable; provided that Section 12.9(a)(ii) of the
Equity Definitions shall be amended by inserting (i) at the end of the fifth line
thereof the following phrase: “(or GS)”, (ii) at the end of clause (X) the
following phrase: “(or, in the case of GS, a Hedging Party Related Transaction)”;
and (iii) in clause (Y), immediately following the words “such Transaction”, the
following phrase: “(or, in the case of GS, a Hedging Party Related Transaction).”
	 
	 	 	 	 	 	 
	GS:

	 	 	 	 	 	Goldman Sachs International or any of its affiliates to which Goldman Sachs
International assigns its rights and obligations under a Hedging Party Related
Transaction.
	 
	 	 	 	 	 	 
	Hedging Party Related	 	 
	 

	 	 	 	Transaction:
	 	A transaction between GS and Dealer or its affiliate evidenced by a
confirmation that refers to the Transaction.
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	Insolvency Filing:
	 	Applicable
	 
	 	 	 	 	 	 
	 

	 	(c)
	 	Increased Cost of Hedging:
	 	 Applicable; provided that Section
12.9(a)(vi) of the Equity Definitions shall be amended by inserting at the end of
clause (A) thereof the following phrase: “(or a Hedging Party Related
Transaction).”
	 
	 	 	 	 	 	 
	Hedging Party:	 	GS
	 
	 	 	 	 	 	 
	Determining Party:	 	GS






9









 






	 	 	 	 	 
	Non-Reliance:	 	Applicable
	 
	 	 	 	 
	Agreements and Acknowledgments	 	 
	Regarding Hedging Activities:	 	Applicable
	 
	 	 	 	 
	Additional Acknowledgments:	 	Applicable
	 
	 	 	 	 
	3.

	 	Calculation Agent:
	 	GS.
	 
	 	 	 	 
	4.

	 	Account Details:	 	 
	 
	 	 	 	 
	 

	 	Dealer Payment Instructions:
	 	To be provided by Dealer
	 
	 	 	 	 
	 

	 	Counterparty Payment Instructions:
	 	To be provided by Counterparty.
	 
	 	 	 	 
	5.

	 	Offices:	 	 
	 
	 	 	 	 
	 	 	The Office of Dealer for the Transaction is:
	 
	 	 	 	 
	 	 	          550 California Street, 14th Floor, San Francisco, CA 94104
	 
	 	 	 	 
	 	 	The Office of Counterparty for the Transaction is:
	 
	 	 	 	 
	 	 	          4425 Corporation Lane, Virginia Beach, Virginia 23462
	 
	 	 	 	 
	6.	 	Notices: For purposes of this Confirmation:






	 	 	 	 	 
	(a)	 	Address for notices or communications to Counterparty:
	 
	 	 	 	 
	 

	 	To:
	 	AMERIGROUP Corporation
	 

	 	 	 	4425 Corporation Lane
	 

	 	 	 	Virginia Beach, VA 23462
	 

	 	Attn:
	 	Office of General Counsel
	 

	 	Telephone:
	 	757-490-6900
	 
	 	 	 	 
	(b)	 	Address for notices or communications to Dealer:
	 
	 	 	 	 
	 

	 	To:
	 	Wells Fargo Bank, N.A.
	 

	 	 	 	550 California Street
	 

	 	 	 	14th Floor
	 

	 	 	 	San Francisco, CA 94104
	 
	 	 	 	 
	 

	 	Attn:
	 	Financial Products Documentation Group
	 

	 	 	 	Equities Trading Manager
	 

	 	Telephone:
	 	(415) 396-3962
	 

	 	Facsimile:
	 	(415) 646-9208
	 
	 	 	 	 
	 

	 	With a copy to:	 	 
	 
	 	 	 	 
	 

	 	Attn:
	 	Michele Beasley
	 

	 	Facsimile:
	 	(415) 646-9208
	 
	 	 	 	 
	(c)	 	Address for notices or communications to Calculation Agent:
	 
	 	 	 	 
	 	 	All communications relating to the Transaction or the Agreement shall be transmitted
exclusively:
	 
	 	 	 	 
	 

	 	Through:
	 	Goldman, Sachs & Co.
	 

	 	 	 	One New York Plaza
	 

	 	 	 	New York, NY 10004
	 

	 	Attn:
	 	Equity Operations: Options and Derivatives
	 

	 	Telephone:
	 	(212) 902-1981
	 

	 	Facsimile:
	 	(212) 428-1980/1983






10









 






	 	 	 	 	 
	 

	 	With a copy to:	 	 
	 
	 	 	 	 
	 

	 	Attn:
	 	Tracey McCabe
	 

	 	 	 	Equity Capital Markets
	 

	 	Telephone:
	 	(212) 357-0428
	 

	 	Facsimile:
	 	(212) 902-3000






     7. Representations, Warranties and Agreements:



     (a) In addition to the representations and warranties in the Agreement and those contained
elsewhere herein, Counterparty represents and warrants to and for the benefit of, and agrees with,
Dealer and GS as follows:




     (i) On the Trade Date, each date on which Counterparty delivers a Notice of Exercise
relating to an Exercise Date that is or is following the Independent Threshold Date (other
than any such Exercise Date occurring during the Final Conversion Period) and each date on
which Counterparty delivers a notice of cash percentage pursuant to Section 12.02(a)(2) of
the Indenture (A) none of Counterparty and its officers and directors is aware of any
material nonpublic information regarding Counterparty or the Shares and (B) all reports and
other documents filed by Counterparty with the Securities and Exchange Commission (“SEC”)
when considered as a whole (with the more recent such reports and documents deemed to amend
inconsistent statements contained in any earlier such reports and documents) pursuant to
the Exchange Act of 1934, as amended (the “Exchange Act”) do not contain any untrue
statement of a material fact or any omission of a material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading.




     (ii) On the Trade Date and on each day during the Observation Period for any Exercise
Date that is or is following the Independent Threshold Date, neither Counterparty nor any
“affiliate” or “affiliated purchaser” (each as defined in Rule 10b-18 of the Exchange Act
(“Rule 10b-18”)) shall directly or indirectly (including, without limitation, by means of
any cash-settled or other derivative instrument, other than the Transaction) purchase,
offer to purchase, place any bid or limit order that would effect a purchase of, or
commence any tender offer relating to, any Shares (or an equivalent interest, including a
unit of beneficial interest in a trust or limited partnership or a depository share) or any
security convertible into or exchangeable or exercisable for Shares.




     (iii) Without limiting the generality of Section 13.1 of the Equity Definitions,
Counterparty acknowledges that neither Dealer nor GS is making any representations or
warranties with respect to the treatment of the Transaction under FASB Statements 149 or
150, EITF Issue No. 00-19 (or any successor issue statements) or under FASB’s Liabilities &
Equity Project.




     (iv) Without limiting the generality of Section 3(a)(iii) of the Agreement, the
Transaction will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.




     (v) Prior to the Trade Date, Counterparty shall deliver to Dealer a resolution of
Counterparty’s board of directors authorizing the Transaction and such other certificate or
certificates as Dealer shall reasonably request.




     (vi) Counterparty is not entering into this Confirmation to create actual or apparent
trading activity in the Shares (or any security convertible into or exchangeable for
Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any
security convertible into or exchangeable for Shares) or to otherwise violate the Exchange
Act.




     (vii) Counterparty is not, and after giving effect to the transactions contemplated
hereby will not be, required to register as an “investment company” as such term is defined
in the Investment Company Act of 1940, as amended.




     (viii) On the Trade Date, the Premium Payment Date and the Additional Premium Payment
Date, if any, (A) the assets of Counterparty at their fair valuation exceed the liabilities
of



11









 






Counterparty, including contingent liabilities, (B) the capital of Counterparty is
adequate to conduct the business of Counterparty and (C) Counterparty has the ability to
pay its debts and obligations as such debts mature and does not intend to, or does not
believe that it will, incur debt beyond its ability to pay as such debts mature.




     (ix) The representations and warranties of Counterparty set forth in Section 3 of the
Agreement and Section 1 of the Purchase Agreement are true and correct as of the Trade
Date, the Effective Date and the Additional Premium Payment Date and are hereby deemed to
be repeated to Dealer as if set forth herein.




     (x) Counterparty understands that no obligations of Dealer to it hereunder will be
entitled to the benefit of deposit insurance and that such obligations will not be
guaranteed by any affiliate of Dealer or any governmental agency.




     (xi) On the Trade Date and each day during the Observation Period for any Exercise
Date that is or is following the Independent Threshold Date, the Shares or securities that
are convertible into, or exchangeable or exercisable for, Shares are not, and shall not be,
subject to a “restricted period,” as such term is defined in Regulation M under the
Exchange Act.



     (b) Each of Dealer and Counterparty agrees and represents that it is an “eligible contract
participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended.



     (c) Each of Dealer and Counterparty acknowledges that the offer and sale of the Transaction to
it is intended to be exempt from registration under the Securities Act of 1933, as amended (the
“Securities Act”) by virtue of Section 4(2) thereof. Accordingly, Counterparty represents and
warrants to Dealer that (i) it has the financial ability to bear the economic risk of its
investment in the Transaction and is able to bear a total loss of its investment and its
investments in and liabilities in respect of the Transaction, which it understands are not readily
marketable, are not disproportionate to its net worth, and it is able to bear any loss in
connection with the Transaction, including the loss of its entire investment in the Transaction,
(ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under
the Securities Act, (iii) it is entering into the Transaction for its own account and without a
view to the distribution or resale thereof, (iv) the assignment, transfer or other disposition of
the Transaction has not been and will not be registered under the Securities Act and is restricted
under this Confirmation, the Securities Act and state securities laws, and (v) its financial
condition is such that it has no need for liquidity with respect to its investment in the
Transaction and no need to dispose of any portion thereof to satisfy any existing or contemplated
undertaking or indebtedness and is capable of assessing the merits of and understanding (on its own
behalf or through independent professional advice), and understands and accepts, the terms,
conditions and risks of the Transaction.



     (d) Each of Dealer and Counterparty agrees and acknowledges (A) that this Confirmation is (i)
a “securities contract,” as such term is defined in Section 741(7) of Title 11 of the United States
Code (the “Bankruptcy Code”), with respect to which each payment and delivery hereunder is a
“settlement payment,” as such term is defined in Section 741(8) of the Bankruptcy Code, and (ii) a
“swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect
to which each payment and delivery hereunder is a “transfer,” as such term is defined in Section
101(54) of the Bankruptcy Code, and (B) that Dealer is entitled to the protections afforded by,
among other sections, Section 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy
Code.



     (e) Counterparty shall deliver to Dealer and GS an opinion of counsel, dated as of the Trade
Date and reasonably acceptable to each of Dealer and GS in form and substance, with respect to the
matters set forth in Section 3(a) of the Agreement.



     8. Other Provisions:



     (a) Right to Extend. The Calculation Agent may postpone any Settlement Date or any other date
of delivery by Dealer, with respect to some or all of the relevant Options, if the Calculation
Agent determines, in its reasonable discretion, that such extension is reasonably necessary or
appropriate to preserve Hedging Party’s hedging or hedge unwind activity under the Transaction or a
Hedging Party Related Transaction in light of existing liquidity conditions or to enable Hedging
Party to effect purchases



12









 




of Shares in connection with its hedging, hedge unwind or settlement activity under the
Transaction or a Hedging Party Related Transaction in a manner that would, if Hedging Party were
Counterparty or an affiliated purchaser of Counterparty, be in compliance with applicable legal,
regulatory or self-regulatory requirements, or with related policies and procedures applicable to
Hedging Party.



     (b) Additional Termination Events. The occurrence of (i) an event of default with respect to
Counterparty under the terms of the Convertible Debentures as set forth in Section 5.01 of the
Indenture that results in an acceleration of the Convertible Debentures pursuant to the terms of
the Indenture or (ii) an Amendment Event shall be an Additional Termination Event with respect to
which the Transaction is the sole Affected Transaction and Counterparty is the sole Affected Party,
and the Calculation Agent shall be the party entitled to designate an Early Termination Date
pursuant to Section 6(b) of the Agreement.





     “Amendment Event” means that Counterparty amends, modifies, supplements or obtains a
waiver in respect of any term of the Indenture or the Convertible Debentures governing the
principal amount, coupon, maturity, repurchase obligation of Counterparty, redemption right
of Counterparty, any term relating to conversion of the Convertible Debentures (including
changes to the conversion price, conversion settlement dates or conversion conditions), or
any term that would require consent of the holders of not less than 100% of the principal
amount of the Convertible Debentures to amend, in each case without the prior consent of
the Calculation Agent, such consent not to be unreasonably withheld.



     (c) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary
Events. If Dealer shall owe Counterparty any amount pursuant to Section 12.2 of the Equity
Definitions and “Consequences of Merger Events” above, or Sections 12.3, 12.6, 12.7 or 12.9 of the
Equity Definitions (except in the event of a Merger Event, Insolvency or Nationalization, in which
the consideration or proceeds to be paid to holders of Shares consists solely of cash) or pursuant
to Section 6(d)(ii) of the Agreement (except in the event of an Event of Default in which
Counterparty is the Defaulting Party or a Termination Event in which Counterparty is the Affected
Party, that resulted from an event or events within Counterparty’s control) (a “Payment
Obligation”), Counterparty shall have the right, in its sole discretion, to require Dealer to
satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by
giving irrevocable telephonic notice to Dealer and the Calculation Agent, confirmed in writing
within one Scheduled Trading Day, by 4:00 P.M. New York City time on the Merger Date, Announcement
Date or Early Termination Date, as applicable (“Notice of Share Termination”). Upon such Notice of
Share Termination, the following provisions shall apply on the Scheduled Trading Day immediately
following the Merger Date, Announcement Date or Early Termination Date, as applicable:



	 	 	 
	Share Termination Alternative:

	 	Applicable and means that Dealer shall
deliver to Counterparty the Share
Termination Delivery Property on the date
on which the Payment Obligation would
otherwise be due pursuant to Section 12.7
or 12.9 of the Equity Definitions or
Section 6(d)(ii) of the Agreement, as
applicable (the “Share Termination
Payment Date”), in satisfaction of the
Payment Obligation.
	 
	 	 
	Share Termination Delivery
Property:

	 	A number of Share Termination Delivery
Units, as calculated by the Calculation
Agent, equal to the Payment Obligation
divided by the Share Termination Unit
Price. The Calculation Agent shall
adjust the Share Termination Delivery
Property by replacing any fractional
portion of the aggregate amount of a
security therein with an amount of cash
equal to the value of such fractional
security based on the values used to
calculate the Share Termination Unit
Price.
	 
	 	 
	Share Termination Unit Price:

	 	The value of property contained in one
Share Termination Delivery Unit on the
date such Share Termination Delivery
Units are to be delivered as Share
Termination Delivery Property, as
determined by the Calculation Agent in
its discretion by commercially reasonable
means and notified by the Calculation
Agent to Dealer at the time of
notification of the Payment Obligation.






13









 






	 	 	 
	Share Termination Delivery Unit:

	 	In the case of a Termination Event, Event
of Default or Delisting, one Share or, in
the case of an Insolvency,
Nationalization or Merger Event, one
Share or a unit consisting of the number
or amount of each type of property
received by a holder of one Share
(without consideration of any requirement
to pay cash or other consideration in
lieu of fractional amounts of any
securities) in such Insolvency,
Nationalization or Merger Event. If such
Insolvency, Nationalization or Merger
Event involves a choice of consideration
to be received by holders, such holder
shall be deemed to have elected to
receive the maximum possible amount of
cash.
	 
	 	 
	Failure to Deliver:

	 	Applicable
	 
	 	 
	Other applicable provisions:

	 	If Share Termination Alternative is
applicable, the provisions of Sections
9.8, 9.9, 9.11 and 9.12 of the Equity
Definitions will be applicable as if
“Physical Settlement” applied to the
Transaction, except that all references
to “Shares” shall be read as references
to “Share Termination Delivery Units”;
provided that the Representation and
Agreement contained in Section 9.11 of
the Equity Definitions shall be modified
by excluding any representations therein
relating to restrictions, obligations,
limitations or requirements under
applicable securities laws as a result of
the fact that Buyer is the issuer of any
Share Termination Delivery Units (or any
part thereof).






     (d) Disposition of Hedge Shares. Counterparty hereby agrees that if, in the good faith
reasonable judgment of either Hedging Party or Dealer, the Shares (the “Hedge Shares”) acquired by
Hedging Party for the purpose of hedging its obligations pursuant to the Transaction or a Hedging
Party Related Transaction cannot be sold in the U.S. public market by Hedging Party without
registration under the Securities Act, Counterparty shall, at its election: (i) in order to allow
Hedging Party to sell the Hedge Shares in a registered offering, make available to Dealer and
Hedging Party an effective registration statement under the Securities Act to cover the resale of
such Hedge Shares and (A) enter into an agreement, in form and substance satisfactory to Dealer and
Hedging Party, substantially in the form of an underwriting agreement for a registered offering,
(B) provide accountant’s “comfort” letters in customary form for registered offerings of equity
securities, (C) provide disclosure opinions of nationally recognized outside counsel to
Counterparty reasonably acceptable to Dealer and Hedging Party, (D) provide other customary
opinions, certificates and closing documents customary in form for registered offerings of equity
securities and (E) afford Dealer and Hedging Party a reasonable opportunity to conduct a “due
diligence” investigation with respect to Counterparty customary in scope for underwritten offerings
of equity securities; provided, however, that if either Dealer or Hedging Party, in its sole
reasonable discretion, is not satisfied with access to due diligence materials, the results of its
due diligence investigation, or the procedures and documentation for the registered offering
referred to above, then clause (ii) or clause (iii) of this Section 8(d) shall apply at the
election of Counterparty; (ii) in order to allow Hedging Party to sell the Hedge Shares in a
private placement, use its best efforts to enter into a private placement agreement substantially
similar to private placement purchase agreements customary for private placements of equity
securities, in form and substance satisfactory to Dealer and Hedging Party, including customary
representations, covenants, blue sky and other governmental filings and/or registrations,
indemnities to Dealer and Hedging Party, due diligence rights (for Dealer, Hedging Party or any
designated buyer of the Hedge Shares from Hedging Party), opinions and certificates and such other
documentation as is customary for private placements agreements, all reasonably acceptable to
Dealer and Hedging Party (in which case, the Calculation Agent shall make any adjustments to the
terms of the Transaction that are necessary, in its reasonable judgment, to compensate Hedging
Party for any discount from the public market price of the Shares incurred on the sale of Hedge
Shares in a private placement); or (iii) purchase the Hedge Shares from Hedging Party at the VWAP
Price on such Exchange Business Days, and in the amounts, requested by Hedging Party. “VWAP Price”
means, on any Exchange Business Day, the per Share volume-weighted average price as displayed under
the heading “Bloomberg VWAP” on Bloomberg page AGP.N <equity> VAP (or any successor thereto)
in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on such Exchange Business
Day (or if such volume-weighted average price is unavailable, the




14









 




market value of one Share on such Exchange Business Day, as determined by the Calculation
Agent using a volume-weighted method). For the avoidance of doubt, Counterparty is not obligated
to purchase Shares under any circumstances under this Section 8(d) unless it elects to do so
pursuant to Section 8(d)(iii).




     (e) Repurchase Notices. Counterparty shall, on any day on which Counterparty effects any
repurchase of Shares, promptly give Dealer and the Calculation Agent a written notice of such
repurchase (a “Repurchase Notice”) on such day if, following such repurchase, the Notice Percentage
as determined on such day is (i) greater than 9.0% and (ii) greater by 0.5% than the Notice
Percentage included in the immediately preceding Repurchase Notice (or, in the case of the first
such Repurchase Notice, greater than the Notice Percentage as of the date hereof). The “Notice
Percentage” as of any day is the fraction, expressed as a percentage, the numerator of which is the
Number of Shares and the denominator of which is the number of Shares outstanding on such day. In
the event that Counterparty fails to provide Dealer or the Calculation Agent with a Repurchase
Notice on the day and in the manner specified in this Section 8(e) then Counterparty agrees to
indemnify and hold harmless Dealer and Hedging Party, their respective affiliates and their
respective directors, officers, employees, agents and controlling persons (collectively, an
“Indemnified Party”) from and against any and all losses, claims, damages and liabilities (or
actions in respect thereof), joint or several, to which such Indemnified Party may become subject
under applicable securities laws, including without limitation, Section 16 of the Exchange Act, or
under any state law, regulation or regulatory order, relating to or arising out of such failure.
If for any reason the foregoing indemnification is unavailable to any Indemnified Party or
insufficient to hold harmless any Indemnified Party, then Counterparty shall contribute, to the
maximum extent permitted by law, to the amount paid or payable by the Indemnified Party as a result
of such loss, claim, damage or liability. In addition, Counterparty will reimburse any Indemnified
Party for all expenses (including reasonable counsel fees and expenses) as they are incurred (after
notice to Counterparty) in connection with the investigation of, preparation for or defense or
settlement of any pending or threatened claim or any action, suit or proceeding arising therefrom,
whether or not such Indemnified Party is a party thereto and whether or not such claim, action,
suit or proceeding is initiated or brought by or on behalf of Counterparty. This indemnity shall
survive the completion of the Transaction contemplated by this Confirmation and any assignment and
delegation of the Transaction made pursuant to this Confirmation or the Agreement shall inure to
the benefit of any permitted assignee of Dealer and Hedging Party.



     (f) Transfer and Assignment. Neither party may transfer any of its rights or obligations
under the Transaction without the prior written consent of the non-transferring party; provided
that at any time at which (i) the Equity Percentage exceeds 9.0%, (ii) Dealer, Dealer Group or any
person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer,
Dealer Group or any such person, a “Dealer Person”) under any State laws, regulations or regulatory
orders applicable to ownership of Shares (“Applicable State Laws”), owns, beneficially owns,
constructively owns, controls, holds the power to vote or otherwise meets a relevant definition of
ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to
reporting or registration obligations or other requirements of a Dealer Person under Applicable
State Laws and with respect to which such requirements have not been met or the relevant approval
has not been received minus (y) 1% of the number of Shares outstanding on the date of determination
(either such condition described in clause (i) or (ii), an “Excess Ownership Position” and, such
condition described in clause (ii), an “Excess State Law Ownership Position”) or (iii) a Hedging
Disruption has occurred and is continuing, if Dealer, in the judgment of Dealer or the Calculation
Agent, is unable to effect a transfer or assignment to a third party after using its commercially
reasonable efforts (and, in the event of a Hedging Disruption, after attempting to effect such
transfer or assignment for five consecutive Scheduled Trading Days) on pricing terms reasonably
acceptable to Dealer and the Calculation Agent such that an Excess Ownership Position or a Hedging
Disruption, as the case may be, no longer exists, Dealer or the Calculation Agent may designate any
Scheduled Trading Day as an Early Termination Date with respect to a portion (the “Terminated
Portion”) of the Transaction, such that such Excess Ownership Position or Hedging Disruption, as
the case may be, no longer exists. In the event that Dealer or the Calculation Agent so designates
an Early Termination Date with respect to a portion of the Transaction, a payment or delivery shall
be made pursuant to Section 6 of the Agreement and Section 8(c) of this Confirmation as if (i) an
Early Termination Date had been designated in respect of a Transaction having terms identical to
the Terminated Portion of the Transaction, (ii) Counterparty shall be the sole Affected Party with
respect to such partial termination and (iii) such portion of the Transaction shall be the only
Terminated Transaction. In the event that a



15









 




Hedging Disruption has occurred, the Calculation Agent will also adjust one or more terms of
the Transaction to account for the difference in the economic position in respect of an option
transaction with terms matching that of the Transaction (an “Equivalent Transaction") of a
hypothetical dealer who is fully hedged in respect of such Equivalent Transaction and a
hypothetical dealer hedging such Equivalent Transaction with respect to whom a Hedging Disruption
has occurred to the same extent and for the same duration as such Hedging Disruption with respect
to Dealer and the Transaction. The “Equity Percentage” as of any day is the fraction, expressed as
a percentage, (A) the numerator of which is the number of Shares that (x) Dealer and any of its
affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” test under
Section 13 of the Exchange Act (collectively, “Dealer Group”) and all persons who may form a
“group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer and (y) Hedging
Party and any of its affiliates subject to aggregation with Hedging Party for purposes of the
“beneficial ownership” test under Section 13 of the Exchange Act (collectively, “Hedging Party
Group”) and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the
Exchange Act) with Hedging Party “beneficially own” (within the meaning of Section 13 of the
Exchange Act) without duplication on such day and (B) the denominator of which is the number of
Shares outstanding on such day. “Hedging Disruption” has the meaning set forth in Section
12.9(a)(v) of the Equity Definitions; provided that Section 12.9(a)(v) of the Equity Definitions
shall be amended by inserting at the end of clause (A) thereof the following phrase: “(or a Hedging
Party Related Transaction).” Dealer agrees that Dealer Group shall use commercially reasonable
efforts, in consultation with counsel as to legal and regulatory issues, to hedge its exposure to
the Transaction and to manage its other positions through the use of cash-settled swaps or other
derivative instruments to the extent necessary to avoid the occurrence of an Excess Ownership
Position. Counterparty may transfer or assign its rights and obligations hereunder and under the
Agreement, in whole or in part, to any party with the consent of Dealer and GS, such consent not to
be unreasonably withheld. Notwithstanding any other provision of this Confirmation to the contrary
requiring or allowing Dealer to receive or deliver any Shares, Dealer may designate any of its
affiliates to receive or deliver such Shares and otherwise perform Dealer’s obligations in respect
of the Transaction and any such designee may assume such obligation. Dealer shall be discharged of
its obligation hereunder only to the extent of any such performance.




     (g) Staggered Settlement. If, as of any Exchange Business Day during the relevant Observation
Period, as defined in the Indenture, (X) the Staggered Settlement Equity Percentage is greater than
9.0% or (Y) an Excess State Law Ownership Position or a Hedging Party Excess State Law Ownership
Position exists, Dealer may, by notice to Counterparty prior to any Settlement Date (a “Nominal
Settlement Date”), elect to deliver the Shares on one or more dates (each, a “Staggered Settlement
Date”) or at two or more times on the Nominal Settlement Date as follows:




     (i) in such notice, Dealer will specify to Counterparty the related Staggered
Settlement Dates (each of which will be on or prior to such Nominal Settlement Date, but
not prior to the beginning of such Observation Period) or delivery times and how it will
allocate the Shares it is required to deliver under “Delivery Obligation” (above) among the
Staggered Settlement Dates or delivery times; and




     (ii) the aggregate number of Shares that Dealer will deliver to Counterparty hereunder
on all such Staggered Settlement Dates and delivery times will equal the number of Shares
that Dealer would otherwise be required to deliver on such Nominal Settlement Date.



     The “Staggered Settlement Equity Percentage” as of any day is the fraction, expressed as a
percentage, (A) the numerator of which is the sum of (i) the number of Shares that Dealer, any of
its affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” Test
under Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of
Rule 13d-5(b)(1) under the Exchange Act) with Dealer and Hedging Party, any of its affiliates
subject to aggregation with Hedging Party for purposes of the “beneficial ownership” Test under
Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of Rule
13d-5(b)(1) under the Exchange Act) with Hedging Party “beneficially own” (within the meaning of
Section 13 of the Exchange Act) without duplication on such day, other than any Shares so owned as
a hedge of the Transaction or the Hedging Party Related Transaction, and (ii) the Number of Shares
hereunder and (B) the denominator of which is the number of Shares outstanding on such day.



16









 





     The “Hedging Party Excess State Law Ownership Position” occurs when, as of any day, Hedging
Party, Hedging Party Group or any person whose ownership position would be aggregated with that of
Hedging Party or Hedging Party Group (Hedging Party, Hedging Party Group or any such person, a
“Hedging Party Person”) under any Applicable State Laws, owns, beneficially owns, constructively
owns, controls, holds the power to vote or otherwise meets a relevant definition of ownership with
respect to in excess of a number of Shares equal to (x) the number of Shares that would give rise
to reporting or registration obligations or other requirements of a Hedging Party Person under
Applicable State Laws and with respect to which such requirements have not been met or the relevant
approval has not been received minus (y) 1% of the number of Shares outstanding on such date of
determination.



     (h) Agreement in Respect of Termination Amounts. In determining any amounts payable in
respect of the termination or cancellation of the Transaction pursuant to Section 6 of the
Agreement or Article 12 of the Equity Definitions, the Calculation Agent shall make such
determination without regard to (i) changes to costs of funding, stock loan rates or expected
dividends, or (ii) losses or costs incurred in connection with terminating, liquidating or
re-establishing any hedge related to the Transaction (or any gain resulting from any of them).



     (i) Disclosure. Effective from the date of commencement of discussions concerning the
Transaction, Counterparty and each of its employees, representatives, or other agents may disclose
to any and all persons, without limitation of any kind, the tax treatment and tax structure of the
Transaction and all materials of any kind (including opinions or other tax analyses) that are
provided to Counterparty relating to such tax treatment and tax structure.



     (j) No Set-off. The provisions of Section 2(c) of the Agreement shall not apply to the
Transaction. Each party waives any and all rights it may have to set-off delivery or payment
obligations it owes to the other party under the Transaction against any delivery or payment
obligations owed to it by the other party, whether arising under the Agreement, under any other
agreement between parties hereto, by operation of law or otherwise.



     (k) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to
convey to it rights with respect to the Transaction that are senior to the claims of common
stockholders in the event of Counterparty’s bankruptcy. For the avoidance of doubt, the parties
agree that the preceding sentence shall not apply at any time other than during Counterparty’s
bankruptcy to any claim arising as a result of a breach by Counterparty of any of its obligations
under this Confirmation or the Agreement.



     (l) Early Unwind. In the event the sale by Counterparty of the Convertible Debentures is not
consummated with the several Purchasers party to the Purchase Agreement pursuant to the Purchase
Agreement for any reason by the close of business in New York on March 28, 2007 (or such later date
as agreed upon by the parties, which in no event shall be later than April 2, 2007) (March 28, 2007
or such later date being the “Early Unwind Date”), the Transaction shall automatically terminate
(the “Early Unwind”), on the Early Unwind Date and the Transaction and all of the respective rights
and obligations of Dealer and Counterparty thereunder shall be cancelled and terminated. Following
such termination and cancellation, each party shall be released and discharged by the other party
from and agrees not to make any claim against the other party with respect to any obligations or
liabilities of either party arising out of and to be performed in connection with the Transaction
either prior to or after the Early Unwind Date. Dealer and Counterparty represent and acknowledge
to the other that upon an Early Unwind all obligations with respect to the Transaction shall be
deemed fully and finally discharged.



     (m) Adjustment Upon Amendment or Exchange of Convertible Debentures. If the Convertible
Debentures are amended or an irrevocable election is made thereunder to change the settlement
method thereunder (including, without limitation, to change from net share settlement to physical
settlement) or the Convertible Debentures are exchanged for new convertible debentures with a
different settlement method but otherwise substantially identical to the Convertible Debentures,
the parties shall work together in good faith to adjust the terms of the Transaction (including,
without limitation, the settlement method under the Transaction) to preserve the fair value of the
Transaction and the economic intent of the parties in light of such amendment or exchange. Without
limiting the generality of the foregoing, if the Convertible Debentures are so amended, changed or
exchanged and the settlement method for the resulting Convertible Debentures or convertible
debentures (the “New Convertible Debentures”) is “gross physical settlement” (i.e. the entire
conversion value of the New Convertible Debentures is settled in Shares (or Shares and cash



17









 




in lieu of fractional Shares)), then such adjustments to the terms of the Transaction shall
provide that (i) in respect of any Exercise Date that (A) occurs prior to the Final Conversion
Period, (B) is not also a Conversion Date for a number of Relevant Convertible Debentures equal to
the number of Options hereunder exercised on such Exercise Date or (C) occurs during the Final
Conversion Period if (in the case of this clause (C) only) the average of the Daily VWAP on each of
the 10 consecutive VWAP Trading Days ending on the first day of the Final Conversion Period is
greater than 90% of the Strike Price as of the last of such 10 VWAP Trading Days and less than 110%
of such Strike Price, the valuation and settlement terms of the Transaction shall be as currently
provided in this Confirmation as if there had been no such amendment, change or exchange of the
Convertible Debentures (which means, for the avoidance of doubt, that the Delivery Obligation will
be determined assuming that there had been no such amendment, change or exchange) except that, in
the case of an Exercise Date that occurs during the Final Conversion Period, the Delivery
Obligation will be capped so that the value of the Delivery Obligation does not exceed the value of
the Convertible Obligation minus the product of $1,000 and the number of Options being exercised on
such Exercise Date, with both values determined using the Relevant Price as of the date two
Exchange Business Days prior to the Settlement Date, determined as if such date were a Valuation
Date; and (ii) in respect of any other Exercise Date, the valuation and settlement terms of the
Transaction shall be adjusted to conform to those in the New Convertible Debenture (which means,
for the avoidance of doubt, that the determination of the Delivery Obligation will take into
account such amendment, change or exchange, and will continue to exclude amounts comprising the
Convertible Obligation as a result of provisions in the relevant indenture relating to “make-whole”
adjustments and discretionary adjustments as currently contemplated in this Confirmation).




     (n) Early Termination or Cancellation. Notwithstanding anything to the contrary in the Equity
Definitions or the Agreement, to the extent that Dealer would otherwise have the right under the
Equity Definitions or the Agreement to elect to cancel the Transaction, to designate an Early
Termination Date in respect of the Transaction or to determine any amount due upon the cancellation
or early termination of the Transaction, the Calculation Agent shall make such election,
designation or determination, as the case may be, in place of Dealer.



     (o) Third Party Beneficiary. GS shall be the third party beneficiary of Counterparty’s
representations, warranties, agreements, indemnities and other obligations hereunder and will have
a right to directly enforce those obligations against Counterparty.



     (p) Governing Law. THIS CONFIRMATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REFERENCE TO ITS CHOICE OF LAW DOCTRINE).



          9. Arbitration.




     (a) All parties to this Confirmation are giving up the right to sue each other in court,
including the right to a trial by jury, except as provided by the rules of the arbitration forum in
which a claim is filed.



     (b) Arbitration awards are generally final and binding; a party’s ability to have a court
reverse or modify an arbitration award is very limited.



     (c) The ability of the parties to obtain documents, witness statements and other discovery is
generally more limited in arbitration than in court proceedings.



     (d) The arbitrators do not have to explain the reason(s) for their award.




     (e) The panel of arbitrators will typically include a minority of arbitrators who were or are
affiliated with the securities industry, unless Counterparty is a member of the organization
sponsoring the arbitration facility, in which case all arbitrators may be affiliated with the
securities industry.



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     (f) The rules of some arbitration forums may impose time limits for bringing a claim in
arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court.



     (g) The rules of the arbitration forum in which the claim is filed, and any amendments
thereto, shall be incorporated into this Confirmation.



     (h) Counterparty agrees that any and all controversies that may arise between Counterparty and
Dealer, including, but not limited to, those arising out of or relating to the Agreement or the
Transaction hereunder, shall be determined by arbitration conducted before The New York Stock
Exchange, Inc. (“NYSE”) or NASD Dispute Resolution (“NASD-DR”), or, if the NYSE and NASD-DR decline
to hear the matter, before the American Arbitration Association, in accordance with their
arbitration rules then in force. The award of the arbitrator shall be final, and judgment upon the
award rendered may be entered in any court, state or federal, having jurisdiction.



     (i) No person shall bring a putative or certified class action to arbitration, nor seek to
enforce any pre-dispute arbitration agreement against any person who has initiated in court a
putative class action or who is a member of a putative class who has not opted out of the class
with respect to any claims encompassed by the putative class action until: (i) the class
certification is denied; (ii) the class is decertified; or (iii) Counterparty is excluded from the
class by the court.



     (j) Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any
rights under this Confirmation except to the extent stated herein.



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     Counterparty hereby agrees (a) to check this Confirmation carefully and immediately upon
receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm
that the foregoing (in the exact form provided by Dealer) correctly sets forth the terms of the
agreement between Dealer and Counterparty with respect to the Transaction, by manually signing this
Confirmation or this page hereof as evidence of agreement to such terms and providing the other
information requested herein and immediately returning an executed copy to Wells Fargo Bank,
National Association, Facsimile No. (415) 646-9208, with a copy to Goldman Sachs International,
Equity Derivatives Documentation Department, Facsimile No. (212) 428-1980/83.



	 	 	 	 	 
	 	Yours faithfully,



WELLS FARGO BANK, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/  Gordy Holtermen	 
	 	 	Name:  Gordy Holtermen	 	 
	 	 	Title:  Executive Vice President	 
	 



	 	 	 	 	 
	Agreed and accepted by:	 	 
	 
	 	 	 	 
	AMERIGROUP CORPORATION	 	 
	 
	 	 	 	 
	By:
	 	/s/ James W. Treuss	 	 
	 

	 	 

Name: James W. Truess

Title: Executive Vice President and Chief Financial Officer