EX-10.1






RETIREMENT AND CONSULTING AGREEMENT




This Retirement and Consulting Agreement (the “Agreement”) is made and entered into effective as of
September 30, 2007 (the “Effective Date”), by and between Jeffrey L. McWaters (the “Executive”) and
AMERIGROUP Corporation, a Delaware corporation (the “Company”).



AGREEMENT




In consideration of the mutual covenants herein contained and the continued employment of the
Executive by the Company (or one of its affiliates), the parties agree as follows:



1. Duties; Compensation; Retirement Date. Effective August 31, 2007, the Executive
resigned his position as Chief Executive Officer of the Company and all officer positions he held
with Company subsidiaries. From September 1, 2007, the Executive shall continue to serve as
Chairman of the Board of Directors of the Company (the “Board”) through the date that the Company’s
Annual Meeting of Stockholders is held in 2008 (the “2008 Annual Meeting”), and immediately prior
to the 2008 Annual Meeting the Executive shall resign as Chairman of the Board and as a director of
the Company and all Company subsidiaries unless the Board otherwise requests that the Executive
remain as a director at such time. The Executive shall remain an employee of the Company (or one
of its affiliates) through the date of the 2008 Annual Meeting or, if later, the last day of the
calendar month in which the 2008 Annual Meeting occurs (the “Retirement Date”), at which time the
Executive shall retire from employment with the Company and all Company subsidiaries as applicable.
For the period beginning September 1, 2007 through the Retirement Date, the Executive shall
receive a salary of $37,500 per month, the bonuses and equity treatment pursuant and subject to the
provisions of Section 4 hereof, the benefits as described in and subject to the terms of Sections 5
and 6 hereof and reimbursement for reasonable and necessary out-of-pocket expenses incurred in
connection with his duties hereunder in accordance with the Company’s standard policies, in lieu of
receiving any other compensation with respect to his service on the Board or any committee of the
Board; during this period the Executive shall be available to the Company a minimum of twenty (20)
hours per week and shall be responsible for his duties as Chairman of the Board and such other
duties as may be reasonably requested from time to time by the Company’s Chief Executive Officer.



2. Consulting Services and Fee. The Company and the Executive agree that the
Executive will provide consulting services to the Company for the period commencing on the first
day following the Retirement Date and ending on August 31, 2009 (the “Consulting Period”). The
Consulting Period shall be extended only by the written agreement of the Executive and the Company.
The services which the Executive shall provide shall be determined by the Chief Executive Officer
of the Company (or his designee). The Executive shall be paid a fee for such consulting services
at the rate of $27,083 per month during the Consulting Period, those benefits in Section 6.2 that
are specifically provided during the Consulting Period and reimbursement for necessary
out-of-pocket expenses incurred in connection with his duties hereunder in accordance with the
Company’s standard policies. The dates of performance of the Executive’s consulting services
hereunder shall be



determined by the Company, subject to mutual agreement of the parties. The parties hereby agree
that the amount of services to be provided by the Executive from and after the beginning of the
Consulting Period shall be less than the level of services that would result in the Executive’s
retirement not being treated as a separation from service for purposes of Section 409A of the
Internal Revenue Code of 1986, as amended (“Section 409A”). This consulting arrangement, together
with the Company’s obligation to provide the payments and benefits described in this Section 2 and
Section 4.2, are expressly conditioned upon the Executive executing and delivering a general
release of claims against the Company on the Retirement Date substantially in the form attached
hereto as Exhibit A (and the expiration of any revocation period applicable thereto) as described
in Section 3 hereof.



3. Release.



3.1 Acknowledgement. The Executive acknowledges that the certainty provided by reaching
agreement with the Company as to the amounts of the payments and benefits described herein is
adequate and satisfactory consideration for the assurances made by the Executive in this Agreement,
including, without limitation, the general release of claims to be given by the Executive pursuant
to Sections 2 and 3.2 hereof.



3.2 General Release of Claims. The Executive agrees that in the event he executes a general
release of claims against the Company substantially in the form attached hereto as Exhibit A on or
shortly after the Retirement Date and such general release becomes effective pursuant to its terms,
the Executive shall (a) serve as a consultant to the Company during the Consulting Period and be
entitled to the payments set forth in Section 2 above; and (b) be eligible to receive long term
cash incentive payments from the Company in accordance with the specific terms set forth in
Sections 4.2 below.



4. Bonus Payments; Equity Treatment. 



4.1 2007 Annual Bonus. The Executive’s Annual Target MJO Cash Bonus for 2007 is $1,268,750,
provided that the determination whether to award a MJO Cash Bonus and its terms and amount shall be
in the sole good faith discretion of the Compensation Committee of the Board (the “Compensation
Committee”) taking into account and consistent with the Compensation Committee’s policies at that
time as applied to other senior executive level associates of the Company, the achievement of the
applicable Company performance goals in 2007, the achievement of the applicable Executive
performance goals in 2007 and, subject to Section 7.2, the Executive’s continued employment through
the applicable award date with respect to such bonus; it being agreed that for purposes solely of
this Agreement that the Executive shall be deemed to have achieved his performance goals in 2007 as
measured through August 31, 2007, but that any such annual bonus is subject to the Company’s
performance and the sole good faith discretion of the Compensation Committee. The Compensation
Committee may, it its sole good faith discretion, award the Executive a MJO Cash Bonus for 2007 in
excess of, or, in exercising its negative discretion, less than the Annual Target in the event the
Company outperforms its goals. Such annual bonus payment, if any, shall be made to the Executive
at the time such bonus payments are made to eligible employees generally. For the purposes of this
Section 4.1, the MJO Cash Bonus for 2007 shall not be prorated, notwithstanding the fact that
Executive did not serve as Chief Executive Officer for the entire fiscal year.



4.2 Long Term Cash Incentive Awards. Subject to the provisions set forth in Section 3.2
above, the Executive shall continue to be eligible to receive his long term cash incentive payments
based on yearly installments of $222,272 pursuant to the Company’s 2009 Long Term Incentive Plan
(the program covering 2006-2008, inclusive) and the Company’s 2010 Long Term Incentive Plan (the
program covering 2007-2009, inclusive) to the extent such installments are earned and payable under
the terms of the applicable Long Term Incentive Plan, with such payments made to the Executive at
the time such bonus payments are made to eligible employees generally even if the Executive is not
an employee of the Company at the time of such payment (provided the Executive has not been
terminated by the Company for Cause (as defined below) prior to the respective payment dates), but
with no installments for 2009 and installments for 2008 pro-rated for the period of the Executive’s
service through the Retirement Date. For the avoidance of doubt, the Executive shall not be
eligible to receive any payment with respect to the Company’s 2011 Long Term Incentive Plan, if any
(the program covering 2008-2010, inclusive).



4.3 Eligibility for Equity Awards in 2008. The Executive shall be eligible for consideration
for an equity award for 2007 (to be awarded in 2008) with a baseline equity grant target value of
$736,875, provided that the determination whether to make any equity award and its value shall be
in the sole good faith discretion of the Compensation Committee taking into account and consistent
with the Compensation Committee’s policies at that time as applied to other senior executive level
associates of the Company, the achievement of the applicable Company performance goals in 2007, the
achievement of the applicable Executive performance goals in 2007 and the Executive’s continued
employment through the applicable grant date with respect to such equity award; provided, however,
that the Executive shall not be eligible to receive an “outperform” equity award for 2007. In the
event that the Compensation Committee grants an equity award to the Executive as contemplated by
this Section 4.3, such award shall be comprised of (a) 25% time based restricted stock, (b) 50%
nonqualified stock options and (c) 25% premium nonqualified stock options. Such award, if any,
shall be evidenced by the form of Nonqualified Stock Option Agreement and Restricted Stock
Agreement to evidence equity awards to other Company senior executives for equity awards for 2007
(awarded in 2008), if any, and shall provide, among other things, that all options shall vest
quarterly through June 30, 2009 and all shares of restricted stock shall be subject to a vesting
schedule that concludes no later than the end of the Consulting Period. The parties agree that for
purposes solely of this Agreement the Executive shall be deemed to have achieved his performance
goals in 2007 as measured through August 31, 2007 but that any equity award is subject to the
Company’s performance and the sole good faith discretion of the Compensation Committee.



4.4 Treatment of Existing Equity Awards. Certain of the existing equity awards previously
granted by the Company to the Executive shall be modified and amended as follows:




(a) The stock options granted to the Executive pursuant to that certain Nonqualified Stock
Option Agreement dated as of February 14, 2006 (the “2006 Option Agreement”) and pursuant to those
certain Nonqualified Stock Option Agreements dated as of March 13, 2007 (the “2007 Option
Agreements”) which are not vested as of the Effective Date shall immediately vest and become
exercisable as of the Effective Date and this Section 4.4(a) shall be deemed an amendment to the
2006 Option Agreement and the 2007 Option Agreements;




(b) The shares of restricted stock granted to the Executive pursuant to that certain
Restricted Stock Agreement dated as of March 13, 2007 (the “2007 RSG Agreement”) for which the
restrictions on transfer set forth in Section 2 of the 2007 RSG Agreement have not lapsed by the
Effective Date shall immediately lapse as of the Effective Date and this Section 4.4(b) shall be
deemed an amendment to the 2007 RSG Agreement; and




(c) The post-employment termination exercise period for any stock options granted to the
Executive pursuant to that certain Incentive Stock Option Agreement dated as of February 11, 2004
(the “2004 Option Agreement”), that certain Incentive Stock Option Agreement dated as of February
7, 2002 (the “2002 Option Agreement”), and that certain Incentive Stock Option Agreement dated as
of July 10, 2000 (the “2000 Option Agreement” and collectively with the 2004 Option Agreement, the
2002 Option Agreement and the 2000 Option Agreement, the “Vested Option Agreements”)) shall be
extended from (i) ninety (90) days to twelve (12) months from the date of such termination in the
event of termination of the Executive’s employment other than for termination for Cause (as
defined in the Vested Option Agreements) and (ii) six (6) months to twelve (12) months from the
date of such termination in the event of termination of the Executive’s employment as a result of
death or Disability (as defined in the Vested Option Agreements). This Section 4.4(c) shall be
deemed an amendment to the Vested Option Agreements.



Except as expressly provided herein, the Executive’s existing stock options and restricted stock
awards, including, without limitation, the 2007 Option Agreements, the 2006 Option Agreement, the
2007 RSG Agreement, the Vested Option Agreements and that certain Restricted Stock Agreement dated
February 14, 2006 (granting performance based restricted stock), shall continue to be subject to
their existing terms and conditions, as set forth in the applicable equity plan and award
agreements. In addition, the Company’s policies with respect to trading of Company securities shall
continue to apply to the Executive, in accordance with their terms and consistent with his
relationship with the Company at any given time (i.e, as member of the board of directors through
the Retirement Date and as a former employee during the Consulting Period and thereafter); it being
understood that Executive shall be deemed a “Section 16 Officer” under the Company’s Policy on
Trading in Company Securities through the Retirement Date.



5. Treatment of Deferred Compensation Benefits. The Executive’s benefits under the
Company’s 2005 Executive Deferred Compensation Plan and 2002 Executive Deferred Compensation Plan,
if any, shall be calculated and distributed based on the terms and conditions of such plans as in
effect on the Retirement Date.



6.



1



Earned and Unpaid Salary; Other Benefits. 



6.1 Earned and Unpaid Salary. On or as soon as practicable following the Retirement Date, the
Company shall pay to the Executive, in a cash lump sum, any portion of his salary that is earned
and unpaid as of the Retirement Date, as well as a cash payment in respect of granted but unused
vacation pay in accordance with the Company’s policy, which payment shall be based upon the
Executive’s salary as in effect immediately prior to the Retirement Date.



6.2 Other Benefits. The Company shall also pay or provide to the Executive all compensation
and benefits payable to him under the terms of the Company’s compensation and benefit plans
(including qualified retirement plans), programs, or arrangements as in effect immediately prior to
the Retirement Date. Through the Retirement Date, the Executive shall participate on the same
basis with all other management employees of the Company in the Company’s standard benefits package
generally available for senior management, as well as all other officers and employees of the
Company (including, without limitation, an annual medical exam, personal use of the Company’s
aircraft (provided the Executive reimburses the Company for the cost thereof in accordance with the
Company’s policy) and financial planning services). Through the Retirement Date, the Executive
shall be entitled to obtain reimbursement on an after tax basis for (or have the Company directly
pay) the amount necessary to pay the premiums on a standard $1 million term life insurance policy,
payable upon the Executive’s death to his designated beneficiary; in the event the Company pays the
premium directly, the Company shall indemnify the Executive on an after tax basis for all taxes
incurred by him on the Company paid premiums. During the Consulting Period, Executive shall be
entitled to use the Company’s aircraft in connection with his duties performed for the Company in
accordance with Company policies. From the date hereof through the Consulting Period, the Company
shall provide the Executive with reasonable administrative support, including office space outside
of the Company’s offices and executive-level secretarial support. The parties acknowledge and
agree that such administrative support is necessary for the provision of Executive’s services
hereunder and is not intended to be additional compensation to the Executive. To the extent that
such administrative support is deemed taxable income to the Executive, the Company shall reimburse
the Executive for his tax liability associated therewith (including, a tax “gross-up” for such
reimbursement calculated by the Company), subject to reasonable substantiation by the Executive.




7. Termination of Employment.



7.1 Termination for Cause. The Company may, immediately and unilaterally, terminate the
Executive’s employment hereunder for “Cause” prior to the Retirement Date upon written notice to
the Executive. Termination of the Executive’s employment or service by the Company shall
constitute a termination for “Cause” under this Section 7.1 if such termination is for one or more
of the following causes, as determined by the Board of Directors of the Company by a resolution
adopted by two-thirds (2/3) of its members (excluding the Executive):




(a) the substantial and continuing failure of the Executive to render services to the Company
or any subsidiary or affiliate in accordance with the Executive’s obligations and position with
the Company, subsidiary or affiliate, after 30 day’s notice from the President of the Company or
any subsidiary or affiliate, such notice setting forth in reasonable detail the nature of such
failure, and in the event the Executive fails to cure such breach or failure within 30 days of
notice from the Company or any subsidiary or affiliate, if such breach or failure is capable of
cure;




(b) the Executive’s dishonesty, gross negligence, breach of fiduciary duty;




(c) the commission by the Executive of an act of fraud or embezzlement, as found by a court
of competent jurisdiction;




(d) the conviction of the Executive of a felony; or




(e) a material breach of the terms of this Agreement or any other agreement with the Company
or any subsidiary or affiliate, provided that the Company or any subsidiary or affiliate provides
the Executive with adequate notice of such breach and the Executive fails to cure such breach, if
the breach is reasonably curable, within thirty (30) days after receipt of such notice.



In the event of a termination for Cause pursuant to the provisions of clauses (a) through (e)
above, inclusive, the Executive shall cease to be entitled to any payments or benefits hereunder,
except as may be required by law.



7.2 Termination Without Cause. In the event the Company terminates the Executive’s employment
without Cause prior to the Retirement Date, the Executive shall be entitled to receive his monthly
salary from the date of such termination through May 31, 2008 (or, if later, the date of
termination of employment, the “Termination Date”)), and the long term cash incentive payments
contemplated by Section 4.2 to the extent such installments are earned and payable under the terms
of the applicable Long Term Incentive Plan, with such payments made to the Executive at the time
such bonus payments are made to eligible employees generally even if the Executive is not an
employee of the Company at the time of such payment. In the event the Company terminates the
Executive’s employment without Cause prior to the date on which MJO Cash Bonuses for 2007, if any,
are paid to the other senior executive level associates of the Company (including the Executive),
the Executive shall be entitled to receive the MJO Cash Bonus for 2007 at an amount not less than
the Annual Target. Additionally, upon such termination without Cause, the Compensation Committee
may, in its sole discretion, (i) grant an equity award as contemplated by Section 4.3, (ii) vest
all or a portion of any unvested stock options, restricted stock or time-based restricted stock
owned by the Executive as of the Termination Date and/or (iii) extend the exercise period of any
stock options previously granted to Executive. The Executive agrees that any compensation or other
benefit provided to him pursuant to this Section 7.2 shall be subject to Executive executing and
delivering to the Company a general release of claims against the Company as of the Termination
Date substantially in the form attached hereto as Exhibit A and such general release becoming
effective pursuant to its terms.



7.3 Death or Disability. In the event of the Executive’s death prior the Retirement Date, the
Company shall pay to the Executive’s estate the amounts payable to Executive under Section 7.2 as
if the Executive’s employment had been terminated without Cause plus the benefits payable pursuant
to the $1 million term life insurance policy described in Section 6.2, which shall be payable to
the Executive’s designated beneficiary. In the event that the Executive’s employment or service
with the Company terminates prior to the Retirement Date due to the Executive’s physical incapacity
or mental incompetence (the Executive shall be deemed to have suffered physical incapacity or
mental incompetence if he is unable to perform the essential functions of his job duties hereunder
after any ninety (90) work days out of any 365-day period), the Executive shall be entitled to
receive the amounts payable to Executive under Section 7.2 as if the Executive’s employment had
been terminated without Cause, provided, however, the Company shall be entitled to reduce the cash
payments so required by the amount of any disability payments the Executive receives under any
disability policy maintained by the Company for his benefit. Further, in addition to the
foregoing, in the event of termination of employment as a result of death or disability, the
Executive shall be entitled to receive any long term incentive payments described in Section 4.2 of
this Agreement in accordance with the terms of the applicable long term incentive plan(s).



7.4 Change in Control. Notwithstanding anything to the contrary in this Section 7, in the
event the Executive’s employment is terminated by the Company prior to the Retirement Date in
connection with a Change in Control (as such term is defined in the Company’s Change in Control
Benefit Policy), the Executive shall be eligible to receive the benefits to which he is entitled
pursuant to the Company’s Change in Control Benefit Policy. The Executive’s Multiple (as such term
is defined in the Company’s Change in Control Benefit Policy) shall be three (3). Effective on and
after the Retirement Date, the Executive shall cease to be eligible for coverage or benefits under
the Company’s Change in Control Benefit Policy.




8. General Provisions.



8.1 Indemnification. The Executive shall be entitled to coverage under the Company’s
indemnification policies and shall contemporaneously execute a copy of the Company’s standard
indemnification agreement substantially in the form attached hereto as Exhibit B. The indemnity
coverage as set forth in this section shall include the Executive’s employment as Chairman of the
Board. The Executive agrees to execute any future generally applicable amendment to, or replacement
of, such standard indemnification agreement form so long as the Executive’s rights under any
indemnification agreement are not reduced. Further, the Company agrees to indemnify, defend and
hold Executive harmless from and in respect of any damages, costs and reasonable expenses incurred
by the Executive in the defense of a claim by a third party against the Executive arising directly
from any actions taken by the Executive on behalf of the Company during the Consulting Period at
the written request of the Company, except to the extent that such damages, costs or expenses
result from or are related to Executive’s dishonesty, gross negligence, willful misconduct or
failure to obey the written instructions of the Company.



8.2 Covenant Not to Compete.




(a) In consideration for the payments and benefits to be provided to the Executive pursuant
to this Agreement, and as a material condition to the payments and provision of such benefits, the
Executive hereby expressly agrees as follows:



(i) The Executive shall 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 his 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
Period (defined below), the Executive shall 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 Period” means the twenty-four (24) month period beginning on August 31, 2007
and ending on the second anniversary of such date.



(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 the Executive’s employment
with an AMERIGROUP Company he (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) As soon as reasonably practicable following the Retirement Date in any event not later
than May 31, 2008, the Company shall provide to the Executive in writing a list of products and
services and geographical locations that it reasonably believes are subject to the definition of
“Covered Product or Service” and the definition of “Covered Area”, as applicable. The parties
acknowledge and agree that such written list shall be binding on the parties with respect to the
interpretation of the terms “Covered Product or Service” and “Covered Area”.



(d) Notwithstanding the foregoing, the Executive expressly agrees that any breach of the
provisions of this Section 8.2 or the Release attached as Exhibit A by the Executive shall
constitute a material breach of this Agreement and shall relieve the Company of all obligations
under this Agreement, including, but not limited to, its obligation to engage Executive as a
consultant pursuant to Section 2 above and to provide Executive with the payments set forth
therein. Executive further agrees that any breach by the Executive of the covenants made in
Sections 8.2(a), (b) and (c) 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 the Executive’s obligations hereunder. The Executive agrees
that any such AMERIGROUP Company may seek and obtain injunctive relief without posting an
injunction bond. The Executive hereby acknowledges and agrees that he shall have access to
confidential and proprietary information and trade secrets concerning the AMERIGROUP Companies
during his employment and that the covenants in Sections 8.2(a), (b) and (c) are reasonable in
scope and necessary to protect the legitimate business interests of the AMERIGROUP Companies. The
Executive 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, the
Executive acknowledges and agrees that the experience and/or knowledge that he acquires in the
course of his employment with an AMERIGROUP Company may relate not only to the Covered Products and
Services of the AMERIGROUP Company with which he is employed, but also those of other AMERIGROUP
Companies.)



8.3 Severability. The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this Agreement. If any
provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion
of such provision, together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent consistent with law.



8.4 Status as Consultant. Nothing herein contained shall be construed to constitute the
parties hereto, with respect to the Consulting Period, as partners or as joint venturers, or either
as agent of the other, or as employer and employee. By virtue of the relationship described
herein, the Executive’s relationship to the Company during the Consulting Period shall be that of
an independent contractor only and the Executive shall perform all services pursuant to this
Agreement in respect of the Consulting Period without the power to bind or represent the Company
for any purpose whatsoever. The Executive shall not provide any services under the Company’s
business name during the Consulting Period and shall not present himself as an employee of the
Company during the Consulting Period. Subject only to such specific limitations as are contained
in this Agreement, the manner, means, details or methods by which the Executive performs his
obligations under this Agreement during the Consulting Period shall be solely within the
Executive’s discretion. The Company shall not have the authority to, nor shall it, supervise,
direct or control the manner, means, details or methods utilized by the Executive to perform his
obligations under this Agreement during the Consulting Period and nothing in this Agreement shall
be construed to grant the Company any such authority.



8.5 Entire Agreement. The Executive represents that, in executing this Agreement, he has not
relied upon any representation or statement made by the Company, other than those set forth herein,
with regard to the subject matter, basis, or effect of this Agreement or otherwise. The Executive
acknowledges that the payments and benefits described in this Agreement are in lieu of and in full
satisfaction of any obligations, including any amounts that might be payable or securities
deliverable, under any contract, agreement, plan, policy, program, practice or otherwise, past or
present, of the Company or any of its affiliates, including, but not limited to, the Second Amended
and Restated Employment Agreement by and between the Executive and the Company dated October 2,
2000, as amended (the “Existing Employment Agreement”), other than any accrued and vested benefits
under any tax-qualified retirement plan. The Executive hereby waives any rights he might otherwise
have with respect to such obligations. Effective as of the close of business on August 31, 2007,
the Existing Employment Agreement ceased to be of any further force or effect. The Executive
agrees that neither the execution of this Agreement nor the consummation of any of the transactions
contemplated hereby shall constitute “Changed Circumstances” within the meaning of the Existing
Employment Agreement and that no severance or other benefits otherwise shall be payable thereunder
by reason of the execution of this Agreement or the consummation of any of the transactions
contemplated hereby. Notwithstanding anything to the contrary in this Section 8.5, this Agreement
shall have no effect on any stock option agreement or restricted stock agreement between the
parties (including those agreements referenced and except to the extent provided in Section 4.4),
or on any employee noncompetition, nondisclosure, and developments agreement between the parties,
and such agreements shall remain in full force and effect in accordance with their respective
terms; provided, however, that, if there is a conflict between any provision in any such agreement
and a provision in this Agreement, the provision in this Agreement shall control.



8.6 Successors and Assigns. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive otherwise than by shall or
the laws of descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s legal representatives. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns.



8.7 Governing Law; Captions; Amendment. This Agreement, the employment and consulting
relationships contemplated herein and any claim arising from such relationships, whether or not
arising under this Agreement, shall be governed by and construed in accordance with the internal
laws of the Commonwealth of Virginia, without regard to any conflict of law principles. The
captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified except by a written agreement executed by the parties
hereto or their respective successors and legal representatives.



8.8 Withholding; Other Tax Considerations. Notwithstanding any other provision of this
Agreement, the Company may withhold from amounts payable under this Agreement all federal, state,
local, and foreign taxes that are required to be withheld by applicable laws or regulations. With
respect to the Consulting Fee, the Executive acknowledges that at all times during the Consulting
Period, the Executive shall be an independent contractor in providing services as specified
hereunder. The Executive hereby acknowledges responsibility for all federal and state income
taxes, Federal Insurance Contribution Act taxes and workers’ compensation and unemployment
compensation taxes, if applicable, due with respect to his services hereunder during the Consulting
Period.



8.9 Counterparts. This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same instrument.



8.10 Review by Counsel. Executive represents and warrants that, in negotiating and executing
this Agreement, Executive has had an adequate opportunity to consult with competent counsel or
other representatives of Executive’s choosing concerning the meaning and effect of each term and
provision hereof, including his tax advisors, and that there are no representations, promises or
agreements other than those expressly set forth in writing herein.



8.11 Negotiated Agreement. The parties agree that this is a negotiated agreement and that no
term herein shall be construed against a party merely because that party or its attorneys proposed
or drafted such term.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK –

SIGNATURE PAGE FOLLOWS]






2






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




AMERIGROUP CORPORATION




By:

Stanley F. Baldwin, Executive Vice President, 

Secretary and General Counsel





EXECUTIVE:




     




JEFFREY L. McWATERS



3




EXHIBIT A



RELEASE AGREEMENT




In consideration of the mutual promises and commitments specified in the Retirement and
Consulting Agreement between Executive and the Company dated September 30, 2007 (“Retirement and
Consulting Agreement”), the parties agree as follows:



1. General Release.



(a) Executive states and affirms that Executive has not previously filed or joined in any
complaints, charges, or lawsuits against AMERIGROUP with any governmental agency or court of law or
equity. Executive, for and on behalf of Executive and Executive’s estate, heirs, spouse, life
partner, representatives, successors and assigns, waives, releases and forever discharges
AMERIGROUP and all related entities, together with its present or former directors, officers,
partners, employees, attorneys and agents, from any and all rights, claims, charges, complaints,
causes of action, promises, agreements, controversies, obligations, damages and liabilities of
every kind whatsoever, known or unknown, that Executive has or may have relating to or arising out
of Executive’s employment with AMERIGROUP and the separation thereof, including but not limited to
any claims of wrongful discharge, breach of express or implied contract, fraud, misrepresentation,
defamation, liability in tort, claims of any kind that may be brought in any court or
administrative agency, any claims under Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the
Equal Pay Act, the Executive Retirement Income Security Act, the Older Workers Benefit Protection
Act, the Pregnancy Discrimination Act, Virginia Human Rights Law, each as amended, or any other
Executive Orders, federal, state or local law relating to employment, employee benefits or the
termination of employment, or any other claim arising out of or relating to Executive’s employment,
excepting any vested rights Executive may have under any of the Company’s benefits plans.



(b) This Release Agreement does not waive any rights or claims that Executive may have which
arise after the date the Executive signs this Release Agreement or which cannot be waived or
released as a matter of law; provided however, that this Release Agreement does
waive any claims or rights that Executive has or may have relating to or arising out of the Second
Amended and Restated Employment Agreement by and Between the Executive and the Company dated
October 2, 2000 (as amended), which claims or rights may arise before, upon or after the date
Executive signs this Release Agreement. Executive also represents that Executive has not given,
sold, assigned, or transferred to any one else, any claim, or a portion of a claim discussed in
this Release Agreement.



(c) This Release Agreement does not include a release of the Executive’s rights or claims to
any payments of any vested qualified retirement benefits under the Company’s ERISA plans or any
other benefit plan described in the Retirement and Consulting Agreement. This Release Agreement
does not include a release of the Executive’s right to continuation in the Company’s medical plans
as provided by COBRA.



(d) This Release Agreement does not include a release of any rights or claims the Executive
may have under the Indemnification Agreement attached to the Retirement and Consulting Agreement as
Exhibit B.



2. Claims and Actions.



(a) Executive promises never to file a lawsuit asserting any claims that are released in this
Release Agreement.



(b) This Release Agreement does not waive any rights or claims that Executive may have which
arise after the date the Executive signs this Release Agreement.



(c) Executive agrees that he has been granted any leave to which he was entitled under the
Family and Medical Leave Act or related state or local leave or disability accommodation laws, and
that there has been no retaliation as a result of, interference with, or restraint of my use of
such leave. Executive further agrees that he has no known workplace injuries or occupational
diseases.



3. Special ADEA Waiver and Release Notification.



(a) The General Release, Section 1 above, of this Release Agreement, includes a waiver and
release of all claims under the Age Discrimination in Employment Act (“ADEA”) and, therefore,
pursuant to the requirements of the ADEA, Executive acknowledges that Executive has been:



(i) advised that the waiver and release includes, but is not limited to, all claims under the
ADEA arising up to and including the date of execution of this waiver and release;



(ii) advised to consult with an attorney and/or other advisor concerning Executive’s rights
and obligations under this Release Agreement prior to Executive’s execution of it. Executive
understands that whether or not to do so is Executive’s decision. Executive agrees, however, that
AMERIGROUP shall not be required to pay any of Executive’s attorney’s fees in this or any related
matter or lawsuit, now or later, and that the payments and benefits referenced above are in full
and complete settlement of all matters between Executive and AMERIGROUP, including but not limited
to, attorney’s fees and costs;



(iii) given at least twenty-one (21) days within which to consider this Release Agreement; and



(iv) advised that Executive may revoke this Release Agreement within seven (7) days of
Executive’s signing it. Revocation can be made by delivering a written notice of revocation to
Stanley F. Baldwin, General Counsel, AMERIGROUP Corporation, 4425 Corporation Lane, Suite 300,
Virginia Beach, Virginia 23462. For such revocation to be effective, Mr. Baldwin must receive
notice no later than 5:00 p.m. on the seventh (7th) calendar day after Executive signs
this Release Agreement. If Executive revokes this Release Agreement, it shall not be effective or
enforceable and Executive will not receive the payments or benefits set forth in Sections 2 and 4.2
of the Retirement and Consulting Agreement.



4. Nondisparagement.



Executive agrees that Executive will not make, or cause to be made, any comments (whether
written or oral) relating to AMERIGROUP or any of its present or former directors, officers,
partners, employees, attorneys or agents which may tend to injure the business or reputation of
AMERIGROUP. AMERIGROUP agrees that it will not authorize its present directors, officers, partners,
employees, attorneys or agents to make any comments (whether written or oral) relating to Executive
which may tend to injure the business reputation of Executive. Nothing herein shall preclude either
party from sharing information about the other party with a government agency subject to a subpoena
or from providing testimony in any legal proceeding.



5. No Admission.



It is understood and agreed that, prior to entering into this Release Agreement, AMERIGROUP
has admitted no liability or any improper conduct, all of which the Company specifically denies.



6. No Waiver or Breach or Remedy.



A waiver by AMERIGROUP of the breach of any of the provisions of this Release Agreement by
Executive shall not be deemed a waiver by AMERIGROUP of any subsequent breach, nor shall recourse
to any remedy hereunder be deemed a waiver of any other or further relief or remedy provided for
herein. A waiver by Executive of the breach of any of the provisions of this Release Agreement by
AMERIGROUP shall not be deemed a waiver by Executive of any subsequent breach, nor shall recourse
to any remedy hereunder be deemed a waiver of any other or further relief or remedy provided for
herein.



7. Severability.



In the event that any provision of this Release Agreement is determined to be invalid by a
court or tribunal of competent jurisdiction, all other provisions of this Release Agreement shall
remain in full force and effect.



8. Entire Agreement.



(a) This Release Agreement, in conjunction with the provisions of the Retirement and
Consulting Agreement, constitutes the entire agreement and understanding between the parties and
supersedes all other agreements between the parties whether oral or written with respect to the
subject matter hereto.



(b) The parties understand and agree that all terms of this Release Agreement are contractual
and are not a mere recital, and represent and warrant that they are competent and possess the full
and complete authority to covenant and agree as herein provided.



(c) Executive understands, agrees, and represents that the covenants made herein and the
releases herein executed may affect rights and liabilities of substantial extent and agrees that
the covenants and releases provided herein are in Executive’s best interest. Executive represents
and warrants that, in negotiating and executing this Release Agreement, Executive has had an
adequate opportunity to consult with competent counsel or other representatives of Executive’s
choosing concerning the meaning and effect of each term and provision hereof, and that there are no
representations, promises or agreements other than those expressly set forth in writing herein.
Executive acknowledges that Executive received a copy of this Release Agreement, and was offered a
reasonable period to consider it.



(d) The parties agree that this is a negotiated agreement and that no term herein shall be
construed against a party merely because that party or its attorneys proposed or drafted such term.



(e) The parties have carefully read this Release Agreement in its entirety; fully understand
and agree to its terms and provisions; intend and agree that it is final and binding and understand
that, in the event of a breach, either party may seek relief, including damages, restitution and
injunctive relief, at law or in equity, in a court of competent jurisdiction.



(f) Each party also agrees that, without receiving further consideration, it will sign and
deliver such documents and do anything else that is necessary in the future to make the provisions
of this Release Agreement effective.



9. Agreement Binding.



This Release Agreement shall be binding on the parties and upon their heirs, administrators,
representatives, executors, successors, and assigns and shall inure to their benefit and to that of
their heirs, administrators, representatives, executors, successors, and assigns.



10. Violation by Executive.



In the event that Executive violates any of the terms of this Release Agreement, AMERIGROUP
shall have the right to terminate any or all of its commitments herein and under the Retirement and
Consulting Agreement and to recover any monies or other considerations previously provided to
Executive and to pursue any other remedies available to AMERIGROUP.



11. Violation by AMERIGROUP.



In the event that AMERIGROUP violates any of the terms of this Release Agreement, AMERIGROUP
agrees that Executive shall be entitled to pursue any remedies available to him.



12. Voluntary.



Executive agrees that Executive has read and carefully considered this Release Agreement, and
has had the opportunity to ask questions of company representatives. Executive agrees that
Executive also had the opportunity to discuss this Release Agreement with an attorney. Executive
agrees that Executive is signing this agreement voluntarily and of Executive’s own free will.



13. Choice of Law.



This Agreement and the legal relationships among the parties hereto shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia, without regard to conflict
of laws principles. Each party hereby irrevocably consents, in any dispute, action, litigation or
other proceeding concerning this Agreement, to the jurisdiction of the state and federal courts
having venue for the City of Norfolk, Virginia, and irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of such suit, action or
proceeding in such court and further waives the right to object, with respect to such suit, action
or proceeding, that such court does not have jurisdiction over such party or that venue is
improper.



14. Section Headings.



The section headings in this Agreement are intended to be for reference purposes only and
shall in no way be construed to modify or restrict any of the terms or provisions of this
Agreement.



15. No Third Party Rights.



This Agreement is entered into solely between AMERIGROUP and Executive and shall not be deemed
to create any rights in any third parties or to create any obligations of AMERIGROUP to any third
party, except as to any rights of Executive’s Estate, as provided under this Agreement.



16. Counterparts.



This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same instrument.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK –

SIGNATURE PAGE FOLLOWS]





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IN WITNESS WHEREOF, and intending to be legally bound, the parties have executed the foregoing
Release Agreement effective  .



	 	 	 
	
 
	 	AMERIGROUP Corporation

By:
	Executive

	 	Name:
	Jeffrey L. McWaters

	 	Title:






5




EXHIBIT B



INDEMNIFICATION AGREEMENT




THIS INDEMNIFICATION AGREEMENT is made as of this 30th day of September, 2007, by and between
Jeffrey L. McWaters (the “Indemnitee”) and AMERIGROUP Corporation, a Delaware corporation with a
principal place of business at 4425 Corporation Lane, Suite 300, Virginia Beach, Virginia 23462
(the “Company”).



RECITALS:




A. It is essential that the Company retain and attract as directors and officers the most
capable persons available.



B. The Indemnitee is a director and/or officer of the Company.



C. Both the Company and the Indemnitee recognize the increased risk of litigation and other
claims being asserted against directors and officers of public companies.



D. The Bylaws of the Company require the Company to indemnify directors, officers and certain
other persons to the full extent permitted by law, and Indemnitee has been serving and continues to
serve as a director and/or officer of the Company, in part, in reliance on such Bylaws.



E. In recognition of the Indemnitee’s need for substantial protection against personal
liability in order to maintain the Indemnitee’s continued service to the Company in an effective
manner and the Indemnitee’s reliance on the aforesaid Bylaws and, in part, to provide the
Indemnitee with specific contractual assurance that the protection promised by such Bylaws will be
available to the Indemnitee (regardless of, among other things, any amendment to or revocation of,
such Bylaws or any change in the composition of the Company’s Board of Directors or any acquisition
transaction relating to the Company), the Company desires to provide in this Agreement for the
indemnification of and the advance of expenses to the Indemnitee to the full extent (whether
partial or complete) permitted by law, as set forth in this Agreement and, to the extent officers’
and directors liability insurance is maintained by the Company, to provide for the continued
coverage of the Indemnitee under the Company’s directors and officers liability insurance policies.



NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and in consideration of the mutual covenants and obligations herein contained,
the parties hereto agree as follows:



1. Definitions. As used in this Agreement, the following terms shall have the
meanings specified below:



(A) "Change in Control”. Any of the following:



(i) The acquisition by any “person” or “group” (as defined in or pursuant to Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than the
Company, any subsidiary thereof or any employee benefit plan of the Company or a subsidiary),
directly or indirectly, as “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of
securities of the Company representing twenty percent (20%) or more of either the then outstanding
shares or the combined voting power of the then outstanding securities of the Company;



(ii) Either a majority of the directors of the Company elected at the Company’s annual
stockholders meeting shall have been nominated for election other than by or at the direction of
the “incumbent directors” of the Company, or the “incumbent directors” shall cease to constitute a
majority of the directors of the Company. The term “incumbent director” shall mean any director
who was a director of the Company on the date hereof and any individual who becomes a director of
the Company subsequent to the date hereof and who is elected or nominated by or at the direction of
at least two-thirds (2/3) of the then incumbent directors;



(iii) The shareholders of the Company approve (x) a merger, consolidation or other business
combination of the Company with any other “person” or “group” (as defined in or pursuant to
Sections 13(d) and 14(d) of the Exchange Act) or affiliate thereof, other than a merger or
consolidation that would result in the outstanding common stock of the Company immediately prior
thereto continuing to represent (either by remaining outstanding or by being converted into common
stock of the surviving entity or a parent or affiliate thereof) more than fifty percent (50%) of
the outstanding common stock of the Company or such surviving entity or a parent or affiliate
thereof outstanding immediately after such merger, consolidation or other business combination, or
(y) a plan of complete liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company’s assets; or



(iv) Any other event or circumstance which is not covered by the foregoing subsections but
which the Board of Directors of the Company determines to affect control of the Company and with
respect to which the Board of Directors adopts a resolution that the event or circumstance
constitutes a Change of Control for purposes of this Agreement.



(v) The date of a Change of Control under this Section 1(A) above is the date on which an
event described in Sections 1(A)(i), 1(A)(ii), 1(A)(iii), or 1(A)(iv) above occurs.



(vi) If, following a Change of Control and a dispute with the Company regarding the terms of
this Section 1(A) and any related provision of this Agreement, the Indemnitee collects any part or
all of the severance pay provided under this Section 1(A) by or through the assistance of legal
counsel, the Company will pay all costs of any such collection or enforcement, including reasonable
attorneys’ fees and other out of pocket expenses incurred by the Indemnitee, up to that point when
the Company offered to settle the dispute for an amount equal to the amount that the Indemnitee is
entitled to recover.



(vii) The payments described in this Section 1(A) will be due the Indemnitee regardless of any
subsequent employment obtained by the Indemnitee.



(B) "Claim”. Any threatened, pending or completed action, suit, judgment,
investigation or proceeding, and any appeal thereof, whether civil, criminal, administrative or
investigative and/or any inquiry or investigation, whether conducted by the Company or any other
party that the Indemnitee in good faith believes might lead to the institution of any such action.



(C) "Expenses”. Include attorneys’ fees and all other costs, expenses, and
obligations paid or incurred in connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to defend, be a witness in or participate in
any Claim relating to any Indemnifiable Event.



(D) "Indemnifiable Event”. Any event, occurrence or circumstance related to the fact
that the Indemnitee is or was a director or officer of the Company, or is or was serving at the
request of the Company as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by
reason of anything done or not done by the Indemnitee in any such capacity.



(E) "Potential Change in Control”. Shall be deemed to have occurred if (a) the
Company enters into an agreement or arrangement, the consummation of which would result in the
occurrence of a Change in Control; (b) any person (including the Company) publicly announces an
intention to take or to contemplate taking actions which if consummated would constitute a Change
in Control; (c) any person (other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), who is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing ten percent (10%) or more of the combined voting power of
the Company’s then outstanding Voting Securities increases his beneficial ownership of such
securities by five percent (5%) or more over the percentage so owned by such person on the date
hereof; or (d) the Board of Directors adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control has occurred.



(F) "Reviewing Party”. Any appropriate person or body consisting of a member or
members of the Company’s Board of Directors, including the Special Independent Counsel referred to
in Section 2(C) (or, to the fullest extent permitted by law, any other person or body appointed by
the Board of Directors), who is not a party to the particular claim for which the Indemnitee is
seeking indemnification.



(G) "Voting Securities”. Any securities of the Company which vote generally in the
election of directors.



2. Indemnification.



(A) Non-Exclusivity. The rights of the Indemnitee hereunder shall be in addition to
any other rights the Indemnitee may have under the Company’s Certificate of Incorporation or Bylaws
or the Delaware General Corporation law or otherwise. To the extent that a change in the Delaware
General Corporation Law (whether by statute or judicial decision) permits greater indemnification
than would be afforded currently under the Company’s Certificate of Incorporation or Bylaws or this
Agreement, to the fullest extent permitted by law it is the intent of the parties hereto that the
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change
immediately upon the occurrence of such change without further action by the Company or the
Indemnitee.



(B) Basic Indemnification Agreement.



(i) In the event the Indemnitee was, is or becomes a party to or witness or other participant
in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of
(or arising in part out of) an Indemnifiable Event, the Company shall indemnify the Indemnitee to
the fullest extent not prohibited by law, as soon as practicable but in any event no later than
thirty (30) days after written demand is presented to the Company, against any and all Expenses,
judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and
other charges paid or payable in connection with or in respect of such Expenses, judgments, fines,
penalties or amounts paid in settlement) of such Claim. Notwithstanding anything in this Agreement
to the contrary, prior to a Change in Control the Indemnitee shall not be entitled to
indemnification pursuant to this Agreement in connection with any Claim initiated by the Indemnitee
against the Company or any director or officer of the Company unless the Company has joined in or
consented to the initiation of such Claim. If so requested by the Indemnitee, the Company shall
advance to the Indemnitee (within twenty (20) days of such request) any and all Expenses (an
“Expense Advance”).



(ii) Notwithstanding the foregoing, (a) the obligations of the Company under Section 2(B)(i)
shall be subject to the condition that any Reviewing Party shall not have determined (in a written
opinion, in any case in which the Special Independent Counsel referred to in Section 2(C) below is
involved) that the Indemnitee would not be permitted to be indemnified under applicable law, and
(b) the obligation of the Company to make an Expense Advance pursuant to Section 2(B)(i) shall be
subject to the condition that if, when and to the extent that any Reviewing Party determines that
the Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall
be entitled to be reimbursed by the Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if the Indemnitee has commenced legal
proceedings in a court of competent jurisdiction to secure a determination that the Indemnitee
should be indemnified under applicable law, any determination made by a Reviewing Party that the
Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and
the Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final
judicial determination is made with respect thereto (as to which all rights of appeal therefrom
have been exhausted or lapsed). If there has not been a Change in Control, a Reviewing Party shall
be selected by the Board of Directors, and if there has been such a Change in Control, a Reviewing
Party shall be the Special Independent Counsel referred to in Section 2(C) below. If there has
been no appointment or no determination by a Reviewing Party or if a Reviewing Party determines
that the Indemnitee substantively would not be permitted to be indemnified in whole or in part
under applicable law, the Indemnitee shall have the right to commence litigation in any court in
the Commonwealth of Virginia having subject matter jurisdiction thereof and in which venue is
proper seeking an initial determination by the court or challenging any such determination by the
court or challenging any such determination by the Reviewing Party or any aspect thereof, including
the legal or factual basis therefor, and the Company hereby consents to service of process and to
appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and the Indemnitee.



(C) Change in Control. The Company agrees that if there is a Change in Control, then
with respect to all matters thereafter arising concerning the rights of the Indemnitee to indemnity
payments and Expense Advances under this Agreement, the Company’s Certificate of Incorporation or
Bylaws, or any other agreement now or hereafter in effect relating to Claims for Indemnifiable
Events, the Company shall seek legal advice only from “Special Independent Counsel” selected by the
Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who
has not otherwise performed services for the Company or the Indemnitee within the last five (5)
years (other than in connection with such matters). Such Special Independent Counsel, among other
things, shall render its written opinion to the Company and the Indemnitee as to whether and to
what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company
agrees to pay the reasonable fees of the Special Independent Counsel referred to above and may
fully indemnify such Special Independent Counsel against any and all expenses (including attorneys’
fees), claims, liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto.



(D) Establishment of Trust. In the event of a Potential Change in Control or a Change
in Control, the Company shall, upon written request by the Indemnitee, create a “Trust” for the
benefit of the Indemnitee and from time to time upon written request of the Indemnitee shall fund
such Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the
time of each such request to be incurred in connection with investigating, preparing for and
defending any Claim relating to an Indemnifiable Event, and any and all judgments, fines, penalties
and settlement amounts of any and all Claims relating to an Indemnifiable Event from time to time
actually paid or claimed, reasonably anticipated or proposed to be paid. The amount or amounts to
be deposited in the Trust pursuant to the foregoing funding obligation shall be determined by a
Reviewing Party in any case in which the Special Independent Counsel referred to above is involved.
The terms of the Trust shall provide that upon a Change in Control (i) the Trust shall not be
revoked or the principal thereof invaded without the written consent of the Indemnitee, (ii) the
Trustee shall advance, within two (2) business days of a request by the Indemnitee, any and all
Expenses to the Indemnitee (and the Indemnitee hereby agrees to reimburse the Trust under the
circumstances under which the Indemnitee would be required to reimburse the Company under Section
2(B)(ii) above), (iii) the Trust shall continue to be funded by the Company in accordance with the
funding obligation set forth above, (iv) the Trustee shall promptly pay to the Indemnitee all
amounts for which the Indemnitee shall be entitled to indemnification pursuant to this Agreement or
otherwise, and (v) all unexpended funds in the Trust shall revert to the Company upon a final
determination by the Reviewing Party or a court of competent jurisdiction, as the case may be, that
the Indemnitee has been fully indemnified under the terms of this Agreement. The Trustee shall be
a bank or trust company or other individual or entity chosen by the Indemnitee and acceptable to
and approved of by the Company. Nothing in this Section 2(D) shall relieve the Company of any of
its obligations under this Agreement.



(E) Indemnification for Additional Expenses. To the fullest extent not prohibited by
law, the Company shall indemnify the Indemnitee against any and all Expenses and, if requested by
the Indemnitee, shall (within two (2) business days of such request) advance to the Indemnitee such
Expenses as are incurred by the Indemnitee in connection with any Claim asserted against or action
brought by the Indemnitee for (i) indemnification or an advance payment of Expenses by the Company
under this Agreement, the Company’s Bylaws or Certificate of Incorporation or any other agreement
now or hereafter in effect relating to Claims for Indemnifiable Events, and/or (ii) recovery under
any directors’ and officers’ liability insurance policies maintained by the Company, regardless of
whether the Indemnitee ultimately is determined to be entitled to such indemnification, advance
payment of Expenses or insurance recovery, as the case may be.



(F) Partial Indemnity. If the Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion, but not all, of any Expenses,
judgments, fines, penalties or amounts paid in settlement of a Claim, the Company shall
nevertheless indemnify the Indemnitee for that portion thereof to which the Indemnitee is entitled.
Moreover, notwithstanding any other provision of this Agreement, to the extent that the Indemnitee
is or has been successful on the merits or otherwise in defense of any and all Claims relating in
whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, the Indemnitee shall be indemnified against all Expenses incurred in
connection therewith. In



6



connection with any determination by the Reviewing Party or otherwise as to whether the Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish
that the Indemnitee is not so entitled.



(G) No Presumption. For purposes of this Agreement, to the fullest extent permitted
by law, the termination of any Claim, action, suit or proceeding, by judgment, order, settlement
(whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that the Indemnitee did not meet any particular standard
of conduct or have any particular belief or that a court has determined that indemnification is not
permitted by applicable law.



(H) Liability Insurance. To the extent the Company shall maintain an insurance policy
or policies providing directors’ and officers’ liability insurance, the Indemnitee shall be covered
by such policy or policies, in accordance with its or their terms, to the maximum extent of the
coverage available for any director or officer of the Company.



(I) Period of Limitations. No legal action shall be brought and no cause of action
shall be asserted by or in the right of the Company or any affiliate of the Company against the
Indemnitee, the Indemnitee’s spouse, heirs, executors or personal or legal representatives after
the expiration of two (2) years from the date of accrual of such cause of action, and any claim or
cause of action of the Company or its affiliates shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such two (2) year period.



(J) Subrogation. In the event of payment by the Company under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights of recovery of the
Indemnitee, who shall execute all papers required and shall do everything that may be necessary to
secure such rights, including the execution of such documents necessary to enable the Company
effectively to bring suit to enforce such rights.



(K) No Duplication of Payments. The Company shall not be liable under this Agreement
to make any payment in connection with any Claim made against the Indemnitee to the extent the
Indemnitee has otherwise received payment (under any insurance policy, the Bylaws of the Company or
otherwise) in respect of such Claim.



3. Consent and Waiver by Third Parties. The Indemnitee hereby represents and warrants
that he has obtained all waivers and/or consents from third parties which are necessary for his
employment with the Company on the terms and conditions set forth herein and to execute and perform
this Agreement without being in conflict with any other agreement, obligation or understanding with
any such third party. The Indemnitee represents that he is not bound by any agreement or any other
existing or pervious business relationship which conflicts with, or may conflict with, the
performance of his obligations hereunder or prevent the full performance of his duties and
obligations hereunder.



4. Governing Law. This Agreement shall be governed by and construed in accordance
with the internal laws of the Commonwealth of Virginia, except for the rights, privileges and
obligations with respect to the indemnity provisions set forth in Section 2 which shall be governed
by and construed in accordance with the internal laws of the State of Delaware.



5. Severability. In case any one or more of the provisions contained in this
Agreement for any reason shall be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall be construed and reformed to the maximum extent permitted by law.



6. Waivers and Modifications. This Agreement may be modified, and the rights, remedies
and obligations contained in any provision hereof may be waived, only in accordance with this
Section 6. No waiver by either party of any breach by the other or any provision hereof shall be
deemed to be a waiver of any later or other breach thereof or as a waiver of any other provision of
this Agreement. This Agreement sets forth all of the terms of the understanding between the
parties hereto with reference to the subject matter set forth herein and may not be waived,
changed, discharged or terminated orally or by any course of dealing between the parties, but only
by an instrument in writing signed by the party against whom any waiver, change, discharge or
termination is sought. No modification or waiver by the Company shall be effective without the
consent of at least two-thirds (2/3) of the members of the Board of Directors then in office at the
time of such modification or waiver.



7. Assignment. The Indemnitee acknowledges that the services to be rendered by him
hereunder are unique and personal in nature. Accordingly, the Indemnitee may not assign any of his
rights or delegate any of his duties or obligations under this Agreement. The rights and
obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding
upon, the successors and assigns of the Company.



8. Entire Agreement. This Agreement constitutes the entire understanding of the
parties relating to the subject matter hereof and supersedes and cancels all agreements, written or
oral, made prior to the date hereof between the Indemnitee and the Company relating to the subject
matter hereof or thereof.



9. Notices. All notices hereunder shall be in writing and shall be delivered in
person or mailed by certified or registered mail, return receipt requested, addressed as set forth
on the signature page hereto.



10. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall constitute one and the
same instrument.



11. Section Headings. The descriptive section headings herein have been inserted for
convenience only and shall not be deemed to define, limit, or otherwise affect the construction of
any provision hereof.



12. Arbitration. The parties shall submit any dispute relating to this Agreement to
arbitration by notifying the other party hereto, in writing, of such dispute. Within ten (10) days
after receipt of such notice, the parties shall designate in writing one arbitrator to resolve the
dispute; provided, that if the parties cannot agree on an arbitrator within such 10-day period, the
arbitrator shall be selected by the American Arbitration Association. The arbitrator so designated
shall not be an employee, consultant, officer, director or stockholder of any party hereto or any
affiliate of any party to this Agreement. The arbitration shall be governed by the rules of the
American Arbitration Association; provided, that the arbitrator shall have sole discretion with
regard to the admissibility of evidence. The arbitrator shall rule on each disputed issue. All
rulings of the arbitrator shall be in writing and shall be delivered to the parties hereto. Any
arbitration pursuant to this Section 12 shall be conducted in Virginia Beach, Virginia. Any
arbitration award may be entered in and enforced by any court having jurisdiction thereover and the
parties hereby consent and commit themselves to the jurisdiction of the courts of the Commonwealth
of Virginia for purposes of the enforcement of any arbitration award. The arbitrator may proceed
to an award notwithstanding the failure of the other party to participate in the proceedings. The
prevailing party shall be entitled to an award of reasonable attorneys’ fees incurred in connection
with the arbitration in such amount as may be determined by the arbitrators. The award of the
arbitrator shall be the sole and exclusive remedy of the parties and shall be enforceable in any
court of competent jurisdiction. Notwithstanding the foregoing, the parties shall be entitled to
seek injunctive relief or other equitable remedies from any court of competent jurisdiction.



IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the
date first above written as an instrument under seal.




AMERIGROUP CORPORATION




By: [SEAL]

Stanley F. Baldwin

Executive Vice President,

General Counsel and Secretary





INDEMNITEE:




[SEAL]



JEFFREY L. McWATERS



Address for Notices:



AMERIGROUP Corporation





4425 Corporation Lane, Suite 300


Virginia Beach, VA 23462


Attention: Stanley F. Baldwin


Executive Vice President, General Counsel



and Secretary




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