Document:

ex10-20.htm

    
      
         

      

      
         

        
          

        

      

      
         

        
           

          

        

      
EXHIBIT 10.20

    EIGHTH
AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER

     

    THIS
EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this "Amendment"), dated as
of June 11, 2008, is entered into among COMMERCE ENERGY, INC., a California
corporation ("Borrower"), COMMERCE
ENERGY GROUP, INC., a Delaware corporation ("Parent"), WACHOVIA
CAPITAL FINANCE CORPORATION (WESTERN), a California corporation, as Agent
("Agent") and
the financial institutions party to the below referenced Loan Agreement as
Lenders (collectively, "Lenders").

     

    RECITALS

     

    A.           Borrower,
Parent, Agent and Lenders have previously entered into that certain Loan and
Security Agreement dated June 8, 2006 (the "Loan Agreement") as
amended by the First Amendment to Loan and Security Agreement and Waiver dated
September 20, 2006 (the "First Amendment"),
the Second Amendment to Loan and Security Agreement and Waiver dated
October 26, 2006 (the "Second Amendment"),
the Third Amendment to Loan and Security Agreement and Waiver dated
March 15, 2007 (the "Third Amendment"),
the Fourth Amendment to Loan and Security Agreement dated June 26, 2007 (the
"Fourth
Amendment"), the Fifth Amendment to Loan and Security Agreement dated
August 1, 2007 (the "Fifth Amendment"),
the Sixth Amendment to Loan and Security Agreement dated November 16, 2007
(the "Sixth
Amendment") and the Seventh Amendment to Loan and Security Agreement
dated March 12, 2008 (the “Seventh Amendment”)
pursuant to which Agent and Lenders have made certain loans and financial
accommodations available to Borrower.  Terms used herein without
definition shall have the meanings ascribed to them in the Loan
Agreement.

     

    B.           The
following Events of Default have occurred and are continuing under the Loan
Agreement:  (i) Borrower failed to maintain a Fixed Charge Coverage
Ratio of not less than 1.5 to one for the twelve (12) consecutive month period
ended April 30, 2008 as required in Section 9.17 of the Loan Agreement and (ii)
Borrower failed  to earn EBITDA of not less than $3,500,000 for the
nine (9) consecutive month period ended April 30, 2008 as required in Section
9.17.2 of the Loan Agreement (collectively, the “Known Existing
Defaults”).

     

    C.           Borrower
and Parent have requested that Agent and Lenders waive the Known Existing
Defaults and amend the Loan Agreement on the terms and conditions set forth
herein.

     

    D.           Borrower
and Parent are entering into this Amendment with the understanding and agreement
that, except as specifically provided herein, none of Agent's or any Lender's
rights or remedies as set forth in the Loan Agreement is being waived or
modified by the terms of this Amendment.

     

    AGREEMENT

     

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

     

    
      
        
          
            	
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    1. Amendments to Loan
Agreement.

     

    (a) Borrowing
Base.  The definition of “Borrowing Base” in Section 1.11
of the Loan Agreement is hereby amended and restated to read in its entirety as
follows:

     

    “1.11                      ‘Borrowing
Base’ shall mean, at any time, the difference of (a) the lesser of (i) the
sum of all collections received on the Accounts of Borrowers during the
immediately preceding thirty (30) days, or (ii) the sum of
(A) eighty-five (85%) percent of the Eligible Billed Accounts, plus
(B) the lesser of $12,000,000 or sixty-five (65%) percent of the Eligible
Unbilled Accounts, plus (C) the lesser of the Inventory Loan Limit or
seventy (70%) percent multiplied by the Value of the Eligible Inventory, plus
(D) the lesser of $35,000,000 or ninety-five (95%) percent of Eligible Cash
Collateral, minus (b) any Reserves.”

     

    (b) Excess
Availability.  The definition of “Excess Availability” in
Section 1.41 of the Loan Agreement is hereby amended to insert the phrase “plus
any additional loans or other lines of credit arranged by Borrowers and approved
by the Agent that are subordinated in right of payment to the Obligations on
terms and conditions satisfactory to the Agent” immediately after the phrase “in
respect of Letter of Credit Obligations)” in clause (a) thereof.

     

    (c) Interest
Rate.

     

    (i) The
phrase "three quarters of one (0.75%) percent" in the definition of “Interest
Rate” in Section 1.58(a)(i) of the Loan Agreement is hereby replaced with
"two and one-quarter (2.25%) percent".

     

    (ii) The
phrase “three and one-quarter (3.25%) percent” in the definition of “Interest
Rate” in Section 1.58(a)(ii) of the Loan Agreement is hereby replaced with “four
and three-quarters (4.75%) percent”.

     

    (d) Letter of Credit
Rate.

     

    (i) The
phrase "two and one-quarter (2.25%) percent" in the definition of “Letter of
Credit Rate” in Section 1.66(a) of the Loan Agreement is hereby replaced
with "three and three-quarters (3.75%) percent".

     

    (ii) The
phrase "two (2.00%) percent" in the definition of “Letter of Credit Rate” in
Section 1.66(b) of the Loan Agreement is hereby replaced with "three and
one-half (3.50%) percent".

     

    (e) Collections.  Notwithstanding
any prior course of conduct, Borrower acknowledges and reaffirms its agreement
under Sections 6.3(a) and (c) of the Loan Agreement to promptly deposit
into the Lockbox Accounts and to direct its account debtors to directly remit
into the Lockbox Accounts all payments on Receivables and all payments
constituting proceeds of Inventory or other Collateral in the identical form in
which such payments are made, whether by cash, check or other manner, and to
transfer the funds deposited into the Lockbox Accounts to the Blocked Accounts
for application to the Obligations.

     

    (f) Access to Premises and
Management.  Section 7.7 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:

     

    “7.7           Access to Premises and
Management.  From time to time as requested by Agent, at the
cost and expense of Borrowers, (a) Agent or its designee (which for purposes of
this section shall include Carl Marks Advisory Group LLC, and its Affiliates,
sucessors or assigns (collectively, the “Consultant”)) shall,
at any time after notice to Parent, or at any time without notice to
Administrative Borrower if an Event of Default exists or has occurred and is
continuing, have (i) complete access to and cooperation of management of each
Borrower and each Guarantor, and (ii) complete access to all of each Borrower's
and Guarantor’s premises during normal business hours, each for the purposes of
inspecting, verifying and auditing the Collateral and all of each Borrower's and
Guarantor’s books and records (including the Records), assessing each Borrower’s
historic cash flows, liquidity and financial controls and performance generally,
and the projected Borrowing Base and Excess Availability, and (b) each Borrower
and Guarantor shall promptly furnish to Agent or its designee such copies of
such books and records or extracts therefrom as Agent or its designee may
request, and Agent or any Lender or Agent’s designee may use during normal
business hours such of any Borrower's and Guarantor’s personnel, equipment,
supplies and premises as may be reasonably necessary for the foregoing and if an
Event of Default exists or has occurred and is continuing for the collection of
Receivables and realization of other Collateral; provided that for purposes of
the performance  of duties under this section, the Consultant shall be
deemed the agent and advisor of Agent for the purposes of Section 11.5
hereof.”

     

    (g) Fixed Charge Coverage
Ratio.  Section 9.17 of the Loan Agreement is hereby amended
and restated to read in its entirety as follows:

     

    “9.17                      Fixed Charge Coverage
Ratio.  Parent and its Subsidiaries shall maintain a Fixed
Charge Coverage Ratio as of the last day of each month beginning August 31,
2008, as determined for the period of each month then ending, of not less than
one to one.  Based upon the projected financial statements furnished
by Borrowers to Agent pursuant to Section 9.6(a)(iii) hereof for each fiscal
year after July 31, 2008, Agent shall reasonably establish minimum Fixed Charge
Coverage Ratio levels for Parent and its Subsidiaries for each period beginning
on August 1, 2008 and ending on the last day of each of October, January, April
and July during such fiscal year (it being understood that such levels will be
no less stringent than one to one).”

     

    (h) Excess
Availability.  Section 9.17.1 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:

     

    “9.17.1                 Excess
Availability.  Borrowers shall maintain Excess Availability of
not less than $2,500,000 at all times prior to November 1, 2008 and $10,000,000
at all times on and after November 1, 2008.”

     

    (i) EBITDA.  Section 9.17.2
of the Loan Agreement is hereby amended and restated to read in its entirety as
follows:

     

    "9.17.2                 EBITDA.  Parent
and its Subsidiaries shall earn EBITDA during each month, measured on the last
day of such month beginning August 31, 2008 and as determined for the period of
such month then ending, of not less than $500,000.  Based upon the
projected financial statements furnished by Borrowers to Agent pursuant to
Section 9.6(a)(iii) hereof for each fiscal year after July 31, 2008, Agent
shall reasonably establish minimum EBITDA levels for Parent and its Subsidiaries
for each period beginning on August 1, 2008 and ending on the last day of each
of October, January, April and July during such fiscal year (it being understood
that such levels will be no less stringent than those set forth above), and
Parent and its Subsidiaries shall earn EBITDA during each such period of not
less than the applicable minimum EBITDA level so established by
Agent."

     

    (j) Compliance with Liquidity
Forecast.  The following Section 9.18 (previously reserved in
the Sixth Amendment) is hereby added to the Loan Agreement:

     

    “9.18                      Compliance with Liquidity
Forecast.  Borrowers shall, until the last day of any month in
which the Borrowers shall (a) have earned at least $7,000,000 in EBITDA as
determined for a period of twelve (12) consecutive months then ending and (b)
have maintained a Fixed Charge Coverage Ratio of not less than 1.5 to one as
determined for a period of twelve (12) consecutive months then ending, provide
to the Agent, on the last Business Day of each week beginning June 6, 2008, a
projected daily Liquidity (defined below) forecast (each such document a “Forecast”) for the
next succeeding eight weeks, at a minimum in the form and substance of Exhibit D hereto, but
the contents of which shall be more fully agreed upon among the Borrowers and
Agent and in any case in form and substance satisfactory to the Agent, for each
Borrower and Guarantor, and each of their respective
Subsidiaries.  Beginning on June 13, 2008, Borrowers shall maintain
aggregate Liquidity (defined below), measured weekly for each preceding week, of
no less than 65% of the projected aggregate Liquidity for such week as
calculated in the most recent applicable Forecast; provided that an additional
Forecast, in form and substance satisfactory to the Agent, shall be provided to
the Agent on the 15th day of
each month, and if such Forecast projects that the aggregate Liquidity of the
Borrowers will be less than zero as of the 20th and/or
25th
days of each month, after the payment by the Borrowers of all payables to
suppliers, Borrowers shall have a cure period of five (5) Business Days from the
delivery of such Forecast to ensure forecasted Liquidity as of the 20th and
25th
days of such month shall not be less than zero; provided further that
regardless of any cure period and until any such Liquidity deficit is cured, the
Borrowers shall be deemed to be in non-compliance with this section and nothing
herein shall operate to limit any rights or remedies the Agent may have under
this Agreement or any other Loan Document.  For purposes of this
section, “Liquidity” shall mean
the sum of unencumbered available cash, plus Cash
Equivalents, plus Excess
Availability.”

     

    (k) Early Termination
Fee.  Section 13.1(c) of the Loan Agreement is hereby deleted
in its entirety.

     

    2. Waiver of Known Existing
Defaults.  Agent and Lenders hereby waive enforcement of their
rights and remedies arising from the Known Existing Defaults; provided, however,
nothing herein shall be deemed a waiver with respect to any failure to comply
fully with Sections 9.17 and 9.17.2 of the Loan Agreement (as amended or
modified by this Amendment) at any time hereafter or with respect to any period
ending after the date hereof.  This waiver shall be effective only for
the specific defaults comprising the Known Existing Defaults, and in no event
shall this waiver be deemed to be a waiver of Agent’s or any Lender’s rights and
remedies with respect to any other Defaults or Events of Default now existing or
hereafter arising.  Nothing contained in this Amendment nor any
communications between Borrower or Parent and Agent or any Lender shall be a
waiver of any rights or remedies Agent and Lenders have or may have, except as
specifically provided herein.  Except as specifically provided herein,
Agent and Lenders hereby reserve and preserve all of their rights and remedies
under the Loan Agreement and the other Financing Agreements.

     

    3. Amendment
Fee.  Until the termination of the Loan Agreement, Borrower
shall pay Agent, for the benefit of Lenders based upon their respective Pro Rata
Shares, a monthly service fee in the amount of $35,000, the first payment of
which shall be fully earned as of and due and payable by Borrower in advance on
the date hereof and on the first day of each month hereafter; provided that the service fees
to be paid by the Borrower under this section shall be no less than $140,000 in
the aggregate.

     

    4. Delivery of Annual
Budget.  Pursuant to the request of Agent under Section 9.6(d)
of the Loan Agreement, Borrower shall deliver to Agent the 2009 fiscal year
budget of each Borrower, in form and substance satisfactory to the Agent, on or
before July 15, 2008.

     

    5. Termination of Loan
Agreement.  Borrower hereby acknowledges and agrees that on or
before November 1, 2008, Borrower shall terminate the Loan Agreement pursuant to
the terms of Section 13 thereof (as amended by this Amendment), and on other
terms and conditions satisfactory to the Agent to the extent not prescribed by
such section.

     

    6. Effectiveness of this
Amendment.  The effectiveness of this Amendment, and the
waivers provided herein, are conditioned upon the occurrence of each of the
following:

     

    (a) Amendment.  Agent
shall have received this Amendment, fully executed in a sufficient number of
counterparts for distribution to all parties.

     

    (b) Fee
Letter.  Agent shall have received a fully-executed copy of the
fee letter agreement, dated as of the date hereof, between Agent and
Borrower.

     

    (c) Representations and
Warranties.  The representations and warranties set forth
herein and in the Loan Agreement shall be true and correct.

     

    (d) Other Required
Documentation.  All other documents and legal matters in
connection with the transactions contemplated by this Amendment shall have been
delivered or executed or recorded and shall be in form and substance
satisfactory to Agent.

     

    7. Representations and
Warranties.  Each of Borrower and Parent represents and
warrants as follows:

     

    (a) Authority.  Such
party has the requisite corporate power and authority to execute and deliver
this Amendment, and to perform its obligations hereunder and under the Financing
Agreements (as amended or modified hereby) to which it is a
party.  The execution, delivery and performance by such party of this
Amendment have been duly approved by all necessary corporate action and no other
corporate proceedings are necessary to consummate such
transactions.

     

    (b) Enforceability.  This
Amendment has been duly executed and delivered by such party.  This
Amendment and each Financing Agreement (as amended or modified hereby) is the
legal, valid and binding obligation of such party, enforceable against such
party in accordance with its terms, and is in full force and
effect.

     

    (c) Representations and
Warranties.  The representations and warranties contained in
each Financing Agreement (other than any such representations or warranties
that, by their terms, are specifically made as of a date other than the date
hereof) are correct on and as of the date hereof as though made on and as of the
date hereof.

     

    (d) Material Adverse
Effect.  There has been no Material Adverse
Effect.

     

    (e) Due
Execution.  The execution, delivery and performance of this
Amendment are within the power of such party, have been duly authorized by all
necessary corporate action, have received all necessary governmental approval,
if any, and do not contravene any law or any material contractual restrictions
binding on such party.

     

    (f) No
Default.  After giving effect to the waivers contained herein,
no event has occurred and is continuing that constitutes a Default or Event of
Default.

     

    8. Governing
Law.  The validity, interpretation and enforcement of this
Amendment and any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of California but excluding any principles of
conflicts of law or other rule of law that would cause the application of the
law of any jurisdiction other than the laws of the State of
California.

     

    9. Counterparts.  This
Amendment may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement.  Delivery of an executed counterpart of this Amendment by
telefacsimile or other electronic method of transmission shall have the same
force and effect as the delivery of an original executed counterpart of this
Amendment.  Any party delivering an executed counterpart of this
Amendment by telefacsimile or other electronic method of transmission shall also
deliver an original executed counterpart, but the failure to do so shall not
affect the validity, enforceability or binding effect of this
Amendment.

     

    10. Reference to and Effect on
the Financing Agreements.

     

    (a) Upon and
after the effectiveness of this Amendment, each reference in the Loan Agreement
to "this Agreement", "hereunder", "hereof" or words of like import referring to
the Loan Agreement, and each reference in the other Financing Agreements to "the
Loan Agreement", "thereof" or words of like import referring to the Loan
Agreement, shall mean and be a reference to the Loan Agreement as modified and
amended hereby.

     

    (b) Except as
specifically amended above, the Loan Agreement and all other Financing
Agreements, are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed and shall constitute the legal, valid,
binding and enforceable obligations of Borrower or Parent (as applicable) to
Agent and Lenders.

     

    (c) The
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
Agent or Lenders under any of the Financing Agreements, nor constitute a waiver
of any provision of any of the Financing Agreements.

     

    (d) To the
extent that any terms and conditions in any of the Financing Agreements shall
contradict or be in conflict with any terms or conditions of the Loan Agreement,
after giving effect to this Amendment, such terms and conditions are hereby
deemed modified or amended accordingly to reflect the terms and conditions of
the Loan Agreement as modified or amended hereby.

     

    11. Estoppel.  To
induce Agent and Lenders to enter into this Amendment and to continue to make
advances to Borrower under the Loan Agreement, Borrower hereby acknowledges and
agrees that, as of the date hereof, there exists no right of offset, defense,
counterclaim or objection in favor of Borrower as against Agent or Lenders with
respect to the Obligations.

     

    12. Integration.  This
Amendment, together with the other Financing Agreements, incorporates all
negotiations of the parties hereto with respect to the subject matter hereof and
is the final expression and agreement of the parties hereto with respect to the
subject matter hereof.

     

    13. Severability.  In
case any provision in this Amendment shall be invalid, illegal or unenforceable,
such provision shall be severable from the remainder of this Amendment and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

     

    14. Submission of
Amendment.  The submission of this Amendment to the parties or
their agents or attorneys for review or signature does not constitute a
commitment by Agent to waive any of its rights and remedies under the Financing
Agreements, and this Amendment shall have no binding force or effect until all
of the conditions to the effectiveness of this Amendment have been satisfied as
set forth herein.

     

    [signature
to follow on next page]

     

    
      
        
          
            	
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    IN
WITNESS WHEREOF, the parties have entered into this Amendment as of the date
first above written.

     

    COMMERCE
ENERGY, INC.,

     

    a
California corporation

     

    

     

    By: /s/ C. Douglas
Mitchell                                                                

    Name:
/s/ C. Douglas
Mitchell______________

    Title:  Interim Chief Financial
Officer

    

    

    COMMERCE
ENERGY GROUP, INC.,

     

    a
Delaware corporation

     

    

     

    By: /s/ C. Douglas
Mitchell                                                                

    Name:
C. Douglas
Mitchell______________

    Title:  Interim Chief Financial
Officer

    

    

    
      
        
          
            	
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    WACHOVIA
CAPITAL FINANCE CORPORATION (WESTERN),

    a
California corporation, as Agent and Lender

     

    

     

    By: /s/ Carlos
Valles                                                                

    Name:
Carlos
Valles                                                                

    Title:
Director                                                                

    

    

    
      
        
          
            	
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    WELLS
FARGO FOOTHILL, LLC

    as
Lender

     

    

     

    By: /s/ Rina
Shinoda                                                                

    Name:
Rina
Shinoda                                                                

    Title:
Vice
President                                                                

    
      
        
          
            	
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    EXHIBIT
D

    TO THE
LOAN AGREEMENT

    

    SAMPLE LIQUIDITY
FORECAST

    

    See
attached.

    
      
        
          
            	
                    28781504
      05033154EX-10.1

SEPARATION AND RELEASE AGREEMENT

FOR VALUABLE CONSIDERATION, this Separation and Release Agreement is entered into on      
(the “Effective Date”) by William T. Keena and AMERIGROUP Corporation.

SECTION I

REASONS FOR AGREEMENT

1. The Company and I have agreed that my employment with the Company shall terminate and I shall
permanently separate from the Company, effective as of the close of business on July 1, 2008 (the
“End Date”). However, beginning at the close of business on the Effective Date and ending on the
End Date, I shall be on Administrative Leave, as defined below.

2. Although the Company and I are amicably parting, the Company and I recognize that such a
relationship and its termination may give rise to potential claims or liabilities. To the fullest
extent permitted by law, the Company and I wish to resolve and fully settle such claims or
liabilities pursuant to the terms of this Agreement.

SECTION II

DEFINITIONS 

The Company and I agree to the following definitions, and that they shall apply to this Agreement:

401(k) Plan

A 401(k) plan is a type of employer-sponsored retirement plan, established pursuant to 26
USC 409A, as amended.

ADEA

Age Discrimination in Employment Act of 1967, as amended.

Administrative Leave

Paid leave that begins on the Effective Date and ends on the End Date.

During Administrative Leave, I understand and agree that:

	 	(a)	 	I shall continue to receive salary payments at the rate in
effect on the Effective Date, payable in accordance with the Company’s regular
biweekly payroll cycle;

	 	(b)	 	except as expressly provided herein and subject to the terms
and eligibility of the applicable plans, I shall continue to receive coverage
under the Company’s employee medical, dental, vision, life, accidental death
and dismemberment, disability, employee assistance program, short term
disability, long term disability and flexible spending plans at my coverage or
participation level as of the Effective Date;

	 	(c)	 	the stock options and restricted stock awards previously
granted to me will continue to vest in accordance with the terms of the
applicable Equity Agreement through the close of business on the End Date;

	 	(d)	 	I shall continue to receive Company contributions to my 401(k)
plan and my health savings plan, if applicable.

(e) I shall not report for work or be present on Company property;

	 	(f)	 	I shall not accrue PAL; and

	 	(g)	 	I shall not represent myself to be an employee of the Company
or have any authority to contract for or on behalf of the Company, to incur
obligations or indebtedness for or on behalf of the Company, or, in any way to
bind, act on behalf of, or represent the Company.

Agreement

This Separation and Release Agreement and all, if any, addenda, schedules, and other
documents attached hereto or incorporated herein by reference.

Chairman’s Bonus Program

That cash incentive plan by which employees may receive a cash bonus, contingent upon the
Company and the employee achieving certain criteria, which is payable under the Company’s
2007 Cash Incentive Plan, as amended, or any predecessor or successor plan.

COBRA

Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

Code of Conduct

The Company’s Code of Business Conduct and Ethics, as in effect from time to time.

Company

AMERIGROUP Corporation, a Delaware corporation, and its successors and assigns.

Company Parties

The Company’s subsidiaries, affiliates, successors, and assigns, and each of their
respective present and former officers, directors, shareholders, partners, employees, and
attorneys, and agents of any of them, whether in their individual or official capacities,
and the current and former trustees or administrators of any pension, welfare, or other
employee benefit plan of Company, in their official and individual capacities, all of whom
are third party beneficiaries of this Agreement.

Confidential Separation Information

The existence of and terms set forth in this Agreement.

1

Consideration Period

That reasonable period but in no event less than twenty-one (21) days, during which I can
consider whether to sign the Agreement. The twenty-one (21) day period begins to run on the
day that I am provided a copy of this Agreement. I understand that if I sign the Agreement
before the end of the twenty-one (21) day period, it will be my voluntary decision to do so
because I have decided I do not need any additional time to decide whether to sign the
Agreement.

Corporate Compliance Officer

The Company’s Senior Vice President, Business Ethics, or such other person designated by the
Company from time to time as responsible for ensuring the application of the Code of
Conduct.

Corporate Compliance Program 

Those guidelines and standards promulgated in support of the Code of Conduct. The Code of
Conduct is posted on the Company’s corporate website, www.amerigroupcorp.com, a copy
of which was provided to me in the course of my employment with the Company.

Effective Date

Shall be the date of this Agreement, May 23, 2008.

End Date

The date set forth in Section I (1) above, which shall be the date on which the
employee/employer relationship between the Company and me ends.

ENNDA

Any Employee Noncompetition, Nondisclosure and Developments Agreement, Confidentiality
Agreement, or similar agreement, signed by me in connection with my employment with the
Company.

Equity Agreements

Restricted Stock Agreements and Stock Option Agreements issued pursuant to the Company’s
2005 Equity Incentive Plan, as amended, or any successor or predecessor plan.

I, Me, or My

“I,” “me,” or “my,” as used herein, shall at all times mean William T. Keena, and anyone
who has or obtains any legal rights or claims through William T. Keena.

LTIP

The Company’s Long Term Incentive Plan, payable under the Company’s 2007 Cash Incentive
Plan, as amended, or any predecessor or successor plan, designed to provide long-term cash
incentive compensation based upon individual and Company performance through a three (3)
year deferred payment structure.

My Claims 

All of the claims I have now against the Company, whether or not I know about those claims,
including but not limited to, claims for any action or inaction, loss, expense, or any
damages of whatever nature arising from any occurrence or occurrences from the beginning of
time until the date on which I release such claims, including, to the extent permitted by
law, claims for: breach of express or implied contract; payment of wages, commissions,
reimbursements, sick pay, vacation pay, employee benefits, insurance, pension, or other
compensation, including any bonus or other payments under the Chairman’s Bonus Plan or LTIP;
fraud or misrepresentation; violation of any federal, state, and/or local law, regulation or
rule, including but not limited to, Title VII of the Civil Rights Act of 1964, the Americans
with Disabilities Act, the Equal Pay Act, the Rehabilitation Act, the ADEA, the Employee
Retirement Income Security Act (except for any vested benefits under any tax qualified
benefit plan), Older Workers Benefit Protection Act, the Pregnancy Discrimination Act,
COBRA, the Worker Adjustment and Retraining Notification Act, the Sarbanes-Oxley Act, the
Fair Credit Reporting Act, in each case as amended, and all other Executive Orders, federal,
state, and/or local civil rights laws prohibiting discrimination or other unlawful activity
on the basis of race, color, creed, marital status, sex, age, religion, national origin,
disability, pregnancy, sexual orientation, political affiliation, status with respect to
public assistance, membership in local commission, or any other protected class status;
sexual harassment; retaliation; defamation; intentional or negligent infliction of emotional
distress; breach of the covenant of good faith and fair dealing; promissory estoppel; unjust
enrichment; negligence; wrongful termination of employment; constructive discharge; invasion
of privacy; fraudulent inducement; negligent hiring, retention, training, and/or
supervision; all other claims for unlawful employment practices; all claims for attorney’s
fees, costs, disbursements, fees, or other payments; and all other common law, legal,
equitable or statutory claims (whether on a contract, tort, or other theory), whether they
could be brought directly by me on my own behalf or by any other person, agency, or
organization on my behalf.

PAL

Paid Annual Leave.

Revocation Period

If I am entitled to rights under the ADEA, that seven (7) day period, during which I may
revoke the portion of this Agreement that releases claims under the ADEA. I understand that
the seven (7) day period begins to run on the day that I sign this Agreement.

Section 409A

Section 409A of the Internal Revenue Code of 1986, as amended.

Severance Payments

Shall have the meaning provided in Section III (1)(b) below. The Severance Payments are
treated like weekly earnings and applied to the period following my separation. My
eligibility for unemployment benefits will be delayed until the Severance Payments have
ended.

Severance Period

The period during which I am eligible to receive payments pursuant to Section III (1)(b).

SECTION III

BENEFITS

1. Subject to the terms and conditions hereof, including Sections III (2), (4) and (5), I
understand that, in order to assist me in my separation and as consideration for the promises that
I make in this Agreement, the Company agrees to provide certain benefits and payments to me.

(a) If I:

(i) agree to the terms and conditions of this Agreement;

	 	 	 
	(ii)

	 	sign and deliver to the Company this Agreement;
	(iii)

	 	do not revoke or rescind this Agreement; and
	(iv)

	 	do not breach this Agreement:

(b) then, beginning no sooner than the eighth (8th) day after I sign this Agreement, or the
first payroll distribution day after the End Date, whichever occurs later, the Company shall
pay to me:

(i) a lump-sum payment in the amount of Seventy Five Thousand dollars and no cents
($75,000.00); and

(ii) an additional Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three
dollars and no cents ($333,333.00) distributed over a twelve (12) month period on the
Company’s regular biweekly payroll cycle (the “Severance Payments”).

2. The Company has agreed to provide the Severance Payments to assist me in transitioning to, and
until I secure employment or a consulting role with, another entity. Accordingly, I understand and
agree that the Severance Payments shall be reduced upon the occurrence of certain events in
accordance with this Section III (2) as follows.

(a) If, during the Severance Period, I become employed by or render consulting services to
any person or entity, the Severance Payments shall be permanently reduced by the amount of any
wages, consulting fees or other cash remuneration paid or to be paid to me in consideration of such
employment or consultancy. The reduction shall be applied pro rata on a biweekly basis over the
remaining payments to be made to me pursuant to Section III (1)(b)(ii). By way of example and for
illustrative purposes only, if a biweekly payment to be made to me pursuant to Section III
(1)(b)(ii) equals $12,820.50 and I become employed or serve as a consultant with a salary or fee
arrangement, as applicable, at an annual rate of $200,000 (which would equal $7,692.31 on a
biweekly basis), then the biweekly amount payable to me under Section III (1)(b)(ii) shall be
permanently reduced by $7,692.31 to $5,128.19 for the remainder of the Severance Period. The
subsequent loss of employment or termination of consulting services shall not affect the reduction
in the Severance Payments contemplated by this Section III (2)(a).

(b) I agree that I have an affirmative obligation to actively seek new employment during the
Severance Period and to immediately notify the Company in writing upon my acceptance of new
employment or a consulting engagement (setting forth in reasonable detail the nature of the
position and compensation) and that the failure to actively seek employment or to inform the
Company immediately upon accepting employment or a consulting engagement shall constitute a
material breach of this Agreement.

3. As soon as practicable after the End Date, the Company will (a) pay me a lump sum for all my
accrued and unpaid PAL, and (b) reimburse me for unreimbursed expenses incurred prior to the
Effective Date, in accordance with the Company’s Travel Expense Policy; however, I understand that
I must submit reimbursement requests, with receipts attached, within thirty (30) days after the
Effective Date otherwise the Company will not reimburse me.

4. To the extent required by law, the Company will withhold income and employment taxes and other
amounts from payments and benefits provided under this Agreement, including any amounts payable
under this Section III.

5. I acknowledge and agree that in the event that I breach this Agreement, the Equity Agreements
or the ENNDA, the Company shall have no obligation to make any payments to me provided for in
Section III hereof and the Company may seek any other remedies available to it arising from such
breach.

SECTION IV

REPRESENTATIONS

1. I agree that I have or will be separated from employment with the Company at the close of
business on the End Date.

2. I agree that the Company has no formal severance package, is not obligated to provide any
severance benefit, and is only obligated to pay compensation that has already accrued. The
benefits and payments provided to me in this Agreement are unique to me and reflect my contribution
to the Company. This Agreement shall not be deemed to establish an agreement or other employee
benefit plan or program available to other Company employees. I further agree that certain
benefits and payments provided for in this Agreement are in excess of the amounts that I would
otherwise be entitled to receive.

3. I agree that this Agreement does not constitute an admission that the Company has violated any
local ordinance, state or federal statute or regulation, or principle of common law, or that the
Company has engaged in any unlawful or improper conduct toward me. I agree that I will not
characterize this Agreement or the payment of any money or other consideration in accordance with
this Agreement as an admission that the Company has engaged in any unlawful or improper conduct
toward me or treated me unfairly.

4. I agree that at all relative times, I was an employee “at-will” and that my employment with the
Company will cease effective as of the close of business on the End Date.

5. I understand that if I have any unvested options to purchase shares of common stock of the
Company, the End Date will trigger the expiration of those options and, if I have any vested but
unexercised options to purchase shares of common stock of the Company, the End Date will begin the
post-termination exercise period as provided in the applicable Equity Agreement.  Further, if I
have any shares of restricted stock of the Company for which the restrictions have not lapsed,
then those shares shall immediately be reacquired by the Company as of the End Date without
consideration of any kind pursuant to the terms of the applicable Equity Agreement.

6. In accordance with Company policies, if any person asks the Company for a reference for me, the
Company will provide only my dates or employment. I agree that I will not at any time disparage,
defame, or besmirch the reputation, character, image, products, or services of the Company or the
Company Parties.

7. I understand that during the Consideration Period, if applicable, I may consider whether to
sign this Agreement.

8. I understand that I have no obligation to sign this Agreement. I understand that if I choose
not to sign this Agreement, the Company will pay me the compensation that I have earned through the
Effective Date, and the aforementioned accrued and unpaid PAL, all less applicable taxes and
deductions. Further, if I choose not to sign this Agreement, I: (i) shall retain all vested
benefits under the Company’s 401(k) Plan; (ii) will be reimbursed for incurred and unreimbursed
expenses, subject to the provisions herein; (iii) will be offered the benefits to which I am
entitled under COBRA; and (iv) shall retain all vested benefits under the Company’s Deferred
Compensation Plan, if I am a participant.

9. The Company and I agree that the circumstances of my separation from the Company do not
constitute a “for cause” termination pursuant to the applicable section of the ENNDA, or pursuant
to the applicable sections of the Equity Agreements. Accordingly, I understand that, effective on
the End Date, I am released from the non-compete restrictions of the ENNDA and of the Equity
Agreements. Nonetheless, I agree to continue to comply with all other terms of the ENNDA and the
Equity Agreements, including the non-disclosure, non-solicitation and confidentiality provisions,
and I agree and understand that the other restrictions contained in those agreements survive
execution of this Agreement and my separation from the Company.

10. I acknowledge that:

	 	(a)	 	I have been advised by the Company to consult with my attorney before executing
this Agreement;

	 	(b)	 	I have had a full opportunity to consider this Agreement;

	 	(c)	 	I have had a full opportunity to ask any questions that I may have concerning
this Agreement, or the settlement of My Claims, if any, against the Company and others;

	 	(d)	 	I have not relied upon any written or oral statements or representations made
by the Company, or its representatives, other than the statements and representations
that are explicitly set forth in this Agreement, and any qualified employee benefit
plans sponsored by the Company in which I am a participant; and

	 	(e)	 	I am competent and possess the full and complete authority to covenant and
agree as herein provided, and that I am signing this Agreement voluntarily and of my
own free will.

11. If, after the End Date, I file an application for unemployment compensation pursuant to my
state’s guidelines, the Company will not contest my application. However, the Company will not
provide false or misleading information to any federal, state, or local agency.

12. I resign as an officer of the Company effective as of the Effective Date.

SECTION V

RELEASE and WAIVER

1. I represent that I have not given, sold, assigned, or transferred to any one else, any of My
Claims, or any portion of My Claims.

2. On behalf of myself, my attorneys, heirs, executors, administrators, successors and assigns, to
the fullest extent permitted by applicable law, I hereby release, discharge, and give up all My
Claims against the Company and the Company Parties in exchange for the compensation, promises, and
undertakings as described in this Agreement between the Company and me. I hereby release and
discharge the Company and the Company Parties not only from any and all of My Claims that I could
make on my own behalf, but also from those claims that may or could be brought by any other person
or organization on my behalf. I have not caused or permitted to be served, filed, or commenced,
and I will not cause or permit to be served, filed, or commenced, any lawsuits, charges,
complaints, actions, notices, or other demands against the Company or the Company Parties with any
federal, state, or local judicial or administrative agency or body based on My Claims. In the
event any such claim has been or is asserted, I agree that this release shall act as a total and
complete bar to my re-employment or to recovery of any relief or sum or amount whatsoever from the
Company and the Company Parties, whether labeled award, liability, damages, judgment, back pay,
wages, fine, or penalty, or otherwise resulting directly or indirectly from any lawsuit, remedy,
charge, or complaint, whether brought privately by me or by anyone else, including any federal,
state, or local judicial or administrative agency or body, whether or not on my behalf or at my
request, and I agree to pay for all costs incurred by the Company and the Company Parties,
including reasonable attorneys’ fees, in defending against such claim. The benefits and payments I
am receiving represent full and fair compensation for the release of all My Claims, including
without limitation, claims for attorneys’ fees and costs. The Company shall not be obligated and
does not owe me anything in addition to that described above.

3. I agree that I have been paid for and/or have received all compensation, wages, bonuses,
commissions, and/or benefits to which I may be entitled (including all amounts under the Chairman’s
Bonus Program and the LTIP). I agree that I have been granted any leave to which I was entitled
under the Family and Medical Leave Act, as amended, the Pregnancy Discrimination Act, as amended,
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. I further
agree that I have no known workplace injuries or occupational diseases.

4. I agree that I have not been retaliated against for reporting any allegations of wrongdoing by
the Company or the Company Parties, including any allegations of corporate fraud.

5. Notwithstanding anything to the contrary contained herein, I understand that I have not waived,
and am not waiving, my rights:

	 	(a)	 	to enforce the provisions of this Agreement;

	 	(b)	 	under COBRA;

	 	(c)	 	under the Company’s 401(k) Plan and the Executive Deferred Compensation Plan,
if applicable, subject to any effect of my separation under such plans;

	 	(d)	 	under the Equity Agreements, subject to any effect of my separation under such
agreements;

	 	(e)	 	under the Company’s health savings plan, subject to any effect of my separation
under such Plan; or

	 	(f)	 	to claims that I may have which arise after the date that I sign this
Agreement.

6. The Company and I acknowledge that this Section V does not limit either my or the Company’s
right, where applicable, to file or participate in an investigative proceeding of any federal,
state or local governmental agency. To the extent permitted by law, I agree that if such an
administrative claim is made, I shall not be entitled to recover any individual monetary relief or
other individual remedies.

7. I agree that this Section V should be interpreted as broadly as possible to achieve my intention
to resolve all of My Claims, if any, against the Company and the Company Parties. If any of the
release provisions contained in this Agreement are held by a court to be inadequate to release a
particular claim encompassed within my claims, the Company and I agree that the release provisions
contained in this Agreement will remain in full force and effect with respect to all the rest of my
claims.

SECTION VI

SPECIAL ADEA WAIVER and RELEASE NOTIFICATION

I undestand that the provisions contained in this Section VI are applicable only if I am at

least forty (40) years old when I sign this Agreement.

1. Section V of this Agreement includes a waiver and release of all claims under the ADEA and,
therefore, pursuant to the requirements of the ADEA, I acknowledge that I have been:

	 	(a)	 	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;

	 	(b)	 	advised to consult with an attorney and/or other advisor concerning my rights
and obligations under this Agreement prior to my signing it; I understand that whether
or not to do so is my decision. I agree that neither the Company nor the Company
Parties shall be required to pay any of my attorney’s fees in connection with my
consideration of this Agreement, and that the benefits and payments promised in Section
III are in full and complete settlement of all matters between me and the Company,
including but not limited to, attorney’s fees and costs;

	 	(c)	 	advised that I have at least twenty-one (21) days within which to consider this
Agreement; and

	 	(d)	 	advised that I may revoke the portion of this Agreement that releases claims
under the ADEA within seven (7) days of my signing it. Revocation can be made by
delivering a written notice of revocation to Stanley F. Baldwin, General Counsel,
AMERIGROUP Corporation, 4425 Corporation Lane, Virginia Beach, Virginia 23462. I
acknowledge that for such revocation to be effective, the notice must be postmarked no
later than the seventh (7th) calendar day after I signed this Agreement. I
understand that if I revoke this Agreement, or any part of this Agreement, it shall not
be effective or enforceable and I will not receive the benefits and payments described
in Section III.

SECTION VII

CONFIDENTIALITY and COOPERATION

1. Notwithstanding anything else contained in this Agreement or in any other agreement between me
and the Company, I agree that subsequent to the End Date, I shall provide complete and truthful
information to, and otherwise cooperate fully with the Company in its defense of or other
participation in any administrative, judicial or other proceeding arising from any charge,
complaint or other action that has been or may be filed, and the Company agrees to be responsible
for those costs and expenses reasonably incurred by me, including reasonable attorneys’ fees, in
fulfilling my obligations pursuant to this paragraph.

2. I agree that, at any time, upon reasonable notice from the Company, I will, without further
consideration, but at no expense to me, timely execute and deliver such acknowledgements,
instruments, certificates, and other ministerial documents (including without limitation,
certification as to specific actions performed by me in my capacity for the Company) as may be
necessary or appropriate to make the provisions of this Agreement effective or to formalize and
complete the Company’s corporate records; provided, however, that nothing in this paragraph will
require me to take any action that I reasonably believe to be unlawful or unethical or to make any
inaccurate statement of actual facts.

3. I agree that I will not recommend or suggest to any potential claimants or plaintiffs or their
attorneys or agents that they initiate claims or lawsuits against the Company or the Company
Parties, nor will I voluntarily aid, assist, or cooperate with any claimants or plaintiffs or their
attorneys or agents in any claims or lawsuits now pending or commenced in the future against the
Company or the Company Parties; provided, however, that this paragraph will not be interpreted or
construed to prevent me from giving testimony in response to questions asked pursuant to a legally
enforceable subpoena, deposition notice, or other legal process, during any legal proceedings or
arbitrations involving the Company or the Company Parties. I agree to notify the Company of any
subpoena, deposition notice, or other legal process that I receive, within three (3) days after my
receipt of same. To the extent permitted by law, I agree that I waive any right that I may have to
recover any individual monetary relief or other individual remedies as a result of such legal
proceedings or arbitrations. I further agree that I will not provide information or testimony in
any court or other legal action against the Company or the Company Parties except pursuant to a
lawful subpoena or other valid legal process.

4. I understand and agree that in order to minimize disruption and distraction from on-going
business operations, it is the intent of the Company and me that the terms of my separation from
the Company, including the Confidential Separation Information, will be forever treated as
confidential; provided, however, the Company may disclose the Confidential Separation Information
in its discretion. Accordingly, except as provided below, I will not disclose the Confidential
Separation Information, to anyone at any time and will not comment on this Agreement if asked about
it by employees or former employees of the Company. Notwithstanding the foregoing, it will not be
a violation of this Agreement for me to disclose Confidential Separation Information:

	 	(a)	 	in reports to governmental agencies as required by law;

	 	(b)	 	to my spouse or life partner, my attorneys, my accountants, or my tax advisors;
or

	 	(c)	 	in connection with any litigation proceeding involving the Company, the Company
Parties’, or my rights or obligations under this Agreement.

5. I agree to return to the Company on or before the End Date, all of the Company’s documents,
information (whether in paper or electronic form) and property in my possession, control or custody
including, but not limited to, my security badge, keys, files, member lists, mailing lists,
provider lists, account information, samples, prototypes, price lists and pricing information,
passwords, codes, and all of the tangible and intangible property belonging to the Company and
relating to my employment.  I further represent and warrant that I have not retained any copies,
electronic or otherwise, of such property.

SECTION VIII

CORPORATE COMPLIANCE

1. I confirm that I have complied with the duties and obligations outlined in this Section VIII
and I acknowledge that such compliance is a condition to my eligibility to receive the benefits and
payments described in Section III. I acknowledge that I will not be eligible to receive the
benefits and payments described in Section III if I am found to have committed or condoned during
my employment any acts of fraud against the Company or its subsidiaries or affiliates or the
government. By signing below, I confirm that:

	 	(a)	 	I have not committed or condoned any such fraudulent activity;

(b) I have complied with the Corporate Compliance Program during my employment;

	 	(c)	 	I have not participated in or knowingly permitted others to engage in any
conduct prohibited by the Corporate Compliance Program;

	 	(d)	 	I understand that I have a duty under the Corporate Compliance Program to
notify the Corporate Compliance Officer of any knowledge of violation of the Corporate
Compliance Program; and

	 	(e)	 	I am not aware of any such violation by me or anyone else employed by the
Company or the Company Parties.

2. I agree to conduct an exit interview on or before my End Date, with the Corporate Compliance
Officer and will share any and all concerns regarding the operation of the Company whether or not
those concerns were previously expressed to senior management of the Company. I acknowledge and
agree that such exit interview will be a condition precedent to the payment of the Severance
Payments by the Company.

SECTION IX

OTHER TERMS

1. This Agreement, subject to the provisions of Section IV (9) above, constitutes the entire
agreement and understanding between the Company and me, and supersedes all other agreements between
the Company and me, whether oral or written with respect to the subject matter hereto.

2. This Agreement shall not be assignable, in whole or in part, by me without the prior written
consent of the Company. The Company may, without my consent, assign its rights and obligations
under this Agreement.

3. The descriptive headings of the paragraphs and subparagraphs of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.

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

5. This Agreement is a negotiated agreement and no term herein shall be construed against the
Company or me merely because the Company or I, or our respective attorneys, proposed or drafted
such term.

6. All terms of this Agreement are contractual and are not a mere recital.

7. This Agreement is entered into solely between the Company and me and, except where specifically
stated in this Agreement, shall not be deemed to create any rights in any third parties or to
create any obligations of the Company to any third party.

8. This Agreement is intended to comply with Section 409A. To the extent the Company or I
reasonably determine that any provision of this Agreement would subject me to the excise tax under
Section 409A, the Company and I agree in good faith to cooperate to reform this Agreement in a
manner that would avoid the imposition of such tax while preserving any affected benefit or payment
to the extent reasonably practicable without increasing the cost to the Company. To the extent
required in order to comply with Section 409A, amounts that would otherwise be payable under
Section III of the Agreement during the six-month period immediately following the End Date shall
instead be paid on the first business day after the date that is six months following “separation
from service” within the meaning of Section 409A. To the extent that a payment payable under
Section III of the Agreement may be paid so as to avoid the imposition of the six-month delay in
the immediately preceding sentence, the Company agrees in good faith to pay it at such time, if
such payment is practical and if I have executed and not revoked the release of the Company
contained herein or elsewhere. I understand that nothing contained in this Agreement is intended
to constitute a guarantee of my personal tax treatment.

9. The invalidity or unenforceability of any provision contained herein shall not affect the
validity of any other provisions of this Agreement, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted, or, to the extent permitted by
applicable law, such invalid or unenforceable paragraph shall be replaced with another paragraph as
similar in terms as may be possible and as may be legal, valid and enforceable.

10. This Agreement will be interpreted and construed in accordance with, and any dispute or
controversy arising from any breach or asserted breach of this Agreement will be governed by, the
laws of the Commonwealth of Virginia, without regard to conflict of laws principles. The Company
and I each irrevocably consent, in any dispute, action, litigation or other proceeding concerning
this Agreement, to the jurisdiction of the state or federal courts having venue for the City of
Virginia Beach, Virginia, and irrevocably waive, 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 waive the right to object, with respect to such suit, action or proceeding, that
such court does not have jurisdiction over the Company or me or that venue is improper.

[SIGNATURE PAGE FOLLOWS]

2

IN WITNESS WHEREOF, the parties hereto have executed this Separation and Release Agreement as of
the date set forth below as an instrument under seal.

     Witness:      

WILLIAM T. KEENA

Date:      Date:      

AMERIGROUP CORPORATION

By:      Witness:      

Date:      Date:      

3

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