exv10w2



 







EXHIBIT 10.2




          THIS
FUTURE TRANSACTION FEE AGREEMENT is dated as of May 11, 2006 (this “Agreement”) and is between HealthMarkets, Inc., a Delaware corporation
(“HealthMarkets” or the “Company”) and Goldman, Sachs & Co. (the
“Advisor”).




RECITALS




          WHEREAS, the Advisor has expertise in the areas of finance, strategy, investment, acquisitions
and other matters relevant to the Company and its business.




          WHEREAS, the Advisor is willing to use its expertise to provide substantial financial and
structural analysis, due diligence investigations, corporate strategy, and other advice and
assistance in connection with the certain future transactions the Company may consider and engage
in from time to time.




          WHEREAS, the Company desires to avail itself and its subsidiaries of the Advisor’s expertise
in providing financial and structural analysis, due diligence investigations, corporate strategy,
and other advice and assistance, which the Company believes will be beneficial to it and its
subsidiaries, and the Advisor wishes to provide the services to the Company as set forth in this
Agreement in consideration of the payment of the fees described below.




          NOW, THEREFORE, in consideration of the premises and agreements contained herein and of other
good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties agree
as follows:




AGREEMENT




          SECTION 1.   Services.




          (a) The Advisor agrees to be prepared and available to provide to the Company, to the extent
appropriate and reasonably requested by the Company, by and through itself, its affiliates and/or
such respective officers, employees, representatives and third parties (collectively hereinafter
referred to as the “Advisor Designees”) as the Advisor in its sole discretion may designate
from time to time, financial and strategic advisory services (“Services”) in relation to
actual and potential Future Transactions (as defined below), including, without limitation, (a)
financial and structural analysis, due diligence investigations, corporate strategy, and other
advice and assistance, (b) advice regarding the structure, terms, conditions and other provisions,
distribution and timing of debt and equity offerings and advice regarding relationships with the
Company’s and its subsidiaries’ lenders and bankers, (c) advice regarding the Company’s acquisition
strategy, and (d) such other advice directly related or ancillary to the above financial advisory
services as may be reasonably requested by the Company; provided that if the Investor Group
(as defined in the Stockholders Agreement) affiliated with the Advisor holds 5% or less of the
outstanding shares of common stock of HealthMarkets, the Advisor will not be obligated to be
prepared and available to provide any Services. “Stockholders Agreement” means the Stockholders
Agreement, dated as of April 5, 2006, by and among the Company and the stockholders named therein.




          (b) It is expressly agreed that the Services to be performed under this Agreement will not
include any investment banking or other financial advisory services which may be

 










 








provided by any affiliate of the Advisor in connection with any actual or potential
acquisition, divestiture, financing, refinancing, recapitalization or other transaction involving
the Company or any of its subsidiaries.




          SECTION 2.   Fees.




          (a) In consideration for the Advisor being prepared and available to provide Services (but
regardless of whether the Company elects to avail itself of such preparedness and availability), in
connection with any acquisition, divestiture, sale of all or part of the business, business
combination, financing, refinancing, recapitalization or similar transaction by the Company or any
of its subsidiaries (any such transaction, a “Future Transaction”), the Advisor or any Advisor
Designee designated by the Advisor from time to time shall be entitled to receive upon consummation
of (i) any such acquisition, disposition, sale, business combination, a fee equal to (x) 0.2538% of
the aggregate enterprise value of the acquired, divested, sold or combined, financed, refinanced or
recapitalized entity (calculated, on a consolidated basis for such entity, as the sum of (1) the
market value of its common equity (or the fair market value thereof if not publicly traded), (2)
the value of its preferred stock (at liquidation value), (3) the book value of its minority
interests and (4) its aggregate long- and short-term debt, less its unrestricted cash), or (y) if
such transaction is structured as an asset purchase or sale, 0.2538% of the consideration paid for
or received in respect of the assets acquired, disposed of or combined with plus liabilities
assumed and (ii) any such financing, refinancing or recapitalization, a fee equal to 0.2538% of the
aggregate value of the securities subject to such financing, refinancing or recapitalization (in
each such case as described in (i) and (ii), the “Contingent Fee”). Under no circumstance
shall the aggregate Contingent Fees paid pursuant to the Contingent Fee Agreements (as defined
below) be less than the aggregate fees paid to all third party advisors in connection with such
acquisition, divestiture, sale, business combination, financing, refinancing, recapitalization or
similar transaction. “Contingent Fee Agreements” means this Agreement and any similar
future transaction fee agreements entered into by the Company approximately concurrently with the
execution of this Agreement.




          (b) Timing and Method of Payments. Each Contingent Fee shall become due and payable
upon the earlier of the execution of any agreement or commitment with respect to the relevant
Future Transaction or the consummation thereof, and shall be paid promptly upon consummation of the
relevant Future Transaction. All amounts paid by the Company to the Advisor or its Advisor
Designee pursuant to this Section 2 shall be made by wire transfer in same-day funds on the date of
the consummation of the relevant Future Transaction to the respective bank accounts designated by
the Advisor or its Advisor Designee, and shall not be refundable under any circumstances.




          SECTION 3.   Reimbursements.




          In addition to the fees payable pursuant to this Agreement, from time to time as proper
invoices are presented, the Company will pay directly or reimburse the Advisor and each of its
Advisor Designees for their respective Out-of-Pocket Expenses (as defined below). For the purposes
of this Agreement, the term “Out-of-Pocket Expenses” means the out-of-pocket costs and
expenses incurred by an Advisor or its Advisor Designees in connection with the Services provided
under this Agreement, including, without limitation, (a) fees and disbursements of any

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independent professionals and organizations, including independent accountants, financial
advisor, outside legal counsel, advisor or consultants, retained by the Advisor or any of its
Advisor Designees, (b) costs of any outside services or independent contractors such as couriers,
business publications, on-line financial services or similar services, retained or used by the
Advisor or any of its Advisor Designees, and (c) transportation, per diem costs, word processing
expenses or any similar expense not associated with the Advisor or its Advisor Designees’ ordinary
operations. All payments or reimbursements for Out-of-Pocket Expenses will be made by wire
transfer in same-day funds to the bank accounts designated by the Advisor or its Advisor Designee
(if such Out-of-Pocket Expenses were incurred by the Advisor or its Advisor Designees) promptly
upon or as soon as practicable following request for payment or reimbursement in accordance with
this Agreement, or at the Advisor’s election to the account indicated to the Company by the
relevant payee.




          SECTION 4.   Indemnification.




          (a) The Company will indemnify and hold harmless, to the full extent permitted by law, the
Advisor, its Advisor Designees and their respective partners (both general and limited), members
(both managing and otherwise), stockholders, officers, directors, advisory directors, managing
directors, employees, agents, representatives and affiliates (as the term is defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as in effect on the date hereof) (other than
the Company and its subsidiaries) (and partners (both general and limited), members (both managing
and otherwise), stockholders, officers, directors, advisory directors, managing directors,
employees, agents, representatives and controlling persons thereof) (each such person being an
“Indemnified Party”) against any and all losses, claims, damages and liabilities, including
in connection with seeking indemnification, whether joint or several (the “Liabilities”),
related to, arising out of or in connection with the Services under this Agreement or the
engagement of the Advisor or its Advisor Designees pursuant to and the performance by the Advisor
and its Advisor Designees of the Services under this Agreement, whether or not pending or
threatened, whether or not an Indemnified Party is a party, whether or not resulting in any
liability and whether or not such action, claim, suit, investigation or proceeding is initiated or
brought by the Company. The Company will reimburse any Indemnified Party for all reasonable costs
and expenses (including without limitation reasonable attorneys’ fees and any and all expenses
incurred investigating, preparing or defending against any litigation, commenced or threatened, or
any claim, and any and all amounts paid in any settlement of any such claim or litigation) as they
are incurred in connection with investigating, preparing, pursuing, defending or assisting in the
defense of any action, claim, suit, investigation or proceeding for which the Indemnified Party
would be entitled to indemnification under the terms of the previous sentence, or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party thereto. The
Company will not be liable under the foregoing indemnification provision with respect to any
particular loss, claim, damage, liability, cost or expense of an Indemnified Party to the extent
that such is determined by a court, in a final judgment from which no further appeal may be taken,
to have resulted primarily from the gross negligence or willful misconduct of such Indemnified
Party. The attorneys’ fees and other expenses of an Indemnified Party shall be paid by the Company
as they are incurred upon receipt, in each case, of an undertaking by or on behalf of the
Indemnified Party to repay such amounts if it is finally judicially determined that the Liabilities
in question resulted primarily from the gross negligence or willful misconduct of such Indemnified
Party. Such indemnification obligation shall be in addition to any liability that the Company may
otherwise

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have to any other such Indemnified Party. The provisions of this Section 4 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party and its respective
successors, heirs and representatives.




          (b) If such indemnification is for any reason not available or insufficient to hold an
Indemnified Party harmless, the Company agrees to contribute to the Liabilities involved in such
proportion as is appropriate to reflect the relative benefits received (or anticipated to be
received) by the Company, on the one hand, and by the Advisor or Advisor Designee, on the other
hand, with respect to the Services or, if such allocation is determined by a court or arbitral
tribunal to be unavailable, in such proportion as is appropriate to reflect other equitable
considerations such as the relative fault of the Company, on the one hand, and of the Advisor or
Advisor Designee, on the other hand; provided, however, that to the extent
permitted by applicable law, the Indemnified Parties shall not be responsible for amounts which in
the aggregate are in excess of the amount of all fees actually received by the Advisor and Advisor
Designees from the Company with respect to the Services. Relative benefits to the Company, on the
one hand, and to the Advisor and Advisor Designees, on the other hand, with respect to the Services
shall be deemed to be in the same proportion as (i) the total value received or proposed to be
received by the Company in connection with the Services or any transactions to which the Services
relates bears to (ii) all fees actually received by the Advisor and Advisor Designees in connection
with the Services. Relative fault shall be determined, in the case of Liabilities arising out of
or based on any untrue statement or any alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company to the Advisor and Advisor Designees
and the parties’ relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act of 1933, as amended) shall be entitled
to contribution from any person who was not guilty of such fraudulent misrepresentation.




          (c) Upon receipt by an Indemnified Party of actual notice of any pending or threatened action,
claim, suit, investigation or proceeding (an “Action”) against such Indemnified Party with
respect to which indemnity may be sought under this Agreement, such Indemnified Party shall
promptly notify the Company in writing; provided that failure to so notify the Company
shall not relieve the Company from any liability which the Company may have on account of the
indemnity provision under this Agreement or otherwise, except to the extent the Company shall have
been materially prejudiced by such failure. The Company shall, if requested by such Indemnified
Party, assume the defense of any such Action including the employment of counsel reasonably
satisfactory to such Indemnified Party. Any Indemnified Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party, unless: (i) the
Company has failed to assume the defense and employ counsel promptly or (ii) the named parties to
any such Action (including any impleaded parties) include such Indemnified Party and the Company,
and such Indemnified Party shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or in addition to those available to the Company;
provided that the Company shall not in such event be responsible hereunder for the fees and
expenses of more than one firm of separate counsel in connection with any Action in the same
jurisdiction, in addition to any local counsel.




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The Company will not, without the Advisor’s prior written consent, settle, compromise, or
consent to the entry of any judgment in or otherwise seek to terminate any Action in respect of
which indemnification may be sought hereunder (whether or not any Indemnified Party is a party
therein) unless the Company has given the Advisor reasonable prior written notice thereof and such
settlement, compromise, consent or termination includes an unconditional release of each
Indemnified Party from any liabilities arising out of such Action. The Company will not permit any
such settlement, compromise, consent or termination to include a statement as to, or an admission
of, fault, culpability or a failure to act by or on behalf of an Indemnified Party, without such
Indemnified Party’s prior written consent. No Indemnified Party seeking indemnification,
reimbursement or contribution under this Agreement will, without the Company’s prior written
consent, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate
any Action referred to herein.




          (d) Prior to entering into any agreement or arrangement with respect to, or effecting, any
merger, statutory exchange or other business combination or proposed sale or exchange, dividend or
other distribution or liquidation of all or a significant portion of its assets in one or a series
of transactions or any significant recapitalization or reclassification of its outstanding
securities that does not directly or indirectly provide for the assumption of the obligations of
the Company set forth herein, the Company will promptly notify the Advisor in writing thereof and,
if requested by the Advisor, shall arrange in connection therewith alternative means of providing
for the obligations of the Company set forth herein, including the assumption of such obligations
by another party, insurance, surety bonds or the creation of an escrow, in each case in an amount
and on terms and conditions satisfactory to the Advisor.




          (e) The Company’s obligations hereunder shall be in addition to any rights that any
Indemnified Party may have at common law or otherwise. The Company acknowledges that in connection
with the Services the Advisor and Advisor Designees are acting as independent contractors and not
in any other capacity with duties owing solely to the Company.




          (f) The provisions of this Section and any modification thereof shall apply to the Services
provided to the Company by the Advisor or its Advisor Designees (including related activities prior
to the date hereof) and shall remain in full force and effect regardless of the completion or
termination of this Agreement. If any term, provision, covenant or restriction herein is held by a
court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the
remainder of the terms, provisions and restrictions contained herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.




          SECTION 5.   Accuracy of Information.




          The Company shall furnish or cause to be furnished to the Advisor and its Advisor Designees
such information as the Advisor or its Advisor Designees believe reasonably appropriate to their
Services hereunder and to comply with Securities and Exchange Commission or other legal
requirements relating to the beneficial ownership by the Investors (as defined in the Stockholders
Agreement) of equity securities of the Company (all such information so furnished, the
“Information”). The Company recognizes and confirms that the Advisor (a) has and will use
and rely primarily on the Information and on information available from generally recognized public
sources in performing the Services contemplated by this Agreement without having independently
verified the same, (b) does not assume responsibility for the accuracy or

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completeness of the Information and such other information and (c) is entitled to rely upon
the Information without independent verification.




          SECTION 6.   Term.




          This Agreement shall terminate upon the earlier of (i) the Termination Date (as defined
below), and (ii) the date upon which the Lump Sum Payment (as defined in the Transaction and
Monitoring Fee Agreement (as defined below)) is made pursuant to the Transaction and Monitoring Fee
Agreement; provided, in the case of clause (ii) that, in the event that, within six months
after the date upon which the Lump Sum Payment is made, the Company enters into a Future
Transaction, the Advisor or its Advisor Designees shall be entitled to receive the Contingent Fee
payable in connection with such Future Transaction in accordance with Section 2, such fee to be
paid immediately upon the earlier of the execution of any agreement or commitment with respect
thereto or the consummation thereof; provided, further, with respect to either of
clauses (i) or (ii), that the Company’s obligations pursuant to Sections 2, 3, and 4, and its
obligation to pay any unpaid amounts that have otherwise become due and payable hereunder, shall
survive any such termination. “Termination Date” means the earliest of (x) April 5, 2016,
(y) such time as the Advisor is no longer obligated to be prepared and available to provide
Services pursuant to Section 1(a) and (z) such earlier date as the Company and the Majority Sponsor
Stockholders (as defined in the Stockholders Agreement) may mutually agree upon with respect to all
of the Contingent Fee Agreements. “Transaction and Monitoring Fee Agreement” means the Transaction
and Monitoring Fee Agreement, dated as of April 5, 2006, by and between the Company and the
Advisor.




          SECTION 7.   Permissible Activities.




          Nothing herein will in any way preclude the Advisor or its Advisor Designees (other than the
Company or its subsidiaries and their respective employees) or their respective partners (both
general and limited), members (both managing and otherwise), officers, directors, employees,
affiliates, agents or representatives from engaging in or investing in any business activities or
from performing services for its or their own account or for the account of others, including for
companies that may be or are in competition with the Company or any of its subsidiaries in any
business conducted by the Company or its subsidiaries.




          SECTION 8.   Miscellaneous.




          (a) This Agreement may be amended, modified or supplemented without consent or signature of
the Advisor, but only in writing by the Company and Sponsor Stockholders (as defined in the
Stockholders Agreement) that own not less than 70% of the Sponsor Shares (as defined in the
Stockholders Agreement); provided, however, that this Agreement may be amended by
the Company and the Majority Sponsor Stockholders (as defined in the Stockholders Agreement) to
increase or decrease fees payable by the Company, provided that the fees payable by the Company
under all Contingent Fee Agreements in which the advisor thereunder is still obligated to be
prepared and available to provide Services as specified in Section 1(a) of each Contingent Fee
Agreement are increased or decreased in the same proportion; provided, further,
that any amendment, modification or supplement that affects the Advisor adversely and
disproportionately relative to the advisors under any other Contingent Fee Agreements shall require
the consent of the Advisor. Any party hereto may, on behalf of itself only, (i) extend the time
for the performance of any of the obligations or other acts of the other

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parties hereto, (ii) waive any inaccuracies in the representations and warranties of any other
party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance by
any other party with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party granting such waiver, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or future failure. Any
amendment, waiver or consent will be effective only in the specific instance and for the specific
purpose for which given.




          (b) Any notices, demands, requests, waivers, or other communications required or permitted
under this Agreement shall be in writing and shall be addressed as follows:




	 	 	 
	To the Company:

	 	HealthMarkets, Inc.
	 

	 	9151 Grapevine Highway
	 

	 	North Richland Hills, TX 76180
	 

	 	Facsimile: (817) 255-5334
	 

	 	Attention: Chief Executive Officer
	 

	 	Attention: General Counsel
	 
	 	 
	To the Advisor:

	 	Goldman, Sachs & Co.
	 

	 	85 Broad Street, 31st Floor
	 

	 	New York, NY 10004
	 

	 	Facsimile: (212) 357-5505
	 

	 	Attention: John Bowman
	 
	 	 
	With a copy to:

	 	Sullivan & Cromwell LLP
	 

	 	125 Broad Street
	 

	 	New York, New York 10004
	 

	 	Facsimile: (212) 558-3588
	 

	 	Attention: Richard A. Pollack, Esq.





Unless otherwise specified herein, such notices or other communications will be deemed received (i)
on the date delivered, if delivered personally, and (ii) one business day after being sent by
overnight courier.




          (c) This Agreement sets forth the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof, and will supersede all previous oral and written (and
all contemporaneous oral) negotiations, commitments, agreements and understandings relating hereto.




          (d) This Agreement will be governed by, and construed in accordance with, the laws of the
State of New York.




          (e) The parties hereby irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the federal courts of the Southern District of New York and New York State courts
sitting in New York City for any actions, suits or proceedings arising out of or relating to this
Agreement and the transactions contemplated hereby (and agree not to commence any action, suit or
proceeding relating thereto except in such courts, and further agree that

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service of any process, summons, notice or document by U.S. registered mail to its address set
forth above shall be effective service of process for any action, suit or proceeding brought
against such party in any such court). The parties hereby irrevocably and unconditionally waive
any objection to the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in the federal courts of the Southern District of
New York and New York State courts sitting in New York City, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any such action, suit
or proceeding brought in any such court has been brought in an inconvenient forum.




          (f) The provisions of this Agreement are binding upon and inure to the benefit of the parties
hereto and their respective successors. Subject to the next sentence, no Person other than the
parties hereto and their respective successors is intended to be a beneficiary of this Agreement.
The parties acknowledge and agree that the Advisor Designees and the respective partners (both
general and limited), members (both managing and otherwise), stockholders, officers, directors,
advisory directors, managing directors, employees, agents, representatives and affiliates of the
Advisor and its Advisor Designees are third-party beneficiaries under Section 4 of this Agreement.
The Advisor shall have the right to assign this Agreement to its affiliate or affiliates.




          (g) This Agreement may be executed by one or more parties to this Agreement on any number of
separate counterparts (including by facsimile), and all of said counterparts taken together will be
deemed to constitute one and the same instrument.




          (h) Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction
will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition or unenforceability
in any jurisdiction will not invalidate or render unenforceable such provision in any other
jurisdiction.




[Remainder of Page Intentionally Left Blank]





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          IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Future
Transaction Fee Agreement on the date first written above.




	 	 	 	 	 	 	 
	 	 	HEALTHMARKETS, INC.	 	 
	 

	 	 	 	 	 	 
	 

	 	By:	 	/s/ William J. Gedwed 	 	 
	 

	 	 	 	 

Name: William J. Gedwed
	 	 
	 

	 	 	 	Title: President and Chief
Executive Officer	 	 






[HealthMarkets Signature Page to Future Transaction Fee Agreement]




 









 








	 	 	 	 	 	 	 
	 	 	GOLDMAN, SACHS & CO.	 	 
	 

	 	 	 	 	 	 
	 

	 	By:	 	/s/ John E. Bowman 	 	 
	 

	 	 	 	 

Name: John E. Bowman
	 	 
	 

	 	 	 	Title: Managing Director	 	 






[Goldman Sachs Signature Page to Future Transaction Fee Agreement]