Document:

exv10w96

 

EXHIBIT
10.96

HEALTHMARKETS, INC.

Agents’ Stock Accumulation Plan

(As Amended and Restated Effective April 5, 2006)

(“ASAP”)

	 	 	 
	Sponsoring Company	 	Participating
Agencies
	 
	 	 	 	 	 	 
	HealthMarkets, Inc.

	 	Cornerstone America,
	9151 Boulevard 26

	 	a division of Mid-West National Life
	North Richland Hills, Texas 76180

	 	Insurance Company of Tennessee
	 

	 	Central Park Office Tower
	 
	 	2350 Airport Freeway
	 

	 	Suite 100
	 

	 	Bedford, Texas 76022
	 
	 	 
	 

	 	Success Driven Awards, Inc.
	 

	 	c/o HealthMarkets, Inc.
	 

	 	9151 Boulevard 26

North Richland Hills, Texas 76180

For Information Call:

Karie Graves

500 Grapevine Highway

Suite 300

Hurst, Texas 76054

(817) 255-3839

kgraves@ugaais.com

Amended and Restated: April 5, 2006

 

 

HEALTHMARKETS, INC.

Agents’ Stock Accumulation Plan (ASAP)

ARTICLE I.

DEFINITIONS

     The following capitalized terms shall have the respective meaning assigned to them below.
If not otherwise defined in this plan document, capitalized terms shall have the meaning assigned
to them in ACE and/or MAC.

     1.1. “ACE” means the HealthMarkets Agents’ Contribution to Equity Plan, as amended
and restated as of April 5, 2006.

     1.2. “Administrator” means HealthMarkets, or any person or persons authorized by the
Board of Directors of HealthMarkets (the “Board”) to administer ASAP.

     1.3. “Agent” means any independent insurance agent or independent field sales
representative (“FSR”) who is a member of or contracted with a Participating Agency and who is not
an employee of such Participating Agency.

     1.4. “ASAP” means this HealthMarkets Agent Stock Accumulation Plan, as amended and
restated as of April 5, 2006.

     1.5. “ASAP Credit” means a credit posted to the MAC Account of an eligible ASAP
Participant pursuant to the terms of ASAP. The ASAP Credit shall be in the form of Equivalent
Shares equal to the number of Shares that could be purchased with an eligible ASAP Participant’s
ASAP Credit Amount.

     1.6. “ASAP Credit Addendum” means the addendum filed with the Administrator by each
Participating Agency, which sets forth the ASAP Credit Amount applicable to the Participating
Agency’s Agents who are ASAP Participants. Such ASAP Credit Addenda are incorporated by reference
into this ASAP plan document.

     1.7. “ASAP Credit Amount” means an amount equal to a predetermined percentage of an
eligible Agent’s calculated advances during the period described below during which the Agent is an
ASAP Participant. For a Participant who has elected not to take advances, such Participant’s ASAP
Credit Amount shall be calculated by the Participating Agency as indicated on the ASAP Credit
Addendum. For purposes of ASAP, the period for determining an ASAP Participant’s ASAP Credit Amount
shall commence on the date the Agent initially Contracts with the Participating Agency and end on
the December 31 of the first full Calendar Year thereafter, provided that the Agent is continuously
contracted with the Participating Agency during such period. The percentage used to determine the
ASAP Credit Amount shall be designated from time to time by each Participating Agency in an ASAP
Credit Addendum. Notwithstanding the foregoing, such percentage is initially established at
fifteen percent (15%); provided, however, that, for each Agent participating in ASAP during all or
any portion of the one year period ending on April 5, 2007 (such period of participation, the
“Founder’s Period”), such percentage shall be increased and equal to thirty percent (30%) with
respect to such eligible Agent’s calculated advances paid during the Founder’s Period.

-1-

 

     1.8. “ASAP Participant” means an Agent who is a participant in ASAP in accordance
with Section 3.1.

     1.9. “Board” shall mean the Board of directors of HealthMarkets, as constituted
from time to time.

     1.10. “Calendar Year” means the twelve (12) month period commencing on January 1 and
ending on December 31.

     1.11. “Contract” means “Independent Agent Commission-Only Contract and/or FSR
Agreement between the Participant and a Participating Agency.”

     1.12. “Dynamic Equity Fund Plan” or “DEF Plan” means the equity program maintained
by HealthMarkets for the benefit of agents contracted with Participating Agencies, which program
collectively includes ASAP, ACE and MAC..

     1.13. “Equivalent Shares” means a book credit representing the number of whole
Shares that would be purchased had ASAP Credits been invested in Shares on the date such credits
were posted to the Participant’s MAC Account.

     1.14. “Fair Market Value” of a Share shall be determined by the Board in good faith
as of the September 30 (the “Valuation Date”) immediately preceding the January 1 on which the ASAP
Credit is posted to a participant’s MAC Account as provided in Section 4.1 hereof. In determining
“Fair Market Value,” the Board will consider (among other factors it deems appropriate) the
valuation prepared by The Blackstone Group (“Blackstone”) in the ordinary course of business for
reporting to its advisory board and investors. Within not more than ten (10) business days
following each Valuation Date, Blackstone will deliver to the Board its current valuation, and
within not more than five (5) business days thereafter the Board shall deliver to the Sponsoring
Company, the Administrator and each Participating Agency its determination of Fair Market Value of
a Share as of the immediately preceding Valuation Date. Notwithstanding the foregoing, if there is
a regular public trading market for such Shares, “Fair Market Value” shall mean, as of any given
date, the mean between the highest and lowest reported sales prices of a Share during normal
business hours on the New York Stock Exchange Composite Tape or, if not listed on such exchange, on
any other national securities exchange on which the Shares are listed or on NASDAQ.

     1.15. “MAC” means the HealthMarkets Matching Agency Contribution Plan, as amended
and restated as of April 5, 2006.

     1.16. “MAC Account” means the separate book account of each Participant’s MAC
Equivalent Shares, as maintained by the Administrator in accordance with the terms of MAC.

     1.17. “Participating Agency” means any insurance agency, company, or other
organization, which, with the consent of the Sponsoring Company, adopts ASAP.

     1.18. “Plan Year” means the Calendar Year.

     1.19. “Share” means a share of HealthMarkets’ Class A-2 common stock, $0.01 par
value per share.

     1.20. “HealthMarkets” means HealthMarkets, Inc. (formerly UICI), a Delaware
corporation.

-2-

 

ARTICLE II.

GENERAL

     2.1. History and Purpose – HealthMarkets has established the following plans for the benefit
of Agents contracted with Participating Agencies that sell insurance policies and ancillary
products issued by or reinsured by insurance company subsidiaries of HealthMarkets and the FSRs
that enroll members in various membership associations:

	 	A.	 	HealthMarkets Agents’ Stock Accumulation Plan (“ASAP”), as
amended and restated as of February 1, 2000.
	 
	 	B.	 	HealthMarkets Agents’ Contribution to Equity Plan I (“ACE I”),
as amended and restated as of July 1, 2004;
	 
	 	C.	 	HealthMarkets Agents’ Contribution to Equity Plan II (“ACE
II”), as amended and restated as of October 1, 2004;
	 
	 	D.	 	HealthMarkets Agents’ Matching Agency Contribution Plan I (“MAC
I”), as amended and restated as of July 1, 2004;
	 
	 	E.	 	HealthMarkets Agents’ Matching Agency Contribution Plan II
(“MAC II”), as amended and restated as of October 1, 2004;

Collectively, ACE I and ACE II are sometimes referred to herein as the “Agent Contribution Plans;”
MAC I and MAC II sometimes collectively referred to as the “Agent Matching Plans”; and ASAP, the
Agent Contribution Plans and the Agent Matching Plans are sometimes collectively referred to as the
“DEF Plans.” The Sponsoring Company maintains the DEF Plans to promote the mutual interests of
HealthMarkets and its stockholders, on the one hand, and the agents contracted with Participating
Agencies that sell insurance policies and ancillary products issued by or reinsured by insurance
company subsidiaries of HealthMarkets and the FSRs that enroll members in various membership
associations, on the other hand. Through the DEF Plans, the Sponsoring Company seeks to provide a
continuing incentive to such agents and FSRs to sell such insurance policies and ancillary products
and to enroll such members, thereby providing HealthMarkets and its stockholders with the benefit
of having agents and FSRs whose performance is motivated through a closer identity of interests
with HealthMarkets’ stockholders.

     2.2. Shares – As of the Effective Time (as defined in the Agreement and Plan of Merger, dated
as of September 15, 2005 (the “Merger Agreement”), among the Sponsoring Company and certain
entities formed by Blackstone, DLJ Merchant Banking Partners IV, L.P. and Goldman, Sachs & Co), (a)
each share of HealthMarkets common stock then owned by a Participant under any Agent Contribution
Plan shall be converted into the right to receive one Share (as defined in Section 1.19 above) and
shall thereafter be held under, and in accordance with and subject to the terms of, ACE; and (b)
each Matching Credit then posted to a Participant’s Account under any Agent Matching Plan shall
represent an equivalent book credit representing one Share (as defined in Section 1.19 above) and
shall thereafter constitute a Matching Credit in accordance with and subject to the terms of MAC.
The rights and obligations of the holders of each Share shall be as set forth in the Amended and
Restated Certificate of Incorporation of HealthMarkets (the “Certificate of Incorporation”) to be
effective as of the Effective Time (as defined in the Merger Agreement), the terms of which are
specifically incorporated herein by reference thereto.

-3-

 

     2.3. Non-Qualified Plan – ASAP is not intended to be a qualified plan under Section 401(a) of
the Internal Revenue Code of 1986 (the “Code”) or an employee benefit plan under the Employee
Retirement Income Security Act of 1974 (“ERISA”) and is not subject to the vesting, funding,
nondiscrimination, or other requirements imposed on such plans by the Code and ERISA.

     2.4. ASAP Administration – Subject in all respects to the provisions hereof, the Sponsoring
Company hereby appoints the Administrator to control and manage the operation and administration of
ASAP.

     2.5. Applicable Laws – ASAP shall be construed and administered according to the internal laws
of the State of Texas.

     2.6. Gender And Number – Where the context requires, words in either gender include the other
gender, words in the singular include the plural, and words in the plural include the singular.

     2.7. Evidence – Evidence required of anyone under ASAP may include, but is not limited to,
valid certificates, affidavits, documents, or other information considered pertinent and reliable
by the Administrator.

     2.8. Action By the Sponsoring Company, Administrator or Participating Agency – Any action
required or permitted to be taken by the Sponsoring Company, the Administrator or any Participating
Agency under ASAP shall be taken by an officer duly authorized to take such action by the Board,
the Administrator or the Participating Agency, as the case maybe. If a Participating Agency is not
a corporation, any action required or permitted to be taken under ASAP shall be by the individual
or individuals authorized to take such action on behalf of a Participating Agency, as identified to
Administrator. The Administrator shall have no duty to investigate or confirm the validity of such
identified individual’s authority to act.

ARTICLE III.

ELIGIBILITY

     3.1. Participation – Each Agent shall become an ASAP Participant on the date such Agent enters
into a written Contract with the Participating Agency. Participation shall end on the earlier of
the following:

	 	(a)	 	the date the one-time ASAP Credit is posted to the ASAP
Participant’s MAC Account in accordance with Section 4.1; or
	 
	 	(b)	 	the date the Agent’s Contract is terminated, either by the
Agent or the Participating Agency.

Participation in ASAP does not give any Agent the right to be credited with the one-time ASAP
Credit unless the ASAP Participant satisfies all the ASAP Credit eligibility requirements described
in Section 3.2.

     3.2. Eligibility For ASAP Credit – Subject to the terms and conditions of ASAP, each ASAP
Participant will become eligible for a one-time ASAP Credit after the completion of one (1) full
Calendar Year following the date the ASAP Participant entered into a written Contract with the
Participating Agency and during which the ASAP Participant is continuously contracted with the
Participating Agency,

-4-

 

provided such ASAP Participant elects to participate in DEF by timely completing a DEF
Participant’s Election Form and such form has been received and acknowledged by the Administrator.
An ASAP Participant who does not submit a properly completed DEF Participant’s Election Form
(within the time period required by the Administrator) to elect to participate in DEF or does not
meet eligibility requirements shall not be eligible for the ASAP Credit, but will be allowed to
elect to participate in the DEF plan. An ASAP Participant shall have his or her first opportunity
to elect to participate in DEF during a period established by the Administrator, which period shall
commence on or about the date the ASAP Participant completes one (1) full Calendar Year following
the date he or she enters into a written Contract with the Participating Agency (during which
Calendar Year the ASAP Participant is continuously contracted with the Participating Agency.) An
Agent shall be eligible for only one ASAP Credit.

     3.3. Participation Not Contract Of Employment – ASAP does not constitute a contract of
employment, and ASAP participation does not give any ASAP Participant the right to be retained in
the service of the Participating Agency or HealthMarkets either as an employee or an independent
contractor, nor to any right or claim to any benefit under ASAP, unless such right or claim has
specifically accrued under the terms of ASAP.

ARTICLE IV.

ASAP CREDITS

     4.1. ASAP Credit – On or about January 1 of each year, the Administrator will post on behalf
of a Participating Agency a one-time ASAP Credit to the MAC Account of each ASAP Participant then
eligible for the ASAP Credit in accordance with Section 3.2. Such ASAP Credit shall equal a number
of Equivalent Shares determined by dividing the eligible ASAP Participant’s ASAP Credit Amount by
the Fair Market Value of Shares as of the September 30 immediately preceding such January 1. The
ASAP Participant’s participation in ASAP shall end on the December 31 first preceding the date the
ASAP Credit is posted to his or her MAC Account.

     4.2. Treatment of ASAP Credits under MAC – ASAP Credits shall become Bonus Credits, as that
term is defined in MAC for purposes of MAC plan administration. In no event shall such Bonus
Credits, if forfeited under Article V of MAC, become a part of the Forfeiture Credit Pool (as such
term is defined in MAC). ASAP Credits shall vest in the same manner as all MAC Credits vest under
the terms of MAC. Accordingly, vesting of any ASAP Credit shall commence only when an Agent has
completed at least one “year of participation” as that term is specifically defined in MAC. The
period during which an Agent is an ASAP Participant shall not be counted when determining the
Agent’s vested percentage in any credits made to his or her MAC Account, and participation in ASAP
shall not be counted when determining an Agent’s “years of participation.”

     4.3. Statement of ASAP Credit Amount – The Administrator shall provide each ASAP Participant
who has not yet completed the ASAP Credit eligibility requirements described in Section 3.2 with
monthly statements reflecting the ASAP Participant’s then current potential ASAP Credit Amount
based on advances made to such ASAP Participant from the date he or she first contracted with the
Participating Agency to the date of the statement.

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ARTICLE V.

AMENDMENT AND TERMINATION OF ASAP

     5.1. Amendment – The Sponsoring Company reserves the right to amend ASAP at any time for any
reason; provided, however, that (a) no amendment shall reduce the number of Shares in a
Participant’s Account and any amounts credited to his or her Account prior to such amendment, and
(b) to the extent required by applicable law or regulation, any proposed amendment to the Plan will
be subject to approval of the shareholders of HealthMarkets if such amendment would have the effect
of (i) materially increasing the benefits accruing to Participants under the Plan, (ii) materially
increasing the aggregate number of securities that may be issued under the Plan or (iii) materially
modifying the requirements as to eligibility for participation in the Plan. Any Participating
Agency may, with approval of the Sponsoring Company, amend the ASAP Credit Amount for such
Participating Agency’s participating Agents at any time by filing an amended Credit Addendum with
the Administrator. Amendments will become effective for Credits made forty-five (45) days after
notice of any such amendment is distributed to Participants in accordance with procedures
established by the Administrator, in its sole discretion, from time to time.

     5.2. Termination – While HealthMarkets expects and intends to continue ASAP, it reserves the
right to terminate ASAP at any time. ASAP will terminate as to all ASAP Participants and all
Agents on the first to occur of the following:

	 	(a)	 	the date ASAP is terminated by HealthMarkets;
	 
	 	(b)	 	the date that HealthMarkets is judicially declared bankrupt or insolvent; or
	 
	 	(c)	 	the date of the dissolution, merger, consolidation, or reorganization of
HealthMarkets, or the sale of all or substantially all of HealthMarkets’ assets, except
that arrangements may be made whereby ASAP will be continued by any successor to
HealthMarkets or any purchaser of substantially all of HealthMarkets’ assets, in which
case the successor or purchaser will be substituted for HealthMarkets under ASAP.

     5.3. Withdrawal of Participating Agency – A Participating Agency may withdraw its
participation in ASAP or the Sponsoring Company through the Administrator may terminate any
Participating Agency’s participation in ASAP by submitting written notification of such to the
other party at least thirty (30) days prior to the effective date of such withdrawal or termination
of participation. In the event a Participating Agency notifies the Administrator that it ceases to
adopt ASAP, or the Sponsoring Company through the Administrator withdraws its consent to the
adoption of ASAP by a Participating Agency, ASAP shall terminate as to all ASAP Participants and
all Agents who are members of or contracted with such Participating Agency, as of the effective
date of either such notice.

     5.4. ASAP Credits on Termination – On termination of ASAP in accordance with Section 5.2 or
5.3, crediting of ASAP Credits on behalf of any ASAP Participant who has not completed his or her
first full Calendar Year following the date the ASAP Participant first entered into a written
Contract with the Participating Agency shall be at the sole discretion of the Sponsoring Company.
Any such credit will be made as soon as administratively practical following the ASAP termination
date.

     5.5. Notice of Amendment – The Administrator will notify affected ASAP Participants of any
material amendment or termination of ASAP.

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     5.6. Prior Plan Agreements Superseded – The terms of ASAP as herein set forth shall supersede
in all respects and be in complete substitution for all other prior agreements and understandings
with respect to the subject matter hereof.

     5.7. Rights of Participants – Subject in all respects to the right of the Sponsoring Company
as provided in Section 5.1 hereof to amend ASAP at any time and the right of the Sponsoring Company
to terminate ASAP as provided in Section 5.2 hereof at any time, it is agreed and hereby
acknowledged that the obligation, if any, to maintain ASAP shall be and remain solely the
obligation of HealthMarkets in its capacity as Sponsoring Company and not the obligation of any of
HealthMarkets’ subsidiaries, and no ASAP Participant hereunder shall have recourse to or other
rights against any of HealthMarkets’ subsidiaries in connection with the maintenance or
administration of ASAP. Notwithstanding the foregoing, the Sponsoring Company reserves the right
to maintain and/or administer ASAP through one or more of its subsidiaries.

[REST OF PAGE INTENTIONALLY LEFT BLANK]

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HealthMarkets, Inc.

Agents’ Stock Accumulation Plan

ASAP

ASAP Credit Addendum

	 	 	 
	Participating Agency:

	 	Cornerstone America, a division of Mid-West
	 

	 	National Life Insurance Company of Tennessee
	 

	 	Central Park Office Tower
	 

	 	2350 Airport Freeway, Suite 100
	 

	 	Bedford, Texas 76022

“ASAP CREDIT AMOUNT” The ASAP Credit Amount is established at fifteen percent (15%) of the ASAP
Participant’s calculated advances, and for the ASAP Participant whose status is “Non-Advance” an
advance shall be calculated based on monthly volume of insurance policies and/or ancillary products
submitted multiplied by a percentage the Participating Agency deems appropriate, during the period
commencing on the date the ASAP Participant initially contracts with the Participating Agency and
ending on the December 31 of the first full Calendar Year thereafter, provided that the ASAP
Participant is continuously contracted with the Participating Agency during that period.
Notwithstanding the foregoing, for each Agent participating in ASAP during all or any portion of
the one year period ending on April 5, 2007 (such period of participation, the “Founder’s Period”),
such percentage shall be increased and equal to thirty percent (30%) with respect to such eligible
Agent’s calculated advances paid during the Founder’s Period.

     This Addendum is effective as of April 5, 2006.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	HealthMarkets, Inc.	 	Cornerstone America, a division of Mid-West

National Life Insurance Company of Tennessee
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Printed Name:	 	 	 	Printed Name:	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Success Driven Awards, Inc.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Printed Name:	 	 	 	 	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Title:exv10w111

 

EXHIBIT
10.111

August 18, 2006                     

The MEGA Life and Health Insurance Company

9151 Grapevine Highway

North Richland Hills, Texas 76180

	 	 	 
	Attn:

	 	William J. Gedwed
	 

	 	Chairman

Dear Mr. Gedwed:

This letter confirms the understanding and agreement (“Agreement”) between The Blackstone Group
L.P. (“Blackstone”) and The MEGA Life and Health Insurance Company (the “Company”) regarding the
retention of Blackstone and its affiliates, successors and assigns, as appropriate, by the Company
as its exclusive financial advisor for the purposes set forth herein.

Under this Agreement, Blackstone will provide financial advisory services to the Company and the
Company’s affiliates in connection with a Transaction and will assist the Company and the Company’s
affiliates in analyzing, structuring, negotiating and effecting the Transaction pursuant to the
terms and conditions of this Agreement. As used in this Agreement, “Transaction” means, whether in
one or a series of transactions, the sale, transfer or other disposition, directly or indirectly,
of all or a significant portion of the business, assets or securities of the Star HRG division of
the Company (“Star HRG”) and/or the Student Insurance division of the Company (“Student
Insurance”), collectively the “Divisions”, whether by way of a merger or consolidation,
reorganization, recapitalization or restructuring, tender or exchange offer, negotiated purchase,
leveraged buyout, minority investment or partnership, collaborative venture or otherwise,
co-insurance or reinsurance transaction, or any other extraordinary corporate transaction involving
the Divisions.

In connection with its engagement, Blackstone agrees to:

	 	(a)	 	provide advisory services, including a general business and financial analysis,
transaction feasibility analysis and pricing analysis of the Transaction;
	 
	 	(b)	 	provide advice with respect to the structure of the consideration to be
received in the Transaction;
	 
	 	(c)	 	develop a list of potential purchasers for the Transaction and consult with the
Company from time to time as to such potential purchasers;
	 
	 	(d)	 	assist in negotiations and develop a general Transaction strategy; and

 

 

The MEGA Life and Health Insurance Company

August 18, 2006

Page 2

	 	(e)	 	provide other financial advisory services which may be customarily rendered in
connection with the Transaction.

Upon the consummation of any Transaction, the Company agrees to pay Blackstone 1.00% of the
Consideration (as defined below) involved in the Transaction for its financial advisory services.

Compensation attributable to that part of the Consideration that is contingent upon the occurrence
of some future event shall be paid when such contingent payments are made.

In this Agreement, “Consideration” means the gross value of all cash, securities and other
properties paid or payable, directly or indirectly, in one transaction or in a series or
combination of transactions, in connection with the Transaction or a transaction related thereto
(including, without limitation, amounts paid (A) pursuant to covenants not to compete or similar
arrangements and (B) to holders of any warrants, stock purchase rights, convertible securities or
similar rights and to holders of any options or stock appreciation rights, whether or not vested).
Consideration shall also specifically include the value of any buyer or installment note and, for
the avoidance of doubt, the principal amount of any such note shall not be considered contingent
consideration. Consideration shall also include the value of any long-term liabilities (including
the principal amount of any indebtedness for borrowed money, preferred stock obligations, any
pension liabilities and guarantees) indirectly or directly assumed or acquired, or otherwise repaid
or retired, in connection with or in anticipation of the Transaction. Consideration shall include
all amounts paid into escrow and all contingent payments payable in connection with the
Transaction, with fees on amounts paid into escrow to be payable upon the unconditional release to
the Company or to an Affiliate of the Company of such funds from escrow and fees on contingent
payments to be payable when such contingent payments are made. If the Consideration to be paid is
computed in any foreign currency, the value of such foreign currency shall, for purposes hereof, be
converted into U.S. dollars at the prevailing exchange rate on the date or dates on which such
Consideration is paid. Consideration shall exclude the impact of payments made to fund inadequate
reserves under any co-insurance agreements.

For purposes of this Agreement, the value of any securities (whether debt or equity) or other
property paid or payable as part of the Consideration shall be determined as follows: (1) the value
of securities that are freely tradable in an established public market will be determined on the
basis of the last market closing price prior to the public announcement of the Transaction; and (2)
the value of securities that are not freely tradable or have no established public market or, if
the Consideration utilized consists of property other than securities, the value of such other
property shall be the fair market value thereof as mutually agreed by the parties hereto.
Notwithstanding the foregoing, the value of any buyer or installment note shall be the principal
amount of any such note.

In addition to any fees that may be payable to Blackstone under this Agreement, the Company agrees
to reimburse Blackstone, upon request made from time to time, for Blackstone’s reasonable
out-of-pocket expenses incurred in connection with the services rendered by Blackstone hereunder
(including, without limitation, travel and lodging, data, word processing, graphics and
communication charges, research costs, courier services and fees, expenses and disbursements of any
legal counsel retained by Blackstone).

The Company agrees that at the closing of the Transaction it will effect a wire transfer to
Blackstone of all fees payable to Blackstone under the Agreement that have not previously been
paid, as well as all out-of-pocket expenses incurred by Blackstone through the closing date in
connection with its services rendered hereunder that have not previously been reimbursed by the
Company.

 

 

The MEGA Life and Health Insurance Company

August 18, 2006

Page 3

In order to coordinate efforts on behalf of the Company and the Company’s Affiliates, during the
period of Blackstone’s engagement, neither the Company nor its management will initiate any
discussion looking to a potential Transaction except with the assistance of Blackstone or upon the
prior notice to Blackstone. In the event that the Company or its management receives an inquiry
concerning a potential Transaction, they will promptly inform Blackstone of such inquiry in order
that Blackstone can assess such inquiry and assist the Company in any resulting negotiations.

The Company will furnish or cause to be furnished to Blackstone such information as Blackstone
believes appropriate to its assignment (all such information so furnished being the “Information”).
The Company recognizes and confirms that Blackstone (a) 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 completeness of the Information and such other
information, (c) is entitled to rely upon the Information without independent verification, and (d)
will not make an appraisal of any assets in connection with its assignment.

Except as contemplated by the terms hereof or as required by applicable law or legal process,
Blackstone shall keep confidential all material non-public information provided to it by or at the
request of the Company, and shall not disclose such information, the Company’s interest in a
Transaction or the subject matter of this Agreement to any third party or to any of its employees
or advisors.

In the event that confidential information belonging to the Company is stored electronically on
Blackstone’s computer systems, Blackstone shall not be liable for any damages resulting from
unauthorized access, misuse or alteration of such information by persons not acting on its behalf,
provided that Blackstone exercises the same degree of care in protecting the confidentiality of,
and in preventing unauthorized access to, the Company’s information that it exercises with regard
to its own most sensitive proprietary information.

Except as required by applicable law, any advice to be provided by Blackstone under this Agreement
shall not be disclosed publicly or made available to third parties without the prior written
consent of Blackstone. In addition, Blackstone may not be otherwise publicly referred to without
its prior written consent. All services, advice, information and reports provided by Blackstone to
the Company in connection with this assignment shall be for the sole benefit of the Company and
shall not be relied upon by any other person.

In the event that Blackstone is requested or authorized by you or required by government
regulation, subpoena or other legal process to produce documents, or to make its current or former
personnel available as witnesses at deposition or trial, arising as a result of or in connection
with Blackstone’s engagement for the Company, the Company will, so long as Blackstone is not a
party to the proceeding in which the information is sought, pay Blackstone the reasonable fees and
expenses of its counsel incurred in responding to such a request. Nothing in this paragraph shall
affect in any way the Company’s obligations pursuant to the separate indemnification agreement
attached hereto.

 

 

The MEGA Life and Health Insurance Company

August 18, 2006

Page 4

The Company acknowledges and agrees that Blackstone has been retained to act solely as financial
advisor to the Company and may be retained, under the circumstances herein contemplated, to act as
placement agent. In such capacities, Blackstone shall act as an independent contractor, and any
duties of Blackstone arising out of its engagement pursuant to this Agreement shall be owed solely
to the Company. Because Blackstone will be acting on the Company’s behalf in this capacity, it is
customary for us to receive indemnification. A copy of Blackstone’s standard form of
indemnification agreement is attached to this Agreement as Attachment A.

Blackstone’s engagement hereunder may be terminated upon 10 days’ written notice without cause by
either the Company or Blackstone; termination for cause by either party will occur forthwith.
Notwithstanding the foregoing, the provisions relating to (i) the payment of fees and expenses
accrued through the date of termination, (ii) the disclosure of Blackstone services, advice,
information and reports, (iii) the status of Blackstone as an independent contractor, (iv) the
limitation on to whom Blackstone shall owe any duties and (v) waivers of the right to trial by jury
will survive any such termination, and any such termination shall not affect the Company’s
obligations under the indemnification agreement attached as Attachment A. Blackstone will be
entitled to the Transaction Fee set forth above in the event that at any time prior to the
expiration of 12 months after such termination a definitive agreement with respect to a Transaction
is executed and a Transaction is thereafter consummated. 

The Company does not appear on the Specially Designated Nationals and Blocked Persons List of the
Office of Foreign Assets Control of the United States Department of the Treasury, nor is it a
prohibited party according to other U.S. government regulatory or enforcement agencies.

The Company acknowledges that Blackstone may, at its option and expense, place an announcement in
such newspapers and periodicals as it may choose, stating that Blackstone has acted as the
financial advisor to the Company in connection with the Transaction.

Notwithstanding anything to the contrary provided elsewhere herein, none of the provisions of this
Agreement shall in any way limit the activities of Blackstone Group Holdings L.L.C. and its
affiliates in their businesses distinct from the corporate advisory business of The Blackstone
Group L.P., provided that the confidential information obtained by Blackstone pursuant to this
Agreement is not made available to representatives of Blackstone Group Holdings L.L.C. and its
affiliates who are not involved in the corporate advisory business of The Blackstone Group L.P.

Blackstone acknowledges and agrees that the terms of this Agreement (including the form of
indemnification agreement attached to this Agreement as Attachment A) and the transactions
contemplated hereby constitute a transaction between the Company and a “related party,” and, as
such, (a) is subject to the prior approval and consent of a majority of the directors of the
Company who are not affiliated with Blackstone and (b) is subject to the prior approval of the
Oklahoma Insurance Department.

This Agreement (including the attached indemnification agreement) embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and understandings
relating to the subject matter hereof. If any provision of this Agreement is determined to be
invalid or unenforceable in any respect, such determination will not affect or impair such
provision or the remaining provisions of this Agreement in any other respect, which will remain in
full force and effect. No waiver, amendment or other modification of this Agreement shall be
effective unless in writing and signed by each party to be bound thereby. This Agreement shall be
governed by, and construed in accordance with, the laws of the state of New York applicable to
contracts executed in and to be performed in that state.

 

 

The MEGA Life and Health Insurance Company

August 18, 2006

Page 5

The Company hereby agrees that any action or proceeding based hereon or arising out of Blackstone’s
engagement hereunder shall be brought and maintained by the Company exclusively in the courts of
the State of New York located in the City and County of New York or in the United States District
Court for the Southern District of New York. The Company irrevocably submits to the jurisdiction
of the courts of the State of New York located in the City and County of New York and the United
States District Court for the Southern District of New York and appellate courts from any thereof
for the purpose of any action or proceeding based hereon or arising out of Blackstone’s engagement
hereunder and irrevocably agrees to be bound by any judgment rendered thereby in connection with
such action or proceedings. The Company hereby irrevocably waives, to the fullest extent permitted
by law, any objection it may have or hereafter may have to the laying of venue of any such action
or proceeding brought in any such court referred to above and any claim that such action or
proceeding has been brought in an inconvenient forum and agrees not to plead or claim the
same. 

The provisions hereof shall inure to the benefit of and be binding upon the successors and assigns
of the Company, Blackstone and any person entitled to be indemnified under the indemnification
agreement attached hereto as Attachment A.

Any rights to trial by jury with respect to any claim or proceeding related to, or arising out of,
this Agreement, engagement or any transaction or conduct in connection herewith, is waived.

Please confirm that the foregoing correctly sets forth our agreement by signing and returning to
Blackstone the duplicate copy of this Agreement and the indemnification agreement attached hereto
as Attachment A.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	THE BLACKSTONE GROUP L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	      Martin Alderson-Smith

      Senior Managing Director	 	 

Accepted and Agreed

to as of the date first

written above:

The MEGA Life and Health Insurance Company

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 

	 	William J. Gedwed	 	 
	 

	 	Chairman	 	 

Enclosure

 

 

ATTACHMENT A

August 18, 2006

The Blackstone Group L.P.

345 Park Avenue

New York, NY 10154

INDEMNIFICATION AGREEMENT

Gentlemen:

This letter will confirm that we have engaged The Blackstone Group L.P. (“Blackstone”) to advise
and assist us in connection with the matters referred to in our letter of agreement dated as of
August 18, 2006 (the “Engagement Letter”). This Indemnification Agreement shall be effective as of
April 5, 2006, for all purposes, notwithstanding the subsequent execution of the Engagement Letter
on August 18, 2006.

In consideration of your agreement to act on our behalf in connection with such matters, we agree
to indemnify and hold harmless you and your affiliates and your and their respective partners (both
general and limited), members, officers, directors, employees and agents and each other person, if
any, controlling you or any of your affiliates (you and each such other person being an
“Indemnified Party”) from and against any losses, claims, damages, expenses and liabilities
whatsoever, whether they be joint or several, related to, arising out of or in connection with the
engagement (the “Engagement”) under the Engagement Letter and will reimburse each Indemnified Party
for all expenses (including fees, expenses and disbursements of counsel) as they are incurred in
connection with investigating, preparing, pursuing, defending or assisting in the defense of any
action, claim, suit, investigation or proceeding related to, arising out of or in connection with
the Engagement or this agreement, whether or not pending or threatened, whether or not any
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 us. We will not,
however, be liable under the foregoing indemnification provision for any losses, claims, damages or
liabilities (or expenses relating thereto) that are finally judicially determined by a court of
competent jurisdiction to have primarily resulted from the gross negligence or willful misconduct
of Blackstone. We also agree that no Indemnified Party shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to us or our owners, parents, affiliates, security
holders or creditors for or in connection with the Engagement except for any such liability for
losses, claims, damages or liabilities incurred by us that are finally judicially determined by a
court of competent jurisdiction to have primarily resulted from the gross negligence or willful
misconduct of Blackstone.

If the indemnification provided for in the preceding paragraph is for any reason (other than the
gross negligence or willful misconduct of Blackstone as provided above) unavailable to an
Indemnified Party in respect of any losses, claims, damages or liabilities referred to herein,
then, in lieu of indemnifying such Indemnified Party hereunder, we shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (and expenses relating thereto) in such

 

 

The MEGA Life and Health Insurance Company

August 18, 2006

Page 2

proportion as is appropriate to reflect not only the relative benefits received (or anticipated to
be received) by you, on the one hand, and us, on the other hand, from the Engagement but also the
relative fault of each of you and us, as well as any other relevant equitable considerations;
provided, however, to the extent permitted by applicable law, in no event shall your aggregate
contribution to the amount paid or payable exceed the aggregate amount of fees actually received by
you under the Engagement Letter. For the purposes of this agreement, the relative benefits to us
and you of the Engagement shall be deemed to be in the same proportion as (a) the total value paid
or contemplated to be paid or received or contemplated to be received by us, our security holders
and our creditors in the transaction or transactions that are subject to the Engagement, whether or
not any such transaction is consummated, bears to (b) the fees paid or to be paid to Blackstone
under the Engagement Letter (excluding any amounts paid as reimbursement of expenses).

Neither party to this agreement will, without the prior written consent of the other party (which
consent will not be unreasonably withheld), settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (a “Judgment”), whether or not we or any Indemnified Party
are an actual or potential party to such claim, action, suit or proceeding. In the event that we
seek to settle or compromise or consent to the entry of any Judgment, we agree that such
settlement, compromise or consent (i) shall include an unconditional release of Blackstone and each
other Indemnified Party hereunder from all liability arising out of such claim, action, suit or
proceeding, (ii) shall not include a statement as to, or an admission of, fault, culpability or a
failure to act by or on behalf of Blackstone or each other Indemnified Party, and (iii) shall not
impose any continuing obligations or restrictions on Blackstone or each other Indemnified Party.

Promptly after receipt by an Indemnified Party of notice of any complaint or the commencement of
any action or proceeding with respect to which indemnification is being sought hereunder, such
person will notify us in writing of such complaint or of the commencement of such action or
proceeding, but failure to so notify us will not relieve us from any liability which we may have
hereunder or otherwise, except to the extent that such failure materially prejudices our rights.
If we so elect or are requested by such Indemnified Party, we will assume the defense of such
action or proceeding, including the employment of counsel reasonably satisfactory to Blackstone and
the payment of the fees and disbursements of such counsel.

In the event, however, such Indemnified Party reasonably determines in its judgment that having
common counsel would present such counsel with a conflict of interest or if we fail to assume the
defense of the action or proceeding in a timely manner, then such Indemnified Party may employ
separate counsel reasonably satisfactory to us to represent or defend it in any such action or
proceeding and we will pay the fees and disbursements of such counsel; provided, however, that we
will not be required to pay the fees and disbursements of more than one separate counsel for all
Indemnified Parties in any jurisdiction in any single action or proceeding. In any action or
proceeding the defense of which we assume, the Indemnified Party will have the right to participate
in such litigation and to retain its own counsel at such Indemnified Party’s own expense.

The foregoing reimbursement, indemnity and contribution obligations of ours under this agreement
shall be in addition to any rights that an Indemnified Party may have at common law or otherwise,
and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of ours and such Indemnified Party.

The provisions of this agreement shall apply to the Engagement, as well as any additional
engagement of Blackstone by us in connection with the matters which are the subject of the
Engagement, and any

2

 

 

The MEGA Life and Health Insurance Company

August 18, 2006

Page 3

modification of the Engagement or additional engagement and shall remain in full force and effect
regardless of any termination or the completion of your services under the Engagement Letter.

This agreement and the Engagement Letter shall be governed by, and construed in accordance with,
the laws of the state of New York applicable to contracts executed in and to be performed in that
state.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	The MEGA Life and Health Insurance Company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	William J. Gedwed	 	 
	 

	 	 	 	Chairman	 	 

Accepted
and Agreed to as of the date first written above.

THE
BLACKSTONE GROUP L.P.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 

	 	Martin Alderson-Smith	 	 
	 

	 	Senior Managing Director

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