Document:

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Exhibit 10.1

HEALTHMARKETS 2006 MANAGEMENT OPTION PLAN

     1. Purpose. The purpose of the HealthMarkets 2006 Management Option Plan is to
attract and retain officers and other key employees for HealthMarkets, Inc. (formerly UICI), a
Delaware corporation, and its Subsidiaries (as defined below) and to provide to such persons
incentives and rewards for superior performance.

     2. Definitions. As used in this Plan:

          “409A Guidance” has the meaning provided in Section 16 of this Plan.

          “Affiliate” of a Person means any Person which directly or indirectly controls, is
controlled by, or is under common control with such Person.

          “Blackstone” means The Blackstone Group.

          “Board” means the Board of Directors of the Company and, to the extent of any
delegation by the Board to a committee (or subcommittee thereof) pursuant to Section 13 of this
Plan, such committee (or subcommittee).

          “Business Combination” has the meaning provided in Section 8 of this Plan.

          “Change of Control” has the meaning provided in Section 8 of this Plan.

          “Class A-1 Common Stock” means the shares of Class A-1 Common Stock, par value $0.01
per share, of the Company or any security into which such shares of Class A-1 Common Stock may be
changed by reason of any transaction or event of the type referred to in Section 7 of this Plan.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time.

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

          “Controlling Interest” in an entity will mean (x) beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the equity securities
representing more than 50% of the voting power of the outstanding equity securities of the entity.

          “Date of Grant” means the date specified by the Board on which a grant of Option
Rights shall become effective (which date shall not be earlier than the date on which the Board
takes action with respect thereto).

          “Director” means a member of the Board.

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          “Effective Time” has the meaning provided in Section 1.3 of the Merger Agreement.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, as such law, rules and regulations may be amended from time to time.

          “Fair Market Value” shall have the meaning set forth in the Stockholders Agreement.

          “Incentive Stock Options” means Option Rights that are intended to qualify as
“incentive stock options” under Section 422 of the Code or any successor provision.

          “Individual” has the meaning provided in Section 8 of this Plan.

          “IPO” shall have the meaning set forth in the Stockholders Agreement.

          “Management Objectives” means the measurable performance objective or objectives
established, when so determined by the Board, pursuant to this Plan for Participants who have
received grants of Option Rights pursuant to this Plan. Management Objectives may be described in
terms of Company-wide objectives or objectives that are related to the performance of the
individual Participant or of the Subsidiary, division, department, region or function within the
Company or Subsidiary in which the Participant is employed. The Management Objectives may be made
relative to the performance of other corporations.

          If the Board determines that a change in the business, operations, corporate structure or
capital structure of the Company, or the manner in which it conducts its business, or other events
or circumstances render the Management Objectives unsuitable, the Board may in its discretion
modify such Management Objectives or the related minimum acceptable level of achievement, in whole
or in part, as the Board deems appropriate and equitable.

          “Merger Agreement” means the Agreement and Plan of Merger dated September 15, 2005 by
and among Premium Finance LLC, a Delaware limited liability company, Mulberry Finance Co., Inc., a
Delaware corporation, DLJMB IV First Merger LLC, a Delaware limited liability company, Premium
Acquisition, Inc., a Delaware corporation (“Merger Co 1”), Mulberry Acquisition, Inc., a
Delaware corporation (“Merger Co 2”), DLJMB IV First Merger Co Acquisition Inc., a Delaware
corporation (“Merger Co 3,” and, together with Merger Co 1 and Merger Co 2, the “Merger
Cos”) and the Company, pursuant to which each of the Merger Cos will be merged into the Company
(the “Merger”) at the Effective Time.

          “Non-Employee Director” means a director who is not an employee of the Company or any
Subsidiary.

          “Non-Qualified Stock Options” means Option Rights which are not intended to be
Incentive Stock Options.

          “Optionee” means the optionee named in an agreement evidencing an outstanding Option
Right.

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          “Option Price” means the purchase price payable on exercise of an Option Right.

          “Option Right” means the right to purchase shares of Class A-1 Common Stock upon
exercise of an option granted pursuant to Section 4 of this Plan.

          “Outstanding Company Voting Securities” means the then-outstanding equity securities
of the Company entitled to vote generally in the election of directors.

          “Participant” means a person who is selected by the Board to receive Option Rights
under this Plan and who is at the time an officer or other employee of the Company or any one or
more of its Subsidiaries, or who has agreed to commence serving in any of such capacities within 90
days of the Date of Grant, and shall also include each Non-Employee Director who receives an award
of Option Rights.

          “Permitted Holders” has the meaning provided in Section 8 of this Plan.

          “Person” means any individual, sole proprietorship, partnership, corporation, limited
liability company, unincorporated society or association, trust or other entity.

          “Plan”
means this HealthMarkets 2006 Management Option Plan.

          “Stockholders Agreement” means the UICI Stockholders’ Agreement by and among
investment funds affiliated with The Blackstone Group, L.P., Goldman Sachs & Co. and DLJ Merchant
Banking Partners IV, L.P., the Company, the Executive, and other signatories thereto dated
April 5, 2006, as may be amended from time to time.

          “Subsidiary” means a corporation, company or other entity (i) more than fifty percent
(50%) of whose outstanding shares or securities (representing the right to vote for the election of
directors or other managing authority) are, or (ii) which does not have outstanding shares or
securities (as may be the case in a partnership, limited liability company, joint venture or
unincorporated association), but more than fifty percent (50%) of whose ownership interest
representing the right generally to make decisions for such other entity is, now or hereafter,
owned or controlled, directly or indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of Incentive Stock Options,
“Subsidiary” means any corporation in which at the time the Company owns or controls, directly or
indirectly, more than fifty percent (50%) of the total combined voting power represented by all
classes of stock issued by such corporation.

          “Tandem Option” shall have the meaning assigned to such term in Section 24 of the
several agreements evidencing the grant of the Option Rights granted to the Option Holders on May
8, 2006.

          “Ten Percent Employee” means an employee of the Company or any of its Subsidiaries who
owns Class A-1 Common Stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company.

     3. Shares Available Under this Plan. (a) Subject to adjustment as provided in Section
3(b) and Section 7 of this Plan, the number of shares of Class A-1 Common Stock that

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may be issuable pursuant to Option Rights shall not exceed in the aggregate 1,489,741 shares
of Class A-1 Common Stock, plus any shares issuable (not to exceed 849,600 shares) pursuant to the
Tandem Options to the extent that the Option Rights with respect to which the Tandem Options are
granted are not cancelled upon grant of the Tandem Options. Subject to adjustment as provided in
Section 3(b) and Section 7 of this Plan, the number of shares of Class A-1 Common Stock that may be
issuable to any single Participant during the term of this Plan pursuant to Option Rights shall not
exceed in the aggregate 1,489,741 shares of Class A-1 Common Stock, plus any shares issuable (not
to exceed 849,600 shares) pursuant to the Tandem Options to the extent that the Option Rights with
respect to which the Tandem Options are granted are not cancelled upon grant of the Tandem Options.
The total number of available shares of Class A-1 Common Stock that may be issuable upon exercise
of Option Rights intended to be Incentive Stock Options shall not exceed 1,489,741, plus any shares
issuable (not to exceed 849,600 shares) pursuant to the Tandem Options to the extent that the
Option Rights with respect to which the Tandem Options are granted are not cancelled upon grant of
the Tandem Options. Such shares may be shares of original issuance or treasury shares or a
combination thereof.

          (b) The number of shares available in Section 3(a) above shall be adjusted to account for
shares relating to options that expire, are forfeited or are transferred, surrendered or
relinquished upon the payment of any Option Price by the transfer to the Company of shares of Class
A-1 Common Stock or upon satisfaction of any withholding amount. Upon payment in cash of the
benefit provided by any award granted under this Plan, any shares that were covered by that award
shall again be available for issue or transfer hereunder; provided, however, that shares of Class
A-1 Common Stock withheld to satisfy tax withholding obligations shall be deemed delivered for
purposes of the limitation set forth in the third sentence of Section 3(a).

     4. Option Rights. The Board may, from time to time and upon such terms and conditions
as it may determine, authorize the granting to Participants of options to purchase shares of Class
A-1 Common Stock. Each such grant may utilize any or all of the authorizations, and shall be
subject to all of the requirements contained in the following provisions:

          (a) Option Rights granted under this Plan may be (i) Incentive Stock Options, (ii)
Non-Qualified Stock Options, or (iii) combinations of the foregoing.

          (b) Each grant shall specify the number of shares of Class A-1 Common Stock to which it
pertains subject to the limitations set forth in Section 3 of this Plan.

          (c) Each grant shall specify an Option Price per share. The Option Price of an Option Right
may not be less than 100% of the Fair Market Value on the Date of Grant, except that the Option
Price of an Incentive Stock Option issued to a Ten Percent Employee may not be less than 110% of
the Fair Market Value on the Date of Grant.

          (d) The Option Price shall be payable in (i) cash in the form of currency or check or by wire
transfer as directed by the Company or (ii) such other form of consideration as is deemed
acceptable by the Board.

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          (e) The Company may provide for payment of the Option Price by the Optionee, in installments,
if the Optionee so elects, with or without interest, upon terms determined by the Board.

          (f) Successive grants may be made to the same Participant whether or not any Option Rights
previously granted to such Participant remain unexercised.

          (g) Each grant shall specify the period or periods of continuous service by the Optionee with
the Company or any Subsidiary that is necessary before the Option Rights or installments thereof
will become exercisable and may provide for the earlier exercise of such Option Rights in the event
of a Change of Control or such other times as the Board shall determine.

          (h) Any grant of Option Rights may specify Management Objectives that must be achieved as a
condition to the exercise of such rights.

          (i) The Board may, at or after the Date of Grant of any Option Rights (other than Incentive
Stock Options), provide for the payment of dividend equivalents to the Optionee.

          (j) No Option Right shall be exercisable more than 10 years from the Date of Grant (5 years
with respect to Incentive Stock Options granted to a Ten Percent Employee).

          (k) Each grant of Option Rights shall be evidenced by an agreement executed on behalf of the
Company by an officer and delivered to the Optionee and containing such terms and provisions,
consistent with this Plan, as the Board may approve.

          (l) Upon termination of a Participant’s employment with the Company prior to an IPO, any
shares of Class A-1 Common Stock acquired as a result of the exercise of an Option Right shall be
subject to the Call Rights as provided in the Stockholders Agreement.

     5. Awards to Non-Employee Directors. The Board may, from time to time and upon such
terms and conditions as it may determine, authorize the granting to Non-Employee Directors of
Option Rights.

          (a) Each grant of Option Rights awarded pursuant to this Section 5 shall be upon terms and
conditions consistent with Section 4 of this Plan and shall be evidenced by an agreement in such
form as shall be approved by the Board. Each grant shall specify an Option Price per share, which
shall not be less than 100% of the Fair Market Value on the Date of Grant. Each such Option Right
granted under the Plan shall expire not more than 10 years from the Date of Grant and shall be
subject to earlier termination as hereinafter provided. Unless otherwise determined by the Board,
such Option Rights shall be subject to the following additional terms and conditions:

               (i) Each grant shall specify the number of shares of Class A-1 Common Stock to which it
pertains subject to the limitations set forth in Section 3 of this plan.

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               (ii) In the event of the termination of service on the Board by the holder of any such
Option Rights, other than by reason of disability or death, the then outstanding Options
Rights of such holder may be exercised to the extent that they would be exercisable on the
date that is ninety days after the date of such termination and shall expire ninety days
after such termination, or on their stated expiration date, whichever occurs first.

               (iii) In the event of the death or disability of the holder of any such Option Rights,
each of the then outstanding Option Rights of such holder may be exercised at any time
within one (1) year after such death or disability, but in no event after the expiration
date of the term of such Option Rights.

               (iv) If a Non-Employee Director subsequently becomes an employee of the Company or a
Subsidiary while remaining a member of the Board, any Option Rights held under the Plan by
such individual at the time of such commencement of employment shall not be affected
thereby.

               (v) Option Rights may be exercised by a Non-Employee Director only upon payment to the
Company in full of the Option Price of the shares of Class A-1 Common Stock to be delivered.
Such payment shall be made in (i) cash in the form of currency or check or by wire transfer
as directed by the Company or (ii) such other form of consideration as is deemed acceptable
by the Board.

     6. Transferability. (a) Except as otherwise determined by the Board or as set forth
in the Stockholders Agreement, no Option Right granted under this Plan shall be transferable by a
Participant other than by will or the laws of descent and distribution. Except as otherwise
determined by the Board, Option Rights shall be exercisable during the Optionee’s lifetime only by
him or her or by his or her guardian or legal representative.

          (b) The Board may specify at the Date of Grant that part or all of the shares of Class A-1
Common Stock that are to be issued or transferred by the Company upon the exercise of Option Rights
shall be subject to further restrictions on transfer.

     7. Adjustments. The Board may make or provide for such substitution or adjustments in
the numbers of shares of Class A-1 Common Stock covered by outstanding Option Rights granted
hereunder, and in the kind and Option Price of shares covered by outstanding Option Rights and/or
such other equitable substitution or adjustments as the Board, in its sole discretion, exercised in
good faith, may determine to prevent dilution or enlargement of the rights of Participants or
Optionees that otherwise would result from (a) any stock dividend, extraordinary cash-dividend,
stock split, combination of shares, recapitalization or other change in the capital structure of
the Company, or (b) any merger, consolidation, spin-off, split-off, spin-out, split-up,
reclassification, reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or
event having an effect similar to any of the foregoing. Such substitutions and adjustments may
include, without limitation, canceling any and all Option Rights in exchange for cash payments
equal to the excess, if any, of the value of the consideration paid to a shareholder of a share of
Class A-1 Common Stock over the Option Price per share subject to such Option

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Right in connection with such an adjustment event. The Board may also make or provide for
such adjustments in the aggregate number and class of shares specified in Section 3 of this Plan as
the Board in its sole discretion, exercised in good faith, may determine is appropriate to reflect
any transaction or event described in this Section 7; provided, however, that any
such adjustment to the number of Incentive Stock Options available for grant specified in Section
3(a) shall be made only if and to the extent that such adjustment would not cause any Option
intended to qualify as an Incentive Stock Option to fail so to qualify.

     8. Change of Control. For purposes of this Plan, except as may be otherwise
prescribed by the Board in an agreement evidencing a grant made under the Plan, a “Change of
Control” shall mean if at any time any of the following events shall have occurred:

          (a) the acquisition by any individual entity or group, within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act (an “Individual”), other than Blackstone, DLJ Merchant
Banking Partners IV, L.P. and Goldman, Sachs & Co. and their respective Affiliates (the
“Permitted Holders”), directly or indirectly, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of equity securities of the Company representing
more than 50% of the voting power of the Outstanding Company Voting Securities; provided,
however, that for purposes of this subsection (a), the following acquisitions will not
constitute a Change of Control: (i) any acquisition by the Company, (ii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (iii) any acquisition by any Person pursuant to a transaction which
complies with clauses (i) and (ii) of subsection (b) below; or

          (b) the consummation of a reorganization, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Company or the purchase of assets or stock of
another entity (a “Business Combination”), in each case, unless immediately following such
Business Combination, (i) all or substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding
combined voting power of the then-outstanding securities entitled to vote generally in the election
of directors of the entity resulting from such Business Combination (including an entity which as a
result of such transaction owns the Company or all or substantially all of the Company’s assets
either directly or through one or more Subsidiaries) in substantially the same proportion as their
ownership immediately prior to such Business Combination of the Outstanding Company Voting
Securities, and (ii) no Person (excluding the Permitted Holders) beneficially owns, directly or
indirectly, more than a majority of the combined voting power of the then-outstanding voting
securities of such entity except to the extent that such ownership of the Company existed prior to
the Business Combination.

          (c) Notwithstanding paragraphs (a) and (b) above, in no event will a Change of Control be
deemed to occur if the Permitted Holders maintain a direct or indirect Controlling Interest in the
Company or in an entity that maintains a direct or indirect Controlling Interest in the Company.

     9. Fractional Shares. The Company shall not be required to issue any fractional
shares of Class A-1 Common Stock pursuant to this Plan. The Board may provide for the elimination
of fractions or for the settlement of fractions in cash.

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     10. Withholding Taxes. The Company may withhold, or require a Participant to remit to
the Company, an amount sufficient to satisfy federal, state, local or foreign taxes (including the
Participant’s FICA obligation) in connection with any payment made or benefit realized by a
Participant or other person under this Plan or otherwise, and the amounts available to the Company
for such withholding are insufficient, it shall be a condition to the receipt of such payment or
the realization of such benefit that the Participant or such other person make arrangements
satisfactory to the Company for payment of the balance of such taxes required to be withheld. The
Company may elect to have such withholding obligation satisfied by having the Participant surrender
to the Company or any Subsidiary a portion of the Class A-1 Common Stock that is issued or
transferred to the Participant upon the exercise of an Option Right (but only to the extent of the
minimum withholding required by law), and the Class A-1 Common Stock so surrendered by the
Participant shall be credited against any such withholding obligation at the Fair Market Value of
such shares on the date of such surrender.

     11. Foreign Employees. In order to facilitate the making of any grant or combination
of grants under this Plan, the Board may provide for such special terms for options to Participants
who are foreign nationals or who are employed by the Company or any Subsidiary outside of the
United States of America as the Board may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Board may approve such supplements
to or amendments, restatements or alternative versions of this Plan as it may consider necessary or
appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for
any other purpose, and the Secretary or other appropriate officer of the Company may certify any
such document as having been approved and adopted in the same manner as this Plan. No such special
terms, supplements, amendments or restatements, however, shall include any provisions that are
inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended
to eliminate such inconsistency without further approval by the shareholders of the Company.

     12. Stockholders Agreement. Class A-1 Common Stock acquired upon exercise of an
Option Right will be subject to the terms and conditions of the Stockholders’ Agreement. The
Company and Participants acknowledge that they will agree to provide the Company with the right to
require a Participant to waive any registration rights with regard to such shares of Class A-1
Common Stock upon an IPO, in which case the Company will implement an IPO bonus plan in cash, stock
or additional Option Rights to compensate for any such Participant’s loss of liquidity.

     13. Administration of this Plan. (a) This Plan shall be administered by the Board,
which may from time to time delegate all or any part of its authority under this Plan to a
committee of the Board (or subcommittee thereof) consisting of not less than two Directors
appointed by the Board. If Directors constitute “outside directors” for purposes of the exemption
set forth in Section 162(m)(4)(C) of the Code from the limitation on deductibility imposed by
Section 162(m) of the Code, then in such event such Directors (or a subset thereof) shall be
delegated authority to administer the Plan. A majority of the committee (or subcommittee) shall
constitute a quorum, and the action of the members of the committee (or subcommittee) present at
any meeting at which a quorum is present, or acts unanimously approved in writing, shall be

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the acts of the committee (or subcommittee). To the extent of any such delegation, references
in this Plan to the Board shall be deemed to be references to any such committee or subcommittee.

          (b) The interpretation and construction by the Board of any provision of this Plan or of any
agreement, notification or document evidencing the grant of Option Rights and any determination by
the Board pursuant to any provision of this Plan or of any such agreement, notification or document
shall be final and conclusive. No member of the Board shall be liable for any such action or
determination made in good faith.

     14. Amendments, Etc. (a) The Board may at any time and from time to time amend this
Plan in whole or in part, including, without limitation, to comply with applicable law, stock
exchange rules or accounting rules; provided, however, that any amendment which
must be approved by the shareholders of the Company in order to comply with applicable law shall
not be effective unless and until such approval has been obtained. Presentation of this Plan or
any amendment hereof for shareholder approval shall not be construed to limit the Company’s
authority to offer similar or dissimilar benefits under other plans without shareholder approval.

          (b) The Board may, with the concurrence of the affected Participant and as otherwise permitted
by Section 7 hereof, cancel any agreement evidencing Option Rights granted under this Plan. In the
event of such cancellation, the Board may authorize the granting of new Option Rights under this
Plan (which may or may not cover the same number of shares of Class A-1 Common Stock that had been
the subject of the prior option) in such manner, at such Option Price and subject to such other
terms, conditions and discretions as would have been applicable under this Plan had the canceled
Option Rights not been granted.

          (c) In case of termination of employment or, if the Participant is a Non-Employee Director,
termination of service on the Board by reason of death, disability or normal or early retirement
(as determined by the Board), or in the case of hardship or other special circumstances, of a
Participant who holds an Option Right not immediately exercisable in full, or who holds shares of
Class A-1 Common Stock subject to any transfer restriction imposed pursuant to Section 6(b) of this
Plan, the Board may, in its sole discretion, accelerate the time at which such Option Right may be
exercised or the time when such transfer restriction will terminate or may waive any other
limitation or requirement under any such award.

          (d) This Plan shall not confer upon any Participant any right with respect to continuance of
employment or other service with the Company or any Subsidiary, nor shall it interfere in any way
with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s
employment or other service at any time.

          (e) To the extent that any provision of this Plan would prevent any Option Right that was
intended to qualify as an Incentive Stock Option from qualifying as such, that provision shall be
null and void with respect to such Option Right. Such provision, however, shall remain in effect
for other Option Rights and there shall be no further effect on any provision of this Plan.

          (f) Any grant of Option Rights may require, as a condition to the exercise, grant or sale
thereof, that the Participant agree to be bound by (i) any shareholders agreement

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among all or certain shareholders of the Company that may be in effect at the time of
exercise, grant or sale or certain provisions of any such agreement that may be specified by the
Company or (ii) any other agreement requested by the Company.

     15. Termination. No grant shall be made under this Plan more than 10 years after the
date on which this Plan is first approved by the shareholders of the Company, but all grants made
on or prior to such date shall continue in effect thereafter subject to the terms thereof and of
this Plan.

     16. Compliance with Section 409A of the Code. The Plan is intended to comply and
shall be administered in a manner that is intended to comply with Section 409A of the Code and
shall be construed and interpreted in accordance with such intent. To the extent that a payment
and/or benefit owed or due to a Participant under the Plan is subject to Section 409A of the Code,
it shall be paid in a manner that complies with Section 409A of the Code, including proposed,
temporary or final regulations or any other guidance issued by the Secretary of the Treasury and
the Internal Revenue Service with respect thereto (the “409A Guidance”). Any provision of the Plan
that would cause a payment and/or benefit to fail to satisfy Section 409A of the Code shall have no
force and effect until amended to comply with Code Section 409A (which amendment may be retroactive
to the extent permitted by the 409A Guidance).

     17. Successors. All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation, spin-off, or
otherwise, of all or substantially all of the business and/or assets of the Company.

     18. Unfunded Status of Plan. It is presently intended that the Plan constitute an
“unfunded” plan for incentive and deferred compensation. The Board may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to deliver Class A-1
Common Stock or make payments; provided, however, that unless the Board otherwise
determines, the existence of such trusts or other arrangements shall be consistent with the
“unfunded” status of the Plan.

     19. Gender and Number. Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine; the plural shall include the singular and the
singular shall include the plural.

     20. Severability. If one or more of the provisions of the Plan is invalidated for any
reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be
separable from the other provisions hereof, and the remaining provisions hereof shall continue to
be valid and fully enforceable.

     21. Governing Law. The interpretation, performance, and enforcement of the Plan shall
be governed by the laws of the State of Delaware, without giving effect to the principles of
conflict of laws thereof and all parties, including their successors and assigns, consent to the
jurisdiction of the state and federal courts of Delaware.

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EXHIBIT
10.2

FORM OF NONQUALIFIED STOCK OPTION AGREEMENT

     This AGREEMENT (this “Agreement”) is made as of         , 2006 by and between HealthMarkets,
Inc. (formerly UICI), a Delaware corporation (the “Company”), and [                    ] (“Optionee”). As
a condition precedent to the Company’s grant of the Options (as defined in Section 2 of this
Agreement) to Optionee, Optionee is executing and delivering a counterpart of the Stockholders
Agreement and thereby agrees to be bound by the Stockholders’ Agreement as a “Management
Stockholder” thereunder.

     1. Certain Definitions. Capitalized terms used, but not otherwise defined, in this
Agreement will have the meanings given to such terms in the Company’s 2006 Management Option Plan
(the “Plan”). As used in this Agreement:

          (a) “Call Right” has the meaning specified in Section 8 of this Agreement.

          (b) “Company” has the meaning specified in the introductory paragraph of this
Agreement.

          (c) “Compensation Committee” means the Executive Compensation Committee of the
Board.

          (d) “Disability” shall mean the Optionee’s incapacity due to physical or mental
illness to substantially perform his duties on a full-time basis for at least 26 consecutive weeks
or an aggregate period in excess of 26 weeks in any one fiscal year, and within 30 days after a
notice of termination is thereafter given by the Company, the Optionee shall not have returned to
the full-time performance of the Optionee’s duties; provided, however, that if the Optionee shall
not agree with a determination to terminate his employment because of Disability, the question of
the Optionee’s Disability shall be subject to the certification of a qualified medical doctor
selected by the Company or its insurers and acceptable to the Optionee or, in the event of the
Optionee’s incapacity to accept a doctor, the Optionee’s legal representative.

          (e) “Effective Time” has the meaning specified in Section 9 hereof.

          (f) “Fair Market Value” shall have the meaning specified in the Stockholders
Agreement.

          (g) “Options” has the meaning specified in Section 2 of this Agreement.

          (h) “Optionee” has the meaning specified in the introductory paragraph of this
Agreement.

          (i) “Option Price” has the meaning specified in Section 2 of this Agreement.

          (j) “Option Shares” has the meaning specified in Section 2 of this Agreement.

          (k) “Performance-Based Tranche” has the meaning specified in Section 2 of this
Agreement.

          (l) “Plan” has the meaning specified in Section 1 of this Agreement.

 

 

          (m) “Employment Agreement” means the separate agreement, dated as of April ___, 2006,
between the Company and Optionee.

          (n) “Termination for Cause” means the termination by the Company or any Subsidiary
of Optionee’s employment with the Company or any Subsidiary as a result of (i) the commission by
Optionee of an act of gross negligence, willful misconduct, fraud, embezzlement, misappropriation
or breach of fiduciary duty against the Company or any of its affiliates or Subsidiaries, or the
conviction of Optionee by a court of competent jurisdiction of, or a plea of guilty or nolo
contendere to, any felony or any crime involving moral turpitude or any crime which reasonably
could affect the reputation of the Company or the Optionee’s ability to perform the duties required
under his employment agreement, if any, with the Company or any Subsidiary, (ii) the commission by
Optionee of a material breach of any of the covenants in his employment agreement, if any, with the
Company or any Subsidiary or the Stockholders Agreement, which breach has not been remedied within
30 days of the delivery to the Optionee by the Board of written notice of the facts constituting
the breach, and which breach if not cured, would have a material adverse effect on the Company, or
(iii) the habitual and willful neglect by Optionee of his obligations under his employment
agreement, if any, with the Company or any Subsidiary or the Optionee’s duties as an employee of
the Company or any Subsidiary.

          (o) “Termination for Good Reason” means the termination by the Optionee of
Optionee’s employment with the Company or any Subsidiary with written notice to the Company within
90 days following the occurrence, without Optionee’s consent, of any of the following events (after
failure of the Company or any Subsidiary to cure in thirty (30) days): (i) the reduction of
Optionee’s position from that of a senior executive level position with the Company or any
Subsidiary, (ii) a decrease in Optionee’s base salary or target annual bonus, other than in the
case of a decrease for a majority of similarly situated executives of the Company or any
Subsidiary, (iii) a reduction in Optionee’s participation in the Company’s or any Subsidiary’s
benefit plans and policies to a level materially less favorable to Optionee, unless such reduction
applies to a majority of the senior level executives of the Company or any Subsidiary, or (iv) the
announcement of the relocation of Optionee’s primary place of employment to a location 50 or more
miles from the current headquarters.

          (p) “Termination Without Cause” means the termination by the Company or any
Subsidiary of Optionee’s employment with the Company or any Subsidiary for any reason other than a
Termination for Cause (other than by reason of Optionee’s death or Disability) and shall include
the Company’s or the Subsidiary’s election not to extend any employment agreement between Optionee
and the Company or any Subsidiary at the end of any employment period.

          (q) “Time-Based Tranche” has the meaning specified in Section 2 of this Agreement.

          (r) “Tranche C Option Shares” has the meaning specified in Section 2 of this
Agreement.

          (s) “Voluntary Termination” means Optionee’s termination of Optionee’s employment
with the Company or any Subsidiary for any reason, other than a Termination for Good Reason.

 

 

     2. Grant of Stock Option. Subject to and upon the terms, conditions, and restrictions
set forth in this Agreement and in the Plan and the Company’s obtaining shareholder approval of the
Plan, the Company hereby grants to Optionee options (the “Options”) to purchase ___shares of the
Company’s Class A-1 Common Stock (the “Option Shares”). The Options may be exercised from time to
time in accordance with the terms of this Agreement. Subject to adjustment as hereinafter
provided,

          (a) one-third of the Option Shares (___shares) may be purchased pursuant to the
Options at a price (the “Option Price”) of $37.00 per share (the “Time-Based Tranche”);

          (b) one-third of the Option Shares (___shares) may be purchased pursuant to the
Options at an Option Price of $37.00 per share (the “Performance-Based Tranche”); and

          (c) one-third of the Option Shares (___shares) (the “Tranche C Option Shares”) may
be purchased pursuant to this Option at an Option Price of (i) $37.00 per share, if Optionee
exercises the option to purchase any Tranche C Option Shares prior to the second anniversary
of the Effective Time; (ii) $40.70 per share, if Optionee exercises the option to purchase
any Tranche C Option Shares on or after the second anniversary of the Effective Time but
prior to the third anniversary of the Effective Time; (iii) $44.77 per share, if Optionee
exercises the option to purchase any Tranche C Option Shares on or after the third
anniversary of the Effective Time but prior to the fourth anniversary of the Effective Time;
(iv) $49.25 per share, if Optionee exercises the option to purchase any Tranche C Option
Shares on or after the fourth anniversary of the Effective Time but prior to the fifth
anniversary of the Effective Time; and (v) $54.17 per share, if Optionee exercises the
option to purchase any Tranche C Option Shares on or after the fifth anniversary of the
Effective Time.

The Options are intended to be nonqualified stock options and shall not be treated as an “incentive
stock option” within the meaning of that term under Section 422 of the Code, or any successor
provision thereto. In the event that shareholder approval of the Plan is not obtained, this Option
shall be void ab initio and of no force and effect.

     3. Term of Options. The term of the Options shall commence at the Effective Time and,
unless earlier terminated in accordance with Section 7 hereof, shall expire ten (10) years from the
Effective Time.

     4. Right to Exercise. Unless terminated as hereinafter provided, the Options shall
become exercisable only as follows:

          (a) The Options shall become exercisable with respect to 20% of the Time-Based
Tranche (___shares) on each of the first five anniversaries of the Effective Time if Optionee
remains in the continuous employ of the Company or any Subsidiary as of each such date.

          (b) The Optionee may earn the right to exercise the option to purchase (i) 25% of
the Performance-Based Tranche (___shares) on the first anniversary of the Effective Time, (ii)
25% of the Performance-Based Tranche (___shares) on the second anniversary of the Effective Time,
(iii) 17% of the Performance-Based Tranche (___shares) on the third anniversary of the Effective
Time, (iv) 17% of the Performance-Based Tranche (___shares) on the fourth anniversary of the
Effective Time and (v) the remaining 16% of the Performance-Based Tranche (___shares) on the
fifth anniversary of the Effective Time, provided, however, that (A) as of each such date Optionee
shall have remained in the continuous employ of the Company or any Subsidiary and (B) the Company
shall have achieved certain specified performance targets (including, without limitation, EBIT, net
income and revenue growth) set by the Compensation Committee after consultation in good faith with
the Chief Executive Officer of the

 

 

Company for such year. Any shares included in the Performance-Based Tranche as to which
Optionee does not earn the right to exercise the related Option Shares shall thereupon expire and
terminate.

          (c) The Options shall become exercisable with respect to (i) 25% of the Tranche C
Option Shares (___shares) on the first anniversary of the Effective Time, (ii) 25% of the Tranche
C Option Shares (___shares) on the second anniversary of the Effective Time, (iii) 17% of the
Tranche C Option Shares (___shares) on the third anniversary of the Effective Time, (iv) 17% of
the Tranche C Option Shares (___shares) on the fourth anniversary of the Effective Time and (v)
the remaining 16% of the Tranche C Option Shares (___shares) on the fifth anniversary of the
Effective Time, provided however, that as of each such date Optionee remains in the continuous
employ of the Company or any Subsidiary.

          (d) Notwithstanding the foregoing, (i) the Options granted hereby shall become
immediately exercisable with respect to all of the Option Shares upon the occurrence of a Change of
Control if Optionee remains in the continuous employ of the Company or any Subsidiary until the
date of the consummation of such Change of Control and (ii) if the Optionee’s employment with the
Company or any Subsidiary terminates for any reason other than a Termination for Cause or a
Voluntary Termination, then (A) the Options shall be exercisable with respect to a number of Option
Shares equal to the sum of (x) the total number of Option Shares that became exercisable pursuant
to Sections 4(a), 4(b) and 4(c) hereof as of the date of Optionee’s termination of employment and
(y) the number of Option Shares that would have become exercisable under the provisions of Sections
4(a), 4(b) and 4(c) hereof if the Optionee had remained in the employ of the Company or any
Subsidiary until the first anniversary of the date of Optionee’s termination of employment with the
Company or any Subsidiary; provided, however, that the number of Option Shares that would have
become exercisable under the provisions of Section 4(b) if the Optionee had remained in the employ
of the Company or any Subsidiary until the first anniversary of the date of Optionee’s termination
of employment with the Company or any Subsidiary will not become exercisable under clause (y) above
if it is apparent, in the reasonable judgment of the Company, that the Company will miss the
performance targets for the fiscal year in which the termination of employment occurs; and (B) and
all other Options shall terminate.

          (e) Optionee shall be entitled to the privileges of ownership with respect to Option
Shares purchased and delivered to Optionee upon the exercise of all or part of the Options.

     5. Option Nontransferable. Optionee may not transfer or assign all or any part of the
Options other than by will or by the laws of descent and distribution. The Options may be
exercised, during the lifetime of Optionee, only by Optionee, or in the event of Optionee’s legal
incapacity, by Optionee’s guardian or legal representative acting on behalf of Optionee in a
fiduciary capacity under state law and court supervision.

     6. Notice of Exercise; Payment.

          (a) To the extent then exercisable, the Option may be exercised in whole or in part
by written notice to the Company stating the number of Option Shares for which the Options are
being exercised and the intended manner of payment. The date of such notice shall be the exercise
date. Except as otherwise provided in Section 24, payment equal to the aggregate Option Price of
the Option Shares being purchased pursuant to an exercise of the Options must be tendered in full
with the notice of exercise to the Company in one or a combination of the following methods as
specified by Optionee in the notice of exercise: (i) cash in the form of currency or check or by
wire transfer as directed by the Company, (ii) solely following an IPO or shares of the Company’s
Class A-1 Common Stock otherwise being traded on an established securities market, through the
surrender to the Company of shares of Class A-1 Common

 

 

Stock owned by Optionee for at least six months as valued at their Fair Market Value on the
date of exercise or (iii) through such other form of consideration as is deemed acceptable by the
Board.

          (b) As soon as practicable upon the Company’s receipt of Optionee’s notice of
exercise and payment, the Company shall direct the due issuance of the Option Shares so purchased.

          (c) As a further condition precedent to the exercise of the Options in whole or in
part, Optionee shall comply with all regulations and the requirements of any regulatory authority
having control of, or supervision over, the issuance of the shares of Class A-1 Common Stock and in
connection therewith shall execute any documents which the Board shall in its sole discretion deem
necessary or advisable.

     7. Termination of Agreement. The Agreement and the Options granted hereby shall
terminate automatically and without further notice on the earliest of the following dates:

          (a) following Optionee’s termination due to Optionee’s death, Disability,
Termination for Good Reason or Termination Without Cause by the Company, the earlier of (i) one (1)
year following the Optionee’s date of termination or (ii) the remaining term of the Option;
provided, however, that it shall be a condition to the exercise of the Options in the event of
Optionee’s death that the Person exercising the Options shall (i) have agreed in a form
satisfactory to the Company to be bound by the provisions of this Agreement and the Stockholders
Agreement and (ii) comply with all regulations and the requirements of any regulatory authority
having control of, or supervision over, the issuance of the shares of Class A-1 Common Stock and in
connection therewith shall execute any documents which the Board shall in its sole discretion deem
necessary or advisable;

          (b) after Optionee’s Voluntary Termination the earlier of (i) ninety (90) calendar
days following the Optionee’s date of termination or (ii) the remaining term of the Options;

          (c) The date of Optionee’s Termination for Cause; or

          (d) Ten (10) years from the Effective Time.

In the event that Optionee’s employment is terminated in the circumstances described in Section
7(c) hereof, this Agreement shall terminate at the time of such termination notwithstanding any
other provision of this Agreement and the Options will cease to be exercisable to the extent
exercisable as of such termination and will not be or become exercisable after such termination.
Optionee shall be deemed to be an employee of the Company or any Subsidiary if on a leave of
absence approved by the Board.

     8. Call Right. Upon termination of Optionee’s employment for any reason prior to an
IPO, the Company will have the right to purchase (the “Call Right”) any Option Shares that Optionee
received pursuant to the terms and conditions set forth in Article VI Call Rights of the
Stockholders Agreement.

     9. Effective Time. The Options granted hereby shall be and become effective (the
“Effective Time”) upon the last to occur of each of the following:

          (a) An executed counterpart of this Agreement shall be delivered to the Company by
the Optionee; and

          (b) The Plan shall have been approved by the Board of Directors of the Company.

 

 

     10. Initial Public Offering. Option Shares acquired on exercise of any Option will be
subject to the terms and conditions of the Stockholders’ Agreement. The Company and Optionee
acknowledge that they will agree to provide the Company with the right to require Optionee and
other executives of the Company or any Subsidiary to waive any registration rights with regard to
such Option Shares upon an IPO, in which case the Company will implement an IPO bonus plan in cash,
stock or additional options to compensate for Optionee’s and the other executives’ loss of
liquidity.

     11. No Employment Contract. Nothing contained in this Agreement shall (a) confer upon
Optionee any right to be employed by or remain employed by the Company or any Subsidiary, or (b)
limit or affect in any manner the right of the Company or any Subsidiary to terminate the
employment or adjust the compensation of Optionee.

     12. Taxes and Withholding. The Company or any Subsidiary may withhold, or require
Optionee to remit to the Company or any Subsidiary, an amount sufficient to satisfy federal, state,
local or foreign taxes (including the Optionee’s FICA obligation) in connection with any payment
made or benefit realized by Optionee or other person under this Agreement or otherwise, and the
amounts available to the Company or any Subsidiary for such withholding are insufficient, it shall
be a condition to the receipt of such payment or the realization of such benefit that Optionee or
such other person make arrangements satisfactory to the Company or any Subsidiary for payment of
the balance of such taxes required to be withheld. The Company or any Subsidiary may elect to have
such withholding obligation satisfied by having Optionee surrender to the Company or any Subsidiary
a portion of the Option Shares that is issued or transferred to Optionee upon the exercise of an
Option (but only to the extent of the minimum withholding required by law), and the Option Shares
so surrendered by Optionee shall be credited against any such withholding obligation at the Fair
Market Value of such shares on the date of such surrender.

     13. Compliance with Law. The Company shall make reasonable efforts to comply with all
applicable federal and state securities laws; provided, however, that notwithstanding any other
provision of this Agreement, the Options shall not be exercisable if the exercise thereof would
result in a violation of any such law.

     14. Adjustments. The Board may make or provide for such substitution or adjustments
in the number of Option Shares covered by the Options, in the Option Price applicable to such
Options, the Maximum Price (as defined in Section 24), and in the kind of shares covered thereby
and/or such other equitable substitution or adjustments as the Board may determine to prevent
dilution or enlargement of Optionee’s rights that otherwise would result from (a) any stock
dividend, extraordinary or special cash-dividend, stock split, combination of shares,
recapitalization, or other change in the capital structure of the Company, (b) any merger,
consolidation, spin-off, split-off, spin-out, split-up, reclassification, reorganization, partial
or complete liquidation, or other distribution of assets or issuance of rights or warrants to
purchase securities, or (c) any other corporate transaction or event having an effect similar to
any of the foregoing. Such substitutions and adjustments may include, without limitation,
canceling any and all Options in exchange for cash payments equal to the excess, if any, of the
value of the consideration paid to a shareholder of an Option Share over the Option Price per share
subject to such Option in connection with such an adjustment event.

     15. Relation to Other Benefits. Any economic or other benefit to Optionee under this
Agreement shall not be taken into account in determining any benefits to which Optionee may be
entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by
the Company or any Subsidiary and shall not affect the amount of any life insurance coverage
available to any beneficiary under any life insurance plan covering employees of the Company or any
Subsidiary.

 

 

     16. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this
Agreement to the extent that the amendment is applicable hereto; provided, however, that no
amendment shall adversely affect the rights of Optionee under this Agreement without Optionee’s
written consent.

     17. Severability. If one or more of the provisions of this Agreement is invalidated
for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed
to be separable from the other provisions hereof, and the remaining provisions hereof shall
continue to be valid and fully enforceable.

     18. Relation to Plan. This Agreement is subject to the terms and conditions of the
Plan. In the event of any inconsistent provisions between this Agreement and the Plan, the Plan
shall govern. The Board acting pursuant to the Plan, as constituted from time to time, shall,
except as expressly provided otherwise herein, have the right to determine any questions which
arise in connection with the Option or its exercise.

     19. Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and
assigns of Optionee, and the successors and assigns of the Company.

     20. Governing Law. The interpretation, performance, and enforcement of this Agreement
shall be governed by the laws of the State of Delaware, without giving effect to the principles of
conflict of laws thereof and all parties, including their successors and assigns, consent to the
jurisdiction of the state and federal courts of Delaware.

     21. Prior Agreement. As of the Effective Time, this Agreement supersedes any and all
prior and/or contemporaneous agreements, either oral or in writing, between the parties hereto, or
between either or both of the parties hereto and the Company, with respect to the subject matter
hereof, including, without limitation, the Employment Agreement. Each party to this Agreement
acknowledges that no representations, inducements, promises, or other agreements, orally or
otherwise, have been made by any party, or anyone acting on behalf of any party, pertaining to the
subject matter hereof, which are not embodied herein, and that no prior and/or contemporaneous
agreement, statement or promise pertaining to the subject matter hereof that is not contained in
this Agreement shall be valid or binding on either party.

     22. Notices. For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or permitted to be given
hereunder will be in writing and will be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof confirmed), or five business
days after having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the
Company (to the attention of the Secretary of the Company) at its principal executive offices and
to Optionee at his principal residence, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of changes of address shall be
effective only upon receipt.

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

     24. Tandem Option. Notwithstanding any other provision of this Agreement to the
contrary, in the event that the Compensation Committee grants to the Optionee an option on the same

 

 

terms and conditions as the Option granted hereunder (with the term and vesting provisions of
such option commencing as of the date of grant of this Option) except with an exercise price per
share (other than shares issuable upon exercise of options corresponding to the Options granted
pursuant to Sections 2(c)(ii), (iii), (iv) and (v), which shall have an exercise price per share
equal to the exercise prices set forth in Sections 2(c)(ii), (iii), (iv) and (v) hereof) equal to
the then-current Fair Market Value of a share of Class A-1 Common Stock on the date of grant of
such option (a “Tandem Option”), (a) the maximum amount per Option Share that may be derived upon
the exercise of the Option granted hereunder or upon the cancellation of the Option pursuant to
Section 14 of this Agreement shall be equal to the exercise price per share of Class A-1 Common
Stock subject to the Tandem Option (the “Maximum Price”), provided that if the Fair Market Value
(and therefore the exercise price per share of the Tandem Option) is equal to $37 on the date of
grant of the Tandem Option, this Option shall be cancelled without the payment of any consideration
therefor and (b) any exercise of the Option shall be on a “net-share” basis. Any exercise of the
Tandem Option shall be deemed to be an exercise of the corresponding number and type of Option
Shares granted hereunder and any exercise of the Option granted hereunder shall be deemed to be an
exercise of the corresponding number and type of shares subject to the Tandem Option.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its
duly authorized officer and Optionee has executed this Agreement, as of the day and year first
above written.

	 	 	 	 	 
	 	 	HealthMarkets, Inc.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	 	 	 
	 

	 	OPTIONEE	 
	 

	 	Name:

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