THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

HealthSpring, Inc. (HS)

4/28/2006 Proxy Information

Recapitalization

On March 1, 2005, we consummated the recapitalization of our predecessor, pursuant to which the GTCR Funds acquired stock in, and obtained voting control of, the Company. Certain of the agreements relating to the recapitalization transaction are described below.

Stock Purchase Agreement; Purchase and Exchange Agreement. Pursuant to the stock purchase agreement entered into by the Company in connection with the recapitalization transaction, the GTCR Funds and certain other investors, including certain of our directors and executive officers, purchased an aggregate of 136,072 shares of our preferred stock and 18,237,587 shares of our common stock for an aggregate purchase price of approximately $139.7 million. Pursuant to the stock purchase agreement, among other transactions:

• The GTCR Funds purchased 130,569 shares of preferred stock and 17,500,000 shares of common stock for a purchase price of $134.1 million;

• Martin S. Rash, a director, purchased 487 shares of preferred stock and 65,265 shares of common stock for a purchase price of $500,000;

• Kevin M. McNamara, who subsequently became an executive officer, purchased 243 shares of preferred stock and 32,633 shares of common stock for a purchase price of $250,000;

• J. Gentry Barden, who subsequently became an executive officer, purchased 49 shares of preferred stock and 6,527 shares of common stock for a purchase price of $50,000; and

• David L. Terry, Jr., an executive officer, purchased 77 shares of preferred stock and 10,369 shares of common stock for a purchase price of $79,438.

Pursuant to the purchase and exchange agreement, dated November 10, 2004, entered into in connection with the recapitalization by GTCR, our predecessor NewQuest, LLC, the members of NewQuest, LLC, the Company, and NewQuest, Inc., a wholly-owned subsidiary of the Company, the members of NewQuest, LLC exchanged or sold their ownership interests in NewQuest, LLC for an aggregate of $295.4 million in cash (including $17.2 million placed in escrow to secure contingent post-closing indemnification liabilities), 91,082 shares of preferred stock, and 12,207,631 shares of common stock of HealthSpring. The table below lists with respect to each of our directors, executive officers, and 5% or greater stockholders (including persons or entities related to the director, executive officer, or stockholder) who participated in the recapitalization: (a) the number of NewQuest, LLC membership units contributed to HealthSpring, (b) the number of shares of preferred and common stock of HealthSpring received in connection with the contribution, (c) the number of NewQuest, LLC membership units sold to HealthSpring, and (d) the aggregate cash value of the membership units sold to HealthSpring, as part of the recapitalization. (See page 21 of proxy for table).

Stockholders Agreement. Each of our stockholders prior to the IPO was a party to a stockholders agreement dated March 1, 2005. That agreement was amended and restated effective upon the completion of the IPO. Under the amended and restated stockholders agreement, each share of our capital stock beneficially owned by our pre-IPO stockholders, other than shares held by the GTCR Funds, is generally subject to certain restrictions on transfer, other than certain permitted transfers described in the stockholders agreement.

The amended and restated stockholders agreement also provides:

• that we will nominate, and the stockholders party thereto will vote their shares for, two representatives designated by GTCR Funds for election as directors until such time as the GTCR Funds hold less than 15% of the outstanding shares of common stock of the Company; and thereafter one representative designated by GTCR until such time as the GTCR Funds hold less than 10% of the outstanding shares of common stock of the Company;

• that the GTCR Funds will have the right to designate one of their director designees to serve on each of the committees established by our board of directors, except if prohibited by applicable law or the NYSE rules, until such time as the GTCR Funds hold less than 15% of the outstanding shares of common stock of the Company; and

• that the GTCR Funds must consent to any equity or equity based awards to our executive officers, until such time as the GTCR Funds hold less than 15% of the outstanding shares of common stock of the Company.

Professional Services Agreement. Under the professional services agreement, dated March 1, 2005, between HealthSpring, NewQuest, Inc. and GTCR Golder Rauner II, LLC, HealthSpring engaged GTCR Golder Rauner II, LLC as a financial and management consultant. Two of our directors, Messrs. Nolan and Timm, are affiliated with GTCR Golder Rauner II, LLC. During the term of its engagement, GTCR Golder Rauner II, LLC agreed to consult on business and financial matters, including corporate strategy, budgeting of future corporate investments, acquisition and divestiture strategies and debt and equity financings for an annual management fee of $500,000, payable in equal monthly installments, and reimbursement for certain related expenses. GTCR Golder Rauner II, LLC, an affiliate of the GTCR Funds, was paid an aggregate of $458,337 under this agreement in management fees and related expenses through the termination of this agreement upon the completion of the IPO. Additionally, GTCR Golder Rauner II, LLC was paid a placement fee of approximately $1.34 million under the professional services agreement in connection with the sale of our securities in connection with the recapitalization in 2005.

Conversion of Phantom Membership Units of NewQuest, LLC. Our predecessor, NewQuest, LLC, entered into phantom membership agreements for the benefit of certain of its employees, including a number of our past and current officers and directors. The phantom membership agreements provided for cash payments to the holders upon the occurrence of a change in control of NewQuest, LLC or an initial public offering. If a change in control or an initial public offering did not occur within ten years of the date of the phantom membership agreements, such agreements expired without any consideration required to be paid to the holders. In connection with the recapitalization, the holders of phantom membership agreements entered into agreements converting their phantom membership units into NewQuest, LLC series D membership units and canceling their rights under the phantom membership agreements, in each case effective as of December 31, 2004. The conversion ratio, and value of the new NewQuest, LLC membership interests, was determined based on the value of NewQuest, LLC implied by the recapitalization.

As part of the conversion and cancellation of the phantom membership agreements, NewQuest, LLC loaned each holder of phantom membership units an amount sufficient to pay the estimated federal and state tax liability of the phantom unit holder as a result of the conversion (which was based on an estimated marginal tax rate of approximately 36%). These loans, in the form of promissory notes, accrued interest at the applicable federal rate, were secured by a pledge of the Series D membership units received upon conversion and were paid in full at the closing of the recapitalization on March 1, 2005. At the time of the conversion, the Company also paid each former phantom member an amount equal to the accrued interest, grossed-up to cover related withholding taxes, estimated to be payable with respect to the promissory notes from January 1, 2005 through the anticipated closing of the recapitalization. At the closing of the recapitalization, the former phantom members were paid an additional amount designed to compensate them for (a) the amounts, if any, that would have been received had the conversion occurred at March 1, 2005 instead of December 31, 2004 and (b) the accrued interest, grossed-up to cover related withholding taxes, payable with respect to the promissory notes in excess of the estimated interest paid upon the conversion. The series D membership units issued in connection with the conversion were either sold to us for cash or contributed to us in exchange for shares of our preferred and common stock as part of the recapitalization under the purchase and exchange agreement described above.

The following table lists, for our directors and executive officers who held NewQuest, LLC phantom membership units: (a) the aggregate number of phantom membership units held by such person at the time of the conversion; (b) the number of series D membership units received upon conversion of the phantom membership units; (c) the aggregate value of the series D membership units sold or contributed to us in connection with the recapitalization; (d) the aggregate amount of the loan made to each person in connection with the conversion; and (e) the aggregate amount of the grossed-up interest payments and additional amounts such person was entitled to receive upon the conversion and the closing of the recapitalization. (See page 22 of proxy for table).

RPO Relationship

Renaissance Physician Organization, or RPO, is a Texas non-profit corporation the members of which are GulfQuest L.P., one of our wholly owned HMO management subsidiaries, and 13 affiliated independent physician associations. Herbert A. Fritch, our President and Chief Executive Officer, serves as president of RPO, but does not receive any compensation from RPO. Dr. Pasquale Pingitore, our Senior Vice President and Chief Medical Officer, served as chief medical officer of RPO, without compensation, through December 2005. Our Texas HMO, Texas HealthSpring, LLC, has contracted with RPO to provide professional medical and covered medical services and procedures to members of our Medicare Advantage plan. Pursuant to that agreement, RPO shares risk relating to the provision of such services, both upside and downside, with the Company on an equal allocation. Another agreement we have with RPO delegates responsibility to our GulfQuest subsidiary for medical management, claims processing, provider relations, credentialing, finance, and reporting services for RPO’s Medicare and commercial members. Pursuant to that agreement, GulfQuest receives a management fee, calculated as a percentage of Medicare premiums, plus a dollar amount per member per month for RPO’s commercial members, plus 25% of the profits from RPO’s operations. Both agreements have a ten year term that expires on December 31, 2014 and automatically renew for additional one to three year terms thereafter, unless notice of non-renewal is given by either party at least 180 days prior to the end of the then-current term. The agreements also contain certain restrictions on our ability to enter into agreements with physician networks in certain counties where RPO provides services. Likewise, RPO is subject to restrictions regarding providing coverage in plans competitive with our Texas HMO’s Medicare Advantage plan.

For the years ended December 31, 2004 and 2005, RPO paid GulfQuest management and other fees of approximately $10.4 million and $13.4 million, respectively. In addition, Texas HealthSpring, LLC paid RPO approximately $53.8 million and $78.6 million in 2004 and 2005, respectively.

In connection with certain agreements made by RPO and its related physician groups as a condition to the recapitalization, the Company and RPO agreed to the potential issuance to RPO of approximately 1% of the common equity in the Company following the recapitalization. It was understood and agreed that this equity would be issued based on RPO achieving certain performance goals over the five year period following the recapitalization. The Company and RPO subsequently engaged in negotiations concerning this commitment, including discussions regarding a settlement of our obligation by a cash payment to RPO which would eliminate the future performance requirements. We settled this obligation in its entirety for $4.0 million in February 2006.