EXHIBIT 10.1
EXECUTION VERSION
STOCK AND WARRANT
PURCHASE AGREEMENT
by and between
CONSECO, INC.
and
PAULSON & CO. INC.
October 13, 2009

 

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CONSECO, INC.
STOCK AND WARRANT PURCHASE AGREEMENT
     This Stock and Warrant Purchase Agreement (this “Agreement”) is made as of
October 13, 2009, by and between Conseco, Inc., a Delaware corporation (the
“Company”), and Paulson & Co. Inc., a Delaware corporation, on behalf of the
several investment funds and accounts managed by it (“Purchaser”).
RECITALS
     WHEREAS, the Company desires to issue and sell and Purchaser desires to
purchase certain shares of the Company’s common stock, par value $0.01 per share
(the “Company Common Stock”), and warrants to purchase shares of Company Common
Stock, in each case on the terms set forth herein;
     WHEREAS, prior to the date of this Agreement, the New York Stock Exchange
(the “NYSE”) has agreed to grant the Company an exemption from the shareholder
approval requirements of Section 312 of the NYSE Listed Company Manual with
respect to the transactions contemplated by this Agreement (the “NYSE
Exemption”); and
     WHEREAS, simultaneously with the Closing hereunder, the Company and
Purchaser intend to enter into an Investor Rights Agreement in substantially the
form attached hereto as Exhibit A (the “Investor Rights Agreement” and together
with the Warrants (as defined below) and this Agreement, the “Transaction
Documents”).
     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
SECTION 1
Agreement to Sell and Purchase
     Subject to the terms and conditions hereof, Purchaser agrees to purchase
from the Company and the Company agrees to sell and issue to the Purchaser, on
the Closing Date, 16,400,000 shares (the “Shares”) of Company Common Stock and
warrants to purchase 5,000,000 shares of Company Common Stock in the aggregate
in substantially the form and subject to the terms set forth in Exhibit B hereto
(the “Warrants” and together with the Shares, the “Securities”) for an aggregate
purchase price payable by Purchaser for the Securities (the “Purchase Price”)
equal to $77,900,000 (such issuance, sale and purchase of the Securities, along
with the other commitments by each party to the other set forth in this
Agreement, the “Transaction”).
SECTION 2
Closing, Delivery and Payment
     2.1 Closing. The closing (the “Closing”) of the purchase and sale of the
Securities shall take place at the offices of Simpson Thacher & Bartlett LLP,
425 Lexington

 

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Avenue, New York, New York, at 10:00 a.m., local time on (i) the first Business
Day (as defined below) upon which each of the conditions set forth in Section 8
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions) are
waived or fulfilled or (ii) such other date and time as the parties hereto may
mutually agree. The date on which the Closing occurs is referred to herein as
the “Closing Date.” For purposes of this Agreement, a “Business Day” shall mean
any day that is not a Saturday, Sunday or other day in which banks in the State
of Indiana or the State of New York are authorized or required by law to be
closed.
     2.2 Delivery. At the Closing, subject to the terms and conditions hereof,
the Company will deliver to Purchaser (i) a certificate or certificates
evidencing the Shares and (ii) the Warrants, in each case registered in such
names and denominations as set forth in the instructions of Purchaser provided
to the Company at least three (3) Business Days in advance of the Tender Offer
Closing free and clear of any liens or other encumbrances (other than those
placed thereon by or on behalf of Purchaser and subject to any restrictions on
resale in accordance with applicable law or the provisions of the Investor
Rights Agreement) and Purchaser will make payment to the Company of the Purchase
Price, by wire transfer of immediately available funds to an account designated
in writing by the Company at least three (3) Business Days in advance of the
Tender Offer Closing. Purchaser and the Company shall execute a cross receipt
acknowledging receipt of the Securities and the Purchase Price, respectively.
     2.3 Anti-Dilution. If, between the date of this Agreement and the Closing
Date, the outstanding shares of Company Common Stock shall have been changed
into or exchanged for a different number or kind of shares or securities as a
result of any reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other substantially similar
transaction (a “Recapitalization”), a reasonable, appropriate and proportionate
adjustment shall be made to the number of Shares, the number of shares of Common
Stock subject to, or the exercise price reflected in, the Warrants, and, as
applicable, to the Purchase Price, as the case may be, for the Shares, to the
extent that such Recapitalization is consistent with the covenants of the
Company contained in this Agreement and subject to such anti-dilution
adjustments being reasonably acceptable to the Purchaser.
SECTION 3
Representations and Warranties of the Company
     Except (i) as otherwise disclosed or incorporated by reference and readily
apparent in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, its Quarterly Report on Form 10-Q for the quarter ended
March 30, 2009, its Quarterly Report on Form 10-Q for the quarter ended June 30,
2009, each Current Report on Form 8-K of the Company filed after June 30, 2009
and prior to the date hereof (in each case, including any supplements or
amendments thereto) and the Current Report on Form 8-K of the Company regarding
certain accounting matters to be filed the date hereof, a draft of which has
been provided to Purchaser (the “2009 Reports”) or (ii) as disclosed on
Schedule 3 hereto, the Company hereby represents and warrants to Purchaser, as
of the date hereof and as of the Closing, as follows:

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     3.1 Organization and Standing. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction where the ownership or operation
of its assets or properties or conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect (as defined below). As used in this Agreement, a “Material
Adverse Effect” means any effect, circumstance, occurrence or change that is
material and adverse to the business, assets, results of operations or financial
condition of the Company and Company Subsidiaries (as defined below), taken as a
whole, or the legality, validity or enforceability of this Agreement or the
Company’s ability to perform any of its obligations under this Agreement in
substantially the manner set forth herein; provided, however, that Material
Adverse Effect shall not be deemed to include (A) any effects, circumstances,
occurrences or changes generally affecting the insurance industry, the economy,
or the financial, real estate, securities or credit markets in the United
States, including effects on such industry, economy or markets resulting from
any regulatory or political conditions or developments, or any outbreak or
escalation of hostilities, declared or undeclared acts of war or terrorism,
(B) changes in generally accepted accounting principles in the United States
(“GAAP”), (C) changes in laws governing financial institutions and laws of
general applicability or related policies or interpretations of any Governmental
Authority), (in the case of each of clause (A), (B) and (C), other than effects,
circumstances, occurrences or changes that arise after the date of this
Agreement but before the Closing to the extent that such effects, circumstances,
occurrences or changes have a materially disproportionate adverse effect on the
Company and Company Subsidiaries relative to other companies in the insurance
industry), or (D) changes in the market price or trading volume of Company
Common Stock (it being understood and agreed that the exception set forth in
this clause (D) does not apply to the underlying reason or cause giving rise to
or contributing to any such change).
     (b) Each Company Subsidiary is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization or incorporation.
Each Company Subsidiary is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction where the ownership or operation
of its assets or properties or conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect. The Company has delivered to Purchaser a true and complete list
as of the date hereof of each Company Subsidiary that conducts insurance
operations (“Company Insurance Subsidiaries”), identifying the states or
jurisdictions where such Company Insurance Subsidiaries are domiciled or
“commercially domiciled” for insurance regulatory purposes. As used in this
Agreement, “Company Subsidiary” means any person of which at least a majority of
the securities or ownership interests having by their terms ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions is directly or indirectly owned or controlled by the Company
or by one or more of its Company Subsidiaries; and “person” means an individual,
corporation, limited liability company, partnership, association, trust,
unincorporated organization, other entity or group (as defined in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).

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     3.2 Company Capital Stock.
          (a) As of the date hereof, the authorized capital stock of the Company
consists solely of 8,000,000,000 shares of Company Common Stock, of which
184,886,216 shares are issued and outstanding (excluding 677,500 shares of
unvested restricted stock), and 265,000,000 shares of preferred stock, par value
$0.01 per share, none of which are issued and outstanding. As of the date
hereof, 8,615,150 shares of Company Common Stock are issuable upon the exercise
of outstanding options to acquire such shares, 1,475,525 shares of Company
Common Stock are issuable pursuant to unvested performance share units and there
are 677,500 outstanding shares of unvested restricted stock. Each outstanding
option to acquire Company Common Stock was granted with an exercise price per
share equal to or greater than the per share fair market value (as such term is
used in Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”), and the Department of Treasury regulations and other interpretive
guidance issued thereunder) of the Company Common Stock underlying such option
on the grant date thereof and was otherwise issued in compliance with applicable
laws. The outstanding shares of Company Common Stock have been duly authorized
and are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws and are not subject to
preemptive rights (and were not issued in violation of any preemptive rights).
Except for (a) the Company’s 3.50% Convertible Debentures due September 30, 2035
(the “Convertible Debentures”), issued pursuant to an Indenture, dated as of
August 15, 2005, between the Company and The Bank of New York Trust Company,
N.A., as trustee (as may be amended from time to time, the “Indenture”), (b) the
Section 382 Rights Agreement, dated as of January 20, 2009, between the Company
and American Stock Transfer & Trust Company, LLC (the “382 Rights Agreement”),
(c) the Amended and Restated Long Term Incentive Plan of the Company and equity
awards granted thereunder, (d) the Purchase Agreement between the Company and
Morgan Stanley & Co., Incorporated, dated as of the date of this Agreement,
pursuant to which Morgan Stanley has agreed to purchase up to $293 million in
aggregate principal amount of the Company’s 7% Convertible Senior Debentures due
2016 (the “Purchase Agreement”), (e) the Indebtedness issued pursuant to the
Company Refinancing (as defined below) and (f) the Warrants, neither the Company
nor any Company Subsidiary has, and none is bound by, (i) any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase, repurchase, redemption or other acquisition
of, or issuance of, or securities or rights convertible into or exchangeable
for, any shares of capital stock of the Company or any securities representing
the right to purchase or otherwise receive any shares of capital stock of the
Company (including any rights plan or agreement), (ii) any right of first
refusal or offer, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by this Agreement, (iii) any
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock, nor does, to the knowledge of the
Company, any such agreement exist between or among any of the Company’s
stockholders, (iv) any obligation to issue shares of Company Common Stock or
other securities to any person (other than the Purchaser), (v) any obligation
to, as a result of the issuance and the sale of the Securities, adjust (whether
automatically or otherwise) the exercise, conversion, exchange or reset price
under any Company securities.

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          (b) Each of the Shares, the Warrants and the shares of Company Common
Stock issuable upon exercise of the Warrants have been duly authorized by all
necessary corporate action on the part of the Company and, when issued and paid
for in accordance with this Agreement and, as applicable, the terms of the
Warrants, will be duly and validly issued, fully paid and nonassessable, free
and clear of all liens, other than restrictions on transfer provided for by
applicable federal and state securities laws and the Transaction Documents and
liens imposed by or through the Purchasers.
     3.3 Subsidiaries. The names, jurisdictions of organization and authorized
and issued capital stock and other equity and voting interests of all Company
Subsidiaries are set forth on Schedule 3.3. Except as set forth on Schedule 3.3
hereto, the Company owns, directly or indirectly, all of the capital stock or
other equity or voting interests of each Company Subsidiary free and clear of
any liens (other than pursuant to the Credit Agreement, as defined below) and
all the issued and outstanding shares of capital stock or other equity or voting
interests of each Company Subsidiary have been duly authorized and validly
issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities. No Company Subsidiary owns any
shares of Company Common Stock. There are no outstanding options, warrants,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to subscribe for
or acquire, any shares of capital stock or other equity or voting interests of
any Company Subsidiary, or contracts, commitments, understandings or
arrangements by which the Company or any Company Subsidiary is or may become
bound to issue additional shares of capital stock or other equity or voting
interests of any Company Subsidiary or any securities convertible into or
exercisable or exchangeable for shares of capital stock or other equity or
voting interests of any Company Subsidiary. There are no outstanding agreements
of any kind which obligate the Company or any Company Subsidiaries to
repurchase, redeem or otherwise acquire any capital stock or other equity or
voting interests of any Company Subsidiary.
     3.4 Corporate Power. The Company and each Company Subsidiary has all
requisite power and authority (corporate and otherwise) to carry on its business
as it is now being conducted and to own, lease or operate all its properties and
assets; and the Company has all requisite corporate power and authority and has
taken all corporate action necessary in order to execute, deliver and perform
its obligations under the Transaction Documents and to consummate the
Transaction. Neither the Company nor any Company Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, certificate of designations, bylaws or charter documents.
     3.5 Corporate Authority. This Agreement and the Transaction, including the
issuance of the Shares, the Warrants, and any shares of Company Common Stock
issuable upon exercise of the Warrants, have been, and the other Transaction
Documents when delivered hereunder will have been, duly authorized by all
necessary corporate action of the Company and the board of directors of the
Company (the “Company Board”). This Agreement has been, and the other
Transaction Documents when delivered hereunder will have been, duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery of this Agreement by Purchaser, this Agreement is, and the other
Transaction Documents when delivered hereunder will be, valid and legally

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binding agreements of the Company, enforceable against the Company in accordance
with their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general applicability
relating to or affecting creditors’ rights or to general equity principles.
     3.6 Regulatory Approvals; No Violations. (a) Assuming the accuracy of
Purchaser’s representations and warranties set forth in Sections 4.1, 4.2 and,
solely as this representation relates to requirements under the
Hart-Scott-Rodino Act of 1976, as amended (the “HSR Act”), 4.7, no consents,
approvals, permits, orders or authorizations of, exemptions, reviews or waivers
by, or notices, reports, filings, declarations or registrations with, any
federal, state or local court, governmental, legislative, judicial,
administrative or regulatory authority, agency, commission, body or other
governmental entity or self regulatory organization or stock exchange (each, a
“Governmental Authority”) or of, by or with any other third party are required
to be made or obtained by the Company or any Company Subsidiary in connection
with the execution, delivery and performance by the Company of this Agreement,
or, when delivered hereunder, the other Transaction Documents, or the
consummation of the Transaction, except for (A) forms, filings, registrations,
submissions, statements, certifications, reports and documents required to be
filed or furnished by the Company with the U.S. Securities and Exchange
Commission (the “SEC”) after the date hereof under the Exchange Act or the
Securities Act of 1933, as amended (the “Act”), (B) a supplemental listing
application and supporting documents required to be filed with the NYSE in
respect of the Shares and the shares of Common Stock reserved in respect of the
Warrants, and (C) any securities or “blue sky” filings of any state.
     (b) The execution, delivery and performance of this Agreement by the
Company does not, and the execution, delivery and performance of the other
Transaction Documents when delivered hereunder, and the consummation by the
Company of the Transaction, the Company Refinancing and the Public Offering,
will not, (A) constitute or result in a breach or violation of, or a default
under, the acceleration of any obligations or penalties or the creation of any
charge, mortgage, pledge, security interest, restriction, claim, lien, equity,
encumbrance or any other encumbrance or exception to title of any kind on the
assets of the Company or any Company Subsidiaries (with or without notice, lapse
of time, or both) pursuant to, agreements binding upon the Company or any
Company Subsidiary or to which the Company or any Company Subsidiary or any of
their respective properties is subject or bound or any law, regulation, judgment
or governmental or non-governmental permit or license to which the Company or
any Company Subsidiary or any of their respective properties is subject,
(B) constitute or result in a breach or violation of, or a default under, the
certificate of incorporation of the Company, as amended, or the bylaws of the
Company or (C) require any consent or approval or notice or other filing under
any such agreement except, in the case of clauses (A) or (C) above, for any
breach, violation, default, acceleration, creation, change, consent or approval
that, individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect.
     (c) As of the date of this Agreement, after giving effect, pro forma, to
the Transaction and the other transactions contemplated hereby, the Company
Refinancing and the Public Offering, the Company is in compliance with the
covenants set forth in Sections 7.11, 7.12, 7.14, 7.15, 7.16 and 7.17 of the
Credit Agreement as of September 30, 2009.

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     3.7 No Brokers. Neither the Company nor any Company Subsidiary nor any of
their respective officers, directors, employees, agents or representatives has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders or similar fees in connection with the Transaction, other
than fees and expenses payable to Morgan Stanley & Co. pursuant to an engagement
letter, which fees have been previously disclosed to Purchaser.
     3.8 Company Reports; Financial Statements. Except as set forth on
Schedule 3.8 hereto:
          (a) The Company, and each Company Subsidiary has filed or furnished,
as applicable, all forms, filings, registrations, submissions, statements,
certifications, reports and documents required to be filed or furnished by it
with the SEC under the Exchange Act or the Act since December 31, 2006 (the
forms, statements, reports and documents filed or furnished since December 31,
2006 and through the date hereof, including any amendments thereto, the “Company
Reports”). Each of the Company Reports, at the time of its filing or being
furnished complied, or if not yet filed or furnished, will comply, in all
material respects with the applicable requirements of the Act and the Exchange
Act, and any rules and regulations promulgated thereunder applicable to the
Company Reports. As of their respective dates (or, if amended prior to the date
hereof, as of the date of such amendment), the Company Reports did not, and any
Company Reports filed or furnished with the SEC subsequent to the date hereof
will not, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading.
          (b) The Company’s consolidated financial statements (including, in
each case, any notes thereto) contained in the Company Reports, were or will be
prepared (i) in accordance with GAAP applied on a consistent basis throughout
the periods indicated (except as may be indicated in the notes thereto or, in
the case of interim consolidated financial statements, where information and
footnotes contained in such financial statements are not required under the
rules of the SEC to be in compliance with GAAP) and (ii) in compliance as to
form, as of their respective date of filing with the SEC, in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, and in each case such
consolidated financial statements fairly presented, in all material respects,
the consolidated financial position, results of operations, changes in
stockholder’s equity and cash flows of the Company and the consolidated Company
Subsidiaries as of the respective dates thereof and for the respective periods
covered thereby (subject, in the case of unaudited statements, to normal
year-end adjustments which were not and which are not expected to be,
individually or in the aggregate, material to the Company and its consolidated
Company Subsidiaries taken as a whole).
          (c) The audited balance sheets of each of the Company Insurance
Subsidiaries as of December 31, 2006, 2007, and 2008 and the related statements
of income, surplus and cash flows for the years thus ended, and their respective
annual statements for the fiscal years ended December 31, 2006, 2007, and 2008
(the “Insurance Subsidiary Annual Statements”), as filed with the principal
Regulatory Authority overseeing insurance businesses conducted in the
jurisdiction of domicile of such Company Insurance Subsidiary

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and the National Association of Insurance Commissioners (together, the
“Principal Insurance Regulatory Authorities”), have been prepared in accordance
with SAP (as defined below) applied on a consistent basis and present fairly in
all material respects their respective statutory financial conditions as of such
date and the results of their respective statutory operations and cash flows for
the year then ended. As used herein, “SAP” means the accounting procedures and
practices prescribed or permitted from time to time by the respective states of
domicile of the Company Insurance Subsidiaries and applied in a consistent
manner throughout the periods involved. The balance sheets of the Company and
the Company Subsidiaries at dates after December 31, 2008, and the related
statements of income, surplus and cash flows, which have been filed with the
Principal Insurance Regulatory Authorities (the “2009 SAP Statements” and
together with the Insurance Subsidiary Annual Statements, the “SAP Statement”),
copies of which have been made available to the Purchaser by the Company, have
been prepared in accordance with SAP applied on a consistent basis and present
fairly in all material respects the applicable Company Insurance Subsidiaries’
respective statutory financial conditions as of such dates and the results of
their respective operations and cash flows. Schedule 3.8(c) hereto sets forth
all prescribed or permitted accounting practices that have been adopted since
December 31, 2006, by any of the Company Insurance Subsidiaries, and the effect
of such prescribed or permitted practices are fully and accurately reflected in
the SAP-basis financial statements described above.
          (d) The Company Common Stock is registered pursuant to Section 12(b)
of the Exchange Act, and the Company has taken no action designed to, or which
to its knowledge is likely to have the effect of, terminating the registration
of the Company Common Stock under the Exchange Act nor has the Company received
any notification that the SEC is contemplating terminating such registration.
          (e) The Company is in compliance in all material respects with the
applicable listing and corporate governance rules and regulations of the New
York Stock Exchange (the “NYSE”) and any further requirements imposed by the
NYSE Exemption or any subsequent exemption that would satisfy the condition to
closing set forth in Section 8.1(e). Except as set forth on Schedule 3.8(e), the
Company has not, in the preceding twelve (12) months, received notice from the
NYSE to the effect that the Company is not in compliance with the listing or
maintenance requirements of the NYSE. The Company is, and, assuming the
consummation of the transactions contemplated hereby, the Company Refinancing
and the Public Offering, has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
          (f) Except as set forth on Schedule 3.8(f), the Company is in material
compliance with all provisions of the Sarbanes Oxley Act of 2002 that are
applicable to it. The Company maintains disclosure controls and procedures
required by Rule 13a-15 or 15d-15 under the Exchange Act. Such disclosure
controls and procedures are designed to provide reasonable assurance that
information required to be disclosed by the Company is recorded and reported on
a timely basis to the individuals responsible for the preparation of the
Company’s filings with the SEC and other public disclosure documents. The
Company maintains internal control over financial reporting (as defined in
Rule 13a-15 or 15d-15, as applicable, under the Exchange Act). Such internal
control over financial reporting is

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designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with GAAP and includes policies and procedures that (i) pertain to
the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company, (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and that
receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company, and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a
material effect on its financial statements.
          (g) The Company has disclosed, based on the most recent evaluation of
its chief executive officer and its chief financial officer prior to the date
hereof, to the Company’s auditors and the audit committee of the Company Board
(A) any significant deficiencies and material weaknesses in the design or
operation of its internal control over financial reporting that are reasonably
likely to adversely affect the Company’s ability to record, process, summarize
and report financial information and has identified for the Company’s auditors
and audit committee of the Company Board any material weaknesses in internal
control over financial reporting and (B) any fraud, whether or not material,
that involves management or other employees who have a significant role in the
Company’s internal control over financial reporting. Since the filing date of
the Company’s most recently filed periodic report under the Exchange Act, there
have been no changes in the Company’s internal control over financial reporting
or disclosure controls and procedures or, to the knowledge of the Company, in
other factors that could significantly affect the Company’s internal controls.
          (h) The Company and Company Subsidiaries have filed all reports and
statements, together with any amendments required to be made with respect
thereto, that they were required to file since December 31, 2006, with any
Governmental Authority having jurisdiction over its business or any of its
assets or properties (each a “Regulatory Authority”), and has paid all fees and
assessments due and payable in connection therewith, except where the failure to
so file such reports and statements or pay such fees is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect. As of their
respective dates, such reports and statements complied in all material respects
with all the laws, rules and regulations of the applicable Regulatory Authority
with which they were filed.
     3.9 Absence of Certain Changes. Since December 31, 2008, (1) the Company
and Company Subsidiaries have conducted their respective businesses in all
material respects in the ordinary course, consistent with prior practice, and
(2) no event or events have occurred that have had or would be reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect.
     3.10 Compliance with Laws; Insurance.
     (a) The Company and each Company Subsidiary have all material permits,
licenses, authorizations, orders and approvals of, and have made all material
filings,

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applications and registrations with, any Governmental Authority that are
required in order to permit them to own or lease their properties and assets and
to carry on their business as presently conducted and that are material to the
business of the Company or such Company Subsidiary; and all such material
permits, licenses, certificates of authority, orders and approvals are in full
force and effect and, to the knowledge of the Company, no material suspension or
cancellation of any of them is threatened, and all such filings, applications
and registrations are current. The conduct by the Company and each Company
Subsidiary of their business and the condition and use of their properties does
not violate or infringe any applicable domestic (federal, state or local) or
foreign law, statute, ordinance, license or regulation, except for conduct which
has not had or is not reasonably likely to have a Material Adverse Effect.
Neither the Company nor any Company Subsidiary is in default under any order,
license, regulation, demand, writ, injunction or decree of any Governmental
Authority, except for any default which has not had or is not reasonably likely
to have a Material Adverse Effect. The Company and the Company Subsidiaries
currently are complying with, and to the knowledge of the Company, none of them
has been threatened to be charged with or given notice of any violation of, all
applicable federal, state, local and foreign laws, regulations, rules,
judgments, injunctions or decrees, except where such non-compliance has not had
nor is reasonably likely to have a Material Adverse Effect. Except for statutory
or regulatory restrictions of general application to life and health insurance
companies, no Governmental Authority has placed any material restriction on the
business or properties of the Company or any Company Subsidiary. Except for
routine examinations by insurance regulators, as of the date hereof, no
investigation by any Governmental Authority with respect to the Company or any
of the Company Subsidiaries is pending or, to the knowledge of the Company,
threatened.
     (b) The Company and each Company Subsidiary is presently insured, and
during each of the past five calendar years (or during such lesser period of
time as the Company has owned such Company Subsidiary) has been insured, for
amounts and against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured. All insurance
policies issued by any Company Subsidiary that are now in force are, to the
extent required under applicable law, in a form acceptable in all material
respects to applicable Governmental Authorities, or have been filed with and not
objected to by such Governmental Authorities within the period provided for such
objection.
     3.11 Litigation. Except as set forth on Schedule 3.11 hereto, as of the
date hereof, (i) no civil, criminal or administrative litigation, claim, action,
suit, hearing, arbitration, investigation or other proceeding before any
Governmental Authority or arbitrator is pending or, to the actual knowledge of
the Company, threatened against the Company or any Company Subsidiary, (ii)
neither the Company nor any Company Subsidiary is subject to any order, judgment
or decree, and (iii) there are no facts or circumstances that could result in
any claims against, or obligations or liabilities of, the Company or any Company
Subsidiary, except with respect to (i), (ii) and (iii) for those that are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.
     3.12 Reserves.
     (a) The aggregate reserves of the Company Insurance Subsidiaries as
recorded in the Company SAP Statements have been determined in all material
respects in accordance

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with generally accepted actuarial principles consistently applied (except as set
forth therein) and are considered by management of the Company to be adequate as
of the date of such statements to cover the total amount of all reasonably
anticipated insurance liabilities of the Company Insurance Subsidiaries. All
reserves of the Company Insurance Subsidiaries set forth in the Company SAP
Statements are fairly stated in accordance with sound actuarial principles and
meet the requirements of all applicable Insurance Laws including the applicable
SAP, except where failure to so state reserves or meet such requirements,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
     (b) Each Company Insurance Subsidiary (i) is in compliance with all
applicable insurance regulatory minimum capital or surplus requirements;
(ii) has not become subject to any “Company Action Level” pursuant to applicable
risk-based capital guidelines, and has not received notice of any pending action
that would result in its becoming so subject; (iii) has not taken any steps
towards commencing, and has not received notice of any actions taken by relevant
Regulatory Authorities to commence, any rehabilitation, delinquency or
insolvency proceedings under applicable insurance laws in any state or foreign
jurisdiction; (iv) has assets that exceed its respective total reserves, all as
computed in accordance with applicable statutory accounting principles applied
consistently with past practice and (v) has sufficient financial resources,
based on reasonable assumptions as to future pay-out patterns, premium increases
and other relevant factors, to pay its policy liabilities and other obligations
as the foregoing become due in the ordinary course of business.
     3.13 Rights Agreement. On or prior to the date hereof, the Company Board
has taken all action necessary and appropriate to ensure that the Purchaser
shall be an “Exempted Entity” under the 382 Rights Agreement in connection with
the purchase of the Securities, the purchase and the exercise of the Warrants
and the purchase and the conversion of any Convertible Debentures that Purchaser
may purchase in the Company Refinancing.
     3.14 Undisclosed Events. Neither the Company nor any of the Company
Subsidiaries has any liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) which are not properly reflected or reserved
against in the Company’s financial statements included in the 2009 Reports to
the extent required to be so reflected or reserved against in accordance with
GAAP, except for (i) liabilities that have arisen in the ordinary course of
business consistent with past practice and that have not had a Material Adverse
Effect, and (ii) liabilities that have not had and would not reasonably be
expected to have a Material Adverse Effect.
     3.15 Labor. Neither the Company nor any Company Subsidiary is a party to
any collective bargaining agreement or employs any member of a union. The
Company and the Company Subsidiaries are in material compliance with all U.S.
federal, state and local laws and regulations relating to employment and
employment practices, terms and conditions of employment and wages and hours,
and employee benefits plans (including, without limitation, the Employee
Retirement Income Securities Act of 1974, as amended), except where such
non-compliance has not had or is not reasonably likely to have a Material
Adverse Effect. Neither the chief executive officer nor the chief financial
officer of the

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Company has notified the Company of his intended resignation or retirement or
other termination of such officer’s employment with the Company.
     3.16 Transactions With Affiliates and Employees. Except as set forth in the
Company Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is currently a
party to any transaction with the Company or any Company Subsidiary (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $120,000 other than for (i) payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including
agreements under any equity compensation plans.
     3.17 Investment Company. The Company is not, and immediately after receipt
of payment for the Securities, will not be, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
     3.18 No Integrated Offering. Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 4 hereof, the sale of the
Securities to Purchaser and the Company Refinancing does not require the
registration of the Shares, the Warrants or any shares of Company Common Stock
issuable upon exercise of the Warrants under the Act.
     3.19 Taxes. The Company and each Company Subsidiary has timely filed all
material federal, state, local and foreign income, franchise and other tax
returns, reports and declarations required by any Governmental Authority with
jurisdiction over the Company or any Company Subsidiary and has paid or accrued
all taxes shown as due thereon except for any taxes which are being contested in
good faith (by appropriate proceedings and in respect of which adequate reserves
with respect thereto are maintained in accordance with GAAP), or where the
failure to file such returns or pay such taxes would not, individually or in the
aggregate, have or be reasonably likely to have a Material Adverse Effect. All
such returns were complete and correct in all material respects and the Company
has no knowledge of a material tax deficiency which has been asserted or
threatened against the Company or any Company Subsidiary. Except as set forth on
Schedule 3.19 hereto, the Company is not under audit by any taxing authority.
The Company has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods to which those returns, reports or declarations
apply. The Company is not, nor has it been in the last five (5) years, a U.S.
real property holding corporation under Section 897 of the Code. There are no
unpaid taxes in any material amount claimed to be due by any taxing authority.
For purposes of this Section 3.19, taxes shall include any and all interest and
penalties.
     3.20 Indebtedness; Other Contracts.
          (a) Neither the Company nor any of its Subsidiaries has any
outstanding material Indebtedness. For purposes of this Agreement: (x)
“Indebtedness” of any person

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means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including, without limitation, “capital leases” in
accordance with GAAP (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP, consistently
applied for the periods covered thereby, is classified as a capital lease,
(G) all indebtedness referred to in clauses (A) through (F) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any person, even though the person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations (as defined below) in
respect of indebtedness or obligations of others of the kinds referred to in
clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any
person, any direct or indirect liability, contingent or otherwise, of that
person with respect to any indebtedness, lease, dividend or other obligation of
another person if the primary purpose or intent of the person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee
of such liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto.
          (b) True, complete and correct copies of each material contract of the
Company or any Company Subsidiary required to be filed on a Current Report on
Form 8-K, a Quarterly Report on Form 10-Q, or an Annual Report on Form 10-K, in
each case pursuant to Item 601(a) and Item 601(b)(10) of Regulation S-K under
the Exchange Act (the “Company Material Agreements”) are attached or
incorporated as exhibits to the 2009 Reports. Except as set forth in the 2009
Reports: (1) each of the Company Material Agreements is valid and binding on the
Company and the Company Subsidiaries, as applicable, and in full force and
effect, (2) the Company and each of the Company Subsidiaries, as applicable, are
in all material respects in compliance with and have in all material respects
performed all obligations required to be performed by them to date under each
Company Material Agreement; (3) neither the Company nor any of the Company
Subsidiaries knows of, or has received notice of, any material violation or
default (or any condition which with the passage of time or the giving of notice
would cause such a violation of or a default) by any party under any Company
Material Agreement.
     3.21 Environmental Matters. The Company and the Company Subsidiaries
(i) are in compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants (“Environmental

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Laws”), (ii) have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such permit,
license or approval, except, in the case of (i), (ii) and (iii), where such
non-compliance or failure to receive such permit, license or approval has not
had and would not be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect.
     3.22 Regulation M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities or (ii) sold, bid for, purchased or paid any compensation for
soliciting purchases of any of the Securities.
     3.23 Shell Company Status. The Company is not, and has never been, an
issuer of the type described in paragraph (i) of Rule 144 under the Act.
     3.24 NYSE Exemption. The NYSE notified the Company that the NYSE will grant
the NYSE Exemption upon execution by NYSE of a supplemental listing application
for, among other things, the Shares and the shares of Company Common Stock
issuable upon exercise of the Warrants. The transactions contemplated by this
Agreement will, prior to and through the Closing Date, be exempt from the
requirements of Section 312 of the NYSE Listed Company Manual as a result of the
NYSE Exemption.
     3.25 Estimates and Projections. The Company has previously provided the
Purchaser with operating and financial projections and forecasts prepared as of
June 30, 2009 (the “June 30 Projections”). It is the Company’s practice to
prepare and update its internal operating and financial projections and
forecasts on a quarterly basis, and such projections and forecasts prepared for
the quarter ending September 30, 2009, to the extent any portion of the June 30
Projections are no longer relevant, shall supersede such portions of the June 30
Projections.
     3.26 Certain Business Practices. To the knowledge of the Company, none of
the Company or any Company Subsidiary or any director, officer, agent, employee
or other person acting for or on behalf of Company or any Company Subsidiary has
violated the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any
other anti-bribery or anti-corruption laws applicable to the Company or any
Company Subsidiary.
SECTION 4
Representations and Warranties of Purchaser
     Purchaser hereby represents and warrants to the Company as follows:
     4.1 Institutional Accredited Investor; Experience. Purchaser is an
“accredited investor” (as defined in Rule 501 under the Act) and is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests.

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     4.2 Investment. Purchaser is acquiring the Securities for its own account,
for investment and not with the view to distribution in violation of securities
laws; provided, that this representation and warranty shall not be deemed to
limit the Purchaser’s right to sell the Securities pursuant to an effective
registration statement or otherwise in compliance with applicable federal and
state securities laws. As used in this Agreement, “Affiliate” means, with
respect to any person, any other person that directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, such person, and the term “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such person, whether through ownership of voting securities, by
contract or otherwise.
     4.3 No Reliance. Purchaser has relied upon the representations and
warranties set forth herein and its own investigations and diligence, including
a review of the 2009 Reports filed with the SEC and including with respect to
the tax consequences of this investment and the Transaction. Purchaser
understands and acknowledges that neither the Company nor any of the Company’s
representatives, agents or attorneys is making or has made at any time any
warranties or representations of any kind or character, express or implied, with
respect to any matter or the Company Common Stock, except as expressly set forth
herein.
     4.4 Organization and Standing. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the States of Delaware
and is qualified to do business and in good standing in the State of New York.
     4.5 Corporate Power. Purchaser has all requisite corporate power and
authority and has taken all corporate action necessary in order to execute,
deliver and perform its obligations under this Agreement and to consummate the
Transaction.
     4.6 Corporate Authority. This Agreement and the Transaction have been duly
authorized by all necessary corporate action of Purchaser. This Agreement has
been duly executed and delivered by Purchaser, and, assuming the due
authorization, execution and delivery of this Agreement by the Company, this
Agreement is a valid and legally binding agreement of Purchaser, enforceable
against Purchaser in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors’ rights or to general
equity principles.
     4.7 Regulatory Approvals; No Violations. (a) No consents, approvals,
permits, order or authorizations of, exemptions, reviews or waivers by, or
notices, reports, filings or registrations with any Governmental Authority or
with any other third party are required to be made or obtained by Purchaser or
any of its Affiliates or any of their respective officers, directors or
employees in connection with the execution, delivery and performance by
Purchaser of this Agreement or the consummation of the Transaction except for
those already obtained or made.

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     (b) Immediately following the purchase of the Securities, no ultimate
parent entity of any investment fund managed by the Purchaser will hold more
than $65,200,000 of shares of Company Common Stock.
     (c) The execution, delivery, and performance of this Agreement by Purchaser
does not, and the consummation by Purchaser of the Transaction will not,
(A) constitute or result in a breach or violation of, or a default under, or the
acceleration or creation of any obligations, penalties or the creation of any
charge, mortgage, pledge, security interest, restriction, claim, lien or equity,
encumbrance or any other encumbrance or exception to title of any kind on the
assets or properties of Purchaser (with or without notice, lapse of time, or
both) pursuant to agreements binding upon Purchaser or to which Purchaser or any
of its properties is subject or bound or any law, regulation, judgment or
governmental or non-governmental permit or license to which Purchaser or any of
its properties is subject, (B) constitute or result in a breach or violation of,
or a default under, the certificate of incorporation, as amended, or the bylaws
or other organizational documents of Purchaser or (C) require any consent or
approval under any such agreement except, in the case of clauses (A) or
(C) above, for any breach, violation, default, acceleration, creation, change,
consent or approval that, individually or in the aggregate, is not reasonably
likely to have a material adverse effect on the ability of Purchaser to timely
consummate the Transaction.
     4.8 Ownership of Shares. As of the date of this Agreement, Purchaser and
its Affiliates are the owners of record or the beneficial owners (as such term
is defined under Rule 13d-3 under the Exchange Act) of 3,600,000 shares of
Company Common Stock or securities convertible into or exchangeable for Company
Common Stock. As of the Closing, Purchaser and its Affiliates shall not be the
owners of record or the beneficial owners of Company Common Stock other than the
shares or securities set forth in the preceding sentence (and any securities
issued in respect thereof, or in substitution therefor, in connection with any
stock split, dividend, spin-off or combination, or any reclassification,
recapitalization, merger, consolidation, exchange or other similar
reorganization or business combination) and the Securities purchased hereunder.
     4.9 Available Funds. Purchaser will have available to it at Closing all
funds necessary for the payment to the Company of the aggregate Purchase Price.
SECTION 5
Covenants
     5.1 Reasonable Best Efforts; Further Assurances. (a) Subject to the terms
and conditions of this Agreement, each of the Company and Purchaser agrees to
cooperate with the other and use its reasonable best efforts in good faith to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary on its part under this Agreement or under applicable laws to
consummate and make effective the Transaction as promptly as reasonably
practicable, including the satisfaction of the conditions set forth in Section 8
hereof; provided, however, that neither Purchaser nor the Company shall be
required to obtain or seek any Principal Insurance Regulatory Authority’s
clearance, approval, consent, authorization, exemption, waiver or similar order
(“Insurance Regulatory Approvals”). Purchaser hereby covenants and agrees that
it shall not, prior to the Closing,

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knowingly take any action that is reasonably likely to require that Purchaser
obtain an Insurance Regulatory Approval that will be an Approval (as defined in
Section 8.1(c) hereof).
          (b) (i) Purchaser and the Company each has made its own legal
determination, based on existing facts and, in the case of the Company, based in
part upon and assuming the accuracy of Purchaser’s representations and
warranties set forth in Section 4.7(b) hereof, that no premerger notification is
required by the HSR Act in connection with the Closing. Purchaser hereby
covenants and agrees that it shall not, prior to the Closing, knowingly take any
action that is reasonably likely to result in an HSR Event.
               (ii) Notwithstanding the foregoing, in the event that either the
Company or Purchaser, in consultation with legal counsel, finally determines
that the Transaction will, or is reasonably likely to, require a premerger
notification under the HSR Act (an “HSR Event”), such party shall notify the
other as soon as is reasonably practicable, and in any event within 24 hours
after making such final determination.
          (c) If, at any time a filing is required by the HSR Act with respect
to the Transaction, then the parties shall reasonably cooperate and consult with
each other and each of the Company and Purchaser shall use their respective
reasonable best efforts to make any filings required by the HSR Act as promptly
as practicable and, in the case of a filing under the HSR Act that is an
Approval, in any event within twenty (20) days following delivery of notice in
respect of an HSR Event. The Company shall pay any filing fees in connection
with such filing under the HSR Act. If, after the Closing, Purchaser determines
that a filing under the HSR Act is necessary for it or its affiliates to
acquire, convert or exercise any securities of the Company, the parties will
also cooperate and consult with each other in the same manner.
          (d) Subject to the terms and conditions of this Agreement, each of the
Company and Purchaser shall use reasonable best efforts, at the Company’s sole
expense, to lift any injunction to the Transaction as promptly as reasonably
practicable.
          (e) Upon the request of Purchaser, the Company shall, and shall cause
each of its controlled Affiliates to, (i) cooperate with the filing of any
statement, notice, petition or application by or on behalf of the Purchaser or
any of its Affiliates in order to obtain any Insurance Regulatory Approvals in
connection with Purchaser’s acquisition of beneficial ownership of Company
Common Stock or securities convertible into Company Common Stock, (ii) furnish
to Purchaser all information concerning the Company and each Company Subsidiary,
and their respective directors, officers and stockholders and such other matters
as may be reasonably necessary or advisable in connection with any such
Insurance Regulatory Approvals, (iii) respond to any government requests for
information, and (iv) contest and resist any action, including any legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any Order that restricts, prevents or prohibits the consummation of
the transactions contemplated by any such filing, including by pursuing all
available avenues of administrative and judicial appeal and all available
legislative action, (v) cooperate with Purchaser in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of Purchaser or any of its
Affiliates in connection with

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proceedings under or relating to such Insurance Regulatory Approvals or any
other federal, state or foreign laws applicable to the insurance industry as
conducted by the Company and its Affiliates, and (vi) provide Purchaser with
copies of all material communications from and filings with, any Governmental
Authorities in connection with this Section 5.1(e).
          (f) Notwithstanding anything to the contrary herein, neither party nor
any of their respective Affiliates shall be required to take any action pursuant
to this Section 5.1 which would be reasonably likely to be unreasonably
burdensome on such party or any of its respective Affiliates, or to require such
party or its respective Affiliates to divest or dispose of any assets,
securities or other instruments whether now owned or hereafter acquired or to
accept any limitation on any of its investment activities.
     5.2 Press Releases. The Company shall, by 8:30 a.m. (New York City time) on
the Business Day immediately following the date of this Agreement and the
Closing Date, issue a press release disclosing the material terms of the
transactions contemplated hereby and file a Current Report on Form 8-K, filing
the Transaction Documents as exhibits thereto. The Company and Purchaser shall
consult with each other before issuing any press release with respect to the
Transaction or this Agreement and shall not issue any such press release or make
any public statements (including any non-confidential filings with Governmental
Authorities that name another party hereto) without the prior consent of such
other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that a party may, without the prior consent of the other
party, issue such press release or make such public statements as may upon the
advice of outside counsel be required by law or the rules or regulations of the
NYSE, the SEC, any other Governmental Authority or any other applicable
regulation, in which such case the disclosing party shall provide the other
party with prior notice of such public statement; provided that such party shall
use its reasonable best efforts to consult with and coordinate such press
release with the other party; provided, further, that such party shall only
include in a press release not receiving the consent of the non-filing party
such information that is legally required to be disclosed upon the advice of
counsel.
     5.3 Conduct of Business Prior to the Closing. Except as otherwise expressly
contemplated or permitted by this Agreement or with the prior written consent of
Purchaser (which consent shall not be unreasonably withheld or delayed), during
the period from the date of this Agreement to the Closing Date, the Company
shall, and shall cause each Company Subsidiary to, (i) conduct its business only
in the usual, regular and ordinary course consistent with past practice and
(ii) take no action which would reasonably be expected to adversely affect or
delay (x) the receipt of any approvals of any Governmental Authority required to
consummate the transactions contemplated hereby or (y) the consummation of the
transactions contemplated hereby.
     5.4 Company Forbearances. Except as expressly contemplated or permitted by
this Agreement or as set forth in Schedule 5.4, during the period from the date
of this Agreement to the Closing, the Company shall not, and shall not permit
any Company Subsidiary to, without the prior written consent of Purchaser (which
consent shall not be unreasonably withheld or delayed):

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          (a) set any record or payment dates for the payment of any dividends
or distributions on its capital stock, including, without limitation, any shares
of preferred stock, or other equity interest or make, declare or pay any
dividend or make any other distribution on, or directly or indirectly redeem,
purchase or otherwise acquire, any shares of its capital stock or other equity
interest or any securities or obligations convertible into or exchangeable for
any shares of its capital stock or other equity interest or stock appreciation
rights or grant any person any right to acquire any shares of its capital stock
or other equity interest, other than (A) dividends paid by any of Company
Subsidiaries so long as such dividends are only paid to the Company or any of
its other wholly owned Subsidiaries; (B) pursuant to the Company Refinancing and
(C) pursuant to the Company’s equity incentive plan;
          (b) issue or commit to issue any additional shares of capital stock,
including, without limitation, any shares of preferred stock or other equity
interest, or any securities convertible into or exercisable for, or any rights,
warrants or options to acquire, any additional shares of capital stock or other
equity interest, except (i) pursuant to the Company Refinancing, (ii) options,
restricted stock or other equity grants under the Company’s equity incentive
plan or (iii) pursuant to the exercise of Company options or vesting of
restricted stock or other equity grants under the Company’s equity incentive
plan;
          (c) take any action which would result in the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby to
cause the Purchaser to become an “Acquiring Person” for purposes of the 382
Rights Agreement; or
          (d) effect any Recapitalization, enter into or agree to enter into any
merger or consolidation with any person, or sell any properties or assets that
are material to the business of Company or any Company Subsidiary, as
applicable, except for reinsurance in the ordinary course of business;
          (e) incur any Indebtedness for borrowed money or guarantee any such
Indebtedness, except for (i) the Company Refinancing and (ii) intercompany
Indebtedness among the Company and or one or more of its wholly-owned Company
Subsidiaries; or
          (f) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.4
     5.5 Public Offering; Registration of Shares. Without limiting any rights of
the Purchaser set forth in the Investor Rights Agreement, the Company will file
a registration statement on Form S-1 (or other reasonably appropriate form) for
a registered public offering of the Company Common Stock for net cash proceeds
to the Company of not less than $200 million (the “Public Offering”), no later
than forty five (45) days after the date of the Tender Offer Closing (as defined
below) and the Company shall use its reasonable best efforts to have such
registration statement declared effective by the SEC and use its reasonable best
efforts to consummate the Public Offering, in each case, no later than one
hundred and twenty (120) days after the date of the Tender Offer Closing;
provided that, the net cash proceeds to the Company required to be received in
such Public Offering shall be reduced if, and to the extent that, the Company
Board determines in good faith that the Public Offering will otherwise
jeopardize or endanger the availability to the Company of its

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net operating loss carryforwards to be used to offset its taxable income in such
year or future years, and the basis for such determination is provided in
writing to Purchaser.
     5.6 Refinancing. Subject to the terms and conditions of, and to the extent
permitted by, the Second Amended and Restated Credit Agreement, dated as of
October 10, 2006, by and among the Company, the lenders signatory thereto, and
Bank of America N.A. as administrative agent, as amended by Amendment No. 1
thereto dated June 12, 2007, and Amendment No. 2 thereto dated March 30, 2009
(as may be further amended from time to time, the “Credit Agreement”), the
Convertible Debentures and the Indenture, the Company shall use its reasonable
best efforts to promptly consummate one or more offerings of Indebtedness (as
such term is defined in the Credit Agreement) substantially on the terms set
forth in on Schedule 5.6 hereto, resulting in aggregate proceeds to the Company
sufficient to allow the Company to purchase up to the outstanding principal
amount of the Convertible Debentures (such transaction, the “Company
Refinancing”); provided that, for the avoidance of doubt, the Company’s
obligation to use reasonable best efforts shall not create any obligation of the
Company to agree to alter the proposed terms of any such Company Refinancing,
including the prices paid upon tender of Convertible Debentures, interest or
conversion rates applicable to offered Indebtedness, or otherwise.
     5.7 Listing of Shares. The Company shall use its reasonable best efforts to
cause the Shares to be approved for listing on the NYSE, subject to official
notice of issuance, as promptly as practicable, and in any event before the
Closing.
     5.8 Preservation of NOLs. The Company will not enter into any transaction
(other than a sale of the entire Company) with any person that would result in
the loss of or limit the ability of the Company to fully utilize their net
operating losses without the prior written consent of Purchaser, except in
connection with a transaction that the Company Board determines in good faith is
reasonably likely to provide a benefit to the Company and its stockholders that
exceeds the harm caused by and resulting from the loss of or limitation of the
ability of the Company to fully utilize their net operating losses.
Notwithstanding the foregoing, the Company’s obligations under this Section 5.8
shall expire on the first date that the Purchaser and its Affiliates
beneficially own or own of record less than 5% of the voting stock of the
Company on an as-converted basis.
     5.9 Takeover Protections. Except with respect to the Company’s 382 Rights
Agreement, which is addressed in Section 3.13 hereof, prior to the Closing, the
Company and the Company Board will have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti takeover provision under the Company’s certificate of
incorporation (or similar charter documents) or the laws of the state of
Delaware (including Section 203 of the Delaware General Corporation Law) that is
or could become applicable to the Purchaser as a result of the Purchaser and the
Company fulfilling their obligations or exercising their rights hereunder,
including, without limitation, as a result of the Company’s issuance of the
Shares and the Warrants and Purchaser’s ownership of the Shares and Warrants and
any Indebtedness of the Company that Purchaser may acquire in the Company
Refinancing.

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     5.10 Material Non-Public Information. Except in connection with any notice
required to be provided hereunder or in connection with any reasonable response
to unsolicited written or oral requests from Purchaser or its representatives
and affiliates for information, between the date hereof and Closing, the Company
shall use its reasonable best efforts to refrain from providing the Purchaser
with any material, non-public information without the Purchaser’s prior written
consent.
SECTION 6
Private Placement of the Securities
     6.1 Securities Act Exemption. It is intended that the Company Common Stock
and Warrants to be issued pursuant to this Agreement will not be registered
under the Act in reliance on the exemption from the registration requirements of
Section 5 of the Act set forth in Section 4(2) and Regulation D under the Act.
     6.2 Rule 144 Reporting. With a view to making available to Purchaser the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Securities to the public without registration, the Company agrees, at all
times after the effective date of this Agreement and until the Purchaser no
longer holds any Securities, any shares of Common Stock issuable upon exercise
of the Warrants, any convertible Indebtedness it may acquire in the Company
Refinancing or any Common Stock issuable upon conversion thereof, to use its
reasonable best efforts to:
          (a) make and keep public information available, as those terms are
understood and defined in Rule 144(c)(1) under the Act or any similar or
analogous rule promulgated under the Act;
          (b) file with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
          (c) not terminate its status as an issuer required to file reports
under the Exchange Act (even if the Exchange Act or the rules and regulations
thereunder would permit such termination); and
          (d) furnish to Purchaser forthwith upon request: a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
under the Act, and of the Exchange Act; a copy of the most recent annual or
quarterly report of the Company; and such other reports and documents as
Purchaser may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
SECTION 7
Indemnity
     7.1 Indemnity for Purchaser. (a) The Company agrees to indemnify and hold
harmless Purchaser and its Affiliates and each of their respective officers,
directors, partners,

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members and employees, and each person who controls Purchaser within the meaning
of the Exchange Act and the rules and regulations promulgated thereunder (each
an “Indemnified Person”), to the fullest extent lawful, from and against any and
all claims, damages, liabilities, deficiencies, judgments, fines, amounts paid
in settlement and expenses (including reasonable attorneys’ fees and expenses)
(collectively, “Losses”) arising out of or resulting from any action, suit,
claim, arbitration, mediation, proceeding or investigation by any Governmental
Authority, stockholder of the Company or any other person arising out of or
resulting from (i) any inaccuracy in or breach of the Company’s representations
or warranties in this Agreement; (ii) the Company’s breach of agreements or
covenants made by the Company in this Agreement; (iii) any third party claims
arising out of or resulting from the Transaction or any other Transaction
Document (unless such claim is based upon conduct by the Purchaser that
constitutes fraud, gross negligence or willful misconduct); or (iv) any third
party claims arising directly or indirectly out of the Purchaser’s status as
owner of the Securities or the actual, alleged or deemed control or ability to
influence the Company or any Company Subsidiary (unless such claim is based upon
conduct by the Purchaser that constitutes fraud, gross negligence or willful
misconduct); provided, that Losses shall not include any consequential or
punitive damages (except to the extent Purchaser and its Affiliates are liable
to a third party for such consequential or punitive damages).
          (b) Notwithstanding the foregoing, the Company shall have no liability
to indemnify any Indemnified Person on account of any claim pursuant to clauses
(i) and (ii) of Section 7.1(a) (1) unless and until the liability of the Company
with respect to any individual claim or demand (or series of reasonably related
claims or demands) equals or exceeds $100,000, (2) unless and until the
liability of the Company in respect of such claims, when aggregated with their
liability in respect of all other claims made pursuant to clauses (i) and
(ii) of Section 7.1(a), amounts to more than $1,000,000 and (3) in respect of
claims made pursuant to clause (i) of Section 7.1(a), unless such claim is
asserted in writing by such Indemnified Party prior to the termination of the
applicable representation and warranty as set forth in Section 9.5 hereof,
whereupon the Company shall be liable to pay amounts due pursuant to clauses
(i) and (ii) of Section 7.1(a). The maximum aggregate liability of the Company
for any and all claims under clauses (i) and (ii) of Section 7.1(a) shall not
exceed the Purchase Price.
     7.2 Indemnity Procedures. Each Indemnified Person shall give prompt written
notice to the Company of any claim, action, suit or proceeding commenced against
it in respect of which indemnity may be sought hereunder, but failure to so
notify the Company shall not relieve the Company from any liability which it may
have under the indemnity provided in Section 7.1, unless and to the extent the
Company shall have been actually and materially prejudiced by the failure of
such Indemnified Person to so notify the Company. Such notice shall describe in
reasonable detail such claim. In case any claim, action, suit or proceeding is
brought against an Indemnified Person, the Indemnified Person shall be entitled
to hire, at its own expense, separate counsel and participate in the defense
thereof. If the Company so elects within a reasonable time after receipt of
notice, the Company may assume the defense of the action or proceeding at the
Company’s own expense with counsel chosen by the Company and approved by the
Indemnified Person, which approval shall not be unreasonably withheld, and the
Indemnified Party may participate in such defense at its own expense; provided,
however, that the Company will not settle or compromise any claim,

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action, suit or proceeding, or consent to the entry of any judgment with respect
to any such pending or threatened claim, action, suit or proceeding without the
written consent of the Indemnified Person unless such settlement, compromise or
consent secures the unconditional release of the Indemnified Person from all
liabilities arising out of such claim, action, suit or proceeding and requires
nothing other than the payment of money by the Company; provided, further, that
if the defendants in any such claim, action, suit or proceeding include both the
Indemnified Person and the Company and the Indemnified Person reasonably
determines, based upon advice of legal counsel, that such claim, action, suit or
proceeding involves a conflict of interest (other than one of a monetary nature)
that would reasonably be expected to make it inappropriate for the same counsel
to represent both the Company and the Indemnified Person, then the Company shall
not be entitled to assume the defense of the Indemnified Person and the
Indemnified Person shall be entitled to separate counsel at the Company’s
expense, which counsel shall be chosen by the Indemnified Person and approved by
the Company, which approval shall not be unreasonably withheld; and provided,
further, that it is understood that the Company shall not be liable for the
fees, charges and disbursements of more than one separate firm for the
Indemnified Persons. If the Company assumes the defense of any claim, action,
suit or proceeding, all Indemnified Persons shall thereafter deliver to the
Company copies of all notices and documents (including court papers) received by
such Indemnified Persons relating to the claim, action, suit or proceeding, and
each Indemnified Person shall cooperate in the defense or prosecution of such
claim. Such cooperation shall include the retention and (upon the Company’s
request) the provision to the Company of records and information that are
reasonably available to the Indemnified Party and that are reasonably relevant
to such claim, action, suit or proceeding, and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. If the Company is not entitled to assume the
defense of such claim, action, suit or proceeding as a result of the second
proviso to the fourth sentence of this Section 7.2, the Company’s counsel shall
be entitled to conduct the Company’s defense and counsel for the Indemnified
Person shall be entitled to conduct the defense of the Indemnified Person, it
being understood that both such counsel will cooperate with each other, to the
extent feasible in light of the conflict of interest or different available
legal defenses, to conduct the defense of such action or proceeding as
efficiently as possible. If the Company is not so entitled to assume the defense
of such action or does not assume the defense, after having received the notice
referred to in the first sentence of this Section 7.2, the Company will pay the
reasonable fees and expenses of counsel for the Indemnified Person; in that
event, however, the Company will not be liable for any settlement of any claim,
action, suit or proceeding effected without the written consent of the Company,
which may not be unreasonably withheld, delayed or conditioned. If the Company
is entitled to assume, and assumes, the defense of an action or proceeding in
accordance with this Section 7.2, the Company shall not be liable for any fees
and expenses of counsel for the Indemnified Person incurred thereafter in
connection with that action or proceeding except as set forth in the proviso in
the fourth sentence of this Section 7.2. Unless and until a final judgment is
rendered that an Indemnified Person is not entitled to the costs of defense
under the provisions of this Section 7.2, the Company shall reimburse, promptly
as they are incurred, the Indemnified Person’s costs of defense. The Company’s
obligation to indemnify the Indemnified Persons for Losses hereunder is
irrespective of whether the Indemnified Person has itself made payments in
respect of such Losses.

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     7.3 Exclusive Remedy. Following the Closing, the indemnification
obligations of this Article VII shall be the sole and exclusive remedy for any
Indemnified Party in respect of the Company’s breaches of this Agreement, and no
other remedy shall be had in contract, tort or otherwise, except in cases of
fraud.
SECTION 8
Conditions
     8.1 Conditions to Each Party’s Obligations to Close the Transaction. The
obligation of Purchaser to purchase the Securities, and of the Company to issue
and sell the Securities, at Closing is subject to the fulfillment of the
following conditions as of the Closing Date:
     (a) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, law,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and restrain,
enjoins or otherwise prohibits consummation of any transaction contemplated by
this Agreement (collectively, an “Order”).
     (b) Purchase Agreement. The Purchase Agreement shall be in full force and
effect.
     (c) Approvals. All material consents, authorizations, approvals and filings
required to be obtained from or filed with a Governmental Authority in order to
consummate the Transaction (collectively, “Approvals”) shall have been obtained
or made (as applicable), and such Approvals shall not contain any condition that
would (i) require Purchaser or the Company or any of its Subsidiaries to divest
or dispose of any assets, securities or other instruments, (ii) restrain or
impose any limit on the Purchaser’s or the Company’s or any of its Subsidiaries’
investment activities, (iii) require an amendment or waiver of any term or
condition of any Transaction Document, or (iv) be reasonably likely to have a
material adverse effect on the Purchaser or a Material Adverse Effect.
     (d) Refinancing. The first closing of the Company Refinancing shall have
occurred or shall occur simultaneously, and the Company shall, on the Closing
Date, apply 100% of the proceeds therefrom to repurchase Convertible Notes at
the closing of a tender offer for such Convertible Notes (collectively, the
“Tender Offer Closing”); provided, however, that no party may delay or prevent
the Closing on the basis that this condition has not been satisfied if the
failure of this condition to be so satisfied is as a result of or arises from
such party’s actions or its failure to act or its breach of this Agreement.
     (e) NYSE Exemption. The transactions contemplated hereby shall not require
the approval of the Company’s shareholders pursuant to Section 312 of the NYSE
Listed Company Manual, whether as a result of the NYSE Exemption or a comparable
exemption granted by the NYSE imposing conditions and subject to qualifications
no more burdensome to Purchaser or the Company than those anticipated to be
included in the NYSE Exemption and delivered to Purchaser prior to the date
hereof, or otherwise reasonably acceptable to Purchaser and the Company.

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     8.2 Conditions to the Obligations of Purchaser. The obligation of Purchaser
to purchase the Securities is, at the option of Purchaser, subject to the
fulfillment of the following conditions as of the Closing Date:
     (a) Representations and Warranties; Covenants. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
at and as of the date hereof and as of the Closing Date (except to the extent
such representations and warranties relate to an earlier date, in which case
such representations and warranties shall be true and correct on and as of such
earlier date). The Company shall have performed or complied in all material
respects with all covenants and agreements of the Company in this Agreement.
     (b) Bringdown Certificate. The Company shall have delivered to Purchaser a
certificate of the Company, executed by the chief executive officer and chief
financial officer of the Company, dated the Closing Date, and certifying to the
fulfillment of the conditions specified in clause (a) of this Section 8.2.
     (c) Legal Opinion. The Company shall have (i) caused the primary legal
officer of the Company to deliver a legal opinion to Purchaser in the form of
Exhibit C hereto; and (ii) caused Simpson Thacher & Bartlett LLP to deliver a
legal opinion to Purchaser in substantially the form of Exhibit D hereto.
     (d) No Delisting. From the date of this Agreement to and including the
Closing Date the Company Common Stock shall not have been delisted by the NYSE
nor shall trading in the Company Common Stock have been suspended by the NYSE.
     (e) Credit Agreement Repayment Acceleration; Pro Forma Compliance. No
acceleration of the Company’s repayment obligations pursuant to Section 8.2 of
the Credit Agreement shall have occurred and not been withdrawn. No “Default” or
“Event of Default” shall have occurred and be continuing under the Credit
Agreement. As of September 30, 2009, pro forma for the transactions contemplated
by this Agreement, the Company Refinancing and the Public Offering, the Company
shall be in compliance with each of the covenants set forth in Sections 7.11,
7.12, 7.14, 7.15, 7.16 and 7.17 of the Credit Agreement.
     (f) Investor Rights Agreement. The Company shall have executed and
delivered the Investor Rights Agreement to Purchaser.
     8.3 Conditions to Closing of Company. The Company’s obligation to sell and
issue the Securities is, at the option of the Company, subject to the
fulfillment of the following conditions as of the Closing Date:
     (a) Representations and Warranties; Covenants. The representations and
warranties of Purchaser in this Agreement shall be true and correct at and as of
the Closing (except to the extent such representations and warranties relate to
an earlier date, in which case such representations and warranties shall be true
and correct on and as of such earlier date). Purchaser shall have performed or
complied in all material respects with all covenants and agreements of Purchaser
in this Agreement.

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     (b) Bringdown Certificate. Purchaser shall have delivered to the Company a
certificate of Purchaser, executed by an authorized officer of Purchaser, dated
the Closing Date, and certifying to the fulfillment of the conditions specified
in clause (a) of this Section 8.3.
     (c) Investor Rights Agreement. Purchaser shall have executed and delivered
the Investor Rights Agreement to the Company.
SECTION 9
Miscellaneous
     9.1 Governing Law; Venue. This Agreement shall be deemed to be made in and
in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of New York (except to the extent that
mandatory provisions of Delaware law are applicable). The parties hereby
irrevocably submit to the jurisdiction of the courts of the State of New York
and the federal courts of the United States of America located in the State of
New York solely for the purposes of any suit, action or other proceeding between
any of the parties hereto arising out of this Agreement or any transaction
contemplated hereby, and hereby waive, and agree to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof, that it
is not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in said courts or that the venue thereof may not
be appropriate or that this Agreement may not be enforced in or by such courts,
and the parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such New York state or
federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 9.8 or in such other
manner as may be permitted by law, shall be valid and sufficient service
thereof. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
     9.2 Fees and Expenses. The Company shall reimburse Purchaser for all
reasonable costs and expenses incurred in connection with the transactions
contemplated by this Agreement (including all reasonable legal fees and
disbursements in connection with the documentation and implementation of the
transactions contemplated by this Agreement and due diligence in connection
therewith and fees incurred in connection with regulatory filings and clearances
including one filing under the HSR Act and under insurance regulations of each
Principal Insurance Regulatory Authority incurred in connection with each of
(i) the Purchaser’s acquisition of the Shares, (ii) the Purchaser’s exercise of
the Warrants and (iii) the Purchaser’s conversion of any convertible
Indebtedness of the Company acquired by Purchaser in the Refinancing, which
amount shall be withheld by the Purchaser from the Purchase Price payable by the
Purchaser at the Closing or, if incurred after the Closing, shall be promptly
reimbursed to the Purchaser by the Company. The Company shall be responsible for
its own fees and expenses incurred in connection with the transactions
contemplated by this Agreement. The Company shall pay all fees of its transfer
agent,

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stamp taxes and other taxes and duties levied in connection with the delivery of
the Securities to the Purchaser.
     9.3 Attorney’s Fees. In the event of any action of any kind between the
parties hereto with respect to this Agreement, the prevailing party shall be
entitled to recover from the other party its reasonable attorney’s fees and
related costs, expenses and disbursements incurred in connection with such
action.
     9.4 Termination. This Agreement may be terminated at any time prior to the
Closing:
          (a) by either Purchaser or the Company if the Closing shall not have
occurred by October 15, 2010 (the “Termination Date”), provided, however that
the right to terminate this Agreement under this Section 9.4(a) shall not be
available to any party whose breach of any representation or warranty or failure
to perform any obligation under this Agreement shall have caused or resulted in
the failure of the Closing to occur on or prior to such date; or
          (b) by either Purchaser or the Company in the event that any
Governmental Authority shall have issued an Order and such Order shall have
become final and nonappealable; or
          (c) by the Company if there has been a breach of any representation,
warranty, covenant or agreement made by Purchaser in this Agreement, or any such
representation and warranty shall have become untrue after the date of this
Agreement, such that Section 8.3(a) would not be satisfied and such breach or
condition is not curable or, if curable, is not cured within thirty (30) days
after written notice thereof is given by the Company to Purchaser (but in any
event not later than the Termination Date); or
          (d) by Purchaser if there has been a breach of any representation,
warranty, covenant or agreement made by the Company in this Agreement, or any
such representation and warranty shall have become untrue after the date of this
Agreement, such that Section 8.2(a) would not be satisfied and such breach or
condition is not curable or, if curable, is not cured within thirty (30) days
after written notice thereof is given by Purchaser to the Company (but in any
event not later than the Termination Date); or
          (e) by either party if the NYSE notifies the Company that it will not
provide the NYSE Exemption, or if the NYSE Exemption (or any subsequent
exemption applicable hereunder), after issuance, is revoked, rescinded, expires
or is no longer in full force and is not replaced within ten (10) Business Days
with an exemption that satisfies the condition to each party’s obligation to
close the Transaction set forth in Section 8.1(e); or
          (f) by the mutual written consent of Purchaser and the Company.
In the event of termination of this Agreement as provided in this Section 9.4,
this Agreement shall forthwith become void, except that (a) this Section 9 shall
survive, (b) the Mutual Nondisclosure Agreement, dated as of August 27, 2009, by
and between the Company and Purchaser (the “Confidentiality Agreement”) shall
survive in accordance with its terms and

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(c) no such termination shall relieve any party from liability for any breach of
this Agreement, material misrepresentation or fraud.
     9.5 Survival. The representations and warranties made herein shall expire
as of the third anniversary of the Closing, provided, however, that (i) the
representations and warranties contained in Section 3.2(b) shall survive the
Closing and remain in effect indefinitely and (ii) the representations and
warranties contained in Sections 3.10, 3.19 and 3.21 shall survive the Closing
until the expiration of the applicable statute of limitations. The covenants and
agreements set forth in Sections 5.1(b)(ii), 5.1(c), 5.1(e), 5.1(d), 5.2, 5.5,
5.6, 5.7, 5.8, 5.9, 5.10, 6.2, 7 and 9 shall survive the Closing.
     9.6 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
     9.7 Entire Agreement; Amendment. This Agreement, the Investor Rights
Agreement and the Confidentiality Agreement (in each case including any
Exhibits, Schedules or other attachments thereto) constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
     9.8 Notices, Etc. Any notice, request, instruction or other document to be
given hereunder by any party to the other will be in writing and will be deemed
to have been duly given (a) on the date of delivery if delivered personally or
by telecopy or facsimile, upon confirmation of receipt, (b) on the first
Business Day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the third Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice.
     If to Purchaser to it at:
Paulson & Co. Inc.
1251 Avenue of the Americas, 50th Floor
New York, NY, 10020
Attn: Mr. Michael Waldorf
Telephone: (212) 956-2221
Fax: (212) 351-5887
with a copy to (which copy alone shall not constitute notice):
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Floor

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New York, New York 10176
Attn: Stephen M. Schultz, Esq.
Telephone: (212) 986-6000
Fax: (212) 986-8866
     If to the Company:
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attn: General Counsel
Telephone: (317) 817-2889
Fax: (317) 817-2826
with a copy to (which copy alone shall not constitute notice):
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attn: Gary I. Horowitz, Esq.
Telephone: (212) 455-2000
Fax: (212) 455-2502
     9.9 Specific Performance. The Company and Purchaser acknowledge and agree
that irreparable damage to the other party would occur in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that each
party shall be entitled to an injunction, injunctions or other equitable relief,
without the necessity of posting a bond, to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which the
parties may be entitled by law or equity.
     9.10 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, shall impair any
such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach, default or noncompliance under this
Agreement or any waiver on such party’s part of any provisions or conditions of
this Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to any party, shall be cumulative and
not alternative.
     9.11 No Third Party Beneficiaries. Other than as set forth in Section 7.3,
nothing in this Agreement, expressed or implied, is intended to confer upon any
person, other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.

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     9.12 No Assignment. This Agreement shall not be assignable other than by
operation of law; provided, however, that Purchaser may assign its rights and
obligations under this Agreement without the Company’s consent to any Affiliate,
but only if the assignee agrees in writing with the Company in form and
substance reasonably satisfactory to the Company to be bound by the terms of
this Agreement and, in conjunction therewith, makes to the Company
representations and warranties substantially equivalent (with necessary
conforming changes) to those contained in Section 4 as if such assignee were
“Purchaser” therein (any such transferee shall be included in the term
“Purchaser”); provided, further, that no such assignment shall be permitted
without the Company’s consent if it (x) would require any consents or approvals
from or filings or notices with any Governmental Authority or other person or
(y) would reasonably be expected to adversely affect or delay the consummation
of the transactions contemplated hereby.
     9.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument. This Agreement may be executed by facsimile signature(s).
     9.14 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
     9.15 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
[SIGNATURE PAGE FOLLOWS]

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     This STOCK AND WARRANT PURCHASE AGREEMENT is hereby executed as of the date
first above written.

              “COMPANY”   CONSECO, INC.    
 
           
 
  By:   /s/ C. James Prieur    
 
                Name: C. James Prieur         Title: Chief Executive Officer    
 
            “PURCHASER”   PAULSON & CO. INC., on behalf of the several
investment funds and accounts managed by it    
 
           
 
  By:   /s/ Michael Waldorf    
 
                Name: Michael Waldorf         Title: Managing Director