Document:

exv10w1

EXHIBIT 10.1

EXECUTION VERSION

STOCK AND WARRANT

PURCHASE AGREEMENT

by and between

CONSECO, INC.

and

PAULSON & CO. INC.

October 13, 2009

 

 

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

 

 

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 

- 13 -

 

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.

- 14 -

 

     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.

- 15 -

 

     (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,

- 16 -

 

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

- 17 -

 

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.

- 20 -

 

     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,

- 22 -

 

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.

- 23 -

 

     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.

- 24 -

 

     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.

- 25 -

 

     (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,

- 26 -

 

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

- 27 -

 

(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.

- 29 -

 

     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 Directorexv10w2

EXHIBIT 10.2

EXHIBIT A

INVESTOR RIGHTS AGREEMENT

          THIS INVESTOR RIGHTS AGREEMENT (this “Agreement”) is entered into as of ___, 20___, by
and among 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 (the
“Stockholder”) and any other Investors agreeing in writing to be bound by the terms of this
Agreement.

W I T N E S S E T H:

          WHEREAS, pursuant to the Stock Purchase Agreement, dated as of October 13, 2009 (the
“Purchase Agreement”), by and among the Company and the Stockholder, the Company issued to
the Stockholder shares of Common Stock (as defined below) and Warrants (as defined below);

          WHEREAS, as a result of and immediately following the consummation of the transactions
contemplated by the Purchase Agreement, the Stockholder owns [___] Shares (as defined below) and
Warrants (as defined below) to purchase 5,000,000 shares of Common Stock; and

          WHEREAS, in connection with the consummation of the transactions contemplated by the Purchase
Agreement, each of the Company and the Stockholder desire to enter into this Agreement to set forth
certain rights and obligations of the Company and the Stockholder with respect to the ownership by
the Stockholder of the Company’s securities and certain other matters, all in accordance with the
terms and conditions set forth herein.

          NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

ARTICLE I

DEFINITIONS

     SECTION 1.1 Certain Defined Terms. Capitalized terms used and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the Purchase Agreement. For purposes of this Agreement, the following terms shall have the following
meanings:

 

 

          “5% Shareholder” shall mean a Person or group of Persons that is a “5-percent
shareholder” of the Company pursuant to Treasury Regulation § 1.382-2T(g).

          “Additional Effective Date” shall have the meaning set forth in Sections 3.1(c) and
3.2(b).

          “Additional Filing Date” shall have the meanings set forth in Sections 3.1(c) and
3.2(b).

          “Adjusted Ownership” means, with respect to any Person a percentage determined by
dividing (a) the sum of (i) the number of issued and outstanding Voting Securities of the
Company owned by such person and (ii) the number of Voting Securities issuable upon the conversion
or exercise of any Equity Securities of the Company owned by such person, by (b) the sum of (i) the
number of issued and outstanding Voting Securities of the Company in the aggregate and (ii) the
number of Voting Securities issuable upon the conversion or exercise of any Equity Securities of
the Company owned by such person, then multiplying such quotient by 100%.

          “Affiliate” means, with respect to any Person, any other Person that directly or
indirectly through one or more intermediaries, controls, is controlled by or is under common
control with, such specified Person, for so long as such Person remains so associated to the
specified Person.

          “Affiliated Assignee” shall have the meaning set forth in Section 8.9.

          “Assignment Period” shall have the meaning set forth in Section 3.1(d).

          “beneficial owner” or “beneficially own” has the meaning given such term in
Rule 13d-3 under the Exchange Act and a Person’s beneficial ownership of either Common Stock or
other Voting Securities of the Company shall be calculated in accordance with the provisions of
such Rule; provided, however, that for purposes of determining beneficial ownership, a Person shall
be deemed to be the beneficial owner of any security which may be acquired by such Person whether
within sixty (60) days or thereafter, upon the conversion, exchange or exercise of any options,
rights or other securities.

          “Black Out Period” shall have the meanings set forth in Sections 3.3(a)(i) and (ii).

          “Business Day” means any day other than a day on which banks are required or
authorized by law to be closed in the State of New York or the State of Indiana.

          “Capital Stock” means, with respect to any Person at any time, any and all shares,
interests, participations or other equivalents (however designated, whether voting or non-voting)
of capital stock, partnership interests (whether general or limited) or equivalent ownership
interests in or issued by such Person and, with respect to the Company, includes any and all shares
of Common Stock, preferred stock and any other equity interests of the Company.

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          “Claims” shall have the meaning set forth in Section 4.4(a).

          “Closing” has the meaning assigned to such term in the Purchase Agreement.

          “Closing Date” has the meaning assigned to such term in the Purchase Agreement.

          “Common Stock” means the common stock, par value $0.01 per share, of the Company 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.

          “Company Affiliate” refers to any Investor during and for the three months following
such time such Investor (i) holds in excess of 10% of the Voting Securities of the Company or (ii)
has a material relationship with any director of the Company.

          “Company Board” means the Board of Directors of the Company.

          “Company Non-Affiliate” means any Investor other than a Company Affiliate.

          “Company Offering” means any public offering of securities of the Company, in whole or
in part, by the Company (other than pursuant to Form S-8 or Form S-4).

          “Confidentiality Agreement” means the Mutual Nondisclosure Agreement dated as of
August 27, 2009, by and between the Stockholder and the Company.

          “control” (including the terms “controlled by” and “under common control
with”), with respect to the relationship between or among two or more Persons, means the
possession, directly or indirectly, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as trustee or executor,
by contract or otherwise.

          “Covered Securities” means Common Stock and any securities convertible into or
exercisable or exchangeable for Common Stock, other than securities that are (A) Indebtedness issued in connection with the Company Refinancing (as such terms are defined in the Purchase
Agreement), (B) the Warrants, (C) issued by the Company pursuant to any employment contract,
employee or benefit plan, stock purchase plan, stock ownership plan, stock option or equity
compensation plan or other similar plan where stock is being issued or offered to a trust, other
entity to or for the benefit of any employees, potential employees, consultants, officers or
director of the Company, (D) issued by the Company in connection with a business combination or
other merger, acquisition or disposition transaction, (E) issued with reference to the common

3

 

stock
of a Subsidiary (i.e., a carve-out transaction), (F) issued as a dividend or in connection with a
dividend investment or stockholder purchase plan or (G) issued in exchange for, or upon exercise or
conversion of, (i) currently outstanding securities or (ii) securities issued hereafter that are
securities described in clauses (A) through (F) above.

          “Demand Limitation” shall have the meaning set forth in Section 3.2.

          “Demand Notice” shall have the meaning set forth in Section 3.2.

          “Designated Securities” shall have the meaning set forth in Section 5.2.

          “Effective Date” shall have the meaning set forth in Section 3.1(c).

          “Equity Securities” means with respect to the Company, any and all shares of Capital
Stock of the Company or securities of the Company, options or other rights convertible into, or
exchangeable or exercisable for, such shares.

          “Excess Shares” shall have the meaning set forth in Section 7.1(c).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

          “Filing Date” shall have the meaning set forth in Section 3.1(c).

          “Holdback Period” shall have the meaning set forth in Section 4.6.

          “incur” or “incurrence” means to incur, create, assume, guarantee or otherwise
become directly or indirectly liable with respect to.

          “Indemnified Parties” shall have the meaning set forth in Section 4.4(a).

          “Initial Effective Date” shall have the meaning set forth in Section 3.1(a)(ii).

          “Initial Filing Date” shall have the meaning set forth in Section 3.1(a)(i).

          “Investor” means any of the Stockholder Parties and the Unaffiliated Assignees.

          “Investor Representative” means the Stockholder or its Affiliated designee, or, on or
after such date as the Stockholder Parties hold less than 50% of the Registrable Securities
outstanding (determined based on the Registrable Securities Purchase Price of the Registrable
Securities then held by the Stockholder Parties as a percentage of the aggregate Registrable

4

 

Securities Purchase Price applicable to all Registrable Securities then outstanding) for a 90
consecutive day period, the Investor or group of Affiliated Investors who hold the largest single
block of Registrable Securities.

          “Liquidated Damages” shall have the meaning set forth in Section 3.3(d)(i).

          “Lock-Up Period” means the period commencing on the Closing Date and ending on the
date that is the earlier of (a) 90 days after the closing of the Public Offering (as defined in the
Purchase Agreement) and (b) six months after the Closing Date.

          “NYSE” means The New York Stock Exchange, Inc.

          “Percentage Interest” means, as of any date, the percentage equal to (i) the aggregate
number of Shares beneficially owned or otherwise held by the Stockholder Parties as of such date,
divided by (ii) the total number of outstanding shares of Company Common Stock as of such date.

          “Person” means any individual, corporation, limited liability company, limited or
general partnership, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivisions thereof or any Group (as such term
is defined in Section 13(d)(3) of the Exchange Act) comprised of two or more of the foregoing.

          “Permitted Assignee” shall have the meaning set forth in Section 8.9.

          “Plan of Distribution” shall have the meaning set forth in Section 3.1(a)(i).

          “Private Placement” shall have the meaning set forth in Section 5.3(b).

          “Public Offering” has the meaning attributed thereto in the Purchase Agreement.

          “Purchase Agreement” shall have the meaning set forth in the Recitals.

          “Qualified Offering” shall have the meaning set forth in Section 5.1.

          “Registrable Securities” means any Shares and Warrants issued to the Stockholder
pursuant to the Purchase Agreement or subsequently issued with respect thereto (including, without
limitation, upon exercise of the Warrants), any convertible Indebtedness issued in

5

 

connection with the Company Refinancing and any other shares of Common Stock now owned or hereafter acquired by the
Stockholder (including shares issued upon conversion, exercise, or otherwise in respect of any
Equity Securities), other than (i) shares of Common Stock subject to registration or registration
rights pursuant to any past, present or future obligation of the Company under any other Agreement
(other than shares of Common Stock issued upon conversion of convertible Indebtedness acquired by
Stockholder in the Company Refinancing), and (ii) in the case of any Permitted Assignee hereunder,
shares of Common Stock acquired by such Permitted Assignee that were not (or, if issuable upon
conversion or exercise of any Equity Securities of the Company, would not have been if so converted
by the prior holder) Registrable Securities immediately prior to the acquisition of such shares of
Common Stock or Equity Securities convertible thereinto. As to any particular Registrable
Securities, once issued, such Registrable Securities shall cease to be Registrable Securities when
(i) a registration statement with respect to the sale by the Investor of such securities shall have
become effective under the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (ii) such securities shall have been distributed to
the public pursuant to Rule 144 (or any successor provision), (iii) such securities are eligible to
be a sold by the holder thereof pursuant to Rule 144 without restriction or limitation thereunder
on volume or manner of sale (other than restrictions imposed hereunder) in the reasonable opinion
of counsel to the Company; (iv) such securities are sold in a private transaction in which the
transferor’s rights under this Agreement are not assigned to the transferee of the securities; or
(v) such securities shall have ceased to be outstanding. For purposes of this Agreement, any
required calculation of the amount of, or percentage of, Registrable Securities shall be based on
the number of Shares or other shares of Common Stock which are Registrable Securities.

          “Registrable Securities Purchase Price” means, with respect to any Registrable
Security, the purchase price actually paid by the Investor holding such Registrable Security (or,
if such Registrable Security was acquired upon exercise or conversion of other Equity Securities,
the exercise price or conversion price thereof), in all cases subject to adjustment for any stock
split, dividend, spin-off or combination, or any reclassification, recapitalization, merger,
consolidation, exchange or other similar reorganization or business combination. Notwithstanding
the foregoing, the Registrable Securities Purchase Price for
(i) the Shares shall be $4.29 per
Share and (ii) the Warrants shall be $1.50 per share of common stock issuable upon exercise of the
Warrants, in all cases subject to adjustment for any stock split, dividend, spin-off or
combination, or any reclassification, recapitalization, merger, consolidation, exchange or other
similar reorganization or business combination.

          “Registration Default” shall have the meaning set forth in Section 3.1(d).

          “Registration Expenses” means any and all expenses incident to performance of or
compliance with Articles III, IV and V of this Agreement, including (i) all SEC and NYSE or other
securities exchange registration and filing fees, (ii) all fees and expenses of complying with
securities or blue sky laws (including the reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) all fees and expenses incurred in connection with

6

 

the listing of the Registrable Securities on the NYSE or any other securities exchange pursuant to
this Agreement and all rating agency fees, (v) the fees and disbursements of counsel for the
Company and of the Company’s independent public accountants, including the expenses of any special
audits and/or “cold comfort” letters required by or incident to such performance and compliance,
(vi) the reasonable fees and disbursements of counsel, (vii) any reasonable fees and disbursements
of underwriters and their counsel customarily paid by the issuers or sellers of securities
(including, without limitation, fees and expenses related to filings with the Financial Industry
Regulatory Authority, Inc.), and the reasonable fees and expenses of special experts retained in
connection with the requested registration, but excluding underwriting discounts and commissions
and transfer taxes, if any, and (viii) all expenses incurred in connection with any road shows
(including the reasonable out-of-pocket expenses of the holder of the applicable Registrable
Securities).

          “Registration Statement” means any registration statement of the Company under the
Securities Act which covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement. For the avoidance of doubt,
the definition of “Registration Statement” includes any Shelf Registration.

          “Response Period” shall have the meaning set forth in Section 3.2.

          “Rule 144” means Rule 144 (or any successor provision) under the Securities Act.

          “Scheduled Earnings Blackouts” shall have the meaning set forth in Section 3.3(a)(ii).

          “SEC” means the U.S. Securities and Exchange Commission or any other federal agency
then administering the Securities Act or the Exchange Act and other federal securities laws.

          “Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

          “Sell-Down” shall have the meaning set forth in Section 5.5.

          “Shares” shall mean (a) the Shares acquired by the Stockholder pursuant to the
Purchase Agreement, (b) any Common Stock issued to any Investor in connection with the exercise of
the Warrants, and any securities issued in respect of (a) or (b), or in substitution therefor, in
connection with any stock split, dividend, spin-off or combination, or any

7

 

reclassification,
recapitalization, merger, consolidation, exchange or other similar reorganization or business
combination.

          “Shelf Registration” shall have the meaning set forth in Section 3.1(a)(i).

          “Stockholder Party” means any of the Stockholder and the Affiliated Assignees.

          “Subsidiary” means (i) any corporation of which a majority of the securities entitled
to vote generally in the election of directors thereof, at the time as of which any determination
is being made, are owned by another entity, either directly or indirectly, and (ii) any joint
venture, general or limited partnership, limited liability company or other legal entity in which
an entity is the record or beneficial owner, directly or indirectly, of a majority of the voting
interests or the general partner and, with respect to the Company.

          “Suspension Notice” shall have the meaning set forth in Section 3.3(a).

          “Transaction Agreements” shall mean the Confidentiality Agreement and the Purchase
Agreement.

          “Transfer” shall mean, with respect to any security or instrument, any voluntary or
involuntary attempt to, directly or indirectly, offer, sell, assign, transfer, grant a
participation in, pledge, hypothecate or otherwise encumber or dispose of, including, without
limitation, by way of entry into any swap or other agreement or transaction that hedges or
transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of
such security or instrument, or the consummation of any such transactions.

          “Unaffiliated Assignee” shall have the meaning set forth in Section 8.9.

          “Underwriter Cutback” shall have the meaning set forth in Section 3.2.

          “Underwritten Offering” shall have the meaning set forth in Section 3.2.

          “Voting Securities” means, at any time, shares of any class of Equity Securities which
are then entitled to vote generally in the election of Directors.

          “Voting Threshold” means, at any time and with respect to any matter upon which
holders of any class or series of Capital Stock of the Company are then entitled to vote or
consent, 19.9% of the aggregate voting power of all Capital Stock so entitled. If approval of such
matter requires the separate vote or consent of any class(es) or series of Capital Stock of the

8

 

Company, the “Voting Threshold” will be determined in respect of, and by reference to, the
aggregate voting power of all class(es) or series of Capital Stock entitled to vote in each such
vote or consent.

          “Warrants” shall mean the warrants to acquire an aggregate 5,000,000 shares of Common
Stock purchased by the Stockholder pursuant to the Purchase Agreement.

          “Withheld Shares” shall have the meaning set forth in Section 7.1(b).

          SECTION 1.2 Other Definitional Provisions. (a) The words “hereof”, “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Article and Section references are to
this Agreement unless otherwise specified.

               (b) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

ARTICLE II

RESTRICTIONS ON TRANSFER

          SECTION 2.1 Transfer of the Shares. No Investor shall Transfer any Shares or Warrants
without the Company’s written consent except (i) any Transfer by a Stockholder Party to any
Affiliate of the Stockholder who agrees to be bound by all of the provisions of this Agreement as a
Stockholder Party (subject to Section 8.9), which Affiliate of the Stockholder will then be a
Stockholder Party entitled to further transfer as a Stockholder Party hereunder to Affiliates of
the Stockholder in accordance with the terms hereof, or (ii) (x) upon the expiration of the Lock-Up
Period, (y) pursuant to a Transfer described in Section 2.3(b) or (z) in the event of a Sell-Down
and, in the case of clauses (x), (y) and (z):

               (a) pursuant to an effective registration statement under the Securities Act;

               (b) pursuant to Rule 144; or

               (c) upon receipt by the Company of an opinion of counsel reasonably satisfactory to the
Company that such Transfer is exempt from registration under the Securities Act and applicable
state laws.

          SECTION 2.2 Restrictive Legends. Each of the Investors hereby acknowledges and agrees that,
during the term of this Agreement, each of the certificates or book-entry

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confirmations
representing Shares or Warrants shall be subject to stop transfer instructions and shall include
the applicable portion(s) of the legends set forth below:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR CONFIRMATION HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF (“TRANSFERRED”) EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER.”

In the event that any Shares, Warrants or Common Stock issuable upon exercise of the Warrants or
upon conversion of convertible Indebtedness acquired by Stockholder in the Company Refinancing (i)
are no longer subject to the transfer restrictions set forth in this Agreement, (ii) are
Transferred in a transaction registered under the Act, (iii) are Transferred in a transaction
exempt from the registration requirements of the Act, and upon delivery to the Company of such
documents as it may reasonably request with respect to such exemption, (iv) upon an Investor’s
request and receipt by the Company and its transfer agent of an opinion of Investor’s counsel
reasonably satisfactory to the Company and its transfer agent to the effect that a “private
placement” legend is no longer required under the Act and applicable state laws or (v) upon an
Investor’s request and receipt by the Company and its transfer agent of the certificate attached
hereto as Exhibit A certifying that such shares of Common Stock are eligible for resale without
limitation under Rule 144 (other than Company information requirements of Rule 144(c)), the Company
shall promptly issue new certificates or book-entry confirmations representing such Shares or
Warrants, at the expense of the Company. The Company shall cause its counsel to issue a legal
opinion, if required (or requested by the Company’s transfer agent), to effect the removal of such
legend or notation, as applicable, in accordance with this Section 2.2.

          SECTION 2.3 Restriction on Certain Transactions. From and after the date hereof,
each Investor hereby covenants and agrees that it shall not, without the prior written consent of
the Company, Transfer any of the Shares to any person if such Transfer, taken together with any
other Transfers of shares of Common Stock by the Investor to the same person or any of its
Affiliates at any time, would, to the knowledge of the Investor, cause such Person and its
Affiliates to become a 5% Shareholder. Notwithstanding this Section 2.3, nothing shall prevent any
Stockholder Party from making a Transfer in violation of Section 2.3 under the following
circumstances:

               (a) Transfers with the consent of the Company Board (such consent not to be withheld unless
the Company Board determines in good faith that such Transfer will jeopardize or endanger the
availability to the Company of its 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 the applicable Stockholder Party) to any Stockholder Party if the transferee agrees in
writing for the benefit of the Company (with a copy thereof to be furnished to the Company) to be bound by the terms of this Agreement and provided that, in
conjunction therewith, the transferee makes to the Company, at and as of the date of such

10

 

transfer,
each of the representations and warranties contained in Sections 4.1, 4.2 and 4.7 of the Purchase
Agreement as if such assignee were “Purchaser” therein;

               (b) Transfers pursuant to a merger, tender offer or exchange offer or other business
combination, acquisition of assets or similar transaction or change of control involving the
Company or any Subsidiary of the Company so long as (i) such transaction has been approved by the
Company Board or (ii) none of the Stockholder Parties (x) is a member of the group (as such term is
defined in Section 13(d)(3) of the Exchange Act) conducting such transaction or (y) has taken any
actions otherwise prohibited pursuant to Section 6.2 hereunder in connection with such transaction;
and

               (c) Transfers in connection with the sale of shares in a widely-distributed Underwritten
Offering.

          SECTION 2.4 Transfers Not In Compliance. A purported or attempted Transfer of Shares or
Warrants by an Investor, and any purported assignment of Investor’s rights and obligations
hereunder, that does not comply with Section 2.1, Section 2.2, Section 2.3 and Section 8.9 shall be
void ab initio and the purported transferee or successor by operation of law shall not be deemed to
be a stockholder or warrantholder of the Company for any purpose and shall not be entitled to any
of the rights of (i) in the case of a Transfer of Shares, a stockholder, including, without
limitation, the right to vote any Shares entitled to vote or to receive a certificate or
certificates for the Shares or any dividends or other distributions on or with respect to the
Shares or (ii) in the case of a Transfer of Warrants, a warrantholder, including, without
limitation, the right to exercise such Warrants or to receive shares of Common Stock in respect
thereof.

ARTICLE III

REGISTRATION RIGHTS WITH RESPECT TO

THE REGISTRABLE SECURITIES

          SECTION 3.1 Shelf Registration Statement Matters.

               (a) Shelf Registration Statement. Subject to Section 3.3, the Company shall:

               (i) on or prior to the 60th day after the Closing (the “Initial
Filing Date”), prepare and file with the SEC a “shelf” Registration Statement
covering the resale of 100% of the Registrable Securities (a “Shelf
Registration”) on such Initial Filing Date for an offering to be made on a
continuous basis pursuant to Rule 415 under the Securities Act (or any successor provisions),
which Shelf Registration shall be on Form S-3 (except if the Company is not then

11

 

eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on Form S-1 or another reasonably appropriate form)
and shall contain substantially the “Plan of Distribution” attached hereto
as Annex A;

               (ii) use reasonable best efforts to cause the Shelf Registration to become
effective as soon as practicable after such filing, but in no event later than the
120th day after the Closing (the “Initial Effective Date”);
provided, however, that in the event the Company is notified by the SEC that the
Shelf Registration will not be reviewed or is no longer subject to further review
and comments, the Initial Effective Date shall be the fifth Business Day following
the date on which the Company is so notified if such date precedes the date
otherwise required above;

               (iii) use reasonable best efforts to maintain continuously in effect,
supplement and amend, if necessary, the Shelf Registration, as required by the
instructions applicable to such registration form or by the Securities Act, until
there are no remaining Registrable Securities;

               (iv) furnish, upon request, to the holders of the Registrable Securities to
which the Shelf Registration relates copies of any supplement or amendment to such
Shelf Registration prior to such supplement or amendment being used and/or filed
with the SEC; and

               (v) pay all Registration Expenses in connection with the Shelf Registration,
whether or not it becomes effective, and whether all, some or none of the
Registrable Securities to which it relates are sold pursuant to it.

          (b) Effective Shelf Registration Statement. (i) If at any time, the Shelf Registration
ceases to be effective, the Company shall, subject to Section 3.3, file, not later than 30 days
after such prior Shelf Registration ceased to be Effective (a “New Filing Date”), and use
its reasonable best efforts to cause to become effective a new Shelf Registration as soon as
practicable, but not later than the 90th day after such New Filing Date (a “New
Effective Date”); provided, however, that in the event the Company is notified by the SEC that
the Shelf Registration will not be reviewed or is no longer subject to further review or comments,
the New Effective Date shall be the fifth Business Day following the date on which the Company is
so notified if such date precedes the date otherwise required above.

               (ii) If, after any Shelf Registration has become effective, it is interfered
with by any stop order, injunction or other order or requirement of the
SEC or other governmental agency or authority, the Company shall use its
reasonable best efforts to prevent the issuance of any stop order suspending the

12

 

effectiveness of the Shelf Registration or of any order preventing or suspending the
use of any prospectus and, if any such order is issued, to obtain the withdrawal of
any such order at the earliest possible moment, but not later than the
90th day after such order is issued (a “Withdrawal Date”).

               (c) Additional Registrable Securities. At any time that the Company knows that the
number of Registrable Securities at such time exceeds 115% of the number of shares of Common Stock
then registered on all Registration Statements applicable to the Registrable Securities, the
Company shall, subject to Section 3.3, use its reasonable best efforts to amend any existing
Registration Statement, or to file an additional Registration Statement, to register for resale by
the Holders of not less than 100% of the Registrable Securities as soon as reasonably practicable,
but not later than the 30th day after the Company first knows of such circumstance (an
“Additional Filing Date” and together with the Initial Filing Date, the New Filing Date, a
“Filing Date”), and shall use its reasonable best efforts to cause such amendment or
additional Registration Statement to be declared effective, as soon as practicable, but not later
than the 60th day after the Additional Filing Date (an “Additional Effective
Date” and together with the Initial Effective Date and the New Effective Date and the
Withdrawal Date, an “Effective Date”); provided, however that in the event the Company is
notified by the SEC that such additional Registration Statement will not be reviewed or is no
longer subject to further review and comments, such Additional Effective Date as to such
Registration Statement shall be the fifth Business Day following the date on which the Company is
so notified if such date precedes the date otherwise required above.

               (d) Delay Payments. (i) The Company and each Investor each agree that the Investor
will suffer damages, and it would not be feasible to ascertain the extent of such damages with
precision, if the Company fails to fulfill its obligations under Article III hereof. Subject in all
cases to Section 3.3 (including any applicable Blackout Period imposed in accordance therewith) and
Section 4.6 (including any Holdback Period imposed in accordance therewith, whether such period is
pursuant to the agreement set forth in Section 4.6 or a separate agreement with the underwriters of
any Company Offering or Underwritten Offering), if (A) a Registration Statement is not filed on or
prior to any Filing Date applicable thereto, (B) a Registration Statement is not declared effective
by the SEC or any order of a governmental authority preventing or suspending the use of any
prospectus is not lifted prior to any Effective Date applicable thereto, (C) the Company fails to
file with the SEC a request for acceleration of effectiveness in accordance with Rule 461
promulgated under the Securities Act, within five Business Days after the date that the Company is
notified in writing by the SEC that a Registration Statement will not be “reviewed,” or is not
subject to further review, (D) after the Effective Date, the Shares are not listed on the NYSE, (E)
after the Effective Date, a Registration Statement required to be effective hereunder ceases for
any reason to remain effective (without being succeeded immediately by a replacement Registration
Statement filed and declared effective) or usable (excluding during the Lock-Up Period, and
excluding as a result of a post-effective amendment thereto that is required by applicable law in
order to cause a Permitted Assignee hereunder to be named as a selling securityholder therein,
provided that such post-effective amendment is filed by the Company within 10 Business Days after the Company
receiving notice from any Investor that such post-effective amendment is required (any such 10

13

 

Business Day period, an “Assignment Period”) for the resale of Registrable Securities, or
the Investors are otherwise unable to effect the resale of any Registrable Securities hereunder as
a result of a breach by the Company of its obligations hereunder, in each case for such period of
time (excluding the duration of any Black Out Period applicable to such Registrable Securities, any
Holdback Period, any Assignment Period or the Lock-up Period) as to any Registrable Securities for
which any Registration Statement is then required to be effective hereunder (each of the events
referred to in clauses (A) through (E), a “Registration Default”) the Company shall pay to
any Investor holding any Registrable Securities not eligible for resale as a result of such
Registration Default, for the duration of such Registration Default as it applies to such
Registrable Securities held by such Investor:

                    (1) if such Investor is a Company Affiliate, an amount (the “Affiliate
Liquidated Damages”) equal to (i) one-half of one percent (0.5%) per year of the
Registrable Securities Purchase Price applicable to such Registrable Securities for
the period up to and including the 70th day in any 360 consecutive-day
period during which a Registration Default has occurred and is continuing, payable
in cash on each January 1 and July 1 and calculated on the basis of a 360
calendar-day year consisting of twelve 30 calendar-day months, and (ii) one percent
(1.0%) per 30 days of the Registrable Securities Purchase Price applicable to such
Registrable Securities for the period exceeding the 70th day in any 360
consecutive-day period during which a Registration Default has occurred and is
continuing, payable in cash on the second business day of each calendar month in
respect of payments accruing through the last day of the preceding calendar month,
with late payments accruing interest at a rate of 18% per annum (or such lesser
maximum amount that is permitted to be paid by applicable law), compounding on each
payment date; or

                    (2) If such Investor is a Company Non-Affiliate, an amount equal to one percent
(1.0%) per 30 days of the Registrable Securities Purchase Price applicable to such
Registrable Securities, payable in cash on the second business day of each calendar
month in respect of payments accruing through the last day of the preceding calendar
month, with late payments accruing interest at a rate of 18% per annum (or such
lesser maximum amount that is permitted to be paid by applicable law), compounding
on each payment date (the payments described in clauses (1) and (2) of this Section
3.3(d)(i), the “Liquidated Damages”)

               (ii)  Notwithstanding anything to the contrary herein, in no event shall the
Company be liable for Liquidated Damages in excess of $8,000,000 in any calendar
year, pro-rated for the remaining portion of the calendar year in which this
Agreement is entered into. Each of the Company and each Investor agree that the
Liquidated Damages provided for in this Section 3.1(d) constitute a reasonable estimate of the damages that may be incurred by
the Investor by reason of a Registration Default and that such Liquidated Damages

14

 

are the only monetary damages available to the Stockholder in the event of a
Registration Default.  Notwithstanding anything to the contrary set forth in this
Section 3.1, no event shall be considered a Registration Default hereunder if such
event or the primary cause thereof (i) was consented to in writing by the
Stockholder or Investors holding in excess of 50% of the then-outstanding
Registrable Securities (determined based on the Registrable Securities Purchase
Price applicable to the then-outstanding Registrable Securities), or (ii) results
(and shall not be considered a Registration Default for as long as it continues to
result) primarily from (x) any breach or delay in performance by any Investor of any
of its obligations set forth in this Agreement, (y) an Investor’s objection pursuant
to Section 4.1(c) or (z) any delay caused or requested by any underwriter or
underwriters in connection with an Underwritten Offering, including as a result of
any holdback period contemplated by Section 4.6 hereof.

          SECTION 3.2 Underwritten Offerings; Demand Registration. Subject to Section 3.3
(including any Blackout Period imposed in accordance therewith) and 4.6 (including any Holdback
Period imposed in accordance therewith, whether such period is pursuant to the agreement set forth
in Section 4.6 or a separate agreement with the underwriters of any Company Offering or
Underwritten Offering), the Stockholder or, if the Stockholder has assigned its rights under this
Section 3.2 in accordance with the terms of this Agreement, Investors holding more than 50% of the
Registrable Securities at such time (determined based on the Registrable Securities Purchase Price
applicable to the then-outstanding Registrable Securities)) may deliver a notice to the Company
stating that it wishes to effect an underwritten offering of all or part of its Registrable
Securities (an “Underwritten Offering”) and stating the number of the Registrable
Securities to be included in the Underwritten Offering (a “Demand Notice”). The Company
shall, promptly after its receipt of a Demand Notice, give all other Investors written notice of
such request. Each such Investor may, by delivery of written notice to the Company within twenty
(20) days after the Company’s delivery of notice to such Investor (the “Response Period”),
request that all or any portion of such Investor’s Registrable Securities be included in such
Underwritten Offering. Notwithstanding the foregoing, the Stockholder and the other Investors,
collectively, shall be entitled to deliver to the Company no more than three (3) Demand Notices in
the aggregate (the “Demand Limitation”); provided that no Demand Notice shall be counted
against the Demand Limitation unless and until the Registration Statement filed pursuant to such
Demand Notice is declared effective and the Registrable Securities registered thereunder have been
sold (other than any such Registrable Securities excluded from such Underwritten Offering as a
result of a determination by the underwriter that marketing factors required a limitation on the
number of shares to be underwritten in such offering (an “Underwriter Cutback”), except in
the event that (i) the Stockholder or Investors holding of more than 50% of the Registrable
Securities requested to be registered in such Underwritten Offering (determined based on the
Registrable Securities Purchase Price applicable to such Registrable Securities) elect to abandon
such offering or (ii) the Underwritten Offering is not consummated primarily as a result of the
action, or failure to act, of one or more Investors holding Registrable Securities requested to be
included therein. Notwithstanding the foregoing, if, in connection with an Underwritten Offering
requested pursuant to the final Demand Notice permitted under the Demand Limitation set forth above, (i) the Stockholder Parties request that all of their
remaining Registrable Securities be included in such Underwritten Offering, and (ii) solely as a

15

 

result of an Underwriter Cutback, the Stockholder Parties are required to sell less than 75% of
such Registrable Securities requested to be distributed in such Underwritten Offering, then the
Stockholder Parties will be entitled, collectively, to request one additional Underwritten Offering
with respect to all of their remaining Registrable Securities, in which all Investors will be
entitled to participate as if in connection with, and pursuant to the procedures applicable to, the
delivery of a Demand Notice; provided that, in connection with such additional Underwritten
Offering, any Underwriter Cutbacks shall be applied first, pro rata, with respect to the
Registrable Securities of Unaffiliated Assignees requested to be included therein, and thereafter,
pro rata, with respect to the Registrable Securities of the Stockholder Parties requested to be
included therein.

          Upon expiration of such Response Period (or, if the Lock-Up Period has not then expired, upon
expiration of the Lock-Up Period), and subject to Section 3.3 hereof, as soon as reasonably
practicable and subject to such Underwriter Cutbacks as may be requested by the managing
underwriter(s) of such Underwritten Offering:

               (a) if there is, at such time, an effective Shelf Registration in respect of the Registrable
Securities, the Company shall promptly amend or supplement the Shelf Registration if and as may be
necessary in order to enable such Registrable Securities to be distributed pursuant to an
Underwritten Offering, but in any event no later than 30 days after the expiration of the Response
Period, and shall use its reasonable best efforts to cause such amendment to become effective as
soon as practicable after such filing, but in any event no later than 90 days after the expiration
of the Response Period; or

               (b) if there is, at such time, no effective Shelf Registration in effect in respect of the
Registrable Securities, the Company shall:

               (i) cause to be prepared and to file a Registration Statement as promptly as
reasonably practicable after expiration of the Response Period, but in any event no
later than 30 days thereafter;

               (ii) use reasonable best efforts to cause such Registration Statement to become
effective as soon as practicable after filing, but in any event no later than 90
days after expiration of the Response Period;

               (iii) use reasonable best efforts to maintain in effect, supplement and amend,
if necessary, the Registration Statement, as required by the instructions applicable
to such registration form or by the Securities Act for the period required to
consummate the Underwritten Offering;

               (iv) furnish, upon request, to the holders of the Registrable Securities to
which the Registration Statement relates copies of any supplement or

16

 

amendment to
such Registration Statement prior to such supplement or amendment being used and/or
filed with the SEC; and

               (v) pay all Registration Expenses in connection with the Registration
Statement, whether or not it becomes effective, and whether all, some or none of the
Registrable Securities to which it relates are sold pursuant to it.

The date that is thirty (30) days after the expiration of the Response Period shall be an
“Additional Filing Date” for purposes of Section 3.1(d) hereunder, and the date that is
ninety (90) days after the expiration of the Response Period shall be an “Additional
Effective Date” for purposes of Section 3.1(d) hereunder.

          SECTION 3.3 Suspension of Registration Rights. (a) Notwithstanding anything to the
contrary herein, if the Company shall at any time furnish to the Stockholder a certificate signed
by any of its authorized officers (a “Suspension Notice”) stating that:

               (i) the Company has pending or in process a material transaction, the
disclosure of which would, in the good faith judgment of the Company Board, after
consultation with its outside counsel, materially and adversely affect the Company;
or

               (ii) the Company Board has made the good faith determination (after
consultation with counsel and including, without limitation, recurring earnings
blackout periods established by the Company Board or a designated committee thereof
(“Scheduled Earnings Blackouts”)) (i) that use or continued use of any
proposed or effective Registration Statement for purposes of effecting offers or
sales of Registrable Securities pursuant thereto would require, under the Securities
Act, premature disclosure in such Registration Statement (or the prospectus relating
thereto) of material, non-public information (without disclosing the specific
material, non-public information, unless the Stockholder specifically requests in
writing to receive such material, non-public information), (ii) that such premature
disclosure would not be in the best interest of the Company and (iii) that it is
therefore essential to defer the filing or to suspend the use of such Registration
Statement (and the prospectus relating thereto) for purposes of effecting offers or
sales of Registrable Securities pursuant thereto,

then the right of the Investors to require the Company to file any Registration Statement
or, after the filing thereof, use any Registration Statement (and the prospectus relating
thereto) for purposes of effecting offers or sales of Registrable Securities pursuant
thereto shall be suspended for a period (a “Black Out Period”) of not more than (i) with
respect to any Company Affiliate, 180 days in any 360 consecutive-day period (and no more
than

17

 

45 consecutive days in any 360 consecutive day period except, in the case of a
Suspension Notice delivered, or a Scheduled Earnings Blackout designated, in respect of the
Company’s year-end earnings reports, no more than 65 consecutive days after delivery of
such Suspension Notice or start of such Scheduled Earnings Black Out), (ii) with respect to
any Company Non-Affiliate, 90 days in any 360 consecutive-day period (and no more than 45
consecutive days in any 360 consecutive day period except, in the case of a Suspension
Notice delivered, or Scheduled Earnings Blackout designated, in respect of the Company’s
year-end earnings reports, no more than 65 consecutive days after delivery of such
Suspension Notice or start of such Scheduled Earnings Black Out). For avoidance of doubt,
with respect to any Registrable Security, no Registration Default shall be applicable to
such Registrable Security during any Black Out Period permitted to be imposed on the holder
of such Registrable Security pursuant to this Section 3.3. Notwithstanding anything to the
contrary in this Section 3.3(a), the Company shall not impose any Black Out Period,
including any Scheduled Earnings Black Out, in a manner that is more restrictive
(including, without limitation, as to duration) than the comparable restrictions the
Company may impose on Transfers of the Company’s Equity Securities by its directors and
senior executive officers.

               (b) During any Black Out Period, no Investor shall offer or sell any Registrable Securities
pursuant to or in reliance upon any Registration Statement (or the prospectus relating thereto)
filed by the Company. Notwithstanding the foregoing, if the public announcement of such material,
nonpublic information is made during a Black Out Period, then the Black Out Period shall terminate
without any further action of the parties and the Company shall immediately notify the Investors of
such termination. 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 a Stockholder
Party or its representatives and affiliates for information, the Company shall use its reasonable
best efforts to refrain from providing any Stockholder Party with any material, non-public
information without such Stockholder Party’s prior written consent.

          SECTION 3.4 Incidental Registration Rights. If the Company at any time proposes to
offer Covered Securities in a registered Company Offering for its own account, each such time it
will promptly give written notice to the Investors of its intention so to do.  Upon the written
request of any Investor, received by the Company within thirty (30) days after delivery of any such
notice by the Company, requesting to register any or all of its Registrable Securities, the Company
will use its reasonable best efforts to cause such Registrable Securities to be included in the
securities to be covered by the Registration Statement proposed to be filed in connection with the
registered Company Offering to the extent required to permit the sale or other disposition by such
Investor of such Registrable Securities.  If such registered Company Offering involves an
underwriting, the Company shall so advise the Investors as a part of the written notice given
pursuant to this Section 3.4.  In such event, the right of any Investor to registration pursuant to
this Section 3.4 shall be conditioned upon such Investor’s participation in such underwriting to
the extent provided herein.  If any Investor proposes to distribute any or all of its Registrable Securities through such underwritten Company Offering, it shall (together
with the Company and any other Investors so participating) enter into an underwriting agreement in

18

 

customary form with the underwriter or underwriters selected for underwriting by the Company.
 Notwithstanding any other provision of this Section 3.4, if there is an Underwriter Cutback, such
limitation will be imposed first pro rata with respect to all securities whose holders have a
contractual, incidental right to include such securities in the Registration Statement (including,
without limitation, any Investors) and as to which inclusion has been requested pursuant to such
right.  The Company shall be obligated to include in such Registration Statement only such limited
portion of Registrable Securities with respect to which any Investor has requested inclusion
hereunder.  Notwithstanding the foregoing provisions, the Company may withdraw any Registration
Statement referred to in this Section 3.4 without thereby incurring any liability to any Investor.
 If any Investor disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the underwriter or in such other manner as may be
required by any underwriting agreement to which the Investor becomes a party in connection with
such underwriting.  Any Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration and the Company Offering, and the
Registration Statement applicable to such registration shall not be available for use by such
Investor in respect of such withdrawn Registrable Securities.  

ARTICLE IV

REGISTRATION PROCEDURES

          SECTION 4.1 Registration Procedures. If and whenever the Company is required to
effect or cause the registration of any Registrable Securities under the Securities Act under this
Agreement:

               (b) The Company will use its reasonable best efforts to cause the Registration Statement
applicable to such Registrable Securities to become effective and, subject to Section 3.3 hereof,
the Company will prepare and file with the SEC such amendments and supplements to the Registration
Statement and the prospectus or prospectus supplement used in connection therewith as may be
necessary (i) in the case of a Shelf Registration, to keep such Shelf Registration continuously
effective and usable for resale of the Registrable Securities for a period from the date of its
initial effectiveness until such time as there are no such Registrable Securities remaining
(including by refiling the Shelf Registration (or a new Shelf Registration) if the initial Shelf
Registration expires, (ii) in the case of any other Registration Statement, to keep such
Registration Statement effective and usable for resale of all of the Registrable Securities
intended to be sold pursuant thereto and (iii) to comply with the provisions of the Securities Act
with respect to the disposition of the Registrable Securities covered by such Registration
Statement. The Company shall use its reasonable best efforts to cause any amendment to any
Registration Statement to be declared effective by the SEC as soon as practicable following the
filing thereof with the SEC. In the event that the Company is a well-known seasoned issuer (as
defined under Rule 405 of the Act) at the time of the filing of the Shelf Registration with the SEC, such Shelf Registration shall be designated by the Company as an automatic Shelf
Registration.

19

 

               (c) Not less than five (5) Business Days prior to the filing of each Registration Statement
and not less than one (1) Business Day prior to the filing of any related prospectus or any
amendment or supplement thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, upon request of any Investor (but not if
such Investor does not so request) (i) furnish to such Investor drafts of all such documents
proposed to be filed, which documents (other than those incorporated or deemed to be incorporated
by reference) will be subject to the review of such Investor, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond, during normal business
hours and upon reasonable notice, to such inquiries as shall be necessary, in the reasonable
opinion of counsel to such Investor, to conduct a reasonable investigation within the meaning of
the Securities Act. If such Investor reasonably and in good faith objects in writing and with
specificity to any proposed disclosure in a draft Registration Statement or prospectus (no later
than three (3) Business Days after the Stockholder has been furnished copies thereof) or any
amendments or supplements thereto (no later than one (1) Business Day after the Stockholder has
been furnished copies thereof) (i) regarding such Investor or (ii) on the basis that the
disclosure, as proposed, contains one or more untrue statements of a material fact or omissions to
state any material fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading, in each case whether such
disclosure is contained in the “selling stockholder” section thereof or otherwise, the Company
shall not file such Registration Statement or such prospectus or amendments or supplements thereto
until it has taken such steps as it deems reasonably appropriate to address the Investor’s
concerns.

               (d) The Company will furnish to each Investor such number of copies of the applicable
Registration Statement and each such amendment and supplement thereto (including in each case all
exhibits) and of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such Investor may reasonably
request in order to facilitate the disposition of Registrable Securities owned or to be distributed
by such Investor.

               (e) The Company shall use its reasonable best efforts to register and qualify the Registrable
Securities under such other securities or “blue sky” laws of such jurisdictions within the United
States as shall be reasonably requested by the Investors, to keep such registration or
qualification in effect for so long as such Registrable Securities remain outstanding, and to take
any other action which may be reasonably necessary to enable the Investors to consummate the
disposition in such jurisdictions within the United States of the Registrable Securities; provided
that the Company shall not be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in any such states or
jurisdictions.

               (f) After the filing of any Registration Statement, the Company will promptly notify the
Investors of any stop order issued or threatened by the SEC and shall use its reasonable best
efforts to prevent the entry of such stop order or to remove it if entered.

20

 

               (g) The Company shall use its reasonable best efforts to cause the Shares and the Common Stock
issued upon exercise of the Warrants to be listed on the NYSE or such other securities exchange on
which the Common Stock is then listed. The Company will comply in all material respects with the
Company’s reporting, filing and other obligations under the NYSE Listed Company Manual or bylaws or
other rules of the NYSE or comparable regulations of such other securities exchanges on which the
Common Stock is then listed. The Company will not take any action which would be reasonably
expected to result in the delisting or suspension of trading of the Common Stock, including the
Shares and the Common Stock issued upon exercise of the Warrants, on the NYSE or a comparable
national securities exchange.

               (h) The Company shall promptly notify the Investors:

               (i) of the existence of any fact of which the Company is aware or the
occurrence of an event or the passage of time that makes the financial statements
included in a Registration Statement ineligible for inclusion therein or any
statement made in a Registration Statement or related prospectus untrue in any
material respect or that otherwise requires the preparation of a supplement or
amendment thereto so that, as thereafter amended or supplemented, such Registration
Statement or related prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary
to make the statement therein, in light of the circumstances under which they are
made, not misleading and promptly make available to the Investors a reasonable
number of copies of any such supplement or amendment; provided that any Suspension
Notice (including, with respect to Scheduled Earnings Blackouts, any such Suspension
Notice describing the Company’s Scheduled Earnings Blackout policy) shall satisfy
the notice requirements hereunder;

               (ii) when any Registration Statement filed pursuant to this Agreement or any
amendment thereto (other than through the incorporation by reference therein of any
report, statement or other document required to be filed pursuant to the Exchange
Act and the rules and regulations thereunder) has been filed with the SEC and when
such Registration Statement or any post-effective amendment thereto has become
effective;

               (iii) of any request by the SEC for amendments or supplements to any
Registration Statement or the prospectus included therein; and

               (iv) of the receipt by the Company or its legal counsel of any notification
with respect to the suspension of the qualification of the Common Stock for sale in
any jurisdiction or the initiation or threatening of any proceeding for such purpose
or the issuance of any stop order suspending the effectiveness of any registration
statement.

21

 

               (i) The Company shall use reasonable best efforts to procure the cooperation of the Company’s
transfer agent in settling any offering or sale of Registrable Securities, including with respect
to the transfer of physical stock certificates into book-entry form in accordance with any
procedures reasonably requested by any Investor.

               (j) In connection with an Underwritten Offering, the Company shall:

               (i) enter into such customary agreements, including a customary underwriting
agreement, in each case in form and substance reasonably satisfactory to the
Company, which may include indemnification provisions in favor of underwriters and
other Persons in addition to, or in substitution for the provisions of Section 4.4
hereof, and take such other actions as the Stockholder Parties, the Investor
Representative or the underwriters may reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;

               (ii) obtain one or more comfort letters, dated such date or dates as are
customary for the Company in the context of an underwritten Company Offering,
addressed to any underwriters of the Underwritten Offering, signed by the Company’s
independent public accountants, in form and covering such matters of the type
customarily covered by comfort letters delivered by the Company in connection with
underwritten Company Offerings as the lead underwriters may reasonably request;

               (iii) make available for inspection by the Stockholder, by the Investor
Representative, by any underwriter participating in any disposition to be effected
pursuant to an Underwritten Offering and by any attorney, accountant or other agent
retained by the Stockholder, the Investor Representative or any such underwriter,
all pertinent financial and other records, pertinent corporate documents and
properties of the Company, and cause all of the Company’s officers, directors and
employees to supply all information reasonably requested by the Stockholder, the
Investor Representative or any such underwriter, attorney, accountant or agent in
connection with such Underwritten Offering;

               (iv) if requested by the managing underwriter or agent or the Stockholder or
the Investor Representative, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or agent or
Investor Representative or the Stockholder reasonably requests to be included
therein, including, with respect to the number of Registrable Securities being sold
by the Investors to such underwriter or agent, the purchase price being paid
therefor by such underwriter or agent and with respect to any other terms of the
underwritten offering and make all required filings of such prospectus supplement or
post-effective amendment as soon as

22

 

reasonably practicable after being notified of the matters incorporated in such
prospectus supplement or post-effective amendment;

               (v) use its reasonable best efforts to obtain for delivery to the underwriter
or agent an opinion or opinions from counsel for the Company in customary form and
in form, substance and scope reasonably satisfactory to such underwriters or agents
and their counsel;

               (vi) use its commercially reasonable efforts (taking into account the interests
of the Company) to make available the executive officers of the Company to
participate with the Stockholder, the Investor Representative and any underwriters
in any customary “road shows” or other selling efforts that may be reasonably
requested by the Stockholder and the Investor Representative, on the one hand, or
managing underwriters, on the other hand, in connection with an Underwritten
Offering.

          SECTION 4.2 Information Supplied. The Company may require any Investor to furnish the Company with, and such Investor shall
promptly furnish, such information regarding the Investor and pertinent to the disclosure
requirements reasonably relating to the registration and the distribution of the Registrable
Securities as the Company may from time to time reasonably request in writing.

          SECTION 4.3 Restrictions on Disposition. Each Investor agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 4.1(h), such Investor will forthwith discontinue disposition
of Registrable Securities pursuant to the registration statement covering such Registrable
Securities until such Investor’s receipt of the copies of the supplemented or amended prospectus
contemplated by Section 4.1(h), and, if so directed by the Company, such Investor will deliver to
the Company all copies, other than permanent file copies then in such Investor’s possession, of the
prospectus covering such Registrable Securities current at the time of receipt of such notice;
provided that, for the duration of any such suspension of the use of the Registration Statement
that is not included as a Black Out Period, Liquidated Damages shall accrue and be payable pursuant
to Section 3.1(d) hereof.

          SECTION 4.4 Indemnification. (a) In the event of any registration of any Registrable Securities under the Securities Act
pursuant to Articles III or IV of this Agreement, the Company shall, and it hereby does, indemnify
and hold harmless, to the extent permitted by law, the seller of any Registrable Securities covered
by such registration statement, each Affiliate of such seller and their respective directors,
officers, employees and stockholders or members or general and limited partners (and any director,
officer, Affiliate, employee, stockholder and controlling Person of any of the foregoing), each
Person who participates as an underwriter in the offering or sale of such securities and each other
Person, if any, who controls such seller or any such underwriter within the meaning of the
Securities Act (collectively, the “Indemnified Parties”), against any and all losses,
claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or
threatened) in respect thereof (“Claims”) and expenses (including reasonable attorney’s
fees and reasonable expenses of investigation) to which such

23

 

Indemnified Party may become subject under the Securities Act, common law or otherwise, insofar as
such Claims or expenses arise out of, relate to or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration statement under which
such securities were registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or (ii) any omission or
alleged omission to state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of a prospectus, in light of the circumstances under which
they were made) not misleading; provided, that the Company shall not be liable to any Indemnified
Party in any such case to the extent that any such Claim or expense arises out of, relates to or is
based upon any untrue statement or alleged untrue statement or omission or alleged omission made in
such registration statement or amendment or supplement thereto or in any such preliminary, final or
summary prospectus in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller specifically for use in the preparation thereof; and,
provided, further, that the Company will not be liable in any such case to the extent, but only to
the extent, that the foregoing indemnity with respect to any untrue statement contained in or
omitted from a registration statement or the prospectus shall not inure to the benefit of any party
(or any person controlling such party) who is obligated to deliver a prospectus in transactions in
a security as to which a registration statement has been filed pursuant to the Securities Act and
from whom the person asserting any such Damages purchased any of the Registrable Securities to the
extent that it is finally judicially determined that such Damages resulted solely from the fact
that such party sold Registrable Securities to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the registration statement or the
prospectus, as amended or supplemented, and (x) the Company shall have previously and timely
furnished sufficient copies of the registration statement or prospectus, as so amended or
supplemented, to such party in accordance with this Agreement and (y) the registration statement or
prospectus, as so amended or supplemented, would have corrected such untrue statement or omission
of a material fact. The Company’s obligation to indemnify for Claims and expenses hereunder is
irrespective of whether the Indemnified Party has itself paid such Claims or expenses.

               (b) As a condition to including any Registrable Securities in any registration statement filed
in accordance with Sections 3.2 or 3.4 herein, the Company shall have received a customary
agreement from the prospective seller of such Registrable Securities or any underwriter to
indemnify and hold harmless (in the same manner and to the same extent as set forth in Section
4.4(a)) the Company and all other prospective sellers or any underwriter, as the case may be, with
respect to any untrue statement or alleged untrue statement in or omission or alleged omission from
such registration statement, any preliminary, final or summary prospectus contained therein, or any
amendment or supplement thereto, if such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such seller or underwriter specifically for use in the
preparation of such registration statement, preliminary, final or summary prospectus or amendment
or supplement, or a document incorporated by reference into any of the foregoing. Such indemnity
shall remain in full force and effect regardless of any investigation made by or on behalf of the
Company or any of the prospective sellers, or any of their respective Affiliates, directors,
officers or controlling Persons and shall survive the transfer of securities by any seller. In no
event shall the liability of any selling holder of Registrable Securities hereunder be greater in
amount than the dollar amount of

24

 

the proceeds received by such holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.

               (c) Each indemnified party hereunder shall give prompt written notice to the indemnifying
party of any Claim commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify the indemnifying party shall not relieve such indemnifying party from any
liability which it may have under the indemnity provided in this Section 4.4, unless and to the
extent the indemnifying party shall have been actually and materially prejudiced by the failure of
such indemnified party to so notify the indemnifying party. Such notice shall describe in
reasonable detail such Claim. In case any Claim is brought against an indemnified party, the
indemnified party shall be entitled to hire, at its own expense, separate counsel and participate
in the defense thereof. If the indemnifying party so elects within a reasonable time after receipt
of notice, the indemnifying party may assume the defense of the Claim at the indemnifying party’s
own expense with counsel chosen by the indemnifying party and approved by the indemnified party,
which approval shall not be unreasonably withheld, and the indemnified party may participate in
such defense at its own expense; provided, however, that the indemnifying party will not settle or
compromise any Claim, or consent to the entry of any judgment with respect to any such pending or
threatened Claim, without the written consent of the indemnified party unless such settlement,
compromise or consent secures the unconditional release of the indemnified party from all
liabilities arising out of such Claim; provided, further, that if the defendants in any such Claim
include both the indemnified party and the indemnifying party and the indemnified party reasonably
determines, based upon advice of legal counsel, that such Claim 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 indemnifying party and the indemnified party, then the
indemnifying party shall not be entitled to assume the defense of the indemnified party and the
indemnified party shall be entitled to separate counsel at the indemnifying party’s expense, which
counsel shall be chosen by the indemnified party and approved by the indemnifying party, which
approval shall not be unreasonably withheld; and provided, further, that it is understood that the
indemnifying party shall not be liable for the fees, charges and disbursements of more than one
separate firm for the indemnified parties. If the indemnifying party assumes the defense of any
Claim, all indemnified parties shall thereafter deliver to the indemnifying party copies of all
notices and documents (including court papers) received by such indemnified parties relating to the
Claim, and each indemnified party shall cooperate in the defense or prosecution of such Claim.
Such cooperation shall include the retention and (upon the indemnifying party’s request) the
provision to the indemnifying party of records and information that are reasonably available to the
Indemnified Party and that are reasonably relevant to such Claim and making employees available on
a mutually convenient basis to provide additional information and explanation of any material
provided hereunder. If the indemnifying party is not entitled to assume the defense of such Claim
as a result of the second proviso to the fourth sentence of this Section 4.4(c), the indemnifying
party’s counsel shall be entitled to conduct the indemnifying party’s defense and counsel for the
indemnified party shall be entitled to conduct the defense of the indemnified party, 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 indemnifying party is not so entitled to
assume the defense of such action or does not assume the defense, after having

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received the notice referred to in the first sentence of this Section 4.4(c), the indemnifying
party will pay the reasonable fees and expenses of counsel for the indemnified party; in that
event, however, the indemnifying party will not be liable for any settlement of any Claim effected
without the written consent of the indemnifying party, which may not be unreasonably withheld,
delayed or conditioned. If the indemnifying party is entitled to assume, and assumes, the defense
of an action or proceeding in accordance with this Section 4.4(c), the indemnifying party shall not
be liable for any fees and expenses of counsel for the indemnified party incurred thereafter in
connection with that action or proceeding except as set forth in the proviso in the fourth sentence
of this Section 4.4(c). Unless and until a final judgment is rendered that an indemnified party is
not entitled to the costs of defense under the provisions of this Section 4.4(c), the indemnifying
party shall reimburse, promptly as they are incurred, the indemnified party’s costs of defense.
The indemnifying party’s obligation to indemnify the indemnified parties for Claims hereunder is
irrespective of whether the indemnified party has itself made payments in respect of such Claims.

               (d) (i) If the indemnification provided for in this Section 4.4 from the indemnifying party
is unavailable to an indemnified party hereunder in respect of any Claim or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result of such Claim or
expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in such Claim or
expenses, as well as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party under this Section 4.4(d) as a result of the Claim and expenses
referred to above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any action or proceeding.

               (ii) The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.4(d) were determined by pro rata allocation
or by any other method of allocation which does not take account of the equitable
considerations referred to in Section 4.4(d)(i). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation.

               (e) Indemnification similar to that specified in this Section 4.4 (with appropriate
modifications) shall be given by the Company and each seller of Registrable Securities with respect
to any required registration or other qualification of securities under any law or with any
governmental authority other than as required by the Securities Act.

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               (f) The obligations of the parties under this Section 4.4 shall be in addition to any
liability which any party may otherwise have to any other party.

          SECTION 4.5 Required Reports. So long as there are Registrable Securities, the Company shall 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 the Company agrees that it will use
reasonable best efforts to timely file the reports required to be filed by it under the Securities
Act and the Exchange Act and it will take such further action as any Investor may reasonably
request, all to the extent required from time to time to enable such Investor to sell shares of
Registrable Securities pursuant to this Agreement, including without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any Investor, the Company will
deliver to such Investor a written statement as to whether it has complied with such requirements.

          SECTION 4.6 Holdback Agreement. If any Company Offering or any sale of securities in connection with a registration under Article
III hereof shall be in connection with an underwritten public offering, each of the Company and
each Investor agree and, if so requested by any underwriter in connection with such offering or
sale, shall enter into a customary agreement with such underwriter agreeing, not to effect any sale
or distribution, including, in the case of Investors, any sale pursuant to Rule 144 under the
Securities Act, of any such securities of the Company, or options or other rights convertible into,
or exchangeable or exercisable for, such securities (other than as part of such underwritten public
offering), within seven (7) days before, or ninety (90) days (or such lesser period as the managing
underwriters may permit) after, the effective date of any such Company Offering or registration
pursuant to Article III or the closing of any sale of securities in connection with a registration
under Section 3.2 (except as part of any such registration or sale) (such period, a “Holdback
Period”); provided, that, notwithstanding the foregoing, with respect to any Company Offering,
the Investors shall have no obligation under this Section 4.6, and shall not be required to enter
into any agreement with an underwriter pursuant to this Section 4.6, in each case that is more
restrictive than the obligations imposed on and agreements required to be entered into by the
directors and senior executive officers of the Company in connection with such Company Offering
and/or in each case that would restrict or prohibit a Sell-Down.

          SECTION 4.7 No Inconsistent Agreement. The Company represents and warrants that it will not enter into, or cause or permit any of its
Subsidiaries to enter into, any agreement which conflicts with or limits or prohibits the exercise
of the rights granted to the holders of Registrable Securities in this Agreement.

ARTICLE V

PREEMPTIVE RIGHTS; SHARE REPURCHASES

          SECTION 5.1 Company Sale of Covered Securities. If the Company offers to sell Covered Securities in a public or private offering of Covered
Securities solely for cash (a

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“Qualified Offering”), the Stockholder Parties shall be
afforded the opportunity to acquire from the Company, for the same price and on the same terms as
such Covered Securities are offered, in the aggregate up to the amount of Covered Securities
required to enable it to maintain its then-current Percentage Interest, but solely to the extent
that (i) any such issuance of shares of Covered Securities would not result in the issuance of
Covered Securities that would require a vote of the stockholders of the Company pursuant to the
rules of the NYSE and (ii) the Company Board determines in its good faith discretion that the
acquisition of such Covered Shares by the Stockholder will not jeopardize or endanger the
availability to the Company of its net operating loss carryforwards to be used to offset its
taxable income in such year or future years, and the basis for such determination shall be provided
to the Stockholder in writing; provided, however, that this Section 5.1 shall not apply to any
Qualified Offering the gross proceeds of which, together with the aggregate gross proceeds of any
other Qualified Offering of Covered Securities after the date hereof, do not exceed $1,000,000.
For the avoidance of doubt, to the extent that the Stockholder Parties’ acquisition of Covered
Securities required to enable the Stockholder Parties to maintain their then-current Percentage
Interest would result in an event described in clause (i) or (ii) of the preceding sentence, the
Stockholder Parties may nonetheless acquire up to the maximum amount that would not result in the
occurrence of such event. In addition prior to the date of this Agreement, 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 other agreements or the laws of its state of
incorporation (including, without limitation, Section 203 of the Delaware General Corporation Law)
that is or could become applicable to Stockholder as a result of the Stockholder exercising its
rights under this Section 5.1 to acquire Covered Securities as set forth herein; provided that the
Company and the Company Board shall not be required to take any such action in respect of the
Company’s Section 382 Rights Agreement, dated as of January 20, 2009, between the Company and
American Stock Transfer & Trust Company, LLC (the “382 Rights Agreement”) (which will not
be applicable to the extent clause (ii) above does not apply).

          SECTION 5.2 Notice. Prior to making any Qualified Offering of Covered Securities, the Company shall give the
Stockholder written notice of its intention (including, in the case of a registered public
offering and to the extent possible, a copy of the prospectus included in the registration
statement filed in respect of such), describing, to the extent then known, the anticipated
amount of securities, price (or, in the case of a registered public offering, an estimated
range of prices) and other material terms upon which the Company proposes to offer the same.
The Stockholder shall have ten (10) days from the provision of such notice to notify the
Company in writing that it intends to exercise such preemptive purchase rights and as to the
amount of Covered Securities the Stockholder desires to purchase, up to the maximum
amount calculated pursuant to Section 5.1 (the “Designated Securities”). Such notice shall
constitute a non-binding indication of interest of the Stockholder to purchase the amount of
Designated Securities so specified (or a proportionately lesser amount if the amount of Covered
Securities to be offered in such Qualified Offering is subsequently reduced) at the price (or range
of prices) and other terms set forth in the Company’s notice to it. The failure to respond during
such ten (10) day period shall constitute a waiver of preemptive rights in respect of such
offering. Any notice provided
by the Company pursuant to this Section 5.2, and any information
provided

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to the Stockholder otherwise in connection with such Qualified Offering, shall be subject
to the terms of the Confidentiality Agreement applicable to “Evaluation Material” thereunder until
the 90th day following the consummation of any such Qualified Offering of Covered
Securities, regardless of any termination thereof. If the sale of Covered Securities contemplated
by the Qualified Offering described in such notice delivered to the Stockholder (i) is not subject
to a binding agreement between the Company and the purchasers of such Covered Securities, (ii) is
not otherwise consummated within thirty (30) days of delivery of such notice to the Stockholder, or
(iii) if the terms of such binding agreement in respect of the Qualified Offering are materially
amended, or if the terms relating to price are amended whatsoever, then such Qualified Offering
shall again be subject to the requirements of this Article V.

          SECTION 5.3 Purchase Mechanism. (a) If the Stockholder exercises its preemptive purchase rights provided in this Article V
with respect to a Qualified Offering that is an underwritten public offering or a private
offering made to qualified institutional buyers (as such term is defined in Rule 144A under
the Act) for resale pursuant to Rule 144A under the Act, the Company shall offer the
Stockholder, if such underwritten public offering or Rule 144A offering is consummated, the
Designated Securities (as adjusted downward or, at the Stockholder’s option, upward to reflect
the actual size of such offering when priced) at the same price and on the same terms as the
Covered Securities are offered to the initial purchasers in such offering and shall provide
written notice of such price to the Stockholder as soon as practicable prior to such
consummation.

               (b) If the Stockholder exercises its preemptive rights provided in this Article V with respect
to a Qualified Offering that is not an underwritten public offering or Rule 144A offering (a
“Private Placement”), the closing of the purchase of the Covered Securities with respect to
which such right has been exercised shall be conditioned on the consummation of the Private
Placement giving rise to such preemptive purchase rights and shall take place simultaneously with
the closing of the Private Placement or on such other date as the Company and the Stockholder shall
agree in writing; provided that the actual amount of Covered Securities to be sold to the
Stockholder pursuant to its exercise of preemptive rights hereunder shall be reduced if the
aggregate amount of Covered Securities sold in the Private Placement is reduced and, at the option
of the Stockholder (to be exercised by delivery of written notice to the Company within five (5)
Business Days of receipt of notice of such increase), shall be increased if such aggregate amount
of Covered Securities sold in the Private Placement is increased. In connection with its purchase
of Designated Securities, the Stockholder shall, if it continues to wish to exercise its preemptive
rights with respect to such offering, execute an agreement containing representations, warranties
and agreements of the Stockholder that are substantially
similar in all material respects to the agreements executed by other purchasers in such
Private Placement.

               (c) If, prior to consummation of Qualified Offering, the terms of the proposed issuance change
with the result that the price is less than the minimum price or more than the maximum price set
forth in the notice contemplated by Section 5.2 or the other principal terms are more favorable in
any material respect to the prospective purchaser than those set forth

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in such notice, it shall be
necessary for a separate notice to be furnished, and the terms and provisions of this Article V
separately complied with.

          SECTION 5.4 Termination of Preemptive Rights. Anything to the contrary in this Article V notwithstanding, the preemptive right to
purchase Covered Securities granted by this Article V shall terminate as of and not be available
for any offering that commences at any time after the date on which the Stockholder Transfers any
Shares, other than Transfers (i) to Affiliates of the Stockholder or (ii) pursuant to a Sell-Down.

          SECTION 5.5 Notice of Share Repurchase, Redemption. Unless otherwise instructed in writing by the Stockholder, following the date hereof and
until the earlier of (i) the fifth anniversary of the date hereof, (ii) such time as the
Stockholder Parties’ Adjusted Ownership no longer exceeds 10% and (iii) such time as the
Stockholder Parties no longer hold any indebtedness of the Company, the Company will not, directly
or indirectly, redeem, purchase or otherwise acquire, any of its Voting Securities without
providing the Stockholder at least 90 days prior written notice, which notice shall not be
delivered prior to the date of public announcement of such proposed redemption or repurchase.
Beginning on the date of delivery of such notice until the first to occur of (i) the date such
share repurchase, redemption or acquisition is commenced or (ii) the date such Stockholder receives
notice from the Company that it has abandoned the repurchase, redemption or acquisition disclosed
in such notice, the Stockholder Parties shall be permitted to Transfer Equity Securities of the
Company without regard to the Lock-Up Period and shall have no obligation pursuant to Section 4.6
hereof, in each case to the extent reasonably required to ensure that no Stockholder Party, or a
direct or indirect owner of such Stockholder Party (that is a non-U.S. person) is deemed to be a
10% or more owner of the Company for purposes of the portfolio interest exemption from withholding
as set forth in Sections 871 and 881 of the Internal Revenue Code of 1986, as amended (a
“Sell-Down”). Notwithstanding the foregoing, the Company shall not, directly or
indirectly, redeem, purchase or otherwise acquire any of its Voting Securities prior to the date
which is 90 days following the closing of the Public Offering.

ARTICLE VI

STANDSTILL

          SECTION 6.1 No Acquisition. Prior to the first anniversary of the date of this Agreement, each of the Investors shall
not, and shall cause each of their respective controlled
Affiliates not to, directly or indirectly, acquire, or agree to acquire, by purchase or
otherwise, beneficial ownership of any Capital Stock of the Company (except pursuant to the
Purchase Agreement, the provisions of Article V of this Agreement, the exchange of rights issued
pursuant to the 382 Rights Agreement, the exercise of the Warrants, or the conversion of any
convertible indebtedness acquired in connection with the Company Refinancing or by way of any stock
split, dividend, spin-off, combination, reclassification or recapitalization of the Company and its
Common Stock) to the extent such acquisition would result in such Investor and its controlled
Affiliates beneficially owning in excess of 19.9% of the Voting Securities of the Company;

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provided
that, for purposes of this Section 6.1, “beneficial ownership” shall have the meaning given to such
term in Rule 13d-3 of the Exchange Act without regard to the proviso included in the definition of
“beneficial ownership” set forth in Section 1.1 hereof. For the avoidance of doubt, this
prohibition shall not apply to acquisitions of (i) the Company’s convertible Indebtedness (or the
conversion of such convertible Indebtedness into Capital Stock of the Company) issued in connection
with the Company Refinancing, (ii) the Warrants (or the receipt of the Common Stock of the Company
upon exercise of the Warrants), (iii) in connection with any exchange of rights under the 382
Rights Agreement; (iv) purchases of Covered Securities in a Qualified Offering pursuant to and
subject to the limitations set forth in Article V hereof and (v) purchases of Common Stock on the
market if, and to the extent, required to maintain such Investor’s Ownership Percentage after
giving effect to any preemptive rights available to such Investor pursuant to Article V.
Notwithstanding anything to the contrary herein, nothing in this Agreement shall be construed as an
exemption of any Investor from the provisions of the 382 Rights Agreement, or a waiver of the
applicability thereof, absent (and solely to the extent of) an express determination of exemption
or inapplicability by the Company Board in accordance with the terms of the 382 Rights Agreement.

          SECTION 6.2 Other Restrictions. Each of the Investors shall not, and will cause its controlled Affiliates not to, directly
or indirectly, alone or in concert with others, unless specifically requested in writing by the
Chief Executive Officer of the Company or by a resolution of the Company Board, take any of the
actions set forth below (or take any action that would require the Company to make an announcement
regarding any of the following:

               (a) effect, seek, offer, engage in, propose (whether publicly or otherwise) or cause or
participate in, or assist any other Person to effect, seek, engage in, offer, cause, propose
(whether publicly or otherwise) or participate in:

               (i) any acquisition of beneficial ownership of Voting Securities of the Company
which would result in a breach of Section 6.1 of this Agreement;

               (ii) any tender or exchange offer, merger, consolidation, share exchange,
business combination, recapitalization, restructuring, liquidation, dissolution or
other extraordinary transaction involving the Company or any material portion of its
business or any purchase of all or any substantial part of the assets of the Company
or any material portion of its business; provided that, if
such transaction is being conducted by a third-party unaffiliated with such
Investor, the foregoing shall not prevent such Investor from tendering, exchanging,
exercising voting rights in respect of, or otherwise exercising rights in respect of
and opting to receive the benefit of such transactions in the same manner as offered
to other holders of the Company’s Common Stock not participating in the “group” (as
such term is used in Section 13(d)(3) of the Exchange Act) conducting such
transaction; or

31

 

               (iii) any “solicitation” of “proxies” (as such terms are used in the proxy
rules of the SEC, but without regard to the exclusion set forth in Section
14a-1(l)(2)(iv) from the definition of “solicitation”) with respect to the Company
or any of its Affiliates or any action resulting in the Stockholder, or any of its
controlled Affiliates, or such other Person becoming a “participant” in any
“election contest” (as such terms are used in the proxy rules of the SEC) with
respect to the Company or any of its Subsidiaries.

               (b) propose any matter for submission to a vote of stockholders of the Company or any of its
Affiliates;

               (c) seek election to, seek to place a representative on, or seek the removal of, any director
of the Company or any of its Affiliates;

               (d) except as contemplated by this Agreement and except for proxies granted to Affiliates of
the Stockholder (and their respective employees, attorneys and agents (other than Persons who are
attorneys and agents solely as a result of the granting of such proxy), grant any proxy with
respect to any Capital Stock of the Company;

               (e) form, join or participate in a “group” (as such term is used in Section 13(d)(3) of the
Exchange Act) with respect to any Capital Stock of the Company, or deposit any Capital Stock of the
Company in a voting trust or, except as contemplated by this Agreement, subject any Capital Stock
of the Company to any arrangement or agreement with respect to the voting of such Capital Stock or
other agreement having similar effect;

               (f) take any other actions to seek to affect the control of the Company Board or the
management of the Company or any of its Affiliates, including publicly suggesting or announcing its
willingness to engage in or have another Person engage in a transaction that could reasonably be
expected to result in a business combination or to increase the percentage of Capital Stock owned
by the Investor; provided that from and after the first anniversary of this Agreement, each
Investor and its Affiliates shall not be prohibited by this clause (g) from acquiring Capital Stock
of the Company;

               (g) enter into any discussions, negotiations, arrangements or understandings with any Persons
with respect to any of the foregoing, or advise, assist, encourage or seek to persuade others to
take any action with respect to any of the foregoing; or

               (h) disclose to any Person (other than an Affiliate) or otherwise induce, encourage, discuss
or facilitate, any intention, plan or arrangement inconsistent with the foregoing or with the
restrictions on transfer set forth in Article II or form any such intention which would result in
the Company or any of its Affiliates or any Investor or any of its Affiliates

32

 

being required to
make any such disclosure in any filing with a Governmental Authority or being required to make a
public announcement with respect thereto;

provided, however, that notwithstanding the foregoing restrictions, each Investor shall be entitled
to make any disclosure required by securities or similar disclosure laws, as advised in writing by
outside counsel reasonably familiar with such matters; provided, further that the Stockholder shall
not be prohibited from requesting that the Company Board consider nominating a designee of the
Stockholder for election to the Company Board and, if so elected, from assisting such designee in
the conduct of such designee’s office and the fulfillment of such designee’s fiduciary duties in
such office. Subject to Section 7.1, nothing in this Agreement, including this Section 6.2, will
prohibit, limit, condition or delay each Investor’s ability (i) to vote (including by proxy) or
consent with respect to any matter properly brought before stockholders of the Company for a vote
or consent, or (ii) to tender or exchange its shares); provided, further, that the Stockholder
shall not be required to take any such action as a result of the request of the Company or a
resolution of the Company Board, but, if so requested, prior to receipt of written notice from the
Company to the contrary, the Stockholder may continue to take such actions that are reasonably
related to the matters addressed in, reasonably in furtherance of, and not in conflict with, such
request or resolution and, if available, the publicly stated position of the Company with respect
to the matters addressed therein.

          SECTION 6.3 Termination of Standstill. The provisions of this Article VI (except for the last sentence of Section 6.1 hereof)
shall terminate in respect of any individual Investor in the event (i) the Company Board approves a
tender offer for 50% or more of the outstanding Capital Stock of the Company (provided that if such
offer is withdrawn or expires without being consummated, this Article VI shall be reinstated),(ii)
it is publicly disclosed that Capital Stock representing 33-1/3% or more of the voting power of the
Company’s stockholders have been acquired by any Person (including any group of Persons acting in
concert) other than such Investor and its Affiliates, (iii) of (a) the filing by the Company of a
voluntary petition in bankruptcy; (b) the entry of an order of relief in any bankruptcy or
insolvency proceeding in respect of the Company or the entry of an order that the Company is a
bankrupt or insolvent; or (c) any involuntary proceeding seeking liquidation, reorganization or
other relief against the Company under any bankruptcy, insolvency or other similar law now or
hereafter in effect that has not been dismissed 60 days after the commencement thereof, (iv) of the
public announcement of any merger, consolidation, share exchange, business combination,
recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction, in
each case involving a change of control of the Company or substantially all of its business or any
purchase of all or substantially all of the assets of the Company or substantially all of its
business, in each case conducted by any Person (including any group of Persons acting in concert)
other than such Investor and its Affiliates, (v) solely with respect to the Stockholder Parties,
the Stockholder Parties’ aggregate Adjusted Ownership has not exceeded 9.9% for 120 consecutive
days or (vi) of the first anniversary of the first date upon which the Warrants may be exercised in
accordance with their terms.

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ARTICLE VII

VOTING LIMITATION

          SECTION 7.1 Limitation on Voting. At any meeting of the Company’s stockholders, however called, including any adjournment or
postponement thereof, or in connection with any written consent of the Company’s stockholders,
unless otherwise consented to by the Company Board:

               (a) each Investor shall, and shall cause its controlled Affiliates to, appear at each such
meeting or otherwise cause all Capital Stock of the Company beneficially owned or owned of record
by such Investor or its controlled Affiliates entitled to vote on any matter at such meeting to be
duly counted as present thereat for purposes of calculating a quorum (to the extent such shares of
Capital Stock may be so counted);

               (b) with respect to any proposals requiring approval by the affirmative vote of a percentage
of the votes cast in respect of such proposal, in person or by proxy, at such meeting, each
Investor shall, and shall cause its controlled Affiliates to, vote, or cause to be voted,
collectively, that number of shares of its and their Capital Stock entitled to be voted in respect
of such proposal representing no more than the Voting Threshold in respect of such proposal, and
shall cause any remaining shares of its and their Capital Stock entitled to vote thereon to be
properly withheld (but not cast as abstaining votes) from voting on such matter (such remaining
shares, the “Withheld Shares”);

               (c) with respect to any proposals at any such meeting requiring approval by the affirmative
vote of a percentage of the outstanding shares of Capital Stock or of aggregate voting power
entitled to vote in respect of such proposal, in person or by proxy, at such meeting, or in respect
of any written consent of the Company’s stockholders, or any proposal in respect of which the
provisions of Section 7.1(b) cannot or do not apply, each Investor shall, and shall cause its
controlled Affiliates to, vote, or cause to be voted, all shares of its and their Capital Stock
entitled to be voted in respect of such proposal in excess of the Voting Threshold (such excess
shares, the “Excess Shares”) in the same proportion as all other votes cast on such
proposal (including any votes cast by such Investor and its controlled Affiliates other than Excess
Shares).

          SECTION 7.2 No Inconsistent Agreements. Each Investor hereby represents, warrants, covenants and agrees that, except for this
Agreement, the neither such Investor nor any of its controlled Affiliates (a) have entered into,
and none shall enter into at any time while this Agreement remains in effect, any voting agreement
or voting trust with respect to such Investor’s or its controlled Affiliates’ Capital Stock of the
Company and (b) have granted, and none shall grant at any time while this Agreement remains in
effect, a proxy, consent or power of attorney with respect to such Investor’s or its controlled
Affiliates’ Capital Stock of the Company that is inconsistent with this Agreement.

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          SECTION 7.3 Termination of Voting Rights. The provisions of this Article VII shall terminate in respect of any individual Investor in
the event (i) the Company Board approves a tender offer for 50% or more of the outstanding Capital
Stock of the Company (provided that if such offer is withdrawn or expires without being
consummated, this Article VII shall be reinstated), (ii) it is publicly disclosed that Capital
Stock representing 33-1/3% or more of the voting power of the Company’s stockholders has been
acquired by any Person (including any group of Persons acting in concert) other than such Investor
and its Affiliates, (iii) of (a) the filing by the Company of a voluntary petition in bankruptcy;
(b) the entry of an order of relief in any bankruptcy or insolvency proceeding in respect of the
Company or the entry of an order that the Company is bankrupt or insolvent; or (c) any involuntary
proceeding seeking liquidation, reorganization or other relief against the Company under any
bankruptcy, insolvency or other similar law now or hereafter in effect that has not been dismissed
60 days after the commencement thereof, (iv) of the public announcement of any merger,
consolidation, share exchange, business combination, recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction, in each case involving a change of control of the
Company or substantially all of its business or any purchase of all or substantially all of the
assets of the Company or substantially all of its business, in each case conducted by any Person
(including any group of Persons acting in concert) other than such Investor and its Affiliates, or
(v) solely with respect to the Stockholder Parties, upon the date that the Stockholder Parties’
aggregate Adjusted Ownership has not exceeded 9.9% for 120 consecutive days.

ARTICLE VIII

MISCELLANEOUS

          SECTION 8.1 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 8.5 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.

35

 

          SECTION 8.2 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.

          SECTION 8.3 Termination. The provisions of Article III and Article IV of this Agreement
shall terminate upon the earliest to occur of (a) the date when no Registrable Securities remain
outstanding, (b) June 30, 2017 and (c), solely with respect to any individual Investor, when such
Investor no longer holds any Registrable Securities or Warrants. The remaining provisions of
this agreement shall terminate in accordance with their terms, or, if no such termination is
provided for hereunder, shall survive until terminated by written agreement of each of the parties
hereto. Nothing herein shall relieve any party from any liability for the breach of any provisions
set forth in this Agreement.

          SECTION 8.4 Entire Agreement; Amendments. This Agreement and the Transaction Agreements
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.

          SECTION 8.5 Notices. 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 the Stockholder to it at:

Paulson & Co. Inc.

1251 Avenue of the Americas, 50th Floor

New York, New York 10020

Attn: Mr. Michael Waldorf

Telephone: (212) 956-2221

Fax: (212) 351-5886

with a copy to (which copy alone shall not constitute notice):

Kleinberg, Kaplan, Wolff & Cohen, P.C.

551 Fifth Avenue, 18th Floor

36

 

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

          SECTION 8.6 Specific Performance. The Company and the Stockholder 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.

          SECTION 8.7 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.

          SECTION 8.8 No Third Party Beneficiaries. Other than as set forth in Section 4.4,
nothing in this Agreement, expressed or implied, is intended to confer upon any person, other

37

 

than the parties hereto or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.

          SECTION 8.9 Successors, Assigns; Transferees. This Agreement shall bind and inure to
the benefit of and be enforceable by the parties hereto and their respective successors and
permitted assigns and transferees. Except as expressly provided herein, this Agreement may not be
assigned by any party hereunder except by operation of law or with the prior written consent of the
Company, in the case of any assignment by an Investor, or of the Stockholder, in the case of the
Company, except that an Investor hereunder may assign the rights to cause the Company to register
any Registrable Securities that such Investor Transfers to a transferee pursuant to and in
accordance with this Agreement (but, for so long as such Investor holds Equity Securities of the
Company, no such Transfer or assignment shall relieve such Investor of its obligations hereunder),
if such transferee (a) (i) acquires at least 10% of the Registrable Securities (other than
convertible Indebtedness issued in connection with the Company Refinancing) pursuant to such
transfer and (ii) as a result of such acquisition, beneficially owns at least 10% of the Common
Stock of the Company (excluding convertible Indebtedness issued in connection with the Company
Refinancing) or (b) is an Affiliate of the Stockholder (a transferee described in clause (a), an
“Unaffiliated Assignee”, a transferee described in clause (b), an “Affiliated
Assignee”, and collectively, the “Permitted Assignees”), in each case subject to the
succeeding sentence. Any purported Permitted Assignee shall agree to be bound by and subject to
the obligations attributable to an Investor and of a holder of Registrable Securities found in
Articles I, II, III, IV, VI, VII and VIII of this Agreement but excluding any rights and
obligations attributable solely to the Stockholder or, in the case of an Unaffiliated Assignee, to
an Affiliated Assignee) and, solely with respect to purported Permitted Assignees that are
Affiliates of the Stockholder, Article V hereof, and as a condition to such transferee’s receipt of
such shares and such rights, such transferee, if not already bound in writing by such provisions
hereof, shall execute an agreement in form and substance reasonably satisfactory to the Company,
agreeing to be bound by such provisions hereof. For avoidance of doubt, however, no such transfer
and assignment shall (i) act to duplicate any limited rights to which the Stockholder is otherwise
entitled hereunder, including, without limitation, the right to deliver no more than three Demand
Notices pursuant to Section 3.2 hereunder or (ii) act to assign or transfer any of the rights and
obligations set forth in Article V hereof except in respect of a transfer and assignment to a
Permitted Assignee who is also an Affiliate of the Stockholder.

          SECTION 8.10 Expenses. Except as otherwise expressly provided herein, each of the
Company and the Stockholder shall bear its own respective expenses incurred on its behalf with
respect to this Agreement.

          SECTION 8.11 Payment Obligations. Notwithstanding anything to the contrary herein,
the Company will make any payment required to be made by it pursuant to the terms of this Agreement
only to the extent not prohibited by any material agreement of the Company in effect on the date
hereof, and any failure to make a payment otherwise so required hereunder shall not constitute a
default or breach of the Company’s obligations hereunder to the extent so prohibited by any such
material agreement.

38

 

          SECTION 8.12 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).

          SECTION 8.13 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..

          SECTION 8.14 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.

39

 

          IN WITNESS WHEREOF, the parties hereto have executed the INVESTOR RIGHTS AGREEMENT as of the
date set forth in the first paragraph hereof.

	 	 	 	 	 
	 	CONSECO, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	PAULSON & CO. INC., on behalf of the several investment funds and accounts managed by it

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

Annex A

Plan of Distribution

We are registering the shares offered by this prospectus on behalf of the selling stockholders
named in this prospectus. The selling stockholders may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of common stock or interests in shares of common
stock on any stock exchange, market or trading facility on which the shares are traded or in
private transactions directly or through one or more underwriters, broker-dealers or agents. If
the shares of common stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions or agent’s commissions.
These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at
prices related to the prevailing market price, at varying prices determined at the time of sale, or
at negotiated prices.

The selling stockholders will act independently of us in making decisions as to the timing, manner
and size of each sale. The selling stockholders may use any one or more of the following methods
when disposing of shares or interests therein:

	 	•	 	in the over-the-counter market;
	 
	 	•	 	on any national securities exchange or market, if any, on which
our common stock may be listed at the time of sale;
	 
	 	•	 	in transactions otherwise than on an exchange or in the
over-the-counter market, or in a combination of any such
transactions;
	 
	 	•	 	through block trades in which the broker or dealer so engaged will
attempt to sell the shares as agent, but may position and resell a
portion of the block as principal to facilitate the transaction;
	 
	 	•	 	through purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this prospectus;
	 
	 	•	 	in ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
	 
	 	•	 	through writing of options, swaps, forwards, or derivatives;
	 
	 	•	 	in privately negotiated transactions;
	 
	 	•	 	in transactions to cover short sales;
	 
	 	•	 	through transactions in which broker-dealers may agree with the
selling stockholders to sell a specified number of such shares at
a stipulated price per share;
	 
	 	•	 	through a combination of any such methods of sale.

 

 

The selling stockholders may, from time to time, pledge or grant a security interest in some or all
of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock,
from time to time, under this prospectus, or under an amendment or supplement to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended
amending the list of selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus.

The selling stockholders may sell their shares of our common stock directly to purchasers or may
use brokers, dealers, underwriters or agents to sell such shares. In effecting sales, brokers and
dealers engaged by the selling stockholders may arrange for other brokers or dealers to
participate. Brokers or dealers may receive commissions, discounts or concessions from a selling
stockholder or, if any such broker-dealer acts as agent for the purchaser of such shares, from a
purchaser in amounts to be negotiated. Such compensation may, but is not expected to, exceed that
which is customary for the types of transactions involved. Broker-dealers may agree with a selling
stockholder to sell a specified number of such shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a selling stockholder, to purchase
as principal any unsold shares at the price required to fulfill the broker-dealer commitment to the
selling stockholders. Broker-dealers who acquire shares as principal may thereafter resell such
shares from time to time in transactions, which may involve block transactions and sales to and
through other broker-dealers, including transactions of the nature described above, in the
over-the-counter market or otherwise at prices and on terms then prevailing at the time of sale, at
prices then related to the then-current market price or in negotiated transactions. In connection
with such resales, broker-dealers may pay to, or receive from, the purchasers of such shares
commissions as described above.

The selling stockholders and any broker-dealers or agents that participate with the selling
stockholders in sales of their shares of our common stock may be deemed to be “underwriters” within
the meaning of the Securities Act of 1933, as amended in connection with such sales. In such event,
any commissions received by such broker-dealers or agents and any profit on the resale of such
shares purchased by them may be deemed to be underwriting commissions or discounts under the
Securities Act of 1933, as amended.

From time to time, the selling stockholders may engage in short sales, short sales against the box,
puts and calls and other hedging transactions in our securities, and may sell and deliver their
shares of our common stock in connection with such transactions or in settlement of securities
loans. These transactions may be entered into with broker-dealers or other financial institutions.
In addition, from time to time a selling stockholder may pledge our shares pursuant to the margin
provisions of customer agreements with broker-dealers or other financial institutions. Upon
delivery of such shares or a default by a selling stockholder, the broker-dealer or financial
institution may offer and sell such pledged shares from time to time under this prospectus, or
under an amendment or supplement to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933, as amended amending the list of selling stockholders to

 

 

include the pledgee, transferee or other successors in interest as selling stockholders under this
prospectus.

The selling stockholders also may resell all or a portion of the shares in open market transactions
in reliance upon Rule 144 under the Securities Act of 1933, as amended provided that they meet the
criteria and conform to the requirements of that rule.

We are required to pay all fees and expenses incident to the registration of the common stock. We
have agreed to indemnify the selling stockholders against certain losses, claims, damages and
liabilities under the Securities Act of 1933, as amended.

The selling stockholders are subject to applicable provisions of the Securities Exchange Act of
1934, as amended and the SEC’s rules and regulations, including Regulation M, which provisions may
limit the timing of purchases and sales of the shares by the selling stockholders.

In order to comply with certain states’ securities laws, if applicable, the shares may be sold in
those jurisdictions only through registered or licensed brokers or dealers. In certain states the
shares may not be sold unless the shares have been registered or qualified for sale in such state,
or unless an exemption from registration or qualification is available and is obtained.

We will file supplements to this prospectus as required by item 508 of Regulation S-K to the extent
applicable.

The selling stockholders are not restricted as to the price or prices at which they may sell their
common shares. Sales of such common shares may have an adverse effect on the market price of the
securities, including the market price of the common shares. Moreover, the selling stockholders are
not restricted as to the number of common shares that may be sold at any time, and it is possible
that a significant number of common shares could be sold at the same time, which may have an
adverse effect on the market price of the common shares.

We and the selling stockholders may agree to indemnify any underwriter, broker-dealer or agent that
participates in transactions involving sales of the common shares against certain liabilities,
including liabilities arising under the Securities Act.

 

 

EXHIBIT A

FORM OF REQUEST FOR REMOVAL OF RESTRICTIVE LEGEND IN

CONNECTION WITH A TRANSFER PURSUANT TO RULE 144

To be delivered to:

Conseco, Inc.

11825 North Pennsylvania Street

Carmel, Indiana 46032

Attn: General Counsel

[Address of Transfer Agent]

				
	 	Re:	 	Shares, Warrants or Common Stock issuable upon exercise of the Warrants or upon
conversion of convertible Indebtedness acquired by Stockholder in the Company
Refinancing (collectively, the “Securities”)

          Reference is hereby made to the Investor Rights Agreement dated as of                           , 20      (the
“Rights Agreement”) by and among 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, and any other Investors agreeing in writing to be
bound by the terms of the Rights Agreement. Capitalized terms used by not defined herein will have
the respective meanings ascribed to such terms in the Rights Agreement.

          This letter relates to the following Securities held by the undersigned Investor (the
“Subject Securities”):

	 	o	 	Warrants to acquire                  
    shares of Common Stock represented by certificate
number(s):                       
                        
                        
                        
      .
	 
	 	o	 	                     shares of Common Stock represented by certificate number(s):
                      
                       
                        
                        
       .

          The undersigned Investor requests that the restrictive legend included on the face of the
Subject Securities described above pursuant to Section 2.2 of the Rights Agreement (the
“Restrictive Legend”) be removed. In connection with such request, the undersigned
Investor does hereby certify that neither the Restrictive Legend nor the restrictions on transfer
set forth therein are required to ensure that transfers of the Subject Securities will not violate
the registration requirements of the Securities Act for the reason checked below:

          The Subject Securities are being Transferred in a transaction exempt from registration under
the Securities Act pursuant to Rule 144. The Investor hereby certifies that the Subject Securities
are eligible for resale without limitation under Rule 144 (other than company information
requirements of paragraph (c) of Rule 144). In connection with this Transfer, the Investor hereby
represents and warrants as follows:

	 	1.	 	The Investor is not, and has not been at any time during the three months
preceding the date hereof, an affiliate (as defined under Rule 144) of the Company;
	 
	 	2.	 	The Subject Securities were acquired from the Issuer or from an affiliate of
the Issuer, and the full purchase price or other consideration was paid therefore, at
least six months prior to the date hereof; and

 

 

	 	3.	 	The Investor is not aware of any material adverse information with regard to
the Company which has not been publicly disclosed.

          Notwithstanding anything to the contrary herein, and without otherwise limiting the Investor’s
remedies under the Rights Agreement, if the Company is not in compliance with the Company
information requirements of paragraph (c) of Rule 144, the Investor hereby instructs the Company to
disregard this request until such time as the Company is again in compliance with such requirements
of paragraph (c) of Rule 144.

          This certificate and the statements contained herein are made for the benefit of the Company
and the Company’s transfer agent on behalf of the undersigned Investor.

	 	 	 	 	 
	 	[NAME OF INVESTOR]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

Dated:          
           ,

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