THE SECURITIES
REPRESENTED BY THIS WARRANT 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.
THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND OTHER
RESTRICTIONS SET FORTH IN AN INVESTOR RIGHTS AGREEMENT, DATED AS OF
[ ], 2009, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE
ISSUER.
1.
Definitions . Unless the context otherwise requires, when
used herein the following terms shall have the meanings
indicated.
“
Board of Directors ” means the board of directors of
the Company or any committee thereof duly authorized to act in the
relevant matter on behalf of such board of directors.
“
Business Day ” means any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which
banking institutions in the State of Indiana or the State of New
York generally are authorized or required by law or other
governmental actions to close.
“
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.
“
Clause A Distribution ” has the meaning set forth in
Section 12(C).
“
Clause B Distribution ” has the meaning set forth in
Section 12(C).
“
Clause C Distribution ” has the meaning set forth in
Section 12(C).
“
close of business ” means 5:00 p.m., New York City
time.
“
Closing Sale Price ” of the Common Stock or any
securities distributed in a Spin-Off, as the case may be, on any
date of determination means:
(a) the closing
sale price per share of the Common Stock or such other securities
(or if no closing sale price is reported, the average of the
closing bid and closing ask prices or, if more than one in either
case, the average of the average closing bid and the average
closing ask prices) as reported by the New York Stock Exchange on
such date;
(b) if the Common
Stock or such other securities are not listed on the New York Stock
Exchange on such date, the closing sale price per share of the
Common Stock or such other securities (or if no closing sale price
is reported, the average of the closing bid and closing ask prices
or, if more than one in either case, the average of the average
closing bid and the average closing ask prices) as reported in
composite transactions for the principal U.S. national or regional
securities exchange on which the Common Stock or such other
securities are traded; or
(c) if the Common
Stock or such other securities are not listed on a U.S. national or
regional securities exchange, the last quoted bid price for the
Common Stock or such other securities on such date in the
over-the-counter market as reported by Pink OTC Markets Inc. or
other similar organization; or
(d) if the Common
Stock or such other securities are not so quoted by Pink OTC
Markets Inc. or any similar organization, as determined by a
nationally recognized securities firm retained by the Company for
this purpose.
The
Closing Sale Price will be determined without reference to early
hours, after hours or extended market trading.
“
Code ” means the Internal Revenue Code of 1986, as
amended.
“
Common Stock ” means the common stock, par value $0.01
per share, of the Company.
“
Company ” means Conseco, Inc., a Delaware
corporation.
“
Continuing Director ” means, during any period of 12
consecutive calendar months, those individuals who (a) were
directors of the Company on the first day of each such period or
(b) who subsequently became directors of the Company and whose
election or initial nomination for election subsequent to that date
was approved by a majority of the Continuing Directors then on the
Company Board, to constitute a majority of the Company
Board.
“
Distributed Property ” has the meaning set forth in
Section 12(C).
“
Exchange Act ” means the Securities Exchange Act of
1934, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.
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“
Ex-Dividend Date ” means, with respect to any
issuance, dividend or distribution, the first date on which shares
of the Common Stock trade on the applicable exchange or in the
applicable market, regular way, without the right to receive the
issuance, dividend or distribution in question.
“
Exercise Date ” means any date, on or prior to the
Expiration Date, on which the Warrantholder exercises the right to
purchase the Shares, in whole or in part, pursuant to and in
accordance with the terms and conditions described
herein.
“
Exercise Price ” means $6.50 per share of Common
Stock, subject to adjustment as provided in Section 12, and
all references thereto shall be deemed to mean such defined term as
adjusted, if applicable.
“
Expiration Date ” means the day on which the
Expiration Time occurs.
“
Expiration Time ” has the meaning set forth in
Section 3.
“
Fair Market Value ” means the amount which a willing
buyer would pay a willing seller in an arm’s-length
transaction as reasonably determined by the Board of Directors in
good faith; provided , however, that if the Warrantholder
disputes such valuation, then such determination shall be made at
the expense of the Company by a third party valuation expert
reasonably acceptable to the Company and the Warrantholder;
provided , further, that if the initial determination of the
Board of Directors is within the range of reasonable valuations of
“Fair Market Value” determined by such valuation firm,
then the Warrantholder shall reimburse the Company for the fees and
expenses of such valuation.
“
Fundamental Change ” shall be deemed to have occurred
at the time after this Warrant is originally issued if any of the
following occurs:
(a) any
acquisition, directly or indirectly, by any person, or two or more
persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
50% or more of the outstanding shares of voting stock of the
Company, in each case other than any transaction:
(i) involving a
merger or consolidation that does not result in a reclassification,
conversion, exchange or cancellation of the outstanding Common
Stock; or
(ii) pursuant to
which the holders of the Common Stock immediately prior to the
transaction have the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power of all shares of
capital stock entitled to vote generally in the election of
directors of the continuing or surviving corporation immediately
after the transaction, with such holders’ proportional voting
power immediately after the transaction vis-à-vis each other
with respect to the securities they receive in such transaction
being in substantially the same proportions as their respective
voting power vis-à-vis each other with respect to the Common
Stock that they held immediately before such transaction;
or
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(iii) that is
effected solely to change the Company’s jurisdiction of
incorporation and results in a reclassification, conversion or
exchange of outstanding shares of the Common Stock solely into
shares of common stock of the surviving entity; or
(b) during any
period of 12 consecutive calendar months, commencing on the
original issuance date of this Warrant, the ceasing of the
Continuing Directors to constitute a majority of the Board of
Directors; or
(c) the Company
conveys, sells, transfers or leases all or substantially all of its
assets to another Person; or;
(d) a Termination
of Trading; or
(e) the holders of
the Common Stock approve any plan or proposal for the liquidation
or dissolution of the Company.
For the purpose
of this definition only, “ person ” includes any
syndicate or group deemed to be a “ person ”
under Section 13(d)(3) of the Exchange Act.
“
Investor Rights Agreement ” means the Investor Rights
Agreement, dated ___, 2009, between the Company and Paulson &
Co., Inc., on behalf of the several investment funds and accounts
managed by it.
“
Market Disruption Event ” means:
(a) a failure by
the principal market on which the Common Stock is listed or
approved for trading to open for trading during its regular trading
session; or
(b) the occurrence
or existence for more than a one half-hour period in the aggregate
on any Scheduled Trading Day of any suspension or limitation
imposed on trading (by reason of movements in price exceeding
limits permitted by the principal market on which the Common Stock
is listed or approved for trading or otherwise) in the shares of
the Common Stock or in any options, contracts or future contracts
relating to shares of the Common Stock, and such suspension or
limitation occurs or exists at any time before 1:00 p.m., New York
City time, on such day.
“
open of business ” means 9:00 a.m., New York City
time.
“
Person ” means a legal person, including any
individual, corporation, estate, partnership, joint venture,
association, joint-stock corporation, limited liability company,
limited liability partnership or trust.
“
Reference Property ” shall have the meaning set forth
in Section 13.
“
Regulatory Approvals ” means, with respect to the
Warrantholder, the receipt of approvals and authorizations of,
filings and registrations with, notifications to, or expiration or
termination of any applicable waiting period under, (x) the
Hart-Scott-Rodino Antitrust
4
Improvements
Act of 1976 and the rules and regulations thereunder or the
competition or merger control laws of other jurisdictions or
(y) all insurance statutes and regulations applicable to the
direct and indirect insurance company subsidiaries of the Company,
in each case to the extent applicable and necessary to permit the
Warrantholder to exercise this Warrant, in whole or in part, and
own the Shares purchased thereby.
“
Reorganization Event ” has the meaning set forth in
Section 13.
“
Restricted Ownership Percentage ” has the meaning set
forth in Section 3A(C).
“
Scheduled Trading Day ” means any day that is
scheduled to be a Trading Day on the principal U.S. national or
regional securities exchange or market on which the Common Stock is
listed or admitted for trading; provided , that if the
Common Stock is not listed or traded, “ Scheduled Trading
Day ” shall mean any Business Day.
“
SEC ” means the U.S. Securities and Exchange
Commission.
“
Securities Act ” means the Securities Act of 1933, as
amended, or any successor statute, and the rules and regulations
promulgated thereunder.
“
Shares ” has the meaning set forth in
Section 2.
“
Spin-Off ” has the meaning set forth in
Section 12(C).
“
Spin-Off Valuation Period ” has the meaning set forth
in Section 12(C).
“
Stock and Warrant Purchase Agreement ” means the Stock
and Warrant Purchase Agreement, dated as of October 13, 2009,
between the Company and the Purchaser, including all schedules and
exhibits thereto
“
Subsidiary ” means, with respect to any person, any
corporation, partnership, limited liability company, limited
liability partnership, joint venture, trust, association or other
unincorporated organization of which or in which such person and
such person’s Subsidiaries own directly or indirectly more
than 50% of (a) the combined voting power of all classes of
stock having general voting power under ordinary circumstances to
elect a majority of the board of directors, if it is a corporation;
(b) the voting or managing interests (which shall mean the
general partner in the case of a partnership), if it is a
partnership, joint venture or similar entity; (c) the
beneficial interest, if it is a trust, association or other
unincorporated organization; or (d) the membership interest,
if it is a limited liability company.
“
Termination of Trading ” means any time that the
Common Stock ceases to be listed for trading on any of the New York
Stock Exchange, the NASDAQ Global Select Market or the NASDAQ
Global Market (or any of their respective successors).
“
TO Expiration Date ” has the meaning set forth in
Section 12(E).
“
TO Expiration Time ” has the meaning set forth in
Section 12(E).
5
“
Trading Day ” means a day on which (a) there is
no Market Disruption Event and (b)(i) trading in the Common Stock
generally occurs on the New York Stock Exchange, or if the Common
Stock is not listed on the New York Stock Exchange, then as
generally occurs on the principal U.S. national or regional
securities exchange on which the Common Stock is then traded, or
(ii) if the Common Stock is not listed or approved for trading
on the New York Stock Exchange or another U.S. national or regional
securities exchange; provided, that if the Common Stock is not so
listed or traded, “ Trading Day ” shall mean any
Business Day.
“
Trigger Event ” has the meaning set forth in
Section 12(C).
“
unit of Reference Property ” shall have the meaning
set forth in Section 13.
“
Warrantholder ” has the meaning set forth in
Section 2.
“
Warrant ” means this Warrant, issued pursuant to the
Stock and Warrant Purchase Agreement.
2. Number
of Shares; Exercise Price . This certifies that, for value
received, [NAME OF WARRANTHOLDER] (the “ Warrantholder
”) is entitled, upon the terms and subject to the conditions
hereinafter set forth, to acquire from the Company, in whole or in
part, subject to receipt of Regulatory Approval (or, in the case of
any required insurance regulatory approvals, upon entry into
mutually agreed alternative arrangements (such as delivery of the
Shares into an escrow account or voting trust) permitting exercise
of this Warrant pending receipt of any required insurance
regulatory approvals) and in compliance with the limitations on
exercise set forth in Section 3A, up to an aggregate of [ ]
fully paid and non-assessable shares of Common Stock (the “
Shares ”), at a purchase price per Share equal to the
Exercise Price.
3.
Exercise of Warrant; Term . Subject to Section 2 and
Section 3A, and to the extent permitted by applicable laws and
regulations, the right to purchase the Shares represented by this
Warrant is exercisable, in whole or in part, by the Warrantholder,
at any time or from time to time (i) after the earlier to
occur of (x) the open of business on June 30, 2013, or
(y) receipt of a notice of a Fundamental Change as provided in
Section 17 from the Company following a Fundamental Change,
(ii) but in no event later than the close of business on
December 30, 2016 (the “ Expiration Time
”), by:
(1) the surrender
of this Warrant and Notice of Exercise annexed hereto, duly
completed and executed on behalf of the Warrantholder, at the
office of the Company in Carmel, Indiana (or such other office or
agency of the Company in the United States as it may designate by
notice in writing to the Warrantholder at the address of the
Warrantholder appearing on the books of the Company),
and
(2) payment of the
aggregate Exercise Price for the number of Shares thereby
purchased, at the election of the Warrantholder, in one of the
following manners:
(i) by tendering
in cash, by certified or cashier’s check or by wire transfer
payable to the order of the Company; or
6
(ii) by having the
Company withhold a number of shares of Common Stock issuable upon
exercise of this Warrant equal in value to the aggregate Exercise
Price as to which this Warrant is so exercised based on the Closing
Sale Price of the Common Stock on the Trading Day prior to the date
on which this Warrant and the Notice of Exercise are delivered to
the Company.
In
the event this Warrant is surrendered for exercise in respect of
less than all the Shares issuable on such exercise at any time
prior to the Expiration Time, the Warrantholder will be entitled to
receive from the Company within a reasonable time, and in any event
not exceeding three Business Days following such Exercise Date, a
new Warrant in substantially identical form for the purchase of the
number of Shares equal to the difference between the number of
Shares subject to this Warrant and the number of Shares as to which
this Warrant is so exercised, in which case such surrendered
Warrant shall be cancelled. Notwithstanding anything to the
contrary set forth herein, upon exercise of any portion of this
Warrant in accordance with the terms hereof, the Warrantholder
shall not be required to physically surrender this Warrant to the
Company unless such Warrantholder is purchasing the full number of
Shares represented by this Warrant, in which case the Warrantholder
shall promptly surrender this Warrant to the Company. The
Warrantholder and the Company shall each maintain records showing
the number of Shares so exercised and issued hereunder and the
dates of such exercises or shall use such other method, reasonably
satisfactory to the Warrantholder and the Company, so as not to
require physical surrender of this Warrant upon each such exercise.
In the event of any dispute or discrepancy, such records of the
Company establishing the number of Shares to which the
Warrantholder is entitled shall be controlling and determinative in
the absence of demonstrable error. Notwithstanding the foregoing,
if this Warrant is exercised as aforesaid, the Warrantholder may
not transfer or assign this Warrant unless such Warrantholder first
physically surrenders this Warrant to the Company, whereupon the
Company will forthwith issue and deliver upon order of the
Warrantholder a new Warrant of like tenor, registered on the books
of the Company as the Warrantholder may reasonably request,
representing the number of Shares not then exercised. The
Warrantholder and any permitted assignee, by acceptance of this
Warrant or a new Warrant, acknowledge and agree that, by reason of
the provisions of this Section 3, following exercise of any portion
of this Warrant, the number of Shares represented by this Warrant
may be less than the number of Shares set forth on the face
hereof.
3A. Limitations
on Exercise .
(A)
Section 382 . This Warrant shall not be exercisable by
the Warrantholder to the extent that the exercise hereof would
cause the Warrantholder to become, directly or indirectly, a
“5-percent shareholder” (as such term is used in
Section 382 of the Code and the Treasury regulations
promulgated thereunder), unless the Warrantholder has received
prior approval of the Board of Directors.
(B) 9.9%
Limitation . Except with respect to Section 3A(C) below,
the number of Shares issuable to the Warrantholder upon exercise
hereof shall not, when added to the total number of shares of
Common Stock deemed beneficially owned by such Warrantholder at
such time (other than by virtue of the ownership of securities or
rights to acquire securities (including the Shares) that have
limitations on the Warrantholder’s right to convert, exercise
or purchase
7
similar to the
limitation set forth herein), as determined pursuant to the rules
and regulations promulgated under Section 13(d) of the Exchange
Act, including all shares of Common Stock deemed beneficially owned
(other than by virtue of the ownership of securities or rights to
acquire securities that have limitations on the right to convert,
exercise or purchase similar to the limitations set forth herein)
at such time by persons that would be aggregated for purposes of
determining whether a “group” exists under Section
13(d) of the Exchange Act, exceed 9.9% of the total issued and
outstanding shares of the Common Stock (the “ Restricted
Ownership Percentage ”). Warrantholder shall have the
right (x) at any time and from time to time to reduce its
Restricted Ownership Percentage immediately upon notice to the
Company and (y) (subject to waiver) at any time and from time to
time, to increase its Restricted Ownership Percentage immediately
in the event of the announcement as pending or planned, of a
Fundamental Change.
(C) The
foregoing Section 3A(B) shall not apply to the extent that the
Warrantholder is subject to Section 16(a) of the Exchange Act,
without regard to the aggregate number of shares of Common Stock
issuable upon exercise of this Warrant or issuable upon conversion
or exercise of other securities or instruments containing
limitations on the Warrantholder’s right to convert, exercise
or purchase shares of Common Stock similar to the limitation set
forth in Section 3A(B) above.
(D) The
Company may rely, without limitation, solely upon receipt of any
Notice of Exercise by the Warrantholder hereunder as sufficient
evidence of the inapplicability of each of the limitations to
exercise set forth in this Section 3A. The Company shall not
be liable to the Warrantholder or any other Person for any breach
of the provisions of this Section 3A resulting from actions
the Company is otherwise required to take in connection with any
exercise of all or any part of this Warrant in reliance on a Notice
of Exercise delivered by the Warrantholder.
4.
Reservation of Shares; Shares to Be Fully Paid; Listing of
Shares .
(A) The
Company shall at all times reserve and keep available, out of its
authorized but unissued Common Stock, a sufficient number of shares
of Common Stock to satisfy the exercise of this Warrant from time
to time as this Warrant is presented for exercise in accordance
with the terms of this Warrant. The Company hereby represents and
warrants that any Shares issued upon the exercise of this Warrant
in accordance with the terms of this Warrant will be duly
authorized, validly issued, fully paid and non-assessable and free
and clear of preemptive rights.
(B) The
person(s) in whose name(s) any Shares so issued, as designated by
the Warrantholder, will be deemed to be the holder(s) of record of
such Shares as of the close of business on the Exercise Date,
notwithstanding that the stock transfer books of the Company may
then be closed or certificates representing such Shares may not be
actually delivered on such date; provided, however , that if
such Exercise Date occurs after the Ex-Dividend Date of an event
that requires an adjustment to the Exercise Price and on or prior
to the record date for such event, the person in whose name any
Shares so issued upon exercise will be deemed to be the holder of
record of such Shares as of the open of business on the Business
Day immediately following the record date for such
event.
8
(C) Certificates
for Shares issued upon exercise of this Warrant will be issued in
such name(s) as the Warrantholder may designate and will be
delivered to such named person(s) within a reasonable time, not to
exceed three Business Days after any Exercise Date; provided,
however, that the delivery of the certificates representing such
Shares will be delayed until the Business Day immediately following
the record date for an event that requires an adjustment to the
Exercise Price if such Business Day is later than three Business
Days after the applicable Exercise Date.
(D) If at any
time the Company’s Common Stock shall be listed on any
national securities exchange or automated quotation system, the
Company will use reasonable best efforts to list, and keep listed,
so long as the Common Stock shall be so listed on such exchange or
automated quotation system, any Shares issuable upon
exercise.
5. No
Fractional Shares or Scrip . Any exercise of this Warrant shall
be for a whole number of Shares. No fractional Shares or scrip
representing fractional Shares shall be issued upon any exercise of
this Warrant. Upon exercise of this Warrant, if the Shares that the
Warrantholder shall be entitled to receive include a fractional
share of Common Stock, the Company will increase the number of
Shares issuable to the next whole number of Shares.
6. No
Rights as Warrantholder; Transfer Books . This Warrant does not
entitle the Warrantholder to any voting rights or other rights as
holder of Common Stock of the Company prior to the date of exercise
hereof. The Company will at no time close its transfer books
against transfer of this Warrant in any manner which interferes
with the timely exercise of this Warrant.
7. Taxes
on Shares Issued . The Company shall pay any documentary, stamp
or similar issue or transfer tax due on the issue or delivery of
Shares on exercise of this Warrant pursuant hereto; provided,
however, that if such documentary, stamp or similar issue or
transfer tax is due because the Warrantholder has requested that
the Shares be issued in a name other than that of the Warrantholder
or an affiliate of the Warrantholder, then such taxes shall be paid
by such Warrantholder, and the Company shall not be required to
issue or deliver any stock certificate representing the Shares
unless and until such Warrantholder shall have paid to the Company
the amount of such tax or shall have established to the
satisfaction of the Company that such tax have been
paid.
(A) Subject
to compliance with clause (B) of this Section 8, this
Warrant and all rights hereunder are transferable, in whole or in
part, upon the books of the Company by the registered holder hereof
in person or by duly authorized attorney, and a new warrant or new
warrants shall be made and delivered by the Company, of the same
tenor and date as this Warrant but registered in the name or names
of one or more transferees, upon surrender of this Warrant, duly
endorsed, to the office or agency of the Company described in
Section 2. All expenses (other than issue or transfer taxes)
and other charges payable in connection with the preparation,
execution and delivery of the new warrants pursuant to this
Section 8 shall be paid by the Company.
9
(B) Notwithstanding
the foregoing, this Warrant and any rights hereunder, and any
Shares issued upon exercise of this Warrant, shall be subject to
the applicable restrictions as set forth in the Investor Rights
Agreement.
(C) If and
for so long as required by the Investor Rights Agreement, this
Warrant Certificate, and any Shares issued upon exercise of this
Warrant, shall contain a legend as set forth in Section 2.2 of the
Investor Rights Agreement.
9.
Exchange and Registry of Warrant . This Warrant is
exchangeable, upon the surrender hereof by the Warrantholder to the
Company, for a new warrant or warrants of like tenor and
representing the right to purchase the same aggregate number of
Shares. The Company shall maintain a registry showing the name and
address of the Warrantholder as the registered holder of this
Warrant. This Warrant may be surrendered for exchange or exercise,
in accordance with its terms, at the office of the Company, and the
Company shall be entitled to rely in all respects, prior to written
notice to the contrary, upon such registry.
10. Loss,
Theft, Destruction or Mutilation of Warrant . Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and in the case
of any such loss, theft or destruction, upon recei
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