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 ”).
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:
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 ”).
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.
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
- 5 -
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.
(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
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